Stock Purchase Agreement

EXHIBIT 10.31





STOCK PURCHASE AGREEMENT

by and between

AASTROM BIOSCIENCES, INC.

and the

INVESTORS LISTED ON SCHEDULE A









January 8, 1996

TABLE OF CONTENTS

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



Page

----

1. Purchase and Sale of Stock............................................ 1

1.1 Sale and Issuance of Series E Preferred Stock.................. 1

1.2 Closing........................................................ 1



2. Representations and Warranties of the Company......................... 2

2.1 Organization, Good Standing and Qualification.................. 2

2.2 Subsidiaries................................................... 2

2.3 Authorization.................................................. 2

2.4 Capitalization................................................. 2

2.5 Valid Issuance of Preferred and Common Stock................... 3

2.6 Financial Statements........................................... 4

2.7 Governmental Consents.......................................... 4

2.8 Litigation..................................................... 4

2.9 Patents and Trademarks......................................... 5

2.10 Compliance With Other Instruments.............................. 5

2.11 Compliance With Law............................................ 6

2.12 Agreements; Action............................................. 6

2.13 Corporate Documents............................................ 7

2.14 Title to Property and Assets................................... 7

2.15 Employee Benefit Plans......................................... 7

2.16 Leasehold Interests............................................ 8

2.17 Tax Returns and Payments....................................... 8

2.18 Insurance...................................................... 8

2.20 Changes........................................................ 9

2.21 Related-Party Transactions..................................... 9

2.22 Small Business Matters......................................... 10

2.23 Hazardous Materials............................................ 11

2.24 Disclosure..................................................... 11



3. Representations, Warranties and Covenants of Each Investor............ 11

3.1 Authorization.................................................. 11

3.2 Purchase Entirely for Own Account.............................. 11

3.3 Disclosure of Information...................................... 12

3.4 Investment Experience.......................................... 12

3.5 Restricted Securities.......................................... 12

3.6 Further Limitations on Disposition............................. 12

3.7 Legends........................................................ 13

3.8 Accredited Investor............................................ 13

i

TABLE OF CONTENTS (cont'd)

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Page

----

3.9 Removal of Legends; Further Covenants.......................... 13



4. California Commissioner of Corporations............................... 14

4.1 Corporate Securities Law....................................... 14



5. Conditions of Each Investor's Obligations at Closing.................. 14

5.1 Representations and Warranties................................. 14

5.2 Performance.................................................... 14

5.3 Qualifications................................................. 14

5.5 Opinion of Company Counsel..................................... 15

5.6 Investor Rights Agreement...................................... 15



6. Conditions of the Company's Obligations at Closing.................... 15

6.1 Representations and Warranties................................. 15



7. Covenants............................................................. 15

7.1 Observer Rights................................................ 15

7.2 Registration Rights............................................ 16

7.3 Financial Information, Etc..................................... 16

7.4 Information Rights and Related Covenants....................... 16

7.5 Right of First Offer........................................... 16

7.6 Best Efforts on Sale of Stock.................................. 16



8. Miscellaneous......................................................... 16

8.1 Successors and Assigns......................................... 16

8.2 Governing Law.................................................. 16

8.3 Counterparts................................................... 17

8.4 Titles and Subtitles........................................... 17

8.5 Notices........................................................ 17

8.6 Brokers and Finders............................................ 17

8.7 Expenses....................................................... 17

8.8 Severability................................................... 17

8.9 Entire Agreement............................................... 17

8.10 Assurances..................................................... 18



SCHEDULE A - Schedule of Investors SCHEDULE B - Schedule of Exceptions





STOCK PURCHASE AGREEMENT

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



THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of January 8, 1996 by and between AASTROM Biosciences, Inc., a Michigan corporation (the "Company"), and the investors listed on Schedule A hereto, each of which is herein referred to as an "Investor" and all of which are referred to collectively as the "Investors."



In consideration of the mutual covenants contained herein and such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:



1. Purchase and Sale of Stock.

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



1.1 Sale and Issuance of Series E Preferred Stock.

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



(a) The Company shall adopt and file with the Secretary of State of the State of Michigan on or before the Closing Date, as defined below, the Restated Articles of Incorporation in the form previously reviewed and approved by the Investors (the "Restated Articles").



(b) Subject to the terms and conditions of this Agreement, on the Closing Date, each Investor agrees to purchase and the Company agrees to sell and issue to each Investor that number of shares of the Company's Series E Preferred Stock (the "Series E Preferred Stock") set forth opposite such Investor's name on Schedule A hereto at the purchase price of $4.25 per share, for the aggregate consideration set forth on Schedule A hereto.



(c) The Company may sell shares of the Series E Preferred Stock not sold on the Closing Date to the State Treasurer of the State of Michigan (the "State of Michigan") in an amount equal to the number of shares set forth opposite such Investor's name on Schedule A hereto at one additional closing, provided that the closing of any such additional sale of shares must occur on or before January 31, 1996, and provided, further, that the total number of shares of Series E Preferred Stock so sold, together with those shares of Series E Preferred Stock sold on the Closing Date, shall not exceed 1,411,765. Such purchaser shall be deemed to be an Investor for purposes of this Agreement, and the shares so sold shall be deemed to have been acquired on the same terms and conditions as are set forth in this Agreement.



1.2 Closing. The purchase and sale of the Series E Preferred Stock

------- (the "Closing") shall take place at the offices of Riordan & McKinzie, 300 South Grand Avenue, 29th Floor, Los Angeles, California 90071, on January 8, 1996, or at such other time and place as the Company and the Investors mutually agree upon (the "Closing Date"). At the Closing the Company shall deliver to each Investor a certificate representing the number of shares of Series E Preferred Stock purchased by such Investor against delivery to the Company by such Investor of the aggregate purchase price therefor by the wire transfer of immediately available funds to an account designated by the Company at least two (2) days prior to the Closing Date.



2. Representations and Warranties of the Company. The Company hereby

--------------------------------------------- represents and warrants to each Investor that, except as set forth on the Schedule of Exceptions attached hereto as Schedule B, which exceptions shall be deemed to be representations and warranties as if made hereunder, and which exceptions, though referencing specific sections, shall serve to modify each and every section relevant thereto:



2.1 Organization. Good Standing and Qualification. The Company is a

--------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Michigan and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and in good standing in each jurisdiction in which the nature of the business conducted by it or its ownership or leasing of property makes such qualification necessary and in which the failure so to qualify would have a material adverse effect on the Company's operations, financial condition, business prospects or properties (a "Material Adverse Effect").



2.2 Subsidiaries. The Company has no subsidiaries, and does not own,

------------ directly or indirectly, (a) any shares of the capital stock, or securities convertible into capital stock, of any corporation or (b) any interest in any partnership, joint venture or similar business enterprise, and the Company does not control any entity.



2.3 Authorization. All corporate action on the part of the Company,

------------- its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and the authorization, the issuance (or reservation for issuance) and delivery of the Series E Preferred Stock being sold hereunder and the Common Stock issuable upon conversion of the Series E Preferred Stock has been taken or will be taken on or prior to the Closing Date. This Agreement constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally.



2.4 Capitalization. The authorized capital of the Company consists,

-------------- or will consist on the Closing Date, of:



(a) Preferred Stock. 8,540,000 shares of preferred stock, of

--------------- which 2,500,000 shares have been designated Series A Preferred Stock (the "Series A Preferred Stock"), all of which are issued and outstanding, 3,030,000 shares have been designated Series B Preferred Stock (the "Series B Preferred Stock"), all of which are issued



and outstanding, 10,000 shares have been designated Series C Preferred Stock (the "Series C Preferred Stock"), all of which are issued and outstanding, 3,000,000 shares have been designated Series D Preferred Stock (the "Series D Preferred Stock"), all of which are issued and outstanding, and 1,411,765 have been designated Series E Preferred Stock, none of which is issued and outstanding. The rights, preferences and privileges of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock will be as stated in the Restated Articles, a copy of which was provided to each Investor. Based upon the Company's records the outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are held by the persons and in the numbers indicated on the stockholders list made available to the Investors prior to the Closing Date. The Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are sometimes collectively referred to herein as the "Preferred Stock."



(b) Common Stock. 17,000,000 shares of common stock, no par

------------ value (the "Common Stock"), 2,592,610 shares of which are issued and outstanding and, based upon the Company's records, are owned by the persons and in the numbers indicated on the stockholders list made available to the Investors.



(c) Agreements for Purchase of Shares. Except as set forth on

--------------------------------- the Schedule of Exceptions hereto, there are no outstanding subscriptions, options, warrants, rights (including conversion or preemptive rights) or agreements of any kind or nature whatsoever under which the Company is obligated to issue any shares of its capital stock or any securities of any kind representing an ownership interest in the Company, and no holder of any security of the Company is entitled to preemptive or other similar rights to purchase any securities of the Company that have not been waived in contemplation of the sale and issuance of Series E Preferred Stock pursuant to the terms of this Agreement.



2.5 Valid Issuance of Preferred and Common Stock.

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



(a) The Series E Preferred Stock which is being purchased by the Investors hereunder, when issued, sold and delivered in accordance with the terms hereof, for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and, based in part upon the representations of the Investors in this Agreement, will be issued in compliance with all applicable federal and state securities laws. The Common Stock issuable upon conversion of the Series E Preferred Stock purchased under this Agreement has been duly and validly reserved for issuance and, upon issuance and in accordance with the terms of the Restated Articles, will be duly and validly issued, fully paid and nonassessable and will be issued in compliance with all applicable federal and state securities laws.



(b) The outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and



Common Stock of the Company have been duly and validly authorized, issued and delivered, and are validly outstanding, fully paid and nonassessable. The Common Stock issuable upon conversion of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock has been duly and validly reserved for issuance and, when issued in accordance with the Restated Articles, will be duly and validly issued, fully paid and nonassessable. The outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and Common Stock have been issued in compliance with all applicable federal and state securities laws.



2.6 Financial Statements. The Company has delivered to each

-------------------- Investor audited financial statements, which include the Company's balance sheet, statement of operations and statement of cash flows, for itself at and for the fiscal years ended June 30, 1995, 1994 and 1993 and its unaudited balance sheet and income statement at and for the five (5)-month period ended November 30, 1995 (the "Financial Statements"). The Financial Statements are complete and correct in all material respects, subject to normal year-end adjustments and to other adjustments made in the ordinary course of business and relating to grants, licenses and other similar items, and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and are consistent with each other. The Financial Statements accurately set out and describe the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject, in the case of the unaudited financial statements, to normal year-end audit adjustments. Except as set forth in the Financial Statements, or as approved by the Board of Directors in the ordinary course of business, the Company has no liabilities, contingent or otherwise, other than (a) liabilities incurred in the ordinary course of business subsequent to June 30, 1995, and (b) obligations under contracts and commitments incurred in the ordinary course of business, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company.



2.7 Governmental Consents. To the best knowledge of the Company, no

--------------------- consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for the filings pursuant to applicable federal and state securities laws.



2.8 Litigation. Except as set forth on the Schedule of Exceptions,

---------- there is no action, suit, proceeding or investigation pending or, to the best knowledge of the Company, currently threatened against the Company, its directors or officers that questions the validity of this Agreement or the right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby or which might result, either individually or in the aggregate, in a Material Adverse Effect, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for the



foregoing. The foregoing includes, without limitation, actions pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company's employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers, or the obligations of such employees under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company presently intends to initiate.



2.9 Patents and Trademarks. The Company has good and exclusive

---------------------- ownership of, or an exclusive license or right of use with respect to, those patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes that are necessary for its business as now conducted and as proposed to be conducted, and, to the best knowledge of the Company, after reasonable inquiry, the Company's current use or planned use of its patents and other proprietary rights do not and will not conflict with or infringement of the rights of others. Except as set forth in the Schedule of Exceptions hereto, there are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity which would be material to the business of the Company. The Company has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. The Company is not aware that any of its employees and consultants is obligated under any contract (including licens ...