Document:

Exhibit 10.4

                              EMPLOYMENT AGREEMENT

      The Employment  Agreement (the "Agreement") is made and entered into as of
the 22nd day of August,  2002 (the "Effective  Date"), by and between CYTOMEDIX,
INC., a Delaware corporation (the "Company"), and KENT T. SMITH ("Executive").

      NOW,  THEREFORE,  in  consideration of the mutual covenants and agreements
contained herein, the parties hereby agree as follows.

                                    ARTICLE 1

                      EFFECTIVE DATE AND TERM OF EMPLOYMENT

      1.1 Term of  Employment.  Subject to extension in accordance  with Section
1.2,  the Term,  as  defined  below,  of the  Agreement  shall  commence  on the
Effective  Date and shall  continue  until the date one year hence (the "Initial
Term"), unless terminated earlier in accordance with Article 5 of the Agreement.
For  purposes of the  Agreement,  the "Term" shall mean the Initial Term and any
extensions thereof made in accordance with Section 1.2 below.

      1.2  Extension of Term.  The Initial Term of the Agreement may be extended
upon the mutual  agreement of the parties by two years on the first  anniversary
of the Effective Date and in one year increments on each subsequent  anniversary
of the Effective Date  thereafter.  Any party desiring to extend the Term of the
Agreement  must notify the other  party,  in writing,  not less than ninety (90)
days prior to the last day of the Term of the Agreement then in effect.  If both
parties  give such  written  notice not less than  ninety (90) days prior to the
expiration  of the Term then in effect,  the Term  automatically  extends for an
additional  year (or in the case of the first  anniversary,  two (2) years),  as
noted above.

      1.3 Expiration of Term. If the Term of the Agreement  expires based on the
Company  giving  notice of an election not to extend the Term under Section 1.2,
the  termination of Executive's  employment  that results shall be treated as an
Involuntary  Termination  for  Other  than  Cause  under  Section  5.5 below for
purposes of the payments and benefits  due  Executive  from the Company.  If the
Term of the Agreement  expires  based on Executive  giving notice of an election
not to extend  the Term  under  Section  1.2,  the  termination  of  Executive's
employment  that  results  shall be treated  as a  Voluntary  Termination  under
Section 5.8.2 for purposes of the payments and benefits due  Executive  from the
Company.

                                    ARTICLE 2
                              DUTIES AND ACTIVITIES

      2.1 Employment.  During the Term, the Company shall employ Executive,  and
Executive shall accept  employment with the Company,  upon the terms and subject
to the conditions set forth in the Agreement.

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      2.2  Position.  During the Term,  Executive  shall serve as President  and
Chief  Executive  Officer of the Company,  and shall hold such other position or
positions  as the parties  mutually  agree in writing.  Executive  shall  report
directly to the Chairman of the Board of Directors of the Company (the "Board").
As  President  and  Chief  Executive  Officer,   Executive  shall  have  overall
responsibility  for directing the Company toward the achievement of its business
objectives  as  developed  by the Board.  Upon the  termination  of  Executive's
employment  hereunder in accordance with Article 5, Executive shall  immediately
resign as President and Chief Executive Officer and from all other positions, if
any, with the Company.

      2.3 Duties.  During the Term,  Executive  shall devote his business  time,
attention,  and energies to the business of the Company and use his best efforts
to promote the interest of the  Company.  Executive  shall  perform such duties,
services,  and responsibilities  incident to the Executive's  positions that are
reasonably  consistent  with such positions and shall act in accordance with the
policies and  directives of the Company as determined  from time to time. In the
capacity,  Executive  shall have the full authority and be responsible to manage
the operations of the Company consistent with the Company's annual and strategic
business plans, such plans to set forth guidelines related to budgeting, capital
expenditures,  hiring and other  initiatives,  and to be formulated by Executive
and  approved  by the  Board.  Executive  shall have the  authority  to bind the
Company  to  contracts  that are  consistent  with the  Executive's  duties  and
responsibilities, subject only to specific limitations imposed by the Board.

      2.4  Principal  Location.  The  principal  location  at which  Executive's
services are to be  performed  shall be at office  space  located in  reasonable
proximity to  Executive's  home address,  which is 13319  Seagrove  Street,  San
Diego, CA 92130,  subject to reasonable travel requirements during the course of
performing such services.

      2.5 Other Activities.  Subject to Article 7, and not withstanding  Section
2.3,  Executive may engage in other business  activities and invest his personal
assets in other businesses or ventures to the extent that such other activities,
business,  or ventures do not materially  interfere with the  performance of his
duties under the Agreement.

                                    ARTICLE 3
                          SALARY, BONUS, AND BENEFITS

      3.1 Base Salary. During the Term of this Agreement,  the Company shall pay
Executive  a base salary  ("Base  Salary").  Commencing  on the  Effective  Date
through  December 31,  2002,  this Base Salary shall be not less than the annual
rate of $200,000.  At the end of each  calendar  year,  the  Company's  Board of
Directors  shall  review  Executive's  Base  Salary  and  may in its  discretion
increase,  but may not decrease without his prior written  consent,  Executive's
Base Salary.

      3.2 Incentive Stock Options.  The Company shall grant Executive  Incentive
Stock Options as outlined in Part A of Appendix 1.

      3.3 Annual  Bonus and  Long-Term  Incentive  Program.  The  Company  shall
establish, and Executive shall be entitled to participate in the Company's Bonus
Compensation  Program,  beginning

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in the year 2003,  which shall be  substantially  in accordance with the summary
points  contained in Part A of Appendix I, attached hereto and made part hereof.
To the extent that  Executive  is entitled to receive  each Bonus,  such payment
shall be made not later than sixty (60) days  following the end of the Company's
fiscal year. The Company shall  establish,  and Executive shall also be entitled
to  participate  in, the  Company's  Executive  Long Term  Incentive  Program as
described in Part A of Appendix I.

      3.4   Withholding.   The  Company   shall  deduct  or  withhold  from  the
compensation  and  benefits  payable  to  Executive  hereunder  any and all sums
required for federal and state income and  employment  taxes now  applicable  or
that may be enacted and become applicable during the Term of the Agreement.

      3.5 Benefits.  During the Term,  the Company shall provide  Executive with
benefits as described in Part B of Appendix I, and Executive agrees to submit to
any medical or other  examination  and to execute and deliver any application or
other instrument in writing reasonably necessary to effectuate such benefit plan
or  insurance  coverage.  Executive  shall be  entitled  to  participate  in all
ordinary and  customary  benefit  plans  afforded to executive  employees of the
Company.  Executive's  participation  in  said  benefit  plans  shall  be at the
Company's  sole  expense  except to the  extent  employee  contributions  may be
required under the Company's  benefit plans as they may now or hereafter  exist.
Such benefits may include any qualified or unqualified pension,  profit sharing,
and savings plans, any death benefit and disability benefit plan, life insurance
coverage,  any cafeteria  plans,  and any medical,  dental,  health,  vision and
welfare plans or insurance coverage.

      3.6 Vacation.  During the Term,  Executive  shall be entitled to three (3)
weeks  of paid  vacation  for  each  year of his  employment  hereunder.  Unused
vacation  may be  carried  over  from  year to year,  subject  to a cap equal to
Executive's  annual vacation  entitlement.  Once that cap is reached,  Executive
will not accrue any additional  vacation  until his accrued  vacation time falls
below the cap.  Vacations  shall be taken at such times as are  approved  by the
Chairman of the Board or in accordance  with the policies of the Company then in
effect.

                                    ARTICLE 4
                                BUSINESS EXPENSES

      4.1  Expenses.  The Company  shall pay or reimburse  the Executive for all
reasonable and authorized business expenses incurred by the Executive during the
Term.

      4.2 Business  Travel.  The Company shall reimburse  Executive for expenses
incurred for business-related  travel in accordance with existing Company travel
policies, which may change from time to time.

      4.3  Documentation.  As a condition to reimbursement  under the Article 4,
Executive shall furnish to the Company  adequate  records and other  documentary
evidence  required  by  federal  and  state  statutes  and  regulations  for the
substantiation  of each  expenditure.  Executive

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acknowledges and agrees that failure to furnish the required  documentation  may
result in the Company denying all or part of the expense for which reimbursement
is sought.

                                    ARTICLE 5
                            TERMINATION OF EMPLOYMENT

      5.1 Termination of Employment.  Notwithstanding  the provisions of Article
1,  either  the  Company  or  Executive  may  terminate  Executive's  employment
hereunder during the Term, subject to the following terms and conditions.

      5.2  Involuntary  Termination  by the  Company  for Cause.  As used in the
Agreement, "Cause" shall mean either:

      5.2.1 a material and willful  breach of any material term of the Agreement
by Executive,  as determined by a majority of the disinterested directors of the
Board,  but  only if such  material  and  willful  breach  remains  uncured  (as
reasonably  determined  by the  Board)  after  thirty  (30)  days  have  elapsed
following  the date that the  Company  gives  Executive  written  notice of such
breach;

      5.2.2 willful  conduct by Executive  that is  materially  injurious to the
Company  or  to  any  affiliate  or  successor  thereto,  whether  financial  or
otherwise,  as  determined by a majority of the  disinterested  directors of the
Board, but only if Executive has failed to cease any such conduct within fifteen
(15) days  after the date the  Company  gives  Executive  written  notice of its
belief that Executive is engaging in such conduct;

      5.2.3 Executive's conviction of a felony,

      5.2.4  Executive's  conviction of any crime  involving  moral turpitude or
dishonesty.

The Company may terminate  Executive's  employment hereunder for Cause by giving
Executive  thirty (30) days' written  notice.  Where  Executive is entitled to a
cure period,  the termination date under this Section shall be the day after the
cure period  expires,  if Executive  fails to cure.  In such event,  the Company
shall  pay to  Executive  his  Base  Salary  through  the  date  of  Executive's
termination,  his accrued but unused vacation, all deferred compensation owed to
Executive under any other agreements,  and his reimbursable expenses pursuant to
Article 4 incurred prior to such termination.

      5.3  Termination  for  Disability.  As used in the Agreement,  Executive's
"Disability" shall mean a good faith  determination by the Board, acting without
participation by Executive, based on competent and independent medical evidence,
that  Executive,  as a result  of a mental  or  physical  disease  or  condition
expected to continue  indefinitely,  is  incapable of  performing a  substantial
portion of the services contemplated in the Agreement. The Company may terminate
Executive's  employment  hereunder  in the event of  Executive's  Disability  by
giving  Executive  thirty (30) days' written notice.  In such event, the Company
shall pay to Executive his Base Salary  through the date of  termination  (which
shall be thirty (30) days after written  notice is given) and,  thereafter,  his
Base  Salary for a period of eleven  (11)  additional  months  after the date of
termination,  less net amounts

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received  during that period from any long-term  disability  insurance  provided
under Article 3. The Base Salary shall be paid at the annual rate of Executive's
Base Salary in effect on the date of  Executive's  termination of employment and
shall be payable not less  frequently  than  semi-monthly in accordance with the
Company's  executive  compensation  practices.  The  Company  shall  also pay to
Executive a prorated bonus and incentive  compensation payment based on the then
applicable  bonus  plan/long  term incentive  compensation  program in an amount
equal  to the  bonus/incentive  payment  that  would  otherwise  be paid for the
fiscal/calendar  (depending on the plan or program)  year in which  Executive is
terminated,  multiplied  by a fraction,  the numerator of which is the number of
days that Executive was employed  during that year, and the denominator of which
is  365,   payable  no  later  than  sixty  (60)  days  after  the  end  of  the
fiscal/calendar year in which Executive's employment is terminated.  The Company
shall  also  pay  Executive's   accrued  but  unused   vacation,   all  deferred
compensation  owed to  Executive  under any other  agreements,  and his expenses
incurred prior to such termination of employment  reimbursable  under Article 4.
All  benefits  provided  under  Section 3.5 shall be  extended,  at  Executive's
election and cost, to the extent permitted by Company's  insurance  policies and
benefit plans, for twelve (12) months after the date of Executive's termination,
except as required by law (e.g., COBRA health insurance continuation election).

      Within sixty (60) days of the Effective Date hereof,  the Executive  shall
provide to the Board written  documentation from a licensed physician evidencing
the Executive's fitness for duty as such duties are described herein.

      5.4  Termination  for  Death.   Executive's   employment  hereunder  shall
terminate  upon  Executive's  death.  In such event,  the  Company  shall pay to
Executive's estate his Base Salary until the end of the month in which the death
occurred, all accrued but unused vacation pay, all deferred compensation owed to
Executive under any other  agreements,  and all unreimbursed  expenses which are
reimbursable pursuant to Article 4 incurred prior to his death.

      5.5  Involuntary  Termination  for  Other  than  Cause.  The  Company  may
terminate  Executive's  employment  hereunder  during a Term of employment other
than for Cause by  giving  Executive  ninety  (90)  days'  written  notice.  Any
termination of Executive's  employment by the Company without Cause,  prior to a
Change of Control, that occurs at the request or insistence of any person (other
than the  Company)  relating to such  Change of Control  shall be deemed to have
occurred after the Change of Control for the purposes of the Agreement.

      Should the Executive's employment be terminated hereunder during a Term of
employment other than for Cause, prior to a Change of Control, the Company shall
pay to Executive all Base Salary and bonuses earned up to and including the date
of  termination  (which shall be the date ninety (90) days after the date of the
written notice), all accrued and unused vacation,  and all unreimbursed expenses
which are reimbursable pursuant to Article 4 incurred prior to such termination.
In addition, the Company shall:

      5.5.1 pay to  Executive a severance  payment in an amount equal to six (6)
months of  Executive's  Base  Salary in effect on the date of  termination  (the
"Severance  Payment").  The Severance Payment shall be paid in a lump sum within
thirty (30) days of the date of  termination,  at the annual rate of Executive's
Base Salary on the date of termination.

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      5.5.2 pay to Executive a prorated bonus and a prorated long term incentive
program  payment,  based on the then  applicable  bonus plan/long term incentive
program, in an amount equal to the bonus/incentive  payment that would otherwise
be paid for the fiscal/calendar (depending on the plan or program) year in which
Executive is terminated, multiplied by a fraction, the numerator of which is the
number of days that Executive was employed during that year, and the denominator
of which is 365,  payable  no later  than  sixty  (60) days after the end of the
fiscal/calendar year in which Executive's employment is terminated.

      5.5.3 keep all medical,  disability,  life and dental benefits that are in
effect as of the date of termination in force,  at the sole cost to the Company,
for twelve (12) after the date of notice of termination;

      5.5.4 extend the exercise date of any stock options that the Executive has
to purchase shares in the Company for a term of twelve (12) months from the date
of termination; and

      5.5.5  immediately  pay to  Executive  all deferred  compensation  owed to
Executive under any other agreements.

      5.6 Involuntary  Termination by Executive For "Good Reason" As used in the
Agreement, "Good Reason" shall mean any of the following:

      5.6.1 a material and willful  breach of any material term of the Agreement
by the Company,  including but not limited to the assignment to Executive of any
duties inconsistent in any material respect with Executive's position (including
status, offices, title, and reporting requirements),  authority, duties or other
responsibilities  or any other  action of the Company that results in a material
diminishment in such position,  authority,  duties,  or  responsibilities,  or a
reduction  by the  Company  in  Executive's  Base  Salary,  Bonus and  Incentive
Compensation  programs as in effect on the Effective  Date and as the same shall
be  increased  from  time to time  hereafter;  unless  remedied  (as  reasonably
determined by Executive) within thirty (30) days after receipt of written notice
thereof given by Executive;

      5.6.2 the  Company's  requiring  Executive  to be based at a  location  in
excess of thirty (30) miles from the location of Executive's principal residence
without the prior written consent of Executive;

      5.6.3 the failure by the Company to: (a)  continue in effect any  material
compensation or benefit plan, program, policy or practice in which Executive was
participating  during the Term of his  employment  or at the time of a Change of
Control;  or (b) provide Executive with compensation and benefits at least equal
(in terms of benefit levels and/or reward  opportunities)  to those provided for
under each  employee  benefit  plan,  program,  policy and practice as in effect
immediately  prior to a Change of Control (or as in effect  following the Change
of Control, if greater); or

      5.6.4 the failure by the Company to obtain a  satisfactory  agreement from
any successor to the Company to assume and agree to perform the Agreement, or an
election by Executive not to give

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consent to an  assignment  under  Section  8.5, or an election by  Executive  to
terminate  his  employment  at the same time as or within six (6) months after a
Change in Control.

Executive may terminate his  employment  hereunder for Good Reason by giving the
Company  thirty (30) days'  written  notice.  Where the Company is entitled to a
cure period,  the termination date under this Section shall be the day after the
cure period expires,  if the Company fails to cure. Such a termination  shall be
treated as an Involuntary  Termination for Other than Cause, and Executive shall
be  entitled  to the  payments  and  benefits as set forth in Section 5.5 above,
except that the  Severance  Payment  referenced  in Section 5.5.1 shall be in an
amount equal to eleven (11) months of Executive's Base Salary.

      5.7 Change of Control.

      5.7.1  Following  or at the same time as a Change of Control  (as  defined
below),  if the  Agreement  is  terminated  (or not  renewed)  by the Company in
accordance  with  Section 5.5 or 1.2, or by the  Executive  in  accordance  with
Section 5.6, then, in addition to the benefits  described in Section 5.5, all of
Executive's  issued and unvested  stock options shall  immediately  become fully
vested and exercisable.

      5.7.2 "Change of Control" shall mean any of the following:

            a.  a sale of all or substantially all of the assets of the Company;

            b.  the  acquisition of more than thirty percent (30%) of the common
            stock of the Company (with all classes or series thereof  treated as
            a  single  class)  by any  person  or  group  of  persons,  except a
            Permitted Shareholder (as hereinafter defined), acting in concert. A
            "Permitted  Shareholder"  means a  holder,  as of the  date the 2002
            Stock Option Plan was adopted by the Company, of common stock;

            c.  a reorganization  of the  Company  wherein the holders of common
            stock of the Company receive stock in another  company,  a merger of
            the Company with another  company  wherein  there is a fifty percent
            (50%) or greater  change in the ownership of the common stock of the
            Company  as a result of such  merger,  or any other  transaction  in
            which  the  Company  (other  than  as  the  parent  corporation)  is
            consolidated  for federal  income tax  purposes or is eligible to be
            consolidated   for  federal   income  tax   purposes   with  another
            corporation;

            d. in the event that the common  stock is traded on an  established
            securities  market,  a  public  announcement  that  any  person  has
            acquired  or has  the  right  to  acquire  beneficial  ownership  of
            fifty-one percent (51%) or more of the then-outstanding common stock
            and, for this purpose, the terms "person" and "beneficial ownership"
            shall have the meanings  provided in Section 13(d) of the Securities
            and  Exchange  Act of  1934  or  related  rules  promulgated  by the
            Securities and Exchange Commission, or the commencement of or public
            announcement  of an  intention  to

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            make a tender offer or exchange offer for fifty-one percent (51%) or
            more of the then outstanding common stock;

            e.  a  majority  of the Board  of  Directors  is  not  comprised  of
            Continuing  Directors.  A  "Continuing  Director"  means a  director
            recommended  by the Board for  election as a director of the Company
            by the stockholders; or

            f.  a  sufficient change in the share  ownership  of the  Company to
            constitute  a  change  of  effective  ownership  or  control  of the
            Company.

      5.8 Voluntary  Termination.  The Agreement may be  voluntarily  terminated
under either of the following conditions:

      5.8.1 At any time, upon the mutual written consent of the parties prior to
the  expiration  of the  Term  set  forth  in  Article  1. In the  event of such
voluntary termination,  Executive agrees to remain in the service of the Company
for an agreed upon period of time not to exceed  three (3) months to  facilitate
transition.  Executive's compensation during said transition shall be determined
and paid as follows.  During said  transition,  Executive shall continue receive
compensation  equal  to 110  percent  of his  Base  Salary  at the  time  of the
termination.   Said  payment  shall  be  made  at  least  monthly.  The  Company
understands that Executive,  during the transition period, will be seeking other
opportunities  and  will not be  devoting  his full  time and  attention  to the
affairs of the Company. The parties shall be free to agree upon any different or
additional terms in writing at the time of the termination.

      5.8.2  At any  time,  upon  sixty  (60)  days'  prior  written  notice  by
Executive.  In such event,  the Company  shall pay to Executive  his Base Salary
through the  Executive's  date of  termination  (which  shall be sixty (60) days
after the date of his written  notice),  his accrued  but unused  vacation,  all
deferred  compensation  owed to Executive  under any other  agreements,  and his
reimbursable  expenses pursuant to Article 4 incurred prior to such termination.
The Company may accelerate the termination  date by giving a lump-sum payment in
lieu of notice.

                                    ARTICLE 6
                                    INSURANCE

      6.1 The Company shall provide the Executive with  directors' and officers'
liability  insurance  coverage.  In the event that the Company's  directors' and
officers'  liability  insurance coverage lapses, and if the Executive is a party
to or is threatened to be made a party to any  threatened,  pending or completed
claim, action, suit, or proceeding, or appeal therefrom, whether civil, criminal
administrative,  investigative,  or  otherwise,  because he is or was an officer
and/or  director of the  Company or at the express  request of the Company is or
was serving for purposes reasonably understood by him to be for the Company as a
director,  officer, partner,  employee, agent, trustee, or in any other capacity
of an association,  corporation,  general or limited partnership, joint venture,
trust, or other entity, the Company shall indemnify the Executive  against,  and
shall pay and advance,  all reasonable  expenses,  including attorney's fees and
disbursements, and any judgments,

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fines,  and amounts paid in settlement  incurred by him in connection  with such
claim,  action,  suit,  proceeding,  or appeal therefrom,  to the fullest extent
permitted under applicable law.

                                    ARTICLE 7
                              RESTRICTIVE COVENANTS

      7.1 Confidential  Information.  In the course of his employment hereunder,
Executive may have access to  confidential  records,  data,  formulae,  customer
lists,  trade secrets,  specifications,  inventions  and processes  owned by the
Company.  During  the Term and  thereafter,  Executive  shall not,  directly  or
indirectly, disclose such information to any person or use any such information,
except as required in the  performance  of  Executive's  duties  hereunder.  All
records,  files, keys,  drawings,  documents,  models,  equipment,  and the like
relating to the Company's business, which Executive shall prepare, copy, or use,
or with which  Executive  comes into contact  shall be and remain the  Company's
sole  property,  shall not be removed  from the  Company's  premises,  except as
necessary for the performance of the Executive's  duties,  and shall be returned
to the Company upon the  expiration or  termination  of the Term of  Executive's
employment.

      7.2 Competing Business.  As used in the Agreement,  a "Competing Business"
refers to any  person or entity  engaged in any of the  businesses  in which the
Company or any of its  affiliates,  or any of their  respective  successors  and
assigns,  are  engaged.  The  restrictions  contained in the  paragraphs  of the
Article 7 shall apply only to Executive's  actions within the cities,  counties,
states of the United  States,  and other  countries  where the  Company  and its
affiliates  do  business  during the  Non-competition  Period.  The  Company and
Executive  acknowledge and agree that the duration,  scope,  and geographic area
for which the covenant is to be effective are reasonable.

      7.3 Non-competition Period. The "Non-Competition Period" shall be one year
following the date of termination of Executive's employment

      7.4 Covenant Not to Compete.  Executive  shall not, at any time during the
Term and during the Non-competition Period,

      7.4.1  either  directly  or  indirectly,  or solely or jointly  with other
persons or entities, own, manage,  operate, join, control,  consult with, render
services for or participate in the ownership,  management,  operation or control
of, or be  connected  as an officer,  director,  employee,  partner,  principal,
agent, consultant or other representative with, or permit his name to be used in
connection with any profit or nonprofit business,  organization or entity, other
than the Company  and its  affiliates,  which  operates or engages in or owns an
interest in a Competing Business.

      7.4.2  lend any  credit  or money  for the  purposes  of  establishing  or
operating any Competing  Business or otherwise give aid or advice to any person,
firm, association, corporation, or entity engaging in any Competing Business, or

      7.4.3  solicit,  contract,  divert,  or take away or attempt  to  solicit,
divert,  or take away any of the  customers,  potential  customers,  business or
patrons of the Company and its affiliates or any of

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their  respective  successors  and assigns,  directly or  indirectly,  by or for
himself or as the agent of any other  person or entity or  through  others as an
agent or on behalf of a competitor of the Company.

Notwithstanding  the  foregoing,  Executive may own publicly  traded  securities
issued by a Competing Business,  provided that Executive shall not own more than
1 percent of the value of any class of such securities outstanding at such time.

      7.5 Solicitation of Employees. Executive shall not, at any time during the
Term  or  during  the  Non-competition  Period,  defined  as  the  term  of  the
employment,  directly  or  indirectly,  by or for himself or as the agent of any
other  person or  entity or  through  others as an agent in any way  solicit  or
induce or attempt to solicit or induce any  employee,  officer,  representative,
consultant, or other agent of the Company or its affiliates, whether such person
is presently  employed with the Company or an affiliate or may hereinafter be so
employed, to leave the Company's employ or the employ of a Company affiliate.

      7.6  Disclosure of Proprietary  Information.  In the course of Executive's
employment with the Company,  Executive may have access to confidential records,
data, formulae, customer lists, trade secrets,  specifications,  inventions, and
processes owned by the Company and its affiliates. During Executive's employment
with the Company and thereafter,  Executive shall maintain in strict  confidence
and shall not, directly or indirectly, use, disseminate, disclose, or publish or
use for his benefit or the benefit of any person,  firm,  corporation,  or other
entity,  any  confidential  or  proprietary  information  or trade secrets of or
relating  to the  Company  and its  affiliates,  or which  the  Company  and its
affiliates have a right to use, including, without limitation,  information with
respect to the  Company's and its  affiliates'  vendors,  suppliers,  customers,
potential customers,  marketing methods, costs, prices, and terms of employment.
Executive shall not deliver to any person,  firm,  corporation,  or other entity
any  document,   record,  notebook,   computer  program  or  similar  repository
containing any such  confidential  or proprietary  information or trade secrets,
except as required in the faithful  performance  of  Executive's  duties  during
employment with the Company,  provided,  however, that the foregoing restriction
shall  not  apply  to (i)  disclosure  or use of  Executive's  general  business
knowledge or any such information that became generally  available to the public
in any manner or form through no fault of Executive,  (ii)  disclosure or use of
any  such  information  with  the  Company's  prior  written  consent,  or (iii)
disclosure of any such information  required by a court or a governmental agency
of  competent  jurisdiction.  In the event  that  Executive  is so  required  or
compelled to make such disclosure, Executive shall cooperate with the Company to
preserve  in full  the  confidentiality  of all  proprietary  information  whose
disclosure is not required or compelled.

      7.6.1 All such information and trade secrets and all records, files, keys,
drawings,  documents,  models,  equipment and the like relating to the Company's
and its  affiliates'  business with which  Executive comes into contact shall be
and remain the sole  property of the Company  and its  affiliates,  shall not be
removed from the  Company's or its  affiliates'  premises,  except as reasonably
appropriate  for the  performance  of  Executive's  duties or with the Company's
prior written  consent,  and shall be returned to the Company and its affiliates
upon Executive's retirement or other termination of employment with the Company.

                                       10
<PAGE>

      7.6.2 The Company and Executive hereby stipulate and agree that as between
them the foregoing matters are important, material, and confidential proprietary
information and trade secrets and affect the successful  conduct of the business
of the Company, its affiliates, and any successor or assignee of the Company and
its affiliates. In the event that during Executive's employment with the Company
or  thereafter,  Executive  becomes  employed  by any  employer  other  than the
Company,  Executive shall notify such employer of the terms of the Article 7 and
all  sections  and  subsections  thereunder  not  later  than  the date on which
Executive commences employment with such employer.

      7.7  Normal  Business   Communications.   Notwithstanding  the  foregoing,
Executive  may engage in  discussion  and  meetings  with  representatives  of a
Competing  Business in the normal  course of the business of the Company  during
Executive's employment with the Company.

      7.8 Enforcement of Covenants Not to Compete or Disclose.

      7.8.1 The Company and Executive  intend that the provisions of the Article
7 shall be fully  enforceable as set forth herein.  To the extent that any court
of competent  jurisdiction  finds that any such  provision is  unenforceable  by
reason of its duration or scope,  the Company and Executive  agree that it shall
be enforced  insofar as it may be enforced  within the limits of the law of that
jurisdiction but that the Agreement as a whole shall be unaffected elsewhere.

      7.8.2  The  Company  and  Executive  recognize  and  acknowledge  that the
Company, by the Agreement,  has sought to prohibit competition and disclosure of
confidential  information by Executive  during  Executive's  employment with the
Company  and  thereafter  and  that  Executive's   performance  of  services  or
disclosure of  confidential  information  in  contravention  of the Agreement or
other  breach  of the  provisions  of the  Article  7 would  consequently  cause
immediate and  irreparable  harm to the business and goodwill of the Company and
its  affiliates,  the exact amount of which will be difficult or  impossible  to
ascertain,  and  that  damages,  if any,  and  other  remedies  at law  would be
inadequate.  Accordingly,  should  Executive  perform or attempt or  threaten to
perform  services or disclose  confidential  information in contravention of the
Agreement  or  otherwise  breach the  provisions  of the  Article 7, the Company
shall,  in  addition  to any and all other  remedies  available  to it under the
Agreement,  have the right to seek and obtain an injunction  or other  equitable
relief,  restraining  and preventing  Executive from  performing  such services,
disclosing such information, or breaching the provisions of this Article 7.

      7.8.3 The Company shall not decrease or discontinue any payments to or for
the benefit of  Executive  or deny him any other  benefit  under this  Agreement
based upon a claim that Executive has breached this Article 7. The Company shall
instead  continue  such payments and benefits  pending  legal  resolution of any
issues between the parties and entry of a final court judgment  resolving  those
issues.

                                    ARTICLE 8
                               GENERAL PROVISIONS

      8.1 Entire Agreement. The Agreement is intended to be the final, complete,
and conclusive  agreement  between the parties relating to the employment of the
Executive  by  the

                                       11
<PAGE>

Company   with   respect  to  the  Term,   and  all  prior  or   contemporaneous
understandings,  representations,  and statements,  oral or written,  are merged
herein.  No  modification,  waiver,  amendment,  discharge,  or  change  of  the
Agreement  shall be valid  unless the same is in writing and signed by the party
against which the enforcement thereof is or may be sought.

      8.2 No Waiver. No waiver by conduct or otherwise by any party of any term,
provision,  or  condition  of the  Agreement  shall be deemed or  construed as a
further or continuing waiver of any such term,  provision,  or condition or as a
waiver of a similar or dissimilar  condition or provision at the same time or at
any prior or subsequent time.

      8.3 Remedies  Not  Exclusive.  No remedy  conferred by any of the specific
provisions  of the  Agreement is intended to be  exclusive of any other  remedy,
except as expressly  provided in the Agreement,  and each and every remedy shall
be  cumulative  and in addition to every other remedy given  hereunder or now or
hereafter  existing in law, in equity, by statute,  or otherwise.  No failure by
any party to exercise and no delay in  exercising  any rights shall be construed
or deemed to be a waiver thereof, and no single or partial exercise by any party
shall preclude any other or future exercise thereof or the exercise of any other
right.

      8.4 Notices.  Except as otherwise  provided in the Agreement,  any notice,
approval,  consent,  waiver, or other communication  required or permitted to be
given or to be served upon any person or entity in connection with the Agreement
shall be in writing.  Such notice  shall be either  personally  served,  sent by
telegram,  tested telex, fax, cable,  prepaid  registered or certified mail with
return receipt  requested,  or by other express mail service and shall be deemed
given at the time such  notice was  actually  given if  personally  served or by
express mail  service,  or two  business  days  following  delivery by telegram,
telex,  fax, cable, or mail. Any notice given by telegram,  telex, fax, or cable
shall  be  confirmed  in  writing  by the  carrier  making  the  service  within
forty-eight hours after being sent. Such notices shall be addressed to the party
to whom such notice is to be given at the party's  address set forth below or as
such party shall otherwise direct.

          If to the Company:    Cytomedix, Inc.
                                Eden Tower Plaza
                                790 Frontage Road
                                Northfield, IL  60093

          If to the Executive:  Kent T. Smith
                                13319 Seagrove Street
                                San Diego, CA 92130

      8.5  Assignment.  This  Agreement  is  intended  to bind and  inure to the
benefit  of and be  enforceable  by the  Executive  and the  Company,  and their
respective successors, heirs (in the case of Executive) and assigns, except that
(1) the Agreement and the Executive's  rights and obligations  hereunder may not
be assigned by the Executive,  and any purported  assignment by the Executive in
violation  hereof  shall be null and  void;  and (2) in the  event of any  sale,
transfer,  or other  disposition  of all or  substantially  all of the Company's
assets or business,  whether by merger,  consolidation or otherwise, the Company
may assign the Agreement  and its rights  hereunder,  only with the

                                       12
<PAGE>

Executive's  consent and only provided that such assignment  shall not limit the
Company's liability under the Agreement to the Executive. Notwithstanding any of
the  foregoing,  all of  Executive's  rights  and  interest  hereunder  shall be
assignable to Executive's  legal  representatives,  executors or conservators in
the event of Executive's Death or Disability.

      8.6  Governing  Law.  The  Agreement  shall be  construed  and enforced in
accordance  with the laws of California  without giving effect to the principles
of conflict of laws thereof.  Venue for any dispute  resolution  shall be in San
Diego, California.

      8.7  Counterparts.  The  Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be deemed an original, but all of which shall
constitute one instrument.

      8.8  Severability.  The provisions of the agreement are severable,  and if
any provision or application thereof is held invalid or unenforceable, then such
holding shall not affect any other provision or application.

      8.9 Arbitration. Any controversy or claim arising out of or related to the
Agreement  or the breach  thereof  shall be settled  by binding  arbitration  in
accordance   with  the  rules  then  in  effect  of  the  American   Arbitration
Association,  which  arbitration  shall be held in San  Diego,  California.  The
arbitrator's  decision  shall be binding and final,  and judgment upon the award
rendered may be entered in any court having jurisdiction thereof.

      8.10 Injunctive Relief. The Executive agrees that it would be difficult to
compensate  Company fully for damages for any violation of the provisions of the
Agreement,   including   without   limitation   the  provisions  of  Article  7.
Accordingly,  the  Executive  specifically  agrees  that  the  Company  and  its
successors  and assigns shall be entitled to temporary and permanent  injunctive
relief to enforce the provisions of the Agreement. The provision with respect to
injunctive relief shall not, however, diminish the right of the Company to claim
and recover damages in addition to injunctive relief.

                  [Remainder of Page Intentionally Left Blank]

                                       13
<PAGE>

      IN WITNESS WHEREOF,  the parties execute the Agreement  effective the date
first above written.

      COMPANY:

      CYTOMEDIX, INC., a Delaware corporation

      By:    /s/David Crews
      Title: Director
      Date:  August 22, 2002

      EXECUTIVE:

      /s/Kent T. Smith
      Kent T. Smith
      Date:  August 13, 2002

                                       14
<PAGE>

                                   APPENDIX I

                       Part A - Bonus and Incentive Plans

1.    Annual Bonus. In addition to Executive's Base Salary,  each year Executive
      shall be eligible to participate in the Company's  "Annual Bonus Program."
      The amount of the Annual Bonus (as defined below) as well as the nature of
      such Annual Bonus (i.e.,  mandatory or discretionary)  shall be determined
      as set forth below.

      (a)   Mandatory  Annual Bonus.  On an annual  basis,  and in each instance
            prior to the  beginning  of the next  fiscal  year,  the  Board,  in
            consultation with the Company's management, will determine a revenue
            target (the  "Revenue  Target") for the coming  fiscal year.  In the
            event that, at the end of the  applicable  fiscal year,  the Company
            actual revenues are less than eighty percent (80%) of the applicable
            Revenue  Target,  then  payment  of the  Annual  Bonus  shall not be
            mandatory  and shall be  determined  as set forth in Section 1(b) of
            Part A of this  Appendix  I. In the  event  that,  at the end of the
            applicable  fiscal year, the Company actual revenues are equal to or
            exceed  eighty  percent  (80%) of the  Applicable  Target,  then the
            Annual Bonus shall be payable as follows:

                   -----------------------------------------------
                     Actual Revenue (as             Percentage of
                    % of Target Revenue)             Annual Bonus
                   -----------------------------------------------
                             80%                         40%
                   -----------------------------------------------
                             85%                         55%
                   -----------------------------------------------
                             90%                         70%
                   -----------------------------------------------
                             95%                         85%
                   -----------------------------------------------
                        100% or more                     100%
                   -----------------------------------------------

      (b)   Discretionary  Annual  Bonus.  In  the  event  that  Company  actual
            revenues  are less  than  eighty  percent  (80%)  of the  applicable
            Revenue Target, then payment of the Annual Bonus shall be determined
            by the Board in its sole discretion.

      (c)   Annual  Bonus.  Executive's  Annual Bonus shall equal fifty  percent
            (50%)  of Base  Salary  and  shall be  payable  in  accordance  with
            Sections 1(a) and (b) of Part A of this Appendix I.

      (d)   Revenue Targets.  No mandatory Annual Bonus shall be payable for the
            fiscal year ending December 31, 2002, irrespective of actual Company
            revenues.  For the fiscal year ending December 31, 2003, the Revenue
            Target shall equal Fourteen Million Dollars ($14,000,000).

2.    Long Term Incentive Program.  During the Term of Executive's employment by
      the Company,  Executive  shall be entitled to participate in the Company's
      Executive  Long Term

                                       15
<PAGE>

      Incentive  Program  which will be  established  by the Board in accordance
      with a strategic plan  developed for the Company and on appropriate  terms
      and conditions.

3. Incentive Stock Options.

      (a)   General. As of the Effective Date of the Agreement and in accordance
            with the Company's  2002 Stock Option Plan,  the Company shall award
            Executive   common  stock  stock  options  (the  "Options")  in  the
            aggregate  amount of Five Hundred  Twenty-One  Thousand Nine Hundred
            Twenty-Eight  (521,928).  Seventy Thousand (70,000)  Options,  which
            shall be awarded to the  Executive  under the 2002 Stock Option Plan
            in  connection  with  Executive's  success  bonus  relating  to  the
            emergence of the Company from  bankruptcy,  shall be fully vested as
            of the date of such award;  the  remainder of the Options shall vest
            on  a  monthly   schedule  over  a  twenty-four  (24)  month  period
            commencing on the Effective  Date. The exercise price of the Options
            shall be the fair market value of the Company's  common stock on the
            date of award of such Options, which will be determined by the Board
            of Directors.  The Options shall expire ten (10) years from the date
            each Option becomes exercisable.  Immediately  preceding a Change of
            Control,  all issued and unvested Options shall  immediately  become
            fully vested and exercisable by Executive.

      (b)   Limited Anti-Dilution  Protection.  The parties understand and agree
            that the  Company is  contemplating  an  additional  round of equity
            financing,  not to  exceed  $2,000,000,  which is  intended  to fund
            certain clinical trials that are desirable for product  development.
            In the event that the Company  consummates  such an additional round
            of equity financing prior to the second anniversary of the Effective
            Date,  Executive  shall  receive  additional  Options  in an  amount
            equivalent  to 5% of the amount of additional  financing  committed.
            These  additional  Options shall vest as if they had been awarded on
            the award  date  described  above and had been  subject  to the same
            twenty-four  (24) month  vesting  period  applicable  to the Options
            issued pursuant to Appendix I, Part A, Paragraph  (3)(a) above.  The
            exercise price of such Options shall be the fair market value of the
            Company's  common stock on the date of award of such Options,  which
            will be  determined  by the  Board of  Directors.  Financings  shall
            include, but not be limited to, secondary public offerings,  private
            placements  and other vehicles used to provide funds to the Company.
            In the event that the proceeds from any  additional  round of equity
            financing  are  intended to be applied to any purpose  other than to
            fund clinical trials as described above, then no additional  Options
            shall be granted to Executive.

                  Part B - Employee Benefit Plans and Programs

1.    Insurance  Program.  The  Company  shall  establish  for  the  benefit  of
      Executive an insurance program,  which shall include,  among other things,
      life, health,  dental,  vision,  flexible spending program,  and long-term
      disability  coverage.  Such insurance program shall be no less competitive
      than similar  benefit  programs that are established for other health care
      companies or comparable industries.

                                       16
<PAGE>

2.    Pension or Profit-Sharing  Programs. In addition to the insurance program,
      the  Company  shall  establish  a 410(k)  plan and may,  at the  Company's
      discretion, also establish a pension or other profit sharing program.

                                       17Exhibit 10.5

                              EMPLOYMENT AGREEMENT

      The Employment  Agreement (the "Agreement") is made and entered into as of
the 4th day of September, 2002 (the "Effective Date"), by and between CYTOMEDIX,
INC.,  a  Delaware   corporation  (the   "Company"),   and  CARELYN  P.  FYLLING
("Executive").

      NOW,  THEREFORE,  in  consideration of the mutual covenants and agreements
contained herein, the parties hereby agree as follows.

                                    ARTICLE 1

                      EFFECTIVE DATE AND TERM OF EMPLOYMENT

      1.1 Term of  Employment.  Subject to extension in accordance  with Section
1.2,  the Term,  as  defined  below,  of the  Agreement  shall  commence  on the
Effective  Date and shall  continue  until the date one year hence (the "Initial
Term"), unless terminated earlier in accordance with Article 5 of the Agreement.
For  purposes of the  Agreement,  the "Term" shall mean the Initial Term and any
extensions thereof made in accordance with Section 1.2 below.

      1.2  Extension of Term.  The Initial Term of the Agreement may be extended
upon the mutual  agreement of the parties by two years on the first  anniversary
of the Effective Date and in one year increments on each subsequent  anniversary
of the Effective Date  thereafter.  Any party desiring to extend the Term of the
Agreement,  such party must notify the other  party,  in writing,  not less than
ninety  (90)  days  prior to the last day of the Term of the  Agreement  then in
effect.  If both parties give such written notice not less than ninety (90) days
prior to the  expiration  of the Term  then in  effect,  the Term  automatically
extends for an additional year (or in the case of the first anniversary, two (2)
years), as noted above.

      1.3 Expiration of Term. If the Term of the Agreement  expires based on the
Company  giving  notice of an election not to extend the Term under Section 1.2,
the  termination of Executive's  employment  that results shall be treated as an
Involuntary  Termination  for  Other  than  Cause  under  Section  5.5 below for
purposes of the payments and benefits  due  Executive  from the Company.  If the
Term of the Agreement  expires  based on Executive  giving notice of an election
not to extend  the Term  under  Section  1.2,  the  termination  of  Executive's
employment  that  results  shall be treated  as a  Voluntary  Termination  under
Section 5.8.2 for purposes of the payments and benefits due  Executive  from the
Company.

                                    ARTICLE 2
                              DUTIES AND ACTIVITIES

      2.1 Employment.  During the Term, the Company shall employ Executive,  and
Executive shall accept  employment with the Company,  upon the terms and subject
to the conditions set forth in the Agreement.

                                       1
<PAGE>

      2.2 Position.  During the Term, Executive shall serve as Vice President of
Professional  Services,  and shall hold such other  position or positions as the
parties mutually agree in writing.  Executive shall report directly to the Chief
Executive  Officer of the Company.  As Vice President of Professional  Services,
Executive shall have overall responsibility for directing the clinical research,
in-service  activities,  and professional services of the Company as well as the
sales  efforts and investor  relations  toward the  achievement  of its business
objectives  as  developed  by the CEO and the Board of  Directors of the Company
(the  "Board").  Upon the  termination of  Executive's  employment  hereunder in
accordance with Article 5, Executive shall immediately  resign as Vice President
of Professional  Services of the Company and from all other  positions,  if any,
with the Company.

      2.3 Duties.  During the Term,  Executive  shall devote her business  time,
attention,  and energies to the business of the Company and use her best efforts
to promote the interest of the  Company.  Executive  shall  perform such duties,
services,  and responsibilities  incident to the Executive's  positions that are
reasonably  consistent  with such positions and shall act in accordance with the
policies and  directives of the Company as determined  from time to time. In the
capacity,  Executive  shall have the full authority and be responsible to manage
the operations of the Company consistent with the Company's annual and strategic
business plans, such plans to set forth guidelines related to budgeting, capital
expenditures,  hiring and other  initiatives,  and to be formulated by Executive
and  approved  by the  Board.  Executive  shall have the  authority  to bind the
Company  to  contracts  that are  consistent  with the  Executive's  duties  and
responsibilities, subject only to specific limitations imposed by the Board.

      2.4  Principal  Location.  The  principal  location  at which  Executive's
services are to be performed  shall be at the  Executive's  home address,  10952
Steamboat  Loop  NW,  Walker,  MN 56484 - 2088,  subject  to  reasonable  travel
requirements during the course of performing such services.

      2.5 Other Activities.  Subject to Article 7, and not withstanding  Section
2.3,  Executive may engage in other business  activities and invest her personal
assets in other businesses or ventures to the extent that such other activities,
business,  or ventures do not materially  interfere with the  performance of her
duties under the Agreement.

                                    ARTICLE 3
                           SALARY, BONUS, AND BENEFITS

      3.1 Base Salary. During the Term of this Agreement,  the Company shall pay
Executive  a base salary  ("Base  Salary").  Commencing  on the  Effective  Date
through  December 31,  2002,  this Base Salary shall be not less than the annual
rate of $130,000.  At the end of each  calendar  year,  the  Company's  Board of
Directors  shall  review  Executive's  Base  Salary  and  may in its  discretion
increase,  but may not decrease without her prior written  consent,  Executive's
Base Salary.

      3.2 Incentive Stock Options.  The Company shall grant Executive  Incentive
Stock Options as outlined in Part A of Appendix 1.

                                       2
<PAGE>

      3.3 Annual  Bonus and  Long-Term  Incentive  Program.  The  Company  shall
establish, and Executive shall be entitled to participate in the Company's Bonus
Compensation  Program,  beginning in the year 2003, which shall be substantially
in  accordance  with the  summary  points  contained  in Part A of  Appendix  I,
attached  hereto and made part hereof.  To the extent that Executive is entitled
to receive each Bonus, such payment shall be made not later than sixty (60) days
following the end of the Company's fiscal year. The Company shall establish, and
Executive shall also be entitled to participate in, the Company's Executive Long
Term Incentive Program as described in Part A of Appendix I.

      3.4   Withholding.   The  Company   shall  deduct  or  withhold  from  the
compensation  and  benefits  payable  to  Executive  hereunder  any and all sums
required for federal and state income and  employment  taxes now  applicable  or
that may be enacted and become applicable during the Term of the Agreement.

      3.5 Benefits.  During the Term,  the Company shall provide  Executive with
benefits as described in Part B of Appendix I, and Executive agrees to submit to
any medical or other  examination  and to execute and deliver any application or
other instrument in writing reasonably necessary to effectuate such benefit plan
or  insurance  coverage.  Executive  shall be  entitled  to  participate  in all
ordinary and  customary  benefit  plans  afforded to executive  employees of the
Company.  Executive's  participation  in  said  benefit  plans  shall  be at the
Company's  sole  expense  except to the  extent  employee  contributions  may be
required under the Company's  benefit plans as they may now or hereafter  exist.
Such benefits may include any qualified or unqualified pension,  profit sharing,
and savings plans, any death benefit and disability benefit plan, life insurance
coverage,  any cafeteria  plans,  and any medical,  dental,  health,  vision and
welfare  plans or  insurance  coverage.  The Company  shall pay to  Executive an
amount  equal to up to  eighty  percent  (80%) of  Executive's  actual  cost for
private  health  insurance.  As a condition to this  payment ,  Executive  shall
furnish  adequate  records and other  documentary  evidence as  requested by the
Company.

      3.6  Vacation.  During the Term,  Executive  shall be entitled to four (4)
weeks  of paid  vacation  for  each  year of her  employment  hereunder.  Unused
vacation  may be  carried  over  from  year to year,  subject  to a cap equal to
Executive's  annual vacation  entitlement.  Once that cap is reached,  Executive
will not accrue any additional  vacation  until her accrued  vacation time falls
below the cap.  Vacations  shall be taken at such times as are  approved  by the
Chairman of the Board or in accordance  with the policies of the Company then in
effect.

                                    ARTICLE 4
                                BUSINESS EXPENSES

      4.1  Expenses.  The Company  shall pay or reimburse  the Executive for all
reasonable and authorized business expenses incurred by the Executive during the
Term.

      4.2 Business  Travel.  The Company shall reimburse  Executive for expenses
incurred for business-related  travel in accordance with existing Company travel
policies, which may change from time to time.

                                       3
<PAGE>

      4.3  Documentation.  As a condition to reimbursement  under the Article 4,
Executive shall furnish to the Company  adequate  records and other  documentary
evidence  required  by  federal  and  state  statutes  and  regulations  for the
substantiation  of each  expenditure.  Executive  acknowledges  and agrees  that
failure to furnish the required  documentation may result in the Company denying
all or part of the expense for which reimbursement is sought.

                                    ARTICLE 5
                            TERMINATION OF EMPLOYMENT

      5.1 Termination of Employment.  Notwithstanding  the provisions of Article
1,  either  the  Company  or  Executive  may  terminate  Executive's  employment
hereunder during the Term, subject to the following terms and conditions.

      5.2  Involuntary  Termination  by the  Company  for Cause.  As used in the
Agreement, "Cause" shall mean either:

      5.2.1 a material and willful  breach of any material term of the Agreement
by Executive,  as determined by a majority of the disinterested directors of the
Board,  but  only if such  material  and  willful  breach  remains  uncured  (as
reasonably  determined  by the  Board)  after  thirty  (30)  days  have  elapsed
following  the date that the  Company  gives  Executive  written  notice of such
breach;

      5.2.2 willful  conduct by Executive  that is  materially  injurious to the
Company  or  to  any  affiliate  or  successor  thereto,  whether  financial  or
otherwise,  as  determined by a majority of the  disinterested  directors of the
Board, but only if Executive has failed to cease any such conduct within fifteen
(15) days  after the date the  Company  gives  Executive  written  notice of its
belief that Executive is engaging in such conduct;

      5.2.3 Executive's conviction of a felony,

      5.2.4  Executive's  conviction of any crime  involving  moral turpitude or
dishonesty.

The Company may terminate  Executive's  employment hereunder for Cause by giving
Executive  thirty (30) days' written  notice.  Where  Executive is entitled to a
cure period,  the termination date under this Section shall be the day after the
cure period  expires,  if Executive  fails to cure.  In such event,  the Company
shall  pay to  Executive  her  Base  Salary  through  the  date  of  Executive's
termination,  her accrued but unused vacation, all deferred compensation owed to
Executive under any other agreements,  and her reimbursable expenses pursuant to
Article 4 incurred prior to such termination.

      5.3  Termination  for  Disability.  As used in the Agreement,  Executive's
"Disability" shall mean a good faith  determination by the Board, acting without
participation by Executive, based on competent and independent medical evidence,
that  Executive,  as a result  of a mental  or  physical  disease  or  condition
expected to continue  indefinitely,  is  incapable of  performing a  substantial
portion of the services contemplated in the Agreement. The Company may terminate
Executive's

                                       4
<PAGE>

employment hereunder in the event of Executive's  Disability by giving Executive
thirty  (30) days'  written  notice.  In such event,  the  Company  shall pay to
Executive her Base Salary through the date of termination (which shall be thirty
(30) days after written notice is given) and, thereafter,  her Base Salary for a
period of eleven (11) additional months after the date of termination,  less net
amounts  received  during that period from any  long-term  disability  insurance
provided  under  Article 3. The Base Salary  shall be paid at the annual rate of
Executive's  Base  Salary in effect on the date of  Executive's  termination  of
employment  and  shall be  payable  not less  frequently  than  semi-monthly  in
accordance  with the Company's  executive  compensation  practices.  The Company
shall also pay to Executive a prorated bonus and incentive  compensation payment
based on the then applicable bonus plan/long term incentive compensation program
in an amount equal to the  bonus/incentive  payment that would otherwise be paid
for the  fiscal/calendar  (depending  on the  plan  or  program)  year in  which
Executive is terminated, multiplied by a fraction, the numerator of which is the
number of days that Executive was employed during that year, and the denominator
of which is 365,  payable  no later  than  sixty  (60) days after the end of the
fiscal/calendar year in which Executive's employment is terminated.  The Company
shall  also  pay  Executive's   accrued  but  unused   vacation,   all  deferred
compensation  owed to  Executive  under any other  agreements,  and her expenses
incurred prior to such termination of employment  reimbursable  under Article 4.
All  benefits  provided  under  Section 3.5 shall be  extended,  at  Executive's
election and cost, to the extent permitted by Company's  insurance  policies and
benefit plans, for twelve (12) months after the date of Executive's termination,
except as required by law (e.g., COBRA health insurance continuation election).

      Within sixty (60) days of the Effective Date hereof,  the Executive  shall
provide to the Board written  documentation from a licensed physician evidencing
the Executive's fitness for duty as such duties are described herein.

      5.4  Termination  for  Death.   Executive's   employment  hereunder  shall
terminate  upon  Executive's  death.  In such event,  the  Company  shall pay to
Executive's estate her Base Salary until the end of the month in which the death
occurred, all accrued but unused vacation pay, all deferred compensation owed to
Executive under any other  agreements,  and all unreimbursed  expenses which are
reimbursable  pursuant  to Article 4 incurred  prior to her death.  The  Company
shall also pay to Executive's estate a prorated bonus and incentive compensation
payment based on the then applicable bonus plan/long term incentive compensation
program in an amount equal to the  bonus/incentive  payment that would otherwise
be paid for the fiscal/calendar (depending on the plan or program) year in which
Executive  has died,  multiplied  by a fraction,  the  numerator of which is the
number of days that Executive was employed during that year, and the denominator
of which is 365,  payable  no later  than  sixty  (60) days after the end of the
fiscal/calendar  year in which Executive died. The  Executive's  share,  stocks,
and/or  stock  options  that have been vested to the date of death will become a
property of the Executive's estate.

      5.5  Involuntary  Termination  for  Other  than  Cause.  The  Company  may
terminate  Executive's  employment  hereunder  during a Term of employment other
than for Cause by  giving  Executive  ninety  (90)  days'  written  notice.  Any
termination of Executive's  employment by the Company without Cause,  prior to a
Change of Control, that occurs at the request or insistence of any person (other
than the  Company)  relating to such  Change of Control  shall be deemed to have
occurred after the Change of Control for the purposes of the Agreement.

                                       5
<PAGE>

      Should the Executive's employment be terminated hereunder during a Term of
employment other than for Cause, prior to a Change of Control, the Company shall
pay to Executive all Base Salary and bonuses earned up to and including the date
of  termination  (which shall be the date ninety (90) days after the date of the
written notice), all accrued and unused vacation,  and all unreimbursed expenses
which are reimbursable pursuant to Article 4 incurred prior to such termination.
In addition, the Company shall:

      5.5.1 pay to  Executive a severance  payment in an amount equal to six (6)
months of  Executive's  Base  Salary in effect on the date of  termination  (the
"Severance  Payment").  The Severance Payment shall be paid in a lump sum within
thirty (30) days of the date of  termination,  at the annual rate of Executive's
Base Salary on the date of termination.

      5.5.2 pay to Executive a prorated bonus and a prorated long term incentive
program  payment,  based on the then  applicable  bonus plan/long term incentive
program, in an amount equal to the bonus/incentive  payment that would otherwise
be paid for the fiscal/calendar (depending on the plan or program) year in which
Executive is terminated, multiplied by a fraction, the numerator of which is the
number of days that Executive was employed during that year, and the denominator
of which is 365,  payable  no later  than  sixty  (60) days after the end of the
fiscal/calendar year in which Executive's employment is terminated.

      5.5.3 keep all medical,  disability,  life and dental benefits that are in
effect as of the date of termination in force,  at the sole cost to the Company,
for twelve (12) after the date of notice of termination;

      5.5.4 extend the exercise date of any stock options that the Executive has
to purchase shares in the Company for a term of twelve (12) months from the date
of termination; and

      5.5.5  immediately  pay to  Executive  all deferred  compensation  owed to
Executive under any other agreements.

      5.6 Involuntary  Termination by Executive For "Good Reason" As used in the
Agreement, "Good Reason" shall mean any of the following:

      5.6.1 a material and willful  breach of any material term of the Agreement
by the Company,  including but not limited to the assignment to Executive of any
duties inconsistent in any material respect with Executive's position (including
status, offices, title, and reporting requirements),  authority, duties or other
responsibilities  or any other  action of the Company that results in a material
diminishment in such position,  authority,  duties,  or  responsibilities,  or a
reduction  by the  Company  in  Executive's  Base  Salary,  Bonus and  Incentive
Compensation  programs as in effect on the Effective  Date and as the same shall
be  increased  from  time to time  hereafter;  unless  remedied  (as  reasonably
determined by Executive) within thirty (30) days after receipt of written notice
thereof given by Executive;

                                       6
<PAGE>

      5.6.2 the  Company's  requiring  Executive  to be based at a  location  in
excess of thirty (30) miles from the location of Executive's principal residence
without the prior written consent of Executive;

      5.6.3 the failure by the Company to: (a)  continue in effect any  material
compensation or benefit plan, program, policy or practice in which Executive was
participating  during the Term of her  employment  or at the time of a Change of
Control;  or (b) provide Executive with compensation and benefits at least equal
(in terms of benefit levels and/or reward  opportunities)  to those provided for
under each  employee  benefit  plan,  program,  policy and practice as in effect
immediately  prior to a Change of Control (or as in effect  following the Change
of Control, if greater); or

      5.6.4 the failure by the Company to obtain a  satisfactory  agreement from
any successor to the Company to assume and agree to perform the Agreement, or an
election by Executive not to give consent to an assignment under Section 8.5, or
an election by  Executive  to terminate  her  employment  at the same time as or
within six (6) months after a Change in Control.

Executive may terminate her  employment  hereunder for Good Reason by giving the
Company  thirty (30) days'  written  notice.  Where the Company is entitled to a
cure period,  the termination date under this Section shall be the day after the
cure period expires,  if the Company fails to cure. Such a termination  shall be
treated as an Involuntary  Termination for Other than Cause, and Executive shall
be  entitled  to the  payments  and  benefits as set forth in Section 5.5 above,
except that the  Severance  Payment  referenced  in Section 5.5.1 shall be in an
amount equal to eleven (11) months of Executive's Base Salary.

      5.7 Change of Control.

      5.7.1  Following  or at the same time as a Change of Control  (as  defined
below),  if the  Agreement  is  terminated  (or not  renewed)  by the Company in
accordance  with  Section 5.5 or 1.2, or by the  Executive  in  accordance  with
Section 5.6, then, in addition to the benefits  described in Section 5.5, all of
Executive's  issued and unvested  stock options shall  immediately  become fully
vested and exercisable.

      5.7.2 "Change of Control" shall mean any of the following:

            a.  a sale of all or substantially all of the assets of the Company;

            b.  the acquisition  of more than thirty percent (30%) of the common
            stock of the Company (with all classes or series thereof  treated as
            a  single  class)  by any  person  or  group  of  persons,  except a
            Permitted Shareholder (as hereinafter defined), acting in concert. A
            "Permitted  Shareholder"  means a  holder,  as of the  date the 2002
            Stock Option Plan was adopted by the Company, of common stock;

            c.  a  reorganization of the  Company  wherein the holders of common
            stock of the Company receive stock in another  company,  a merger of
            the Company with another  company  wherein  there is a fifty percent
            (50%) or greater  change in the ownership

                                       7
<PAGE>

            of the common  stock of the Company as a result of such  merger,  or
            any other transaction in which the Company (other than as the parent
            corporation) is  consolidated  for federal income tax purposes or is
            eligible to be  consolidated  for federal  income tax purposes  with
            another corporation;

            d.  in the event that the common  stock is traded on an  established
            securities  market,  a  public  announcement  that  any  person  has
            acquired  or has  the  right  to  acquire  beneficial  ownership  of
            fifty-one percent (51%) or more of the then-outstanding common stock
            and, for this purpose, the terms "person" and "beneficial ownership"
            shall have the meanings  provided in Section 13(d) of the Securities
            and  Exchange  Act of  1934  or  related  rules  promulgated  by the
            Securities and Exchange Commission, or the commencement of or public
            announcement  of an  intention  to make a tender  offer or  exchange
            offer for fifty-one  percent  (51%) or more of the then  outstanding
            common stock;

            e.  a  majority  of the Board  of  Directors  is  not  comprised  of
            Continuing  Directors.  A  "Continuing  Director"  means a  director
            recommended  by the Board for  election as a director of the Company
            by the stockholders; or

            f.  a  sufficient  change in the share ownership  of the  Company to
            constitute  a  change  of  effective  ownership  or  control  of the
            Company.

      5.8 Voluntary  Termination.  The Agreement may be  voluntarily  terminated
under either of the following conditions:

      5.8.1 At any time, upon the mutual written consent of the parties prior to
the  expiration  of the  Term  set  forth  in  Article  1. In the  event of such
voluntary termination,  Executive agrees to remain in the service of the Company
for an agreed upon period of time not to exceed  three (3) months to  facilitate
transition.  Executive's compensation during said transition shall be determined
and paid as follows.  During said  transition,  Executive shall continue receive
compensation  equal  to 110  percent  of her  Base  Salary  at the  time  of the
termination.   Said  payment  shall  be  made  at  least  monthly.  The  Company
understands that Executive,  during the transition period, will be seeking other
opportunities  and  will not be  devoting  her full  time and  attention  to the
affairs of the Company. The parties shall be free to agree upon any different or
additional terms in writing at the time of the termination.

      5.8.2  At any  time,  upon  sixty  (60)  days'  prior  written  notice  by
Executive.  In such event,  the Company  shall pay to Executive  her Base Salary
through the  Executive's  date of  termination  (which  shall be sixty (60) days
after the date of her written  notice),  her accrued  but unused  vacation,  all
deferred  compensation  owed to Executive  under any other  agreements,  and her
reimbursable  expenses pursuant to Article 4 incurred prior to such termination.
The Company may accelerate the termination  date by giving a lump-sum payment in
lieu of notice.

                                       8
<PAGE>

                                    ARTICLE 6
                                    INSURANCE

      6.1 The Company shall provide the Executive with  directors' and officers'
liability  insurance  coverage.  In the event that the Company's  directors' and
officers'  liability  insurance coverage lapses, and if the Executive is a party
to or is threatened to be made a party to any  threatened,  pending or completed
claim, action, suit, or proceeding, or appeal therefrom, whether civil, criminal
administrative,  investigative,  or otherwise,  because she is or was an officer
and/or  director of the  Company or at the express  request of the Company is or
was serving for purposes reasonably understood by her to be for the Company as a
director,  officer, partner,  employee, agent, trustee, or in any other capacity
of an association,  corporation,  general or limited partnership, joint venture,
trust, or other entity, the Company shall indemnify the Executive  against,  and
shall pay and advance,  all reasonable  expenses,  including attorney's fees and
disbursements, and any judgments, fines, and amounts paid in settlement incurred
by her in  connection  with such  claim,  action,  suit,  proceeding,  or appeal
therefrom, to the fullest extent permitted under applicable law.

                                    ARTICLE 7
                              RESTRICTIVE COVENANTS

      7.1 Confidential  Information.  In the course of her employment hereunder,
Executive may have access to  confidential  records,  data,  formulae,  customer
lists,  trade secrets,  specifications,  inventions  and processes  owned by the
Company.  During  the Term and  thereafter,  Executive  shall not,  directly  or
indirectly, disclose such information to any person or use any such information,
except as required in the  performance  of  Executive's  duties  hereunder.  All
records,  files, keys,  drawings,  documents,  models,  equipment,  and the like
relating to the Company's business, which Executive shall prepare, copy, or use,
or with which  Executive  comes into contact  shall be and remain the  Company's
sole  property,  shall not be removed  from the  Company's  premises,  except as
necessary for the performance of the Executive's  duties,  and shall be returned
to the Company upon the  expiration or  termination  of the Term of  Executive's
employment.

      7.2 Competing Business.  As used in the Agreement,  a "Competing Business"
refers to any person or entity  engaged in the growth factor  field,  and any of
the  businesses in which the Company or any of its  affiliates,  or any of their
respective  successors and assigns, are engaged.  The restrictions  contained in
the paragraphs of the Article 7 shall apply only to  Executive's  actions within
the cities, counties, states of the United States, and other countries where the
Company and its affiliates do business during the  Non-competition  Period.  The
Company  and  Executive  acknowledge  and agree that the  duration,  scope,  and
geographic area for which the covenant is to be effective are reasonable.

      7.3 Non-competition Period. The "Non-Competition Period" shall be one year
following the date of termination of Executive's employment

      7.4 Covenant Not to Compete.  Executive  shall not, at any time during the
Term and during the Non-competition Period,

                                       9
<PAGE>

      7.4.1  either  directly  or  indirectly,  or solely or jointly  with other
persons or entities, own, manage,  operate, join, control,  consult with, render
services for or participate in the ownership,  management,  operation or control
of, or be  connected  as an officer,  director,  employee,  partner,  principal,
agent, consultant or other representative with, or permit her name to be used in
connection with any profit or nonprofit business,  organization or entity, other
than the Company  and its  affiliates,  which  operates or engages in or owns an
interest in a Competing Business.

      7.4.2  lend any  credit  or money  for the  purposes  of  establishing  or
operating any Competing  Business or otherwise give aid or advice to any person,
firm, association, corporation, or entity engaging in any Competing Business, or

      7.4.3  solicit,  contract,  divert,  or take away or attempt  to  solicit,
divert,  or take away any of the  customers,  potential  customers,  business or
patrons of the Company and its affiliates or any of their respective  successors
and assigns,  directly or  indirectly,  by or for himself or as the agent of any
other  person  or  entity  or  through  others  as an  agent or on  behalf  of a
competitor of the Company.

Notwithstanding  the  foregoing,  Executive may own publicly  traded  securities
issued by a Competing Business,  provided that Executive shall not own more than
1 percent of the value of any class of such securities outstanding at such time.

      7.5 Solicitation of Employees. Executive shall not, at any time during the
Term  or  during  the  Non-competition  Period,  defined  as  the  term  of  the
employment,  directly  or  indirectly,  by or for himself or as the agent of any
other  person or  entity or  through  others as an agent in any way  solicit  or
induce or attempt to solicit or induce any  employee,  officer,  representative,
consultant, or other agent of the Company or its affiliates, whether such person
is presently  employed with the Company or an affiliate or may hereinafter be so
employed, to leave the Company's employ or the employ of a Company affiliate.

      7.6  Disclosure of Proprietary  Information.  In the course of Executive's
employment with the Company,  Executive may have access to confidential records,
data, formulae, customer lists, trade secrets,  specifications,  inventions, and
processes owned by the Company and its affiliates. During Executive's employment
with the Company and thereafter,  Executive shall maintain in strict  confidence
and shall not, directly or indirectly, use, disseminate, disclose, or publish or
use for her benefit or the benefit of any person,  firm,  corporation,  or other
entity,  any  confidential  or  proprietary  information  or trade secrets of or
relating  to the  Company  and its  affiliates,  or which  the  Company  and its
affiliates have a right to use, including, without limitation,  information with
respect to the  Company's and its  affiliates'  vendors,  suppliers,  customers,
potential customers,  marketing methods, costs, prices, and terms of employment.
Executive shall not deliver to any person,  firm,  corporation,  or other entity
any  document,   record,  notebook,   computer  program  or  similar  repository
containing any such  confidential  or proprietary  information or trade secrets,
except as required in the faithful  performance  of  Executive's  duties  during
employment with the Company,  provided,  however, that the foregoing restriction
shall  not  apply  to (i)  disclosure  or use of  Executive's  general  business
knowledge or any such information that became generally  available to the public
in any manner or form through no fault of Executive,  (ii)  disclosure or use of
any  such  information  with  the  Company's  prior  written  consent,  or (iii)
disclosure of any such information  required by a court or

                                       10
<PAGE>

a governmental agency of competent jurisdiction.  In the event that Executive is
so required or compelled to make such disclosure, Executive shall cooperate with
the  Company  to  preserve  in  full  the  confidentiality  of  all  proprietary
information whose disclosure is not required or compelled.

      7.6.1 All such information and trade secrets and all records, files, keys,
drawings,  documents,  models,  equipment and the like relating to the Company's
and its  affiliates'  business with which  Executive comes into contact shall be
and remain the sole  property of the Company  and its  affiliates,  shall not be
removed from the  Company's or its  affiliates'  premises,  except as reasonably
appropriate  for the  performance  of  Executive's  duties or with the Company's
prior written  consent,  and shall be returned to the Company and its affiliates
upon Executive's retirement or other termination of employment with the Company.

      7.6.2 The Company and Executive hereby stipulate and agree that as between
them the foregoing matters are important, material, and confidential proprietary
information and trade secrets and affect the successful  conduct of the business
of the Company, its affiliates, and any successor or assignee of the Company and
its affiliates. In the event that during Executive's employment with the Company
or  thereafter,  Executive  becomes  employed  by any  employer  other  than the
Company,  Executive shall notify such employer of the terms of the Article 7 and
all  sections  and  subsections  thereunder  not  later  than  the date on which
Executive commences employment with such employer.

      7.7  Normal  Business   Communications.   Notwithstanding  the  foregoing,
Executive  may engage in  discussion  and  meetings  with  representatives  of a
Competing  Business in the normal  course of the business of the Company  during
Executive's employment with the Company.

      7.8 Enforcement of Covenants Not to Compete or Disclose.

      7.8.1 The Company and Executive  intend that the provisions of the Article
7 shall be fully  enforceable as set forth herein.  To the extent that any court
of competent  jurisdiction  finds that any such  provision is  unenforceable  by
reason of its duration or scope,  the Company and Executive  agree that it shall
be enforced  insofar as it may be enforced  within the limits of the law of that
jurisdiction but that the Agreement as a whole shall be unaffected elsewhere.

      7.8.2  The  Company  and  Executive  recognize  and  acknowledge  that the
Company, by the Agreement,  has sought to prohibit competition and disclosure of
confidential  information by Executive  during  Executive's  employment with the
Company  and  thereafter  and  that  Executive's   performance  of  services  or
disclosure of  confidential  information  in  contravention  of the Agreement or
other  breach  of the  provisions  of the  Article  7 would  consequently  cause
immediate and  irreparable  harm to the business and goodwill of the Company and
its  affiliates,  the exact amount of which will be difficult or  impossible  to
ascertain,  and  that  damages,  if any,  and  other  remedies  at law  would be
inadequate.  Accordingly,  should  Executive  perform or attempt or  threaten to
perform  services or disclose  confidential  information in contravention of the
Agreement  or  otherwise  breach the  provisions  of the  Article 7, the Company
shall,  in  addition  to any and all other  remedies  available  to it under the
Agreement,  have the right to seek and obtain an injunction  or other  equitable
relief,  restraining  and preventing  Executive from  performing  such services,
disclosing such information, or breaching the provisions of this Article 7.

                                       11
<PAGE>

      7.8.3 The Company shall not decrease or discontinue any payments to or for
the benefit of  Executive  or deny her any other  benefit  under this  Agreement
based upon a claim that Executive has breached this Article 7. The Company shall
instead  continue  such payments and benefits  pending  legal  resolution of any
issues between the parties and entry of a final court judgment  resolving  those
issues.

                                    ARTICLE 8
                               GENERAL PROVISIONS

      8.1 Entire Agreement. The Agreement is intended to be the final, complete,
and conclusive  agreement  between the parties relating to the employment of the
Executive  by  the  Company  with  respect  to  the  Term,   and  all  prior  or
contemporaneous  understandings,   representations,   and  statements,  oral  or
written, are merged herein. No modification,  waiver,  amendment,  discharge, or
change of the Agreement  shall be valid unless the same is in writing and signed
by the party against which the enforcement thereof is or may be sought.

      8.2 No Waiver. No waiver by conduct or otherwise by any party of any term,
provision,  or  condition  of the  Agreement  shall be deemed or  construed as a
further or continuing waiver of any such term,  provision,  or condition or as a
waiver of a similar or dissimilar  condition or provision at the same time or at
any prior or subsequent time.

      8.3 Remedies  Not  Exclusive.  No remedy  conferred by any of the specific
provisions  of the  Agreement is intended to be  exclusive of any other  remedy,
except as expressly  provided in the Agreement,  and each and every remedy shall
be  cumulative  and in addition to every other remedy given  hereunder or now or
hereafter  existing in law, in equity, by statute,  or otherwise.  No failure by
any party to exercise and no delay in  exercising  any rights shall be construed
or deemed to be a waiver thereof, and no single or partial exercise by any party
shall preclude any other or future exercise thereof or the exercise of any other
right.

      8.4 Notices.  Except as otherwise  provided in the Agreement,  any notice,
approval,  consent,  waiver, or other communication  required or permitted to be
given or to be served upon any person or entity in connection with the Agreement
shall be in writing.  Such notice  shall be either  personally  served,  sent by
telegram,  tested telex, fax, cable,  prepaid  registered or certified mail with
return receipt  requested,  or by other express mail service and shall be deemed
given at the time such  notice was  actually  given if  personally  served or by
express mail  service,  or two  business  days  following  delivery by telegram,
telex,  fax, cable, or mail. Any notice given by telegram,  telex, fax, or cable
shall  be  confirmed  in  writing  by the  carrier  making  the  service  within
forty-eight hours after being sent. Such notices shall be addressed to the party
to whom such notice is to be given at the party's  address set forth below or as
such party shall otherwise direct.

          If to the Company:    Cytomedix, Inc.
                                1523 S. Bowman Road
                                Little Rock, AR 72211

                                       12
<PAGE>

          If to the Executive:   Carelyn P. Fylling
                                 10952 Steamboat Loop NW
                                 Walker, MN 56484 - 2088

      8.5  Assignment.  This  Agreement  is  intended  to bind and  inure to the
benefit  of and be  enforceable  by the  Executive  and the  Company,  and their
respective successors, heirs (in the case of Executive) and assigns, except that
(1) the Agreement and the Executive's  rights and obligations  hereunder may not
be assigned by the Executive,  and any purported  assignment by the Executive in
violation  hereof  shall be null and  void;  and (2) in the  event of any  sale,
transfer,  or other  disposition  of all or  substantially  all of the Company's
assets or business,  whether by merger,  consolidation or otherwise, the Company
may assign the Agreement  and its rights  hereunder,  only with the  Executive's
consent and only  provided  that such  assignment  shall not limit the Company's
liability  under the  Agreement  to the  Executive.  Notwithstanding  any of the
foregoing,  all of Executive's rights and interest hereunder shall be assignable
to Executive's legal representatives,  executors or conservators in the event of
Executive's Death or Disability.

      8.6  Governing  Law.  The  Agreement  shall be  construed  and enforced in
accordance  with the laws of California  without giving effect to the principles
of conflict of laws thereof.  Venue for any dispute  resolution  shall be in San
Diego, California.

      8.7  Counterparts.  The  Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be deemed an original, but all of which shall
constitute one instrument.

      8.8  Severability.  The provisions of the agreement are severable,  and if
any provision or application thereof is held invalid or unenforceable, then such
holding shall not affect any other provision or application.

      8.9 Arbitration. Any controversy or claim arising out of or related to the
Agreement  or the breach  thereof  shall be settled  by binding  arbitration  in
accordance   with  the  rules  then  in  effect  of  the  American   Arbitration
Association,  which  arbitration  shall be held in San  Diego,  California.  The
arbitrator's  decision  shall be binding and final,  and judgment upon the award
rendered may be entered in any court having jurisdiction thereof.

      8.10 Injunctive Relief. The Executive agrees that it would be difficult to
compensate  Company fully for damages for any violation of the provisions of the
Agreement,   including   without   limitation   the  provisions  of  Article  7.
Accordingly,  the  Executive  specifically  agrees  that  the  Company  and  its
successors  and assigns shall be entitled to temporary and permanent  injunctive
relief to enforce the provisions of the Agreement. The provision with respect to
injunctive relief shall not, however, diminish the right of the Company to claim
and recover damages in addition to injunctive relief.

                  [Remainder of Page Intentionally Left Blank]

                                       13
<PAGE>

      IN WITNESS WHEREOF,  the parties execute the Agreement  effective the date
first above written.

      COMPANY:

      CYTOMEDIX, INC., a Delaware corporation

      By:     /s/David Crews
      Title:  Director
      Date:  September 4, 2002

      EXECUTIVE:

      /s/ Carelyn P. Fylling
      Carelyn P. Fylling
      Date:  September 4, 2002

                                       14
<PAGE>

                                   APPENDIX I

                       Part A - Bonus and Incentive Plans

1.    Annual Bonus. In addition to Executive's Base Salary,  each year Executive
      shall be eligible to participate in the Company's  "Annual Bonus Program."
      The amount of the Annual Bonus (as defined below) as well as the nature of
      such Annual Bonus (i.e.,  mandatory or discretionary)  shall be determined
      as set forth below.

      (a)   Mandatory  Annual Bonus.  On an annual  basis,  and in each instance
            prior to the  beginning  of the next  fiscal  year,  the  Board,  in
            consultation with the Company's management, will determine a revenue
            target (the  "Revenue  Target") for the coming  fiscal year.  In the
            event that, at the end of the  applicable  fiscal year,  the Company
            actual revenues are less than eighty percent (80%) of the applicable
            Revenue  Target,  then  payment  of the  Annual  Bonus  shall not be
            mandatory  and shall be  determined  as set forth in Section 1(b) of
            Part A of this  Appendix  I. In the  event  that,  at the end of the
            applicable  fiscal year, the Company actual revenues are equal to or
            exceed  eighty  percent  (80%) of the  Applicable  Target,  then the
            Annual Bonus shall be payable as follows:

                  -----------------------------------------------
                    Actual Revenue (as             Percentage of
                   % of Target Revenue)             Annual Bonus
                  -----------------------------------------------
                            80%                         40%
                  -----------------------------------------------
                            85%                         55%
                  -----------------------------------------------
                            90%                         70%
                  -----------------------------------------------
                            95%                         85%
                  -----------------------------------------------
                       100% or more                     100%
                  -----------------------------------------------

      (b)   Discretionary  Annual  Bonus.  In  the  event  that  Company  actual
            revenues  are less  than  eighty  percent  (80%)  of the  applicable
            Revenue Target, then payment of the Annual Bonus shall be determined
            by the Board in its sole discretion.

      (c)   Annual  Bonus.  Executive's  Annual  Bonus shall  equal  thirty-five
            percent (35%) of Base Salary and shall be payable in accordance with
            Sections 1(a) and (b) of Part A of this Appendix I.

      (d)   Revenue Targets.  No mandatory Annual Bonus shall be payable for the
            fiscal year ending December 31, 2002, irrespective of actual Company
            revenues.  For the fiscal year ending December 31, 2003, the Revenue
            Target shall equal Fourteen Million Dollars ($14,000,000).  For each
            succeeding   year,   the  Revenue  target  shall  equal  the  amount
            established in the budget of the Board.

                                       15
<PAGE>

2.    Long Term Incentive Program.  During the Term of Executive's employment by
      the Company,  Executive  shall be entitled to participate in the Company's
      Executive  Long Term  Incentive  Program which will be  established by the
      Board in accordance with a strategic plan developed for the Company and on
      appropriate terms and conditions.

3.    Incentive Stock Options.

      (a)   General. As of the Effective Date of the Agreement and in accordance
            with the Company's  2002 Stock Option Plan,  the Company shall award
            Executive  common stock stock options in the aggregate amount of Two
            Hundred Fifty Thousand (250,000).  Eighty Thousand (80,000) Options,
            which shall be awarded to the Executive  under the 2002 Stock Option
            Plan in connection  with  Executive's  success bonus relating to the
            emergence of the Company from  bankruptcy,  shall be fully vested as
            of the date of such award;  the  remainder of the Options shall vest
            on  a  monthly   schedule  over  a  twenty-four  (24)  month  period
            commencing on the Effective  Date. The exercise price of the Options
            shall be the fair market value of the Company's  common stock on the
            date of award of such Options, which will be determined by the Board
            of Directors.  The Options shall expire ten (10) years from the date
            each Option becomes exercisable.  Immediately  preceding a Change of
            Control,  all issued and unvested Options shall  immediately  become
            fully vested and exercisable by Executive.

      (b)   Limited Anti-Dilution  Protection.  The parties understand and agree
            that the  Company is  contemplating  an  additional  round of equity
            financing,  not to  exceed  $2,000,000,  which is  intended  to fund
            certain clinical trials that are desirable for product  development.
            In the event that the Company  consummates  such an additional round
            of equity financing prior to the second anniversary of the Effective
            Date,  Executive  shall  receive  additional  Options  in an  amount
            equivalent  to 2% of the amount of additional  financing  committed.
            These  additional  Options shall vest as if they had been awarded on
            the award  date  described  above and had been  subject  to the same
            twenty-four  (24) month  vesting  period  applicable  to the Options
            issued  pursuant to Appendix I, Part  A(3)(a)  above.  The  exercise
            price  of  such  Options  shall  be the  fair  market  value  of the
            Company's  common stock on the date of award of such Options,  which
            shall be  determined  by the Board of  Directors.  Financings  shall
            include, but not be limited to, secondary public offerings,  private
            placements and other vehicles used to provide funds to the Company.

                  Part B - Employee Benefit Plans and Programs

1.    Insurance  Program.  The  Company  shall  establish  for  the  benefit  of
      Executive an insurance program,  which shall include,  among other things,
      life, health,  dental,  vision,  flexible spending program,  and long-term
      disability  coverage.  Such insurance program shall be no less competitive
      than similar  benefit  programs that are established for other health care
      companies or comparable  industries.  Pursuant to Section 3.5, the Company
      shall pay to Executive an amount  equal to up to eighty  percent  (80%) of
      Executive's  actual cost for

                                       16
<PAGE>

      private health insurance.  As a condition to the payment of the additional
      compensation  under Section 3.5,  Executive shall furnish adequate records
      and other documentary evidence as requested by the Company.

2.    Pension or Profit-Sharing  Programs. In addition to the insurance program,
      the  Company  shall  establish  a 410(k)  plan and may,  at the  Company's
      discretion, also establish a pension or other profit sharing program.

                                       17

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