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                                                                   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

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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 Employee for the
Relocation Costs. The Employee shall be required to refund and pay to Employer
100% of the Relocation Costs that have been paid by the Employer on the
following terms:

            (i) If Employee's employment with Employer ceases within 18 months
after Employee commences full-time employment with Employer (the "Commencement
Date"), due to the Employee voluntarily electing to leave the employ of
Employer, or Employer terminating the Employee for Cause, Employee hereby agrees
to refund and pay to Employer 100% of the Relocation Costs that have been paid
by Employer.

            (ii) If Employer elects to terminate the employment of Employee
without Cause, then Employee shall have no obligation to refund any of the
Relocation Costs. If Employee's employment terminates due to Employee's death or
disability, then Employee shall have no obligation to refund any of the
Relocation Costs.

            (iii) With respect to any of the Relocation Costs which Employee
does become obligated to refund to Employer, as specified above, said refund
shall be made within six months after the termination of employment. Any portion
of the Relocation Costs which are obligated to be refunded by Employee, and
which are not refunded within said six (6) months, shall thereafter bear a late
payment charge of 10% per annum.

      5. TERM.

      5.1 COMMENCEMENT. The employment relationship pursuant to this Agreement
shall commence on the date as of which this Agreement was executed as set forth
above.

      5.2 TERMINATION AT WILL. Employer and Employee acknowledge and agree that
Employer's employment currently is "at will" and that their employment
relationship may be terminated by either party at any time, with or without
Cause.

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      6. PAYMENTS UPON TERMINATION.

      6.1 PAYMENT OF COMPENSATION UPON TERMINATION. Upon termination of
Employee's employment with the Company, Employee shall be entitled to be paid
her salary as provided in Section 4.1 through the effective date of such
termination, as full compensation for any and all claims of Employee under this
Agreement or otherwise, except as set forth in Section 6.2.

      6.2 PAYMENT OF SEVERANCE UPON TERMINATION.

            6.2.1 Severance. In the event Employee's employment is terminated by
Employer without Cause, or in the event of Employee's termination of her
employment for Good Reason within twelve (12) months following a Change in
Control, then Employer shall pay to Employee severance payment equal to six (6)
months of Employee's then current annual salary rate, less customary payroll
deductions. During the 40% Period and the 50% Period, the Employee's then
current annual salary rate shall be forty (40%) percent and fifty (50%) percent,
respectively, of Employee's Base Salary. The severance payment shall be paid in
equal installments over six (6) months in accordance with the Employer's normal
payroll periods, except that severance payments due following a Change in
Control shall be paid in a lump sum immediately following the Change in Control.

            6.2.2 Continued Medical Coverage. In the event Employee's employment
is terminated, then Employee shall be entitled to elect continued medical
insurance coverage in accordance with applicable provisions of the Consolidated
Budget Reconciliation Act of 1985 ("COBRA").

            6.2.3 Right to Terminate. Employer retains and reserves the right to
terminate the employment of Employee at any time, with or without Cause. For
avoidance of doubt, said severance payment shall not be owed if Employee's
termination is for Cause, if Employee voluntarily terminates employment for
reasons other than as specified in Section 6.2.1 hereof or if Employee's
employment terminates as a result of Employee's death or disability.

            6.2.4 No Liability. No director, officer or shareholder of Employer
shall have any personal liability for the payment of any severance to Employee.

            6.2.5 Academic Grant Upon Termination. In the event (1) Employee's
employment is terminated by Employer without Cause, (2) the next position
obtained by Employee within six (6) months of such termination of employment
with Employer, and requiring at least fifty (50%) percent of Employee's business
time and efforts, is with an academic institution (the "Institution") and (3) at
the time of the termination of employment with Employer, either (a) Employer's
net revenue from the sale of products during the prior twelve (12) full calendar
months exceeds Two Hundred Million Dollars ($200,000,000.00) or (b) Employer's
Market Cap exceeds $1 Billion Dollars ($1,000,000,000.00), then Employer will
provide a research grant to the Institution on the following terms and
conditions:

            (i) The grant will support a project mutually agreed upon by
Employee, Employer and the Institution; provided that the project must benefit
and support Employer's research program, as determined by Employer in its sole
discretion.

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            (ii) The grant will not be less than Five Hundred Thousand
($500,000.00) Dollars or such greater amount as determined by Employer in its
sole discretion.

            (iii) The other terms and conditions of the grant shall be as
determined by Employer in its sole discretion, including, but not limited to,
the timing of the funding of the grant.

      6.3 RESIGNATION. Employee's entitlement to any compensation or benefits
under this Section 6 (other than compensation and benefits earned by Employee
through the date of Employee's termination of employment) is conditioned upon
Employee's resignation from all capacities in which Employee is then rendering
services to Employer, including from the Board of Directors and any committees
thereof on which Employee serves.

      6.4 EXCLUSIVE REMEDY. The parties acknowledge and agree that the payments
specified herein constitute Employee's sole and exclusive remedy for any alleged
injury or other damages arising out of a termination of Employee's employment
under circumstances described herein. Accordingly, as a condition to receipt of
said payments, Employee shall sign a customary and reasonable release form, in
the form attached hereto as Exhibit A, pursuant to which Employee acknowledges
and agrees that Employee has no claims against Employer or any director,
officer, shareholder or agent of Employer, or any successor in interest to
Employer, with respect to any employment matters or termination of employment
(excepting only for accrued salary, accrued vacation leave and reimbursement of
customary business expenses incurred on behalf of Employer, all in the ordinary
course of business, or any incentive sale bonus to which Employee may be
entitled, if any).

      7. GENERAL PROVISIONS.

      7.1 ATTORNEYS' FEES. In the event of any dispute or breach arising with
respect to this Agreement, the party prevailing in any negotiations or
proceedings for the resolution or enforcement thereof shall be entitled to
recover from the losing party reasonable expenses, attorneys' fees and costs
incurred therein.

      7.2 AMENDMENTS. No amendment or modification of the terms or conditions of
this Agreement shall be valid unless in writing and signed by both parties
hereto. There shall be no implied-in-fact contracts modifying the terms of this
Agreement. However, the noncumulation of benefits provision of Section 7.6 shall
apply to any subsequent agreement, unless (i) such provision is explicitly
disclaimed in the subsequent agreement, and (ii) the subsequent agreement has
been authorized by the Board of Directors of the Employer or a committee
thereof.

      7.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the employment of Employee, other than
relating to the Employer's stock option grants to Employee, the Employer's
inventions, trade secrets, and proprietary and confidential information,
competition with the Employer and solicitation of the Employer's employees. This
Agreement supersedes all prior agreements, understandings, negotiations and
representation with respect to the employment relationship. Not withstanding the
foregoing, as set forth in the Employer's letter to employee dated August 18,
2004 any terms set forth in said letter that are not otherwise addressed in this
agreement are hereby incorporated into and made part of this Agreement.

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      7.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal and legal representatives,
executors, administrators, successors, heirs, distributes, devises and legatees.

      7.5 NO LIMITATION OF REGULAR BENEFIT PLANS. This Agreement is not intended
to and shall not affect, limit or terminate any plans, programs, or arrangements
of Employer that are regularly made available to a significant number of
employees or officers of the Employer, including without limitation Employer's
stock option plans.

      7.6 NONCUMULATION OF BENEFITS. Employee may not cumulate cash severance
payments under both this Agreement and another agreement. If Employee has any
other binding written agreement with Employer which provides that, upon a Change
in Control or termination of employment, Employee shall receive one or more of
the benefits described in Sections 6 of this Agreement (i.e., the payment of
cash compensation), then with respect to those benefits the aggregate amounts
payable under this Agreement shall be reduced by the amounts paid or payable
under such other agreements.

      7.7 NO ASSIGNMENT OF BENEFITS. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditors
process, and any action in violation of this Section 7.7 shall be void.

      7.8 NOTICES. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered, when mailed, if mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid, or when shipped, if shipped
by nationally known reputable overnight delivery service and shipping charges
prepaid. In the case of Employee, notices shall be addressed to Employee at the
home address which she most recently communicated to the Employer, in writing.
In the case of the Employer, notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.

      7.9 NO DUTY TO MITIGATE. Employee shall not be required to mitigate the
amount of any payment contemplated by this Agreement (whether by seeking
employment with a new employer or in any other manner), nor shall any such
payment be reduced by any earnings that Employee may receive from any other
source except as otherwise provided herein.

      7.10 NO REPRESENTATIONS. Employee acknowledges that in entering into this
Agreement Employee is not relying and has not relied on any promise,
representation or statement made by or on behalf of the Employer which is not
set forth in this Agreement.

      7.11 CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Michigan, without regard to its choice of law rules.

      7.12 WAIVER. Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
or prevent that party thereafter from enforcing each and every other provision
of this Agreement.

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      7.13 SEVERABLE PROVISIONS. The provisions of this Agreement are severable,
and if any one or more provisions may be determined to be judicially
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be binding and enforceable.

      7.14 TAX WITHHOLDING. The payments to be made pursuant to this Agreement
will be subject to customary withholding of applicable income and employment
taxes.

      7.15 CONSULTATION. Employee acknowledges that this Agreement confers
significant legal rights on Employee, and also involves Employee waiving other
potential rights she might have under other agreements and laws. Employee
acknowledges that Employer has encouraged Employee to consult with Employee's
own legal, tax, and financial advisers before signing the Agreement; and that
Employee has had adequate time to do so before signing this Agreement.

      7.16 COUNTERPARTS. This Agreement may be executed in counterparts, and
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

      7.17 EXCESS PARACHUTE PAYMENT. In the event that any payment or benefit
received or to be received by Employee pursuant to this Agreement or otherwise
would subject Employee to any excise tax pursuant to Section 4999 of the Code
due to the characterization of such payment or benefit as an excess parachute
payment under Section 280G of the Code, Employee may elect in his sole
discretion to reduce the amounts of any payments or benefits otherwise called
for under this Agreement in order to avoid such characterization.

      7.18 CLAIMS PROCEDURE FOR SEVERANCE PAYMENTS.

            7.18.6 Administrator. The administrator for purposes of the
severance payments provided by Section 6.2 of this Agreement shall be the
Employer ("Administrator"), whose address is 24 Frank Lloyd Wright Dr., P.O. Box
376, Ann Arbor, Michigan 48106, and whose telephone number is 734-930-5555. The
"Named Fiduciary" as defined in Section 402(a)(2) of ERISA, also shall be the
Employer. The Employer shall have the right to designate one or more employees
as the Administrator and the Named Fiduciary at any time, and to change the
address and telephone number of the same. The Employer shall give the Employee
written notice of any change in the Administrator and Named Fiduciary, or in the
address or telephone number of the same.

            7.18.7 Claims. The Administrator shall make all determinations as to
the right of any person to receive benefits under this Agreement. Any denial by
the Administrator of a claim for benefits by the Employee ("the claimant") shall
be stated in writing by the Administrator and delivered or mailed to the
claimant within ten (10) days after receipt of the claim, unless special
circumstances require an extension of time for processing the claim. If such an
extension is required, written notice of the extension shall be furnished to the
claimant prior to the termination of the initial 10-day period. In no event
shall such extension exceed a period of ten (10) days from the end of the
initial period. Any notice of denial shall set forth the specific reasons for
the denial, specific reference to pertinent provisions of this Agreement upon
which the denial is based, a description of any additional material or
information necessary for the claimant to perfect the claim, with an explanation
of why such material or information is

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necessary, and any explanation of claim review procedures, and the time limits
applicable to such procedures, including a statement of the claimant's right to
bring a civil action under ERISA Section 502(a) after exhausting all levels of
appeal provided herein, written to the best of the Administrator's ability in a
manner that may be understood without legal or actuarial counsel.

            7.18.8 Review of Claim Denial. A claimant whose claim for benefits
has been wholly or partially denied by the Administrator may request, within
sixty (60) days following the date of such denial, in a writing addressed to the
Administrator, a review of such denial. The claimant shall be entitled to submit
such issues or comments in writing or otherwise, as the claimant shall consider
relevant to a determination of the claim, and the claimant may include a request
for a hearing in person before the Administrator. Prior to submitting the
request, the claimant shall be entitled to review such documents as are relevant
to the claim. The claimant may, at all stages of review, be represented by
counsel, legal or otherwise, of the claimant's choice. All requests for review
shall be promptly resolved. The Administrator's decision with respect to any
such review shall be set forth in writing and shall be mailed to the claimant
not later than ten (10) days following receipt by the Administrator of the
claimant's request unless special circumstances, such as the need to hold a
hearing, require an extension of time for processing, in which case the
Administrator's decision shall be so mailed not later than twenty (20) days
after receipt of such request.

            7.18.9 Arbitration. A claimant who has followed the procedure in
paragraphs 7.18.2 and 7.18.3 of this Section, but who has not obtained full
relief on the claim for benefits, may, within sixty (60) days following the
claimant's receipt of the Administrator's written decision on review, apply in
writing to the Administrator for arbitration of the claim as provided in Section
7.19.

      7.19 ARBITRATION.

            (a) Either party to this Agreement, after complying with the
requirements of Section 7.18, to the extent applicable, may submit any dispute
under this Agreement for binding arbitration of the dispute before an arbitrator
mutually acceptable to both parties, the arbitration to be held in Ann Arbor,
Michigan, in accordance with the arbitration rules of the American Arbitration
Association, as then in effect, and the rights of claimant under Section 7.18.
If the parties are unable to mutually agree upon an arbitrator, then the
arbitration proceedings shall be held before three arbitrators, one of which
shall be designated by the Employer, one of which shall be designated by the
claimant and the third of which shall be designated mutually by the first two
arbitrators in accordance with the arbitration rules referenced above. The
arbitrator(s) sole authority shall be to interpret and apply the provisions of
this Agreement; the arbitrator(s) shall not change, add to, or subtract from,
any of the Agreement's provisions. The arbitrator(s) shall have the power to
compel attendance of witnesses at the hearing. Any court having jurisdiction may
enter a judgment based upon such arbitration. Except as set forth in Section
7.18, the decision of the arbitrator(s) shall be final and binding on the
parties to this Agreement and without appeal to any court. Except as set forth
in Section 7.18, upon execution of this Agreement, the Employee shall be deemed
to have waived any right to commence litigation proceedings regarding this
Agreement outside of arbitration without the express written consent of the
Employer.

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            (b) In the case of a dispute relating to severance payments provided
by Section 6.2, the decision of the arbitrator(s) shall be delivered or mailed
to the claimant within sixty (60) days of the claimant's initial request for
review of the denied claim under Section 7.18 unless special circumstances
require an extension of time. If an extension is needed the arbitrator(s) shall,
before the end of the sixty (60) day period, give to the claimant written notice
of the special circumstances requiring the extension and the date by which the
arbitrator(s) expect(s) to render a decision. The extension of time shall not
exceed sixty (60) days from the end of the initial sixty (60) day period.
Notwithstanding the provisions of Section 7.19(b), in the case of a dispute
relating to severance payments provided by Section 6.2, the claimant shall not
be precluded from challenging the arbitrator's decision under Section 502(a) of
ERISA.

      7.20 ERISA. The severance compensation provided by Section 6.2 of this
Agreement constitutes an unfunded compensation arrangement for a member of a
select group of the Employer's management and any exemptions under ERISA, as
applicable to such an arrangement, shall be applicable to this Agreement.
Section 7.18, Section 7.19(b) and Section 7.20 apply to the severance
compensation provided by Section 6.2 of this Agreement.

      7.21 REPORTING AND DISCLOSURE. The Employer, from time to time, shall
provide government agencies with such reports concerning this Agreement as may
be required by law, and the Employer shall provide the Employee with such
disclosure concerning this Agreement as may be required by law or as the
Employer may deem appropriate.

      8. EMPLOYEE'S REPRESENTATIONS. Employee represents and warrants that
Employee (i) is free to enter into this Agreement and to perform each of the
terms and covenants contained herein, (ii) is not restricted or prohibited,
contractually or otherwise, from entering into and performing this Agreement,
and (iii) will not be in violation or breach of any other agreement by reason of
Employee's execution and performance of this Agreement.

                                       12
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.

                                         EMPLOYER:

                                         Aastrom Biosciences, Inc.

                                         By: ___________________________________
                                                  R. Douglas Armstrong, Ph.D.
                                         Its:     Chairman and Chief Executive
                                                  Officer

                                         EMPLOYEE:
                                         _______________________________________
                                         Name:    J. M. Hock, Ph.D.

                                         Address: 8215 Raven Day Drive East
                                                  Indianapolis, Indiana 46240

                                       13
<PAGE>

                                    EXHIBIT A
                          TO AASTROM BIOSCIENCES, INC.
                              EMPLOYMENT AGREEMENT
                                RELEASE AGREEMENT

      THIS AGREEMENT ("Agreement") is made by and between _____________________
("Employee") and Aastrom Biosciences, Inc. (the "Company").

                                    RECITALS

      A. Employee has terminated employment as an Employee officer of Company,
effective __________, ____.

      B. Employee has been given the opportunity to review this Agreement, to
consult with legal counsel, and to ascertain his rights and remedies.

      C. Employee and Company, without any admission of liability, desire to
settle with finality, compromise, dispose of, and release any and all claims and
demands asserted or which could be asserted arising out of Employee's employment
at and separation from Company.

      In consideration of the foregoing and of the promises and mutual covenants
contained herein, it is hereby agreed between Employee and Company as follows:

                                    AGREEMENT

      1. In exchange for the good and valuable consideration set forth in that
certain Employment Agreement, made as of _______________________, between the
Company and Employee (the "Employment Agreement"), Employee hereby releases,
waives and discharges any and all manner of action, causes of action, claims,
rights, charges, suits, damages, debts, demands, obligations, attorneys fees,
and any and all other liabilities or claims of whatsoever nature, whether in law
or in equity, known or unknown, including, but not limited to, age
discrimination under The Age Discrimination In Employment Act of 1967 (as
amended), employment discrimination prohibited by other federal, state or local
laws, and any other claims, which Employee has claimed or may claim or could
claim in any local, state or federal or other forum, against Company, its
directors, officers, employees, agents, attorneys, successors and assigns as a
result of or relating to Employee's employment at and separation from Company
and as an officer of Company as a result of any acts or omissions by Company or
any of its directors, officers, employees, agents, attorneys, successors or
assigns ("Covered Acts or Omissions") which occurred prior to the date of this
Agreement; excluding only (i) those to compel the payment of amounts due to
Employee as provided in the Employment Agreement, (ii) enforcement of any rights
of Employee under any stock option agreements with the Company or (iii) those
for indemnification under the Company's articles of incorporation, bylaws or
applicable law by reason of his service as an officer or director of the
Company.

      2. Employee agrees to immediately return to Company all property, assets,
manuals, materials, information, notes, reports, agreements, memoranda, customer
lists, formulae, data, know-how, inventions, trade secrets, processes,
techniques, and all other assets, materials and

<PAGE>

information of any kind or nature, belonging or pertaining to Company ("Company
Information and Property"), including, but not limited to, computer programs and
diskettes or other media for electronic storage of information containing
Company Information and Property, in Employee's possession, and Employee shall
not retain copies of any such Company Information and Property. Employee further
agrees that from and after the date hereof she will not remove from Company's
offices any Company Information and Property, nor retain possession or copies of
any Company Information and Property.

      3. Employee agrees that she shall never make any statement that negatively
affects the goodwill or good reputation of the Company, or any officer or
director of Company, except as required by law, and except that such statements
may be made to members of the Board of Directors of the Company.

      4. Employee covenants and agrees that she shall never commence or
prosecute, or knowingly encourage, promote, assist or participate in any way,
except as required by law, in the commencement or prosecution, of any claim,
demand, action, cause of action or suit of any nature whatsoever against Company
or any officer, director, employee or agent of Company ("Covered Litigation")
that is based upon any claim, demand, action, cause of action or suit released
pursuant to this Agreement or involving or based upon the Covered Acts and
Omissions.

      5. Employee further agrees that she has read this Agreement carefully and
understands all of its terms.

      6. Employee understands and agrees that she was advised to consult with an
attorney and did so prior to executing this Agreement.

      7. Employee understands and agrees that she has been given twenty-one (21)
days within which to consider this Agreement.

      8. Employee understands and agrees that she may revoke this Agreement for
a period of seven (7) calendar days following the execution of this Agreement
(the "Revocation Period"). This Agreement is not effective until this revocation
period has expired. Employee understands that any revocation, to be effective,
must be in writing and either (a) postmarked within seven (7) days of execution
of this Agreement and addressed to Aastrom Biosciences, Inc., 24 Frank Lloyd
Drive, Ann Arbor, Michigan 48105 or (b) hand delivered within seven (7) days of
execution of this Agreement to Aastrom Biosciences, Inc., 24 Frank Lloyd Drive,
Ann Arbor, Michigan 48105. Employee understands that if revocation is made by
mail, mailing by certified mail, return receipt requested, is recommended to
show proof of mailing.

      9. In agreeing to sign this Agreement and separate from Company, Employee
is doing so completely voluntarily and of his own free-will and without any
encouragement or pressure from Company and agrees that in doing so she has not
relied on any oral statements or explanations made by Company or its
representatives.

      10. Both parties agree not to disclose the terms of this Agreement to any
third party, except as is required by law, or as is necessary for purposes of
securing counsel from either parties' attorneys or accountants.

                                       2
<PAGE>

        11. This Agreement shall not be construed as an admission of wrongdoing
by Company.

      12. This Agreement contains the entire agreement between Employee and
Company regarding the matters set forth herein. Any modification of this
Agreement must be made in writing and signed by Employee and each of the
entities constituting the Company.

      13. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Michigan, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Michigan or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Michigan.

      14. In the event any provision of this Agreement or portion thereof is
found to be wholly or partially invalid, illegal or unenforceable in any
judicial proceeding, then such provision shall be deemed to be modified or
restricted to the extent and in the manner necessary to render the same valid
and enforceable, or shall be deemed excised from this Agreement, as the case may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision had been originally incorporated
herein as so modified or restricted, or as if such provision had not been
originally incorporated herein, as the case may be.

      15. If there is a breach or threatened breach of the provisions of this
Agreement, Company may, in addition to other available rights and remedies,
apply to any court of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce, or prevent any violation of, any of the
provisions of this Agreement.

      16. In the event that Employee violates the terms of this Agreement, in
addition to other available rights and remedies, the Company shall be released
of all of its remaining obligations under the Severance Agreement.

      The parties hereto have entered into this Agreement as of this ____day of
_____,________

                                         AASTROM BIOSCIENCES, INC.

                                         By:  __________________________________

                                         Name:  ________________________________

                                         Title:  _______________________________

                                         EMPLOYEE

                                         _______________________________________

                                       3