Document:

Exhibit
4.2

 

SUBORDINATED
PROMISSORY NOTE

 

TELESAT
CANADA

  

	CAD$145,465,511	March 28, 2012

 

FOR VALUE RECEIVED, Telesat Canada (the
“Borrower”), a Canadian corporation, hereby promises to pay to the order of Red Isle Private Investments Inc.,
a Canadian corporation (including any permitted assignee that is the holder of this Note, the “Lender”) the
principal sum of $145,465,511 plus interest, less the amount of any payments made prior to such date, on March 28, 2016 (the “Final
Maturity Date”) or such earlier date as may be required by the terms hereof, in accordance with the terms and conditions
hereof.

 

1.            Definitions.

 

“Accounting Policies” means
the same accounting policies reflected in Holdings’ 2011 consolidated audited financial statements, as determined in accordance
with IFRS consistently applied. 

 

“Business Day” shall mean
any day other than Saturday, Sunday or other day on which banking institutions in New York City, Toronto or Montreal are authorized
or required to remain closed.

 

“Cash EBITDA” means, for
any period, all revenues of the Borrower and its subsidiaries during such period, less (a) operating expenses, less (b) amortization
of deferred revenues, plus (c) non-cash stock-based compensation, plus (d) non-cash consulting fees paid to Loral Permitted Persons
(as defined below) to the extent included in operating expenses, in each case, during such period and calculated in accordance
with the Accounting Policies.

 

“Cash Management Agreement”
shall mean any agreement or other instrument governing any direct or indirect liability, contingent or otherwise, of such person
in respect of  

 

    	 

    	 

    

 

cash management services (including treasury,
depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements), including obligations
for the payment of agreed interest and reasonable, fees, charges, expenses, attorney costs and disbursements in connection therewith,
that constitute Secured Obligations under the Credit Facilities (or any refinancing of such Credit Facilities (including, without
limitation, agreements, amendments and restatements)).

 

“Change of Control” means
a Change of Control (as defined in any agreement in respect of any Senior Debt) shall have occurred.

 

“Committed Capital Expenditures”
means capital expenditures calculated in accordance with the Accounting Policies as presented in the quarterly and annual financial
statements under “Committed Capital Expenditures”, plus accrued and unpaid capital expenses less expected customer
prepayments and milestone payments (other than any prepayments or milestone payments that are contingent upon events outside the
Borrower’s control).

 

“Credit Facilities” means
the Credit Agreement dated as of March 28, 2012 by and among Telesat Canada, the other borrowers thereunder, the guarantors party
thereto, the lenders party thereto, JPMorgan Chase, as Administrative Agent, and the other agents party thereto.

 

“Holdings” means Telesat
Holdings Inc., a Canadian corporation (it being understood that Holdings may amalgamate with the Borrower (and in connection therewith
any intermediate holding company, including Telesat Interco Inc.), in which case references to Holdings shall be deemed to mean
references to the Borrower).

 

“Senior Debt” means collectively,
(a) obligations incurred in respect of (i) the Credit Facilities, Cash Management Agreements and Swap Agreements, (ii) the Indenture
dated 

 

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as of June 30, 2008, between Telesat Canada,
the other issuers thereunder, the guarantors party thereto, and The Bank of New York, as Trustee, in respect of the 11.0% Senior
Notes Due 2015, and (iii) the Indenture dated as of June 30, 2008, between Telesat Canada, the other issuers thereunder, the guarantors
party thereto, and The Bank of New York, as Trustee, in respect of the 12.5% Senior Subordinated Notes Due 2017 and (b) any indebtedness
incurred to refinance any indebtedness (including, without limitation, agreements, amendments and restatements) described in clause
(a) or in this clause (b).

 

“Swap Agreement” shall
mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving,
or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination
of these transactions that constitute Secured Obligations under the Credit Facilities (or any refinancing of such Credit Facilities
(including, without limitation, agreements, amendments and restatements)).

 

“Tax” or “Taxes”
shall mean any tax, duty, levy, impost, assessment or other governmental change (including, without limitation, penalties, interest
and any other liabilities related thereto).

 

“Treasury Rate” shall mean,
as of the applicable date, the yield to maturity as of such date of United States Treasury securities with a 10-year constant maturity
(as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available
at least two Business Days prior to such date (or, if such Statistical Release is no longer published, any publicly available source
of similar market data).

 

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2.            Interest.

 

(a)          Interest
hereunder shall accrue on the outstanding unpaid principal amount hereof at the fixed rate of: (i) from the date hereof until the
second anniversary hereof, 9.75% per annum and (ii) thereafter, the Treasury Rate as of the date of such second anniversary plus
7.50% per annum, but no less than 11% per annum (the “Applicable Rate”). For the purposes of the Interest
Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is
to be calculated on the basis of a 360-day or 365-day year, the yearly rate of interest to which the rate used in such calculation
is equivalent shall be the rate so used multiplied by the actual number of days in the calendar year in which the same is to be
ascertained and divided by 360 or 365, as applicable. Interest payments shall be payable in cash on each anniversary of the date
hereof and on the date of any prepayment, Scheduled Repayment provided for in Section 4 or other payment made in accordance with
the provisions hereof; provided, that the Borrower shall have the option to pay interest in kind on the third anniversary
date by adding such amount to the principal of this Note (the “PIK Interest”). All PIK Interest shall accrue
interest at the Applicable Rate from the interest payment date on which such PIK Interest was issued.

 

(b)          Subject
to Section 8, upon the occurrence of any default set forth in Section 7 and for so long as such default is continuing, the Applicable
Rate shall increase immediately by an increment of 2.00% per annum.

 

3.            Voluntary
Prepayment. At any time prior to the maturity date of this Note and without prior notice, the Borrower may pay without penalty
or premium the outstanding principal balance of this Note in whole or in part, with accrued and unpaid interest thereon.

 

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4.            Scheduled
Repayments.

 

(a)          On
the second anniversary of the date hereof, or if such date is not a Business Day (as defined below), the following Business Day,
the Borrower shall pay the Lender an amount equal to at least 50% of the outstanding principal amount of this Note as of the date
hereof and all accrued and unpaid interest thereon (less the amount of any prepayments, repayments or other payments made in accordance
with the terms hereof prior to such date).

 

(b)          Within
6 months after the second anniversary of the date hereof, the Borrower shall pay the Lender the amount, if greater than zero,
of the outstanding principal amount of this Note as of the second anniversary of the date hereof and all accrued and unpaid interest
thereon, if the “Cash and Cash Equivalent” reflected in Holdings’ balance sheet, as calculated in accordance
with the Accounting Policies, as of the end of the quarter following the second anniversary of the date (such date, the “Second
Anniversary Calculation Date”) hereof plus (1) the Cash EBITDA for the Borrower and its subsidiaries for the previous
twelve months ended as of the Second Anniversary Calculation Date less (2) the Committed Capital Expenditures of the Borrower
and its subsidiaries for the twelve months following the Second Anniversary Calculation Date, less (3) the mandatory debt repayments
and projected cash interest payments of the Borrower and its subsidiaries for the twelve months following the Second Anniversary
Calculation Date, in each case with respect to Senior Debt and any other senior indebtedness for borrowed money incurred to acquire
or construct satellites (including, without limitation, launch services and insurance) or satellite-related assets or interests,
less (4) the projected cash Taxes payable by the Borrower and its subsidiaries for the twelve months following the Second Anniversary
Calculation Date, is greater than (A) the excess, if any, of CDN$50 million over the principal amount outstanding under the revolving
credit facility as of

 

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 the Second Anniversary Calculation Date, plus (B) the outstanding principal amount outstanding under this
Note, together with all accrued and unpaid interest thereon (as of the Second Anniversary Calculation Date) (the “Second
Anniversary Excess Cash Calculation”). The Borrower shall deliver to the Lender an officer’s certificate on such
payment date setting forth the Second Anniversary Excess Cash Calculation with such supporting documentation as is reasonably requested
by the Lender. 

 

(c)          Within
6 months after the third anniversary of the date hereof, the Borrower shall pay the Lender the amount, if greater than zero,
of the outstanding principal amount of this Note as of the third anniversary of the date hereof and all accrued and unpaid
interest thereon, if the “Cash and Cash Equivalent” reflected in Holdings’ balance sheet, as calculated in
accordance with the Accounting Policies, as of the end of the quarter following the third anniversary of the date hereof
(such date, the “Third Anniversary Calculation Date”) plus (1) the Cash EBITDA for the Borrower and its
subsidiaries for the previous twelve months ended as of the Third Anniversary Calculation Date less (2) the Committed Capital
Expenditures of the Borrower and its subsidiaries for the twelve months following Third Anniversary Calculation Date, less
(3) the mandatory debt repayments and projected cash interest payments of the Borrower and its subsidiaries for the twelve
months following the Third Anniversary Calculation Date, in each case with respect to Senior Debt and any other senior
indebtedness for borrowed money incurred to acquire or construct satellites (including, without limitation, launch services
and insurance) or satellite-related assets or interests, less (4) the projected cash Taxes payable by the Borrower and its
subsidiaries for the twelve months following the Third Anniversary Calculation Date, is greater than (A) the excess, if any,
of CDN$50 million over the principal amount outstanding under the revolving credit facility as of the Third Anniversary
Calculation  

 

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Date, plus (B) the outstanding principal amount outstanding under this Note, together with all
accrued and unpaid interest thereon (as of the Third Anniversary Calculation Date) (the “Third Anniversary Excess Cash
Calculation”). The Borrower shall deliver to the Lender an officer’s certificate on such payment date setting forth
the Third Anniversary Excess Cash Calculation with such supporting documentation as is reasonably requested by the Lender. 

 

(d)          The
Borrower shall pay any unpaid balance on this Note (including, without limitation, any accrued and unpaid interest and PIK Interest)
on the Final Maturity Date.

 

(e)          The
Borrower agrees not to enter into any agreement that by its terms restricts its ability to make the payments required under this
Note other than as expressly set forth in Sections 2(a) and 9.

 

5.            Redemption
Upon Change of Control. Subject to compliance with the terms of all agreements governing Senior Debt relating to the prepayment
of subordinated debt generally (it being understood that the Borrower shall use commercially reasonable efforts to comply with
any such terms at such time), the Borrower shall redeem this Note from the Lender on the effective date of such Change of Control
at a price equal to the unpaid balance on this Note (including, without limitation, any accrued and unpaid interest and PIK Interest).
The Borrower shall use commercially reasonable efforts to provide the Lender at least 30 days prior notice of such redemption.

 

6.            Method
of Payment. Payments under this Note (other than PIK Interest) shall be made in the lawful money of Canada by wire transfer
of immediately available funds, to such account or accounts as the Lender shall direct from time to time. If any payment of principal
or interest becomes due on a day that is not a Business Day, such payment shall be on the next succeeding Business Day.

 

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7.            Defaults.

 

(a)          If
default shall be made in the due and punctual payment of the principal of or interest on account of this Note, or the redemption
of this Note pursuant to Section 5, when and as the same shall become due and payable, whether at maturity or otherwise, the Lender
shall have the option, by written notice to the Borrower, to declare the outstanding principal balance of this Note, together with
all accrued and unpaid interest, due and payable; provided, that the Borrower shall have five calendar days to cure any
default in the payment of interest when due.

 

(b)          In
the event the Borrower commences a voluntary case under the United States Bankruptcy Code or any bankruptcy, insolvency or similar
law now or hereafter in effect, or commits an act of bankruptcy as such term is defined under the Bankruptcy and Insolvency Act
(Canada), the outstanding principal balance of this Note, together with all accrued and unpaid interest, shall automatically become
due and payable.

 

(c)          In
the event that an involuntary case is commenced against the Borrower under the United States Bankruptcy Code or any bankruptcy,
insolvency or similar law now or hereafter in effect and such proceeding or petition remains undismissed for a period of sixty
(60) days or if the Borrower approves of or acquiesces in any such involuntary case, the outstanding principal balance of this
Note, together with all accrued and unpaid interest, shall automatically become due and payable.

 

(d)          In
the event any of the Senior Debt shall not be paid after final maturity or upon the acceleration of any such Senior Debt by the
holders thereof because of a default, and for so long as such Senior Debt is not paid in full or such acceleration is not rescinded,
the Lender shall have the option, by written notice to the Borrower, to declare the outstanding principal balance of this Note,
together with all accrued and unpaid interest, due and payable.

 

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8.            Usury
Savings. Notwithstanding anything to the contrary contained herein, the Lender shall never be entitled to receive as interest
on the obligation evidenced hereby any amount in excess of the maximum rate of interest permitted to be charged by applicable law;
and in the event that the Lender ever receives any such excess, such amount which would be excessive interest shall be applied
to the reduction of the future Scheduled Payments hereunder, and if the remaining outstanding principal sum hereunder is paid in
full, any remaining excess shall forthwith be paid to the Borrower.

 

9.            Subordination.

 

(a)          The
Lender and Holdings agree that solely to the extent and in the manner set forth in this Section 9, any payment required to be made
hereunder is expressly subordinated in right of payment to the prior payment in full of all claims of holders of Senior Debt (“Senior
Obligations”).

 

(b)          In
the event (x) of any insolvency or bankruptcy proceedings or any receivership, liquidation, reorganization or other similar proceedings
in respect of the Borrower or Holdings, as applicable, or a substantial part of its property, or of any proceedings for liquidation,
dissolution or other winding up of the Borrower or Holdings, as applicable, whether or not involving insolvency or bankruptcy,
or (y) that (A) a default shall have occurred with respect to the payment of principal of or interest on or other monetary amounts
due and payable on any Senior Debt, and such default shall have continued beyond the period of grace, if any, in respect thereof,
and such default shall not have been cured or waived or shall not have ceased to exist, or (B) the maturity of any Senior Debt
shall have been accelerated because of a default in respect of any Senior Debt, and any such acceleration has not been rescinded,
((x) and (y) collectively, “Subordination Events”), then, after the occurrence of a Subordination Event:

 

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(i)          the
holders of all Senior Obligations shall first be entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money’s worth, before the Lender is entitled to receive any payment or distribution
(other than Permitted Junior Securities) on account of the Borrower’s or Holdings’, as applicable, obligations hereunder;

 

(ii)         any
payment by, or distribution of assets of, the Borrower or Holdings, as applicable, of any kind or character, whether in cash, property
or securities, to which the Lender would be entitled except for the provisions of this Section 9 (other than Permitted Junior Securities)
shall be paid or delivered by the person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of such Senior Obligations or their representative or representatives, ratably according
to the aggregate amounts remaining unpaid on account of such Senior Obligations held or represented by each, to the extent necessary
to make payment in full of all Senior Obligations remaining unpaid after giving effect to any concurrent payment or distribution
(or provision therefor) to the holders of such Senior Obligations, before any payment or distribution to the Lender is made hereunder;
provided, that in the event any such Senior Obligations are subordinated in right of payment to other Senior Obligations,
such payment or distribution shall not be made ratably to such subordinated obligations but instead first ratably to other Senior
Obligations (ratably) until paid in full and then to such subordinated obligations; and

 

(iii)        in
the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, the Borrower or Holdings, as applicable,
of any kind or character, whether in cash, property or securities, on account of the Borrower’s or Holdings’, as applicable, 

 

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 obligations hereunder (other than Permitted Junior Securities), shall be received by the Lender after the occurrence of a Subordination
Event before all Senior Obligations of are paid in full, or provision is made for such payment in money or money’s worth,
such payment or distribution on account of Borrower’s or Holdings’, as applicable, obligations hereunder shall be held
in trust by the Lender for the benefit of the holders of such Senior Obligations and shall forthwith be paid over to the holders
of such Senior Obligations or their representative or representatives, ratably as aforesaid, for application to the payment of
all Senior Obligations remaining unpaid until all such Senior Obligations shall have been paid in full, after giving effect to
any concurrent payment or distribution (or provision therefor) to the holders of such Senior Obligations.

 

For purposes of this Section 9 only,
the words “cash, property or securities” shall not be deemed to include shares of stock of the Borrower or Holdings,
as applicable, as reorganized or readjusted, or securities of the Borrower or Holdings, as applicable, or any other corporation
provided for by a plan of reorganization or readjustment which are subordinate in right of payment to all Senior Obligations which
may at the time be outstanding to the same extent as, or to a greater extent than, this Note is so subordinated as provided in
this Section 9 (collectively, the “Permitted Junior Securities”).

 

(c)          Subrogation
to Rights of Holders of Senior Obligations. Upon the payment in full of all Senior Obligations or the provision for such payment
in accordance with its terms, the rights of the Lender shall be subrogated to the rights of the holders of Senior Obligations to
receive any further payments or distributions of cash, property or securities of the Borrower or Holdings, as applicable, applicable
to the holders of the Senior Obligations until all amounts owing on this Note shall be paid in full; and such payments or distributions
of cash, property or securities received by the Lender, by reason of such subrogation, which otherwise 

 

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would be paid or distributed
to the holders of such Senior Obligations shall, as between the Borrower or Holdings, as applicable, its creditors other than the
holders of Senior Obligations, and the Lender, be deemed to be a payment by the Borrower or Holdings, as applicable, to or on account
of Senior Obligations, it being understood that the provisions of this Section 9 are and are intended solely for the purpose of
defining the relative rights of the Lender, on the one hand, and the holders of the Senior Obligations, on the other hand. 

 

(d)          Modification,
Extension, Etc., of Senior Obligations. The holders of Senior Obligations may, without affecting in any manner the subordination
of the payment of principal or interest or other amounts expressly set forth in this Section 9, if any, on this Note, at any time
or from time to time and in their absolute discretion, agree with the Borrower to change the manner, place or terms of payment,
change or extend the time of payment of, or renew or alter, any Senior Obligations, or amend or supplement any instrument pursuant
to which any Senior Obligation is issued, or exercise or refrain from exercising any other of their rights under the Senior Obligations
including, without limitation, the waiver of default thereunder, all without notice to or assent from the Lender.

 

(e)          Rights
of Holders of Senior Obligations Not Impaired. No right of any present or future holder of Senior Obligations to enforce the
subordination provisions expressly set forth in this Section 9 shall at any time or in any way be prejudiced or impaired by any
act or failure to act on the part of the Borrower or by any noncompliance by the Borrower with the terms, provisions and covenants
of this Note, regardless of any knowledge thereof any such holder may have or be otherwise charged with.

 

10.         Guarantee.

 

(a)          Holdings
hereby unconditionally and irrevocably, as a primary obligor and not only as a surety, guarantees to the Lender and its successors,
indorsees, transferees and

 

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permitted assigns, the prompt and complete payment and performance by the Borrower when due (whether
at the stated maturity, by acceleration or otherwise) of this Note and the obligations hereunder (the “Guaranteed Obligations”).

 

(b)          Anything
herein to the contrary notwithstanding, the maximum liability of Holdings hereunder shall in no event exceed the amount which can
be guaranteed by Holdings under applicable federal and state laws relating to the insolvency of debtors.

 

(c)          The
guarantee contained in this Section 10 shall remain in full force and effect until all of the Guaranteed Obligations shall have
been paid in full in cash.

 

(d)          No
payment made by the Borrower, Holdings, any other guarantor or any other person or received or collected by the Lender from the
Borrower, Holdings, any other guarantor or any other person by virtue of any action or proceeding or any set-off or appropriation
or application at any time or from time to time in reduction of or in payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of Holdings hereunder which shall, notwithstanding any such payment (other
than any payment made by Holdings in respect of the Guaranteed Obligations or any payment received or collected from Holdings in
respect of the Guaranteed Obligations), remain liable for the Guaranteed Obligations up to the maximum liability of Holdings hereunder
until the Guaranteed Obligations are paid in full in cash.

 

(e)          Holdings
waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or
proof of reliance by the Lender upon the guarantee contained in this Section 10 or acceptance of the guarantee contained in this
Section 10. Holdings waives (i) diligence, presentment, protest, demand for payment and notice of default or non-payment to or
upon the Borrower or any other guarantor with respect to 

 

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the Guaranteed Obligations, (ii) notice of the existence or creation or
non-payment of all or any of the Guaranteed Obligations, and (iii) all diligence in collection or protection of or realization
upon any Guaranteed Obligations or any security for or guaranty of any Guaranteed Obligations. 

 

11.         Miscellaneous.

 

(a)          Expenses;
Indemnity. The Borrower shall reimburse on demand, all reasonable costs and expenses incurred by or on behalf of the Lender, and
any successors or assignees of the Lender or subsequent successors and assignees including, without limitation, reasonable fees,
costs and expenses of counsel of the Lender and any successors or assignees of the Lender or subsequent successors and assignees,
arising from or relating to: (i) the negotiation, preparation, execution, delivery, performance and administration of this Note,
(ii) any requested amendments, waivers or consents to this Note, whether or not such documents become effective or are given, (iii)
the enforcement, preservation and protection of the Lender’s rights under this Note, (iv) the defense of any claim or action
asserted or brought against the Lender by any person that arises from or relates to this Note or the Lender’s claims against
the Borrower or Holdings, or any and all matters in connection therewith, (v) all efforts made by or on behalf of the Lender to
enforce payment of any obligation due under this Note, or (vi) the receipt by the Lender of any advice from professionals with
respect to any of the foregoing. Each of Holdings and the Borrower agrees to indemnify on demand the Lender and each of its respective
affiliates, directors, trustees, officers, employees, advisors and agents (each such person, including Lender, an “Indemnitee”)
against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related costs and expenses,
including, without limitation, reasonable fees, costs and expenses of counsel of the Lender, incurred by or asserted against any
Indemnitee arising out of, in any way connected with, or as a result of (x) the execution or delivery of this Note or any agreement
or instrument contemplated hereby, the

 

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 performance by the parties hereto of their respective obligations hereunder or the consummation
of the transactions contemplated hereby, (y) the use of the proceeds of this Note or (z) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto except, in each case, to the extent
such loss, claim, damage, liability or expense (i) is found in a final, nonappealable judgment by a court of competent jurisdiction
to have resulted primarily from such Indemnitee’s gross negligence or willful misconduct (or that of any of such Indemnitee’s
respective subsidiaries or any of their respective officers, directors, employees or members), (ii) directly results from a material
breach of any Indemnitee’s obligations (or those of any of such Indemnitee’s respective subsidiaries or any of their
respective officers, directors, employees, agents, advisors or other representatives) under this Note, (iii) arises out of or in
connection with any claim, litigation, investigation or proceeding that has not resulted from any act or omission by Holdings or
the Borrower and that is brought by an Indemnitee against one or more other Indemnitee or (iv) directly results from a settlement
of a proceeding entered into by such Indemnitee without the Borrower’s prior written consent. The provisions of this Section
11(a) shall remain operative and in full force and effect regardless of the cancellation of this Note, the consummation of the
transactions contemplated hereby, the repayment of the Borrower’s obligations hereunder, the invalidity or unenforceability
of any term or provision of this Note or any investigation made by or on behalf of the Lender. 

 

(b)          No
Waiver; Remedies Cumulative. No failure on the part of the Lender or the Borrower to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise by the Lender or the Borrower of
any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The

 

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remedies herein provided
are cumulative and not exclusive of any remedies provided by any other instrument or document or under applicable law.

 

(c)          Amendments.
No amendment, modification or waiver of any provision of this Note nor consent to any departure by the Borrower therefrom shall
be effective unless the same shall be in writing and signed by the Lender and the Borrower and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for which given. Notwithstanding the foregoing, no amendment
to this Section 11(c) or Section 9 or the definitions relating thereto that adversely affects in any material respect the rights
of any holder of Senior Debt at the time outstanding may be made unless the holders of such Senior Debt (or any group or representative
thereof authorized to give a consent) consent in writing to such amendment, and the holders of Senior Debt shall be third party
beneficiaries of this Section 11(c).

 

(d)          Construction.
This Note, and all matters arising out of or related to this Note, shall be governed by, and construed and interpreted in accordance
with, the laws of Ontario. Each provision of this Note has been subject to the mutual consultation, negotiation and agreement of
the Borrower and the Lender and there is to be no construction against either of them based on any presumption of their involvement
in the drafting hereof.

 

(e)          Successors
and Assigns. This Note shall be binding upon the Borrower and its legal representatives, successors and permitted assigns and
the terms hereof shall inure to the benefit of the Lender, its successors, heirs and assigns. This Note may be transferred or assigned,
in whole or in part, by the Lender or the Lender’s permitted successors and assigns at any time, subject to compliance with
applicable law.

  

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(f)          Severability.
The provisions of this Note are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall not in any manner affect such provision in any other jurisdiction
or any other provision of this Note in any jurisdiction.

 

(g)          Jurisdiction;
Waiver of Jury Trial. The parties hereto hereby irrevocably consent to the jurisdiction of any court located in Ontario over
any suit, action or proceeding arising out of or related to this Note, and each of the parties hereto hereby further irrevocably
consents to the service of process in any such suit, action or proceeding by mailing the same in a sealed envelope, first-class
mail, postage prepaid and either certified or registered, return receipt requested, addressed to the relevant party at the following
addresses: if to Lender, Public Sector Pension Investment Board, Attn: Chief Legal Officer, 1250 René-Lévesque Blvd.
West, Suite 900, Montreal, QC, Canada H3B 4W8; if to Borrower, Telesat Canada, Attn: General Counsel, 1601 Telesat Court, Ottawa,
Ontario, Canada K1B 5P4; and if to Holdings, Telesat Holdings Inc., Attn: General Counsel, 1601 Telesat Court, Ottawa, Ontario,
Canada K1B 5P4, or in each case, to such other address as such party may request by written notice to each other party. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE.

 

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IN WITNESS WHEREOF, the parties hereto hereby
execute this Note as of the day and year first written above.

 

	 	TELESAT CANADA
	 	 	 	 
	 	By:	/s/ Michel G. Cayouette
	 	 	Name:	Michel G. Cayouette
	 	 	Title: 	Chief Financial Officer and
	 	 	 	Treasurer
	 	 	 	 
	 	TELESAT HOLDINGS INC.
	 	 	 	 
	 	By:	/s/ Michel G. Cayouette
	 	 	Name:	Michel G. Cayouette
	 	 	Title: 	Chief Financial Officer and
	 	 	 	Treasurer

 

[Signature page to Subordinated Promissory
Note]COMMON STOCK PURCHASE WARRANT

 

NEOSTEM, INC.

 

	Warrant Shares: _______	
        Initial Exercise Date:  October
        ___, 20121

        Issue Date: April ___, 20122

 

THIS COMMON STOCK PURCHASE WARRANT
(the “Warrant”) certifies that, for value received, _____________ or its assigns (the
“Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time after October ___, 2012 (the “Initial Exercise Date”) (or such earlier
date hereafter designated by the Company) and on or prior to the close of business on April __, 2017 (the
“Termination Date”) but not thereafter, to subscribe for and purchase from Neostem, Inc., a Delaware
corporation (the “Company”), up to _____________________________ (_______) shares (as subject to
adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).  This Warrant is the
Warrant to purchase Common Stock issued pursuant to the prospectus supplement dated March ___, 2012 and accompanying
prospectus (collectively, the “Prospectus”) that forms a part of the Registration Statement on Form S-3
(File No. 333-173855) (the “Registration Statement”).

 

Section
1.                Definitions.  For
purposes of this Warrant, the following terms shall have the following meanings:

 

(a)               
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under
the Securities Act.

 

(b)              
“Board of Directors” means the board of directors of the Company.

 

(c)               
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law
or other governmental action to close.

 

(d)              
“Commission” means the United States Securities and Exchange Commission.

 

(e)               
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other
class of securities into which such securities may hereafter be reclassified or changed.

 

(f)               
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.

 

______________________________

1
6 month anniversary of the issue date.

2
5 year anniversary of the issue date.

 

    	 

    	 

    
 

(g)              
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

(h)              
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or
other entity of any kind.

 

(i)                
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

 

(j)                
“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any
direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

(k)              
“Trading Day” means a day on which the principal Trading Market is open for trading. 

 

(l)                
“Trading Market” means any of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question:  the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

(m)             “Transfer
Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a
mailing address of 17 Battery Place, New York, NY 10004 and a facsimile number of (212) 509-5150, and any successor transfer
agent of the Company.

 

(n)              
“VWAP” means, for any date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported
by, at the Company’s option, either Nasdaq Data on Demand or Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:00 p.m. (New York City time -Trading Market close)), (b)  if the OTC Bulletin Board is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board,
(c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are
then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.

 

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Section
2.                Exercise.

 

(a)               
Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing
on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto. Within three (3)
Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the
Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the
Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice
of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number
of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder
in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records
showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice
of Exercise Form within one (1) Business Day of receipt of such notice.  The Holder and any assignee, by acceptance
of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.

 

(b)              
Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.51,
subject to adjustment hereunder (the “Exercise Price”).

 

(c)               
Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering
the Warrant Shares, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder,
then this Warrant may be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the
Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the Trading
Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,”
as set forth in the applicable Notice of Exercise;

 

(B) = the Exercise
Price of this Warrant, as adjusted hereunder; and

 

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(X) = the number of Warrant Shares
that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means
of a cash exercise rather than a cashless exercise.

 

 In no event may this warrant
be net cash settled.

 

(d)              
Mechanics of Exercise.

 

i.                   
Delivery of Warrant Shares Upon Exercise.  Warrant Shares purchased hereunder shall be transmitted
by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such
system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of
the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery to
the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (A)
the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required) and (C) payment of the aggregate
Exercise Price as set forth above (including by cashless exercise, if permitted) (such date, the “Warrant Share Delivery
Date”).   The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated
to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant
has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required
to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.

 

ii.                 
Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the
Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of Warrant Shares,
deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.               
Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder the
Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such
exercise.

 

iv.               
Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise.  In addition
to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant
Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation
was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery
obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

 

    	- 4 -

    	 

    
 

v.                 
No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled
to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction
in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi.               
Charges, Taxes and Expenses.  Issuance of Warrant Shares shall be made without charge to the Holder
for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in the event Warrant Shares are to be issued in a
name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient
to reimburse it for any transfer tax incidental thereto.

 

    	- 5 -

    	 

    
 

vii.             
Closing of Books.  The Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

(e)               
Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant,
and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s
Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned
by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e),
beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in
accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination
of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of
which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise
shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities
owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to
the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In
addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining
the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected
in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent
public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number
of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading
Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities
of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares
of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number
of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue
to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered
to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this
Warrant.

 

    	- 6 -

    	 

    
 

(f)               
Call Provision.  Subject to the provisions of Section 2(d) and this Section 2, if, after the Initial
Exercise Date, the VWAP for each of 10 consecutive Trading Days (the “Measurement Period,” which 10 consecutive
Trading Day period shall not have commenced until after the Initial Exercise Date) exceeds $1.53 (subject to adjustment for forward
and reverse stock splits, recapitalizations, stock dividends and the like after the issuance date of this Warrant), then the Company
may, within one (1) Trading Day of the end of such Measurement Period, call for cancellation of all or any portion of this Warrant
for which a Notice of Exercise has not yet been delivered (such right, a “Call”) for consideration equal to
$0.001 per Share.  To exercise this right, the Company must deliver to the Holder an irrevocable written notice (a “Call
Notice”), indicating therein the portion of unexercised portion of this Warrant to which such notice applies.  If
the conditions set forth below for such Call are satisfied from the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant subject to such Call Notice for which a Notice of Exercise shall
not have been received by the Call Date will be cancelled at 6:30 p.m. (New York City time) on the tenth Trading Day after the
date the Call Notice is sent by the Company (such date and time, the “Call Date”).  Any unexercised
portion of this Warrant to which the Call Notice does not pertain will be unaffected by such Call Notice.  In furtherance
thereof, the Company covenants and agrees that it will honor all Notices of Exercise with respect to Warrant Shares subject to
a Call Notice that are tendered through 6:30 p.m. (New York City time) on the Call Date.  The parties agree that any
Notice of Exercise delivered following a Call Notice which calls less than all the Warrants shall first reduce to zero the number
of Warrant Shares subject to such Call Notice prior to reducing the remaining Warrant Shares available for purchase under this
Warrant.  For example, if (A) this Warrant then permits the Holder to acquire 100 Warrant Shares, (B) a Call Notice pertains
to 75 Warrant Shares, and (C) prior to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice of Exercise
in respect of 50 Warrant Shares, then (x) on the Call Date the right under this Warrant to acquire 25 Warrant Shares will be automatically
cancelled, (y) the Company, in the time and manner required under this Warrant, will have issued and delivered to the Holder 50
Warrant Shares in respect of the exercises following receipt of the Call Notice, and (z) the Holder may, until the Termination
Date, exercise this Warrant for 25 Warrant Shares (subject to adjustment as herein provided and subject to subsequent Call Notices).  Subject
again to the provisions of this Section 2(f), the Company may deliver subsequent Call Notices for any portion of this Warrant for
which the Holder shall not have delivered a Notice of Exercise.  Notwithstanding anything to the contrary set forth in
this Warrant, the Company may not deliver a Call Notice or require the cancellation of this Warrant (and any such Call Notice shall
be void), unless, from the beginning of the Measurement Period through the Call Date, (1) the Company shall have honored in accordance
with the terms of this Warrant all Notices of Exercise delivered by  6:30 p.m. (New York City time) on the Call Date,
and (2) a registration statement shall be effective as to all Warrant Shares and the prospectus thereunder available for use by
the Company for the sale of all such Warrant Shares to the Holder, and (3) the Common Stock shall be listed or quoted for trading
on a Trading Market, and (4) there is a sufficient number of authorized shares of Common Stock for issuance of all shares underlying
Warrants, and (5) the issuance of the shares shall not cause a breach of any provision of 2(e) herein (i.e., the Company may only
call such portion of the Warrant as to which Holder is entitled to exercise in accordance with Section 2(e)).  The Company’s
right to call the Warrants under this Section 2(f) shall be exercised ratably among the Holders based on each Holder’s initial
purchase of Warrants from the Company pursuant to the Registration Statement.

 

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Section
3.                Certain
Adjustments.

 

(a)               
Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock
dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued
by the Company upon exercise of this Warrant, and which shall not include any shares of Common Stock issued in connection with
dividend payments in respect of the Company’s Series E 7% Senior Convertible Preferred Stock), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares
of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant
shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or re-classification.

 

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(b)              
Subsequent Rights Offerings.  If the Company, at any time while the Warrant is outstanding, shall
issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the VWAP on the record date mentioned below, then the Exercise Price shall
be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date
of issuance of such rights, options or warrants plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered
(assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would
purchase at such VWAP.  Such adjustment shall be made whenever such rights, options or warrants are issued, and shall
become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options
or warrants.

 

(c)               
Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, shall distribute
to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends)
or rights or warrants to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled
to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned
above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record
date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors of the Company in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.

 

(d)              
Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, for consideration which is distributed to the holders of all the
Company’s Common Stock, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock or (iv)
the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization
of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property or (v) the Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than
50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement
or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately
prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section
2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise
of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that
is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or
(3) a Fundamental Transaction (other than as described solely in clause (v) above) involving a person or entity not traded on a
national securities exchange, including, but not limited to, the Nasdaq Global Select Market, the Nasdaq Global Market, NYSE Amex,
the New York Stock Exchange or the Nasdaq Capital Market, the Company or any Successor Entity (as defined below) shall, at the
Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental
Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash
equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental
Transaction. “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing
Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day
of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental
Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental
Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered
in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a
remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and
the Termination Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant
and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form
and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction
and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose
of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which
is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions
of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this
Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

    	- 9 -

    	 

    
 

(e)               
Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding
as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

(f)               
Notice to Holder.

 

i.                   
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section
3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting
adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

    	- 10 -

    	 

    
 

ii.                 
Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution
in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed
to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 10 calendar days prior
to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To
the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company
or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such
notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section
4.                Transfer
of Warrant.

 

(a)               
Transferability.  This Warrant and all rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon
such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly
be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.

 

    	- 11 -

    	 

    
 

(b)              
New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange
for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant
Shares issuable pursuant thereto.

 

(c)               
Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for
that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof
or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section
5.                Miscellaneous.

 

(a)               
No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting
rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

(b)              
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to
it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor
and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

(c)               
Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or
the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right
may be exercised on the next succeeding Business Day.

 

    	- 12 -

    	 

    
 

(d)              
Authorized Shares.

 

The Company covenants that, during
the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares
to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty
of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under
this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant
and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue). 

 

Except and to the extent as waived
or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary
or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the
generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant
and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which
would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

 

    	- 13 -

    	 

    
 

(e)               
Jurisdiction. This Warrant shall be governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of
the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of
New York.

 

(f)               
Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

(g)              
Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder
on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.

 

(h)              
Notices.  Any notice, request or other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the information provided by the Holder to the Company in writing. 

 

(i)                
Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder
to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.

 

(j)                
Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would
be adequate.

 

(k)              
Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

(l)                
Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Company and the Holder.

 

(m)            
Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Warrant.

 

    	- 14 -

    	 

    
 

(n)              
Headings.  The headings used in this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this Warrant.

 

 

(Signature Page Follows)

 

    	- 15 -

    	 

    

 

IN WITNESS WHEREOF,
the Company has caused this Common Stock Purchase Warrant to be executed by its officer thereunto duly authorized as of the date
first above indicated.

 

NEOSTEM, INC.

 

 

By:______________________

Name: Robin L. Smith

Title: Chief Executive Officer

 

    	- 16 -

    	 

    
  

NOTICE OF EXERCISE

 

To:neostem, inc.

 

(1)  
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer
taxes, if any.

 

(2)  
Payment shall take the form of (check applicable box):

 

[ ] in lawful
money of the United States; or

 

[ ] if permitted
the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c),
to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).

 

(3)  
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

 

The Warrant Shares shall be delivered to the following DWAC
Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: ________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________

Name of Authorized Signatory: ____________________________________________________

Title of Authorized Signatory: _____________________________________________________

Date: _________________________________________________________________________

 

 

    	 

    	 

    

  

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

 

 

FOR VALUE RECEIVED, [____] all
of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

 

_______________________________________________ whose address
is

 

_______________________________________________________________.

 

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature:_____________________________

 

Holder’s Address:_____________________________

 

_____________________________

 

 

 

Signature Guaranteed: ___________________________________________

 

 

NOTE: The signature to this Assignment
Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever,
and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing Warrant.

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