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Stock Purchase Agreement - Aastrom Biosciences Inc., SBIC Partners LP and State Treasurer of the State of Michigan

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                           STOCK PURCHASE AGREEMENT
                                by and between
                           AASTROM BIOSCIENCES, INC.
                                    and the
                        INVESTORS LISTED ON SCHEDULE A




                                January 8, 1996
<PAGE>
 
                               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
<PAGE>
 
                          TABLE OF CONTENTS (cont'd)
                          --------------------------



                                                                            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

                                      ii
<PAGE>
 
                           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
<PAGE>
 
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

                                       2
<PAGE>
 
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

                                       3
<PAGE>
 
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

                                       4
<PAGE>
 
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
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of his or her best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees and consultants
of the Company, nor the conduct of the Company's business as proposed, will, to
the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees and consultants is now
obligated, which conflict or default would have a Material Adverse Effect on the
Company.

         2.10  Compliance With Other Instruments. To the best knowledge of the
               ---------------------------------
Company, the Company is not in violation or default of any provisions of the
Restated Articles or Bylaws or of any instrument, permit, judgment, order, writ,
decree or contract to which it is a party or by which it is bound or of any
provision of any federal or state statute, rule or regulation applicable to the
Company, which violation or default would have a Material Adverse Effect on the
Company. The execution, delivery and performance of this

                                       5
<PAGE>
 
Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the revocation, impairment or forfeiture of a material
permit or license, or the creation of any material lien, charge or encumbrance
upon any of the assets of the Company.

         2.11  Compliance With Law. To the best knowledge of the Company, the
               -------------------
Company has complied with all laws, rules, regulations and orders applicable to
its business, operations, properties, assets, products and services, the
violation of which would have a Material Adverse Effect upon the Company, and
the Company has all necessary permits, licenses and other authorizations
required to conduct its business as it is now conducted. There is no existing
law, rule, regulation or order, and the Company after due inquiry is not aware
of any proposed law, rule, regulation or order, whether federal or state, which
would prohibit or restrict the Company from, or otherwise have a Material
Adverse Effect on the Company in, conducting its business, other than the
customary governmental approvals required for medical products. The current
status with respect to the review and approval of the Company's products by the
U.S. Food and Drug Administration is set forth on the Schedule of Exceptions.
Without limiting the foregoing in any manner, the Company has complied in all
material respects with all applicable laws relating to the employment of labor,
including provisions relating to wages, hours, equal opportunity, collective
bargaining and the payment of Social Security and other taxes, with ERISA, as
defined below, with the Occupational Health and Safety Act and with the
Americans With Disabilities Act. The Company is in full compliance with the
Immigration Reform and Control Act of 1986, as amended, and, to the best of the
Company's knowledge, all key employees who are not United States citizens are
currently authorized under United States immigration laws to hold United States
employment and will continue to have such employment authorization through the
foreseeable future and are otherwise in compliance with United States
immigration laws.

         2.12  Agreements; Action.
               ------------------

               (a) Except as set forth on the Schedule of Exceptions, there are
no agreements, understandings, instruments or contracts to which the Company is
a party or by which it is bound which involve (i) obligations of, or payments
to, the Company in excess of One Hundred Thousand Dollars ($100,000), other than
obligations with respect to compensation under employment or consulting
agreements previously disclosed to each Investor, (ii) the license of any
patent, copyright, trade secret or other proprietary right of the Company, (iii)
agreements relating to the development, manufacture or distribution of the
Company's products, (iv) indemnification by the Company with respect to
infringement of proprietary rights or (v) any other material agreement.

                                       6
<PAGE>
 
               (b) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of One Hundred Thousand
Dollars ($100,000) or in excess of One Hundred Fifty Thousand Dollars ($150,000)
in the aggregate, other than obligations with respect to compensation under
employment or consulting agreements, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business and other than sales,
exchanges or dispositions which would result in a Material Adverse Effect on the
Company.

               (c) The Company is not a party to or bound by any contract,
agreement or instrument, or subject to any restriction under the Restated
Articles or Bylaws, which would have a Material Adverse Effect on its business
as now conducted or as proposed to be conducted.

               (d) The Company has not engaged and is not presently engaged in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than twenty-five
percent (25%) of the voting power of the Company is disposed of or (iii)
regarding any other form of liquidation, dissolution or winding up of the
Company.

         2.13  Corporate Documents. The Restated Articles and Bylaws of the
               -------------------
Company are in the form made available to the Investors.

         2.14  Title to Property and Assets. The Company has good and
               ----------------------------
marketable title to its properties and assets reflected in the Financial
Statements or acquired by it since the date of the Financial Statements (other
than properties and assets disposed of in the ordinary course of business since
the date of the Financial Statements), and all such properties and assets are
free and clear of mortgages, pledges, security interests, liens, charges,
claims, restrictions and other encumbrances, except for liens to secure payment
of obligations reflected in the Financial Statements and for current taxes not
yet due and payable and minor imperfections of title, if any, not material in
nature or amount and not materially detracting from the value or impairing the
use of the property subject thereto or impairing the operations or proposed
operations of the Company.

         2.15  Employee Benefit Plans. To the best knowledge of the Company,
               ----------------------
each of the Company's employee benefit plans, as such term is defined in the
Employee Retirement Income Securities Act of 1974, as amended ("ERISA"),
complies in form and in operation in all respects with the applicable
requirements of ERISA and the

                                       7
<PAGE>
 
Internal Revenue Code of 1986, as amended (the "Code"). All required reports and
descriptions have been filed or distributed appropriately with respect to each
such employee benefit plan and there have been no prohibited transactions with
respect to any such plan. No fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of any employee benefit plan. No charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand with respect
to the administration or the investment of the assets of any employee benefit
plan (other than routine claims for benefits) is pending or, to the Company's
knowledge, threatened. The Company (and employees with responsibility for
employee benefits matters) have no knowledge of any basis for any such charge,
complaint, action, suit, hearing, investigation, claim or demand.

         2.16  Leasehold Interests. Each lease or agreement to which the
               -------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any material default of the Company
with respect to any term thereof and the Company has not been notified of any
default and has no reason to believe that it is in default of any term
thereunder. To the best of the Company's knowledge, no other party to any such
lease or agreement is in default of a material term thereunder. No event has
occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and no claim has been asserted against the Company adverse to its rights in such
leasehold interests.

         2.17  Tax Returns and Payments. The Company has filed all federal,
               ------------------------
state and local tax returns and reports as required by law and has paid all
taxes and other assessments due prior to the date that any penalty would accrue
thereon, or adequate reserves for the payment thereof have been set forth in the
Financial Statements. The provision for taxes of the Company are adequate for
taxes due or accrued as of the date thereof. No deficiency assessment with
respect to or proposed adjustment of the Company's federal, state, county or
local taxes is pending or, to the best of the Company's knowledge, threatened.
There is no tax lien, whether imposed by any federal, state, county or local
taxing authority, outstanding against the assets, properties or business of the
Company.

         2.18  Insurance. The Company maintains as to its properties and
               ---------
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated.

         2.19  Labor Agreements and Actions. The Company is not bound by or
               ----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any

                                       8
<PAGE>
 
of the employees of the Company. There is no strike or other labor dispute
involving the Company pending, or to the knowledge of the Company threatened,
which could have a Material Adverse Effect on the Company, nor is the Company
aware of any labor organization activity involving its employees. The Company is
not aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.

         2.20  Changes. Since June 30, 1995, there has not been:
               -------

               (a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business, including but not
limited to transactions with Rhone-Poulenc Rorer, Inc. and Immunex, which have
not been, in the aggregate, materially adverse;

               (b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);

               (c) any waiver by the Company of a valuable right or of a
material debt owed to it;

               (d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);

               (e) any material change or amendment to a material contract or
agreement by which the Company or any of its assets or properties is bound or
subject;

               (f) any material change in any compensation arrangement or
agreement with any officer, director or employee; or

               (g) to the Company's knowledge, any other event or condition of
any character that could be reasonably expected to result in a Material Adverse
Effect on the Company.

         2.21  Related-Party Transactions. No employee, officer or director of
               --------------------------
the Company, or member of his or her immediate family is indebted to the
Company, nor

                                       9
<PAGE>
 
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company, and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. Except as set forth on the Schedule of Exceptions, no member
of the immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.

         2.22  Small Business Matters.
               ---------------------- 

               (a) The Company, together with its "affiliates" (as that term is
defined in Title 13, Code of Federal Regulations, (S)121.401), is a "small
business concern" within the meaning of the Small Business Investment Act of
1958, as amended (the "SBIA") and the regulations thereunder, including Title
13, Code of Federal Regulations, (S)121.802. The information set forth in the
Small Business Administration Forms 480, 652 and Part A of Form 1031 regarding
the Company and its affiliates is accurate and complete. Copies of such forms
shall have been completed and executed by the Company and delivered to any
Investor requesting such forms (each, an "SBIC Investor").

               (b) The proceeds from the sale of the Series E Preferred Stock
will be used by the Company for general working capital purposes, for its growth
modernization and expansion. No portion of the proceeds of any SBIC Investor (i)
will be used to provide capital to a corporation licensed under the SBIA, (ii)
will be used outside the United States (except (x) to acquire abroad materials
and industrial property rights for a domestic operation or (y) for transfer to a
controlled foreign Subsidiary, so long as at least fifty-one percent (51%) of
the Company's assets and activities will remain within the United States), or
(iii) will be used for any purpose contrary to the public interest (including
without limitation, activities which are in violation of law) or inconsistent
with free competitive enterprise, in each case, within the meaning of 13 C.F.R.
(S)107.901.

               (c) The Company's primary business activity does not involve,
directly or indirectly, providing funds to others, the purchase or discounting
of debt obligations, factoring or long-term leasing of equipment with no
provision for maintenance or repair, and the Company is not classified under
Major Group 65 (Real Estate) of the SIC Manual.

               (d) If the Company breaches the representations in subsections
(b) or (c) above in any material respect, then in addition to all other remedies
available to the SBIC Investors, each SBIC Investor may demand that the Company
immediately repurchase all securities acquired by the SBIC Investor at the
purchase price therefor.

                                      10
<PAGE>
 
         2.23  Hazardous Materials. To the best knowledge of the Company, the
               -------------------
Company has never spilled or released any Hazardous Materials at any site owned
or leased by it. To the best knowledge of the Company, all materials used by the
Company have been and are handled, packaged, labeled, stored, used and disposed
of in accordance with all applicable federal, state and local requirements. To
the best knowledge of the Company, no third party has ever generated, used,
handled, stored, treated, disposed of, spilled or released any Hazardous
Materials at any site owned or leased by the Company, nor has there been or is
there threatened any release of any Hazardous Materials on or at any such site.
To the best knowledge of the Company, there are not underground storage tanks at
any site owned or leased by the Company. For purpose of this Section 2.23,
"Hazardous Materials" shall mean any element, substance, compound or mixture
(including, without limitation, any pollutant, contaminant, chemical or
industrial, toxic or hazardous substance or waste and any break-down product
thereof), whether solid, liquid or gaseous, that (i) has been, is or shall be in
the future subject to regulation of any kind (including, without limitation,
regulation by statute, rule, regulation, ordinance, order, decree, notice, plan
or demand letter) by any federal, state or local governmental authority with
regard to protection of the environment or protection of environmental health
and safety, or (ii) the presence, existence or threat of which shall at any time
give rise, under any theory of law or equity, to any liability of any kind or
nature whatsoever.

         2.24  Disclosure. The Company has fully provided each Investor with 
               ----------
all the material information which such Investor has requested for deciding
whether to purchase the Series E Preferred Stock. Neither this Agreement nor any
other statements or certificates made or delivered in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not, in light of the
circumstances under which such statements are made, misleading.

     3.  Representations Warranties and Covenants of Each Investor. This
         ---------------------------------------------------------
Agreement is made with each Investor in reliance upon such Investor's
representation and warranties to the Company, which by such Investor's execution
of this Agreement such Investor hereby confirms, that:

         3.1   Authorization. This Agreement constitutes its valid and legally
               -------------
binding obligation, enforceable against the Investor in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally.

         3.2   Purchase Entirely for Own Account. The Series E Preferred Stock
               ---------------------------------
to be received by Investor and the Common Stock issuable upon conversion thereof
(collectively, the "Securities") will be acquired only for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each

                                      11
<PAGE>
 
Investor further represents that such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Each Investor represents that it has full power and authority to
enter into this Agreement.

         3.3   Disclosure of Information. Investor has received all the
               -------------------------
information it considers necessary or appropriate for deciding whether to
purchase shares of Series E Preferred Stock and has received all information it
has requested from the Company. Such Investor further represents that it has had
an opportunity to ask questions of management of the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities and that all such questions have been answered to the satisfaction of
such Investor. In entering into this Agreement, the Investor has not relied on
any written or oral representation or other information except as provided to
the Investor by the Company and its agents. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 2
of this Agreement or the right of the Investors to rely thereon.

         3.4   Investment Experience. The Investor is aware that an investment
               ---------------------
in the Series E Preferred Stock involves very significant risks and that, in
particular, the Company is in the development stage. Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk and complete loss of its
investment in the Series E Preferred Stock and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in shares of Series E Preferred Stock. Such Investor has
not been organized solely for the purpose of acquiring the Securities.

         3.5   Restricted Securities. Each Investor understands that the
               ---------------------
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. In this connection each Investor represents that it is
familiar with Securities and Exchange Commission ("SEC") Rule 144, as presently
in effect, and understands the resale limitations imposed thereby and by the
Securities Act.

         3.6   Further Limitations on Disposition. Without in any way limiting
               ----------------------------------
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until:

               (a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or

                                      12
<PAGE>
 
               (b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company and
its counsel, that such disposition will not require registration of such shares
under the Securities Act, provided that the Company will not require the State
of Michigan to deliver an opinion under Section 3.6.

               (c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.

         3.7   Legends. It is understood that the certificates evidencing the
               -------
Securities may bear the following legend:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN ACQUIRED
         FOR INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
         NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
         WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
         THE SECURITIES ACT OF 1933, OR UNLESS AN EXEMPTION FROM REGISTRATION
         UNDER SUCH ACT IS AVAILABLE.

         3.8   Accredited Investor. Each Investor is an accredited investor as
               -------------------
defined in Rule 501(a) of Regulation D, as amended, of the SEC under the
Securities Act.

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

               (a) Any legend endorsed on a certificate pursuant to Section 3.8
hereof shall be removed (i) if the Securities represented by such certificate
shall have been effectively registered under the Securities Act or otherwise
lawfully sold in a public transaction, (ii) if such Securities may be
transferred in compliance with Rule 144(k)

                                      13
<PAGE>
 
promulgated under the Securities Act or (iii) if the holder of such Securities
shall have provided the Company with an opinion of counsel, in form and
substance acceptable to the Company and its counsel and from attorneys
reasonably acceptable to the Company and its counsel, stating that a public
sale, transfer or assignment of such Securities may be made without
registration.

               (b) Any legend endorsed upon a certificate pursuant to Section
3.8 hereof shall be removed if the Company receives an order of the appropriate
state authority authorizing such removal or if the holder of such Securities
provides the Company with an opinion of counsel, in form and substance
acceptable to the Company and its counsel and from attorneys reasonably
acceptable to the Company and its counsel, stating that such state legend may be
removed.

     4.  California Commissioner of Corporations.
         --------------------------------------- 

         4.1   Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
               ------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTIONS 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

     5.  Conditions of Each Investor's Obligations at Closing. The obligations
         ----------------------------------------------------
of each Investor under Section 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:

         5.1   Representations and Warranties. The representations and
               ------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.

         5.2   Performance. The Company shall have performed and complied with
               -----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

         5.3   Qualifications. The offer and sale of the Series E Preferred
               --------------
Stock and the underlying shares of Common Stock to the Investors shall be
either registered

                                      14
<PAGE>
 
and qualified with the securities administration of all relevant states or
pursuant to this Agreement, or such offer and sale shall be exempt from such
registration qualification.

         5.4   Proceedings and Documents. All corporate and other proceedings
               -------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Investor and its counsel, and each Investor shall have
received all such counterpart original, certified and other copies of such
documents as such Investor may reasonably request.

         5.5   Opinion of Company Counsel. Each Investor shall have received 
               --------------------------
from Pepper, Hamilton & Scheetz, counsel for the Company, an opinion, dated as
of the Closing, in form and substance satisfactory to the Investors.

         5.6   Investor Rights Agreement. The Investors and the Company shall
               -------------------------
have entered into the Investor Rights Agreement.

     6.  Conditions of the Company's Obligations at Closing. The obligations
         --------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by such
Investor:

         6.1   Representations and Warranties. The representations and
               ------------------------------
warranties of the Investor contained in Section 3 hereof shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.

     7.  Covenants. In connection with the transactions contemplated hereby, the
         ---------
Company hereby covenants and agrees as follows:

         7.1   Observer Rights. At any time after the date hereof, the
               ---------------
Investors shall have the right to have one (1) designated representative (the
"Designated Representative") attend any and all meetings of the Company's Board
of Directors, in a nonvoting capacity. The initial Designated Representative
shall be Gregory J. Forrest, who may be replaced at any time and from time to
time by Investors holding a majority of the Series E Preferred Stock, provided
that each subsequent Designated Representative shall be reasonably acceptable to
the Company. The Company will provide such Designated Representative with all
usual and customary communications made to the Board and give such Designated
Representative copies of all materials delivered to the Board and/or other non-
voting observers outside of meetings. At the request of the Company, the
Designated Representative shall enter into a confidentiality agreement with the
Company in the form that has been previously delivered to the Company by other
non-voting observers to the Board. The provisions of this Section 7.1 shall
terminate automatically and be of no further force and effect upon the
consummation by the Company of an initial public offering under the Securities
Act.

                                      15
<PAGE>
 
         7.2   Registration Rights. The Company hereby grants to each Investor
               -------------------
all of the rights and benefits set forth in Sections 2.4 through 2.14,
inclusive, of that certain Amended and Restated Investors' Rights Agreement
dated as of April 7, 1992, as amended to date (the "Investors' Rights
Agreement").

         7.3   Financial Information, Etc. The Company hereby agrees to comply
               --------------------------
with those affirmative covenants set forth in Sections 3.1 through 3.7,
inclusive, of the Investors' Rights Agreement and to afford each Investor with
the rights and benefits set forth therein.

         7.4   Information Rights and Related Covenants.
               ----------------------------------------

               (a) Within ninety (90) days after the date hereof, the Company
shall provide to each Investor seeking such information a certificate of its
chief financial officer (i) verifying the use of the proceeds of each SBIC
Investor from the sale of Series E Preferred Stock and (ii) certifying
compliance by the Company with the provisions of this Agreement. In addition to
any other rights granted hereunder, the Company shall provide each such Investor
and the U.S. Small Business Administration (the "SBA") access to its books and
records for the purpose of verifying the use of the proceeds of such Investor's
financing.

               (b) The Company will at all times comply with the
nondiscrimination requirements of 13 C.F.R., Parts 112, 113 and 117.

         7.5   Right of First Offer. The Company hereby grants to each
               --------------------
Investor all of the rights and benefits of Section 4.1 of the Investors' Rights
Agreement.

         7.6   Best Efforts on Sale of Stock. The Company agrees to use its 
               -----------------------------
best efforts to include a pro rata portion of the shares of Series E Preferred
Stock held by the Investors in any sale of any of the capital stock of the
Company by any other investor in the Company.

     8.  Miscellaneous.
         ------------- 

         8.1   Successors and Assigns. The terms and conditions of this
               ----------------------
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

         8.2   Governing Law. This Agreement shall be governed by and
               -------------
construed under the laws of the State of Michigan.

                                      16
<PAGE>
 
         8.3   Counterparts. This Agreement may be executed in two or more
               ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         8.4   Titles and Subtitles. The titles and subtitles used in this
               --------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

         8.5   Notices. Unless otherwise provided, any notice required or
               -------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or, if sent
by telecopier, upon confirmation of transmission, or three (3) days after
deposit with the United States Post Office, by registered or certified mail, or
one (1) day after deposit with an overnight air courier, in each case postage
prepaid and addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties.

         8.6   Brokers and Finders. Each party represents that it neither is
               -------------------
nor will be obligated for the payment of any broker or finder fee or commission
in connection with this transaction. Each Investor agrees to indemnify and hold
harmless the Company from any liability for any commission or compensation in
the nature of a broker or finder fee (and the costs and expenses of defending
against such liability or asserted liability) for which the Investor or any of
its officers, partners, employees or representatives is responsible. The Company
agrees to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a broker or finder fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.

         8.7   Expenses. The Company shall pay the reasonable fees and
               --------
expenses of Riordan & McKinzie acting as counsel to SBIC Partners, L.P.

         8.8   Severability. If one or more provisions of this Agreement are
               ------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

         8.9   Entire Agreement. This Agreement and the Investors Rights
               ----------------
Agreement constitute the entire agreement among the parties hereto pertaining to
the subject matter hereof and supersede all prior agreements, term sheets,
letters, discussions and understandings of the parties in connection therewith.

                                      17
<PAGE>
 
         8.10  Assurances. Each party to this Agreement shall execute all
               ----------
instruments and documents and take all actions as may be reasonably required to
effectuate this Agreement, whether before, concurrently with or after the
consummation of the transactions contemplated hereby.

                                      18
<PAGE>
 
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

COMPANY:                           AASTROM BIOSCIENCES, INC. 
                                   P.O. Box 376              
                                   Ann Arbor, Michigan 48106 
                                   Fax: (313) 930-5546       
                                                             
                                   By: /s/ R. DOUGLAS ARMSTRONG, Ph.D.
                                       -------------------------------------
                                       R. Douglas Armstrong, Ph.D. 
                                       President and Chief Executive Officer 
                                                                         
INVESTORS:                         SBIC PARTNERS, L.P.                   
                                   201 Main Street, Suite 2302           
                                   Fort Worth, Texas 76102               
                                   Fax: (817) 338-2047                   
                                                                         
                                   By: Forrest Binkley & Brown L.P.,     
                                       General Partner                       
                                                                         
                                       By: Forrest Binkley & Brown Venture Co.,
                                           General Partner

                                           By: /s/ JEFFREY J. BROWN
                                               -------------------------------
                                               Jeffrey J. Brown
                                               Office of the President
                                                                         
                                   By: SL-SBIC Partners, L.P.,           
                                       General Partner                       
                                                                         
                                       By: FW-SBIC, Inc.,                   
                                           General Partner
                                                                         
                                           By: /s/ PETER STERLING
                                               -------------------------------
                                               Name:  Peter Sterling
                                               Title: Chairman

                   [Signatures continued on following page]

                                      19
<PAGE>
 
                   [Signatures continued from previous page]

                                   STATE TREASURER OF THE STATE OF MICHIGAN,
                                   CUSTODIAN OF THE MICHIGAN PUBLIC SCHOOL
                                   EMPLOYEES' RETIREMENT SYSTEM, STATE
                                   EMPLOYEES' RETIREMENT SYSTEM, MICHIGAN STATE
                                   POLICE RETIREMENT SYSTEM, AND MICHIGAN JUDGES
                                   RETIREMENT SYSTEM
                                   c/o Alternative Investments Division
                                   430 West Allegan
                                   Treasury Building, 3rd Floor
                                   Lansing, Michigan 48933 
                                   Fax: (517) 335-3668

                                   By: /s/ PAUL E. RICE
                                       ---------------------------------------
                                       Name: Paul E. Rice, Administrator
                                       Title: Alternative Investments Division

                                   By: 
                                       ---------------------------------------
                                       Name:
                                              --------------------------------
                                       Title:
                                              --------------------------------

                                      20
<PAGE>
 
                                  Schedule A

                             SCHEDULE OF INVESTORS
                             ---------------------

 
 
                                 Number                   Aggregate
Investor                       of Shares               Purchase Price
--------                       ---------               --------------
                                                  
SBIC Partners, L.P.              941,177                $4,000,002.25

State Treasurer of the
State of Michigan                470,588                $1,999,999
                               ---------                -------------
           Totals:             1,411,765                $6,000,001.25
 

                                 Schedule A-1