EXHIBIT 10.6
Compensatory Arrangements for Executive Officers
     The Compensation Committee (the “Committee”) of the Board of Directors of
OSI Pharmaceuticals, Inc. (“OSI” or the “Company”) approved the 2007 salaries
and 2006 cash bonuses for OSI’s principal executive officer, principal
accounting officer and other named executive officers (as that term is defined
in Item 402 of Regulation S-K) as set forth in OSI’s proxy statement dated
May 4, 2007 (the “2007 Proxy”), excluding David R. Guyer, M.D., who resigned
from the Company in May 2006. The following table sets forth the annual base
salary level of such officers for 2007 and the 2006 cash bonuses for each such
officer:

                              Name and Position     2007 Base Salary     2006
Bonus    
Colin Goddard, Ph.D.
Chief Executive Officer(1)
    $ 600,000         —      
Michael G. Atieh
Executive Vice President, Chief Financial Officer and Treasurer
    $ 425,000       $ 205,000      
Gabriel Leung
Executive Vice President and President, (OSI) Oncology
    $ 420,000       $ 204,000      
Anker Lundemose, M.D., Ph.D., D.Sc.
Executive Vice President and President, (OSI) Prosidion
    $ 402,250       $ 196,220      
Paul Chaney
Executive Vice President and President, (OSI) Eyetech
    $ 378,500       $ 182,000      

(1)   Given the market performance of Macugen® (pegaptanib sodium injection),
and the resulting decision of OSI to exit the eye disease business it acquired
through it acquisition of Eyetech Pharmaceuticals, Inc. in November 2005, the
Committee concurred with Dr. Goddard’s recommendation that he not receive a 2006
bonus or merit increase to his 2007 base salary.

Cash Bonuses
     The 2006 bonus awards were computed in accordance with the Committee’s
policy awarding annual bonuses for executive officers, as disclosed in the
Compensation Discussion and Analysis section of the 2007 Proxy, and are
consistent with past practices. OSI has established a discretionary annual cash
bonus program for all of its employees, including its executive officers. The
bonus targets, which are a percentage of base salary, for all of its executive
officers are based upon their respective grade levels. The amount of bonus
actually paid to its employees, including the executive officers (other than
OSI’s CEO), is a function of the corporate and individual performance measures.
The CEO’s bonus is based entirely on corporate performance measures. Consistent
with its compensation objectives, a larger portion of the bonuses for OSI’s
executive officers is tied to corporate performance as compared to individual
performance. In addition, the performance of their respective department(s) or
function group(s) is the largest component in measuring the individual
performance for executive officers (other than the CEO).

 

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     The actual amount of the bonuses paid to its executive officers, including
the CEO, varies depending upon the Company’s performance and, for executive
officers other than the CEO, such executive officers’ individual performance.
The corporate component has historically ranged between 80% and 150% of the
corporate component target and the individual performance component ranges
between 90% and 120% of the individual performance component target depending
upon an executive’s individual performance rating. In 2006, the Committee set
the corporate component at 100%. The individual component of the annual cash
bonus is based on the executive officer’s individual performance rating,
determined in the manner discussed above. For 2006, the individual performance
component of the annual cash bonus was set at 100% for executive officers who
received one of the top three performance ratings. In 2006, each of the
executive officers received one of the top three performance ratings, resulting
in an individual performance component of 100% for each them.
     The bonus targets for the named executive officers are either set in
accordance with their employment agreements or are based upon their respective
grade levels. The 2007 bonus targets (which represents a percentage of base
salary) for the named executive officers are as follows:

          Name   Target  
Colin Goddard, Ph.D.
    *  
Michael G. Atieh
    50 %
Gabriel Leung
    50 %
Paul G. Chaney
    50 %
Anker Lundemose, M.D., Ph.D., D.Sc.
    50 %

   
 
* No specific target. Determined by the Committee in its discretion.

Equity Awards
     OSI grants equity awards of stock options, restricted stock and restricted
stock units to its employees under its Amended and Restated Stock Incentive
Plan. Most of its employees, including its executive officers, receive an annual
equity grant in December. The total amount of equity to be granted is initially
determined by the CEO in consultation with the Vice President of Human
Resources, and then recommended to the Committee for approval. The exercise
price for all stock options is set at the closing price of OSI’s common stock on
the date that the Committee approves the annual grant, with such approval date
serving as the date of grant. Equity grants to the named executive officers are
formula based and designed to provide a level of equity compensation that is at
the approximate 50th percentile of that awarded by OSI’s peer group of
companies. OSI determines the value of the grants provided to each executive
officer by assigning such executive officer with a fixed grant percentage based
on his or her grade level and then multiplying this percentage by his or her
annual salary. For 2006, the named executive officers received either 100% or
75% of their formula grant, based on their individual performance ratings.
Perquisites

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     OSI provides very few perquisites to its executive officers. Certain of its
named executive officers receive a leased car or car allowance, reimbursement of
relocation expenses, legal fees and home security systems.

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