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                                                                     EXHIBIT 4.1

                                 FORM OF WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF WITHOUT EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS, (II) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION OR QUALIFICATION UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (III) SUCH TRANSFER BEING MADE
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THIS WARRANT AND THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

                                 STEMCELLS, INC.

                        WARRANT TO PURCHASE COMMON STOCK

Warrant No.: _________________

Number of Shares: 1,898,000

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Date of Issuance: May __, 2003 ("ISSUANCE DATE")

StemCells, Inc., a Delaware corporation (the "COMPANY"), hereby certifies that,
for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
RIVERVIEW GROUP, LLC, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including all Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the "WARRANT"), at any
time or times on or after the date hereof, but not after 11:59 P.M., New York
Time, on the Expiration Date (as defined below), One Million Eight Hundred
Ninety-Eight Thousand (1,898,000) fully paid nonassessable shares of Common
Stock (as defined below) (the "WARRANT SHARES"). Except as otherwise defined
herein, capitalized terms in this Warrant shall have the meanings set forth in
Section 15. Notwithstanding any assignment of this Warrant in whole or in part,
Riverview Group, LLC shall remain obligated to pay the exercise price for the
Warrant Shares. This Warrant is one of the Warrants to Purchase Common Stock
(the "SPA WARRANTS") issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of May [7], 2003 (the "INITIAL ISSUANCE DATE"),
among the Company and the purchasers (the "PURCHASERS") referred to therein (the
"SECURITIES PURCHASE AGREEMENT").

         1.       EXERCISE OF WARRANT.

                  (a)      Mechanics of Exercise. Subject to the terms and
conditions hereof (including, without limitation, the limitations set forth in
Section 1(f)), this Warrant may be exercised by the holder hereof on any day
from and after the date on which the Company obtains the Stockholder Approval,
in whole or in part, by (i) delivery of a written notice, in the form attached
hereto as Exhibit A (the "EXERCISE NOTICE"), of such holder's election to
exercise this Warrant, (ii) payment to the Company of an amount equal to the
applicable Exercise Price multiplied by the number of Warrant Shares as to which
this Warrant is being exercised (the "AGGREGATE EXERCISE PRICE") in cash or by
wire transfer of immediately available funds and (iii) the surrender to a common
carrier for overnight delivery to the Company, on or as soon as practicable
following the date the holder of this Warrant delivers the Exercise Notice to
the Company, of this Warrant (or an indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction). On or before the
third Business Day following the date on which the Company has received each of
the Exercise Notice, the Aggregate Exercise Price and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) (the "EXERCISE DELIVERY DOCUMENTS"), the Company
shall (X) issue and deliver to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder of this Warrant or its
designee, for the number of shares of Common Stock to which the holder of this
Warrant is entitled pursuant to such exercise, or (Y) provided that the
Company's transfer agent (the "TRANSFER AGENT") is participating in The
Depository Trust

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Company ("DTC") Fast Automated Securities Transfer Program, upon the request of
the holder, credit such aggregate number of shares of Common Stock to which the
holder of this Warrant is entitled pursuant to such exercise to the holder's or
its designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system. Upon delivery of the Exercise Notice and Aggregate Exercise
Price referred to in clause (ii) above, the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of this Warrant as required by clause (iii)
above or the certificates evidencing such Warrant Shares. If the number of
Warrant Shares represented by this Warrant submitted for exercise pursuant to
this Section 1(a) is greater than the number of Warrant Shares being acquired
upon an exercise, then the Company shall as soon as practicable and in no event
later than three Business Days after any exercise and at its own expense, issue
a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to
which this Warrant is exercised. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number. The
Company shall pay any and all taxes, including without limitation, all
documentary stamp, transfer or similar taxes, or other incidental expense that
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

                  (b)      Exercise Price. For purposes of this Warrant,
"EXERCISE PRICE" means $1.50, subject to adjustment as provided herein.

                  (c)      Company's Failure to Timely Deliver Securities.

         (i)      Failure to Deliver Shares. Subject to Section 1(f), if the
         Company shall fail for any reason or for no reason to issue to the
         holder, within three Business Days of receipt of the Exercise Delivery
         Documents, a certificate for the number of shares of Common Stock to
         which the holder is entitled or to credit the holder's balance account
         with DTC for such number of shares of Common Stock to which the holder
         is entitled upon the holder's exercise of this Warrant, the Company
         shall pay as additional damages in cash to such holder on each day
         after such third Business Day that the issuance of such Common Stock
         certificate is not timely effected an amount equal to 1.0% of the
         product of (A) the sum of the number of shares of Common Stock not
         issued to the holder on a timely basis and to which the holder is
         entitled and (B) the Closing Sale Price of the Common Stock on the
         trading day immediately preceding the last possible date which the
         Company could have issued such Common Stock to the holder without
         violating Section 1(a). In addition, the holder, upon written notice to
         the Company, may void its Exercise Notice with respect to, and have
         returned, any portion of this Warrant that has not been exercised
         pursuant to such Exercise Notice; provided that the voiding of an
         Exercise Notice shall not affect the Company's obligations to make any
         payments which have accrued prior to the date of such notice pursuant
         to this Section 1(c)(i) or otherwise.

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         (ii)     Failure to Deliver New Warrant. If within ten Business Days
         after the Company's receipt of the Exercise Delivery Documents, the
         Company fails to deliver a new Warrant to the holder for the number of
         shares of Common Stock to which such holder is entitled, the Company
         shall pay as additional damages in cash to such holder on each day
         after such tenth Business Day that such delivery of such new Warrant is
         not timely effected an amount equal to 1.0% of the product of (A) the
         number of shares of Common Stock represented by the portion of this
         Warrant which is not being exercised and (B) the Closing Sale Price of
         the Common Stock on the trading day immediately preceding the last
         possible date which the Company could have issued such Warrant to the
         holder without violating Section 1(a).

                  (d)      Disputes. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall promptly issue to the holder the number of Warrant
Shares that are not disputed and resolve such dispute in accordance with Section
11.

                  (e)      Limitations on Exercises.

         (i)      Beneficial Ownership. The Company shall not effect the
         exercise of this Warrant, and no Person (as defined below) who is a
         holder of this Warrant shall have the right to exercise this Warrant,
         to the extent that after giving effect to such exercise, such Person
         (together with such Person's affiliates) would beneficially own in
         excess of [9.99%] of the shares of the Common Stock outstanding
         immediately after giving effect to such exercise. For purposes of the
         foregoing sentence, the aggregate number of shares of Common Stock
         beneficially owned by such Person and its affiliates shall include the
         number of shares of Common Stock issuable upon exercise of this Warrant
         with respect to which the determination of such sentence is being made,
         but shall exclude shares of Common Stock which would be issuable upon
         (i) exercise of the remaining, unexercised portion of this Warrant
         beneficially owned by such Person and its affiliates and (ii) exercise
         or conversion of the unexercised or unconverted portion of any other
         securities of the Company beneficially owned by such Person and its
         affiliates (including, without limitation, any convertible notes or
         convertible preferred stock or warrants) subject to a limitation on
         conversion or exercise analogous to the limitation contained herein.
         Except as set forth in the preceding sentence, for purposes of this
         paragraph, beneficial ownership shall be calculated in accordance with
         Section 13(d) of the Securities Exchange Act of 1934, as amended. For
         purposes of this Warrant, in determining the number of outstanding
         shares of Common Stock a holder may rely on the number of outstanding
         shares of Common Stock as reflected in (1) the Company's most recent
         Form 10-Q, Form 10-K or other public filing with the Securities and
         Exchange Commission, as the case may be, (2) a more recent public
         announcement by the Company or (3) any other notice by the Company or
         its Transfer Agent setting forth the number of shares of Common Stock
         outstanding. For any reason at any time, upon the written or oral
         request of the holder of this Warrant, the Company shall within one
         Business Days confirm orally and in writing to the holder of this
         Warrant the number of shares of Common Stock then outstanding. In any
         case, the number of outstanding shares of Common Stock shall be
         determined after giving effect to the conversion or exercise of
         securities of the

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         Company, including the SPA Securities and the SPA Warrants, by the
         holder of this Warrant and its affiliates since the date as of which
         such number of outstanding shares of Common Stock was reported.

         (ii)     Principal Market Regulation. The Company shall not be
         obligated to issue any shares of Common Stock upon exercise of this
         Warrant if the issuance of such shares of Common Stock would exceed
         that number of shares of Common Stock which the Company may issue upon
         exercise of this Warrant (including, as applicable, any shares of
         Common Stock issued upon conversion of or as payment of any interest
         under the SPA Securities) without breaching the Company's obligations
         under the rules or regulations of the Principal Market (the "EXCHANGE
         CAP"), except that such limitation shall not apply in the event that
         the Company obtains the approval of its shareholders as required by the
         applicable rules of the Principal Market for issuances of Common Stock
         in excess of such amount. Until such approval is obtained, no Purchaser
         shall be issued, upon exercise of any SPA Warrants, shares of Common
         Stock. The Company shall not be obligated to make any penalty payments,
         including those contemplated by Section 1(c) of this Warrant, by reason
         of the application of this Section 1(e).

         (f)      Forced Exercise. Notwithstanding the foregoing, in the event
that at any time following the effective date of the Registration Statement
filed pursuant to Section 2(a) of the Registration Rights Agreement, the
Conditions to Cancellation of Right to Exercise Warrant (as defined below) are
satisfied, then the Company shall have the right to send a written notice to the
holder hereof on the Business Day immediately after the Measuring Period
indicating that the right of the holder to further exercise this Warrant will
terminate on the twentieth (20th) trading day (the "Warrant Cancellation Date")
following receipt of such written notice as to the Warrants for which the holder
has not delivered an Exercise Notice as of such termination date. "Conditions to
Cancellation of Right to Exercise Warrant " means the following conditions: (i)
on each day during the period beginning on the first day of the Measuring Period
(as defined below) and ending on the Warrant Cancellation Date, the Registration
Statement registering the Registrable Securities (as defined in the Registration
Rights Agreement) shall be effective and available for the sale of at least all
of the Registrable Securities required to be included in such Registration
Statement and there shall not have been any Grace Periods; (ii) on each day
during the period beginning on the Initial Issuance Date and ending on the
Warrant Cancellation Date, the Common Stock is designated for quotation on The
New York Stock Exchange, Inc. (the "NYSE"), The NASDAQ National Market
("NASDAQ") or the NASDAQ SmallCap Market and shall not have been suspended from
trading on such exchange or market (other than suspensions of not more than one
day and occurring prior to the Warrant Cancellation Date due to business
announcements by the Company) nor on each day during the period beginning on the
first day of the Measuring Period (as defined below) and ending on the Warrant
Cancellation Date shall delisting or suspension by such exchange or market been
threatened or pending either (A) in writing by such exchange or market or (B) by
falling below the minimum listing maintenance requirements of such exchange or
market; (iii) during the period beginning on the Initial Issuance Date and
ending on and including the Warrant Cancellation Date, there shall not have
occurred (A) an event that would cause the Company to be in breach of any of its
representations, warranties or covenants as if the Company had made such
representation, warranty or covenant or any such date or (B) the public
announcement of a pending, proposed or intended Organic

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Change, unless such pending, proposed or intended Organic Change has been
terminated, abandoned or consummated and the Company has publicly announced such
termination, abandonment or consummation of such Organic Change; (iv) during the
period beginning on the Initial Issuance Date and ending on and including the
Warrant Cancellation Date, the Company shall have delivered unrestricted shares
of Common Stock upon resale of the Common Shares (as defined in the Securities
Purchase Agreement) and Warrant Shares upon exercise of the Warrants to the
holders on a timely basis; (v) the Company shall not have failed to timely make
any payments to the holder within 5 Business Days of when such payment is due,
whether as interest or penalty payments; (vi) the Company shall have no
knowledge of any fact that would cause the Registration Statements required
pursuant to the Registration Rights Agreement not to be effective and available
for the sale of at least all of the Registrable Securities in accordance with
the terms of the Registration Rights Agreement; (vii) the Company otherwise
shall have been in material compliance with and shall not have breached, in any
material respect, any provision, covenant, representation or warranty of the
Securities Purchase Agreement, the Registration Rights Agreement and any of the
Warrants; and (viii) the Closing Sale Price for any ten consecutive trading days
(the "Measuring Period") is equal to or greater than $2.50 (subject to
adjustment for stock splits, stock dividends, recapitalizations, combinations,
reverse stock splits or other similar events).

         2.       ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:

                  (a)      Adjustment upon Subdivision or Combination of Common
Stock. If the Company at any time after the date of issuance of this Warrant
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this Section 2(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

                  (b)      Other Considerations. All calculations under this
Section 2 shall be made by the Company in good faith.

         3.       PURCHASE RIGHTS; ORGANIC CHANGE.

                  (a)      Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the holder of this Warrant
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had

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held the number of shares of Common Stock acquirable upon complete exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

                  (b)      Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets to another Person or other transaction, in each case which is
effected in such a way that holders of Common Stock are entitled to receive
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "ORGANIC CHANGE." Subject to Section 4(n) of the Securities
Purchase Agreement, prior to the consummation of any (i) sale of all or
substantially all of the Company's assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the Person issuing
the securities or providing the assets in such Organic Change (in each case, the
"ACQUIRING ENTITY") a written agreement (in form and substance reasonably
satisfactory to the holders of SPA Warrants representing at least two-thirds of
the shares of Common Stock obtainable upon exercise of the SPA Warrants then
outstanding) to deliver to the holder of this Warrant in exchange for this
Warrant, a security of the Acquiring Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant and reasonably
satisfactory to the holder of this Warrant (including, an adjusted exercise
price equal to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and exercisable for a corresponding number of
shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant), if the
value so reflected is less than the Exercise Price in effect immediately prior
to such consolidation, merger or sale). In the event that an Acquiring Entity is
directly or indirectly controlled by a company or entity whose common stock or
similar equity interest is listed, designated or quoted on a securities exchange
or trading market, the holder of this Warrant may elect to treat such Person as
the Acquiring Entity for purposes of this Section 3(b). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of SPA
Warrants representing at least two-thirds of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding) to insure that
the holder of this Warrant thereafter will have the right to acquire and receive
in lieu of or in addition to (as the case may be) the shares of Common Stock
immediately theretofore acquirable and receivable upon the exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of
shares of Common Stock which would have been acquirable and receivable upon the
exercise of this Warrant as of the date of such Organic Change (without regard
to any limitations on the exercise of this Warrant).

         4.       NONCIRCUMVENTION. The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, and will at all times in good faith carry out all the provisions of
this

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Warrant and take all action as may be required to protect the rights of the
holder of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) will, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the exercise of the SPA
Warrants, the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of the SPA Warrants then outstanding (without
regard to any limitations on exercise) in accordance with Section 3(c) of the
Securities Purchase Agreement.

         5.       WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder, solely in such Person's capacity as a
holder, of this Warrant shall be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, solely
in such Person's capacity as a holder of this Warrant, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which such Person
is then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 5, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.

         6.       REISSUANCE OF WARRANTS.

                  (a)      Transfer of Warrant. If this Warrant is to be
transferred in compliance with the provisions hereof, the holder shall surrender
this Warrant to the Company, whereupon the Company will forthwith issue and
deliver upon the order of the holder of this Warrant a new Warrant (in
accordance with Section 6(d)), registered as the holder of this Warrant may
request, representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the holder of this Warrant representing the right to
purchase the number of Warrant Shares not being transferred.

                  (b)      Lost, Stolen or Mutilated Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the holder of this
Warrant to the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall execute and
deliver to the Holder a new Warrant (in accordance with Section 6(d))
representing the right to purchase the Warrant

<PAGE>

Shares then underlying this Warrant.

                  (c)      Warrant Exchangeable for Multiple Warrants. This
Warrant is exchangeable, upon the surrender hereof by the holder of this Warrant
at the principal office of the Company, for a new Warrant or Warrants (in
accordance with Section 6(d)) representing in the aggregate the right to
purchase the number of Warrant Shares then underlying this Warrant, and each
such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the holder of this Warrant at the time of
such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.

                  (d)      Issuance of New Warrants. Whenever the Company is
required to issue a new Warrant pursuant to the terms of this Warrant, such new
Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as
indicated on the face of such new Warrant, the right to purchase the Warrant
Shares then underlying this Warrant (or in the case of a new Warrant being
issued pursuant to Section 6(a) or Section 6(c), the Warrant Shares designated
by the holder of this Warrant which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant, which is the same as the Issuance Date, and (iv) shall have the
same rights and conditions as this Warrant.

         7.       NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the holder of this Warrant with prompt written notice of all
actions taken pursuant to this Warrant, including in reasonable detail a
description of such action and the reason therefore. Without limiting the
generality of the foregoing, the Company will give written notice to the holder
of this Warrant (i) immediately upon any adjustment of the Exercise Price or
number of Warrant Shares or number or kind of securities purchasable upon
exercise of this Warrant, setting forth in reasonable detail, and certifying,
the facts requiring such adjustment and the calculation of such adjustment and
(ii) at least ten days prior to the date on which the Company closes its books
or takes a record, or in the event that the Company does not so close its books
or take a record, at least ten days prior to the date of any such event, (A)
with respect to any dividend or distribution upon the Common Stock, (B) with
respect to any grants, issues or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property to holders of
Common Stock or (C) for determining rights to vote with respect to any Change of
Control (as defined in the SPA Securities), dissolution or liquidation, provided
in each case that such information shall be made known to the public prior to or
in conjunction with such notice being provided to such holder. Notwithstanding
the foregoing, Section 4(i) of the Securities Purchase Agreement shall apply to
all notices given pursuant to this Warrant.

         8.       AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of SPA
Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding;

<PAGE>

provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of stock obtainable upon exercise of
any SPA Warrant without the written consent of the holder of this Warrant. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the SPA Warrants then outstanding.

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

         10.      CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

         11.      DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within two Business Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the holder of this
Warrant. If the holder of this Warrant and the Company are unable to agree upon
such determination or calculation of the Exercise Price or the Warrant Shares
within three Business Days of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within two
Business Days submit via facsimile (a) the disputed determination of the
Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the holder of this Warrant or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company's independent,
outside accountant. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten Business
Days from the time it receives the disputed determinations or calculations. Such
investment bank's or accountant's determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.

         12.      REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, the Securities Purchase Agreement,
the SPA Securities and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the holder of this Warrant right to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder of this Warrant and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.

<PAGE>

         13.      TRANSFER. Subject to compliance with any applicable securities
laws, this Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by
Section 2(f) of the Securities Purchase Agreement or any other provision of this
Warrant.

         14.      CERTAIN DEFINITIONS. For purposes of this Warrant, the
following terms shall have the following meanings:

                  (a)      "BLOOMBERG" means Bloomberg Financial Markets.

                  (b)      "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                  (c)      "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant to
Section 11. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during the
applicable calculation period.

                  (d)      "COMMON STOCK" means (i) the Company's common stock,
par value $0.01 per share, and (ii) any capital stock into which such Common
Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.

                  (e)      "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) directly or indirectly convertible into or
exercisable or exchangeable for Common Stock.

                  (f)      "EXPIRATION DATE" means the date two years after the
Closing Date (as

<PAGE>

defined in the Securities Purchase Agreement) pursuant to which this Warrant was
initially issued or, if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a "HOLIDAY"), the
next date that is not a Holiday.

                  (g)      "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

                  (h)      "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                  (i)      "PRINCIPAL MARKET" means The NASDAQ National Market
or in the event that the Company is no longer listed with The NASDAQ National
Market, the market or exchange on which the Common Stock is then listed and
traded, which only may be The New York Stock Exchange, Inc., the American Stock
Exchange or The NASDAQ SmallCap Market.

                  (j)      "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the Purchasers.

                  (k)      "SPA SECURITIES" means the shares of Common Stock
issued pursuant to the Securities Purchase Agreement.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.

                                                     STEMCELLS, INC.

                                              By: _____________________________
                                                     Name: Iris Brest
                                                     Title: General Counsel

<PAGE>

                                                                       EXHIBIT A

                                 EXERCISE NOTICE

            TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
                        WARRANT TO PURCHASE COMMON STOCK

                                 STEMCELLS, INC.

                  The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of StemCells,
Inc., a Delaware corporation (the "COMPANY"), evidenced by the attached Warrant
to Purchase Common Stock (the "WARRANT"), and tenders herewith payment to the
Company of the aggregate exercise price in full, equal to
$_____________________, together with all applicable transfer taxes, if any.

Please issue the Warrant Shares in the following name and to the following
address:

         Issue to:

         Facsimile Number:

         Authorization:

         Account Number:
          (if electronic book entry transfer)

         Transaction Code Number:
                  (if electronic book entry transfer)

                  To the extent the foregoing exercise is for less than the full
number of Warrant Shares issuable pursuant to the Warrant, a replacement Warrant
representing the remainder of the Warrant Shares issuable (and otherwise of like
form, tenor and effect) shall be delivered to holder.

                  The undersigned confirms the continuing validity of, and
reaffirms as of the date hereof, the representations and warranties set forth in
Section 2 of the Securities Purchase Agreement, dated as of May [7], 2003, by
and among the Company and the Buyers named therein. The undersigned agrees to
comply with the prospectus delivery requirements (to the extent applicable)
under the applicable securities laws in connection with any transfer of the
aforesaid Warrant Shares.

                  Date: _______________ __, ______

Name of Registered Holder
By:
Name:
Title:

<PAGE>

                                 ACKNOWLEDGMENT

         The Company hereby acknowledges this Exercise Notice and hereby directs
EquiServe Trust Company, N.A. to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated May __,
2003 from the Company and acknowledged and agreed to by EquiServe Trust Company,
N.A.

                                              STEMCELLS, INC.

                                              By:______________________________
                                                    Name:
                                                    Title: