Document:

Unassociated Document

    COMMON
STOCK PURCHASE WARRANT

    

    NEOSTEM,
INC.

     

    
      
        	
                Warrant
      Shares: ___________

              	
                Initial
      Exercise Date:  May __,
2011

              

      

    

     

    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 on or after the six month anniversary of the
date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on November __, 2015 (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 November 16, 2010 and accompanying
prospectus (collectively, the “Prospectus”) that
forms a part of the Registration Statement on Form S-3 (File No. 333-166169)
(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)           “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 using (i) a price per share
of Common Stock equal to the Weighted Average Price of the Common Stock for the
Trading Day immediately preceding the date of consummation of the applicable
Change of Control, (ii) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of this Warrant as of the
date of consummation of the applicable Fundamental Transaction
and (iii) an expected volatility equal to the greater of 60% and the 100-day
volatility obtained from the HVT function on Bloomberg determined as of the
Trading Day next following the date of the public announcement of the applicable
Fundamental Transaction.

     

    c)           “Change of Control”
means any Fundamental Transaction other than (A) any reorganization,
recapitalization or reclassification of the Common Stock, in which holders of
the Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    d)           “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.

     

    e)           “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.

     

    f)           “Eligible Market”
means the The New York Stock Exchange, Inc., The NYSE Amex, The NASDAQ Global
Select Market, The NASDAQ Global Market or The NASDAQ Capital
Market.

     

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

     

    h)           “Parent Entity” of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

     

    i)           “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.

     

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

     

    k)           “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.

     

    l)           “Successor Entity”
means the Person (or, if so elected by the Holder, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Holder, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

     

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

     

    
      
         

      

      
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    n)           “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).

     

    o)           “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 Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (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.

     

    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.

     

    
      
         

      

      
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    b)           Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $1.85, subject to adjustment hereunder (the “Exercise
Price”).

     

    c)           Cashless Exercise. If
at the time of exercise hereof there is no effective registration statement
registering, or the prospectus contained therein is not available for the
issuance of the Warrant Shares to the Holder and all of the Warrant Shares are
not then registered for resale by Holder into the market at market prices from
time to time on an effective registration statement for use on a continuous
basis (or the prospectus contained therein is not available for use), then this
Warrant may also 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
certificate for the 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

            

    

    

    
      	
               
      

            	
              (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 Certificates
Upon Exercise.  Certificates for 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.

     

    
      
         

      

      
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    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 the certificate or certificates
representing 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 a certificate or the certificates representing 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 Certificates 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 a certificate or the
certificates representing the Warrant Shares pursuant to an exercise on or
before the second Trading Day following 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
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

     

    
      
         

      

      
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    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 certificates for 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 certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates 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 certificates for 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.

     

    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.

     

    
      
         

      

      
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    f)           Call
Provision.  Subject to the provisions of Section 2(d) and this
Section 2, if, after the Initial Exercise Date, (i) the VWAP for each of 20
consecutive Trading Days (the “Measurement Period,”
which 20 consecutive Trading Day period shall not have commenced until after the
Initial Exercise Date) exceeds $3.70 (subject to adjustment for forward and
reverse stock splits, recapitalizations, stock dividends and the like after the
issuance date of this Warrant), (ii) the average daily volume for such
Measurement Period exceeds $100,000 per Trading Day (subject to adjustment for
forward and reverse stock splits, recapitalizations, stock dividends and the
like after the issuance date of this Warrant) and (iii) the Holder is not in
possession of any information that constitutes, or might constitute, material
non-public information which was provided by the Company, then the Company may,
within 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
Statements.

     

    
      
         

      

      
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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), (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.

     

    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.

     

    
      
         

      

      
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    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, (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 (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 the foregoing, in the event of a Change
of Control other than one in which a Successor Entity that is a publicly traded
corporation whose stock is quoted or listed for trading on an Eligible Market
assumes this Warrant such that the Warrant shall be exercisable for the publicly
traded common stock of such Successor Entity, at the request of the Holder
delivered before the 90th day after such Change of Control (such a request, a
“Black Scholes
Exercise”), the Company (or the Successor Entity) shall purchase this
Warrant from the Holder by paying to the Holder, within five business days after
such request (or, if later, on the effective date of the Fundamental
Transaction), cash in an amount equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such Change of
Control.

     

    
      
         

      

      
        -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.

     

    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 20 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.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    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.

     

    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.

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    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.

     

    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 certificates for the 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).

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    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.

     

    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.

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    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.

     

    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)

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    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:

      Title:

    

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    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 a certificate or certificates representing 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 or by
physical delivery of a certificate to:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
________________________________________________________________________

    Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

    Name of
Authorized Signatory:
___________________________________________________________________

    Title of
Authorized Signatory:
____________________________________________________________________

    Date:
________________________________________________________________________________________

    

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

     

    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.

    

    
      
         

      

      
        -17-Unassociated Document

    FORM
OF COMMON STOCK PURCHASE WARRANT

    

    NEOSTEM,
INC.

     

    
      
        	
                Warrant
      Shares: [1,322,486]

              	
                Issue
      Date: November __, 2010

              

      

    

    

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, [________] (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after May ___, 2011 (the “Initial Exercise
Date”) and on or prior to the close of business on the three (3) year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Neostem Inc., a Delaware
corporation (the “Company”), up to
[1,322,486] shares (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).

     

    Section
1.             Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated November 16, 2010, among the Company and the purchasers signatory thereto,
as the same may be amended from time to time.  Exercise of this
Warrant in excess of the amounts permitted under Section 16 of the Certificate
of Designations (as defined below) is conditional on approval of the
shareholders of the Company as contemplated by Section 3.13 of the Purchase
Agreement.

     

    Section
2.             Exercise.

     

    (a)           Exercise of
Warrant.  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 of a duly executed facsimile copy of the Notice of Exercise annexed
hereto (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); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received payment of the aggregate Exercise Price of the shares thereby purchased
by wire transfer or cashier’s check drawn on a United States
bank.  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 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 within 1 business day of receipt
of such notice.  In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error.  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 $2.0874 subject to adjustment hereunder (the “Exercise
Price”).

     

    (c)           Exercise Elected by
Company. To the extent that the Daily VWAP (as defined in the Certificate
of Designations) of the Common Stock has remained at least 100% above the
Exercise Price ($4.1748) for 20 Trading Days out of 30 consecutive Trading Days
(the “Trigger
Period”), but subject to the conditions set forth below, the Company may
require the Holder to exercise this Warrant in full upon not less than 10
business days prior written notice (“Mandatory Notice
Period”) to the registered Holder at the address of the Holder appearing
on the books of the Company, stating that the Company is requiring exercise of
this Warrant.  Exercise by the Holder shall occur in accordance with
Section 2(f) herein.  Notwithstanding the delivery of a notice
pursuant to this Section 2(f), the Holder may exercise of this Warrant at any
time during the Mandatory Notice Period.  The Company’s right to
require the exercise of this Warrant shall be subject to the following
additional conditions: (i) during each Trading Day of the Trigger Period and
during each Trading Day of the Mandatory Notice Period, the Equity Conditions
(as defined below) shall be satisfied; and (ii) the Daily VWAP of the Common
Stock has remained at least 100% above the Exercise Price during all Trading
Days in the Mandatory Notice Period.

     

    As used
herein, “Equity
Conditions” shall mean each of the following:  (i) on each day
of the Trigger Period and on each day of the Mandatory Notice Period, all
Warrants Shares issuable upon exercise of this Warrant shall be eligible for
resale by the Holder without restriction and without need for additional
registration under any applicable federal or state securities laws and the
Company shall have no knowledge of any fact that would cause any Warrant Shares
issuable upon exercise of this Warrant not to be so eligible for resale by the
Holder without restriction and without the need for additional registration
under any applicable federal or state securities laws; (ii) on each day during
the Trigger Period and the Mandatory Notice Period, the Common Stock is
designated for listing on a Trading Market (as defined in the Certificate of
Designations) and shall not have been suspended from trading on such Trading
Market nor shall delisting or suspension by such exchange or market have been
threatened or pending in writing by such Trading Market nor shall there be any
Securities and Exchange Commission (“SEC”) or judicial stop trade order or
trading suspension stop order; (iii) any Warrant Shares issuable upon exercise
of this Warrant may be issued in full without violating the rules or regulations
of the Trading Market or any applicable laws; (iv) on each day during the
Trigger Period and the Mandatory Notice Period, there shall not have occurred
and be continuing, unless waived by the Holder, either (A) a Trigger Event (as
defined in the Certificate of Designations) or (B) an event that with the
passage of time or giving of notice would constitute a Trigger Event; (v) on
each day during the Trigger Period and the Mandatory Notice Period, the Company
has not provided the Holder with any non-public information in breach of Section
3.8 of the Purchase Agreement; (vi) on each day during the Trigger Period and
the Mandatory Notice Period, neither the Registration Statement (as defined in
the Purchase Agreement) nor the Prospectus (as defined in the Purchase
Agreement) nor any Prospectus Supplements (as defined in the Purchase Agreement)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading and such Registration
Statement, such Prospectus and such Prospectus Supplements comply with all
applicable securities laws as to form and substance (unless all Common Shares
issuable on the applicable Mandatory Redemption Date (or such other date
requiring payment in Common Shares) may be resold by the Holder pursuant to Rule
144 under the Securities Act of 1933, as amended (the “Securities Act”) without
volume limitations or any public information requirements or such other
exemption from registration that would permit the Holder to resell such Common
Shares without restriction and without need for additional registration under
any securities laws); (vii) the Company’s transfer agent for the Common Stock is
participating in the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program; and (viii) all Warrants Shares issuable upon
exercise of this Warrant are duly authorized and will be validly issued, fully
paid and non-assessable upon issuance, free and clear of all liens, claims or
encumbrances, and the issuance (and Payment of the Exercise Price in accordance
with the terms hereof) thereof will not require any further approvals of the
Company’s Board of Directors or stockholders.  All references to the
"Registration Statement" or "Prospectus" shall include any amendments or
supplements thereto, as filed from time to time, including, without limitation,
any Exchange Act (as defined below) filings incorporated by
reference.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (d)           Cashless
Exercise.  If at any time after 6 months from the Issue Date,
there is no effective registration statement registering issuance of the Warrant
Shares to the Holder, or no current prospectus available for, the resale of the
Warrant Shares by the Holder, then this Warrant may also be exercised at such
time by means of a “Cashless Exercise” (including any exercise required by the
Company pursuant to Section 6(c)).  Pursuant to such Cashless
Exercise, the Holder shall be entitled to receive a certificate for the number
of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:

     

    
      	
               
      

            	
              (A)
      =

            	
              the
      Daily VWAP (as defined in the Certificate of Designations) on the Trading
      Day immediately preceding the date of such
  election;

            

    

     

    
      	
               
      

            	
              (B)
      =

            	
              the
      Exercise Price of this Warrant, as adjusted;
and

            

    

     

    
      	
               
      

            	
              (X)
      =

            	
              the
      number of Warrant Shares issuable upon exercise of this Warrant in
      accordance with the terms of this Warrant by means of a cash exercise
      rather than a cashless exercise.

            

    

     

    (e)          Exercise
Limitations.

     

    (i)           Holder’s
Restrictions.  Notwithstanding anything to the contrary
contained herein, the Company shall not effect any exercise of this Warrant, and
the Holder shall not have the right to exercise any portion of this Warrant, if
the number of Warrant Shares to be issued pursuant to such exercise would
exceed, when aggregated with all other shares of Common Stock beneficially owned
by the Holder at such time (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder, including without limitation, shares
of Common Stock that would be aggregated with the Holder’s beneficial ownership
for purpose of determining a group under Section 13(d) of the Exchange Act), the
number of shares of Common Stock that would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder, including without limitation, shares of Common Stock that
would be aggregated with the Holder’s beneficial ownership for purpose of
determining a group under Section 13(d) of the Exchange Act) more than 4.9% (the
“Beneficial Ownership
Limitation”) of the then issued and outstanding shares of Common
Stock.  The provisions of this Section 2(e) may be waived by a Holder
upon not less than sixty-five (65) days prior notice to the
Company.  Notwithstanding the foregoing, the Holder shall have the
right to: (A) at any time and from time to time immediately reduce the
Beneficial Ownership Limitation and (B) (subject to waiver) at any time and from
time to time, increase the Beneficial Ownership Limitation immediately in the
event of the announcement as pending or planned, of a Change in Control
Transaction (as defined in the Certificate of Designations).

    
      
         

      

      
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    (f)           Mechanics of
Exercise.

     

    (i)           Issuance
Limitations.  The total number of Warrant Shares issued or
issuable hereunder shall not (when aggregated with any Warrant Shares already
issued upon exercise of this Warrant and any shares of Common Stock issued upon
conversion or redemption of the Preferred Shares) exceed the maximum number of
Common Shares which the Company can so issue pursuant to any rule or regulation
of the NYSE Amex Equities (or any other Trading Market (as defined in the
Certificate of Designations) on which the Common Shares trade) (the “Maximum Share
Amount”), subject to equitable adjustments from time to time for stock
splits, stock dividends, combinations, capital reorganizations and similar
events relating to the Common Shares occurring after the Initial Issuance Date
(as defined in the Certificate of Designations).

     

    (ii)           Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit/Withdrawal at Custodian (“DWAC”) system if the
Company is a participant in such system and there is an effective Registration
Statement permitting the resale of the Warrant Shares by the Holder, and
otherwise by physical delivery to the address specified by the Holder in the
Notice of Exercise within three (3) Trading Days after the receipt by the
Company of the Notice of Exercise, surrender of this Warrant and payment of the
aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”).   This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company, if such
date is after Notice of Exercise and this Warrant are received by the
Company.  The Warrant Shares shall be deemed to have been issued, and
the 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 by 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(f)(vi) prior to the issuance of
such shares, have been paid.

     

    (iii)           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 the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of 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.

    
      
         

      

      
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    (iv)          Rescission
Rights.  If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to this Section 2(f)(ii) by the third Trading Day immediately
following the Warrant Share Delivery Date, then the Holder will have the right
to rescind such exercise.

     

    (v)           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing 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 (1) pay in cash to the Holder the amount 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 (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) 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
the Company shall promptly return the Exercise Price for such Warrant Shares to
the Holder) 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 (1)
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 certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

    (vi)          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 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.

     

    (vii)         Charges, Taxes and
Expenses.  Issuance of certificates for 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 certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates 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 certificates for 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.

    
      
         

      

      
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    (g)         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.

     

    Section
3.           Certain Adjustments.
At any time while this Warrant is outstanding, the Exercise Price shall be
subject to adjustment from time to time as follows (but shall not be increased,
other than pursuant to Section 3(a) hereof):

     

    (a)          Adjustments for Stock Splits
and Combinations. If the Company shall at any time or from time to time
effect a stock split of the outstanding Common Stock, the Exercise Price in
effect immediately prior to the stock split shall be proportionately
decreased.  If the Company shall at any time or from time to time,
combine the outstanding shares of Common Stock, the Exercise Price in effect
immediately prior to the combination shall be proportionately increased. Any
adjustments under this Section 3(a) shall be effective at the close of business
on the date the stock split or combination occurs.

     

    (b)          Adjustments for Certain
Dividends and Distributions. If the Company shall at any time or from
time to time make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in
shares of Common Stock, then, and in each event, the Exercise Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying the Exercise Price then in
effect by a fraction:

     

    (i)           the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date; and

     

    (ii)          the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.

     

    (c)          Adjustment for Other
Dividends and Distributions. If the Company shall at any time or from
time to time make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in
securities or other property other than shares of Common Stock, then, and in
each event, an appropriate revision to the Exercise Price shall be made and
provision shall be made (by adjustments of the Exercise Price or otherwise) so
that Holder shall receive upon exercise of this Warrant, in addition to the
number of Warrant Shares issuable upon such exercise, the number of securities
of the Company or other issuer (as applicable) or other property that the Holder
would have received had this Warrant been exercisable into Common Stock on the
date of such event; provided, however, that if such
record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Exercise Price
shall be adjusted pursuant to this Section 3(c) as of the time of actual payment
of such dividends or distributions.

    
      
         

      

      
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    (d)          Adjustments for
Reclassification, Exchange or Substitution. If the Common Stock at any
time or from time to time after the Closing Date shall be changed to the same or
different number of shares or other securities of any class or classes of stock
or other property, whether by reclassification, exchange, substitution or
otherwise (other than by way of a stock split or combination of shares or stock
dividends provided for in Sections 3(a), 3(b) and 3(c), or a Corporate Event
provided for in Section 3(e), then, and in each event, an appropriate revision
to the Exercise Price shall be made and provisions shall be made (by adjustments
of the Exercise Price or otherwise) so that the Holder shall have the right
thereafter to exercise this Warrant for the kind and amount of shares of stock
or other securities or other property receivable upon reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock into which this Warrant might have been exercised immediately prior
to such reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.

     

    (e)          Other Corporate
Events. Prior to the consummation of any Change of Control pursuant to
which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon exercise of this Warrant, in
substitution for the shares of Common Stock issuable upon exercise of this
Warrant, such securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such shares of Common
Stock been held by the Holder upon the consummation of such Corporate Event
(without taking into account any limitations or restrictions on the
exercisability of this Warrant). Provisions made pursuant to the preceding
sentence shall be in a form and substance reasonably satisfactory to the Holder.
The provisions of this Section 3(e) shall apply similarly and equally to
successive Corporate Events and shall be applied without regard to any
limitations on the exercisability of this Warrant.

     

    (f)           Adjustments for Issuance of
Additional Shares of Common Stock. In the event the Company shall issue
or sell any additional shares of Common Stock (otherwise than as provided in the
foregoing subsections (a) through (e) of this Section 3 or pursuant to Common
Stock Equivalents (as defined below) granted or issued on or prior to the
Closing Date) (for the avoidance of doubt, this Section 3(f) shall apply to the
issuance and sale of the shares of Common Stock under the Equity Line (as
defined in the Certificate of Designations)) (the “Additional Shares of Common
Stock”), at a price per share less than the Exercise Price then in
effect, or without consideration, the Exercise Price then in effect upon each
such issuance shall be adjusted to that price (rounded to the nearest cent)
determined by multiplying the Exercise Price by a fraction:

     

    (i)           the
numerator of which shall be equal to the sum of (A) the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus (B) the number of shares of Common Stock (rounded to
the nearest whole share) which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at a price
per share equal to the then Exercise Price, and

    
      
         

      

      
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    (ii)           the
denominator of which shall be equal to the number of shares of Common Stock
outstanding immediately after the issuance of such Additional Shares of Common
Stock.

     

    (iii)          No
adjustment of the number of shares of Common Stock shall be made under this
Section 3(f) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to the exercise of any warrants or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange rights
in any Common Stock Equivalents (as defined below), if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights or
upon the issuance of such Common Stock Equivalents (or upon the issuance of any
warrant or other rights therefore) pursuant to Section 3(g).

     

    (g)         Issuance of Common Stock
Equivalents.  If (a) the Company, at any time after the Closing
Date, shall issue any securities convertible into or exchangeable for, directly
or indirectly, Common Stock (“Convertible
Securities”), or (b) any rights or warrants or options to purchase any
such Common Stock or Convertible Securities (collectively, the “Common Stock
Equivalents”) shall be issued or sold and if the sum of the price for
which such Common Stock Equivalents are sold (on a per Common Share Basis) plus
the price per share for which Additional Shares of Common Stock may be issuable
pursuant to any such Common Stock Equivalent shall be less than the Exercise
Price then in effect, or if, after any such issuance of Common Stock
Equivalents, the price per share for which Additional Shares of Common Stock may
be issuable thereafter is amended or adjusted, and the sum of such issuance
price plus such price as so amended shall be less than the Exercise Price in
effect at the time of such amendment or adjustment, then the Exercise Price,
upon each such issuance or amendment, shall be adjusted as provided in Section
3(f). No adjustment shall be made to the Exercise Price upon the issuance of
Common Stock pursuant to the exercise, conversion or exchange of any Convertible
Security or Common Stock Equivalent where an adjustment to the Exercise Price
was made as a result of the issuance or purchase of any Convertible Security or
Common Stock Equivalent.

     

    (h)         Certain Issues
Excepted.  There shall be no adjustment to the Exercise
Price pursuant to Section 3(f) or Section 3(g) with respect to the sale or
issuance of Excluded Securities (as defined in the Certificate of
Designations).

    
      
         

      

      
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    (i)           Calculation of Consideration
Received.  In case any Common Stock Equivalents are issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Common Stock Equivalents by the parties thereto, the Common
Stock Equivalents will be deemed to have been issued for a consideration of
$0.01.  If any shares of Common Stock, Common Stock Equivalents or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the gross
proceeds received by the Company therefor.  If any shares of Common
Stock, Common Stock Equivalents or Convertible Securities are issued or sold for
a consideration other than cash, the amount of such consideration received by
the Company will be the fair value of such consideration, except where such
consideration consists of publicly traded securities, in which case the amount
of consideration received by the Company will be the closing sale price of such
security on the date of receipt.  If any shares of Common Stock,
Common Stock Equivalents or Convertible Securities are issued to the owners of
the non-surviving entity in connection with any merger in which the Company is
the surviving entity, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such shares of Common Stock, Common
Stock Equivalents or Convertible Securities, as the case may be.  The
fair value of any consideration other than cash or publicly traded securities
will be determined jointly by the Company and the Holder.  If such
parties are unable to reach agreement within ten (10) days after the occurrence
of an event requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within twenty (20)
Trading Days after the tenth day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Holders.  The determination of such appraiser shall be final and
binding upon all parties absent manifest error or fraud and the fees and
expenses of such appraiser shall be borne by the Company.

     

    (j)           Adjustment to Warrant
Shares.  Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
shares of Common Stock determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such
adjustment.

     

    (k)           Certificates as to
Adjustments. Upon occurrence of each adjustment or readjustment of the
Exercise Price or number of shares of Common Stock issuable upon conversion of
this Warrant pursuant to this Section 3, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to the Holder a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon written request of the Holder, at
any time, furnish or cause to be furnished to the Holder a like certificate
setting forth such adjustments and readjustments, the Exercise Price in effect
at the time, and the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon the
exercise of this Warrant. Notwithstanding the foregoing, the Company shall not
be obligated to deliver a certificate unless such certificate would reflect an
increase or decrease of at least one percent (1%) of such adjusted
amount.  If the adjustment is not made because the adjustment does not
change the applicable Exercise Price by more than one percent (1%),
then the adjustment that is not made will be carried forward and taken into
account in any future adjustment. Notwithstanding the foregoing, all such
carried forward adjustments shall be made to the Exercise Price when they
add up to one percent (1%).

     

    (l)           Participation.  The
Holder, as the holder of this Warrant, shall be entitled to receive such
dividends paid and distributions made to the holders of Common Stock to the same
extent as if the Holder had exercised this Warrant into Common Stock (without
regard to any limitations on exercise herein or elsewhere) and had held such
shares of Common Stock on the record date for such dividends and
distributions.  Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common
Stock.

    
      
         

      

      
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    (m)         Notice to Allow Exercise by
Holder.  If (A) the Company shall declare a redemption of the
Common Stock; (B) 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; (C) 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, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or (D) 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, a notice stating (x) the date on which a record is to
be taken for the purpose of such redemption, 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 redemption 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 or (z) the date of such dissolution, liquidation or winding up of the
affairs of the Company; 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.  Subject to
applicable law and notwithstanding anything herein to the contrary, the Holder
shall be provided a reasonable opportunity (which shall be not less than eight
(8) calendar days notice) to exercise this Warrant prior to the effective date
of the event triggering such notice.  Notwithstanding the foregoing,
the delivery of the notice described in this Section 3(m) is not intended to and
shall not bestow upon the Holder any voting rights whatsoever with respect to
outstanding unexercised Warrants.

     

    Section
4.             Transfer of
Warrant.

     

    (a)          Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof, this Warrant and all rights hereunder 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 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.  A Warrant, if properly
assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.

     

    (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 original Issue Date and
shall be identical with this Warrant except as to the number of Warrant Shares
issuable pursuant thereto.

    
      
         

      

      
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    (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.

     

    (d)          Transfer
Restrictions.  If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer, that the Holder
or transferee of this Warrant, as the case may be, furnish to the Company a
written opinion of counsel reasonably satisfactory to the Company (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act, (ii) that the transferor or transferee
execute and deliver to the Company an investment letter in form and substance
reasonably acceptable to the Company and (iii) that the transferee be an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a) (7), or
(a)(8) promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a)(1) promulgated under the Securities Act.

     

    Section
5.            Transferability.

     

    (a)          Conditions for
Transfer.  The Holder agrees and acknowledges that this Warrant
may not be sold, transferred, assigned or hypothecated by the Holder except in
compliance with the provisions of the Securities Act and any applicable State
securities or “blue sky” laws.  The Holder further represents to the
Company, by accepting this Warrant, that it has full power and authority to
accept this Warrant and make the representations set forth herein.

     

    Section
6.            Miscellaneous.

     

    (a)          No Rights as Stockholder
Until Exercise.  Except as set forth in Section 3(l), this
Warrant does not entitle the Holder to any voting rights or other rights as a
stockholder of the Company prior to the exercise hereof.  Upon the
surrender of this Warrant and the payment of the aggregate Exercise Price, the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender and payment.

     

    (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.

    
      
         

      

      
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    (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.

     

    (d)          Authorized
Shares.  The Company covenants that during the period the
Warrant is outstanding and exercisable, 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
certificates for the 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 (as defined in the Certificate of
Designations) 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, 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).

     

    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 (a) 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, (b) 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 (c) use
its reasonable best 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.

    
      
         

      

      
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    (e)          Governing Law and
Jurisdiction.  All questions concerning the construction,
validity, enforcement and interpretation of this Warrant or actions, disputes or
proceedings arising out or related to this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.

     

    (f)           Nonwaiver.  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
Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date.

     

    (g)          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 notice
provisions of the Purchase Agreement.

     

    (h)          Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of 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.

     

    (i)           Remedies.  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.

     

    (j)           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 of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by any such Holder or holder of Warrant
Shares.

     

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

     

    (l)           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.

     

    (m)         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.

     

    [Remainder
of Page Left Blank Intentionally]

    
    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

        

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

     

    
      
        	
                NEOSTEM,
      INC.

              
	 
      
	
                By:  

              	
                    

              

      

    

    
    

    Signature Page to
Warrant

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
    

    NOTICE
OF EXERCISE

     

    TO:        [_______________________]

     

    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 be made in lawful money of the United States.

     

    3.           Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

    
    

    _________________________

     

    The
Warrant Shares shall be delivered by physical delivery of a certificate
to:

     

    4.           Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

     

    [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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