Document:

<PAGE>

                           ENZON PHARMACEUTICALS, INC.
                        2007 EMPLOYEE STOCK PURCHASE PLAN

      1. ESTABLISHMENT OF PLAN.

      Enzon Pharmaceuticals, Inc. (the "COMPANY") proposes to grant options for
purchase of the Company's Common Stock (the "COMMON STOCK") to eligible
employees of the Company and its Participating Subsidiaries (as hereinafter
defined) pursuant to this 2007 Employee Stock Purchase Plan (this "PLAN"). For
the purposes of this Plan, "Parent Corporation" and "Subsidiary" shall have the
same meanings as "parent corporation" and "subsidiary corporation" in Sections
424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as
amended (the "CODE"). "Participating Subsidiaries" are Parent Corporations or
Subsidiaries that the Board of Directors of the Company (the "BOARD") designates
from time to time as corporations that shall participate in this Plan. The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments to or replacements of such
Section), and this Plan shall be so construed. Any term not expressly defined in
this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein.

      2. NUMBER OF SHARES.

      The total number of shares of Common Stock initially reserved and
available for issuance pursuant to this Plan shall be 1,000,000 (the "SHARE
LIMIT"), subject to adjustments effected in accordance with Section 15 of this
Plan. The Board may at such time as it deems necessary implement a substantially
similar plan for employees resident outside the United States or persons,
including consultants and directors not eligible for this Plan ("NONQUALIFIED
PLAN") in which case the Share Limit shall be reduced by the number of shares
issued under the Nonqualified Plan. Shares issued under this Plan may consist,
in whole or in part, of authorized and unissued shares or treasury shares
reacquired in private transactions or open market purchases, but all shares
issued under this Plan and the Nonqualified Plan shall be counted against the
Share Limit.

      3. PURPOSE.

      The purpose of this Plan is to provide eligible employees of the Company
and Participating Subsidiaries with a convenient means of acquiring an equity
interest in the Company through payroll deductions, to enhance such employees'
sense of participation in the affairs of the Company and Participating
Subsidiaries, and to provide an incentive for continued employment. For the
purposes of this Plan, "employee" shall mean any individual who is an employee
of the Company or a Participating Subsidiary. Whether an individual qualifies as
an employee shall be determined by the Committee (hereinafter defined), in its
sole discretion. The Committee shall be guided by the provisions of Treasury
Regulation Section 1.421-7 and Section 3401(c) of the Code and the Treasury
Regulations thereunder, with the intent that the Plan cover all "employees"
within the meaning of those provisions other than those who are not eligible to
participate in the Plan, provided, however, that any determinations regarding
whether an

<PAGE>

individual is an "employee" shall be prospective only, unless otherwise
determined by the Committee (as hereinafter defined). Unless the Committee makes
a contrary determination, the employees of the Company shall, for all purposes
of this Plan, be those individuals who are carried as employees of the Company
or a Participating Subsidiary for regular payroll purposes or are on a leave of
absence for not more than 90 days. Any inquiries regarding eligibility to
participate in the Plan shall be directed to the Committee, whose decision shall
be final.

      4. ADMINISTRATION.

      This Plan shall be administered by the Compensation Committee of the Board
(the "COMMITTEE"). Subject to the provisions of this Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, all questions of
interpretation or application of this Plan shall be determined by the Committee
and its decisions shall be final and binding upon all participants. Members of
the Committee shall receive no compensation for their services in connection
with the administration of this Plan, other than standard fees as established
from time to time by the Board for services rendered by Board members serving on
Board committees. All expenses incurred in connection with the administration of
this Plan shall be paid by the Company.

      5. ELIGIBILITY.

      Any employee of the Company or the Participating Subsidiaries is eligible
to participate in an Offering Period (as hereinafter defined) under this Plan
except the following:

            (a) employees who are not employed by the Company or a Participating
Subsidiary prior to the beginning of such Offering Period or prior to such other
time period as specified by the Committee;

            (b) employees who are customarily employed for twenty (20) hours or
less per week;

            (c) employees who are customarily employed for five (5) months or
less in a calendar year;

            (d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries;

            (e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
purposes; and

                                       2
<PAGE>

            (f) employees who reside in countries for whom such employees'
participation in the Plan would result in a violation under any corporate or
securities laws of such country of residence.

      In addition, consultants, directors and employees not resident in the
United States can be eligible to participate in a Nonqualified Plan as
determined by the Committee.

      6. OFFERING DATES.

      The offering periods of this Plan (each, an "OFFERING PERIOD") shall be of
six (6) months duration commencing on April 1 and October 1 of each year and
ending on September 30 and March 31 of each year. The first business day of each
Offering Period is referred to as the "OFFERING DATE." The last business day of
each Offering Period is referred to as the "PURCHASE DATE." The Committee shall
have the power to change the Offering Dates, the Purchase Dates and the duration
of Offering Periods without stockholder approval if such change is announced
prior to the relevant Offering Period or prior to such other time period as
specified by the Committee.

      7. PARTICIPATION IN THIS PLAN.

      Eligible employees may become participants in an Offering Period under
this Plan on the Offering Date, after satisfying the eligibility requirements,
by delivering a subscription agreement to the Company prior to such Offering
Date, or such other time period as specified by the Committee. Once an employee
becomes a participant in an Offering Period by filing a subscription agreement,
such employee shall automatically participate in the Offering Period commencing
immediately following the last day of the prior Offering Period unless the
employee withdraws or is deemed to withdraw from this Plan or terminates further
participation in the Offering Period as set forth in Section 12 below. Such
participant is not required to file any additional subscription agreement in
order to continue participation in this Plan.

      8. GRANT OF OPTION ON ENROLLMENT.

      Enrollment by an eligible employee in this Plan with respect to an
Offering Period shall constitute the grant (as of the Offering Date) by the
Company to such employee of an option to purchase on the Purchase Date up to
that number of shares of Common Stock determined by a fraction, the numerator of
which is the amount accumulated in such employee's payroll deduction account
during such Offering Period and the denominator of which is the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), provided, however, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (x) the maximum number of shares set by the Committee pursuant to
Section 11(c) below with respect to the applicable Purchase Date, or (y) the
maximum number of shares which may be purchased pursuant to Section 11(b) below
with respect to the applicable Purchase Date. The fair market value of a share
of the Company's Common Stock shall be determined as

                                       3
<PAGE>

provided in Section 9 below. Notwithstanding the foregoing, in the event of a
change in generally accepted accounting principles which would adversely affect
the accounting treatment applicable to any current Offering Period, the
Committee may make such changes to the number of Shares purchased at the end of
the Offering Period or the purchase price paid as are allowable under generally
accepted accounting principles and as it deems necessary in the sole discretion
of the Committee to avoid or minimize adverse accounting consequences.

      9. PURCHASE PRICE.

      The purchase price per share at which a share of Common Stock shall be
sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:

            (a) the fair market value on the Offering Date; or

            (b) the fair market value on the Purchase Date.

      For the purposes of this Plan, the term "FAIR MARKET VALUE" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:

            (a) if such Common Stock is then quoted on the Nasdaq Global Market,
its closing price on the Nasdaq Global Market on the date of determination as
reported in The Wall Street Journal;

            (b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal; or

            (c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq Global Market nor listed or admitted to trading on a national securities
exchange, the average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal.

      10. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.

            (a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments,
not less than one percent (1%), nor greater than fifteen percent (15%), or such
lower limit set by the Committee. Compensation shall mean all W-2 cash
compensation, including, but not limited to, base salary, wages, bonuses,
incentive compensation, commissions, overtime, shift premiums, plus draws
against commissions, provided, however that compensation shall not include any
long term disability or workmens compensation payments, car allowances,
relocation payments or expense reimbursements and further provided, however,
that for purposes of determining a participant's compensation, any election by
such participant to reduce his or her regular cash remuneration under Sections
125 or 401(k) of the Code shall be treated as if the participant did not make
such election. Payroll deductions shall commence on the first payday of the
Offering Period and shall

                                       4
<PAGE>

continue to the end of the Offering Period unless sooner altered or terminated
as provided in this Plan.

            (b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective no later than the second succeeding payroll period commencing after
the Company's receipt of the authorization and shall continue for the remainder
of the Offering Period unless changed as described below. Such change in the
rate of payroll deductions may be made at any time during an Offering Period,
but not more than one (1) change may be made effective during any Offering
Period. A participant may increase or decrease the rate of payroll deductions
for any subsequent Offering Period by filing with the Company a new
authorization for payroll deductions prior to the beginning of such Offering
Period, or such other time period as specified by the Committee.

            (c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Company a request for
cessation of payroll deductions. Such reduction shall be effective beginning no
later than the second succeeding payroll period after the Company's receipt of
the request and no further payroll deductions shall be made for the duration of
the Offering Period. Payroll deductions credited to the participant's account
prior to the effective date of the request shall be used to purchase shares of
Common Stock of the Company in accordance with Section (e) below. A participant
may not resume making payroll deductions during the Offering Period in which he
or she reduced his or her payroll deductions to zero.

            (d) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.

            (e) On each Purchase Date, for so long as this Plan remains in
effect and provided that the participant has not submitted a signed and
completed withdrawal form before that date, which notifies the Company that the
participant wishes to withdraw from that Offering Period under this Plan and
have all payroll deductions accumulated in the account maintained on behalf of
the participant, as of that date returned to the participant, the Company shall
apply the funds then in the participant's account to the purchase of whole
shares of Common Stock reserved under the option granted to such participant
with respect to the Offering Period to the extent that such option is
exercisable on the Purchase Date. The purchase price per share shall be as
specified in Section 9 of this Plan. Any cash remaining in a participant's
account after such purchase of shares shall be refunded to such participant in
cash, without interest, provided, however, that any amount remaining in such
participant's account on a Purchase Date which is less than the amount necessary
to purchase a full share of Common Stock shall be carried forward, without
interest, into the next Offering Period. In the event that this Plan has been
oversubscribed, all funds not used to purchase shares on the Purchase Date shall
be returned to the participant, without interest. No Common Stock shall be
purchased on a Purchase Date on behalf of any employee whose participation in
this Plan has terminated prior to such Purchase Date.

                                       5
<PAGE>

            (f) As soon as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.

            (g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant shall have
no interest or voting rights in shares covered by his or her option until such
option has been exercised.

      11. LIMITATIONS ON SHARES TO BE PURCHASED.

            (a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. This limit means that the maximum
purchase price for shares purchased during a calendar year is $21,250 assuming a
15% discount pursuant to Section 9. The Company shall automatically suspend the
payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.

            (b) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Prior to
the commencement of any Offering Period or prior to such time period as
specified by the Committee, the Committee may, in its sole discretion, set a
maximum number of shares which may be purchased by any employee at any single
Purchase Date (hereinafter the "MAXIMUM SHARE AMOUNT"). The Maximum Share Amount
shall be 2,500 shares. If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount prior to the
commencement of the next Offering Period. The Maximum Share Amount shall
continue to apply with respect to all succeeding Purchase Dates and Offering
Periods unless revised by the Committee as set forth above.

            (c) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company shall make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected.

            (d) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 11
shall be returned to the participant as soon as practicable after the end of the
applicable Offering Period, without interest.

      12. WITHDRAWAL.

            (a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Company a written notice to that effect on
a form provided for such

                                       6
<PAGE>

purpose. Such withdrawal may be elected at any time prior to the end of an
Offering Period, or such other time period as specified by the Committee.

            (b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 7 above for initial
participation in this Plan.

      13. TERMINATION OF EMPLOYMENT.

      Termination of a participant's employment for any reason, including
retirement, death or the failure of a participant to remain an eligible employee
of the Company or of a Participating Subsidiary, shall immediately terminate his
or her participation in this Plan. In such event, the payroll deductions
credited to the participant's account shall be returned to him or her or, in the
case of his or her death, to his or her legal representative, without interest.
For purposes of this Section 13, an employee shall not be deemed to have
terminated employment or failed to remain in the continuous employ of the
Company or of a Participating Subsidiary in the case of sick leave, military
leave, or any other leave of absence approved by the Board, provided, however
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.

      14. RETURN OF PAYROLL DEDUCTIONS.

      In the event a participant's interest in this Plan is terminated by
withdrawal, termination of employment or otherwise, or in the event this Plan is
terminated by the Board, the Company shall deliver to the participant all
payroll deductions credited to such participant's account. No interest shall
accrue on the payroll deductions of a participant in this Plan.

      15. CAPITAL CHANGES.

      Subject to any required action by the stockholders of the Company, the
number and type of shares of Common Stock covered by each option under this Plan
which has not yet been exercised and the number and type of shares of Common
Stock which have been authorized for issuance under this Plan, but have not yet
been placed under option (collectively, the "RESERVES"), as well as the price
per share of Common Stock covered by each option under this Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock), any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company or other change in the corporate structure or
capitalization affecting the Company's present Common Stock, provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Committee, whose determination shall be final, binding and
conclusive. Except as expressly provided herein,

                                       7
<PAGE>

no issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.

      In the event of the proposed dissolution or liquidation of the Company,
the Offering Period shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee. The Committee
may, in the exercise of its sole discretion in such instances, declare that this
Plan shall terminate as of a date fixed by the Committee and give each
participant the right to purchase shares under this Plan prior to such
termination. In the event of (i) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the stockholders of the Company or their relative stock holdings and the options
under this Plan are assumed, converted or replaced by the successor corporation,
which assumption shall be binding on all participants), (ii) a merger in which
the Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (iii) the sale of all or substantially all of the assets of the
Company, or (iv) the acquisition, sale, or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar transaction, the
Plan shall continue with regard to Offering Periods that commenced prior to the
closing of the proposed transaction and shares shall be purchased based on the
Fair Market Value of the surviving corporation's stock on each Purchase Date,
unless otherwise provided by the Committee.

      The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.

      16. NONASSIGNABILITY.

      Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under this
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by shall, the laws of descent and distribution or as provided in
Section 23 below) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be void and without effect.

      17. REPORTS.

      Individual accounts shall be maintained for each participant in this Plan.
Each participant shall receive, as soon as practicable after the end of each
Offering Period, a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Offering Period, as the case may be.

                                       8
<PAGE>

      18. NOTICE OF DISPOSITION.

      Each participant shall notify the Company in writing if the participant
disposes of any of the shares purchased in any Offering Period pursuant to this
Plan if such disposition occurs within two (2) years from the Offering Date or
within one (1) year from the Purchase Date on which such shares were purchased
(the "NOTICE PERIOD"). The Company may, at any time during the Notice Period,
place a legend or legends on any certificate representing shares acquired
pursuant to this Plan requesting the Company's transfer agent to notify the
Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.

      19. NO RIGHTS TO CONTINUED EMPLOYMENT.

      Neither this Plan nor the grant of any option hereunder shall confer any
right on any employee to remain in the employ of the Company or any
Participating Subsidiary, or restrict the right of the Company or any
Participating Subsidiary to terminate such employee's employment.

      20. EQUAL RIGHTS AND PRIVILEGES.

      All eligible employees shall have equal rights and privileges with respect
to this Plan so that this Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision of the Code and the
related regulations. Any provision of this Plan which is inconsistent with
Section 423 or any successor provision of the Code shall, without further act or
amendment by the Company, the Committee or the Board, be reformed to comply with
the requirements of Section 423. This Section 20 shall take precedence over all
other provisions in this Plan.

      21. NOTICES.

      All notices or other communications by a participant to the Company under
or in connection with this Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.

      22. TERM; STOCKHOLDER APPROVAL.

      After this Plan is adopted by the Board, this Plan shall become effective
on the First Offering Date (as defined above). This Plan shall be approved by
the stockholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. No purchase of shares pursuant to this Plan shall occur prior to such
stockholder approval. This Plan shall continue until the earlier to occur of (a)
termination of this Plan by the Board (which termination may be effected by the
Board at any time), (b) issuance of all of the shares of Common Stock reserved
for issuance under this Plan, or (c) ten (10) years from the adoption of this
Plan by the Board.

                                       9
<PAGE>

      23. DESIGNATION OF BENEFICIARY.

            (a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of a Offering Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.

            (b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

      24. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.

      Shares shall not be issued with respect to an option unless the exercise
of such option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or automated quotation system upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

      25. APPLICABLE LAW.

      The Plan shall be governed by the substantive laws (excluding the conflict
of laws rules) of the State of Delaware.

      26. AMENDMENT OR TERMINATION.

      The Board may at any time amend, terminate or extend the term of this
Plan, except that any such termination cannot affect options previously granted
under this Plan, nor may any amendment make any change in an option previously
granted which would adversely affect the right of any participant, nor may any
amendment be made without approval of the stockholders of the Company obtained
in accordance with Section 22 above within twelve (12) months of the adoption of
such amendment (or earlier if required by Section 22) if such amendment would:

            (a) increase the number of shares that may be issued under this
Plan; or

            (b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.

                                       10
<PAGE>

      Notwithstanding the foregoing, the Board may make such amendments to the
Plan as the Board determines to be advisable and which do not cause unfavorable
accounting treatment, including changes with respect to current Offering
Periods, if the continuation of the Plan or any Offering Period would result in
financial accounting treatment for the Plan that is different from the financial
accounting treatment in effect on the date this Plan is adopted by the Board.

                                       11exv10w1

 

Exhibit 10.1

MERCANTILE BANK OF MICHIGAN

EXECUTIVE OFFICER BONUS PLAN FOR 2007

1. Purpose of the Plan

     This Executive Officer Bonus Plan for 2007 (the “Plan”) provides for cash bonus awards to
executive officers of Mercantile Bank of Michigan (the “Bank”). The bonus awards are based on the
consolidated operating results of the Bank and its consolidated affiliates, including Mercantile
Bank Corporation (the “Company”).

     The purpose of the Plan is to:

	 	•	 	promote the growth, profitability and expense control necessary to accomplish corporate
strategic long term plans

	 	•	 	encourage superior results by providing a meaningful incentive

	 	•	 	support teamwork among employees

2. Eligibility

     The executive officers of the Bank who hold the offices listed on Schedule I (collectively,
the “Executive Officers,” and each, an “Executive Officer”) are included in the Plan. An Executive
Officer must be an active employee on the day that the bonus awards are distributed to be eligible
to receive a bonus award. An Executive Officer who is out on medical leave at the time the awards
are distributed will be eligible to receive a bonus award. An Executive Officer who is suspended
with or without pay at the time the awards are distributed will not be eligible to receive a bonus
award. Any unpaid bonus award is cancelled upon termination of employment with the Bank and its
subsidiaries that employed the Executive Officer.

3. Performance Goals and Bonus Awards

     The Plan includes three tiers of potential bonus awards, each with its own performance goal.
Bonus awards will be paid or not paid for each tier depending on whether the performance goal for
the tier is met for 2007. The bonus awards for each tier will be based, for each eligible
Executive Officer, on a percent of the annual salary actually paid to the Executive Officer for
2007 (including annual salary that may be attributable to the Bank or any of its affiliated
companies). The annual salary used for this purpose will exclude incentive compensation and all
non-cash compensation.

 

 

     Schedule I lists the maximum potential bonus for each eligible Executive Officer, by level, as
a percent of the eligible Executive Officer’s annual salary. The percentages listed in Schedule I,
for each level, are referred to as the “Maximum Bonus Percentage” and apply to each eligible
Executive Officer based on his or her level. For purposes of the Plan, the terms “Maximum Bonus
Pool” and “Officer Allocation Fraction” are calculated as follows. “Maximum Bonus Pool” equals the
sum of the products obtained by multiplying (a) the Maximum Bonus Percentage for each eligible
Executive Officer (expressed for each as a decimal fraction), times (b) the annual salary paid to
him or her for 2007. The “Officer Allocation Fraction” for each eligible Executive Officer is the
fraction (a) the numerator of which is the product of the Executive Officer’s Maximum Bonus
Percentage (expressed as a decimal fraction) times the annual salary paid to him or her for 2007,
and (b) the denominator of which is the Maximum Bonus Pool.

     The bonus awards for each tier will be determined based on the net operating income of the
Company and its subsidiaries, determined on a consolidated basis, after taxes and including pre-tax
accruals for bonus awards under this and all other incentive compensation plans of the Company or
any of its subsidiaries (“Net Operating Income”). For purposes of the Plan, when calculating Net
Operating Income for 2007 (though not for 2006), all income and expenses directly attributable to
activities or investments of the Company or any of its subsidiaries in or for any banking markets
in which neither the Company nor any of its subsidiaries had any significant activities or
investments in 2006 will be excluded.

     For purposes of determining the Tier 1, Tier 2 and Tier 3 bonus pools set forth below, the
Bank will, to the extent practical, cause the bonus pool for each of Tier 1, Tier 2 and Tier 3,
respectively, to be the same fraction of the Maximum Bonus Pool as the corresponding bonus pool for
each of tier 1, tier 2 and tier 3 under the Bank’s Non-Lender Bonus Plan for 2007 (the “Non-Lender
Bonus Plan”) is a fraction of the maximum bonus pool under the Non-Lender Bonus Plan. It is the
intent that the Plan and the Non-Lender Bonus Plan for corresponding tiers pay the same proportion
of their respective maximum bonus pools for 2007. For example, if the Tier 1 Bonus Pool of the
Plan equals 0.10 times the Maximum Bonus Pool, it would be expected that the tier 1 bonus pool of
the Non-Lender Bonus Plan would equal 0.10 times the maximum bonus pool described in the Non-Lender
Bonus Plan. The proportionality set forth above shall be taken into account in calculating the
amounts that may be paid to eligible Executive Officers for each bonus pool tier without causing
Net Operating Income to be less than a specified amount.

Tier 1 Bonus Pool 

     The Tier 1 bonus pool consists of the lesser of (a) 0.25 times the Maximum Bonus Pool, and (b)
the amount, if any, that may be paid to the eligible Executive Officers for 2007 without the Net
Operating Income for 2007 being less than the Net Operating Income for 2007 set forth in the budget
approved by the Board of Directors of the Company for 2007. The Net Operating Income set forth in
the budget as of March 1, 2007 shall be used for purposes of determining the Tier 1 bonus pool.
From the Tier

 

 

1 bonus pool, bonus awards will be paid to each eligible Executive Officer in an amount equal to
the Tier 1 bonus pool times his or her Officer Allocation Fraction.

Tier 2 Bonus Pool

     The Tier 2 bonus pool consists of the least of (a) 0.25 times the Maximum Bonus Pool, (b) one
percent of Net Operating Income for 2006, and (c) the amount, if any, that could be paid to
eligible Executive Officers without Net Operating Income for 2007 being less than the Tier 2 Base
Percent of Net Operating Income for 2006. The Tier 2 Base Percent shall be established by the
Board of Directors of the Bank on or before March 1, 2007. From this bonus pool, bonus awards will
be paid to each eligible Executive Officer in an amount equal to the Tier 2 bonus pool times his or
her Officer Allocation Fraction.

Tier 3 Bonus Pool

     The Tier 3 bonus pool consists of the lesser of (a) 0.50 times the Maximum Bonus Pool, and (b)
the amount, if any, that could be paid to eligible Executive Officers without Net Operating Income
for 2007 being less than the Tier 3 Base Percent of Net Operating Income for 2006. From this bonus
pool, bonus awards will be paid to each eligible Executive Officer in an amount equal to the Tier 3
bonus pool times his or her Officer Allocation Fraction.

Bonus Award Exceptions

     Each bonus award provided for above in this Section 3 will be subject to reduction or
cancellation in full by an Administrator (as defined in Section 5 below), in its discretion, if the
bonus award would be payable to an employee of the Bank or a subsidiary who at any time during 2007
(a) received from the Bank or subsidiary a performance evaluation in writing that indicates a
composite rating of “needs improvement” or “unsatisfactory” (each presently being one of the two
least favorable evaluation categories used), or a substantially equivalent rating, pursuant to an
annual or other significant performance evaluation, or (b) was on disciplinary probation.

4. Timing of Bonus Payouts

     Bonus awards that are earned under the Plan for 2007 will be paid to eligible Executive
Officers on or before March 15, 2008.

5. Plan Administration

     The Board of Directors of the Bank and its Compensation Committee, or if the Board of
Directors so designates, another committee of the Board of Directors (each an “Administrator”)
will have the authority to administer and interpret the Plan, and approve or determine the amounts
to be distributed under the Plan as bonus awards, including any determination made pursuant to the
last paragraph of Section 3 above.

 

 

Any interpretation or construction of the Plan or approval or determination of bonus awards by an
Administrator, will be final and binding on the Bank and its subsidiaries, all employees and past
employees, their heirs, successors and assigns. No member of the Board of Directors of the Bank or
any of its affiliates, or any committee of the Board of Directors of the Bank or any affiliate,
will be liable for any action or determination made in good faith regarding the Plan or any bonus
award.

6. No Right to Employment

     The Plan does not give any employee any right to continued employment, or limit in any way the
right of the Bank or any affiliated company to terminate his or her employment at any time.

7. Withholding of Taxes

     The Bank will have the right to deduct from any payment to be made pursuant to the Plan any
Federal, state or local taxes required by law to be withheld.

8. Amendment of the Plan

     The Plan may be amended from time to time by the Board of Directors of the Bank, without the
consent of any Executive Officer, other employee or past employee, (a) to the extent required to
comply with applicable law; (b) to make reasonable adjustments for any acquisition or sale of a
business or branch, merger, reorganization, or restructuring, change in accounting principles or
their application, or special charges or extraordinary items, that materially affect the Company or
any of its consolidated subsidiaries; or (c) to make any changes that do not materially and
adversely affect the bonus award payable to any eligible Executive Officer.

9. Governing Law

     The validity, construction and interpretation of the Plan will be determined in accordance
with the laws of the State of Michigan.

10. Effective Date

     The Plan is effective as of January 1, 2007.

 

 

SCHEDULE I

MAXIMUM BONUS PERCENTAGES FOR EXECUTIVE OFFICERS FOR 2007

UNDER MERCANTILE BANK OF MICHIGAN

EXECUTIVE OFFICER BONUS PLAN FOR 2007

	 	 	 	 	 
	 	 	MAXIMUM BONUS
	EXECUTIVE OFFICER LEVEL	 	PERCENTAGE
	 
	 	 	 	 
	Chief Operating Officer and Chief Financial Officer
	 	 	45	%
	 
	 	 	 	 
	Chairman of the Board and President
	 	 	50	%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]