<PAGE>


                                                                    Exhibit 4.18


THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND NOT WITH A VIEW TOWARD RESALE OR DISTRIBUTION. THIS WARRANT AND ANY
SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT, OR AS OTHERWISE PROVIDED FOR IN THIS WARRANT. IN ADDITION, THE
HOLDER OF THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT IS ENTITLED TO CERTAIN REGISTRATION RIGHTS AS SET FORTH IN THIS WARRANT.

                                 STEMCELLS, INC.

                        WARRANT TO PURCHASE COMMON STOCK


Warrant No.:  CF-1                                    Number of Shares Issuable:
                                                                         146,199
Date of Issuance:  December 4, 2001

         StemCells, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Cantor Fitzgerald & Co., the registered holder
hereof or its permitted assigns (the "HOLDER"), is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after 5:00
P.M. Eastern Standard Time on the Expiration Date (as defined herein) 146,199
fully paid, nonassessable shares of Common Stock (as defined herein) of the
Company (the "WARRANT SHARES") at the Warrant Exercise Price per share provided
in Section l(a) below. This Warrant (the "WARRANT") is issued pursuant to
Section 4(b) of the letter agreement between the Company and Cantor Fitzgerald &
Co., dated as of December 3, 2001 (the "ENGAGEMENT AGREEMENT").

      1. DEFINITIONS AND INTERPRETATION.

         (a) DEFINITIONS. The following words and terms as used in this Warrant
shall have the following meanings:

                  (i) "BUSINESS DAY" means any day on which commercial banks in
         New York City are required or permitted to be open for business.

<PAGE>


                  (ii) "COMMON STOCK" means (i) the Company's common stock, par
         value .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.

                  (iii) "EXCHANGE ACT" means the Securities Exchange Act of
         1934, as amended.

                  (iv) "EXPIRATION DATE" means the date four (4) years from the
         date of the issuance of the Warrant set forth above (unless otherwise
         extended by the Company) or, if such date falls on a Saturday, Sunday
         or other day on which banks are required or authorized to be closed in
         the City of New York or the State of New York (a "Holiday"), the next
         preceding date that is not a Holiday.

                  (v) "MARKET PRICE" shall mean, on any date specified herein,
         the amount per share of the Common Stock, equal to (a) if such Common
         Stock is then listed or admitted for trading on any national securities
         exchange, the last reported sale price of such Common Stock, regular
         way, on such date or, in case no such sale takes place on such date,
         the average of the closing bid and asked prices thereof, regular way,
         on such date, in either case as officially reported on the principal
         national securities exchange on which such Common Stock is then listed
         or admitted for trading, or (b) if such Common Stock is not then listed
         or admitted for trading on any national securities exchange but is
         designated as a national market system security by the NASD, the last
         reported trading price of the Common Stock on such date, or (c) if such
         Common Stock is not then listed or admitted for trading on any national
         securities exchange and (i) the Common Stock is not designated as a
         national market system security by the NASD or (ii) there shall have
         been no trading on such date, the average of the closing bid and asked
         prices of the Common Stock on such date as shown by the NASD automated
         quotation system or the Nasdaq SmallCap Market, or (d) if such Common
         Stock is not then listed or admitted for trading on any national
         exchange or quoted in the over-the-counter market, the fair value
         thereof (as of a date which is within 20 days of the date as of which
         the determination is to be made) determined in good faith by the Board
         of Directors of the Company.

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

                  (vii) "SECURITIES ACT" means the Securities Act of 1933, as
         amended.

                  (viii) "WARRANT" shall mean this warrant and all warrants
         issued in exchange, transfer or replacement of any thereof.

                  (ix) "WARRANT EXERCISE PRICE" shall be equal to $3.42 per
         share of Common Stock, subject to adjustment as hereinafter provided.

                  (x) "WARRANT SHARES" means the shares of Common Stock issuable
         upon exercise of this Warrant.


                                       2
<PAGE>


         (b) OTHER DEFINITIONAL PROVISIONS.

                  (i) Except as otherwise specified herein, all references
         herein (A) to the Company shall be deemed to include the Company's
         successors and (B) to any applicable law defined or referred to herein,
         shall be deemed references to such applicable law as the same may have
         been or may be amended or supplemented from time to time.

                  (ii) Unless the context of this Warrant otherwise requires:
         (1) the words "hereof", "herein" and "hereunder" and words of similar
         import when used in this Warrant shall refer to this Warrant as a whole
         and not to any particular provision of this Warrant, and Section and
         paragraph references are to the Sections and paragraphs of this Warrant
         unless otherwise specified; and (2) the word "including" and words of
         similar import when used in this Warrant shall mean "including, without
         limitation," unless otherwise specified.

                  (iii) Whenever the context so requires, the neuter gender
         includes the masculine or feminine, and the singular number includes
         the plural, and vice versa.

      2. EXERCISE OF WARRANT.

         (a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day after the opening of business
on the date hereof and prior to 5:00 P.M. Eastern Standard Time on the
Expiration Date by:

                  (i) delivery of a written notice, in the form of the exercise
         notice attached as Exhibit A hereto (a "EXERCISE NOTICE"), of such
         holder's election to exercise this Warrant, which notice shall specify
         the number of Warrant Shares to be purchased;

                  (ii) payment to the Company (X) of an amount equal to the
         Warrant Exercise Price multiplied by the number of Warrant Shares as to
         which the Warrant is being exercised (plus any applicable issue or
         transfer taxes) (the "AGGREGATE WARRANT EXERCISE PRICE") in cash or by
         check or wire transfer, or (Y) by means of direction to the Company to
         cancel such number of the shares of Common Stock otherwise issuable to
         the holder upon such exercise equal to the number of shares specified
         in the Exercise Notice MULTIPLIED BY the Warrant Exercise Price DIVIDED
         BY the Market Price on the date of exercise, or (Z) by surrender to the
         Company for cancellation certificates representing shares of Common
         Stock of the Company owned by the Holder (properly endorsed for
         transfer in blank) having an aggregate Market Price on the date of the
         exercise of the Warrant equal to some or all of the Aggregate Warrant
         Exercise Price (either subclause (Y) or (Z) immediately preceding, a
         "CASHLESS EXERCISE"); and

                  (iii) the surrender of this Warrant, to a common carrier for
         delivery to the Company as soon as practicable following such date (but
         in any case prior to 5:00 P.M. Eastern Standard Time on the Expiration
         Date), this Warrant


                                       3
<PAGE>


         (or an indemnification undertaking with respect to this Warrant in the
         case of its loss, theft, or destruction); PROVIDED that if such Warrant
         Shares are to be issued in any name other than that of the registered
         holder of this Warrant, such issuance shall be deemed a transfer and
         the provisions of Section 7 shall be applicable.

In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2, a certificate or certificates for the Warrant
Shares so purchased, in such denominations as may be requested by the holder
hereof and registered in the name of, or as directed by, the Holder, shall be
delivered at the Company's expense to, or as directed by, such holder as soon as
practicable after such rights shall have been so exercised, and in any event no
later than three (3) Business Days after the Company's receipt of the materials
and payments specified above in this Section 2(a). Upon the Company's receipt of
the materials and payments specified above in this Section 2(a), the Holder
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 the certificates evidencing such Warrant
Shares. In the case of a dispute as to the determination of the Warrant Exercise
Price or the Market Price or the arithmetic calculation of the Warrant Shares,
the Company shall promptly issue to the Holder the number of shares of Common
Stock that is not disputed and shall submit the disputed determinations or
arithmetic calculations to the Holder via facsimile within three (3) Business
Days of receipt of the Holder's Exercise Notice. If the Holder and the Company
are unable to agree upon the determination of the Warrant Exercise Price or
Market Price or arithmetic calculation of the Warrant Shares within three (3)
Business Days of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Market Price
to an independent, reputable investment banking firm which has not (and whose
affiliates have not) performed any investment banking services for, or had any
other material relationship with, the Company during the immediately preceding
two (2) year period, or (ii) the disputed arithmetic calculation of the Warrant
Shares to an independent, national public accounting firm which has not (and
whose affiliates have not) performed any accounting or consulting services for,
or had any other material relationship with, the Company during the immediately
preceding two (2) year period. The Company shall cause the investment banking
firm, or the accounting firm, as the case may be, to perform the determinations
or calculations and notify the Company and the Holder of the results no later
than five Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accounting firm's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error and the Company shall be liable for the costs and expenses related to such
determination or calculation.

         (b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in any event no later than three (3) Business Days after any exercise and at its
own expense, issue a new Warrant identical in all respects to the Warrant
exercised except it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised. Upon presentation of a duly executed Exercise Notice, the Holder
shall be entitled to exercise this Warrant in whole or in part, if the Holder
shall have previously exercised and surrendered


                                       4
<PAGE>


this Warrant and the Company shall not have issued a new Warrant representing
the number of shares issuable following such prior exercise.

         (c) 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 issued
upon exercise of this Warrant shall be rounded down to the nearest whole number
and the Company shall pay to the Holder in lieu of such fractional share cash in
an amount in proportion to the Market Price of a share of Common Stock on the
date of exercise.

         (d) If the Company shall have failed for any reason (other than
pursuant to a dispute as described in Section 2(a)) or for no reason to issue to
Holder, on or before the day which is five (5) Business Days after the Company's
receipt of the materials and payments described in Section 2(a) hereof, a
certificate for the number of shares of Common Stock to which the Holder is
entitled upon the Holder's exercise of this Warrant, the Company shall, upon
notice from the Holder and in lieu of any other remedies under this Agreement or
otherwise available to such Holder pay as liquidated damages, in cash, to such
holder, for each day after such fifth Business Day until the date of delivery,
an amount equal to one-quarter of one percent (0.25%) of the product of (A) 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 difference between (1) the Warrant
Exercise Price then in effect and (2) the Market Price of the Common Stock on
the date on which the holder exercised the Warrant with respect to which the
Company has failed to make timely delivery hereunder. Any sums due to holder
pursuant to this Section 2(d) shall be paid by certified funds or wire transfer
simultaneously upon and no later than the delivery to holder of the shares of
Common Stock which have not been delivered to holder on a timely basis and which
gives rise to the Company's obligation to make the payments required by this
Section 2(d).

      3. COVENANTS AS TO COMMON STOCK. As of the date of this Warrant as set
forth in Section 12 below, the Company and, where applicable, the Holder, hereby
represents, warrants, covenants and agrees as follows:

         (a) This Warrant has been duly and validly authorized, executed and
delivered by the Company and constitutes a valid and legally binding agreement
of the Company, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The execution and delivery by the Company of this Warrant does not,
and the delivery of any Warrant Shares upon the valid exercise of this Warrant
will not, except as would not have a material adverse effect on the business of
the Company: (i) violate any provision of the Certificate of Incorporation or
By-Laws of the Company; (ii) violate any provision of, or result in the
termination or acceleration of, or default under, or entitle any party to
accelerate (whether after the filing of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon any of the assets of the
Company pursuant to any provision of any mortgage, lien, lease, agreement,
license, or instrument, or violate any law, regulation, order, arbitration
award, judgment or decree to which the Company is a party or by which its
property is bound; or (iii) require any governmental consent, authorization,
filing, approval, or exemption.


                                       5
<PAGE>


         (b) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company has the
power to own its property and to carry on its business as it is now being
conducted. The Company is duly qualified to do business and is in good standing
in the jurisdictions in which the character or location of the properties owned
or leased by the Company or the nature of the business conducted by the Company
makes such qualification necessary, except where the failure to qualify
individually or in the aggregate will not have a material adverse effect on the
business of the Company.

         (c) When issued upon exercise, each Warrant Share will be duly and
validly issued, fully paid, non-assessable and free of preemptive rights. Based
in part upon the representations of the Holder in this Warrant, this Warrant and
any Warrant Shares will be issued in compliance with all applicable federal and
state securities laws, rules and regulations, and the offer, sale and issuance
of this Warrant and the Warrant Shares will constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act.

         (d) A Warrant issued in substitution for or replacement of this Warrant
will upon issuance be duly authorized and validly issued.

         (e) All Warrant Shares which may be issued upon the exercise as set
forth herein of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.

         (f) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.

         (g) The Warrant Shares have been listed upon each national securities
exchange or automated quotation system, if any, or over-the-counter-bulletin
board upon which shares of the Company's Common Stock are currently listed or
quoted (subject to official notice of the over-the-counter bulletin board of
issuance upon exercise of this Warrant) and the Company shall maintain, so long
as any other shares of Common Stock shall be so listed or quoted, such listing
or quotation of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list or obtain quotation on
each such national securities exchange, automated quotation system or
over-the-counter bulletin board, as the case may be, and shall maintain such
listing in quotation of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange, automated
quotation system or over-the-counter bulletin board.

         (h) 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such


                                       6
<PAGE>


action as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose 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 Warrant Exercise Price then in effect, and (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.

         (i) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.

         (j) The Warrant Shares shall be registered with the Securities and
Exchange Commission ("SEC") by their inclusion, and the inclusion of the Holder
as a selling stockholder, in the registration statement on Form S-3 to be filed
with the SEC by the Company with respect to the shares issued on or about the
date hereof to the Riverview Group, L.L.C. The Company and the Holder further
agree as follows:

                  (i) If at any time the number of shares of Common Stock
         included in such registration statement shall be insufficient to cover
         all of the Warrant Shares issuable upon exercise of the unexercised
         portion of the Warrant, then promptly, but in no event later than 30
         days after such insufficiency shall occur, the Company shall file with
         the SEC an additional registration statement on Form S-3 (or, if the
         Company is not eligible to use such form at the time of filing with the
         SEC, Form S-1) (together with the initial registration statement, the
         "REGISTRATION STATEMENTS"), covering such number of shares of Common
         Stock as shall be sufficient to permit such exercise.

                  (ii) The Company shall use its best efforts to cause the
         Registration Statements to become effective as soon as possible after
         the filing of each, and to keep the Registration Statements effective
         pursuant to Rule 415 under the Securities Act at all times until the
         earliest of (A) the date on which all Warrant Shares have been sold by
         the Holder, (B) the date on which all Warrant Shares can be sold (other
         than by a Cashless Exercise) without restriction under Rule 144 under
         the Securities Act, or (C) December 4, 2006 or, if the Holder shall
         have been prohibited from disposing of Warrant Shares pursuant to
         Section 3(j)(xi) hereof, the date which is the number of days such
         prohibition applied after December 4, 2006 (the period beginning on the
         date hereof and ending on the earliest of such dates, the "REGISTRATION
         PERIOD").

                  (iii) The Company shall notify the Holder of the effectiveness
         of the Registration Statements on the date each Registration Statement
         is declared effective. The Company shall prepare and file with the SEC
         such amendments (including post-effective amendments) and supplements
         to the Registration Statements and the prospectus used in connection
         with the Registration Statements as may be necessary to keep the
         Registration Statements effective at all times during the Registration
         Period, and, during the Registration Period,


                                       7
<PAGE>


         comply with the provisions of the Securities Act with respect to the
         disposition of all Warrant Shares until such time as all of such
         Warrant Shares have been disposed of in accordance with the intended
         methods of disposition by the seller or sellers thereof as set forth in
         the Registration Statement.

                  (iv) The Company shall furnish to each Holder whose Warrant
         Shares are included in any Registration Statement and its legal
         counsel, (i) promptly after the same is prepared and publicly
         distributed, filed with the SEC or received by the Company, one copy of
         the Registration Statement and any amendment thereto, each preliminary
         prospectus and prospectus and each amendment or supplement thereto,
         each letter written by or on behalf of the Company to the SEC or the
         staff of the SEC and each item of correspondence from the SEC or the
         staff of the SEC relating to such Registration Statement, and (ii) such
         number of copies of a prospectus, including a preliminary prospectus,
         and all amendments and supplements thereto and such other documents, as
         such Holder may reasonably request in order to facilitate the
         disposition of the Warrant Shares registered on behalf of the Holder.

                  (v) The Company shall notify the Holder of the existence of
         any event or circumstance of which the Company has knowledge, as
         promptly as practicable after becoming aware of such event or
         circumstance, as a result of which the prospectus included in a
         Registration Statement, as then in effect, includes an untrue statement
         of a material fact or omits to state a material fact required to be
         stated therein or necessary to make the statements therein, in light of
         the circumstances under which they were made, not misleading, and use
         its commercially reasonable efforts promptly to prepare a supplement or
         amendment to such Registration Statement to correct such untrue
         statement or omission, file such supplement or amendment with the SEC
         at such time as shall permit the Holder to sell Warrant Shares pursuant
         to such Registration Statement as promptly as practicable, and deliver
         a number of copies of such supplement or amendment to the Holder as the
         Holder may reasonably request.

                  (vi) As promptly as practicable after becoming aware of such
         event, the Company shall notify the Holder of the issuance by the SEC
         of any stop order or other suspension of effectiveness of a
         Registration Statement at the earliest possible time.

                  (vii) The Company shall use its commercially reasonable
         efforts (i) to cause all the Warrant Shares covered by the Registration
         Statements to be listed on the Nasdaq National Market or such other
         principal securities market on which securities of the same class or
         series issued by the Company are then listed or traded or (ii) if
         securities of the same class or series as the Warrant Shares are not
         then listed on the Nasdaq National Market or any such other securities
         market, to cause all of the Warrant Shares covered by the Registration
         Statements to be listed on the New York Stock Exchange, the American
         Stock Exchange or the Nasdaq SmallCap Market.


                                       8
<PAGE>


                  (viii) As of the date hereof, the Company is eligible to file
         the Registration Statement on Form S-3. The Company shall file all
         reports required to be filed by the Company with the SEC in a timely
         manner so as to obtain and/or maintain eligibility for the use of Form
         S-3.

                  (ix) It shall be a condition precedent to the obligations of
         the Company to complete the registration pursuant to this Warrant with
         respect to the Shares that the Holder shall furnish to the Company such
         information regarding itself, the Warrant Shares held by it or to which
         it is entitled to receive upon exercise of the Warrant and the intended
         method of disposition of the Warrant Shares held by it as shall be
         reasonably required to effect the registration of such Warrant
         Shares.

                  (x) The Holder, by its acceptance of the Warrant, agrees to
         cooperate with the Company as reasonably requested by the Company in
         connection with the preparation and filing of the Registration
         Statements hereunder, unless the Holder has notified the Company in
         writing of its election to exclude all of its Warrant Shares from the
         Registration Statement.

                  (xi) The Holder agrees that, upon receipt of any notice from
         the Company of the existence of any event of the kind described in
         clauses (v) or (vi) above, the Holder will immediately discontinue
         disposition of Warrant Shares pursuant to the Registration Statement
         covering such Warrant Shares until the Holder's receipt of the copies
         of the supplemented or amended prospectus contemplated by clauses (v)
         or (vi) above and, if so directed by the Company, the Holder shall
         deliver to the Company (at the expense of the Company) or destroy (and
         deliver to the Company a certificate of destruction) all copies in such
         Holder's possession of the prospectus covering such Warrant Shares
         current at the time of receipt of such notice.

                  (xii) The Holder agrees to take all reasonable actions
         necessary to comply with the prospectus delivery requirements of the
         Securities Act applicable to its sales of Warrant Shares and to assist
         the Company in carrying out its obligations hereunder.

                  (xiii) All reasonable expenses (other than underwriting
         discounts and commissions and other fees and expenses of investment
         bankers engaged by the Holder and other than brokerage commissions),
         incurred in connection with registrations, filings or qualifications
         pursuant to this Section 3(j), including, without limitation, all
         registration, listing and qualifications fees, printers and accounting
         fees and the fees and disbursements of counsel for the Company, shall
         be borne by the Company.

                  (xiv) The provisions of this Section 3(j) shall survive the
         exercise of the Warrant by the Holder.

      4. TAXES. The Company shall not be required to pay any tax or taxes
attributable to the initial issuance of the Warrant Shares or any permitted
transfer involved in the issue or


                                       9
<PAGE>


delivery of any certificates for Warrant Shares in a name other than that of the
registered holder hereof or upon any permitted transfer of this Warrant.

      5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no Holder, as such, 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, as such, any of the rights of a
stockholder 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 he or she 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 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. REPRESENTATIONS OF HOLDER. The Holder of this Warrant, by the
acceptance hereof, represents (and any assignor shall represent) that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
purposes and not with a view to, or for sale in connection with, any
distribution hereof, and not with any present intention of distributing any of
the same. The Holder of this Warrant further represents (and any assignor shall
represent), by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "ACCREDITED INVESTOR"). Upon exercise of this Warrant, the Holder shall, if
requested by the Company, confirm in writing, in a form reasonably satisfactory
to the Company, that the Warrant Shares so purchased are being acquired solely
for the Holder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale and that such
Holder is an Accredited Investor. If such Holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such Holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States Federal or state securities laws.

      7. OWNERSHIP AND TRANSFER.

         (a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each permissible transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the


                                       10
<PAGE>


contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.

         (b) This Warrant and the rights granted to the Holder hereof are
transferable, in whole or in part, upon surrender of this Warrant, together with
a properly executed warrant power in the form of EXHIBIT B attached hereto;
provided, however, that any transfer or assignment shall subject to the
conditions set forth in Sections 3(j) and 6 above and Sections 7(c) and 11
below.

         (c) Except as set forth in Section 3(j), the Holder of this Warrant
understands that this Warrant and the Warrant Shares have not been and are
not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) such Holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
the securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration. Notwithstanding
anything set forth herein to the contrary, the Company shall not require an
opinion of counsel with respect to any and all transfers, assignments or
sales by and between Cantor Fitzgerald & Co. ("CANTOR"), on the one hand, and
any affiliate or affiliated person (as such terms are defined in Rule 405
under the Securities Act) of Cantor, on the other hand (it being expressly
understood and agreed that such transfers, assignments or sales shall be
conducted in accordance with applicable federal and state securities laws),
and, upon due notice from Cantor or any affiliate of Cantor of any such
transfer, sale or assignment, and delivery to the Company of the duly
executed warrant power in the form of EXHIBIT B attached hereto, the Company
shall immediately direct its transfer agent effect any such transfer, sale or
assignment, provided that in no event shall the legend required by this
Section 7(c) be removed as a result of such a transfer without opinion of
counsel reasonably acceptable to the Company. Any sale of such securities
made in reliance on Rule 144 promulgated under the Securities Act may be made
only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be
an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and regulations of the Securities and Exchange Commission thereunder; and
neither the Company nor any other person is under any obligation to register
this Warrant and the Warrant Shares under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder except as set forth in Section 3(j) hereof. All Warrants and
Warrant Shares shall bear a legend in substantially the form set forth below:

         THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
         WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
         ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD RESALE
         OR DISTRIBUTION. THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE
         EXERCISE OF THIS WARRANT MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
         OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
         THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
         APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL


                                       11
<PAGE>


         IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT
         REGISTRATION IS NOT REQUIRED UNDER SAID ACT, OR AS OTHERWISE PROVIDED
         FOR IN THIS WARRANT. IN ADDITION, THE HOLDER OF THIS WARRANT AND ANY
         SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT IS ENTITLED TO
         CERTAIN REGISTRATION RIGHTS AS SET FORTH IN THIS WARRANT.

      8. ADJUSTMENT OF WARRANT EXERCISE PRICE. The Warrant Exercise Price
shall be adjusted from time to time as follows:

         (a) ADJUSTMENT OF WARRANT EXERCISE PRICE 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,
re-capitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
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 Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased.

         (b) DE MINIMIS ADJUSTMENTS. If the amount of any adjustment of the
Warrant Exercise Price per share required pursuant to Section 8(a) would be less
than one tenth of one percent (0.1%) of the Warrant Exercise Price, such amount
shall be carried forward and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall aggregate a change in the
Warrant Exercise Price of at least one tenth of one percent (0.1%) of such
Purchase Price. All calculations under this Warrant shall be made to the nearest
0.1 of a cent or to the nearest one-tenth of a share, as the case may be.

         (c) ABANDONED DIVIDEND OR DISTRIBUTION. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Warrant Exercise Price under the terms of this Warrant) and shall, thereafter,
and before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Warrant Exercise Price and number
of shares of Common Stock purchasable upon Warrant exercise by reason of the
taking of such record shall be reversed, and any subsequent adjustments, based
thereon, shall be recomputed.

         (d) ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Company, on one or more occasions, (i) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (ii) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock shall be changed into or exchanged for
stock or


                                       12
<PAGE>


other securities of any other Person or cash or any other property, or (iii)
shall transfer all or substantially all of its properties or assets to any other
Person, or (iv) shall effect a capital reorganization or reclassification of the
Common Stock, then, and in the case of each such transaction, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Warrant, the Holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be entitled to receive
(at the Aggregate Warrant Exercise Price in effect at the time of such
consummation for all Common Stock issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock issuable upon such exercise
prior to such consummation, the highest amount of securities, cash or other
property to which such Holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised this Warrant immediately
prior thereto, subject to adjustments (subsequent to such consummation) as
nearly equivalent as possible to the adjustments provided for in this Section 8,
PROVIDED that if a purchase, tender or exchange offer shall have been made to
and accepted by the holders of more than 50% of the outstanding shares of the
Company's Common Stock, and if the Holder of this Warrant so designates in a
notice given to the Company on or before the date immediately preceding the date
of the consummation of such transaction, the Holder of this Warrant shall be
entitled to receive the highest amount of securities, cash or other property to
which it would actually have been entitled as a shareholder if the Holder of
this Warrant had exercised such Warrants prior to the expiration of such
purchase, tender or exchange offer and accepted such offer, subject to
adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments provided for
elsewhere in this Section 8. Notwithstanding anything contained in this Warrant
to the contrary, the Company shall not effect any of the transactions described
in subclauses (i) through (iv) of this Section 8(d) unless, prior to the
consummation thereof, each Person (other than the Company) which may be required
to deliver any stock, securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to the
holder of this Warrant, (x) the obligations of the Company under this Warrant,
and (y) the obligation to deliver to the Holder of this Warrant such shares of
stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 8, the Holder may be entitled to receive.

         (e) NOTICES.

                  (i) In each case of any adjustment or readjustment in the
         shares of Common Stock issuable upon the exercise of this Warrant, the
         Company at its expense shall promptly compute such adjustment or
         readjustment in accordance with the terms of this Warrant and prepare a
         certificate, signed by the Chairman of the Board, President or one of
         the Vice Presidents of the Company setting forth such adjustment or
         readjustment and showing in reasonable detail the method of calculation
         thereof and the facts upon which such adjustment or readjustment is
         based, including a statement of (a) the consideration received or to be
         received by the Company for any additional shares of Common Stock
         issued or sold or deemed to have been issued, (b) the number of shares
         of Common Stock outstanding or deemed to be outstanding, and (c) the
         Warrant Exercise Price in effect immediately prior to such adjustment
         and as adjusted and readjusted (if required by Section 8) on account
         thereof. The Company shall forthwith mail a copy of each such
         certificate to each Holder of a Warrant and shall, upon the


                                       13
<PAGE>


         written request at any time of any Holder of a Warrant, furnish to such
         Holder a like certificate setting forth the Warrant Exercise Price at
         the time in effect and showing in reasonable detail how it was
         calculated. The Company shall also keep copies of all such certificates
         at its principal office and shall cause the same to be available for
         inspection at such office during normal business hours by any Holder of
         a Warrant or any prospective purchaser of a Warrant designated by the
         Holder thereof. The Company shall, upon the request in writing of the
         Holder (at the Company's expense) retain independent public accountants
         of recognized national standing in accordance with the provisions of
         Section 2(a) above, and a certificate signed by such accounting firm
         shall be conclusive evidence of the correctness of such adjustment,
         which shall be binding on the Holder and the Company.

                  (ii) The Company shall provide notice at least five (5)
         Business Days prior to each Holder of a Warrant specifying the date or
         expected date on which any of the events described in subclauses (i)
         through (iv) of Section 8(d) hereof is to take place and the time, if
         any such time is to be fixed, as of which the holders of record of
         Common Stock shall be entitled to exchange their shares of Common Stock
         for the securities or other property deliverable upon event.

      9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall, on receipt of an
indemnification undertaking, issue a new Warrant of like denomination and tenor
as the Warrant so lost, stolen, mutilated or destroyed.

      10. NOTICE. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

              If to the Company:    StemCells, Inc.
                                    3155 Porter Drive
                                    Palo Alto, CA  94304
                                    Attention:  Martin McGlynn, President & CEO
                                    Telephone:  (650) 475-3100
                                    Facsimile:  (650) 475-3101



                                       14
<PAGE>


              With a copy simultaneously by like means to:

                                    Ropes & Gray
                                    One International Place
                                    Boston, MA 02110
                                    Attention:  Geoffrey B. Davis, Esq.
                                    Telephone:  (617) 951-7000
                                    Facsimile:  (617) 951-7050

If to a holder of this Warrant, to it at the address set forth below such
holder's signature on the signature page hereof, with a copy simultaneously by
like means to each of: (i) Cantor Fitzgerald & Co., 299 Park Avenue, New York,
NY 10171, Attention: Stephen Merkel, Esq., Telephone: (212) 281-6969, Facsimile:
(212) 751-7050, and (ii) Zukerman Gore & Brandeis, LLP, 900 Third Avenue, New
York, NY 10022, Attention: Clifford A. Brandeis, Esq., Telephone: (212)
223-6700, Facsimile: (212) 223-6433. Each party shall provide written notice to
the other party of any change in address or facsimile number.

      11. INDEMNIFICATION AND CONTRIBUTION WITH RESPECT TO REGISTRATION
RIGHTS. If any Warrant Shares are included in any Registration Statement under
the Securities Act pursuant to this Warrant:

         (a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the directors, officers and partners, if any, of such
Holder, each person, if any, who controls any Holder within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Holders, the directors, officers and partners, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "CLAIMS") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following: (i) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS"). Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 11(a): (I) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any person indemnified under this Section
11(a) or expressly for use in connection with the


                                       15
<PAGE>


preparation of any Registration Statement, the prospectus or any such amendment
thereof or supplement thereto; (II) with respect to any preliminary prospectus
shall not inure to the benefit of any person indemnified under this Section
11(a) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented; and (III) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified person referred to in this Section 11(a).

         (b) In connection with any Registration Statement in which a Holder is
participating, each such Holder agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 11(a), the Company, each
of its directors, officers and partners who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, any underwriter and any other stockholder
selling securities pursuant to the Registration Statement or any of its
directors, officers, partners or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use in
connection with such Registration Statement or any post-effective amendment
thereof, or any prospectus included therein; and such Holder will reimburse any
legal or other expenses reasonably incurred by any indemnified person under this
Section 11(b), promptly as such expenses are incurred and are due and payable,
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 11(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Holder, which consent shall not be
unreasonably withheld; provided, further, however, that each Holder shall be
liable under this Section 11(b) for only that amount of a Claim as does not
exceed the amount of the proceeds to such Holder from the sale of the
Registrable Securities pursuant to such Registration Statement that resulted in
such Claim. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of any indemnified person under this
Section 11(b) and shall survive the transfer of the Registrable Securities by
the Holders pursuant to Section 7. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 11(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
indemnified person under this Section 11(b) if the untrue statement or omission
of material fact contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented.

         (c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in any Registration Statement.


                                       16
<PAGE>


         (d) Each party entitled to indemnification under this Section 11 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any such Claim as to which indemnity may be sought and
the Indemnifying Party shall have the right to participate in, and, to the
extent the Indemnifying Party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
selected by the Indemnifying Party but reasonably acceptable to the Indemnified
Party; provided, however, that an Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the Indemnifying
Party, if, in the reasonable opinion of counsel retained by the Indemnifying
Party, the representation by such counsel of the Indemnified Party and the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnifying Party within a reasonable time of the commencement of any such
action shall not relieve such Indemnifying Party of any liability to the
Indemnified Party under this Section 11, except to the extent that the
Indemnifying Party is prejudiced in its ability to defend such action. The
indemnification required by this Section 11 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.

         (e) To the extent any indemnification by an Indemnifying Party is
prohibited or limited by law, the Indemnifying Party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 11 to the fullest extent permitted by law; provided, however,
that (i) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth in
Section 11, (ii) no seller of Warrant Shares guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Warrant Shares who was not
guilty of such fraudulent misrepresentation and (iii) contribution by any Holder
shall be limited in amount to the amount by which the net amount of proceeds
received by such Holder (if any) from the sale of such Warrant Shares that
resulted in such Claim exceeds the purchase price paid by such Holder for such
Warrant Shares.


                                       17
<PAGE>


      12. DATE. This Warrant, in all events, shall be wholly void and of no
effect after 5:00 P.M. Eastern Standard Time on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Sections 3(j), 7
and 11 shall continue in full force and effect after such date as to any Warrant
Shares or other securities issued upon the exercise of this Warrant.

      13. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omitted to perform any act herein required to be performed
by it, only if the Company has obtained the written consent of the Holders of
Warrants representing a majority of the shares of Common Stock obtainable upon
exercise of the Warrants then outstanding, provided that no such action may
increase the Warrant Exercise Price of the Warrants or decrease the number of
shares or class of stock obtainable upon exercise of any warrants with out the
written consent of the Holder of such warrant.

      14. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
the several sections of this Warrant are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. This Warrant shall be
governed by and interpreted under the laws of the State of New York, without
giving effect to any choice of law or conflict of laws principles thereof.

      15. JUDICIAL PROCEEDINGS. Any legal action, suit or proceeding brought
against the Company or the Holder with respect to this Warrant may be brought in
any federal court of the Southern District of New York or any state court
located in New York County, State of New York, and by execution and delivery of
this Warrant, the Company and the Holder hereby irrevocably and unconditionally
waives any claim (by way of motion, as a defense or otherwise) of improper
venue, that it is not subject personally to the jurisdiction of such court, that
such courts are an inconvenient forum or that this Warrant or the subject matter
may not be enforced in or by such court. Each of the Company and the Holder
hereby irrevocably and unconditionally consents to the process of any of the
aforementioned courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, at its address
set forth or provided for in Section 10 hereof, such service to become effective
10 days after such mailing. Nothing herein contained shall be deemed to affect
the right of any party to serve process in any manner permitted by law or
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction to enforce judgment obtained in any action, suit or
proceeding brought pursuant to this Section.

      16. WAIVER OF TRIAL BY JURY. EACH OF THE COMPANY AND THE HOLDER WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
CONCERNING ANY RIGHTS UNDER THIS WARRANT OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION WITH THIS WARRANT, AND AGREES THAT ANY
SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.


                                       18
<PAGE>


         This Warrant has been duly executed by the Company and the Holder as of
the date first set forth above.

                                       StemCells, Inc.



                                       By: /s/ Iris Brest
                                           ------------------------------------
                                           Name:  Iris Brest
                                           Title: General Counsel and Secretary



Cantor Fitzgerald & Co.


By: /s/ Phil Marber
    -------------------------------------------------
   Name:  Phil Marber
          -------------------------------------------
   Title: President
          ------------------------------------------



                                       19
<PAGE>


                                    EXHIBIT A

                             FORM OF EXERCISE NOTICE


     (Complete and sign only exercise of the Warrant in whole or in part.)


TO:      StemCells, Inc.

         The undersigned, the holder of the attached Warrant to which this
Exercise Notice applies, hereby irrevocably elects to exercise the purchase
rights represented by such warrant for and to purchase thereunder _______ shares
of Common Stock, par value $.01 per share (the "Shares"), from StemCells, Inc.
(or such other securities issuable pursuant to the terms of the Warrant) and:

         _______ (i) herewith makes payment of $_______ therefor (equal to the
Aggregate Warrant Exercise Price) in cash or by certified or official bank
check; or

         _______ (ii) elects to make payment upon a Cashless Exercise pursuant
to Section 2(a)(Y) of the Warrant and authorizes the Company to cancel such
number of shares as calculated in accordance with such Section 2(a)(Y) of the
Warrant; or

         ________ (iii) elects to make payment upon a Cashless Exercise pursuant
to Section 2(a)(Z) of the Warrant and surrenders herewith certificates
representing the number of shares of Common Stock of the Company as calculated
pursuant to Section 2(a)(Z) of the Warrant.

         The undersigned hereby requests that the certificate(s) representing
such securities be issued in the name(s) and delivered to the address(es) as
follows:

Name:
             -------------------------------------------------------------------
Address:
             -------------------------------------------------------------------
Social Security Number (if applicable):


             -------------------------------------------------------------------
Deliver to:
             -------------------------------------------------------------------
Address:
             -------------------------------------------------------------------

         If the foregoing exercise notice evidences an exercise of the Warrant
to purchase fewer than all of the Shares (or other securities issuable pursuant
to the terms of the Warrant) to which the undersigned is entitled under such
warrant, please issue a new warrant, of like tenor, relating to the remaining
portion of the securities issuable upon exercise of such warrant (or other
securities issuable pursuant to the terms of such warrant) in the name(s), and
deliver the same to the address(es), as follow:

Name:
             -------------------------------------------------------------------
Address:
             -------------------------------------------------------------------

             -------------------------------------------------------------------
Dated:
             -------------------------------------------------------------------


----------------                     -------------------------------------------
(Name of holder)                     (Social Security or Taxpayer Identification
                                     Number of holder, if applicable)




                                       20
<PAGE>


----------------------------------
(Signature of holder or Authorized
Signatory)

Signature Guaranteed:
                     ----------------------------




                                       21
<PAGE>


                                    EXHIBIT B

                              FORM OF WARRANT POWER


         FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
____________________________________________ Federal Identification No.______, a
warrant to purchase shares of the capital stock of StemCells, Inc. a Delaware
corporation, represented by warrant certificate No._________, standing in the
name of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint ____________________________, attorney
to transfer the warrants of said corporation, with full power of substitution in
the premises.

Dated:
      -----------------------

                                    By:
                                         --------------------------------------
                                    Its:
                                         --------------------------------------




                                       22