EMPLOYMENT AGREEMENT


     EMPLOYMENT  AGREEMENT  (this  "Agreement")  dated  as of May 9,  2001  (the
"Effective Date"),  between Enzon, Inc. (the "Company"),  a Delaware corporation
with offices in Piscataway, New Jersey, and Arthur J. Higgins (the "Executive"),
a resident of Libertyville, Illinois.

     WHEREAS,  the Company is a biopharmaceutical  company engaged in developing
advanced therapeutics for life threatening diseases; and

     WHEREAS,   Executive  has  extensive   experience  as  an  executive  of  a
pharmaceutical company; and

     WHEREAS,  the Company wishes to employ the Executive to render services for
the Company on the terms and  conditions  set forth in this  Agreement,  and the
Executive  wishes to be retained  and  employed by the Company on such terms and
conditions;

     NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth below and other good and valuable consideration,  the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:

     1. Employment.  The Company hereby employs the Executive, and the Executive
accepts such employment and agrees to perform services for the Company,  for the
period and upon the other terms and conditions set forth in this Agreement.

     2. Term.  Unless terminated at an earlier date in accordance with Section 9
hereof, the term of the Executive's  employment  hereunder shall commence on the
date agreed upon in writing by Executive  and the Chairman (the  "Chairman')  of
the  Company's  Board of  Directors  (the  "Board"),  which date shall be within
twenty-one  (21) days  following the Effective Date or such longer period as may
be  mutually   agreed  to  in  writing  by  Executive   and  the  Chairman  (the
"Commencement  Date") and shall extend  through such date, not earlier than June
1, 2005,  which is twelve (12) months  following  the date on which either party
hereto receives written notice (a "notice of non-renewal")  from the other party
that such other party does not wish for the term hereof to continue  beyond such
twelve (12) month period (the "Term").  In the event the Commencement  Date does
not occur within such  twenty-one  (21) day period or such mutually  agreed upon
extended  period of time,  this Agreement  shall  terminate and be of no further
force or effect and the  parties  shall have no  obligation  to each other under
this  Agreement  or  otherwise.  Subject  to  possible  earlier  termination  in
accordance  with Section 9 hereof,  unless and until a notice of  non-renewal is
given by a party,  the Term  shall  always  have at  least  twelve  (12)  months
remaining,  and all of the provisions of this  Agreement  shall continue in full
force and effect during such period.

     3. Position and Duties.

     (a) Service with Company.  During the term of the  Executive's  employment,
the  Executive  agrees to perform such  employment  duties for the Company in an
executive and managerial  capacity  commensurate with the positions of President
and Chief  Executive  Officer of the Company.  As President and Chief  Executive
Officer,  Executive shall have the authority and duty generally to supervise and
direct the business of the Company,  subject to the control and direction of the
Board and of any duly authorized Committee of the Board. The Executive


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also agrees to serve as Chairman of the Board of Directors  of the Company,  for
any period  during the Term for which he is elected to serve as  Chairman of the
Board.  The Company  agrees to cause  Executive  to be elected to the  Company's
Board of  Directors  as of the  Commencement  Date and to cause  Executive to be
elected to serve as Chairman of the Board  commencing no later than December 31,
2001.  Subject to the Company's  compliance  with  applicable  legal and listing
requirements, the timing and content of the press release announcing Executive's
joining the Company  shall be subject to the mutual  agreement of Executive  and
the Company.

     (b)  Performance  of  Duties.  The  Executive  agrees to serve the  Company
faithfully and to the best of his ability and to devote his full time, attention
and efforts to the business and affairs of the Company  during his employment by
the Company.  Executive has provided, under separate cover, the Company with the
form of Employee  Agreement used by Executive's  former  employer (the "Employee
Agreement") which, to the best of Executive's  knowledge,  is the only agreement
which could  arguably  restrict  his  employment  activities  subsequent  to the
termination of his employment with such former  employer.  Executive agrees that
he will not use on behalf, or for the benefit, of the Company or disclose to the
Company any confidential information of or concerning his former employer. It is
the  Company's  intention  that  Executive  not  breach any  confidentiality  or
noncompetition  agreement  he may have with his  former  employer.  Based on his
knowledge of his former employer's business and confidential information and the
information  concerning the Company's business  heretofore provided to Executive
by the Company or publicly available, to the best of Executive's knowledge,  his
entering into and performing  this Agreement will not constitute a breach of the
Employee  Agreement or any other  obligation  of Executive.  Executive  will not
render or perform  services for any other  corporation,  firm,  entity or person
which are inconsistent  with the provisions of this Agreement.  While he remains
employed by the Company, the Executive may participate in reasonable  charitable
activities and personal investment  activities so long as such activities do not
conflict  or  interfere  with the  performance  of his  obligations  under  this
Agreement.  Subject to the prior approval of the Board,  subsequent to the first
anniversary of the Commencement Date,  Executive may join and serve on the board
of directors of up to two other  companies,  provided that such other  companies
are not  competitors  of the Company and such service would not  interfere  with
Executive's  obligations  to the  Company  hereunder  or involve or  potentially
involve a conflict of interest, as determined by the Board in its discretion.

4.   Compensation.

     (a) Base Salary. As compensation in full for all services to be rendered by
the Executive under this Agreement, the Company shall pay to the Executive, less
applicable  deductions  and  withholdings,  a ratable  base  salary  (the  "Base
Salary") of Five Hundred Thousand Dollars ($500,000) per year, which Base Salary
shall be paid in accordance  with the Company's  normal  payroll  procedures and
policies for its senior management. The compensation payable to Executive during
each  year  after  the  first  year  of  the  Executive's  employment  shall  be
established  by the Board or the  Compensation  Committee  thereof  following an
annual  performance  review by the Board,  but in no event shall the Base Salary
for any  successive  year of the Term be less  than the Base  Salary  in  effect
during the previous year of the Term.

     (b) Annual  Bonus.  Commencing  with the fiscal year ending June 30,  2002,
Executive  shall be  entitled to  participate  in the  Company's  bonus plan for
management and any successor bonus plan covering  management (the "Bonus Plan").
Under the Bonus Plan, the


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Executive shall be eligible to receive a  performance-based  cash bonus for each
year of  employment  (commencing  July 1,  2001)  in an  amount,  and  based  on
individual and/or corporate  objectives,  targets and factors (and evaluation as
to the extent of achievement  thereof),  to be established and determined by the
Board in its discretion  following  consultation between the Board and Executive
prior to, or within sixty (60) days after the commencement of, each fiscal year.
Under the Bonus Plan for  Executive,  (i) the  minimum  cash bonus shall be zero
(0), (ii) the target cash bonus shall equal 100% of the Base Salary (the "Target
Bonus"),  and (iii) the  maximum  cash bonus  shall  equal 200% of Base  Salary.
Executive hereby represents and warrants that his accepting  employment with the
Company will cause him to forfeit a bonus of approximately  $500,000 which would
have been  payable  to him by his former  employer  if he had not  resigned  his
position with such employer.  Based upon such representation and warranty and in
recognition of such bonus forfeited by Executive, Executive shall be entitled to
receive a  guaranteed  minimum cash bonus in the amount of Seven  Hundred  Fifty
Thousand Dollars ($750,000) for the fiscal year ended June 30, 2002, which bonus
shall be payable in July 2002.

     (c)  Participation  in Benefit Plans.  While he is employed by the Company,
Executive shall also be eligible to participate in any employee benefit plans or
programs which may be offered by the Company to the extent that Executive  meets
the  requirements  for  each  individual  plan and in all  other  plans in which
Company  executives  participate.  The Company  provides no  assurance as to the
adoption or continuance of any particular employee benefit plan or program,  and
Executive's  participation  in any such plan or program  shall be subject to the
provisions,  rules  and  regulations  applicable  thereto.  To  the  extent  the
Company's group life insurance plan available for Executive provides for a death
benefit of less than $2 million and the Company's long-term disability insurance
policy  provides  for an annual  disability  benefit to  Executive  of less that
$400,000,  the Company  shall  reimburse  Executive  for an  aggregate  of up to
$10,000 per year to cover Executive's cost of acquiring  supplemental group term
life  insurance  and  supplemental  long-term  disability  insurance  to provide
benefits that cover the foregoing  deficiencies  in coverage under the Company's
policies.

     (d)  Expenses.  The  Company  will  pay  or  reimburse  Executive  for  all
reasonable  and  necessary   out-of-pocket  expenses  incurred  by  him  in  the
performance of his duties under this Agreement,  subject to the Company's normal
policies for expense verification. In addition, to be consistent and competitive
with industry practice the Company shall pay or reimburse  Executive for (i) all
reasonable  out-of-pocket  relocation  expenses incurred in Executive's  initial
relocation from his current  residence in Illinois to a residence located within
a 50 mile radius of the Company's current  executive offices in Piscataway,  New
Jersey  and (ii) for all  reasonable  transitional  living and  commuting  costs
incurred by Executive  for the period  commencing on the  Commencement  Date and
ending on the  earlier of (A) six months  after the  Commencement  Date (or such
longer  period as agreed to by the Board) and (ii)  Executive's  relocation to a
permanent  residence within a 50 mile radius of the Company's  current executive
offices in  Piscataway,  New Jersey.  The  Company  will also bear the cost of a
corporate country club membership for use by Executive during the Term.  Subject
to the accuracy of the  representations  by  Executive in the second,  third and
fifth sentences of Section 3(b) hereof,  the Company shall  reimburse  Executive
for all  reasonable  costs  incurred by  Executive  in  defending  any action by
Executive's  prior  employer  which seeks to prevent or restrict  Executive from
performing his duties and obligations to the Company hereunder. In addition, the
Company  will  reimburse  Executive  for up to  $20,000  of  costs  incurred  by
Executive in contesting any attempt by Executive's former employer to prevent or
restrict  Executive from  exercising  vested options for such former  employer's
common stock, which attempt is based upon Executive joining the Company.


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     (e) Stock Options. Subject to Executive commencing his employment hereunder
as the Company's President and Chief Executive Officer on the Commencement Date,
Executive shall be granted options to purchase an aggregate of 800,000 shares of
Common  Stock  of  the  Company,  subject  to  the  terms  of  the  Enzon,  Inc.
Non-Qualified  Stock Option Plan, as amended (the "Option  Plan") and the Notice
of Option  Grant  attached  hereto as Exhibit A.  Except as  otherwise  provided
herein the Option  Plan shall  govern the terms of the options  granted  herein.
Executive  acknowledges  that he has  received and reviewed a copy of the Option
Plan.  The exercise  price of such options shall be the last reported sale price
of a share of  Common  Stock as  reported  by the  Nasdaq  Stock  Market  on the
Commencement  Date. Such options shall vest and be exercisable (i) as to 200,000
shares on the  Commencement  Date (subject to the requirement in the Option Plan
that such  options  not be  exercisable  for six  months  after  the grant  date
thereof),  and (ii) as to 150,000 shares on each of the first, second, third and
fourth anniversaries of the Commencement Date; provided, that such options shall
immediately  vest and become  exercisable  (subject  to the  requirement  in the
Option Plan that such  options not be  exercisable  for the six months after the
grant date  thereof)  when the last reported sale price of a share of the Common
Stock is at least one hundred dollars  ($100.00) as reported on the Nasdaq Stock
Market for at least twenty (20) consecutive  trading days, provided that, except
as otherwise  provided in Section 10 hereof,  Executive is then  employed by the
Company on a full-time basis as its President and Chief Executive  Officer.  The
price of the Common  Stock that  triggers  accelerated  vesting of such  options
shall  be  adjusted  for  stock  splits,   stock  dividends  and  other  similar
recapitalization events. Except as otherwise provided in Section 10 hereof, once
such options become  exercisable they shall remain  exercisable  until 5:00 p.m.
New York City time on the tenth (10th)  anniversary of the Commencement Date. In
addition,  at the  discretion  of the  Board  of  Directors  (or its  applicable
committee),  Executive  shall be  entitled  to receive  further  grants of stock
options, subject to the terms of the Option Plan.

     (f)  Restricted  Stock.  Subject to  Executive  commencing  his  employment
hereunder as the Company's  President and Chief Executive Officer, no later than
thirty (30) days after the  Commencement  Date Executive  shall be issued 25,000
shares of common stock of the Company  (the  "Restricted  Stock"),  which shares
shall vest as to 5,000 shares per year  commencing on the first  anniversary  of
the  Commencement  Date.  Executive  shall  pay  $250  to the  Company  for  the
Restricted Stock. The grant of the Restricted Stock shall be represented by, and
subject  to,  the terms of the  Restricted  Stock  Agreement  annexed  hereto as
Exhibit B. Prior to the issuance of the Restricted  Stock to the Executive,  the
Company shall cause such issuance to be registered  under the  Securities Act of
1933, as amended (the "1933 Act"),  such that Executive will be able to sell the
Restricted  Stock without  complying with the holding period required under Rule
144 promulgated under the 1933 Act.

     (g) Vacation.  Executive  shall be entitled to vacations in accordance with
the policy of the Company with respect to its senior management,  in effect from
time to time.

     5. Noncompetition and Confidentiality Covenant.

     (a)  Noncompetition.  The "Noncompete Period" shall be (i) the Term of this
Agreement and (ii) (A) the two (2) year period immediately following termination
of Executive's  employment with the Company in the event the Company  terminates
Executive's  employment  for  Cause  pursuant  to  Section  9(a)(iii)  hereof or
Executive  voluntarily  terminates  his employment  (but not any  termination by
Executive  for Good Reason  pursuant  to Section  9(c)  hereof),  (B) the period
following termination of Executive's employment which is the lesser of


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(x) two (2) years and (y) any period for which  Executive is entitled to receive
his Base Salary as  severance  payments  pursuant  to Section 10 hereof,  in the
event  Executive's  employment is  terminated in a manner which  entitles him to
severance  payments  under  Section  10  hereof  or (C) the one (1) year  period
following  termination  of Executive's  employment  with the Company if the Term
ends as a  result  of a  notice  of  non-renewal  under  Section  2  hereof.  In
consideration  for  the  compensation  payable  to  Executive  pursuant  to this
Agreement,  including without  limitation the stock options and Restricted Stock
granted to Executive hereunder, during the Noncompete Period, Executive will not
directly, or indirectly, whether as an officer, director, stockholder,  partner,
proprietor,  associate,  employee,  consultant,   representative  or  otherwise,
become,  or be interested in or associated  with any other person,  corporation,
firm,  partnership or entity, engaged to a significant degree in (x) developing,
marketing  or  selling  enzymes,   protein-based   biopharmaceuticals  or  other
pharmaceuticals  that  are  modified  using  polyethylene  glycol  ("PEG"),  (y)
developing,  marketing or selling single-chain  antigen-binding  proteins or (z)
any  technology or area of business in which the Company  becomes  involved to a
significant  degree  during  the term of this  Agreement.  For  purposes  of the
preceding  sentence,  to  determine  whether  any  entity  is  engaged  in  such
activities to a "significant  degree",  comparison will be made to the Company's
operations at that time. In other words,  an entity will be deemed to be engaged
in an activity to a significant  degree if the number of employees and/or amount
of funds  devoted  by such  entity to such  activity  would be  material  to the
Company's  operations  at that time.  Notwithstanding  anything to the  contrary
contained herein,  Executive shall be entitled to work with or for (i) an entity
that is developing,  marketing or manufacturing  monoclonal  antibodies,  (ii) a
licensee of the Company if the only  activities  conducted by such licensee that
would be covered by the restrictions in this Section 5(a) are conducted pursuant
to, and covered by, the license  granted by the Company and (iii) an entity that
is engaged in a research  project that would be covered by the  restrictions  in
this  Section 5(a) if such  research  project is not material to such entity and
Executive would have no direct involvement in such research project; provided in
the case of employment  covered by clauses (ii) and (iii)  Executive  shall have
provided the Board with a detailed  description  of the proposed  employment and
obtained  the  written   consent  of  the  Board  (which  consent  will  not  be
unreasonably  withheld)  prior to commencing any such  employment.  Executive is
hereby prohibited from ever using any of the Company's  proprietary  information
or trade  secrets to conduct any  business,  except for the  Company's  business
while  Executive  is employed by the Company as provided in Section 5(b) hereof.
The provision  contained in the preceding sentence shall survive the termination
of  Executive's  employment  pursuant to Section 9 hereof or  otherwise.  In the
event  Executive  breaches any of the  covenants set forth in this Section 5(a),
the running of the period of restriction set forth herein shall  recommence upon
Executive's compliance with the terms of this Section 5(a).

     (b) Confidentiality. Executive recognizes and acknowledges that information
relating to the Company's business,  including,  but not limited to, information
relating  to  patent  applications  filed or to be filed by the  Company,  trade
secrets relating to the Company's products or services, and information relating
to the Company's  research and development  activities,  shall be and remain the
sole and exclusive property of the Company and is a valuable, special and unique
asset of the Company's  business.  The Executive  will not,  during or after the
term of his  employment  by the Company,  disclose any such  information  to any
person, corporation, firm, partnership or other entity; provided, however, that,
notwithstanding  the foregoing,  during the term of Executive's  employment with
the Company,  Executive may make such  disclosure  if such  disclosure is in the
Company's best interests,  is made in order to promote and enhance the Company's
business, and sufficient arrangements are made with the person or entity to whom


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such disclosure is made to ensure the  confidentiality  of such disclosure.  The
provisions of this Section 5(b) shall  survive the  termination  of  Executive's
employment pursuant to Section 9 hereof or otherwise.

     (c) Nonsolicitation of Employees.  During the Noncompete Period,  Executive
shall not,  directly or indirectly,  personally or through others,  encourage to
leave employment with the Company,  employ or solicit for employment,  or advise
or recommend to any other person, firm, business,  or entity that they employ or
solicit  for  employment,  any  employee  of  the  Company  or  of  any  parent,
subsidiary, or affiliate of the Company.

     6.  Ventures.  If,  during the term of his  employment,  the  Executive  is
engaged in or  associated  with the  planning or  implementing  of any  project,
program,  venture or  relationship  involving  the  Company and a third party or
parties,  all rights in such project,  program,  venture or  relationship  shall
belong to the Company.  Except as approved by the Board, the Executive shall not
be entitled to any interest in such project, program, venture or relationship or
to any commission,  finder's fee or other  compensation in connection  therewith
other than the  compensation  to be paid to the  Executive  as  provided in this
Agreement.

     7.  Acknowledgment.  Executive  agrees that the  covenants  and  agreements
contained  in Section 5 hereof are the essence of this  Agreement;  that each of
such covenants is reasonable and necessary to protect and preserve the Company's
interests,  properties and business;  that  irreparable  loss and damage will be
suffered  by the  Company  should  Executive  breach any of such  covenants  and
agreements; that each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement;  that the unenforceability
or breach of any such  covenants or  agreement  shall not affect the validity or
enforceability of any other such covenant or agreement or any other provision of
this  Agreement;  and that, in addition to other  remedies  available to it, the
Company shall be entitled to both  temporary and permanent  injunctions  and any
other rights or remedies it may have,  at law or in equity,  to end or prevent a
breach or contemplated breach by Executive of any such covenants or agreements.

     (a) Geographic  Extent of  Executive's  Obligations  Concerning  Section 5.
Given the  nature of the  Company's  business,  the  restrictions  contained  in
Section 5 cannot be limited to any particular geographic region.  Therefore, the
obligations of Executive  under Section 5 shall apply to any geographic  area in
which the  Company  (i) has  engaged in  business  during the Term  through  its
investment or trading activities or otherwise, or (ii) has otherwise established
its goodwill, business reputation or any customer or vendor relations.

     (b)  Limitation  of  Covenant.   Ownership  by  Executive,   as  a  passive
investment,  of less than two percent of the outstanding shares of capital stock
of any corporation listed on a national  securities  exchange or publicly traded
on Nasdaq shall not constitute a breach of Section 5.

     (c) Blue Pencil  Doctrine.  If the duration or  geographical  extent of, or
business  activities  covered  by,  Section 5 are in excess of what is valid and
enforceable  under  applicable  law, then such  provision  shall be construed to
cover only that duration,  geographical  extent or activities that are valid and
enforceable.  Executive  acknowledges the uncertainty of the law in this respect
and expressly  stipulates  that this Agreement be given the  construction  which
renders  its  provisions  valid  and  enforceable  to the  maximum  extent  (not
exceeding its express terms) possible under applicable law.


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     (d) Disclosure. Executive shall disclose to any prospective employer, prior
to  accepting  or  continuing  employment,  the  existence  of Section 5 of this
Agreement and shall provide such  prospective  employer with a copy of Section 5
of this  Agreement.  The  obligation  imposed  by  this  subsection  7(d)  shall
terminate two years after the end of the Term.

     8. Intellectual Property and Related Matters.

     (a) Disclosure and Assignment.  Executive will promptly disclose in writing
to  the  Company  complete  information   concerning  each  and  every  product,
invention,  discovery,  practice,  process or method, whether patentable or not,
made, developed,  perfected,  devised, conceived or first reduced to practice by
Executive,  either solely or in collaboration  with others,  during the Term, or
within six months  thereafter,  whether or not  during  regular  working  hours,
relating either directly or indirectly to the business,  products,  practices or
techniques of the Company ("Developments"). Executive, to the extent that he has
the  legal  right  to do  so,  hereby  acknowledges  that  any  and  all  of the
Developments  are the  property of the Company and hereby  assigns and agrees to
assign to the Company any and all of  Executive's  right,  title and interest in
and to any and all of the Developments. At the request of the Company, Executive
will  confer  with  the  Company  and its  representatives  for the  purpose  of
disclosing  all  Developments  to the  Company as the Company  shall  reasonably
request during the period ending one year after the Term.

     (b)  Limitation on Section 8(a).  The  provisions of Section 8(a) shall not
apply to any Development meeting the following conditions:

          (i) such  Development  was developed  entirely on the  Executive's own
     time;

          (ii)  such  Development  was  made  without  the  use of  any  Company
     equipment, supplies, facility or trade secret or customer information;

          (iii) such Development does not relate (A) directly to the business of
     the  Company or (B) to the  Company's  actual or  demonstrably  anticipated
     research or product or customer development; and

          (iv) such  Development  does not result from any work performed by the
     Executive for the Company.

     (c) Assistance of Executive.  Upon request and without further compensation
therefor,  but at no expense to  Executive,  Executive  will do all lawful acts,
including  but not limited to, the  execution of papers and lawful oaths and the
giving of  testimony,  that in the opinion of the  Company,  may be necessary or
desirable  in enforcing  the  Company's  intellectual  property and trade secret
rights,  and for  perfecting,  affirming and  recording  the Company's  complete
ownership and title thereto.

     (d) Records. Executive will keep complete, accurate and authentic accounts,
notes,  data and records of the Developments in the manner and form requested by
the Company. Such accounts, notes, data and records shall be the property of the
Company,  and,  upon  the  earlier  of  its  request  or the  conclusion  of his
employment, Executive will promptly surrender same to it.

     (e)  Copyrightable   Material.   All  right,  title  and  interest  in  all
copyrightable  material  that  Executive  shall  conceive or  originate,  either
individually or jointly with others, and which


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arise out of the  performance  of this  Agreement,  will be the  property of the
Company and are by this  Agreement  assigned to the Company along with ownership
of any and all  copyrights  in the  copyrightable  material.  Upon  request  and
without further compensation therefor, but at no expense to Executive, Executive
shall  execute  all papers and perform  all other acts  necessary  to assist the
Company to obtain  and  register  copyrights  on such  materials  in any and all
countries.  Where applicable,  works of authorship  created by Executive for the
Company  in  performing  his  responsibilities  under  this  Agreement  shall be
considered "works made for hire," as defined in the U.S. Copyright Act.

     (f) Know-How and Trade Secrets.  All know-how and trade secret  information
conceived or originated by Executive  that arises out of the  performance of his
obligations or responsibilities  under this Agreement or any related material or
information shall be the property of the Company,  and all rights therein are by
this Agreement assigned to the Company.

     9. Termination of Employment.

     (a)  Grounds  for  Termination.  Executive's  employment  pursuant  to this
Agreement  shall terminate prior to the expiration of the Term in the event that
at any time:

          (i) Executive dies,

          (ii) Executive  becomes disabled (as defined below), so that he cannot
     perform the essential  functions of his position with or without reasonable
     accommodation,

          (iii) The Board elects to terminate Executive's employment for "Cause"
     and notifies Executive in writing of such election, or

          (iv) The Board  elects to  terminate  Executive's  employment  without
     "Cause" and notifies Executive in writing of such election.

     If  Executive's  employment is  terminated  pursuant to clause (i), (ii) or
(iii) of this Section 9(a), such termination shall be effective immediately.  If
Executive's employment is terminated pursuant to subsection (iv) of this Section
9(a), such  termination  shall be effective 30 days after delivery of the notice
of termination.

     (b)  "Cause"  Defined.  "Cause"  shall  mean (i) the  willful  engaging  by
Executive  in illegal  conduct or gross  misconduct  which is  demonstrably  and
materially  injurious to the  Company,  (ii)  Executive's  refusal to attempt to
perform his  obligations to the Company  hereunder  (other than any such failure
resulting  from  illness  or  incapacity),  which  refusal is  demonstrably  and
materially  injurious  to  the  Company  or  (iii)  Executive's  breach  of  his
obligations  under this Agreement,  which breach is demonstrably  and materially
injurious to the Company.  For purposes of this Section  9(b), no act or failure
to act on Executive's  part shall be deemed "willful" unless done, or omitted to
be done,  by  Executive  not in good faith and  without  reasonable  belief that
Executive's  action  of  omission  was  in the  best  interest  of the  Company.
Notwithstanding  the  foregoing,  Executive  shall  not be  deemed  to have been
terminated  for Cause unless and until the Company  delivers to Executive a copy
of a  resolution  duly  adopted  by  the  affirmative  vote  of  not  less  than
three-quarters of the entire  membership of the Board (not including  Executive)
at a meeting of the Board  called and held for such  purpose  (after  reasonable
notice to Executive and an opportunity for Executive,  together with counsel, to
be heard before


                                       8
<PAGE>


the  Board)  finding  that,  in the good faith  opinion of the Board,  Executive
engaged in conduct set forth above and  specifying  the  particulars  thereof in
reasonable detail.

     (c)  Termination  by  Executive  for Good  Reason.  Executive's  employment
pursuant to this Agreement may terminate  prior to the expiration of the Term in
the event Executive has a "Good Reason" to terminate his employment, which shall
mean the following:

          (i) Any material  adverse change in Executive's  status or position as
     an officer of the  Company,  including,  without  limitation,  any material
     adverse  change  in  Executive's  status  or  position  as  a  result  of a
     diminution in Executive's  duties,  responsibilities or authority as of the
     Commencement  Date (or any status or  position  to which  Executive  may be
     promoted after the Commencement Date) or the assignment to Executive of any
     duties or  responsibilities  which are inconsistent with Executive's status
     or position,  or any removal of Executive  from or any failure to reappoint
     or reelect Executive to such positions; or

          (ii) The failure by the Board to elect Executive Chairman of the Board
     by December 31, 2001; or

          (iii) The failure of the Board to continue  to maintain  Executive  as
     Chairman  of the  Board at all times  subsequent  to his  initial  election
     thereof through the remaining Term; or

          (iv) The failure of the Board to nominate  Executive for reelection to
     the Board and  recommend to the  Company's  stockholders  that they vote in
     favor of Executive's reelection to the Board upon expiration of Executive's
     term on the Board at any time during the Term; or

          (v) A reduction in  Executive's  annual Base Salary as the same may be
     increased from time to time; or

          (vi) A reduction  in the Target Bonus which could be paid to Executive
     under the Bonus Plan below 100% of Executive's  Base Salary  (provided that
     the Company's failure to actually award any bonus to Executive,  except for
     the guaranteed bonus for the fiscal year ending June 30, 2002 under Section
     4(c), or the Company's actually awarding a bonus to Executive which is less
     than the Target Bonus, shall not constitute Good Reason); or

          (vii) The material breach by the Company of its obligations under this
     Agreement; or

          (viii) The relocation of the Company's  principal executive offices to
     a location  more than  thirty-five  (35) miles  from the  location  of such
     offices or the Company requiring  Executive to be based anywhere other than
     the  Company's  principal  executive  offices,  except for required  travel
     substantially consistent with Executive's business obligations.

     Prior to the Executive being permitted to terminate his employment for Good
Reason,  the Company shall have sixty (60) days to cure any such alleged breach,
assignment, reduction or


                                       9
<PAGE>


requirement,  after Executive provides the Company written notice of the actions
or omissions constituting such breach, assignment, reduction or requirement.

     (d) "Change of Control" Defined. Change of Control means the following:

          (i) "Board Change" which,  for purposes of this Agreement,  shall have
     occurred if, over any  twenty-four  month  period,  a majority of the seats
     (other than  vacant  seats) on the  Company's  Board were to be occupied by
     individuals  who were neither (A) nominated by at least  one-half  (1/2) of
     the  directors  then in office nor (B) appointed by directors so nominated,
     but  excluding,  for  this  purpose,  any  such  individual  whose  initial
     assumption  of office  occurs as a result of either an actual or threatened
     election  contest or other actual or threatened  solicitation of proxies or
     consents  by or on behalf of a Person (as  defined  herein)  other than the
     Board, or

          (ii) the  acquisition by any  individual,  entity or group (within the
     meaning of Section  13(d)(3) or 14(d)(2) of the Securities  Exchange Act of
     1934 (the "Exchange Act"), (a "Person") of beneficial ownership (within the
     meaning of Rule 13d-3  promulgated under the Exchange Act) of a majority of
     the then  outstanding  voting  securities of the Company (the  "Outstanding
     Company  Voting  Securities");   provided,   however,  that  the  following
     acquisitions shall not constitute a Change of Control:  (A) any acquisition
     by the Company,  or (B) any  acquisition  by any employee  benefit plan (or
     related  trust)  sponsored or maintained by the Company or any  corporation
     controlled by the Company,  or (C) any public offering or private placement
     by the Company of its voting securities; or

          (iii) a merger or  consolidation of the Company with another entity in
     which  neither the Company nor a corporation  that,  prior to the merger or
     consolidation,  was a  subsidiary  of the Company,  shall be the  surviving
     entity; or

          (iv) a merger or consolidation  of the Company  following which either
     the Company or a corporation  that,  prior to the merger or  consolidation,
     was a  subsidiary  of the  Company,  shall be the  surviving  entity  and a
     majority of the Outstanding  Company Voting Securities is owned by a Person
     or  Persons  who  were  not  "beneficial  owners"  of  a  majority  of  the
     Outstanding  Company Voting Securities  immediately prior to such merger or
     consolidation; or

          (v) a voluntary or involuntary liquidation of the Company; or

          (vi) a sale or  disposition  by the  Company  of at  least  80% of its
     assets in a single  transaction or a series of  transactions  (other than a
     sale  or  disposition  of  assets  to a  subsidiary  of  the  Company  in a
     transaction  not  involving  a Change of  Control or a change in control of
     such subsidiary).

     Transactions  in which the Executive is part of the acquiring  group do not
constitute a Change of Control.

     (e) "Disabled"  Defined.  As used in this  Agreement,  the term  "disabled"
means any mental or physical  condition that renders Executive unable to perform
the   essential   functions  of  his  position,   with  or  without   reasonable
accommodation, for a period in excess of 180 days.


                                       10
<PAGE>


     (f) Surrender of Records and Property.  Upon  termination of his employment
with the Company,  Executive shall deliver  promptly to the Company all records,
manuals,  books,  lists,  blank forms,  documents,  letters,  memoranda,  notes,
notebooks,  reports, data, tables, calculations or copies thereof that relate in
any way to the business,  products,  practices or techniques of the Company, and
all other property,  trade secrets and confidential  information of the Company,
including,  but not limited to, all  documents  that in whole or in part contain
any trade secrets or  confidential  information of the Company,  which in any of
these cases are in his possession or under his control.

     10. Effect of Termination.

     (a)   Termination   Without  Cause  or  for  Good  Reason  Prior  to  Third
Anniversary.

     In the event the Company terminates Executive's employment as the Company's
President and Chief Executive Officer without Cause pursuant to Section 9(a)(iv)
hereof or  Executive  terminates  such  employment  for Good Reason  pursuant to
Section 9(c) hereof, prior to the third anniversary of the Commencement Date,

          (i) Executive  shall  receive cash payments  equal to the remainder of
     his Base  Salary  which  would  otherwise  be  payable  during  the  period
     commencing  as of the date of such  termination  and  ending on the  fourth
     anniversary of the Commencement Date;

          (ii)  Executive  shall receive cash payments equal to the aggregate of
     the  Target  Bonuses  (based  on the  Base  Salary  at  the  time  of  such
     termination)  which would have been  payable  for each of the fiscal  years
     ending on June 30 of 2002, 2003, 2004 and 2005,  except that no such Target
     Bonus  payment  will be made  for any  fiscal  year  ending  prior  to such
     termination  to the  extent a bonus  for such  fiscal  year was  determined
     (either  before  or after  such  termination)  and paid to  Executive  or a
     determination  was made (either before or after such  termination)  that no
     bonus was payable to Executive for such fiscal year;

          (iii)  if  Executive,   and  any  spouse  and/or  dependents  ("Family
     Members") has medical and dental  coverage on the date of such  termination
     under a group  health plan  sponsored  by the  Company,  the  Company  will
     reimburse  Executive for the total applicable  premium cost for medical and
     dental coverage under the Consolidated Omnibus Budget Reconciliation Act of
     1986, 29 U.S.C. Sections 1161-1168; 26 U.S.C. Section 4980B(f), as amended,
     and all applicable  regulations  (referred to  collectively as "COBRA") for
     Executive and his Family Members for a period of up to eighteen (18) months
     commencing  on the date of such  termination;  provided,  that the  Company
     shall have no  obligation  to reimburse  Executive  for the premium cost of
     COBRA  coverage  as of the date  Executive  and his Family  Members  become
     eligible to obtain comparable benefits from a subsequent employer;

          (iv)  Executive  shall receive cash payments  equal to any unpaid Base
     Salary through the date of termination;

          (v) the Restricted Stock granted to Executive pursuant to Section 4(f)
     hereof shall vest immediately upon termination;


                                       11
<PAGE>


          (vi) all options granted to Executive  pursuant to Section 4(e) hereof
     which have not vested at the time of such  termination will terminate as of
     the date of such  termination  and will be of no  further  force or effect;
     provided however that a pro rated portion (based on the portion of the year
     between  anniversaries of the  Commencement  Date during which Executive is
     employed by the  Company) of the  tranche of  unvested  options  which were
     scheduled to vest on the anniversary of the  Commencement  Date immediately
     following the date of such termination shall vest;

          (vii) all options granted to Executive pursuant to Section 4(e) hereof
     which have vested at the time of such termination  will remain  exercisable
     until their expiration dates; and

          (viii)  Executive  shall  continue  to be  entitled  to  any  deferred
     compensation  and other unpaid amounts and benefits earned and vested prior
     to Executive's termination.

     (b) Termination For Cause. In the event the Company terminates  Executive's
employment as the  Company's  President  and Chief  Executive  Officer for Cause
pursuant to Section 9(a)(iii) hereof, (i) Executive shall be entitled to receive
payment of his Base Salary through the date of termination, (ii) Executive shall
continue to be entitled to any deferred  compensation  and other unpaid  amounts
and  benefits  earned and vested  prior to  Executive's  termination,  (iii) all
options  granted to Executive  pursuant to Section 4(e) hereof which have vested
prior to the date of  Executive's  termination  shall remain  exercisable  for a
period of six months following Executive's termination, (iv) all options granted
to Executive  pursuant to Section 4(e) hereof which have not vested prior to the
date  of  Executive's  termination  will  terminate  as  of  the  date  of  such
termination  and will be of no further force and effect,  and (v) Executive will
forfeit all unvested  Restricted Stock granted to Executive  pursuant to Section
4(f) hereof.

     (c) Death. In the event Executive's  employment as the Company's  President
and Chief Executive Officer is terminated as a result of Executive's  death, (i)
Executive's  estate  or  Executive's  duly  designated  beneficiaries  shall  be
entitled to payment of his Base Salary  through the date of  Executive's  death,
(ii) Executive's  estate or Executive's duly designated  beneficiaries  shall be
entitled to a pro rata amount of the Target  Bonus  (based on the Base Salary at
the time of death)  for the  fiscal  year in which he dies,  (iii) all  unvested
Restricted Stock granted to Executive pursuant to Section 4(f) hereof shall vest
immediately  upon  Executive's  death,  (iv) the  options  granted to  Executive
pursuant  to  Section  4(e)  hereof  which  have  not  vested  as of the date of
Executive's death shall continue to vest in accordance with the vesting schedule
set forth in Section 4(e) hereof,  and shall remain  exercisable  (together with
any options granted under Section 4(e) which had previously  vested),  until the
earlier  of (A)  three  years  from  the  date of  death  and (B) the end of the
remaining  exercise  term of such options set forth in Section 4(e) hereof,  and
(v)  Executive's  estate or  Executive's  duly  designated  beneficiaries  shall
continue to be entitled to any deferred  compensation  and other unpaid  amounts
and benefits earned and vested prior to Executive's death. If Executive's Family
Members have medical and dental coverage on the date of such termination under a
group  health plan  sponsored by the Company,  the Company will  reimburse  such
Family  Member for the total  applicable  premium  cost for  medical  and dental
coverage  under COBRA for such Family  Members for a period of up to  thirty-six
(36) months  commencing  on the date of such  termination;  provided the Company
shall have no obligation to reimburse  such Family  Members for the premium cost
of COBRA


                                       12
<PAGE>


coverage as of the date they become eligible to obtain comparable  benefits from
another employer.

     (d) Disability. Upon termination of Executive's employment as the Company's
President  and Chief  Executive  Officer on account  of  Executive's  disability
pursuant to Section 9(a)(ii) hereof,  (i) Executive shall be entitled to payment
of his Base Salary through the commencement of long term disability  payments to
Executive  under any plan  provided or paid for by the Company,  (ii)  Executive
shall be entitled to a pro rata  amount of the Target  Bonus  (based on the Base
Salary  at the  time of such  termination)  for the  fiscal  year in  which  his
employment is terminated,  (iii) Executive shall be entitled to all compensation
and benefits to which Executive is entitled pursuant to the Company's disability
policies in effect as of the date of Executive's termination,  (iv) all unvested
Restricted Stock granted to Executive pursuant to Section 4(f) hereof shall vest
immediately upon such termination, (v) the options granted to Executive pursuant
to Section 4(e) hereof which have not vested as of the date of such  termination
shall  continue to vest in  accordance  with the vesting  schedule  set forth in
Section 4(e) hereof,  and shall remain  exercisable  (together  with any options
granted under Section 4(e) which had  previously  vested),  until the earlier of
(A) three years from the date of such termination of Executive's  employment and
(B) the end of the remaining  exercise term of such options set forth in Section
4(f),  hereof and (vi)  Executive  shall continue to be entitled to any deferred
compensation  and other unpaid  amounts and benefits  earned and vested prior to
Executive's  termination.  If Executive and his Family  Members have medical and
dental  coverage  on the  date of such  termination  under a group  health  plan
sponsored by the Company,  the Company will  reimburse  Executive  for the total
applicable  premium  cost for  medical  and  dental  coverage  under  COBRA  for
Executive  and his Family  Members  for a period of up to  eighteen  (18) months
commencing on the date of such  termination;  provided the Company shall have no
obligation to reimburse Executive and his Family Members for the premium cost of
COBRA coverage as of the date they become eligible to obtain comparable benefits
from another employer.

     (e) Voluntary  Resignation.  In the event Executive voluntarily  terminates
his employment as the Company's  President and Chief  Executive  Officer,  other
than for Good Reason, or delivers to the Company a notice of non-renewal of this
Agreement  pursuant  to Section 2 hereof,  (i)  Executive  shall be  entitled to
receive  payment  of his  Base  Salary  through  the date of  termination,  (ii)
Executive shall continue to be entitled to any deferred  compensation  and other
unpaid amounts and benefits earned and vested prior to Executive's  termination,
(iii) all options  granted to  Executive  pursuant to Section  4(e) hereof which
have vested prior to the date of such termination shall remain exercisable for a
period of six months  following such  termination,  (iv) all options  granted to
Executive  pursuant to Section  4(e) hereof  which have not vested  prior to the
date of such  termination  will terminate as of the date of such termination and
will be of no further  force and  effect,  and (v)  Executive  will  forfeit all
unvested Restricted Stock granted to Executive pursuant to Section 4(f) hereof.

     (f)  Termination  Without  Cause or For  Good  Reason  Subsequent  to Third
Anniversary.  In the event the Company terminates  Executive's employment as the
Company's  President  and Chief  Executive  Officer  without  Cause  pursuant to
Section 9(a)(iv) hereof or Executive  terminates such employment for Good Reason
pursuant to Section 9(c) hereof, after the third anniversary of the Commencement
Date,


                                       13
<PAGE>


          (i) Executive  shall  receive cash  payments  equal to his annual Base
     Salary at the time of such termination.

          (ii) Executive  shall receive a cash payment equal to the Target Bonus
     (based on the Base Salary at the time of such termination)  under the Bonus
     Plan for the fiscal year during which such termination occurs;

          (iii) if  Executive  and his Family  Members  have  medical and dental
     coverage  on the  date  of such  termination  under  a  group  health  plan
     sponsored by the  Company,  the Company will  reimburse  Executive  for the
     total  applicable  premium cost for medical and dental coverage under COBRA
     for  Executive  and his Family  Members for a period of up to eighteen (18)
     months  commencing  on the  date of such  termination;  provided,  that the
     Company  shall have no  obligation  to reimburse  Executive for the premium
     cost of COBRA  coverage  as of the date  Executive  and his Family  Members
     become eligible to obtain comparable benefits from a subsequent employer;

          (iv)  Executive  shall receive cash payments  equal to any unpaid Base
     Salary through the date of such termination;

          (v) Executive  shall receive a cash payment equal to a pro rata amount
     of the  Target  Bonus  (based  on the  Base  Salary  at the  time  of  such
     termination) for the fiscal year during which termination occurs;

          (vi) all  Restricted  Stock  granted to Executive  pursuant to Section
     4(f) hereof shall vest immediately upon termination;

          (vii) all options granted to Executive pursuant to Section 4(e) hereof
     which have not vested at the time of such  termination will terminate as of
     the date of such  termination  and will be of no  further  force or effect;
     provided however that a pro rated portion (based on the portion of the year
     between  anniversaries of the  Commencement  Date during which Executive is
     employed by the  Company) of the  tranche of  unvested  options  which were
     scheduled to vest on the anniversary of the  Commencement  Date immediately
     following the date of such termination shall vest;

          (viii) all  options  granted to  Executive  pursuant  to Section  4(e)
     hereof  which  have  vested  at the time of such  termination  will  remain
     exercisable until their expiration dates; and

          (ix)  Executive   shall  continue  to  be  entitled  to  any  deferred
     compensation  and other unpaid amounts and benefits earned and vested prior
     to Executive's termination.

     (g)  Termination  Without  Cause or For Good  Reason In  Connection  With A
Change in Control. In the event the Company terminates Executive's employment as
the Company's  President and Chief  Executive  Officer without Cause pursuant to
Section 9(a)(iv) hereof or Executive  terminates such employment for Good Reason
pursuant to Section 9(c) hereof  within the period which  commences  ninety (90)
days before and ends two (2) years following a Change in Control, in lieu of the
provisions of Section 10(a) or 10(f) above,

          (i) Executive  shall  receive cash  payments  equal to any unpaid Base
     Salary  through the date of  termination,  plus an amount  equal to the pro
     rated portion of the


                                       14
<PAGE>


     Target  Bonus  (based on the Base  Salary at the time of such  termination)
     which would have been payable to Executive for the fiscal year during which
     such termination occurs;

          (ii)  Executive  shall receive cash payments  equal to three times the
     sum of the following:  (1) his Base Salary at the time of such  termination
     and (2) the  Target  Bonus  (based  on the Base  Salary at the time of such
     termination) for the fiscal year in which such termination occurs,

          (iii) if  Executive  and his Family  Members  have  medical and dental
     coverage  on the  date  of such  termination  under  a  group  health  plan
     sponsored by the  Company,  the Company will  reimburse  Executive  for the
     total  applicable  premium cost for medical and dental coverage under COBRA
     for  Executive  and his Family  Members for a period of up to eighteen (18)
     months  commencing on the date of such termination and will continue to pay
     Executive an amount equal to such COBRA  reimbursement  during the eighteen
     (18) month period  following such initial  eighteen (18) month period after
     such  termination;  provided,  that the Company shall have no obligation to
     reimburse  Executive for the premium cost of COBRA  coverage as of the date
     Executive  and his Family  Members  become  eligible  to obtain  comparable
     benefits from a subsequent employer;

          (iv) all  Restricted  Stock  granted to Executive  pursuant to Section
     4(f) hereof shall vest immediately upon such  termination;  (v) the options
     granted to Executive  pursuant to Section 4(e) hereof shall be fully vested
     and shall remain exercisable until their expiration dates; and

          (vi)  Executive   shall  continue  to  be  entitled  to  any  deferred
     compensation  and other unpaid amounts and benefits earned and vested prior
     to Executive's termination.

     In the event the Executive  becomes entitled to payments under this Section
10(g), the Company shall cause its independent  auditors  promptly to review, at
the Company's expense, the applicability of Section 4999 of the Internal Revenue
Code (the "Code") to such payments.  If such auditors  shall  determine that any
payment or distribution of any type by the Company to Executive, whether paid or
payable or distributed or distributable  pursuant to the terms of this Agreement
or otherwise (the "Total Payments"),  would be subject to the excise tax imposed
by Section 4999 of the Code,  or any interest or penalties  with respect to such
excise tax (such excise tax, together with any such interest and penalties,  are
collectively  referred to as the "Excise Tax"), then Executive shall be entitled
to receive an additional cash payment (a "Gross-Up  Payment")  within 30 days of
such  determination  equal to an amount such that after  payment by Executive of
all taxes  (including  any  interest or  penalties  imposed with respect to such
taxes),  including any Excise Tax, imposed upon the Gross-Up Payment,  Executive
would retain an amount of the Gross-Up  Payment  equal to the Excise Tax imposed
upon  the  Total  Payments.   For  purposes  of  the  foregoing   determination,
Executive's tax rate shall be deemed to be the highest statutory  marginal state
and Federal tax rate (on a combined basis) (including his share of F.I.C.A.  and
Medicare taxes) then in effect. If no determination by the Company's auditors is
made prior to the time a tax return reflecting the Total Payments is required to
be filed by Executive,  Executive will be entitled to receive a Gross-Up Payment
calculated on the basis of the Total Payments  reported by Executive in such tax
return,  within 30 days of the filing of such tax return.  In all events, if any
tax authority  determines  that a greater  Excise Tax should be imposed upon the
Total Payments than is determined by the Company's independent auditors or


                                       15
<PAGE>


reflected  in  Executive's  tax  return  pursuant  to this  Section  10(g),  the
Executive shall be entitled to receive the full Gross-Up  Payment  calculated on
the basis of the  amount of Excise  Tax  determined  to be  payable  by such tax
authority from the Company within 30 days of such determination.

     (h) All payments  made to Executive  under any of the  subsections  of this
Section 10 which are based  upon  Executive's  salary or bonus  shall be made at
times and in a manner which is in accordance with the Company's standard payroll
practices for senior  management;provided that any such payments which are still
owed to Executive under Section 10(g) hereof as of the second anniversary of the
termination of Executive's  employment  under Section 10(g) hereof shall be paid
to Executive within thirty (30) days after such second anniversary date.

     11. Miscellaneous.

     (a) Entire Agreement. This Agreement (including the exhibits, schedules and
other documents  referred to herein) contains the entire  understanding  between
the parties  hereto with respect to the subject matter hereof and supersedes any
prior understandings,  agreements or representations,  written or oral, relating
to the subject matter hereof.

     (b) Counterparts.  This Agreement may be executed in separate counterparts,
each of  which  will  be an  original  and all of  which  taken  together  shall
constitute  one and the same  agreement,  and any party  hereto may execute this
Agreement by signing any such counterpart.

     (c) Severability. Whenever possible, each provision of this Agreement shall
be  interpreted  in such a manner as to be effective and valid under  applicable
law but if any  provision of this  Agreement  is held to be invalid,  illegal or
unenforceable  under any  applicable  law or rule,  the  validity,  legality and
enforceability  of the other provision of this Agreement will not be affected or
impaired thereby.

     (d) Successors and Assigns.  This Agreement shall be binding upon and inure
to the  benefit of the  parties  hereto  and their  respective  heirs,  personal
representatives  and, to the extent permitted by subsection (e),  successors and
assigns.  The  Company  will  require its  successors  to  expressly  assume its
obligations under this Agreement.

     (e) Assignability. Neither this Agreement nor any right, remedy, obligation
or  liability  arising  hereunder  or  by  reason  hereof  shall  be  assignable
(including  by  operation  of law) by either  party  without  the prior  written
consent of the other  party to this  Agreement,  except  that the  Company  may,
without the consent of the Executive,  assign its rights and  obligations  under
this Agreement to any  corporation,  firm or other business  entity with or into
which the Company may merge or consolidate,  or to which the Company may sell or
transfer all or substantially  all of its assets, or of which 50% or more of the
equity  investment and of the voting  control is owned,  directly or indirectly,
by, or is under common ownership with, the Company. After any such assignment by
the Company,  and provided  that such  assignment  arises by operation of law or
involves an express  written  assumption by the  assignee,  the Company shall be
immediately  released and discharged  from all further  liability  hereunder and
such assignee  shall  thereafter be deemed to be the Company for the purposes of
all provisions of this Agreement.

     (f) Modification,  Amendment,  Waiver or Termination.  No provision of this
Agreement may be modified, amended, waived or terminated except by an instrument
in writing signed by the parties to this Agreement. No course of dealing between
the parties will modify,


                                       16
<PAGE>


amend,  waive or  terminate  any  provision  of this  Agreement or any rights or
obligations of any party under or by reason of this  Agreement.  No delay on the
part of the Company in exercising any right  hereunder shall operate as a waiver
of such right. No waiver, express or implied, by the Company of any right or any
breach by  Executive  shall  constitute a waiver of any other right or breach by
Executive.

     (g) Notices. All notices, consents,  requests,  instructions,  approvals or
other  communications  provided for herein shall be in writing and  delivered by
personal  delivery,  overnight  courier,  mail,  electronic  facsimile or e-mail
addressed  to the  receiving  party at the  address set forth  herein.  All such
communications shall be effective when received.

Address for the Executive:

                    Arthur J. Higgins
                    5501 Churchill Lane
                    Libertyville, Illinois 60048

Address for the Company:

                    Enzon, Inc.
                    20 Kingsbridge Road
                    Piscataway, New Jersey 08854
                    Attn:  Corporate Secretary

Any party may change the  address  set forth above by notice to each other party
given as provided herein.

     (h) Headings.  The headings  contained in this  Agreement are for reference
purposes only and shall not in any way affect the meaning or  interpretation  of
this Agreement.

     (i)   Governing   Law.   ALL  MATTERS   RELATING  TO  THE   INTERPRETATION,
CONSTRUCTION,  VALIDITY AND  ENFORCEMENT OF THIS AGREEMENT  SHALL BE GOVERNED BY
THE  INTERNAL  LAWS OF THE STATE OF NEW  JERSEY,  WITHOUT  GIVING  EFFECT TO ANY
CHOICE OF LAW PROVISIONS THEREOF.

     (j)  Resolution  of  Certain  Claims -  Injunctive  Relief.  The  Executive
acknowledges  that it would be  difficult  to fully  compensate  the Company for
damages  resulting from any breach by him of the  provisions of this  Agreement.
Accordingly, the Executive agrees that, in addition to, but not to the exclusion
of any other available  remedy,  the Company shall have the right to enforce the
provisions  of  Sections  5  through  8 or 9(f) by  applying  for and  obtaining
temporary  and  permanent  restraining  orders  or  injunctions  from a court of
competent  jurisdiction  without the  necessity of filing a bond  therefor,  and
without the  necessity  of proving  actual  damages,  and the  Company  shall be
entitled to recover from the Executive its reasonable  attorneys' fees and costs
in enforcing the provisions of Sections 5 through 8 or 9(f).

     (k) Arbitration.  Except as otherwise  specifically provided for hereunder,
any claim or  controversy  arising out of or relating to this  Agreement  or the
breach hereof shall be settled by arbitration in accordance with the laws of the
State of New Jersey.  Such  arbitration  shall be  conducted in the State of New
Jersey in accordance with the rules then existing of the American


                                       17
<PAGE>


Arbitration Association. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. In the event of any dispute
arising under this  Agreement,  the respective  parties shall be responsible for
the payment of their own legal fees and disbursements.

     (l) Board  Approval.  On or prior to the Effective  Date, the Company shall
provide  Executive  with a copy of the duly  adopted  resolutions  of its  Board
approving the terms of this  Agreement,  electing  Executive to the positions of
President and Chief Executive  Officer effective as of the Commencement Date and
electing Executive to the Board effective as of the Commencement Date.

     (m) Third-Party Benefit. Nothing in this Agreement,  express or implied, is
intended to confer upon any other person any rights,  remedies,  obligations  or
liabilities of any nature whatsoever.

     (n) Withholding  Taxes.  The Company may withhold from any benefits payable
under  this  Agreement  all  federal,  state,  city or  other  taxes as shall be
required pursuant to any law or governmental regulation or ruling.

     IN WITNESS  WHEREOF,  the parties  hereto  have  executed  this  Employment
Agreement as of the Effective Date.


ENZON, INC.


By:
   -------------------------------------------
     Kenneth J. Zuerblis, Vice President,
     Finance and Chief Financial Officer



By:
   -------------------------------------------
     Randy H. Thurman
     Chairman of the Board



By:
    ------------------------------------------
     Dr. Rosina Dixon
     Chairperson of the Governance Committee





----------------------------------------------
     Arthur J. Higgins


<PAGE>


                                                                       Exhibit A

Certificate No.                                      Optionee: Arthur J. Higgins
                ------------                                   -----------------

No. of options: 800,000        Date granted:                     Price:
                -------                      --------------             --------

     This Option is granted pursuant to the employment agreement dated as of [ ]
     (the  "Employment  Agreement")  between the  Optionee  and Enzon Inc.  (the
     "Company").  The  Optionee  acknowledges  receipt  of a copy  of the  Enzon
     Non-Qualified  Stock Option Plan, as Amended (the "Plan"),  and  represents
     that he is  familiar  with the  terms  and  provisions  of the Plan and the
     Employment  Agreement.  The Optionee  hereby accepts this Option and agrees
     that except as otherwise  provided in the  Employment  Agreement the Option
     Plan shall  govern the terms of the options  granted  herein.  The Optionee
     hereby agrees to accept as binding, conclusive, and final all decisions and
     interpretations  of the  Compensation  Committee  or the Board of Directors
     upon any  questions  arising under the Plan. As a condition to the issuance
     of shares of Common Stock of the Company  under this  Option,  the Optionee
     authorizes the Company to withhold,  in accordance with applicable law from
     any regular  cash  compensation  payable to him,  any taxes  required to be
     withheld by the Company  under  Federal,  state or local law as a result of
     his  exercise  of this  Option.  The  Company,  in its  sole  and  absolute
     discretion,  may allow  Optionee  to satisfy  Optionee's  federal and state
     income  tax  withholding  obligations  upon  exercise  of the Option by (i)
     having  the  Company  withhold  a portion  of the  shares  of common  stock
     otherwise to be delivered  upon exercise of the Option having a fair market
     value  equal to the amount of federal and state  income tax  required to be
     withheld upon such exercise,  in accordance  with such rules as the Company
     may from time to time  establish,  or (ii) delivering to the Company shares
     of its common  stock other than the shares  issuable  upon  exercise of the
     Option with a fair market  value equal to such taxes,  in  accordance  with
     such rules.


Dated: [     ]

                                                 ENZON, INC.


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


                                                 Optionee:


                                                 --------------------------
                                                 Arthur J. Higgins



                                    Exhibit A

<PAGE>


                                                                       Exhibit B

                        RESTRICTED STOCK AWARD AGREEMENT

     THIS  AGREEMENT,  made as of this  ____ day of [ ],  2001,  by and  between
Enzon,  Inc.,  a Delaware  corporation  (the  "Company"),  and Arthur J. Higgins
("Executive").

     WITNESSETH, THAT:

     WHEREAS, The Company wishes to grant a restricted stock award to Executive;

     NOW,  THEREFORE,  In  consideration  of the premises  and mutual  covenants
herein contained, the parties hereto hereby agree as follows:

     1. Award

     The Company,  effective as of the date of this Agreement,  hereby grants to
Executive a  restricted  stock award of 25,000  shares (the  "Shares") of common
stock of the Company (the "Common Stock") (against  Executive's  payment of $250
representing  the par value  thereof),  subject to the terms and  conditions set
forth herein and to the terms of the  Employment  Agreement  between the Company
and  Executive,   dated  as  of  May  __,  2001  (the  "Employment  Agreement").
Capitalized  terms used but not defined herein shall have the meanings  ascribed
to such terms in the Employment Agreement.

     2. Vesting

     Subject to the terms and conditions of this Agreement and Section 10 of the
Employment  Agreement,  the  Executive's  Shares  shall  vest  according  to the
following schedule:

       Years of Service by Executive as an
     Employee of the Company Following Grant        Vested Percentage
     ---------------------------------------        -----------------

                        0                                  0%

                        1                                  20%

                        2                                  40%

                        3                                  60%

                        4                                  80%

                        5                                  100%

For  purposes of this Section 2, years of service by Executive as an employee of
the  Company  shall  begin to accrue on [ ],  2001.  One year of  service  shall
consist of twelve (12) full calendar  months of service.  Any temporary  absence
from  employment in excess of six (6) months shall not be considered as years of
service.

                                    EXHIBIT B


<PAGE>


     3. Restriction on Transfer

     Until any group of Shares vests pursuant to Sections 2 or 4 hereof, none of
such  Shares  may be  sold,  assigned,  transferred,  pledged,  hypothecated  or
otherwise  disposed of or  encumbered,  and no attempt to transfer  such Shares,
whether voluntary or involuntary,  by operation of law or otherwise,  shall vest
the transferee with any interest or right in or with respect to such Shares.

     4. Early Vesting; Forfeiture

     (a) Nonvested  Shares may vest on an accelerated  basis in accordance  with
the provisions of Section 10 of the Employment Agreement

     (b) Nonvested  Shares may be forfeited in accordance with the provisions of
Section 10 of the Employment Agreement.

     5. Issuance and Custody of Certificate

     (a) The Company  shall  cause to be issued one or more stock  certificates,
registered  in  the  name  of  Executive,   evidencing  the  Shares.  Each  such
certificate shall bear the following legends:

     "The shares of common stock  represented by this certificate are subject to
forfeiture,  and the transferability of this certificate and the shares of stock
represented  hereby  are  subject  to the  restrictions,  terms  and  conditions
(including  restrictions  against transfer) contained in an Employment Agreement
entered into between Enzon,  Inc. and the registered  owner of such shares dated
May __, 2001 and a Restricted Stock Award Agreement  entered into between Enzon,
Inc. and the registered owner of such shares. Copies of the Employment Agreement
and Restricted Stock Award Agreement are on file in the office of Enzon, Inc."

     (b) Executive  shall cause stock powers  relating to the Shares executed by
Executive to be delivered to the Company.

     (c) Each certificate issued pursuant to Section 5(a) hereof,  together with
the stock powers relating to the Shares,  shall be deposited by the Company with
the  Secretary of the Company or a custodian  designated by the  Secretary.  The
Secretary or such  custodian  shall issue a receipt to Executive  evidencing the
certificate or certificates held which are registered in the name of Executive.

     (d) After any Shares  subject to this Agreement vest pursuant to Sections 2
or 4(b) hereof,  the Company shall promptly cause a certificate or  certificates
evidencing  such vested Shares,  (together with the stock powers relating to the
Shares)  to  be  released  and  delivered  to  Executive  or  Executive's  legal
representatives, beneficiaries or heirs.

     (e) Prior to  issuance of the  Shares,  the Company  shall have caused such
issuance to be registered under the Securities Act of 1933, as amended.


                                       2
<PAGE>


     6. Distributions and Adjustments

     (a) If all or any portion of the Shares vest in Executive subsequent to any
change in the number or character of the shares of Common Stock (through merger,
consolidation,  reorganization,  recapitalization, stock dividend or otherwise),
Executive shall then receive upon such vesting the number and type of securities
or other  consideration which Partaicipant would have received if the Shares had
vested prior to the event changing the number or character of outstanding shares
of Common Stock.

     (b) Any  additional  shares of Common  Stock,  any other  securities of the
Company and any other  property  (except for cash  dividends)  distributed  with
respect to the Shares  prior to the date the Shares vest shall be subject to the
same  restrictions,  terms and  conditions  as the  Shares.  Any cash  dividends
payable with respect to the Shares shall be distributed to Executive at the same
time cash dividends are distributed to shareholders of the Company generally.

     (c) Any  additional  shares of Common Stock,  any  securities and any other
property  (except for cash  dividends)  distributed  with  respect to the Shares
prior  to the  date  such  Shares  vest  shall be  promptly  deposited  with the
Secretary or the custodian  designated by the Secretary to be held in custody in
accordance with Section 5(c) hereof.

     7. Taxes

     (a) The  issuance of the Shares to  Executive  pursuant  to this  Agreement
involves  complex  and  substantial  tax  considerations,   including,   without
limitation,  consideration  of the  advisability of Executive making an election
under  Section  83(b) of the Internal  Revenue  Code.  The Executive is urged to
consult his own tax advisor with respect to the  transactions  described in this
Agreement. The Company makes no warranties or representations  whatsoever to the
Executive  regarding the tax  consequences  of the grant to the Executive of the
Shares or this Agreement.  Executive acknowledges that the making of any Section
83(b) election shall be his personal responsibility.

     (b) In order to  provide  the  Company  with the  opportunity  to claim the
benefit of any income tax  deduction  which may be available to it in connection
with this  restricted  stock award,  and in order to comply with all  applicable
federal or state tax laws or regulations, the Company may take such action as it
deems appropriate to insure that, if necessary,  all applicable federal or state
income and social security taxes, which are the sole and absolute responsibility
of Executive, are withheld or collected from Executive.

     (c)  Executive  may elect to  satisfy  his  federal  and state  income  tax
withholding   obligations   arising  from  the  receipt  of,  or  the  lapse  of
restrictions  relating to, the Shares by (i) delivering cash, check (bank check,
certified  check or personal  check) or money order  payable to the order of the
Company,  (ii) having the Company  withhold a portion of the Shares otherwise to
be delivered having a fair market value based on the last reported sale price of
a share of Common  Stock on the Nasdaq  Stock Market (or if the shares no longer
trade on the Nasdaq  Stock  Market,  the closing or last  reported  price on the
principal  exchange  or system on which they trade)  (the "Fair  Market  Value")
equal to the amount of such taxes,  or (iii)  delivering  to the Company  Common
Stock having a Fair Market Value equal to the amount of such taxes.  The Company
will not deliver any  fractional  Share but will pay, in lieu thereof,  the Fair
Market


                                       3
<PAGE>


Value of such fractional  Share. The  Participant's  election must be made on or
before the date that the amount of tax to be withheld is determined.  Otherwise,
the  Company  shall be  entitled  to  withhold  taxes due in such  manner as the
Company determines in its discretion.

     8. Miscellaneous

     (a) This Agreement is issued pursuant to the Employment  Agreement  entered
into  between  the  Executive  and the  Company  and is  subject  to its  terms.
Executive hereby acknowledges receipt of a copy of the Employment Agreement. The
Employment  Agreement is also available for inspection  during business hours at
the principal office of the Company.

     (b) This Agreement  shall not confer on Executive any right with respect to
continuance of employment by the Company.

     IN WITNESS  WHEREOF,  The parties  hereto have caused this  Agreement to be
executed on the day and year first above written.


                                           ENZON, INC.



                                           By:
                                              ------------------------

                                           Its:
                                               -----------------------



                                           ---------------------------
                                           Arthur J. Higgins


                                       4