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                                                                     EXHIBIT 4.1

                                 STEMCELLS, INC.

                              AMENDED AND RESTATED
                           2004 EQUITY INCENTIVE PLAN

1. PURPOSE

      The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of StemCells, Inc. (the "Company") by enhancing its ability to attract
and retain employees and other persons or entities who are in a position to make
significant contributions to the success of the Company and its subsidiaries
through ownership of shares of the Company's common stock ("Stock").

      The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.

2. ADMINISTRATION

      The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an award is cancelled, grant another Award in
its place on such terms as the Board shall specify), except that the Board may
not, without the consent of the holder of an Award, take any action under this
clause with respect to such Award if such action would adversely affect the
rights of such holder; (g) prescribe the form or forms of instruments that are
required or deemed appropriate under the Plan, including any written notices and
elections required of Participants, and change such forms from time to time; (h)
adopt, amend and rescind rules and regulations for the administration of the
Plan; and (i) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Board, and all other determinations and
actions of the Board made or taken under authority granted by any provision of
the Plan, will be conclusive and will bind all parties. Nothing in this
paragraph shall be construed as limiting the power of the Board to make
adjustments under Section 7.3 or Section 8.6.

      The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least two
directors. A majority of the members of the Committee shall


                                     - 1 -

constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee by a writing signed by a
majority of the Committee members. On and after registration of the Stock under
the Securities Exchange Act of 1934 (the "1934 Act"), the Board shall delegate
the power to select directors and officers to receive Awards under the Plan and
the timing, pricing and amount of such Awards to a committee, all members of
which shall be non-employee directors within the meaning of Rule 16b-3 under the
1934 Act and "outside directors" within the meaning of section 162(m)(4)(C)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"). In addition, the
Board may, in its discretion, delegate to a Committee consisting solely of the
chief executive officer of the Company, if he or she is member of the Board of
Directors, the power to grant Awards under the Plan to persons who are not, and
who are not expected to be, executive officers or directors of the Company.

3. EFFECTIVE DATE AND TERM OF PLAN

      The Plan will become effective on the date on which it is approved by the
stockholders of the Company.

      No Award may be granted under the Plan after March 11, 2014, but Awards
previously granted may extend beyond that date.

4. SHARES SUBJECT TO THE PLAN

      Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
3,000,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.

      Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.

      Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options may be granted to any Participant during the life of the Plan is
500,000 and the maximum number of shares of Stock as to which Stock Appreciation
Rights may be granted to any Participant during the life of the Plan is 500,000.
For purposes of this paragraph, except as otherwise provided in regulations or
other guidance issued under Section 162(m) of the Code, any repricing of an
Option or Stock Appreciation Right shall be treated as an additional grant. The
per-individual limitations described in this paragraph shall be construed and
applied consistent with the rules and regulations under Section 162(m) of the
Code.

      Subject to the adjustment as provided in Section 8.6 below, Awards of
Stock, including Restricted, Unrestricted and Deferred Stock Awards, and Stock
that may be part of any


                                     - 2 -

Performance Awards (other than Stock issued upon exercise of any Performance
Option), shall not exceed 1,000,000 shares of Stock during the life of the Plan.

5. ELIGIBILITY AND PARTICIPATION

      Those eligible to receive Awards under the Plan ("Participants") will be
employees of the Company or any of its subsidiaries ("Employees") and other
persons or entities (including without limitation non-Employee directors of the
Company or a subsidiary of the Company) who, in the opinion of the Board, are in
a position to make a significant contribution to the success of the Company or
its subsidiaries. A "subsidiary" for purposes of the Plan will be a corporation
in which the Company owns, directly or indirectly, stock possessing 50% or more
of the total combined voting power of all classes of stock.

6. TYPES OF AWARDS

      6.1.  Options

            (a)   Nature of Options. An Option is an Award entitling the
                  recipient on exercise thereof to purchase Stock at a specified
                  exercise price.

                  Both "incentive stock options," as defined in section 422 of
                  the Code (any Option intended to qualify as an incentive stock
                  option being hereinafter referred to as an "ISO"), and Options
                  that are not incentive stock options [non-ISOs], may be
                  granted under the Plan. ISOs shall be awarded only to
                  Employees.

            (b)   Exercise Price. The exercise price of an Option will be
                  determined by the Board subject to the following:

                  (1)   The exercise price of an ISO shall not be less than 100%
                        (110% in the case of an ISO granted to a ten-percent
                        shareholder) of the fair market value of the Stock
                        subject to the Option, determined as of the time the
                        Option is granted. A "ten-percent shareholder" is any
                        person who at the time of grant owns, directly or
                        indirectly, or is deemed to own by reason of the
                        attribution rules of section 424(d) of the Code, stock
                        possessing more than 10% of the total combined voting
                        power of all classes of stock of the Company or of any
                        of its subsidiaries.

                  (2)   In no case may the exercise price paid for Stock which
                        is part of an original issue of authorized Stock be less
                        than the par value per share of the Stock.

                  (3)   Except pursuant to Section 8.6 hereof, the exercise
                        price of an Option at any time after the time of grant
                        may not be reduced except with the approval of the
                        shareholders of the Company and, in the case of an
                        Option originally awarded as an ISO, only with the
                        consent of the Participant, provided, however, that in
                        no case shall the exercise price of an Option be reduced
                        below 85% of the fair market value of the Stock subject
                        to the Option as of the


                                     - 3 -

                        time the Option is granted (110% in the case of an
                        Option granted to a ten-percent shareholder).

                  (4)   The exercise price of an Option granted to an Employee
                        or a director of the Company shall not be less than 100%
                        of the fair market value of the Stock subject to the
                        Option, determined as of the time the Option is granted.

            (c)   Duration of Options. The latest date on which an Option may be
                  exercised will be the tenth anniversary (fifth anniversary, in
                  the case of an ISO granted to a ten-percent shareholder) of
                  the day immediately preceding the date the Option was granted,
                  or such earlier date as may have been specified by the Board
                  at the time the Option was granted.

            (d)   Exercise of Options. An Option will become exercisable at such
                  time or times, and on such conditions, as the Board may
                  specify, provided, however, that in all cases the Option shall
                  become exercisable at a rate of at least 20% per year over
                  five years from the date the Option was granted, subject to
                  reasonable conditions as the Board may from time to time
                  specify. However, in the case of an Option granted to
                  officers, directors, managers or consultants of the Company or
                  any of its affiliates, the Option may become fully
                  exercisable, subject to reasonable conditions such as the
                  Board may from time to time specify, at any time or during any
                  period established by the Board. The Board may at any time
                  accelerate the time at which all or any part of the Option may
                  be exercised.

                  Any exercise of an Option must be in writing, signed by the
                  proper person and delivered or mailed to the Company,
                  accompanied by (1) any documents required by the Board and (2)
                  payment in full in accordance with paragraph (e) below for the
                  number of shares for which the Option is exercised.

            (e)   Payment for Stock. Stock purchased on exercise of an Option
                  must be paid for as follows: (1) in cash or by check
                  (acceptable to the Company in accordance with guidelines
                  established for this purpose), bank draft or money order
                  payable to the order of the Company or (2) if so permitted by
                  the instrument evidencing the Option (or in the case of an
                  Option which is not an ISO, by the Board at or after grant of
                  the Option), (i) through the delivery of shares of Stock which
                  have been outstanding for at least six months (unless the
                  Board expressly approves a shorter period) and which have a
                  fair market value on the last business day preceding the date
                  of exercise equal to the exercise price, or (ii) by delivery
                  of a promissory note of the Option holder to the Company,
                  payable on such terms as are specified by the Board, or (iii)
                  by delivery of an unconditional and irrevocable undertaking by
                  a broker to deliver promptly to the Company sufficient funds
                  to pay the exercise price, or (iv) by the withholding of
                  shares of Stock otherwise deliverable upon exercise which have
                  a fair market value on the date of exercise at least equal to
                  the exercise price, or (v) by any combination of the
                  permissible forms of payment; provided, that if the Stock
                  delivered upon exercise of the Option is an original issue of
                  authorized Stock, at least so much of the exercise price as
                  represents the par value of such Stock must be paid other than
                  by the


                                     - 4 -

                  Option holder's personal check or promissory note. The
                  foregoing notwithstanding, any stock purchased on exercise of
                  an Option must be paid for in a manner consistent with law,
                  and in particular stock purchased on exercise of an Option by
                  a Director or an Executive Officer of the Company must be paid
                  for in a manner consistent with the Sarbanes-Oxley Act of 2002
                  and regulations pursuant thereto.

            (f)   Discretionary Payments. If the market price of shares of Stock
                  subject to an Option (other than an Option which is in tandem
                  with a Stock Appreciation Right as described in Section 6.2
                  below) exceeds the exercise price of the Option at the time of
                  its exercise, the Board may cancel the Option and cause the
                  Company to pay in cash or in shares of Common Stock (at a
                  price per share equal to the fair market value per share) to
                  the person exercising the Option an amount equal to the
                  difference between the fair market value of the Stock which
                  would have been purchased pursuant to the exercise (determined
                  on the date the Option is cancelled) and the aggregate
                  exercise price which would have been paid. The Board may
                  exercise its discretion to take such action only if it has
                  received a written request from the person exercising the
                  Option, but such a request will not be binding on the Board.

      6.2.  Stock Appreciation Rights

            (a)   Nature of Stock Appreciation Rights. A Stock Appreciation
                  Right is an Award entitling the recipient on exercise of the
                  Right to receive an amount, in cash or Stock or a combination
                  thereof (such form to be determined by the Board), determined
                  by reference to appreciation in Stock value.

            (b)   Grant of Stock Appreciation Rights. Stock Appreciation Rights
                  may be granted in tandem with, or independently of, Options
                  granted under the Plan. A Stock Appreciation Right granted in
                  tandem with an Option which is not an ISO may be granted
                  either at or after the time the Option is granted. A Stock
                  Appreciation Right granted in tandem with an ISO may be
                  granted only at the time the Option is granted.

            (c)   Rules Applicable to Tandem Awards. When Stock Appreciation
                  Rights are granted in tandem with Options, the following will
                  apply:

                  (1)   The Stock Appreciation Right will be exercisable only at
                        such time or times, and to the extent, that the related
                        Option is exercisable and will be exercisable in
                        accordance with the procedure required for exercise of
                        the related Option.

                  (2)   The Stock Appreciation Right will terminate and no
                        longer be exercisable upon the termination or exercise
                        of the related Option, except that a Stock Appreciation
                        Right granted with respect to less than the full number
                        of shares covered by an Option will not be reduced until
                        the number of shares as to which the related Option has
                        been exercised or has terminated exceeds the number of
                        shares not covered by the Stock Appreciation Right.


                                     - 5 -

                  (3)   The Option will terminate and no longer be exercisable
                        upon the exercise of the related Stock Appreciation
                        Right.

                  (4)   The Stock Appreciation Right will be transferable only
                        with the related Option.

                  (5)   A Stock Appreciation Right granted in tandem with an ISO
                        may be exercised only when the market price of the Stock
                        subject to the Option exceeds the exercise price of such
                        option.

            (d)   Exercise of Independent Stock Appreciation Rights. A Stock
                  Appreciation Right not granted in tandem with an Option will
                  become exercisable at such time or times, and on such
                  conditions, as the Board may specify. The Board may at any
                  time accelerate the time at which all or any part of the Right
                  may be exercised.

                  Any exercise of an independent Stock Appreciation Right must
                  be in writing, signed by the proper person and delivered or
                  mailed to the Company, accompanied by any other documents
                  required by the Board.

      6.3.  Restricted and Unrestricted Stock

            (a)   Nature of Restricted Stock Award. A Restricted Stock Award
                  entitles the recipient to acquire shares of Stock subject to
                  the restrictions described in paragraph (d) below ("Restricted
                  Stock"). The purchase price (or value attributed thereto, in
                  the case of Restricted Stock granted in lieu of compensation)
                  of the Restricted Stock Award shall be at least 85% (100% in
                  the case of a Restricted Stock Award granted to a ten-percent
                  shareholder) of the fair value of the Stock at the time the
                  recipient is granted the right to purchase the Stock or at the
                  time the purchase is consummated, or, in the case of
                  Restricted Stock granted in lieu of compensation, at the time
                  of grant.

            (b)   Acceptance of Award. A Participant who is granted a Restricted
                  Stock Award will have no rights with respect to such Award
                  unless the Participant accepts the Award by written instrument
                  delivered or mailed to the Company accompanied by payment in
                  full of the specified purchase price, if any, of the shares
                  covered by the Award. Payment may be by certified or bank
                  check or other instrument acceptable to the Board.

            (c)   Rights as a Stockholder. A Participant who receives Restricted
                  Stock will have all the rights of a stockholder with respect
                  to the Stock, including voting and dividend rights, subject to
                  the restrictions described in paragraph (d) below and any
                  other conditions imposed by the Board at the time of grant.
                  Unless the Board otherwise determines, certificates evidencing
                  shares of Restricted Stock will remain in the possession of
                  the Company until such shares are free of all restrictions
                  under the Plan.

            (d)   Restrictions. Except as otherwise specifically provided by the
                  Plan, Restricted Stock may not be sold, assigned, transferred,
                  pledged or otherwise encumbered or disposed of, and if the
                  Participant ceases to be an Employee or otherwise suffers a
                  Status


                                     - 6 -

                  Change (as defined at Section 7.2(a) below) for any reason,
                  must be offered to the Company for purchase at the fair market
                  value on the date of the Status Change, provided further that
                  the Company's right of repurchase must be exercised for cash
                  or cancellation of purchase money indebtedness within 90 days
                  of the Status Change.

            (e)   Notice of Election. Any Participant making an election under
                  Section 83(b) of the Code with respect to Restricted Stock
                  must provide a copy thereof to the Company within 10 days of
                  the filing of such election with the Internal Revenue Service.

            (f)   Other Awards Settled with Restricted Stock. The Board may, at
                  the time any Award described in this Section 6 is granted,
                  provide that any or all the Stock delivered pursuant to the
                  Award will be Restricted Stock.

            (g)   Unrestricted Stock. The Board may, in its sole discretion,
                  sell or grant in lieu of compensation to any Participant
                  shares of Stock free of restrictions under the Plan for a
                  price (or attributed value in the case of a grant in lieu of
                  compensation) which is at least 85% (100% in the case of a
                  Restricted Stock Award sold to a ten-percent shareholder) of
                  the fair value of the Stock at the time the recipient is
                  granted the right to purchase the Stock or at the time the
                  purchase is consummated, or, in the case of Restricted Stock
                  granted in lieu of compensation, at the time of grant.

      6.4.  Deferred Stock

            A Deferred Stock Award entitles the recipient to receive shares of
            Stock to be delivered in the future. Delivery of the Stock will take
            place at such time or times, and on such conditions, as the Board
            may specify. The Board may at any time accelerate the time at which
            delivery of all or any part of the Stock will take place. At the
            time any Award described in this Section 6 is granted, the Board may
            provide that, at the time Stock would otherwise be delivered
            pursuant to the Award, the Participant will instead receive an
            instrument evidencing the Participant's right to future delivery of
            Deferred Stock.

      6.5.  Performance Awards; Performance Goals

            (a)   Nature of Performance Awards. A Performance Award entitles the
                  recipient to receive, without payment, an amount in cash or
                  Stock or a combination thereof (such form to be determined by
                  the Board) following the attainment of Performance Goals.
                  Performance Goals may be related to personal performance,
                  corporate performance, departmental performance or any other
                  category of performance deemed by the Board to be important to
                  the success of the Company. The Board will determine the
                  Performance Goals, the period or periods during which
                  performance is to be measured and all other terms and
                  conditions applicable to the Award.

            (b)   Other Awards Subject to Performance Condition. The Board may,
                  at the time any Award described in this Section 6 is granted,
                  impose the condition (in addition to any conditions specified
                  or authorized in this Section 6 or any other provision of the
                  Plan)


                                     - 7 -

                  that Performance Goals be met prior to the Participant's
                  realization of any payment or benefit under the Award.

      6.6.  Loans and Supplemental Grants

            (a)   Loans. The Company may make a loan to a Participant ("Loan"),
                  either on the date of or after the grant of any Award to the
                  Participant. A Loan may be made either in connection with the
                  purchase of Stock under the Award or with the payment of any
                  Federal, state and local income tax with respect to income
                  recognized as a result of the Award. The Board will have full
                  authority to decide whether to make a Loan and to determine
                  the amount, terms and conditions of the Loan, including the
                  interest rate (which may be zero), whether the Loan is to be
                  secured or unsecured or with or without recourse against the
                  borrower, the terms on which the Loan is to be repaid and the
                  conditions, if any, under which it may be forgiven. However,
                  no Loan may have a term (including extensions) exceeding ten
                  years in duration. The foregoing notwithstanding, no Loan may
                  be made to a Director or an Executive Officer of the Company,
                  nor may any Loan be made except in manner consistent with law.

            (b)   Supplemental Grants. In connection with any Award, the Board
                  may at the time such Award is made or at a later date, provide
                  for and grant a cash award to the Participant ("Supplemental
                  Grant") not to exceed an amount equal to (1) the amount of any
                  federal, state and local income tax on ordinary income for
                  which the Participant may be liable with respect to the Award,
                  determined by assuming taxation at the highest marginal rate,
                  plus (2) an additional amount on a grossed-up basis intended
                  to make the Participant whole on an after-tax basis after
                  discharging all the Participant's income tax liabilities
                  arising from all payments under this Section 6. Any payments
                  under this subsection (b) will be made at the time the
                  Participant incurs Federal income tax liability with respect
                  to the Award.

7.    EVENTS AFFECTING OUTSTANDING AWARDS

      7.1.  Death or Disability

            If a Participant dies or becomes disabled, the following will apply:

            (a)   All Options and Stock Appreciation Rights held by the
                  Participant immediately prior to death, to the extent then
                  exercisable, may be exercised by the Participant's executor or
                  administrator or the person or persons to whom the Option or
                  Right is transferred by will or the applicable laws of descent
                  and distribution, at any time within the one-year period
                  ending with the first anniversary of the Participant's death
                  (or such shorter or longer period as the Board may determine,
                  but in no event less than six (6) months), and shall thereupon
                  terminate. In no event, however, shall an Option or Stock
                  Appreciation Right remain exercisable beyond the latest date
                  on which it could have been exercised without regard to this
                  Section 7. Except as otherwise determined by the Board, all
                  Options and Stock Appreciation Rights held by a Participant
                  immediately prior to death that are not then exercisable shall
                  terminate at death.


                                     - 8 -

            (b)   Except as otherwise determined by the Board, all Restricted
                  Stock held by the Participant must be transferred to the
                  Company (and, in the event the certificates representing such
                  Restricted Stock are held by the Company, such Restricted
                  Stock will be so transferred without any further action by the
                  Participant) in accordance with Section 6.3 above.

            (c)   Any payment or benefit under a Deferred Stock Award,
                  Performance Award, or Supplemental Grant to which the
                  Participant was not irrevocably entitled prior to death will
                  be forfeited and the Award canceled as of the time of death,
                  unless otherwise determined by the Board.

      7.2.  Termination of Service (Other Than By Death)

            If a Participant who is an Employee ceases to be an Employee for any
            reason other than death, or if there is a termination (other than by
            reason of death) of the consulting, service or similar relationship
            in respect of which a non-Employee Participant was granted an Award
            hereunder (such termination of the employment or other relationship
            being hereinafter referred to as a "Status Change"), the following
            will apply:

            (a)   Except as otherwise determined by the Board, all Options and
                  Stock Appreciation Rights held by the Participant that were
                  not exercisable immediately prior to the Status Change shall
                  terminate at the time of the Status Change. Any Options or
                  Rights that were exercisable immediately prior to the Status
                  Change will continue to be exercisable for a period of three
                  months (or such longer period as the Board may determine), and
                  shall thereupon terminate, unless the Status Change results
                  from a discharge for cause which in the opinion of the Board
                  casts such discredit on the Participant as to justify
                  immediate termination of the Award. In no event, however,
                  shall an Option or Stock Appreciation Right remain exercisable
                  beyond the latest date on which it could have been exercised
                  without regard to this Section 7. For purposes of this
                  paragraph, in the case of a Participant who is an Employee, a
                  Status Change shall not be deemed to have resulted by reason
                  of (i) a sick leave or other bona fide leave of absence
                  approved for purposes of the Plan by the Board, or (ii) a
                  transfer of employment between the Company and a subsidiary or
                  between subsidiary, or to the employment of a corporation (or
                  a parent or subsidiary corporation of such corporation)
                  issuing or assuming an option in a transaction to which
                  section 424(a) of the Code applies.

            (b)   Except as otherwise determined by the Board, all Restricted
                  Stock held by the Participant at the time of the Status Change
                  must be transferred to the Company (and, in the event the
                  certificates representing such Restricted Stock are held by
                  the Company, such Restricted Stock will be so transferred
                  without any further action by the Participant) in accordance
                  with Section 6.3 above.

            (c)   Any payment or benefit under a Deferred Stock Award,
                  Performance Award, or Supplemental Grant to which the
                  Participant was not irrevocably entitled prior to the


                                     - 9 -

                  Status Change will be forfeited and the Award cancelled as of
                  the date of such Status Change unless otherwise determined by
                  the Board.

      7.3.  Certain Corporate Transactions

            Except as provided below in this Section 7.3, on the effective date
            of a Corporate Transaction (as defined below) (i) each outstanding
            Option and Stock Appreciation Right shall automatically become
            exercisable with respect to one hundred percent (100%) of any
            portion of such Option or Stock Appreciation Right which is not then
            exercisable, (ii) all restrictions with respect to one hundred
            percent (100%) of the shares of Common Stock then subject to the
            restrictions of Restricted Stock awards shall lapse, (iii) one
            hundred percent (100%) of all payments or other benefits under each
            outstanding Deferred Stock Award, Performance Award and Supplemental
            Grant which have not then been paid or provided shall be paid or
            provided, and (iv) one hundred percent (100%) of the unpaid
            principal balance and accrued interest on each outstanding Loan
            shall be forgiven.

            Provisions (i) through (iv) above shall not apply to the extent an
            outstanding Award held by a participant who, following the covered
            transaction, will be employed by or otherwise providing services to
            a corporation which is a surviving or acquiring corporation in such
            transaction or an affiliate of such a corporation, is replaced by
            such surviving or acquiring corporation or affiliate with a
            replacement award which, in the judgment of the Board, is
            substantially equivalent to the Award and which replacement award
            provides that if the recipient of such replacement award suffers an
            Involuntary Termination (as defined below) within twenty-four (24)
            months after the effective date of the Corporate Transaction in
            which such replacement award was granted then (i) each replacement
            option and stock appreciation right will automatically become
            exercisable with respect to one hundred percent (100%) of any
            portion of such replacement option or stock appreciation right which
            is unexercisable at the time of the Involuntary Termination, (ii)
            all restrictions with respect to one hundred percent (100%) of the
            shares of stock subject to replacement restricted stock awards at
            the time of the Involuntary Termination shall lapse, (iii) one
            hundred percent (100%) of all payments or other benefits under each
            outstanding replacement deferred stock award, performance award and
            supplemental grant which have not been paid or provided as of the
            time of the Involuntary Termination shall be paid or provided, and
            (iv) one hundred percent (100%) of the unpaid principal balance and
            accrued interest at the time of the Involuntary Termination on each
            outstanding replacement loan shall be forgiven.

            The term "Corporate Transaction" shall mean the occurrence of any of
            the following: (i) a merger or consolidation involving the Company
            which results in less than 50% of the combined voting power of the
            surviving or resulting entity's outstanding securities being held by
            the stockholders of the Company who were stockholders immediately
            prior to such transaction, or (ii) the sale, transfer or other
            disposition of more than 51% of the Company's assets in a single or
            related series of transactions or (iii) within any twenty-four (24)
            consecutive month period, persons who were members of the Board
            immediately prior to such twenty-four (24) month period, together
            with any persons who


                                     - 10 -

            were first elected as directors (other than as a result of any
            settlement of a proxy or consent solicitation contest or any action
            taken to avoid such a contest) during such twenty-four (24) month
            period by or upon the recommendation of persons who were members of
            the Board immediately prior to such twenty-four (24) month period
            and who constituted a majority of the Board at the time of such
            election, cease to constitute a majority of the Board.

            The term "Involuntary Termination" shall mean (i) the termination of
            the services of any Participant which occurs by reason of such
            individual's involuntary dismissal or discharge for reasons other
            than as a result of (a) the commission of any act or fraud,
            embezzlement or dishonesty by the Participant, (b) material
            unauthorized use or disclosure by such individual of confidential
            information or trade secrets of the Company or its successor, or (c)
            any other intentional misconduct by such individual adversely
            affecting the business or affairs of the Company or its successor in
            a material manner, or (ii) a material diminution of the
            responsibilities of a Participant, (iii) a reduction of more than
            10% in a Participant's level of compensation (including base salary,
            benefits or any non-discretionary and objective-standard incentive
            payment or bonus award) or (iv) a relocation of a Participant's
            principal place of employment by more than 50 miles, only if such
            change, reduction or relocation is effected by the Company or the
            successor thereto without the Participant's consent.

8.    GENERAL PROVISIONS

      8.1.  Documentation of Awards

            Awards will be evidenced by such written instruments, if any, as may
            be prescribed by the Board from time to time. Such instruments may
            be in the form of agreements to be executed by both the Participant
            and the Company, or certificates, letters or similar instruments,
            which need not be executed by the Participant but acceptance of
            which will evidence agreement to the terms thereof.

      8.2.  Rights as a Stockholder, Dividend Equivalents

            Except as specifically provided by the Plan, the receipt of an Award
            will not give a Participant rights as a stockholder; the participant
            will obtain such rights, subject to any limitations imposed by the
            Plan or the instrument evidencing the Award, upon actual receipt of
            Stock. However, the Board may, on such conditions as it deems
            appropriate, provide that a Participant will receive a benefit in
            lieu of cash dividends that would have been payable on any or all
            Stock subject to the Participant's Award had such Stock been
            outstanding. Without limitation, the Board may provide for payment
            to the Participant of amounts representing such dividends, either
            currently or in the future, or for the investment of such amounts on
            behalf of the Participant. The Plan shall comply with Section
            260.140.1 of the California Code of Regulations regarding the voting
            rights of the Stock and other equity securities.


                                     - 11 -

      8.3.  Conditions on Delivery of Stock

            The Company will not be obligated to deliver any shares of Stock
            pursuant to the Plan or to remove restriction from shares previously
            delivered under the Plan (a) until all conditions of the Award have
            been satisfied or removed, (b) until, in the opinion of the
            Company's counsel, all applicable federal and state laws and
            regulation have been complied with, (c) if the outstanding Stock is
            at the time listed on any stock exchange, until the shares to be
            delivered have been listed or authorized to be listed on such
            exchange upon official notice of notice of issuance, and (d) until
            all other legal matters in connection with the issuance and delivery
            of such shares have been approved by the Company's counsel. If the
            sale of Stock has not been registered under the Securities Act of
            1933, as amended (the "1933 Act"), the Company may require, as a
            condition to exercise of the Award, such representations or
            agreements as counsel for the Company may consider appropriate to
            avoid violation of such Act and may require that the certificates
            evidencing such Stock bear an appropriate legend restricting
            transfer.

            If an Award is exercised by the Participant's legal representative,
            the Company will be under no obligation to deliver Stock pursuant to
            such exercise until the Company is satisfied as to the authority of
            such representative.

      8.4.  Tax Withholding

            The Company will withhold from any cash payment made pursuant to an
            Award an amount sufficient to satisfy all federal, state and local
            withholding tax requirements (the "withholding requirements").

            In the case of an Award pursuant to which Stock may be delivered,
            the Board will have the right to require that the Participant or
            other appropriate person remit to the Company an amount sufficient
            to satisfy the withholding requirements, or make other arrangements
            satisfactory to the Board with regard to such requirements, prior to
            the delivery of any Stock. If and to the extent that such
            withholding is required, the Board may permit the Participant or
            such other person to elect at such time and in such manner as the
            Board provides to have the Company hold back from the shares to be
            delivered, or to deliver to the Company, Stock having a value
            calculated to satisfy the withholding requirement.

            If at the time an ISO is exercised the Board determines that the
            Company could be liable for withholding requirements with respect to
            a disposition of the Stock received upon exercise, the Board may
            require as a condition of exercise that the person exercising the
            ISO agree (a) to inform the Company promptly of any disposition
            (within the meaning of section 424(c) of the Code) of Stock received
            upon exercise, and (b) to give such security as the Board deems
            adequate to meet the potential liability of the Company for the
            withholding requirements and to augment such security from time to
            time in any amount reasonably deemed necessary by the Board to
            preserve the adequacy of such security.


                                     - 12 -

      8.5.  Transferability of Awards

            Except as provided below, no Award (other than an Award in the form
            of an outright transfer of cash) may be transferred other than by
            will or by the laws of descent and distribution, or as permitted by
            Rule 701 under the 1933 Act. During an employee's lifetime an Award
            requiring exercise may be exercised only by the Participant (or in
            the event of the Participant's incapacity, the person or persons
            legally appointed to act on the Participant's behalf). The Board may
            grant Options that are transferable, in accordance with Rule 701
            under the 1933 Act, to family members by gift or domestic relations
            orders.

      8.6.  Adjustments in the Event of Certain Transactions

            (a)   In the event of a stock dividend, stock split, reverse stock
                  split or combination of shares, recapitalization or other
                  change in the Company's capitalization, or other distribution
                  to common stockholders other than normal cash dividends, after
                  the effective date of the Plan, the Board will make any
                  appropriate adjustments to the maximum number of shares that
                  may be delivered under the Plan under Section 4 above.

            (b)   In any event referred to in paragraph (a), the Board will also
                  make any appropriate adjustments to the number and kind of
                  shares of stock or securities subject to Awards then
                  outstanding or subsequently granted, any exercise prices
                  relating to Awards and any other provision of Awards affected
                  by such change. The Board may also make such adjustments to
                  take into account material changes in law or in accounting
                  practices or principles, mergers, consolidations,
                  acquisitions, dispositions or similar corporate transactions,
                  or any other event, if it is determined by the Board that
                  adjustments are appropriate to avoid distortion in the
                  operation of the Plan.

      8.7.  Employment Rights, Etc.

            Neither the adoption of the Plan nor the grant of Awards will confer
            upon any person any right to continue retention by the Company or
            any subsidiary as an Employee or otherwise, or affect in any way the
            right of the Company or subsidiary to terminate an employment,
            service or similar relationship at any time. Except as specifically
            provided by the Board in any particular case, the loss of existing
            or potential profit in Awards granted under the Plan will not
            constitute an element of damages in the event of termination of an
            employment, service or similar relationship even if the termination
            is in violation of an obligation of the Company to the Participant.

      8.8.  Deferral of Payments

            The Board may agree at any time, upon request of the Participant, to
            defer the date on which any payment under an Award will be made.


                                     - 13 -

      8.9.  Past Services as Consideration

            Where a Participant purchases Stock under an Award for a price equal
            to the par value of the Stock the Board may determine that such
            price has been satisfied by past services rendered by the
            Participant.

      8.10. Participants' Receipt of Annual Financial Statements

            The Company shall deliver annual financial statements of the Company
            to Participants holding Stock or other securities under the Plan.

9.    EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION

      Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock will be issued to
Employees.

      The Board may at any time or times amend the Plan or any outstanding Award
for any purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards, provided that (except to
the extent expressly required or permitted by the Plan) no such amendment will,
without the approval of the stockholders of the Company, effectuate a change for
which stockholder approval is required in order for the Plan to continue to
qualify for the award of ISOs under section 422 of the Code, or for the award of
performance-based compensation under section 162(m) of the Code, or to continue
to qualify under Rule 16b-3 promulgated under Section 16 of the 1934 Act, or
otherwise under applicable law.


                                     - 14 -

                                                                     EXHIBIT 5.1


August 13, 2004




StemCells, Inc.

Ladies and Gentlemen:

This opinion is furnished to you in connection with a registration statement on
Form S-8 (the "Registration Statement"), filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the registration of
3,000,000 shares of Common Stock, $.01 par value (the "Shares"), of StemCells,
Inc., a Delaware corporation (the "Company"). The Shares are issuable under the
Company's Amended and Restated 2004 Equity Incentive Plan (the "Plan").

We are familiar with the actions taken by the Company in connection with the
adoption of the Plan. For purposes of our opinion, we have examined and relied
upon such documents, records, certificates and other instruments as we have
deemed necessary. The opinions expressed below are limited to the Delaware
General Corporation Law, including the applicable provisions of the Delaware
Constitution and the reported cases interpreting those laws.

Based on the foregoing, we are of the opinion that the Shares have been duly
authorized and, when the Shares have been issued and sold in accordance with the
terms of the Plan, the Shares will be validly issued, fully paid and
nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. Our consent shall not be deemed an admission that we are
experts whose consent is required under Section 7 of the Securities Act of 1933.

It is understood that this opinion is to be used only in connection with the
offer and sale of Shares while the Registration Statement is in effect.

Very truly yours,

/s/  Ropes & Gray LLP

Ropes & Gray LLP

                                                                    EXHIBIT 23.1

                         CONSENT OF GRANT THORNTON LLP,
                  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We have issued our reports dated February 22, 2004 accompanying the consolidated
financial statements of StemCells, Inc. appearing in the 2003 Annual Report of
the Company to its shareholders and accompanying the schedules included in the
Annual Report on Form 10-K for the year ended December 31, 2003 which are
incorporated by reference in this Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the aforementioned
reports.


/s/  Grant Thornton LLP

San Francisco, California
August 12, 2004

                                                                    Exhibit 23.2

               CONSENT OF ERNST &YOUNG LLP, INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM


We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the StemCells, Inc. Amended and Restated 2004 Equity
Incentive Plan, of our report dated March 4, 2003, except for Note 1 --
Restatement of Consolidated Financial Statements, as to which the date is March
31, 2004, with respect to the 2001 and 2002 consolidated financial statements of
StemCells, Inc included in its Annual Report (Form 10-K) for the year ended
December 31, 2003, filed with the Securities and Exchange Commission.

                                          /s/ Ernst & Young LLP


August 12, 2004