Execution
Version

    
    

    SECURITIES
PURCHASE AGREEMENT

     

    Dated
as of November 16, 2010

     

    by
and among

     

    Neostem,
Inc., JGB Management Inc.

     

    and

     

    THE
PURCHASERS LISTED ON EXHIBIT A

    
    

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SECURITIES
PURCHASE AGREEMENT

     

    This
SECURITIES PURCHASE AGREEMENT dated as of November 16, 2010 (this “Agreement”) is by and
among Neostem, Inc., a Delaware corporation
(the “Company”), each of
the purchasers whose names are set forth on Exhibit A attached
hereto (each a “Purchaser” and
collectively, the “Purchasers”), and JGB
Management Inc., the Purchaser Representative (as defined herein), only with
respect to Section 3.7(a) and Article 6.

     

    WHEREAS:

     

    A.           The
Company has authorized convertible preferred stock of the Company designated as
“7% Senior Convertible
Preferred Stock”, the terms of which are set forth in the certificate of
designation for such series of preferred stock (the “Certificate of
Designations”) in the form attached hereto as Exhibit B (together
with any convertible preferred shares issued in replacement
thereof in accordance with the terms thereof, the “Preferred Shares”),
which Preferred Shares shall be convertible into the Company's common stock, par
value $0.0001 per share (the “Common Stock”), in
accordance with the terms of the Certificate of Designations (as converted,
collectively, the “Conversion
Shares”).

     

    B.           The
Preferred Shares shall be mandatorily redeemed by the Company in accordance with
the Certificate of Designations and the redemption price therefor shall be paid
either in cash or shares of Common Stock (the “Redemption
Shares”).

     

    C.           Each
Purchaser wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of Preferred
Shares set forth opposite such Purchaser’ name in Exhibit A hereto
(which aggregate number for all Purchasers shall be 10,582,011 (the “Total Subscription
Amount”); (ii) a Warrant representing the right to acquire initially up
to that number of additional shares of Common Stock set forth opposite such
Purchaser’s name on Exhibit A (the “Warrants”), in
substantially the form attached hereto as Exhibit C (as
exercised, collectively, the “Warrant Shares”); and
(iii) the number of shares of Common Stock (the “Common Shares”) set
forth opposite such Purchaser’s Name on Exhibit
A.

     

    D.           The
Preferred Shares, the Conversion Shares, the Redemption Shares, the Common
Shares, the Warrants and the Warrant Shares are collectively referred to herein
as the “Securities”.

     

    E.           The
Company has engaged Cowen and Company, LLC and LifeTech Capital, a division of
Aurora Capital, LLC as its exclusive placement agents (the “Placement Agents”)
for the offering of the Securities on a “best efforts” basis.

     

    The
parties hereto agree as follows:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
1

     

    PURCHASE
AND SALE OF SECURITIES

     

    1.1.         Purchase and Sale of
Securities.

     

    (a)           Purchase and Sale of
Securities.   Subject to the satisfaction (or waiver) of the
conditions set forth herein, the Company shall issue and sell to each Purchaser,
and each Purchaser severally, but not jointly, agrees to purchase from the
Company on the Closing Date (as defined below), (i) the number of Preferred
Shares as is set forth opposite such Purchaser’s name in Exhibit A; (ii)
Warrants to acquire initially up to that number of Warrant Shares as is set
forth opposite such Purchaser’s name as set forth in Exhibit A; and (iii)
the number of Common Shares set forth opposite such Purchaser’s name in Exhibit
A.  The aggregate purchase price for the Securities shall be
$10,000,000.

     

    (b)           The
Company has filed with the Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-3 (File No. 333-166169]) (the “Registration
Statement”), including the prospectus contained therein (the “Base Prospectus”),
relating to securities (the “Shelf Securities”),
including the Securities to be issued from time to time by the
Company.  The offering and sale of the Securities (the “Offering”) are being
made pursuant to (a) the Registration Statement and the Base Prospectus and
(b) one or more prospectus supplements (the “Prospectus Supplements” and the Base Prospectus, the
“Prospectus”)
containing certain supplemental information regarding the Securities and the
terms of the Offering that has been or will be filed with the Commission and
delivered to the Purchasers (or made available to the Purchasers by the filing
by the Company of an electronic version thereof with the
Commission).

     

    1.2.         Purchase Price and
Closing.  (a)  Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell to each Purchaser and, in
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, each Purchaser, severally but
not jointly, agrees to purchase the Preferred Shares, Common Shares, and
Warrants set forth opposite such Purchaser’s name on Exhibit A for the
amount to be paid by such Purchaser for the Preferred Shares, Common Shares, and
Warrants as specified on Exhibit A (as to each
Purchaser, the “Subscription
Amount”).  At the Closing (as defined below) under this
Agreement, each Purchaser shall deliver (i) 67.5% of the Subscription Amount by
wire transfer of immediately available funds to the Company; (ii) 7.5% of the
Subscription Amount by wire transfer of immediately available funds to Cowen and
Company, LLC as representative of the Placement Agents; and (iii) 25% of the
Subscription Amount (the “Escrow Amount”) to Wells Fargo Bank, National
Association, as escrow agent (the “Escrow Agent”) pursuant to the terms of that
certain Escrow Agreement between the Company, the Purchasers, and the Escrow
Agent (the “Escrow Agreement”) in the form annexed hereto as Exhibit
D.  The Purchase Price shall be allocated to the Preferred Shares, the
Common Shares, and the Warrants based on their relative fair-market values, as
determined by the Purchasers

     

    (b)           The
Closing under this Agreement (the “Closing”) shall take
place on or before November 19, 2010 (the “Closing Date”), provided, that all of the
conditions set forth in Article 4 hereof have been fulfilled or waived in
accordance herewith.  The Closing shall take place at the offices of
Kleinberg, Kaplan, Wolff & Cohen, P.C., 551 Fifth Avenue, 18th Floor, New
York, New York  10176 at 10:00 a.m. Eastern Standard Time, or at such
other time and place as the parties may agree.  Subject to the terms
and conditions of this Agreement, at the Closing the Purchasers shall purchase
and the Company shall issue and deliver or cause to be delivered to each
Purchaser the Preferred Shares, Common Shares, and Warrants for the applicable
amounts set forth opposite the name of such Purchaser on Exhibit A
hereto.  Also at the Closing, the Company shall issue and deliver the
Preferred Shares, Common Shares, and Warrants in the applicable percentages set
forth opposite the names of such Purchaser on Exhibit A
hereto.

     

    
      
        
        

      

      
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    ARTICLE
2

     

    REPRESENTATIONS
AND WARRANTIES

     

    2.1.         Representations and
Warranties of the Company.  Except as otherwise disclosed or
incorporated by reference and readily apparent in the Company’s Prospectus
Supplement, Prospectus, Annual Report on Form 10-K for the year ended December
31, 2009 (the "Form
10-K"), any quarterly or current report, or proxy statement filed by the
Company with the Commission pursuant to the reporting requirements of the
Exchange Act subsequent to the filing of the Form 10-K and prior to the date of
this Agreement (in each case, including any supplements or amendments thereto)
(the “Reports”), the
Company hereby represents and warrants to the Purchasers and the Placement
Agents, as of the date of this Agreement and as of the Closing Date as
follows:

     

    (a)           Organization, Good Standing
and Power.  The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own, lease and operate its properties
and assets and to conduct its business as it is now being
conducted.  The Company and each such Subsidiary (as defined below) is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse Effect (as
defined below).  For the purposes of this Agreement, “Material Adverse
Effect” means any material adverse effect on the business, operations,
properties, prospects, or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole and/or any condition, circumstance, or
situation that would prohibit in any material respect the ability of the Company
to perform any of its obligations under this Agreement or any of the Transaction
Documents (as defined below) in any material respect.

     

    (b)          Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Certificate of
Designations, the Escrow Agreement, and the Warrants (collectively, the “Transaction
Documents”) and to issue and sell the Preferred Shares, Common Shares,
and Warrants in accordance with the terms hereof.  The execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, provided however that the Company must obtain any stockholder approval
as may be required by the NYSE Amex.  When executed and delivered by
the Company, each of the Transaction Documents shall constitute a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.

     

    
      
        
        

      

      
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    (c)           Capitalization.  The
authorized capital stock and the issued and outstanding shares of capital stock
of the Company as of the date of this Agreement is set forth in the Prospectus
Supplement.  All of the outstanding shares of the Common Stock and any
other outstanding security of the Company have been duly and validly
authorized.  No shares of Common Stock or any other security of the
Company were issued in violation of any preemptive rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the
Company.  Furthermore, there are no equity plans, contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company, except as set forth on Schedule
2.1(e).  The Company is not a party to or bound by any
agreement or understanding granting registration or anti-dilution rights to any
person or entity with respect to any of its equity or debt securities, except
where such registration or anti-dilution rights pursuant to such agreements
individually or in the aggregate, have not had or reasonably would be expected
to have a Material Adverse Effect.  Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities and any voting and lock-up agreements entered into in
connection with the transactions contemplated by that certain Agreement and Plan
of Merger, dated September 23, 2010, by and among the Company, NBS Acquisition
Company LLC and Progenitor Cell Therapy, LLC (the “PCT Merger”) and the
concurrent common stock offering, the Company is not a party to, and it has no
knowledge of, any agreement or understanding restricting the voting or transfer
of any shares of the capital stock of the Company.  For purposes of
this Section 2.1 “knowledge” means the actual or constructive knowledge of the
Company.

     

    (d)          Issuance of
Securities.  The Preferred Shares, Common Shares, and Warrants
to be issued at the Closing have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Securities shall be validly issued and outstanding, fully-paid, non-assessable
and free any clear of all Liens (as defined below) of any pre-emptive rights and
rights of refusal of any kind.  When the Preferred Shares and Warrants
are issued and paid for in accordance with the terms of the Transaction
Documents, such shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and nonassessable, free and clear
of all Liens, encumbrances, pre-emptive rights and rights of refusal of any
kind.  When the Conversion Shares and/or Redemptions Shares are issued
in accordance with the terms of the Certificate of Designations and the Warrant
Shares are issued upon exercise of the Warrants and payment of the exercise
price, such shares will be duly authorized by all necessary corporate action and
validly issued and outstanding, fully paid and nonassessable, free and clear of
all Liens, encumbrances, pre-emptive rights and rights of refusal of any
kind.

     

    
      
        
        

      

      
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    (e)          No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Transaction Documents, and the consummation by the Company
of the transactions contemplated by the Transaction Documents, and the issuance
of the Securities as contemplated by the Transaction Documents, do not and will
not (i) violate or conflict with any provision of the Company’s Articles of
Incorporation (the “Articles”) or By-laws
(the “By-laws”), each as
amended to date (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries’
respective properties or assets are bound, (iii) result in a violation of any
foreign, federal, state or local statute, law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries are bound or affected, or (iv)
create or impose a lien, mortgage, security interest, charge or encumbrance of
any nature (each, a “Lien”) on any
property or asset of the Company or its Subsidiaries under any agreement or any
commitment to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or by which any of their
respective properties or assets are bound, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
violations, acceleration, cancellations, creations and impositions as would not,
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect.  Neither the Company nor any of its
Subsidiaries is required under foreign, federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents or issue and sell the Securities other than the filing of the
Prospectus Supplements with the Commission in accordance with the terms hereof,
any filings or approvals required from the Financial Industry Regulatory
Authority, Inc. (“FINRA”) and any
approval of the Company's stockholders, as may be required by the NYSE
Amex.

     

    (f)           Commission Documents,
Financial Statements.  The Common Stock of the Company is
registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), and the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
including filings incorporated by reference therein being referred to herein as
the “Commission
Documents”).  At the times of their respective filings, the
Form 10-K for the fiscal year ended December 31, 2009 (the “Form 10-K”, and
together with any other report, schedule, form, statement or other document
filed by the Company with the Commission pursuant to the reporting requirements
of the Exchange Act subsequent to the filing of the Form 10-K and prior to the
date of this Agreement, the “Public Filings”)
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated
thereunder.  The Public Filings, the Registration Statement, and the
Prospectus did not (and at the time of filing of any applicable Prospectus
Supplement will not), and do not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided however, that the Company makes
no representation or warranty as to information furnished to the Company by the
Purchasers.  As of their respective dates, the financial statements of
the Company included in the Commission Documents complied as to form in all
material respects with Regulation S-X and all other published rules and
regulations of the Commission.  Such financial statements have been
prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).

     

    
      
        
        

      

      
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    (g)          Subsidiaries.

     

    (i)           Schedule 2.1(g) sets
forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s or
entity’s ownership of the outstanding stock or other interests of such
Subsidiary.  For the purposes of this Agreement, “Subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries.  All the outstanding shares of
capital stock (if any) of each subsidiary of the Company have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
by the Company directly or indirectly through one or more wholly-owned
subsidiaries, free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third
party.

     

    (ii)           Each
of the Company's Subsidiaries that is incorporated in the People's Republic of
China or "PRC" (a "China Subsidiary") have been duly organized and are validly
existing as corporations or other legal entities in good standing (or the
Chinese equivalent thereof) under the laws of their respective jurisdictions of
organization.  Each China Subsidiary is duly qualified to do business
and is in good standing as foreign corporations or other legal entity in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification and have all
power and authority (corporate or other) necessary to own or hold their
respective properties and to conduct the businesses in which they are engaged,
except where the failure to so qualify or have such power or authority would not
have, singularly or in the aggregate, a Material Adverse Effect.  The
Company owns or controls, directly or indirectly, only the following
corporations, partnerships, limited liability partnerships, limited liability
companies, associations or other entities:  NeoStem (China), Inc.,
China Biopharmaceutical Holdings, Inc., Stem Cell Technologies, Inc., NeoStem
Therapies, Inc., Qingdao Niao Bio-Technology Ltd. and Beijing Ruijieao
Bio-Technology Ltd. (the "PRC VIEs") and Suzhou Erye Pharmaceuticals
Ltd.

     

    (iii)           Each
China Subsidiary has applied for and obtained all requisite business licenses,
clearance and permits required under PRC law as necessary for the conduct of its
businesses in all material respects, and each China Subsidiary has complied in
all material respects with all PRC laws, rules and regulations (“PRC Laws”) in
connection with foreign exchange, including without limitation, carrying out all
relevant filings, registrations and applications for relevant permits with the
PRC State Administration of Foreign Exchange and any other relevant authorities,
and all such permits are validly subsisting. The registered capital of each
China Subsidiary has been fully paid up in accordance with the schedule of
payment stipulated in its respective articles of association, approval document,
certificate of approval and legal person business license (hereinafter referred
to as the “Establishment Documents”) and in compliance in all material respects
with PRC Laws, except where the failure to have been fully paid would not have a
Material Adverse Effect and there is no outstanding capital contribution
commitment for any China Subsidiary. The Establishment Documents of the China
Subsidiaries have been duly approved in accordance with the laws of the PRC and
are valid and enforceable. The business scope specified in the Establishment
Documents of each China Subsidiary complies in all material respects with the
requirements of all relevant PRC Laws. The outstanding equity interests of each
China Subsidiary are owned by the respective entities or individuals identified
as the registered holders thereof in the Reports.

     

    
      
        
        

      

      
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    (iv)           No
consents, approvals, authorizations, orders, registrations, clearances,
certificates, franchises, licenses, permits or qualifications of or with any PRC
governmental agency are required for the Company’s or its affiliates’ or
subsidiaries’ contractual arrangements and agreements with the PRC variable
interest entities and their registered equity holders (the “VIE Structure”) or
the execution, delivery and performance of such contractual arrangements and
agreements (the “VIE Structuring Documents”) except where the failure to obtain
such consents, approvals, authorizations, orders, registrations, clearances,
certificates, franchises, licenses, permits or qualifications would not,
singularly or in the aggregate, have a Material Adverse Effect.  None
of the VIE Structuring Documents has been revoked and no such revocation is
pending or, to the Company’s knowledge, threatened.  Each of the VIE
Structuring Documents has been entered into prior to the date thereof in
compliance in all material respects with all applicable laws and regulations and
constitutes a valid and legally binding agreement, enforceable in accordance
with its terms.

     

    (v)           The
VIE Structure complies, and immediately following the consummation of the
offering and sale of the Securities will comply, in all material respects with
all applicable laws, regulations, rules, orders, decrees, guidelines, notices or
other legislation of the PRC; the VIE Structure has not been challenged by any
PRC governmental agency and there are no legal, arbitration, governmental or
other proceedings (including, without limitation, governmental investigations or
inquiries) pending before or, to the Company’s knowledge, threatened or
contemplated by any PRC governmental agency in respect of the VIE Structure; and
the Company reasonably believes that after the consummation of the offering and
sale of the Securities, the VIE Structure will not be challenged by any PRC
governmental agency.

     

    (vi)           Each
of the China Subsidiaries is in compliance with all requirements under all
applicable PRC Laws to qualify in all material respects for their exemptions
from enterprise income tax or other income tax benefits (the “Tax Benefits”) as
described in the Reports, and the actual operations and business activities of
each such China Subsidiary are sufficient to meet the qualifications for the Tax
Benefits. No submissions made to any PRC government authority in connection with
obtaining the Tax Benefits contained any misstatement or omission that would
have affected the granting of the Tax Benefits. No China Subsidiary has received
notice of any deficiency in its respective applications for the Tax Benefits,
and the Company is not aware of any reason why any such China Subsidiary might
not qualify for, or be in compliance with the requirements for, the Tax
Benefits.

     

    
      
        
        

      

      
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    (h)           No Material Adverse
Change.  Since December 31, 2009, (i) the Company has not
experienced or suffered any event or series of events that, individually or in
the aggregate, has had or reasonably would be expected to have a Material
Adverse Effect; and (ii) no event or circumstance has occurred or exists with
respect to the Company or its Subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed.

     

    (i)           No Undisclosed
Liabilities.  Neither the Company nor any Subsidiary has any
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) which are not properly reflected or reserved against in the Company’s
financial statements included in the Reports to the extent required to be so
reflected or reserved against in accordance with GAAP, except for (i)
liabilities that have arisen in the ordinary course of business consistent with
past practice and that have not had a Material Adverse Effect, and (ii)
liabilities that, individually or in the aggregate, have not had and would not
reasonably be expected to have or result in a Material Adverse
Effect.

     

    (j)           Indebtedness.  Schedule 2.1(j)
hereto sets forth as of the Closing Date all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments.  For the purposes of this Agreement,
“Indebtedness”
shall include (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all
reimbursement or other obligations in respect of letters of credit, bankers
acceptances, current swap agreements, interest rate hedging agreements, interest
rate swaps, or other financial products, (c) all capital or equipment lease
obligations or purchase money security interests that exceed $2,500,000 in the
aggregate in any fiscal year, (d) all obligations or liabilities secured by a
Lien on any asset of the Company, irrespective of whether such obligation or
liability is assumed, other than capital or equipment leases and purchase money
security interests in amounts excluded from disclosure under clause (c) above,
and (e) any obligation guaranteeing or intended to guarantee (whether directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse)
any of the foregoing obligations of any other person or entity.

     

    (k)          Title to
Assets.  Each of the Company and the Subsidiaries has good and
marketable title to all of its real and personal property which are material to
the business of the Company, free and clear of any Liens, except for those that
would not, individually or in the aggregate, reasonably be expected to have or
result in a Material Adverse Effect.  All leases of the Company and
each of its Subsidiaries are valid and subsisting and in full force and
effect.

     

    (l)           Actions
Pending.  There is no action, suit, claim, arbitration,
alternate dispute resolution proceeding or other proceeding (collectively,
“Proceedings”)
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary that questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto.  To the
knowledge of the Company, there are no such investigations pending or
threatened.  There are no material Proceedings pending or, to the
knowledge of the Company, threatened against or involving the Company, any
Subsidiary or any of their respective properties or assets.  No
Proceeding described in the Reports would, individually or in the aggregate,
reasonably be expected, if adversely determined, to have a Material Adverse
Effect.  There are no outstanding orders, judgments, injunctions,
awards, decrees or, to the knowledge of the Company, investigations of any
court, arbitrator or governmental, regulatory body, self-regulatory agency or
stock exchange against the Company or any Subsidiary or, to the knowledge of the
Company, any officers or directors of the Company or Subsidiary in their
capacities as such, except for those that would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect.

     

    
      
        
        

      

      
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    (m)         Compliance with
Law.  Except as would not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse Effect, the
Company and its Subsidiaries have been and are presently conducting their
respective businesses in accordance with all applicable foreign, federal, state
and local governmental laws, rules, regulations and ordinances.  The
Company and each of its Subsidiaries have all material franchises, permits,
licenses, consents and other material governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it except where any failures to possess the same would not individually or in
the aggregate reasonably be expected to have or result in a Material Adverse
Effect.  The Company has complied and will comply in all material
respects with all applicable federal and state securities laws in connection
with the Offering.

     

    (n)          Taxes.  The
Company and each Subsidiary each has (i) timely filed all necessary federal,
state, local and foreign tax returns, and all such returns were true, complete
and correct, and (ii) paid all federal, state, local and foreign taxes,
assessments, governmental or other charges due and payable for which it is
liable, including, without limitation, all sales and use taxes and all taxes
which the Company or any of its Subsidiaries is obligated to withhold from
amounts owing to employees, creditors and third parties, and (iii) does not have
any tax deficiency or claims outstanding or assessed or, to its knowledge,
proposed against any of them, except those, in each of the cases described in
clauses (i), (ii) and (iii) of this paragraph (n), that would not, singularly or
in the aggregate, have a Material Adverse Effect.  The Company is not,
nor has it been in the last five years, a U.S. real property holding corporation
under Section 897 of the Code.  The Company and its Subsidiaries have
not engaged in any transaction which is a corporate tax shelter or which could
be characterized as such by the Internal Revenue Service or any other taxing
authority.  The accruals and reserves on the books and records of the
Company and its Subsidiaries in respect of tax liabilities are adequate to meet
any assessments and related liabilities, and since December 31, 2009 the Company
and its Subsidiaries have not incurred any liability for taxes other than in the
ordinary course.

     

    (o)          Certain
Fees.  Except for the retention of the Placement Agents, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.

     

    (p)          Disclosure. Except
for the information concerning the transactions contemplated by this Agreement
and the concurrent common stock offering, the Company confirms that neither it
nor any other person or entity acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information.

     

    
      
        
        

      

      
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    (q)          Intellectual
Property.  The Company and its subsidiaries own or possess the
valid right to use all (i) valid and enforceable patents, patent applications,
trademarks, trademark registrations, service marks, service mark registrations,
Internet domain name registrations, copyrights, copyright registrations,
licenses,  trade secret rights (“Intellectual Property
Rights”) and (ii) inventions, software, works of authorships, trade
marks, service marks, trade names, databases, formulae, know how, Internet
domain names and other intellectual property (including trade secrets and other
unpatented and/or unpatentable proprietary confidential information, systems, or
procedures) (collectively, “Intellectual Property
Assets”) necessary to conduct their respective businesses as currently
conducted, and as proposed to be conducted and described in the Reports and the
Prospectus.  To the knowledge of the Company, neither the Company nor
any of its Subsidiaries is infringing, misappropriating, or otherwise violating,
valid and enforceable Intellectual Property Rights of any other person, and,
except as set forth in the Reports and the Prospectus, have not received written
notice of any challenge (, by any other person to the rights of the Company and
its subsidiaries with respect to any Intellectual Property Rights or
Intellectual Property Assets owned or used by the Company or its
subsidiaries.  To the knowledge of the Company, except as described in
the Registration Statement, the Report and the Prospectus, the Company and its
subsidiaries’ respective businesses as now conducted do not give rise to any
infringement of, any misappropriation of, or other violation of, any valid and
enforceable Intellectual Property Rights of any other person.  All
licenses for the use of the Intellectual Property Rights described in the
Reports and the Prospectus are valid, binding upon, and enforceable by or
against the parties thereto in accordance to its terms.  The Company
has complied in all material respects with, and is not in breach nor has
received any asserted or threatened claim of breach of any Intellectual Property
license that has not been resolved, and to the knowledge of the Company there
has been no unresolved breach or anticipated breach by any other person to any
Intellectual Property license, except where such breach, singularly or in the
aggregate, would not have a Material Adverse Effect.  There are no
unresolved claims against the Company alleging the infringement by the Company
of any patent, trademark, service mark, trade name, copyright, trade secret,
license in or other intellectual property right or franchise right of any
person, except to the extent that any such claim does not have a Material
Adverse Effect.  The Company has taken reasonable steps to protect,
maintain and safeguard its Intellectual Property Rights, including the execution
of appropriate nondisclosure and confidentiality agreements.  The
consummation of the transactions contemplated by this Agreement will not result
in the loss or impairment of or payment of any additional amounts with respect
to, nor require the consent of any other person in respect of, the Company's
right to own, use, or hold for use any of the Intellectual Property Rights as
owned, used or held for use in the conduct of the business as currently
conducted.  The Company has taken the necessary actions to obtain
ownership of all works of authorship and inventions made by its employees,
consultants and contractors during the time they were employed by or under
contract with the Company and which relate to the Company’s business. All key
employees have signed confidentiality and invention assignment agreements with
the Company.

     

    
      
        
        

      

      
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    (r)           Environmental
Compliance.  The Company and each of its Subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities (whether foreign, federal, state or local), or from any other person
or entity, that are required under any Environmental Laws, except where any such
failures would not individually or in the aggregate, reasonably be expected to
have or result in a Material Adverse Effect.  “Environmental Laws”
shall mean all applicable foreign, federal, state and local laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in
nature.   The Company and each of its Subsidiaries are also in
compliance with all requirements, limitations, restrictions, conditions,
standards, schedules and timetables required or imposed under all Environmental
Laws, except as would not, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.  Except as
would not, individually or in the aggregate, reasonably be expected to have or
result in a Material Adverse Effect, there are no past or present events,
conditions, circumstances, incidents, actions or omissions relating to or in any
way affecting the Company or its Subsidiaries that violate or may violate any
Environmental Law or that may give rise to any environmental liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation under any Environmental Law, or based on or
related to the manufacture, processing, distribution, use, treatment, storage
(including without limitation underground storage tanks), disposal, transport or
handling, or the emission, discharge, release or threatened release of any
hazardous substance.

     

    (s)          Books and Records; Internal
Accounting Controls.  The books and records of the Company and
its Subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the Subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any
Subsidiary.  The Company is in material compliance with all provisions
of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
Date.  The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences and
control over financial reporting (as defined in Exchange Act Rules
13a-15).  The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and
forms.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act).

     

    
      
        
        

      

      
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    (t)           Material
Agreements.  True, complete and correct copies of each material
contract of the Company or any Subsidiary required to be filed on a Current
Report on Form 8-K, a Quarterly Report on Form 10-Q, or an Annual Report on Form
10-K, in each case pursuant to Item 601(a) and Item 601(b)(10) of Regulation S-K
under the Exchange Act (the “Company Material
Agreements”) are attached or incorporated as exhibits to the
Reports.  Each of the Company Material Agreements is valid and binding
on the Company and the Subsidiaries, as applicable, and in full force and
effect.  The Company and each of the Subsidiaries, as applicable, are
in all material respects in compliance with and have in all material respects
performed all obligations required to be performed by them to date under each
Company Material Agreement.  Neither the Company nor any Subsidiary
knows of, or has received notice of, any material violation or default (or any
condition which with the passage of time or the giving of notice would cause
such a violation of or a default) by any party under any Company Material
Agreement.

     

    (u)          Transactions with
Affiliates.  There are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person or entity owning at least 5% of the outstanding capital stock of the
Company or any Subsidiary or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder which, in each case, is required to be disclosed in the
Commission Documents or in the Company’s most recently filed definitive proxy
statement on Schedule 14A, that is not so disclosed in the Commission Documents
or in such proxy statement.

     

    (v)          Employees.  There
is (A) no significant unfair labor practice complaint pending against the
Company, or any of its subsidiaries, nor to the knowledge of the Company,
threatened against it or any of its subsidiaries, before the National Labor
Relations Board, any state or local labor relation board or any foreign labor
relations board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Company or any of its subsidiaries, or, to the knowledge of
the Company, threatened against it and (B) no labor disturbance by the employees
of the Company or any of its subsidiaries exists or, to the Company’s knowledge,
is imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or its subsidiaries principal
suppliers, manufacturers, customers or contractors, that could reasonably be
expected, singularly or in the aggregate, to have a Material Adverse
Effect.  Neither the Company nor any Subsidiary has any employment
contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
Subsidiary required to be disclosed in the Reports that is not so
disclosed.  No “named executive officer” (as defined in Item 402 of
Regulation S-K) of the Company has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment with the
Company or any Subsidiary.  The Company and each Subsidiary is in
compliance with all foreign, federal, state and local laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, and employee benefits plans (including, without
limitation, the Employee Retirement Income Securities Act of 1974, as amended,
and any similar law of the PRC), except where such non-compliance would not,
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect.

     

    
      
        
        

      

      
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    (w)         Absence of Certain
Developments.  Since the date on which the most recent Report
was filed with the Commission through the date hereof, neither the Company nor
any of its subsidiaries has (i) issued or granted any securities other than
options to purchase common stock pursuant to the Company’s stock option plan or
securities issued upon exercise of stock options in the ordinary course of
business, (ii) incurred any material liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred in the
ordinary course of business, (iii) entered into any material transaction other
than in the ordinary course of business or (iv) declared or paid any dividend on
its capital stock.

     

    (x)          No Guarantees of
Indebtedness.  The Company has not guaranteed (directly or
indirectly) any Indebtedness of any Subsidiary.

     

    (y)          Investment Company Act
Status.  Neither the Company nor any Subsidiary is, nor as a
result of and immediately upon the Closing will be, an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

     

    (z)          Independent Nature of
Purchasers.  The Company acknowledges that the obligations of
each Purchaser under the Transaction Documents are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under the
Transaction Documents.  The Company acknowledges that each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such
purpose.

     

    (aa)        Dilutive
Effect.  The Company understands and acknowledges that its
obligation to issue the Securities pursuant to the Transaction Documents is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interest of other shareholders of the
Company.

     

    (bb)       DTC
Status.  The Company’s transfer agent is a participant in and
the Common Stock is eligible for transfer pursuant to the Depository Trust
Company Fast Automated Securities Transfer Program.  The name,
address, telephone number, fax number, contact person and email of the Company
transfer agent is set forth on Schedule
2.1(bb).

     

    (cc)        Governmental
Approvals.  Except for the filing of the Prospectus Supplements
and the filing of any notice prior or subsequent to the Closing that may be
required under applicable state and/or federal securities laws or
by  FINRA or the NYSE Amex (which if required, shall be filed on a
timely basis), no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the performance by the Company of its
obligations under the Transaction Documents.

     

    
      
        
        

      

      
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    (dd)       Insurance.  The
Company and each of its Subsidiaries carry or are covered by insurance in such
amounts and covering such risks as management of the Company believes to be
prudent.  Neither the Company nor any such Subsidiary has been refused
any material insurance coverage sought or applied for and the Company does not
have any reason to believe that it or any Subsidiary will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not reasonably be expected to have or result in a
Material Adverse Effect.

     

    (ee)        Trading
Activities.  It is understood and acknowledged by the Company
that none of the Purchasers has been asked to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Conversion Shares, the Redemption Shares or the Warrant
Shares for any specified term.  The Company further understands and
acknowledges that one or more Purchasers may engage in hedging and/or trading
activities at various times during the period that the Conversion Shares, the
Redemption Shares or the Warrant Shares are outstanding, including, without
limitation, during the periods that the value of the Conversion Shares, the
Redemption Shares or Warrant Shares are being determined and such hedging and/or
trading activities, if any, can reduce the value of the existing stockholders’
equity interest in the Company both at and after the time the hedging and/or
trading activities are being conducted.

     

    (ff)         Certain Business
Practices.  None of the Company or any Company Subsidiary or,
to the Company's knowledge, any director, officer, agent, employee or other
person or entity acting for or on behalf of Company or any Subsidiary has
violated the U.S. Foreign Corrupt Practices Act of 1977, as amended or to the
knowledge of the Company, anti-corruption laws applicable to the Company or any
Subsidiary.

     

    (gg)       Shell Company
Status.  The Company is not currently, and has not been for the
past twelve (12) months, an issuer of the type described in paragraph (i) of
Rule 144 under the Securities Act.

     

    (hh)       Registration
Statement.

     

    (i)           The
Registration Statement has become effective; no stop order suspending the
effectiveness of the Registration Statement is in effect, and no proceedings for
such purpose are pending before or, to the knowledge of the Company, threatened
by the Commission.  Upon issuance and delivery to the Purchasers in
accordance with the provisions of the Transaction Documents, the Securities
shall be free of any restriction on transferability under federal securities
laws and for Securities consisting of shares of Common Stock, state “Blue Sky”
laws and any certificates or other instruments evidencing or representing the
Securities shall be free of any restrictive legend.

     

    
      
        
        

      

      
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    (ii)           The
Company is in compliance in all material respects with the applicable listing
and corporate governance rules and regulations of the NYSE AMEX Equities (the
“Principal
Market”).  The Company has not, in the preceding twelve (12)
months, received notice from the Principal Market to the effect that the Company
is not in compliance with the listing or maintenance requirements of the
Principal Market. The Company is, and has no reason to believe that it will not
in the foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.

     

    2.2.         Representations and
Warranties of the Purchasers.  Each of the Purchasers hereby
represents and warrants to the Company with respect solely to itself and not
with respect to any other Purchaser as follows as of the date hereof and as of
the Closing Date:

     

    (a)           Organization and Standing of
the Purchasers.  If the Purchaser is an entity, such Purchaser
is a corporation, limited liability company, partnership or limited partnership
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization.

     

    (b)           Authorization and
Power.  Each Purchaser has the requisite power and authority to
enter into and perform the Transaction Documents and to purchase Preferred
Shares and Warrants being sold to it hereunder.  The execution,
delivery and performance of the Transaction Documents by each Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Purchaser or its board of directors,
stockholders, members or partners, as the case may be, is
required.  When executed and delivered by the Purchasers, the
Transaction Documents shall constitute valid and binding obligations of each
Purchaser enforceable against such Purchaser in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.

     

    (c)           No
Conflicts.  The execution, delivery and performance by each
Purchaser of the Transaction Documents to which it is a party and the
consummation by each Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
the Purchaser, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Purchaser is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to the
Purchaser, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations that would not, individually or in the
aggregate, reasonably be expected to have or result in a material adverse effect
on the ability of the Purchaser to perform its obligations
hereunder.

     

    (d)           Certain Fees. The Purchasers have not
employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders’ structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents.

     

    
      
        
        

      

      
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    ARTICLE
3

     

    COVENANTS
AND AGREEMENTS

     

    Unless
otherwise specified in this Article, for so long as any Preferred Shares or
Warrants remain outstanding, and between the date hereof and the Closing Date,
the Company covenants with each Purchaser as follows, which covenants are for
the benefit of each Purchaser their respective permitted assignees.

     

    3.1.         Issuance of the
Shares.  The Company will issue the Preferred Shares, Common
Shares, and Warrants to each Purchaser at the Closing.

     

    3.2.         Compliance with Laws;
Commission.    The Company shall take all necessary
actions and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance (free from any restriction on
transferability under federal securities laws) of the Securities to the
Purchasers or their respective subsequent holders.

     

    3.3.         Registration and
Listing.  The Company shall cause its Common Stock to continue
to be registered under Sections 12(b) of the Exchange Act, to comply in all
material respects with its reporting and filing obligations under the Exchange
Act and to not take any action or file any document (whether or not permitted by
the Securities Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act even if the rules and
regulations thereunder would permit such termination.  The Company
will use its reasonable commercial efforts to continue the listing or trading of
its Common Stock on the Principal Market.  In addition, the Company
shall keep the Registration Statement (or another registration statement
covering issuance of the Warrant Shares) continuously effective.  In
further addition, the Company shall file such amendments to the Registration
Statement (or such other registration statement covering the issuance of Warrant
Shares) and such prospectus supplements that may be necessary for the issuance
of any Conversion Shares, Redemption Shares and/or Warrant Shares to the
Purchasers free of any restrictive legends or other limitation on resale by the
Purchasers under the Securities Act.

     

    3.4.         Keeping of Records and Books
of Account.  The Company shall use reasonable commercial
efforts to keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

     

    3.5.         Other
Agreements.  The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
of the Company to perform under any Transaction Document.  The Company
shall comply with each of its obligations, covenants and agreements under the
other Transaction Documents in all material respects.

     

    
      
        
        

      

      
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    3.6.         Use of
Proceeds.  The proceeds from the sale of the Securities
hereunder shall be used by the Company for general corporate
purposes.

     

    3.7.         Disclosure of
Transaction.

     

    (a)           Except
for press releases and public statements as may upon the advice of outside
counsel be required by law or the rules or regulations of the Principal Market
or the Commission (“Required
Disclosures”), the Company shall separately consult with JGB Management
Inc. (the “Purchaser
Representative”) before issuing any press release with respect to the
Transaction Documents or the transactions contemplated thereby and shall not
issue any such press release or make any public statements (including any
non-confidential filings with governmental entities that name another party
hereto) without the prior consent of the Purchaser Representative, which consent
shall not be unreasonably withheld or delayed.  In the case of any
Required Disclosure, the Company shall provide the Purchaser Representative with
prior notice of such Required Disclosure and use its reasonable best efforts to
consult with and coordinate such Required Disclosure with the Purchaser
Representative.  Unless the Company and the Purchaser Representative
otherwise agree, the Company shall only include in a Required Disclosure such
information that is legally required to be disclosed upon the advice of
counsel.

     

    (b)           The
Company shall file with the Commission a Current Report on Form 8-K (the “Form 8-K”), as soon
as practicable following the date hereof but in no event more than four business
days following the date hereof (the “Announcement Date”),
which shall attach as exhibits all press releases relating to the transactions
contemplated by this Agreement and the Transaction Documents.  In
addition, no later than 8:45 AM New York City Time on the business day following
the Closing Date (the “Closing Announcement
Date”), the Company shall also file a Current Report on Form
8-K.  The Form 8-K, including all exhibits, filed no later than the
Announcement Date and the Closing Announcement Date, shall be subject to prior
review and comment by the Purchaser Representative.  Upon the filing
of the Form 8-K either by the Announcement Date or Closing Announcement Date, as
applicable, no Purchaser shall be deemed to be in possession of any non-public
information regarding the Company.  Notwithstanding the Company’s
failure to comply with its obligation to file the Form 8-K, pursuant to this
Section 3.7(b), following the Announcement Date, or Closing Announcement Date,
as applicable, no Purchaser shall be deemed (A) to have any obligation of
confidentiality with respect to any non-public information of the Company or (B)
to be in breach of any duty to the Company and/or any other person and/or to
have misappropriated any non-public information of the Company, if such
Purchaser engages in transactions in securities of the Company, including,
without limitation, any hedging transactions, short sales or any derivative
transactions based on securities of the Company, while in possession of such
information.

     

    
      
        
        

      

      
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    3.8.         Disclosure of Material
Information; No Obligation of Confidentiality.

     

    (a)           The
Company covenants and agrees that neither it nor any other person or entity
acting on its behalf will provide any Purchaser or its agents or counsel with
any information that the Company believes constitutes non-public information,
unless prior thereto such Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information.  The
Company understands and confirms that each Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.  In the event of a breach of the foregoing covenant by the
Company, or any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, the Company shall publicly disclose any
material, non-public information in a Form 8-K within one business day following
the date that it discloses such information to any Purchaser or such earlier
time as may be required by Regulation FD or other applicable
law.   In the event that the Company discloses any non-public
information to a Purchaser and fails to publicly file a Form 8-K in accordance
with the above, then a Purchaser shall have the option to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents; provided, however, such Purchaser shall provide the Company with a
copy of such press release, public advertisement or other public announcement at
least twelve hours prior to its public dissemination.  No Purchaser
shall have any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, stockholders or agents, for any
such disclosure.

     

    (b)           No
Purchaser shall be deemed to have any obligation of confidentiality with respect
to (i) any non-public information of the Company disclosed to such Purchaser in
breach of Section 3.8(a) (whether or not the Company files a Form 8-K as
provided above), (ii) the fact that any Purchaser has exercised any of its
rights and/or remedies under the Transaction Documents or (iii) any information
obtained by any Purchaser as a result of exercising any of its rights and/or
remedies under the Transaction Documents.   In further addition,
no Purchaser shall be deemed to be in breach of any duty to the Company and/or
to have misappropriated any non-public information of the Company, if such
Purchaser engages in transactions of securities of the Company, including,
without limitation, any hedging transactions, short sales or any derivative
transactions based on securities of the Company while in possession of such
non-public information.

     

    (c)           Any
Form 8-K, including all exhibits thereto, filed by the Company pursuant to Section 3.8(a) shall
be subject to prior review and comment by the applicable Purchaser.

     

    (d)           From
and after the filing of any Form 8-K pursuant to Section 3.8(a) with the
Commission, no Purchaser shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of their
respective officers, directors, employees or agents, that is not disclosed in
such Form 8-K filed pursuant to Section 3.8(a).

     

    3.9.         Amendments to Charter
Documents.  The Company shall not, without the consent of each
holder of the Preferred Shares then held by the Purchasers, amend or waive any
provision of the Articles or By-laws of the Company whether by merger,
consolidation or otherwise in any way that would adversely affect any rights of
the holder of the Securities.  Without limiting the generality of the
foregoing, without the prior express written consent of the Required Holders (as
defined in the Certificate of Designations), the Company shall not hereafter
authorize or issue additional or other capital stock that is of senior or
pari-passu rank to the Preferred Shares in respect of the preferences as to
dividends and other distributions, amortization and redemption payments and
payments upon a Liquidation Event (as defined in the Certificate of
Designations).  The Company shall be permitted to issue preferred
stock that is junior in rank to the Preferred Shares in respect of the
preferences as to dividends and other distributions, amortization and redemption
payments and payments upon a Liquidation Event, provided, that the maturity date
(or any other date requiring redemption, repayment or any other payment,
including, without limitation, dividends in respect of any such preferred
shares) of any such junior preferred shares is not on or before ninety-one (91)
days after the Maturity Date (as defined in the Certificate of
Designations).

     

    
      
        
        

      

      
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    3.10.      No
Pledge.  Neither the Company nor any Subsidiary (except for the
existing mortgage by Progenitor Cell Therapy, LLC on the property located in
Allendale, New Jersey (the “Allendale Property”),
as it may be increased by up to $1 million or otherwise amended from time to
time (not to exceed a total of $3.9 million), and any existing pledges by
Neostem (China) Inc. prior to the Closing Date) shall create, incur or permit to
exist any pledge, mortgage, lien, charge, encumbrance, hypothecation or other
grant of security interest, whether direct or indirect, voluntary or involuntary
or by operation of law on any assets without the prior written consent of a
majority of the holders of the Preferred Shares (“Pledge
Limitations”).  Such Pledge Limitations shall not apply to (1)
any pledges by Suzhou Erye Pharmaceutical Co., Ltd (“Suzhou”), a company
organized under the laws of the People’s Republic of China (for the avoidance of
doubt, neither the Company nor any Subsidiary shall guarantee (directly or
indirectly) any Indebtedness of any kind incurred by Suzhou), (2) capital or
equipment leases or purchase money financing arrangements first incurred after
the date hereof involving less than $2.5 million in the aggregate so long as the
collateral is limited to the equipment or other Property leased or purchased
(“Permitted Equipment Financing”) (for the avoidance of doubt, once any portion
of Permitted Equipment Financing has been repaid by the Company or any
Subsidiary, as applicable, it may not be reborrowed), (3) insurance premium
financing, (4) any pledges securing debt described by the last sentence of
Section 3.11 or (5) any “Permitted Liens.”  (“Permitted Liens”
shall mean: (i) liens imposed by law for taxes, assessments or charges or levies
of any governmental authority for claims not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP; (ii) liens of landlords and liens of carriers,
warehousemen, suppliers, mechanics, materialmen and other liens in existence on
the date hereof or thereafter imposed by law and created in the ordinary course
of business; (iii) liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts, statutory obligations and other similar obligations, (iv) easements
(including, without limitations, reciprocal easement agreements and utility
agreements), rights-of-way, covenants, consents, reservations, encroachments,
variations and zoning and other restrictions, charges or encumbrances (whether
or not recorded) and interest of ground lessors, which do not interfere
materially with the ordinary conduct of the business of the Company; (v) letters
of credit or deposits in the ordinary course to secure leases, and (vi) liens
consisting of customary transfer restrictions in joint venture agreements,
stockholder agreements or other similar agreements.

     

    
      
        
        

      

      
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    3.11.       Indebtedness;
Rank.  Except for the mortgage held by Progenitor Cell Therapy,
LLC on the Allendale Property as it may be increased by up to $1 million or
otherwise amended from time to time (not to exceed a total of $3.9 million),
existing Indebtedness incurred by Neostem (China) Inc. prior to the Closing
Date, other borrowing by NeoStem (China) to provide for foreign currency
exchange and secured by cash reserves of 100% of the amount borrowed, any
Indebtedness incurred by Suzhou, Permitted Equipment Financing (for the
avoidance of doubt, once any portion of Permitted Equipment Financing has been
repaid by the Company or any Subsidiary, as applicable, it may not be
reborrowed) and insurance premium financing, the Company will not, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
Indebtedness of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom that is senior in any respect to the Preferred Shares without the
prior written consent of a majority of the holders of the Preferred
Shares.  Without limiting the foregoing, the Company will not create
any class or series of Securities having preference over, or senior to, the
Preferred Shares without the prior written consent of a majority of the holders
of the Preferred Shares.  Notwithstanding the foregoing, if the
Company acquires any other business, whether through merger, sale of stock, sale
of assets or otherwise, and such business is obligated under any Indebtedness,
such acquisition shall be permitted and neither this Section 3.11 nor Section
3.10 will be deemed to have been breached by virtue of the assumption of such
Indebtedness in or by virtue of the acquisition transaction; provided, that such
acquired business did not incur Indebtedness or encumber its assets in
contemplation of such acquisition.

     

    3.12.       No Guarantees of
Indebtedness.  The Company will not guarantee (directly or
indirectly), any Indebtedness of any Subsidiary, including without limitation,
any Indebtedness of Suzhou.

     

    3.13.       Certificate re: Tax
Status:  Upon the request of any Purchaser, the Company shall
deliver to such Purchaser a certificate in the form of Exhibit E and as of
such date as may be requested by such Purchaser and shall make such filings as
may be required to permit such Purchaser to rely on such certification to
establish that an interest in the Company is not a U.S. real property interest
holding corporation for the purposes of the Code.

     

    3.14.       Special Stockholders
Meeting.  The Company agrees to call a special meeting of
shareholders, to file with the SEC a proxy statement/prospectus within thirty
days of the date hereof and will use commercially reasonable efforts hold within
eighty days of the
date hereof (or one-hundred days after the date hereof if
the proxy statement/prospectus is reviewed by the SEC), a special stockholders
meeting for the purpose of approving the issuance in full of all Conversion
Shares and Redemption Shares issued pursuant to the Certificate of Designations
and all Warrant Shares pursuant to the Warrants.  The Purchasers
acknowledge that they cannot convert the Preferred Stock to Common Stock or
exercise the Warrants for more than an aggregate of [___] shares [19.9% of the outstanding NeoStem
Common Stock minus shares to be issued in simultaneous common stock offerings
and the number of common shares issued hereunder] [PLEASE FILL IN], or
exercise any voting rights, until after shareholder approval of such issuances
is obtained at such shareholders meeting.

     

    3.15.       Tax
Compliance.  The Company shall keep such records and make such
tax filings, including filing IRS Form 5452 and making the election under
Treasury Regulation 1.1441-3(c)(2)(i)(C), as may be required in connection with
any actual or deemed distribution with respect to the capital stock of the
Company (including, without limitation, the Preferred Shares) that is not
taxable as a “dividend” for U.S. federal income tax purposes.

     

    
      
        
        

      

      
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    ARTICLE
4

    
    

    CONDITIONS

     

    4.1.         Conditions Precedent to the
Obligation of the Company to Close and to Sell the
Securities.  The obligation hereunder of the Company to close
and issue and sell the Securities to the Purchasers at the Closing is subject to
the satisfaction or waiver, at or before the Closing of the conditions set forth
below.  These conditions are for the Company’s sole benefit and may be
waived by the Company (other than as set forth in Section 4.1(g) below) at any
time in its sole discretion.

     

    (a)          Accuracy of the Purchasers’
Representations and Warranties. The representations and warranties of
each Purchaser shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time, except for
representations and warranties that are expressly made as of a particular date,
which shall be true and correct in all material respects as of such
date.

     

    (b)          Performance by the
Purchasers.  Each Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Purchasers at or prior to the Closing Date.

     

    (c)          Escrow. The
Purchasers shall have executed and delivered the Escrow Agreement.

     

    (d)          No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

     

    (e)          Delivery of Subscription
Amount.  Each Purchaser shall have delivered to the Company its
Subscription Amount for the Preferred Shares, Common Shares, and Warrants
purchased by such Purchaser.

     

    (f)           Delivery of Transaction
Documents.  The Transaction Documents shall have been duly
executed and delivered by the Purchasers to the Company.

     

    (g)          Satisfaction of Certain
Other Conditions.  The conditions of the Placement Agents’
obligations set forth in Section 6 of that certain Placement Agency Agreement
dated of even date herewith by and among the Company and the Placement Agents
(the “Placement Agency Agreement”) shall have been satisfied by the Company in
full and the Placement Agency Agreement shall not have been terminated by the
Placement Agents pursuant to Section 8 of the Placement Agency
Agreement.

     

    4.2.         Conditions Precedent to the
Obligation of the Purchasers to Close and to Purchase the
Securities.  The obligation hereunder of the Purchasers to
purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below.  These conditions are for the
Purchasers’ sole benefit and may be waived by the Purchasers (other than as set
forth in Section 4.2(q) below) at any time in their sole
discretion.

     

    
      
        
        

      

      
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    (a)          Accuracy of the Company’s
Representations and Warranties.  The representations and
warranties of the Company in this Agreement and the other Transaction Documents
shall be true and correct in all material respects as of the date when made and
as of the Closing Date, except for representations and warranties that speak as
of a particular date, which shall be true and correct in all material respects
as of such date.

     

    (b)          Performance by the
Company.  The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.

     

    (c)          Escrow. The Company
shall have executed and delivered the Escrow Agreement.

     

    (d)          Prospectus: Registration
Statement.  The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) under the Securities Act within the
applicable time period prescribed for such filing by the rules and regulations
under the Securities Act; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or, to the Company’s
knowledge, threatened by the Commission and no notice of objection by the
Commission to the use of the Registration Statement or any post-effective
amendment thereto pursuant to Rule 401 (g)(2) under the Securities Act
shall have been received; no stop order suspending or preventing the use of the
Prospectus shall have been initiated or threatened by the
Commission.

     

    (e)           No Suspension,
Etc.  The shares of Common Stock (i) shall be designated for
quotation or listed on the Principal Market and (ii) shall not have been
suspended, as of the Closing Date, by the Commission or the Principal Market
from trading on the Principal Market nor shall suspension by the Commission or
the Principal Market have been threatened, as of the Closing Date, either (A) in
writing by the Commission or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market.

     

    (f)           No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

     

    (g)          No Proceedings or
Litigation.  No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary or any Purchaser, or any of the officers,
directors or affiliates of the Company or any Subsidiary or any Purchaser
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

     

    (h)           Opinion of
Counsel.  The Purchasers shall have received an opinion of
counsel to the Company, dated the Closing Date, substantially in the form of
Exhibit G
hereto, with such exceptions and limitations as shall be reasonably acceptable
to counsel to the Purchasers.

     

    
      
        
        

      

      
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    (i)           Receipt of
Proceeds.  Prior to the Closing Date or simultaneously
therewith, the Company shall have sold Common Stock and/or warrants for gross
proceeds of not less than $8,000,000 and not more than $15,000,000.

     

    (j)           Secretary’s
Certificate. The Company shall have delivered to the Purchasers a
certificate, signed by the Secretary of the Company and dated as of the Closing
Date, as to (i) the resolutions adopted by its Board of Directors approving the
transactions contemplated hereby, (ii) its charter, as in effect at the Closing
Date, (iii) its bylaws, as in effect at the Closing Date, and (iv) the authority
and incumbency of the officers executing the Transaction Documents and any other
documents required to be executed or delivered in connection
therewith.

     

    (k)           Officer’s
Certificate. On the Closing Date, the Company shall have delivered to the
Purchasers a certificate signed by an executive officer on behalf of the
Company,  dated as of the Closing Date, confirming the accuracy of the
Company’s representations, warranties and performance of covenants as of the
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in paragraphs (a)-(e) and (j)-(p) of this Section 4.2 as of
the Closing Date.

     

    (l)           Material Adverse
Effect.  No change having a Material Adverse Effect shall have
occurred.

     

    (m)         Listing
Application.  The Conversion Shares, the Redemption Shares and
the Warrant Shares have been approved for listing on the Principal Market,
subject only to official notice of issuance.

     

    (n)          Approvals.  Except
as otherwise provided in Section 3.14 herein, the Company shall have obtained
all required consents and approvals of its Board of Directors deliver and
perform the Transaction Documents.

     

    (o)          Voting Agreement. The
Purchasers shall have received the Voting Agreement, in the form of Exhibit F attached
hereto, from officers, directors and certain shareholders of the Company, with
respect to the voting of their shares of Common Stock, which shall include Robin
Smith, Catherin M. Vaczy, Larry A. May, Alan G. Harris, Richard Berman, Steven
S. Myers, Drew Bernstein, Eric H.C. Wei, Rim Asia Capital Partners, L.P., Shi
Mingsheng, Madam Zhang Jian and Fullbright Finance Limited.

     

    (p)          Certificate of
Designations.  The Certificate of Designations shall have been
filed with the Secretary of State of the State of Delaware.

     

    (q)          Satisfaction of Certain
Other Conditions.  The conditions of the Placement Agents’
obligations set forth in Section 6 of the Placement Agency Agreement shall have
been satisfied by the Company in full and the Placement Agency Agreement shall
not have been terminated by the Placement Agents pursuant to Section 8 of the
Placement Agency Agreement.

     

    
      
        
        

      

      
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    ARTICLE
5

     

    TERMINATION

     

    5.1.         Termination.  This
Agreement may be terminated at any time prior to the Closing Date:

     

    5.1.1.  by
either Purchasers representing a majority of the Total Subscription Amount or
the Company if the Closing shall not have occurred by November 19, 2010 (the
“Termination
Date”), provided,
however that the right to terminate this Agreement under this Section
5.1.1 shall not be available to any party whose breach of any
representation or warranty or failure to perform any obligation under this
Agreement shall have caused or resulted in the failure of the Closing to occur
on or prior to such date; or

     

    5.1.2.  Purchasers
representing a majority of the Total Subscription Amount or the Company in the
event that any federal, state or local court, governmental, legislative,
judicial, administrative or regulatory authority, agency, commission, body or
other governmental entity or self regulatory organization or stock exchange
(each, a “Governmental
Authority”) shall have issued any statute, law, ordinance, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and restrain, enjoins or otherwise
prohibits consummation of any transaction contemplated by this Agreement
(collectively, an “Order”) and such
Order shall have become final and nonappealable; or

     

    5.1.3.  by
the Company if there has been a material breach of any representation, warranty,
covenant or agreement made by Purchasers in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 4.1(a) would not be satisfied and such breach or
condition is not curable or, if curable, is not cured within five (5) days after
written notice thereof is given by the Company to Purchasers (but in any event
not later than the Termination Date); or

     

    5.1.4.  by
Purchasers representing a majority of the Total Subscription Amount if there has
been a material breach of any representation, warranty, covenant or agreement
made by the Company in this Agreement, or any such representation and warranty
shall have become untrue after the date of this Agreement, such that Section
4.2(a) would not be satisfied and such breach or condition is not curable or, if
curable, is not cured within five (5) days after written notice thereof is given
by Purchaser to the Company (but in any event not later than the Termination
Date); or

     

    
      
        
        

      

      
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    5.1.5.  by
the mutual written consent of the Purchasers representing a majority of the
Total Subscription Amount and the Company.

     

    5.2.         In
the event of termination of this Agreement as provided in this Section 5.2,
this Agreement shall forthwith become void, except that this Article 5 and
Article 7 herein shall survive.  No such termination shall relieve any
party from liability for any breach of this Agreement, material
misrepresentation or fraud.

     

    ARTICLE
6

     

    INDEMNIFICATION

     

    6.1.         General
Indemnity.  The Company agrees to indemnify and hold harmless
each Purchaser and its respective directors, officers, affiliates, members,
managers, employees, agents, successors and assigns (collectively, “Indemnified Parties”)
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys’ fees, charges
and disbursements) incurred by any Indemnified Party as a result of, arising out
of or based upon (i) any inaccuracy in or breach of the Company’s
representations or warranties in this Agreement; (ii) the Company’s breach of
agreements or covenants made by the Company in this Agreement or any Transaction
Document; (iii) any third party claims arising out of or resulting from the
transactions contemplated by this Agreement or any other Transaction Document
(unless such claim is based upon conduct by such Indemnified Party that
constitutes fraud, gross negligence or willful misconduct); (iv) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Prospectus Supplement or any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Purchaser furnished in writing to the Company by or
on behalf of any Purchaser; (v) any breach by the Company of the Securities Act
or the rules promulgated thereunder, or (vi) any third party claims arising
directly or indirectly out of such Indemnified Party’s status as owner of the
Securities or the actual, alleged or deemed control or ability to influence the
Company or any Subsidiary (unless such claim is based upon conduct by such
Purchaser that constitutes fraud, gross negligence or willful
misconduct).

     

    
      
        
        

      

      
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    6.2.         Indemnification
Procedure.  With respect to any third-party claims giving rise
to a claim for indemnification, the Indemnified Party will give written notice
to the Company of such third party claim; provided, that the failure of
any party entitled to indemnification hereunder to give notice as provided
herein shall not relieve the Company of its obligations under this Article 5
except to the extent that the Company is actually materially prejudiced by such
failure to give notice. In case any such action, proceeding or claim is brought
against an Indemnified Party in respect of which indemnification is sought
hereunder, the Company shall be entitled to participate in and, unless in the
reasonable judgment of the Indemnified Party a conflict of interest between it
and the Indemnified Party exists with respect to such action, proceeding or
claim (in which case the Company shall be responsible for the reasonable fees
and expenses of one separate counsel for the Indemnified Parties), to assume the
defense thereof with counsel satisfactory to the Indemnified
Party.  In the event that the Company advises an Indemnified Party
that it will not contest such a claim for indemnification hereunder, or fails,
within 10 days of receipt of any indemnification notice to notify, in writing,
such person or entity of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or discontinues its
defense at any time after it commences such defense), then the Indemnified Party
may, at its option, defend, settle or otherwise compromise or pay such action or
claim.   In any event, unless and until the Company elects in
writing to assume and does so assume the defense of any such claim, proceeding
or action, the Indemnified Party’s costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding shall
be losses subject to indemnification hereunder.  The Company shall
keep the Indemnified Party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto.  If the
Company elects to defend any such action or claim, then the Indemnified Party
shall be entitled to participate in such defense with counsel of its choice at
its sole cost and expense.  Notwithstanding anything in this Article 6
to the contrary, the Company shall not, without the Indemnified Party’s prior
written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof.  The indemnification obligations to
defend the Indemnified Party required by this Article 6 shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the Indemnified Party shall refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification.  The indemnity agreements contained
herein shall be in addition to (a) any cause of action or similar rights of the
Indemnified Party against the Company or others, and (b) any liabilities the
Company may be subject to pursuant to the law.

     

    6.3.         Contribution.  If
the indemnification provided for in Section 6.1 is unavailable to any
Indemnified Party thereunder in respect of any losses, liabilities,
deficiencies, costs, damages or expenses (or actions in respect thereof)
referred to in such Section, then the Company shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses,
liabilities, deficiencies, costs, damages or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and such Indemnified Party on the
other.

     

    ARTICLE
7

     

    MISCELLANEOUS

     

    7.1.         Fees and
Expenses.  The Company shall reimburse each Purchaser for all costs and
expenses reasonably incurred by such Purchaser in connection with the
negotiation, drafting and execution of the Transaction Documents and the
transactions contemplated thereby (including all legal fees, travel,
disbursements and due diligence in connection therewith and all fees incurred in
connection with any necessary regulatory filings and clearances); provided, however, that the
amount of such costs and expenses due to the Purchasers shall be reduced by an
amount equal to $25,000, which has been previously advanced to the Purchasers;
provided, further,
however, that the Company shall have no obligation to reimburse the
Purchasers for any such costs and expenses to the extent that they exceed, in
the aggregate, $75,000, unless otherwise agreed in writing by the
Company.  In addition, the Company shall pay all reasonable fees and
expenses incurred by any Purchaser in connection with the enforcement of this
Agreement or any of the other Transaction Documents, including, without
limitation, all reasonable attorneys’ fees and expenses; provided, however, that in the event
that the enforcement of this Agreement is contested and it is finally judicially
determined that such Purchaser was not entitled to the enforcement of the
Transaction Document sought, then the Purchaser seeking enforcement shall
reimburse the Company for all fees and expenses paid pursuant to this
sentence.  The Company shall be responsible for its own fees and
expenses incurred in connection with the transactions contemplated by this
Agreement, including the fees and expenses of the Placement
Agents.  The Company shall pay all fees of its transfer agent, stamp
taxes and other taxes and duties levied in connection with the delivery of the
Securities to each Purchaser.

     

    
      
        
        

      

      
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    7.2.         Specific Performance;
Consent to Jurisdiction; Venue.

     

    (a)           The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific terms
or were otherwise breached.  It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement or the other Transaction Documents and to
enforce specifically the terms and provisions hereof or thereof without the
requirement of posting a bond or providing any other security, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.

     

    (b)           The
parties agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue.  The parties
irrevocably consent to personal jurisdiction in the state and federal courts in
New York County of the state of New York.  The Company and each
Purchaser consent to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law. The parties hereby waive all rights to a trial by
jury.

     

    7.3.         Amendment.  No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and Purchasers holding at least a majority of
the outstanding principal amount of the Preferred Shares; provided, that any
waiver or amendment of any provision effecting the rights, obligations or
conditions of, or relating to, the Placement Agents shall not be effective
without the written consent of Cowen and Company, LLC.

     

    7.4.         Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur or (c) upon delivery
by e-mail (if delivered on a Business Day during normal business hours where
such notice is to be received) upon recipient’s actual receipt and
acknowledgement of such e-mail. The addresses for such communications shall
be:

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    
      
        	
                If
      to the Company:

              	
                Neostem,
      Inc.

                420
      Lexington Avenue

                Suite
      450

                New
      York, New York

                Attention:
      General Counsel

                Telephone
      No.: 212-584-4180

                Facsimile
      No.: 646-514-7787

                E-mail: cvaczy@neostem.com

              
	 
      	 
      
	
                with
      a copy to:

              	
                Lowenstein
      Sandler PC

                65
      Livingston Avenue

                Roseland,
      New Jersey 07068

                Attention:  Alan
      Wovsaniker

                Telephone
      No.:  (973) 597 2564

                Telecopy
      No.: (973) 597 2565

                E-mail: awovsaniker@lowenstein.com

              
	 
      	 
      
	
                If
      to any Purchaser:

              	
                At
      the address of such Purchaser set forth on such Purchaser’s signature
      page

              
	 
      	 
      
	
                With
      a copy to (which shall not constitute
      notice):

              	
                Kleinberg,
      Kaplan, Wolff & Cohen, P.C.

                551
      Fifth Avenue, 18th Floor

                New
      York, New York  10176

                Attention:  Lawrence
      D. Hui, Esq.

                Telephone
      No.:  (212) 986-6000

                E-mail:
      lhui@kkwc.com

              


      

    

    


    Any party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other party hereto.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

    

    7.5.         Waivers.  No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it
thereafter.  No consideration shall be offered or paid to any
Purchaser to amend or waive or modify any provision of this Agreement unless the
same consideration is also offered to all of the parties to this Agreement then
holding Preferred Shares.  This provision constitutes a separate right
granted to each Purchaser by the Company and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase
disposition or voting of Securities or otherwise.

     

    7.6.         Headings.  The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose and
shall not be deemed to limit or affect any of the provisions
hereof.

     

    7.7.         Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns.  The
Purchasers may assign the Securities and its rights under this Agreement and the
other Transaction Documents and any other rights hereto and thereto without the
consent of the Company.  The Company may not assign or delegate any of
its rights or obligations hereunder or under any Transaction
Document.

     

    7.8.         No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person or entity, except that the Placement Agents are intended third party
beneficiaries of the representations, warranties and agreements of the Company
contained herein.

     

    7.9.         Governing Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts of
law principles that would result in the application of the substantive law of
another jurisdiction.  This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.

     

    7.10.       Survival.  The
covenants, agreements and representations and warranties of the Company under
the Transaction Documents shall survive the execution and delivery hereof
indefinitely.

     

    7.11.       Counterparts.  This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.  Signature pages to this Agreement may be delivered by
facsimile or other means of electronic transmission.

     

    7.12.       Publicity.  Subject
to Section 3.7, the Company agrees that it will not disclose, and will not
include in any public announcement, the names of the Purchasers without the
consent of the Purchasers, which consent shall not be unreasonably withheld or
delayed, or unless and until such disclosure is required by law, rule or
applicable regulation, and then only to the extent of such requirement.
Notwithstanding the foregoing, the Purchasers consent to being identified in any
filings the Company makes with the Commission to the extent required by law or
the rules and regulations of the Commission.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

       

    

    7.13.       Severability.  The
provisions of this Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.

     

    7.14.       Further
Assurances.  From and after the date of this Agreement, upon
the request of the Purchasers or the Company, the Company and each Purchaser
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the other Transaction
Documents

     

    7.15.       Independent Nature of
Purchasers’ Obligations and Rights.  The rights and obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document.  Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchaser as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  The Company acknowledges, that each Purchaser
has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and
advisors.  Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

     

    7.16.       Time Is of the
Essence.  Time is of the essence of this Agreement and each
Transaction Document.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         


      

      
        30

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized officers as of the
date first above written.

     

    
      
        
          
            
              
                
                  
                    	
                            NEOSTEM,
      INC.

                          
	 
      	 
      
	
                            By:

                          	      
                            /s/ Robin L.
Smith

                          
	
                            Name:

                          	Robin
      L. Smith
	
                            Title:

                          	Chief
      Executive Officer
	 
      	 
      
	
                            JGB
      MANAGEMENT INC.

                          
	 
      	 
      
	
                            By:

                          	/s/
      Brett Cohen
	
                            Name:

                          	Brett
      Cohen
	
                            Title:

                          	Director


                  

                

              

            

          

        

      

    

     

    [SIGNATURE
PAGES CONTINUE]

    
       

    

    
      
         


      

      
         


        
          

        

      

      
         


      

    
 

    [PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

     

    IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

     

    Name of
Purchaser:
_____________________________________________________________

     

    Signature
of Authorized Signatory of Purchaser:
______________________________________

     

    Name of
Authorized Signatory:
____________________________________________________

     

    Title of
Authorized Signatory:
_____________________________________________________

     

    Email
Address of
Purchaser:_______________________________________________________

     

    Fax
Number of Purchaser:
________________________________________________________

     

    Address
for Notice of Purchaser:
___________________________________________________

     

    Address
for Delivery of Securities for Purchaser (if not same as address for notice):
______________________________________________________________________________

     

    Subscription
Amount: $_________________

     

    [SIGNATURE
PAGES CONTINUE]

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

     

    LIST
OF PURCHASERS AND SUBSCRIPTION AMOUNT

     

    
      
         


      

      
        A-1

        
          

        

      

      
         


      

    


    EXHIBIT
B

     

    FORM
OF CERTIFICATE OF DESIGNATIONS

    
    

    
      
         


      

      
        B-1

        
          

        

      

      
         


      

    


    EXHIBIT
C

     

    FORM
OF WARRANT

     

    
      
         


      

      
        C-1

        
          

        

      

      
         


      

    


    EXHIBIT
D

     

    FORM
OF ESCROW AGREEMENT 


    
      
         


      

      
        D-1

        
          

        

      

      
         


      

    
 

    EXHIBIT
E

    


    FIRPTA
CERTIFICATE

     

    At no
time during the period beginning five years prior to [date] and ending on [date]
was Neostem, Inc. a “United States real property holding corporation,” as such
term is defined by Section 897(b)(2) of the Internal Revenue Code of 1986, as
amended.

     

    Under
penalties of perjury I declare that I have examined this certification and, to
the best of my knowledge and belief, it is true, correct and
complete.

     

    
      
        
          
            
              	
                      By:

                    	
                         
      

                    
	
                      Title:

                    	
                       
      

                    
	
                      Date:

                    	
                        
      

                    


            

          

        

      

    

     

    
      
         


      

      
        
          E-1

        

        
          

        

      

      
         


      

    
 

    EXHIBIT
F

     

    FORM
OF VOTING AGREEMENT

     

    
      
         


      

      
        F-1

        
          

        

      

      
         


      

    


    EXHIBIT
G

    
    

    OPINION
OF COUNSEL TO COMPANY

     

    
      
         


      

      
        G-1