EMPLOYMENT AGREEMENT







         THIS AGREEMENT, made effective as of this 1st day of January, 2001, by

and between STEVEN A. GOULD, M.D. ("Employee") and NORTHFIELD LABORATORIES INC.,

a Delaware corporation (the "Company").



                              W I T N E S S E T H :



         WHEREAS, Employee is now employed as the President of the Company;



         WHEREAS, the Company and Employee now desire to enter into this

Agreement in order to continue such employment for the term set forth herein and

subject to the terms and conditions set forth herein; and



         WHEREAS, the Company and Employee desire to continue the Proprietary

Information and Inventions Agreement entered into by and between Employee and

the Company dated September 1, 1985 (the "Proprietary Information and Inventions

Agreement") in full force and effect;



         NOW, THEREFORE, in consideration of the premises, and of the mutual

covenants hereinafter set forth, the parties do hereby agree as follows:



         1. Employment. The Company agrees to employ Employee, and Employee

agrees to remain in the employ of the Company, for the period (the "Employment

Period") beginning on January 1, 2001 and ending on the earlier to occur of (a)

December 31, 2002 or (b) the date as of which Employee's employment is

terminated pursuant to paragraph 5 of this Agreement. During the Employment

Period, Employee shall serve as the President of the Company and shall perform

such executive and managerial duties consistent with such position as the Chief

Executive Officer and the Board of Directors of the Company shall from time to

time direct. Employee shall devote his full business time and attention to the

business of the Company and its subsidiaries.



         2. Location. Employee shall be based at the Company's headquarters in

Evanston, Illinois, or at such other location as may be agreed upon by Employee

and the Board of Directors of the Company. Employee shall, however, also travel

to other locations at such times as may be reasonably required for the

performance of his duties under this Agreement; provided that the frequency and

duration of such travel shall not be substantially greater than the frequency

and duration of Employee's travel during his employment by the Company prior to

the date of this Agreement.







{PAGE}   2









         3. Compensation. During the Employment Period, Employee shall be

compensated as follows:



                  (a) Salary. An "Employment Year" shall be the twelve-month

         period beginning on the first day of the Employment Period and on each

         anniversary of such date during the Employment Period. For the first

         Employment Year, Employee shall be paid an annual base salary at a rate

         which is not less than $294,973 per year. For the second Employment

         Year, Employee shall be paid an annual base salary at a rate which is

         not less than $303,822 per year. Employee's base salary shall be paid

         in equal, semi-monthly installments.



                  (b) Bonus. Employee shall be paid a cash bonus of $147,486 as

         of the date the Company files a Biologic License Application for its

         PolyHeme blood substitute product with the United States Food and Drug

         Administration. Employee shall be paid an additional cash bonus of

         $294,973 as of the date the Company is granted approval for the

         commercial sale of PolyHeme in the United States for any indication.

         The Board of Directors of the Company may in its discretion determine

         to award Employee additional cash bonuses from time to time during the

         term of this Agreement.



                  (c) Award of Stock Options. On January 1, 2001, the Company

         awarded Employee stock options under the Northfield Laboratories Inc.

         1999 Stock Option Plan to acquire 15,000 shares of the Company's Common

         Stock at an exercise price per share equal to the fair market value of

         the Company's Common Stock as of the date of grant. On or before

         January 1, 2002, the Compensation Committee of the Board of Directors

         of the Company shall review the performance of the Company and

         Executive during the first Employment Year and shall determine whether

         the award of additional stock options to Employee is appropriate. The

         Board of Directors of the Company may in its discretion determine to

         award Employee additional stock options or other forms of equity

         incentive compensation from time to time during the term of this

         Agreement.



                  (d) Paid Vacation. Employee shall be entitled to five weeks

         paid vacation in each calendar year. Any vacation which is not used by

         Employee shall be forfeited at the end of the calendar year.



                  (e) Expenses. Employee shall be reimbursed for all reasonable

         business expenses incurred in the performance of his duties pursuant to

         this Agreement, to the extent such expenses are substantiated and are

         consistent with the general policies of the Company and its

         subsidiaries relating to the reimbursement of expenses of senior

         executive officers.











                                       2

{PAGE}   3



                  (f) Fringe Benefits. In addition to any other compensation

         provided under this Agreement, Employee shall also be entitled to

         participate, during the Employment Period, in any and all pension,

         stock option, relocation, profit sharing, and other employee benefit

         plans or fringe benefit programs which are from time to time maintained

         by the Company or its subsidiaries for their senior executive officers,

         in accordance with the provisions of such plans or programs as from

         time to time in effect.



                  (g) Deduction and Withholding. All compensation and other

         benefits payable to or on behalf of Employee pursuant to this Agreement

         shall be subject to such deductions and withholding as may be agreed to

         by Employee or required by applicable law.



         4. Other Benefits. The compensation provisions of this Agreement shall

be in addition to, and not in derogation or diminution of, any benefits that

Employee or his beneficiaries may be entitled to receive under the provisions of

any pension, stock option, profit sharing, disability (except as otherwise

provided in subparagraph 6(b)), relocation or other employee benefit plan now or

hereafter maintained by the Company or by any of its subsidiaries. The Company

shall not make any changes in such plans or arrangements which would adversely

affect Employee's rights or benefits thereunder, unless such change is made

uniformly in a plan of general application to all of the Company's or a

subsidiary's eligible employees.



         5. Termination. Employee's employment may be terminated without any

breach of this Agreement only under the following circumstances:



                  (a) Death. Employee's employment shall terminate upon his

         death.

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