Exhibit 10.3
AASTROM BIOSCIENCES, INC.
SENIOR EXECUTIVE INCENTIVE BONUS PLAN
1. Purpose
     This Senior Executive Incentive Bonus Plan (the “Incentive Plan”) is
intended to provide an incentive for superior work and to motivate eligible
executives of Aastrom Biosciences, Inc. (the “Company”) toward even higher
achievement and business results, to tie their goals and interests to those of
the Company and its shareholders and to enable the Company to attract and retain
highly qualified executives. The Incentive Plan is for the benefit of Covered
Executives (as defined below).
2. Covered Executives
     From time to time, the Compensation Committee of the Board of Directors of
the Company (the “Compensation Committee”) may select certain key executives
(the “Covered Executives”) to be eligible to receive bonuses hereunder.
3. Administration
     The Compensation Committee shall have the sole discretion and authority to
administer and interpret the Incentive Plan.
4. Bonus Determinations
     (a) A Covered Executive may receive a bonus payment under the Incentive
Plan based upon the attainment of performance targets which are established by
the Compensation Committee and relate to financial, operational, clinical or
regulatory metrics with respect to the Company or any of its subsidiaries (the
“Corporate Performance Goals”), including the following: cash flow, revenue,
earnings before interest, taxes, depreciation and amortization, net income
(loss) (either before or after interest, taxes, depreciation and/or
amortization), changes in the market price of the Company’s common stock,
acquisitions or strategic transactions, clinical or regulatory milestones,
operating income (loss), return on capital, assets, equity or investment,
shareholder returns, gross or net profit levels, expense, margins, operating
efficiency, working capital and earnings (loss) per share of the Company’s
common stock, any of which may be measured either in absolute terms or as
compared to any incremental increase or as compared to results of a peer group.
Each Corporate Performance Goal may have a “minimum” hurdle, a “target”
(100 percent attainment of the Corporate Performance Goal) and a “maximum.”
     (b) Except as otherwise set forth in this Section 4(b): (i) any bonuses
paid to Covered Executives under the Incentive Plan shall be based upon
objectively determinable bonus formulas that tie such bonuses to one or more
performance targets relating to the Corporate Performance Goals, (ii) bonus
formulas for Covered Executives shall be adopted in each performance period by
the Compensation Committee and communicated to each Covered Executive at the
beginning of each performance period and (iii) no bonuses shall be paid to
Covered Executives unless and until the Compensation Committee makes a
determination with

 

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respect to the attainment of the performance objectives. Notwithstanding the
foregoing, the Company may adjust bonuses payable under the Incentive Plan based
on achievement of individual performance goals or pay bonuses (including,
without limitation, discretionary bonuses) to Covered Executives under the
Incentive Plan based upon such other terms and conditions as the Compensation
Committee may in its discretion determine.
     (c) Each Covered Executive shall have a targeted bonus opportunity for each
performance period. For each Covered Executive, the Compensation Committee shall
have the authority to apportion the annual target award so that a portion of the
annual target award shall be tied to attainment of corporate performance targets
and a portion of the target award shall be tied to attainment of individual
performance targets.
     (d) The payment of a bonus to a Covered Executive with respect to a
performance period shall be conditioned upon the Covered Executive’s employment
by the Company on the last day of the performance period.
5. Timing of Payment
     The Corporate Performance Goals will be measured at the end of each fiscal
year after the Company’s financial reports have been published. If the Corporate
Performance Goals and or individual goals for any fiscal year are met, payments
will be made as soon as practicable, but not later than March 15 of the
subsequent fiscal year. For the avoidance of doubt, bonuses for year 1 must be
paid by March 15 of year 2.
6. Amendment and Termination
     The Company reserves the right to amend or terminate the Incentive Plan at
any time in its sole discretion.

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