Document:

Exhibit 10.1

 

THIRD AMENDMENT TO

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

This THIRD AMENDMENT TO THIRD AMENDED AND RESTATED
CREDIT AGREEMENT (this “Amendment”), dated November 9, 2005, is
among DIGITAL GENERATION SYSTEMS, INC., a Delaware corporation (the “Borrower”),
each of the banks or other lending institutions which is or may from time to
time become a party to the Agreement (hereinafter defined) (each a “Lender”
and collectively, the “Lenders”), JPMORGAN CHASE BANK, N.A. (formerly
known as JPMorgan Chase Bank), a national banking association (“Chase”),
as administrative agent for the Lenders and the Issuing Bank (in such capacity,
together with its successors in such capacity, the “Administrative Agent”),
and as issuer of Letters of Credit under the Agreement (in such capacity,
together with its successors in such capacity, the “Issuing Bank”).

 

RECITALS:

 

A.            The Borrower, the Lenders, the
Issuing Bank and the Administrative Agent have entered into that certain Third
Amended and Restated Credit Agreement dated as of April 15, 2005, as
amended by that certain First Amendment to Third Amended and Restated Credit
Agreement dated as of May 10, 2005, as further amended by that certain
Second Amendment to Third Amended and Restated Credit Agreement dated as of August 5,
2005 (as amended, the “Agreement”).

 

B.            The parties hereto now desire to
amend the Agreement as provided herein.

 

NOW, THEREFORE, in consideration of the premises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1          DEFINITIONS.  Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.

 

 

ARTICLE II

 

AMENDMENTS

 

2.1          AMENDED DEFINITIONS.

 

(a)           Effective as of the date hereof, the
last sentence of the definition of “Revolving Credit Commitment” set forth in Section 1.01
of the Agreement is hereby amended to read in its entirety as follows:

 

“As of November 9, 2005, the aggregate amount of the Lenders’
Revolving Credit Commitments is $4,500,000.”

 

(b)           Effective as of the date hereof, the
definition of “Applicable Margin” set forth in Section 1.01 of the
Agreement is hereby amended to read in its entirety as follows:

 

“Applicable
Margin” means, for any day, (a) with respect to the Loans comprising
each Eurodollar Borrowing, 4.25% per annum over the Adjusted LIBO Rate, (b) with
respect to the Loans comprising each ABR Borrowing, 2.75% per annum over the
Alternate Base Rate, and (c) with respect to Commitment Fees, 0.50% per
annum.

 

(c)           Effective as of the date hereof, the
definition of “Availability Period” set forth in Section 1.01 of the
Agreement is hereby amended to read in its entirety as follows:

 

“Availability
Period” means the period from and including the Effective Date of the
Agreement to November 9, 2005.

 

2.2          DELETED DEFINITION.  Effective as of the date hereof, Section 1.01
of the Agreement is hereby amended to delete the definition of “Permitted
Media DVX Payments” in its entirety.

 

2.3          COMMITMENTS.  Effective as of the date hereof, the
following sentence is hereby added to Section 2.01 of the Agreement to
read in its entirety as follows:

 

“From and after the expiration of the Availability Period, Borrower may
not reborrow amounts repaid in respect of the Revolving Loans, and the
obligation of Lenders to make any further Revolving Loans terminates as of the
expiration of the Availability Period.

 

2.4          DELETION OF INCREASED COMMITMENTS
PROVISION.  Effective as of the date
hereof, Section 2.15 of the Agreement is hereby deleted in its entirety.

 

2.5          RESTRICTED PAYMENTS.  Effective as of the date hereof, Section 8.06(a) of
the Agreement is hereby amended to read in its entirety as follows:

 

“(a)         The Borrower will
not, and will not permit any of its Subsidiaries to, declare or make, or agree
to pay or make, directly or indirectly, any Restricted Payment or incur any
obligation, (contingent or otherwise) to do so, except (i) the Borrower
may declare and pay dividends with respect to its capital stock payable solely
in additional shares of its common stock, and (ii) Subsidiaries may
declare and pay dividends to the Borrower or any Guarantor that is a Loan Party.”

 

2

 

2.6          MEDIA DVX PAYMENTS. Effective November 9,
2005, Section 8.15 of the Agreement is hereby amended to read in its
entirety as follows:

 

“8.15 Media DVX Payments Not Permitted. Without in any way
limiting any other covenant set forth in this Agreement, the Borrower will not,
and will not permit any Subsidiary to make any payment of any kind whatsoever
(whether by means of any loan, advance, capital contribution, fee or otherwise)
or transfer any assets to Media DVX Acquisition Corp.”

 

2.7          CAPITAL EXPENDITURES.  Effective October 1, 2005, Section 9.05
of the Agreement is hereby amended to read in its entirety as follows:

 

“9.05      Capital Expenditures.  The Borrower will not permit the aggregate
Capital Expenditures of the Loan Parties to exceed (a) $400,000 during the
Borrower’s fiscal quarter ending December 31, 2005, or (b) $300,000
during each fiscal quarter of Borrower ending on March 31, 2006 or any
fiscal quarter of Borrower thereafter.

 

2.8          COMMITMENTS.  Effective as of the date hereof, Schedule 1.01
to the Agreement is hereby amended to read in its entirety as set forth on
Annex 1 hereto.

 

ARTICLE III

 

WAIVER

 

3.1          WAIVER. Borrower has informed
Administrative Agent and Lenders that Borrower violated a financial covenant in
the Agreement as hereinafter described. 
Borrower has requested that the Administrative Agent and Lenders waive,
and Administrative Agent and Lenders have agreed to waive the violation of the
Senior Leverage Ratio, set forth in Section 9.02 of the Agreement
for the fiscal quarter ending September 30, 2005.

 

3.2          ADDITIONAL LIMITATIONS ON WAIVER.
The waiver referenced in this Article is only for the specific financial
covenant and time period set forth in this Article.  The waiver referenced in this Article is
a one-time waiver, does not concern compliance (or the effect of
non-compliance) with any other provision of the Agreement, and does not amend
or modify the Agreement.  The waiver
referenced in this Article does not create any obligation on the part of
Administrative Agent or any Lenders to grant a similar waiver or waivers under
similar or dissimilar future circumstances. 
Except as expressly limited by the waiver referenced in this Article,
Administrative Agent or any Lenders reserve the right to enforce each provision
of the Agreement and the other Loan Documents in strict accordance with the
terms and conditions thereof.

 

ARTICLE IV

 

AMENDMENT FEE

 

4.1          AMENDMENT FEE. The Borrower
agrees to pay to the Administrative Agent for the account of each Lender (pro
rata in accordance with the Total Commitment of each Lender) an Amendment Fee
in the amount of the Total Commitment times 0.40%.

 

3

 

ARTICLE V

 

CONDITIONS PRECEDENT

 

5.1          CONDITIONS.  The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent:

 

(a)           Fees and Expenses.  Borrower shall have paid all fees, costs and
expenses payable to Lenders or Administrative Agent under the Agreement or any
other agreement or arrangement, including without limitation the Amendment Fee
referenced in Section 4.1 of this Amendment and those referred to in Section 12.03
of the Agreement and in any fee letter.

 

(b)           Representations and Warranties.  The representations and warranties contained
herein and in all other Loan Documents, as amended hereby, shall be true and
correct as of the date hereof as if made on the date hereof.

 

(c)           No Default.  After giving effect to this Amendment, no
Default shall have occurred and be continuing.

 

(d)           Revolving Credit Notes.
Borrower shall have executed and delivered to Administrative Agent the amended
and restated Revolving Credit Notes provided by Administrative Agent to
Borrower for execution.

 

ARTICLE VI

 

RATIFICATIONS, REPRESENTATIONS AND WARRANTIES

 

6.1          RATIFICATIONS.  The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect.  Borrower agrees that the
Agreement, as amended hereby, and the other Loan Documents shall continue to be
legal, valid, binding and enforceable in accordance with their respective
terms.

 

6.2          REPRESENTATIONS AND WARRANTIES.  Borrower hereby represents and warrants to
the Administrative Agent and the Lenders that (1) the execution, delivery,
and performance by the Borrower and the Guarantors of this Amendment and
compliance with the terms and provisions hereof have been duly authorized by
all requisite action on the part of each such Person and do not and will not (a) violate
or conflict with, or result in a breach of, or require any consent under (i) the
articles of incorporation, certificate of incorporation, bylaws, partnership
agreement or other organizational documents of any such Person, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or decree
of any Governmental Authority or arbitrator, or (iii) any material
agreement or instrument to which any such Person is a party or by which any of
them or any of their property is bound or subject, (2) after giving effect
to this Amendment,

 

4

 

the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and correct
on and as of the date hereof as though made on and as of the date hereof, and (3) after
giving effect to this Amendment, no Default has occurred and is continuing.

 

ARTICLE VII

 

MISCELLANEOUS

 

7.1          SURVIVAL OF REPRESENTATIONS AND
WARRANTIES.  All representations and
warranties made in this Amendment or any other Loan Document shall survive the
execution and delivery of this Amendment, and no investigation by the
Administrative Agent or any Lender or any closing shall affect the
representations and warranties or the right of the Administrative Agent or any
Lender to rely upon them.

 

7.2          REFERENCE TO AGREEMENT.  Each of the Loan Documents, including the
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.

 

7.3          EXPENSES.  Borrower agrees to pay on demand all
reasonable out-of-pocket costs and expenses incurred by the Administrative
Agent in connection with the preparation, negotiation, and execution of this
Amendment and any and all amendments, modifications, and supplements thereto,
including without limitation the reasonable costs and fees of the Administrative
Agent’s legal counsel, and all out-of-pocket costs and expenses incurred by the
Administrative Agent and the Lenders, or any of them, in connection with the
enforcement or preservation of any rights under the Agreement, as amended
hereby, or any other Loan Document, including without limitation the costs and
fees of the Administrative Agent’s legal counsel and of the respective Lenders’
legal counsel.

 

7.4          SEVERABILITY.  Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

 

7.5          APPLICABLE LAW. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE OTHER LOAN DOCUMENTS,
THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE DEEMED TO HAVE BEEN MADE
AND TO BE PERFORMABLE IN DALLAS, DALLAS COUNTY, TEXAS AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

 

7.6          SUCCESSORS AND ASSIGNS.  This Amendment is binding upon and shall
inure to the benefit of the Borrower, the Lenders, the Issuing Bank, the
Administrative Agent and their respective successors and assigns, except the
Borrower shall not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Administrative Agent.

 

5

 

7.7          COUNTERPARTS.  This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.  This Amendment shall not be
effective unless and until the Administrative Agent, the requisite Lenders, the
Borrower and the Guarantors have each executed and delivered a counterpart
hereof.

 

7.8          HEADINGS.  The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.

 

7.9          RELEASE OF CLAIMS.  The Borrower and the Guarantors each hereby
acknowledge and agree that none of them has any and there are no defenses,
counterclaims, offsets, cross-complaints, claims or demands of any kind or
nature whatsoever to or against the Administrative Agent, the Issuing Bank, any
of the Lenders or the terms and provisions of or the obligations of the
Borrower, any Guarantor or any Subsidiary created or evidenced by the Agreement
or any of the other Loan Documents, and that neither the Borrower nor any of
the Guarantors has any right to seek affirmative relief or damages of any kind
or nature from the Administrative Agent, the Issuing Bank, or any of the
Lenders.  To the extent any such
defenses, counterclaims, offsets, cross-complaints, claims, demands or rights
exist, Borrower and the Guarantors each hereby waives, and hereby knowingly and
voluntarily releases and forever discharges the Administrative Agent, the
Issuing Bank, each of the Lenders and their respective predecessors, officers,
directors, agents, attorneys, employees, successors and assigns, from all
possible claims, demands, actions, causes of action, defenses, counterclaims,
offsets, cross-complaints, damages, costs, expenses and liabilities whatsoever,
whether known or unknown, such waiver and release being with full knowledge and
understanding of the circumstances and effects of such waiver and release and
after having consulted legal counsel with respect thereto.

 

7.10        ENTIRE AGREEMENT.  THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO REGARDING
THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS
AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO.  THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their respective authorized officers as
of the day and year first above written.

 

	
   

  	
  DIGITAL
  GENERATION SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A. Choucair

  
	
   

  	
   

  	
  Chief Financial Officer and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, N.A.

  
	
   

  	
  (formerly
  known as JPMorgan Chase Bank),

  
	
   

  	
  as a Lender,
  as Issuing Bank and as

  
	
   

  	
  Administrative
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID E.
  NOLET

  
	
   

  	
   

  	
  David E. Nolet

  
	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA
  BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID
  WHITING

  
	
   

  	
   

  	
  David Whiting

  
	
   

  	
   

  	
  Senior Vice President

  

 

SIGNATURE PAGE

 

 

Each of the undersigned Guarantors hereby (a) consents
and agrees to this Amendment, and (b) agrees that its Guaranty shall
continue to be the legal, valid and binding obligation of such Guarantor
enforceable against such Guarantor in accordance with its terms.

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  DIGITAL
  GENERATION SYSTEMS OF NEW

  
	
   

  	
  YORK, INC.,

  
	
   

  	
  a New York
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A. Choucair

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STARGUIDE DIGITAL NETWORKS, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STARCOM MEDIATECH, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  

 

 

	
   

  	
  CORPORATE COMPUTER SYSTEMS

  
	
   

  	
  CONSULTANTS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CORPORATE COMPUTER SYSTEMS, INC.,

  
	
   

  	
  (d/b/a Musicam
  USA),

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MUSICAM EXPRESS, L.L.C.,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DG SYSTEMS ACQUISITION CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  

 

 

	
   

  	
  DG SYSTEMS ACQUISITION II CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DG SYSTEMS ACQUISITION III CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OMAR A.
  CHOUCAIR

  
	
   

  	
   

  	
  Omar A.
  Choucair

  
	
   

  	
   

  	
  President

  

 

 

ANNEX 1

TO

THIRD AMENDMENT TO

THIRD
AMENDED AND RESTATED

CREDIT AGREEMENT

 

SCHEDULE 1.01

 

LENDERS AND COMMITMENTS

 

	
  Lender

  	
   

  	
  Revolving Credit

  Commitment

  	
   

  	
  Term Loan

  Commitment

  	
   

  	
  Total Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JPMorgan
  Chase Bank

  	
   

  	
  $

  	
  1,875,000

  	
   

  	
  $

  	
  5,208,333.33

  	
   

  	
  $

  	
  7,083,333.33

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Comerica
  Bank

  	
   

  	
  $

  	
  1,875,000

  	
   

  	
  $

  	
  5,208,333.33

  	
   

  	
  $

  	
  7,083,333.33

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MetroBank,
  N.A.

  	
   

  	
  $

  	
  750,000

  	
   

  	
  $

  	
  2,083,333.33

  	
   

  	
  $

  	
  2,833,333.33

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  4,500,000

  	
   

  	
  $

  	
  12,500,000

  	
   

  	
  $

  	
  17,000,000

  	
   

  

 

1<PAGE>
                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT (this "Agreement") dated as of September 2, 2005
(the "Effective Date"), between ENZON PHARMACEUTICALS, INC. (the "Company"), a
Delaware corporation with offices in Bridgewater, New Jersey, and IVAN D. HORAK,
M.D. (the "Executive"), a resident of New Jersey.

                                   BACKGROUND

         A. The Company is a biopharmaceutical company engaged in developing
advanced therapeutics for life threatening diseases.

         B. The Executive has experience as an executive in the
biopharmaceutical industry.

         C. 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.

                                      TERMS

         In consideration of the foregoing 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. The term of the Executive's employment hereunder (the "Term")
shall commence on the Effective Date, and unless terminated at an earlier date
in accordance with Section 9 hereof, and shall extend through the fourth
anniversary of the Effective Date, subject to automatic renewal for an
additional twenty-four (24) months, unless either party hereto receives written
notice from the other party no later than ninety (90) days prior to the fourth
anniversary of the Effective Date (a "first term notice of non-renewal") that
such other party does not wish for the term hereof to continue beyond the fourth
anniversary of the Effective Date, in which event the term hereof and the
Executive's employment shall end at 5:00 PM on the fourth anniversary of the
Effective Date. If neither party provides a first term notice of non-renewal
prior to the fourth anniversary of the Effective Date, then the Term and the
Executive's employment shall extend until 5:00 PM Eastern Time on the earlier of
(a) the sixth (6th) anniversary of the Effective Date and (b) the date that is
twelve (12) months following the date on which either party hereto receives
written notice (an "extension term 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 notice period. For the purposes of this Agreement, a "first
term notice of non-renewal" and an "extension term notice of non-renewal" shall
be referred to collectively as a "notice of non-renewal."

         3. Position and Duties.

         (a) Service with Company. During the Term, the Executive agrees to
perform such employment duties for the Company in an executive and managerial
capacity commensurate with the position of Executive Vice President and Chief
Scientific Officer of the Company. As Executive Vice President and Chief
Scientific Officer, the Executive shall have the authority, duties and
responsibilities associated with this position, including, without limitation,
the authority and duty generally to supervise and direct all research and
development activities of the Company as well as such additional duties
consistent with his position as assigned by the Chief Executive Officer,
reporting to the Chief Executive Officer, and subject to the control and
direction of the Chief Executive Officer of the Company, the Board of Directors
of the Company (the "Board"), or any duly authorized Committee of the Board. For
specificity, Executive's Position Description is attached hereto as Exhibit C.

<PAGE>

         (b) Performance of Duties.

                  (i) 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.

                  (ii) The 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 the Executive not breach any
         confidentiality agreement to which he is party, including, without
         limitation, any such agreement he may have with his former employer.
         The Executive will not render or perform services for any other
         corporation, firm, entity or person which are inconsistent with the
         provisions of this Agreement.

                  (iii) 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.

         (c) The Executive's Representations and Warranties. The Executive
represents and warrants to the Company that his entering into and performing
this Agreement will not constitute a breach of any employment, consulting,
non-competition or other agreement to which he is a party or any other
obligation of the Executive. The Executive represents and warrants to the
Company that he has not been debarred under the Generic Drug Enforcement Act of
1992 (Sections 306-308 of the Federal Food, Drug and Cosmetic Act) nor has the
Executive received notice of action or threat of action of debarment. The
Executive shall comply with the Company's material policies governing the
conduct of senior executives, including, without limitation, its Substance Abuse
Policy, during the Term.

         4. Compensation.

         (a) Base Salary. The Company shall pay to the Executive, less
applicable deductions and withholdings, base salary (the "Base Salary") at an
annual rate of Four Hundred Twenty-Five Thousand Dollars ($425,000) 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
the Executive during each fiscal year of the Company beginning after the
Effective Date shall be established by the Board or the Compensation Committee
thereof following an annual performance review, but in no event shall the annual
rate of Base Salary for any successive year of the Term be less than the highest
annual rate of Base Salary in effect during the previous year of the Term.

                                       2
<PAGE>

         (b) Annual Bonus. The Executive shall be entitled to participate in the
Company's bonus plan for management and any successor bonus plan covering
management with respect to each fiscal year of the Company ending during the
Term (the "Bonus Plan"). Under the Bonus Plan, the Executive shall be eligible
to receive a performance-based cash bonus for each fiscal year ending during the
Term in an amount, and based on objective 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 Chief Executive Officer and the Executive
prior to, or within sixty (60) days after the commencement of, each fiscal year.
Under the Bonus Plan for the Executive, (i) the minimum cash bonus shall be zero
(0), (ii) the target cash bonus shall equal 50% of the Base Salary (the "Target
Bonus"), and (iii) the maximum cash bonus shall equal 82.5% of Base Salary. In
addition to the foregoing amounts, within five (5) days after Executive's first
day of employment, the Company shall pay to Executive a bonus in cash in the
amount of $100,000.

         (c) Participation in Benefit Plans; Indemnification. While he is
employed by the Company, the Executive shall also be eligible to participate in
any incentive and employee benefit plans or programs which may be offered by the
Company to the extent that the 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, except as provided at Section
10 hereof, the Executive's participation in any such plan or program shall be
subject to the provisions, rules and regulations applicable thereto. During the
Executive's employment with the Company, and thereafter, the Company shall
indemnify the Executive and hold him harmless from and against any claim,
liability and expense (including, without limitation, reasonable attorney fees)
made against or incurred by him in connection with his employment by the
Company, and cover him under a policy of directors and officers liability
insurance, in a manner and to an extent that is not less favorable to the
Executive as the indemnification protection, and liability insurance coverage,
that is afforded by the Company to any other senior officer or director. A copy
of the Company's Directors and Officers Liability Insurance policy will be
provided to the Executive.

         (d) Expenses. The Company will pay or reimburse the 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.

         (e) Stock Options. Subject to the Executive commencing his employment
hereunder as the Company's Executive Vice President and Chief Scientific Officer
on the Effective Date, the Executive shall be granted options to purchase shares
of common stock of the Company ("Common Stock") pursuant to the Company's 1987
Non-Qualified Stock Option Plan, as amended (the "Stock Plan") and the form of
Non-Qualified Stock Option Certificate and Agreement attached hereto as Exhibit
A (the "Option Agreement"). Such options (the "Option") will cover 200,000 (Two
Hundred Thousand) shares of Common Stock at an exercise price per share equal to
the last reported sale price of a share of Common Stock as reported by the
Nasdaq Stock Market on the Effective Date or, if the Nasdaq Stock Market is not
open on the Effective Date, on the day next preceding the Effective Date on
which the Nasdaq Stock Market is open. The Option shall vest and be exercisable
as to 50,000 shares on each of the first four anniversaries of the Effective
Date. Except as otherwise provided in Section 10 hereof, once such options
become exercisable, they shall remain exercisable until 5:00 PM Eastern Time on
the tenth (10th) anniversary of the Effective Date. Except as otherwise provided
in this Agreement, the Option Agreement, a copy of which the Executive has
received and reviewed, shall govern the terms of the options granted hereunder.
In addition, at the discretion of the Board of Directors (or its applicable
committee), the Executive shall be entitled to receive further grants of stock
options, subject to the terms of the Option Plan.

                                       3
<PAGE>

         (f) Restricted Stock Units. Upon execution of this Agreement, the
Executive shall be granted 50,000 (Fifty Thousand) restricted stock units,
subject to the terms of the Restricted Stock Unit Award Agreement attached
hereto as Exhibit B and the 2001 Incentive Stock Plan. The restricted stock
units shall vest 15,000 shares on each of the third and fourth anniversaries of
the Effective Date and 20,000 shares on the fifth anniversary of the Effective
Date. The Executive acknowledges that he has received and reviewed a copy of the
2001 Incentive Stock Plan. At the discretion of the Board of Directors (or its
applicable committee), the Executive shall be entitled to receive additional
grants of restricted stock units, subject to the terms of the 2001 Incentive
Stock Plan or such other equity compensation plans that may be adopted by the
Company from time to time. Nothing contained herein shall be deemed to guarantee
the Executive any additional grants of options, restricted stock, restricted
stock units, other equity awards or securities of the Company.

         (g) Vacation. The 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.

         (h) Tax and Financial Planning Services. During each year of the term
of this Agreement, Company agrees to reimburse Executive, up to $7,500 per
fiscal year, for the costs of all tax return preparation, including any United
States, state, or local returns, as well as for professional estate and
financial planning services, if any, with Executive choosing the tax and other
professionals who will provide such services. The Company will pay Executive's
professional fees incurred to negotiate and prepare this Agreement and related
agreements, in an amount not to exceed $7,500.

         (i) Certain Legal Expenses. In the event of any legal proceedings,
including without limitation arbitration, between the Company and Executive with
respect to any dispute hereunder in which Executive prevails over the Company,
the Company shall pay Executive's reasonable legal fees and expenses incurred in
connection with such proceedings.

         (j) Employee Handbook. The Company's Employee Handbook will be provided
to Executive. In the event the provisions of the Employee Handbook are
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall control.

         5. Noncompetition and Confidentiality Covenant.

         (a) Noncompetition. The "Noncompete Period" shall be the Term plus the
one (1) year period immediately following termination of the Executive's
employment with the Company irrespective of the reason for, or circumstances
surrounding, such termination. In consideration for the compensation payable to
the Executive pursuant to this Agreement, including without limitation the stock
options and Restricted Stock Units granted to the Executive hereunder, during
the Noncompete Period, the 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, manufacturing, 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 specific technology or
specific area of business in which the Company becomes involved to a significant
degree during the Term. 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. The
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 the Executive is employed by the Company as provided in Section
5(b) hereof. The provisions contained in this Section 5(a) shall survive the
termination of the Executive's employment pursuant to Section 9 hereof or
otherwise. In the event the Executive breaches any of the covenants set forth in
this Section 5(a), the running of the period of restriction set forth herein
shall be tolled for the period during which the breach exists and recommence
upon the Executive's compliance with the terms of this Section 5(a).

                                       4
<PAGE>

         (b) Confidentiality.

                  (i) The Executive acknowledges that, by reason of his
         employment by the Company, he will have access to confidential
         information of the Company, including, but not limited to, information
         and knowledge pertaining to products, inventions, discoveries,
         improvements, innovations, designs, ideas, trade secrets, proprietary
         information, manufacturing, packaging, advertising, marketing,
         distribution and sales methods, sales and profit figures, customer and
         vendor lists and relationships between the Company and dealers,
         distributors, sales representatives, wholesalers, customers, suppliers
         and others who have business dealings with them (collectively,
         "Confidential Information"). The Executive acknowledges that such
         Confidential Information is a valuable and unique asset of the Company
         and covenants that, both during and after the Term, he will not
         disclose any Confidential Information to any person or entity, nor use
         the Confidential Information for any purpose, except as his duties as
         an employee of the Company may require, without the prior written
         authorization of the Board. The obligation of confidentiality imposed
         by this Section 5(b) shall not apply to Confidential Information that
         otherwise becomes generally known to the public through no act of the
         Employee in breach of this Agreement or any other party in violation of
         an existing confidentiality agreement with the Company or which is
         required to be disclosed by a specific order of a court or governmental
         agency.

                  (ii) All Confidential Information, as well as any other
         records, designs, patents, business plans, financial statements,
         manuals, memoranda, lists, research and development plans and products,
         and other property delivered to or compiled by the Executive for or on
         behalf of the Company or its vendors or customers that pertain to the
         business of the Company shall be and remain the property of the
         Company, and be subject at all times to its discretion and control.
         Likewise, all Confidential Information, as well as any other formulae,
         correspondence, reports, records, charts, advertising materials and
         other similar data pertaining to the business, activities or future
         plans of the Company (and all copies thereof) that are collected by the
         Executive shall be delivered promptly to the Company without request by
         it upon termination of the Executive's employment.

                                       5
<PAGE>

         (c) Nonsolicitation of Employees. During the Noncompete Period, the
Executive shall not, directly or indirectly, personally or through others,
encourage to leave employment with the Company, 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. The Executive agrees that the covenants and
agreements contained in Section 5 hereof are material to 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 the 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 the Executive of any such
covenants or agreements.

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

         (b) Limitation of Covenant. Ownership by the Executive, as a passive
investment, of less than five percent (5%) of the outstanding shares of capital
stock or equity of any corporation or other entity that is publicly traded shall
not constitute a breach of Section 5.

         (c) Blue Pencil Doctrine. The restrictions contained in Section 5 are
limited to the United States. 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. The 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.

                                       6
<PAGE>

         (d) Disclosure. The 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 one year after the termination of the Executive's employment
with the Company.

         8. Intellectual Property and Related Matters.

         (a) Disclosure and Assignment. The 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
the 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"). The Executive 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 the Executive's
right, title and interest in and to any and all of the Developments. At the
request of the Company, the 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 three (3) years
after the end of 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 the Executive. Upon request and without further
compensation therefor, but at no expense to the Executive, the 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 to Developments.

         (d) Records. The 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 the Company's request or the
conclusion of his employment, the Executive will promptly surrender same to the
Company.

                                       7
<PAGE>

         (e) Copyrightable Material. All right, title and interest in all
copyrightable material that the Executive shall conceive or originate, either
individually or jointly with others, and which arise out of the performance of
his duties under this Agreement or otherwise as an employee of the Company, 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 the
Executive, the 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 the 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 the 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. The Executive's employment pursuant to
this Agreement shall terminate prior to the expiration of the Term in the event
that at any time:

                  (i) the Executive dies,

                  (ii) the 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 the Executive's employment
         for "Cause" and notifies the Executive in writing of such election,

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

                  (v) The Executive elects to terminate his employment, without
         Good Reason and without liability, and notifies the Board in writing of
         such election.

         If the Executive's employment is terminated pursuant to clause (i),
(ii) or (iii) of this Section 9(a), such termination shall be effective
immediately. If the Executive's employment is terminated pursuant to subsection
(iv) of this Section 9(a), such termination shall be effective 30 days after
receipt of the notice of termination, and if pursuant to subsection (v) of this
Section 9(a), such termination shall be effective 15 days after receipt of such
notice.

         (b) "Cause" Defined. "Cause" shall mean (i) the willful engaging by the
Executive in illegal conduct or gross misconduct that is demonstrably and
materially injurious to the Company, (ii) the Executive's willful refusal to
perform his duties hereunder (other than any such failure resulting from illness
or incapacity) which refusal is demonstrably and materially injurious to the
Company, but only after the Executive has first received written notice of such
alleged refusal, and such refusal shall have continued for fifteen (15) days
after such notice without cure by the Executive, or (iii) the Executive's
material breach of his obligations under this Agreement which breach is
demonstrably and materially injurious to the Company, but only after the
Executive has first received written notice of such alleged breach and has
failed to cure such breach within fifteen (15) days after such notice; provided,
however, that if the breach is not one that can be reasonably cured, then the
foregoing requirement in this Clause (iii) for notice and opportunity to cure
shall not apply. For purposes of this Section 9(b), no act or failure to act on
the Executive's part shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interests of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until the Company delivers to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the Board (not including the Executive, if he is then on the Board)
at a meeting of the Board called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive engaged in conduct set forth above and specifying
the particulars thereof in reasonable detail.

                                       8
<PAGE>

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

                  (i) Any material adverse change in the Executive's status or
         position, including, without limitation, any material diminution in the
         Executive's position, duties, responsibilities or authority, as set
         forth in Executive's Position Description, or the assignment to the
         Executive of any duties or responsibilities that are inconsistent with
         the Executive's status or position as of the Effective Date; or

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

                  (iii) A reduction in the Target Bonus which could be paid to
         the Executive under the Bonus Plan below 50% of the Executive's Base
         Salary or a failure to pay when due any bonus earned for a completed
         performance period in accordance with the applicable bonus plan
         ("Earned Bonus"), provided however, that the Company's failure to
         actually award any bonus to the Executive, or the Company's actually
         awarding a bonus to the Executive which is less than the Target Bonus
         in each case in accordance with the applicable bonus plan, shall not
         constitute Good Reason; or

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

                  (v) The relocation of the Company's principal executive
         offices to a location that increases the Executive's commuting distance
         by more than thirty-five (35) miles or the Company requiring the
         Executive to be based anywhere other than the Company's principal
         executive offices, except for required travel substantially consistent
         with the Executive's business obligations; or

                  (vi) The Company provides the Executive a notice of
         non-renewal of the Term under Section 2(b) hereof.

                                       9
<PAGE>

         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 requirement, after the 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 (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) nor (B)
         appointed by directors so nominated, 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 consolidation of the Company with another entity or a
         merger 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, but a majority of the Outstanding Company Voting Securities is
         then 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.

                                       10
<PAGE>

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

         (f) Surrender of Records and Property. Upon termination of his
employment with the Company, the 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 or Upon the Company's
Notice of Non-Renewal.

         In the event the Company terminates the Executive's employment as the
Company's Executive Vice President and Chief Scientific Officer without Cause
pursuant to Section 9(a)(iv) hereof, the Executive terminates his employment for
Good Reason pursuant to Section 9(c) hereof, or the Company fails to renew the
Term upon the expiration thereof under Section 2(a) or the Company provides a
notice of non-renewal under Section 2 hereof, then

                  (i) the Executive shall receive lump sum cash payment within
         ten (10) days after the date of termination of employment in an amount
         equal to one (1) year of his annual Base Salary at the time of such
         termination;

                  (ii) the Executive shall receive a lump sum cash payment
         within ten (10) days after the date of termination of employment in an
         amount equal to the Target Bonus (based on the Base Salary at the time
         of such termination) which would have been payable in the fiscal year
         which commences immediately following the date of termination;

                  (iii) if the 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 the 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 the 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 the Executive for the premium cost of COBRA
         coverage as of the date the Executive and his Family Members become
         eligible to obtain comparable benefits from a subsequent employer;

                  (iv) the Executive shall receive a lump sum cash payment
         within ten (10) days after the date of termination of employment in an
         amount equal to ("Accrued Obligations"): (1) any unpaid Base Salary
         through the date of termination, (2) any unpaid Earned Bonus for a
         performance period ending prior to the date of termination, (3) accrued
         and unpaid vacation and (4) incurred and unreimbursed business
         expenses;

                                       11
<PAGE>

                  (v) the Executive shall receive a lump sum cash payment within
         ten (10) days after the date of termination of employment in an amount
         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 options granted to the Executive pursuant to Section
         4(e) hereof that have not vested at the time of such termination shall
         vest immediately upon termination;

                  (vii) all options granted to the Executive pursuant to Section
        4(e) hereof that have vested or become vested at the time or as a result
        of such termination will remain exercisable until their expiration
        dates;

                  (viii) all shares of restricted stock granted to the Executive
        pursuant to Section 4(f) hereof that have not vested at the time of such
        termination shall vest immediately upon such termination; and

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

         (b) Termination For Cause. In the event the Company terminates the
Executive's employment as the Company's Executive Vice President and Chief
Scientific Officer for Cause pursuant to Section 9(a)(iii) hereof, (i) the
Executive shall be entitled to receive payment of his Accrued Obligations, (ii)
the Executive shall continue to be entitled to any deferred compensation and
other unpaid amounts and benefits earned and vested prior to the Executive's
termination, (iii) all options to acquire shares in the Company held by the
Executive which have vested prior to the date of the Executive's termination of
employment shall remain exercisable after such termination in accordance with
the terms of the relevant plans and granting instruments, (iv) all options
granted to the Executive that have not vested prior to the date of the
Executive's termination of employment will terminate as of the date of such
termination and will be of no further force and effect; and (v) all shares of
restricted stock awarded to the Executive that have not vested prior to the date
of the Executive's termination of employment shall be forfeited.

         (c) Death. In the event the Executive's employment with the Company is
terminated as a result of the Executive's death, (i) the Executive's estate or
the Executive's duly designated beneficiaries shall be entitled to payment of
his Accrued Obligations; (ii) the Executive's estate or the 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 options to acquire shares in the Company held by the
Executive which have not vested at the time of the Executive's death will
continue to vest in accordance with their terms and shall remain exercisable
(together with any options which had previously vested), until the earlier of
(A) one year from the date of death and (B) the end of the remaining exercise
term of such options; (iv) all shares of restricted stock awarded to the
Executive shall fully vest; and (v) the Executive's estate or the 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
the Executive's death. If the 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 Members for the total
applicable premium cost for medical and dental coverage under COBRA for such
Family Members for a period of up to twenty-four (24) 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 coverage as of the
date they become eligible to obtain comparable benefits from another employer.

                                       12
<PAGE>

         (d) Disability. Upon termination of the Executive's employment as the
Company's Executive Vice President and Chief Scientific Officer on account of
the Executive's disability pursuant to Section 9(a)(ii) hereof, (i) the
Executive shall be entitled to payment of his Base Salary through the
commencement of long term disability payments to the Executive under any plan
provided or paid for by the Company and other Accrued Obligations, (ii) the
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) the Executive shall be entitled to all
compensation and benefits to which the Executive is entitled pursuant to the
Company's disability policies in effect as of the date of the Executive's
termination, (iv) all options to acquire shares of the Company held by the
Executive which have not vested at the date of termination of employment will
continue to vest in accordance with their terms, and shall remain exercisable
(together with any options which had previously vested), until the earlier of
(A) one year from the date of such termination of the Executive's employment and
(B) the end of the remaining exercise term of such options, (v) all shares of
restricted stock awarded to the Executive shall fully vest; and (vi) the
Executive shall continue to be entitled to any deferred compensation and other
unpaid amounts and benefits earned and vested prior to the Executive's
termination. If the 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 the Executive for the total applicable
premium cost for medical and dental coverage under COBRA for the 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 the 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 Without Good Reason or upon the Executive's
Notice of Non-Renewal. In the event the Executive voluntarily terminates his
employment with the Company without Good Reason, or the Executive's employment
terminates following the Executive having provided the Company with a notice of
non-renewal of the Term under Section 2 hereof, (i) the Executive shall be
entitled to receive payment of his Accrued Obligations, (ii) the Executive shall
continue to be entitled to any deferred compensation and other unpaid amounts
and benefits earned and vested prior to the Executive's termination, (iii) all
options to acquire shares of the Company held by the Executive which have vested
prior to the date of such termination shall remain exercisable after such
termination in accordance with the terms of the relevant plans and granting
instruments, (iv) all options to acquire shares of the Company held by the
Executive 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) all shares of restricted stock awarded to the Executive that
have not vested prior to the date of the Executive's termination of employment
shall be forfeited.

                                       13
<PAGE>

         (f) 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 Executive Vice President and Chief Scientific 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 one (1) year following a Change
in Control, in lieu of the provisions of Section 10(a) or 10(e) above,

                  (i) Executive shall receive a lump sum cash payment within ten
         (10) days after the date of termination of employment in an amount
         equal to his Accrued Obligations plus an amount equal to the pro rated
         portion of the 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 a lump sum cash payment within
         ten (10) days after the date of termination in an amount equal to two
         (2) 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 six (6) 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) 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) Except as otherwise specifically provided under Section 10, all
payments made to the Executive under any of the subsections of this Section 10
that are based upon the Executive's salary or bonus shall be made at times and
in a manner that is in accordance with the Company's standard payroll practices
for senior management.

         (h) Notwithstanding anything else herein to the contrary, the Executive
shall not be entitled to realize or receive any termination related benefits
provided for in this Section 10, including, without limitation, all
post-termination payments and the acceleration of option or restricted stock or
restricted stock unit vesting schedules unless the Executive shall have executed
and delivered to the Company a full release (reasonably satisfactory to the
Company's counsel) of all claims against the Company and its affiliates,
successors and assigns.

         (i) Nothing in this Agreement or in any other plan, award or agreement
of the Company applicable to the Executive shall result in the reduction or
limitation of (i) any payments under Section 10(f) and/or (ii) the accelerated
vesting of options to acquire common stock and/or (iii) shares of restricted
stock and/or restricted stock units under Section 11 or (iv) any other payments
or benefits (the "Total Payments") that may be deemed to be contingent upon a
change in ownership or control pursuant to Section 280G of the Internal Revenue
Code ("Code"), regardless of whether the Total Payments would be subject to the
excise tax imposed by Section 4999 of the Code. If the Executive does become
liable for any excise tax under Section 4999 of the Code, such liability shall
not entitle the Executive to any additional payments from the Company to
reimburse the Executive for such tax liability. The Company shall be entitled to
withhold from payments due to the Executive an amount equal to the actual amount
of any excise tax under Section 4999 of the Code to which the Executive is
subject, as determined by the Company's independent auditors.

                                       14
<PAGE>

         (j) If and when during the Term, the Company shall adopt (or amend) a
severance plan generally applicable to its executive officers (other than the
Chief Executive Officer), which provides for payments and benefits upon certain
events of termination of employment in connection with a change in control of
the Company at levels that are greater than those provided herein under Section
10(f) or 10(i) (or provide in connection with a change in control of the
Company, for lump sum or otherwise more accelerated payments than those provided
for under Section 10(f)), then promptly following adoption (or amendment) of
such a plan, the Company and Executive agree to negotiate in good faith an
amendment to the provisions of Sections 10(f) or 10(i) to provide Executive with
comparable payments and benefits upon certain events of termination or otherwise
in connection with a change of control of the Company to those provided to other
senior executive officers covered by such plan with the same line of reporting
to the Chief Executive Officer as Executive. Notwithstanding the foregoing, it
is understood that the Company may enter into individual contractual
arrangements with other executives for benefits, and nothing herein shall
require the Company to provide the same benefits or level of benefits to the
Executive.

         11. Effect of Change of Control. In the event of a Change of Control,
in addition to any other consequences provided for in this Agreement:

         (a) all shares of restricted stock and restricted stock units awarded
to the Executive shall fully vest immediately prior to the Change of Control;
and

         (b) all options to acquire shares of common stock of the Company held
by the Executive shall become fully vested immediately prior to the effective
date of the Change of Control.

         The Executive shall have a reasonable opportunity to exercise all or
any portion of such options prior to the effective date of the Change of
Control, and any options not exercised prior to the effective date of the Change
of Control shall terminate as of the effective date of the Change of Control and
will be of no further force or effect. To the extent that this Section 11 is
inconsistent with the provisions of the relevant plan and granting instruments
under which such options were issued, the Company and the Executive agree that
such inconsistent provisions are hereby superceded and the provisions of this
Section 11 shall govern.

         12. 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.

                                       15
<PAGE>

         (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, 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 the Executive shall
constitute a waiver of any other right or breach by the 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:

                           Ivan D. Horak, M.D.
                           685 ROUTE 202/206
                           BRIDGEWATER, NJ  08807

                                       16
<PAGE>

Address for the Company:

                           Enzon Pharmaceuticals, Inc.
                           685 Route 202/206
                           Bridgewater, New Jersey 08807
                           Attn:  EVP of Human Resources

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) 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.

         (l) 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.

         (m) Survival. The provisions of Section 4(c), 4(i) and Section 10 shall
survive the termination of the Executive's employment and the termination of the
Agreement.

         (m) Counterparts. This agreement may be executed in separate
counterparts, all of which taken together shall constitute one and the same
agreement.

                          Signatures on following page

                                       17
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by a duly authorized representative, this Employment Agreement as of
the Effective Date.

ENZON PHARMACEUTICALS, INC.

By:  /s/ Jeffrey H. Buchalter
   -----------------------------------------------------------
     Name: Jeffrey H. Buchalter
     Title: Chairman & Chief Executive Officer

     /s/ Ivan D. Horak, M.D.
   -----------------------------------------------------------
     IVAN D. HORAK, M.D.

                                       18
<PAGE>

                                                                       Exhibit A

                           ENZON PHARMACEUTICALS, INC.
               NON-QUALIFIED STOCK OPTION CERTIFICATE & AGREEMENT

                                                   Grant Date:

                                                   Certificate No.:

<TABLE>
<CAPTION>
         -------------------------------------------------------------------------------------------------

                                            SUMMARY GRANT INFORMATION
         --------------------------------------------- ---------------------------------------------------
         <S>                                           <C>
         EMPLOYEE:
         --------------------------------------------- ---------------------------------------------------

         NUMBER OF SHARES:
         --------------------------------------------- ---------------------------------------------------

         EXERCISE PRICE:
         --------------------------------------------- ---------------------------------------------------
                                                       1987 Non-Qualified Stock Option Plan, as amended
         PLAN:                                         (the "Plan")
         --------------------------------------------- ---------------------------------------------------

         OPTION                                        ___________________ (subject to earlier
         TERMINATION DATE:                             termination, as set forth in the Plan)
         --------------------------------------------- ---------------------------------------------------

<CAPTION>
         -------------------------------------------------------------------------------------------------
                                               VESTING INFORMATION
         --------------------------------------------- ---------------------------------------------------
         <S>                                           <C>
                                                        Number of Shares at to which the Option Becomes
                             Date                                         Exercisable
         --------------------------------------------- ---------------------------------------------------

         --------------------------------------------- ---------------------------------------------------

         --------------------------------------------- ---------------------------------------------------

         --------------------------------------------- ---------------------------------------------------

         --------------------------------------------- ---------------------------------------------------
</TABLE>

         In accordance with the terms and conditions of the Plan and the mutual
promises and undertakings contained in the attached pages, intending to be
legally bound, the parties hereto agree to the provisions set forth in the
Option Terms attached hereto.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.

ENZON PHARMACEUTICALS, INC.                          EMPLOYEE

By:/s/ Paul Davit                                   /s/ Ivan D. Horak, M.D.
   -------------------------------------------      ----------------------------
      Paul Davit                                              Signature
      Executive Vice President, Human Resources                9/2/05
                                                    ----------------------------
                                                                Date
<PAGE>

                      1987 Non-Qualified Stock Option Plan
                                  Option Terms

         1. Grant of Option. The Company hereby grants Employee the right and
option (the "Option") to purchase all or any part of an aggregate of the number
of shares of the Company's common stock, par value $0.01 per share (the "Common
Stock") set forth above, at the price per share set forth above (the "Exercise
Price") on the terms and conditions set forth in this Agreement and in the Plan.
It is understood and agreed that the Exercise Price is the per share Fair Market
Value (as defined in the Plan) of such shares on the date of this Agreement. The
Option is not intended to be an Incentive Stock Option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Option is issued pursuant to the Plan and is subject to its terms. A copy of the
Plan has been furnished to Employee. Employee hereby confirms he/she has
received and thoroughly read the Plan. The Company invites and encourages
Employee to contact any member of the Company's Human Resources Department with
any questions he/she may have regarding the Plan or this Agreement.

         2. Expiration. The Option shall terminate at the close of business on
the termination date set forth above or earlier as is prescribed in the Plan.
Employee shall not have any of the rights of a stockholder with respect to the
shares subject to the Option until such shares shall be issued to Employee upon
the proper exercise of the Option.

         3. Vesting of Option Rights. Except as otherwise provided in the Plan,
the Option shall become exercisable in portions in accordance with the schedule
set forth above, provided the Employee is employed by the Company on the vesting
date in question.

         4. Exercise of Option after Termination of Employment. Except as
otherwise set forth in the Plan, the Option shall terminate and may no longer be
exercised if Employee ceases to be employed by the Company or its subsidiaries.

         5. Transfer and Assignment. This Option may not be transferred except
in accordance with the terms of the Plan. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors, and assigns of
the Employee.

         6. Method of Exercise of Option. The Option may be exercised in whole
or in part from time to time by Employee or other proper party in accordance
with the terms of the Plan by serving written notice of exercise on the Company
at its principal office within the period during which the Option is exercisable
as provided in this Agreement. The notice shall state the number of shares as to
which the Option is being exercised and shall be accompanied by payment in full
of the Exercise Price for all shares designated in the notice. Payment of the
Exercise Price shall be made in cash (including bank check, personal check or
money order payable to the Company), or otherwise in accordance with the Plan.
This Option shall be exercised only for 100 shares of Common Stock or a multiple
thereof or for the full number of shares for which the Option is then
exercisable.

         7. Forfeiture of Option and Option Gain Resulting From Certain
Activities.

                                     2 of 4
<PAGE>

         (a) IF, AT ANY TIME THAT (I) IS WITHIN TWO (2) YEARS AFTER THE DATE
THAT EMPLOYEE HAS EXERCISED THE OPTION OR (II) IS WITHIN TWO (2) YEARS AFTER THE
DATE OF THE TERMINATION OF EMPLOYEE'S EMPLOYMENT WITH THE COMPANY FOR ANY REASON
WHATSOEVER WHILE AN OPTION AGREEMENT UNDER THE PLAN IS IN EFFECT, WHICHEVER IS
LONGER, EMPLOYEE ENGAGES IN ANY FORFEITURE ACTIVITY (AS DEFINED BELOW) THEN (I)
THE OPTION SHALL IMMEDIATELY TERMINATE EFFECTIVE AS OF THE DATE ANY SUCH
ACTIVITY FIRST OCCURRED, AND (II) ANY GAIN RECEIVED BY EMPLOYEE PURSUANT TO THE
EXERCISE OF THE OPTION GRANTED HEREUNDER MUST BE PAID TO THE COMPANY WITHIN 30
DAYS OF DEMAND BY THE COMPANY. FOR PURPOSES HEREOF, THE GAIN ON ANY EXERCISE OF
THE OPTION SHALL BE DETERMINED BY MULTIPLYING THE NUMBER OF SHARES PURCHASED
PURSUANT TO THE OPTION TIMES THE EXCESS OF THE FAIR MARKET VALUE OF A SHARE OF
THE COMPANY'S COMMON STOCK ON THE DATE OF EXERCISE (WITHOUT REGARD TO ANY
SUBSEQUENT INCREASE OR DECREASE IN THE FAIR MARKET VALUE) OVER THE EXERCISE
PRICE.

         (b) AS USED HEREIN, EMPLOYEE SHALL BE DEEMED TO HAVE ENGAGED IN A
FORFEITURE ACTIVITY IF EMPLOYEE (I) BREACHES ANY NON-COMPETE OR NON-DISCLOSURE
AGREEMENT BETWEEN THE COMPANY AND THE EMPLOYEE OR (II) FAILS TO HOLD IN A
FIDUCIARY CAPACITY FOR THE BENEFIT OF THE COMPANY ALL CONFIDENTIAL, PROPRIETARY
OR TRADE SECRET INFORMATION, KNOWLEDGE AND DATA, INCLUDING RESEARCH AND
DEVELOPMENT INFORMATION, FINANCIAL INFORMATION, SALES OR MARKETING INFORMATION,
TECHNICAL INFORMATION CUSTOMER LISTS AND INFORMATION, BUSINESS PLANS AND
BUSINESS STRATEGY ("CONFIDENTIAL DATA") RELATING IN ANY WAY TO THE BUSINESS OF
THE COMPANY FOR SO LONG AS SUCH CONFIDENTIAL DATA REMAINS CONFIDENTIAL.

         (c) IF ANY COURT OF COMPETENT JURISDICTION SHALL DETERMINE THAT THE
FOREGOING FORFEITURE PROVISION IS INVALID IN ANY RESPECT, THE COURT SO HOLDING
MAY LIMIT SUCH COVENANT EITHER OR BOTH IN TIME, IN AREA OR IN ANY OTHER MANNER
WHICH THE COURT DETERMINES SUCH THAT THE COVENANT SHALL BE ENFORCEABLE AGAINST
EMPLOYEE. EMPLOYEE ACKNOWLEDGES THAT THE REMEDY OF LAW FOR ANY BREACH OF THE
COVENANT NOT TO COMPETE REFERENCED ABOVE WILL BE INADEQUATE TO PROTECT THE
COMPANY'S INTERESTS AND COMPENSATE FOR THE HARM FLOWING FROM SUCH BREACH, AND
THAT THE COMPANY SHALL BE ENTITLED, IN ADDITION TO ANY REMEDY OF LAW, TO
PRELIMINARY AND PERMANENT INJUNCTIVE RELIEF.

8. Miscellaneous.

         (a) In the event that any provision of this Agreement conflicts with or
is inconsistent in any respect with the terms of the Plan, the terms of the Plan
shall control.

         (b) Neither the Plan nor this Agreement shall (i) be deemed to give any
individual a right to remain an employee of the Company, (ii) restrict the right
of the Company to discharge any employee, with or without cause, or (iii) be
deemed to be a written contract of employment.

         (c) The exercise of all or any parts of the Option shall only be
effective at such time that the sale of shares of Common Stock pursuant to such
exercise will not violate any state or federal securities or other laws. This
Option may not be exercised if the issuance of shares of Common Stock of the
Company upon such exercise would constitute a violation of any applicable
Federal or state securities or other law or valid regulation. The Employee, as a
condition to his or her exercise of this Option, shall represent to the Company
that the shares of Common Stock of the Company that he or she acquires under
this Option are being acquired by him or her for investment and not with a view
to distribution or resale, unless counsel for the Company is then of the opinion
that such a representation is not required under the Securities Act of 1933, as
amended (the "Act") or any other applicable law, regulation, or rule of any
governmental agency and shall, if the shares of Common Stock underlying this
Option are not registered under the Act, acknowledge that the certificate
evidencing such shares may be stamped with a restrictive legend and such shares
will be "restricted securities" as defined in Rule 144 promulgated under the
Act.

                                     3 of 4
<PAGE>

         (d) The Company shall at all times during the term of the Option
reserve and keep available such number of shares of the Company's Common Stock
as will be sufficient to satisfy the requirements of this agreement.

         (e) In order to provide the Company with the opportunity to claim the
benefit of any income tax deduction which may be available to it upon the
exercise of the Option and in order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to insure that, if necessary, all applicable federal or state
payroll, withholding, income or other taxes are withheld or collected from
Employee.

         (f) The Company, in its sole and absolute discretion, may allow
Employee to satisfy Employee'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.

                                     4 of 4
<PAGE>

                                                                       Exhibit B

                      RESTRICTED STOCK UNIT AWARD AGREEMENT

         THIS AGREEMENT, dated as of September 2, 2005, is between Enzon
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and
Ivan D. Horak, M.D., an individual resident of the State of New Jersey
("Employee").

                                    RECITALS

         A. The Company wishes to grant to Employee, effective as of the date of
this Agreement, an award of restricted stock units of the Company's common
stock, par value $.01 per share (the "Common Stock"), on the terms and subject
to the conditions set forth in this Agreement and the Company's 2001 Incentive
Stock Plan, as a amended on November 12, 2003 and December 2, 2003.

         B. Employee desires to accept such grant.

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

         1. Definitions. As used in this Agreement, the following terms have the
meanings set forth below:

         "Acquiring Person" shall mean any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) who or which, together with all Affiliates and Associates of
such person, is the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company's then
outstanding securities, but shall not include the Company, or any subsidiary of
the Company.

         "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 promulgated under the Exchange Act.

         "Award" has the meaning ascribed to such term in Section 2 hereof.

         "Board" means the Board of Directors of the Company.

         A "Change in Control" shall mean:

         (a) the public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") that any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, other than the Company or any of its subsidiaries, has become
the beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 35% or more of the combined voting power of the Company's then
outstanding voting securities in a transaction or series of transactions; or
<PAGE>

         (b) the "Continuing Directors" (as defined below) cease to constitute a
majority of the Company's Board of Directors; or

         (c) the shareholders of the Company approve:

                  (i) any consolidation or merger of the Company in which the
         Company is not the continuing or surviving corporation; or

                  (ii) any consolidation or merger 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 then outstanding voting securities of the
         Company (the "Outstanding Company Voting Securities") is owned by a
         Person or Persons (as defined in Section 13(d)(3) or 14(d)(2) of the
         Securities Exchange Act of 1934, as amended) who were not "beneficial
         owners" of a majority of the Outstanding Company Voting Securities
         immediately prior to such merger or consolidation;

                  other than a merger of the Company in which shareholders of
         the Company immediately prior to the merger have the same proportionate
         ownership of stock of the surviving corporation immediately after the
         merger; or

         (d) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company; or

         (e) any plan of liquidation or dissolution of the Company; or

         (f) the majority of the Continuing Directors determine in their sole
and absolute discretion that there has been a change in control of the Company.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Common Stock" has the meaning specified in Recital A hereof.

         "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

         "Continuing Director" shall mean any person who is a member of the
Board of Directors of the Company, who, while such a person is a member of the
Board of Directors, is not an Acquiring Person (as hereinafter defined) or an
Affiliate or Associate (as hereinafter defined) of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
who (A) was a member of the Board of Directors on the date of this Agreement or
(B) subsequently becomes a member of the Board of Directors, if such person's
initial nomination for election or initial election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors.

         "Plan" means the Company's 2001 Stock Incentive Plan, as amended from
time to time.

                                       2
<PAGE>

         "Restricted Stock Units" means the right to receive Vested Shares upon
their vesting in accordance with Section 3 below.

         "Shares" means, collectively, the shares of Common Stock subject to the
Award, whether or not such shares are Vested Shares.

         "Vested Shares" means the Shares with respect to which the Restricted
Stock Units have vested at any particular time.

         2. Award. The Company, effective as of the date of this Agreement,
hereby grants to Employee _______________ Restricted Stock Units (the "Award")
representing the right to receive ____________ Vested Shares, subject to the
terms and conditions set forth herein and in the Plan.

         3. Vesting.

         (a) Subject to the terms and conditions of this Agreement, the
Restricted Stock Units awarded hereunder to Employee shall vest and become the
right to receive Vested Shares in accordance with the following schedule:

         On Each of the                    Percentage or Number of
         Following Dates                      Shares that Vest
---------------------------------     -------------------------------

       ________ __, 200_                           __%
       ________ __, 200_                           __%
       ________ __, 200_                           __%
       ________ __, 200_                           __%

         (b) Notwithstanding the vesting provisions contained in Section 3(a)
above, but subject to the other terms and conditions set forth herein, if
Employee has been continuously employed by the Company until the date of a
Change In Control of the Company, all of the Restricted Stock Units shall
immediately vest on the date of such Change In Control.

         (c) In the event of the disability (within the meaning of Section
22(e)(3) of the Code) or death of Employee, if Employee has been continuously
employed by the Company until the date of such disability or death, Employee or
his estate shall become immediately vested, as of the date of such disability or
death, in all of the Restricted Stock Units subject to the Award.

         (d) Except as provided in Section 3(c) and any effective employment
agreements that Employee might have with the Company, if Employee ceases to be
an employee for any reason prior to the vesting of the Restricted Stock Units
pursuant to Sections 3(a) or 3(b) hereof, Employee's rights to all of the
Restricted Stock Units (and the Shares subject to the Award) not vested on the
date that Employee ceases to be an employee shall be immediately and irrevocably
forfeited and the Employee will retain no rights with respect to the forfeited
units.

                                       3
<PAGE>

         4. Additional Restriction on Transfer of Restricted Stock Units.

         The Restricted Stock Units cannot be sold, assigned, transferred,
gifted, pledged, hypothecated, or in any manner encumbered or disposed of at any
time prior to delivery of the Shares underlying the Restricted Stock Units after
the Restricted Stock Units have vested pursuant to Section 3 above.

         5. Issuance and Custody of Certificate; Representations of Employee.

         (a) Subject to the restrictions in this Section 5, upon vesting of the
Restricted Stock Units and following payment of any applicable withholding taxes
pursuant to section 8 of this Agreement, the Company shall promptly cause to be
issued and delivered to Employee a certificate or certificates evidencing such
Vested Shares, free of any restrictive legends and registered in the name of
Employee or in the name of Employee's legal representatives, beneficiaries or
heirs, as the case may be, and shall cause such certificate or certificates to
be delivered to Employee or Employee's legal representatives, beneficiaries or
heirs.

         (b) The issuance of any Common Stock in accordance with this Award
shall only be effective at such time that the sale or issuance of Common Stock
pursuant to this Agreement will not violate any state or federal securities or
other laws.

         (c) At any time after the vesting of the Restricted Stock Units and
prior to the issuance of the Vested Shares, if the issuance of the Vested Shares
to the Employee is prohibited due to limitations under this Section 5, the
Company shall use its reasonable best efforts to remove such limitations, unless
such limitations relate solely to Employee's personal situation. If such
limitations relate solely to Employee's personal situation, the Company will use
its reasonable best efforts to cooperate with the Employee in resolving such
limitation.

         6. Rights as Shareholder. Prior to the Restricted Stock Units vesting
and Employee receiving his shares of Common Stock underlying the Restricted
Stock Units pursuant to Section 5 above, Employee shall not have ownership or
rights of ownership of any Common Stock underlying the Restricted Stock Units
awarded hereunder. Employee shall not be entitled to receive dividend
equivalents on the Restricted Stock Units awarded.

         7. Distributions and Adjustments. In accordance with Section 4(C) of
the Plan, the Award shall be subject to adjustment in the event that any
distribution, recapitalization, reorganization, merger or other event covered by
Section 4(C) of the Plan shall occur.

         8. Taxes. 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 unit 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 are withheld or collected from
Employee.

         9. Employee's Employment. Nothing in this Agreement shall confer upon
Employee any right to continue in the employ of the Company or any of its
subsidiaries or interfere with the right of the Company or its subsidiaries, as
the case may be, to terminate Employee's employment or to increase or decrease
Employee's compensation at any time.

                                       4
<PAGE>

         10. Notices. All notices, claims, certificates, requests, demands, and
other communications hereunder shall be in writing and shall be deemed to have
been duly given and delivered if personally delivered or if sent by nationally
recognized overnight courier, by facsimile or by registered or certified mail,
return receipt requested and postage prepaid, addressed as follows:

         (a) If to the Company, to it at:

                           Enzon Pharmaceuticals, Inc.
                           685 Route 202/206
                           Bridgewater, New Jersey 08807
                           Attn:  General Counsel

         (b) If to Employee, to him at such Employee's address as most recently
supplied to the Company and set forth in the Company's records; or

         (c) to such other address as the party to whom notice is to be given
may have furnished to the other party in writing in accordance herewith.

         Any such notice or communication shall be deemed to have been received
(i) in the case of personal delivery, on the date of such delivery (or if such
date is not a business day, on the next business day), (ii) in the case of
nationally-recognized overnight courier, on the next business day after the date
sent, (iii) in the case of facsimile transmission, when received (or if not sent
on a business day, on the next business day after the date sent), and (iv) in
the case of mailing, on the third business day following the date on which the
piece of mail containing such communication is posted.

         11. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other or subsequent breach.

         12. Undertaking. Both parties hereby agree to take whatever additional
actions and execute whatever additional documents either party may in their
reasonable judgment deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on the other party under
the provisions of this Agreement.

         13. Plan Provisions Control. The Award is made subject to the terms and
provisions of the Plan. In the event that any provision of the Agreement
conflicts with or is inconsistent in any respect with the terms of the Plan, the
terms of the Plan shall control.

         14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware (without giving effect to
principles of conflicts of laws).

         15. Counterparts. This Agreement may be executed in one or more
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts together shall constitute but one agreement.

                                       5
<PAGE>

         16. Entire Agreement. This Agreement (and the other writings
incorporated by reference herein, including the Plan) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior or contemporaneous written or oral negotiations,
commitments, representations, and agreements with respect thereto.

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

                               ENZON PHARMACEUTICALS, INC.

                               By:      /s/ Paul Davit
                                        -------------------------------
                                        Name:  Paul Davit
                                        Title: Executive Vice President,
                                        Human Resources

                               EMPLOYEE

                                        /s/ Ivan D. Horak, M.D.
                                        -------------------------------
                                        Name: Ivan D. Horak, M.D.

                                       6
<PAGE>

[ENZON LOGO]                                                           Exhibit C

                              POSITION DESCRIPTION

TITLE:               EXECUTIVE VICE PRESIDENT & CHIEF SCIENTIFIC OFFICER
REPORTS TO:          CHAIRMAN & CEO
DEPARTMENT:          RESEARCH & DEVELOPMENT
LOCATION:            PISCATAWAY, NJ

================================================================================
POSITION OVERVIEW:

The Executive Vice President & Chief Scientific Officer ("CSO") has the key
responsibility for the conversion of scientific knowledge, technology platform
research or partnering opportunities into commercially attractive and
proprietary products and fuel the growth of Enzon in the marketplace, in a
sustainable fashion, with the resources available. The CSO will seek to optimize
the overall effectiveness and efficiency of the R&D organization in order to
achieve these goals. The CSO is critically involved in assembling, maintaining
and growing top talent, and provides an environment in which individuals with
diverse backgrounds and expertise are challenged and excel to a high level of
performance. He will also seek to minimize organizational disconnects, e.g., at
interfaces to Technical Operations or Marketing.

As an Executive Officer the CSO is a key member of corporate management and
contributes to all aspects of business success, including superior growth,
superior financial performance, shareholder value creation and sustainability of
the business.

================================================================================

MAJOR POSITION ACTIVITIES & RESPONSIBILITIES:

o  Defining the R&D strategy and overseeing its implementation

o  Defining the technologies, in-house activities and collaborations that
   provide the basis for successful discoveries

o  Securing, expanding and defending intellectual property

o  Building, advancing and maintaining a high value, proprietary pipeline of
   projects according to the strategic output goal, and contribute to
   licensing/partnering activities

o  Directing the resources to the most promising projects and maximizing R&D
   productivity based on metrics

o  Building, leading and maintaining an organization and senior team that is
   capable of implementing the R&D strategy

o  Full responsibility for R&D budget, including all staffing

o  Foster a culture (as defined in the R&D strategy) consistent with the overall
   corporate culture that is driven by People who are Passionate about what they
   do, strive for their Performance to exceed expectations, take Pride in a job
   well done, and firmly believe that Promises that are made must be delivered.

================================================================================

BACKGROUND QUALIFICATIONS:

o  MD and/or PhD

o  Solid experience and proven track record in leading an integrated
   pharmaceutical R&D effort on a significant scale (>$30M budget)

o  Ability to lead in networked structures such as CRO relations or
   partnerships/alliances

o  Proven track record of achievement in successfully discovering and developing
   commercially attractive projects through all stages of development to launch

o  Thorough familiarity with therapeutic fields of interest to Enzon (now and/or
   in the future)

o  Thorough familiarity with and a network within the medical, scientific and
   regulatory communities, preferably on a global scale

o  Proven ability to work successfully in a culturally diverse environment

                                       1

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