-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PE2blxr4HikIab0tc35KIaP6ku2xepXujRBey91fte6kL+6OQJwNMgp04mIn2b97 401J0IG7FW0IfmuzQfrm3Q== 0000950137-01-500847.txt : 20010416 0000950137-01-500847.hdr.sgml : 20010416 ACCESSION NUMBER: 0000950137-01-500847 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010228 FILED AS OF DATE: 20010413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHFIELD LABORATORIES INC /DE/ CENTRAL INDEX KEY: 0000920947 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 363378733 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24050 FILM NUMBER: 1602366 BUSINESS ADDRESS: STREET 1: 1560 SHERMAN AVE STREET 2: SUITE 1000 CITY: EVANSTON STATE: IL ZIP: 60201-4800 BUSINESS PHONE: 8478643500 MAIL ADDRESS: STREET 1: 1560 SHERMAN AVE STE 1000 STREET 2: 37TH FLOOR CITY: EVANSTON STATE: IL ZIP: 60201-4800 10-Q 1 c61623e10-q.txt 10-Q FOR PERIOD ENDING FEBRUARY 28, 2001 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED FEBRUARY 28, 2001 OR [ ] TRANSITION REPORT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO -------------- --------------- COMMISSION FILE NUMBER 0-24050 NORTHFIELD LABORATORIES INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3378733 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1560 SHERMAN AVENUE, SUITE 1000, EVANSTON, ILLINOIS 60201-4800 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 864-3500 FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT: NOT APPLICABLE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT. YES NO --- --- AS OF FEBRUARY 28, 2001, REGISTRANT HAD 14,265,875 SHARES OF COMMON STOCK OUTSTANDING ================================================================================ 2 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors Northfield Laboratories Inc.: We have reviewed the balance sheet of Northfield Laboratories Inc. (a company in the development stage) as of February 28, 2001, and the related statements of operations for the three-month periods ended February 28, 2001 and February 29, 2000, and statements of operations and cash flows for the nine-month periods ended February 28, 2001 and February 29, 2000 and for the period from June 19, 1985 (inception) through February 28, 2001. We have also reviewed the statements of shareholders' equity (deficit) for the nine-month period ended February 28, 2001 and for the period from June 19, 1985 (inception) through February 28, 2001. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance sheet of Northfield Laboratories Inc. as of May 31, 2000, and the related statements of operations, shareholders' equity (deficit), and cash flows for the year then ended and for the period from June 19, 1985 (inception) through May 31, 2000 (not presented herein); and in our report dated June 29, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of May 31, 2000 and in the accompanying statement of shareholders' equity (deficit) is fairly stated, in all material respects, in relation to the statement from which it has been derived. /s/ KPMG LLP Chicago, Illinois March 21, 2001 3 NORTHFIELD LABORATORIES INC. (a company in the development stage) Balance Sheets February 28, 2001 (unaudited) and May 31, 2000
FEBRUARY 28, MAY 31, ASSETS 2001 2000 ------------- ------------- Current assets: Cash $ 7,299,077 15,154,295 Short-term marketable securities 23,799,980 23,129,324 Prepaid expenses 223,629 409,270 Other current assets 632,555 505,572 ------------- ------------- Total current assets 31,955,241 39,198,461 Property, plant, and equipment, net 2,811,257 2,455,701 Other assets 122,775 74,333 ------------- ------------- $ 34,889,273 41,728,495 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,347,153 1,061,367 Accrued expenses 149,551 174,009 Accrued compensation and benefits 268,620 250,570 ------------- ------------- Total current liabilities 1,765,324 1,485,946 Other liabilities 167,231 147,717 ------------- ------------- Total liabilities 1,932,555 1,633,663 ------------- ------------- Shareholders' equity: Preferred stock, $.01 par value. Authorized 5,000,000 shares; none issued and outstanding -- -- Common stock, $.01 par value. Authorized 30,000,000 shares; issued and outstanding 14,265,875 shares at February 28, 2001 and May 31, 2000, respectively 142,659 142,424 Additional paid-in capital 117,503,271 117,276,051 Deficit accumulated during the development stage (84,689,212) (77,323,643) ------------- ------------- Total shareholders' equity 32,956,718 40,094,832 ------------- ------------- $ 34,889,273 41,728,495 ============= =============
See accompanying independent accountants' review report. 4 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Operations Three and nine-month periods ended February 28, 2001 and February 29, 2000 and for the period from June 19, 1985 (inception) through February 28, 2001
CUMULATIVE THREE-MONTH PERIOD ENDED NINE-MONTH PERIOD ENDED FROM ------------------------------ ---------------------------- JUNE 19, 1985 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, THROUGH 2001 2000 2001 2000 FEBRUARY 28, 2001 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- ----------- ----------------- Revenues - license income -- -- -- -- 3,000,000 Costs and expenses: Research and development $ 2,488,972 2,364,773 6,963,676 6,851,403 76,104,089 General and administrative 620,079 657,759 2,047,582 1,666,064 33,518,795 ------------ ---------- ---------- ---------- ----------- 3,109,051 3,022,532 9,011,258 8,517,467 109,622,884 ------------ ---------- ---------- ---------- ----------- Other income and expense: Interest income 504,733 558,499 1,645,689 1,707,652 22,016,906 Interest expense -- -- -- -- (83,234) ------------ ---------- ---------- ---------- ----------- 504,733 558,499 1,645,689 1,707,652 21,933,672 ------------ ---------- ---------- ---------- ----------- Net loss $ (2,604,318) (2,464,033) (7,365,569) (6,809,815) (84,689,212) ============ ========== ========== ========== =========== Net loss per basic share $ (0.18) (0.17) (0.52) (0.48) (9.18) ============ ========== ========== ========== =========== Shares used in calculation of per share data 14,263,003 14,240,864 14,252,632 14,240,203 9,224,175 ============ ========== ========== ========== ===========
See accompanying independent accountants' review report. 5 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Shareholders' Equity (Deficit) Nine-month period ended February 28, 2001 and for the period from June 19, 1985 (inception) through February 28, 2001
SERIES A CONVERTIBLE PREFERRED STOCK COMMON STOCK PREFERRED STOCK --------------------- ----------------------- ---------------------- NUMBER AGGREGATE NUMBER AGGREGATE NUMBER AGGREGATE OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT --------- --------- ---------- --------- --------- ---------- Issuance of common stock on August 27, 1985 -- $ -- 3,500,000 $ 35,000 -- $ -- Issuance of Series A convertible preferred stock at $4.00 per share on August 27, 1985 (net of costs of issuance of $79,150) -- -- -- -- 250,000 250,000 Net loss -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1986 -- -- 3,500,000 35,000 250,000 250,000 Net loss -- -- -- -- -- -- Deferred compensation relating to grant of stock options -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1987 -- -- 3,500,000 35,000 250,000 250,000 Issuance of Series B convertible preferred stock at $35.68 per share on August 14, 1987 (net of costs of issuance of $75,450) -- -- -- -- -- -- Net loss -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1988 -- -- 3,500,000 35,000 250,000 250,000 Issuance of common stock at $24.21 per share on June 7, 1988 (net of costs of issuance of $246,000) -- -- 413,020 4,130 -- -- Conversion of Series A convertible preferred stock to common stock on June 7, 1988 -- -- 1,250,000 12,500 (250,000) (250,000) Conversion of Series B convertible preferred stock to common stock on June 7, 1988 -- -- 1,003,165 10,032 -- -- Exercise of stock options at $2.00 per share -- -- 47,115 471 -- -- Issuance of common stock at $28.49 per share on March 6, 1989 (net of costs of issuance of $21,395) -- -- 175,525 1,755 -- -- Issuance of common stock at $28.49 per share on March 30, 1989 (net of costs of issuance of $10,697) -- -- 87,760 878 -- -- Sale of options at $28.29 per share to purchase common stock at $.20 per share on March 30, 1989 (net of costs of issuance of $4,162) -- -- -- -- -- -- Net loss -- -- -- -- -- -- Deferred compensation relating to grant of stock options -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1989 -- -- 6,476,585 64,766 -- -- Net loss -- -- -- -- -- -- Deferred compensation relating to grant of stock options -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1990 -- -- 6,476,585 64,766 -- -- Net loss -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1991 -- -- 6,476,585 64,766 -- -- Exercise of stock warrants at $5.60 per share -- -- 90,000 900 -- -- Net loss -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1992 -- -- 6,566,585 65,666 -- -- Exercise of stock warrants at $7.14 per share -- -- 15,000 150 -- -- Issuance of common stock at $15.19 per share on April 19, 1993 (net of costs of issuance of $20,724) -- -- 374,370 3,744 -- -- Net loss -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- ------ ------- --------- --------- -------- --------- Balance at May 31, 1993 -- -- 6,955,955 69,560 -- -- ------ ------- --------- --------- -------- ---------
(Continued) 6 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Shareholders' Equity (Deficit) Nine-month period ended February 28, 2001 and for the period from June 19, 1985 (inception) through February 28, 2001
SERIES B CONVERTIBLE DEFICIT TOTAL PREFERRED STOCK ACCUMULATED SHARE- --------------------- ADDITIONAL DURING THE DEFERRED HOLDERS' NUMBER AGGREGATE PAID-IN DEVELOPMENT COMPEN- EQUITY OF SHARES AMOUNT CAPITAL STAGE SATION (DEFICIT) --------- --------- ----------- ------------- ---------- ---------- Issuance of common stock on August 27, 1985 -- $ -- (28,000) -- -- 7,000 Issuance of Series A convertible preferred stock at $4.00 per share on August 27, 1985 (net of costs of issuance of $79,150) -- -- 670,850 -- -- 920,850 Net loss -- -- -- (607,688) -- (607,688) ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1986 -- -- 642,850 (607,688) -- 320,162 Net loss -- -- -- (2,429,953) -- (2,429,953) Deferred compensation relating to grant of stock options -- -- 2,340,000 -- (2,340,000) -- Amortization of deferred compensation -- -- -- -- 720,000 720,000 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1987 -- -- 2,982,850 (3,037,641) (1,620,000) (1,389,791) Issuance of Series B convertible preferred stock at $35.68 per share on August 14, 1987 (net of costs of issuance of $75,450) 200,633 200,633 6,882,502 -- -- 7,083,135 Net loss -- -- -- (3,057,254) -- (3,057,254) Amortization of deferred compensation -- -- -- -- 566,136 566,136 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1988 200,633 200,633 9,865,352 (6,094,895) (1,053,864) 3,202,226 Issuance of common stock at $24.21 per share on June 7, 1988 (net of costs of issuance of $246,000) -- -- 9,749,870 -- -- 9,754,000 Conversion of Series A convertible preferred stock to common stock on June 7, 1988 -- -- 237,500 -- -- -- Conversion of Series B convertible preferred stock to common stock on June 7, 1988 (200,633) (200,633) 190,601 -- -- -- Exercise of stock options at $2.00 per share -- -- 93,759 -- -- 94,230 Issuance of common stock at $28.49 per share on March 6, 1989 (net of costs of issuance of $21,395) -- -- 4,976,855 -- -- 4,978,610 Issuance of common stock at $28.49 per share on March 30, 1989 (net of costs of issuance of $10,697) -- -- 2,488,356 -- -- 2,489,234 Sale of options at $28.29 per share to purchase common stock at $.20 per share on March 30, 1989 (net of costs of issuance of $4,162) -- -- 7,443,118 -- -- 7,443,118 Net loss -- -- -- (791,206) -- (791,206) Deferred compensation relating to grant of stock options -- -- 683,040 -- (683,040) -- Amortization of deferred compensation -- -- -- -- 800,729 800,729 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1989 -- -- 35,728,451 (6,886,101) (936,175) 27,970,941 Net loss -- -- -- (3,490,394) -- (3,490,394) Deferred compensation relating to grant of stock options -- -- 699,163 -- (699,163) -- Amortization of deferred compensation -- -- -- -- 546,278 546,278 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1990 -- -- 36,427,614 (10,376,495) (1,089,060) 25,026,825 Net loss -- -- -- (5,579,872) -- (5,579,872) Amortization of deferred compensation -- -- -- -- 435,296 435,296 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1991 -- -- 36,427,614 (15,956,367) (653,764) 19,882,249 Exercise of stock warrants at $5.60 per share -- -- 503,100 -- -- 504,000 Net loss -- -- -- (7,006,495) -- (7,006,495) Amortization of deferred compensation -- -- -- -- 254,025 254,025 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1992 -- -- 36,930,714 (22,962,862) (399,739) 13,633,779 Exercise of stock warrants at $7.14 per share -- -- 106,890 -- -- 107,040 Issuance of common stock at $15.19 per share on April 19, 1993 (net of costs of issuance of $20,724) -- -- 5,663,710 -- -- 5,667,454 Net loss -- -- -- (8,066,609) -- (8,066,609) Amortization of deferred compensation -- -- -- -- 254,025 254,025 ------- ----------- ---------- ---------- ---------- ---------- Balance at May 31, 1993 -- -- 42,701,314 (31,029,471) (145,714) 11,595,689 ------- ----------- ---------- ---------- ---------- ----------
(Continued) 7 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Shareholders' Equity (Deficit), continued Nine months ended February 28, 2001 and for the period from June 19, 1985 (inception) through February 28, 2001
SERIES A CONVERTIBLE SERIES B CONVERTIBLE PREFERRED STOCK COMMON STOCK PREFERRED STOCK PREFERRED STOCK ------------------- ------------------- -------------------- ------------------- NUMBER AGGREGATE NUMBER AGGREGATE NUMBER AGGREGATE NUMBER AGGREGATE OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT --------- --------- --------- --------- --------- --------- --------- --------- Net loss -- $ -- -- $ -- -- $ -- -- $ -- Issuance of common stock at $6.50 per share on May 26, 1994 (net of costs of issuance of $2,061,149) -- -- 2,500,000 25,000 -- -- -- -- Cancellation of stock options -- -- -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 1994 -- -- 9,455,955 94,560 -- -- -- -- Net loss -- -- -- -- -- -- -- -- Issuance of common stock at $6.50 per share on June 20, 1994 (net of issuance costs of $172,500) -- -- 375,000 3,750 -- -- -- -- Exercise of stock options at $7.14 per share -- -- 10,000 100 -- -- -- -- Exercise of stock options at $2.00 per share -- -- 187,570 1,875 -- -- -- -- Cancellation of stock options -- -- -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 1995 -- -- 10,028,525 100,285 -- -- -- -- Net loss -- -- -- -- -- -- -- -- Issuance of common stock at $17.75 per share on August 9, 1995 (net of issuance costs of $3,565,125) -- -- 2,925,000 29,250 -- -- -- -- Issuance of common stock at $17.75 per share on September 11, 1995 (net of issuance costs of $423,238) -- -- 438,750 4,388 -- -- -- -- Exercise of stock options at $2.00 per share -- -- 182,380 1,824 -- -- -- -- Exercise of stock options at $6.38 per share -- -- 1,500 15 -- -- -- -- Exercise of stock options at $7.14 per share -- -- 10,000 100 -- -- -- -- Cancellation of stock options -- -- -- -- -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 1996 -- -- 13,586,155 135,862 -- -- -- -- Net loss -- -- -- -- -- -- -- -- Exercise of stock options at $0.20 per share -- -- 263,285 2,633 -- -- -- -- Exercise of stock options at $2.00 per share -- -- 232,935 2,329 -- -- -- -- Exercise of stock options at $7.14 per share -- -- 10,000 100 -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 1997 -- -- 14,092,375 140,924 -- -- -- -- Net loss -- -- -- -- -- -- -- -- Exercise of stock options at $7.14 per share -- -- 5,000 50 -- -- -- -- Amortization of deferred compensation -- -- -- -- -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 1998 -- -- 14,097,375 140,974 -- -- -- -- Net loss -- -- -- -- -- -- -- -- Non-cash compensation -- -- -- -- -- -- -- -- Exercise of stock options at $7.14 per share -- -- 17,500 175 -- -- -- -- Exercise of stock warrants at $8.00 per share -- -- 125,000 1,250 -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 1999 -- -- 14,239,875 142,399 -- -- -- -- Net loss -- -- -- -- -- -- -- -- Non-cash compensation -- -- -- -- -- -- -- -- Exercise of stock options at $13.38 per share -- -- 2,500 25 -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at May 31, 2000 -- -- 14,242,375 142,424 -- -- -- -- Net loss (unaudited) -- -- -- -- -- -- -- -- Exercise of stock options at $10.81 per share -- -- 17,500 175 -- -- -- -- Exercise of stock options at $6.38 per share -- -- 6,000 60 -- -- -- -- ----- ------- ---------- -------- ----- ------- ----- -------- Balance at February 28, 2001 (unaudited) -- $ -- 14,265,875 $142,659 -- $ -- -- $ -- ===== ======= ========== ======== ===== ======= ===== ========
See accompanying independent accountants' review report. (Continued) 8
DEFICIT TOTAL ACCUMULATED SHARE- ADDITIONAL DURING THE DEFERRED HOLDERS' PAID-IN DEVELOPMENT COMPEN- EQUITY CAPITAL STAGE SATION (DEFICIT) ------------ ------------ ------------ ------------ Net loss -- (7,363,810) -- (7,363,810) Issuance of common stock at $6.50 per share on May 26, 1994 (net of costs of issuance of $2,061,149) 14,163,851 -- -- 14,188,851 Cancellation of stock options (85,400) -- 85,400 -- Amortization of deferred compensation -- -- 267 267 ------------ ------------ ------------ ------------ Balance at May 31, 1994 56,779,765 (38,393,281) (60,047) 18,420,997 Net loss -- (7,439,013) -- (7,439,013) Issuance of common stock at $6.50 per share on June 20, 1994 (net of issuance costs of $172,500) 2,261,250 -- -- 2,265,000 Exercise of stock options at $7.14 per share 71,300 -- -- 71,400 Exercise of stock options at $2.00 per share 373,264 -- -- 375,139 Cancellation of stock options (106,750) -- 106,750 -- Amortization of deferred compensation -- -- (67,892) (67,892) ------------ ------------ ------------ ------------ Balance at May 31, 1995 59,378,829 (45,832,294) (21,189) 13,625,631 Net loss -- (4,778,875) -- (4,778,875) Issuance of common stock at $17.75 per share on August 9, 1995 (net of issuance costs of $3,565,125) 48,324,374 -- -- 48,353,624 Issuance of common stock at $17.75 per share on September 11, 1995 (net of issuance costs of $423,238) 7,360,187 -- -- 7,364,575 Exercise of stock options at $2.00 per share 362,937 -- -- 364,761 Exercise of stock options at $6.38 per share 9,555 -- -- 9,570 Exercise of stock options at $7.14 per share 71,300 -- -- 71,400 Cancellation of stock options (80,062) -- 80,062 -- Amortization of deferred compensation -- -- (62,726) (62,726) ------------ ------------ ------------ ------------ Balance at May 31, 1996 115,427,120 (50,611,169) (3,853) 64,947,960 Net loss -- (4,245,693) -- (4,245,693) Exercise of stock options at $0.20 per share 50,025 -- -- 52,658 Exercise of stock options at $2.00 per share 463,540 -- -- 465,869 Exercise of stock options at $7.14 per share 71,300 -- -- 71,400 Amortization of deferred compensation -- -- 2,569 2,569 ------------ ------------ ------------ ------------ Balance at May 31, 1997 116,011,985 (54,856,862) (1,284) 61,294,763 Net loss -- (5,883,378) -- (5,883,378) Exercise of stock options at $7.14 per share 35,650 -- -- 35,700 Amortization of deferred compensation -- -- 1,284 1,284 ------------ ------------ ------------ ------------ Balance at May 31, 1998 116,047,635 (60,740,240) -- 55,448,369 Net loss -- (7,416,333) -- (7,416,333) Non-cash compensation 14,354 -- -- 14,354 Exercise of stock options at $7.14 per share 124,775 -- -- 124,950 Exercise of stock warrants at $8.00 per share 998,750 -- -- 1,000,000 ------------ ------------ ------------ ------------ Balance at May 31, 1999 117,185,514 (68,156,573) -- 49,171,340 Net loss -- (9,167,070) -- (9,167,070) Non-cash compensation 57,112 -- -- 57,112 Exercise of stock options at $13.38 per share 33,425 -- -- 33,450 ------------ ------------ ------------ ------------ Balance at May 31, 2000 117,276,051 (77,323,643) -- 40,094,832 Net loss (unaudited) -- (7,365,569) -- (7,365,569) Exercise of stock options at $10.81 per share 189,000 -- -- 189,175 Exercise of stock options at $6.38 per share 38,220 -- -- 33,280 ------------ ------------ ------------ ------------ Balance at February 28, 2001 (unaudited) 117,503,271 (84,689,212) -- 32,956,718 ============ ============ ============ ============
(Continued) 9 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Cash Flows Nine-month periods ended February 28, 2001 and February 29, 2000 and for the period from June 19, 1985 (inception) through February 28, 2001
NINE MONTHS ENDED CUMULATIVE ---------------------------- FROM FEBRUARY 28, FEBRUARY 29, JUNE 19, 1985 ---------------------------- THROUGH 2001 2000 FEBRUARY 28, 2001 (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ------------------ Cash flows from operating activities: Net loss $ (7,365,569) (6,809,815) (84,689,212) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 368,758 325,417 15,017,387 Non-cash compensation -- 74,328 3,552,723 Loss on sale of equipment -- -- 66,359 Changes in assets and liabilities: Prepaid expenses 185,641 194,964 (432,840) Other current assets (126,983) (61,126) (2,528,806) Other assets (49,200) -- (42,247) Accounts payable 285,786 (353,771) 1,347,153 Accrued expenses (24,458) (8,716) 149,551 Accrued compensation and benefits 18,050 38,215 268,620 Other liabilities 19,514 16,510 167,231 ------------ ---------- --------- Net cash used in operating activities (6,688,461) (6,583,994) (67,124,081) ------------ ---------- --------- Cash flows from investing activities: Purchase of property, plant, equipment, and capitalized engineering costs (723,556) (2,145,445) (17,764,358) Proceeds from matured marketable securities 7,548,171 15,549,200 362,938,152 Proceeds from sale of marketable securities -- -- 7,141,656 Purchase of marketable securities (8,218,827) (4,909,192) (393,879,789) Proceeds from sale of equipment -- 1,786,436 1,863,023 ------------ ---------- --------- Net cash used in investing activities (1,394,212) 10,280,999 (39,701,316) ------------ ---------- --------- Cash flows from financing activities: Proceeds from issuance of common stock 227,455 33,450 103,749,383 Payment of common stock issuance costs -- -- (5,072,012) Proceeds from issuance of preferred stock -- -- 6,644,953 Proceeds from sale of stock options to purchase common shares -- -- 7,443,118 Proceeds from issuance of notes payable -- -- 1,500,000 Repayment of notes payable -- -- (140,968) Net cash provided by financing activities 227,455 33,450 114,124,474 ------------ ---------- --------- Net increase (decrease) in cash (7,855,218) 3,730,455 7,299,077 Cash at beginning of period 15,154,295 25,855,668 -- ------------ ---------- --------- Cash at end of period $ 7,299,077 29,586,123 7,299,077 ============ ========== ===========
See accompanying independent accountants' review report. 10 NORTHFIELD LABORATORIES INC. (a company in the development stage) Notes to Financial Statements February 28, 2001 (1) BASIS OF PRESENTATION The interim financial statements presented are unaudited but, in the opinion of management, have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a basis consistent with those of the annual financial statements. Such interim financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for the interim period presented are not necessarily indicative of the results to be expected for the year ending May 31, 2001. The interim financial statements should be read in connection with the audited financial statements for the year ended May 31, 2000. (2) COMPUTATION OF NET LOSS PER SHARE Basic earnings per share is based on the weighted average number of shares outstanding and excludes the dilutive effect of unexercised common stock equivalents. Diluted earnings per share is based on the weighted average number of shares outstanding and includes the dilutive effect of unexercised common stock equivalents. Because the Company reported a net loss for all periods presented, basic and diluted per share amounts are the same. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Since Northfield's incorporation in 1985, we have devoted substantially all of our efforts and resources to the research, development and clinical testing of our potential product, PolyHeme(TM). We have incurred operating losses during each year of our operations since inception and expect to incur substantial additional operating losses for the next several years. From Northfield's inception through February 28, 2001, we have incurred operating losses totaling $84,689,000. Our success will depend on several factors, including our ability to obtain Food & Drug Administration regulatory approval of PolyHeme and our manufacturing facilities, obtain sufficient quantities of blood to manufacture PolyHeme in commercial quantities, manufacture and distribute PolyHeme in a cost-effective manner, and enforce our patent positions. We have experienced significant delays in the development and clinical testing of PolyHeme. We cannot ensure that we will be able to achieve these goals or that we will be able to realize product revenues or profitability on a sustained basis or at all. We anticipate that research and development expenses will increase during the foreseeable future. These expected increases are attributable to anticipated future clinical trials, monitoring and reporting the results of these trials and continuing process development associated with improving our manufacturing capacity to permit commercial-scale production of PolyHeme. We expect that general and administrative expenses will increase over the foreseeable future due to increased expenses relating to the expansion of our organization in support of potential expanded commercial operations. 12 RESULTS OF OPERATIONS We reported no revenues for either of the three-month periods ended February 28, 2001 or 2000. From Northfield's inception through February 28, 2001, we have reported total revenues of $3,000,000, all of which were derived from licensing fees. OPERATING EXPENSES Operating expenses for our third fiscal quarter ended February 28, 2001 totaled $3,109,000, an increase of $86,000 from the $3,023,000 reported in the third quarter of the prior fiscal year. Measured on a percentage basis, total expenses in the third quarter of fiscal 2001 increased by 2.8%. This increase was primarily due to higher costs related to the expansion of our manufacturing organization and facilities. Research and development expenses for the third quarter of fiscal 2001 totaled $2,489,000, an increase of $124,000, or 5.2%, from the $2,365,000, reported in the third quarter of fiscal 2000. The majority of the increase in research and development expenses resulted from increased costs associated with our expanded manufacturing organization and facilities. The clinical trials continue to shift from field work in the hospitals to data accumulation and analysis. Phase II and Phase III trials remain active in the field, but patient accrual has slowed. Research and development expenses for the nine-month period ended February 28, 2001 totaled $6,964,000, an increase of $113,000 or 1.6%, from the $6,851,000 of expense incurred in the comparable prior year period. The nature of expenditures has changed as higher 13 employment levels and salary increases have pushed labor costs up while purchased services have decreased as a 3rd party viral inactivation study conducted during the first half of the last fiscal year has not been repeated. We anticipate that research and development expenses will remain stable over the balance of the fiscal year. Beyond that, we expect these expenses to increase significantly. Additional costs are being planned for additional multi-center clinical trials, third party clinical monitoring, biostatistical analysis, report preparation, expanding our manufacturing organization and developing additional sources of hemoglobin. General and administrative expenses in the third quarter of fiscal 2001 totaled $620,000 compared to expenses of $658,000 in the third quarter of 2000, representing a decrease of $38,000, or 5.8%. The decrease was primarily due to lower travel expense. General and administrative expenses for the nine-month period ended February 28, 2001 totaled $2,048,000, which represents a $382,000, or 22.9%, increase from the $1,666,000 in the comparable prior year period. All of the increase was due to higher legal fees. 14 INTEREST INCOME Interest income in the third quarter of fiscal 2001 totaled $505,000, or a $53,000 decrease from the $558,000 in interest income reported in the third quarter of fiscal 2000. Higher interest rates early in fiscal 2001 somewhat offset lower available investment balances to account for the decrease. Currently available short-term interest rates are yielding over 2% less than the rates available for the comparable prior year period. Consequently, interest income will remain below prior year levels for the remainder of fiscal 2001 as the corporation will be investing smaller amounts which will be earning lower interest rates. Interest income for the nine-month period ended February 28, 2001 totaled $1,646,000, or a $62,000 decrease from the comparable prior year period. Higher interest rates available earlier in the current fiscal year offset declining investment balances and combined to cause the modest decrease in interest income. On a going forward basis, lower available interest rates and lower available investment balances will cause future interest income to remain below prior year levels. NET LOSS The net loss for the third quarter ended February 28, 2001 was $2,604,000, or $.18 per basic share, compared to a net loss of $2,464,000, or $.17 per basic share, for the third quarter ended February 29, 2000. The difference is due to the increased expense associated with our expanded manufacturing organization and facility costs. 15 For the nine-month period ended February 28, 2001, Northfield reported a loss of $7,366,000, or $.52 per basic share, compared to the comparable prior year period results of a loss of $6,810,000, or $.48 per basic share. Higher legal fees combined with an expanded manufacturing organization and higher facility costs accounted for the increased loss. LIQUIDITY AND CAPITAL RESOURCES From Northfield's inception through February 28, 2001, we have used cash for operating activities and for the purchase of engineering services and property, plant and equipment in the amount of $84,888,000. For the nine-month periods ended February 28, 2001 and 2000, these cash expenditures totaled $7,412,000, and $8,729,000, respectively. The decreased cash outlay for fiscal 2001 compared to the comparable prior year period reflects a decreased level of capital spending. We have financed our research and development and other activities to date primarily through the public and private sale of equity securities and, to a more limited extent, through the licensing of product rights. As of February 28, 2001, we had cash and marketable securities totaling $31,099,000. We believe our existing capital resources will be adequate to satisfy our operating capital requirements and maintain our existing manufacturing plant and office facilities for approximately the next 24-30 months. Thereafter, we are likely to require substantial additional capital to continue our 16 operations. We are currently unable to fund the construction of a large-scale greenfield manufacturing facility, which is estimated to cost approximately $45 million, without raising substantial additional capital. Currently, we have manufacturing capacity of approximately 10,000 units. Initial engineering on the leased space adjacent to our existing manufacturing facility is completed. This engineering indicates an additional capacity of 75,000 units could be developed in approximately 16-18 months at a cost of $26-30 million. Like the greenfield project, significant additional funding will be required before the smaller scale expansion facility could be completed. Northfield has not yet committed to the build-out of a smaller scale expansion facility. We view the smaller scale expansion facility as financially prudent yet large enough for commercial viability. We may enter into collaborative arrangements with strategic partners which could provide us with additional funding or absorb expenses we would otherwise be required to pay. We have engaged in discussions with a number of potential strategic partners. These discussions are at various stages and we cannot ensure that any of these arrangements will be consummated. Our capital requirements may vary materially from those now anticipated because of the results of our clinical testing of PolyHeme, the establishment of relationships with strategic partners, changes in the scale, timing or cost of our commercial manufacturing facility, competitive and technological advances, the FDA regulatory process, changes in our marketing and distribution strategy and other factors. 17 PART II. OTHER INFORMATION Item 6. Exhibits a) Exhibit 10.15 - Employment Agreement - Richard DeWoskin Exhibit 10.16 - Employment Agreement - Steven A. Gould, MD Exhibit 10.17 - Employment Agreement - Jack Kogut Exhibit 10.18 - Form of Indemnification Agreement - Director and Executive Officer, Richard DeWoskin and Steven A. Gould, MD Exhibit 10.19 - Form of Indemnification Agreement - Director, Gerald Moss, MD, Bruce Chelberg, David Savner, and Jack Olshansky Exhibit 10.20 - Form of Indemnification Agreement - Executive Officer, Jack Kogut Exhibit 15 - Acknowledgement of Independent Certified Public Accountants b) None. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 13, 2001. NORTHFIELD LABORATORIES INC. By /s/ RICHARD E. DEWOSKIN ----------------------------------------- Richard E. DeWoskin Chairman of the Board and Chief Executive Officer By /s/ JACK J. KOGUT ----------------------------------------- Jack J. Kogut Secretary and Treasurer (principal financial officer and principal accounting officer) EX-10.15 2 c61623ex10-15.txt EMPLOYMENT AGREEMENT - RICHARD DEWOSKIN 1 EXHIBIT 10.15 EMPLOYMENT AGREEMENT THIS AGREEMENT, made effective as of this 1st day of January, 2001, by and between RICHARD E. DEWOSKIN ("Employee") and NORTHFIELD LABORATORIES INC., a Delaware corporation (the "Company"). W I T N E S S E T H : WHEREAS, Employee is now employed as the Chief Executive Officer of the Company; WHEREAS, the Company and Employee now desire to enter into this Agreement in order to continue such employment for the term set forth herein and subject to the terms and conditions set forth herein; and WHEREAS, the Company and Employee desire to continue the Proprietary Information and Inventions Agreement entered into by and between Employee and the Company dated August 27, 1985 (the "Proprietary Information and Inventions Agreement") in full force and effect; NOW, THEREFORE, in consideration of the premises, and of the mutual covenants hereinafter set forth, the parties do hereby agree as follows: 1. Employment. The Company agrees to employ Employee, and Employee agrees to remain in the employ of the Company, for the period (the "Employment Period") beginning on January 1, 2001 and ending on the earlier to occur of (a) December 31, 2002 or (b) the date as of which Employee's employment is terminated pursuant to paragraph 5 of this Agreement. During the Employment Period, Employee shall serve as the Chief Executive Officer of the Company and shall perform such executive and managerial duties consistent with such position as the Board of Directors of the Company shall from time to time direct. Employee shall devote his full business time and attention to the business of the Company and its subsidiaries. 2. Location. Employee shall be based at the Company's headquarters in Evanston, Illinois, or at such other location as may be agreed upon by Employee and the Board of Directors of the Company. Employee shall, however, also travel to other locations at such times as may be reasonably required for the performance of his duties under this Agreement; provided that the frequency and duration of such travel shall not be substantially greater than the frequency and duration of Employee's travel during his employment by the Company prior to the date of this Agreement. 2 3. Compensation. During the Employment Period, Employee shall be compensated as follows: (a) Salary. An "Employment Year" shall be the twelve-month period beginning on the first day of the Employment Period and on each anniversary of such date during the Employment Period. For the first Employment Year, Employee shall be paid an annual base salary at a rate which is not less than $278,048 per year. For the second Employment Year, Employee shall be paid an annual base salary at a rate which is not less than $286,389 per year. Employee's base salary shall be paid in equal, semi-monthly installments. (b) Bonus. Employee shall be paid a cash bonus of $139,024 as of the date the Company files a Biologic License Application for its PolyHeme blood substitute product with the United States Food and Drug Administration. Employee shall be paid an additional cash bonus of $278,048 as of the date the Company is granted approval for the commercial sale of PolyHeme in the United States for any indication. The Board of Directors of the Company may in its discretion determine to award Employee additional cash bonuses from time to time during the term of this Agreement. (c) Award of Stock Options. On January 1, 2001, the Company awarded Employee stock options under the Northfield Laboratories Inc. 1999 Stock Option Plan to acquire 18,000 shares of the Company's Common Stock at an exercise price per share equal to the fair market value of the Company's Common Stock as of the date of grant. On or before January 1, 2002, the Compensation Committee of the Board of Directors of the Company shall review the performance of the Company and Executive during the first Employment Year and shall determine whether the award of additional stock options to Employee is appropriate. The Board of Directors of the Company may in its discretion determine to award Employee additional stock options or other forms of equity incentive compensation from time to time during the term of this Agreement. (d) Paid Vacation. Employee shall be entitled to five weeks paid vacation in each calendar year. Any vacation which is not used by Employee shall be forfeited at the end of the calendar year. (e) Expenses. Employee shall be reimbursed for all reasonable business expenses incurred in the performance of his duties pursuant to this Agreement, to the extent such expenses are substantiated and are consistent with the general policies of the Company and its subsidiaries relating to the reimbursement of expenses of senior executive officers. 2 3 (f) Fringe Benefits. In addition to any other compensation provided under this Agreement, Employee shall also be entitled to participate, during the Employment Period, in any and all pension, stock option, relocation, profit sharing, and other employee benefit plans or fringe benefit programs which are from time to time maintained by the Company or its subsidiaries for their senior executive officers, in accordance with the provisions of such plans or programs as from time to time in effect. (g) Deduction and Withholding. All compensation and other benefits payable to or on behalf of Employee pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by Employee or required by applicable law. 4. Other Benefits. The compensation provisions of this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that Employee or his beneficiaries may be entitled to receive under the provisions of any pension, stock option, profit sharing, disability (except as otherwise provided in subparagraph 6(b)), relocation or other employee benefit plan now or hereafter maintained by the Company or by any of its subsidiaries. The Company shall not make any changes in such plans or arrangements which would adversely affect Employee's rights or benefits thereunder, unless such change is made uniformly in a plan of general application to all of the Company's or a subsidiary's eligible employees. 5. Termination. Employee's employment may be terminated without any breach of this Agreement only under the following circumstances: (a) Death. Employee's employment shall terminate upon his death. (b) Disability. If, as a result of Employee's incapacity due to physical or mental illness or accident, (i) Employee shall have been absent from his duties for the Company on a full-time basis for the entire period of six consecutive months and (ii) within thirty days after written Notice of Termination is given (which may occur before or after the end of such six-month period) shall not have returned to the performance of his duties, the Company may terminate Employee's employment for "disability." (c) Cause. The Company may terminate Employee's employment hereunder for "cause." For purposes of this Agreement, "cause" shall mean the conviction of Employee of any felony or any failure by Employee to comply in all material respects with any material term of this Agreement or the Proprietary Information and Inventions Agreement which conduct or failure is materially injurious to the Company, monetarily or otherwise. Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for cause without (i) at least 60 days prior written notice from the Company to Employee setting forth the reasons for the Company's intention to terminate for cause, (ii) an opportunity to cure the stated cause during the 60-day notice period, and (iii) after all of the preceding procedures have been satisfied or made available, delivery to Employee 3 4 of a Notice of Termination from the Board of Directors of the Company finding that in the good faith opinion of such Board of Directors, Employee was guilty of the conduct or of the failure described in the second sentence of this subparagraph, specifying the particulars in detail, and that Employee has failed to cure the stated cause. (d) Termination by Employee. Employee may voluntarily terminate his employment at any time. Employee's termination of employment shall be for "good reason" if he voluntarily terminates his employment: (i) within 90 days after a "change in control" (as defined below) of the Company for any reason; (ii) at any time after a "change in control" of the Company because: (A) he has been reassigned to a position of lesser rank or status or to a location other than Evanston, Illinois (or such other location as Employee may agree), without his consent; or (B) his annual base salary has been reduced; or (C) his benefits have been reduced; (iii) because of a failure by the Company to comply with any material provision of this Agreement which has not been cured within ten days after written notice of such noncompliance has been given by the Employee to the Company; or (iv) because of any purported termination of the Employee's employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph 5(e) hereof (and for purposes of this Agreement no such purported termination shall be effective). For purposes of this Agreement, a "change in control" shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect as of the date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to the reporting requirements of the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred if: (i) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; 4 5 (ii) the stockholders of the Company approve any plan or proposal of liquidation or dissolution of the Company; (iii) there shall be consummated any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have, directly or indirectly, at least an 80% ownership interest in the outstanding Common Stock of the surviving corporation immediately after the merger; (iv) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities ordinarily having the right to vote for the election of directors; (v) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the "Board" generally, and as of the date hereof, the "Incumbent Board") cease for any reason to constitute a majority of the Board; provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall be, for purposes of this Agreement, considered as though such individual were a member of the Incumbent Board; provided further that, notwithstanding the foregoing, an individual whose initial assumption of office as a director is in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board shall not be considered as a member of the Incumbent Board for purposes of this Agreement; or (vi) the Board fails to nominate Employee for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (Employee having indicated his willingness to be nominated as a director and to serve as a director if elected), Employee is nominated for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (Employee having indicated his willingness to serve as a director if elected) but is not elected as a director by the Company's stockholders at such meeting, or Employee is removed from office as a director, with or without cause, by vote or consent of the Company's stockholders, if, in each case, such event occurs 5 6 in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board. (e) Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination because of Employee's death) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. (f) Date of Termination of Employment. "Date of Termination" shall mean (i) if Employee's employment is terminated by his death, the date of his death; (ii) if Employee's employment is terminated for disability pursuant to subparagraph 5(b) above, 30 days after Notice of Termination is given (provided that Employee shall not have returned to the performance of his duties during such thirty-day period); (iii) if Employee's employment is terminated for any other reason, the date specified in the Notice of Termination which shall not be less than 10 days nor more than 60 days from the date Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 6. Compensation Upon Termination of Employment or During Disability. (a) Death. If Employee's employment is terminated by his death, the Company shall continue to pay his full base salary at the rate then in effect to Employee's surviving spouse or, if he has no surviving spouse, to his estate as a death benefit for a period of one month following his Date of Termination. (b) Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to physical or mental illness or accident, the Company shall continue to pay him his full base salary at the rate then in effect for such period until his Date of Termination and shall pay him any bonus that becomes payable prior to his Date of Termination. Notwithstanding the preceding sentence any salary payments made to Employee during such period of incapacity shall be reduced (but not below zero) by amounts actually paid to the Employee for the same period and at or prior to the time of any such salary payment under disability benefit plans maintained by the Company; provided such 6 7 disability benefit amounts were not previously applied to reduce any such salary payment. (c) Cause. If Employee's employment is terminated for cause, the Company shall pay Employee his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and, except for other compensation or benefits accrued through his Date of Termination, the Company shall have no further obligations to Employee under this Agreement except as otherwise required by applicable law. (d) Breach; Termination for Good Reason. If (i) in breach of this Agreement, the Company shall terminate Employee's employment other than pursuant to subparagraphs 5(a), 5(b) or 5(c) hereof (it being understood that a purported termination pursuant to subparagraphs 5(b) or 5(c) hereof which is disputed and finally determined not to have been proper shall be a termination of Employee's employment by the Company in breach of this Agreement) or (ii) Employee shall terminate his employment for good reason, then: (i) the Company shall make a lump sum payment to Employee, not later that five business days after the Notice of Termination is given by the Company or Employee, as applicable, in an amount equal to two times Employee's highest annual base salary as in effect at any time during the twelve months preceding the date such Notice of Termination is given; (ii) the Company shall pay to Employee, not later than five business days after the date they become due and payable, any bonus that would have been payable to Employee pursuant to subparagraph 3(b) had Employees employment with the Company continued through the expiration of the Employment Period; (iii) if the termination of Employee's employment occurs after the date of a change in control of the Company, any stock options held by Executive that did not become fully vested and exercisable as of the date of such change in control shall become fully vested and exercisable as of the Date of Termination; and (iv) until the second anniversary of the date the Notice of Termination is given by the Company or Employee, as applicable, Employee shall continue to be eligible to participate in any accident, health, disability, life or similar employee welfare benefit plans maintained by the Company or its subsidiaries, to the same extent he was eligible to participate in such plans at any time during the twelve months preceding the date such Notice of Termination is given and at no cost to him; provided that if such continued participation is precluded by the provisions of such plans or by applicable law, the Company shall provide Employee with comparable benefits of equivalent value. 7 8 Employee understands and agrees that if he materially breaches any material provision of the Proprietary Information and Inventions Agreement, the Company shall cease to have any obligation to make any payment under this subparagraph 6(d). (e) Voluntary Termination. If Employee voluntarily terminates his employment other than for good reason, he shall not be entitled to receive any compensation or benefits pursuant to this Agreement, other than compensation or benefits accrued through the Date of Termination or as otherwise required by law. (f) Post-Employment Period Severance. If Employee's employment with the Company terminates at any time after December 31, 2002 for any reason other than Employee's death, disability or discharge for cause and an "employment offer" (as defined below) by the Company is not outstanding as of the date of the termination of Employee's employment, then the Company shall continue to pay Employee his full base salary, at a rate equal to the rate in effect immediately prior to December 31, 2002, until December 31, 2004. If Employee's employment with the Company terminates at any time after December 31, 2002 for any reason other than Employee's death, disability or discharge for cause and an "employment offer" by the Company is outstanding as of the date of the termination of Employee's employment, then the Company shall continue to pay Employee his full base salary, at a rate equal to the rate in effect immediately prior to December 31, 2002, until December 31, 2003. An "employment offer" shall be deemed to be outstanding as of the date of the termination of Employee's employment with the Company if, as of such date, there is outstanding a written offer by the Company to enter into an employment agreement with Employee in substantially the form of this Agreement providing for a term of employment ending on or after December 31, 2004 and an annual base salary at least equal to Employee's base salary in effect immediately prior to December 31, 2002. The Company shall notify Employee in writing at least 30 days prior to the expiration of the Employment Period as to whether the Company plans to extend an employment offer to Employee. Employee shall not be entitled to receive any severance payments under this subparagraph 6(f) if Employee and the Company enter into an employment or severance agreement after the date of this Agreement (including any renewal or extension of this Agreement) that includes severance arrangements relating to the termination of Employee's employment with the Company after December 31, 2002. Employee understands and agrees that if he materially breaches any material provision of the Proprietary Information and Inventions Agreement, the Company shall cease to have any obligation to make any severance payments under this subparagraph. Employee further understands and agrees that the payments to be made to Employee pursuant to this Section 6(f) may be applied by the Company to satisfy its payment obligations set forth in Section 5 of the Proprietary Information and Inventions Agreement for the period during which payments are being made to Employee in accordance with this Section 6(f). 8 9 (g) Mitigation. Employee shall not be required to mitigate the amount of any payment provided for this paragraph 6 by seeking other employment or otherwise, nor shall the amount of any payments provided in this Agreement be reduced by any compensation earned by Employee as the result of his self-employment or his employment by another employer after his Date of Termination. 7. Excise Tax Payments. (a) Right to Receive Gross-Up Payment. In the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) to Employee or for Employee's benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, Employee's employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to herein as the "Excise Tax"), then Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes and the Excise Tax, other than interest and penalties imposed by reason of Employee's failure to file timely a tax return or pay taxes shown due on Employee's return, and including any Excise Tax imposed upon the Gross-Up Payment), Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Determination Relating to Gross-Up Payment. An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Company's expense by an accounting firm of recognized national standing selected by the Company and reasonably acceptable to Employee (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to the Company and Employee within five days of the Date of Termination, if applicable, or such other time as requested by the Company or by Employee (provided Employee reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax shall be imposed with respect to any such Payment or Payments. The Gross-Up Payment, if any, as determined pursuant to this subparagraph 7(b) shall be paid by the Company to Employee within five days after the receipt of the Determination. Within ten days after the delivery of the Determination to Employee, Employee shall have the right to dispute the Determination (the "Dispute"). The existence of the Dispute shall not 9 10 in any way affect Employee's right to receive the Gross-Up Payment in accordance with the Determination. If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and Employee, subject to the application of the provisions of subparagraph 7(c). (c) Excess Payment and Underpayment. As a result of uncertainty in the application of Sections 280G and 4999 of the Code, it is possible that a Gross-Up Payment (or a portion thereof) shall be paid which should not be paid (an "Excess Payment") or that a Gross-Up Payment (or a portion thereof) which should be paid shall not be paid (an "Underpayment"). An Underpayment shall be deemed to have occurred (i) upon notice (formal or informal) to Employee from any governmental taxing authority that Employee's tax liability (whether in respect of Employee's current taxable year or in respect of any prior taxable year) may be increased by reason of the imposition of the Excise Tax on a Payment or Payments with respect to which the Company has failed to make a sufficient Gross-Up Payment, (ii) upon a determination by a court, (iii) by reason of a determination by the Company (which shall include the position taken by the Company, together with its consolidated group, on its federal income tax return) or (iv) upon the resolution of the Dispute to Employee's satisfaction. If an Underpayment occurs, Employee shall promptly notify the Company and the Company shall promptly, but in any event at least five days prior to the date on which the applicable government taxing authority has requested payment, pay to Employee an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties (other than interest and penalties imposed by reason of Employee's failure to file timely a tax return or pay taxes shown due on Employee's return) imposed on the Underpayment. An Excess Payment shall deemed to have occurred upon a Final Determination (as hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or Payments (or portion thereof) with respect to which Employee had previously received a Gross-Up Payment. A "Final Determination" shall be deemed to have occurred when Employee has received from the applicable government taxing authority a refund of taxes or other reduction in Employee's tax liability by reason of the Excise Payment and upon either (i) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Employee and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired or (ii) the statute of limitations with respect to Employee's applicable tax return has expired. If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to Employee and Employee shall pay to the Company on demand (but not less than 10 days after the determination of such Excess Payment and written notice has been delivered to Employee) the amount of the Excess Payment plus interest at an annual rate equal to the Applicable Federal Rate provided for in Section 1274(d) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to Employee until the date of repayment to the Company. 10 11 (d) Payment of Excise Tax Withholding. Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax is imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities as Excise Tax withholding the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments. 8. Successors; Binding Agreement. (a) Successors to the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to terminate his employment with the Company for good reason. As used in this Agreement, "Company" shall mean the Company and any successor to its business and/or assets which executes and delivers the agreement provided for in this paragraph 8 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) Assignment. Employee's rights and interests under this Agreement may not be assigned, pledged or encumbered by him without the Company's written consent. This Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amounts would still be payable to him hereunder if he had continued to live all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's surviving spouse or, if there is no surviving spouse, to his estate. 9. Proprietary Information. Employee and the Company have entered into the Proprietary Information and Inventions Agreement, which agreement shall remain in full force and effect. 10. Payment of Costs and Indemnification. (a) Payment of Costs. In the event that a dispute arises regarding termination of Employee's employment or the interpretation or enforcement of this Agreement, the Company shall promptly pay, or reimburse to Employee, as and when incurred, all reasonable fees and expenses (including reasonable legal fees and expenses, court costs, costs of investigation and similar expenses) incurred by Employee in contesting or disputing any such termination, in seeking to obtain or enforce any right or benefit provided for in this Agreement, or in otherwise pursuing his claim; provided, however, that the Company shall be entitled to 11 12 recover from Employee the amount of any such fees and expenses paid by the Company if the Company obtains a final judgment in its favor on the merits of such dispute from a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise. (b) Indemnification. The Company shall indemnify and hold Employee harmless to he maximum extent permitted by law against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by Employee in connection with the defense of, or as a result of, any action or proceeding (or any appeal from any action or proceeding) in which Employee is made or is threatened to be made a party by reason of the fact that Employee is or was an employee, officer, or director of the Company or any of its subsidiaries, regardless of whether such action or proceeding is one brought by or in the right of the Company to procure a judgment in its favor. The undertaking of subparagraph (a) above is independent of, and shall not be limited or prejudiced by, the undertakings of this subparagraph (b). The indemnification provided in this Agreement is in addition to, and not in derogation of, any rights to indemnification or advancement of expenses to which Executive may otherwise be entitled under the Certificate of Incorporation or Bylaws of the Company, any indemnification contract or agreement, any policy of insurance or otherwise. (c) Warranty. The Company hereby represents and warrants that the undertakings of payment and indemnification set out in (a) and (b) above are not in conflict with the Certificate of Incorporation or Bylaws of the Company or with any validly existing agreement or other proper corporate action of the Company. 11. Registration Rights. (a) Demand Registration. Upon the terms and subject to the conditions set forth in this paragraph 11, Employee or his estate or legal representative may request a single registration (the "Demand Registration") under the Securities Act of 1933, as amended (the "Securities Act"), of all or part of the shares of the Company's Common Stock beneficially owned by Employee or his estate (collectively, the "Registrable Securities"). (b) Demand Priority. The Company shall not include in the Demand Registration any securities which are not Registrable Securities without the prior written consent of Employee or his estate or legal representative. If the Demand Registration is an underwritten offering and the managing underwriters advise the Company that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities which can be sold in an orderly manner in such offering within a price range acceptable to Employee or his estate or legal representative, the Company shall include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of 12 13 such underwriters can be sold in an orderly manner within the price range of such offering. (c) Postponement Right. The Company may postpone for up to 90 days the filing or the effectiveness of a registration statement for the Demand Registration if the Board of Directors of the Company determines in good faith that such Demand Registration would reasonably be expected to have an adverse effect on any proposal or plan by the Company to engage in any acquisition of assets (other than in the ordinary course of business), merger, consolidation or tender offer or to enter into any material license agreement, joint venture arrangement or similar transaction; provided that in such event, the holders of Registrable Securities shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as the permitted Demand Registration hereunder and the Company shall pay all registration expenses in connection with such registration in accordance with subparagraph 11(h). (d) Piggyback Registrations. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company shall give prompt written notice to Employee of its intention to effect such a registration and shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the giving of the Company's notice. (e) Piggyback Priority on Company Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities and any other securities requested to be included in such registration by holders entitled to registration rights in connection therewith, pro rata among such holders based on the number of shares requested to be included in such registration, and (iii) third, other securities requested to be included in such registration (f) Piggyback Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the holders initially requesting such registration, the Company shall include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration and the Registrable Securities requested to be included therein by the holders thereof, pro rata among such holders based on the number of shares requested to be included in 13 14 such registration, and (ii) second, other securities requested to be included in such registration. (g) Best Efforts by the Company. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition. (h) Registration Expenses. The Company shall pay all expenses incident to the registration and disposition of the Registrable Securities pursuant to this Agreement, including all registration, filing and applicable securities exchange fees, all fees and expenses of complying with state securities or blue sky laws (including fees and disbursements of counsel to the underwriters or the holders of Registrable Securities in connection with "blue sky" qualification of the Registrable Securities and determination of their eligibility for investment under the laws of the various jurisdictions), all word processing, duplicating and printing expenses, all messenger and delivery expenses, the fees and disbursements of counsel for the Company and of counsel for any other person reasonably requested by the holders of a majority of the Registrable Securities included in the registration, the fees and expenses of the Company's independent public accountants and any other independent public accountants whose opinions are included in the registration statement, including the expenses of "cold comfort" letters or any special audits required by, or incident to, such registration, all fees and disbursements of underwriters (other than underwriting discounts and commissions), all transfer taxes, and the reasonable fees and expenses of counsel and accountants to the holders of Registrable Securities; provided that the holders of Registrable Securities will be required to pay all underwriting discounts and commissions in respect of the Registrable Securities being registered by such holders. In connection with any registration pursuant to this Agreement, the Company will not be obligated to pay the fees and expenses for more than one counsel, other than local and special counsel, or for more than one firm of accountants representing the holders of Registrable Securities. (i) Indemnification by the Company. The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In 14 15 connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (j) Indemnification by Holders. In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify shall be individual to each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (k) Limitations on Exercise. The registration rights provided in this paragraph 11 shall be exercisable only after the occurrence of a change in control of the Company. 12. General Provisions. (a) Fees and Expenses. The Company shall pay as they become due all legal fees and related expenses (including the costs of experts) incurred by Employee as a result of (i) Employee's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) and (ii) Employee seeking to obtain or enforce any right or benefit provided by this Agreement (including any such fees and expenses incurred in connection with any Dispute or Gross-Up Payment, whether as a result of any applicable government taxing authority proceeding, audit or otherwise) or by any other plan or arrangement maintained by the Company under which Employee is or may be entitled to receive benefits. (b) No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any right of set-off, counterclaim, recoupment, defense or other right which the Company may have against Employee or others. 15 16 (c) Effect of Headings. The headings of all of the paragraphs and subparagraphs of this Agreement are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement. (d) Modification, Amendment, Waiver. No modification, amendment, or waiver of any provision of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision of this Agreement in accordance with its terms. (e) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidly, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (f) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person. (g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois. (h) Notices. Any notice to be served under this Agreement shall be in writing and shall be mailed by registered mail, return receipt requested, addressed: If to the Company, to: Northfield Laboratories Inc. 1560 Sherman Avenue Evanston, Illinois 60201-4422 Attention: Board of Directors If to Employee, to: c/o Northfield Laboratories Inc. 1560 Sherman Avenue Evanston, Illinois 60201-4422 or to such other place as either party may specify in writing, delivered in accordance with the provisions of this subparagraph. 16 17 (i) Survival. The rights and obligations of the parties shall survive the term of Employee's employment to the extent that any performance is required under this Agreement after the expiration or termination of such term. (j) Entire Agreement. This Agreement, together with the Proprietary Information and Inventions Agreement described in paragraph 9 above, constitutes the entire agreement of the parties with respect to the subject matter thereof, and supersedes all previous agreements between the parties relating to the same subject matter (but excluding the Proprietary Information and Inventions Agreement, which agreement shall remain in full force and effect). (k) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document. * * * * * 17 18 * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. EMPLOYEE NORTHFIELD LABORATORIES INC. /s/ Richard E. DeWoskin By - ------------------------ ----------------------- Richard E. DeWoskin Its ----------------------- 18 EX-10.16 3 c61623ex10-16.txt EMPLOYMENT AGREEMENT - STEVEN A. GOULD MD 1 EXHIBIT 10.16 EMPLOYMENT AGREEMENT THIS AGREEMENT, made effective as of this 1st day of January, 2001, by and between STEVEN A. GOULD, M.D. ("Employee") and NORTHFIELD LABORATORIES INC., a Delaware corporation (the "Company"). W I T N E S S E T H : WHEREAS, Employee is now employed as the President of the Company; WHEREAS, the Company and Employee now desire to enter into this Agreement in order to continue such employment for the term set forth herein and subject to the terms and conditions set forth herein; and WHEREAS, the Company and Employee desire to continue the Proprietary Information and Inventions Agreement entered into by and between Employee and the Company dated September 1, 1985 (the "Proprietary Information and Inventions Agreement") in full force and effect; NOW, THEREFORE, in consideration of the premises, and of the mutual covenants hereinafter set forth, the parties do hereby agree as follows: 1. Employment. The Company agrees to employ Employee, and Employee agrees to remain in the employ of the Company, for the period (the "Employment Period") beginning on January 1, 2001 and ending on the earlier to occur of (a) December 31, 2002 or (b) the date as of which Employee's employment is terminated pursuant to paragraph 5 of this Agreement. During the Employment Period, Employee shall serve as the President of the Company and shall perform such executive and managerial duties consistent with such position as the Chief Executive Officer and the Board of Directors of the Company shall from time to time direct. Employee shall devote his full business time and attention to the business of the Company and its subsidiaries. 2. Location. Employee shall be based at the Company's headquarters in Evanston, Illinois, or at such other location as may be agreed upon by Employee and the Board of Directors of the Company. Employee shall, however, also travel to other locations at such times as may be reasonably required for the performance of his duties under this Agreement; provided that the frequency and duration of such travel shall not be substantially greater than the frequency and duration of Employee's travel during his employment by the Company prior to the date of this Agreement. 2 3. Compensation. During the Employment Period, Employee shall be compensated as follows: (a) Salary. An "Employment Year" shall be the twelve-month period beginning on the first day of the Employment Period and on each anniversary of such date during the Employment Period. For the first Employment Year, Employee shall be paid an annual base salary at a rate which is not less than $294,973 per year. For the second Employment Year, Employee shall be paid an annual base salary at a rate which is not less than $303,822 per year. Employee's base salary shall be paid in equal, semi-monthly installments. (b) Bonus. Employee shall be paid a cash bonus of $147,486 as of the date the Company files a Biologic License Application for its PolyHeme blood substitute product with the United States Food and Drug Administration. Employee shall be paid an additional cash bonus of $294,973 as of the date the Company is granted approval for the commercial sale of PolyHeme in the United States for any indication. The Board of Directors of the Company may in its discretion determine to award Employee additional cash bonuses from time to time during the term of this Agreement. (c) Award of Stock Options. On January 1, 2001, the Company awarded Employee stock options under the Northfield Laboratories Inc. 1999 Stock Option Plan to acquire 15,000 shares of the Company's Common Stock at an exercise price per share equal to the fair market value of the Company's Common Stock as of the date of grant. On or before January 1, 2002, the Compensation Committee of the Board of Directors of the Company shall review the performance of the Company and Executive during the first Employment Year and shall determine whether the award of additional stock options to Employee is appropriate. The Board of Directors of the Company may in its discretion determine to award Employee additional stock options or other forms of equity incentive compensation from time to time during the term of this Agreement. (d) Paid Vacation. Employee shall be entitled to five weeks paid vacation in each calendar year. Any vacation which is not used by Employee shall be forfeited at the end of the calendar year. (e) Expenses. Employee shall be reimbursed for all reasonable business expenses incurred in the performance of his duties pursuant to this Agreement, to the extent such expenses are substantiated and are consistent with the general policies of the Company and its subsidiaries relating to the reimbursement of expenses of senior executive officers. 2 3 (f) Fringe Benefits. In addition to any other compensation provided under this Agreement, Employee shall also be entitled to participate, during the Employment Period, in any and all pension, stock option, relocation, profit sharing, and other employee benefit plans or fringe benefit programs which are from time to time maintained by the Company or its subsidiaries for their senior executive officers, in accordance with the provisions of such plans or programs as from time to time in effect. (g) Deduction and Withholding. All compensation and other benefits payable to or on behalf of Employee pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by Employee or required by applicable law. 4. Other Benefits. The compensation provisions of this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that Employee or his beneficiaries may be entitled to receive under the provisions of any pension, stock option, profit sharing, disability (except as otherwise provided in subparagraph 6(b)), relocation or other employee benefit plan now or hereafter maintained by the Company or by any of its subsidiaries. The Company shall not make any changes in such plans or arrangements which would adversely affect Employee's rights or benefits thereunder, unless such change is made uniformly in a plan of general application to all of the Company's or a subsidiary's eligible employees. 5. Termination. Employee's employment may be terminated without any breach of this Agreement only under the following circumstances: (a) Death. Employee's employment shall terminate upon his death. (b) Disability. If, as a result of Employee's incapacity due to physical or mental illness or accident, (i) Employee shall have been absent from his duties for the Company on a full-time basis for the entire period of six consecutive months and (ii) within thirty days after written Notice of Termination is given (which may occur before or after the end of such six-month period) shall not have returned to the performance of his duties, the Company may terminate Employee's employment for "disability." (c) Cause. The Company may terminate Employee's employment hereunder for "cause." For purposes of this Agreement, "cause" shall mean the conviction of Employee of any felony or any failure by Employee to comply in all material respects with any material term of this Agreement or the Proprietary Information and Inventions Agreement which conduct or failure is materially injurious to the Company, monetarily or otherwise. Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for cause without (i) at least 60 days prior written notice from the Company to Employee setting forth the reasons for the Company's intention to terminate for cause, (ii) an opportunity to cure the stated cause during the 60-day notice period, and (iii) after all of the preceding procedures have been satisfied or made available, delivery to Employee 3 4 of a Notice of Termination from the Board of Directors of the Company finding that in the good faith opinion of such Board of Directors, Employee was guilty of the conduct or of the failure described in the second sentence of this subparagraph, specifying the particulars in detail, and that Employee has failed to cure the stated cause. (d) Termination by Employee. Employee may voluntarily terminate his employment at any time. Employee's termination of employment shall be for "good reason" if he voluntarily terminates his employment: (i) within 90 days after a "change in control" (as defined below) of the Company for any reason; (ii) at any time after a "change in control" of the Company because: (A) he has been reassigned to a position of lesser rank or status or to a location other than Evanston, Illinois (or such other location as Employee may agree), without his consent; or (B) his annual base salary has been reduced; or (C) his benefits have been reduced; (iii) because of a failure by the Company to comply with any material provision of this Agreement which has not been cured within ten days after written notice of such noncompliance has been given by the Employee to the Company; or (iv) because of any purported termination of the Employee's employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph 5(e) hereof (and for purposes of this Agreement no such purported termination shall be effective). For purposes of this Agreement, a "change in control" shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect as of the date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to the reporting requirements of the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred if: (i) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; 4 5 (ii) the stockholders of the Company approve any plan or proposal of liquidation or dissolution of the Company; (iii) there shall be consummated any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have, directly or indirectly, at least an 80% ownership interest in the outstanding Common Stock of the surviving corporation immediately after the merger; (iv) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities ordinarily having the right to vote for the election of directors; (v) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the "Board" generally, and as of the date hereof, the "Incumbent Board") cease for any reason to constitute a majority of the Board; provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall be, for purposes of this Agreement, considered as though such individual were a member of the Incumbent Board; provided further that, notwithstanding the foregoing, an individual whose initial assumption of office as a director is in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board shall not be considered as a member of the Incumbent Board for purposes of this Agreement; or (vi) the Board fails to nominate Employee for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (Employee having indicated his willingness to be nominated as a director and to serve as a director if elected), Employee is nominated for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (Employee having indicated his willingness to serve as a director if elected) but is not elected as a director by the Company's stockholders at such meeting, or Employee is removed from office as a director, with or without cause, by vote or consent of the Company's stockholders, if, in each case, such event occurs 5 6 in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board. (e) Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination because of Employee's death) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. (f) Date of Termination of Employment. "Date of Termination" shall mean (i) if Employee's employment is terminated by his death, the date of his death; (ii) if Employee's employment is terminated for disability pursuant to subparagraph 5(b) above, 30 days after Notice of Termination is given (provided that Employee shall not have returned to the performance of his duties during such thirty-day period); (iii) if Employee's employment is terminated for any other reason, the date specified in the Notice of Termination which shall not be less than 10 days nor more than 60 days from the date Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 6. Compensation Upon Termination of Employment or During Disability. (a) Death. If Employee's employment is terminated by his death, the Company shall continue to pay his full base salary at the rate then in effect to Employee's surviving spouse or, if he has no surviving spouse, to his estate as a death benefit for a period of one month following his Date of Termination. (b) Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to physical or mental illness or accident, the Company shall continue to pay him his full base salary at the rate then in effect for such period until his Date of Termination and shall pay him any bonus that becomes payable prior to his Date of Termination. Notwithstanding the preceding sentence any salary payments made to Employee during such period of incapacity shall be reduced (but not below zero) by amounts actually paid to the Employee for the same period and at or prior to the time of any such salary payment under disability benefit plans maintained by the Company; provided such 6 7 disability benefit amounts were not previously applied to reduce any such salary payment. (c) Cause. If Employee's employment is terminated for cause, the Company shall pay Employee his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and, except for other compensation or benefits accrued through his Date of Termination, the Company shall have no further obligations to Employee under this Agreement except as otherwise required by applicable law. (d) Breach; Termination for Good Reason. If (i) in breach of this Agreement, the Company shall terminate Employee's employment other than pursuant to subparagraphs 5(a), 5(b) or 5(c) hereof (it being understood that a purported termination pursuant to subparagraphs 5(b) or 5(c) hereof which is disputed and finally determined not to have been proper shall be a termination of Employee's employment by the Company in breach of this Agreement) or (ii) Employee shall terminate his employment for good reason, then: (i) the Company shall make a lump sum payment to Employee, not later that five business days after the Notice of Termination is given by the Company or Employee, as applicable, in an amount equal to two times Employee's highest annual base salary as in effect at any time during the twelve months preceding the date such Notice of Termination is given; (ii) the Company shall pay to Employee, not later than five business days after the date they become due and payable, any bonus that would have been payable to Employee pursuant to subparagraph 3(b) had Employees employment with the Company continued through the expiration of the Employment Period; (iii) if the termination of Employee's employment occurs after the date of a change in control of the Company, any stock options held by Executive that did not become fully vested and exercisable as of the date of such change in control shall become fully vested and exercisable as of the Date of Termination; and (iv) until the second anniversary of the date the Notice of Termination is given by the Company or Employee, as applicable, Employee shall continue to be eligible to participate in any accident, health, disability, life or similar employee welfare benefit plans maintained by the Company or its subsidiaries, to the same extent he was eligible to participate in such plans at any time during the twelve months preceding the date such Notice of Termination is given and at no cost to him; provided that if such continued participation is precluded by the provisions of such plans or by applicable law, the Company shall provide Employee with comparable benefits of equivalent value. 7 8 Employee understands and agrees that if he materially breaches any material provision of the Proprietary Information and Inventions Agreement, the Company shall cease to have any obligation to make any payment under this subparagraph 6(d). (e) Voluntary Termination. If Employee voluntarily terminates his employment other than for good reason, he shall not be entitled to receive any compensation or benefits pursuant to this Agreement, other than compensation or benefits accrued through the Date of Termination or as otherwise required by law. (f) Post-Employment Period Severance. If Employee's employment with the Company terminates at any time after December 31, 2002 for any reason other than Employee's death, disability or discharge for cause and an "employment offer" (as defined below) by the Company is not outstanding as of the date of the termination of Employee's employment, then the Company shall continue to pay Employee his full base salary, at a rate equal to the rate in effect immediately prior to December 31, 2002, until December 31, 2004. If Employee's employment with the Company terminates at any time after December 31, 2002 for any reason other than Employee's death, disability or discharge for cause and an "employment offer" by the Company is outstanding as of the date of the termination of Employee's employment, then the Company shall continue to pay Employee his full base salary, at a rate equal to the rate in effect immediately prior to December 31, 2002, until December 31, 2003. An "employment offer" shall be deemed to be outstanding as of the date of the termination of Employee's employment with the Company if, as of such date, there is outstanding a written offer by the Company to enter into an employment agreement with Employee in substantially the form of this Agreement providing for a term of employment ending on or after December 31, 2004 and an annual base salary at least equal to Employee's base salary in effect immediately prior to December 31, 2002. The Company shall notify Employee in writing at least 30 days prior to the expiration of the Employment Period as to whether the Company plans to extend an employment offer to Employee. Employee shall not be entitled to receive any severance payments under this subparagraph 6(f) if Employee and the Company enter into an employment or severance agreement after the date of this Agreement (including any renewal or extension of this Agreement) that includes severance arrangements relating to the termination of Employee's employment with the Company after December 31, 2002. Employee understands and agrees that if he materially breaches any material provision of the Proprietary Information and Inventions Agreement, the Company shall cease to have any obligation to make any severance payments under this subparagraph. Employee further understands and agrees that the payments to be made to Employee pursuant to this Section 6(f) may be applied by the Company to satisfy its payment obligations set forth in Section 5 of the Proprietary Information and Inventions Agreement for the period during which payments are being made to Employee in accordance with this Section 6(f). 8 9 (g) Mitigation. Employee shall not be required to mitigate the amount of any payment provided for this paragraph 6 by seeking other employment or otherwise, nor shall the amount of any payments provided in this Agreement be reduced by any compensation earned by Employee as the result of his self-employment or his employment by another employer after his Date of Termination. 7. Excise Tax Payments. (a) Right to Receive Gross-Up Payment. In the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) to Employee or for Employee's benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, Employee's employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to herein as the "Excise Tax"), then Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes and the Excise Tax, other than interest and penalties imposed by reason of Employee's failure to file timely a tax return or pay taxes shown due on Employee's return, and including any Excise Tax imposed upon the Gross-Up Payment), Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Determination Relating to Gross-Up Payment. An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Company's expense by an accounting firm of recognized national standing selected by the Company and reasonably acceptable to Employee (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to the Company and Employee within five days of the Date of Termination, if applicable, or such other time as requested by the Company or by Employee (provided Employee reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax shall be imposed with respect to any such Payment or Payments. The Gross-Up Payment, if any, as determined pursuant to this subparagraph 7(b) shall be paid by the Company to Employee within five days after the receipt of the Determination. Within ten days after the delivery of the Determination to Employee, Employee shall have the right to dispute the Determination (the "Dispute"). The existence of the Dispute shall not 9 10 in any way affect Employee's right to receive the Gross-Up Payment in accordance with the Determination. If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and Employee, subject to the application of the provisions of subparagraph 7(c). (c) Excess Payment and Underpayment. As a result of uncertainty in the application of Sections 280G and 4999 of the Code, it is possible that a Gross-Up Payment (or a portion thereof) shall be paid which should not be paid (an "Excess Payment") or that a Gross-Up Payment (or a portion thereof) which should be paid shall not be paid (an "Underpayment"). An Underpayment shall be deemed to have occurred (i) upon notice (formal or informal) to Employee from any governmental taxing authority that Employee's tax liability (whether in respect of Employee's current taxable year or in respect of any prior taxable year) may be increased by reason of the imposition of the Excise Tax on a Payment or Payments with respect to which the Company has failed to make a sufficient Gross-Up Payment, (ii) upon a determination by a court, (iii) by reason of a determination by the Company (which shall include the position taken by the Company, together with its consolidated group, on its federal income tax return) or (iv) upon the resolution of the Dispute to Employee's satisfaction. If an Underpayment occurs, Employee shall promptly notify the Company and the Company shall promptly, but in any event at least five days prior to the date on which the applicable government taxing authority has requested payment, pay to Employee an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties (other than interest and penalties imposed by reason of Employee's failure to file timely a tax return or pay taxes shown due on Employee's return) imposed on the Underpayment. An Excess Payment shall deemed to have occurred upon a Final Determination (as hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or Payments (or portion thereof) with respect to which Employee had previously received a Gross-Up Payment. A "Final Determination" shall be deemed to have occurred when Employee has received from the applicable government taxing authority a refund of taxes or other reduction in Employee's tax liability by reason of the Excise Payment and upon either (i) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Employee and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired or (ii) the statute of limitations with respect to Employee's applicable tax return has expired. If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to Employee and Employee shall pay to the Company on demand (but not less than 10 days after the determination of such Excess Payment and written notice has been delivered to Employee) the amount of the Excess Payment plus interest at an annual rate equal to the Applicable Federal Rate provided for in Section 1274(d) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to Employee until the date of repayment to the Company. 10 11 (d) Payment of Excise Tax Withholding. Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax is imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities as Excise Tax withholding the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments. 8. Successors; Binding Agreement. (a) Successors to the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to terminate his employment with the Company for good reason. As used in this Agreement, "Company" shall mean the Company and any successor to its business and/or assets which executes and delivers the agreement provided for in this paragraph 8 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) Assignment. Employee's rights and interests under this Agreement may not be assigned, pledged or encumbered by him without the Company's written consent. This Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amounts would still be payable to him hereunder if he had continued to live all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's surviving spouse or, if there is no surviving spouse, to his estate. 9. Proprietary Information. Employee and the Company have entered into the Proprietary Information and Inventions Agreement, which agreement shall remain in full force and effect. 10. Payment of Costs and Indemnification. (a) Payment of Costs. In the event that a dispute arises regarding termination of Employee's employment or the interpretation or enforcement of this Agreement, the Company shall promptly pay, or reimburse to Employee, as and when incurred, all reasonable fees and expenses (including reasonable legal fees and expenses, court costs, costs of investigation and similar expenses) incurred by Employee in contesting or disputing any such termination, in seeking to obtain or enforce any right or benefit provided for in this Agreement, or in otherwise pursuing his claim; provided, however, that the Company shall be entitled to 11 12 recover from Employee the amount of any such fees and expenses paid by the Company if the Company obtains a final judgment in its favor on the merits of such dispute from a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise. (b) Indemnification. The Company shall indemnify and hold Employee harmless to he maximum extent permitted by law against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by Employee in connection with the defense of, or as a result of, any action or proceeding (or any appeal from any action or proceeding) in which Employee is made or is threatened to be made a party by reason of the fact that Employee is or was an employee, officer, or director of the Company or any of its subsidiaries, regardless of whether such action or proceeding is one brought by or in the right of the Company to procure a judgment in its favor. The undertaking of subparagraph (a) above is independent of, and shall not be limited or prejudiced by, the undertakings of this subparagraph (b). The indemnification provided in this Agreement is in addition to, and not in derogation of, any rights to indemnification or advancement of expenses to which Executive may otherwise be entitled under the Certificate of Incorporation or Bylaws of the Company, any indemnification contract or agreement, any policy of insurance or otherwise. (c) Warranty. The Company hereby represents and warrants that the undertakings of payment and indemnification set out in (a) and (b) above are not in conflict with the Certificate of Incorporation or Bylaws of the Company or with any validly existing agreement or other proper corporate action of the Company. 11. Registration Rights. (a) Demand Registration. Upon the terms and subject to the conditions set forth in this paragraph 11, Employee or his estate or legal representative may request a single registration (the "Demand Registration") under the Securities Act of 1933, as amended (the "Securities Act"), of all or part of the shares of the Company's Common Stock beneficially owned by Employee or his estate (collectively, the "Registrable Securities"). (b) Demand Priority. The Company shall not include in the Demand Registration any securities which are not Registrable Securities without the prior written consent of Employee or his estate or legal representative. If the Demand Registration is an underwritten offering and the managing underwriters advise the Company that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities which can be sold in an orderly manner in such offering within a price range acceptable to Employee or his estate or legal representative, the Company shall include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of 12 13 such underwriters can be sold in an orderly manner within the price range of such offering. (c) Postponement Right. The Company may postpone for up to 90 days the filing or the effectiveness of a registration statement for the Demand Registration if the Board of Directors of the Company determines in good faith that such Demand Registration would reasonably be expected to have an adverse effect on any proposal or plan by the Company to engage in any acquisition of assets (other than in the ordinary course of business), merger, consolidation or tender offer or to enter into any material license agreement, joint venture arrangement or similar transaction; provided that in such event, the holders of Registrable Securities shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as the permitted Demand Registration hereunder and the Company shall pay all registration expenses in connection with such registration in accordance with subparagraph 11(h). (d) Piggyback Registrations. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company shall give prompt written notice to Employee of its intention to effect such a registration and shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the giving of the Company's notice. (e) Piggyback Priority on Company Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities and any other securities requested to be included in such registration by holders entitled to registration rights in connection therewith, pro rata among such holders based on the number of shares requested to be included in such registration, and (iii) third, other securities requested to be included in such registration (f) Piggyback Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the holders initially requesting such registration, the Company shall include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration and the Registrable Securities requested to be included therein by the holders thereof, pro rata among such holders based on the number of shares requested to be included in 13 14 such registration, and (ii) second, other securities requested to be included in such registration. (g) Best Efforts by the Company. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition. (h) Registration Expenses. The Company shall pay all expenses incident to the registration and disposition of the Registrable Securities pursuant to this Agreement, including all registration, filing and applicable securities exchange fees, all fees and expenses of complying with state securities or blue sky laws (including fees and disbursements of counsel to the underwriters or the holders of Registrable Securities in connection with "blue sky" qualification of the Registrable Securities and determination of their eligibility for investment under the laws of the various jurisdictions), all word processing, duplicating and printing expenses, all messenger and delivery expenses, the fees and disbursements of counsel for the Company and of counsel for any other person reasonably requested by the holders of a majority of the Registrable Securities included in the registration, the fees and expenses of the Company's independent public accountants and any other independent public accountants whose opinions are included in the registration statement, including the expenses of "cold comfort" letters or any special audits required by, or incident to, such registration, all fees and disbursements of underwriters (other than underwriting discounts and commissions), all transfer taxes, and the reasonable fees and expenses of counsel and accountants to the holders of Registrable Securities; provided that the holders of Registrable Securities will be required to pay all underwriting discounts and commissions in respect of the Registrable Securities being registered by such holders. In connection with any registration pursuant to this Agreement, the Company will not be obligated to pay the fees and expenses for more than one counsel, other than local and special counsel, or for more than one firm of accountants representing the holders of Registrable Securities. (i) Indemnification by the Company. The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In 14 15 connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (j) Indemnification by Holders. In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify shall be individual to each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (k) Limitations on Exercise. The registration rights provided in this paragraph 11 shall be exercisable only after the occurrence of a change in control of the Company. 12. General Provisions. (a) Fees and Expenses. The Company shall pay as they become due all legal fees and related expenses (including the costs of experts) incurred by Employee as a result of (i) Employee's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) and (ii) Employee seeking to obtain or enforce any right or benefit provided by this Agreement (including any such fees and expenses incurred in connection with any Dispute or Gross-Up Payment, whether as a result of any applicable government taxing authority proceeding, audit or otherwise) or by any other plan or arrangement maintained by the Company under which Employee is or may be entitled to receive benefits. (b) No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any right of set-off, counterclaim, recoupment, defense or other right which the Company may have against Employee or others. 15 16 (c) Effect of Headings. The headings of all of the paragraphs and subparagraphs of this Agreement are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement. (d) Modification, Amendment, Waiver. No modification, amendment, or waiver of any provision of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision of this Agreement in accordance with its terms. (e) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidly, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (f) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person. (g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois. (h) Notices. Any notice to be served under this Agreement shall be in writing and shall be mailed by registered mail, return receipt requested, addressed: If to the Company, to: Northfield Laboratories Inc. 1560 Sherman Avenue Evanston, Illinois 60201-4422 Attention: Board of Directors If to Employee, to: c/o Northfield Laboratories Inc. 1560 Sherman Avenue Evanston, Illinois 60201-4422 or to such other place as either party may specify in writing, delivered in accordance with the provisions of this subparagraph. (i) Survival. The rights and obligations of the parties shall survive the term of Employee's employment to the extent that any performance is required under this Agreement after the expiration or termination of such term. 16 17 (j) Entire Agreement. This Agreement, together with the Proprietary Information and Inventions Agreement described in paragraph 9 above, constitutes the entire agreement of the parties with respect to the subject matter thereof, and supersedes all previous agreements between the parties relating to the same subject matter (but excluding the Proprietary Information and Inventions Agreement, which agreement shall remain in full force and effect). (k) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document. * * * * * 17 18 * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. EMPLOYEE NORTHFIELD LABORATORIES INC. /s/ Steven A. Gould, M.D. By - ---------------------------- ----------------------- Steven A. Gould, M.D. Its ----------------------- 18 EX-10.17 4 c61623ex10-17.txt EMPLOYMENT AGREEMENT - JACK KOGUT 1 EXHIBIT 10.17 EMPLOYMENT AGREEMENT THIS AGREEMENT, made effective as of this 1st day of January, 2001, by and between JACK J. KOGUT ("Employee") and NORTHFIELD LABORATORIES INC., a Delaware corporation (the "Company"). W I T N E S S E T H : WHEREAS, Employee is now employed as the Vice President - Finance of the Company; WHEREAS, the Company and Employee now desire to enter into this Agreement in order to continue such employment for the term set forth herein and subject to the terms and conditions set forth herein; and WHEREAS, the Company and Employee desire to continue the Proprietary Information and Inventions Agreement entered into by and between Employee and the Company dated October 1, 1986 (the "Proprietary Information and Inventions Agreement") in full force and effect; NOW, THEREFORE, in consideration of the premises, and of the mutual covenants hereinafter set forth, the parties do hereby agree as follows: 1. Employment. The Company agrees to employ Employee, and Employee agrees to remain in the employ of the Company, for the period (the "Employment Period") beginning on January 1, 2001 and ending on the earlier to occur of (a) December 31, 2002 or (b) the date as of which Employee's employment is terminated pursuant to paragraph 5 of this Agreement. During the Employment Period, Employee shall serve as the Vice President - Finance of the Company and shall perform such executive and managerial duties consistent with such position as the Chief Executive Officer and the Board of Directors of the Company shall from time to time direct. Employee shall devote his full business time and attention to the business of the Company and its subsidiaries. 2. Location. Employee shall be based at the Company's headquarters in Evanston, Illinois, or at such other location as may be agreed upon by Employee and the Board of Directors of the Company. Employee shall, however, also travel to other locations at such times as may be reasonably required for the performance of his duties under this Agreement; provided that the frequency and duration of such travel shall not be substantially greater than the frequency and duration of Employee's travel during his employment by the Company prior to the date of this Agreement. 2 3. Compensation. During the Employment Period, Employee shall be compensated as follows: (a) Salary. An "Employment Year" shall be the twelve-month period beginning on the first day of the Employment Period and on each anniversary of such date during the Employment Period. For the first Employment Year, Employee shall be paid an annual base salary at a rate which is not less than $232,958 per year. For the second Employment Year, Employee shall be paid an annual base salary at a rate which is not less than $239,947 per year. Employee's base salary shall be paid in equal, semi-monthly installments. (b) Bonus. Employee shall be paid a cash bonus of $116,479 as of the date the Company files a Biologic License Application for its PolyHeme blood substitute product with the United States Food and Drug Administration. Employee shall be paid an additional cash bonus of $232,958 as of the date the Company is granted approval for the commercial sale of PolyHeme in the United States for any indication. The Board of Directors of the Company may in its discretion determine to award Employee additional cash bonuses from time to time during the term of this Agreement. (c) Award of Stock Options. On January 1, 2001, the Company awarded Employee stock options under the Northfield Laboratories Inc. 1999 Stock Option Plan to acquire 12,000 shares of the Company's Common Stock at an exercise price per share equal to the fair market value of the Company's Common Stock as of the date of grant. On or before January 1, 2002, the Compensation Committee of the Board of Directors of the Company shall review the performance of the Company and Executive during the first Employment Year and shall determine whether the award of additional stock options to Employee is appropriate. The Board of Directors of the Company may in its discretion determine to award Employee additional stock options or other forms of equity incentive compensation from time to time during the term of this Agreement. (d) Paid Vacation. Employee shall be entitled to five weeks paid vacation in each calendar year. Any vacation which is not used by Employee shall be forfeited at the end of the calendar year. (e) Expenses. Employee shall be reimbursed for all reasonable business expenses incurred in the performance of his duties pursuant to this Agreement, to the extent such expenses are substantiated and are consistent with the general policies of the Company and its subsidiaries relating to the reimbursement of expenses of senior executive officers. 2 3 (f) Fringe Benefits. In addition to any other compensation provided under this Agreement, Employee shall also be entitled to participate, during the Employment Period, in any and all pension, stock option, relocation, profit sharing, and other employee benefit plans or fringe benefit programs which are from time to time maintained by the Company or its subsidiaries for their senior executive officers, in accordance with the provisions of such plans or programs as from time to time in effect. (g) Deduction and Withholding. All compensation and other benefits payable to or on behalf of Employee pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by Employee or required by applicable law. 4. Other Benefits. The compensation provisions of this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that Employee or his beneficiaries may be entitled to receive under the provisions of any pension, stock option, profit sharing, disability (except as otherwise provided in subparagraph 6(b)), relocation or other employee benefit plan now or hereafter maintained by the Company or by any of its subsidiaries. The Company shall not make any changes in such plans or arrangements which would adversely affect Employee's rights or benefits thereunder, unless such change is made uniformly in a plan of general application to all of the Company's or a subsidiary's eligible employees. 5. Termination. Employee's employment may be terminated without any breach of this Agreement only under the following circumstances: (a) Death. Employee's employment shall terminate upon his death. (b) Disability. If, as a result of Employee's incapacity due to physical or mental illness or accident, (i) Employee shall have been absent from his duties for the Company on a full-time basis for the entire period of six consecutive months and (ii) within thirty days after written Notice of Termination is given (which may occur before or after the end of such six-month period) shall not have returned to the performance of his duties, the Company may terminate Employee's employment for "disability." (c) Cause. The Company may terminate Employee's employment hereunder for "cause." For purposes of this Agreement, "cause" shall mean the conviction of Employee of any felony or any failure by Employee to comply in all material respects with any material term of this Agreement or the Proprietary Information and Inventions Agreement which conduct or failure is materially injurious to the Company, monetarily or otherwise. Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for cause without (i) at least 60 days prior written notice from the Company to Employee setting forth the reasons for the Company's intention to terminate for cause, (ii) an opportunity to cure the stated cause during the 60-day notice period, and (iii) after all of the preceding procedures have been satisfied or made available, delivery to Employee 3 4 of a Notice of Termination from the Board of Directors of the Company finding that in the good faith opinion of such Board of Directors, Employee was guilty of the conduct or of the failure described in the second sentence of this subparagraph, specifying the particulars in detail, and that Employee has failed to cure the stated cause. (d) Termination by Employee. Employee may voluntarily terminate his employment at any time. Employee's termination of employment shall be for "good reason" if he voluntarily terminates his employment: (i) within 90 days after a "change in control" (as defined below) of the Company for any reason; (ii) at any time after a "change in control" of the Company because: (A) he has been reassigned to a position of lesser rank or status or to a location other than Evanston, Illinois (or such other location as Employee may agree), without his consent; or (B) his annual base salary has been reduced; or (C) his benefits have been reduced; (iii) because of a failure by the Company to comply with any material provision of this Agreement which has not been cured within ten days after written notice of such noncompliance has been given by the Employee to the Company; or (iv) because of any purported termination of the Employee's employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph 5(e) hereof (and for purposes of this Agreement no such purported termination shall be effective). For purposes of this Agreement, a "change in control" shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect as of the date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to the reporting requirements of the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred if: (i) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; 4 5 (ii) the stockholders of the Company approve any plan or proposal of liquidation or dissolution of the Company; (iii) there shall be consummated any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have, directly or indirectly, at least an 80% ownership interest in the outstanding Common Stock of the surviving corporation immediately after the merger; (iv) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities ordinarily having the right to vote for the election of directors; or (v) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the "Board" generally, and as of the date hereof, the "Incumbent Board") cease for any reason to constitute a majority of the Board; provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall be, for purposes of this Agreement, considered as though such individual were a member of the Incumbent Board; provided further that, notwithstanding the foregoing, an individual whose initial assumption of office as a director is in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board shall not be considered as a member of the Incumbent Board for purposes of this Agreement. (e) Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination because of Employee's death) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. 5 6 (f) Date of Termination of Employment. "Date of Termination" shall mean (i) if Employee's employment is terminated by his death, the date of his death; (ii) if Employee's employment is terminated for disability pursuant to subparagraph 5(b) above, 30 days after Notice of Termination is given (provided that Employee shall not have returned to the performance of his duties during such thirty-day period); (iii) if Employee's employment is terminated for any other reason, the date specified in the Notice of Termination which shall not be less than 10 days nor more than 60 days from the date Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 6. Compensation Upon Termination of Employment or During Disability. (a) Death. If Employee's employment is terminated by his death, the Company shall continue to pay his full base salary at the rate then in effect to Employee's surviving spouse or, if he has no surviving spouse, to his estate as a death benefit for a period of one month following his Date of Termination. (b) Disability. During any period that Employee fails to perform his duties hereunder as a result of incapacity due to physical or mental illness or accident, the Company shall continue to pay him his full base salary at the rate then in effect for such period until his Date of Termination and shall pay him any bonus that becomes payable prior to his Date of Termination. Notwithstanding the preceding sentence any salary payments made to Employee during such period of incapacity shall be reduced (but not below zero) by amounts actually paid to the Employee for the same period and at or prior to the time of any such salary payment under disability benefit plans maintained by the Company; provided such disability benefit amounts were not previously applied to reduce any such salary payment. (c) Cause. If Employee's employment is terminated for cause, the Company shall pay Employee his full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and, except for other compensation or benefits accrued through his Date of Termination, the Company shall have no further obligations to Employee under this Agreement except as otherwise required by applicable law. (d) Breach; Termination for Good Reason. If (i) in breach of this Agreement, the Company shall terminate Employee's employment other than pursuant to subparagraphs 5(a), 5(b) or 5(c) hereof (it being understood that a purported termination pursuant to subparagraphs 5(b) or 5(c) hereof which is disputed and finally determined not to have been proper shall be a termination of 6 7 Employee's employment by the Company in breach of this Agreement) or (ii) Employee shall terminate his employment for good reason, then: (i) the Company shall make a lump sum payment to Employee, not later that five business days after the Notice of Termination is given by the Company or Employee, as applicable, in an amount equal to two times Employee's highest annual base salary as in effect at any time during the twelve months preceding the date such Notice of Termination is given; (ii) the Company shall pay to Employee, not later than five business days after the date they become due and payable, any bonus that would have been payable to Employee pursuant to subparagraph 3(b) had Employees employment with the Company continued through the expiration of the Employment Period; (iii) if the termination of Employee's employment occurs after the date of a change in control of the Company, any stock options held by Executive that did not become fully vested and exercisable as of the date of such change in control shall become fully vested and exercisable as of the Date of Termination; and (iv) until the second anniversary of the date the Notice of Termination is given by the Company or Employee, as applicable, Employee shall continue to be eligible to participate in any accident, health, disability, life or similar employee welfare benefit plans maintained by the Company or its subsidiaries, to the same extent he was eligible to participate in such plans at any time during the twelve months preceding the date such Notice of Termination is given and at no cost to him; provided that if such continued participation is precluded by the provisions of such plans or by applicable law, the Company shall provide Employee with comparable benefits of equivalent value. Employee understands and agrees that if he materially breaches any material provision of the Proprietary Information and Inventions Agreement, the Company shall cease to have any obligation to make any payment under this subparagraph 6(d). (e) Voluntary Termination. If Employee voluntarily terminates his employment other than for good reason, he shall not be entitled to receive any compensation or benefits pursuant to this Agreement, other than compensation or benefits accrued through the Date of Termination or as otherwise required by law. (f) Post-Employment Period Severance. If Employee's employment with the Company terminates at any time after December 31, 2002 for any reason other than Employee's death, disability or discharge for cause and an "employment offer" (as defined below) by the Company is not outstanding as of the date of the termination of Employee's employment, then the Company shall continue to pay 7 8 Employee his full base salary, at a rate equal to the rate in effect immediately prior to December 31, 2002, until December 31, 2004. If Employee's employment with the Company terminates at any time after December 31, 2002 for any reason other than Employee's death, disability or discharge for cause and an "employment offer" by the Company is outstanding as of the date of the termination of Employee's employment, then the Company shall continue to pay Employee his full base salary, at a rate equal to the rate in effect immediately prior to December 31, 2002, until December 31, 2003. An "employment offer" shall be deemed to be outstanding as of the date of the termination of Employee's employment with the Company if, as of such date, there is outstanding a written offer by the Company to enter into an employment agreement with Employee in substantially the form of this Agreement providing for a term of employment ending on or after December 31, 2004 and an annual base salary at least equal to Employee's base salary in effect immediately prior to December 31, 2002. The Company shall notify Employee in writing at least 30 days prior to the expiration of the Employment Period as to whether the Company plans to extend an employment offer to Employee. Employee shall not be entitled to receive any severance payments under this subparagraph 6(f) if Employee and the Company enter into an employment or severance agreement after the date of this Agreement (including any renewal or extension of this Agreement) that includes severance arrangements relating to the termination of Employee's employment with the Company after December 31, 2002. Employee understands and agrees that if he materially breaches any material provision of the Proprietary Information and Inventions Agreement, the Company shall cease to have any obligation to make any severance payments under this subparagraph. Employee further understands and agrees that the payments to be made to Employee pursuant to this Section 6(f) may be applied by the Company to satisfy its payment obligations set forth in Section 5 of the Proprietary Information and Inventions Agreement for the period during which payments are being made to Employee in accordance with this Section 6(f). (g) Mitigation. Employee shall not be required to mitigate the amount of any payment provided for this paragraph 6 by seeking other employment or otherwise, nor shall the amount of any payments provided in this Agreement be reduced by any compensation earned by Employee as the result of his self-employment or his employment by another employer after his Date of Termination. 7. Excise Tax Payments. (a) Right to Receive Gross-Up Payment. In the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) to Employee or for Employee's benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, Employee's employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such 8 9 interest and penalties, are hereinafter collectively referred to herein as the "Excise Tax"), then Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes and the Excise Tax, other than interest and penalties imposed by reason of Employee's failure to file timely a tax return or pay taxes shown due on Employee's return, and including any Excise Tax imposed upon the Gross-Up Payment), Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Determination Relating to Gross-Up Payment. An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Company's expense by an accounting firm of recognized national standing selected by the Company and reasonably acceptable to Employee (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to the Company and Employee within five days of the Date of Termination, if applicable, or such other time as requested by the Company or by Employee (provided Employee reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax shall be imposed with respect to any such Payment or Payments. The Gross-Up Payment, if any, as determined pursuant to this subparagraph 7(b) shall be paid by the Company to Employee within five days after the receipt of the Determination. Within ten days after the delivery of the Determination to Employee, Employee shall have the right to dispute the Determination (the "Dispute"). The existence of the Dispute shall not in any way affect Employee's right to receive the Gross-Up Payment in accordance with the Determination. If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and Employee, subject to the application of the provisions of subparagraph 7(c). (c) Excess Payment and Underpayment. As a result of uncertainty in the application of Sections 280G and 4999 of the Code, it is possible that a Gross-Up Payment (or a portion thereof) shall be paid which should not be paid (an "Excess Payment") or that a Gross-Up Payment (or a portion thereof) which should be paid shall not be paid (an "Underpayment"). An Underpayment shall be deemed to have occurred (i) upon notice (formal or informal) to Employee from any governmental taxing authority that Employee's tax liability (whether in respect of Employee's current taxable year or in respect of any prior taxable year) may be increased by reason of the imposition of the Excise Tax on a Payment or Payments with respect to which the Company has failed to make a sufficient Gross-Up Payment, (ii) upon a determination by a court, (iii) by reason of a determination by the Company (which shall include the position taken by the Company, together with its consolidated group, on its federal income tax return) or (iv) upon the resolution of the Dispute to Employee's satisfaction. If an Underpayment occurs, Employee 9 10 shall promptly notify the Company and the Company shall promptly, but in any event at least five days prior to the date on which the applicable government taxing authority has requested payment, pay to Employee an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties (other than interest and penalties imposed by reason of Employee's failure to file timely a tax return or pay taxes shown due on Employee's return) imposed on the Underpayment. An Excess Payment shall deemed to have occurred upon a Final Determination (as hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or Payments (or portion thereof) with respect to which Employee had previously received a Gross-Up Payment. A "Final Determination" shall be deemed to have occurred when Employee has received from the applicable government taxing authority a refund of taxes or other reduction in Employee's tax liability by reason of the Excise Payment and upon either (i) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds Employee and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired or (ii) the statute of limitations with respect to Employee's applicable tax return has expired. If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to Employee and Employee shall pay to the Company on demand (but not less than 10 days after the determination of such Excess Payment and written notice has been delivered to Employee) the amount of the Excess Payment plus interest at an annual rate equal to the Applicable Federal Rate provided for in Section 1274(d) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to Employee until the date of repayment to the Company. (d) Payment of Excise Tax Withholding. Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax is imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities as Excise Tax withholding the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments. 8. Successors; Binding Agreement. (a) Successors to the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to terminate his employment with the Company for good reason. As 10 11 used in this Agreement, "Company" shall mean the Company and any successor to its business and/or assets which executes and delivers the agreement provided for in this paragraph 8 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) Assignment. Employee's rights and interests under this Agreement may not be assigned, pledged or encumbered by him without the Company's written consent. This Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amounts would still be payable to him hereunder if he had continued to live all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's surviving spouse or, if there is no surviving spouse, to his estate. 9. Proprietary Information. Employee and the Company have entered into the Proprietary Information and Inventions Agreement, which agreement shall remain in full force and effect. 10. Payment of Costs and Indemnification. (a) Payment of Costs. In the event that a dispute arises regarding termination of Employee's employment or the interpretation or enforcement of this Agreement, the Company shall promptly pay, or reimburse to Employee, as and when incurred, all reasonable fees and expenses (including reasonable legal fees and expenses, court costs, costs of investigation and similar expenses) incurred by Employee in contesting or disputing any such termination, in seeking to obtain or enforce any right or benefit provided for in this Agreement, or in otherwise pursuing his claim; provided, however, that the Company shall be entitled to recover from Employee the amount of any such fees and expenses paid by the Company if the Company obtains a final judgment in its favor on the merits of such dispute from a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise. (b) Indemnification. The Company shall indemnify and hold Employee harmless to he maximum extent permitted by law against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by Employee in connection with the defense of, or as a result of, any action or proceeding (or any appeal from any action or proceeding) in which Employee is made or is threatened to be made a party by reason of the fact that Employee is or was an employee, officer, or director of the Company or any of its subsidiaries, regardless of whether such action or proceeding is one brought by or in the right of the Company to procure a judgment in its favor. The undertaking of subparagraph (a) above is independent of, and shall not be limited or prejudiced by, the undertakings of this subparagraph (b). The indemnification provided in this Agreement is in addition to, and not in derogation of, any rights to indemnification or advancement of expenses to which Executive may otherwise be entitled under 11 12 the Certificate of Incorporation or Bylaws of the Company, any indemnification contract or agreement, any policy of insurance or otherwise. (c) Warranty. The Company hereby represents and warrants that the undertakings of payment and indemnification set out in (a) and (b) above are not in conflict with the Certificate of Incorporation or Bylaws of the Company or with any validly existing agreement or other proper corporate action of the Company. 11. General Provisions. (a) Fees and Expenses. The Company shall pay as they become due all legal fees and related expenses (including the costs of experts) incurred by Employee as a result of (i) Employee's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) and (ii) Employee seeking to obtain or enforce any right or benefit provided by this Agreement (including any such fees and expenses incurred in connection with any Dispute or Gross-Up Payment, whether as a result of any applicable government taxing authority proceeding, audit or otherwise) or by any other plan or arrangement maintained by the Company under which Employee is or may be entitled to receive benefits. (b) No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any right of set-off, counterclaim, recoupment, defense or other right which the Company may have against Employee or others. (c) Effect of Headings. The headings of all of the paragraphs and subparagraphs of this Agreement are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement. (d) Modification, Amendment, Waiver. No modification, amendment, or waiver of any provision of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision of this Agreement in accordance with its terms. (e) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidly, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (f) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person. 12 13 (g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois. (h) Notices. Any notice to be served under this Agreement shall be in writing and shall be mailed by registered mail, return receipt requested, addressed: If to the Company, to: Northfield Laboratories Inc. 1560 Sherman Avenue Evanston, Illinois 60201-4422 Attention: Board of Directors If to Employee, to: c/o Northfield Laboratories Inc. 1560 Sherman Avenue Evanston, Illinois 60201-4422 or to such other place as either party may specify in writing, delivered in accordance with the provisions of this subparagraph. (i) Survival. The rights and obligations of the parties shall survive the term of Employee's employment to the extent that any performance is required under this Agreement after the expiration or termination of such term. (j) Entire Agreement. This Agreement, together with the Proprietary Information and Inventions Agreement described in paragraph 9 above, constitutes the entire agreement of the parties with respect to the subject matter thereof, and supersedes all previous agreements between the parties relating to the same subject matter (but excluding the Proprietary Information and Inventions Agreement, which agreement shall remain in full force and effect). (k) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document. * * * * * 13 14 * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. EMPLOYEE NORTHFIELD LABORATORIES INC. /s/ Jack J. Kogut By - -------------------------- ----------------------- Jack J. Kogut Its ---------------------- 14 EX-10.18 5 c61623ex10-18.txt INDEMNIFICATION AGREEMENT - DIRECTOR/EXEC OFFICER 1 EXHIBIT 10.18 FORM OF INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT dated as of January 1, 2001, by and between Northfield Laboratories Inc., a Delaware corporation (the "Company"), and the undersigned director and executive officer of the Company (the "Indemnified Party"). The Indemnified Party serves as a director and executive officer of the Company. The Company's Certificate of Incorporation permits the Company to indemnify the directors, officers, employees and agents of the Company. The Company's Certificate of Incorporation and Section 145 of the Delaware General Corporation Law, as amended from time to time (the "Delaware Law"), also permit agreements between the Company and its directors, officers, employees and agents for the indemnification of such persons by the Company. In recognition of the past services provided to the Company by the Indemnified Party, and in order to induce the Indemnified Party to continue to serve as a director and officer of the Company, the Company has determined to enter into this Agreement with the Indemnified Party. NOW, THEREFORE, in consideration of the Indemnified Party's continued service as a director and officer of the Company, the parties hereto agree as follows: Section 1. Definitions. For purposes of this Agreement: "Change in Control" means a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect as of the date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to the reporting requirements of the Exchange Act; provided that, without limitation, such a change in control will be deemed to have occurred if: (a) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; (b) the stockholders of the Company approve any plan or proposal of liquidation or dissolution of the Company; (c) there is consummated any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have, directly or indirectly, at least an 80% ownership interest in the outstanding Common Stock of the surviving corporation immediately after the merger; 2 (d) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities ordinarily having the right to vote for the election of directors; (e) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the "Board" generally, and as of the date hereof, the "Incumbent Board") cease for any reason to constitute a majority of the Board; provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board will be, for purposes of this Agreement, considered as though such individual were a member of the Incumbent Board; provided further that, notwithstanding the foregoing, an individual whose initial assumption of office as a director is in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board will not be considered as a member of the Incumbent Board for purposes of this Agreement; or (f) the Board fails to nominate the Indemnified Party for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (the Indemnified Party having indicated his willingness to be nominated as a director and to serve as a director if elected), the Indemnified Party is nominated for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (the Indemnified Party having indicated his willingness to serve as a director if elected) but is not elected as a director by the Company's stockholders at such meeting, or the Indemnified Party is removed from office as a director, with or without cause, by vote or consent of the Company's stockholders, if, in each case, such event occurs in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board. "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding with respect to which indemnification is sought by the Indemnified Party pursuant to this Agreement. "Expenses" includes all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating in or being or preparing to be a witness in a Proceeding. 3 "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (a) the Company or the Indemnified Party in any matter material to either such party (other than with respect to matters concerning the Indemnified Party under this Agreement or of other indemnified parties under similar indemnification agreements), or (b) any other party to the Proceeding giving rise to a claim for indemnification under this Agreement. Notwithstanding the foregoing, the term "Independent Counsel" will not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnified Party in an action to determine the Indemnified Party's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to the Agreement or its engagement pursuant hereto. "Proceeding" means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise, and whether civil, criminal, administrative or investigative, in which the Indemnified Party was, is or may be involved as a party or otherwise by reason of the fact that the Indemnified Party is or was a director, officer, employee or agent of the Company or is or was serving as a director, officer, employee, agent or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in each case whether or not the Indemnified Party continues to serve in the same capacity at the time any liability or Expense is incurred for which indemnification may be sought under this Agreement, including any such proceeding based on events or occurrences prior to the date of this Agreement. Section 2. Indemnification. The Company agrees to indemnify and hold harmless the Indemnified Party to the full extent authorized or permitted by the provisions of the Delaware Law and the Company's Certificate of Incorporation. In furtherance of the foregoing, and without limiting the generality thereof, the Company agrees to indemnify the Indemnified Party against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful; provided that in connection with any Proceeding by or in the right of the Company to procure a judgment in its favor, no indemnification against such Expenses will be made in respect of any claim, issue or matter in such Proceeding as to which the Indemnified Party is adjudged to be liable to the Company, unless and to the extent that the Court of Chancery of the State of the Delaware or the court in which such Proceeding has been brought or is pending determines that such indemnification may be made. To the extent that the Indemnified Party is a party to and is successful, on the merits or otherwise, in any Proceeding, he will be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If the Indemnified Party is not wholly successful in any Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such 4 Proceeding, the Company will indemnify the Indemnified Party against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 2, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue or matter. Section 3. Indemnification for Expenses as Witness. To the extent the Indemnified Party is, by reason of the fact that the Indemnified Party is or was a director, officer, employee or agent of the Company or is or was serving as a director, officer, employee, agent or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, a witness in any action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative, to which the Indemnified Party is not a party, the Company agrees to indemnify the Indemnified Party against all Expenses reasonably incurred by him or on his behalf in connection therewith. Section 4. Contribution. If the indemnification provided in Section 2 is unavailable and may not be paid to the Indemnified Party for any reason, then in respect to any Proceeding in which the Company is jointly liable with the Indemnified Party (or would be if joined in such Proceeding), the Company agrees to contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnified Party in such proportion as is appropriate to reflect (a) the relative benefits received by the Company and by the Indemnified Party from the transaction from which such Proceeding arose and (b) the relative fault of the Company and the Indemnified Party in connection with the events which resulted in such Expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company and the Indemnified Party will be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or any other method of allocation that does not take account of the foregoing equitable considerations. Section 5. Advancement of Expenses. The Company agrees to advance all Expenses reasonably incurred by or on behalf of the Indemnified Party in connection with any Proceeding within 10 days after the receipt by the Company of a statement or statements from the Indemnified Party requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the Expenses incurred by the Indemnified Party and will include or be preceded or accompanied by an undertaking by or on behalf of the Indemnified Party to repay any Expenses advanced if it is ultimately determined that the Indemnified Party is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 will be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 will be subject to the condition that, if, when and to the extent that the Company determines that the Indemnified Party would not be 5 permitted to be indemnified under applicable law, the Company will be entitled to be reimbursed, within 30 days after such determination, by the Indemnified Party (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided that if the Indemnified Party has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnified Party should be indemnified under applicable law, any determination made by the Company that the Indemnified Party would not be permitted to be indemnified under applicable law will not be binding and the Indemnified Party will not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Section 6. Indemnification Procedures. (a) The Indemnified Party agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaints, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure of the Indemnified Party to so notify the Company will not relieve the Company of any obligation which it may have to the Indemnified Party under this Agreement or otherwise. (b) The Indemnified Party will be entitled to control the defense of any Proceeding with counsel of his own choosing reasonably acceptable to the Company, and the Company will cooperate in the defense of such Proceeding. If the Indemnified Party determines not to control the defense of any Proceeding with counsel of his own choosing, the Indemnified Party will promptly so notify the Company in writing and the Company will be required to assume the defense of such Proceeding using counsel reasonably acceptable to the Indemnified Party. (c) The Company will not be liable for any settlement of any Proceeding by the Indemnified Party effected without the Company's written consent, which consent will not be unreasonably withheld, delayed or conditioned by the Company. The Company will not be required to obtain the consent of the Indemnified Party to the settlement of any Proceeding that the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnified Party a complete and unqualified release with respect to all potential liability. (d) To obtain indemnification, the advancement of Expenses or contribution by the Company under this Agreement, the Indemnified Party must submit to the Company a written request, including therewith such documentation and information as is reasonably available to the Indemnified Party and is reasonably necessary to determine whether and to what extent the Indemnified Party is entitled to indemnification. The Corporate Secretary of the Company will, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that the Indemnified Party has requested indemnification. 6 (e) Upon written request by the Indemnified Party for indemnification, a determination, if required by applicable law, with respect to the Indemnified Party's entitlement thereto will be made in the specific case (i) if a Change in Control has not occurred since the date of this Agreement, (A) by the Board of Directors by a majority vote of the Disinterested Directors, (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, if obtainable, if the majority of the Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which will be delivered to the Indemnified Party, or (C) if so directed by a majority of the Disinterested Directors, by the stockholders of the Company or (ii) if a Change in Control has occurred since the date of this Agreement, by Independent Counsel in a written opinion to the Board of Directors, a copy of which will be delivered to the Indemnified Party (unless the Indemnified Party requests that such determination be made by the Board of Directors or the stockholders, in which case the determination will be made in the manner provided in clause (i) above). The Indemnified Party will cooperate with the person or entity making such determination with respect to the Indemnified Party's entitlement to indemnification, including providing to such person or entity upon reasonable request with any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to the Indemnified Party and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors, or stockholder of the Company will act reasonably and in good faith in making a determination under the Agreement of the Indemnified Party's entitlement to indemnification. Any costs or expenses (including attorneys' fees and disbursements) incurred by the Indemnified Party in so cooperating with the person or entity making such determination will be borne by the Company (irrespective of the determination as to the Indemnified Party's entitlement to indemnification) and the Company hereby agrees to indemnify and hold the Indemnified Party harmless therefrom. (f) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel will be selected as provided in this Section 6(f). If a Change in Control has not occurred since the date of this Agreement, the Independent Counsel will be selected by the Company's Board of Directors, and the Company will give written notice to the Indemnified Party advising him of the identity of the Independent Counsel so selected. If a Change in Control has occurred since the date of this Agreement, the Independent Counsel will be selected by the Indemnified Party and the Indemnified Party will give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, the Indemnified Party or the Company, as the case may be, may, within 10 days after such written notice of selection will have been given, deliver to the other party a written objection to such selection; provided that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 1, and the objection will set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If a written objection is made and 7 substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by the Indemnified Party of a written request for indemnification pursuant to Section 6(d), no Independent Counsel has been selected and not objected to, either the Company or the Indemnified Party may petition any court of competent jurisdiction for resolution of any objection which may have been made by the Company or the Indemnified Party to the other party's selection of Independent Counsel or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court will designate, and the person with respect to whom all objections are so resolved or the person so appointed will act as Independent Counsel under Section 6(e). The Company will pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(e), and the Company will pay all reasonable fees and expenses incident to the procedures of this Section 6(f), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the commencement of any judicial proceeding or arbitration pursuant to this Agreement, Independent Counsel will be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (g) If it is determined that the Indemnified Party is entitled to indemnification, payment to the Indemnified Party will be made within 10 days after such determination. Section 7. Assumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification under this Agreement, the person or entity making such determination will presume that the Indemnified Party is entitled to indemnification under this Agreement if the Indemnified Party has submitted a request for indemnification in accordance with Section 6(d) and the Company will have the burden of proof to overcome that presumption in connection with the making by any person or entity of any determination contrary to that presumption. (b) If the person or entity empowered or selected under Section 6 to determine whether the Indemnified Party is entitled to indemnification has not made a determination within 30 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification will be deemed to have been made and the Indemnified Party will be entitled to such indemnification, absent (i) a misstatement by the Indemnified Party of a material fact, or an omission of a material fact necessary to make the Indemnified Party's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. Notwithstanding the foregoing, the provisions of this Section 7(b) will not apply if (i) the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(e) and if (A) within 15 days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their 8 consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat, or (ii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(e). (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of the Indemnified Party to indemnification or create a presumption that the Indemnified Party did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that the Indemnified Party had reasonable cause to believe that his conduct was unlawful. (d) For purposes of any determination of good faith, the Indemnified Party will be deemed to have acted in good faith if the Indemnified Party's action is based on the records or books of account of the Company, including financial statements, or on information supplied to the Indemnified Party by the directors, officers or employees of the Company in the course of their duties, or on the advice of legal counsel for the Company or on information or records given or reports made to the Company by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company. In addition, the knowledge or actions, or failure to act, of any director, officer, agent or employee of the Company will not be imputed to the Indemnified Party for purposes of determining the right to indemnification under this Agreement. The provisions of this Section 7(d) will not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnified Party may be deemed to have met the applicable standards of conduct set forth in this Agreement. Section 8. Remedies of Indemnified Party. (a) In the event that (i) a determination is made pursuant to Section 6 that the Indemnified Party is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) no determination of entitlement to indemnification has been made pursuant to Section 6(e) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 3 within 10 days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within 10 days after a determination has been made that the Indemnified Party is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 or 7, the Indemnified Party will be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Alternatively, the Indemnified Party, at his option, may seek an award in arbitration to be conducted in Chicago, Illinois by a single 9 arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Indemnified Party will commence such proceeding seeking an adjudication or an award in arbitration within 120 days following the date on which the Indemnified Party first has the right to commence such proceeding pursuant to this Section 8(a). The Company will not oppose the Indemnified Party's right to seek any such adjudication or award in arbitration. (b) In the event that a determination has been made pursuant to Section 6(e) that the Indemnified Party is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 8 will be conducted in all respects as a de novo trial or arbitration on the merits and the Indemnified Party will not be prejudiced by reason of that adverse determination. (c) If a determination has been made pursuant to Section 6(e) that the Indemnified Party is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 8 absent (i) a misstatement by the Indemnified Party of a material fact, or an omission of a material fact necessary to make the Indemnified Party's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. (d) In the event that the Indemnified Party, pursuant to this Section 8, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, the Indemnified Party will be entitled to recover from the Company, and will be indemnified by the Company against, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it is determined in such judicial adjudication or arbitration that the Indemnified Party is entitled to receive part but not all of the indemnification sought, the expenses incurred by the Indemnified Party in connection with such judicial adjudication or arbitration will be appropriately prorated. The Company will indemnify the Indemnified Party against any and all expenses and, if requested by the Indemnified Party, will (within 10 days after receipt by the Company of a written request therefor) advance such expenses to the Indemnified Party, which are incurred by the Indemnified Party in connection with any action brought by the Indemnified Party to recover under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether the Indemnified Party ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery, as the case may be. (e) The Company will be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and will stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. 10 Section 9. Agreements Relating to Change in Control. (a) For a period of six years after the date of any Change in Control, the Company will cause to be maintained in effect the policies of directors and officers liability insurance and fiduciary liability insurance currently maintained by the Company with respect to claims arising from or relating to actions or omissions, or alleged actions or omissions, occurring on or prior to the date of the Change in Control. The Company may at its discretion substitute for such policies currently maintained by the Company directors and officers liability insurance and fiduciary liability insurance policies with reputable and financially sound carriers providing for no less favorable coverage. Notwithstanding the provisions of this Section 9(a), the Company will not be obligated to make annual premium payments with respect to such policies of insurance to the extent such premiums exceed 300 percent of the annual premiums paid by the Company as of the date of this Agreement. If the annual premium costs necessary to maintain such insurance coverage exceed the foregoing amount, the Company will maintain the most advantageous policies of directors and officers liability insurance and fiduciary liability insurance obtainable for an annual premium equal to the foregoing amount. (b) For a period of six years after the date of any Change in Control, the Company will maintain in effect such provisions in its Certificate of Incorporation providing for exculpation of director and officer liability and indemnification to the fullest extent permitted from time to time under the law of the State of Delaware, which provisions will not be amended, except as required by applicable law or except to make changes permitted by applicable law that would enlarge the scope of the Indemnified Party's indemnification rights thereunder. The foregoing will not be deemed to restrict the right of the Company to modify the provisions of its Certificate of Incorporation relating to exculpation of director and officer liability or indemnification with respect to events or occurrences after the date of the Change in Control so long as such modifications do not adversely affect the rights of the Indemnified Party. Section 10. Non-Exclusivity. (a) The rights of indemnification as provided by this Agreement will not be deemed exclusive of any other rights to which the Indemnified Party may at any time be entitled under applicable law, the Certificate of Incorporation of the Company, any agreement, any vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof will limit or restrict any right of the Indemnified Party under this Agreement in respect of any action taken or omitted by such the Indemnified Party prior to such amendment, alteration or repeal. To the extent that a change in the Delaware Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Company's Certificate of Incorporation and this Agreement, it is the intent of the parties hereto that the Indemnified Party will enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy will be cumulative and in 11 addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent or subsequent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, the Indemnified Party will be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies. (c) In the event of any payment under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of the Indemnified Party, who will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company will not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnified Party has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Section 11. Duration of Agreement. All agreements and obligations of the Company contained in this Agreement will continue during the period the Indemnified Party is a director, officer, employee or agent of the Company or is serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise and will continue thereafter so long as the Indemnified Party may be subject to any Proceeding (or any proceeding commenced under Section 8), whether or not he is acting or serving in any such capacity at the time any liability or Expense is incurred for which indemnification may be sought under this Agreement. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. Section 12. Security. To the extent requested by the Indemnified Party and approved by the Company's Board of Directors, the Company may at any time and from time to time provide security to the Indemnified Party for the Company's obligations hereunder through an irrevocable blank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnified Party, may not be revoked or released without the prior written consent of the Indemnified Party. Section 13. Miscellaneous. 12 (a) No agreement modifying or amending this Agreement or extending or waiving any provision of this Agreement will be valid or binding unless it is in writing and is executed and delivered by or on behalf of the party against which it is sought to be enforced. (b) Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (c) This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (d) The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (e) All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient or when sent to the recipient by telecopy (receipt confirmed), one business day after the date when sent to the recipient by reputable express courier service (charges prepaid) or three business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Company and the Indemnified Party at the addresses indicated below: If to the Company: Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston, Illinois 60201-4422 Attention: Corporate Secretary If to the Indemnified Party: c/o Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston, Illinois 60201-4422 or to such other address or to the attention of such other party as the recipient party has specified by prior written notice to the sending party. 13 (f) This Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. (g) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction will be applied against any party. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation. (h) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. 14 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. NORTHFIELD LABORATORIES INC. By ---------------------------------- Its --------------------------------- ------------------------------------ EX-10.19 6 c61623ex10-19.txt FORM OF INDEMNIFICATION AGREEMENT - DIRECTOR 1 EXHIBIT 10.19 FORM OF INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT dated as of January 1, 2001, by and between Northfield Laboratories Inc., a Delaware corporation (the "Company"), and the undersigned director of the Company (the "Indemnified Party"). The Indemnified Party serves as a director of the Company. The Company's Certificate of Incorporation permits the Company to indemnify the directors, officers, employees and agents of the Company. The Company's Certificate of Incorporation and Section 145 of the Delaware General Corporation Law, as amended from time to time (the "Delaware Law"), also permit agreements between the Company and its directors, officers, employees and agents for the indemnification of such persons by the Company. In recognition of the past services provided to the Company by the Indemnified Party, and in order to induce the Indemnified Party to continue to serve as a director of the Company, the Company has determined to enter into this Agreement with the Indemnified Party. NOW, THEREFORE, in consideration of the Indemnified Party's continued service as a director of the Company, the parties hereto agree as follows: Section 1. Definitions. For purposes of this Agreement: "Change in Control" means a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect as of the date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to the reporting requirements of the Exchange Act; provided that, without limitation, such a change in control will be deemed to have occurred if: (a) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; (b) the stockholders of the Company approve any plan or proposal of liquidation or dissolution of the Company; (c) there is consummated any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have, directly or indirectly, at least an 80% ownership interest in the outstanding Common Stock of the surviving corporation immediately after the merger; 2 (d) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities ordinarily having the right to vote for the election of directors; (e) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the "Board" generally, and as of the date hereof, the "Incumbent Board") cease for any reason to constitute a majority of the Board; provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board will be, for purposes of this Agreement, considered as though such individual were a member of the Incumbent Board; provided further that, notwithstanding the foregoing, an individual whose initial assumption of office as a director is in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board will not be considered as a member of the Incumbent Board for purposes of this Agreement; or (f) the Board fails to nominate the Indemnified Party for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (the Indemnified Party having indicated his willingness to be nominated as a director and to serve as a director if elected), the Indemnified Party is nominated for election as a director in connection with any annual or special meeting of the Company's stockholders at which directors are to be elected (the Indemnified Party having indicated his willingness to serve as a director if elected) but is not elected as a director by the Company's stockholders at such meeting, or the Indemnified Party is removed from office as a director, with or without cause, by vote or consent of the Company's stockholders, if, in each case, such event occurs in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board. "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding with respect to which indemnification is sought by the Indemnified Party pursuant to this Agreement. "Expenses" includes all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating in or being or preparing to be a witness in a Proceeding. 3 "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (a) the Company or the Indemnified Party in any matter material to either such party (other than with respect to matters concerning the Indemnified Party under this Agreement or of other indemnified parties under similar indemnification agreements), or (b) any other party to the Proceeding giving rise to a claim for indemnification under this Agreement. Notwithstanding the foregoing, the term "Independent Counsel" will not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnified Party in an action to determine the Indemnified Party's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to the Agreement or its engagement pursuant hereto. "Proceeding" means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise, and whether civil, criminal, administrative or investigative, in which the Indemnified Party was, is or may be involved as a party or otherwise by reason of the fact that the Indemnified Party is or was a director, officer, employee or agent of the Company or is or was serving as a director, officer, employee, agent or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in each case whether or not the Indemnified Party continues to serve in the same capacity at the time any liability or Expense is incurred for which indemnification may be sought under this Agreement, including any such proceeding based on events or occurrences prior to the date of this Agreement. Section 2. Indemnification. The Company agrees to indemnify and hold harmless the Indemnified Party to the full extent authorized or permitted by the provisions of the Delaware Law and the Company's Certificate of Incorporation. In furtherance of the foregoing, and without limiting the generality thereof, the Company agrees to indemnify the Indemnified Party against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful; provided that in connection with any Proceeding by or in the right of the Company to procure a judgment in its favor, no indemnification against such Expenses will be made in respect of any claim, issue or matter in such Proceeding as to which the Indemnified Party is adjudged to be liable to the Company, unless and to the extent that the Court of Chancery of the State of the Delaware or the court in which such Proceeding has been brought or is pending determines that such indemnification may be made. To the extent that the Indemnified Party is a party to and is successful, on the merits or otherwise, in any Proceeding, he will be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If the Indemnified Party is not wholly successful in any Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such 4 Proceeding, the Company will indemnify the Indemnified Party against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 2, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue or matter. Section 3. Indemnification for Expenses as Witness. To the extent the Indemnified Party is, by reason of the fact that the Indemnified Party is or was a director, officer, employee or agent of the Company or is or was serving as a director, officer, employee, agent or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, a witness in any action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative, to which the Indemnified Party is not a party, the Company agrees to indemnify the Indemnified Party against all Expenses reasonably incurred by him or on his behalf in connection therewith. Section 4. Contribution. If the indemnification provided in Section 2 is unavailable and may not be paid to the Indemnified Party for any reason, then in respect to any Proceeding in which the Company is jointly liable with the Indemnified Party (or would be if joined in such Proceeding), the Company agrees to contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnified Party in such proportion as is appropriate to reflect (a) the relative benefits received by the Company and by the Indemnified Party from the transaction from which such Proceeding arose and (b) the relative fault of the Company and the Indemnified Party in connection with the events which resulted in such Expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company and the Indemnified Party will be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or any other method of allocation that does not take account of the foregoing equitable considerations. Section 5. Advancement of Expenses. The Company agrees to advance all Expenses reasonably incurred by or on behalf of the Indemnified Party in connection with any Proceeding within 10 days after the receipt by the Company of a statement or statements from the Indemnified Party requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the Expenses incurred by the Indemnified Party and will include or be preceded or accompanied by an undertaking by or on behalf of the Indemnified Party to repay any Expenses advanced if it is ultimately determined that the Indemnified Party is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 will be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 will be subject to the condition that, if, when and to the extent that the Company determines that the Indemnified Party would not be 5 permitted to be indemnified under applicable law, the Company will be entitled to be reimbursed, within 30 days after such determination, by the Indemnified Party (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided that if the Indemnified Party has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnified Party should be indemnified under applicable law, any determination made by the Company that the Indemnified Party would not be permitted to be indemnified under applicable law will not be binding and the Indemnified Party will not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Section 6. Indemnification Procedures. (a) The Indemnified Party agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaints, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure of the Indemnified Party to so notify the Company will not relieve the Company of any obligation which it may have to the Indemnified Party under this Agreement or otherwise. (b) The Indemnified Party will be entitled to control the defense of any Proceeding with counsel of his own choosing reasonably acceptable to the Company, and the Company will cooperate in the defense of such Proceeding. If the Indemnified Party determines not to control the defense of any Proceeding with counsel of his own choosing, the Indemnified Party will promptly so notify the Company in writing and the Company will be required to assume the defense of such Proceeding using counsel reasonably acceptable to the Indemnified Party. (c) The Company will not be liable for any settlement of any Proceeding by the Indemnified Party effected without the Company's written consent, which consent will not be unreasonably withheld, delayed or conditioned by the Company. The Company will not be required to obtain the consent of the Indemnified Party to the settlement of any Proceeding that the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnified Party a complete and unqualified release with respect to all potential liability. (d) To obtain indemnification, the advancement of Expenses or contribution by the Company under this Agreement, the Indemnified Party must submit to the Company a written request, including therewith such documentation and information as is reasonably available to the Indemnified Party and is reasonably necessary to determine whether and to what extent the Indemnified Party is entitled to indemnification. The Corporate Secretary of the Company will, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that the Indemnified Party has requested indemnification. 6 (e) Upon written request by the Indemnified Party for indemnification, a determination, if required by applicable law, with respect to the Indemnified Party's entitlement thereto will be made in the specific case (i) if a Change in Control has not occurred since the date of this Agreement, (A) by the Board of Directors by a majority vote of the Disinterested Directors, (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, if obtainable, if the majority of the Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which will be delivered to the Indemnified Party, or (C) if so directed by a majority of the Disinterested Directors, by the stockholders of the Company or (ii) if a Change in Control has occurred since the date of this Agreement, by Independent Counsel in a written opinion to the Board of Directors, a copy of which will be delivered to the Indemnified Party (unless the Indemnified Party requests that such determination be made by the Board of Directors or the stockholders, in which case the determination will be made in the manner provided in clause (i) above). The Indemnified Party will cooperate with the person or entity making such determination with respect to the Indemnified Party's entitlement to indemnification, including providing to such person or entity upon reasonable request with any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to the Indemnified Party and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors, or stockholder of the Company will act reasonably and in good faith in making a determination under the Agreement of the Indemnified Party's entitlement to indemnification. Any costs or expenses (including attorneys' fees and disbursements) incurred by the Indemnified Party in so cooperating with the person or entity making such determination will be borne by the Company (irrespective of the determination as to the Indemnified Party's entitlement to indemnification) and the Company hereby agrees to indemnify and hold the Indemnified Party harmless therefrom. (f) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel will be selected as provided in this Section 6(f). If a Change in Control has not occurred since the date of this Agreement, the Independent Counsel will be selected by the Company's Board of Directors, and the Company will give written notice to the Indemnified Party advising him of the identity of the Independent Counsel so selected. If a Change in Control has occurred since the date of this Agreement, the Independent Counsel will be selected by the Indemnified Party and the Indemnified Party will give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, the Indemnified Party or the Company, as the case may be, may, within 10 days after such written notice of selection will have been given, deliver to the other party a written objection to such selection; provided that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 1, and the objection will set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If a written objection is made and 7 substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by the Indemnified Party of a written request for indemnification pursuant to Section 6(d), no Independent Counsel has been selected and not objected to, either the Company or the Indemnified Party may petition any court of competent jurisdiction for resolution of any objection which may have been made by the Company or the Indemnified Party to the other party's selection of Independent Counsel or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court will designate, and the person with respect to whom all objections are so resolved or the person so appointed will act as Independent Counsel under Section 6(e). The Company will pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(e), and the Company will pay all reasonable fees and expenses incident to the procedures of this Section 6(f), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the commencement of any judicial proceeding or arbitration pursuant to this Agreement, Independent Counsel will be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (g) If it is determined that the Indemnified Party is entitled to indemnification, payment to the Indemnified Party will be made within 10 days after such determination. Section 7. Assumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification under this Agreement, the person or entity making such determination will presume that the Indemnified Party is entitled to indemnification under this Agreement if the Indemnified Party has submitted a request for indemnification in accordance with Section 6(d) and the Company will have the burden of proof to overcome that presumption in connection with the making by any person or entity of any determination contrary to that presumption. (b) If the person or entity empowered or selected under Section 6 to determine whether the Indemnified Party is entitled to indemnification has not made a determination within 30 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification will be deemed to have been made and the Indemnified Party will be entitled to such indemnification, absent (i) a misstatement by the Indemnified Party of a material fact, or an omission of a material fact necessary to make the Indemnified Party's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. Notwithstanding the foregoing, the provisions of this Section 7(b) will not apply if (i) the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(e) and if (A) within 15 days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their 8 consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat, or (ii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(e). (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of the Indemnified Party to indemnification or create a presumption that the Indemnified Party did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that the Indemnified Party had reasonable cause to believe that his conduct was unlawful. (d) For purposes of any determination of good faith, the Indemnified Party will be deemed to have acted in good faith if the Indemnified Party's action is based on the records or books of account of the Company, including financial statements, or on information supplied to the Indemnified Party by the directors, officers or employees of the Company in the course of their duties, or on the advice of legal counsel for the Company or on information or records given or reports made to the Company by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company. In addition, the knowledge or actions, or failure to act, of any director, officer, agent or employee of the Company will not be imputed to the Indemnified Party for purposes of determining the right to indemnification under this Agreement. The provisions of this Section 7(d) will not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnified Party may be deemed to have met the applicable standards of conduct set forth in this Agreement. Section 8. Remedies of Indemnified Party. (a) In the event that (i) a determination is made pursuant to Section 6 that the Indemnified Party is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) no determination of entitlement to indemnification has been made pursuant to Section 6(e) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 3 within 10 days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within 10 days after a determination has been made that the Indemnified Party is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 or 7, the Indemnified Party will be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Alternatively, the Indemnified Party, at his option, may seek an award in arbitration to be conducted in Chicago, Illinois by a single 9 arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Indemnified Party will commence such proceeding seeking an adjudication or an award in arbitration within 120 days following the date on which the Indemnified Party first has the right to commence such proceeding pursuant to this Section 8(a). The Company will not oppose the Indemnified Party's right to seek any such adjudication or award in arbitration. (b) In the event that a determination has been made pursuant to Section 6(e) that the Indemnified Party is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 8 will be conducted in all respects as a de novo trial or arbitration on the merits and the Indemnified Party will not be prejudiced by reason of that adverse determination. (c) If a determination has been made pursuant to Section 6(e) that the Indemnified Party is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 8 absent (i) a misstatement by the Indemnified Party of a material fact, or an omission of a material fact necessary to make the Indemnified Party's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. (d) In the event that the Indemnified Party, pursuant to this Section 8, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, the Indemnified Party will be entitled to recover from the Company, and will be indemnified by the Company against, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it is determined in such judicial adjudication or arbitration that the Indemnified Party is entitled to receive part but not all of the indemnification sought, the expenses incurred by the Indemnified Party in connection with such judicial adjudication or arbitration will be appropriately prorated. The Company will indemnify the Indemnified Party against any and all expenses and, if requested by the Indemnified Party, will (within 10 days after receipt by the Company of a written request therefor) advance such expenses to the Indemnified Party, which are incurred by the Indemnified Party in connection with any action brought by the Indemnified Party to recover under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether the Indemnified Party ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery, as the case may be. (e) The Company will be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and will stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. 10 Section 9. Agreements Relating to Change in Control. (a) For a period of six years after the date of any Change in Control, the Company will cause to be maintained in effect the policies of directors and officers liability insurance and fiduciary liability insurance currently maintained by the Company with respect to claims arising from or relating to actions or omissions, or alleged actions or omissions, occurring on or prior to the date of the Change in Control. The Company may at its discretion substitute for such policies currently maintained by the Company directors and officers liability insurance and fiduciary liability insurance policies with reputable and financially sound carriers providing for no less favorable coverage. Notwithstanding the provisions of this Section 9(a), the Company will not be obligated to make annual premium payments with respect to such policies of insurance to the extent such premiums exceed 300 percent of the annual premiums paid by the Company as of the date of this Agreement. If the annual premium costs necessary to maintain such insurance coverage exceed the foregoing amount, the Company will maintain the most advantageous policies of directors and officers liability insurance and fiduciary liability insurance obtainable for an annual premium equal to the foregoing amount. (b) For a period of six years after the date of any Change in Control, the Company will maintain in effect such provisions in its Certificate of Incorporation providing for exculpation of director and officer liability and indemnification to the fullest extent permitted from time to time under the law of the State of Delaware, which provisions will not be amended, except as required by applicable law or except to make changes permitted by applicable law that would enlarge the scope of the Indemnified Party's indemnification rights thereunder. The foregoing will not be deemed to restrict the right of the Company to modify the provisions of its Certificate of Incorporation relating to exculpation of director and officer liability or indemnification with respect to events or occurrences after the date of the Change in Control so long as such modifications do not adversely affect the rights of the Indemnified Party. Section 10. Non-Exclusivity. (a) The rights of indemnification as provided by this Agreement will not be deemed exclusive of any other rights to which the Indemnified Party may at any time be entitled under applicable law, the Certificate of Incorporation of the Company, any agreement, any vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof will limit or restrict any right of the Indemnified Party under this Agreement in respect of any action taken or omitted by such the Indemnified Party prior to such amendment, alteration or repeal. To the extent that a change in the Delaware Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Company's Certificate of Incorporation and this Agreement, it is the intent of the parties hereto that the Indemnified Party will enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy will be cumulative and in 11 addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent or subsequent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, the Indemnified Party will be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies. (c) In the event of any payment under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of the Indemnified Party, who will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company will not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnified Party has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Section 11. Duration of Agreement. All agreements and obligations of the Company contained in this Agreement will continue during the period the Indemnified Party is a director, officer, employee or agent of the Company or is serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise and will continue thereafter so long as the Indemnified Party may be subject to any Proceeding (or any proceeding commenced under Section 8), whether or not he is acting or serving in any such capacity at the time any liability or Expense is incurred for which indemnification may be sought under this Agreement. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. Section 12. Security. To the extent requested by the Indemnified Party and approved by the Company's Board of Directors, the Company may at any time and from time to time provide security to the Indemnified Party for the Company's obligations hereunder through an irrevocable blank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnified Party, may not be revoked or released without the prior written consent of the Indemnified Party. Section 13. Miscellaneous. 12 (a) No agreement modifying or amending this Agreement or extending or waiving any provision of this Agreement will be valid or binding unless it is in writing and is executed and delivered by or on behalf of the party against which it is sought to be enforced. (b) Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (c) This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (d) The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (e) All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient or when sent to the recipient by telecopy (receipt confirmed), one business day after the date when sent to the recipient by reputable express courier service (charges prepaid) or three business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Company and the Indemnified Party at the addresses indicated below: If to the Company: Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston, Illinois 60201-4422 Attention: Corporate Secretary If to the Indemnified Party: c/o Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston, Illinois 60201-4422 or to such other address or to the attention of such other party as the recipient party has specified by prior written notice to the sending party. 13 (f) This Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. (g) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction will be applied against any party. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation. (h) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. 14 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. NORTHFIELD LABORATORIES INC. By_______________________________ Its______________________________ _________________________________ EX-10.20 7 c61623ex10-20.txt INDEMNFICATION AGREEMENT - EXECUTIVE OFFICER 1 EXHIBIT 10.20 FORM OF INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT dated as of January 1, 2001, by and between Northfield Laboratories Inc., a Delaware corporation (the "Company"), and the undersigned executive officer of the Company (the "Indemnified Party"). The Indemnified Party serves as an executive officer of the Company. The Company's Certificate of Incorporation permits the Company to indemnify the directors, officers, employees and agents of the Company. The Company's Certificate of Incorporation and Section 145 of the Delaware General Corporation Law, as amended from time to time (the "Delaware Law"), also permit agreements between the Company and its directors, officers, employees and agents for the indemnification of such persons by the Company. In recognition of the past services provided to the Company by the Indemnified Party, and in order to induce the Indemnified Party to continue to serve as an officer of the Company, the Company has determined to enter into this Agreement with the Indemnified Party. NOW, THEREFORE, in consideration of the Indemnified Party's continued service as an officer of the Company, the parties hereto agree as follows: Section 1. Definitions. For purposes of this Agreement: "Change in Control" means a change in control of the Company of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect as of the date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to the reporting requirements of the Exchange Act; provided that, without limitation, such a change in control will be deemed to have occurred if: (a) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company's assets; (b) the stockholders of the Company approve any plan or proposal of liquidation or dissolution of the Company; (c) there is consummated any consolidation or merger of the Company in which the Company is not the surviving or continuing corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have, directly or indirectly, at least an 80% ownership interest in the outstanding Common Stock of the surviving corporation immediately after the merger; 2 (d) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding voting securities ordinarily having the right to vote for the election of directors; or (e) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company (the "Board" generally, and as of the date hereof, the "Incumbent Board") cease for any reason to constitute a majority of the Board; provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board will be, for purposes of this Agreement, considered as though such individual were a member of the Incumbent Board; provided further that, notwithstanding the foregoing, an individual whose initial assumption of office as a director is in connection with any actual or threatened "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 of Regulation 14A promulgated under the Exchange Act) by any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) other than the Incumbent Board will not be considered as a member of the Incumbent Board for purposes of this Agreement. "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding with respect to which indemnification is sought by the Indemnified Party pursuant to this Agreement. "Expenses" includes all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating in or being or preparing to be a witness in a Proceeding. "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (a) the Company or the Indemnified Party in any matter material to either such party (other than with respect to matters concerning the Indemnified Party under this Agreement or of other indemnified parties under similar indemnification agreements), or (b) any other party to the Proceeding giving rise to a claim for indemnification under this Agreement. Notwithstanding the foregoing, the term "Independent Counsel" will not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnified Party in an action to determine the Indemnified Party's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to the Agreement or its engagement pursuant hereto. 3 "Proceeding" means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise, and whether civil, criminal, administrative or investigative, in which the Indemnified Party was, is or may be involved as a party or otherwise by reason of the fact that the Indemnified Party is or was a director, officer, employee or agent of the Company or is or was serving as a director, officer, employee, agent or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in each case whether or not the Indemnified Party continues to serve in the same capacity at the time any liability or Expense is incurred for which indemnification may be sought under this Agreement, including any such proceeding based on events or occurrences prior to the date of this Agreement. Section 2. Indemnification. The Company agrees to indemnify and hold harmless the Indemnified Party to the full extent authorized or permitted by the provisions of the Delaware Law and the Company's Certificate of Incorporation. In furtherance of the foregoing, and without limiting the generality thereof, the Company agrees to indemnify the Indemnified Party against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful; provided that in connection with any Proceeding by or in the right of the Company to procure a judgment in its favor, no indemnification against such Expenses will be made in respect of any claim, issue or matter in such Proceeding as to which the Indemnified Party is adjudged to be liable to the Company, unless and to the extent that the Court of Chancery of the State of the Delaware or the court in which such Proceeding has been brought or is pending determines that such indemnification may be made. To the extent that the Indemnified Party is a party to and is successful, on the merits or otherwise, in any Proceeding, he will be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If the Indemnified Party is not wholly successful in any Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company will indemnify the Indemnified Party against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 2, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue or matter. Section 3. Indemnification for Expenses as Witness. To the extent the Indemnified Party is, by reason of the fact that the Indemnified Party is or was a director, officer, employee or agent of the Company or is or was serving as a director, officer, employee, agent or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, a witness in any action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative, to which the Indemnified Party is not a party, the Company 4 agrees to indemnify the Indemnified Party against all Expenses reasonably incurred by him or on his behalf in connection therewith. Section 4. Contribution. If the indemnification provided in Section 2 is unavailable and may not be paid to the Indemnified Party for any reason, then in respect to any Proceeding in which the Company is jointly liable with the Indemnified Party (or would be if joined in such Proceeding), the Company agrees to contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnified Party in such proportion as is appropriate to reflect (a) the relative benefits received by the Company and by the Indemnified Party from the transaction from which such Proceeding arose and (b) the relative fault of the Company and the Indemnified Party in connection with the events which resulted in such Expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company and the Indemnified Party will be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or any other method of allocation that does not take account of the foregoing equitable considerations. Section 5. Advancement of Expenses. The Company agrees to advance all Expenses reasonably incurred by or on behalf of the Indemnified Party in connection with any Proceeding within 10 days after the receipt by the Company of a statement or statements from the Indemnified Party requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements will reasonably evidence the Expenses incurred by the Indemnified Party and will include or be preceded or accompanied by an undertaking by or on behalf of the Indemnified Party to repay any Expenses advanced if it is ultimately determined that the Indemnified Party is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 will be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 will be subject to the condition that, if, when and to the extent that the Company determines that the Indemnified Party would not be permitted to be indemnified under applicable law, the Company will be entitled to be reimbursed, within 30 days after such determination, by the Indemnified Party (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided that if the Indemnified Party has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnified Party should be indemnified under applicable law, any determination made by the Company that the Indemnified Party would not be permitted to be indemnified under applicable law will not be binding and the Indemnified Party will not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Section 6. Indemnification Procedures. 5 (a) The Indemnified Party agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaints, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure of the Indemnified Party to so notify the Company will not relieve the Company of any obligation which it may have to the Indemnified Party under this Agreement or otherwise. (b) The Indemnified Party will be entitled to control the defense of any Proceeding with counsel of his own choosing reasonably acceptable to the Company, and the Company will cooperate in the defense of such Proceeding. If the Indemnified Party determines not to control the defense of any Proceeding with counsel of his own choosing, the Indemnified Party will promptly so notify the Company in writing and the Company will be required to assume the defense of such Proceeding using counsel reasonably acceptable to the Indemnified Party. (c) The Company will not be liable for any settlement of any Proceeding by the Indemnified Party effected without the Company's written consent, which consent will not be unreasonably withheld, delayed or conditioned by the Company. The Company will not be required to obtain the consent of the Indemnified Party to the settlement of any Proceeding that the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnified Party a complete and unqualified release with respect to all potential liability. (d) To obtain indemnification, the advancement of Expenses or contribution by the Company under this Agreement, the Indemnified Party must submit to the Company a written request, including therewith such documentation and information as is reasonably available to the Indemnified Party and is reasonably necessary to determine whether and to what extent the Indemnified Party is entitled to indemnification. The Corporate Secretary of the Company will, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that the Indemnified Party has requested indemnification. (e) Upon written request by the Indemnified Party for indemnification, a determination, if required by applicable law, with respect to the Indemnified Party's entitlement thereto will be made in the specific case (i) if a Change in Control has not occurred since the date of this Agreement, (A) by the Board of Directors by a majority vote of the Disinterested Directors, (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, if obtainable, if the majority of the Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which will be delivered to the Indemnified Party, or (C) if so directed by a majority of the Disinterested Directors, by the stockholders of the Company or (ii) if a Change in Control has occurred since the date of this Agreement, by Independent Counsel in a written opinion to the Board of Directors, a copy of which will be delivered to the Indemnified Party (unless the Indemnified Party requests that such 6 determination be made by the Board of Directors or the stockholders, in which case the determination will be made in the manner provided in clause (i) above). The Indemnified Party will cooperate with the person or entity making such determination with respect to the Indemnified Party's entitlement to indemnification, including providing to such person or entity upon reasonable request with any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to the Indemnified Party and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors, or stockholder of the Company will act reasonably and in good faith in making a determination under the Agreement of the Indemnified Party's entitlement to indemnification. Any costs or expenses (including attorneys' fees and disbursements) incurred by the Indemnified Party in so cooperating with the person or entity making such determination will be borne by the Company (irrespective of the determination as to the Indemnified Party's entitlement to indemnification) and the Company hereby agrees to indemnify and hold the Indemnified Party harmless therefrom. (f) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel will be selected as provided in this Section 6(f). If a Change in Control has not occurred since the date of this Agreement, the Independent Counsel will be selected by the Company's Board of Directors, and the Company will give written notice to the Indemnified Party advising him of the identity of the Independent Counsel so selected. If a Change in Control has occurred since the date of this Agreement, the Independent Counsel will be selected by the Indemnified Party and the Indemnified Party will give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, the Indemnified Party or the Company, as the case may be, may, within 10 days after such written notice of selection will have been given, deliver to the other party a written objection to such selection; provided that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 1, and the objection will set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by the Indemnified Party of a written request for indemnification pursuant to Section 6(d), no Independent Counsel has been selected and not objected to, either the Company or the Indemnified Party may petition any court of competent jurisdiction for resolution of any objection which may have been made by the Company or the Indemnified Party to the other party's selection of Independent Counsel or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court will designate, and the person with respect to whom all objections are so resolved or the person so appointed will act as Independent Counsel under Section 6(e). The Company will pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(e), and the Company will pay all reasonable 7 fees and expenses incident to the procedures of this Section 6(f), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the commencement of any judicial proceeding or arbitration pursuant to this Agreement, Independent Counsel will be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (g) If it is determined that the Indemnified Party is entitled to indemnification, payment to the Indemnified Party will be made within 10 days after such determination. Section 7. Assumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification under this Agreement, the person or entity making such determination will presume that the Indemnified Party is entitled to indemnification under this Agreement if the Indemnified Party has submitted a request for indemnification in accordance with Section 6(d) and the Company will have the burden of proof to overcome that presumption in connection with the making by any person or entity of any determination contrary to that presumption. (b) If the person or entity empowered or selected under Section 6 to determine whether the Indemnified Party is entitled to indemnification has not made a determination within 30 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification will be deemed to have been made and the Indemnified Party will be entitled to such indemnification, absent (i) a misstatement by the Indemnified Party of a material fact, or an omission of a material fact necessary to make the Indemnified Party's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. Notwithstanding the foregoing, the provisions of this Section 7(b) will not apply if (i) the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(e) and if (A) within 15 days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat, or (ii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(e). (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of the Indemnified Party to indemnification or create a presumption that the Indemnified Party did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best 8 interests of the Company or, with respect to any criminal Proceeding, that the Indemnified Party had reasonable cause to believe that his conduct was unlawful. (d) For purposes of any determination of good faith, the Indemnified Party will be deemed to have acted in good faith if the Indemnified Party's action is based on the records or books of account of the Company, including financial statements, or on information supplied to the Indemnified Party by the directors, officers or employees of the Company in the course of their duties, or on the advice of legal counsel for the Company or on information or records given or reports made to the Company by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company. In addition, the knowledge or actions, or failure to act, of any director, officer, agent or employee of the Company will not be imputed to the Indemnified Party for purposes of determining the right to indemnification under this Agreement. The provisions of this Section 7(d) will not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnified Party may be deemed to have met the applicable standards of conduct set forth in this Agreement. Section 8. Remedies of Indemnified Party. (a) In the event that (i) a determination is made pursuant to Section 6 that the Indemnified Party is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) no determination of entitlement to indemnification has been made pursuant to Section 6(e) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 3 within 10 days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within 10 days after a determination has been made that the Indemnified Party is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 or 7, the Indemnified Party will be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Alternatively, the Indemnified Party, at his option, may seek an award in arbitration to be conducted in Chicago, Illinois by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Indemnified Party will commence such proceeding seeking an adjudication or an award in arbitration within 120 days following the date on which the Indemnified Party first has the right to commence such proceeding pursuant to this Section 8(a). The Company will not oppose the Indemnified Party's right to seek any such adjudication or award in arbitration. (b) In the event that a determination has been made pursuant to Section 6(e) that the Indemnified Party is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 8 will be conducted in all respects as a de novo trial or arbitration on the merits and the Indemnified Party will not be prejudiced by reason of that adverse determination. 9 (c) If a determination has been made pursuant to Section 6(e) that the Indemnified Party is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 8 absent (i) a misstatement by the Indemnified Party of a material fact, or an omission of a material fact necessary to make the Indemnified Party's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. (d) In the event that the Indemnified Party, pursuant to this Section 8, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, the Indemnified Party will be entitled to recover from the Company, and will be indemnified by the Company against, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it is determined in such judicial adjudication or arbitration that the Indemnified Party is entitled to receive part but not all of the indemnification sought, the expenses incurred by the Indemnified Party in connection with such judicial adjudication or arbitration will be appropriately prorated. The Company will indemnify the Indemnified Party against any and all expenses and, if requested by the Indemnified Party, will (within 10 days after receipt by the Company of a written request therefor) advance such expenses to the Indemnified Party, which are incurred by the Indemnified Party in connection with any action brought by the Indemnified Party to recover under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether the Indemnified Party ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery, as the case may be. (e) The Company will be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and will stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. Section 9. Agreements Relating to Change in Control. (a) For a period of six years after the date of any Change in Control, the Company will cause to be maintained in effect the policies of directors and officers liability insurance and fiduciary liability insurance currently maintained by the Company with respect to claims arising from or relating to actions or omissions, or alleged actions or omissions, occurring on or prior to the date of the Change in Control. The Company may at its discretion substitute for such policies currently maintained by the Company directors and officers liability insurance and fiduciary liability insurance policies with reputable and financially sound carriers providing for no less favorable coverage. Notwithstanding the provisions of this Section 9(a), the Company will not be obligated to make annual premium payments with respect to such policies of insurance to the extent such premiums exceed 300 percent of the annual premiums paid by the Company as of 10 the date of this Agreement. If the annual premium costs necessary to maintain such insurance coverage exceed the foregoing amount, the Company will maintain the most advantageous policies of directors and officers liability insurance and fiduciary liability insurance obtainable for an annual premium equal to the foregoing amount. (b) For a period of six years after the date of any Change in Control, the Company will maintain in effect such provisions in its Certificate of Incorporation providing for exculpation of director and officer liability and indemnification to the fullest extent permitted from time to time under the law of the State of Delaware, which provisions will not be amended, except as required by applicable law or except to make changes permitted by applicable law that would enlarge the scope of the Indemnified Party's indemnification rights thereunder. The foregoing will not be deemed to restrict the right of the Company to modify the provisions of its Certificate of Incorporation relating to exculpation of director and officer liability or indemnification with respect to events or occurrences after the date of the Change in Control so long as such modifications do not adversely affect the rights of the Indemnified Party. Section 10. Non-Exclusivity. (a) The rights of indemnification as provided by this Agreement will not be deemed exclusive of any other rights to which the Indemnified Party may at any time be entitled under applicable law, the Certificate of Incorporation of the Company, any agreement, any vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof will limit or restrict any right of the Indemnified Party under this Agreement in respect of any action taken or omitted by such the Indemnified Party prior to such amendment, alteration or repeal. To the extent that a change in the Delaware Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Company's Certificate of Incorporation and this Agreement, it is the intent of the parties hereto that the Indemnified Party will enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy will be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent or subsequent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, the Indemnified Party will be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies. 11 (c) In the event of any payment under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of the Indemnified Party, who will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company will not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnified Party has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Section 11. Duration of Agreement. All agreements and obligations of the Company contained in this Agreement will continue during the period the Indemnified Party is a director, officer, employee or agent of the Company or is serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise and will continue thereafter so long as the Indemnified Party may be subject to any Proceeding (or any proceeding commenced under Section 8), whether or not he is acting or serving in any such capacity at the time any liability or Expense is incurred for which indemnification may be sought under this Agreement. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. Section 12. Security. To the extent requested by the Indemnified Party and approved by the Company's Board of Directors, the Company may at any time and from time to time provide security to the Indemnified Party for the Company's obligations hereunder through an irrevocable blank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnified Party, may not be revoked or released without the prior written consent of the Indemnified Party. Section 13. Miscellaneous. (a) No agreement modifying or amending this Agreement or extending or waiving any provision of this Agreement will be valid or binding unless it is in writing and is executed and delivered by or on behalf of the party against which it is sought to be enforced. (b) Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 12 (c) This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (d) The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (e) All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient or when sent to the recipient by telecopy (receipt confirmed), one business day after the date when sent to the recipient by reputable express courier service (charges prepaid) or three business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Company and the Indemnified Party at the addresses indicated below: If to the Company: Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston, Illinois 60201-4422 Attention: Corporate Secretary If to the Indemnified Party: c/o Northfield Laboratories Inc. 1560 Sherman Avenue Suite 1000 Evanston, Illinois 60201-4422
or to such other address or to the attention of such other party as the recipient party has specified by prior written notice to the sending party. (f) This Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. (g) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction will be applied against any party. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation. (h) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. 13 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. NORTHFIELD LABORATORIES INC. By_______________________________ Its______________________________ _________________________________ EX-15 8 c61623ex15.txt ACKNOWLEDGEMENT OF INDEPENDENT CPA 1 EXHIBIT 15 ACKNOWLEDGMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REGARDING INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors Northfield Laboratories Inc.: With respect to registration statements of Form S-8 of Northfield Laboratories Inc., we acknowledge our awareness of the use therein of our report dated March 21, 2001 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. /s/ KPMG LLP Chicago, Illinois April 13, 2001 -----END PRIVACY-ENHANCED MESSAGE-----