SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
Northfield Laboratories Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fees
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NORTHFIELD LABORATORIES INC.
1560 Sherman Avenue, Suite 1000
Evanston, Illinois 60201-4800
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held
September 17, 2003
----------------------------
TO THE STOCKHOLDERS OF NORTHFIELD LABORATORIES INC:
The Annual Meeting of the stockholders of Northfield Laboratories Inc. (the
"Company") will be held on Wednesday, September 17, 2003 at 10:00 A.M., local
time, at the Third Floor, 1560 Sherman Avenue, Evanston, Illinois 60201-4800,
for the following purposes:
1. To elect six directors to hold office until the next Annual Meeting of
the stockholders of the Company;
2. To ratify the appointment of KPMG LLP as independent auditors of the
Company to serve for the Company's 2004 fiscal year;
3. To approve the Northfield Laboratories Inc. 2003 Equity Compensation
Plan; and
4. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on July 22, 2003 as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof.
Stockholders are requested to complete and sign the enclosed Proxy, which
is solicited by the Board of Directors, and promptly return it in the
accompanying envelope.
By Order of the Board of Directors
JACK J. KOGUT
Secretary
Evanston, Illinois
August 11, 2003
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE
ANNUAL MEETING. RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON
OR TO ATTEND THE ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU
CANNOT ATTEND. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
NORTHFIELD LABORATORIES INC.
-------------------------------------------------
PROXY STATEMENT
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This document is being furnished to holders of the common stock of
Northfield Laboratories Inc. in connection with the solicitation of proxies by
our board of directors for use at Northfield's annual meeting of stockholders to
be held on Wednesday, September 17, 2003, commencing at 10:00 A.M., local time,
at the Third Floor, 1560 Sherman Avenue, Evanston, Illinois 60201-4800, and at
any adjournment or postponement thereof, for the purpose of considering and
acting upon the matters set forth in the accompanying Notice of Annual Meeting
of Stockholders.
This document is first being mailed to holders of common stock on or about
August 11, 2003.
Our principal executive offices are located at 1560 Sherman Avenue, Suite
1000, Evanston, Illinois 60201-4800. Our telephone number is (847) 864-3500. We
also maintain an Internet Web site at www.northfieldlabs.com. The information
contained on our Web site is not deemed to be soliciting material and is not
incorporated by reference in this document.
VOTING AND RECORD DATE
Only holders of record of common stock as of the close of business on July
22, 2003, the record date for the annual meeting, are entitled to notice of and
to vote at the annual meeting. As of July 22, 2003, there were 14,265,875 shares
of common stock outstanding and entitled to be voted at the annual meeting.
QUORUM
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock entitled to vote at the annual meeting is
necessary to constitute a quorum at the annual meeting. Shares that are present
and entitled to vote on any of the proposals to be considered at the annual
meeting will be considered to be present at the annual meeting for purposes of
establishing the presence or absence of a quorum for the transaction of
business. If a broker indicates on the enclosed proxy that it does not have
discretionary authority as to certain shares to vote on a particular proposal,
but otherwise has authority to vote at the annual meeting, those shares will
also be considered as present for purposes of determining the presence or
absence of a quorum at the annual meeting.
REQUIRED VOTE
Each holder of record of shares who is entitled to vote may cast one vote
per share held on all matters properly submitted for the vote of our
stockholders at the annual meeting. The affirmative vote of a majority of the
shares present at the annual meeting will be required to approve each of the
proposals to be considered at the annual meeting.
Shares that are present and entitled to vote, but which withhold their
votes or abstain from voting on a proposal, will have the effect of votes
against the proposal. If a broker indicates on the enclosed proxy that it does
not have discretionary authority as to certain shares to vote on a particular
proposal, those shares will not be considered as votes cast with respect to the
proposal, but will be considered as present for purposes of determining the
number of votes required to approve the proposal.
If any nominee for director fails to receive the affirmative vote of a
majority of the shares present at the annual meeting, the majority of the
directors then in office will be entitled under our certificate of incorporation
and bylaws to fill the resulting vacancy in the board of directors. Each
director chosen in this manner will hold office for a term expiring at our next
annual meeting of stockholders.
PROXIES
All shares entitled to vote and represented by properly executed proxies
received and not revoked prior to the annual meeting will be voted at the annual
meeting in accordance with the instructions indicated on those proxies. If no
instructions are indicated on a properly executed proxy, the shares represented
by that proxy will be voted as recommended by the board of directors.
If any other matters are properly presented at the annual meeting for
consideration, including, among other things, consideration of a motion to
adjourn the annual meeting to another time or place, the persons named in the
enclosed form of proxy will have discretion to vote on those matters in
accordance with their best judgment to the same extent as the person signing the
proxy would be entitled to vote. It is not currently anticipated that any other
matters will be raised at the annual meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. A proxy may be revoked by filing with
Northfield's Corporate Secretary, at or before the taking of the vote at the
annual meeting, a written notice of revocation or a duly executed proxy, in
either case later dated than the prior proxy relating to the same shares. A
proxy may also be revoked by attending the annual meeting and voting in person,
although attendance at the annual meeting will not itself revoke a proxy. Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to Northfield Laboratories Inc., 1560 Sherman Avenue, Suite 1000,
Evanston, Illinois 60201-4800, Attention: Corporate Secretary, or hand delivered
to the Corporate Secretary, at or before the taking of the vote at the annual
meeting.
We will bear all of the expenses of this solicitation. In addition to
solicitation by mail, our directors, officers and employees may solicit proxies
personally and by telephone, internet and telegraph, all without extra
compensation.
ANNUAL REPORT
A copy of our Annual Report on Form 10-K for our 2003 fiscal year,
including financial statements, has been sent simultaneously with this document
or has been previously provided to all stockholders entitled to vote at the
annual meeting.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The board of directors recommends a vote FOR each of the proposals to be
considered at the annual meeting.
2
ITEM 1. ELECTION OF DIRECTORS
The number of directors comprising our full board of directors is currently
fixed at six. All of our directors stand for election each year at our annual
meeting. Directors elected at this year's annual meeting will hold office until
the next annual meeting or until their earlier resignation or removal.
Northfield's board of directors, based on the recommendation of its
nominating committee composed of independent directors, has nominated the
following current directors for reelection at the annual meeting. In the event
any of the nominees should become unavailable for election, the nominating
committee may designate substitute nominees, in which event shares represented
by all proxies returned will be voted for the substitute nominees unless an
indication to the contrary is included on the proxies. The board of directors
recommends a vote FOR the election of each of the following director nominees.
DIRECTOR PRINCIPAL OCCUPATION AND
NAME SINCE OFFICE BUSINESS EXPERIENCE
---- -------- ------ ------------------------
Steven A. Gould, M.D. ...... 1993 Chairman and Chief Dr. Gould, age 56, is a founding
Executive Officer member of Northfield's scientific team
and has served as the Chairman and
Chief Executive Officer of Northfield
since July 2002. From July 1993 to
July 2002, Dr. Gould served as
President and a director of
Northfield. Prior to that time, Dr.
Gould served as a Consultant and
Principal Investigator for
Northfield's clinical trials. From
1989 to 1993, Dr. Gould served as
Chief of the Department of Surgery of
Michael Reese Hospital. Since 1990,
Dr. Gould has also served as Professor
of Surgery, nonsalaried, at the
University of Illinois College of
Medicine. From 1979 through 1989, Dr.
Gould was Assistant Professor and then
Associate Professor in the Department
of Surgery at The University of
Chicago School of Medicine. Dr. Gould
has been involved in development of
national transfusion policy through
his participation in the activities of
the National Heart Lung Blood
Institute, the National Blood Resource
Education Panel, the Department of
Defense, the American Association of
Blood Banks, the American College of
Surgeons and The American Red Cross.
Dr. Gould received his M.D. degree
from the Boston University School of
Medicine in 1973.
3
DIRECTOR PRINCIPAL OCCUPATION AND
NAME SINCE OFFICE BUSINESS EXPERIENCE
---- -------- ------ ------------------------
Bruce S. Chelberg........... 1989 Director Mr. Chelberg, age 69, has served as a
director of Northfield since 1989. Mr.
Chelberg served from May 1992 through
November 2000 as the Chairman and
Chief Executive Officer of
PepsiAmericas, Inc., formerly known as
Whitman Corporation, a principal
stockholder of Northfield. Mr.
Chelberg is also a director of First
Midwest Bancorp, Inc., Snap-On
Incorporated and Actuant Corporation.
Mr. Chelberg received his LLB degree
from the University Of Illinois
College of Law in 1958.
Jack Olshansky.............. 1989 Director Mr. Olshansky, age 74, has served as a
director of Northfield since 1989. Mr.
Olshansky is an independent consultant
to companies in the healthcare
industry. From 1983 to July 2000, Mr.
Olshansky was a founding general
partner of Montgomery Medical
Ventures, L.P. Prior to that time, Mr.
Olshansky served as president of McGaw
Laboratories, a division of American
Hospital Supply Corporation, and vice
president of the Medical Division of
Cutter Laboratories. Mr. Olshansky is
also a director of PrisMedical, Inc.
and Medstone, Inc. Mr. Olshansky
received his B.A. degree from Brooklyn
College in 1950.
David A. Savner............. 1998 Director Mr. Savner, age 59, has served as a
director of Northfield since April
1998. Mr. Savner has since April 1998
been the Senior Vice President and
General Counsel of General Dynamics
Corporation. From 1987 to 1998, Mr.
Savner was a senior partner in the law
firm of Jenner & Block. Mr. Savner
received his J.D. degree from
Northwestern University Law School in
1968.
John F. Bierbaum............ 2002 Director Mr. Bierbaum, age 59, has served as a
director of Northfield since September
2002. Mr. Bierbaum has since March
2003 served as the Executive Vice
President of Pohlad Companies. Prior
to that, Mr. Bierbaum served as a
senior officer of PepsiAmericas, Inc.
and its predecessors. Mr. Bierbaum
received his B.S. degree is Business
Administration -- Accounting from the
University of Minnesota in 1967.
4
DIRECTOR PRINCIPAL OCCUPATION AND
NAME SINCE OFFICE BUSINESS EXPERIENCE
---- -------- ------ ------------------------
Paul M. Ness, M.D. ......... 2002 Director Dr. Ness, age 57, has served as a
director of Northfield since September
2002. Dr. Ness is Professor of
Pathology, Medicine and Oncology at
the Johns Hopkins University School of
Medicine and has been director of the
School's Transfusion Medicine Division
since 1979. Dr. Ness is the scientific
director of the American Red Cross
Blood Services Greater Chesapeake and
Potomac Region, where he previously
served as Chief Executive Officer and
senior medical director. Dr. Ness
served on the Blood Products Advisory
Committee of the Food and Drug
Administration, or FDA, from 1996 to
1998 and has also served on numerous
FDA advisory panels. He was the
president of the American Association
of Blood Banks in 1999 and became
editor of the journal TRANSFUSION in
2003. Dr. Ness received his M.D.
degree from the State University of
New York in 1971.
COMMITTEES OF THE BOARD OF DIRECTORS
We currently have three standing committees.
The audit committee, which met four times during our 2003 fiscal year, is
composed of Messrs. Savner, Bierbaum and Olshansky. The functions of the audit
committee include the review of the planning and results of our annual audit,
the adequacy of our internal accounting controls, and the auditing and
accounting principles and practices to be used in the preparation of our
financial statements. The audit committee has the sole power and authority to
appoint and replace our independent auditors and to determine what, if any, non-
audit services are to be provided by our independent auditors. Each of the
members of Northfield's audit committee is an independent director as defined in
the applicable listing standards of the National Association of Securities
Dealers, Inc. Our board of directors has adopted a written charter for the audit
committee.
The compensation committee, which met once during our 2003 fiscal year, is
composed of Messrs. Chelberg and Olshansky. The compensation committee has the
authority, as delegated by the board of directors, to administer our executive
compensation plans and to determine the salaries and incentive compensation,
including the grant of stock options, to be received by our executive officers
and employees.
The nominating committee is composed of Messrs. Chelberg and Savner. The
nominating committee makes recommendations to our board of directors regarding
the size and composition of the board, establishes procedures for the nomination
process and recommends candidates for election to the board. The nominating
committee met once during our 2003 fiscal year.
MEETING ATTENDANCE
During fiscal 2003, our board of directors met seven times, and no
incumbent director attended fewer than 75 percent of the total number of
meetings of the board of directors and the committees of which he was a member.
COMPENSATION OF DIRECTORS
We compensate outside directors for their participation at board of
director meetings and at committee meetings of the board of directors at a rate
of $1,000 per meeting. Directors are also reimbursed for their
5
expenses for attending meetings of the board of directors and committees. In
addition, non-employee directors receive grants of stock options under our
Nonqualified Stock Option Plan for Outside Directors.
Dr. Ness has provided consulting services to Northfield relating to FDA
regulatory matters and the sourcing of red blood cells from major blood banking
organizations. Dr. Ness received $60,000 from Northfield as payment for his
consulting services during our 2003 fiscal year.
ADOPTION OF CODE OF BUSINESS CONDUCT
Northfield has adopted a written code of business conduct that includes
policies applicable to our directors, officers and employees relating to
compliance with law, conflicts of interest, protection of confidential
information, acceptance of gifts and entertainment, accuracy and integrity of
books and records, political contributions, equal employment opportunity,
workplace harassment and other matters. In connection with its approval of the
code of business conduct, our board of directors has adopted a resolution
requiring prior approval by our audit committee of any waivers of compliance
with respect to the code granted to any Northfield director, officer or
employee.
6
MANAGEMENT
EXECUTIVE OFFICERS
The board of directors will elect our executive officers at its first
meeting following the annual meeting. Our executive officers are as follows:
NAME POSITION
---- --------
Steven A. Gould, M.D...................... Chairman of the Board of Directors and Chief Executive
Officer
Jack J. Kogut............................. Senior Vice President and Chief Financial Officer,
Secretary and Treasurer
Marc D. Doubleday......................... Vice President and General Manager
Jay H. Kleiman, M.D....................... Vice President -- Clinical Affairs
Robert L. McGinnis........................ Vice President -- Planning and Resource Development
Sophia H. Twaddell........................ Vice President -- Corporate Communications
-------------------------
A biographical summary of the business experience of Dr. Gould is included
under "Election of Directors."
Mr. Kogut, age 56, has served as Senior Vice President and Chief Financial
Officer since January 2003. From 1986 to December 2002, Mr. Kogut served as Vice
President -- Finance. Mr. Kogut has also served as Northfield's Secretary and
Treasurer since January 1994. From 1982 to 1986, he was the Group Controller-
Health Products for Sybron Corporation and also served as President of Sybron
Asia. Mr. Kogut received his M.B.A. degree from Loyola University of Chicago in
1972.
Mr. Doubleday, age 44, has served as the Vice President and General Manager
since February 2003. Prior to that time Mr. Doubleday served as Northfield's
Vice President -- Process Engineering since December 1994. Prior to that time,
he served as Northfield's Plant Manager and Senior Process Engineer. Before
joining Northfield in 1988, Mr. Doubleday was employed in various capacities
with Davy McKee, Millipore Corporation and Abbott Laboratories, Inc. Mr.
Doubleday received his M.M. degree from Northwestern University in 1991.
Dr. Kleiman, age 57, has served as Vice President -- Clinical Affairs since
August 2003. From 1998 to 2003, Dr. Kleiman served as Medical Director,
Cardiovascular/Metabolic Clinical Research at former Searle-Pharmacia, now
Pfizer Inc. Prior to that, he was Director, Interventional Cardiovascular
Services at St. Joseph Hospital, Chicago. Dr. Kleiman is also a Clinical
Assistant Professor at Northwestern University Medical School. Dr. Kleiman
received his M.D. degrees from the University of Michigan in 1971. He also holds
a Master of Public Administration degree from the John F. Kennedy School of
Government at Harvard University.
Mr. McGinnis, age 39, has served as the Vice President -- Planning and
Resource Development since February 2003. Prior to that time Mr. McGinnis served
as Vice President -- Manufacturing Development since August 1997. From 1995 to
1997, Mr. McGinnis was a Project Manager for Raytheon Engineering and
Construction. Prior to 1995, Mr. McGinnis was employed by the John Brown
division of Trafalgar House as a Project Manager and Engineer. Mr. McGinnis
received his MBA degree from the University of Chicago in 1995.
Ms. Twaddell, age 51, as served as Vice President -- Corporate
Communications since January, 2003. From 1999 to 2002, Ms. Twaddell was Senior
Vice President and Partner at Fleishman-Hillard in Chicago. She received her
A.B. degree from Connecticut College and an M.A. from Northwestern University.
7
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid for our last three
completed fiscal years to our Chief Executive Officer, our three other most
highly compensated executive officers and two former executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION(2) OPTIONS(#)
--------------------------- ------- ------ ----- --------------- ------------
Steven A. Gould, M.D..................... 2003 308,465 -- 32,239 100,000
Chairman and Chief Executive Officer(3) 2002 298,682 147,487 30,830 --
2001 285,233 -- 27,554 15,000
Jack J. Kogut............................ 2003 244,124 -- 27,453 50,000
Senior Vice President and Chief 2002 235,888 116,479 25,052 --
Financial Officer 2001 225,266 -- 24,663 12,000
Marc D. Doubleday........................ 2003 171,784 -- 10,454 20,000
Vice President and General Manager 2002 163,604 39,423 11,259 10,000
2001 153,509 15,000 9,841 12,000
Robert L. McGinnis....................... 2003 159,166 -- 9,102 20,000
Vice President -- Planning and 2002 151,587 36,527 10,164 10,000
Resource Development 2001 142,234 15,000 8,834 12,000
John A. Dybas, Jr........................ 2003 127,743 -- 12,327 25,000
Former Vice President -- 2002 184,369 47,426 15,044 10,000
Regulatory Affairs(4) 2001 174,771 -- 14,650 10,000
Richard E. DeWoskin...................... 2003 40,755 -- 4,461 --
Former Chief Executive Officer(5) 2002 281,525 139,024 27,306 --
2001 268,867 -- 25,838 18,000
-------------------------
(1) Our fiscal year begins on June 1 and ends on May 31. Our 2003 fiscal year
ended May 31, 2003.
(2) The indicated amounts represent life insurance premiums paid by Northfield
and contributions made by Northfield to the indicated executive officer's
401(k) plan account.
(3) Dr. Gould was elected as our Chief Executive Officer in July 2002.
(4) Mr. Dybas's employment terminated with his death in January 2003. His
unvested stock options terminated upon his death.
(5) Mr. DeWoskin resigned as our Chief Executive Officer in July 2002.
8
The following table sets forth all options granted to our Chief Executive
Officer and other named executive officers during our last completed fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------- ------------ -------- ---------- ---------- ---------
Steven A. Gould, M.D........ 100,000 33% 3.62 01/01/2013 227,660 576,935
Jack J. Kogut............... 50,000 16% 5.08 10/30/2012 159,739 404,811
Marc D. Doubleday........... 20,000 7% 5.08 10/30/2012 63,896 161,924
Robert L. McGinnis.......... 20,000 7% 5.08 10/30/2012 63,896 161,924
John A. Dybas, Jr.(2)....... 25,000 8% 5.08 10/30/2012 79,870 202,405
Richard E. DeWoskin......... -- -- -- -- -- --
-------------------------
(1) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of their
term using five percent and ten percent appreciation rates as required to be
used in this table by the Securities and Exchange Commission, compounded
annually, and are not intended to forecast possible future appreciation, if
any, of our stock price. Additionally, these values do not take into
consideration the provisions of the options providing for nontransferability
or termination of the options following termination of employment.
(2) Mr. Dybas's employment terminated with his death in January 2003. His
unvested stock options terminated upon his death.
Our Chief Executive Officer and other named executive officers did not
exercise any stock options during our 2003 fiscal year. The following table sets
forth information regarding the aggregate value as of May 31, 2003 of
unexercised stock options held by these individuals.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
Steven A. Gould, M.D. ..... -- -- 147,500/107,500 --/283,000
Jack J. Kogut.............. -- -- 96,000/56,000 1,050/68,500
Marc D. Doubleday.......... -- -- 49,500/33,500 420/27,400
Robert L. McGinnis......... -- -- 33,500/33,500 --/27,400
John A. Dybas, Jr. ........ -- -- 46,000/-- 420/--
Richard E. DeWoskin........ -- -- 133,000/-- --/--
-------------------------
(1) These figures are based on a fair market value for our common stock at May
31, 2003 of $6.45 per share, the closing price of the common stock as
reported by the Nasdaq National Market as of that date. May 31, 2003
represents the last trading day in our 2003 fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors consists of Messrs.
Chelberg and Olshansky. Neither of the members of the compensation committee is
a current or former Northfield officer or employee or was a party to any
disclosable related party transaction involving Northfield during our 2003
fiscal year.
9
EMPLOYMENT AGREEMENTS
We have employment agreements with Steven A. Gould, M.D., our Chief
Executive Officer, and Jack J. Kogut, our Senior Vice President and Chief
Financial Officer, Secretary and Treasurer. These employment agreements provide
for terms expiring in December 2004. The annual salaries payable under the
employment agreements with Dr. Gould and Mr. Kogut are $315,000 and $250,000,
respectively. The employment agreements provide that the salaries of the
respective executive officers may be increased but not decreased from the
foregoing amounts at a rate to be agreed by us and the respective executive
officers. The employment agreements also provide for cash bonus payments of
$315,000 and $250,000, respectively, upon the approval by FDA of the commercial
sale of PolyHeme in the United States. Our board of directors may in its
discretion decide to award the respective executive officers additional cash
bonuses from time to time during the term of the respective employment
agreements. No bonuses were paid to Dr. Gould or Mr. Kogut during our 2003
fiscal year. The employment agreements also permit the executive officers to
participate in all other employee benefit plans and programs we make available
generally to our employees.
The employment agreements provide for certain payments following a
termination of employment by the executive officer due to death, disability or
for cause. Additionally, if we terminate the executive officer's employment
other than by reason of death, disability or for cause, or if the executive
officer terminates his employment for good reason, then we generally will be
obligated to make a lump sum payment within five business days after notice of
termination of an amount equal to two times the executive officer's highest
annual base salary in effect at any time during the preceding twelve months,
plus any bonus that would have been payable through the employment term. In
addition, for two years after the notice of termination, the executive officer
will remain eligible to participate in our insurance and similar plans.
If following a change in control of our company, we terminate the executive
officer's employment other than by reason of death, disability or for cause or
if the executive officer terminates his employment for good reason, any unvested
stock options held by the executive officer will be fully vested and exercisable
as of the date of termination.
The employment agreements also provide that if we and the executive officer
are unable to agree by December 31, 2003 on a base salary for the executive
officer for the calendar year 2004, then the executive officer may elect to
terminate his employment as of December 31, 2003 and we will be obligated to pay
the executive officer his full base salary as in effect as of December 31, 2003
until December 31, 2004 and to continue him and his dependents with coverage
under our medical plan until December 31, 2004. In addition, if the executive
officer's employment terminates at any time after December 31, 2004 for any
reason other than death, disability or for cause and an employment offer by us
is not outstanding as of the date of the termination of employment, then we are
obligated to pay his full base salary as of December 31, 2004, until December
31, 2006. If the executive officer's employment terminates at any time after
December 31, 2004 for any reason other than death, disability or for cause and
an employment offer by us is outstanding as of the date of termination of
employment, then we are obligated to pay his full base salary as of December 31,
2004, until December 31, 2005.
INDEMNIFICATION AGREEMENTS
We have written indemnification agreements with each of our directors and
executive officers. These agreements require us to indemnify our directors and
executive officers to the maximum extent permitted by law and to advance all
expenses they may reasonably incur in connection with the defense of any claim
or proceeding in which they may be involved as a party or witness. The
agreements specify certain procedures and assumptions applicable in connection
with requests for indemnification and advancement of expenses and also require
us to continue to maintain directors and officers and fiduciary liability
insurance for a six-year period following any change in control transaction. The
rights provided to our directors and executive officers under their
indemnification agreements are in addition to any other rights such individuals
may have under our restated certificate of incorporation or bylaws, applicable
law or otherwise.
10
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We currently have four equity compensation plans under which shares of our
common stock are authorized for issuance. If the proposal to approve the
Northfield Laboratories Inc. 2003 Equity Compensation Plan is adopted at the
annual meeting, we do not plan to grant any additional options under our
existing stock option plans other than our New Employee Stock Option Plan.
Approval of the 2003 plan will not, however, affect the rights of holders of
options previously granted under our existing stock option plans.
The following table sets forth certain information regarding our existing
equity compensation plans as of May 31, 2003, the end of our last completed
fiscal year.
EQUITY COMPENSATION PLAN INFORMATION
-----------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
TO BE ISSUED WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
UPON EXERCISE OF EXERCISE PRICE OF FUTURE ISSUANCE UNDER
PLAN CATEGORY OUTSTANDING STOCK OPTIONS OUTSTANDING STOCK OPTIONS EQUITY COMPENSATION PLANS
------------- ------------------------- ------------------------- -------------------------
Equity compensation plans
approved by stockholders.... -- -- --
Equity compensation plans not
approved by stockholders.... 959,000 9.62 633,000
------- ---- -------
Total......................... 959,000 9.62 633,000
======= ==== =======
Each of our existing equity compensation plans is a stock option plan that
provides for the issuance of stock options at prices not less than the per share
fair market value of our common stock on the date of grant. Individual grants to
directors, officers and employees under our plans have generally been made
pursuant to individual grant agreements that contain additional terms and
conditions, such as vesting requirements and restrictions on exercise of the
granted options after termination of employment. The compensation committee of
our board of directors acts as the administrator of each of our stock option
plans.
Our Restated Nonqualified Stock Option Plan lapsed on September 30, 1996.
Following termination of this plan, all options outstanding prior to plan
termination continue to be exercisable in accordance with their terms. As of May
31, 2003, options to purchase a total of 77,000 shares of common stock at prices
of $6.38 and $15.19 per share were outstanding under this plan. These options
expire in 2003 and 2004, ten years after the date of grant.
The Northfield Laboratories Inc. 1996 Stock Option Plan provides for the
granting of stock options to purchase up to 500,000 shares of common stock to
directors, officers, key employees and consultants. As of May 31, 2003, options
to purchase a total of 465,000 shares of common stock at prices between $9.56
and $15.41 were outstanding under the 1996 plan. These options expire between
2006 and 2010, ten years after the date of grant.
The Northfield Laboratories Inc. 1999 Stock Option Plan was established
effective June 1, 1999. The 1999 plan provides for the granting of stock options
to purchase up to 500,000 shares of common stock to directors, officers, key
employees and consultants. As of May 31, 2003, options to purchase a total of
347,000 shares of common stock at prices between $3.62 and $14.17 were
outstanding under the 1999 plan. These options expire between 2011 and 2013, ten
years after the date of grant.
The Northfield Laboratories Inc. New Employee Stock Option Plan was
established effective January 1, 2003. The new employee plan provides for the
granting of stock options to purchase up to 350,000 shares of common stock to
newly-hired employees. As of May 31, 2003, options to purchase a total of 10,000
shares common stock at a price of $3.62 per share were outstanding under the new
employee plan. These options expire in 2013, ten years after the date of grant.
Our Nonqualified Stock Option Plan for Outside Directors provides for the
granting of stock options to purchase up to 200,000 shares of common stock to
directors who are neither employees of nor consultants to Northfield and who
were not directors on June 1, 1994. As of May 31, 2003, options to purchase a
total of
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60,000 shares of common stock at prices between $4.09 and $13.38 per share were
outstanding under this plan. These options expire between 2008 and 2012.
EMPLOYEE BENEFIT PLANS
We sponsor a defined contribution 401(k) savings plan covering each of our
employees satisfying certain minimum length of service requirements. We make
discretionary contributions to this plan subject to certain maximum contribution
limitations. Our expenses incurred under this plan for the years ended May 31,
2003, 2002 and 2001 were $145,307, $157,294 and $145,051, respectively.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
directors, executive officers and persons who beneficially own more than 10% of
our common stock file with the Securities and Exchange Commission initial
reports of beneficial ownership of the common stock and reports of changes in
their beneficial ownership.
To our knowledge, based solely upon a review of copies of reports furnished
to us and written representations that no other reports were required during the
fiscal year ended May 31, 2003, our officers, directors and greater than 10%
beneficial owners complied during our last fiscal year with all applicable
Section 16(a) filing requirements.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report of the compensation committee of the board of directors
discusses our executive compensation policies and the bases for the compensation
paid to our Chief Executive Officer during our last completed fiscal year.
COMPENSATION POLICY
Our policy with respect to executive compensation has been designed to
compensate executive officers fairly and adequately in relation to their
responsibilities, capabilities and contributions to Northfield. We have also
sought to align the interests of senior management with those of our
stockholders with respect to long-term increases in the price of our stock. The
compensation committee considers it essential to our success that the
compensation paid to executive officers remain competitive with similar or
competitive companies in order to attract and retain the talented senior
management necessary to achieve our business objectives.
COMPONENTS OF COMPENSATION
The components of compensation paid for our last completed fiscal year to
our executive officers consisted of base salary, stock option grants and certain
other benefits. During our last completed fiscal year, we had employment
agreements which provided for specified annual salaries with Steven A. Gould,
M.D., our Chief Executive Officer, and Jack J. Kogut, our Senior Vice President
and Chief Financial Officer, Secretary and Treasurer. See
"Management -- Employment Agreements." The annual salaries provided in these
employment agreements were determined based principally on the compensation
levels for similar or competitive companies, including companies in the
pharmaceutical and biomedical industries, as well as the levels of
responsibility and experience of the individual executive.
During our last completed fiscal year, we issued stock options to acquire
215,000 shares of common stock to five of our named executive officers. These
options were issued in recognition of these officers' significant contributions
to the clinical development of PolyHeme. The other benefits provided to our
executive officers consist of enhanced life and disability insurance coverage.
Executive officers are also eligible for coverage under our general medical and
life insurance programs and may participate in our defined contribution 401(k)
savings plan on the same terms as other employees. We did not pay cash bonuses
to our named executive officers during the last completed fiscal year.
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CHIEF EXECUTIVE OFFICER COMPENSATION
During our 2003 fiscal year, our Chief Executive Officer, Steven A. Gould,
M.D., received $308,465 in base salary and options to acquire 100,000 shares of
our common stock at an exercise price of $3.62 per share, pursuant to the terms
of his employment agreement. Dr. Gould did not receive a cash bonus during our
2003 fiscal year. The terms of Dr. Gould's employment agreement were determined
based principally on compensation levels applicable to the chief executive
officers of similar or competitive companies and secondarily on Dr. Gould's
prior contributions to Northfield and his high level of experience and
involvement with the development and clinical testing of PolyHeme.
Members of the Compensation Committee
Bruce S. Chelberg
Jack Olshansky
AUDIT COMMITTEE REPORT
Our audit committee has (i) reviewed and discussed our audited financial
statements with management, (ii) discussed with our independent auditors the
matters required to be discussed by SAS 61 (Codification of Statements of
Auditing Standards, AU Section 380), as amended, (iii) received the written
disclosures and the letter from our independent accountants required by
Independence Standards Board Standard No. 1 (Independence Standards Board No. 1,
Independence Discussions with Audit Committees), as amended, and (iv) discussed
with our independent accountants the accountants' independence. Based on the
review and discussions referred to above, the audit committee has recommended to
our board of directors that our audited financial statements be included in its
Annual Report on Form 10-K for the fiscal year ended May 31, 2003 for filing
with the Securities and Exchange Commission.
Members of the Audit Committee
David A. Savner, Chairman
Jack Olshansky
John F. Bierbaum
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on our common
stock from May 31, 1998 through May 31, 2003 with the CRSP Total Return Index
for the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Pharmaceutical
Index. The total stockholder return assumes that $100 was invested in our common
stock and each of the two indexes on May 31, 1998 and also assumes the
reinvestment of any dividends. The return on our common stock is calculated
using the closing price for the common stock on May 31, 2003, as quoted on the
Nasdaq Stock Market, Inc. Past financial performance may not be a reliable
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
[Stock Performance Graph]
NASDAQ PHARMACEUTICALS
STOCKS SIC 2830-2839 US NASDAQ STOCK MARKET (US
& FOREIGN NORTHFIELD LABORATORIES, INC. COMPANIES)
----------------------- ----------------------------- -----------------------
May 29, 1998 100.00 100.00 100.00
May 28, 1999 132.60 78.80 141.00
May 31, 2000 244.90 72.70 193.30
May 31, 2001 260.50 108.50 120.20
May 31, 2002 178.70 26.90 92.50
May 30, 2003 212.50 42.10 92.00
-------------------------
The Report of the Compensation Committee on Executive Compensation, the
Audit Committee Report and the Stock Performance Graph are not deemed to be
soliciting material or to be filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, or Securities Exchange Act of
1934, as amended, or incorporated by reference in any document so filed.
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SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of July 31, 2003, for (i) each of
our current executive officers named under "Management -- Executive Officers,"
(ii) each of our current directors, (iii) each other person who is known by us
to be the beneficial owner of more than five percent of our outstanding common
stock and (iv) all of our current directors and executive officers as a group.
Except as otherwise indicated, the address of each person named in the following
table is c/o Northfield Laboratories Inc., 1560 Sherman Avenue, Suite 1000,
Evanston, Illinois 60201-4800.
PERCENTAGE
NUMBER BENEFICIALLY
NAME OF STOCKHOLDER OF SHARES OWNED(1)
------------------- ---------- ------------
Steven A. Gould, M.D........................................ 675,950(2) 4.1%
Jack J. Kogut............................................... 160,810(3) 1.0%
Marc D. Doubleday........................................... 57,500(4) *
Jay H. Kleiman M.D.......................................... --(5) *
Robert L. McGinnis.......................................... 39,000(6) *
Sophia H. Twaddell.......................................... 1,000(7) *
Bruce S. Chelberg........................................... 15,000(8) *
300 Park Boulevard
Suite 201 Itasca, Illinois 60143
Jack Olshansky.............................................. 43,017(9) *
78305 Sunrise Canyon Avenue
Palm Desert, California 92211-2601
David A. Savner............................................. 32,000(10) *
c/o General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22042
John F. Bierbaum............................................ 5,000(11) *
c/o The Pohlad Companies
60 South Sixth Street
Minneapolis, Minnesota 55402
Paul M. Ness, M.D........................................... 5,000(12) *
1018 Brooklandwood Road
Lutherville, MD 21093
Gerald S. Moss, M.D......................................... 589,150(13) 3.6%
c/o UIC College of Medicine
1853 West Polk Avenue
Chicago, Illinois 60612
PepsiAmericas, Inc. ........................................ 1,502,345(14) 9.3%
60 South Sixth Street
Suite 3880
Minneapolis, Minnesota 55402
SF Capital Partners Ltd..................................... 1,160,714(15) 7.1%
c/o Stark Asset Management LLC
3600 South Lake Drive
St. Francis, Wisconsin 53235
All current directors and executive officers as a group (12
persons).................................................. 1,623,427 9.8%
-------------------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of
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common stock subject to stock options and warrants currently exercisable or
exercisable within 60 days are deemed outstanding for computing the percentage
ownership of the person holding the options and the percentage ownership of any
group of which the holder is a member, but are not deemed outstanding for
computing the percentage ownership of any other person. Except as indicated
by footnote, and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
(2) Includes 147,500 shares of common stock which Dr. Gould is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days. Also includes 484,630 shares held in a personal trust and
43,820 shares held in a family trust. Does not include 107,500 shares
acquirable pursuant to stock options not currently exercisable or
exercisable within 60 days.
(3) Includes 96,000 shares of common stock which Mr. Kogut is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days. Also includes 64,805 shares held in a personal trust. Does
not include 56,000 shares acquirable pursuant to stock options not
currently exercisable or exercisable within 60 days.
(4) Includes 55,000 shares of common stock which Mr. Doubleday is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days. Does not include 28,000 shares acquirable pursuant to stock
options not currently exercisable or exercisable within 60 days.
(5) Does not include 50,000 shares acquirable pursuant to stock options not
currently exercisable or exercisable within 60 days.
(6) Includes 39,000 shares of common stock which Mr. McGinnis is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days. Does not include 28,000 shares acquirable pursuant to stock
options not currently exercisable or exercisable within 60 days.
(7) Does not include 10,000 shares acquirable pursuant to stock options not
currently exercisable or exercisable within 60 days.
(8) Includes 15,000 shares of common stock which Mr. Chelberg is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days.
(9) Includes 35,000 shares of common stock which Mr. Olshansky is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days. Does not include 10,000 shares acquirable pursuant to stock
options not currently exercisable or exercisable within 60 days.
(10) Includes 30,000 shares of common stock which Mr. Savner is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days.
(11) Includes 5,000 shares of common stock which Mr. Bierbaum is entitled to
acquire pursuant to stock options currently exercisable or exercisable
within 60 days. Does not include 10,000 shares acquirable pursuant to stock
options not currently exercisable or exercisable within 60 days.
(12) Includes 5,000 shares of common stock which Dr. Ness is entitled to acquire
pursuant to stock options currently exercisable or exercisable within 60
days. Does not include 10,000 shares acquirable pursuant to stock options
not currently exercisable or exercisable within 60 days.
(13) Dr. Moss, who served as a director for the 2003 fiscal year, is not
standing for election at the annual meeting
(14) Based on the information reported in the Schedule 13G filed with the
Securities and Exchange Commission by PepsiAmericas, Inc., formerly known
as Whitman Corporation.
(15) Based on the information reported in the Schedule 13G filed with the
Securities and Exchange Commission by SF Capital Partners Ltd. Includes
267,857 shares acquirable within 60 days pursuant to a right to purchase
additional shares granted by Northfield.
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ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Our board of directors has selected KPMG LLP as Northfield's independent
auditors for the fiscal year ending May 31, 2004 and has further directed that
the selection of independent auditors be submitted for approval by our
stockholders at the annual meeting. KPMG has served as Northfield's independent
auditors since 1985. Our board of directors believes that KPMG is knowledgeable
about our operations and accounting practices and is qualified to act in the
capacity of our principal independent auditors.
During fiscal 2003, we paid KPMG the following fees:
Audit Fees. For professional services rendered for the audit of our fiscal
year 2003 consolidated financial statements and the review of the financial
statements included in our fiscal year 2003 Forms 10-Q, KPMG billed us a total
of $74,000.
Financial Information System Design and Implementation Fees. KPMG provided
no professional services to us of the nature described in Paragraph (c)(4)(ii)
of Rule 2-01 of Regulation S-X during the fiscal year ended May 31, 2003.
All Other Fees. In addition to the fees described above, KPMG billed us an
aggregate of $21,500 for all other services rendered during fiscal year 2003,
including $4,500 for audit related services concerning the filing of a
registration statement relating to an employee stock option plan, $17,000 for
tax compliance and consultation services.
The audit committee considered whether the non-audit services rendered by
KPMG were compatible with maintaining KPMG's independence as auditors of our
consolidated financial statements, and concluded that they were.
We expect a representative of KPMG to attend the annual meeting. The
representative will have an opportunity to make a statement if he or she desires
and also will be available to respond to appropriate questions. If the selection
of KPMG is not approved by the stockholders, our board of directors will
consider such a vote as advice to select other independent auditors for the 2005
fiscal year, rather than the 2004 fiscal year, because of the difficulty and
expense involved in changing independent auditors on short notice.
The board of directors recommends a vote FOR ratification of the
appointment of KPMG as independent auditors for fiscal 2004.
ITEM 3. APPROVAL OF THE NORTHFIELD LABORATORIES INC.
2003 EQUITY COMPENSATION PLAN
Our board of directors has adopted the Northfield Laboratories Inc. 2003
Equity Compensation Plan and is recommending that stockholders approve the 2003
plan at the annual meeting. We believe that implementation of the 2003 plan will
be integral to our efforts to attract and retain qualified employees,
non-employee directors and consultants while continuing to preserve our
financial resources.
Currently, stock options exercisable for a total of 959,000 shares of
common stock are outstanding under our existing stock option plans and options
exercisable for an additional 633,000 shares remain available for grant under
these plans. If all of the currently outstanding stock options were exercised,
they would represent approximately 5.6 percent of our outstanding shares of
common stock. If the proposal to approve the 2003 plan is adopted at the annual
meeting, we do not plan to grant any additional options under our existing stock
option plans other than our New Employee Stock Option Plan, under which option
grants are limited to new employees joining Northfield. If we were to issue
options covering all of the remaining shares available under our New Employee
Stock Option Plan and all of the 750,000 shares covered by the 2003 plan and all
of our 959,000 currently outstanding stock options were exercised, the total
would represent approximately 11.3 percent of our outstanding shares of common
stock.
The 2003 plan will permit stock option grants, stock grants, restricted
stock grants, restricted stock unit grants, performance stock grants,
performance unit grants, stock appreciation rights grants and cash awards.
17
Stockholder approval of the 2003 plan will permit the performance-based awards
discussed below to qualify for deductibility under Section 162(m) of the
Internal Revenue Code.
We refer to awards and grants under the 2003 plan as "benefits." Those
eligible for benefits under the 2003 plan are referred to as "participants."
Participants include all employees, consultants and non-employee directors of
Northfield.
A summary of the principal features of the 2003 plan is provided below, but
is qualified in its entirety by reference to the full text of the 2003 plan that
was filed electronically with this proxy statement with the Securities and
Exchange Commission and is attached to this proxy statement as Exhibit A. A copy
of the 2003 plan is also available from our company's Secretary at the address
on the cover of this document.
SHARES AVAILABLE FOR ISSUANCE
The aggregate number of shares of our common stock that may be issued under
the 2003 plan will not exceed 750,000 (subject to the adjustment provisions
discussed below).
ADMINISTRATION AND ELIGIBILITY
The 2003 plan will be administered by a committee of our board consisting
of two or more directors, each of whom will satisfy the requirements established
for administrators acting under plans intended to qualify for exemption under
Rule 16b-3 under the Securities Exchange Act of 1934, for outside directors
acting under plans intended to qualify for exemption under Section 162(m) of the
Code and with any applicable requirements established by the Nasdaq Stock
Market, Inc. Currently, we expect that the compensation committee of our board
of directors will administer the 2003 plan.
The committee will approve the aggregate benefits and the individual
benefits for the most senior elected officers and non-employee directors. The
committee may delegate some of its authority under the 2003 plan in accordance
with the terms of the 2003 plan.
No participant may receive in any calendar year:
- stock options relating to more than 100,000 shares;
- restricted stock or restricted stock units that are subject to the
attainment of performance goals (as described below) relating to more
than 50,000 shares;
- stock appreciation rights relating to more than 100,000 shares; or
- performance shares relating to more than 50,000 shares.
No non-employee director may receive in any calendar year stock options
relating to more than 50,000 shares or restricted stock units relating to more
than 25,000 shares.
Each of the above limits is subject to the adjustment provisions discussed
below. The maximum amount that may be earned under performance unit awards by
any participant who is a covered employee within the meaning of Section 162(m)
of the Code in any calendar year may not exceed $500,000.
BENEFITS
Stock Options
Grants of Options
The committee is authorized to grant stock options to participants, or
"optionees," which may be either incentive stock options, or "ISOs," or
nonqualified stock options, or "NSOs." We refer to NSOs and ISOs collectively as
"stock options." The exercise price of any stock option must be equal to or
greater than the fair market value of the shares on the date of the grant. The
term of our stock option cannot exceed 10 years. ISOs may not be granted more
than 10 years after the date that the 2003 plan was adopted by our board of
directors.
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For purposes of the 2003 plan, fair market value is determined in a manner
that the committee may deems equitable, or as required by applicable law or
regulation. Generally, fair market value means the closing price per share for
our common stock on the last trading day preceding the day of the transaction,
as reported for the Nasdaq Stock Market, Inc. in the Wall Street Journal.
Exercisability and Termination
At the time of grant, the committee in its sole discretion will determine
when options are exercisable and when they expire.
Payment of Option Price
Payment for shares purchased upon exercise of a stock option must be made
in full at the time of purchase. Payment may generally be made in cash, by the
transfer to Northfield of shares owned by the participant having a fair market
value on the date of transfer equal to the option exercise price, or in such
other manner as may be authorized by the committee.
SARs
The committee has the authority to grant stock appreciation rights, or
"SARs," to participants and to determine the number of shares subject to each
SAR, the term of the SAR, the time or times at which the SAR may be exercised,
and all other terms and conditions of the SAR. A SAR is a right, denominated in
shares, to receive, upon exercise of the right, in whole or in part, without
payment to Northfield an amount, payable in shares, in cash or a combination
thereof, that is equal to the excess of the fair market value of our common
stock on the date of exercise of the right over the fair market value of our
common stock on the date of grant of the right, multiplied by the number of
shares for which the right is exercised. The committee also may, in its
discretion, substitute SARs which can be settled only in common stock for
outstanding stock options at any time when Northfield is subject to fair value
accounting. The terms and conditions of any substitute SAR will be substantially
the same as those applicable to the stock option that it replaces and the term
of the substitute SAR may not exceed the term of the stock option that it
replaces.
Restricted Stock and Restricted Stock Units
Restricted stock consists of shares which are transferred or sold by
Northfield to a participant, but are subject to substantial risk of forfeiture
and to restrictions on their sale or other transfer by the participant.
Restricted stock units are the right to receive shares at a future date in
accordance with the terms of such grant upon the attainment of certain
conditions specified by the committee which include substantial risk of
forfeiture and restrictions on their sale or other transfer by the participant.
The committee determines the eligible participants to whom, and the time or
times at which, grants of restricted stock or restricted stock units will be
made, the number of shares or units to be granted, the price to be paid, if any,
the time or times within which the shares covered by such grants will be subject
to forfeiture, the time or times at which the restrictions will terminate, and
all other terms and conditions of the grants. Restrictions or conditions could
include the attainment of performance goals, as described below, continuous
service with Northfield, the passage of time or other restrictions or
conditions.
Performance Stock
A participant who is granted performance stock has the right to receive
shares or cash or a combination of shares and cash equal to the fair market
value of such shares at a future date in accordance with the terms of such grant
and upon the attainment of performance goals specified by the committee. The
award of performance stock to a participant will not create any rights in such
participant as a stockholder of Northfield until the issuance of our common
stock with respect to an award.
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Performance Units
A participant who is granted performance units has the right to receive a
payment in cash upon the attainment of performance goals specified by the
committee. The committee may substitute actual shares of our common stock for
the cash payment otherwise required to be made pursuant to a performance unit
award.
Performance Goals
Awards of restricted stock, restricted stock units, performance stock,
performance units and other incentives under the 2003 plan may be made subject
to the attainment of performance goals relating to one or more business criteria
within the meaning of Section 162(m) of the Code, including the attainment of
specified regulatory, scientific or business milestones, increases in the price
of our common stock or other goals. Any performance criteria may be used to
measure the performance of Northfield as a whole or any business unit of
Northfield and may be measured relative to a peer group or index.
Stock Awards
The committee may award shares of our common stock to participants without
payment as additional compensation for service to Northfield. Stock awards may
be subject to other terms and conditions, which may vary from time to time and
among participants, as the committee determines to be appropriate.
Cash Awards
A cash award consists of a monetary payment made by Northfield to a
participant as additional compensation for his or her services to Northfield. A
cash award may be made in tandem with another benefit or may be made
independently of any other benefit. Cash awards may be subject to other terms
and conditions, which may vary from time to time and among participants, as the
committee determines to be appropriate.
AMENDMENT OF THE 2003 PLAN
Our board of directors or the committee has the right and power to amend
the 2003 plan. Neither the board nor the committee, however, may amend the 2003
plan in a manner which would impair or adversely affect the rights of the holder
of a benefit without the holder's consent. No material amendment of the 2003
plan may be made without stockholder approval.
TERMINATION OF THE 2003 PLAN
Our board of directors may terminate the 2003 plan at any time. Termination
will not in any manner impair or adversely affect any benefit outstanding at the
time of termination.
COMMITTEE'S RIGHT TO MODIFY BENEFITS
The committee may grant benefits on terms and conditions different than
those specified in the 2003 plan to comply with the laws and regulations of any
foreign jurisdiction, or to make the benefits more effective under such laws and
regulations. The committee may permit or require a participant to have amounts
or shares of our common stock that otherwise would be paid or delivered to the
participant as a result of the exercise or settlement of an award under the 2003
plan credited to a deferred compensation or stock unit account established for
the participant by the committee on our company's books of account. Neither our
board of directors nor the committee may cancel any outstanding stock option for
the purpose of reissuing the option to the participant at a lower exercise
price, or to reduce the option price of an outstanding option, in each case
without obtaining prior stockholder approval.
CHANGE IN CONTROL
The committee has the right, in connection with the issuance of benefits to
individual participants under the 2003 plan, to include provisions that modify
the terms of the benefit upon the occurrence of a change in
20
control of Northfield. These modifications may include, among others, the
acceleration of the exercisability of stock options and SARs and the termination
of restrictions on shares of restricted stock and restricted stock units. The
2003 plan includes provisions that require the exercise or forfeiture of stock
options and SARs in connection with certain change in control transactions.
Alternatively, the committee has the option under the 2003 plan to cause the
continuing or successor entity following a change in control transaction to
assume the obligations of Northfield under the 2003 plan.
ADJUSTMENTS
If there is any change in our common stock by reason of any stock split,
stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares, the total
number of shares available for benefits, the maximum number of shares which may
be subject to an award in any calendar year and the number of shares subject to
outstanding benefits, and the price of each of the foregoing, as applicable,
will be equitably adjusted by the committee in its discretion.
REUSAGE
If a stock option granted under the 2003 plan expires or is terminated,
surrendered or canceled without having been fully exercised or if restricted
stock, restricted stock units, performance shares or SARs granted under the 2003
plan are forfeited or terminated without the issuance of all of the shares
subject thereto, the shares covered by such benefits will again be available for
use under the 2003 plan. Shares covered by a benefit granted under the 2003 plan
would not be counted as used unless and until they are actually issued and
delivered to a participant. Any shares of common stock covered by a SAR will be
counted as used only to the extent shares are actually issued to the participant
upon exercise of the SAR. The number of shares that are transferred to
Northfield by a participant to pay the exercise or purchase price of a benefit
will be subtracted from the number of shares issued with respect to such benefit
for the purpose of counting shares used. Shares withheld to pay withholding
taxes in connection with the exercise or payment of a benefit will not be
counted as used. Shares covered by a benefit granted under the 2003 plan that is
settled in cash will not be counted as used.
FEDERAL INCOME TAX CONSEQUENCES
We have been advised by counsel that the federal income tax consequences as
they relate to benefits are as follows:
NSOs
An optionee does not recognize taxable income upon the grant of an NSO.
Upon the exercise of such a stock option, the optionee recognizes ordinary
income to the extent the fair market value of the shares received upon exercise
of the NSO on the date of exercise exceeds the exercise price. Northfield
receives an income tax deduction in an amount equal to the ordinary income that
the optionee recognizes upon the exercise of the stock option.
ISOs
An optionee does not generally recognize taxable income upon the grant or
upon the exercise of an ISO. Upon the sale of ISO shares, the optionee
recognizes income in an amount equal to the difference, if any, between the
exercise price of the ISO shares and the fair market value of those shares on
the date of sale. The income is taxed at long-term capital gains rates if the
optionee has not disposed of the stock within two years after the date of the
grant of the ISO and has held the shares for at least one year after the date of
exercise and Northfield is not entitled to a federal income tax deduction. The
holding period requirements are waived when an optionee dies. The exercise of an
ISO may in some cases trigger liability for the alternative minimum tax. If an
optionee sells ISO shares before having held them for at least one year after
the date of exercise and two years after the date of grant, the optionee
recognizes ordinary income to the extent of the lesser of the gain realized upon
the sale or the difference between the exercise price and the fair market value
of the shares on
21
the date of exercise. Any additional gain is treated as long-term or short-term
capital gain depending upon how long the optionee has held the ISO shares prior
to disposition. In the year of disposition, Northfield receives a federal income
tax deduction in an amount equal to the ordinary income that the optionee
recognizes as a result of the disposition.
Restricted Stock
A participant who receives an award of restricted stock does not generally
recognize taxable income at the time of the award. Instead, the participant
recognizes ordinary income in the first taxable year in which his or her
interest in the shares becomes either freely transferable or no longer subject
to substantial risk of forfeiture. The amount of taxable income is equal to the
fair market value of the shares less the cash, if any, paid for the shares. A
participant may elect to recognize income at the time he or she receives
restricted stock in an amount equal to the fair market value of the restricted
stock, less any cash paid for the shares, on the date of the award. Northfield
receives a compensation expense deduction in an amount equal to the ordinary
income recognized by the participant in the taxable year in which restrictions
lapse, or in the taxable year of the award if, at that time, the participant had
filed a timely election to accelerate recognition of income.
Other Benefits
In the case of an exercise of an SAR or an award of restricted stock units,
performance stock, performance units, common stock or cash, the participant will
generally recognize ordinary income in an amount equal to any cash received and
the fair market value of any shares received on the date of payment or delivery.
In that taxable year, Northfield will receive a federal income tax deduction in
an amount equal to the ordinary income which the participant has recognized.
MILLION DOLLAR DEDUCTION LIMIT
Northfield may not deduct compensation of more than $1,000,000 that is paid
to an individual who, on the last day of the taxable year, is either our chief
executive officer or is among one of the four other most highly-compensated
officers for that taxable year as reported in our proxy statement. The
limitation on deductions does not apply to certain types of compensation,
including qualified performance-based compensation. We believe that benefits in
the form of stock options, performance stock, performance units, SARs,
performance-based restricted stock and restricted stock units and cash payments
under management incentive awards constitute qualified performance-based
compensation and, as such, will be exempt from the $1,000,000 limitation on
deductible compensation.
MISCELLANEOUS
A new benefits table is not provided because no grants have been made under
the 2003 plan and all benefits are discretionary.
APPROVAL BY STOCKHOLDERS
In order to be adopted, the 2003 plan must be approved by the affirmative
vote of a majority of the outstanding shares present at the meeting and entitled
to vote.
RECOMMENDATION OF THE BOARD
The board of directors recommends a vote FOR approval of the Northfield
Laboratories Inc. 2003 Equity Compensation Plan.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholders may present proper proposals for inclusion in Northfield's
proxy statement and for consideration at the next annual meeting of our
stockholders by submitting their proposals to us in a timely manner. In order to
be included in our proxy statement for our next annual meeting, stockholder
proposals
22
must be received by us no later than April 10, 2004, and must otherwise comply
with the requirements of the applicable rules of the Securities and Exchange
Commission.
In addition, our restated bylaws establish an advance notice procedure with
regard to certain matters, including stockholder nominations for director and
stockholder proposals not included in our proxy statement, to be brought before
any annual meeting of stockholders. In general, notice must be received by our
corporate secretary not less than 60 days nor more than 90 days prior to the
date of the annual meeting, except if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to our stockholders, in
which event notice by the stockholders to be timely must be received no later
than the close of business on the tenth day following the date on which notice
of the date of the annual meeting was mailed or public disclosure was made. It
is currently expected that our 2004 annual meeting of stockholders will be held
on or about September 17, 2004. Therefore, the deadline under our restated
bylaws for timely submission of director nominations and stockholder proposals
for consideration at our 2004 annual meeting is currently expected to be July
19, 2004. Stockholder nominations for director are also required under our
restated bylaws to include certain information regarding the director nominee
and the stockholder making the nomination.
All notice of proposals by stockholders, whether or not to be included in
our proxy materials, should be sent to Northfield Laboratories Inc., 1560
Sherman Avenue, Suite 1000, Evanston, Illinois 60201-4800, Attention: Corporate
Secretary.
GENERAL
The board of directors does not know of any other matters to be presented
at the annual meeting. If any additional matters are properly presented, the
persons named in the proxy will have discretion to vote in accordance with their
own judgment on these matters.
23
EXHIBIT A
NORTHFIELD LABORATORIES INC.
2003 EQUITY COMPENSATION PLAN
1. Purpose. The purposes of the Northfield Laboratories Inc. 2003 Equity
Compensation Plan (the "Plan") are to (a) encourage outstanding individuals to
accept or continue service as employees, consultants and directors of Northfield
Laboratories Inc. (the "Company") and (b) to furnish additional incentives to
those persons to achieve the Company's business goals and objectives and to
strengthen the mutuality of interest between those persons and the Company's
stockholders by providing them stock options and other stock and cash
incentives.
2. Administration. The Plan will be administered by a Committee (the
"Committee") of the Company's Board of Directors consisting of two or more
directors as the Board may designate from time to time, each of whom will
satisfy such requirements as:
(a) the Securities and Exchange Commission may establish for
administrators acting under plans intended to qualify for exemption under
Rule 16b-3 or its successor under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b) the Nasdaq Stock Market, Inc. may establish pursuant to its
rule-making authority; and
(c) the Internal Revenue Service may establish for outside directors
acting under plans intended to qualify for exemption under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee will have the authority to construe and interpret the Plan
and any benefits granted thereunder, to establish and amend rules for Plan
administration, to change the terms and conditions of options and other benefits
at or after grant, and to make all other determinations which it deems necessary
or advisable for the administration of the Plan. The determinations of the
Committee will be made in its sole discretion in accordance with its judgment as
to the best interests of the Company and its stockholders and in accordance with
the purposes of the Plan. A majority of the members of the Committee will
constitute a quorum, and all determinations of the Committee will be made by a
majority of its members. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee, in writing signed by all the
Committee members. The Committee may authorize one or more officers of the
Company to select employees to participate in the Plan and to determine the
number of option shares and other rights to be granted to such participants,
except with respect to awards to officers subject to Section 16 of the Exchange
Act or officers who are or may become "covered employees" within the meaning of
Section 162(m) of the Code ("Covered Employees"), and any reference in the Plan
to the Committee will include such officer or officers.
3. Participants. Participants will consist of all employees, consultants
and non-employee directors of the Company. Designation of a participant in any
year will not require the Committee to designate that person to receive a
benefit in any other year or to receive the same type or amount of benefit as
granted to the participant in any other year or as granted to any other
participant in any year. The Committee may consider all factors that it deems
relevant in selecting participants and in determining the type and amount of
their respective benefits.
4. Shares Available under the Plan. There is hereby reserved for issuance
under the Plan an aggregate of 750,000 shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"). If there is a lapse, expiration,
termination or cancellation of any Stock Option issued under the Plan prior to
the issuance of shares thereunder or if shares of Common Stock are issued under
the Plan and thereafter are reacquired by the Company, the shares subject to the
Stock Option and the reacquired shares will be added to the shares available for
benefits under the Plan. Shares covered by a benefit granted under the Plan will
not be counted as used unless and until they are actually issued and delivered
to a participant. Any shares covered by a Stock Appreciation Right will be
counted as used only to the extent shares are actually issued to the participant
upon
24
exercise of the right. In addition, any shares of Common Stock exchanged by an
optionee as full or partial payment to the Company of the exercise price under
any Stock Option exercised under the Plan, any shares retained by the Company
pursuant to a participant's tax withholding election, and any shares covered by
a benefit which is settled in cash will be added to the shares available for
benefits under the Plan. All shares issued under the Plan may be either
authorized and unissued shares or issued shares reacquired by the Company. Under
the Plan, no participant may receive in any calendar year (a) Stock Options
relating to more than 100,000 shares, (b) Restricted Stock or Restricted Stock
Units that are subject to the attainment of Performance Goals (as defined in
Section 12) relating to more than 50,000 shares, (c) Stock Appreciation Rights
relating to more than 100,000 shares or (d) Performance Shares relating to more
than 50,000 shares. No non-employee director may receive in any calendar year
Stock Options relating to more than 50,000 shares or Restricted Stock Units
relating to more than 25,000 shares. The shares reserved for issuance and the
limitations set forth above will be subject to adjustment in accordance with
Section 13. All of the available shares may, but need not, be issued pursuant to
the exercise of Incentive Stock Options.
5. Types of Benefits. Benefits under the Plan will consist of Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Stock, Performance Units and Other Stock or Cash Awards, all as
described below.
6. Stock Options. Stock Options may be granted to participants, at any
time as determined by the Committee. The Committee will determine the number of
shares subject to each option and whether the option is an Incentive Stock
Option. The option price for each option will be determined by the Committee but
will not be less than 100% of the fair market value of the Common Stock on the
date the option is granted. Each option will expire at such time as the
Committee will determine at the time of grant. Options will be exercisable at
such time and subject to such terms and conditions as the Committee will
determine; provided that no option will be exercisable later than the tenth
anniversary of its grant. The option price, upon exercise of any option, will be
payable to the Company in full by (a) cash payment or its equivalent, (b)
tendering previously acquired shares (held for at least six months) having a
fair market value at the time of exercise equal to the option price or
certification of ownership of such previously-acquired shares, (c) delivery of a
properly executed exercise notice, together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale proceeds from the
option shares or loan proceeds to pay the exercise price and any withholding
taxes due to the Company and (d) such other methods of payment as the Committee
deems appropriate. In no event will the Committee cancel any outstanding Stock
Option for the purpose of reissuing the option to the participant at a lower
exercise price or reduce the option price of an outstanding option, in each case
without prior stockholder approval.
7. Stock Appreciation Rights. Stock Appreciation Rights may be granted to
participants at any time as determined by the Committee. A Stock Appreciation
right may be granted in tandem with a Stock Option granted under the Plan or on
a free-standing basis. The Committee also may substitute Stock Appreciation
Rights which can be settled only in stock for outstanding Stock Options at any
time. The grant price of a tandem or substitute Stock Appreciation Rights will
be equal to the option price of the related option. The grant price of a
free-standing Stock Appreciation Rights will be equal to the fair market value
of the Common Stock on the date of its grant. A Stock Appreciation Right may be
exercised upon such terms and conditions and for the term as the Committee
determines; provided that the term will not exceed the option term in the case
of a tandem or substitute Stock Appreciation Rights or ten years in the case of
a free-standing Stock Appreciation Right and the terms and conditions applicable
to a substitute Stock Appreciation Right will be substantially the same as those
applicable to the Stock Option which it replaces. Upon exercise of a Stock
Appreciation Right, the participant will be entitled to receive payment from the
Company in an amount determined by multiplying the excess of the fair market
value of a share of Common Stock on the date of exercise over the grant price of
the Stock Appreciation Right by the number of shares with respect to which the
Stock Appreciation Right is exercised. The payment may be made in cash or stock,
at the discretion of the Committee, except in the case of a substitute Stock
Appreciation Right, which may be made only in stock.
8. Restricted Stock and Restricted Stock Units. Restricted Stock and
Restricted Stock Units may be awarded or sold to participants under such terms
and conditions as may be established by the Committee.
25
Restricted Stock and Restricted Stock Units will be subject to such restrictions
as the Committee determines, including, without limitation, any of the
following:
(a) a prohibition against sale, assignment, transfer, pledge,
hypothecation or other encumbrance for a specified period; or
(b) a requirement that the holder forfeit (or in the case of shares or
units sold to the participant resell to the Company at cost) such shares or
units in the event of termination of employment during the period of
restriction.
All restrictions will expire at such times as the Committee may specify.
9. Performance Stock. The Committee may designate the participants to
whom long-term performance stock ("Performance Stock") is to be awarded and
determine the number of shares, the length of the performance period and the
other terms and conditions of each such award. Each award of Performance Stock
will entitle the participant to a payment in the form of shares of Common Stock
upon the attainment of performance goals and other terms and conditions
specified by the Committee. Notwithstanding satisfaction of any performance
goals, the number of shares issued under a Performance Stock award may be
adjusted by the Committee on the basis of such further consideration as the
Committee may determine; provided that the Committee may not, in any event,
increase the number of shares earned upon satisfaction of any performance goal
by any participant who is a Covered Employee. The Committee may make a cash
payment equal to the fair market value of shares of Common Stock otherwise
required to be issued to a participant pursuant to a Performance Stock award.
10. Performance Units. The Committee may designate the participants to
whom long-term performance units ("Performance Units") are to be awarded and
determine the number of units and the terms and conditions of each such award.
Each Performance Unit award will entitle the participant to a payment in cash
upon the attainment of performance goals and other terms and conditions
specified by the Committee. Notwithstanding the satisfaction of any performance
goals, the amount to be paid under a Performance Unit award may be adjusted by
the Committee on the basis of such further consideration as the Committee will
determine; provided that the Committee may not, in any event, increase the
amount earned under Performance Unit awards upon satisfaction of any performance
goal by any participant who is a Covered Employee and the maximum amount earned
by a Covered Employee in any calendar year may not exceed $500,000. The
Committee may substitute actual shares of Common Stock for the cash payment
otherwise required to be made to a participant pursuant to a Performance Unit
award.
11. Other Stock or Cash Awards. In addition to the incentives described
in Sections 6 through 10, the Committee may grant other incentives payable in
cash or in Common Stock under the Plan as it determines to be in the best
interests of the Company and its stockholders and subject to such other terms
and conditions as it deems appropriate.
12. Performance Goals. Awards of Restricted Stock, Restricted Stock
Units, Performance Stock, Performance Units and other incentives under the Plan
may be made subject to the attainment of performance goals relating to one or
more business criteria within the meaning of Section 162(m) of the Code
("Performance Criteria"). Any Performance Criteria may be used to measure the
performance of the Company as a whole or any business unit of the Company and
may be measured relative to a peer group or index. Performance Criteria may be
calculated in accordance with the Company's financial statements, generally
accepted accounting principles or under a methodology established by the
Committee prior to the issuance of an award which is consistently applied and
identified in the audited financial statements, including footnotes, or the
Management Discussion and Analysis section of the Company's annual report.
13. Adjustment Provisions. If the Company at any time changes the number
of issued shares of Common Stock by stock dividend, stock split, spin-off,
split-off, spin-out, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares, the total number of shares reserved for
issuance under the Plan, the maximum number of shares which may be made subject
to an award in any calendar year, and the number of shares covered by each
outstanding award and the price therefor, if any, will be equitably adjusted by
the Committee.
26
14. Terminating Events. The Company, at its option, may give any or all
of the participants at least 10 business days written notice (or, if such notice
period is not practicable, such shorter notice period as the Company determines
in good faith is practicable) prior to the anticipated date of the consummation
of a Terminating Event. Upon receipt of such notice, and for a period of five
business days thereafter (or such other period as may be specified in the
Company's notice with respect to the Terminating Event), each participant
receiving such notice will be permitted to exercise, in whole or in part, the
vested and unexercised portion of each Stock Option or Stock Appreciation Right
held by such participant in accordance with the terms and conditions of the Plan
and the award agreement relating to such Stock Option or Stock Appreciation
Right. Upon the consummation of the Terminating Event, all Stock Options and
Stock Appreciation Rights will be canceled and forfeited to the extent they have
not been exercised in accordance with the provisions of this Section 14. If the
Terminating Event is not consummated, all Stock Options and Stock Appreciation
Rights exercised pursuant to the Company's notice of the Terminating Event will
be deemed not to have been exercised and will thereafter be exercisable to the
same extent and on the same terms and conditions as if notice of the Terminating
Event had not been given by the Company. In lieu of delivering notice of a
Terminating Event pursuant to this Section 14, the Company, at its option, may
cause the successor or acquiring corporation in connection with any Terminating
Event or, if applicable, the corporate parent of any such corporation (the
"Successor Corporation"), to assume in writing the obligations of the Company
under the Plan and the outstanding award agreements entered into pursuant to the
Plan. In such event, the number and kind of shares acquirable upon the exercise
of the Stock Options and Stock Appreciation Rights and the exercise price
applicable thereto will be adjusted appropriately and the Stock Options and
Stock Appreciation Rights as so adjusted will be deemed solely to represent
rights to acquire shares of the Successor Corporation in the manner provided in
the agreements between the Company and the Successor Corporation. For purposes
of this Section 14, "Terminating Event" means any (a) 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 or (b) 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 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.
15. Nontransferability. Each benefit granted under the Plan will not be
transferable otherwise than by will or the laws of descent and distribution and
each Stock Option and Stock Appreciation Right will be exercisable during the
participant's lifetime only by the participant or, in the event of disability,
by the participant's personal representative. In the event of the death of a
participant, exercise of any benefit or payment with respect to any benefit will
be made only by or to the executor or administrator of the estate of the
deceased participant or the person or persons to whom the deceased participant's
rights under the benefit will pass by will or the laws of descent and
distribution. Notwithstanding the foregoing, the Committee may permit the
transfer of a Stock Option or Stock Appreciation Right by the participant,
subject to such terms and conditions as may be established by the Committee.
16. Taxes. The Company will be entitled to withhold the amount of any tax
attributable to any amounts payable or shares deliverable under the Plan, after
giving the person entitled to receive such payment or delivery notice and the
Company may defer making payment or delivery as to any award, if any such tax is
payable until indemnified to its satisfaction. A participant may pay all or a
portion of any required withholding taxes arising in connection with the
exercise of a Stock Option or Stock Appreciation Right or the receipt or vesting
of shares hereunder by electing to have the Company withhold shares of Common
Stock, having a fair market value equal to the amount required to be withheld.
17. Duration, Amendment and Termination. No award of any benefit under
the Plan will be made more than ten years after the date of adoption of the Plan
by the Board of Directors; provided that the terms and conditions applicable to
any option granted on or before such date may thereafter be amended or modified
by mutual agreement between the Company and the participant, or such other
person as may then have an interest therein. The Board of Directors or the
Committee may amend the Plan from time to time or terminate the Plan at any
time; provided that no such action will reduce the amount of any existing award
or change the
27
terms and conditions thereof without the participant's consent. No material
amendment of the Plan will be made without stockholder approval.
18. Fair Market Value. The fair market value of the Common Stock at any
time will be determined in such manner as the Committee may deem equitable or as
required by applicable law or regulation.
19. Other Provisions. The award of any benefit under the Plan may also be
subject to other provisions (whether or not applicable to the benefit awarded to
any other participant) as the Committee determines appropriate, including
provisions intended to comply with federal or state securities laws and stock
exchange requirements, understandings or conditions as to the participant's
employment, requirements or inducements for continued ownership of Common Stock
after exercise or vesting of benefits, acceleration of benefits upon the
occurrence of a change in control of the Company or other events determined by
the Committee, forfeiture of awards in the event of termination of employment
after exercise or vesting, or breach of noncompetition or confidentiality
agreements following termination of employment, or provisions permitting the
deferral of the receipt of a benefit for such period and upon such terms as the
Committee may determine. If any benefit under the Plan is granted to an employee
who is employed or providing services outside the United States and who is not
compensated from a payroll maintained in the United States, the Committee may
modify the provisions of the Plan as they pertain to such individuals to comply
with applicable law, regulation or accounting rules. The Committee may permit or
require a participant to have amounts or shares of Common Stock that otherwise
would be paid or delivered to the participant as a result of the exercise or
settlement of an award under the Plan credited to a deferred compensation or
stock unit account established for the participant by the Committee on the
Company's books of account.
20. Governing Law. The Plan and any actions taken in connection herewith
will be governed by and construed in accordance with the laws of the state of
Delaware without regard to applicable conflict of law principles.
21. Stockholder Approval. The Plan was adopted by the Board of Directors
on July 15, 2003, subject to stockholder approval. The Plan and any benefits
granted thereunder will be null and void if stockholder approval is not obtained
at the Company's next annual meeting of stockholders.
28
--------------------------------------------------------------------------------
Proxy - Northfield Laboratories Inc.
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 17, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of Northfield Laboratories Inc. hereby appoints Jack
J. Kogut and Carmen Wilcox, and each of them, attorneys and proxies with full
power of substitution, to vote at the Annual Meeting of the Stockholders of
Northfield Laboratories Inc. to be held on Wednesday, September 17, 2003, at
10:00 A.M., local time, at 1560 Sherman Avenue, Evanston, Illinois 60201-4800,
and at any adjournment or postponement thereof, in the name of the undersigned
and with the same force and effect as if the undersigned were present and voting
such shares, on the following matters and in the following manner.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREON. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED BY EACH OF THE ABOVE PERSONS FOR EACH OF THE
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING AND FOR SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING AS THE ABOVE PERSONS MAY DEEM
ADVISABLE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
INTERNET VOTING INSTRUCTIONS
Available 24 Hours a day 7 days a week!
[MOUSE ICON] To vote using the Internet
- Go to the following web site:
WWW.COMPUTERSHARE.COM/US/PROXY
- Enter the information requested on your computer screen
and follow the simple instructions.
HOLDER ACCOUNT NUMBER C0123456789 PROXY ACCESS NUMBER 12345
If you vote by the Internet, please DO NOT mail back this proxy card.
Proxies submitted by the Internet must be received by 1:00 a.m., Central Time,
on September 17, 2003.
THANK YOU FOR VOTING
+
Northfield Laboratories Inc. 000000 0000000000 0 0000
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
ADD 3 000000000.000 ext
ADD 4 000000000.000 ext
ADD 5
ADD 6 HOLDER ACCOUNT NUMBER
C 1234567890 J N T
[BAR CODE]
/ / Mark this box with
an X if you have
made changes to your
name or address
details above.
--------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
--------------------------------------------------------------------------------
PLEASE REFER TO THE REVERSE SIDE FOR INTERNET VOTING INSTRUCTIONS.
A ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold For Withhold
01 - Steven A. Gould, M.D. / / / / 04 - David A. Savner / / / /
02 - Bruce S. Chelberg / / / / 05 - John F. Bierbaum / / / /
03 - Jack Olshansky / / / / 06 - Paul M. Ness, M.D. / / / /
B PROPOSALS
The Board of Directors recommends a vote FOR the following proposals.
For Against Abstain
2. To ratify the appointment of KPMG LLP
as independent auditors of the / / / / / / I plan to
Company to serve for the Company's attend the
2004 fiscal year. meeting in
person. / /
For Against Abstain
3. To approve the Northfield
Laboratories Inc. 2003 Equity / / / / / /
Compensation Plan.
4. In their discretion, to act in any
other matters which may properly come
before the Annual Meeting and any
adjournment or postponement thereof.
C AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
NOTE: Sign exactly as your name(s) appear hereon. When signing as attorney,
administrator, trustee, guardian or any other representative capacity, please so
indicate. Please sign in the box(s) below to validate this proxy.
Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (mm/dd/yyyy)
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/ /
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