SEVERANCE PROTECTION AGREEMENT
Exhibit
10.4
SEVERANCE PROTECTION AGREEMENT dated February 25, 2008 by and between Northfield Laboratories
Inc., a Delaware corporation (the “Company”), and (the
“Executive”), and is amended and restated solely to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (“Code Section 409A”) effective as of this 25th day of
February, 2008.
The Board of Directors of the Company (the “Board”) recognizes that the possibility of
a Change in Control (as hereinafter defined) of the Company exists and that the threat or
occurrence of a Change in Control may result in the distraction of its key management personnel
because of the uncertainties inherent in such a situation.
The Board has determined that it is essential and in the best interests of the Company and its
stockholders to retain the services of the Executive in the event of the threat or occurrence of a
Change in Control and to ensure the Executive’s continued dedication and efforts in such event
without undue concern for the Executive’s personal financial and employment security.
In order to induce the Executive to remain in the employ of the Company, particularly in the
event of the threat or occurrence of a Change in Control, the Company desires to enter into this
Agreement to provide the Executive with certain benefits in the event the Executive’s employment is
terminated as a result of, or in connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein,
it is agreed as follows:
Section 1. Definitions. For purposes of this Agreement, the following terms
have the meanings set forth below:
“Board” means the Board of Directors of the Company.
“Cause” for the termination of the Executive’s employment with the Company will be
deemed to exist if the Executive is convicted of any felony or the Executive fails to comply in all
material respects with any material term of the Proprietary Information and Inventions Agreement
dated as of December 5, 2005 between the Company and the Executive, which conduct or failure is
materially injurious to the Company, monetarily or otherwise.
“Change in Control” means a change in control of the Company of a nature that would be
required to be reported in response to Item 1(a) of the Current Report on Form 8- K, as in effect
as of the original date of this Agreement, promulgated pursuant to Section 13 or 15(d) of the
Securities Exchange Act, whether or not the Company is then subject to the reporting requirements
of the Securities Exchange Act; provided that, without limitation, such a change in control will be
deemed to have occurred if:
(a) there is consummated any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of the
Company’s assets;
(b) the stockholders of the Company approve any plan or proposal of liquidation or
dissolution of the Company;
(c) there is consummated any consolidation or merger of the Company in which the
Company is not the surviving or continuing corporation, or pursuant to which shares of the
Company’s Common Stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of the Company’s Common Stock immediately
prior to the merger have, directly or indirectly, at least an 80% ownership interest in the
outstanding Common Stock of the surviving corporation immediately after the merger;
(d) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities
Exchange Act), directly or indirectly, of securities of the Company representing 15% or more
of the combined voting power of the Company’s then outstanding voting securities ordinarily
having the right to vote for the election of directors; provided that no change in control
will be deemed to occur as a result of any acquisition of voting securities directly from
the Company (or as a result of the exercise, conversion or exchange of any securities
acquired directly from the Company) if the transaction pursuant to which such voting
securities or exercisable, convertible or exchangeable securities are issued is approved by
vote of at least three-quarters of the directors comprising the Incumbent Board (as defined
below); or
(e) individuals who, as of the original date of this Agreement, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute a majority of the Board;
provided that any individual becoming a director subsequent to the original date of this
Agreement whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least three-quarters of the directors comprising the Incumbent
Board will be, for purposes of this Agreement, considered as though such individual were a
member of the Incumbent Board; provided further that, notwithstanding the foregoing, an
individual whose initial assumption of office as a director is in connection with any actual
or threatened “solicitation” of “proxies” (as such terms are defined in Rule 14a-1 of
Regulation 14A promulgated under the Securities Exchange Act) by any “person” or “group” (as
such terms are used in Section 13(d) and 14(d) of the Securities Exchange Act) other than
the Incumbent Board will not be considered as a member of the Incumbent Board for purposes
of this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” means Northfield Laboratories Inc., a Delaware corporation, and includes its
Successors.
“Continuation Period” has the meaning set forth in Section 3.1(b)(iii).
“Disability” means the Executive’s incapacity due to physical or mental illness or
accident such that the Executive is absent from his duties for the Company on a full-time basis for
the entire period of six consecutive months or for 270 days in any 365-day period.
2
“Good Reason” for the Executive’s termination of employment with the Company will be
deemed to exist if, within 24 months after the occurrence of a Change in Control one of the
following events occurs without the Executive’s consent and the event is not cured by the Company
subject to the rules below:
(a) the Executive is reassigned to a position of lesser rank or status whereby the
Executive’s duties or authorities are materially inconsistent with his position immediately
before the reassignment;
(b) there is a material change in the geographic location at which the Executive must
perform services; or
(c) the Executive’s annual base salary is materially reduced.
The Executive shall not be deemed to have terminated for Good Reason unless (i) within 45 days
of the initial condition giving rise to Good Reason, the Executive provides the Company with
written notice of such condition, (ii) the Company does not cure the condition within 30 days
following receipt of such notice to cure the condition, and (iii) such 30 day cure period expires
within 24 months after the Change in Control. If the Company does not cure such condition within
the 30 day period, then the Executive’s Termination Date shall be the first day after the 30 day
cure period expires.
“Notice of Termination” means a written notice from the Company of the termination of
the Executive’s employment which indicates the specific termination provision in this Agreement
relied upon and which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the provision so indicated.
“Person” has the meaning as used in Section 13(d) or 14(d) of the Securities Exchange
Act and will include any “group” as such term is used in such sections.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Successor” means a corporation or other entity acquiring all or substantially all the
assets and business of the Company, whether by operation of law, by assignment or otherwise.
“Termination Date” means (a) in the case of the Executive’s death, the Executive’s
date of death, (b) in the case of the termination of the Executive’s employment with the Company by
the Executive for Good Reason, the first day after the Company’s 30 day cure period expires
(referenced above under “Good Reason”), and (c) in all other cases, the date specified in the
Notice of Termination; provided that if the Executive’s employment is terminated by the Company for
Cause or due to Disability, the date specified in the Notice of Termination will be at least 30
days after the date the Notice of Termination is given to the Executive.
Section 2. Term of Agreement. This Agreement will commence as of October 4,
2002 and will continue in effect until September 30, 2004; provided that commencing on September
30, 2004 and on each September 30 thereafter, the term of this Agreement will automatically be
extended for one year unless either the Company or the Executive gives written
3
notice to the other at least 90 days prior to such date that the term of this Agreement will
not be so extended. Notwithstanding any such notice by the Company, the term of this Agreement
will in any case not expire prior to the expiration of 24 months after the occurrence of a Change
in Control.
Section 3. Termination of Employment.
3.1 If, during the term of this Agreement, the Executive’s employment with the Company is
terminated within 24 months following a Change in Control, the Executive will be entitled to the
following compensation and benefits:
(a) If the Executive’s employment with the Company is terminated (i) by the Company for
Cause or Disability, (ii) by reason of the Executive’s death or (iii) by the Executive other
than for Good Reason, the Company will pay to the Executive all compensation, including all
accrued vacation pay, earned by the Executive through and including the Termination Date;
(b) If the Executive’s employment with the Company is terminated for any reason other
than as specified in Section 3.1(a), the Executive will be entitled to the following:
(i) the Company will pay the Executive all compensation, including all accrued
vacation pay, earned by the Executive through and including the Termination Date;
(ii) the Company will pay the Executive as severance pay, and in lieu of any
further compensation for periods subsequent to the Termination Date, in a single
payment an amount in cash equal to one time the average of the Executive’s annual
base salary for the Company’s two most recently completed fiscal years preceding the
Termination Date;
(iii) for a period of 12 months (the “Continuation Period”), the
Company will at its expense continue on behalf of the Executive and the Executive’s
dependents and beneficiaries the medical, dental and hospitalization benefits
provided (A) to the Executive at any time during the 180-day period prior to the
Change in Control or at any time thereafter or (B) to other similarly situated
executives who continue in the employ of the Company during the Continuation Period.
The coverage and benefits (including deductibles and costs) provided in this
Section 3.1(b)(iii) during the Continuation Period will be no less favorable to the
Executive and the Executive’s dependents and beneficiaries than the most favorable
of such coverages and benefits during any of the periods referred to in clauses (A)
and (B) above. The Company’s obligation hereunder with respect to the foregoing
benefits will be limited to the extent that the Executive obtains any such benefits
pursuant to a subsequent employer’s benefit plans, in which case the Company may
reduce the coverage of any benefits it is required to provide the Executive
hereunder as long as the coverages and benefits of the combined benefit plans are no
less favorable to the Executive than the coverages and
4
benefits required to be provided hereunder. This Section 3.1(b) will not be
interpreted so as to limit any benefits to which the Executive or the Executive’s
dependents or beneficiaries may be entitled under any of the Company’s medical,
dental and hospitalization plans, programs or practices following the Executive’s
termination of employment; and
(iv) all stock options issued by the Company to the Executive will become fully
vested and the Executive will be permitted to exercise such stock options at any
time during the remaining exercise period applicable to such stock options (without
giving effect to any requirement that such stock options be exercised within a
specified period following the termination of the Executive’s employment with the
Company).
(c) The amount provided for in Section 3.1(a) will be paid in a single lump sum cash
payment within fourteen days after the Termination Date. The amount provided for in Section
3.1(b)(i) may be paid within fourteen days after the Termination Date or, if the Company
determines, with the amount provided for in Section 3.1(b)(ii), which will be paid in a
single lump sum cash payment by the Company within fourteen days after the Executive
executes and does not revoke a general release, in the form provided by the Company, of all
claims relating to the Executive’s employment with the Company and the termination of such
employment. The release shall be furnished to the Executive on or as soon as practical
following the Termination Date, but in no event later than the latest date that will insure
that any revocation period provided for in the release will expire no later than fourteen
days before the applicable short-term deferral deadline provided in Section 15. If the
Executive fails to execute the release within a reasonable period of time (21 days, at a
minimum, for an individual termination) or revokes the signed release, the Company’s
obligations under Sections 3.1(b)(ii)-(iv) shall terminate and no severance benefits shall
be payable. In no event shall failure to execute a release or revocation of such release
impact the amount payable under Section 3.1(b)(i).
(d) The Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, and no such payment will be
offset or reduced by the amount of any compensation or benefits provided to the Executive in
any subsequent employment except as specifically provided in Section 3.1(b)(iii).
3.2 Notwithstanding anything contained in this Agreement to the contrary, if the Executive’s
employment with the Company is terminated prior to a Change in Control and the Executive reasonably
demonstrates that such termination (a) was at the request of a Person who has indicated an
intention or taken steps reasonably calculated to effect a Change in Control and who subsequently
effects a Change in Control or (b) otherwise occurred in connection with, or in anticipation of, a
Change in Control which subsequently occurs, then for all purposes of this Agreement, the date of
such Change in Control with respect to the Executive will mean the date immediately prior to the
date of such termination of the Executive’s employment.
3.3 The severance pay and benefits provided for in this Section 3 will be in lieu of any other
severance or termination pay to which the Executive may be entitled under any
5
Company severance or termination plan, program, practice or arrangement. The Executive’s
entitlement to any other compensation or benefits will be determined in accordance with the
Company’s employee benefit plans and other applicable programs, policies and practices as in effect
from time to time.
Section 4. Notice of Termination. Following a Change in Control, any
purported termination of the Executive’s employment by the Company will be communicated by a Notice
of Termination to the Executive. For purposes of this Agreement, no such purported termination
will be effective without such Notice of Termination.
Section 5. Successors; Binding Agreement. This Agreement will be binding upon
and will inure to the benefit of the Company and its Successors, and the Company will require any
Successors to expressly assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such succession or assignment
had taken place. Neither this Agreement nor any right or interest hereunder will be assignable or
transferable by the Executive or by the Executive’s beneficiaries or legal representatives, except
by will or by the laws of descent and distribution. This Agreement will inure to the benefit of
and be enforceable by the Executive’s legal representatives.
Section 6. Fees and Expenses. The Company will pay as they become due all
legal fees and related expenses (including the costs of experts) incurred by the Executive as a
result of the Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under which the Executive
is or may be entitled to receive benefits. In no event shall payment of such expenses be made
later than December 31 of the calendar year following the calendar year in which the expense was
incurred.
Section 7. Notices. All notices, demands and other communications provided
for in the Agreement, including the Notice of Termination, will be in writing and will be deemed to
have been duly given when delivered personally to the recipient or when sent to the recipient by
telecopy (receipt confirmed), one business day after the date when sent to the recipient by
reputable express courier service (charges prepaid) or three business days after the date when
mailed to the recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications will be sent to the Company and the
Executive at the addresses indicated below:
| If to the Company: | Northfield Laboratories Inc. 0000 Xxxxxxx Xxxxxx Xxxxx 0000 Xxxxxxxx, Xxxxxxxx 00000-0000 Attention: Corporate Secretary |
|||||
| If to the Executive: |
or to such other address or to the attention of such other party as the recipient party has
specified by prior written notice to the sending party.
6
Section 8. Nonexclusivity of Rights. Nothing in this Agreement will prevent
or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or
other plan or program provided by the Company (except for any severance or termination policies,
plans, programs or practices) for which the Executive may qualify, nor will anything herein limit
or reduce such rights as the Executive may have under any other agreements with the Company (except
for any severance or termination agreement). Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the Company will be payable
in accordance with such plan or program, except as specifically modified by this Agreement.
Section 9. No Set-Off. The Company’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder will not be affected by
any circumstances, including any right of set-off, counterclaim, recoupment, defense or other right
which the Company may have against the Executive or others.
Section 10. No Change in Employment Relationship. This Agreement and the
rights granted to the Executive hereunder are not intended to (a) provide Executive with any
severance or other rights prior to the occurrence of a Change in Control or (b) provide the
Executive with any right of continuing employment with the Company or otherwise modify the “at
will” employment relationship between the Company and the Executive.
Section 11. Modification and Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Section 12. Severability. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof.
Section 13. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any, understandings and
arrangements, oral or written, between the parties hereto with respect to the subject matter
hereof. No agreement or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not expressly set forth in this
Agreement.
Section 14. Governing Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Illinois without giving effect to the
conflict of laws principles thereof. Any action brought by any party to this Agreement will be
brought and maintained in a court of competent jurisdiction in Xxxx County in the State of
Illinois.
Section 15. Compliance with Section 409A. It is the intention of the Company
and Executive that the provisions of this Agreement comply with Section 409A and all provisions of
this Agreement will be construed and interpreted in a manner consistent with Section 409A. Any
7
mention of “termination” of Executive’s employment contained herein refers to a separation
from service as determined pursuant to Treasury Regulation Section 1.409A-1(h). Further, any
payments (other than those under Section 6) required hereunder shall in no event be paid later than
the 15th day of the third month following the later of (A) the end of the Company’s fiscal year in
which the Termination Date occurs, or (B) the end of the calendar year in which the Termination
Date occurs.
*****
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first above written.
| NORTHFIELD LABORATORIES INC. | ||||||
| By | ||||||
| Its | ||||||
8
