Document:

NEOSTEM,
INC.

    

    2009
EQUITY COMPENSATION PLAN

    

    1.           Purposes of the
Plan.  The purposes of this NeoStem, Inc. 2009 Equity
Compensation Plan (the “Plan”) are: to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentives to Employees, Directors and
Consultants, and to promote the success of the Company and any Parent or
Subsidiary.  Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the Administrator at the
time of grant.  Stock Awards, Unrestricted Shares and Stock
Appreciation Rights may also be granted under
the Plan.

    

    2.           Definitions.  As
used herein, the following definitions shall apply:

    

    “Administrator” means
a Committee which has been delegated the responsibility of administering the
Plan in accordance with Section 4 of the Plan or, if there is no such Committee,
the Board.

    

    “Applicable Laws”
means the requirements relating to the administration of equity compensation
plans under the applicable corporate and securities laws of any of the states in
the United States, U.S. federal securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will
be, granted under the Plan.

    

    “Award” means an
Option, a Stock Award, a Stock Appreciation Right and/or the grant of
Unrestricted Shares.

    

    “Board” means the
Board of Directors of the Company.

    

    “Cause”, with respect
to any Service Provider, means (unless otherwise determined by the
Administrator) such Service Provider’s (i) conviction of, or plea of nolo
contendere to, a felony or crime involving moral turpitude; (ii) fraud on
or misappropriation of any funds or property of the Company; (iii) personal
dishonesty, willful misconduct, willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses) or breach of fiduciary
duty which involves personal profit; (iv) willful misconduct in connection
with the Service Provider’s duties; (v) chronic use of alcohol, drugs or
other similar substances which affects the Service Provider’s work performance;
or (vi) material breach of any provision of any employment, non-disclosure,
non-competition, non-solicitation or other similar agreement executed by the
Service Provider for the benefit of the Company, all as reasonably determined by
the Committee, which determination will be
conclusive.  Notwithstanding the foregoing, if a Service Provider and
the Company (or any of its Affiliates) have entered into an employment
agreement, consulting agreement, advisory agreement or other similar agreement
that specifically defines “cause,” then with respect to such Service Provider,
“Cause” shall have the meaning defined in that employment agreement, consulting
agreement, advisory agreement or other agreement.

    

    “Code” means the
Internal Revenue Code of 1986, as amended.

    

    “Committee” means a
committee of Directors appointed by the Board in accordance with Section 4 of
the Plan.

    

    “Common Stock” means
the common stock, par value $.001 per share, of the Company.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    “Company” means
Neostem, Inc., a Delaware corporation.

    

    “Consultant” means any
person, including an advisor, engaged by the Company or a Parent or Subsidiary
to render services to such entity, other than an Employee or a
Director.

    

    “Director” means a
member of the Board.

    

    “Disability” means
total and permanent disability as defined in Section 22(e)(3) of the
Code.

    

    “Employee” means any
person, including officers and Directors, serving as an employee of the Company
or any Parent or Subsidiary.  An individual shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its Parent,
any Subsidiary or any successor.  For purposes of an Option initially
granted as an Incentive Stock Option, if a leave of absence of more than three
months precludes such Option from being treated as an Incentive Stock Option
under the Code, such Option thereafter shall be treated as a Nonstatutory Stock
Option for purposes of this Plan.  Neither service as a Director nor
payment of a director’s fee by the Company shall be sufficient to constitute
“employment” by the Company.

    

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

    

    “Fair Market Value”
means, as of any date, the value of Common Stock determined as
follows:

    

    (i)           if
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the NYSE Amex, Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, or any
successor to any of them, the Fair Market Value of a Share of Common Stock shall
be the closing sales price of a Share of Common Stock as quoted on such exchange
or system for such date (or the most recent trading day preceding such date if
there were no trades on such date), as reported in The Wall Street
Journal or such other source as the Committee deems reliable, including
without limitation, Yahoo! Finance;

    

    (ii)           if
the Common Stock is regularly quoted by a recognized securities dealer but is
not listed in the manner contemplated by clause (i) above, the Fair Market Value
of a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for such date (or the most recent trading day
preceding such date if there were no trades on such date), as reported in The Wall Street Journal
or such other source as the Committee deems reliable, including without
limitation Yahoo! Finance; or

    

    (iii)           if
neither clause (i) above nor clause (ii) above applies, the Fair Market Value
shall be determined in good faith by the Administrator based on the reasonable
application of a reasonable valuation method.

    

    “Grant Agreement”
means an agreement between the Company and a Participant evidencing the terms
and conditions of an individual Option or Stock Appreciation Right
grant.  Each Grant Agreement shall be subject to the terms and
conditions of the Plan.

    

    
      
         

      

      
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    “Incentive Stock
Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated
thereunder.

    

    “Nonstatutory Stock
Option” means an Option not intended to qualify as an Incentive Stock
Option.

    

    “Notice of Grant”
means a written or electronic notice evidencing certain terms and conditions of
an individual Option grant, Stock Award grant or grant of Unrestricted Shares or
Stock Appreciation Rights.  The Notice of Grant applicable to Stock
Options or Stock Appreciation Rights shall be part of the Grant
Agreement.

    

    “Option” means a stock
option granted pursuant to the Plan.

    

    “Optioned Stock” means
the Common Stock subject to an Option.

    

    “Optionee” means the
holder of an outstanding Option granted under the Plan.

    

    “Parent” means a
“parent corporation” of the Company (or, for purposes of Section 16(b) of the
Plan, a successor to the Company), whether now or hereafter existing, as defined
in Section 424(e) of the Code.

    

    “Participant” shall
mean any Service Provider who holds an Option, Restricted Stock, a Stock Award,
Unrestricted Shares or a Stock Appreciation Right granted or issued pursuant to
the Plan.

    

    “Rule 16b-3” means
Rule 16b-3 of the Exchange Act or any successor to such Rule 16b-3, as such rule
is in effect when discretion is being exercised with respect to the
Plan.

    

    “Section 16(b)” means
Section 16(b) of the Exchange Act.

    

    “Service Provider”
means an Employee, Director or Consultant.

    

    “Share” means a share
of the Common Stock, as adjusted in accordance with Section 16 of the
Plan.

    

    “Stock Appreciation
Right” means a right awarded pursuant to Section 14 of the
Plan.

    

    “Stock Award” means an
Award of Shares pursuant to Section 11 of the Plan or an award of Restricted
Stock Units pursuant to Section 12 of the Plan.

    

    “Stock Award
Agreement” means an agreement, approved by the Administrator, providing
the terms and conditions of a Stock Award.

    

    “Stock Award Shares”
means Shares subject to a Stock Award.

    

    “Stock Awardee” means
the holder of an outstanding Stock Award granted under the Plan.

    

    “Subsidiary” means a
“subsidiary corporation” of the Company (or, for purposes of Section 16(b) of
the Plan, a successor to the Company), whether now or hereafter existing, as
defined in Section 424(f) of the Code.

    

    
      
         

      

      
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    “Unrestricted Shares”
means a grant of Shares made on an unrestricted basis pursuant to Section 13 of
the Plan.

    

    3.           Stock Subject to the
Plan.  Subject to the provisions of Section 16(a) of the Plan,
the maximum aggregate number of Shares that may be issued under the Plan is
17,750,000 Shares, all of which may be issued in respect of Incentive Stock
Options.  The Shares may be authorized but unissued, or reacquired,
shares of Common Stock.  The maximum number of Shares subject to
Options and Stock Appreciation Rights which may be issued to any Participant
under the Plan during any calendar year is 1,900,000 Shares. If an Option or Stock Appreciation
Right expires or becomes unexercisable without having been exercised in full or
is canceled or terminated, or if any Shares of Restricted Stock or Shares
underlying a Stock Award are forfeited or reacquired by the Company, the Shares
that were subject thereto shall be added back to the Shares available for
issuance under the Plan.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

    

    4.           Administration of the
Plan.

    

    (a)       Appointment.  The
Plan shall be administered by a Committee to be appointed by the Board, which
Committee shall consist of not less than two members of the Board and shall be
comprised solely of members of the Board who qualify as both non-employee
directors as defined in Rule 16b-3(b)(3) of the Exchange Act and outside
directors within the meaning of Department of Treasury Regulations issued under
Section 162(m) of the Code.  The Board shall have the power to add or
remove members of the Committee, from time to time, and to fill vacancies
thereon arising; by resignation, death, removal, or
otherwise.  Meetings shall be held at such times and places as shall
be determined by the Committee.  A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before that meeting.

    

    (b)      Powers of the
Administrator.  The Administrator shall have the authority, in
its discretion:

    

    (i)              to
determine the Fair Market Value of Shares;

    

    (ii)             to
select the Service Providers to whom Options, Stock Awards, Unrestricted Shares
and/or Stock Appreciation
Rights may be granted
hereunder;

    

    (iii)            to
determine the number of shares of Common Stock to be covered by each Award
granted hereunder;

    

    (iv)          
 to approve forms of agreement for use under the Plan;

    

    (v)             to
determine the terms and conditions, not inconsistent with the terms of the Plan
or of any Award granted hereunder.  Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options and
Stock Appreciation Rights may be exercised (which may be based on performance
criteria), any vesting, acceleration or waiver of forfeiture provisions, and any
restriction or limitation regarding any Option, Stock Appreciation Right or
Stock Award, or the Shares of Common Stock relating thereto, based in each case
on such factors as the Administrator, in its sole discretion, shall
determine;

    

    
      
         

      

      
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    (vi)          
 to construe and interpret the terms of the Plan, Awards granted pursuant
to the Plan and agreements entered into pursuant to the Plan;

    

    (vii)         
 to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax
laws;

    

    (viii)        
 to modify or amend each Award (subject to Section 19(c) of the Plan),
including the discretionary authority to extend, subject to the terms of the
Plan, the post-termination exercisability period of Options or Stock
Appreciation Rights longer than is otherwise provided for in a Grant Agreement
and to accelerate the time at which any outstanding Option or Stock Appreciation
Right may be exercised;

    

    (ix)           
 to allow grantees to satisfy withholding tax obligations by having the
Company withhold from the Shares to be issued upon exercise of an Option or
Stock Appreciation Right, upon vesting of a Stock Award, or upon the grant of
Unrestricted Shares that number of Shares having a Fair Market Value equal to
the amount required to be withheld, provided that withholding is calculated at
the minimum statutory withholding level.  The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined.  All determinations to have Shares
withheld for this purpose shall be made by the Administrator in its
discretion;

    

    (x)             to
reduce the exercise price of any Option or Stock Appreciation
Right;

    

    (xi)            to
authorize any person to execute on behalf of the Company any agreement entered
into pursuant to the Plan and any instrument required to effect the grant of an
Award previously granted by the Administrator; and

    

    (xii)           to
make all other determinations deemed necessary or advisable for administering
the Plan.

    

    (c)       Effect of Administrator’s
Decision.  The Administrator’s decisions, determinations and
interpretations shall be final and binding on all holders of Awards and
Restricted Stock.  None of the Board, the Committee or the
Administrator, nor any member or delegate thereof, shall be liable for any act,
omission, interpretation, construction or determination made in good faith in
connection with the Plan, and each of the foregoing shall be entitled in all
cases to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including without limitation reasonable
attorneys’ fees) arising or resulting therefrom to the fullest extent permitted
by law and/or under any directors’ and officers’ liability insurance coverage
which may be in effect from time to time.

    

    (d)       Delegation of Grant
Authority.  Notwithstanding any other provision in the Plan,
the Board may authorize the Company’s Chief Executive Officer or another
executive officer of the Company or a committee of such officers (“Authorized Officers”)
to grant Options under the Plan; provided, however, that in no
event shall the Authorized Officers be permitted to grant Options to (i) any
Director, (ii) any person who is identified by the Company as an executive
officer of the Company or who is subject to the restrictions imposed under
Section 16 of the Exchange Act, (iii) any person who is not an employee of the
Company or any Subsidiary, or (iv) such other person or persons as may be
designated from time to time by the Board.  If such authority is
provided by the Board, the Board shall establish and adopt written guidelines
setting forth the maximum number of shares for which the Authorized Officers may
grant Options to any individual during a specified period of time and such other
terms and conditions as the Board deems appropriate for such
grants.  Such guidelines may be amended by the Board prospectively at
any time.  Subject to the foregoing, the Authorized Officers shall
have the same authority as the Administrator under this Section 4 with respect
to the grant of Options under the Plan.

    

    
      
         

      

      
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    5.           Eligibility.  Nonstatutory
Stock Options, Stock Awards, Unrestricted Shares and Stock Appreciation Rights
may be granted to Service Providers.  Incentive Stock Options may be
granted only to Employees.  Notwithstanding anything contained herein
to the contrary, an Award may be granted to a person who is not then a Service
Provider; provided, however, that the grant of such Award shall be conditioned
upon such person becoming a Service Provider at or prior to the time of the
execution of the agreement evidencing such Award.

    

    6.           Limitations.

    

    (a)         Each
Option shall be designated in the Grant Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option.  However, notwithstanding such
designation, if a single Employee becomes eligible in any given year to exercise
Incentive Stock Options for Shares having a Fair Market Value in excess of
$100,000, those Options representing the excess shall be treated as Nonstatutory
Stock Options.  In the previous sentence, “Incentive Stock Options”
include Incentive Stock Options granted under any plan of the Company or any
Parent or any Subsidiary.  For the purpose of deciding which Options
apply to Shares that “exceed” the $100,000 limit, Incentive Stock Options shall
be taken into account in the same order as granted.  The Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

    

    (b)         Neither
the Plan nor any Award nor any agreement entered into pursuant to the Plan shall
confer upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause.

    

    7.           Term of the
Plan.  Subject to Section 22 of the Plan, the Plan shall become
effective upon its adoption by the Board.  It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 19 of the
Plan.

    

    8.           Term of
Options.  Unless otherwise provided in the applicable Grant
Agreement, the term of each Option granted to anyone other than a Consultant
shall be ten (10) years from the date of grant and the term of each Option
granted to any Consultant shall be five (5) years from the date of
grant.  In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the applicable Grant Agreement.  However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option
is granted, owns, directly or indirectly, stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant or such shorter term as may be
provided in the applicable Grant Agreement.

    

    9.           Option Exercise Price;
Exercisability.

    

    (a)         Exercise
Price.  The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

    

    (i)         In
the case of an Incentive Stock Option

    

    
      
         

      

      
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    (A)           granted
to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant, or

    

    (B)           granted
to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.

    

    (ii)         In
the case of a Nonstatutory Stock Option, the per Share exercise price shall be
determined by the Administrator; provided, however, that in the case of a
Nonstatutory Stock Option intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the per Share
exercise price of a Nonstatutory Stock Option shall be no less than 100% of the
Fair Market Value per Share on the date of grant, as determined by the
Administrator in good faith.

    

    (iii)        Notwithstanding
the foregoing, Options may be granted with a per Share exercise price of less
than 100% (or 110%, if clause (i)(A) above applies) of the Fair Market Value per
Share on the date of grant pursuant to a merger or other comparable corporate
transaction.

    

    (b)         Exercise Period and
Conditions.  At the time that an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any conditions that must be satisfied before the Option may be
exercised.

    

    (c)         Reload
Options.  The Administrator may grant Options with a reload
feature.  A reload feature shall only apply when the option price is
paid by delivery of Common Stock (as set forth in Section 10(f)) or by
having  the  Company reduce the number of shares otherwise
issuable to an Optionee (as provided for in Section 10(f)) (a “Net
Exercise”).  The Grant Agreement for the Options containing the
reload feature shall provide that the Option holder shall receive,
contemporaneously with the payment of the exercise price in shares of
Common  Stock or in the event of a Net Exercise, a reload stock option
(the “Reload
Option”) to purchase that number of shares of Common Stock equal to the
sum of (i) the number of shares of Common  Stock used to exercise the
Option (or not issued in the case of a Net Exercise), and (ii) with respect to
Nonstatutory Stock Options, the number of shares of Common Stock used to satisfy
any tax withholding requirement incident to the exercise of such Nonstatutory
Stock Option.  The  terms of the Plan applicable to the
Option shall be equally applicable to the Reload Option with the
following  exceptions: (i) the exercise price per share of Common
Stock deliverable upon the exercise of the Reload Option, (A) in the case of a
Reload Option which is an Incentive Stock Option being granted to a 10%
Stockholder, shall be one hundred ten percent (110%) of the Fair Market Value of
a share of Common Stock on the date of grant of the Reload Option, and (B) in
the case of a Reload Option which is an Incentive Stock Option being granted to
a person other than a 10% Stockholder or is a Nonstatutory Stock Option, shall
be the Fair Market Value of a share of Common Stock on the date of grant of the
Reload Option; and (ii) the term of the Reload Option shall be equal to the
remaining option term of the Option (including a Reload Option) which gave rise
to the Reload Option.  The Reload Option shall be evidenced by an
appropriate amendment to the Grant Agreement for the Option which gave rise to
the Reload Option.  In the event the exercise  price of an
Option containing a reload feature is paid by check and not in shares of Common
Stock, the reload feature shall have no application with respect to such
exercise.

    

    
      
         

      

      
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    10.           Exercise of Options;
Consideration.

    

    (a)         Procedure for Exercise; Rights as a
Shareholder.  Any Option granted hereunder shall be exercisable
according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Grant
Agreement.  Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of
absence.  An Option may not be exercised for a fraction of a
Share.  An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Grant
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is
exercised.  Full payment may consist of any consideration and method
of payment authorized by the Administrator and permitted by the Grant Agreement
and Section 10(f) of the Plan.  Shares issued upon exercise of an
Option shall be issued in the name of the Optionee.  Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.  The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 16 of the Plan.  Exercising an
Option in any manner shall decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.

    

    (b)         Termination of Relationship as a
Service Provider.  Unless otherwise specified in the Grant
Agreement or provided by the Administrator, if an Optionee ceases to be a
Service Provider, other than as a result of (x) the Optionee’s death or
Disability, or (y) termination of such Optionee’s employment or relationship
with the Company with Cause, or (z) the Optionee’s voluntary termination of
employment other than as a result of retirement, the Optionee may exercise his
or her Option for up to ninety (90) days following the date on which the
Optionee ceases to be a Service Provider to the extent that the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Grant Agreement).  If, on the
date that the Optionee ceases to be a Service Provider, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan.  If, after the date
that the Optionee ceases to be a Service Provider the Optionee does not exercise
his or her Option in full within the time set forth herein or the Grant
Agreement, as applicable, the unexercised portion of the Option shall terminate,
and the Shares covered by such unexercised portion of the Option shall revert to
the Plan.  An Optionee who changes his or her status as a Service
Provider (e.g., from being an Employee to being a Consultant) shall not be
deemed to have ceased being a Service Provider for purposes of this Section
10(b), nor shall a transfer of employment among the Company and any Subsidiary
be considered a termination of employment; however, if an Optionee holding
Incentive Stock Options ceases being an Employee but continues as a Service
Provider, such Incentive Stock Options shall be deemed to be Nonstatutory Stock
Options three months after the date of such cessation.

    

    (c)         Disability of an
Optionee.  Unless otherwise specified in the Grant Agreement,
if an Optionee ceases to be a Service Provider as a result of the Optionee’s
Disability, the Optionee may exercise his or her Option, to the extent the
Option is vested on the date that the Optionee ceases to be a Service Provider,
up until the one-year anniversary of the date on which the Optionee ceases to be
a Service Provider (but in no event later than the expiration of the term of
such Option as set forth in the Grant Agreement).  If, on the date
that the Optionee ceases to be a Service Provider, the Optionee is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan.  If, after the Optionee ceases to be
a Service Provider, the Optionee does not exercise his or her Option in full
within the time set forth herein or the Grant Agreement, as applicable, the
unexercised portion of the Option shall terminate, and the Shares covered by
such unexercised portion of the Option shall revert to the Plan.

    

    
      
         

      

      
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    (d)         Death of an
Optionee.  Unless otherwise specified in the Grant Agreement,
if an Optionee dies while a Service Provider, the Option may be exercised, to
the extent that the Option is vested on the date of death, by the Optionee’s
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance up until the one-year anniversary of the Optionee’s death (but in
no event later than the expiration of the term of such Option as set forth in
the Notice of Grant).  If, at the time of death, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan.  If the Option is not
so exercised in full within the time set forth herein or the Grant Agreement, as
applicable, the unexercised portion of the Option shall terminate, and the
Shares covered by the unexercised portion of such Option shall revert to the
Plan.

    

    (e)         Termination for Cause or Voluntary
Termination. If a Service Provider’s relationship with the Company is
terminated for Cause, or if a Service Provider voluntarily terminates his or her
relationship with the Company other than as a result of retirement, then, unless
otherwise provided in such Service Provider’s Grant Agreement or by the
Administrator, such Service Provider shall have no right to exercise any of such
Service Provider’s Options at any time on or after the effective date of such
termination.

    

    (f)         Form of
Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant.  Such consideration may consist entirely of:

    

    (i)       
  cash;

    

    (ii)         check;

    

    (iii)        other
Shares which (A) in the case of Shares acquired upon exercise of an option at a
time when the Company is subject to Section 16(b) of the Exchange Act, have been
owned by the Optionee for more than six months on the date of surrender, and (B)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised;

    

    (iv)        consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;

    

    (v)         a
reduction in the number of Shares otherwise issuable by a number of Shares
having a Fair Market Value equal to the exercise price of the Option being
exercised;

    

    (vi)        any
combination of the foregoing methods of payment; or

    

    (vii)       such
other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws.

    

    11.           Stock Awards.  The
Administrator may, in its sole discretion, grant (or sell at par value or such
higher purchase price as it determines) Shares to any Service Provider subject
to such terms and conditions as the Administrator sets forth in a Stock Award
Agreement evidencing such grant.  Stock Awards may be granted or sold
in respect of past services or other valid consideration or in lieu of any cash
compensation otherwise payable to such individual.  The grant of Stock
Awards under this Section 11 shall be subject to the following
provisions:

    

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

       

    

    (a)  At
the time a Stock Award under this Section 11 is made, the Administrator shall
establish a vesting period (the “Restricted Period”)
applicable to the Stock Award Shares subject to such Stock Award.  The
Administrator may, in its sole discretion, at the time a grant is made,
prescribe restrictions in addition to the expiration of the Restricted Period,
including the satisfaction of corporate or individual performance
objectives.  None of the Stock Award Shares may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of during the Restricted
Period applicable to such Stock Award Shares or prior to the satisfaction of any
other restrictions prescribed by the Administrator with respect to such Stock
Award Shares.

    

    (b)  The Company shall issue,
in the name of each Service Provider to whom Stock Award Shares have been
granted, stock certificates representing the total number of Stock Award Shares
granted to such person, as soon as reasonably practicable after the
grant.  The Company, at the direction of the Administrator, shall hold
such certificates, properly endorsed for transfer, for the Stock Awardee’s
benefit until such time as the Stock Award Shares are forfeited to the Company,
or the restrictions lapse.

    

    (c)  Unless otherwise
provided by the Administrator, holders of Stock Award Shares shall have the
right to vote such Shares and have the right to receive any cash dividends with
respect to such Shares.  All distributions, if any, received by a
Stock Awardee with respect to Stock Award Shares as a result of any stock split,
stock distribution, combination of shares, or other similar transaction shall be
subject to the restrictions of this Section 11.

    

    (d)  Any Stock Award Shares
granted to a Service Provider pursuant to the Plan shall be forfeited if the
Stock Awardee voluntarily terminates employment with the Company or its
subsidiaries or resigns or voluntarily terminates his consultancy or advisory
arrangement or directorship with the Company or its subsidiaries, or if the
Stock Awardee’s employment or the consultant’s or advisor’s consultancy or
advisory arrangement or directorship is terminated for Cause, in each case prior
to the expiration or termination of the applicable Restricted Period and the
satisfaction of any other conditions applicable to such Stock Award
Shares.  Upon such forfeiture, the Stock Award Shares that are
forfeited shall be retained in the treasury of the Company and be available for
subsequent awards under the Plan.  If the Stock Awardee’s employment,
consultancy or advisory arrangement or directorship terminates for any other
reason prior to the expiration or termination of the applicable Restricted
Period and the satisfaction of any other conditions applicable to such Stock
Award Shares, the Stock Award Shares held by such person shall be forfeited,
unless the Administrator, in its sole discretion, shall determine
otherwise.

    

    (e)  Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to the Stock
Award Shares shall lapse and, at the Stock Awardee’s request, a stock
certificate for the number of Stock Award Shares with respect to which the
restrictions have lapsed shall be delivered, free of all such restrictions, to
the Stock Awardee or his beneficiary or estate, as the case may be.

    

    (f)  Prior to the delivery of
any shares of Common Stock in connection with a Stock Award under this Section
11, the Company shall be entitled to require as a condition of delivery that the
Stock Awardee shall pay or make adequate provision acceptable to the Company for
the satisfaction of the statutory minimum prescribed amount of federal and state
income tax and other withholding obligations of the Company, including, if
permitted by the Administrator, by having the Company withhold from the number
of shares of Common Stock otherwise deliverable in connection with a Stock
Award, a number of shares of Common Stock having a Fair Market Value equal to an
amount sufficient to satisfy such tax withholding obligations.

    

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

       

    

    12.           Restricted Stock
Units.  The Committee may, in its sole discretion, grant
Restricted Stock Units to a Service Provider subject to such terms and
conditions as the Committee sets forth in a Stock Award Agreement evidencing
such grant.  “Restricted Stock Units” are Awards denominated in units
evidencing the right to receive Shares of Common Stock, which may vest over such
period of time and/or upon satisfaction of such performance criteria or
objectives as is determined by the Committee at the time of grant and set forth
in the applicable Stock Award Agreement, without payment of any amounts by the
Stock Awardee thereof (except to the extent required by law).  Prior
to delivery of shares of Common Stock with respect to an award of Restricted
Stock Units, the Stock Awardee shall have no rights as a stockholder of the
Company.

    

    Upon
satisfaction and/or achievement of the applicable vesting requirements relating
to an award of Restricted Stock Units, the Stock Awardee shall be entitled to
receive a number of shares of Common Stock that are equal to the number of
Restricted Stock Units that became vested.  To the extent, if any, set
forth in the applicable Stock Award Agreement, cash dividend equivalents may be
paid during, or may be accumulated and paid at the end of, the applicable
vesting period, as determined by the Committee.

    

    Unless
otherwise provided by the Stock Award Agreement, any Restricted Stock Units
granted to a Service Provider pursuant to the Plan shall be forfeited if the
Stock Awardee’s employment or service with the Company or its Subsidiaries
terminates for any reason prior to the expiration or termination of the
applicable vesting period and/or the achievement of such other vesting
conditions applicable to the award.

    

    Prior to
the delivery of any shares of Common Stock in connection with an award of
Restricted Stock Units, the Company shall be entitled to require as a condition
of delivery that the Stock Awardee shall pay or make adequate provision
acceptable to the Company for the satisfaction of the statutory minimum
prescribed amount of federal and state income tax and other withholding
obligations of the Company, including, if permitted by the Administrator, by
having the Company withhold from the number of shares of Common Stock otherwise
deliverable in connection with an award of Restricted Stock Units, a number of
shares of Common Stock having a Fair Market Value equal to an amount sufficient
to satisfy such tax withholding obligations.

    

    13.           Unrestricted Shares. The
Administrator may grant Unrestricted Shares in accordance with the following
provisions:

    

    (a)  The
Administrator may cause the Company to grant Unrestricted Shares to Service
Providers at such time or times, in such amounts and for such reasons as the
Administrator, in its sole discretion, shall determine. No payment shall be
required for Unrestricted Shares.

    

    (b)  The
Company shall issue, in the name of each Service Provider to whom Unrestricted
Shares have been granted, stock certificates representing the total number of
Unrestricted Shares granted to such individual, and shall deliver such
certificates to such Service Provider as soon as reasonably practicable after
the date of grant or on such later date as the Administrator shall determine at
the time of grant.

    

    (c)  Prior
to the delivery of any Unrestricted Shares, the Company shall be entitled to
require as a condition of delivery that the Stock Awardee shall pay or make
adequate provision acceptable to the Company for the satisfaction of the
statutory minimum prescribed amount of federal and state income tax and other
withholding obligations of the Company, including, if permitted by the
Administrator, by having the Company withhold from the number of Unrestricted
Shares otherwise deliverable, a number of shares of Common Stock having a Fair
Market Value equal to an amount sufficient to satisfy such tax withholding
obligations.

    

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

       

    

    14.           Stock Appreciation
Rights.  A Stock Appreciation Right may be granted by the
Committee either alone, in addition to, or in tandem with other Awards granted
under the Plan.  Each Stock Appreciation Right granted under the Plan
shall be subject to the following terms and conditions:

    

    (a)  Each
Stock Appreciation Right shall relate to such number of Shares as shall be
determined by the Committee.

    

    (b)  The
Award Date (i.e., the
date of grant) of a Stock Appreciation Right shall be the date specified by the
Committee, provided that that date shall not be before the date on which the
Stock Appreciation Right is actually granted.  The Award Date of a
Stock Appreciation Right shall not be prior to the date on which the recipient
commences providing services as a Service Provider.  The term of each
Stock Appreciation Right shall be determined by the Committee, but shall not
exceed ten years from the date of grant.  Each Stock Appreciation
Right shall become exercisable at such time or times and in such amount or
amounts during its term as shall be determined by the
Committee.  Unless otherwise specified by the Committee, once a Stock
Appreciation Right becomes exercisable, whether in full or in part, it shall
remain so exercisable until its expiration, forfeiture, termination or
cancellation.

    

    (c)  A
Stock Appreciation Right may be exercised, in whole or in part, by giving
written notice to the Committee.  As soon as practicable after receipt
of the written notice, the Company shall deliver to the person exercising the
Stock Appreciation Right stock certificates for the Shares to which that person
is entitled under Section 14(d) hereof.

    

    (d)  A
Stock Appreciation Right shall be exercisable for Shares only.  The
number of Shares issuable upon the exercise of the Stock Appreciation Right
shall be determined by dividing:

    

    (i)  the
number of Shares for which the Stock Appreciation Right is exercised multiplied
by the amount of the appreciation per Share (for this purpose, the “appreciation
per Share” shall be the amount by which the Fair Market Value of a Share on the
exercise date exceeds (x) in the case of a Stock Appreciation Right granted in
tandem with an Option, the exercise price or (y) in the case of a Stock
Appreciation Right granted alone without reference to an Option, the Fair Market
Value of a Share on the Award Date of the Stock Appreciation Right);
by

    

    (ii)  the
Fair Market Value of a Share on the exercise date.

    

    15.           Non-Transferability.  Unless
determined otherwise by the Administrator, an Option or Stock Appreciation Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the
Optionee.  If the Administrator makes an Option or Stock Appreciation
Right transferable, such Option or Stock Appreciation Right shall contain such
additional terms and conditions as the Administrator deems
appropriate.  Notwithstanding the foregoing, the Administrator, in its
sole discretion, may provide in the Grant Agreement regarding a given Option
that the Optionee may transfer, without consideration for the transfer, his or
her Nonstatutory Stock Options to members of his or her immediate family, to
trusts for the benefit of such family members, or to partnerships in which such
family members are the only partners, provided that the transferee agrees in
writing with the Company to be bound by all of the terms and conditions of this
Plan and the applicable Option.  During the period when Shares of
Restricted Stock and Stock Award Shares are restricted (by virtue of vesting
schedules or otherwise), such Shares may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution.

    

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

       

    

    16.           Adjustments Upon Changes in
Capitalization, Dissolution, Merger or Asset Sale.

    

    (a)         Changes in
Capitalization.  Subject to any required action by the
shareholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, Stock Appreciation Right and Stock Award, the number of
Shares of Restricted Stock outstanding and the number of Shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options, Stock Appreciation Rights or Stock Awards have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, Stock Appreciation Right or Stock Award, as well as the price per share
of Common Stock covered by each such outstanding Option or Stock Appreciation
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been “effected without receipt of
consideration.”  Such adjustment shall be made by the Administrator,
whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares of Common Stock subject
to an Award hereunder.  Except as expressly provided herein, the
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into sub-shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number or
price of Shares of Common Stock then subject to outstanding Options and Stock
Appreciation Rights.

    

    (b)           Corporate
Transactions.  If the Company merges or consolidates with
another corporation, whether or not the Company is the surviving corporation, or
if the Company is liquidated or sells or otherwise disposes of substantially all
its assets, or if any “person” (as that term is used in Section 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing greater than 50% of the
combined voting power of the Company’s then outstanding securities (each such
event a “Corporate
Transaction Event”) then (i) after the effective date of such Corporate
Transaction Event, each holder of an outstanding Option or Stock Appreciation
Right shall be entitled, upon exercise of such Option or Stock Appreciation
Right to receive, in lieu of Shares of Common Stock, the number and class or
classes of shares of such stock or other securities or property to which such
holder would have been entitled if, immediately prior to such Corporate
Transaction Event, such holder had been the holder of record of a number of
Shares of Common Stock equal to the number of shares as to which such Option and
Stock Appreciation Right may be exercised; and (ii) the Board may waive any
limitations set forth in or imposed pursuant hereto so that all Options and
Stock Appreciation Rights from and after a date prior to the effective date of
such Corporate Transaction Event, as specified by the Board, shall be
exercisable in full.  Notwithstanding anything contained herein to the
contrary, the proposed transaction between the Company and China
Biopharmaceutical Holdings, Inc. shall not constitute a Corporate Transaction
Event.

    

    In the
event of a Corporate Transaction Event, then each outstanding Stock Award shall
be assumed or an equivalent agreement or award substituted by the successor
corporation or a Parent or Subsidiary of the successor
corporation.  In the event that the Committee determines that the
successor corporation or a Parent or a Subsidiary of the successor corporation
has refused to assume or substitute an equivalent agreement or award for each
outstanding Stock Award, all vesting periods and conditions under Stock Awards
shall be deemed to have been satisfied.  The Board may also, in its
discretion, cause all vesting periods and conditions under Stock Awards to be
deemed to have been satisfied.

    

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

       

    

    17.           Substitute
Options.  In the event that the Company, directly or
indirectly, acquires another entity, the Board may authorize the issuance of
stock options (“Substitute Options”)
to the individuals performing services for the acquired entity in substitution
of stock options previously granted to those individuals in connection with
their performance of services for such entity upon such terms and conditions as
the Board shall determine, taking into account the conditions of Code Section
424(a), as from time to time amended or superseded, in the case of a Substitute
Option that is intended to be an Incentive Stock Option.  Shares of
capital stock underlying Substitute Stock Options shall not constitute Shares
issued pursuant to the Plan for any purpose.

    

    18.           Date of Grant.  The
date of grant of an Option, Stock Appreciation Right, Stock Award or
Unrestricted Share shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option, Stock Appreciation
Right, Stock Award or Unrestricted Share, or such other later date as is
determined by the Administrator.  Notice of the determination shall be
provided to each grantee within a reasonable time after the date of such
grant.

    

    19.           Amendment and Termination of the
Plan.

    

    (a)         Amendment and
Termination.  The Board may at any time amend, alter, suspend
or terminate the Plan.

    

    (b)         Shareholder
Approval.  The Company shall obtain shareholder approval of any
Plan amendment to the extent necessary to comply with Applicable
Laws.

    

    (c)         Effect of Amendment or
Termination.  No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any grantee, unless mutually
agreed otherwise between the grantee and the Administrator, which agreement must
be in writing and signed by the grantee and the Company.  Termination
of the Plan shall not affect the Administrator’s ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.

    

    20.           Conditions Upon Issuance of
Shares.

    

    (a)         Legal
Compliance.  Shares shall not be issued in connection with the
grant of any Stock Award or Unrestricted Share or the exercise of any Option or
Stock Appreciation Right unless such grant or the exercise of such Option or
Stock Appreciation Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

    

    (b)         Investment
Representations.  As a condition to the grant of any Stock
Award or Unrestricted Share or the exercise of any Option or Stock Appreciation
Right, the Company may require the person receiving such Award or exercising
such Option or Stock Appreciation Right to represent and warrant at the time of
any such exercise or grant that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

    

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

       

    

    (c)         Additional
Conditions.  The Administrator shall have the authority to
condition the grant of any Award in such other manner that the Administrator
determines to be appropriate, provided that such condition is not inconsistent
with the terms of the Plan.

    

    (d)         Trading Policy
Restrictions.  Option and or Stock Appreciation Right exercises
and other Awards under the Plan shall be subject to the terms and conditions of
any insider trading policy established by the Company or the
Administrator.

    

    21.           Inability to Obtain
Authority.  The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not have
been obtained.

    

    22.           Shareholder
Approval.  The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted.  Such shareholder approval shall be obtained in the manner
and to the degree required under Applicable Laws.  Notwithstanding any
provision in the Plan to the contrary, any exercise of an Option or Stock
Appreciation Right granted before the Company has obtained shareholder approval
of the Plan in accordance with this Section 22 shall be conditioned upon
obtaining such shareholder approval of the Plan in accordance with this Section
22.

    

    23.           Withholding; Notice of
Sale.  The Company shall be entitled to withhold from any
amounts payable to an Employee or other Service Provider any amounts which the
Company determines, in its discretion, are required to be withheld under any
Applicable Law as a result of any action taken by a holder of an
Award.

    

    24.           Governing Law.  This
Plan shall be governed by the laws of the State of Delaware, without regard to
conflict of law principles.

     

    
      
         

      

      
        -15-ESCROW
AGREEMENT

     

    THIS
ESCROW AGREEMENT (“Agreement”) is made and entered into as of January 19, 2011,
by and among: NeoStem
Inc., a Delaware corporation (“Parent”); Progenitor Cell Therapy, LLC,
a Delaware limited liability company (the “Company”), Andrew Pecora, as
representative (the “PCT Representative”), of the Members of the Company
identified from time to time on Schedule 1 hereto; and Continental Stock Transfer &
Trust Company, a New York corporation (the “Escrow Agent”).

     

    RECITALS

     

    WHEREAS,
Parent, NBS Acquisition Company, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Parent (“Subco”), the Company and the PCT
Representative have entered into an Agreement and Plan of Merger dated as of
September 23, 2010 (the “Merger Agreement”), pursuant to which, among other
things, (i) Subco is merging with and into the Company, and (ii) certain stock
issuances are to be made by Parent to the Members (as defined
below).  A copy of the Merger Agreement is attached hereto as Exhibit
A;

     

    WHEREAS,
the Merger Agreement contemplates the establishment of an escrow account to
secure certain rights of the Parent Indemnified Parties (as defined in the
Merger Agreement) to indemnification, compensation and reimbursement as provided
in the Merger Agreement; and

     

    WHEREAS,
pursuant to Section 8.5 of the Merger Agreement, Andrew Pecora has been
irrevocably appointed by the Members to serve as the PCT Representative in
connection with all matters under this Agreement and the resolution of all
claims for Damages under the Merger Agreement.

     

    AGREEMENT

     

    The
parties, intending to be legally bound, agree as follows:

     

    Section
1.         Defined
Terms.

     

    1.1     Capitalized
terms used and not defined in this Agreement shall have the meanings given to
them in the Merger Agreement.

     

    1.2     As
used in this Agreement, the term “Members” refers to the Persons who were
members, or equity holders, of the Company immediately prior to the Effective
Time or to which the rights under this Agreement have been assigned as set forth
herein.  “Escrowed Shares” refers to the 10,600,000 shares of Parent
Common Stock being issued as Stock Consideration under the Merger
Agreement.

    

    Section
2.         Escrow and
Indemnification.

     

    2.1     Appointment of Escrow Agent;
Shares and Stock Powers Placed
in Escrow.  Continental Stock Transfer & Trust Company is
hereby appointed to serve as Escrow Agent hereunder, and Continental Stock
Transfer & Trust Company hereby agrees to serve as Escrow Agent
hereunder.  In accordance with the Merger Agreement, at the Closing,
(a) Parent shall issue certificates for the Escrowed Shares registered in the
name of the Escrow Agent evidencing 10,600,000 shares of Parent Common Stock to
be held in escrow under this Agreement, and shall cause such certificates to be
delivered to the Escrow Agent, and (b) the PCT Representative shall deliver to
the Escrow Agent an “assignment separate from certificate” (“Stock Power”)
endorsed by him in blank.  Such endorsement by the PCT Representative
shall have been guaranteed by a national bank or an NYSE-Amex member
firm.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.2     Escrow Account.  The
Escrowed Shares being held in escrow pursuant to this Agreement, together with
any distributions on the Escrowed Shares, shall collectively constitute an
escrow fund securing the indemnification rights of Parent and the other Parent
Indemnified Parties under the Merger Agreement.  The Escrow Agent
agrees to accept delivery of the Escrowed Shares and to hold the Escrowed Shares
in a separate escrow account (such account, the “Escrow Account”), subject to
the terms and conditions of this Agreement and the Merger
Agreement.

     

    2.3     Voting of Escrow
Shares.  The Escrow Agent, as record owner of the Escrowed
Shares, shall exercise all voting rights with respect to such Escrowed Shares in
accordance with Section 3.5 of the Merger Agreement, upon receipt of written
instructions from the Parent.  The Escrow Agent is not obligated to
distribute to the Members or to the PCT Representative any proxy materials or
other documents relating to the Escrowed Shares received by the Escrow Agent
from Parent.

     

    2.4     Reports.  Upon the
request of either Parent or the PCT Representative, the Escrow Agent shall
provide a statement to the requesting party that describes any deposit,
distribution or investment activity or deductions with respect to shares held in
the Escrow Account in addition to quarterly account statements from the Escrow
Agent.

     

    2.5     Dividends,
Etc.  Parent and the PCT Representative, on behalf of each of
the Members, agree that any shares of Parent Common Stock or other property
(including ordinary cash dividends) distributable or issuable (whether by way of
dividend, stock split or otherwise) in respect of or in exchange for any
Escrowed Shares (including pursuant to or as a part of a merger, consolidation,
acquisition of property or stock, reorganization or liquidation involving
Parent) shall not be distributed or issued to the beneficial owners of such
Escrowed Shares, but rather shall be distributed or issued to and held by the
Escrow Agent in the Escrow Account.  Any securities or other property
received by the Escrow Agent in respect of any Escrowed Shares held in escrow as
a result of any stock split or combination of shares of Parent Common Stock,
payment of a stock dividend or other stock distribution in or on shares of
Parent Common Stock, or change of Parent Common Stock into any other securities
pursuant to or as a part of a merger, consolidation, acquisition of property or
stock, reorganization or liquidation involving Parent, or otherwise, shall be
held by the Escrow Agent as part of the Escrow Account.

     

    2.6     Transferability.  Except
as expressly provided for herein or by operation of law, the interests of the
Members in the Escrow Account shall not be assignable or
transferable.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    
 

    2.7     Trust Fund.  The
Escrow Account shall be held as trust funds and shall not be subject to any
lien, attachment, trustee process or any other judicial process of any creditor
of Escrow Agent, any Member or Parent, respectively, or of any party
hereto.  The Escrow Agent shall hold and safeguard the Escrow Account
until the Termination Date (as defined in Section 6) or earlier distribution in
accordance with this Agreement.

     

    Section
3.         Release of Escrow
Shares.

     

    3.1     General.  (X) Within
ten (10) calendar Days after receiving either (a) written instructions from the
Parent (a “Parent Notice”) which have not been objected to by the PCT
Representative within seven (7) calendar days after the later of the PCT
Representative’s receipt of the Parent Notice or the Escrow Agent’s receipt of
such Parent Notice, (b) joint written instructions from Parent and the PCT
Representative (“Joint Instructions”), (c) a decision and/or award from the
Arbitrator (an “Arbitration Award”) or (d) an order issued by a court of
competent jurisdiction (a “Court Order”) relating to the release of any Escrowed
Shares from the Escrow Account or (Y) in accordance with Section 3.4 hereof, the
Escrow Agent shall release or cause to be released any such Escrowed Shares and
any other amounts from the Escrow Account, in the amounts, to the Persons and in
the manner set forth in such Parent Notice, Joint Instructions, Arbitration
Award, Court Order or as provided in Section 3.4.  If a Parent Notice
is sent under Section 8.4 of the Merger Agreement and such Parent Notice is not
disputed as provided in Section 8.4 within 7 calendar days, the Escrow Agent
shall make the distribution requested by the Parent Notice without action by the
PCT Representative.

     

    3.2     Potential Tax
Liability.  Upon receipt of (i) a certification from a Taxable
Member  pursuant to Section 8.4(a)(i) of the Merger Agreement, and
(ii) joint instructions from the Parent and the PCT Representative, the Escrow
Agent shall release shares to a Taxable Member in accordance with the
certification of the Taxable Member and such joint instructions.

     

    3.3     Pro Rata
Distributions.  For purposes of this Agreement, (i) all
distributions (except distributions to the Taxable Members as such pursuant to
Section 3.2 above and Section 8.4(i) of the Merger Agreement) to the Members
shall be pro rata distributions made based on the percentages set forth on
Schedule 1, as may be amended from time to time pursuant to Section 9.8 of this
Agreement, except as follows:

     

    (1) the
Escrow Agent will maintain sub-accounts, referred to as the Taxable Account and
the Balance Account, as provided in Section 8.4 of the Merger Agreement, until
the first anniversary of the date hereof.  The distributions at the
end of the first year pursuant to Section 8.4(a)(ii) shall be made to the
Taxable Members from the Taxable Account and to the Members other than the
Taxable Members from the Balance Account.  The Parent and the PCT
Representative shall provide the Escrow Agent with joint instructions with
respect to the amounts to be distributed to each Member after the first
anniversary of the Closing Date.

     

    (2) no
fractional shares shall be issued, and all amounts released from escrow and
distributed to the Members shall be rounded up or down pursuant to Section
3.4(c) of the Merger Agreement.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    
 

    The
Company and the PCT Representative represent and warrant that Schedule 1 (the
“Percentage Certifications”) accurately reflects each Member’s percentage
membership interest in the Company immediately prior to the consummation of the
Merger.

     

    3.4     Release of the Escrowed
Shares.  Within 10 Business Days following the two year
anniversary of the Closing Date, if there are no claims for Damages against the
Escrow Account that have not been finally resolved and paid, the Escrow Agent
shall deliver to the Members pro rata in accordance with the Percentage
Certification the balance of shares of Parent Common Stock and other property
held in the Escrow Account at such time.  If, on the Termination Date
there are claims for Damages against the Escrow Account that have not been
finally resolved, then, within 10 Business Days of the Termination Date, the
Escrow Agent shall deliver to the Members the excess, if any, by which the value
of the amounts held in the Escrow Account exceed an amount equal to 120% of the
amount of any claims for Damages against the Escrow Account that have not been
finally resolved and paid at such time.  The Parent and the PCT
Representative shall provide the Escrow Agent with joint instructions with
respect to the amounts to be distributed to each Member after the second
anniversary of the Closing Date (and thereafter if shares remain in the Escrow
Account after the second anniversary with respect to unresolved claims for
Damages at such date).  Thereafter, final distributions of the Escrow
Account shall be made in accordance with Section 3.1(X)(a), (b), (c) or (d), as
applicable.

     

    3.5     Distributions.  Whenever
a distribution of a number of shares of Parent Common Stock is to be made
pursuant to the terms of this Agreement, the Escrow Agent shall requisition the
appropriate number of shares from Parent’s stock transfer agent, delivering to
the transfer agent the appropriate stock certificates accompanied by the
respective Stock Powers, together with the specific instructions, as
appropriate.  Within 5 Business Days prior to the date the Escrow
Agent is required to make a distribution of shares of Parent Common Stock or
other property (including ordinary cash dividends) to the Members pursuant to
the terms of this Agreement, the Escrow Agent shall provide the PCT
Representative and the Parent with a notice specifying that a distribution will
be made and requesting that the PCT Representative update the then current
Schedule 1 to this Agreement.  The Escrow Agent shall make the
corresponding distributions to the Persons listed on such updated Schedule 1 in
accordance with the terms hereof, to their respective addresses as set forth
therein.  Notwithstanding anything to the contrary set forth herein,
the Escrow Agent shall not be obligated to make any distribution under this
Agreement to the Members unless it has received from the PCT Representatives an
updated Schedule 1 to this Agreement as provided herein.  Any
distributions to Parent pursuant to the terms of this Agreement shall be made to
the address set forth in Schedule 2 hereto.

     

    3.6     Disputes.  All
disputes, claims, or controversies arising out of or relating to Section 3 of
this Agreement that are not resolved by mutual agreement between Parent and the
PCT Representative  shall be resolved solely and exclusively as set
forth in Section 8.4 of the Merger Agreement by the PCT Representative and the
Parent.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    Section
4.         Fees and
Expenses.

     

    The
Escrow Agent shall be entitled to receive, from time to time, fees in accordance
with Schedule 3.  In accordance with Schedule 3, the Escrow Agent will
also be entitled to reimbursement for reasonable and documented out-of-pocket
expenses incurred by the Escrow Agent in the performance of its duties hereunder
and the execution and delivery of this Agreement.  All such fees and
expenses shall be paid by Parent.

    

    Section
5.         Limitation of Escrow
Agent’s Liability.

     

    5.1     The
Escrow Agent undertakes to perform such duties as are specifically set forth in
this Agreement only and shall have no duty under any other agreement or
document, and no implied covenants or obligations shall be read into this
Agreement against the Escrow Agent.  The Escrow Agent shall incur no
liability with respect to any action taken by it or for any inaction on its part
in reliance upon any notice, direction, instruction, consent, statement or other
document believed by it in good faith to be genuine and duly authorized, nor for
any other action or inaction except for its own gross negligence or willful
misconduct.  In all questions arising under this Agreement, the Escrow
Agent may rely on the advice of counsel, and for anything done, omitted or
suffered in good faith by the Escrow Agent based upon such advice the Escrow
Agent shall not be liable to anyone.  In no event shall the Escrow
Agent be liable for incidental, punitive or consequential damages.

     

    5.2     Parent
and the PCT Representative, acting on behalf of the Members hereby agree to
indemnify the Escrow Agent and its officers, directors, employees and agents
for, and hold it and them harmless against, any loss, liability or expense
incurred without gross negligence or willful misconduct on the part of Escrow
Agent, arising out of or in connection with the Escrow Agent’s carrying out its
duties hereunder.  This right of indemnification shall survive the
termination of this Agreement and the resignation of the Escrow
Agent.

     

    Section
6.         Termination.

     

    This
Agreement shall terminate upon the release by the Escrow Agent of the final
amounts held in the Escrow Account in accordance with Section 3 (the date of
such release being referred to as the “Termination Date”).

     

    Section
7.         Successor Escrow
Agent.

     

    In the
event the Escrow Agent becomes unavailable or unwilling to continue as escrow
agent under this Agreement, the Escrow Agent may resign and be discharged from
its duties and obligations hereunder by giving its written resignation to the
parties to this Agreement.  Such resignation shall take effect not
less than 30 days after it is given to all the other parties
hereto.  In such event, Parent may appoint a successor Escrow Agent
(acceptable to the PCT Representative, acting reasonably).  If Parent
fails to appoint a successor Escrow Agent within 15 days after receiving the
Escrow Agent’s written resignation, the Escrow Agent shall have the right to
apply to a court of competent jurisdiction for the appointment of a successor
Escrow Agent.  The successor Escrow Agent shall execute and deliver to
the Escrow Agent an instrument accepting such appointment, and the successor
Escrow Agent shall, without further acts, be vested with all the estates,
property rights, powers and duties of the predecessor Escrow Agent as if
originally named as Escrow Agent herein.  The Escrow Agent shall act
in accordance with written instructions from Parent and the PCT
Representative  as to the transfer of the Escrow Accounts to a
successor Escrow Agent.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    
 

    Section
8.         PCT
Representative.

     

    8.1     Unless
and until Parent and the Escrow Agent shall have received written notice of the
appointment of a successor PCT Representative, Parent and the Escrow Agent shall
be entitled to rely on, and shall be fully protected in relying on, the power
and authority of the PCT Representative  to act on behalf of the
Members.

     

    Section
9.         Miscellaneous.

     

    9.1     Attorneys’ Fees.  In
any action at law or suit in equity to enforce or interpret this Agreement or
the rights of any of the parties hereunder, the prevailing party in such action
or suit shall be entitled to receive a reasonable sum for its attorneys’ fees
and all other reasonable costs and expenses incurred in such action or
suit.

     

    9.2     Notices.  Any notice
or other communication required or permitted to be delivered to any party under
this Agreement shall be in writing and shall be deemed properly delivered, given
and received when delivered (by hand, by registered mail, by courier or express
delivery service or by facsimile) to the address or facsimile telephone number
set forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):

     

    if to Parent:

    

    NeoStem,
Inc.

    Suite
450

    420
Lexington Avenue

    New York,
NY 10170

    Attention:      Catherine
M. Vaczy, Esq.

    Facsimile:
      (646) 607-4672

    

    with a
copy, which shall not constitute notice, to:

    

    Lowenstein
Sandler PC

    65
Livingston Avenue

    Roseland,
NJ  07068

    Attention:      Alan
Wovsaniker, Esq.

    Facsimile:  
    (973) 597-2565

    

    if
to the PCT Representative :

    

    Dr.
Andrew L. Pecora

    Progenitor
Cell Therapy, LLC

    4 Pearl
Court, Suite C

    Allendale,
NJ 07401

    Facsimile:        (201)
883-1409

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    
 

    with a
copy, which shall not constitute notice, to:

    

    Epstein
Becker & Green, P.C.

    1227 25th
Street, NW

    Suite
700

    Washington,
DC 20037-1156

    Attention:        Robert
D. Reif, Esq.

    Facsimile:       
(202) 861-3529

    

    if
to the Escrow Agent:

    

    Continental
Stock Transfer & Trust Company

    17
Battery Place

    New York,
NY 10004

    Attention:        John
W. Comer, Jr.

    Facsimile:      
  (212) 616-7615

    

    Notwithstanding
the foregoing, notices addressed to the Escrow Agent shall be effective only
upon receipt.  If any notice or other document is required to be
delivered to the Escrow Agent and any other Person, the Escrow Agent may assume
without inquiry that notice or other document was received by such other Person
on the date on which it was received by the Escrow Agent.

     

    9.3     Headings.  The
bold-faced headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or interpretation of this
Agreement.

     

    9.4     Counterparts and Exchanges by
Facsimile or Other Electronic Transmission.  This Agreement may
be executed in several counterparts, each of which shall constitute an original
and all of which, when taken together, shall constitute one
agreement.  The exchange of a fully executed Agreement (in
counterparts or otherwise) by facsimile or other means of electronic
transmission shall be sufficient to bind the parties to the terms and conditions
of this Agreement.

     

    9.5     Applicable Law;
Jurisdiction.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.  Subject to Section 3.5 of this Agreement, in any action
between the parties arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement: (a) each of the parties irrevocably
and unconditionally consents and submits to the non-exclusive jurisdiction and
venue of the state and federal courts located in the State of New York; (b) if
any such action is commenced in a state court, then, subject to applicable law,
no party shall object to the removal of such action to any federal court located
in the State of New York; and (c) each of the parties irrevocably waives the
right to trial by jury.

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    
 

    9.6     Successors and
Assigns.  This Agreement shall be binding upon and shall inure
to the benefit of each of the parties hereto and each of their respective
permitted successors and assigns, if any.  No director indirect
interest in the Escrow Account or the shares of Parent Common Stock held in the
Escrow Account may be sold, assigned, transferred or pledged except by operation
of law.

     

    9.7     Waiver.  No failure
on the part of any Person to exercise any power, right, privilege or remedy
under this Agreement, and no delay on the part of any Person in exercising any
power, right, privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or
remedy.  No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.

     

    9.8     Amendment.  This
Agreement may not be amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered on behalf of Parent,
the PCT Representative and the Escrow Agent; provided, however, that any
amendment executed and delivered by the PCT Representative shall be deemed
to have been approved by and duly executed and delivered by all of the
Members.

     

    9.9     Severability.  Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.  If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified.  In the event such
court does not exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable term or provision
with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term.

     

    9.10   Parties in
Interest.  Except as expressly provided herein, none of the
provisions of this Agreement, express or implied, is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns, if any.

     

    9.11   Entire
Agreement.  This Agreement and the Merger Agreement set forth
the entire understanding of the parties hereto relating to the subject matter
hereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    
 

    9.12   Waiver of Jury
Trial.  Each of the parties hereto hereby irrevocably waives
any and all right to trial by jury in any action arising out of or related to
this Agreement or the transactions contemplated hereby.

      

    9.13   Cooperation.  The
PCT Representative on behalf of the Members and Parent agree to cooperate fully
with each other and the Escrow Agent and to execute and deliver such further
documents, certificates, agreements, stock powers and instruments and to take
such other actions as may be reasonably requested by Parent, the PCT
Representative or the Escrow Agent to evidence or reflect the transactions
contemplated by this Agreement and to carry out the intent and purposes of this
Agreement.

     

    9.14   Construction.

     

    (a)    
   For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neutral genders; the feminine gender shall
include the masculine and neutral genders; and the neutral gender shall include
masculine and feminine genders.

     

    (b)       The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.

     

    (c)        As
used in this Agreement, the words “include” and “including,” and variations
thereof, shall not be deemed to be terms of limitation, but rather shall be
deemed to be followed by the words “without limitation.”

     

    (d)        Except
as otherwise indicated, all references in this Agreement to “Sections”,
“Schedules” and “Exhibits” are intended to refer to Sections of this Agreement,
Schedules to this Agreement and Exhibits to this Agreement.

     

    [Remainder
of page intentionally left blank]

    

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    

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

     

    
      
        
          
            
              	 	
                      NEOSTEM, INC., a
      Delaware corporation

                    
	 	 
      	 
      
	 	
                      By:

                    	
                      /s/
      Robin L. Smith

                    
	 	
                      Name:

                    	
                      Robin
      L. Smith

                    
	 	
                      Title:

                    	
                      Chief
      Executive Officer

                    
	 	 
      	 
      
	 	
                      PROGENITOR
      CELL THERAPY, INC.

                    
	 	 
      	 
      
	 	
                      By:

                    	
                      /s/
      George S. Goldberger

                    
	 	
                      Name:

                    	
                      George
      S. Goldberger

                    
	 	
                      Title:

                    	
                      Chief
      Business & Financial Officer,  Secretary

                    
	 	 
      	 
      
	 	
                       /s/
      Andrew Pecora

                    
	 	
                      Andrew
      Pecora, as PCT Representative

                    
	 	 
      	 
      
	 	 
      
	 	 
      	 
      
	 	
                      CONTINENTAL
      STOCK TRANSFER &

                      TRUST COMPANY, a New
      York corporation

                    
	 	 
      	 
      
	 	
                      By:

                    	
                      /s/
      John W. Comer, Jr.

                    
	 	
                      Name:

                    	
                      John
      W. Comer, Jr.

                    
	 	
                      Title:

                    	
                      Vice
      President & Senior
  Account   Manager

                    

            

          

        

      

    

     

     

     

     

     

     

     

     

     

     

    [Escrow
Agreement Signature Page]

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    SCHEDULE
1

     

    MEMBERS

     

    Percentage
Certification Attached.

    

     

     

    

     

     

     

     

     

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    

    SCHEDULE
2

     

    ESCROWED
SHARES

    
 

    
      	
              Number
      of Escrowed Shares:

            	
              10,600,000

            
	 
      	 
      
	
              Address
      for distributions to Parent:

            	
              NeoStem
      Inc.

            
	 
      	
              Suite
      450

            
	 
      	
              420
      Lexington Avenue

            
	 
      	
              New
      York, New York 10170

            
	 
      	
              Attention:  Catherine
      M. Vaczy, Esq.

            

    

    

     

     

    

     

     

     

     

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    SCHEDULE
3

     

    ESCROW
AGENT’S FEES AND EXPENSES

    

     

    
      	
              Monthly
      Fee for holding securities and/or cash:

            	
              $200
      per month

            
	
              Additional
      out of pocket expenses including postage and stationary:

            	
              Additional

            
	
              Disbursement
      fees at termination:

            	
              Additional

            

    

    

    

    

    

    

     

     

     

    

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    

    EXHIBIT
A

     

    MERGER
AGREEMENT

    
 

     

     

     

     

     

     

     

     

    
      
         

      

      
        -14-

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