SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (this Agreement ) is dated as of

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this Agreement ) is dated as of July 14, 2014, between StemCells, Inc., a Delaware

corporation (the Company ), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a Purchaser and collectively the Purchasers ).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the

Securities Act of 1933, as amended (the Securities Act ), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as

more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for

other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following

terms have the meanings set forth in this Section 1.1:

Acquiring Person shall have the meaning

ascribed to such term in Section 4.5.

Action shall have the meaning ascribed to such term in

Affiliate means any Person that, directly or indirectly through one or more

intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

Board of Directors means the board of directors of the Company.

Business Day means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the

United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

Closing means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

Closing Date means the Trading Day on which all of the Transaction Documents have been executed and

delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers obligations to pay the Subscription Amount and (ii) the Company s obligations to deliver the Securities, in each case, have been

satisfied or waived, but in no event later than the third Trading Day following the date hereof.

Commission means the United States Securities and Exchange

Common Stock means the common stock of the Company, par value $0.01 per share, and any

other class of securities into which such securities may hereafter be reclassified or changed.

Equivalents means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other

instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

Company Counsel means Ropes & Gray LLP.

EGS means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New

York, New York 10105-0302.

Escrow Agent means Signature Bank, a New York State chartered bank, with

offices at 261 Madison Avenue, New York, New York 10016.

Escrow Agreement means the escrow agreement

entered into prior to the date hereof, by and among the Company, the Escrow Agent and Ascendiant Capital Markets, LLC, pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions

contemplated hereunder.

Evaluation Date shall have the meaning ascribed to such term in

Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules

and regulations promulgated thereunder.

Exempt Issuance means the issuance of (a) shares of Common

Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee

of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of

Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or

conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person

(or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in

addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

FCPA means the Foreign Corrupt Practices Act of 1977, as

FDA shall have the meaning ascribed to such term in Section 3.1(gg).

FDCA shall have the meaning ascribed to such term in Section 3.1(gg).

GAAP shall have the meaning ascribed to such term in Section 3.1(h).

Indebtedness shall have the meaning ascribed to such term in Section 3.1(z).

Intellectual Property Rights shall have the meaning ascribed to such term in Section 3.1(o).

Liens means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right

or other restriction.

Material Adverse Effect shall have the meaning assigned to such term in

Material Permits shall have the meaning ascribed to such term in

Per Share Purchase Price equals $1.77, subject to adjustment for reverse and

forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement and prior to the Closing.

Person means an individual or corporation, partnership, trust, incorporated or unincorporated association,

joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

Pharmaceutical Product shall have the meaning ascribed to such term in Section 3.1(gg).

Placement Agent means Ascendiant Capital Markets, LLC.

Proceeding means an action, claim, suit, investigation or proceeding (including, without limitation, an

informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

Prospectus means the final prospectus filed for the Registration Statement.

Prospectus Supplement means the supplement to the Prospectus complying with Rule 424(b) of the Securities

Act that is filed with the Commission and delivered by the Company to each Purchaser at the Closing.

Party shall have the meaning ascribed to such term in Section 4.8.

Registration Statement means the effective registration

statement with Commission file No. 333-193100 which registers the sale of the Shares, the Warrants and the Warrant Shares to the Purchasers.

Required Approvals shall have the meaning ascribed to such term in Section 3.1(e).

Rule 424 means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be

amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

SEC Reports shall have the meaning ascribed to such term in Section 3.1(h).

Securities means the Shares, the Warrants and the Warrant Shares.

Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated

Shares means the shares of Common Stock issued or issuable to each Purchaser pursuant to

Short Sales means all short sales as defined in Rule 200 of Regulation SHO

under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

Subscription Amount means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants

purchased hereunder as specified below such Purchaser s name on the signature page of this Agreement and next to the heading Subscription Amount, in United States dollars and in immediately available funds.

Subsidiary means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where

applicable, also include any direct or indirect significant subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) of the Company formed or acquired after the date hereof.

Trading Day means a day on which the principal Trading Market is open for trading.

Trading Market means any of the following markets or exchanges on which the Common Stock is listed or quoted

for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

Transaction Documents means this Agreement and the Warrants.

Transfer Agent means Computershare, the current transfer agent

of the Company, with a mailing address of 250 Royall St. Canton, MA 02021 and a facsimile number of (781)575-2549, and any successor transfer agent of the Company.

Variable Rate Transaction shall have the meaning ascribed to such term in Section 4.12(b).

Warrants means, collectively, the warrants to purchase Common Stock delivered to the Purchasers at the

Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable commencing on the six month anniversary of the date of issuance and be exercisable until the thirteen month anniversary of the date of issuance, in the form

of Exhibit A attached hereto.

Warrant Shares means the shares of Common Stock issuable upon

exercise of the Warrants.

Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers,

severally and not jointly, agree to purchase, up to an aggregate of $20,000,000 of units, each unit consisting of one share of Common Stock and a Warrant to purchase 0.85 of a share of Common Stock. Each Purchaser shall deliver to the Escrow Agent,

via wire transfer, immediately available funds equal to such Purchaser s Subscription Amount as set forth on the signature page hereto executed by such Purchaser and the Escrow Agent shall deliver, via wire transfer, funds equal to each

Purchaser s Subscription Amount as set forth on the signature page hereto executed by such Purchaser. The Company shall deliver to each Purchaser its respective Shares and a Warrant as determined pursuant to Section 2.2(a), and the Company

and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such

other location as the parties shall mutually agree.