AGREEMENT FOR CONSULTING SERVICES

This Agreement is made by and between StemCells, Inc. (the “Company”) and Judi
Lum (the “Consultant”), and shall be effective as of the date that Rodney K.B.
Young takes office as the Company’s Chief Financial Officer or September 7,
2005, whichever is earlier (the “Effective Date”).

  1.   Consultant hereby agrees to resign from the Company’s employment
effective on the Effective Date and the Company hereby agrees to accept her
resignation.

  2.   Services. The Consultant shall provide to the Company consulting services
in the field referred to in Exhibit A/Item 1 or as otherwise agreed by the
parties in accordance with the terms and conditions contained in this Agreement.

  3.   Term. The services provided by the Consultant to the Company shall be
performed for the term set forth in Exhibit A/Item 2. The Consultant shall
coordinate work efforts and report progress regularly to the individual set
forth in Exhibit A/Item 3.

  4.   Payment for Service Rendered. For providing the consulting services as
referred herein, the Company shall compensate the Consultant as set forth in
Exhibit A/Item 4. In addition to all other compensation, the Company shall cause
one quarter of the option shares granted Consultant in November 2004 (i.e.,
106,250 shares) to vest on the Effective Date hereof, and to remain exercisable
for 3 months thereafter. As of the Effective Date, Company shall also pay
Consultant any accrued unused paid time off (“PTO”). Further, Company shall
contribute to Consultant’s existing 401(k) plan a quarterly match of the lesser
of 3% of earned income or half of Consultant’s contribution (up to a maximum of
6% of Consultant’s salary) up to the Effective Date, including accumulated PTO
if any.

  5.   Consultant’s Warranties. The Consultant hereby warrants that the
Consultant is in no way compromising any rights or trust relationships between
any other party and the Consultant, or creating a conflict of interest for the
Consultant. The Consultant further warrants that she is entitled to enter into
this Agreement.

  6.   Ethics Policy. The Company’s Corporate Code of Ethics and Conduct (the
“Code”) is attached to this Agreement as Exhibit B. Consultant agrees to abide
by all relevant provisions of the Code for the duration of this Agreement.

  7.   Nature of Relationship. The Consultant is an independent contractor and
will not act as an agent of the Company nor shall be deemed an employee of the
Company for the purposes of any employee benefit programs, unemployment benefits
or otherwise. Because the Consultant has heretofore been an employee of the
Company, however, income taxes and other normal payroll deductions will be
withheld from Consultant’s payments as provided in Exhibit A/Item 4. The
Consultant shall not enter into any agreement or incur any obligations on the
Company’s behalf, or commit the Company in any manner, without the Company’s
prior written consent.

  8.   Inventions, Patents and Technology. The Consultant shall promptly and
fully disclose to the Company any and all inventions, improvements, discoveries,
developments, original works of authorship, trade secrets, or other intellectual
property (“Proprietary Information”) conceived, developed or reduced to practice
by the Consultant during the performance of the consulting services performed
for the Company hereunder and related to such services, regardless of whether
such Proprietary Information is patentable, copyrightable, both or neither. The
Consultant shall treat all Proprietary Information as the confidential
information of the Company. The Consultant agrees to, and does hereby, assign to
the Company and its successors and assigns, without further consideration, the
entire right, title and interest in and to each of the Proprietary Information,
including the copyright in the case of copyrightable works. The Consultant
further agrees to execute all applications for patents and/or copyrights,
domestic or foreign, assignments and other papers necessary to secure and
enforce rights relating to the Proprietary Information.

  9.   Confidentiality. The Consultant agrees not to use (except for the
Company’s benefit) or divulge to anyone, either during the term of this
Agreement or thereafter, any of the Company’s trade secrets, the Proprietary
Information or other proprietary data acquired by the Consultant in carrying out
the terms of this Agreement. The Consultant further agrees to turn over to the
Company, or make such disposition thereof as may be directed or approved by the
Company, any notebook, data, information or other material acquired or compiled
by the Consultant in carrying out the terms of this Agreement.

  10.   Termination.

a. Either party may terminate this Agreement by giving written notice at any
time after the first two weeks following the Effective Date. In such event,
Company shall pay Consultant the amount due through the End Date as set forth in
in Exhibit A/Item 2.

b. Termination shall not relieve Consultant of any continuing obligations under
paragraphs 8 or 9, nor relieve Consultant and/or the Company of any continuing
obligations under Exhibit A/Item 4 and Exhibit C of this Agreement, all of which
shall survive termination or expiration of this Agreement.

  11.   Consultant’s Covenants. Consultant agrees to notify the Company before
accepting employment, a consultancy, or entering a relationship of any other
kind with any potential competitor of the Company. If the Company determines
that Consultant’s relationship with such a competitor creates an irreconcilable
conflict of interest, it may terminate the Agreement immediately.

  12.   The parties hereto agree that this Agreement is contingent on the
execution and non-revocation of the Separation Agreement and General Release
attached as Exhibit C hereto.

  13.   Indemnification. Company shall indemnify and hold harmless Consultant
against any claims or liabilities arising out of Consultant’s provision of
consulting services hereunder to the fullest extent permitted by law, except and
to the extent that such claims or liabilities arise from Consultant’s wilful
misconduct or gross negligence.

  14.   Miscellaneous.

a. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy granted hereby, or by any related document or by law.

b. This Agreement shall be deemed to be a contract made under the law of the
State of California and for all purposes it, and any related or supplemental
documents and notices, shall be construed in accordance with and governed by the
law of such State.

c. This Agreement may not be and shall not be deemed or construed to have been
modified, amended, rescinded, canceled or waived, in whole or in part, except by
written instruments signed by the parties hereto.

d. This Agreement, including the exhibits attached hereto and made a part
hereof, constitutes and expresses the entire Agreement and understanding between
the parties. All previous discussions, promises, representations and
understandings between the parties relative to this Agreement, if any, have been
merged into this document.

e. The Consultant may not subcontract any part or all of the services to be
provided without the prior written consent of the Company.

In witness whereof, the parties have executed this Agreement on August 30, 2005.

                 
StemCells, Inc.
              Consultant
 
                _______/s/______________________
      ____/s/________________________
 
                 
   
 
               
By:
  Iris Brest
General Counsel   address:   Judi Lum

 
  3155 Porter Drive
Palo Alto, California 94304  

 

 
               
Tel:
    650.475.3106     Tel:  

 
          SS No.        [SS No.]     
 
               

1

Exhibit A

1. Description of consulting services: Consulting on financial functions of the
Company and development and maintenance of financial and accounting practices
and procedures, including assistance in assuring the accuracy and timeliness of
SEC mandated financial reporting and compliance requirements and advice on
strategic business plans; providing information and support to the Company’s
CFO. The services shall be provided by phone, fax and/or e-mail, and on site at
the Company as may be appropriate and convenient during the term of this
Agreement. After the first two weeks of this Agreement, Consultant shall provide
said services only at the request of the Company subject to Consultant’s
availability and consent.

2. Duration of Agreement: This Agreement for consulting services begins on the
Effective Date and will end without further notice six (6) months and two
(2) weeks after the Effective Date (the “End Date”) unless sooner terminated in
accordance with paragraph 10.

3. The Consultant shall report to: Rodney K.B. Young

4. Payment for services: For services to be rendered by the Consultant
hereunder, at the request of the Company, the Company will pay the Consultant
Seventeen Thousand Nine Hundred seventeen dollars ($17,917) per month, on the
same schedule as salary payments are made to Company employees, subject to the
same withholding and other deductions and legally-required employer
contributions as if the payments were salary. No Company 401(k) contributions or
other employee benefits will be paid. If the Consultant makes the COBRA
election, the Company will pay the employer’s share of Consultant’s health plans
(medical, vision and dental, including the Health Savings Account deductible)
until the End Date. The Consultant will also be reimbursed for reasonable
expenses that are directly related to consulting requested by the Company; such
expenses will be reimbursed within 30 days of the receipt of a signed request
detailing expenses (with receipts). In the event this Agreement is terminated by
Consultant under section 10, payments shall continue to be made on a monthly
(and/or bi-weekly) basis through the End Date. In the event this Agreement is
terminated by the Company under Section 10, amounts that would have become due
and payable during the period from the date of such termination through the End
Date but not yet paid shall be paid to Consultant within 30 days of such
termination. In addition to the other payments mentioned above, when and if
Company’s Board of Directors awards bonuses for 2005, Consultant shall receive
8/12 of that proportion of her target bonus that is generally awarded; the 8/12
reflects the proration for the fraction of the year during which she served as
CFO. Such bonus shall be paid whether or not this Agreement has been terminated
by either party under Section 10. For the avoidance of doubt, it is specifically
agreed that declaring a Company bonus, and the amount of such bonus, if any, are
matters in the complete discretion of the Company’s Board of Directors.

2