Document:

EX-4.3

 

EXHIBIT 4.3

OSI PHARMACEUTICALS, INC.

AMENDED AND RESTATED

STOCK INCENTIVE PLAN

(Including Amendments No. 1 and 2)

1. Purpose

     The purpose of this Amended and Restated Stock Incentive Plan (formerly, the 2001 Incentive
and Non-Qualified Stock Option Plan) (the “Plan”) is to encourage and enable selected management,
other employees, directors (whether or not employees), and consultants of OSI Pharmaceuticals, Inc.
(the “Company”) or a parent or subsidiary of the Company to acquire a proprietary interest in the
Company through the ownership, directly or indirectly, of common stock, par value $.01 per share
(the “Common Stock”), of the Company. Such ownership will provide such employees, directors, and
consultants with a more direct stake in the future welfare of the Company and encourage them to
remain with the Company or a parent or subsidiary of the Company. It is also expected that the
Plan will encourage qualified persons to seek and accept employment with, or become associated
with, the Company or a parent or subsidiary of the Company. As used herein, the term “parent” or
“subsidiary” shall mean any present or future corporation which is or would be a “parent
corporation” or “subsidiary corporation” of the Company as the term is defined in Section 424 of
the Code (determined as if the Company were the employer corporation).

     Pursuant to the Plan, the Company may grant: (i) Incentive Stock Options; (ii) Non-Qualified
Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock; and (v) Stock Bonuses, as
such terms are defined in Section 2.

2. Definitions

     Capitalized terms not otherwise defined in the Plan shall have the following meanings:

     (a) “Award Agreement” shall mean a written agreement, in such form as the Committee shall
determine, that evidences the terms and conditions of a Stock Award granted under the Plan.

     (b) “Fair Market Value” on a specified date means the value of a share of Common Stock,
determined as follows:

          (i) if the Common Stock is listed on any established stock exchange or a national market
system, including without limitation The Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, Inc., its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the
day of determination, as reported in The Wall Street Journal or such other source as the Committee
deems reliable;

          (ii) if the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or
such other source as the Committee deems reliable; or

 

 

          (iii) in the absence of an established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Committee.

     (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (d) “Incentive Stock Option” shall mean an option that is an “incentive stock option” within
the meaning of Section 422 of the Code and that is identified as an Incentive Stock Option in the
Award Agreement by which it is evidenced.

     (e) “Non-Qualified Stock Option” shall mean an option that is not an Incentive Stock Option
within the meaning of Section 422 of the Code.

     (f) “Restricted Stock” shall mean an award of shares of Common Stock that is subject to
certain conditions on vesting and restrictions on transferability as provided in Section 8 of this
Plan.

     (g) “Stock Appreciation Right” shall mean a right to receive payment of the appreciated value
of shares of Common Stock as provided in Section 7 of this Plan.

     (h) “Stock Award” shall mean an Incentive Stock Option, a Non-Qualified Stock Option, a
Restricted Stock award, a Stock Appreciation Right or a Stock Bonus award.

     (i) “Stock Bonus” shall mean a bonus award payable in shares of Common Stock as provided in
Section 9 of this Plan.

3. Administration of the Plan

     The Plan shall be administered by a committee (the “Committee”) as appointed from time to time
by the Board of Directors of the Company, which may be the Compensation Committee of the Board of
Directors. Except as otherwise specifically provided herein, no person, other than members of the
Committee, shall have any discretion as to decisions regarding the Plan. The Company may engage a
third party to administer routine matters under the Plan, such as establishing and maintaining
accounts for Plan participants and facilitating transactions by participants pursuant to the Plan.

     In administering the Plan, the Committee may adopt rules and regulations for carrying out the
Plan. The interpretations and decisions made by the Committee with regard to any question arising
under the Plan shall be final and conclusive on all persons participating or eligible to
participate in the Plan. Subject to the provisions of the Plan, the Committee shall determine the
terms of all Stock Awards granted pursuant to the Plan, including, but not limited to, the persons
to whom, and the time or times at which, grants shall be made, the number of shares to be covered
by each Stock Award, and other terms and conditions of the Stock Award.

4. Shares of Stock Subject to the Plan

     Except as provided in Section 10, the number of shares that may be issued or transferred
pursuant to Stock Awards granted under the Plan shall not exceed 6,800,000 shares of Common Stock.
Such shares may be authorized and unissued shares or previously issued shares acquired or to be
acquired by the Company and held in treasury. Any shares subject to a Stock Award which for any
reason expires, is cancelled or is unexercised may again be subject to a Stock Award under the
Plan. The aggregate Fair Market Value of the shares with respect to which Incentive Stock Options
(determined at the time of grant of the option) are exercisable for the first time by an optionee during any calendar year

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(under the Plan and all plans of the Company and any parent or subsidiary of the Company) shall not exceed
$100,000.

5. Eligibility

     Stock Awards may be granted to directors, officers, employees and consultants of the Company
or a parent or subsidiary of the Company, except that Incentive Stock Options may not be granted to
any such person who is not an employee of the Company or a parent or subsidiary of the Company.

6. Granting of Options

     The Committee may grant options to such persons eligible under the Plan as the Committee may
select from time to time. Such options shall be granted at such times, in such amounts and upon
such other terms and conditions as the Committee shall determine, which shall be evidenced under an
Award Agreement and subject to the following terms and conditions:

     (a) Type of Option. The Award Agreement shall indicate whether and to what extent the option
is intended to be an Incentive Stock Option or a Non-Qualified Stock Option.

     (b) Option Price. The purchase price under each Incentive Stock Option and each Non-Qualified
Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock at the time
the option is granted and not less than the par value of the Common Stock. In the case of an
Incentive Stock Option granted to an employee owning, actually or constructively under Section
424(d) of the Code, more than 10% of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary of the Company (a “10% Stockholder”) the option price shall
not be less than 110% of the Fair Market Value of the Common Stock at the time of the grant.

     (c) Medium and Time of Payment. Stock purchased pursuant to the exercise of an option shall
at the time of purchase be paid for in full in cash, or, upon conditions established by the
Committee, by delivery of shares of Common Stock owned by the recipient. If payment is made by the
delivery of shares, the value of the shares delivered shall be the Fair Market Value of such shares
on the date of exercise of the option. In addition, if the Committee consents in its sole
discretion, an “in the money” Non-Qualified Stock Option may be exercised on a “cashless” basis in
exchange for the issuance to the optionee (or other person entitled to exercise the option) of the
largest whole number of shares having an aggregate value equal to the value of such option on the
date of exercise. For this purpose, the value of the shares delivered by the Company and the value
of the option being exercised shall be determined based on the Fair Market Value of the Common
Stock on the date of exercise of the option. Upon receipt of payment and such documentation as the
Company may deem necessary to establish compliance with the Securities Act of 1933, as amended (the
“Securities Act”), the Company shall, without stock transfer tax to the optionee or other person
entitled to exercise the option, deliver to the person exercising the option a certificate or
certificates for such shares.

     (d) Waiting Period. The waiting period and time for exercising an option shall be prescribed
by the Committee in each particular case; provided, however, that no option may be exercised after
10 years from the date it is granted. In the case of an Incentive Stock Option granted to a 10%
Stockholder, such option, by its terms, shall be exercisable only within five years from the date
of grant.

     (e) Non-Assignability of Options. No Incentive Stock Option and, except as may otherwise be
specifically provided by the Committee, no Non-Qualified Stock Option, shall be assignable or
transferable by the recipient except by will or by the laws of descent and distribution. During
the

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lifetime of a recipient, Incentive Stock Options and, except as may otherwise be specifically
provided by the Committee, Non-Qualified Stock Options, shall be exercisable only by such
recipient. If the Committee approves provisions in any particular case allowing for assignment or
transfer of a Non-Qualified Stock Option, then such option will nonetheless be subject to a
six-month holding period commencing on the date of grant during which period the recipient will not
be permitted to assign or transfer such option, unless the Committee further specifically provides
for the assignability or transferability of such option during this period.

     (f) Effect of Termination of Employment. If a recipient’s employment (or service as an
officer, director or consultant) shall terminate for any reason, other than death or Retirement (as
defined below), the right of the recipient to exercise any option otherwise exercisable on the date
of such termination shall expire unless such right is exercised within a period of 90 days after
the date of such termination. For Options issued prior to June 15, 2005, the term “Retirement”
shall mean the voluntary termination of employment (or service as an officer, director or
consultant) by a recipient who has attained the age of 55 and who has completed at least five years
of service with the Company. For Options issued on or after June 15, 2005, unless otherwise
determined by the Committee and defined in the applicable Award Agreement, the term “Retirement”
shall mean the voluntary termination of employment (or service as an officer, director or
consultant) by a recipient who has attained the age of 60 and who has completed at least twenty
years of service with the Company. If a recipient’s employment (or service as an officer, director
or consultant) shall terminate because of death or Retirement, the right of the recipient to
exercise any option otherwise exercisable on the date of such termination shall be unaffected by
such termination and shall continue until the normal expiration of such option. Notwithstanding
the foregoing, the tax treatment available pursuant to Section 421 of the Code upon the exercise of
an Incentive Stock Option will not be available in connection with the exercise of any Incentive
Stock Option more than three months after the date of termination of such option recipient’s
employment due to Retirement. Option rights shall not be affected by any change of employment as
long as the recipient continues to be employed by either the Company or a parent or subsidiary of
the Company. In no event, however, shall an option be exercisable after the expiration of its
original term as determined by the Committee. The Committee may, if it determines that to do so
would be in the Company’s best interests, provide in a specific case or cases for the exercise of
options which would otherwise terminate upon termination of employment with the Company for any
reason, upon such terms and conditions as the Committee determines to be appropriate. Nothing in
the Plan or in any Award Agreement shall confer any right to continue in the employ of the Company
or any parent or subsidiary of the Company or interfere in any way with the right of the Company or
any parent or subsidiary of the Company to terminate the employment of a recipient at any time.

     (g) Leave of Absence. In the case of a recipient on an approved leave of absence, the
Committee may, if it determines that to do so would be in the best interests of the Company,
provide in a specific case for continuation of options during such leave of absence, such
continuation to be on such terms and conditions as the Committee determines to be appropriate,
except that in no event shall an option be exercisable after 10 years from the date it is granted.

     (h) Sale or Reorganization. In case the Company is merged or consolidated with another
corporation, or in case the property or stock of the Company is acquired by another corporation, or
in case of a reorganization, or liquidation of the Company, the Board of Directors of the Company,
or the board of directors of any corporation assuming the obligations of the Company hereunder,
shall either (i) make appropriate provisions for the protection of any outstanding options by the
substitution on an equitable basis of appropriate stock of the Company, or appropriate options to
purchase stock of the merged, consolidated, or otherwise reorganized corporation, provided only
that such substitution of options shall, with respect to Incentive Stock Options, comply with the requirements of Section 424(a) of

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the Code, or (ii) give written notice to optionees that their options, which will become immediately
exercisable notwithstanding any waiting period otherwise prescribed by the Committee, must be
exercised within 30 days of the date of such notice or they will be terminated.

     (i) Restrictions on Sale of Shares. Without the written consent of the Company, no stock
acquired by an optionee upon exercise of an Incentive Stock Option granted hereunder may be
disposed of by the optionee within two years from the date such incentive stock option was granted,
nor within one year after the transfer of such stock to the optionee; provided, however, that a
transfer to a trustee, receiver, or other fiduciary in any insolvency proceeding, as described in
Section 422(c)(3) of the Code, shall not be deemed to be such a disposition. The optionee shall
make appropriate arrangements with the Company for any taxes which the Company is obligated to
collect in connection with any such disposition, including any federal, state, or local withholding
taxes. No stock acquired by an optionee upon exercise of a Non-Qualified Stock Option granted
hereunder may be disposed of by the optionee (or other person eligible to exercise the option)
within six months from the date such Non-Qualified Stock Option was granted, unless otherwise
provided by the Committee.

7. Grant of Stock Appreciation Rights

     The Committee may grant Stock Appreciation Rights to such persons eligible under the Plan as
the Committee may select from time to time. Stock Appreciation Rights shall be granted at such
times, in such amounts and under such other terms and conditions as the Committee shall determine,
which terms and conditions shall be evidenced under an Award Agreement, subject to the terms of the
Plan. Subject to the terms and conditions of the Award Agreement, a Stock Appreciation Right
shall entitle the award recipient to exercise the Stock Appreciation Right, in whole or in part, in
exchange for a payment of shares of Common Stock, cash or a combination thereof, as determined by
the Committee and provided under the Award Agreement, equal in value to the excess of the Fair
Market Value of the shares of Common Stock underlying the Stock Appreciation Right, determined on
the date of exercise, over the base amount set forth in the Award Agreement for shares of Common
Stock underlying the Stock Appreciation Right, which base amount shall not be less than the Fair
Market Value of such Common Stock, determined as of the date the Stock Appreciation Right is
granted.

8. Grant of Restricted Stock

     The Committee may grant Restricted Stock awards to such persons eligible under the Plan as the
Committee may select from time to time. Restricted Stock awards shall be granted at such times, in
such amounts and under such other terms and conditions as the Committee shall determine, which
terms and conditions shall be evidenced under an Award Agreement, subject to the terms of the Plan.
The Award Agreement shall set forth any conditions on vesting and restrictions on transferability
that the Committee may determine is appropriate for the Restricted Stock award, including the
performance of future services or satisfaction of performance goals established by the Committee.
The books and records of the Company shall reflect the issuance of shares of Common Stock under a
Restricted Stock award and any applicable restrictions and limitations in such manner as the
Committee determines is appropriate. Unless otherwise provided in the Award Agreement, a recipient
of a Restricted Stock award shall be the record owner of the shares of Common Stock to which the
Restricted Stock relates and shall have all voting and dividend rights with respect to such shares
of Common Stock.

9. Grant of Stock Bonus

     The Committee may grant Stock Bonus awards to such persons eligible under the Plan as the
Committee may select from time to time. Stock Bonus awards shall be granted at such times, in such

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amounts and under such other terms and conditions as the Committee shall determine, which terms and
conditions shall be evidenced under an Award Agreement, subject to the terms of the Plan. Upon
satisfaction of any conditions, limitations and restrictions set forth in the Award Agreement, a
Stock Bonus award shall entitle the recipient to receive payment of a bonus described under the
Stock Bonus award in the form of shares of Common Stock of the Company. Prior to the date on which
a Stock Bonus award is required to be paid under an Award Agreement, the Stock Bonus award shall
constitute an unfunded, unsecured promise by the Company to distribute Common Stock in the future.

10. Adjustments in the Event of Recapitalization

     In the event that dividends payable in Common Stock during any fiscal year of the Company
exceed in the aggregate five percent of the Common Stock issued and outstanding at the beginning of
the year, or in the event there is during any fiscal year of the Company one or more splits,
subdivisions, or combinations of shares of Common Stock resulting in an increase or decrease by
more than five percent of the shares outstanding at the beginning of the year, the number of shares
available under the Plan shall be increased or decreased proportionately, as the case may be, and
the number of shares issuable under Stock Awards theretofore granted shall be increased or
decreased proportionately, as the case may be, without change in the aggregate purchase price that
may be applicable thereto. Common Stock dividends, splits, subdivisions, or combinations during
any fiscal year that do not exceed in the aggregate five percent of the Common Stock issued and
outstanding at the beginning of such year shall be ignored for purposes of the Plan. All
adjustments shall be made as of the day such action necessitating such adjustment becomes
effective.

11. Withholding of Applicable Taxes

     It shall be a condition to the performance of the Company’s obligation to issue or transfer
Common Stock or make a payment of cash pursuant to any Stock Award that the award recipient pay, or
make provision satisfactory to the Company for the payment of, any taxes (other than stock transfer
taxes) the Company or any subsidiary is obligated to collect with respect to the issuance or
transfer of Common Stock or the payment of cash under such Stock Award, including any applicable
federal, state, or local withholding or employment taxes.

12. General Restrictions

     Each Stock Award granted under the Plan shall be subject to the requirement that, if at any
time the Board of Directors shall determine, in its discretion, that the listing, registration, or
qualification of the shares of Common Stock issuable or transferable under the Stock Award upon any
securities exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in connection with,
the granting of the Stock Award or the issue or transfer, of shares of Common Stock thereunder,
shares of Common Stock issuable or transferable under any Stock Award shall not be issued or
transferred, in whole or in part, unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not acceptable to the Board of
Directors.

     The Company shall not be obligated to sell or issue any shares of Common Stock in any manner
in contravention of the Securities Act, the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), the rules and regulations of the Securities and Exchange Commission, any state
securities law, the rules and regulations promulgated thereunder or the rules and regulations of any securities
exchange or over the counter market on which the Common Stock is listed or in which it is included
for quotation. The Board of Directors may, in connection with the granting of Stock Awards,
require the individual to

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whom the award is to be granted to enter into an agreement with the
Company stating that as a condition precedent to the receipt of shares of Common Stock issuable or
transferable under the Stock Award, in whole or in part, he shall, if then required by the Company,
represent to the Company in writing that such receipt is for investment only and not with a view to
distribution, and also setting forth such other terms and conditions as the Committee may
prescribe. Such agreements may also, in the discretion of the Committee, contain provisions
requiring the forfeiture of any Stock Awards granted and/or Common Stock held, in the event of the
termination of employment or association, as the case may be, of the award recipient with the
Company. Upon any forfeiture of Common Stock pursuant to an agreement authorized by the preceding
sentence, the Company shall pay consideration for such Common Stock to the award recipient,
pursuant to any such agreement, without interest thereon.

13. Termination and Amendment of the Plan

     The Board of Directors or the Committee shall have the right to amend, suspend, or terminate
the Plan at any time; provided, however, that no such action shall affect or in any way impair the
rights of a recipient under any Stock Award theretofore granted under the Plan; and, provided,
further, that unless first duly approved by the stockholders of the Company entitled to vote
thereon at a meeting (which may be the annual meeting) duly called and held for such purpose,
except as provided in Section 10, no amendment or change shall be made in the Plan increasing the
total number of shares which may be issued or transferred under the Plan, materially increasing the
benefits to Plan participants or modifying the requirements as to eligibility for participation in
the Plan.

14. Term of the Plan

     The Plan shall terminate on June 12, 2011, or on such earlier date as the Board of Directors
or the Committee may determine. Any Stock Award outstanding at the termination date shall remain
outstanding until it has either expired or been exercised or cancelled pursuant to its terms.

15. Compliance with Rule 16b-3

     With respect to persons subject to Section 16 of the Exchange Act, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors. To the
extent any provision of the Plan or action by the Committee (or any other person on behalf of the
Committee or the Company) fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.

16. Rights as a Stockholder

     A recipient of a Stock Award shall have no rights as a stockholder with respect to any shares
issuable or transferable thereunder until the date a stock certificate is issued to him for such
shares unless otherwise provided in the Award Agreement under the Plan. Except as otherwise
expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.

17. Automatic Grant of Options to Non-Employee Directors

     (a) (i) Each director, who is not also an employee of the Company or any of its affiliates, or
the designee of any stockholder of the Company pursuant to a right to designate one or more
directors (an “Eligible Director”) who first becomes an Eligible Director on or after June 13, 2001
but prior to January 1, 2003, shall automatically be awarded a grant of 30,000 Non-Qualified Stock
Options

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upon his or her initial election to the Board of Directors. An Eligible Director receiving
an initial option grant under this Section 17(a)(i) shall not be eligible for an initial grant of
option under any other stock option plan maintained by the Company. Such options shall vest and be
exercisable solely in accordance with the following schedule:

          (A) The options may be exercised with respect to a maximum of one-half of the option shares
during the twelve-month period beginning after the date of grant.

          (B) The options may be exercised with respect to all of the option shares upon the Eligible
Director’s reelection to the Board of Directors for a second consecutive term.

          (C) The options will expire and will no longer be exercisable as of the tenth anniversary of
the date of grant, subject to sooner expiration upon the occurrence of certain events as provided
elsewhere in this Plan.

          (ii) Each Eligible Director who first becomes an Eligible Director on or after January 1,
2003, shall automatically be awarded a grant of 50,000 Non-Qualified Stock Options upon his or her
initial election to the Board of Directors. An Eligible Director receiving an initial option grant
under this Section 17(a)(ii) shall not be eligible for an initial grant of option under any other
stock option plan maintained by the Company. Such options shall vest and be exercisable solely in
accordance with the following schedule:

          (A) The options shall not be exercisable during the twelve-month period beginning after the
date of grant.

          (B) The options may be exercised with respect to one-third of the option shares after the
expiration of twelve months from the date of grant.

          (C) The remaining two-thirds of the options shall vest and become exercisable ratably on a
monthly basis over the two-year period commencing one year from the date of grant and ending three
years from the date of grant.

          (D) The options will expire and will no longer be exercisable as of the tenth anniversary of
the date of grant, subject to sooner expiration upon the occurrence of certain events as provided
elsewhere in this Plan.

     (b) In addition to the grant provided in subsection (a), each Eligible Director who first
became an Eligible Director on or after June 13, 2001 shall automatically be awarded a grant of
Non-Qualified Stock Options upon each reelection of such Eligible Director to a subsequent,
successive term, in the amount of an option for 7,500 shares.

     (c) Except to the extent an option is granted under any automatic grant provision of any other
stock option plan maintained by the Company, each Eligible Director who first became an Eligible
Director prior to June 13, 2001 shall automatically be awarded a grant of Non-Qualified Stock
Options upon the reelection of such Eligible Director to a third or subsequent, successive term, in
the amount and at the times hereinafter set forth. The number of options to which each Eligible Director shall be entitled
pursuant to this subsection (c) shall be as follows:

          (i) 20,000 on the date of the Eligible Director’s reelection to a third one-year term;

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          (ii) 20,000 on the date of the Eligible Director’s reelection to a fourth one-year term;

          (iii) 15,000 on the date of the Eligible Director’s reelection to a fifth one-year term;

          (iv) 15,000 on the date of the Eligible Director’s reelection to a sixth one-year term;

          (v) 10,000 on the date of the Eligible Director’s reelection to a seventh one-year term;

          (vi) 10,000 on the later of the date of the annual meeting of stockholders in 2000, or the
date of the Eligible Director’s reelection to an eighth one-year term;

          (vii) 10,000 on the later of the date of the annual meeting of stockholders in 2001, or the
date of the Eligible Director’s reelection to a ninth one-year term; and

          (viii) 7,500 on the date of the Eligible Director’s reelection to a tenth one-year term and on
each successive reelection to a one-year term thereafter.

     (d) Options granted pursuant to subsections (b) or (c) shall vest and be exercisable solely in
accordance with the following schedule:

          (i) The options shall not be exercisable during the twelve-month period beginning after the
date of grant.

          (ii) The options may be exercised with respect to one-third of the option shares after the
expiration of twelve months from the date of grant.

          (iii) The remaining two-thirds of the options shall vest and become exercisable ratably on a
monthly basis over the two-year period commencing one year from the date of grant and ending three
years from the date of grant.

          (iv) The options will expire and will no longer be exercisable as of the tenth anniversary of
the date of grant, subject to sooner expiration upon the occurrence of certain events as provided
elsewhere in this Plan.

     (c) The option price for all options awarded under this Section 17 shall be equal to 100% of
the Fair Market Value of a share of Common Stock on the date of grant.

18. Options Granted to Employees and Directors of any Subsidiary in the UK

     In addition to the provisions above, the provisions of this Section 18 shall apply as herein
set out to options granted to employees and directors of any subsidiary in the United Kingdom. The
provisions of this Section 18 enable the Plan to be used in a tax efficient manner in the United
Kingdom.

     (a) In this Section 18, the following terms have the meanings ascribed to them:

     “Election” means an election in the form envisaged in Paragraph 3B(1) of Schedule 1 to
SSCBA and acceptable to the UK Subsidiary to the effect that any Secondary NIC arising on the
exercise, assignment or release of a UK Option shall be the liability of the recipient and not the
liability of the UK Subsidiary

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     “Independent Transfer Agent” means any person (other than the Company or any company
affiliated with the Company or any individual affiliated with any such company) who is registered
as a broker-dealer with the U.S. Securities and Exchange Commission and who is thereby able to sell
and transfer shares in the Company on behalf of the Optionholder

     “Optionholder” means an employee or director of the UK Subsidiary who is the holder of
a UK Option

     “Secondary NIC” means secondary national insurance contributions as defined in the
SSCBA

     “SSCBA” means the Social Security Contributions and Benefits Act 1992 of the United
Kingdom

     “UK Option” means an option granted to an employee of the UK Subsidiary

     “UK Subsidiary” means OSI Pharmaceuticals (UK) Limited (a company incorporated in
England under company number 1709877) and any other UK Subsidiary of the Company from time to time.

     (b) To the extent that it is lawful to do so, a UK Option may be granted subject to a
condition that any liability of the UK Subsidiary (as employer or former employer of the relevant
Optionholder) to pay Secondary NIC in respect of the exercise, assignment or release of that UK
Option shall be the liability of the relevant Optionholder and payable by that Optionholder and
that the Optionholder shall not be entitled to exercise the UK Option until he has entered into an
Election to that effect when required to do so by the UK Subsidiary provided that the Committee may
in its discretion at any time or times release the Optionholder from this liability or reduce his
liability thereunder unless that Election has been entered into between the UK Subsidiary and that
Optionholder and that Election (or the legislation which provides for such an Election to be
effective) does not allow for such an Election to be subsequently varied.

     (c) If a UK Option is granted subject to the condition referred to in paragraph (b) above then
the Optionholder shall by completing the Election grant to the UK Subsidiary (as employer or former
employer of the relevant Optionholder) the irrevocable authority, as agent of the Optionholder and
on his behalf, to appoint an Independent Transfer Agent, to act as agent of the Optionholder and on
his behalf, to sell or procure the sale of sufficient of the Stock subject to the UK Option and
remit the net sale proceeds to the UK Subsidiary so that the net proceeds payable to the UK
Subsidiary are so far as possible equal to but not less than the amount of the Secondary NIC for
which the Optionholder is liable under the terms of the Election and the UK Subsidiary shall
account to the Optionholder for any balance.

          No Stock shall be allotted or transferred to the Optionholder by the Company until the UK
Subsidiary has received an amount in cash equal to the amount of the Secondary NIC for which the
Optionholder is liable under the terms of the Election.

     (d) If a UK Option is exercised and the Optionholder is liable to tax duties or other amounts
on such exercise and the UK Subsidiary (as his employer or former employer) is liable to make a
payment to the appropriate authorities on account of that liability, then the Optionholder shall by
having completed the option agreement grant to the UK Subsidiary (as employer or former employer of the relevant
Optionholder) the irrevocable authority, as agent of the Optionholder and on his behalf, to appoint
an Independent Transfer Agent, to act as agent of the Optionholder and on his behalf, to sell or
procure the sale of sufficient of the Shares subject to the UK Option and remit the net sale
proceeds to

10

 

the UK Subsidiary so that the net proceeds payable to the UK Subsidiary are so far as
possible equal to but not less than the amount payable to the appropriate authorities and the UK
Subsidiary shall account to the Optionholder for any balance.

          No Stock shall be allotted or transferred to the Optionholder by the Company until the UK
Subsidiary has received an amount in cash equal to the amount of any liability of the UK Subsidiary
referred to in this paragraph (d).

11<PAGE>

                                                                    EXHIBIT 10.1

            AMENDMENT NUMBER ONE TO SENIOR SECURED CREDIT AGREEMENT

            This Amendment Number One to Senior Secured Credit Agreement
      ("Amendment"), dated as of November 9 2005, and effective as of May 31,
      2005, is entered into by and among WELLS FARGO FOOTHILL, INC., a
      California corporation ("Lender") on the one hand, and CRAY INC., a
      Washington corporation ("Parent"), and each of Parent's Subsidiaries
      identified on the signature page hereof (such Subsidiaries, together with
      Parent, are referred to hereinafter each individually as a "Borrower", and
      individually and collectively, jointly and severally, as the "Borrowers"),
      on the other hand, in light of the following:

            A. Lender and Borrowers have previously entered into that certain
      Senior Secured Credit Agreement, dated as of May 31, 2005 (the
      "Agreement").

            B. Borrowers and Lender desire to amend the Agreement as provided
      for and on the conditions herein.

            NOW, THEREFORE, Borrowers, Agent and Lenders hereby amend and
      supplement the Agreement as follows:

            1. DEFINITIONS. All initially capitalized terms used in this
Amendment shall have the meanings given to them in the agreement unless
specifically defined herein.

            2. AMENDMENTS.

                  (a) Exhibit B-1 - Form of Borrowing Base Certificate is
      replaced with the Exhibit B-1 attached to this Amendment.

                  (b) Exhibit C-1 - Form of Compliance Certificate is replaced
      with the Exhibit C-1 attached to this Amendment.

                  (c) The definition of "Borrowing Base" set forth in Schedule
      1.1 to the Agreement is hereby amended to read as follows:

                  "Borrowing Base" means, as of any date of determination, the
      result of:

                        (a)   the lesser of

                              (i)   $10,000,000, and

                              (ii)  85% of the amount of Eligible Accounts,
                                    minus the amount, if any, of the Dilution
                                    Reserve, plus

                        (b)   the lesser of

                              (i)   $20,000,000, and

                              (ii)  100% of TSM Recurring Revenues, minus

                        (c)   the sum of (i) the Bank Product Reserve, and (ii)
                              the aggregate amount of reserves, if any,
                              established by Lender under Section 2.1(b).

                                       1
<PAGE>

                  (d) The definition of "Maximum Revolver Amount" set forth in
      Schedule 1.1 of the Agreement is hereby amended to read as follows:

                  "Maximum Revolver Amount" means $30,000,000, minus the Line
      Block.

                  (d) Section 6.16(b)(i) of the Agreement is amended in its
      entirety to read as follows:

                  "(b) Make:

                        (i) CAPITAL EXPENDITURES. Capital Expenditures in any
                  fiscal year in excess of the amount set forth in the following
                  table for the applicable period:
<TABLE>
<CAPTION>
                                                   For the First 6 Months of Fiscal
Fiscal Year 2005           Fiscal Year 2006                   Year 2007
<S>                        <C>                     <C>
 $ 17,500,000(*)             $ 16,000,000                     $ 8,000,000
</TABLE>

(*)   No more than $8,000,000 of such amount shall consist of Capital
      Expenditures reflected as "purchases of property and equipment" on
      Parent's and its Subsidiaries' statement of cash flows (contained within
      Parent's and its Subsidiaries' financial statements) prepared from time to
      time."

            3. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby affirms to
Lender that all of such Borrower's representations and warranties set forth in
the Agreement are true, complete and accurate in all respects as of the date
hereof.

            4. NO DEFAULTS. Borrowers hereby affirm to Lender that no Event of
Default has occurred and is continuing as of the date hereof.

            5. CONDITION PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon receipt by Lender of a fully executed copy of this
Amendment.

            6. COSTS AND EXPENSES. Borrowers shall pay to Lender all of Lender's
out-of-pocket costs and expenses (including, without limitation, the fees and
expenses of its counsel arising in connection with the preparation, execution,
and delivery of this Amendment and all related documents.

            7. LIMITED EFFECT. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other respects, the
Agreement, as amended and supplemented hereby, shall remain in full force and
effect.

            8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which when so executed and delivered shall be deemed to be an original.
All such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution of a
counterpart of this Amendment by each of the parties hereto.

                           [Signatures on next page]

                                       2
<PAGE>
            IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first set forth above.

                                   WELLS FARGO FOOTHILL, INC.,
                                   a California corporation

                                   By: /s/ Mara Vaisz
                                       ----------------------------
                                   Title: Vice President

                                       S-1
                     Amendent Number One to Credit Agreement

<PAGE>

                                   CRAY INC.,
                                   a Washington corporation

                                   By: /s/ Kenneth W. Johnson
                                       ----------------------------
                                   Name:  Kenneth W. Johnson
                                   Title: Senior Vice President

                                   CRAY FEDERAL INC.,
                                   a Washington corporation

                                   By: /s/ Charles A. Weidenfeller
                                       ---------------------------------
                                   Name:  Charles A. Weidenfeller
                                   Title: President

                                       S-2
                    Amendement Number One to Credit Agreement
<PAGE>
                                   EXHIBIT B-1

                       FORM OF BORROWING BASE CERTIFICATE

Wells Fargo Foothill, Inc.
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404

            The undersigned, Cray Inc., a Washington corporation ("Parent"),
pursuant to Schedule 5.2 of that certain Credit Agreement, dated as of May 31,
2005 (as amended, restated, modified, supplemented, refinanced, renewed, or
extended from time to time, the "Credit Agreement"), entered into among Parent,
its subsidiaries signatory thereto as Borrowers (collectively with Parent,
"Borrowers"), and Wells Fargo Foothill, Inc., a California corporation as the
lender (in such capacity, together with its successors and assigns, if any, in
such capacity, "Lender"), hereby certifies to Lender that the following items,
calculated in accordance with the terms and definitions set forth in the Credit
Agreement for such items are true and correct, and that Borrowers are in
compliance with and, after giving effect to any currently requested Advances,
will be in compliance with, the terms, conditions, and provisions of the Credit
Agreement.

            All initially capitalized terms used in this Borrowing Base
Certificate have the meanings set forth in the Credit Agreement unless
specifically defined herein.

                  [Remainder of page intentionally left blank.]

                                       1
<PAGE>

Effective Date of Calculation: ___________

A.    BORROWING BASE CALCULATION

      1.    Eligible Accounts

            a.    (i)   85% of Eligible Accounts(1)  $___________

                  (ii)  the amount, if any,
                   of the Dilution Reserve           $___________

                  (iii) Item 1.a.(i) minus
                   Item 1.a.(ii)                     $___________

            b.    $10,000,000                        $___________

            c.    The lesser of Items 1.a. and 1.b.                 $___________

      2.

            a.    100% of TSM Recurring Revenues     $___________

            b.    $20,000,000                        $___________

            c.    The lesser of Items 2.a. and 2.b.                 $___________

      3.    Reserves

            a.    Bank Products Reserve               $___________

            b.    the sum of the aggregate amount of
                  reserves, if any, established by
                  Lender under Section 2.1(b) of the
                  Credit Agreement                    $___________

            c.    Sum of Items 3.a. and 3.b                         $___________

(1) See Annex A

                                       2
<PAGE>

      4.    Borrowing Base (Item 1.c.plus Item 2.c, minus Item 3.c.):   $_______

      5.    Availability Calculation

            a.    (i)   Maximum Revolver
                  Amount minus Line Block (if applicable)   $_______

                  (ii)  Letter of Credit Usage              $_______

                  (iv)  outstanding Advances                $_______

                  (vi)  Item 5.a(i) munus Item 5.a(ii)
                        minus Item 5.a(iii)                 $_______

            b.    (i)   Borrowing Base                      $_______

                  (ii)  Letter of Credit Usage              $_______

                  (iii) outstanding Advances                $_______

                  (iv)  Item5.b(i) munus Item 5.b(ii)
                        munus Item 5.b(iii)                 $_______

            c.    The lesser of Item 5.a. and 5.b.                      $_______

B.    LETTER OF CREDIT CALCULATION

      1.    maximum L/C amount                                          $_______

      2.    L/Cs permitted under Borrowing Base

            a.    Borrowing Base (from Section A, Item 4)   $_______

                                       3

<PAGE>

            b.    Amount of current outstanding Advances      $_______

            c.    Item 2.a. munus Item 2.b.                             $_______

      3.    L/Cs permitted under Maximum Revolver Amount

            a.    Maximum Revolver Amount minus
                  Line Block (if applicable)                  $_______

            b.    Amount of current outstanding Advances      $_______

            c.    Item 3.a. munus Item 3.b.                             $_______

      4.    Letter of Credit Usage plus the amount
            of any proposed Letters of Credit                           $_______

      5.    No L/C Avalilability if Item 4 is greater
            than Item 1, Item 2.c. or Item 3.c.                         $_______

                                       4

<PAGE>

      Additionally, the undersigned hereby certifies and represents and warrants
to Lender on behalf of the Borrowers that (i) as if the date hereof, each
reprtesentation or warranty contained in or pursuant to any Loan Document, any
agreement, instrument, certificate, document or other writing furnished at any
time under or in connection with any Loan Document, and as of the effective date
of any advance, continuation or conversion requested above is true and correct
in all material respects (except to the extent any representation or warranty
expressly related to an earlier date), (ii) each of the covenants and
agreements contained in any Loan Document have been performed (to the extent
required to be performed on or before the date hereof or each such effective
date), (iii) no Default or Event of Default has occurred and is continuing on
the date hereof, nor will any thereof occur after giving effect to the request
above, and (iv) all of the foregoing is true and correct as of the effective
date of the calculations set forth above and that such calculation have been
made in accordance with the requirements of the Credit Agreement.

                                                        CRAY, INC.,
                                                        a Washington corporation
                                                        as Parent

                                                        By:_____________________
                                                        Name:___________________
                                                        Title:__________________

                                       5
<PAGE>
                             Annex A

Accounts created by a Borrower in the ordinary course of
its business arising out of sale of goods (and not out of the
rendition of services), that are not related to Recurring
Revenues, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan
Documents                                                               $______

   less (without duplication)

         The amount of customer deposits and unapplied cash
         relating to Accounts

                                                               $______

         Accounts that the Account Debtor has failed to pay
         within 90 days of original invoice date or Accounts
         with selling terms of more than 30 days               $______

         Accounts owed by an Account Debtor (or its
         Affiliates) where 50% or more of all Accounts owed by
         that Account Debtor (or its Affiliates) are deemed
         ineligible under the immediately preceding clause     $______

         Accounts with respect to which the Account Debtor is
         an Affiliate of any Borrower or an employee or agent
         of any Borrower or any Affiliate of any Borrower      $______

         Accounts arising in a transaction wherein goods are
         placed on consignment or are sold pursuant to a
         guaranteed sale, a sale or return, a sale on
         approval, a bill and hold, or any other terms by
         reason of which the payment by the Account Debtor may
         be conditional                                        $______

         Accounts that are not payable in Dollars and in the
         United States                                         $______

         Accounts with respect to which the Account Debtor
         either (i) does not maintain its chief executive
         office in the United States or Canada, or (ii) is not
         organized under the laws of the United States or any
         state thereof or Canada, or (iii) is the government
         of any foreign country or sovereign state other than
         Canada, or of any state, province, municipality, or
         other political subdivision thereof, or of any
         department, agency, public corporation, or other
         instrumentality thereof, unless (y) the Account is
         supported by an irrevocable letter of credit
         satisfactory to Lender (as to form, substance, and
         issuer or domestic confirming bank) that has been
         delivered to Lender and is directly drawable by
         Lender, or (z) the Account is covered by credit
         insurance in form, substance, and amount, and by an
         insurer, satisfactory to Lender                       $______

                                6
<PAGE>

            Accounts with respect to which the Account Debtor is
            either (i) the United States or any department,
            agency, or instrumentality of the United States
            (exclusive, however, of Accounts with respect to
            which the applicable Borrower has complied, to the
            reasonable satisfaction of Lender, with the
            Assignment of Claims Act, 31 USC Section 3727), or (ii)
            any state of the United States                              $_______

            Accounts with respect to which the Account Debtor is
            a creditor of any Borrower, has or has asserted a
            right of setoff, or has disputed its obligation to
            pay all or any portion of the Account, to the extent
            of such claim, right of setoff, or dispute                  $_______

            Accounts with respect to which the Account Debtor is
            subject to an Insolvency Proceeding, is not Solvent,
            has gone out of business, or as to which a Borrower
            has received notice of an imminent Insolvency
            Proceeding or a material impairment of the financial
            condition of such Account Debtor,                           $_______

            Accounts with respect to which the Account Debtor is
            located in a state or jurisdiction (e.g., New Jersey,
            Minnesota, and West Virginia) that requires, as a
            condition to access to the courts of such
            jurisdiction, that a creditor qualify to transact
            business, file a business activities report or other
            report or form, or take one or more other actions,
            unless the applicable Borrower has so qualified,
            filed such reports or forms, or taken such actions
            (and, in each case, paid any required fees or other
            charges), except to the extent that the applicable
            Borrower may qualify subsequently as a foreign entity
            authorized to transact business in such state or
            jurisdiction and gain access to such courts, without
            incurring any cost or penalty viewed by Lender to be
            significant in amount, and such later qualification
            cures any access to such courts to enforce payment of
            such Account,                                               $_______

            Accounts, the collection of which, Lender, in its
            Permitted Discretion, believes to be doubtful by
            reason of the Account Debtor's financial condition,         $_______

            Accounts that are not subject to a valid and
            perfected first priority Lender's Lien,                     $_______

            Accounts with respect to which (i) the goods giving
            rise to such Account have not been shipped and billed
            to the Account Debtor, or (ii) the services giving
            rise to such Account have not been performed and
            billed to the Account Debtor                                $_______

            Accounts that represent the right to receive progress
            payments or other advance billings that are due prior
            to the completion of performance by the applicable
            Borrower of the subject contract for goods or
            services.                                                   $_______

                                7
<PAGE>

Total Excluded Accounts                                                 $_______

ELIGIBLE ACCOUNTS (TOTAL ACCOUNTS LESS TOTAL EXCLUDED ACCOUNTS):        $_______

                                8
<PAGE>

                                   EXHIBIT C-1

                         FORM OF COMPLIANCE CERTIFICATE

                            [on Parent's letterhead]

To:   Wells Fargo Foothill, Inc.
      2450 Colorado Avenue
      Suite 3000 West
      Santa Monica, California 90404
      Attn: Business Finance Division Manager

                  Re: Compliance Certificate dated ____________

Ladies and Gentlemen:

      Reference is made to that certain CREDIT AGREEMENT (the "Credit
Agreement") dated as of May 31, 2005, by and among WELLS FARGO FOOTHILL, INC.
(together with its successors and permitted assigns, "Lender"), CRAY INC., a
Washington corporation ("Parent"), and each of its Subsidiaries party thereto.
Capitalized terms used in this Compliance Certificate have the meanings set
forth in the Credit Agreement unless specifically defined herein.

      Pursuant to Schedule 5.3 of the Credit Agreement, the undersigned officer
of Parent hereby certifies that:

The financial information of Parent and its Subsidiaries with respect to fiscal
quarter end and fiscal year end periods (furnished in Schedule 1 attached
hereto), if applicable, has been prepared in accordance with GAAP (except for
year-end adjustments and the lack of footnotes), and fairly presents in all
material respects the financial condition of Parent and its Subsidiaries.

The financial information of Parent and its Subsidiaries with respect to periods
other than fiscal quarter end and fiscal year end periods (furnished in Schedule
1 attached hereto), if applicable, do not include all of the adjustments or
footnotes necessary to be in compliance with GAAP. I believe that these
statements should provide a reasonable basis for the Lender to monitor Parents'
and its Subsidiaries' results from operations and their financial position.
These statements are not deliberately misleading and, to my knowledge, do not
contain fraudulent information or fail to include material information.

      1. Such officer has reviewed the terms of the Credit Agreement and has
made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of Parent and its Subsidiaries during
the accounting period covered by the financial statements delivered pursuant to
Schedule 5.3 of the Credit Agreement.

      2. Such review has not disclosed the existence on and as of the date
hereof, and the undersigned does not have knowledge of the existence as of the
date hereof, of any event or condition that constitutes a Default or Event of
Default, except for such conditions or events listed on Schedule 2 attached
hereto, specifying the nature and period of existence thereof and what action
Parent and its Subsidiaries have taken, are taking, or propose to take with
respect thereto.

                                       1
<PAGE>

      3. The representations and warranties of Parent and its Subsidiaries set
forth in the Credit Agreement and the other Loan Documents are true and correct
in all material respects on and as of the date hereof (except to the extent they
relate to a specified date), except as set forth on Schedule 3 attached hereto.

      4. Parent and its Subsidiaries are in compliance with the applicable
covenants contained in Section 6.16 of the Credit Agreement as demonstrated on
Schedule 4 hereof.

      5. Attached hereto on Schedule 5 is a copy of Parent and its Subsidiaries
[10-Q QUARTERLY REPORT/10-K ANNUAL REPORT], filed since the delivery of
Borrower's last Compliance Certificate.

                                       2
<PAGE>

      IN WITNESS WHEREOF, this Compliance Certificate is executed by the
undersigned this _____ day of _______________, ___________.

                                            CRAY INC.,
                                            a Washington corporation

                                                        By:_____________________
                                                        Name:___________________
                                                        Title:__________________
                                       3
<PAGE>

                                   SCHEDULE 1

                                    FINANCIAL

                                       4
<PAGE>
                                   SCHEDULE 2

                           DEFAULT OR EVENT OF DEFAULT

                                       5
<PAGE>

                                   SCHEDULE 3

                         REPRESENTATIONS AND WARRANTIES

                                       6
<PAGE>

                                   SCHEDULE 4

                               FINANCIAL COVENANTS

1. MINIMUM EBITDA.

      Parent's and its Subsidiaries' EBITDA, tested as of the last day of each
fiscal quarter of Parent, for the most recently completed [6] [9] [12] [AS
APPROPRIATE] month period ending _________, ________ is $______________, which
amount [IS/IS NOT] greater than or equal to the amount set forth in Section
6.16(a)(i) of the Credit Agreement for the corresponding period.

2. MINIMUM RECURRING REVENUES.

      Parent's and its Subsidiaries' Recurring Revenues, tested as of the last
day of each fiscal quarter of Parent, for the most recently completed [6] [9]
[12] [AS APPROPRIATE] month period ending _________, ________ are
$______________, which amount [IS/IS NOT] greater than or equal to the amount
set forth in Section 6.16(a)(ii) of the Credit Agreement for the corresponding
period.

3. CAPITAL EXPENDITURES.

      Parent's and its Subsidiaries' Capital Expenditures, for the [FISCAL
YEAR ENDING _________, ________ ARE $____________] [FOR THE FIRST SIX MONTH OF
THE FISCAL YEAR ENDING _________, ________ ARE $____________] [AS APPROPRIATE],
which amount [IS/IS NOT] less than or equal to the amount set forth in Section
6.16(b)(i) of the Credit Agreement for the corresponding period. [WITH RESPECT
TO PARENT'S AND ITS SUBSIDIARIES' FISCAL YEAR ENDING 1995, PARENT'S AND ITS
SUBSIDIARIES' CAPITAL EXPENDITURES CONSISTING OF "PURCHASE OF PROPERTY AND
EQUIPMENT" ARE $______________, WHICH AMOUNT [IS/IS NOT] LESS THAN OR EQUAL TO
THE AMOUNT SET FORTH IN SECTION 6.16(B)(I) OF THE CREDIT AGREEMENT.]

                                       7
<PAGE>

                                   SCHEDULE 5

                   [10-Q QUARTERLY REPORT/10-K ANNUAL REPORT]

                                       8

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