Employment Agreement

Exhibit 10.79


EMPLOYMENT AGREEMENT


This Employment Agreement (the "Agreement") is entered into as of September 1, 2004, by and between AASTROM BIOSCIENCES, INC., a Michigan corporation ("Employer"), and J. M. HOCK, PH.D. ("Employee").


RECITALS


1. Employer desires to employ Employee on the terms and conditions set forth in this Agreement.


2. Employee desires to be employed by Employer on the terms and conditions set forth in this Agreement.


AGREEMENTS


1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings:


"Acquiring Corporation" shall mean the surviving, successor or purchasing corporation or parent corporation thereof, in a Change in Control, as the case may be.


"Cause" means the occurrence of any of the following events, as determined by the Board of Directors of Employer, in good faith:


(i) Employee's theft, material act of dishonesty or fraud, or intentional falsification of any records of Employer;


(ii) Employee's breach of the Aastrom Biosciences, Inc. Employee Proprietary Information and Invention Agreement or any other agreement with the Employer covering the use or disclosure of confidential or proprietary information of Employer, the ownership of intellectual property or restrictions on competition;


(iii) Employee's gross negligence or willful misconduct in the performance of Employee's assigned duties (but not mere unsatisfactory performance); or


(iv) Employee's conviction (including any plea of guilty or nolo contendere) of a crime causing material harm to the reputation or standing of Employer or which materially impairs Employee's ability to perform his duties for Employer.


"Change in Control" shall mean the occurrence of any of the following:


(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities of Employer under an employee benefit plan of Employer, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Employer representing 50% or more of (A) the outstanding


shares of common stock of Employer or (B) the combined voting power of Employer's then-outstanding securities;


(ii) Employer is party to a merger or consolidation which results in the holders of voting securities of Employer outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of Employer or such surviving entity outstanding immediately after such merger or consolidation; or


(iii) the sale or disposition of all or substantially all of Employer's assets (or consummation of any transaction having similar effect).


"Disability" means that:


(i) Employee has been incapacitated by bodily injury, illness or disease so as to be prevented thereby from effectively performing Employee's duties;


(ii) Such incapacity shall have continued for a period of six (6) consecutive months; and


(iii) Such incapacity will, in the opinion of a qualified physician, be long-term, which shall mean a period exceeding twelve (12) months.


"Employee" means J. M. Hock, Ph.D., an individual.


"Employer" means Aastrom Biosciences, Inc., a Michigan corporation, and, following a Change in Control, any Successor that agrees to assume all of the terms and provisions of this Agreement, or a Successor which otherwise becomes bound by operation of law to this Agreement.


"Fair Market Value" means, as of any date of determination, the value of a share of the Common Stock of the Employer determined as follows:


(i) If, on such date, the Common Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Common Stock shall be the average closing price of a share of Common Stock (or the mean of the closing bid and asked prices of a share of Common Stock if the Common Stock is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq Small Cap Market or such other national or regional securities exchange or market system constituting the primary market for the Common Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable, for the thirty (30) consecutive trading days prior to the date of determination.


(ii) If, on such date, the Common Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Common Stock shall be zero.


"Good Reason" means the occurrence of any of the following conditions following a Change in Control, without Employee's informed written consent, which


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condition(s) remain(s) in effect ten (10) days after written notice to Employer from Employee of such condition(s):


(i) assignment of Employee to responsibilities or duties that are not a Substantive Functional Equivalent of the position which Employee occupied prior to the Change in Control;


(ii) any decrease in Employee's base salary or target bonus amount (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned by Employee);


(iii) any failure by Employer to (A) continue to provide Employee with the opportunity to participate, on terms no less favorable than those in effect for the benefit of any employee group which customarily includes a person holding the employment position or a comparable position with Employer then held by Employee, in any benefit or compensation plans and programs, including, but not limited to, Employer's life, disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which Employee was participating immediately prior to the date of the Change in Control, or their equivalent, or (B) provide Employee with all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee group which customarily includes a person holding the employment position or a comparable position with Employer then held by Employee;


(iv) the relocation of Employee's work place for Employer to a location more than 50 miles from the location of the work place prior to the Change in Control, or the imposition of travel requirements substantially more demanding of Employee than such travel requirements existing immediately prior to the Change in Control; or


(v) any material breach of this Agreement by Employer.


"Market Cap" means the outstanding shares of Common Stock of Employer multiplied by the Fair Market Value of the Common Stock of the Employer on the date of determination.


"Relocation Costs" shall mean the following actual out-of-pocket costs incurred by the Employee:


(i) Coach class airfare for Employee's family to move from Indianapolis, Indiana, to Ann Arbor, Michigan area, or, in the alternative, reimbursement of reasonable automobile operating costs (gas, tolls, etc.), not to exceed the current IRS permitted per mile allowances, for up to two automobiles required to move the Employee's family.


(ii) Cost for packing, shipping, and unloading personal household furnishings and belongings from Employee's prior residence to her new residence in Ann Arbor, Michigan area, including temporary storage as needed.


(iii) Shipment of one personal vehicle from Indianapolis, Indiana, to Ann Arbor, Michigan area, via common carrier.


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(iv) Cost for packing, shipping and unloading employee's laboratory equipment and records from Indiana University to the Ann Arbor, Michigan area.


(v) All real estate sales commissions paid by Employee on the sale of her current residence in Indianapolis, Indiana ("Current Residence"), up to 7% of the gross proceeds realized by the Employee from such sale.


(vi) Normal and reasonable closing costs incurred by Employee in connection with the sale of her Current Residence if typically paid by the seller. Closing costs shall be defined as transfer taxes, documentary stamp taxes, title insurance premiums, recording charges, appraisals, inspections, attorneys fees, escrow fees and such other normal and reasonable closing costs as are specifically approved by the Chairman and Chief Executive Officer of Employer. Closing Costs shall not include payments required at closing for real property taxes or assessments, or proration of utilities or other prepaid expenses.


"Substantive Functional Equivalent" means an employment position occupied by Employee after a Change in Control that:


(i) is in a substantive area of competence consistent with Employee's experience and not materially different from the position occupied by Employee prior to the Change in Control;


(ii) requires Employee to serve in a role and perform duties that are functionally equivalent to those performed prior to the Change in Control (such as, Employee officer);


(iii) carries a title that does not connote a lesser rank or corporate role than the title held by Employee prior to the Change in Control; and


(iv) does not otherwise constitute a material, adverse change in Employee's responsibilities or duties, as measured against Employee's responsibilities or duties prior to the Change in Control, causing it to be of materially lesser rank or responsibility.


"Successor" means Employer and any successor or assign to substantially all of its business and/or assets.


2. EMPLOYMENT. Employer hereby engages Employee, and Employee hereby accepts such engagement, upon the terms and conditions set forth herein.


3.DUTIES. Employee is engaged as Vice President Global Research and, if Employee becomes employed by Employer on a full-time basis, Chief Scientific Officer. Employee shall perform faithfully and diligently the duties customarily performed by persons in the position for which employee is engaged, together with such other reasonable and appropriate duties as Employer shall designate from time to time. Employee shall devote Employee's full business time and efforts to the rendition of such services and to the performance of such duties, except as follows:


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(i) For the period of September 1, 2004 through December 31, 2004, Employee shall devote forty (40%) percent of Employee's business time and efforts to the rendition of such services and to the performance of such duties, which shall be at least sixteen (16) hours per week ("40% Period").


(ii) For the period of January 1, 2005 to April 30, 2005, Employee shall devote fifty (50%) percent of Employee's business time and efforts to the rendition of such services and to the performance of such duties, which shall be at least twenty (20) hours per week ("50% Period").


Employee shall not be entitled to provide consulting services or other business or scientific services to any other party, without the prior written consent of Employer. Employer consents to Employee serving on the faculty of School of Medicine of Indiana University through April 30, 2004 and on the adjunct faculty of the University of Michigan, and to employee's consulting activity related to research funding decisions and strategy for US Government agencies; provided that such services do not interfere with the performance of Employee's duties for the Company on the basis set forth in this Section 3 and does not involve Employee providing consulting or other business or scientific services, other than as an educator, to any party other than Employer.


4. COMPENSATION AND FRINGE BENEFITS.


4.1 BASE SALARY. During the term of this Agreement, as compensation for the proper and satisfactory performance of all duties to be performed by Employee hereunder, Employer shall pay to Employee a salary of Two Hundred Fifteen Thousand Dollars ($215,000.00) per year ("Base Salary"), payable in arrears in equal bi-weekly installments, less required deductions for state and federal withholding tax, Social Security and all other employee taxes and payroll deductions. During the 40% Period and the 50% Period, Employee shall be paid a salary equal to forty (40%) percent and fifty (50%) percent, respectively, of Employee's Base Salary. The base salary shall be subject to review and adjustment on an annual basis.


4.2 CUSTOMARY FRINGE BENEFITS. Employee shall be entitled to such fringe benefits as Employer customarily makes available to employees of Employer engaged in the same or similar position as Employee ("Fringe Benefits"). Such Fringe Benefits may include vacation leave, sick leave, and health insurance coverage. Employer reserves the right to change the Fringe Benefits on a prospective basis, at any time, effective upon delivery of written notice to Employee.


4.3 VACATION. Employee is entitled to twenty (20) days of vacation in each calendar year.


4.4 ACCUMULATION. Employee shall earn and accumulate unused vacation and sick leave in accordance with the Company's policy in effect from time to time. Further, Employee shall not be entitled to receive payments in lieu of Fringe Benefits, other than for unused vacation leave earned and accumulated at the time the employment relationship terminates.


4.5 LEAVE OF ABSENCE. Employer shall provide Employee with a paid leave of absence for a period of time in the month of December 2004 as Employee shall determine.


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RELOCATION COSTS.


4.5.1 Temporary Living Allowance. Employee agrees to relocate her principal domestic residence to within fifty (50) miles of Ann Arbor, Michigan, by May 1, 2005. For so long as Employee maintains her principal domestic residence in Indianapolis, Indiana, but in no event later than April 30, 2005, Employer will reimburse Employee for the following costs:


(i) Employee's actual out-of-pocket housing and related costs (including rent, insurance, utilities, local telephone service, laundry) in Ann Arbor, Michigan, in an aggregate amount of not more than One Thousand Eight Hundred Dollars ($1,800.00) per calendar month.


(ii) Employee's actual out-of-pocket costs for round trip coach airfare travel from Ann Arbor, Michigan, to Indianapolis, Indiana, up to one such trip per calendar week. Employee shall use her reasonable best efforts to obtain the most economical fares available for such trips.


4.5.2 Relocation Costs. Employer shall reimburse E ...