SUBSCRIPTION AGREEMENT

EXHIBIT 10.38

AASTROM BIOSCIENCES, INC.



SUBSCRIPTION AGREEMENT





AASTROM Biosciences, Inc. Domino's Farms, Lobby L 24 Frank Lloyd Wright Drive P.O. Box 376 Ann Arbor, MI 48106 Attention: R. Douglas Armstrong, Ph.D.



Gentlemen:



1. Subscription. The undersigned (the "undersigned" or the

------------ "Purchaser"), hereby agrees and subscribes to purchase from AASTROM Biosciences, Inc., a Michigan corporation (the "Company"), 1,250,000 shares (the "Shares") of the Series D Preferred Stock of the Company (the "Series D Stock") at a purchase price of $4.00 per Share, for an aggregate purchase price of $5,000,000 (the "Purchase Price"). This subscription is submitted to you in accordance with and subject to the terms and conditions described in this Subscription Agreement, the Memorandum (as defined in Section 5.c.) and the Articles (as defined in Section 5.c.) relating to the offering (the "Offering") by the Company of up to 2,500,000 shares of Series D Stock.



2. Subscription and Payment. The undersigned is returning to

------------------------ the Company two signed and completed copies of this Subscription Agreement, together with payment of the Purchase Price. Payment of the Purchase Price is being made by delivery to the Company of a check payable to the order of the Company, or by wire transfer of the Purchase Price to the Company. Subject to the satisfaction of the conditions in Section 8, a closing (the "Closing") for the purchase and sale of shares of Series D Stock will be held on May 26, 1995. As soon as practicable after the Closing, the Company shall issue and deliver to the undersigned a stock certificate or certificates, registered in the name of the undersigned, representing the Shares being purchased.



3. Acceptance of Subscription. The undersigned understands and

-------------------------- agrees that the Company in its sole discretion reserves the right to accept or reject this subscription for the Shares. The Company shall have no obligation hereunder until the Company shall execute and deliver to the undersigned an executed copy of this Subscription Agreement. This Subscription Agreement shall continue in full force and effect to the extent this subscription was accepted.



4. Stock Registration Rights. The undersigned shall have the

------------------------- stock registration rights as have been granted pursuant to Sections 2.4 through 2.14 of that certain Amended and Restated Investors' Rights Agreement dated April 7, 1992 by and among the Company and certain investors and shareholders of the Company, attached hereto as Exhibit A.



5. Representations and Warranties of Purchaser. In order to

------------------------------------------- induce the Company to sell the Shares to the undersigned, the undersigned hereby acknowledges, represents, warrants and agrees as follows:



a. None of the Shares of Series D Stock are (and the shares of common stock, no par value ("Common Stock") issuable upon conversion thereof ("Conversion Shares") will not be) registered under the Securities Act of 1933 (as amended, the "Securities Act") or any state securities laws. The undersigned understands that the sale of the Shares is intended to be exempt from registration under Section 4(2) of the Securities Act and/or the provisions of Regulation D promulgated thereunder, based, in part, upon the representations, warranties and agreements contained in this Subscription Agreement;



b. Neither the Securities and Exchange Commission nor any state securities commission has approved any of the Shares or passed upon or endorsed the merits of this transaction;



c. Prior to its execution of this Subscription Agreement, the undersigned has received from the Company (i) the Confidential Private Placement Memorandum of the Company dated April 5, 1995 (together with any exhibits thereto, the "Memorandum"), which supersedes in its entirety the draft Memorandum previously delivered to the undersigned, (ii) a copy of the amendment to the Restated Articles of Incorporation of the Company (the "Articles"), for the purpose of creating the Series D Stock, and (iii) the audited financial statements of the Company for the years ended June 30, 1994, 1993 and 1992, the unaudited financial statements of the Company for the month ended January 31, 1995 (the "Most Recent Financial Statements"), and the unaudited balance sheet of the Company at February 28, 1995 (collectively, the "Financial Statements").



d. The undersigned acknowledges that all documents, records and books pertaining to the investment in the Shares, including the Memorandum, have been made available for inspection by the undersigned, or by its attorney, accountant, purchaser representative and/or tax advisor (collectively, the "Advisors") and that the undersigned and/or its Advisors have completed such review as they deem to be necessary to make the decision to purchase the Shares. Notwithstanding the foregoing, the parties acknowledge and agree that the Purchaser is relying solely on the representations and warranties set forth in Section 6 hereof, which reference the documents set forth in Section 5.c;



e. The undersigned has reviewed the merits and risks of an investment in the Shares. The undersigned and the Advisors have had a reasonable opportunity to ask questions of and receive answers from members of management



of the Company concerning the offer and sale of the Shares and all such questions have been answered to the full satisfaction of the undersigned;



f. In evaluating the suitability of an investment in the Company, the undersigned has not relied upon any representation or other information (oral or written) other than as contained in documents or answers to questions so furnished to the undersigned or its Advisors by the Company;



g. No oral or written representations have been made or oral or written information furnished to the undersigned or its Advisors in connection with the Offering which were in any way inconsistent with the information provided to the undersigned or its Advisors, including the Memorandum.



h. The undersigned, together with the Advisors, have such knowledge and experience in financial, tax and business matters so as to enable each of them to utilize the information made available to each of them in connection with the purchase of the Shares to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision with respect thereto;



i. The undersigned is not relying on the Company with respect to the tax and other economic considerations of an investment in the Shares, and the undersigned has relied on the advice, or has consulted with, only its own Advisors concerning tax matters;



j. The undersigned is acquiring the Shares solely for its own account, for investment, and not with a view to or for subdivision, resale or distribution, in whole or in part, and no other person has or will have a direct or indirect beneficial interest in the Shares, other than for any partner or shareholder owners of the undersigned, if any;



k. The undersigned must bear the economic risk of the investment indefinitely because none of the Shares of Series D Stock (or Conversion Shares) may be sold, hypothecated or otherwise disposed of unless (i) subsequently registered under the Securities Act and applicable state securities laws, or (ii) an exemption from registration is available. Legends shall be placed on the Shares (and the Conversion Shares) to the effect that they have not been registered under the Securities Act or applicable state securities laws and appropriate notations thereon will be made in the Company's stock books;



l. The undersigned has adequate means of providing for the undersigned's current financial needs and foreseeable contingencies and the undersigned can accept the fact that an investment in the Shares will not be liquid;



m. The undersigned is aware that an investment in the Shares involves a number of very significant risks and, in particular, acknowledges that the Company is in the development stage. The undersigned understands that the risks



associated with an investment in the Shares could result in, and the undersigned can sustain, a complete loss of its investment;



n. The undersigned is an "accredited investor" as such term is defined in the regulations promulgated under the Securities Act;



o. The undersigned represents that it has full power and authority to execute and deliver this Subscription Agreement and all other related agreements and certificates and to carry out the provisions hereof and thereof and to purchase and hold the Shares, and this Subscription Agreement is a legal, valid and binding obligation of the undersigned. The execution and delivery of this Subscription Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the undersigned is a party or by which it is bound;



p. The undersigned represents to the Company that the information contained herein may be relied upon by the Company in determining the availability of an exemption from registration under federal and state securities laws. The undersigned further represents and warrants that it will notify the Company immediately upon the occurrence of any material change to the information contained herein occurring prior to the Company's issuance of the Shares;



q. The undersigned is unaware of, and in no way relying on, any form of general solicitation or general advertising in connection with the offer and sale of the Shares.



6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY



The Company represents and warrants to the Purchaser that:



6.01 Organization, Qualifications and Corporate Power.

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The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Michigan and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification. The Company has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform this Subscription Agreement, to issue, sell and deliver the Series D Stock, and to issue and deliver the Conversion Shares as provided in the Articles.





6.02 Authorization of Agreement.

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



(a) The execution and delivery by the Company of this Subscription Agreement, the performance by the Company of its obligations hereunder, the issuance, sale and delivery of the Series D Stock and the issuance and delivery of the Conversion Shares have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Articles or the Bylaws of the Company (the "Bylaws"), or any provision of any indenture, agreement or other instrument to which the Company or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.



(b) The Series D Stock has been duly authorized and, when issued in accordance with this Subscription Agreement, will be validly issued, fully paid and nonassessable shares of the Company with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth herein. The Conversion Shares have been duly reserved for issuance upon conversion of the Series D Stock and, when so issued, will be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock with no personal liability attaching to the ownership thereof and so long as the Series D Stock tendered for conversion is free and clear of liens or encumbrances, will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth herein. Neither the issuance, sale or delivery of the Series D Stock nor the issuance or delivery of the Conversion Shares is subject to any preemptive right of stockholders of the Company or to any right of first refusal or other right in favor of any person which right has not been waived.



6.03 Validity.

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This Subscription Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.



6.04 Authorized Capital Stock.

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



The authorized capital stock of the Company consists of 8,540,000 shares of Preferred Stock, and 17,000,000 shares of Common Stock. Immediately prior to the Closing, 2,592,610 shares of Common Stock and 6,790,001 shares of Preferred Stock will be validly issued and outstanding, fully paid and nonassessable with no personal liability attaching to the ownership thereof. The stockholders of record and holders of subscriptions, warrants, options, convertible securities, and other rights (contingent or other), if any, to purchase or otherwise acquire equity



securities of the Company prior to the Closing Date (the "Original Shareholders") and the number of shares of Common Stock and the number of such subscriptions, warrants, options, convertible securities, and other such rights, if any, held by each, are as set forth in the Memorandum. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class of authorized capital stock of the Company are as set forth in the Articles, a copy of which has previously been delivered to each Purchaser, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions are valid, binding and enforceable and in accordance with all applicable laws. Except as set forth in the attached Schedule 6.04 or in the Memorandum, (a) no person owns of record or is known to the Company to own beneficially any share of Common Stock, (b) no subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire equity securities of the Company is authorized or outstanding and (c) there is no commitment by the Company to issue shares, subscriptions, warrants, options, convertible securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as provided for in the Articles or as set forth herein, the Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Except as set forth herein or in the Memorandum, there are no voting trusts or agreements, stockholders agreements, pledge agreements, buy-sell agreements, rights of first refusal, preemptive rights or proxies relating to any securities of the Company (whether or not the Company is a party thereto). All of the outstanding securities of the Company were issued in compliance with all applicable Federal and state securities laws.



6.05 Litigation.

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(a) The Company is aware of a possible claim against it by Software Publishers Association, relating to the alleged use of unregistered software on the Company's PCs. The Company is in negotiations with such association and believes the matter can be resolved without material adverse consequence to the Company. Except for such action, there is no (a) action, suit, claim, proceeding or investigation pending or, to the best of the Company's knowledge, threatened against or affecting the Company or its directors, officers, or management, at law or in equit ...