Document:

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                                                                  EXHIBIT 4.3

THE SECURITIES REPRESENTED BY 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 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.

                                 STEMCELLS, INC.

                        WARRANT TO PURCHASE COMMON STOCK

Warrant No.: MD-001                                  Number of Shares Issuable:
                                                               20,000

Date of Issuance:  August 3, 2000

     StemCells, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Mark Angelo, the registered holder hereof or its
permitted assigns, 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) twenty thousand (20,000) 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(b) below;

     Section 1.

     (a) LETTER AGREEMENT. This Warrant is one of the warrants (the "Warrants")
issued pursuant to Section 3.4 of the Placement Agency Agreement between the
Company and May Davis Group, Inc., dated as of July 31, 2000 (the "AGENCY
AGREEMENT").

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

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          (i) "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.

          (ii) "EXPIRATION DATE" means the date five (5) years from the date
of the issuance of the Warrant 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.

          (iii) "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.

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

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

          (vi) "WARRANT  EXERCISE  PRICE" shall be equal to $5.0375, subject to
adjustment as hereinafter provided.

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

     (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) When used in this  Warrant, the words  "herein," "hereof," and
"hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and
Exhibits to, this Warrant 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.

     Section 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 or after the opening of
business on the date hereof and prior to 5:00 P.M. Eastern Standard Time on

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the Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) (A) payment to the Company 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 Exercise Price") in cash or by check or wire transfer, or (B) by
notifying the Company that it should subtract from the number of Warrant Shares
Issuable to the holder upon such exercise an amount of warrant shares having a
last reported sale price (as reported by Bloomberg), or, if the foregoing is not
appliclable, the fair market value (in either case, the "Per Share Value"), on
the trading day immediately preceding the date of the subscription notice equal
the Aggregate Exercise Price of the Warrant shares for which this warrant is
being exercised (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 (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 five (5)
business days after the Company's receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction) Upon delivery of the
Exercise Notice, this Warrant (or such indemnification undertaking) and
Aggregate Exercise Price referred to in clause (ii) (A) above or notification to
the Company of a Cashless Exercise referred to in clause (ii) (B) 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 the certificates
evidencing such Warrant Shares. In the case of a dispute as to the determination
of the Warrant Exercise Price or the Average Market Price of a security 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 five (5) business days of receipt of the holder's
subscription notice. If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or Average Market Price or
arithmetic calculation of the Warrant Shares within five (5) 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 Average Market Price to an
independent, reputable investment banking firm or (ii) the disputed arithmetic
calculation of the Warrant Shares to its independent, outside accountant. The
Company shall cause the investment banking firm 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 five 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 deemed
conclusive absent manifest error and the Company shall be liable for the costs
and expenses related to such determination or calculation.

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     (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 five (5) business days after any exercise and at its
own expense, issue a new Warrant identical in all respects to the Warrant
exercised except (i) 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, and (ii) the holder thereof shall be deemed for all corporate
purposes to have become the holder of record of such Warrant Shares immediately
prior to the close of business on the date on which the Warrant is surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes is made, irrespective of the date of delivery of certificates evidencing
such Warrant Shares, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are properly closed, such
person shall be deemed to have become the holder of such Warrant Shares at the
opening of business on the next succeeding date on which the stock transfer
books are open. Upon presentation of a duly executed Subscription Form in the
Form of Exhibit A to this Warrant, the holder shall be entitled to exercise this
Warrant in whole or in part, if the holder shall have previously exercised and
surrendered 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 Per Share Value on the date of payment.

     (d) If the Company shall fail for any reason or for no reason to issue to
holder on a timely basis as described under this Section 2 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 such issuance is not timely effected an amount equal to .25% 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 sum
derived by subtracting (1) the Warrant exercise price then in effect, from (2)
the Closing Bid Price of the Common Stock on the last possible date which the
Company could have issued Common Stock to the holder without violating this
Section 2.

     (e) The Company shall not affect any exercise of any Warrant and no holder
of any Warrant shall have the right to exercise any Warrant pursuant to Section
2 to the extent that after giving effect to such exercise such person (together
with such Persons affiliates) (A) would beneficially owned in excess of 4.9% of
the outstanding shares of Common Stock following such conversion and (B) would
have acquired, through exercise of any Warrant or otherwise, in excess of 4.9%
of the outstanding shares of the Common Stock following such exercise during the
60-day period ending on and including such exercise date. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by a
person and its affiliates or acquired by a person and its affiliates, as the
case may be, shall include the number of shares of Common Stock issuable upon
the exercise of the Warrants with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon

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(i) exercise of the remaining, non exercisable Warrants 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
subject to limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Person and its affiliates. Except as
set forth in the preceding sentence, for purposes of this section 2(e),
beneficial ownership shall be calculated in accordance with Section 13 (d) of
the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the
contrary contained herein, each Exercise Notice shall constitute a
representation by the holder submitting such Exercise Notice that, after giving
effect to such Exercise Notice (A) the holder will not beneficially own (as
determined in accordance with this Section 2(e)) and (B) during the 60-day
period ending on and including such exercise date, the holder will not have
acquired, through exercise of any Warrant or otherwise, a number of shares of
Common Stock in excess of 4.9% of the outstanding shares of Common Stock as
reflected in the Company's most recent Form 10-Q or Form 10-K, as the case may
be, or more recent public release or other public notice by the Company setting
forth the number of Shares of Common Stock outstanding, but after giving effect
to exercise of any Warrant by such holder since the date as of which such
numbers of outstanding shares of the Common Stock was reported, and the Company
shall be entitled to rely solely on the foregoing representation in complying
with this Section 2(e).

     Section 3. COVENANTS AS TO COMMON STOCK. The Company hereby covenants and
agrees as follows:

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

     (b) 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.

     (c) 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.

     (d) The Company shall promptly secure the listing of the shares of Common
Stock issuable upon exercise of this Warrant upon each national securities
exchange or automated quotation system, if any, or over-the-counter-bulletin
board upon which shares of Common Stock are then listed or quoted (subject to
official notice of the over-the-counter bulletin board of issuance upon exercise
of this Warrant) and 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.

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     (e) 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 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 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.

     (f) 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.

     (g) If at any time when the registration statement referred to in the
Agency Agreement is not effective the Company proposes to file with the
Securities and Exchange Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its Securities (other than on Form S-4 or Form S-8 (or their
equivalents at such time) relating to securities to be issued solely in
connection with any acquisition of, or strategic transaction with, any entity or
business or equity securities issuable in connection with stock option or other
employee benefit plans) the Company shall promptly send to the Holder's written
notice of the Company's intention to file a registration statement and of the
holder's rights under this section and, if within five (5) days after receipt of
such notice, the holder hereof shall so request in writing, the Company shall
include in such registration statement all or any part of the Common Stock
underlying this Warrant the holder requests to be registered; provided, however,
that the foregoing shall not apply to any registration statement if the holders
of the securities to be registered thereon have a right to exclude the Warrant
Shares from such registration statement. If a registration pursuant this section
is to be an underwritten public offering and the managing underwriters advise
the Company in writing, that in their reasonable good faith opinion, marketing
or other factors dictate that a limitation on the number of shares of Company
common stock which may be included in the registration statement is necessary to
facilitate and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities requested to be registered
by the holder hereof and other holders of securities entitled to participate in
the registration, as of the date hereof, drawn from them pro rata based on the
number each has requested to be included in such registration. Any holder of a
Warrant or Warrant Shares who wishes to participate in such registration must
execute such agreements and take such actions as are customarily executed or
taken by selling stockholders in connection with a registration.

     Section 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 delivery

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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.

     Section 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.

     Section 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 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.

     Section 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

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thereof for all purposes, notwithstanding any notice to the 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 Section 6 above and Section 7(c) below.

     (c) 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. 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 the Series A Preferred Share Warrants 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 7(d) below. All Warrants and
Warrant Shares shall bear a legend in substantially the form set forth at the
beginning hereof until the Company receives a satisfactory opinion of counsel
that such legend is no longer required.

     (d) The Company shall register the Warrant Shares for resale under the
Securities Act pursuant to the Registration Rights Agreement dated as of July
31, 2000, by and between the Company and the Buyers listed on the signature page
thereto (the "Registration Rights Agreement").

     Section 8. ADJUSTMENT OF WARRANT EXERCISE PRICE. In order to prevent
dilution of the rights granted under this Warrant, 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.

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     (b) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets to another Person or other
similar transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as in "Organic Change." Prior to the consummation of any Organic
Change, the Company will make appropriate provision (in form and substance
reasonably satisfactory to the holders of a majority of the Warrants then
outstanding) to insure that, upon the consummation of such Organic Change, each
of the holders of the Warrants will thereafter have the right to acquire and
receive upon exercise hereof in lieu of the Common Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of the Warrants had such Organic Change not taken
place. In any such case, the Company will make appropriate provision (in form
and substance reasonably satisfactory to the holders of a majority of the
Warrants then outstanding) with respect to such holders' rights and interests to
insure that the provisions of this Section 8(b) will thereafter be applicable to
the Warrants.

     (c) NOTICES.

          (i)  Immediately  upon any  adjustment of the Warrant  Exercise  Price
pursuant to this Section 8, the Company will give written  notice thereof to the
holder of this Warrant,  setting forth in reasonable  detail and  certifying the
calculation of such adjustment.

          (ii) The  Company  will  give  written  notice  to the  holder of this
Warrant at least ten (10) days prior to the date on which the Company closes its
books or takes a record (A) with  respect to any dividend or  distribution  upon
the Common Stock, (B) with respect to any pro rata subscription offer to holders
of  Common  Stock or (C) for  determining  rights to vote  with  respect  to any
Organic Change,  dissolution or liquidation,  except that in no event shall such
notice be provided to such holder prior to such information  being made known to
the public.

          (iii) The Company will also give written  notice to the holder of this
Warrant  at least ten (10) days prior to the date on which any  Organic  Change,
dissolution or liquidation will take place.

     Section 10. 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.

     Section 11. 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:

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                 If to the Company:   StemCells, Inc.
                                      525 Del Rey Avenue
                                      Suite C
                                      Sunnyvale CA. 94086
                                      Attention: George Dunbar, President & CEO
                                      Telephone: (408) 731-8670
                                      Facsimile: (408) 731-8674

                 With a copy 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. Each party shall provide five
(5) days' prior written notice to the other party of any change in address or
facsimile number.

     Section 12. AMENDMENTS. This Warrant and any term hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
party or holder hereof against which enforcement of such change, waiver,
discharge or termination is sought.

     Section 13. DATE. The date of this Warrant is August 3, 2000. 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 Section 7 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.

     Section 14. 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.

     Section 15. 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 law provision.

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

                                       10
<PAGE>

                                 STEMCELLS, INC.

                                 By:
                                    -------------------------------
                                 Name:
                                 Title:

Mark Angelo

By:
   -------------------------------
Name:
     -----------------------------
Title:
      ----------------------------
Address:
        --------------------------

                                       11
<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION

     (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 Form of
Subscription 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 either:
(i) herewith makes payment of $_______ therefor in cash or by certified or
official bank check or (ii) elects to make payment upon a cashless basis
pursuant to Section 2(b) of the Warrant and hereby exercises ______ Warrants and
the Per Share Value for purposes hereof is $_______. The undersigned hereby
requests that the certificate(s) representing such securities be issued in the
name(s) and delivered t the address(es) as follows:

Name:
                            ---------------------------------------
Address:
                            ---------------------------------------
Social Security Number:
                            ---------------------------------------
Deliver to:
                            ---------------------------------------
Address:
                            ---------------------------------------

     This the foregoing subscription 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)

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

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

                                       12
<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:
                                                  --------------------------
                                       13<PAGE>

                                                                  EXHIBIT 4.4

THE SECURITIES REPRESENTED BY 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 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.

                                 STEMCELLS, INC.

                        WARRANT TO PURCHASE COMMON STOCK

Warrant No.: MD-002                                  Number of Shares Issuable:
                                                               20,000

Date of Issuance:  August 3, 2000

     StemCells, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Robert Farrell, the registered holder hereof or its
permitted assigns, 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) twenty thousand (20,000) 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(b) below;

     Section 1.

     (a) LETTER AGREEMENT. This Warrant is one of the warrants (the "Warrants")
issued pursuant to Section 3.4 of the Placement Agency Agreement between the
Company and May Davis Group, Inc., dated as of July 31, 2000 (the "AGENCY
AGREEMENT").

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

                                       1
<PAGE>

          (i) "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.

          (ii) "EXPIRATION DATE" means the date five (5) years from the date of
the issuance of the Warrant 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.

          (iii) "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.

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

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

          (vi) "WARRANT EXERCISE PRICE" shall be equal to $5.0375, subject to
               adjustment as hereinafter provided.

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

     (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) When used in this Warrant, the words "herein," "hereof," and
     "hereunder," and words of similar import, shall refer to this Warrant as
     a whole and not to any provision of this Warrant, and the words
     "Section," "Schedule," and "Exhibit" shall refer to Sections of, and
     Schedules and Exhibits to, this Warrant 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.

     Section 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 or after the opening of
business on the date hereof and prior to 5:00 P.M. Eastern Standard Time on

                                       2
<PAGE>

the Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) (A) payment to the Company 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 Exercise Price") in cash or by check or wire transfer, or (B) by
notifying the Company that it should subtract from the number of Warrant Shares
Issuable to the holder upon such exercise an amount of warrant shares having a
last reported sale price (as reported by Bloomberg), or, if the foregoing is not
appliclable, the fair market value (in either case, the "Per Share Value"), on
the trading day immediately preceding the date of the subscription notice equal
the Aggregate Exercise Price of the Warrant shares for which this warrant is
being exercised (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 (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 five (5)
business days after the Company's receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction) Upon delivery of the
Exercise Notice, this Warrant (or such indemnification undertaking) and
Aggregate Exercise Price referred to in clause (ii) (A) above or notification to
the Company of a Cashless Exercise referred to in clause (ii) (B) 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 the certificates
evidencing such Warrant Shares. In the case of a dispute as to the determination
of the Warrant Exercise Price or the Average Market Price of a security 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 five (5) business days of receipt of the holder's
subscription notice. If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or Average Market Price or
arithmetic calculation of the Warrant Shares within five (5) 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 Average Market Price to an
independent, reputable investment banking firm or (ii) the disputed arithmetic
calculation of the Warrant Shares to its independent, outside accountant. The
Company shall cause the investment banking firm 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 five 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 deemed
conclusive absent manifest error and the Company shall be liable for the costs
and expenses related to such determination or calculation.

                                       3
<PAGE>

     (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 five (5) business days after any exercise and at its
own expense, issue a new Warrant identical in all respects to the Warrant
exercised except (i) 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, and (ii) the holder thereof shall be deemed for all corporate
purposes to have become the holder of record of such Warrant Shares immediately
prior to the close of business on the date on which the Warrant is surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes is made, irrespective of the date of delivery of certificates evidencing
such Warrant Shares, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are properly closed, such
person shall be deemed to have become the holder of such Warrant Shares at the
opening of business on the next succeeding date on which the stock transfer
books are open. Upon presentation of a duly executed Subscription Form in the
Form of Exhibit A to this Warrant, the holder shall be entitled to exercise this
Warrant in whole or in part, if the holder shall have previously exercised and
surrendered 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 Per Share Value on the date of payment.

     (d) If the Company shall fail for any reason or for no reason to issue to
holder on a timely basis as described under this Section 2 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 such issuance is not timely effected an amount equal to .25% 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 sum
derived by subtracting (1) the Warrant exercise price then in effect, from (2)
the Closing Bid Price of the Common Stock on the last possible date which the
Company could have issued Common Stock to the holder without violating this
Section 2.

     (e) The Company shall not affect any exercise of any Warrant and no holder
of any Warrant shall have the right to exercise any Warrant pursuant to Section
2 to the extent that after giving effect to such exercise such person (together
with such Persons affiliates) (A) would beneficially owned in excess of 4.9% of
the outstanding shares of Common Stock following such conversion and (B) would
have acquired, through exercise of any Warrant or otherwise, in excess of 4.9%
of the outstanding shares of the Common Stock following such exercise during the
60-day period ending on and including such exercise date. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by a
person and its affiliates or acquired by a person and its affiliates, as the
case may be, shall include the number of shares of Common Stock issuable upon
the exercise of the Warrants with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon

                                       4
<PAGE>

(i) exercise of the remaining, non exercisable Warrants 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
subject to limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Person and its affiliates. Except as
set forth in the preceding sentence, for purposes of this section 2(e),
beneficial ownership shall be calculated in accordance with Section 13 (d) of
the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the
contrary contained herein, each Exercise Notice shall constitute a
representation by the holder submitting such Exercise Notice that, after giving
effect to such Exercise Notice (A) the holder will not beneficially own (as
determined in accordance with this Section 2(e)) and (B) during the 60-day
period ending on and including such exercise date, the holder will not have
acquired, through exercise of any Warrant or otherwise, a number of shares of
Common Stock in excess of 4.9% of the outstanding shares of Common Stock as
reflected in the Company's most recent Form 10-Q or Form 10-K, as the case may
be, or more recent public release or other public notice by the Company setting
forth the number of Shares of Common Stock outstanding, but after giving effect
to exercise of any Warrant by such holder since the date as of which such
numbers of outstanding shares of the Common Stock was reported, and the Company
shall be entitled to rely solely on the foregoing representation in complying
with this Section 2(e).

     Section 3. COVENANTS AS TO COMMON STOCK. The Company hereby covenants and
agrees as follows:

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

     (b) 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.

     (c) 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.

     (d) The Company shall promptly secure the listing of the shares of Common
Stock issuable upon exercise of this Warrant upon each national securities
exchange or automated quotation system, if any, or over-the-counter-bulletin
board upon which shares of Common Stock are then listed or quoted (subject to
official notice of the over-the-counter bulletin board of issuance upon exercise
of this Warrant) and 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.

                                       5
<PAGE>

     (e) 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 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 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.

     (f) 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.

     (g) If at any time when the registration statement referred to in the
Agency Agreement is not effective the Company proposes to file with the
Securities and Exchange Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its Securities (other than on Form S-4 or Form S-8 (or their
equivalents at such time) relating to securities to be issued solely in
connection with any acquisition of, or strategic transaction with, any entity or
business or equity securities issuable in connection with stock option or other
employee benefit plans) the Company shall promptly send to the Holder's written
notice of the Company's intention to file a registration statement and of the
holder's rights under this section and, if within five (5) days after receipt of
such notice, the holder hereof shall so request in writing, the Company shall
include in such registration statement all or any part of the Common Stock
underlying this Warrant the holder requests to be registered; provided, however,
that the foregoing shall not apply to any registration statement if the holders
of the securities to be registered thereon have a right to exclude the Warrant
Shares from such registration statement. If a registration pursuant this section
is to be an underwritten public offering and the managing underwriters advise
the Company in writing, that in their reasonable good faith opinion, marketing
or other factors dictate that a limitation on the number of shares of Company
common stock which may be included in the registration statement is necessary to
facilitate and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities requested to be registered
by the holder hereof and other holders of securities entitled to participate in
the registration, as of the date hereof, drawn from them pro rata based on the
number each has requested to be included in such registration. Any holder of a
Warrant or Warrant Shares who wishes to participate in such registration must
execute such agreements and take such actions as are customarily executed or
taken by selling stockholders in connection with a registration.

     Section 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 delivery

                                       6
<PAGE>

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.

     Section 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.

     Section 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 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.

     Section 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

                                       7
<PAGE>

thereof for all purposes, notwithstanding any notice to the 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 Section 6 above and Section 7(c) below.

     (c) 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. 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 the Series A Preferred Share Warrants 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 7(d) below. All Warrants and
Warrant Shares shall bear a legend in substantially the form set forth at the
beginning hereof until the Company receives a satisfactory opinion of counsel
that such legend is no longer required.

     (d) The Company shall register the Warrant Shares for resale under the
Securities Act pursuant to the Registration Rights Agreement dated as of July
31, 2000, by and between the Company and the Buyers listed on the signature page
thereto (the "Registration Rights Agreement").

     Section 8. ADJUSTMENT OF WARRANT EXERCISE PRICE. In order to prevent
dilution of the rights granted under this Warrant, 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.

                                       8
<PAGE>

     (b) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets to another Person or other
similar transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as in "Organic Change." Prior to the consummation of any Organic
Change, the Company will make appropriate provision (in form and substance
reasonably satisfactory to the holders of a majority of the Warrants then
outstanding) to insure that, upon the consummation of such Organic Change, each
of the holders of the Warrants will thereafter have the right to acquire and
receive upon exercise hereof in lieu of the Common Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of the Warrants had such Organic Change not taken
place. In any such case, the Company will make appropriate provision (in form
and substance reasonably satisfactory to the holders of a majority of the
Warrants then outstanding) with respect to such holders' rights and interests to
insure that the provisions of this Section 8(b) will thereafter be applicable to
the Warrants.

     (c) NOTICES.

          (i)  Immediately  upon any  adjustment of the Warrant  Exercise  Price
pursuant to this Section 8, the Company will give written  notice thereof to the
holder of this Warrant,  setting forth in reasonable  detail and  certifying the
calculation of such adjustment.

          (ii) The  Company  will  give  written  notice  to the  holder of this
Warrant at least ten (10) days prior to the date on which the Company closes its
books or takes a record (A) with  respect to any dividend or  distribution  upon
the Common Stock, (B) with respect to any pro rata subscription offer to holders
of  Common  Stock or (C) for  determining  rights to vote  with  respect  to any
Organic Change,  dissolution or liquidation,  except that in no event shall such
notice be provided to such holder prior to such information  being made known to
the public.

          (iii) The Company will also give written  notice to the holder of this
Warrant  at least ten (10) days prior to the date on which any  Organic  Change,
dissolution or liquidation will take place.

     Section 10. 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.

     Section 11. 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:

                                       9
<PAGE>

                 If to the Company:   StemCells, Inc.
                                      525 Del Rey Avenue
                                      Suite C
                                      Sunnyvale CA. 94086
                                      Attention: George Dunbar, President & CEO
                                      Telephone: (408) 731-8670
                                      Facsimile: (408) 731-8674

                 With a copy 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. Each party shall provide five
(5) days' prior written notice to the other party of any change in address or
facsimile number.

     Section 12. AMENDMENTS. This Warrant and any term hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
party or holder hereof against which enforcement of such change, waiver,
discharge or termination is sought.

     Section 13. DATE. The date of this Warrant is August 3, 2000. 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 Section 7 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.

     Section 14. 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.

     Section 15. 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 law provision.

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

                                       10
<PAGE>

                                 STEMCELLS, INC.

                                 By:
                                    -------------------------------
                                 Name:
                                 Title:

Robert Farrell

By:
   -------------------------------
Name:
     -----------------------------
Title:
      ----------------------------
Address:
        --------------------------

----------------------------------

----------------------------------

                                       11
<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION

     (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 Form of
Subscription 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 either:
(i) herewith makes payment of $_______ therefor in cash or by certified or
official bank check or (ii) elects to make payment upon a cashless basis
pursuant to Section 2(b) of the Warrant and hereby exercises ______ Warrants and
the Per Share Value for purposes hereof is $_______. The undersigned hereby
requests that the certificate(s) representing such securities be issued in the
name(s) and delivered t the address(es) as follows:

Name:
                            ---------------------------------------
Address:
                            ---------------------------------------
Social Security Number:
                            ---------------------------------------
Deliver to:
                            ---------------------------------------
Address:
                            ---------------------------------------

     This the foregoing subscription 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)

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

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

                                       12
<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:
                                                  --------------------------

                                       13

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