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                                                                   Exhibit 10.51

                                ESCROW AGREEMENT


                  THIS ESCROW AGREEMENT (this "Agreement") is made as of May
10, 2001, by and among StemCells, Inc., a corporation incorporated under the
laws of Delaware (the "Company"), Sativum Investments Limited ("Purchaser"),
and Epstein Becker & Green, P.C., having an address at 250 Park Avenue, New
York, NY 10177 (the "Escrow Agent"). Capitalized terms used but not defined
herein shall have the meanings set forth in the Common Stock Purchase
Agreement referred to in the first recital.

                  WHEREAS, the Purchaser will from time to time as requested
by the Company, purchase shares of the Company's Common Stock from the
Company as set forth in that certain Common Stock Purchase Agreement (the
"Purchase Agreement") dated the date hereof between the Purchaser and the
Company, which shares shall be issued pursuant to the terms and conditions
contained herein and in the Purchase Agreement; and

                  WHEREAS, the Company and the Purchaser have requested that
the Escrow Agent hold in escrow and then distribute the initial documents and
certain funds which are conditions precedent to the effectiveness of the
Purchase Agreement, and have further requested that upon each exercise of a
Draw Down, the Escrow Agent hold the relevant documents and the applicable
purchase price pending receipt by Purchaser of the securities issuable upon
such Draw Down;

                  NOW, THEREFORE, in consideration of the covenants and
mutual promises contained herein and other good and valuable consideration,
the receipt and legal sufficiency of which are hereby acknowledged and
intending to be legally bound hereby, the parties agree as follows:


                                    ARTICLE I

                  TERMS OF THE ESCROW FOR THE INITIAL CLOSING

                  1.1. The parties hereby agree to establish an escrow
account with the Escrow Agent whereby the Escrow Agent shall hold the funds
and documents, which are referenced in Section 4.2 of the Purchase Agreement.

                  1.2. At the Initial Closing, the Company shall deliver to
the Escrow Agent:

                       (i)      the original executed Registration Rights
                                Agreement in the form of EXHIBIT A to the
                                Purchase Agreement;

                       (ii)     the original executed opinion of Ropes &
                                Gray in the form of EXHIBIT C to the
                                Purchase Agreement;

                       (iii)    the sum of $25,000 as a non-accountable
                                expense allowance for the Purchaser's legal,
                                administrative and due diligence costs and
                                expenses;

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                       (iv)     the sum of $25,000 as a non-accountable
                                expense allowance for Pacific Crest
                                Securities, Inc.'s ("Pacific Crest") legal
                                and administrative costs and expenses;


                       (v)      the original executed Company counterpart of
                                this Escrow Agreement;

                       (vi)     the original executed Company counterpart of
                                the Purchase Agreement;

                       (vii)    a warrant issued to Pacific Crest
                                Securities, Inc. to purchase up to 75,000
                                shares of Common Stock otherwise identical
                                to that of the Warrant ("PC Warrant");

                       (viii)   a warrant issued to Granite Financial Group,
                                Inc. to purchase up to 25,000 shares of
                                Common Stock otherwise identical to that of
                                the Warrant (the "Granite Warrant"); and

                       (ix)     the original executed Warrant.

                  1.3. Upon receipt of the foregoing, and receipt of executed
counterparts from Purchaser of the Purchase Agreement, the Registration
Rights Agreement and this Escrow Agreement, the Escrow Agent shall calculate
and enter the exercise price, issuance date and termination date on the face
of the Warrant, PC Warrant and the Granite Warrant and immediately transfer
the sum of $25,000 as directed by the Purchaser and $25,000 as directed by
Pacific Crest, and shall then arrange to have the Purchase Agreement, this
Escrow Agreement, the Registration Rights Agreement, the Warrant, the PC
Warrant, the Granite Warrant and the opinion of counsel delivered to the
appropriate parties.

                  1.4 WIRE TRANSFERS to the Escrow Agent (NOT address for
notice or delivery of documents) shall be made as follows:

                                Epstein Becker & Green, P.C.
                                Master Escrow Account
                                Chase Manhattan Bank
                                1411 Broadway - Fifth Floor
                                New York, New York 10018
                                ABA No. 021000021
                                Account No. 035 1 346036
                                Attention: L. Borneo


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                                   ARTICLE II

                     TERMS OF THE ESCROW FOR EACH DRAW DOWN

                  2.1. Each time the Company shall send a Draw Down Notice to
the Purchaser as provided in the Purchase Agreement, it shall send a copy, by
facsimile, to the Escrow Agent. Either party shall notify the Escrow Agent
and the other party contemporaneously with the delivery of each Draw Down
Notice whether it intends to use the Escrow Agent to effect the Settlements
associated with such Draw Down.

                  2.2. Each time the Purchaser shall purchase Shares pursuant
to a Draw Down for which either party has elected to use the Escrow Agent,
the Purchaser shall send the applicable Purchase Price of the Draw Down
Shares to the Escrow Agent. Upon receipt of such funds, the Escrow Agent
shall advise the Company that it has received the funds for such Draw Down
Shares. The Company shall promptly, but no later than one (1) Trading Day
after receipt of such funding notice from the Escrow Agent:

                       (i)      cause its transfer agent to issue the Draw
                                Down Shares to the Purchaser via DTC's DWAC
                                system to the account specified by the
                                Purchaser from time to time;

                       (ii)     deliver the original executed attorney's
                                opinion in the form of EXHIBIT C to the
                                Purchase Agreement to the Purchaser; and

                       (iii)    deliver a Form 424(b)(3) supplemental
                                prospectus to the Purchaser.

                  2.3. Upon receipt of confirmation from the Purchaser that
such Draw Down Shares have been so deposited and the opinion and the
supplemental prospectus have been so delivered, the Escrow Agent shall, as
soon as practicable but not later than one (1) Trading Day of receipt of the
foregoing, wire 97% of the applicable Investment Amount per the written
instructions of the Company, net of one thousand dollars ($1,000) as escrow
expenses to the Escrow Agent, 2% of the applicable Investment Amount to
Pacific Crest and the remaining 1% of the applicable Investment Amount to
Granite Financial Group, Inc.

                  2.4. The Escrow Agent shall remit the Pacific Crest and
Granite Financial Group, Inc.'s fee in accordance with wire instructions that
Pacific Crest and Granite Financial Group, Inc., respectively, will send to
the Escrow Agent.

                  2.5. In the event that such Draw Down Shares are not in the
Purchaser's DTC account and the opinion and supplemental prospectus are not
delivered to the Purchaser within three (3) Trading Days of the date of the
Escrow Agent's notice, then Purchaser shall have the right to demand, by
notice, the return of the Purchase Price, and the applicable Draw Down Notice
shall be deemed cancelled.


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                                   ARTICLE III

                                  MISCELLANEOUS

                  3.1. No waiver of any breach of any covenant or provision
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof, or of any other covenant or provision herein contained. No
extension of time for performance of any obligation or act shall be deemed an
extension of the time for performance of any other obligation or act.

                  3.2. All notices or other communications required or
permitted hereunder shall be in writing, and shall be sent by fax, overnight
courier, registered or certified mail, postage prepaid, return receipt
requested, and shall be deemed received as set forth in the Purchase
Agreement.

                  3.3. This Escrow Agreement shall be binding upon and shall
inure to the benefit of the permitted successors and permitted assigns of the
parties hereto.

                  3.4. This Escrow Agreement is the final expression of, and
contains the entire agreement between, the parties with respect to the
subject matter hereof and supersedes all prior understandings with respect
thereto. This Escrow Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the parties or by their respective agents duly
authorized in writing or as otherwise expressly permitted herein.

                  3.5. Whenever required by the context of this Escrow
Agreement, the singular shall include the plural and masculine shall include
the feminine. This Escrow Agreement shall not be construed as if it had been
prepared by one of the parties, but rather as if all parties had prepared the
same. Unless otherwise indicated, all references to Articles are to this
Escrow Agreement.

                  3.6. The parties hereto expressly agree that this Escrow
Agreement shall be governed by, interpreted under and construed and enforced
in accordance with the laws of the State of New York. Except as expressly set
forth herein, any action to enforce, arising out of, or relating in any way
to, any provisions of this Escrow Agreement shall be brought as is more fully
set forth in the Purchase Agreement.

                  3.7. The Escrow Agent's duties hereunder may be altered,
amended, modified or revoked only by a writing signed by the Company,
Purchaser and the Escrow Agent.

                  3.8. The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein and may rely
and shall be protected in relying or refraining from acting on any instrument
reasonably believed by the Escrow Agent to be genuine and to have been signed
or presented by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do hereunder
as the Escrow Agent while acting in good faith, excepting only its own gross
negligence or willful misconduct.


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                  3.9. The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of courts of
law and is hereby expressly authorized to comply with and obey orders,
judgments or decrees of any court. In case the Escrow Agent obeys or complies
with any such order, judgment or decree, the Escrow Agent shall not be liable
to any of the parties hereto or to any other person, firm or corporation by
reason of such decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.

                  3.10. The Escrow Agent shall not be liable in any respect
on account of the identity, authorization or rights of the parties executing
or delivering or purporting to execute or deliver the Purchase Agreement or
any documents or papers deposited or called for thereunder or hereunder,
except as a result of the Escrow Agent's gross negligence or willful
misconduct.

                  3.11. The Escrow Agent shall be entitled to employ such
legal counsel and other experts as the Escrow Agent may deem necessary
properly to advise the Escrow Agent in connection with the Escrow Agent's
duties hereunder, may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor, which cost shall be shared equally
by the Company and the Purchaser. THE ESCROW AGENT HAS ACTED AS LEGAL COUNSEL
FOR THE PURCHASER, AND MAY CONTINUE TO ACT AS LEGAL COUNSEL FOR THE
PURCHASER, FROM TIME TO TIME, NOTWITHSTANDING ITS DUTIES AS THE ESCROW AGENT
HEREUNDER. THE COMPANY CONSENTS TO THE ESCROW AGENT IN SUCH CAPACITY AS LEGAL
COUNSEL FOR THE PURCHASER AND WAIVES ANY CLAIM THAT SUCH REPRESENTATION
REPRESENTS A CONFLICT OF INTEREST ON THE PART OF THE ESCROW AGENT. THE
COMPANY UNDERSTANDS THAT THE PURCHASER AND THE ESCROW AGENT ARE RELYING
EXPLICITLY ON THE FOREGOING PROVISION IN ENTERING INTO THIS ESCROW AGREEMENT.
If a conflict of interest shall arise, the parties agree to arrange for a
successor escrow agent.

                  3.12. The Escrow Agent's responsibilities as escrow agent
hereunder shall terminate if the Escrow Agent shall resign by written notice
to the Company and the Purchaser. In the event of any such resignation, the
Purchaser and the Company shall appoint a successor Escrow Agent. The
Purchaser and the Company may remove the Escrow Agent and appoint a successor
at any time by mutual agreement.

                  3.13. If the Escrow Agent reasonably requires other or
further instruments in connection with this Escrow Agreement or obligations
in respect hereto, the necessary parties hereto shall join in furnishing such
instruments.

                  3.14. It is understood and agreed that should any dispute
arise with respect to the delivery and/or ownership or right of possession of
the documents or the escrow funds held by the Escrow Agent hereunder, the
Escrow Agent is authorized and directed in the Escrow Agent's sole discretion
(i) to retain in the Escrow Agent's possession without liability to anyone
all or any part of said documents or the escrow funds until such disputes
shall have been settled either by mutual written agreement of the parties
concerned by a final order, decree or judgment of a board of arbitration or a
court of competent jurisdiction after the time for appeal has expired and no
appeal has been perfected, but the Escrow Agent shall be under no duty
whatsoever to institute or defend any such proceedings or (ii) to deliver the
escrow funds and any other property and documents held by the Escrow Agent
hereunder to a state or Federal court having competent


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subject matter jurisdiction and located in the State and City of New York in
accordance with the applicable procedure therefor.

                  3.15. The Company and the Purchaser agree jointly and
severally to indemnify and hold harmless the Escrow Agent and its partners,
employees, agents and representatives from any and all claims, liabilities,
costs or expenses (including reasonable attorneys' fees) in any way arising
from or relating to the duties or performance of the Escrow Agent hereunder
or the transactions contemplated hereby or by the Purchase Agreement other
than any such claim, liability, cost or expense to the extent the same shall
have been determined by final, unappealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of the Escrow Agent.










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                 [SIGNATURE PAGE TO EQUITY LINE ESROW AGREEMENT]



IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
of this 10th day of May, 2001.

                                    STEMCELLS INC.

                                    By:  /s/ Martin McGlynn
                                        ----------------------------------------
                                         Martin McGlynn, President & CEO

                                    SATIVUM INVESTMENTS LIMITED



                                    By:  /s/ David Sims
                                        ----------------------------------------
                                          David Sims, Director


                                    ESCROW AGENT:

                                    EPSTEIN BECKER & GREEN, P.C.



                                    By:  /s/ Robert F. Charron
                                        ----------------------------------------
                                        Robert F. Charron, Authorized Signatory










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