10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2009
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number: 0-15190

OSI PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	13-3159796
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
41 Pinelawn Road, Melville, N.Y.	11747
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, including area code

(631) 962-2000

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.01 per share Series SRPA Junior Participating Preferred Stock Purchase Rights	The NASDAQ Stock Market LLC

Securities Registered Pursuant to Section 12(g) of the Act: None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

As of June 30, 2009, the aggregate market value of the registrant’s voting stock held by non-affiliates was $1,097,775,521. For purposes of this calculation, shares of common stock held by directors, officers and stockholders whose ownership exceeds five percent of the common stock outstanding at June 30, 2009 were excluded. Exclusion of shares held by any person should not be construed to indicate that the person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that the person is controlled by or under common control with the registrant.

As of February 15, 2010, there were 58,309,364 shares of the registrant’s common stock, par value $.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 2010 annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K.

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	BUSINESS		1
ITEM 1A.	RISK FACTORS		21
ITEM 1B.	UNRESOLVED STAFF COMMENTS		36
ITEM 2.	PROPERTIES		36
ITEM 3.	LEGAL PROCEEDINGS		37
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		37
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		38
ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA		40
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		43
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		60
ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS		62
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		114
ITEM 9A.	CONTROLS AND PROCEDURES		114
ITEM 9B.	OTHER INFORMATION		116
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		116
ITEM 11.	EXECUTIVE COMPENSATION		116
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		116
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		116
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		116
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		117
EX-10.12
EX-10.13
EX-10.14
EX-10.15
EX-10.16
EX-10.17
EX-10.18
EX-10.19
EX-10.41
EX-10.58
EX-10.59
EX-10.60
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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In this Form 10-K, “OSI,” “the Company,” “we,” “us,” and “our” refer to OSI Pharmaceuticals, Inc. and subsidiaries. “(OSI) Eyetech” refers to Oldtech, Inc. (formerly, (OSI) Eyetech, Inc.), our wholly-owned subsidiary.

We own or have rights to various copyrights, trademarks and trade names used in our business including Tarceva^® (erlotinib) and Novantrone^® (mitoxantrone for injection concentrate). This Form 10-K also includes other trademarks, service marks and trade names of other companies.

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PART I

ITEM 1.   BUSINESS

We are a biotechnology company committed to building a scientifically strong and financially successful top tier biopharmaceutical organization that discovers, develops and commercializes innovative molecular targeted therapies, or MTTs, addressing major unmet medical needs in oncology, diabetes and obesity. Our strategic focus is in the area of personalized medicine. We are building upon the knowledge and insights from our flagship product, Tarceva, in order to establish a leadership role in turning the promise of personalized medicine into practice in oncology and in pioneering the adoption of personalized medicine approaches in diabetes and obesity. We are leveraging our targeted therapy expertise in drug discovery, development and translational research to deliver innovative, differentiated new medicines to the right patients, in the right combinations and at the right doses. We believe this approach optimally positions us to accomplish more rapid and cost-effective drug development aimed at providing substantial clinical benefit to the patients who can gain the most from our innovations. We further believe that, with increasing healthcare cost constraints and competition, leadership in personalized medicine approaches will define the successful biopharmaceutical companies of the future.

Our largest area of focus is oncology where our business is anchored by Tarceva, a small molecule inhibitor of the epidermal growth factor receptor, or EGFR, which achieved global sales of over $1.2 billion in 2009. As of February 15, 2010, Tarceva was approved for sale in 109 countries for the treatment of advanced non-small cell lung cancer, or NSCLC, in patients who have failed at least one prior chemotherapy regimen and 80 countries for the treatment of patients with advanced pancreatic cancer in combination with the chemotherapy agent, gemcitabine. Our largest markets for Tarceva are the United States, the European Union, or EU, Japan and China. We co-promote Tarceva in the United States with Genentech, Inc., a wholly-owned member of the Roche Group, where we share profits equally, and we receive royalties on sales outside of the United States from our international collaborator, Roche.

Our research and development, or R&D, programs in diabetes and obesity are conducted at our wholly owned subsidiary in Oxford, England and contribute an important second source of revenues through the licensing of our patent estate relating to the use of dipeptidyl peptidase IV, or DPIV, inhibitors for the treatment of type 2 diabetes and related indications. As of February 15, 2010, twelve pharmaceutical companies have non-exclusive licenses to these patents, which provide us with upfront payments as well as potential milestones and royalties. As of December 31, 2009, this patent estate has generated approximately $178 million in upfront license fees, milestones and royalties.

We expect that our global revenues from Tarceva and our DPIV patent estate will continue to provide us with the capital resources necessary to make disciplined investments in R&D in order to support the continued growth of Tarceva and our internal pipeline of clinical and pre-clinical assets. As part of our lifecycle plan for Tarceva, we, together with Genentech and Roche, continue to invest in a broad clinical development program directed at maximizing Tarceva’s long-term potential, including a number of large, randomized clinical trials designed to expand Tarceva’s use in NSCLC (including studies focused on validating the activity of Tarceva in treating patients whose lung tumors harbor an activating mutation) and new disease settings, such as hepatocellular carcinoma, or HCC. We have also prioritized investment in a portfolio of potentially differentiated and competitive drug candidates and technologies in oncology and diabetes and obesity. We will continue to explore opportunities to selectively acquire attractive pipeline assets, technologies and companies where these types of acquisitions strongly supplement and complement our internal R&D efforts in oncology and diabetes and obesity.

Our development efforts in oncology focus on our pipeline of MTTs in clinical and late-stage pre-clinical development which we intend to develop and commercialize independently in major markets. Our lead oncology compound is OSI-906, an inhibitor of the insulin-like growth factor 1 and the insulin receptors, or IGF-1R/IR, with potential utility for the treatment of many solid tumor types, which entered Phase I studies in June 2007, and commenced its first Phase III efficacy study for the treatment of advanced adrenocortical cancer, or ACC, in the third quarter of 2009. Based on promising results from our Phase I trials, we have embarked on a broad clinical development program for OSI-906, both for use as a single agent and in combination with other therapies. These studies include current Phase I/II and Phase III trials in ovarian cancer and ACC, respectively, as well as anticipated

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Phase II and Phase III studies that will explore the use of OSI-906 for the treatment of NSCLC (in combination with Tarceva) and HCC. We are also developing OSI-027, a next generation mammalian target of rapamycin, or mTOR, kinase inhibitor, which entered Phase I studies in July 2008. Unlike existing agents targeting the mTOR pathway, OSI-027 inhibits both the TORC1 and TORC2 signaling complexes, potentially allowing complete truncation of aberrant cell signaling through this pathway. Each of these MTTs, as well as Tarceva, are small molecules designed to be administered orally as a tablet rather than by the less convenient intravenous infusion methods characteristic of most anti-cancer drugs.

The focus of our proprietary oncology research efforts is on understanding multiple elements of tumor biology — including the dependence of certain tumor cells on activated oncogenic signaling pathways, or onco-addiction, and compensatory signaling — with a particular focus on the biological process of epithelial-to-mesenchymal transition, or EMT, which is of emerging significance in understanding tumor development and disease progression. This research has grown out of our translational research efforts to understand which patients may optimally benefit from Tarceva. Our EMT research investment, together with related insights into mechanisms such as compensatory signaling, is the cornerstone of our personalized medicine approach in cancer, and should allow us to better design combinations of MTTs for specific sub-sets of cancer patients. These translational research efforts include programs designed to develop diagnostic tools derived from genetic signature technologies that will enable us to better identify those patients who will most benefit from our targeted therapies. This, in turn, may enable us to realize significant improvements in patient outcomes and to enhance our competitive position in the oncology marketplace.

We also have research and development programs in diabetes and obesity. Our discovery efforts in diabetes and obesity are concentrated around the neuroendocrine control of bodyweight and glycemia, which focuses on central or peripheral nervous system or hormonal approaches to the control of bodyweight for the treatment of obesity, as well as the lowering of blood glucose together with meaningful weight loss for the treatment of type 2 diabetes. Our lead compound for the treatment of diabetes and obesity is PSN821, an orally administered G protein-coupled receptor 119, or GPR119, agonist with potential anti-diabetic and appetite suppressing features, which entered Phase I studies in the third quarter of 2008. This program represents an opportunity to develop an oral next-generation GLP-1 modulator that can both control hypoglycemia and induce weight loss.

Strategy

Our strategic focus is on turning the promise of innovative, personalized medicine into practice in our industry. In pursuing this strategy, we seek to appropriately balance our financial performance with disciplined, focused and selective investments in R&D designed to realize long term growth for our company. We anticipate that the continued growth of our global revenues from Tarceva and our DPIV patent estate, coupled with disciplined expense management, will allow us to support both a broad lifecycle plan for Tarceva and continue to make R&D investments in those programs that we believe can produce novel, differentiated, “first-in-class” or “best-in-class” drug candidates, such as OSI-906, OSI-027 and PSN821. Our longer term growth strategy seeks to maintain significant ownership and control over these drug candidates throughout their development and commercial lifecycles.

We are also committed to continuing to be a selective acquiror of attractive pipeline assets, technologies and companies to supplement and complement our internal oncology and diabetes and obesity R&D efforts. Our area of focus includes both highly-differentiated pre-clinical and early stage clinical assets, as well as later stage clinical compounds that offer near term revenue potential. As part of this initiative, we entered into a strategic relationship in 2009 with HBM Partners AG — an affiliate of HBM BioVentures AG, a life sciences-focused venture fund that is publicly traded on the SIX Swiss Exchange — to collaborate with us in an advisory role on venture investments and other transactions involving promising companies, compounds, products and technologies in the oncology and diabetes and obesity fields. We successfully completed our first transaction at the end of 2009 with PhaseBio Pharmaceuticals, Inc. and anticipate executing on additional transactions in 2010.

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The goal of our R&D efforts is to pursue novel personalized medicine therapies by discovering and developing innovative, differentiated agents that deliver the right medicines, to the right patients, in the right combinations and at the right doses. We believe that this approach will lead to:

•  More rapid and cost-effective drug development;

•  The discovery and development of drugs that deliver meaningful clinical benefit to patients; and

•  Increased availability of innovative medicines to the patients who can benefit from them the most.

For over a decade, we have demonstrated our ability to discover MTTs in both oncology and diabetes and obesity, and this remains at the core of our efforts to build a differentiated pipeline. These discovery efforts have been guided by our translational research program, which seeks to accelerate the process of transforming scientific discoveries arising from the laboratory and the clinic into new drugs and treatment options for patients. Our translational research program has led us to explore the use of biomarkers to predict, detect and monitor disease, and has directed our research focus towards the biology of EMT in oncology and neuroendocrine control in diabetes and obesity. In oncology, we have learned from our translational research efforts for Tarceva that developing and exploiting a comprehensive understanding of the biology of EMT may be a key to determining patient selection and combination of MTTs for the treatment of cancer. We have, therefore, invested both internally and externally through collaborations, such as our alliance with AVEO Pharmaceuticals, Inc. in order to establish a leadership position in the understanding of this process and establish contextual models of human cancer biology in order to explore the implications of EMT and phenomena such as compensatory signaling mechanisms on oncology drug discovery and development. We believe that our EMT-driven approach to oncology research will provide us with a pathway to selecting responsive patient populations and obtaining the efficacy improvements that will result in meaningful steps forward in patient care and that will be needed in order to compete in a growing and increasingly competitive market for oncology therapeutics. Similarly, in diabetes and obesity, we believe that our focus on the neuroendocrine control of bodyweight and glycemia may allow us to pioneer personalized medicine approaches in the future.

We also believe that a key element to disciplined management of our R&D efforts is the pursuit of an out-licensing or partnering strategy for any program or candidate that we determine no longer meets our criteria as a core asset. For example, in October 2009, we entered into an agreement granting rights to Simcere Pharmaceutical Co., Ltd., a Chinese pharmaceutical company, to develop, manufacture and market OSI-930 (our antiangiogenesis agent) in China.

Our Marketed Product — Tarceva

Overview

Tarceva is an oral, once-a-day, small molecule therapeutic designed to inhibit the receptor tyrosine kinase activity of the protein product of the HER1/EGFR gene. HER1/EGFR is a key component of the HER signaling pathway, which plays a role in the abnormal growth of many cancer cells. EGFR inhibitors were designed to arrest the growth of tumors, referred to as cytostasis; however, under certain circumstances, EGFR inhibition can lead to apoptosis, or programmed cell death, which in turn results in tumor shrinkage. The HER1/EGFR gene is over-expressed, mutated or amplified in approximately 40% to 60% of all solid cancers and contributes to the abnormal growth signaling in these cancer cells. There is a strong scientific rationale and a substantial potential market for EGFR inhibitors. The initial focus of our development program has been on NSCLC and pancreatic cancer. We, together with our collaborators or other third parties, are continuing to explore the use of Tarceva in other tumor types, including HCC, ovarian and colorectal cancers.

The American Cancer Society estimates that approximately 186,000 cancer patients in the United States were diagnosed with NSCLC in 2009. Tarceva is approved for the treatment of NSCLC patients in the second and third-line settings following a course of front-line chemotherapy. Based on data from the Tandem Oncology Monitor, a national audit in 2009 by Synovate, Inc. of cancer patients receiving therapy, approximately 60,000 subsequent courses of therapy were provided to NSCLC Stage IIIB/IV patients in the United States following a course of front-line chemotherapy. The American Cancer Society estimates that approximately 35,000 cancer patients in the United States died from pancreatic cancer in 2009, which makes it the fourth leading cause of cancer death in the

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United States. In the EU, based on information collected by the International Agency for Research on Cancer in Lyon, France, the third most common incident form of cancer in 2006 was lung cancer, with approximately 380,000 cases. The International Agency for Research on Cancer also reported that lung cancer was the most common cause of cancer death in Europe, with approximately 340,000 deaths in 2006.

We have an ongoing collaboration with Genentech and Roche for the continued development and commercialization of Tarceva. We co-promote Tarceva in the United States with Genentech and receive a 50% share of net profits after the deduction of costs of goods and certain sales and marketing expenses. We are also responsible for manufacturing and supply of Tarceva in the United States and receive reimbursement of manufacturing costs from Genentech. Roche is responsible for sales outside of the United States and we receive a royalty on net sales of approximately 20%. Tarceva R&D expenses that are part of the alliance’s global development program generally are shared equally among the three parties.

Lifecycle Plan

We, together with Genentech and Roche, continue to invest in Tarceva through a broad development program. The goal of our lifecycle plan for Tarceva is to maximize the long-term market potential of our flagship product through a series of rationally-designed clinical trials that reflect our personalized medicine approach for Tarceva. Our clinical trial strategy for Tarceva has three key objectives:

•  Expand the use of Tarceva into other NSCLC treatment areas;

•  Expand the use of Tarceva into additional tumor types and further explore its utility in pancreatic cancer; and

•  Develop therapies which combine Tarceva and other novel targeted agents for the treatment of NSCLC and other tumor types.

Studies to Expand Tarceva into other NSCLC Treatment Areas.

EGFR Mutation Studies.

Approximately 12% of caucasian NSCLC patients and approximately 30% of NSCLC patients of Asian origin have lung tumors that harbor activating mutations of the EGFR gene. Multiple small Phase II studies and sub-set analyses of several larger Phase III studies (most recently, the SATURN study, as discussed below) have shown that Tarceva has considerable anti-tumor activity in these patients. We, together with our partners at Roche, are aggressively pursuing clinical studies and diagnostic tests in order to fully validate the benefit of using Tarceva to treat these patients. Given the significant clinical benefit anticipated for these patients, these studies potentially represent a major breakthrough in personalized medicine treatments for NSCLC and a significant opportunity to broaden our Tarceva franchise. Multiple studies are either ongoing or planned that explore the use of Tarceva as a first-line treatment for NSCLC patients with EGFR mutations based on clinical data that suggest that these patients have an enhanced response to Tarceva. In Europe, Roche and the Spanish Lung Cancer Group are collaborating on a prospective, randomized Phase III trial to investigate whether first-line treatment with Tarceva is superior to chemotherapy in NSCLC patients with EGFR mutations, referred to as the EURTAC study. Similarly, in Japan, we are collaborating with Chugai Pharmaceutical Co., Ltd., or Chugai, on a Phase II study of Tarceva as a first-line treatment for NSCLC patients with EGFR mutations. We are also seeking a business partner to ensure rapid development of a companion EGFR mutation diagnostic test to facilitate potential approval of Tarceva for the treatment of first-line NSCLC patients with EGFR mutations in the U.S.

Tarceva Maintenance Therapy Studies.

• SATURN Study (Phase III Study of Tarceva in First-Line NSCLC Patients Following Chemotherapy).  In December 2009, the FDA’s Oncologic Drugs Advisory Committee, or ODAC, voted 12 to one recommending against approval of Tarceva for use in patients with advanced, recurrent or metastatic NSCLC who have not experienced disease progression or unacceptable toxicity during four cycles of front-line chemotherapy, which we refer to as first-line maintenance therapy. The ODAC reviewed data from the randomized 889-patient Phase III study, known as SATURN, which showed that Tarceva resulted in statistically significant improvement in both progression free survival, or PFS, and overall survival (the study’s primary and secondary endpoints, respectively)

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when administered as first-line maintenance therapy, compared to placebo in the first-line maintenance setting. There were no new or unexpected safety signals in the study, and adverse events were consistent with those previously reported for Tarceva in advanced NSCLC. The study was conducted under the auspices of the FDA’s special protocol assessment, or SPA. In January 2010, after the submission of additional data and analyses to the FDA, we received notice that the FDA had extended the review date of the supplemental new drug applications, or sNDA, for Tarceva as a first-line maintenance therapy by an additional 90 days. The original review date under the Prescription Drug User Fee Act was January 18, 2010, and we now anticipate FDA action on the sNDA by April 18, 2010. We, together with our collaborators, are working closely with the FDA during this extended review period. We are also working with Roche in its discussions with the EMEA for the Marketing Authorization Application variation (the EU equivalent of a U.S. sNDA) for Tarceva as a first-line maintenance therapy in the EU.

• ATLAS Study.  In October 2009, Roche communicated to us that an exploratory data sweep for survival of ATLAS, a Phase III study in patients with advanced non-small cell lung cancer who received Tarceva in combination with Avastin as first-line maintenance therapy, was not positive. We did not “opt-in” (i.e., share in the expenses) to the ATLAS study because the study was not designed to be registrational. If the study were to result in an ATLAS-related change to the Tarceva label we would likely be required to opt-in and pay our retrospective share of the study costs and a penalty. We are not currently forecasting any opt-in payments for this study.

RADIANT Study (Adjuvant Tarceva after Surgery and Chemotherapy in Patients with Stage IB-IIIA NSCLC).  Due to its demonstrated efficacy, safety profile and convenience, we believe that Tarceva is well suited for testing in the adjuvant treatment of patients with fully resected stage IB through IIIA NSCLC. Over the last few years, it has been demonstrated that certain patients with resectable NSCLC may benefit from platinum-containing adjuvant chemotherapy. This treatment paradigm is becoming the standard of care in the United States and worldwide. In the 945-patient RADIANT study, patients with fully resected NSCLC who are EGFR-positive by immunohistochemistry, or IHC, and/or fluorescent in situ hybridization, or FISH, and who do or do not receive platinum-containing adjuvant chemotherapy, are randomized to receive Tarceva or placebo for up to two years. This study has the potential to change the standard of care for patients with early stage NSCLC. We expect to complete enrollment in the first half of 2010, and assuming we meet this enrollment target, we anticipate data from this trial in 2013/2014. This study is an important component of our later stage lifecycle plan for Tarceva.

Phase II Studies in Never-smokers. The Cancer and Leukemia Group B, or CALGB, recently completed a randomized Phase II study in previously untreated NSCLC patients with adenocarcinoma who have never smoked or were previous light smokers. For this study, 180 patients with Stage IIIB or IV disease received either Tarceva alone or in combination with the drugs carboplatin and paclitaxel. CALGB has indicated that it plans on providing the results of this study at the June 2010 meeting of the American Society of Clinical Oncology. In addition, the Eastern Cooperative Oncology Group has received approval from the Cancer Therapy Evaluation Program for a similar Phase II study which would randomize patients who have never smoked to either chemotherapy plus Avastin or chemotherapy plus Avastin in combination with Tarceva. The Southwest Oncology Group has also initiated a Phase II study of Avastin and Tarceva in never-smokers. These studies will add further insight to the results seen in retrospective analyses of the never-smoker patients in the prior TRIBUTE and BR.21 randomized Phase III studies. In TRIBUTE, a first-line NSCLC study, the sub-population of patients who were never-smokers receiving Tarceva in combination with chemotherapy had a median survival of 22.5 months, compared to 10.1 months for those receiving chemotherapy alone. In BR.21, the hazard ratio for benefit in never-smokers was 0.42, with a response rate of 24.7% for those patients who received Tarceva alone. A hazard ratio is the most widely accepted statistical measure of the difference in overall survival for a population of patients in a clinical study between the study drug and the control group. A hazard ratio of less then one indicates a reduction in the risk of death.

Tarceva Intercalated with Chemotherapy in First-Line NSCLC. In 2009, an investigator sponsored study in Asia was completed that explored the use of Tarceva intercalated with gemcitabine and a platinum-based chemotherapy in first-line NSCLC patients. Based on favorable results from this study, Roche has initiated a Phase III trial that seeks to confirm the potential benefits of this scheduling regimen. There are also two smaller Phase II studies ongoing in the United Studies that are investigating intercalated chemotherapy treatment regimens.

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TITAN Study. The TITAN study is a randomized 650-patient Phase III study to evaluate the efficacy of Tarceva compared to either of two chemotherapy agents, Alimta^® (pemetrexed) or Taxotere^® (docetaxel), following front-line chemotherapy in advanced, recurrent metastatic NSCLC patients who have experienced rapid disease progression or unacceptable toxicity. The TITAN study is part of our post-marketing commitments agreed to with the FDA upon the approval of Tarceva. Patients with progressive disease as best response to platinum-containing chemotherapy are eligible for enrollment in TITAN and are randomized to Tarceva or chemotherapy (Alimta or Taxotere at the discretion of the investigator). An agreement has been reached with the FDA and European Medicines Agency, or EMEA, to curtail this study, due to lower-than-expected enrollment. Although this study will only enroll approximately two-thirds of the planned number of patients, we still expect it to provide comparative data for Tarceva versus chemotherapy in the sub-set of patients who rapidly progress on front-line chemotherapy.

Studies to Refine the use of Tarceva in Pancreatic Cancer.

RACHEL Study. Sub-set analysis from the PA.3 study in pancreatic cancer suggests that those patients who have a grade 2 Tarceva-related rash have an approximately two-fold increase in their rate of survival. The RACHEL study seeks to explore this observation in a prospective, randomized fashion. This Phase II study is part of Roche’s post-marketing commitments agreed to with the EU regulatory authorities. Approximately 400 patients will be entered into the study and will receive four weeks of the standard gemcitabine plus 100 mg/day Tarceva regimen. Those patients who have not either progressed or demonstrated a grade 2 or 3 rash will be randomized to either continue the standard regimen or undergo a dose escalation protocol for the Tarceva component of the regimen. This study is currently enrolling.

MARK Study. The MARK study is a randomized Phase II study in pancreatic cancer which is primarily designed to provide extensive biomarker follow-up. This study is part of Roche’s post-marketing commitments agreed to with the EU regulatory authorities. Approximately 200 patients whose cancer has progressed on prior chemotherapy or who were considered unsuitable for chemotherapy will be randomized to Tarceva monotherapy or placebo. This study is currently enrolling.

Studies to Expand Tarceva into Additional Tumor Types.

Hepatocellular Cancer. Tarceva demonstrated clinical activity in patients with HCC in two small single arm Phase II trials. We are currently collaborating with Bayer AG and Onyx Pharmaceuticals, Inc. on a Phase III trial that compares Tarceva plus Nexavar^® (sorafenib) with placebo plus Nexavar, for the treatment of advanced HCC. This trial, which is currently enrolling, is primarily sponsored by Bayer and Onyx and has a target enrollment of 700 patients.

Ovarian and Colorectal Cancer. Additional collaborative group Phase III trials are under way in both ovarian cancer and colorectal cancer. The ovarian cancer study, which completed enrollment in 2008, is an 830-patient Phase III trial being conducted by the European Organization for Research into the Treatment of Cancer, or EORTC, and follows a similar maintenance design to the SATURN study, in which Tarceva is used as a monotherapy following initial chemotherapy in patients whose cancer has not progressed. Data from this study are expected in 2011. The colorectal cancer study is a 640-patient study being conducted through a study group in the EU and also employs Tarceva in a maintenance setting. This study tests Tarceva in combination with Avastin as maintenance therapy compared to Avastin alone in patients who have had a partial response or stable disease after treatment in the first-line setting with modified FOLFOX 7 (folinic acid, fluorouracil and oxaliplatin) plus Avastin or modified XELOX (capecitabine plus oxaliplatin) plus Avastin, two widely employed treatment regimens for colorectal cancer.

Studies that Combine Tarceva with other Targeted Agents.

We believe that there are a number of opportunities to combine Tarceva with other targeted agents to create improved patient outcomes, both for NSCLC as well as other tumor types. As discussed below, we initiated a Phase I study in the fourth quarter of 2008 exploring the combination of Tarceva with OSI-906, our oral small molecule IGF-1/IR receptor inhibitor. We also are actively exploring opportunities to combine Tarceva with other targeted therapies through investigator sponsored studies and partnerships with other pharmaceutical and biotechnology companies, including

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current studies with Novartis AG and ArQule, Inc. that combine Tarceva with a mammalian target of rapamycin, or mTOR, and mesenchymal-epithelial transition factor, or c-Met, inhibitor, respectively.

Treatment Beyond Progression. From an exploratory study conducted at Memorial Sloan Kettering Cancer Center, it has been reported that, in patients who progressed on EGFR tyrosine kinase inhibitor, or TKI, therapy, there appeared to be acceleration of disease progression when EGFR TKI therapy was discontinued. Upon reintroduction of EGFR TKI therapy, disease progression slowed. Based upon this observation, we believe further study is warranted as to whether continuing Tarceva therapy beyond disease progression by adding other drugs, and in particular, other targeted agents with a focus on EMT-driven combinations, provides a treatment benefit. Two investigator-sponsored studies are currently exploring this hypothesis.

Investigator Sponsored Studies.

In addition to the studies listed above, there are over 130 ongoing or active studies investigating other Tarceva uses and regimens, including both investigator-sponsored studies and studies sponsored by the National Cancer Institute. These studies are exploring monotherapy and combination uses of Tarceva, including with other novel agents, in various tumor types and with a variety of treatment modalities, such as radiation and surgery. Some studies are also examining the use of Tarceva earlier in the treatment paradigm in both the adjuvant and chemoprevention settings. In general, many of these studies are carried out at minimal cost to us or our collaborators beyond the supply of Tarceva.

Sales and Marketing

In order to maximize the Tarceva brand and to ensure the optimal competitive positioning of Tarceva on a global basis, we entered into a co-development and commercialization alliance with Genentech and Roche in January 2001. Under the alliance, Genentech leads the marketing efforts for Tarceva in the United States and Roche sells and markets the drug in the rest of the world. In addition, we have agreed with Genentech that OSI employees will comprise 50% of the combined U.S. sales force through the end of the 2010 calendar year, after which time the size and composition of the sales force may be adjusted. Our oncology sales specialists currently perform sales calls to certain high-volume physician call targets and associated medical staff, in addition to attending our promotional exhibit booths at medical meetings and tradeshows.

OSI/Genentech/Roche Alliance

We manage the ongoing development program for Tarceva with Genentech and Roche through a global development committee under our co-development and commercialization alliance with Genentech and Roche, the Tripartite Agreement. Following Roche’s completion of the acquisition of the remaining outstanding shares of Genentech in 2009, Roche assumed global responsibility for managing the Tarceva alliance. Operationally, however, Genentech continues to lead the marketing and selling efforts for Tarceva in the United States and Roche continues to market and sell Tarceva in the rest of the world. OSI and Genentech are parties to a collaboration agreement which provides us with the right to co-promote Tarceva. The OSI/Genentech collaboration agreement continues until the date on which neither we nor Genentech are entitled to receive a share of the operating profits or losses on any products resulting from the collaboration, that is, until the date that we and Genentech mutually agree to terminate the collaboration or until either party exercises its early termination rights as described as follows. The OSI/Genentech collaboration agreement is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. Genentech also has the right to terminate the OSI/Genentech collaboration agreement with six months’ prior written notice. Upon such termination, the sole right to commercialize Tarceva in the United States would revert to us. The provisions of the amendment allowing us to co-promote are also subject to termination by Genentech upon a material breach of the amendment by us, which remains uncured, or upon a pattern of non-material breaches which remain uncured. In 2004, we signed a Manufacturing and Supply Agreement with Genentech that clarified our role in supplying Tarceva for the U.S. market. The OSI/Genentech collaboration agreement may be assigned or transferred by either party to any purchaser of all or substantially all of such party’s assets or all of its capital stock, or to any successor corporation via merger or consolidation.

We are also parties to an agreement with Roche whereby we have provided Roche with the right to sell Tarceva worldwide except for the United States, its territories, possessions and Puerto Rico, in exchange for a royalty and

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milestones. The OSI/Roche agreement continues until the date on which we are no longer entitled to receive a royalty on products resulting from the development of Tarceva, that is, until the date of expiration or revocation or complete rejection of the last to expire patent covering Tarceva or, in countries where there is no valid patent covering Tarceva, on the tenth anniversary of the first commercial sale of Tarceva in that country. The OSI/Roche agreement is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In addition, Roche has the right to terminate the agreement on a country-by-country basis with six months’ prior written notice. We also currently have the right to terminate the agreement on a country-by-country basis if Roche has not launched or marketed a product in such country under certain circumstances. Upon a termination, the sole right to commercialize Tarceva in any terminated country would revert to us. The OSI/Roche agreement may be assigned or transferred by either party to any purchaser of all or substantially all of such party’s assets to which the agreement relates or all of its capital stock, or to any successor corporation via merger or consolidation.

Manufacturing and Supply

We currently manage the supply of Tarceva in the United States through third-party manufacturers. Under our collaboration agreement with Genentech, we are responsible for the manufacture and supply of erlotinib, the active pharmaceutical ingredient, or API, and Tarceva tablets for pre-clinical and clinical trials and for the supply of commercial quantities of Tarceva tablets for sales within the United States. Under our collaboration agreement with Roche, Roche is responsible for the manufacture and supply of Tarceva tablets for sales outside of the United States.

Erlotinib is manufactured in a three-step process with high yield. Sumitomo Chemical Co., Ltd. and Dipharma S.p.A. are our manufacturers of the API used for commercial supplies. Both of these manufacturers also manufacture API for Tarceva clinical trials. The Sumitomo agreement terminates in November 2011 and the Dipharma agreement terminates in November 2012. Both agreements automatically renew for an additional period of two years unless terminated by either party on at least 12 months notice prior to the end of their respective initial terms. Our agreements with these manufacturers are subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In addition, we can terminate either agreement if the manufacturer is unable to supply the requested amounts of API in accordance with forecasts or if we discontinue the commercialization of Tarceva.

Schwarz Pharma Manufacturing, Inc. is our manufacturer of Tarceva tablets for clinical and commercial supplies, as well as placebo for blinded clinical studies. The Schwarz agreement terminates in February 2015 and is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In addition, we can terminate the Schwarz agreement if Tarceva is prohibited from being manufactured, shipped, sold, or marketed by the FDA or applicable regulatory authority or in the event of certain product supply failures occurring during a specified period.

Our Clinical Development Programs

We currently have three development candidates in ongoing clinical trials in oncology and diabetes/obesity, all of which are the result of our internal research efforts. Our long-term strategy is to maintain significant control over these assets and to commercialize them, in whole or in part, particularly in the United States.

OSI-906.  OSI-906 is an oral small molecule IGF-1R/IR inhibitor which we believe is among the first and most advanced small molecule inhibitors against the IGF-1R/IR target to enter clinical trials. In pre-clinical studies, OSI-906 has demonstrated synergy with Tarceva and potential utility in a number of different cancers, including NSCLC, breast, pancreatic, prostate, colorectal, ACC, HCC and ovarian. We believe that OSI-906 is potentially more effective than antibodies, given its inhibition of the _PAKT survival pathway and its ability to modulate potential compensatory signaling mechanisms in the tumor cell. We also believe that its oral administration will provide more scheduling flexibility and convenience than antibodies. Based on encouraging data from our initial Phase I studies for OSI-906 that commenced in 2007, we have initiated a broad development plan for OSI-906 that includes the following ongoing or planned studies:

•  ACC.  IGF-1R/IR signaling has been implicated in the pathogenesis of ACC, an area of significant unmet medical need. A significant proportion of patients with ACC have tumors that over-express insulin-like

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growth factor 2, or IGF-2, an IGF-1R ligand, which we believe offers a potential opportunity for patient selection. In the third quarter of 2009, we commenced the first efficacy study of OSI-906 — a Phase III trial that compares OSI-906 versus placebo in patients with advanced ACC, with the primary endpoint of overall survival. As ACC is a rare disease with a high mortality rate, our strategy is to pursue approval with the FDA as an “orphan drug” if the trial is successful, and to investigate options for accelerated approval.

•  NSCLC Maintenance.  As noted above, we commenced a Phase I combination study of Tarceva and OSI-906 based on pre-clinical data that support the importance of compensatory signaling with the IGF-1R/IR and EGFR pathways. We are currently conducting dose escalation studies with Tarceva and OSI-906, with the goal of determining the recommended dose for this combination in the first half of 2010. In the event that we are able to obtain FDA approval for Tarceva in the first-line maintenance setting, we expect to commence a randomized Phase II NSCLC maintenance study of Tarceva plus OSI-906 in patients whose cancer has not progressed following first-line treatment with platinum-based chemotherapy. Alternatively, we may commence a randomized Phase II study of Tarceva plus OSI-906 in the second-line NSCLC setting.

•  NSCLC with EGFR Mutations.  Tarceva has demonstrated impressive benefit in patients with activating EGFR mutations, however, secondary resistance eventually develops resulting in disease relapse. OSI-906 in combination with Tarceva may have the ability to improve patient outcomes through compensatory signaling and by blocking one of the resistance mechanisms to Tarceva. We are planning to initiate a randomized Phase III clinical trial that combines OSI-906 and Tarceva for the first-line treatment of advanced NSCLC patients with EGFR mutations.

•  Ovarian Cancer.  Preclinical data suggest potential synergies between OSI-906 and paclitaxel in the inhibition of IGF-1R/IR signaling pathway. We commenced a randomized Phase I/II study in September 2009 of OSI-906 in combination with paclitaxel for the treatment of advanced ovarian cancer.

•  HCC.  We are currently planning a Phase II clinical trial evaluating OSI-906 as a single agent for the treatment of advanced HCC after the failure of first-line treatment, which we expect to commence in the second half of 2010. Similar to ACC, advanced HCC is a rare disease in which a significant proportion of patients over express IGF-2 offering a patients selection opportunity for IGFR-1R targeted therapy. HCC has a high unmet medical need; therefore, we will investigate accelerated approval options if our Phase II and subsequent Phase III trials are successful.

We are also exploring a number of other potential indications for OSI-906 both as a single agent and in combination with other targeted strategies, including breast and prostate cancers.

PSN821.  PSN821, a novel GPR119 agonist, is an oral small molecule drug with potential anti-diabetic and appetite suppressing effects, which is being developed for the treatment of type 2 diabetes. GLP-1 modulation has been the target of significant industry-wide R&D, with the goal of realizing glucose dependent improvement in beta cell function, and has led to the recent development and approval of GLP-1 peptide agonists such as Eli Lilly and Company and Amylin Pharmaceuticals, Inc.’s Byetta^® (exenatide injection) and DP-IV inhibitors such as Merck & Co., Inc.’s Januvia^tm (sitagliptin) and Bristol-Myers Squibb Company’s, or BMS’s, Onglyza^® (saxagliptin). The peptide agonists can provide meaningful weight loss in addition to effective glucose lowering but are injectables that can cause nausea. The DP-IV inhibitors are more convenient oral agents, but are less effective in glucose lowering and do not provide meaningful weight loss. GPR119 agonists offer the potential for glucose lowering and meaningful weight loss with oral convenience. In pre-clinical models, PSN821 has been shown to release endogenous GLP-1 and increase beta-cell cAMP leading to improved glucose control, delayed gastric emptying, appetite suppression and weight loss. Based on the pre-clinical data set, we believe that PSN821 has the potential to be a “best-in-class” product. PSN821 is currently undergoing chemistry, manufacturing and control, or CMC, development, as well as drug metabolism and pharmacokinetics, or DMPK, and pre-clinical safety testing, to support Phase IIb clinical studies planned to commence in the first quarter of 2011. The first-in-man Phase I single ascending dose clinical study commenced in the third quarter of 2008 and included both healthy volunteers and patients with type 2 diabetes. A 14-day Phase I/IIa dosing clinical study is underway and includes both healthy volunteers and patients with type 2 diabetes.

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OSI-027.  OSI-027 is a small molecule TORC1/TORC2 inhibitor which has the potential to supersede first generation mTOR inhibitors. Unlike existing agents targeting the mTOR pathway, OSI-027 inhibits both the TORC1 and TORC2 signaling complexes, allowing for the potential for complete truncation of aberrant cell signaling through this pathway. Inhibition of TORC1 and TORC2 has been shown in pre-clinical studies to elicit robust anti-tumor activity but to carry an appreciable toxicity burden. We commenced a Phase I clinical trial of OSI-027 in July 2008, which is currently enrolling. After some initial indications of unexpected toxicities, the dose escalation process has recommenced and the study is progressing.

Other Internal and Partnered Development Programs

OSI-296.  OSI-296, a novel, potent tyrosine kinase inhibitor developed to block compensatory signaling in epithelial tumor cells, is among the first pre-clinical candidate to emerge from our EMT technology platform. In pre-clinical studies, OSI-296 has shown efficacy in a number of EMT ligand-driven tumor models and has blocked ligand-driven EMT and tumor growth. OSI-296 is in pre-clinical development. A decision on whether to move this agent into full clinical development will be made upon completion of IND-enabling safety pharmacology and toxicology studies.

PSN010.  In January 2007, we outlicensed our glucokinase activator, or GKA, program, including the small molecule Phase I clinical candidate PSN010, to Eli Lilly. GKAs are designed to have a dual effect in the pancreas and the liver resulting in increased hepatic glucose uptake in the liver and stimulated insulin secretion by the pancreas. Under the terms of our license with Eli Lilly, Eli Lilly is responsible for all aspects of clinical development, manufacturing and commercialization of PSN010 or any back-up compound included within the licensed GKA program. In return for such rights, we received an upfront payment of $25.0 million and will potentially receive milestones and other payments of up to $360.0 million and royalties based on net sales of any product arising from the licensed GKA program. The license agreement will remain in effect as long as Eli Lilly is required to pay royalties to us under the agreement. Eli Lilly is required to pay royalties on a country-by-country basis until, among other things, the expiration of the last to expire patent covering PSN010 or any back-up compound included in the licensed program in such country. The license agreement with Eli Lilly is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In the event of a termination of the agreement, licenses granted to Eli Lilly shall revert back to us. Eli Lilly has indicated that it will advance this program to Phase IIb studies in early 2010.

OSI-930.  OSI-930 is a multi-targeted TKI that principally acts as a potent co-inhibitor of the receptor tyrosine kinases c-kit and the vascular endothelial growth factor receptor-2, or VEGFR-2. It is designed to target the suppression of both cancer cell proliferation and blood vessel growth, or angiogenesis, in selected tumors. We have completed Phase I dose escalation studies of OSI-930 in healthy volunteer patients and two Phase I dose escalation studies in cancer patients, which has determined the maximum tolerated dose, or MTD, for OSI-930 both as single agent and as a possible combination therapy with Tarceva. Because of the large number of VEGFR-2 inhibitors already on the market and currently in development, we have focused on executing partnering transactions for this development program. In October 2009, we entered into an agreement granting rights to Simcere Pharmaceutical to develop, manufacture and market OSI-930 in China.

OSI-632.  OSI-632, an inhibitor of VEGFR-2, is a clinical development candidate from our prior alliance with Pfizer. Pfizer elected to discontinue development of OSI-632 (formerly CP-547,632) and, pursuant to our agreement with Pfizer, it reverted to us and we have the right to pursue its development. We are currently seeking a development partner for this compound and have signed an option agreement with PanOptica for the potential development of OSI-632 in ophthalmology.

PSN602.  PSN602 is a novel dual serotonin and noradrenaline reuptake inhibitor which also elicits 5HT_1A receptor agonism, which was being developed for the long-term treatment of obesity. Inclusion of 5HT_1A agonism has been shown in pre-clinical studies to counterbalance the undesirable cardiovascular effects of increased noradrenaline activity seen with other anti-obesity agents which inhibit the reuptake of noradrenaline and serotonin, while maintaining or improving upon efficacy. The first-in-man Phase I clinical study commenced in the second quarter of 2008 and included single and multiple ascending dosing in both healthy lean and overweight/obese

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volunteers. In the fourth quarter of 2009, we elected to discontinue this program due to lack of a sufficiently competitive clinical profile and pre-clinical safety findings.

Our Oncology and Diabetes and Obesity Discovery Efforts

Oncology Research

Our oncology research efforts are broadly centered around both translational research and drug discovery, each of which is anchored by our continued focus on understanding multiple elements of tumor biology — including onco-addiction and compensatory signaling — but with a particular focus on the biological process known as EMT and its reverse, mesenchymal-to-epithelial transition, or MET, both of which are important phenomena in developmental biology that are becoming increasingly associated with tumor biology. EMT is characterized by the combined loss of epithelial cell junction proteins, such as E-cadherin, and the gain of mesenchymal markers, such as vimentin, fibronectin or MMP-2. An increase in the proportion of cancer cells in a tumor that exhibits the loss of E-cadherin and the acquisition of a more mesenchymal phenotype is believed to correlate with poor prognosis in multiple epithelial derived solid tumors. We believe that EMT may be a marker of tumor progression, with tumors that express mesenchymal markers having a greater tendency to be invasive and to metastasize than those tumors only expressing epithelial markers. Because mesenchymal tumor cells co-opt different sets of oncogenic signaling pathways, we believe that EMT targets represent a novel therapeutic opportunity.

Our early understanding of EMT emanated from work done by our translational research group, which observed that Tarceva’s effects on different types of cancer cells appeared related to the EMT status of these cancer cells. Pursuing EMT may allow us to better understand which patients might more optimally benefit from Tarceva or other MTTs. Retrospective analysis of tumor samples from the TRIBUTE Phase III study of Tarceva in combination with chemotherapy for the treatment of front-line NSCLC patients, and subsequent retrospective analysis of tumor samples from the BR. 21 Phase III study of monotherapy Tarceva in patients who had received prior chemotherapy, suggested that those patients whose tumors abundantly expressed E-cadherin responded better to Tarceva. By acquiring or co-opting a mesenchymal phenotype, we believe that epithelial derived tumor cells utilize different growth and survival pathways and become less dependent on EGFR signaling and ultimately acquire or gain the ability to migrate, invade and metastasize. These properties suggest the need to target distinctly different signaling pathways in order to effectively treat these tumors. As a result of our study of the signaling changes associated with EMT, we have deepened our understanding of compensatory signaling mechanisms associated with pharmacological inhibition of certain receptor tyrosine kinases, or RTKs. These RTKs are involved in the regulation of EMT and tumor growth processes and therefore are attractive therapeutic targets in oncology. For example, we have determined that inhibition of EGFR in tumor cells by Tarceva can lead to enhanced phosphorylation and/or activation of IGF-1R/IR. Conversely, inhibition of IGF-1R/IR can result in increased phosphorylation of EGFR. This observation provides the principal underpinning of our strategy to combine OSI-906 and Tarceva. We believe that this phenomenon may also apply to other RTKs, and this has caused us to focus on identifying rational combinations of molecular-targeted agents directed at EMT-linked targets in order to confront compensatory signaling as a resistance mechanism in tumor cells. This new insight is leading our development project teams to plan and conduct studies of markers of EMT and EGFR signaling in retrospective and prospective clinical trials for Tarceva. These studies may enhance the likelihood of success of Tarceva in additional indications by selecting those patients most likely to better respond to therapy.

Given the importance and relevance of EMT to the therapeutic activity of Tarceva, we have focused our oncology discovery efforts on exploiting our understanding of the signaling pathways that drive EMT and on identifying drug targets that could lead to novel molecular targeted therapies. These research efforts include: (i) discovering and validating EMT-related targets; (ii) developing novel therapies and combinations of therapies against EMT-related targets; (iii) developing specialized animal models that recapitulate EMT processes; (iv) designing rational combination strategies that address compensatory signaling as an EMT-associated drug-resistance mechanism; and (v) identifying and validating biomarkers to support these programs.

In September 2007, we entered into a three-year oncology drug discovery and translational research collaboration with AVEO to help us to better understand the underlying mechanisms of the process of EMT in cancer. A main focus of the collaboration is the development of proprietary target-driven tumor models for use in

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drug screening, translational research and biomarker validation. As part of the collaboration, AVEO provides us with access to its databases of tumor targets identified from AVEO genetic screens focusing on tumor maintenance genes that drive EMT. AVEO uses its proprietary technology platform of genetically-defined mouse models of human cancer to develop for us in vivo tumor models that we believe more accurately portray contextual tumor biology then traditional xenograft models. These models are driven by EMT target genes of interest to us, which validate key EMT targets and create tools for our oncology discovery and translational research. Under the terms of the collaboration, we are responsible for the development and commercialization of all small molecule and non-antibody clinical candidates that arise from the collaboration. We own exclusively all small molecule intellectual property emanating from the collaboration and AVEO retains the rights to any antibodies and antibody-related biologics against targets from the collaboration. In addition to an upfront payment, we pay AVEO for ongoing research funding, and milestones and royalties upon successful development and commercialization of products from the collaboration. In July 2009, we expanded our collaboration with AVEO and received a non-exclusive license to use AVEO’s proprietary bioinformatics platform and data as well as the right to access a proprietary gene index related to a specific target pathway. Further, as part of the expanded collaboration, we received the right, exercisable upon payment of an option fee, to obtain a non-exclusive perpetual license to AVEO’s bioinformatics platform, as well as certain of AVEO’s tumor models and tumor archives.

Diabetes and Obesity Discovery

Our discovery efforts in diabetes and obesity currently focus on innovative, small molecule, orally bioavailable MTTs for the treatment of diabetes and obesity. The International Diabetes Federation, or IDF, estimated in 2007 that up to 246 million people worldwide have diabetes and that this number will reach 380 million by 2025. The IDF also estimated that up to 3.8 million deaths worldwide each year are a result of diabetes, representing the fourth leading cause of death by disease globally. Diabetes is a chronic disease with multiple complications, including cardiovascular and renal disease, neuropathy, blindness and premature mortality. Type 2 diabetes accounted for approximately 90% of diabetics worldwide as of 2007 and, while historically considered a disease found in adults, it is increasingly occurring in obese children. As for obesity, the World Heath Organization, or WHO, estimated in 2005 that over 1.6 billion adults worldwide were overweight, and over 400 million adults were obese. The WHO estimates that these figures will rise to 2.3 billion and 700 million, respectively, by 2015. Obesity is a major risk factor for type 2 diabetes, cardiovascular disease, musculo-skeletal disorders and certain cancers.

Beginning in 2008, we elected to concentrate our discovery efforts around the neuroendocrine control of bodyweight and glycaemia. This area covers central or peripheral nervous system or hormonal approaches to the control of bodyweight for the treatment of obesity, as well as the lowering of blood glucose together with meaningful weight loss for the treatment of type 2 diabetes. We believe that our focus in this area may ultimately lead to the development of a research platform that will allow us to identify biomarkers useful for the development of personalized medicines for diabetes and obesity. We have applied considerable effort in 2009 towards building a leading GPR119 agonist franchise, including research activities to support our first-generation GPR119 agonist PSN821 as well as discovery efforts directed towards identifying second-generation GPR119 agonists.

Our Intellectual Property

Patents and other proprietary rights are vital to our business. Our policy is to protect our intellectual property rights through a variety of means, including applying for patents in the United States and other major industrialized countries, to operate without infringing on the valid proprietary rights of others, and to prevent others from infringing our proprietary rights. We also rely upon trade secrets and improvements, unpatented proprietary know-how and continuing technological innovations to develop and maintain our competitive position. In this regard, we seek restrictions in our agreements with third-parties, including research institutions, with respect to the use and disclosure of our proprietary technology. We also enter into confidentiality agreements with our employees, consultants, scientific advisors and potential partners.

Tarceva-Related Intellectual Property

We have obtained patents for erlotinib, the API for Tarceva, in the United States, the EU, Japan, and a number of other countries. We also pursue extensions of the patent term and/or of the marketing exclusivity term in the

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countries where such extensions are available. We have been granted patent term extensions that extend our U.S. patent for erlotinib to November 2018 and corresponding patents in Europe to March 2020 and in Japan to June 2020. We also intend to seek pediatric exclusivity for Tarceva from the FDA, which, if granted, would extend the U.S. patent for erlotinib by an additional six months. We are currently pursuing U.S. and international patents for new inventions concerning various other formulations of erlotinib and related intermediate chemicals and processes. We have obtained patents covering a key polymorphic form of Tarceva throughout the world, including in the United States and Europe, which expire in 2020. We are also currently seeking patent protection for additional methods of use for Tarceva, including the use of Tarceva in combination with other compounds.

Separate and apart from this patent protection, the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, entitles Tarceva to various periods of non-patent statutory protection, known as marketing exclusivity. The patent system and marketing exclusivity work in tandem to protect our products. For Tarceva, under the Hatch-Waxman Act, we had a five-year period of new chemical entity exclusivity, which expired on November 18, 2009. On its own, this exclusivity meant that another manufacturer could not submit an abbreviated new drug application, or ANDA (i.e., an application for approval of a generic version of our product), or a 505(b)(2) new drug application, or NDA (i.e., an application for a modified version of Tarceva that relies to some degree on the FDA’s previous approval of our product), until the marketing exclusivity period ended. There is an exception, however, that allowed competitors to challenge our patents beginning four years into the exclusivity period (i.e., beginning November 18, 2008) by alleging that one or more of the patents listed in the FDA’s Orange Book are invalid, unenforceable and/or not infringed and submitting an ANDA or 505(b)(2) NDA for a generic or modified version of Tarceva. This patent challenge is commonly known as a Paragraph IV certification. These Paragraph IV certification challenges have become increasingly common throughout the biotechnology and pharmaceutical industries. Tarceva is currently covered by three patents listed in the FDA’s Approved Drugs Products List (Orange Book).

In February 2009, we received Paragraph IV certifications from two generic pharmaceutical companies — Teva Pharmaceuticals U.S.A., Inc., or Teva U.S.A., and Mylan Pharmaceuticals, Inc. In March 2009, we filed lawsuits in the U.S. District Court in Delaware against Teva U.S.A. and Mylan for infringement of U.S. Patent No. 5,747,498, or the ‘498 patent, U.S. Patent No. 6,900,221 and U.S. Patent No. 7,087,613. The filing of these lawsuits restricts the FDA from approving the ANDAs of Teva U.S.A. and Mylan until seven and one-half years have elapsed from the date of Tarceva’s initial approval (i.e., until May 18, 2012). This period of protection, referred to as the statutory litigation stay period, may end early however, in the event of an adverse court action, such as if we were to lose the patent infringement case against either Teva U.S.A. or Mylan before the statutory litigation stay period expires (i.e., the court finds the patents invalid, unenforceable, or not infringed) or if we were to fail to reasonably cooperate in expediting the litigation. On the other hand, if we prevail in the infringement action against Teva U.S.A. and/or Mylan, the ANDA with respect to such generic pharmaceutical company cannot be approved until the patents held to be infringed expire.

In light of the increasingly aggressive challenges by generic companies to innovator intellectual property, we, together with our collaborators, Genentech and Roche, continually assess the intellectual property estate for Tarceva around the world. On February 27, 2008, we filed with the U.S. Patent and Trademark Office, or USPTO, an application to reissue the ‘498 patent. In addition, we also filed with the USPTO a request for a certificate of correction with respect to the ‘498 patent seeking to correct errors of a clerical or typographical nature. The USPTO granted the certificate of correction in September 2008 and on December 29, 2009, the USPTO granted reissue patent RE41,065, replacing the ‘498 patent. The reissue patent has the same November 18, 2018 expiration date (excluding any potential six-month pediatric exclusivity period) as the original ‘498 patent. On January 26, 2010, we submitted an unopposed motion for leave to file an amended and supplemental complaint substituting RE41,065 for the ‘498 patent in the consolidated litigation with Teva U.S.A. and Mylan.

A patent corresponding to the ‘498 patent for Tarceva was granted in February 2007 in India and we, along with our collaborator Roche, successfully opposed a pre-grant opposition to this patent by Natco Pharma, Ltd. in July 2007. We also opposed Natco Pharma’s request for a compulsory license to manufacture Tarceva in India for export to Nepal and Natco Pharma withdrew this request in September 2008. We and Roche are also currently seeking to enforce our composition of matter patent against CIPLA, Ltd. with respect to a generic form of Tarceva launched by CIPLA in India in January 2008. We and Roche filed a lawsuit against CIPLA in the High Court of Delhi in New

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Delhi, India in January 2008, alleging infringement of our patent which included a request that the court issue a preliminary injunction to prevent CIPLA from manufacturing and distributing Tarceva in India. The court denied the request for the preliminary injunction in March 2008, and this decision was affirmed on appeal in April 2009. In August 2009, a special leave petition against this decision was dismissed by the Supreme Court of India. The infringement trial in India is currently ongoing. On December 15, 2009 and January 19, 2010, we filed lawsuits against Natco Pharma and Dr. Reddy’s Laboratories Ltd., respectively, in the High Court of Delhi in New Delhi, India to enforce our composition of matter patent with respect to additional generic forms of Tarceva launched by Natco Pharma and Dr Reddy’s Laboratories in India.

We have also filed lawsuits against Allmed International, Inc., of San Jose California, Natco Pharma and the Ministry of Health of Ukraine to enforce our patents against Allmed and Natco Pharma with respect to a generic form of Tarceva manufactured by Natco Pharma and distributed by Allmed in the Ukraine, and to invalidate the administrative orders from the Ministry of Health of Ukraine registering a generic version of erlotinib on the state registration for medicinal products.

In addition, Teva Pharmaceutical Industries Ltd. filed an opposition to the grant of a patent in Israel corresponding to our U.S. patent directed to a particular polymorph of Tarceva (U.S. Patent No. 6,900,221) in August 2007. This Israeli proceeding will be delayed until prosecution of a co-pending patent application in Israel is completed.

Other Intellectual Property

The DPIV assets we acquired from Probiodrug AG in 2004 include a portfolio of medical use patents. This portfolio contains a number of patent families comprising issued and pending patents and patent applications with claims relating to the use of DPIV inhibitors for the treatment of diabetes and related indications. We also have licensed sub-licensable rights to patents and patent applications claiming the use of combinations of DPIV inhibitors with other anti-diabetic drugs such as metformin. Our rights to this patent estate provide us with a source of upfront payments, and milestone and royalty revenue through the issuance of non-exclusive licenses to the patent estate. As of February 15, 2010, twelve pharmaceutical companies, including Merck, Novartis and BMS, have licenses to this patent estate. These licenses provide us with upfront payments, milestones and royalties which vary according to the individual license agreements. As of December 31, 2009, we have generated approximately $178 million in upfront license fees, milestones and royalties from the patent estate. In October 2006, Merck received FDA approval for its DPIV inhibitor, Januvia. In March 2007, Merck received EU approval for Januvia and FDA approval for Janumet^tm, Merck’s combination product of sitagliptin and metformin. In July 2008, Merck also received EU approval for Janumet. In September 2007, Novartis received EU approval for its DPIV inhibitor, Galvus^® (vildagliptin), and in November 2007, received EU approval for its combination product of vildagliptin and metformin, Eucreas^®. In July 2009 and October 2009, BMS received FDA and EU approval, respectively, for its DPIV inhibitor, Onglyza. We receive royalty payments from sales of Januvia, Janumet, Galvus, Eucreas and Onglyza.

The patents which are the subject of these DPIV licenses will expire beginning in 2017. In March 2008, we announced that the decision of Opposition Division of the European Patent Office to revoke one of our European patents relating to the use of DPIV inhibitors for lowering blood glucose levels had been upheld on appeal. As a result, royalties on sales of DPIV inhibitor products have been or will be reduced or eliminated in those territories where the patent has been revoked and where there is no other patent protection. Royalties may be restored, however, if certain currently pending patents, which are the subject of these licenses, are issued.

We have filed a number of U.S. and international patent applications relating to the OSI-906, OSI-027 and OSI-930 compounds. We have been granted U.S. patents which protect the OSI-906 compound until 2027, not including any potential patent term extension under the Hatch-Waxman Act. We have obtained a Notice of Allowance for the OSI-027 compound patent application which, if granted, would provide patent protection until 2027, not including any additional patent term adjustment determined by the USPTO or patent term extension under the Hatch-Waxman Act. In addition, we are seeking additional patent term adjustments to extend the patent terms for the patents directed to OSI-906 and OSI-027 beyond those determined by the USPTO. We have also sought patent protection for PSN821, our GPR119 agonist. We have been granted U.S. patents which protect the OSI-930

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compound and method of use until 2024, not including any potential patent term extension under the Hatch-Waxman Act.

We have assembled a large patent portfolio which includes over 1,000 granted patents. In addition to our Tarceva- and DPIV-related patents, we have an extensive portfolio of patents directed at composition of matter of our proprietary compounds, in vitro models for drug discovery, clinical biomarkers and assays, in vivo models, and method of use patents, including various combination therapies. In addition, we have approximately 1,000 pending patent applications world-wide.

Our Competition

The pharmaceutical and biotechnology industries are very competitive. We face, and will continue to face, intense competition from large pharmaceutical companies, as well as from numerous smaller biotechnology companies and academic and research institutions. Our competitors are pursuing technologies that are similar to those that comprise our technology platforms and are pursuing the development of pharmaceutical products or therapies that are directly competitive with ours. Some of these competitors have greater capital resources than we do, which provide them with potentially greater flexibility in the development and marketing of their products. In the case of Tarceva, we chose to seek partnerships with leading biotechnology and pharmaceutical industry companies, Genentech and Roche, in order to ensure our competitiveness on a global basis.

The market for oncology products is very competitive, with many products currently in Phase III development. Most major pharmaceutical companies and many biotechnology companies, including our collaborators for Tarceva, Genentech and Roche, currently devote significant operating resources to the research and development of new oncology drugs or additional indications for oncology drugs which are already marketed.

The current competition to Tarceva for the treatment of NSCLC includes existing chemotherapy options such as Alimta, Taxotere and Gemzar^® (gemcitabine), as well as Avastin, which is approved in combination with chemotherapy for the first-line treatment of patients with unresectable, locally advanced, recurrent or metastatic non-squamous NSCLC. Alimta was approved by regulatory authorities in the United States and the EU in 2009 for the first-line treatment of non-squamous NSCLC patients in combination with cisplatin, and as a monotherapy in the first-line maintenance setting. Based on the strength of its Phase III clinical data, Alimta will be a particularly strong competitor if Tarceva receives regulatory approval in the first-line maintenance setting. Tarceva also competes with AstraZeneca plc’s Iressa^® (gefitinib) in the markets where Iressa is available, such as Japan, Canada and, effective as of July 2009, the EU. Based on its approval in the EU for the first-line treatment of NSCLC patients with EGFR mutations, it is also possible that AstraZeneca may seek to amend Iressa’s label in the United States to include the treatment of NSCLC patients in this setting.

Tarceva may also face competition in the future from a number of compounds currently in clinical development for NSCLC. In December 2009, Boehringer Ingelheim announced that it had recently completed enrollment of a Phase III trial investigating the use of its compound BIBW 2992, an orally bioavailable dual receptor TKI, for the treatment of advanced NSCLC. If BIBW 2992 were to receive regulatory approval in this indication, it would be a direct competitor to Tarceva. In December 2008, ImClone Systems, BMS and Merck KGaA announced that they had submitted an application to the FDA to broaden the use of Erbitux^® (cetuximab) to include first-line treatment of patients with advanced NSCLC in combination with platinum-based chemotherapy. The submission was based primarily on positive data from a Phase III study, referred to as FLEX, of the combination of Erbitux and chemotherapy in the treatment of first-line advanced NSCLC. ImClone Systems and BMS subsequently announced in January 2009 that they had withdrawn this application, but stated that they intend to resubmit the application in the future. Tarceva may also face competition in the future from generic versions of the branded products of our competitors as these products lose their market exclusivity.

Other oncology drugs currently in clinical trials for the treatment of NSCLC either as a single agent or as a combination therapy, such as Amgen Inc.’s Vectibix^tm (panitumumab), Millennium Pharmaceuticals, Inc.’s Velcade^® (bortezomib), Pfizer’s Sutent^® (sunitinib malate) and Onyx’s Nexavar, could compete for market share in NSCLC in the future. We are aware of three current or planned Phase III clinical trials evaluating Sutent as a treatment for NSCLC, including a combination trial with Tarceva which is presently enrolling.

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In the pancreatic cancer setting, Tarceva primarily competes with Gemzar monotherapy in the first-line setting. In addition, Tarceva’s use in pancreatic cancer may be affected by experimental use of other products, such as Abraxis BioScience, LLC’s Abraxane^® (paclitaxel protein-bound particles for injectable suspension), for the treatment of pancreatic cancer in combination with gemcitabine. Tarceva could face significant competition from this combination therapy if it were to receive FDA approval for the treatment of pancreatic cancer.

Our core clinical development programs could face competition in the future if successful. OSI-906 could face competition from a number of other pre-clinical and clinical candidates which target IGF-1R/IR, including more advanced antibody clinical candidates from ImClone Systems, Roche and Pfizer. BMS, Exelixis Inc. and Insmed Incorporated have also conducted clinical trials of small molecule IGF-1R inhibitors. OSI-027, a small molecule inhibitor of both mTOR complexes, TORC1 and TORC2, could compete with rapamycin analogs, such as Pfizer’s Torisel^tm (temsirolimus) and Novartis’ Afinitor^® (everolimus), which are known to inhibit the TORC1 complex. OSI-906 and OSI-027 may also compete in the future with therapeutic agents which target other molecular pathways or cellular functions, but potentially have similar clinical applications. PSN821, our GPR119 agonist for the treatment of type 2 diabetes, would potentially compete with current and future type 2 diabetes treatments, including GPR119 agonist Phase I clinical candidates from Metabolex, Inc. and from Arena Pharmaceuticals, Inc. in partnership with Ortho-McNeil-Janssen Pharmaceuticals, Inc.

Government Regulation

As developers and sellers of pharmaceutical products, we are subject to, and any potential products discovered and developed by us must comply with, comprehensive regulation by the FDA, the Centers for Medicare and Medicaid Services and other regulatory agencies in the United States and by comparable authorities in other countries. These national agencies and other state and local entities regulate, among other things, the pre-clinical and clinical testing, safety, effectiveness, approval, manufacture, quality, labeling, distribution, marketing, export, storage, record keeping, advertising, promotion and reimbursement of pharmaceutical and diagnostic products.

Key FDA Regulations

FDA approval of our products is required before the products may be commercialized in the United States. The process of obtaining NDA approvals from the FDA can be costly and time consuming and may be affected by unanticipated delays.

The process required by the FDA before a new drug (pharmaceutical product) or a new route of administration of a pharmaceutical product may be approved for marketing in the United States generally involves:

•  pre-clinical laboratory and animal tests;

•  submission to the FDA of an investigational new drug application, or IND, which must be in effect before clinical trials may begin;

•  adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for its intended indication(s);

•  FDA compliance inspection and/or clearance of all manufacturers;

•  submission to the FDA of an NDA; and

•  FDA review of the NDA or product license application in order to determine, among other things, whether the drug is safe, effective and of appropriate quality for its intended uses.

New indications or other changes to an already approved product also must be approved by the FDA. A sNDA is a supplement to an existing NDA that provides for changes to the NDA and therefore requires FDA approval. There are two types of sNDAs depending on the content and extent of the change: (i) supplements requiring FDA approval before the change is made and (ii) supplements for changes that may be made pending FDA approval. Supplements to the labeling that change the indication section require prior FDA approval before the change can be made to the labeling. Clinical trials are necessary to support sNDAs for new indications.

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The FDA reviews all NDAs submitted before it accepts them for filing. It may refuse to file the application and request additional information rather than accept an NDA for filing, in which case the application must be resubmitted with the supplemental information. Once an NDA is accepted for filing, the FDA begins an in-depth review of the application to determine, among other things, whether a product is safe and effective for its intended use. Drugs that successfully complete NDA review may be marketed in the United States, subject to all conditions imposed by the FDA. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA has substantial discretion in the approval process and may disagree with an applicant’s interpretation of the data submitted in its NDA. The FDA can take an application to its advisory committee to get the committee’s opinion on whether the application should be approved. Though the FDA is not bound by the recommendation of the advisory committee, it is rare for the FDA not to follow the committee’s recommendation. If the FDA cannot approve an NDA they will issue a “complete response” letter describing the specific deficiencies and, where possible, will outline recommended actions for the applicant to take before the NDA can be approved. This may include conducting additional studies.

Manufacturing procedures must conform to current good manufacturing processes, or cGMPs, which must be followed at all times. In complying with this requirement, manufacturers, including a drug sponsor’s third-party contract manufacturers, must continue to expend time, money and effort in the area of production, quality assurance and quality control to ensure compliance. Manufacturing establishments are subject to periodic inspections by the FDA in order to assess, among other things, compliance with cGMP. To supply products for use in the United States, foreign manufacturing establishments also must comply with cGMPs and are subject to periodic inspection by the FDA or by regulatory authorities in certain countries under reciprocal agreements with the FDA.

We are required to comply with requirements concerning advertising and promotional labeling. Our advertising and promotional labeling must be truthful, not misleading and contain fair balance between claims of efficacy and safety. We are prohibited from promoting any claim relating to safety and efficacy that is not approved by the FDA, otherwise known as “off-label” use of products. Physicians may prescribe drugs for uses that are not described in the product’s labeling and that differ from those approved by the FDA. Such off-label uses are common across medical specialties, including in the area of oncology. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. Although the FDA does not regulate the behavior of physicians in their choice of treatments, the FDA does restrict our communications to physicians and patients on the subject of off-label use. Failure to comply with this requirement could result in adverse publicity, significant enforcement action by the FDA, including warning letters, corrective advertising, orders to pull all promotional materials, and substantial civil and criminal penalties. The Department of Justice may also pursue enforcement actions against off-label promotion which could result in criminal and/or civil fines, as well as other restrictions on the future sales of our products.

We are also required to comply with post-approval safety and adverse event reporting requirements. Adverse events related to our products must be reported to the FDA according to regulatory timelines based on their severity and expectedness. Failure to make required safety reports and to establish and maintain related records could result in withdrawal of a marketing application.

Violations of regulatory requirements at any stage, including after approval, may result in various adverse consequences, including the FDA’s delay in approving or refusal to approve a product, withdrawal or recall of an approved product from the market, other voluntary or FDA-initiated action that could delay further marketing and the imposition of criminal penalties against the manufacturer and NDA holder. In addition, later discovery of previously unknown problems may result in restrictions being placed on the product, manufacturer or NDA holder, including withdrawal of the product from the market.

The Hatch-Waxman Act

As discussed above, the Hatch-Waxman Act entitles our products to various periods of non-patent statutory protection, known as marketing exclusivity, which works in tandem with the patent system to protect our products. Thus, even if our patents are successfully challenged by our competitors, another manufacturer cannot submit an application for generic or modified versions of our products until the respective marketing exclusivity periods end.

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Four years into this marketing exclusivity period, the Hatch-Waxman Act permits another manufacturer to submit an application for approval of generic or modified versions of our products by alleging that one or more of the patents listed in the FDA’s Orange Book are invalid, unenforceable and/or not infringed. This allegation is commonly known as a Paragraph IV certification. If a Paragraph IV certification is filed, the NDA and patent holders may bring a patent infringement suit against the applicant. If this action is brought within 45 days of receipt of the Paragraph IV certification, the FDA cannot approve the ANDA or 505(b)(2) application for 30 months from the date of our receipt of the Paragraph IV certification. In addition, if such patent infringement action is so commenced within such 45-day period and occurs during the one-year period beginning on the fourth anniversary of the commencement of the marketing exclusivity period, the 30-month period is extended by an amount of time such that the FDA cannot approve the ANDA until seven and one-half years have elapsed from the date of initial approval. This period of protection, referred to as the statutory litigation stay period, may end early, however, if, for example, we lose the patent infringement case before the statutory litigation stay period expires (i.e., a court finds the patent invalid, unenforceable or not infringed) or if we fail to reasonably cooperate in expediting the litigation. On the other hand, if we win the patent suit, the ANDA or 505(b)(2) application cannot be approved until the expiration of the patent held to be infringed.

Under the Hatch-Waxman Act, the life of our patents may be extended to compensate for marketing time lost while developing our products and awaiting FDA approval of our applications. The extension cannot exceed five years, and the total life of the patent with the extension cannot exceed 14 years from a product’s approval date. The period of extension is generally one-half of the time between the effective date of the IND and the date of submission of the NDA, plus the time between the date of submission of the NDA and the date of FDA approval of the product. Only one patent claiming each approved product is eligible for the extension. We have been granted patent term extensions that extend our U.S. patent for erlotinib through November 2018, and corresponding patents in Europe have been extended through March 2020 under European legislation for supplementary protection certificates and in Japan through June 2020.

Pricing and Reimbursement

Insurance companies, health maintenance organizations, other third-party payors and federal and state governments seek to limit the amount they reimburse for our drugs. Although there are currently no government price controls over private sector purchases in the United States, federal legislation requires pharmaceutical manufacturers to pay prescribed rebates on certain drugs to enable them to be eligible for reimbursement under certain public health care programs. Various states have adopted mechanisms under Medicaid that seek to control drug reimbursement, including by disfavoring certain higher priced drugs and by seeking supplemental rebates from manufacturers. Managed care has also become a potent force in the market place that increases downward pressure on the prices of pharmaceutical products.

Effective January 1, 2006, an expanded prescription drug benefit for all Medicare beneficiaries, known as Medicare Part D, commenced. This is a voluntary benefit that is being implemented through private plans under contractual arrangements with the federal government. Like pharmaceutical coverage through private health insurance, Medicare Part D plans establish formularies and other utilization management tools that govern access to the drugs and biologicals that are offered by each plan. These formularies can change on an annual basis, subject to federal governmental review. These plans may also require beneficiaries to provide out-of-pocket payments for such products. As a prescription medication, reimbursement and payment for Tarceva is frequently administered through Medicare Part D plans. As a result, changes in the formularies or utilization management tools employed by these plans can restrict patient access to Tarceva or increase the out-of-pocket cost for our drug, which in turn could negatively impact Tarceva sales.

Regulatory approval of prices is required in most foreign countries. Certain countries will condition their approval of a product on the agreement of the seller not to sell that product for more than a certain price in that country and in the past have required price reductions after or in connection with product approval. Certain foreign countries also require that the price of an approved product be reduced after that product has been marketed for a period of time. A number of European countries, including Germany, Italy, Spain and the United Kingdom, have implemented, or are considering, legislation that would require pharmaceutical companies to sell their products

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subject to reimbursement at a mandatory discount. Such mandatory discounts would reduce the revenue we receive from our drug sales in these countries.

Other Regulation

In addition to regulations enforced by the FDA, we must also comply with regulations under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other federal, state and local regulations. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements may apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws. In addition, our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds, the handling and disposal of which are governed by various state and federal laws and regulations.

We are subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws generally make it illegal for a prescription drug manufacturer to knowingly and willfully solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the recommendation, purchase or prescription of a particular drug. False claims laws prohibit, among other things, anyone from knowingly and willfully presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid), claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed or claims for medically unnecessary items or services. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including imprisonment, fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid). In addition, under some of these laws, there is an ability for private individuals to bring similar actions. Further, there are an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws.

We are also subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations and individuals from engaging in specified activities to obtain or retain business or to influence a person working in an official capacity. Under the FCPA, it is illegal to pay, offer to pay or authorize the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. In 2009, we implemented a comprehensive anti-bribery and FCPA compliance program that includes an audit of key business activities, the adoption of an anti-bribery and FCPA policy and targeted training for our employees.

In addition, federal and state laws protect the confidentiality of certain health information, in particular individually identifiable information, and restrict the use and disclosure of that information. At the federal level, the Department of Health and Human Services promulgated health information privacy and security rules under the Health Insurance Portability and Accountability Act of 1996. In addition, many state laws apply to the use and disclosure of health information.

In January 2009, we elected to adopt the revised voluntary Code on Interactions with Healthcare Professionals, or PhRMA Code, promulgated by the Pharmaceutical Research and Manufacturers of America. The updated PhRMA Code, which became effective in January 2009, addresses interactions with respect to marketed products and related pre-launch activities and reinforces the intention that interactions with healthcare professionals are professional exchanges designed to benefit patients and to enhance the practice of medicine.

Ardsley Site Consolidation

On July 7, 2009, we announced our plans to consolidate all of our U.S. operations onto a single campus located in Ardsley, New York in Westchester County. On July 20, 2009, we completed the purchase of the 43-acre site, which consists of approximately 400,000 square feet of existing office and laboratory space, for $27 million dollars. We are in the process of renovating the Ardsley site, which we expect to complete by the end of 2010, at an estimated cost of approximately $100 million. We also expect to incur approximately $30 million in restructuring-related costs through the end of 2011 in connection with the consolidation. We anticipate that consolidating our

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oncology R&D, commercial, medical and other support functions at a single site will enhance our oncology R&D capabilities, confer a strategic value to our oncology organization and result in substantial business efficiencies. We expect to realize at least $15 million in annual operational synergies from the consolidation starting in 2011.

In January 2010, we expanded our existing agreement with Novella Clinical, Inc., a clinical research organization, to facilitate the transition of our clinical operations in oncology to our Ardsley, New York campus. Under the terms of the expanded agreement, Novella has agreed to provide us with clinical research and related services for a period of two years, hire certain employees at our Boulder, Colorado facilities and sublease a portion of these facilities, effective February 1, 2010.

Our Employees

We believe that our success is largely dependent upon our ability to attract and retain qualified employees. As of December 31, 2009, we had a total of 512 full-time and 23 part-time employees worldwide. As of February 1, 2010, approximately 70% of our U.S.-based employees have committed to moving with us to our new Ardsley facility.

Available Information

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 electronically with the Securities and Exchange Commission, or SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.osip.com or by contacting the Investor Relations Department at our corporate offices by calling (631) 962-2000 or sending an e-mail message to investorinfo@osip.com.

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ITEM 1A.   RISK FACTORS

This report contains forward-looking statements that do not convey historical information, but relate to predicted or potential future events, such as statements of our plans, strategies and intentions, or our future performance or goals for our product development programs. These statements can often be identified by the use of forward-looking terminology such as “believe,” “expect,” “intend,” “may,” “will,” “should,” or “anticipate” or similar terminology. The statements involve risks and uncertainties and are based on various assumptions. Stockholders and prospective stockholders are cautioned that these statements are only projections. In addition, any forward-looking statement that we make is intended to speak only as of the date on which we made the statement. Except for our ongoing obligations to disclose material information under the federal securities laws, we will not update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made. The following risks and uncertainties, among others, may cause our actual results to differ materially from those described in forward-looking statements made in this report or presented elsewhere by management from time to time.

Risks Related to Our Business

We depend heavily on our principal marketed product, Tarceva, to generate revenues in order to fund our operations.

We currently derive most of our revenues from our principal marketed product, Tarceva, which represented approximately 84% of our total revenues from continuing operations for the year ended December 31, 2009. For the next several years, we will continue to rely on Tarceva to generate the majority of our revenues. Our ability to maintain or increase our revenues for Tarceva will depend on, and may be limited by, a number of factors, including the following:

•  Our ability to maintain and expand the market share, both in the United States and in the rest of the world, and revenues for Tarceva in the treatment of second-line and third-line NSCLC and for first-line pancreatic cancer, in the midst of numerous competing products which are currently in late stage clinical development;

•  Whether data from clinical trials for additional indications are positive and whether such data, if positive, will be sufficient to achieve approval from the FDA and its foreign counterparts to market and sell Tarceva in such additional indications;

•  Whether physicians are willing to switch from existing treatment methods, including traditional chemotherapy agents (where certain reimbursement practices in the United States favor the use of intravenously administered drugs), to Tarceva;

•  Current and future pricing pressures on Tarceva, including as a result of government-imposed price reductions, an increase in imports of Tarceva from lower cost countries to higher cost countries and pressure on physicians to reduce prescriptions of higher priced medicines like Tarceva;

•  Adequate coverage or reimbursement for Tarceva by third-party payors, including private health coverage insurers and health maintenance organizations; and

•  The ability of patients to afford any required co-payments for Tarceva. The risk that patients will not be able to afford the co-payments for Tarceva may become particularly acute if the recent global financial crisis is prolonged or worsens.

If Tarceva were to become the subject of problems related to its efficacy, safety, or otherwise, or if new, more effective treatments were introduced into the market, our revenues from Tarceva could decrease.

If Tarceva becomes the subject of problems, including those related to, among others:

•  efficacy or safety concerns with the product, even if not justified;

•  unexpected side-effects;

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•  regulatory proceedings subjecting the product to potential recall;

•  pressure from competitive products;

•  introduction of more effective treatments; or

•  manufacturing or quality problems that would reduce or disrupt product availability,

our revenues from Tarceva could decrease. For example, efficacy or safety concerns from time to time arise, whether or not justified, that could lead to additional safety warnings on the label, including a “black box” warning that highlights significant safety concerns, or to the recall or withdrawal of Tarceva. In the event of a recall or withdrawal of Tarceva, our revenues would decline significantly.

Our strategy includes expanding uses for Tarceva; however, there can be no assurance that the positive results from the SATURN trial will result in Tarceva receiving the required regulatory approvals for expanded use in NSCLC nor that the data from other clinical trials for additional indications will be positive or sufficient to achieve approval from the FDA and its foreign counterparts to market and sell Tarceva in such additional indications.

In December 2009, the FDA’s ODAC voted 12 to one recommending against approval of Tarceva for first-line maintenance use in people with NSCLC whose cancer has not progressed following first-line treatment with platinum-based chemotherapy, which we refer to as first-line maintenance. The ODAC reviewed data from the pivotal Phase III study, SATURN, which showed statistically significant improvement in both PFS and overall survival when Tarceva was used in the first-line maintenance setting, compared to placebo. In January 2010, we announced that the FDA had extended the review period for the sNDA for Tarceva as a first-line maintenance therapy by an additional 90 days. This extension followed our submission of further data in support of the application. While we believe that the SATURN trial data justifies the approval of Tarceva as a first-line NSCLC maintenance therapy, there can be no assurance that FDA or its foreign counterparts will approve Tarceva in this indication. While the FDA is not obligated to follow the recommendations of ODAC, it typically does. In addition, even if Tarceva receives approval as a first line maintenance therapy, there can be no assurances that Tarceva will gain acceptance among prescribing physicians or that such approval will result in increased Tarceva sales.

We are also conducting a number of other clinical trials which seek to expand the existing indications for Tarceva. The results from these clinical trials are difficult to predict; positive results from pilot studies or other similar studies, including subset analyses from prior studies, are not a guarantee of success in subsequent studies. In addition, there can be no guarantee that such studies, if positive, will result in approvals from the FDA and its foreign counterparts for new indications for Tarceva.

We depend heavily on our co-development and marketing alliance with Genentech and Roche for Tarceva. If Genentech or Roche terminate these alliances, or are unable to meet their contractual obligations, it could negatively impact our revenues and harm our business until appropriate corrective measures have been taken.

Tarceva is being developed and commercialized in an alliance under co-development and marketing agreements with Genentech and Roche. Following Roche’s completion of the acquisition of the remaining outstanding shares of Genentech in 2009, Roche has assumed global responsibility for managing the Tarceva alliance. Operationally, however, Genentech continues to lead the sales and marketing efforts of Tarceva in the United States, and Roche continues to market and sell Tarceva in the rest of the world. The OSI/Genentech collaboration agreement continues until the date on which neither we nor Genentech are entitled to receive a share of the operating profits or losses on any products resulting from the collaboration, that is, until the date that we and Genentech mutually agree to terminate the collaboration or until either party exercises its early termination rights as described as follows. The OSI/Genentech collaboration agreement is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In addition, Genentech has the right to terminate the OSI/Genentech collaboration agreement with six months’ prior written notice. The provisions of the amendment to the agreement allowing us to co-promote are also subject to termination by Genentech upon a material breach of the amendment by us, which remains uncured, or upon a pattern of nonmaterial breaches which remain uncured.

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The OSI/Roche agreement continues until the date on which we are no longer entitled to receive a royalty on products resulting from the development of Tarceva, that is, until the date of expiration or revocation or complete rejection of the last to expire patent covering Tarceva or, in countries where there is no valid patent covering Tarceva, on the tenth anniversary of the first commercial sale of Tarceva in that country. The OSI/Roche agreement is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In addition, Roche has the right to terminate the agreement on a country-by-country basis with six months’ prior written notice. We also currently have the right to terminate the agreement with respect to a particular country under certain circumstances if Roche has not launched or marketed a product in such country.

If we do not maintain a successful collaborative alliance with Roche for the co-development and commercialization of Tarceva, or if Roche is unable to meet its contractual obligations, we may be forced to focus our efforts internally to further commercialize and develop Tarceva without the assistance of a marketing and promotion partner. This would require greater financial resources and would result in us incurring greater expenses and may cause a delay in market penetration while we expand our commercial operations or seek alternative collaborators. Such costs may exceed the increased revenues we would receive from direct Tarceva sales, at least in the near term.

If we do not receive timely and accurate financial information from Genentech and Roche regarding the development and sale of Tarceva, we may be unable to accurately report our results of operations.

Due to our collaborations with Genentech and Roche for Tarceva, we are highly dependent on these companies for timely and accurate information regarding the costs incurred in developing and selling Tarceva, and any revenues realized from its sale, in order to accurately report our results of operations. If we do not receive timely and accurate information associated with the co-promotion and development of Tarceva, we may be required to record significant adjustments to our revenues or expenses in future periods and/or restate our results for prior periods. Such inaccuracies or restatements could cause a loss of investor confidence in our financial reporting or lead to legal claims against us.

We are responsible for the manufacture and supply of Tarceva in the United States. Because we have no commercial manufacturing facilities, we are dependent on two suppliers for the API for Tarceva and a single supplier for the tableting of Tarceva in the United States. If any of these third parties fails to meet its obligations, our revenues from Tarceva could be negatively affected.

We are responsible for manufacturing and supplying Tarceva in the United States under the terms of a Manufacturing and Supply Agreement entered into with Genentech in 2004. We rely on two third-party suppliers to manufacture erlotinib, the API for Tarceva. We also currently rely on a single manufacturer to formulate the Tarceva tablets. If our relationships with any of these manufacturers with respect to Tarceva terminate or if these manufacturers are unable to meet their obligations, we would need to find other sources of supply. Such alternative sources of supply may be difficult to find on terms acceptable to us or in a timely manner, and, if found, would require FDA approval which could cause delays in the availability of erlotinib and ultimately Tarceva tablets, which, in turn, would negatively impact our revenues derived from Tarceva.

Our business will be increasingly affected by pressures on drug pricing, which may limit or reduce the prices we can charge for Tarceva in the future and the pricing structure available to future products emanating from our pipeline.

The growth of overall healthcare costs in many countries means that governments and payors are under pressure to control spending even more tightly. As a result, our business and the pharmaceutical and biotechnology industries in general are operating in an increasingly challenging environment with very significant pricing pressures. These ongoing pressures include government-imposed industry-wide price reductions, mandatory pricing systems, an increase in imports of drugs from lower cost countries to higher cost countries, shifting of the payment burden to patients through higher co-payments and growing pressure on physicians to reduce prescriptions of higher priced medicines like Tarceva. We expect these efforts to continue as healthcare payors — in particular, government-controlled health authorities, insurance companies and managed care organizations — increase their efforts to reduce the overall cost of healthcare, which may limit or reduce the prices we

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can charge in the future for Tarceva and any future products emanating from our pipeline. These pricing pressures could become particularly acute if the current global financial crisis is prolonged or worsens.

Our revenues from our DPIV patent portfolio licenses are contingent upon the ability of our licensees to successfully develop and commercialize their products which are the subject of these licenses and our ability to protect our intellectual property rights in our DPIV patent estate.

We have licensed our DPIV medical use patent portfolio to pharmaceutical companies that develop and commercialize DPIV inhibitor products. We currently derive, or have the potential to derive in the future, revenues from the milestone and royalty obligations under these license agreements. Licensees include Merck, whose product Januvia was approved by the FDA in October 2006 and in the EU in March 2007. Merck’s combination product with metformin, Janumet, was approved by the FDA in March 2007 and in the EU in July 2008. Novartis is also a licensee and it received EU regulatory approval for its product, Galvus, in September 2007. Additionally, in November 2007, Novartis received EU regulatory approval for its combination product with metformin, Eucreas. BMS, which received FDA approval for its DPIV inhibitor, Onglyza, in July 2009 and EU approval in October 2009, is also a licensee of the DPIV estate. There can be no assurance that the licensees of our DPIV patent estate will receive any further approvals from the FDA or other regulatory authorities. The amount of royalties and other payments that we derive from our DPIV patent estate is not only dependent on the extent to which products covered by the license agreements receive regulatory approval but is also dependent on how successful Merck, Novartis, BMS and other licensees are in expanding the global market for DPIV inhibitor products, as well as other factors that could affect their market share, such as safety issues and generic competition. The extent to which we receive revenue under such licenses also depends on our ability to enforce and defend our patent rights in our DPIV portfolio. As an example, in March 2008, we announced that the decision of the Opposition Division of the European Patent Office to revoke one of our European patents relating to the use of DPIV inhibitor products for lowering blood glucose levels had been upheld on appeal. As a result, royalties on sales of DPIV inhibitor products have been or will be reduced or eliminated in those territories where the patent has been revoked and where there is no other patent protection. Our ability to receive DPIV-related revenues also depends on the ability of our licensees to enforce their patent rights on their DPIV-related products, which may face Paragraph IV certification challenges from generic drug companies under the Hatch-Waxman Act upon the fourth anniversary of FDA approval. The first DPIV product that may face such a challenge is Merck’s Januvia, which may be the subject of a Paragraph IV certification beginning in October 2010. If Merck or our other licensees face generic competition for their DPIV products before expiration of our patent rights in our DPIV portfolio, sales from those products will decline, adversely affecting the royalty revenues we receive from those products.

Healthcare reform measures could adversely affect our business.

The United States government and governments in foreign countries have shown significant interest in pursuing healthcare reform in order to reduce costs of healthcare. Any government-adopted reform measures could adversely impact the pricing of Tarceva and our future products or the amount of reimbursement available from governmental agencies or other third-party payors. The pricing and reimbursement environment for our products may become more challenging due to, among other reasons, any new healthcare legislation passed by the U.S. Congress, at the state level, or by foreign governments. For example, in the United States, federal Medicare proposals, along with state Medicaid drug payment changes and healthcare reforms, could lower payments for our products or create financial disincentives for plans to provide access to Tarceva. Further, some states have proposed health care reform legislation requiring greater price reductions and narrowing coverage for drugs, which could impact our products. Additionally, these proposals or separate state and federal proposals could increase the costs of doing business in their respective jurisdictions. While we cannot predict what, if any, legislative or regulatory proposals will be adopted, the announcement or adoption of such proposals could delay or prevent our entry into new markets for our products, affect our sales in the markets where we are already selling Tarceva and materially and adversely affect our business, financial condition and results of operations.

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If our competitors succeed in developing products and technologies that are more effective than our own, or if scientific developments change our understanding of the potential scope and utility of our products, then our products and technologies may be rendered less competitive.

We face significant competition from industry participants that are pursuing products and technologies that are similar to those we are pursuing and who are developing pharmaceutical products that are competitive with our products and potential products. Some of our industry competitors have greater capital resources and larger overall research and development staffs and facilities. With these additional resources, our competitors may be able to respond to the rapid and significant technological changes in the biotechnology and pharmaceutical industries faster than we can. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies. Rapid technological development, as well as new scientific developments, may result in our compounds, products or processes becoming obsolete before we can recover any of the expenses incurred to develop them.

The current competition to Tarceva for the NSCLC indication includes existing chemotherapy options such as Alimta, which has been approved in the United States and the EU for the first-line treatment of non-squamous NSCLC patients in combination with cisplatin and as a monotherapy in the first-line maintenance setting, Taxotere and Gemzar, as well as Avastin, which is approved in combination with chemotherapy for the first-line treatment of patients with unresectable, locally advanced, recurrent or metastatic non-squamous NSCLC. Tarceva also competes with AstraZeneca’s Iressa in the markets where Iressa is available, such as Japan, Canada and the EU. Based on Iressa’s approval in the EU in 2009, it is possible that AstraZeneca may seek to amend Iressa’s label in the United States to include the first-line treatment of NSCLC for patients with EGFR mutations.

Tarceva may face competition in the future with a number of compounds currently in development for NSCLC. In December 2009, Boehringer Ingelheim announced that it had completed enrollment of a Phase III trial investigating the use of its compound BIBW 2992, an orally bioavailable, dual TKI for the treatment of advanced NSCLC. If BIBW 2992 were to receive regulatory approval in this indication, it would be a direct competitor to Tarceva. In December 2008, ImClone Systems, BMS and Merck KGaA announced that they had submitted an application to the FDA to broaden the use of Erbitux to include first-line treatment of patients with advanced NSCLC in combination with platinum based chemotherapy. The submission was based primarily on positive data from a Phase III study, referred to as FLEX, of the combination of Erbitux and chemotherapy in the first-line treatment of advanced NSCLC. ImClone Systems and BMS subsequently announced in January 2009 that they had withdrawn this application, but stated that they intend to resubmit the application in the future, which would result in additional competition for Tarceva if approved. Tarceva may also face competition in the future from generic versions of the branded products of our competitors as these products lose their market exclusivity.

Other oncology drugs currently in clinical trials for the treatment of NSCLC either as a single agent or as a combination therapy, such as Amgen’s Vectibix, Millennium’s Velcade, Pfizer’s Sutent and Bayer and Onyx’s Nexavar, could compete for market share in NSCLC in the future. We are aware of three current or planned Phase III clinical trials evaluating Sutent as a treatment for NSCLC, including a combination trial with Tarceva which is presently enrolling.

In the pancreatic cancer setting, Tarceva primarily competes with Gemzar monotherapy in the first-line. In addition, Tarceva use in pancreatic cancer may be affected by experimental use of other products, such as Abraxis Bioscience’s Abraxane, for the treatment of pancreatic cancer in combination with gemcitabine. Tarceva could face significant competition from this combination therapy if it were to receive FDA approval for the treatment of pancreatic cancer.

Our core clinical development programs could face competition in the future if successful. OSI-906, our oral small molecule IGF-1R/IR inhibitor, could face competition from a number of other pre-clinical and clinical candidates which target the IGF-1R/IR, including more advanced antibody clinical candidates from ImClone, Roche and Pfizer. BMS, Exelixis and Insmed have also conducted clinical trials of small molecule IGF-1R inhibitors. OSI-027, a small molecule inhibitor of both mTOR complexes, TORC1 and TORC2, could compete with rapamycin analogs, such as Pfizer’s Torisel and Novartis’ Afinitor, which are known to inhibit the TORC1 complex. OSI-906 and OSI-027 may also compete in the future with therapeutic agents which target other molecular pathways or cellular functions, but potentially have similar clinical applications. PSN821, our GPR119 agonist

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Phase I clinical candidate for the treatment of type 2 diabetes, would potentially compete with current and future type 2 diabetes treatments, including GPR119 agonist Phase I clinical candidates from Metabolex and Arena Pharmaceuticals in partnership with Ortho-McNeil-Janssen Pharmaceuticals.

Although we have clinical and pre-clinical candidates in the pipeline for oncology and diabetes and obesity that appear to be promising, none of these potential products may reach the commercial market for a number of reasons.

Successful research and development of pharmaceutical products is high risk. Most products and development candidates fail to reach the market. Our success depends on the discovery and development of new drugs that we can commercialize. Many of our pipeline candidates for our oncology and diabetes and obesity clinical programs, including those that we deem to be core assets, are at an early stage. Two of our three development candidates — OSI-027 and PSN821— are in early stage clinical trials, and while OSI-906 has commenced later-stage clinical trials for the treatment of ACC, there can be no assurance that any of these candidates will become a marketed drug.

The clinical candidates in our pipeline may never reach the market for a number of reasons. They may be found ineffective or may cause harmful side-effects during pre-clinical testing or clinical trials or fail to receive necessary regulatory approvals. Interim results of pre-clinical or clinical studies are not necessarily predictive of their final results, and acceptable results in early studies might not be seen in later studies, in large part because earlier phases of studies are often conducted on smaller groups of patients than later studies, and without the same trial design features, such as randomized controls and long-term patient follow-up and analysis. We may find that certain products cannot be manufactured on a commercial scale and, therefore, they may not be economical to produce. Our products could also fail to achieve market acceptance or be precluded from commercialization by proprietary rights of third parties.

We must provide the FDA and similar foreign regulatory authorities with pre-clinical and clinical data that demonstrate that our product candidates are safe and effective for each target indication before they can be approved for commercial distribution. The pre-clinical testing and clinical trials of any product candidates that we develop must comply with regulations by numerous federal, state and local government authorities in the United States, principally the FDA, and by similar agencies in other countries. Clinical development is a long, expensive and uncertain process and is subject to delays. We may encounter delays or rejections based on our inability to enroll or keep enrolled enough patients to complete our clinical trials, especially as new competitors are approved to enter into the market. Patient enrollment depends on many factors, including the size of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites, the eligibility criteria for the trial and the existence of competing clinical trials. Delays in patient enrollment may result in increased costs and a longer than anticipated period of time until data become available, which could have a harmful effect on our ability to develop products.

A significant portion of the research that we are conducting involves new and unproven technologies. Research programs to identify disease targets and product candidates require substantial technical, financial and human resources, whether or not we ultimately identify any candidates. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield candidates for clinical development for a number of reasons, including difficulties in formulation which cannot be overcome, inadequate intellectual property protection and timing and competitive concerns.

Our reliance on third parties, such as clinical research organizations, or CROs, and manufacturers, may result in delays in completing, or a failure to complete, clinical trials if they fail to perform under our agreements with them.

In the course of product development, we engage CROs to conduct and manage clinical studies and to manufacture API and drug product. Because we have engaged, and intend to continue to engage, CROs and third-party manufacturers to help us conduct our clinical studies, obtain market approval for our drug candidates and manufacture API and drug product, many important aspects of this process have been, and will be, out of our direct control. If the CROs or third-party manufacturers fail to perform their obligations under our agreements with them or fail to perform their responsibilities with respect to clinical trials in compliance with good clinical practices, cGMPs, regulations and guidelines enforced by the FDA and similar foreign regulatory authorities, such trials may be materially delayed or terminated, adversely impacting our ability to commercialize our drug candidates.

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Furthermore, any loss or delay in obtaining contracts with such CROs and third-party manufacturers may also delay the completion of our clinical trials and the market approval of drug candidates.

Our operating results could be adversely affected by fluctuations in the value of the U.S. dollar against foreign currencies.

A significant percentage of our revenues are derived from royalties on sales of Tarceva outside of the United States by Roche, and our operating expenses relating to our U.K. subsidiary are denominated in British pounds sterling, or GBP. As result, these Tarceva revenues and U.K. operating expenses are affected by fluctuating foreign currency exchange rates. An increase in the U.S. dollar relative to other currencies in which we have revenues will cause our revenues to be lower than with a stable exchange rate. Changes in exchange rates between the GBP and the U.S. dollar can affect the recorded levels of the assets, liabilities and expenses relating to our U.K. operations. The primary foreign currencies in which we have exchange rate fluctuation exposure are the Euro, the GBP and the Swiss franc, but we also have exposure to exchange rate fluctuation in other currencies. Exchange rates between these currencies and U.S. dollars have fluctuated significantly in recent years, particularly as the current global financial crisis has unfolded, and may continue to do so in the future. We cannot predict the impact of future exchange rate fluctuations on our operating results.

We cannot be certain that any hedging transactions we may enter into will adequately protect us from significant changes in foreign currency exchange rates which would potentially impact our operating results negatively.

In order to manage our exposure to severe fluctuations in foreign currency exchange rates, we have entered, and will continue to enter, from time to time into hedging arrangements with respect to a portion of our foreign currency exposure. These contracts are intended to reduce the effects of variations in currency exchange rates. Such transactions may expose us to the risk of financial loss in certain circumstances, including instances in which there is a change in the expected differential between the underlying exchange rate in the hedging agreement and actual exchange rate.

We may not be able to make our required payments of interest and principal under our outstanding indebtedness when due, and may not be able to repurchase for cash our 2% convertible senior subordinated notes due 2025, or our 2025 Notes, or our 3% convertible senior subordinated notes due 2038, or our 2038 Notes, if required to do so in 2010 and 2013, respectively. If we elect to repurchase our 3.25% convertible senior subordinated notes due 2023, or our 2023 Notes, with our common shares, our shareholders would experience dilution and our stock price may decline.

Our aggregate debt under our 2023 Notes, 2025 Notes and 2038 Notes was approximately $335 million as of December 31, 2009. While we are currently generating sufficient net cash flow to satisfy our anticipated annual interest payments on our outstanding convertible debt and have a cash and short term investment balance in excess of our debt, there can be no assurance that this will be the case in the future. In addition, the holders of the 2023 Notes, the 2025 Notes and the 2038 Notes have the right to require us to repurchase their notes in September 2013, December 2010, and January 2013, respectively. While the 2023 Notes provide us with the option of delivering our common stock in lieu of cash in the event that the holders of the 2023 Notes require us to repurchase all or a portion of their 2023 Notes, the 2025 Notes and the 2038 Notes must be repurchased with cash. If we do not have sufficient resources at the time these obligations are due, we may be required to borrow additional funds or sell additional equity to meet these obligations, but there can be no guarantee that we will be able to raise such capital at the appropriate time on favorable terms or at all. If we are unable to make our annual interest payments or repay any of our convertible notes when due, we will default on our 2023 Notes, the 2025 Notes and the 2038 Notes, permitting the note holders to declare the notes immediately due and payable. There can be no assurance that we will have sufficient capital resources to repay our convertible notes in the event that such a default right is triggered.

We may incur risk in connection with the consolidation of our U.S. operations to Ardsley, New York.

In July 2009, we announced plans to consolidate our U.S. operations onto a single campus located in Ardsley, New York in Westchester County. We anticipate that the majority of the consolidation activities and expenses will

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be completed by the end of 2010. As a consequence of the consolidation, we face several risks including the disruption of our ongoing business, the distraction of employees, increased employee turnover and possible loss of key employees, which can result in loss of productivity and a delay in the advancement of some or all of our development activities in oncology.

Global credit and financial market conditions could negatively impact the value of our current portfolio of cash equivalents and investment securities.

Our cash and cash equivalents are maintained in highly liquid investments with maturities of 90 days or less at the time of purchase. Our investment securities consist of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. As of the date of this filing, we are not aware of any material losses or other significant deterioration in the fair value of our cash equivalents or investment securities since December 31, 2009; however, no assurance can be given that further deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents and investment securities and, as result, our financial condition.

Our effective income tax rate may increase in the future, reducing our net income.

Various internal and external factors may result in an increase to our future effective income tax rate. These factors include, but are not limited to, changes in U.S. and foreign tax laws, regulations, and/or rates; the results of any tax examinations; changing interpretations of existing U.S. and foreign tax laws or regulations; changes in estimates of prior years’ items; past and future levels of R&D spending; acquisitions; changes in our corporate structure; and changes in overall levels of income before taxes — all of which may result in periodic revisions to our effective income tax rate. An increase in our effective income tax rate would have a negative effect on our results from operations, reducing our net income.

The value of our strategic investments may decline, requiring us to impair the value of these investments and thereby reducing our net income.

As a key component of our business strategy, we have made, and plan to continue to make, investments in companies that are in relatively early stages of development. These investments are generally illiquid and inherently risky, as the technologies or products that these companies are pursuing are typically in the early stages of development and may never materialize. Impairments of these investments could occur for a number of reasons, including adverse events with respect to the business or prospects for the underlying companies or a deterioration of market conditions. We may be required to record an impairment charge on a portion or all of the value of these investments and have recorded such impairment charges in the past. Any declines in value of any of our investments that are deemed other than temporary would reduce our net income in future periods when determined.

Risks Relating to Regulatory Matters

Generic competitors can challenge our U.S. patents by filing an ANDA or a 505(b)(2) NDA for a generic or a modified version of Tarceva and negatively affect our competitive position.

Separate and apart from the protection provided under the U.S. patent laws, Tarceva is also subject to the provisions of the Hatch-Waxman Act which provides Tarceva with a five-year period of marketing exclusivity following FDA approval on November 18, 2004. The Hatch-Waxman Act prohibits the FDA from accepting the filing of an ANDA application (for a generic product) or a 505(b)(2) NDA (for a modified version of the product) for such five-year period. There is an exception, however, that allows competitors to challenge our patents beginning four years into the exclusivity period (i.e., beginning November 18, 2008 for Tarceva) by alleging that one or more of the patents listed in the FDA’s Orange Book are invalid, unenforceable and/or not infringed and submitting an ANDA or 505(b)(2) NDA for a generic or modified version of Tarceva. This patent challenge is commonly known as a Paragraph IV certification. Within the past several years, the generic industry has aggressively pursued approvals of generic versions of innovator drugs at the earliest possible point in time.

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In February 2009, we received Paragraph IV certifications from two generic companies — Teva U.S.A and Mylan. In March 2009, we filed lawsuits in U.S. District Court in Delaware against Teva U.S.A. and Mylan for infringement of U.S. Patent No. 5,747,498, U.S. Patent No. 6,900,221 and U.S. Patent No. 7,087,613. The filing of these lawsuits restricts the FDA from approving the ANDAs of Teva U.S.A. and Mylan until seven and one-half years have elapsed from the date of Tarceva’s initial approval (i.e., until May 18, 2012). This period of protection, referred to as the statutory litigation stay period, may end early, however, in the event of an adverse court action, such as if we were to lose either patent infringement case before the statutory litigation stay period expires (i.e., the court finds the patents invalid, unenforceable, or not infringed) or if we were to fail to reasonably cooperate in expediting the litigation. On the other hand, if we prevail in either infringement action, the ANDA cannot be approved until the patents held to be infringed expire. Tarceva is currently protected by three patents listed in the FDA’s Approved Drugs Products List (Orange Book).

Additionally, following the conclusion of the statutory litigation stay period, or earlier date due to a loss of the statutory litigation stay protection, if the ANDA or 505(b)(2) NDA filing has been approved, a generic company may choose to launch a generic version of Tarceva notwithstanding the pendency of our infringement action or any appeal. This is referred to as an “at-risk launch” and is an aggressive strategy pursued by generic companies that has occurred more frequently in the last few years. Any launch of a generic version of Tarceva prior to the expiration of patent protection, whether as a result of the loss of the patent infringement litigation or due to an at-risk launch, will have a material adverse effect on our revenues for Tarceva and our results of operations.

If we do not receive adequate third-party reimbursement for the sales of Tarceva, we may see a reduction in the profitability of Tarceva.

Sales of Tarceva depend, in part, upon the extent to which the costs of Tarceva are paid by health maintenance organizations, managed care, pharmacy benefit and similar reimbursement sources, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. Such third-party payors continue to aggressively challenge the prices charged for healthcare products and services. Additionally, federal, state and foreign governments have prioritized the containment of healthcare costs, and drug prices have been targeted in this effort. If these organizations and third-party payors do not consider Tarceva to be cost-effective, they may not reimburse providers of our products, or the level of reimbursement may reduce the profitability of Tarceva. As an example, while the U.K.’s National Institute of Health and Clinical Excellence recommended funding by the National Health Service for Tarceva in NSCLC, it still has not recommended reimbursement for Tarceva for the treatment of pancreatic cancer.

Beginning January 1, 2006, Medicare beneficiaries could obtain expanded prescription drug coverage through a new Medicare drug benefit that is administered by private, Medicare-approved drug plans. This voluntary benefit allows beneficiaries to choose among various Medicare prescription drug plans based on cost and scope of coverage. Generally, such plans include Tarceva within the scope of the plan, with beneficiaries having to pay various amounts of copayments when obtaining Tarceva. Since plans adjust their formularies on a regular basis, we cannot provide assurance that Tarceva will continue to be included in the same number of plans or at the same level of coverage, and this could adversely affect our revenues. In addition, new legislation may be proposed that could change the Medicare prescription drug benefit and affect the payments for Tarceva under the program.

Government involvement and/or control over pricing of pharmaceutical products can have a negative effect on the revenues that we receive from Tarceva.

In some foreign countries, particularly Canada and the EU countries, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our products to other available therapies. In most countries within the EU, individual governments determine the pricing of medicines, which can result in wide variations for the same product, and member states of the EU may impose new or additional cost-containment measures for drug products. Indeed, in recent years, price reductions and rebates have been mandated in several EU countries, including Germany, Italy, Spain and the United Kingdom. Future mandatory price reductions in the EU or Japan could adversely impact our

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royalty revenues for Tarceva. In the United States, there is, and we expect that there will continue to be, federal, state and local legislation aimed at imposing pricing controls. If such additional legislation is enacted, it would reduce the revenues that we receive for Tarceva in the United States.

The manufacture and packaging of pharmaceutical products, such as Tarceva, are subject to the requirements of the FDA and similar foreign regulatory bodies. If we or our third party manufacturers fail to satisfy these requirements, our or their product development and commercialization efforts may be materially harmed.

The manufacture and packaging of pharmaceutical products, such as Tarceva and our future product candidates, are regulated by the FDA and similar foreign regulatory bodies and must be conducted in accordance with the FDA’s cGMPs and comparable requirements of foreign regulatory bodies. There are a limited number of manufacturers that operate under these cGMP regulations who are both capable of manufacturing our products, and willing to do so. Our failure or the failure of our third party manufacturers to comply with applicable regulations, requirements or guidelines could result in sanctions being imposed on us or them, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. We cannot be certain that we or our present or future suppliers will be able to comply with the pharmaceutical cGMP regulations or other FDA or foreign regulatory requirements. If we fail to meet our manufacturing obligations for Tarceva, our collaborator, Genentech, has the contractual right to take over the supply of Tarceva in the United States.

Changes in the manufacturing process or procedure, including a change in the location where a product is manufactured or a change of a third party manufacturer, require prior FDA review and/or approval of the manufacturing process and procedures in accordance with the FDA’s cGMPs. This review may be costly and time consuming and could delay or prevent the launch of a product or the use of a facility to manufacture a product. In addition, if we elect to manufacture products at the facility of another third party, we will need to ensure that the new facility and the manufacturing process are in substantial compliance with cGMPs. Any such change in facility would be subject to a pre-approval inspection by the FDA and the FDA would require us to demonstrate product comparability. Foreign regulatory agencies have similar requirements.

Any prolonged interruption in the operations of our contractor’s manufacturing facilities could result in cancellations of shipments, loss of product in the process of being manufactured, a shortfall or stock-out of available product inventory or a delay in clinical trials, any of which could have a material adverse impact on our business. A number of factors could cause prolonged interruptions in manufacturing.

In addition, the U.S. federal government and several states impose drug pedigree law requirements designed to record the chain of custody of prescription drugs. Compliance with these pedigree laws may require implementation of tracking systems as well as increased documentation and coordination with our customers. Although there may be changes in these requirements and government enforcement may vary, failure to comply could result in fines or penalties, as well as supply disruptions that could have a material adverse effect on our business.

The FDA and similar foreign regulatory bodies may also implement new standards or change their interpretation and enforcement of existing standards and requirements for manufacture, packaging or testing of products at any time. If we are unable to comply, we may be subject to regulatory, civil actions or penalties which could significantly and adversely affect our business.

If government agencies do not grant us or our collaborators required approvals for any of our potential products in a timely manner or at all, we or our collaborators will not be able to distribute or sell our products currently under development.

All of our potential products must undergo extensive regulatory approval processes in the United States and other countries. These regulatory processes, which include pre-clinical testing and clinical trials of each compound to establish safety and efficacy, can take many years and require the expenditure of substantial resources. The FDA and the other regulatory agencies in additional markets which are material to us and our collaborators, including the EMEA and the Japanese Ministry of Health, may delay or deny the approval of our potential products. Although we have been successful in gaining regulatory approval for Tarceva in the United States and our collaborators have

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gained approval for Tarceva in Canada, Japan, the EU and a number of other territories, there can be no guarantee of subsequent approvals for Tarceva in other territories or for other indications in the United States or for other products in the United States and other territories.

Delays or rejections may be encountered during any stage of the regulatory process based upon the failure of the clinical data to demonstrate compliance with, or upon the failure of the product to meet, a regulatory agency’s requirements for safety, efficacy and quality. Any such delay could have a negative effect on our business. A drug candidate cannot be marketed in the United States until it has been approved by the FDA. Once approved, drugs, as well as their manufacturers, are subject to continuing and ongoing review, and discovery of previously unknown problems with these products or the failure to adhere to manufacturing or quality control requirements may result in restrictions on their distribution, sale or use, or their withdrawal from the market. The FDA also has the authority, when approving a product, to impose significant limitations on the product in the nature of warnings, precautions and contra-indications, or restrictions on the indicated use, conditions for use, labeling, advertising, promotion, marketing, distribution and/or production of the product that could negatively affect the profitability of a drug. Failure to comply with a Phase IV commitment can lead to FDA action either to withdraw approval of a drug or to limit the scope of approval.

Furthermore, once a drug is approved, it remains subject to ongoing FDA regulation. For example, the FDA’s Amendments Act of 2007 provides the FDA with expanded authority over drug products after approval. This legislation enhances the FDA’s authority with respect to post-marketing safety surveillance, including, among other things, the authority to require: (i) additional post-approval studies or clinical trials; (ii) the submission of a proposed risk evaluation and mitigation strategy; and (iii) label changes as a result of safety findings. These requirements may affect our ability to maintain marketing approval of our products or require us to make significant expenditures to obtain or maintain such approvals. This new law also enhances the FDA’s enforcement authority, as well as civil and criminal penalties for violations.

Approved drugs may be marketed only for the indications and claims approved by the FDA. If we fail to comply with the FDA regulations prohibiting promotion of off-label uses and the promotion of products for which marketing clearance has not been obtained, the FDA, the Office of the Inspector General of the U.S. Department of Health and Human Services, the Department of Justice or state Attorneys General could bring an enforcement action against us that would inhibit our marketing capabilities and result in significant penalties. Additional post-approval regulation by the FDA includes changes to the product label, new or revised regulatory requirements for manufacturing practices, written advisements to physicians or a product recall.

The current regulatory framework could change or additional regulations could arise at any stage during our product development or marketing, which may affect our ability to obtain or maintain approval of our products or require us to make significant expenditures to obtain or maintain such approvals. The ability to market and sell a drug product outside of the United States is also subject to stringent and, in some cases, equally complex regulatory processes that vary depending on the jurisdiction.

Some of our activities may subject us to risks under federal and state laws prohibiting “kickbacks” and false or fraudulent claims, which could subject us to potential civil and criminal penalties and exclusion from federal healthcare programs.

We are subject to the provisions of a federal law commonly known as the Federal Health Care Programs’ anti-kickback law, and several similar state laws, which prohibit, among other things, payments intended to induce physicians or others either to purchase or arrange for, or recommend the purchase of, healthcare products or services. While the federal law applies only to products or services for which payment may be made by a federal healthcare program, state laws may apply regardless of whether federal funds may be involved. These laws constrain the sales, marketing and other activities of manufacturers of drugs such as OSI, by limiting the kinds of financial arrangements that manufacturers can have with hospitals, physicians and other potential purchasers or prescribers of drugs. Other federal and state laws generally prohibit individuals or entities from knowingly and willfully presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, or are for items or services that were not provided as claimed. Anti-kickback and false claims laws prescribe civil and criminal penalties for noncompliance that can be substantial, including the

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possibility of imprisonment, fines and exclusion from federal healthcare programs (including Medicare and Medicaid).

Pharmaceutical companies have been the target of lawsuits and investigations alleging violations of government regulation, including claims asserting violations of the federal False Claims Act, the federal health care programs’ anti-kickback statute and other violations in connection with off-label promotion of products and Medicare and/or Medicaid reimbursement, or related to claims under state laws, including state anti-kickback and false claims laws. While we continually strive to comply with these complex requirements, interpretations of the applicability of these laws to marketing practices is ever evolving and even an unsuccessful challenge could cause adverse publicity and be costly to respond to.

If Tarceva is imported into the United States, the EU or Japan from countries where the cost of the drug is lower, it will negatively affect our sales and profitability and harm our business.

Our revenues for Tarceva will be adversely impacted if we face competition in the United States, the EU, Japan or China from lower priced imports from countries where government price controls or other market dynamics have resulted in a lower price for Tarceva. The ability of patients and other customers to obtain these lower priced imports has grown significantly as a result of the Internet, an expansion of pharmacies which specifically target purchasers in countries where drug costs are higher and other factors. Many of these foreign imports are illegal under current law. However, the volume of imports continues to rise due to the limited enforcement resources of U.S. and foreign regulatory and customs authorities, and political pressure in the United States, the EU and Japan to permit the imports as a mechanism for expanding access to lower priced medicines.

In the United States, in December 2003, federal legislation was enacted to modify U.S. import laws and expand the ability for lower priced pharmaceutical products to be imported from Canada, where government price controls have been enacted. These changes to the import laws will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will lead to substantial savings for consumers and will not create a public health safety issue. However, it is possible that this Secretary, or a subsequent Secretary, could make such a certification in the future. In addition, legislation has been proposed to implement the changes to the import laws without any requirement for certification from the Secretary of Health and Human Services, and to broaden permissible imports in other ways. Even if these changes to the import laws do not take effect, and other changes are not enacted, lower priced imports of products from Canada and elsewhere may continue to increase due to market and political forces, and the limited enforcement resources of the FDA, the U.S. Customs Service and other government agencies. For example, state and local governments have suggested that they may import drugs from Canada for employees covered by state health plans or others, and some have already enacted such plans.

In Europe, the importation of pharmaceutical products from countries where prices are low to those where prices for those products are higher, known as parallel trade, may increase. Parallel trade occurs because third parties can exploit the price differential by purchasing drug products in markets where low prices apply and selling them to state authorities and other purchasers in those markets where drugs can be sold at higher prices. There are indications that parallel trade is affecting markets in the EU, and the recent addition of countries from central and eastern Europe to the EU could result in significant increases in the parallel trading of drug products in that region.

The availability of lower priced imports will decrease our sales and thereby decrease our profitability. This impact could become more significant in the future, and the impact could be even greater if there is a further change in the law or if state or local governments take further steps to permit lower priced imports from abroad.

Changes in laws, regulations, accepted clinical procedures or social pressures could restrict our use of animals in testing and therefore adversely affect our R&D activities.

Certain of our R&D activities involve the use of laboratory animals. Changes in laws, regulations or accepted clinical procedures relating to the use of animals in testing may adversely affect our business by delaying or interrupting our R&D activities. In addition, social pressures that would restrict the use of animals in testing, or actions or protests against us or our collaborators by groups or individuals opposed to animal testing, could also delay or interrupt our R&D activities and could disrupt our U.S. and U.K. operations.

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Risks Related to Intellectual Property and Legal Matters

If we cannot successfully protect, exploit or enforce our intellectual property rights, our ability to develop and commercialize our products, and receive revenues from licenses under our intellectual property, will be adversely affected.

We hold numerous U.S. and foreign patents as well as trademarks and trade secrets; we also have many pending applications for additional patents. We intend to continue to seek patent protection for, or maintain as trade secrets, the potentially valuable intellectual property arising from our research and development activities, including commercially promising product candidates that we have discovered, developed or acquired. Our success depends, in part, on our ability and our collaborators’ ability to obtain and maintain patent protection for new product candidates, maintain trade secret protection and operate without infringing the valid and enforceable proprietary rights of third parties. As with most biotechnology and pharmaceutical companies, our patent position is highly uncertain and involves complex legal and factual questions. Without patent and other similar protection, other companies could offer the same or substantially identical products for sale without incurring the sizeable discovery and development costs that we have incurred. Our ability to recover these expenditures and realize profits upon the sale of products could be diminished. The process of obtaining patents can be time-consuming and expensive with no certainty of success. Even if we spend the necessary time and money, a patent may not issue or it may insufficiently protect the technology it was intended to protect. Even if issued, such issuance is not conclusive as to a patent’s validity or its enforceability.

Our patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to prevent or stop competitors from marketing similar products or may limit the length of term of patent protection we may have for our products. Specifically, we are currently involved in litigation with Teva U.S.A. and Mylan, which have alleged that the three patents listed in the Orange Book for Tarceva are invalid, unenforceable, or will not be infringed by generic versions of erlotinib for which these generic pharmaceutical companies have sought FDA approval to commercialize in the United States. In addition, a patent corresponding to the ‘498 patent was granted in February 2007 in India and survived a pre-grant opposition by Natco Pharma in July 2007. We and Roche, are currently seeking to enforce this patent against CIPLA with respect to a generic form of Tarceva launched by CIPLA in India. Together with Roche, we filed a lawsuit against CIPLA in the High Court of Delhi in New Delhi, India in January 2008, alleging infringement of our patents which included a request that the court issue a preliminary injunction to prevent CIPLA from manufacturing and distributing Tarceva in India. The court denied the request for a preliminary injunction in March 2008, and this decision was affirmed on appeal in April 2009. In August 2009, a special leave petition against this decision was dismissed by the Supreme Court of India. We recently filed additional lawsuits in India against Natco Pharma and Dr. Reddy’s Laboratories to enforce our composition of matter patents for Tarceva against these companies, which have launched generic forms of Tarceva in India. We have also filed lawsuits against Allmed International, Inc., of San Jose California, Natco Pharma and the Ministry of Health of Ukraine to enforce our patents against Allmed and Natco Pharma with respect to a generic form of Tarceva manufactured by Natco Pharma and distributed by Allmed in the Ukraine, and to invalidate the administrative orders from the Ministry of Health of Ukraine registering a generic version of erlotinib on the state registration for medicinal products.

In addition, Teva Pharmaceuticals filed an opposition to the grant of a patent in Israel corresponding to our U.S. patent directed to a particular polymorph of Tarceva (U.S. Patent No. 6,900,221) in August 2007. This Israeli proceeding will be delayed until prosecution of a co-pending patent application in Israel is completed.

If we are unsuccessful in enforcing or defending our patents in any of these proceedings and the patents are revoked without possibility of appeal, this could reduce our future potential royalty revenue from sales of Tarceva in these countries and increase the possibility that generic Tarceva will be unlawfully distributed and/or sold into countries where we have patent exclusivity which, in turn, would adversely impact our Tarceva revenues.

We can never be certain that we were first to develop technology or that we were first to file a patent application for a particular technology because most U.S. patent applications are confidential until a patent publishes or issues, and publications in the scientific or patent literature lag behind actual discoveries. If our pending patent applications are not approved for any reason or if we are unable to receive patent protection for additional proprietary

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technologies that we develop, the degree of future protection for our proprietary rights will remain uncertain. Third parties may independently develop similar or alternative technologies, duplicate some or all of our technologies, design around our patented technologies or challenge our pending or issued patents. Furthermore, the laws of foreign countries may not protect our intellectual property rights effectively or to the same extent as the laws of the United States. In addition, some countries do not offer patent protection for certain biotechnology-related inventions. If our intellectual property rights are not adequately protected, we may not be able to commercialize our technologies, products or services and our competitors could commercialize our technologies, which could result in a decrease in our sales and market share that would harm our business and operating results.

We are also party to licenses that give us rights to third-party intellectual property that may be necessary or useful to our business. Our success will depend in part on the ability of our licensors to obtain, maintain and enforce our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications to which we have licenses. Even if patents issue in respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents or may pursue such litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

If we or our collaborators are required to obtain licenses from third parties, our revenues and royalties on any commercialized products could be reduced.

The development of some of our products may require the use of technology developed by third parties. The extent to which efforts by other researchers have resulted or will result in patents and the extent to which we or our collaborators will be forced to obtain licenses from others, if available, on commercially reasonable terms is currently unknown. If we or our collaborators must obtain licenses from third parties, fees must be paid for such licenses, which would reduce the revenues and royalties we may receive on commercialized products.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be negatively impacted.

In addition to patented technology, we rely upon unpatented proprietary technology, trade secrets, processes and know-how. We seek to protect this information in part by entering into confidentiality agreements with our employees, consultants and third parties. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors.

The failure to prevail in litigation and/or the costs of litigation, including patent infringement claims, could harm our financial performance and business operations and could cause delays in product introductions.

We are susceptible to litigation. For example, as a public company, we are subject to claims asserting violations of securities laws and derivative actions. In addition, from time to time we may need to commence litigation in order to enforce our patent rights by bringing an infringement action relating to our patents against third parties, such as our current lawsuits filed against Teva U.S.A. and Mylan for infringement of certain Tarceva-related patents. Also, we cannot ensure that our products or methods do not infringe upon the patents or other intellectual property rights of third parties. As the biotechnology and pharmaceutical industries expand and more patents are filed and issued, the risk increases that our patents or patent applications for our product candidates may give rise to a declaration of interference by the USPTO, or to administrative proceedings in foreign patent offices, or that our activities lead to claims of patent infringement by other companies, institutions or individuals. These entities or persons could bring legal proceedings against us seeking substantial damages or seeking to enjoin us from researching, developing, manufacturing or marketing our products, which could result in substantial costs and harm our reputation. If any of these actions are successful, we may not only be required to pay substantial damages for past use of the asserted intellectual property but we may also be required to cease the infringing activity or obtain the requisite licenses or rights to use the technology, that may not be available to us on acceptable terms, if at all. Litigation and other proceedings may also absorb significant management time.

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Litigation is inherently unpredictable and we may incur substantial expense in defending ourselves or asserting our rights in the litigation in which we are currently involved or in new lawsuits or claims brought against us. Litigation can be expensive to defend, regardless of whether a claim has merit, and the defense of such actions may divert the attention of our management that would otherwise be engaged in running our business and utilize resources that would otherwise be used for the business. In the event of an adverse determination in a lawsuit or proceeding, or our failure to license essential technology, our sales could be harmed and/or our costs increase, which would harm our financial condition and our stock price may decline. While we currently maintain insurance that we believe is adequate, we are subject to the risk that our insurance will not be sufficient to cover claims.

The use of any of our potential products in clinical trials and the sale of any approved products exposes us to liability claims.

The nature of our business exposes us to potential liability risks inherent in the research, development, manufacturing and marketing of drug candidates and products. If any of our drug candidates in clinical trials or our marketed products harm people or allegedly harm people, we may be subject to costly and damaging product liability claims. Many patients who participate in clinical trials are already ill when they enter a trial. The waivers we obtain may not be enforceable and may not protect us from liability or the costs of product liability litigation. While we currently maintain product liability insurance that we believe is adequate, we are subject to the risk that our insurance will not be sufficient to cover claims. There is also a risk that adequate insurance coverage will not be available in the future on commercially reasonable terms, if at all. The successful assertion of an uninsured product liability or other claim against us could cause us to incur significant expenses to pay such a claim, could adversely affect our product development and could cause a decline in our product revenues. Even a successfully defended product liability claim could cause us to incur significant expenses to defend such a claim, could adversely affect our product development and could cause a decline in our product revenues.

Risks Related to Our Common Stock

Our stock price remains volatile which could make it difficult for our stockholders to resell our common stock at desirable prices.

If our stock price falls, our stockholders may not be able to sell their stock at desirable prices. When the stock prices of companies in the NASDAQ Biotechnology Index fall, our stock price will most likely fall as well. The stock price of biotechnology and pharmaceutical companies, including our stock price, has been volatile and may remain volatile for the foreseeable future.

The following factors, among others, some of which are beyond our control, may also cause our stock price to decline:

•  a decline in sales of Tarceva;

•  a decline in our business operating results or prospects;

•  a general economic slowdown in the United States, Europe or other key international markets where Tarceva is sold;

•  adverse events with respect to our intellectual property;

•  a prolonged interruption in the manufacture or supply of Tarceva;

•  announcement or launching of technological innovations or new therapeutic products by third parties;

•  positive or negative clinical efficacy or safety results from our competitors’ products;

•  public concern as to the safety, or withdrawal, of our products and potential products;

•  comments by securities analysts regarding us or our competitors and general market conditions;

•  future sales of substantial amounts of our common stock by us or existing stockholders;

•  negative developments concerning strategic alliance agreements;

•  changes in government regulation, including pricing controls, that impact our products;

•  material delays in our key clinical trials;

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•  negative or neutral clinical trial results, including clinical trial results for additional indications for Tarceva;

•  delays with the FDA in the approval process for products and clinical candidates; and

•  developments in laws or regulations that impact our patent or other proprietary rights.

Our governance documents and state law provide certain anti-takeover measures which will discourage a third party from seeking to acquire us and may impede the ability of stockholders to remove and replace our board of directors and, therefore, our management.

We have had a shareholder rights plan, commonly referred to as a “poison pill,” since January 1999. The purpose of the shareholder rights plan is to protect stockholders against unsolicited attempts to acquire control of us that do not offer a fair price to our stockholders as determined by our board of directors. Under the plan, the acquisition of 17.5% or more of our outstanding common stock by any person or group, unless approved by our board of directors, will trigger the right of our stockholders (other than the acquiror of 17.5% or more of our common stock) to acquire additional shares of our common stock, and, in certain cases, the stock of the potential acquiror, at a 50% discount to market price, thus significantly increasing the acquisition cost to a potential acquiror.

The shareholder rights plan may have the effect of dissuading a potential hostile acquiror from making an offer for our common stock at a price that represents a premium to the then-current trading price. In addition, our certificate of incorporation and by-laws contain certain additional anti-takeover protective devices. For example,

•  no stockholder action may be taken without a meeting, without prior notice and without a vote; solicitations by consent are thus prohibited;

•  special meetings of stockholders may be called only by our board of directors, or by our stockholders holding 20% of our outstanding shares upon 90 days prior written notice;

•  nominations by stockholders of candidates for election to the board of directors at our annual meeting of stockholders must be made at least 45 days prior to the anniversary of the date on which we first mailed our proxy materials for the prior year’s annual meeting of stockholders; and

•  our board of directors has the authority, without further action by the stockholders, to fix the rights and preferences, and issue shares, of preferred stock. An issuance of preferred stock with dividend and liquidation rights senior to the common stock and convertible into a large number of shares of common stock could prevent a potential acquiror from gaining effective economic or voting control.

Further, we are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, restricts certain transactions and business combinations between a corporation and a stockholder owning 15% or more of the corporation’s outstanding voting stock for a period of three years from the date the stockholder becomes a 15% stockholder. In addition to discouraging a third party from acquiring control of us, the foregoing provisions could impair the ability of existing stockholders to remove and replace our management and/or our board of directors.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

There are no unresolved staff comments.

ITEM 2.   PROPERTIES

The following is a summary of the principal facilities which we utilize in our operations:

Ardsley, New York.  In July 2009, we completed the purchase of a 43-acre site at 420 Saw Mill River Road, Ardsley, New York for the purpose of consolidating all of our U.S. operations into a single location. We are in the process of renovating the Ardsley site, which consists of approximately 400,000 square feet of existing office and laboratory space, and expect to complete most of the renovations by the end of 2010. Upon completion of the consolidation, the Ardsley site will serve as the site of all of our U.S. based operations, including our principal executive, oncology R&D, commercial, medical, finance, legal and administrative offices.

Melville, New York.  We own a facility at 41 Pinelawn Road, Melville, New York, consisting of approximately 60,000 square feet. The facility currently houses our principal executive, oncology, finance, legal and administrative offices.

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Farmingdale, New York.  We lease a facility at One BioScience Park Drive, Farmingdale, New York, consisting of approximately 62,000 square feet. Our Farmingdale facility currently contains our drug discovery laboratories for oncology.

Cedar Knolls, New Jersey.  We lease a facility at 140 Hanover Avenue, Cedar Knolls, New Jersey, consisting of approximately 25,000 square feet. Our Cedar Knolls facility currently contains certain of our regulatory, quality control and drug development operations for oncology.

Boulder, Colorado.  We lease two facilities in Boulder, Colorado, which together currently house our clinical and pre-clinical research, regulatory and drug development operations for oncology. One facility is located at 2860 Wilderness Place, and consists of approximately 60,000 square feet and the other one is located at 2970 Wilderness Place, and consists of approximately 26,000 square feet. In February 2010, we subleased approximately 11,000 square feet of our facility at 2970 Wilderness Place to Novella Clinical.

Oxford, England.  In 2009, we completed the purchase of the two buildings that comprise our facility in Oxford, England, consisting in total of approximately 88,000 square feet. This facility houses our diabetes and obesity corporate and R&D operations, as well as certain oncology development operations.

As part of the consolidation of our U.S. operations in Ardsley, New York, we are currently assessing our options for each of our leased facilities in Farmingdale, New York, Cedar Knolls, New Jersey and Boulder Colorado, which we expect to ultimately exit, and our owned facility in Melville, New York.

ITEM 3.   LEGAL PROCEEDINGS

In March 2009, we filed lawsuits in U.S. District Court in Delaware against Teva U.S.A and Mylan for patent infringement of the ‘498 patent, U.S. Patent No. 6,900,221 and U.S. Patent No. 7,087,613. The filing of these lawsuits restricts the FDA from approving the ANDAs of Teva U.S.A. and Mylan until seven and one-half years have elapsed from the date of Tarceva’s initial approval (i.e., until May 18, 2012). This period of protection, referred to as the statutory litigation stay period, may end early however, in the event of an adverse court action, such as if we were to lose the patent infringement case against either Teva U.S.A. or Mylan before the statutory litigation stay period expires (i.e., the court finds the patent invalid, unenforceable, or not infringed) or if we were to fail to reasonably cooperate in expediting the litigation. On the other hand, if we prevail in the infringement action against Teva U.S.A. and/or Mylan, the ANDA with respect to such generic pharmaceutical company cannot be approved until the patent held to be infringed expires.

We and Roche are also currently seeking to enforce Tarceva’s composition of matter patent against CIPLA, Ltd. with respect to a generic form of Tarceva launched by CIPLA in India in January 2008. We, together with Roche filed a lawsuit against CIPLA in the High Court of Delhi in New Delhi, India in January 2008, which included a request that the court issue a preliminary injunction to prevent CIPLA from manufacturing and distributing Tarceva in India. The court denied this request in March 2008 and this decision was affirmed on appeal in April 2009. In August 2009, a special leave petition appealing this decision was dismissed by the Supreme Court of India. The infringement trial in India is currently ongoing. On December 15, 2009 and January 19, 2010, we filed lawsuits against Natco Pharma and Dr. Reddy’s Laboratories, respectively, in the High Court of Delhi in New Delhi, India to enforce our composition of matter patent with respect to additional generic forms of Tarceva launched by Natco Pharma and Dr Reddy’s Laboratories in India.

We have also filed lawsuits against Allmed International, Inc., of San Jose California, Natco Pharma and the Ministry of Health of Ukraine to enforce our patents against Allmed and Natco Pharma with respect to a generic form of Tarceva manufactured by Natco Pharma and distributed by Allmed in the Ukraine, and to invalidate the administrative orders from the Ministry of Health of Ukraine received by Natco Pharma and Allmed approving the sale of such generic products.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of our security holders during the fourth quarter of fiscal 2009.

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded in the over-the-counter market and is included for quotation on the NASDAQ National Market under the symbol OSIP. The following is the range of high and low sales prices by quarter for our common stock from January 1, 2008 through December 31, 2009 as reported on the NASDAQ National Market:

2009 FISCAL YEAR	HIGH		LOW
First Quarter	$	43.00	$	32.28
Second Quarter	$	38.30	$	27.07
Third Quarter	$	36.29	$	27.01
Fourth Quarter	$	35.90	$	30.31

2008 FISCAL YEAR	HIGH		LOW
First Quarter	$	49.21	$	33.46
Second Quarter	$	42.10	$	32.10
Third Quarter	$	53.71	$	41.21
Fourth Quarter	$	48.98	$	31.33

Holders and Dividends

As of February 15, 2010, there were approximately 2,590 holders of record of our common stock. We have not paid any cash dividends since inception and we do not intend to pay any cash dividends in the foreseeable future. Declaration of dividends will depend, among other things, upon future earnings, our operating and financial condition, our capital requirements and general business conditions.

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information as of December 31, 2009

						Number of
						securities
						remaining
						available for
	Number of					future issuance
	securities to be					under equity
	issued upon			Weighted-average		compensation
	exercise of			exercise price of		plans (excluding
	outstanding			outstanding		securities
	options, warrants			options, warrants		reflected in the
Plan category	and rights(a)			and rights(b)		first column)
Equity compensation plans approved by security holders		7,219,401	(c)	$	38.51		3,051,605	(e)
Equity compensation plans not approved by security holders		289,809	(d)	$	48.25		—
Total		7,509,210		$	38.93		3,051,605

a)	Includes stock options, restricted stock, restricted stock units and deferred stock units.
b)	The weighted-average exercise price of outstanding options, warrants and rights does not include restricted stock, restricted stock units and deferred stock units, as they are issued for no cash consideration.
c)	Consists of three plans: the 1997 Incentive and Non-Qualified Stock Option Plan, the 1999 Incentive and Non-Qualified Stock Option Plan and the Amended and Restated Stock Incentive Plan.

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d)

In connection with the acquisition of certain oncology assets from Gilead Sciences, Inc. on December 21, 2001, we adopted a Non-Qualified Stock Option Plan for Former Employees of Gilead Sciences, Inc. As of December 31, 2009, there was 190,419 of options outstanding with a grant price of $45.01 per share, which represented the fair value of our stock at the date granted. With respect to each option grant, one-third of the options vested on the first anniversary of the date of grant and the remainder vested ratably monthly thereafter for 24 months.

e)

Consists of 346,750 shares reserved for issuance under the 1995 Employee Stock Purchase Plan and the stock purchase plan for our U.K.-based employees, and 2,704,855 shares reserved for issuance under the Amended and Restated Stock Incentive Plan.

We have a policy of rewarding employees who achieve 10, 15, 20 and 25 years of continued service with our company with 100, 150 or 200 shares of our common stock depending on years of service. We grant such shares of common stock on an annual basis to those individuals who meet the stated requirements.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

The following table reflects the repurchase of $39.5 million principal amount of our 2023 Notes and the repurchase of $40.0 million principal amount of our 2038 Notes, in the fourth quarter of 2009, as described in this Form 10-K. In addition, the table reflects shares of common stock withheld from employees to satisfy their tax withholding obligations arising upon the vesting of restricted equity awards granted under our Amended and Restated Stock Incentive Plan.

Issuer Purchases of Equity Securities

						Total Number of		Maximum Number (or
						Shares (or Units)		Approximate Dollar
						Purchased as Part		Value) of Shares (or Units)
	Total Number of			Average Price		of Publicly		that May Yet Be
	Shares (or Units)			Paid per Share		Announced Plans or		Purchased Under the
Period	Purchased			(or Unit)		Programs		Plans or Programs
October 1, 2009 – October 31, 2009		—			—		N/A		N/A
November 1, 2009 – November 30, 2009		—			—		N/A		N/A
December 1, 2009 – December 31, 2009		113,581	(1)	$	34.02		N/A		N/A
		789,364	(2)	$	50.02
		541,852	(3)	$	73.82

(1)	Consists of shares of common stock withheld from employees to satisfy their tax withholding obligations arising upon the vesting of restricted equity awards granted under our Amended and Restated Stock Incentive Plan.
(2)	In December 2009, we repurchased an aggregate of $39.5 million principal amount of our 2023 Notes. These were open market repurchases. The repurchased 2023 Notes were subsequently cancelled. The table reflects the number of shares of common stock into which the cancelled notes would have been convertible if the holders of such notes exercised the right to convert the notes at the conversion price of $50.02 prior to the maturity of the 2023 Notes in accordance with the terms of the Indenture for the 2023 Notes.
(3)	In December 2009, we repurchased an aggregate of $40.0 million principal amount of our 2038 Notes. These were open market repurchases. The repurchased 2038 Notes were subsequently cancelled. The table reflects the number of shares of common stock into which the cancelled notes would have been convertible if the holders of such notes exercised the right to convert the notes at the conversion price of $73.82 prior to the maturity of the 2038 Notes in accordance with the terms of the Indenture for the 2038 Notes.

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ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected consolidated financial data as of and for the years ended December 31, 2009, 2008, 2007, 2006 and 2005. As a result of our decision to divest the eye disease business previously held by our wholly owned subsidiary, (OSI) Eyetech, the operating results for (OSI) Eyetech are shown as discontinued operations for all periods subsequent to our acquisition on November 14, 2005. The consolidated statements of operations for the years ended December 31, 2008, 2007, 2006 and 2005, and the consolidated balance sheet data for the years ended December 31, 2008, 2007, 2006 and 2005 reflect the retrospective application of FASB ASC Subtopic No. 470-20, which includes the accounting literature formerly known as FASB Staff Position Accounting Principles Board, or FSP APB, 14-1, “Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement).” The information below should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report.

	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
(In thousands, except per share data)	2009(a)			2008(b)			2007(c)			2006(d)			2005(e)
Consolidated Statement of Operations Data:
Revenues	$	428,148		$	379,388		$	341,030		$	241,037		$	138,423
Expenses:
Cost of goods sold		8,786			9,315			9,399			8,671			5,035
Research and development		151,845			135,344			123,531			117,527			116,655
Acquired in-process research and development		6,500			4,000			9,664			—			3,542
Selling, general and administrative		102,989			94,930			99,159			107,458			89,205
Restructuring charges		4,454			—			—			—			—
Amortization of intangibles		920			2,489			1,840			1,809			15,281
Income (loss) from operations		152,654			133,310			97,437			5,572			(91,295	)
Other income (expense) — net		(19,375	)		(12,650	)		2,108			(4,009	)		6,108
Income (loss) from continuing operations before income taxes		133,279			120,660			99,545			1,563			(85,187	)
Income tax provision (benefit) business		57,284			(316,049	)		2,732			—			—
Net income (loss) from continuing operations		75,995			436,709			96,813			1,563			(85,187	)
Income (loss) from discontinued operations — net of tax		(64	)		4,884			(36,288	)		(610,930	)		(72,029	)
Net income (loss) before extraordinary gain		75,931			441,593			60,525			(609,367	)		(157,216	)
Extraordinary gain — net of tax		—			—			—			22,046			—
Net income (loss)	$	75,931		$	441,593		$	60,525		$	(587,321	)	$	(157,216	)
Basic and diluted net income (loss) per common share:
Basic income (loss):
Income (loss) from continuing operations	$	1.31		$	7.62		$	1.68		$	0.03		$	(1.64	)
Income (loss) from discontinued operation		(0.00	)		0.09			(0.63	)		(10.73	)		(1.38	)
Net income (loss) before extraordinary gain		1.31			7.70			1.05			(10.70	)		(3.02	)
Extraordinary gain		—			—			—			0.39			—
Net income (loss)	$	1.31		$	7.70		$	1.05		$	(10.31	)	$	(3.02	)
Diluted income (loss):
Income (loss) from continuing operations	$	1.29		$	6.93		$	1.66		$	0.03		$	(1.64	)
Loss from discontinued operations		(0.00	)		0.07			(0.62	)		(10.60	)		(1.38	)
Net income (loss) before extraordinary gain		1.29			7.00			1.04			(10.57	)		(3.02	)
Extraordinary gain		—			—			—			0.38			—
Net income (loss)	$	1.29		$	7.00		$	1.04		$	(10.19	)	$	(3.02	)
Shares used in the calculation of income (loss) per common share:
Basic		57,939			57,316			57,665			56,939			52,078
Diluted		60,452			66,911			58,333			57,645			52,078

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	As of		As of		As of		As of		As of
	December 31,		December 31,		December 31,		December 31,		December 31,
(In thousands)	2009(a)		2008(b)		2007(c)		2006(d)		2005(e)
Consolidated Balance Sheet Data:
Cash, cash equivalents and investment securities (unrestricted and restricted)	$	471,895	$	515,511	$	305,098	$	216,368	$	179,606
Receivables		127,171		100,242		87,523		80,075		152,482
Working capital		508,866		629,330		197,631		266,496		276,171
Total assets		1,185,372		1,104,203		557,723		456,841		1,057,464
Long-term liabilities		290,095		444,537		145,142		321,740		304,608
Stockholders’ equity		711,748		598,545		160,087		55,519		610,527

(a)	The calendar 2009 consolidated financial statements include a $6.5 million acquired in-process R&D charge related to the expansion of our AVEO collaboration and the purchase of intellectual property. In December 2009, we repurchased $39.5 million and $40.0 million of outstanding principal of our 2023 Notes and 2038 Notes, respectively. As of December 31, 2009, the 2025 Notes have been reclassified as short-term on the accompanying consolidated balance sheets, since the holders of the Notes have a right to require us to purchase all, or a portion thereof, for cash, on December 15, 2010.
(b)	The calendar 2008 consolidated financial statements include a $4.0 million acquired in-process R&D charge related to the purchase of intellectual property and a $319.2 million benefit, included in income tax provision (benefit), related to the recognition of certain deferred tax assets. During 2008, we issued $200.0 million principal amount of our 2038 Notes in a private placement for net proceeds of approximately $193 million, of which $65.0 million was used to purchase, concurrently with the offering, 1.5 million shares of our common stock. In addition, we repurchased approximately $50 million of our 2023 Notes in 2008.
	The calendar 2008 consolidated financial statements reflect the retrospective application of accounting literature FASB ASC Subtopic No. 470-20 which includes the accounting literature formerly known as FSP APB 14-1. The application of this accounting literature resulted in a $29.9 million decrease to net income, a $0.26 decrease in diluted earnings per share, a $45.9 million decrease in long-term liabilities and a $27.0 million increase in stockholders’ equity.
(c)	The calendar 2007 consolidated financial statements include a $9.7 million acquired in-process R&D charge related to the payment made under our research collaboration with AVEO and the purchase of AdipoGenix, Inc. intellectual property, and a $4.1 million gain, included in “other income (expense) — net,” related to our decision to curtail our post-retirement medical and life insurance plan. The 2023 Notes were classified as a current liability in the December 31, 2007 consolidated balance sheets.
	The calendar 2007 consolidated financial statements reflect the retrospective application of accounting literature FASB ASC Subtopic No. 470-20. The application of this accounting literature resulted in a $5.8 million decrease to net income, a $0.07 decrease in diluted earnings per share, a $21.8 million decrease in long-term liabilities and a $21.1 million increase in stockholders’ equity.
(d)	The calendar 2006 consolidated financial statements reflect the retrospective application of accounting literature FASB ASC Subtopic No. 470-20 which includes the accounting literature formerly known as FSP APB 14-1. The application of this accounting literature resulted in a $5.1 million decrease to net income, a $0.09 decrease in diluted earnings per share, a $27.8 million decrease in long-term liabilities and a $26.9 million increase in stockholders’ equity.
	The calendar 2006 loss from discontinued operations includes $506.0 million of impairment charges related to (OSI) Eyetech goodwill and (OSI) Eyetech amortizable intangibles ($320.3 million and $185.7 million, respectively) and a $26.4 million charge for obsolete and expiring inventory. A $22.0 million extraordinary gain was recognized in the 2006 calendar year as a result of reversing the accrued contingent consideration recorded in connection with the acquisition of Cell Pathways, Inc. in the 2003 fiscal year.
(e)	The calendar 2005 consolidated financial statements reflect the retrospective application of accounting literature FASB ASC Subtopic No. 470-20 which includes the accounting literature formerly known as

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FSP APB 14-1. The application of this accounting literature resulted in a $93,000 decrease to net income, a $33.2 million decrease in long-term liabilities and a $32.1 million increase in stockholders’ equity.

The calendar 2005 consolidated financial statements reflect: (a) the acquisition of Eyetech Pharmaceuticals, Inc. in November 2005 for aggregate consideration of $909.3 million ($637.4 million, net of cash and investments acquired), including cash consideration of $702.1 million, the value of 5.6 million shares of our common stock issued to Eyetech shareholders, the value of converted stock options issued to Eyetech shareholders and transaction-related costs incurred; (b) an in-process R&D charge of $60.9 million related to the acquisition of Eyetech recorded as a loss from discontinued operations; (c) in-process R&D charges of $3.5 million related to the acquisition of the minority interest in Prosidion; and (d) the issuance of $115.0 million principal amount of our 2025 Notes in a private placement for net proceeds of $111.0 million, of which approximately $24 million was used to purchase, concurrently with the offering, 500,000 shares of our common stock and a call spread option with respect to our common stock.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a biotechnology company committed to building a scientifically strong and financially successful top tier biopharmaceutical organization that discovers, develops and commercializes innovative molecular targeted therapies, or MTTs, addressing major unmet medical needs in oncology, diabetes and obesity. Our strategic focus is in the area of personalized medicine. We are building upon the knowledge and insights from our flagship product, Tarceva, in order to establish a leadership role in turning the promise of personalized medicine into practice in oncology and in pioneering the adoption of personalized medicine approaches in diabetes and obesity. We are leveraging our targeted therapy expertise in drug discovery, development and translational research to deliver innovative, differentiated new medicines to the right patients, in the right combinations and at the right doses. We believe this approach optimally positions us to accomplish more rapid and cost-effective drug development aimed at providing substantial clinical benefit to the patients who can gain the most from our innovations. We further believe that, with increasing healthcare cost constraints and competition, leadership in personalized medicine approaches will define the successful biopharmaceutical companies of the future.

Our revenues are presently derived from three primary sources: (i) revenue from our joint collaboration with Genentech, Inc. for the sale of Tarceva in the United States; (ii) royalties we receive from Roche on sales of Tarceva in the rest of the world; and (iii) revenue from licensees of our patent estate relating to the use of dipeptidyl peptidase IV, or DPIV, inhibitors for the treatment of type 2 diabetes and related indications. For 2009, Tarceva global sales were approximately $1.2 billion, which provided us with $358.7 million of Tarceva-related revenues, while licenses under our DPIV patent estate provided us with $67.0 million of revenue, primarily from royalties. In 2009, our Tarceva-related revenues grew by approximately 7% versus the prior year, while the revenues from our DPIV patent estate grew by approximately 63% over the same period. Our DPIV patent estate represents an increasingly important source of revenues and overall revenue growth for our company. As of February 15, 2010, twelve pharmaceutical companies have non-exclusive licenses to our DPIV patents, and three currently have approved products on the market that are early in their life cycle.

We expect that our global revenues from Tarceva and our DPIV patent estate, combined with our diligent management of expenses, will continue to provide us with the capital resources necessary to make disciplined investments in research and development, or R&D, in order to support the continued growth of Tarceva and our internal pipeline of clinical and pre-clinical assets. As part of our lifecycle plan for Tarceva, we, together with Genentech and Roche, continue to invest in a broad clinical development program directed at maximizing Tarceva’s long-term potential, including a number of large, randomized clinical trials designed to expand Tarceva’s use in non-small cell lung cancer, or NSCLC (including studies focused on validating the activity of Tarceva in treating patients whose lung tumors harbor an activating mutation in the EGFR gene), and explore opportunities in new disease settings with other companies. We will also continue to deploy our financial resources to selectively acquire attractive pipeline assets, technologies and companies where these types of acquisitions strongly supplement and complement our internal R&D efforts in oncology and diabetes and obesity.

In July 2009, we announced plans to consolidate all of our U.S. operations onto a single campus located in Ardsley, New York in Westchester County. On July 20, 2009, we completed the purchase of the 43-acre site, which consists of approximately 400,000 square feet of existing office and laboratory space, for $27 million. We are in the process of renovating the Ardsley site, which we expect to fully occupy by the end of 2010, at an estimated cost of approximately $100 million in 2010. We also expect to incur approximately $30 million in restructuring-related costs through the end of 2011. We anticipate that consolidating our oncology R&D, commercial, medical and other support functions into a single U.S. location will enhance the strategic value of our oncology R&D capabilities and result in business efficiencies and synergies.

We believe we have the right mix of size, longevity, R&D capabilities, financial strength, and experience to emerge as a leading top-tier midsized public biotechnology company. As we enter 2010, we remain committed to fully realizing the value of the Tarceva franchise for our shareholders. We are focused on delivering shareholder value beyond the Tarceva franchise by continuing to balance financial performance against the necessary reinvestment in R&D to further leverage our strong Tarceva franchise and develop a portfolio of follow-on

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products largely derived from our innovative and differentiated research platform and pipeline. By leveraging revenues from the Tarceva franchise and the DPIV patent estate, maintaining financial discipline around our R&D investments and controlling our spending on general and administrative expenses, we believe that we can deliver credible near term earnings growth, while continuing to increase our investment in attractive opportunities for long-term value creation for our shareholders.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ significantly from our estimates and the estimated amounts could differ significantly under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and which require our most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Note 1 to the accompanying consolidated financial statements includes a summary of the significant accounting policies used in the preparation of the consolidated financial statements.

Revenue Recognition

Tarceva-related Revenues

Tarceva-related revenues for the years ended December 31, 2009, 2008 and 2007 were $358.7 million, $334.7 million and $267.8 million, respectively. Tarceva-related revenues include net revenue from our unconsolidated joint business, Tarceva-related royalties and Tarceva-related milestone payments.

Net Revenue from Unconsolidated Joint Business

Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech for Tarceva. It consists of our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva, the reimbursement from Genentech of our sales and marketing costs related to Tarceva and the reimbursement from Genentech of most of our manufacturing costs related to Tarceva. Under the co-promotion arrangement, all U.S. sales of Tarceva and associated costs and expenses, except for a portion of our sales-related costs, are recognized by Genentech. Genentech is also responsible for estimating reserves for anticipated returns of Tarceva and monitoring the adequacy of these reserves. We record our 50% share of the co-promotion pretax profit as set forth in our agreement with Genentech. Pretax co-promotion profit under the co-promotion arrangement is derived by calculating U.S. net sales of Tarceva to third-party customers and deducting costs of sales, distribution and selling and marketing expenses incurred by Genentech and us. If actual future results differ from our and Genentech’s estimates, we may need to adjust these estimates, which would have an effect on earnings in the period of adjustment. The reimbursement of sales and marketing costs related to Tarceva is recognized as revenue as the related costs are incurred. We defer the recognition of the reimbursement of our manufacturing costs related to Tarceva until the time Genentech ships the product to third-party customers, at which time our risk of inventory loss no longer exists.

Royalties

We estimate royalty revenue and royalty receivables in the periods these royalties are earned, in advance of collection. Our estimate of royalty revenue and royalty receivables is based upon communication with our collaborators and our licensees. Differences between actual royalty revenue and estimated royalty revenue are adjusted in the period in which they become known, typically the following quarter. Historically, such adjustments have not been material to our consolidated financial condition or results of operations.

The royalty amount with respect to ex-U.S. Tarceva sales is calculated by converting the Tarceva sales for each country in their respective local currency into Roche’s functional currency (Swiss francs) using an exchange rate calculated on a quarterly basis and then to U.S. dollars using an exchange rate calculated on a year-to-date basis (as per

44

our agreement with Roche). The royalties are paid to us in U.S. dollars on a quarterly basis. As a result, fluctuations in the value of the U.S. dollar and Swiss franc against local currencies in which Tarceva is sold, will impact our royalty revenue.

License Fees and Milestones

Our revenue recognition policies for all nonrefundable upfront license fees and milestone arrangements are in accordance with ASC Topic 605, “Revenue Recognition,” and in accordance with Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” as amended by SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.” In addition, we follow the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Subtopic No. 605-25, which includes the accounting literature formerly known as Emerging Issues Task Force Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” for multiple element revenue arrangements entered into or materially amended after June 30, 2003. As a result of an amendment to our collaboration agreement with Genentech in June 2004, milestone payments received from Genentech after June 2004 and the remaining portion of the unearned upfront fee are being recognized in accordance with FASB ASC Subtopic No. 605-25.

Milestones received from Genentech after June 2004 and the remaining unearned upfront fee are being recognized over the term of our Manufacturing and Supply Agreement with Genentech, under which the last items of performance to be delivered to Genentech are set forth, on a straight line basis. In March 2005, we agreed to a further global development plan and budget with our collaborators, Genentech and Roche, for the continued development of Tarceva. For revenue recognition purposes, the revised development plan and budget for Tarceva was deemed a material amendment to our Roche agreement and therefore, future milestones received from Roche will be recognized in accordance with FASB ASC Subtopic No. 605-25. Accordingly, milestone payments received from Roche after March 2005 have been and will be initially recorded as unearned revenue and recognized over the expected performance period of the research collaboration on a straight line basis.

Investments and Other-than-Temporary Impairments

As of December 31, 2009, approximately 53% of our cash equivalents and investment securities consisted of AAA rated and A1 rated securities, including our money market funds, which are AAA rated. The principal–weighted average overall credit rating of our portfolio of cash equivalents and investment securities was AA/Aa2 as of December 31, 2009. We have established guidelines relative to the diversification of our investments and their maturities with the principle objective of capital preservation and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. We classify our investments as available-for-sale securities. These securities are recorded at their fair value. Unrealized holding gains and losses, net of the related tax effect, if any, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, until realized or recognized. The specific identification basis is utilized to calculate the cost to determine realized gains and losses from the sale of available-for-sale securities.

A decline in the fair value of any available-for-sale marketable security below its cost that is deemed to be other-than-temporary results in a reduction in its carrying amount to fair value. The impairment is charged to operations and a new cost basis for the security is then established. The determination of whether an available-for-sale marketable security is other-than-temporarily impaired requires significant judgment and consideration of available quantitative and qualitative evidence in evaluating the potential impairment. Factors evaluated to determine whether the investment is other-than-temporarily impaired include: (i) whether there has been significant deterioration in the issuer’s earnings performance, credit rating or asset quality; (ii) the business prospects of the issuer; (iii) adverse changes in the general market conditions in which the issuer operates; (iv) the length of time that the fair value has been below our cost; (v) our expected future cash flows from the security; and (vi) our intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment. However, even if an investor does not expect to sell a debt security expected cash flows to be received must be evaluated to determine if credit losses have occurred. In the event of a credit loss, only the amount associated with the credit loss is recognized in income. The amount of losses relating to other factors, including those related to changes in interest rates, are recorded in accumulated other comprehensive income. The other-than-temporary impairment model for debt securities also requires additional disclosure regarding the calculation of credit losses and the factors considered in reaching a conclusion that an investment is not other-than-temporarily

45

impaired. Assumptions associated with these factors are subject to future market and economic conditions, which could differ from our assessment. During 2009 and 2008, we recorded a $663,000 and $1.2 million impairment charge, respectively, in other income (expense) related to an other-than-temporary decline in the fair value of common stock and warrants that we previously received as part of a licensing transaction. During 2007, we did not recognize any other-than-temporary impairments.

Inventory

The valuation of inventory requires us to make certain assumptions and judgments to estimate net realizable value. Inventories are reviewed and adjusted for obsolescence and aging based upon estimates of future demand, technology developments and market conditions. We determine the cost of raw materials, work-in-process and finished goods inventories using the weighted average method. Inventory costs include material, labor and manufacturing overhead. Inventories are valued at the lower of cost or market (realizable value). Our inventory is valued at its market value where there is evidence that the utility of goods will be less than cost and that such write-down should occur in the current period. Accordingly, at the end of each period we evaluate our inventory and adjust to net realizable value the carrying value and excess quantities when necessary.

Inventory includes raw materials and work-in-process for Tarceva that may be used in the production of pre-clinical and clinical product, which will be expensed to R&D cost when consumed for these uses. Tarceva is stated at the lower of cost or market, with cost being determined using the weighted average method. As of December 31, 2009 and 2008 our inventories were carried at original cost.

Stock-Based Compensation

We recognize as compensation expense the total fair value of employee stock awards, over the requisite employee service period (generally the vesting period of the grant). We have used and expect to continue to use the Black-Scholes option-pricing model to compute the estimated fair value of stock-based awards on the date of grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. We estimate expected volatility based upon a combination of historical, implied and adjusted historical volatility. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. The fair value of the options is estimated at the date of grant using a Black-Scholes option pricing model with the expected option term determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates.

The assumptions used in computing the fair value of stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. As a result, if other assumptions or estimates had been used, the stock-based compensation expense that was recorded for the years ended December 31, 2009, 2008 and 2007 could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.

Accruals for Clinical Research Organization and Clinical Site Costs

We record accruals for estimated clinical study costs. Clinical study costs represent costs incurred by clinical research organizations, or CROs, and clinical sites. These costs are recorded as a component of R&D expenses. We analyze the progress of the clinical trials, including levels of patient enrollment and/or patient visits, invoices received and contracted costs, when evaluating the adequacy of our accrued liabilities. Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period. Actual costs incurred may not match the estimated costs for a given accounting period.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on

46

deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

For the year ended December 31, 2008, we recorded a $316.0 million income tax benefit from continuing operations, which included a favorable adjustment in the fourth quarter of 2008 of $319.2 million resulting from the reversal of a significant portion of the valuation allowance against our net deferred tax assets. We made this adjustment based on our determination that it is more likely than not that we will generate sufficient taxable income to realize the benefits of our deferred assets, primarily resulting from our net operating losses, or NOLs. The determination was based upon our assessment of our cumulative profitability in the United States over the past three years and our expectation of future taxable income.

As of December 31, 2009, we had remaining approximately $656 million of NOLs related to our U.S. operations and $77 million related to our foreign operations, which result in approximately $201 million of net deferred tax assets. The U.S. NOLs, which, subject to limitations, can be used to offset our future U.S. taxable income, expire between the years 2021 and 2026. Utilization of a portion of the U.S. NOLs may be limited under U.S. Internal Revenue Code Section 382. The U.K. NOLs, which can be used to offset our future U.K. taxable income, do not expire. We have also accumulated $65.7 million in additional other net deferred tax assets based on temporary differences between book and tax reporting.

We recognize any liabilities relating to tax uncertainties in accordance with FASB ASC Subtopic No. 740-10, which includes the accounting literature formerly known as Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” FASB ASC Subtopic No. 740-10 clarifies the criteria that must be met prior to recognition of the financial statement benefit of a position taken in a tax return and includes a benefit recognition model with a two-step approach consisting of a “more-likely-than-not” recognition criteria, and a measurement attribute that measures a given tax position as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FASB ASC Subtopic No. 740-10 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements. As of December 31, 2009 and 2008, we did not have any liabilities relating to tax uncertainties.

Goodwill and Other Long-Lived Assets

We account for goodwill and other intangible assets in accordance with FASB ASC Topic No. 805, “Business Combinations,” and FASB ASC Topic No. 350, “Intangible Assets — Goodwill,” which includes the accounting literature formerly known as SFAS No. 141, “Business Combinations,” and Statement of Financial Accounting Standards, or SFAS, No. 142, “Goodwill and Other Intangible Assets.” FASB ASC Topic No. 805 requires that the purchase method of accounting be used for all business combinations. It specifies the criteria under which intangible assets acquired in a business combination must meet in order to be recognized and reported apart from goodwill. FASB ASC Topic No. 350 requires that goodwill and intangible assets determined to have indefinite lives no longer be amortized but instead be tested for impairment at least annually and whenever events or circumstances occur that indicate impairment might have occurred.

Our identifiable intangible assets are subject to amortization. FASB ASC Topic No. 350 requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with FASB ASC Topic No. 360. FASB ASC Topic No. 360 requires, among other things, that long-lived assets be measured at the lower of carrying amount or fair value, less cost to sell, whether reported in continuing operations or in discontinued operations. We review our intangibles with determinable lives and other long-lived assets for impairment whenever events or changes in circumstances indicate that impairment might have occurred.

Our judgment regarding the existence of impairment indicators is based on various information, including historical and projected future operating results, changes in the manner of our use of the acquired assets or our overall business strategy, and market and economic trends. In the future, events could cause us to conclude that impairment indicators exist and that certain other intangibles and other long-lived assets are impaired which may result in an adverse impact on our financial condition and results of operations. As of December 31, 2009, we had approximately $39 million of goodwill associated with our oncology business. Our annual impairment assessment

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(step 1 analysis) indicated that the current value of this franchise was significantly more than the carrying value of the assets associated with the oncology business, including the goodwill.

Discontinued Operations

On November 6, 2006, we announced our intention to divest our eye disease business. During the first quarter of 2007, we finalized our exit plan and began to actively market our eye disease business assets. As a result of the finalization of our plan to sell the business during the first quarter of 2007, in accordance with the provision of FASB ASC Topic No. 360, the results of operations of (OSI) Eyetech for the current and prior periods have been reported as discontinued operations. In addition, assets and liabilities of (OSI) Eyetech have been classified as assets and liabilities related to discontinued operations, including those held for sale.

On August 1, 2008, we completed the sale of the remaining assets of our eye disease business to Eyetech Inc., a newly formed corporation. Under the terms of the transaction, the principal assets we transferred to Eyetech Inc. consisted of Macugen-related intellectual property and inventory, as well as $5.8 million in working capital primarily in the form of Macugen trade receivables, in exchange for potential sales-related milestones of up to $185 million, a royalty percentage on net sales depending on the level of Macugen sales and the potential for an additional payment in the event of a change of control transaction with respect to Eyetech Inc. We have determined that Eyetech Inc. qualifies as a variable interest entity, or VIE, but as we are not its primary beneficiary, consolidation is not required. FASB ASC Subtopic No. 810-10, which includes the accounting literature formerly known as FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” requires an entity to be classified as a VIE where (i) the reporting company, or its related parties, participated significantly in the design of the entity, or where substantially all of the activities of the entity either involve or are conducted on behalf of the reporting company or its related parties, and (ii) its equity investors do not have a controlling financial interest or where the entity is unable to finance its activities without additional financial support from other parties. Based on this test, we determined that Eyetech Inc. qualified as a VIE due to its inability at the time of its acquisition of the remaining assets of our eye disease business to finance its activities without additional financial support from third parties, and due to the fact that Michael G. Atieh, our former Executive Vice President, Chief Financial Officer and Treasurer, is a stockholder in Eyetech Inc., participated in the design of the entity and agreed to serve as its part-time executive chairman upon his retirement from our company.

FASB ASC Subtopic No. 810-10 further requires the consolidation of entities which are determined to be VIEs when the reporting company determines itself to be the primary beneficiary — in other words, the entity that will absorb a majority of the VIE’s expected losses or receive a majority of the VIE’s expected residual returns. We determined that we are not the primary beneficiary of Eyetech Inc. as: (i) we do not hold an equity position in Eyetech Inc.; (ii) our ongoing interest in this entity is limited to our contingent right to receive future royalties and milestones; and (iii) we do not have liability for the future losses.

Change in Accounting Principle

The consolidated statements of operations for the years ended December 2008 and 2007, and the consolidated balance sheets as of December 31, 2008, reflect the retrospective application of FASB ASC Subtopic No. 470-20, which includes the accounting literature formerly known as FASB Staff Position Accounting Principles Board, or FSP APB, 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” See Note 15 to the accompanying consolidated financial statements for further explanation of the impact of adopting this standard had on our consolidated financial statements.

Years Ended December 31, 2009 and 2008

Results of Operations

Net income for the year ended December 31, 2009 was $75.9 million compared to $441.6 million for the year ended December 31, 2008. Our net income from continuing operations for the years ended December 31, 2009 and 2008 was $76.0 million and $436.7 million, respectively. The decline in net income from continuing operations was primarily due to a $319.2 million non-cash benefit recorded in the fourth quarter of 2008 related to recognition of certain net deferred tax assets (primarily related to our NOLs), offset in part by an increase in Tarceva-related

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revenues and royalties from our DPIV patent estate. Net income for 2009 includes a net loss from discontinued operations of $64,000 and net income for 2008 includes net income from discontinued operations of $4.9 million. As a result of our decision to exit the eye disease business and the finalization of our exit plan in March 2007, the results of the eye disease business are presented as discontinued operations for all periods presented.

Revenues

	Year Ended December 31,
	(in thousands)
	2009		2008		$ Change
Tarceva-related revenues	$	358,730	$	334,653	$	24,077
Other revenues		69,418		44,735		24,683
Total revenues	$	428,148	$	379,388	$	48,760

Tarceva-Related Revenues

Tarceva-related revenues for the years ended December 31, 2009 and 2008 were $358.7 million and $334.7 million, respectively, and included net revenue from our unconsolidated joint business, Tarceva-related royalties and Tarceva-related milestones.

Net Revenue from Unconsolidated Joint Business

Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech for Tarceva. For the years ended December 31, 2009 and 2008, Genentech recorded net sales of Tarceva in the United States and its territories of approximately $479 million and $457 million, respectively. The increase in net sales of Tarceva for the year ended December 31, 2009 compared to the prior year was primarily a result of price increases offset in part by lower demand and a higher level of sales reserves allowances in the year ended December 31, 2009. Our share of these net sales is reduced by the cost of goods sold for Tarceva and the costs related to the sales and marketing of the product. For the year ended December 31, 2009, we reported net revenues from our unconsolidated joint business for Tarceva of $208.8 million compared to $196.1 million for the same period last year. The increase in net revenue from unconsolidated joint business for the year ended December 31, 2009 was primarily due to higher Tarceva sales and slightly lower combined sales and marketing costs incurred under our collaboration with Genentech.

Tarceva-Related Royalties

We receive royalties from Roche of approximately 20% on net sales of Tarceva outside of the United States and its territories. The royalty amount is calculated by converting the respective countries’ Tarceva sales in local currency to Roche’s functional currency (Swiss francs) and then to U.S. dollars. The royalties are paid to us in U.S. dollars on a quarterly basis. As a result, fluctuations in the value of the U.S. dollar against the Swiss franc and local currencies in which Tarceva is sold will impact our earnings. For the years ended December 31, 2009 and 2008, Roche reported U.S. dollar equivalent rest-of-world sales of approximately $724 million and $665 million, respectively. For the years ended December 31, 2009 and 2008, we recorded $146.3 million and $134.6 million in royalty revenue from these sales, respectively. The increase in royalty revenue was primarily due to increased sales volume outside the United States, partially offset by the net negative impact of unfavorable changes in foreign exchange rates versus the prior year period.

Tarceva-Related Milestones

Milestone revenues from Tarceva include the recognition of the ratable portion of upfront fees from Genentech and milestone payments received from Genentech and Roche in connection with various regulatory acceptances and approvals for Tarceva in the United States, Europe and Japan. These payments were deferred and are being recognized as revenue on a straight-line basis over the estimated performance period. The ratable portions of the upfront fees and milestone payments recognized as revenue for the years ended December 31, 2009 and 2008 were $3.7 million and $3.9 million, respectively. The unrecognized deferred revenue related to these upfront fees and

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milestone payments was $33.4 million and $37.1 million as of December 31, 2009 and 2008, respectively. We are also entitled to additional milestone payments from Genentech and Roche upon the occurrence of certain regulatory approvals and filings with respect to Tarceva. The ultimate receipt of these additional milestone payments is contingent upon the applicable regulatory approvals and other future events.

Other Revenues

Other revenues for the years ended December 31, 2009 and 2008 were $69.4 million and $44.7 million, respectively, and include non-Tarceva related license, milestone, royalty and commission revenues.

We recognized $62.0 million and $41.1 million of royalty revenue for the years ended December 31, 2009 and 2008, respectively, from previously granted worldwide non-exclusive license agreements entered into under our DPIV patent portfolio covering the use of DPIV inhibitors for treatment of type 2 diabetes and related indications. Our royalty revenue in 2009 and 2008 was principally derived from sales of Merck’s DPIV inhibitor product, Januvia^tm, and its DPIV combination product with metformin, Janumet^tm. We also derived royalty revenue from sales of Novartis’ DPIV inhibitor products, Galvus^® and Eucreas^® and from Bristol-Meyers Squibb’s, or BMS’s, DPIV inhibitor product Onglyza^tm. The year ended December 31, 2009 also included a $5 million milestone payment from BMS, which we recognized because we had no future performance obligations. The amount of license revenues generated from our DPIV patent estate can be expected to fluctuate from year to year based on: (i) the level of future product sales by our licensees; (ii) the ability of our licensees to achieve specified events under the license agreements which entitle us to milestone payments; and (iii) our ability to enter into additional license agreements in the future.

In October 2009, we licensed the rights to develop, manufacture, and market in China our multi-targeted tyrosine kinase inhibitor, OSI-930, to Simcere Pharmaceutical Co., Ltd., for a $2.5 million upfront fee, potential development and sales milestones, plus potential future royalties on sales. We deferred the initial recognition of the $2.5 million upfront fee based upon our obligation to provide technical and other support for a period of up to 12 months from the date of execution of the license agreement. For the year ended December 31, 2009, we recognized approximately $625,000 of the upfront fee as revenue.

In February 2008, we licensed to a third party our transforming growth factor, or TGF ß3, compound for certain indications, for an upfront fee of $2.0 million. We recognized the $2.0 million payment as license revenue in the first quarter of 2008 since we had no future performance obligations. Pursuant to the terms of a cross license with Novartis AG, approximately $350,000 of the amount we received was paid to Novartis.

Expenses

	Year Ended December 31,
	(in thousands)
	2009		2008		$ Change
Cost of goods sold	$	8,786	$	9,315	$	(529	)
Research and development		151,845		135,344		16,501
Acquired in-process research and development		6,500		4,000		2,500
Selling, general and administrative		102,989		94,930		8,059
Restructuring costs		4,454		—		4,454
Amortization of intangibles		920		2,489		(1,569	)
	$	275,494	$	246,078	$	29,416

Cost of Goods Sold

Total cost of goods sold for the years ended December 31, 2009 and 2008 were $8.8 million and $9.3 million, respectively, and related to Tarceva sales.

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Research and Development

R&D expenses increased by $16.5 million for the year ended December 31, 2009 compared to the prior year. The increase was primarily due to an increase in R&D expenses related to non-Tarceva oncology programs and, in particular, OSI-906, our insulin-like growth factor 1 and insulin receptor, or IGF-1R/IR, inhibitor candidate, R&D expenses related to our diabetes and obesity programs and, in particular, PSN821, our GPR119 agonist candidate, and equity-based compensation. These increases in R&D expenses were partially offset by a decline in R&D expenses for Tarceva.

We consider the active management and development of our clinical pipeline crucial to the long-term process of getting follow-on products approved by the regulatory authorities and brought to market. We manage our overall research, development and in-licensing efforts in a highly disciplined manner designed to advance only high quality, differentiated agents into clinical development. The duration of each phase of clinical development and the probabilities of success for approval of drug candidates entering clinical development will be impacted by a variety of factors, including the quality of the molecule, the validity of the target and disease indication, early clinical data, investment in the program, competition and commercial viability. Because we manage our pipeline in a dynamic and disciplined manner, it is difficult to give accurate guidance on the anticipated proportion of our R&D investments assigned to any one program prior to the Phase III stage of development, or to the future cash inflows from these programs. For the years ended December 31, 2009 and 2008, we invested a total of $55.1 million and $54.3 million, respectively, in research and $96.8 million and $81.0 million, respectively, in pre-clinical and clinical development. We believe that this represents an appropriate level of investment in R&D for our company when balanced against our goals of financial performance and the creation of longer-term shareholder value.

We manage the ongoing development program for Tarceva with our collaborators, Genentech and Roche, through a global development committee under a Tripartite Agreement among the parties. Together with our collaborators, we have implemented a broad-based global development strategy for Tarceva that implements simultaneous clinical programs currently designed to expand the number of approved indications for Tarceva and evaluate the use of Tarceva in new and/or novel combinations. Since 2001, the collaborators have committed an aggregate of approximately $930 million to the global development plan to be shared by the three parties. As of December 31, 2009, we had invested in excess of $275 million in the development of Tarceva, representing our share of the costs incurred through December 31, 2009 under the tripartite global development plan and additional investments outside of the plan.

As we note in Item 1 of this Annual Report on Form 10-K, “Business — Our Marketed Product — Tarceva — Lifecycle Plan,” there are a number of ongoing Phase III clinical trials that seek to expand the use of Tarceva into new indications, both as a single agent and as a combination therapy with other targeted anti-cancer agents. With the exception of the TITAN, RADIANT, SATURN, and EURTAC EGFR-mutation studies discussed in Item 1, we currently provide limited or no financial support for these Phase III clinical trials and generally receive limited information with respect to their progress. As such, we cannot reasonably estimate the completion dates for these studies, nor when, if ever, these studies may provide us with a financial benefit. With respect to the TITAN and RADIANT studies, the TITAN study is part of our post-approval commitment for Tarceva and is unlikely to result in a new indication for Tarceva. The RADIANT study is not expected to result in data until 2013/2014. Given the uncertainties of the drug development process, including those uncertainties discussed in Item 1A of this Annual Report on Form 10-K — “Risk Factors,” we are not able to draw a conclusion at this time regarding the likelihood of a future product launch as a result of this study. With respect to the SATURN study, we estimate that our share of the costs of completing this study will be approximately $3 million. With respect to the EURTAC EGFR-mutation study, we estimate that our share of the costs of completing this study will be approximately $9.1 million. Our estimated share of the costs to complete the EURTAC EGFR-mutation study does not include the cost of developing a companion diagnostic in the United States for EGFR-mutations which, although not part of the study, may be a necessary step for us to receive FDA approval for the use of Tarceva as a monotherapy in first-line patients with EGFR mutations.

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Acquired In-Process Research and Development

In July 2009, we expanded our drug discovery and translational research collaboration with AVEO Pharmaceuticals, Inc. The purpose of this collaboration is the development of MTTs that target the underlying mechanisms of epithelial-to-mesenchymal transition, or EMT, in cancer. Under the terms of our amended collaboration, we delivered to AVEO an upfront cash payment of $5.0 million for access to certain additional AVEO technology and purchased $15.0 million of AVEO’s preferred stock. We also expanded our obligation to provide AVEO with certain future research funding, and obtained an option to expand the collaboration which would require us to make additional payments to AVEO. We are also required to pay AVEO milestones and royalties upon achievement of certain clinical and regulatory events and successful development and commercialization of products coming out of the collaboration. We will use the AVEO technology to support our early development activities and commercialization of products from this technology is not expected in the near term, as is the case with many early research efforts. As this technology is deemed to be related to in-process technology, which is deemed to have no alternative future use, we expensed the $5.0 million payment as acquired in-process R&D in the third quarter of 2009.

In the fourth quarter of 2009, for an upfront fee of $1.5 million, we purchased from PhaseBio Pharmaceuticals, Inc. an option to acquire for additional consideration, an oxyntomodulin program. If we exercise this option, we will also be required to pay milestones and royalties upon occurrence of certain clinical and regulatory events and successful development and commercialization of products. If we elect to exercise the option, we will acquire technology to support our early development activities and as such, the option is deemed early stage with no alternative future use. Commercialization is not expected in the near term, as is the case with many early research efforts. Accordingly, we expensed the $1.5 million payment as acquired in-process R&D in the fourth quarter of 2009. Concurrent with the purchase of the option, we made an $800,000 equity investment in PhaseBio which is recorded in other assets on our consolidated balance sheets as a cost basis investment.

In the fourth quarter of 2008, our U.K. subsidiary that conducts our R&D programs in diabetes and obesity acquired intellectual property and other assets from 7TM Pharma A/S for $4.0 million. The $4.0 million acquisition cost was recorded as an in-process R&D charge, since it was associated with the intellectual property which was deemed to be related to in-process technology with no alternative future use and commercialization is not expected in the near term.

Selling, General and Administrative

Selling, general and administrative expenses for the year ended December 31, 2009 were $103.0 million, an increase of $8.1 million from the same period last year. The increase was primarily attributable to an increase in equity based compensation, salaries, contributions, and general corporate expenses.

Restructuring Costs

In connection with our decision to consolidate our U.S. operations onto a single campus located in Ardsley, New York, we incurred restructuring costs of $4.5 million. On July 20, 2009, we completed the purchase of the 43-acre site, which consists of approximately 400,000 square feet of existing office and laboratory space, for $27 million and expect to incur approximately $100 million of capital-related renovation costs over the next 12 months. In addition, we expect to incur approximately $30 million in restructuring-related cost over the next two years, which primarily relates to labor-related and relocation costs. We incurred restructuring cost of $4.5 million for the year ended December 31, 2009. We also expect to recognize additional exit-related charges related to exiting our other U.S. leased facilities when these facilities cease to be used.

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Other Income and Expense

	Year Ended December 31,
	(in thousands)
	2009			2008			$ Change
Investment income-net	$	8,148		$	12,961		$	(4,813	)
Interest expense		(27,085	)		(27,243	)		158
Other income (expense)-net		(438	)		1,632			(2,070	)
Total other income (expense)	$	(19,375	)	$	(12,650	)	$	(6,725	)

Investment income for the year ended December 31, 2009 declined $4.8 million compared to the same period last year. Despite an increase in the average balance of funds available for investments, investment income was negatively impacted by lower rates of return on our investments.

Interest expense for the year ended December 31, 2009 remained relatively constant compared to the same period last year. Our redemption of approximately $79 million of our outstanding convertible senior subordinated notes in December 2009 did not significantly impact our interest expense for 2009 as the notes were not repurchased until December 2009.

Other income (expense) — net was a $438,000 expense for the year ended December 31, 2009 compared to $1.6 million of income for the same period last year. The change from income to expenses for the year ended December 31, 2009 compared to last year is primarily a result of favorable foreign exchange gains in 2008, partially offset by net higher impairment charges recorded in 2008. The impairment charges we recorded in 2008 were related to common stock and warrants that we previously received as part of a licensing transaction for which we concluded the decline in fair value was other-than-temporary.

Income Taxes

Since the beginning of 2009, we have reported our tax provision using an effective tax rate of approximately 40%. However, we expect to continue paying taxes at the lower alternative minimum tax rates for the next several years as we continue to utilize our NOLs for tax return purposes.

For the year ended December 31, 2009, we recorded a tax provision of $57.3 million on income generated from continuing operations. We also recorded a tax charge of $3.3 million related to state NOLs that no longer met the threshold for recognition as a result of our decision to consolidate our U.S. operations in Ardsley, New York. We reduced the valuation allowance previously recorded against certain deferred tax assets in the United Kingdom, which resulted in the recognition of $18.5 million of deferred tax benefits. The reduction of this valuation allowance is based on the fact that we determined that it was more likely than not that we will generate sufficient taxable income in the United Kingdom to realize the benefits of these deferred tax assets, which principally consist of NOLs. The reduction in the U.K. valuation allowance did not result in a benefit to the consolidated income tax provision because, concurrently, we recognized an offsetting deferred tax liability of $18.5 million in the United States. The recognition of the U.S. deferred tax liability is a result of previously recognized deferred tax assets recorded in the U.S. from the treatment of Prosidion losses as a branch for U.S. income tax purposes. Given our significant level of NOLs in the United States and the United Kingdom, our cash payments for income taxes in 2009 are primarily based on alternative minimum tax rates.

Income (Loss) from Discontinued Operations

On November 6, 2006, we announced our intention to divest our eye disease business. During the first quarter of 2007, we finalized our exit plan and began to actively market our eye disease business assets. As a result of the finalization of our plan to sell the business during the first quarter of 2007, the results of operations of (OSI) Eyetech for the current and prior periods have been reported as discontinued operations. In addition, assets and liabilities of

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(OSI) Eyetech have been classified as assets and liabilities related to discontinued operations, including those held for sale.

On August 1, 2008, we completed the sale of the remaining assets of our eye disease business to Eyetech Inc. Under the terms of the transaction, the principal assets we transferred to Eyetech Inc. consisted of Macugen-related intellectual property and inventory, as well as $5.8 million in working capital primarily in the form of Macugen trade receivables, in exchange for potential future milestone and royalty payments. Macugen net product revenues for the seven months ended July 31, 2008, or the last date that we held the remaining assets of our eye disease business, were $7.2 million. Net loss for the year ended December 31, 2009 was approximately $64,000 compared to net income of $4.9 million, in the same period last year. As a result of the sale of the remaining assets of our eye disease business, during the year ended December 31, 2008, we incurred $14.1 million of charges relating to the write-down of the assets held for sale to their net realizable value as well as transaction-related charges. We also recognized: (i) the remaining balance of the $27.9 million of unearned revenue as income in the third quarter of 2008 as a result of the assignment to Eyetech, Inc. of certain obligations under our amended and restated license agreement with Pfizer; and (ii) a $2.0 million expense in the third quarter of 2008 related to a third-party milestone obligation for Macugen.

Years Ended December 31, 2008 and 2007

Revenues

	Year Ended December 31,
	(in thousands)
	2008		2007		$ Change
Tarceva-related revenues	$	334,653	$	267,799	$	66,854
Other revenues		44,735		73,231		(28,496	)
Total revenues	$	379,388	$	341,030	$	38,358

Tarceva-Related Revenues

Tarceva revenues for the years ended December 31, 2008 and 2007 were $334.7 million and $267.8 million, respectively, and included net revenues from our unconsolidated joint business, Tarceva-related royalties and Tarceva-related milestones.

Net Revenue from Unconsolidated Joint Business

Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech for Tarceva. For the years ended December 31, 2008 and 2007, Genentech recorded net sales of Tarceva in the United States and its territories of approximately $457 million and $417 million, respectively. The increase in net sales of Tarceva for the year ended December 31, 2008 was primarily a result of price increases and a lower level of reserve adjustments recorded in the year ended December 31, 2008 compared to the year ended December 31, 2007, partially offset by a slight decrease in demand. Our share of these net sales is reduced by the cost of goods sold for Tarceva and the costs related to the sales and marketing of the product. For the year ended December 31, 2008, we reported net revenues from our unconsolidated joint business for Tarceva of $196.1 million compared to $168.8 million for the same period last year. The increase in net revenue from unconsolidated joint business for the year ended December 31, 2008 was primarily due to higher sales, higher reimbursement of our sales and marketing costs and overall lower combined sales and marketing costs incurred by the collaboration.

Tarceva-Related Royalties

We receive royalties from Roche of approximately 20% on net sales of Tarceva outside of the United States and its territories. For the years ended December 31, 2008 and 2007, Roche reported U.S. dollar equivalent sales of approximately $665 million and $470 million, respectively, and we recorded $134.6 million and $95.2 million, respectively, in royalty revenue from these sales. The increase in royalty revenue for the year ended December 31,

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2008 was primarily due to increased sales volume outside the United States, including sales in Japan, which has been a market for Tarceva since December 2007, and the net favorable impact of foreign exchange rates.

Tarceva-Related Milestones

Milestone revenues from Tarceva include the recognition of the ratable portion of upfront fees from Genentech and milestone payments received from Genentech and Roche in connection with various regulatory acceptances and approvals for Tarceva in the United States, Europe and Japan. These payments were initially deferred and are being recognized as revenue. The ratable portion of the upfront fees and milestone payments recognized as revenue for the years ended December 31, 2008 and 2007 were $3.9 million and $3.8 million, respectively. The unrecognized deferred revenue related to these upfront fees and milestone payments was $37.1 million and $41.0 million as of December 31, 2008 and 2007, respectively.

Other Revenues

Other revenues for the years ended December 31, 2008 and 2007 were $44.7 million and $73.2 million, respectively, and include non-Tarceva related license, milestone, royalty and commission revenues.

We recognized $41.1 million and $17.1 million of royalty revenue for the years ended December 31, 2008 and 2007, respectively, from previously granted non-exclusive license agreements entered into by Prosidion under our DPIV patent portfolio covering the use of DPIV inhibitors for treatment of type 2 diabetes and related indications. Our royalty revenue in 2008 and 2007 was principally derived from sales of Merck’s DPIV inhibitor product, Januvia, and its DPIV combination product with metformin, Janumet. We also derived royalty revenue in 2008 from sales of Novartis’ DPIV inhibitor products, Galvus and Eucreas. The year ended December 31, 2007 also included $17.7 million of upfront payments and milestones under the non-exclusive licenses for our DPIV patent portfolio.

In February 2008, we licensed to a third party our TGF ß3 compound for certain indications, for an upfront fee of $2.0 million. We recognized the $2.0 million payment as license revenue in the first quarter of 2008 since we had no future performance obligations. Pursuant to the terms of a cross license with Novartis, approximately $350,000 of the amount we received was paid to Novartis.

In January 2007, we licensed our glucokinase activator program, including our clinical candidate PSN010, to Eli Lilly for an upfront fee of $25.0 million and up to $360.0 million in potential development and sales milestones and other payments, plus royalties on any compounds successfully commercialized from this program. For the year ended December 31, 2007, we recognized the full $25.0 million upfront fee based upon completion of our obligation to provide technical support during a transitional period of nine months from the date of execution. The license agreement will remain in effect so long as Eli Lilly is required to pay royalties to us under the agreement. Eli Lilly is required to pay royalties on a country-by-country basis until, among other things, the expiration of the last to expire patent covering PSN010 or any back-up compound included in the licensed program in such country. The license agreement with Eli Lilly is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In the event of a termination of the agreement, licenses granted to Eli Lilly shall revert back to us.

During the third quarter of 2007, we received $7.5 million of license revenue from Renovo Group plc in connection with its license agreement with Shire plc for its TGF ß3 drug candidate Juvista^®. Under our license agreement with Renovo for TGF ß3 for certain indications, we are entitled to a fixed percentage of any upfront payment, development and sales milestones and royalties that Renovo receives from Shire under the license agreement. We are contractually obligated under a cross-license to pay Novartis 15% of any amounts we receive from Renovo.

During the fourth quarter of 2007, we recognized $2.4 million of revenue from the consideration received as a result of outlicensing OSI-7904L, an oncology clinical candidate for which we had ceased development, to OncoVista Innovative Therapies, Inc. The consideration included cash of $500,000 and OncoVista common stock and warrants with a fair value of $1.9 million. The common stock is publicly traded and was recorded as an available-for-sale security. In the fourth quarter of 2008, we recorded a $1.2 million impairment charge in other

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income (expense)-net related to an other-than-temporary decline in fair value of the equity and warrants that we previously received as part of a licensing transaction.

Included in other revenues are sales commissions earned on the sales of Novantrone^® (mitoxantrone for injection concentrate) in the United States for oncology indications. Sales commissions for the years ended December 31, 2008 and 2007 were $171,000 and $2.5 million, respectively. Sales commissions declined significantly subsequent to April 2006 due to the patent expiration of Novantrone in April 2006, which resulted in our loss of market exclusivity for this product and the launch of generic competitors.

Expenses

	Year Ended December 31,
	(in thousands)
	2008		2007		$ Change
Cost of goods sold	$	9,315	$	9,399	$	(84	)
Research and development		135,344		123,531		11,813
Acquired in-process research and development		4,000		9,664		(5,664	)
Selling, general and administrative		94,930		99,159		(4,229	)
Amortization of intangibles		2,489		1,840		649
	$	246,078	$	243,593	$	2,485

Cost of Goods Sold

Total cost of goods sold for the years ended December 31, 2008 and 2007 were $9.3 million and $9.4 million, respectively and related to Tarceva sales.

Research and Development

R&D expenses increased by $11.8 million for the year ended December 31, 2008 compared to the year ended December 31, 2007. The increase was primarily due to an increase in R&D expenses related to non-Tarceva oncology programs and equity-based compensation, partially offset by declines in R&D expenses for Tarceva and for our diabetes and obesity programs. For the years ended December 31, 2008 and 2007, we invested a total of $54.3 million and $47.4 million, respectively, in research and $81.0 million and $76.1 million, respectively, in pre-clinical and clinical development.

We manage the ongoing development program for Tarceva with our collaborators, Genentech and Roche, through a global development committee under a Tripartite Agreement among the parties. Together with our collaborators, we have implemented a broad-based global development strategy for Tarceva that implements simultaneous clinical programs currently designed to expand the number of approved indications for Tarceva and evaluate the use of Tarceva in new and/or novel combinations. As of December 31, 2008, we had invested in excess of $245 million in the development of Tarceva, representing our share of the costs incurred through December 31, 2008 under the tripartite global development plan and additional investments outside of the plan.

Acquired In-Process Research and Development

In the fourth quarter of 2008, we acquired intellectual property and other assets from 7TM Pharma for $4.0 million. The $4.0 million acquisition cost was recorded as an in-process R&D charge, since it was associated with the intellectual property which was considered in-process R&D with no alternative future use and commercialization is not expected in the near term.

In September 2007, we entered into a small molecule drug discovery and translational research collaboration with AVEO. Under the terms of our collaboration, we delivered to AVEO an upfront cash payment of $10.0 million, consisting of $7.5 million for access to certain AVEO technology and $2.5 million to fund the first year of research under the collaboration, and purchased $5.5 million of AVEO’s preferred stock. We are also obligated to provide AVEO with certain future research funding, as well as milestones and royalties upon successful development and

56

commercialization of products from the collaboration. The AVEO technology is deemed in-process R&D since it was intended to be used to support our early development technologies and is deemed to have no alternative future use. Accordingly, we expensed the $7.5 million payment as acquired in-process R&D in the third quarter of 2007.

In the fourth quarter of 2007, we acquired intellectual property and laboratory equipment from AdipoGenix, Inc. for $2.3 million. Of the $2.3 million purchase price, $2.2 million was recorded as an in-process R&D charge since it was associated with the intellectual property which was deemed early stage with no future alternative use in accordance with FASB ASC Topic 730 which includes the accounting literature formerly known as SFAS No. 2, “Accounting for Research and Development Cost.” The remainder of the cost was allocated to the laboratory equipment acquired, based upon its fair value, and capitalized.

Selling, General and Administrative

Selling, general and administrative expenses for the year ended December 31, 2008 were $94.9 million, a decrease of $4.2 million compared to the year ended December 31, 2007. The decrease was primarily attributable to a decline in license related fees and general corporate expenses, partially offsetting higher equity based compensation and salaries.

Other Income and Expense

	Year Ended December 31,
	(in thousands)
	2008			2007			$ Change
Investment income-net	$	12,961		$	12,830		$	131
Interest expense		(27,243	)		(14,892	)		(12,351	)
Other income (expense)-net		1,632			4,170			(2,538	)
Total other income	$	(12,650	)	$	2,108		$	(14,758	)

Investment income for the year ended December 31, 2008 remained relatively constant to the same period in 2007. However, despite an increase in the funds available for investments, investment income was negatively impacted by lower rates of return on our investments.

Interest expense for the year ended December 31, 2008 increased by $12.3 million compared to the same period in 2007, due to the additional interest expense resulting from the issuance of $200.0 million of our 2038 Notes in January 2008. The increase was partially offset by the repurchase of $50.0 million of our 2023 Notes through the first three quarters of 2008. Included in interest expense is non-cash imputed interest expense of $13.0 million and $6.0 million for the years ended December 31, 2008, and 2007, respectively, related to our retrospective application of FASB ASC, Subtopic No. 470-20, which includes accounting literature formerly known as FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (including partial cash settlement).” The application of FASB ASC Subtopic No. 470-20 impacted the carrying value and related interest expense associated with our 2% Convertible Senior Subordinated Notes due 2025, or our 2025 Notes, and 2038 Notes. See Note 15 to the consolidated financial statements for additional information.

Other income (expense) — net was a $1.6 million of income for the year ended December 31, 2008 compared to $4.2 million of income for the same period in 2007. For the year ended December 31, 2008, the $1.6 million of income was primarily a result of $3.4 million of foreign exchange gains recognized by our U.K. operations, partially offset by a $1.2 million impairment charge related to common stock and warrants that we previously received as part of a licensing transaction for which we concluded the decline in market value was other-than-temporary. The other income for the year ended December 31, 2007 was primarily a result of a $4.0 million curtailment gain related to our decision to curtail our post-retirement medical and life insurance plan.

Income Taxes

For the year ended December 31, 2008, we recorded a $316.0 million income tax benefit from continuing operations, which included a favorable adjustment of $319.2 million in the fourth quarter of 2008 resulting from the

57

reversal of a significant portion of our valuation allowance related to our U.S. deferred tax assets. The reduction of the valuation allowance is based on the fact that we determined that it was more likely than not that we will generate sufficient taxable income to realize the benefits of our U.S. deferred assets, primarily resulting from our U.S. NOLs. The determination was based upon our assessment of our cumulative profitability in the United States over the previous three years and our expectation of future taxable income.

Loss from Discontinued Operations

On August 1, 2008, we completed the sale of the remaining assets of our eye disease business to Eyetech Inc. Under the terms of the transaction, the principal assets we transferred to Eyetech Inc. consisted of Macugen-related intellectual property and inventory, as well as $5.8 million in working capital primarily in the form of Macugen trade receivables, in exchange for potential future milestone and royalty payments. Macugen net product revenues for the seven months ended July 31, 2008, or the last date that we held the remaining assets of our eye disease business, were $7.2 million. Net income for the year ended December 31, 2008 was $4.9 million compared to net losses of $36.3 million, in the same period in 2007. As a result of the sale of the remaining assets of our eye disease business, during the year ended December 31, 2008 we incurred $14.1 million of charges relating to the write-down of the assets held for sale to their net realizable value as well as transaction-related charges. We also recognized: (i) the remaining balance of the $27.9 million of unearned revenue as income in the third quarter of 2008 as a result of the assignment to Eyetech Inc. of certain obligations under our amended and restated license agreement with Pfizer; and (ii) a $2.0 million expense in the third quarter of 2008 related to a third-party milestone obligation for Macugen.

Liquidity and Capital Resources

At December 31, 2009, cash and investments, including restricted securities, were $471.9 million compared to $515.5 million at December 31, 2008. The decline of $43.6 million was primarily due to an increase in net cash of $159.8 million generated from operating activities offset by $75.0 million used to repurchase a portion of our 2023 and 2038 Notes, $69.0 million used for capital purchases, including our Ardsley, New York and Oxford, United Kingdom facilities, a $40.0 million equity investment in HBM BioVentures AG and $15.0 million equity investment in AVEO.

In December 2009, we repurchased $40.0 million of principal amount of our 2038 Notes for $37.4 million, which reduced the aggregate principal amount outstanding of the debt to $160.0 million. In December 2009, we also repurchased $39.5 million of principal amount of our 2023 Notes for $37.6 million, which reduced the aggregate principal amount outstanding of the debt to $60.5 million.

In connection with our decision to consolidate our U.S. operations onto a single campus located in Ardsley, New York in Westchester County, we expect to spend approximately $100 million on capital-related renovations over the next 12 months. In addition, we expect to use approximately $16 million of cash for restructuring-related payments.

As a result of our year over year revenue growth and diligent management of our business, in particular our expenses, we have sustained our profitability and strengthened our financial position. If we continue to execute on our internal plans, we expect over the next two years that our R&D investments, capital requirements and the potential redemption of our 2025 Notes in December 2010, can be funded from existing cash balances and the generation of cash flow from Tarceva and our DPIV patent estate licenses. Certain potential exceptions to this include the possible need to fund strategic acquisitions of products and/or businesses should we identify any such strategic opportunities in the future.

58

Commitments and Contingencies

Our major outstanding contractual obligations relate to our senior subordinated convertible notes and our facility leases. The following table summarizes our significant contractual obligations at December 31, 2009 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Payments Due by Period
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Contractual Obligations:
Senior convertible debt(a)	$	536,579	$	9,065	$	18,130	$	18,130	$	491,254
Operating leases		90,491		8,896		17,518		16,551		47,526
Purchase obligations(b)		85,400		35,100		36,700		8,600		5,000
Capital commitments		481		481		—		—		—
Obligations related to exit activities(c)		3,734		2,537		—		—		1,197
Total contractual obligations	$	716,685	$	56,079	$	72,348	$	43,281	$	544,977

(a)	Our senior convertible debt obligations assume the payment of interest on our senior convertible notes through their respective maturity dates and the payment of their outstanding principal balance at their respective maturity dates. The interest payments on our senior convertible notes are at a rate of: (i) 3.25% per annum relating to the $60.5 million principal amount of the 2023 Notes; (ii) 2% per annum relating to the $115.0 million principal amount of the 2025 Notes; and (iii) 3% per annum relating to the $160.0 million principal amount of the 2038 Notes. The holders of the 2023 Notes have the right to require us to purchase, for cash, all of the 2023 Notes, or a portion thereof, in September 2013. In the event that the holders of the 2023 Notes exercise this right, we will have the option of delivering to the holders a specified number of shares of our common stock in lieu of cash as set forth in the indenture for the 2023 Notes. Holders of the 2025 Notes have the right to require us to purchase, for cash, all of the 2025 Notes, or a portion thereof, in December 2010. Holders of the 2038 Notes have the right to require us to purchase, for cash, all of the 2038 Notes, or a portion thereof, in January 2013.
(b)	Includes commercial and research commitments and other significant purchase commitments. Also includes our share of the remaining future estimated commitment related to the Tarceva global development costs of approximately $79 million.
(c)	Includes expected payments for termination benefits and estimated facility refurbishments. As discussed below, we anticipate additional payments relating to plans to consolidate operations.

Other significant commitments and contingencies not included in the table above include the following:

•  As part of our purchase of the 43-acre site in Ardsley, New York, which consists of approximately 400,000 square feet of existing office and laboratory space, we expect to incur approximately $100 million of capital-related renovation costs over the next twelve months. We also expect to use approximately $16 million of cash over the next two years, which primarily relate to labor-related and relocation-related costs. We also expect to recognize additional charges over the next 6 to 12 months related to our leased facilities in the U.S. when these facilities cease to be used.

•  We are committed to share certain commercialization costs relating to Tarceva with Genentech. Under the terms of our agreement, there are no contractually determined amounts for future commercial costs.

•  Under agreements with external CROs, we will continue to incur expenses relating to clinical trials of Tarceva and other clinical candidates. The timing and amount of these disbursements can be based upon the achievement of certain milestones, patient enrollment, services rendered or as expenses are incurred by the CROs and therefore, we cannot reasonably estimate the potential timing of these payments. These agreements are cancellable on short notice.

59

•  Under certain license and collaboration agreements with pharmaceutical companies and educational institutions, we are required to pay royalties, milestone and/or other payments upon the successful development and commercialization of products. However, successful research and development of pharmaceutical products is high risk, and most products fail to reach the market. Therefore, at this time the amount and timing of the payments, if any, are not known.

•  Under certain license and other agreements, we are required to pay license fees for the use of technologies and products in our R&D activities or milestone payments upon the achievement of certain predetermined conditions. These license fees are not deemed material to our consolidated financial statements and the amount and timing of the milestone payments, if any, are not known due to the uncertainty surrounding the successful research, development and commercialization of the products.

•  We have a retirement plan which provides post-retirement medical and life insurance benefits to eligible employees, board members and qualified dependents. We curtailed this plan in 2007; however, certain employees, board members and qualified dependents remain eligible for these benefits. Eligibility is determined based on age and years of service. We had an accrued liability for post-retirement benefit costs of $2.7 million at December 31, 2009.

Accounting Pronouncements

See Note 22, “Accounting Pronouncements,” to the accompanying consolidated financial statements for a discussion of our new accounting pronouncements.

Forward Looking Statements

A number of the matters and subject areas discussed in this Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 1, “Business,” and elsewhere in this report, that are not historical or current facts, deal with potential future circumstances and developments. The discussion of these matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and these discussions may materially differ from our actual future experience involving any one or more of these matters and subject areas. These forward-looking statements are also subject generally to the other risks and uncertainties that are described in this report in Item 1A, “Risk Factors.”

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our cash flow and earnings are subject to fluctuations due to changes in interest rates in our investment portfolio of debt securities and to foreign currency exchange rates. We maintain an investment portfolio of various issuers, types and maturities. These securities are generally classified as available-for-sale as defined by FASB ASC Topic No. 320, which includes the accounting literature formerly known as SFAS No. 115, and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) included in stockholders’ equity. These securities are reported at their amortized cost, which includes the direct costs to acquire the securities, including the amortization of any discount or premium, and accrued interest earned on the securities. We have not used or held derivative financial instruments in our investment portfolio.

A hypothetical 10% change in interest rates during the twelve months ended December 31, 2009 would have resulted in a $426,000 change in our net income for 2009.

Our limited investments in certain biotechnology companies are carried on the equity method or cost method of accounting using the guidance of applicable accounting literature. Other-than-temporary losses are recorded against earnings in the same period the loss was deemed to have occurred.

60

The royalty revenue we receive from Roche on net sales of Tarceva outside of the United States is calculated by converting the respective countries’ Tarceva sales in local currency to Roche’s functional currency (Swiss francs) and then to U.S. dollars. The royalties are paid to us in U.S. dollars on a quarterly basis. As a result, fluctuations in the value of the U.S. dollar against foreign currencies will impact our earnings. A hypothetical 10% change in current rates during the year ended December 31, 2009 would have resulted in an approximate $8.7 million change to our net income for 2009, excluding the impact of any hedges.

Our convertible senior subordinated notes totaled $335.5 million at December 31, 2009, and were comprised of our 2023 Notes, which bear interest at a fixed rate of 3.25%, our 2025 Notes which bear interest at a fixed rate of 2% and our 2038 Notes which bear interest at a fixed rate of 3%. Underlying market risk exists related to an increase in our stock price or an increase in interest rates, which may make the conversion of the 2023 Notes, 2025 Notes or 2038 Notes to common stock beneficial to the holders of such notes. Conversion of the 2023 Notes, 2025 Notes or 2038 Notes would have a dilutive effect on any future earnings and book value per common share.

61

ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS

Index to Consolidated Financial Statements:

	Page
	Number
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements		63
Consolidated Balance Sheets at December 31, 2009 and 2008		64
Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007		65
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007		66
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007		67
Notes to Consolidated Financial Statements		68

62

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and Stockholders
OSI Pharmaceuticals, Inc.:

We have audited the accompanying consolidated balance sheets of OSI Pharmaceuticals, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of OSI Pharmaceuticals, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the consolidated financial statements have been adjusted for the retrospective application of Financial Accounting Standards Board Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)”, (included in FASB ASC Subtopic 470-20, “Debt — Debt with Conversion and Other Options)”, which became effective January 1, 2009.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), OSI Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 24, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Melville, New York

February 24, 2010

63

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND 2008
(In thousands except per share data)

	December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	98,179		$	272,936
Available-for-sale securities		371,410			240,328
Restricted investment securities		2,306			2,247
Accounts receivables — net		127,171			100,242
Inventory		19,138			20,139
Accrued investment income receivable		1,888			1,428
Prepaid expenses and other current assets		16,137			6,719
Assets related to discontinued operations		427			917
Deferred tax assets		55,739			45,495
Total current assets		692,395			690,451
Property, equipment and leasehold improvements — net		101,544			43,443
Debt issuance costs — net		2,720			5,632
Goodwill		38,873			38,648
Other intangible assets — net		7,638			7,711
Other assets		80,505			14,591
Deferred tax assets		261,697			303,727
	$	1,185,372		$	1,104,203
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	62,293		$	49,052
Unearned revenue — current		11,841			10,547
Liabilities related to discontinued operations		1,238			1,522
Convertible senior subordinated notes — net		107,062			—
Deferred tax liabilities		1,095			—
Total current liabilities		183,529			61,121
Other liabilities:
Rent obligations and deferred rent expense		4,829			8,154
Unearned revenue — long-term		29,705			33,398
Convertible senior subordinated notes — net		201,262			369,095
Accrued post-retirement benefit cost and other		5,045			3,890
Deferred tax liabilities		49,254			30,000
Total liabilities		473,624			505,658
Commitments and contingencies (See Note 19)
Stockholders’ equity:
Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued at December 31, 2009 and 2008		—			—
Common stock, $.01 par value; 200,000 shares authorized, 61,636 and 61,124 shares issued at December 31, 2009 and 2008, respectively		616			611
Additional paid-in capital		1,787,386			1,761,179
Accumulated deficit		(981,187	)		(1,057,118	)
Accumulated other comprehensive income (loss)		7,152			(3,908	)
		813,967			700,764
Less: treasury stock, at cost; 3,396 shares at December 31, 2009 and 2008		(102,219	)		(102,219	)
Total stockholders’ equity		711,748			598,545
	$	1,185,372		$	1,104,203

See accompanying notes to consolidated financial statements.

64

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands except per share data)

	Year Ended December 31,
	2009			2008			2007
Revenues:
Tarceva-related revenues	$	358,730		$	334,653		$	267,799
Other revenues		69,418			44,735			73,231
Total revenues		428,148			379,388			341,030
Expenses:
Cost of goods sold		8,786			9,315			9,399
Research and development		151,845			135,344			123,531
Acquired in-process research and development		6,500			4,000			9,664
Selling, general and administrative		102,989			94,930			99,159
Restructuring charges		4,454			—			—
Amortization of intangibles		920			2,489			1,840
Total expenses		275,494			246,078			243,593
Operating income from continuing operations		152,654			133,310			97,437
Other income (expense):
Investment income — net		8,148			12,961			12,830
Interest expense		(27,085	)		(27,243	)		(14,892	)
Other income (expense) — net		(438	)		1,632			4,170
Income from continuing operations before income taxes		133,279			120,660			99,545
Income tax (benefit) provision		57,284			(316,049	)		2,732
Net income from continuing operations		75,995			436,709			96,813
Income (loss) from discontinued operations — net of tax		(64	)		4,884			(36,288	)
Net income	$	75,931		$	441,593		$	60,525
Basic and diluted income (loss) per common share:
Basic income (loss)
Continuing operations	$	1.31		$	7.62		$	1.68
Discontinued operations		0.00			0.09			(0.63	)
Net income	$	1.31		$	7.70		$	1.05
Diluted income (loss)
Continuing operations	$	1.29		$	6.93		$	1.66
Discontinued operations		0.00			0.07			(0.62	)
Net income	$	1.29		$	7.00		$	1.04
Weighted average shares of common stock outstanding:
Basic shares		57,939			57,316			57,665
Diluted shares		60,452			66,911			58,333

See accompanying notes to consolidated financial statements.

65

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands)

											Accumulated
					Additional						Other						Total
	Common Stock				Paid-in			Accumulated			Comprehensive			Treasury			Stockholders’
	Shares		Amount		Capital			Deficit			Income (Loss)			Stock			Equity
Balance at December 31, 2006		59,179	$	592	$	1,649,030		$	(1,559,236	)	$	2,354		$	(37,221	)	$	55,519
Comprehensive income:
Net income		—		—		—			60,525			—			—			60,525
Unrealized gain on investment securities — net		—		—		—			—			486			—			486
Curtailment of post-retirement plan		—		—		—			—			1,316			—			1,316
Foreign currency translation adjustment		—		—		—			—			366			—			366
Total comprehensive income		—		—		—			—			—			—			62,693
Stock options exercised		1,052		11		25,622			—			—			—			25,633
Issuance of common stock under employee purchase plan and other		26		—		776			—			—			—			776
Issuance of restricted stock to employees		95		1		18			—			—			—			19
Equity-based compensation expense		—		—		15,447			—			—			—			15,447
Balance at December 31, 2007		60,352		604		1,690,893			(1,498,711	)		4,522			(37,221	)		160,087
Comprehensive income:
Net income		—		—		—			441,593			—			—			441,593
Unrealized loss on investment securities — net		—		—		—			—			(727	)		—			(727	)
Post-retirement plan		—		—		—			—			378			—			378
Foreign currency translation adjustment		—		—		—			—			(8,081	)		—			(8,081	)
Total comprehensive income		—		—		—			—			—			—			433,163
Value attributed to the equity component of the 2038 Notes		—		—		35,760			—			—			—			35,760
Stock options exercised		568		5		15,733			—			—			—			15,738
Issuance of common stock under employee purchase plan and other		25		—		843			—			—			—			843
Issuance of restricted stock to employees		179		2		—			—			—			—			2
Equity-based compensation expense net of share settlements		—		—		17,494			—			—			—			17,494
Purchase of treasury stock- 1,453 shares		—		—		—			—			—			(64,998	)		(64,998	)
Excess tax benefits from stock-based compensation		—		—		456			—			—			—			456
Balance at December 31, 2008		61,124		611		1,761,179			(1,057,118	)		(3,908	)		(102,219	)		598,545
Comprehensive income:
Net income		—		—		—			75,931			—			—			75,931
Unrealized gain on investment securities — net		—		—		—			—			4,957			—			4,957
Unrealized gain on derivative instruments		—		—		—			—			145			—			145
Post-retirement plan		—		—		—			—			(141	)		—			(141	)
Foreign currency translation adjustment		—		—		—			—			6,099			—			6,099
Total comprehensive income		—		—		—			—			—			—			86,991
Stock options exercised		256		3		5,692			—			—			—			5,695
Issuance of common stock under employee purchase plan and other		68		—		1,074			—			—			—			1,074
Issuance of restricted stock to employees		188		2		—			—			—			—			2
Equity-based compensation expense net of share settlements		—		—		21,316			—			—			—			21,316
Excess tax benefits from stock-based compensation		—		—		5			—			—			—			5
Repurchase of a portion of the value attributed to the equity component of the 2038 Notes		—		—		(1,880	)		—			—			—			(1,880	)
Balance at December 31, 2009		61,636	$	616	$	1,787,386		$	(981,187	)	$	7,152		$	(102,219	)	$	711,748

See accompanying notes to consolidated financial statements.

66

OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands)

	Year Ended December 31,
	2009			2008			2007
Cash flow from operating activities:
Net income	$	75,931		$	441,593		$	60,525
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash compensation charge		25,269			20,727			17,099
Deferred tax provision		52,772			(319,221	)		—
Amortization of debt discount and debt issuance costs		15,093			15,182			7,657
Amortization of premiums and discounts on investments		560			(1,151	)		(2,578	)
Depreciation and amortization		10,056			10,501			10,608
Acquired in-process research and development charge		6,500			4,000			9,664
Impairment of assets		663			1,217			10,765
Gain on repurchase of portion of 2023 and 2038 Notes		(776	)		—			—
Impact of inventory step-up related to inventory sold		—			51			2,365
Loss on sale of eye disease business and non-cash impairment charges		—			14,136			—
Loss on sale and disposals of equipment		—			9			1,471
Gain on sale of intellectual property		—			—			(7,892	)
Changes in assets and liabilities:
Accounts receivable		(25,105	)		(4,895	)		(23,262	)
Inventory		1,000			536			12
Prepaid expenses and other current assets		(8,740	)		2,994			(1,054	)
Other assets		(4,527	)		(67	)		(1,077	)
Accounts payable and accrued expenses		13,505			(12,926	)		6,038
Collaboration profit share payable		—			—			(9,257	)
Unearned revenue		(2,398	)		(33,616	)		(1,331	)
Accrued post-retirement benefit cost and other		(43	)		(134	)		(3,944	)
Net cash provided by operating activities		159,760			138,936			75,809
Cash flows from investing activities:
Purchases of short and long-term available-for-sale securities		(601,754	)		(337,355	)		(258,085	)
Sales of short and long-term available-for-sale securities		234,136			149,141			76,012
Maturities of short and long-term available-for-sale securities		237,495			88,424			211,616
Additions to property, equipment and leasehold improvements		(69,178	)		(4,977	)		(4,332	)
Purchase of equity investments		(56,009	)		—			—
Purchase of intellectual property (acquired in-process research and development)		(6,500	)		(4,886	)		(9,664	)
Proceeds from sale of fixed assets		34			—			335
Purchase of compound library assets		(47	)		(257	)		(3	)
Proceeds from sale of intellectual property		—			—			4,000
Purchase of intangible assets		—			(8,000	)		—
Payments made in connection with disposal of eye disease business		—			(1,240	)		—
Net cash (used in) provided by investing activities		(261,823	)		(119,150	)		19,879
Cash flows from financing activities:
Repurchase of a portion of the 2023 and 2038 Notes		(75,038	)		(50,050	)		—
Proceeds from the exercise of stock options, employee purchase plan, and other		6,776			17,038			26,409
Employees taxes paid related to equity awards		(3,951	)		(3,233	)		(1,654	)
Proceeds from the issuance of convertible senior subordinated notes		—			200,000			—
Debt issuance costs paid		—			(6,730	)		—
Purchase of treasury stock		—			(64,998	)		—
Excess tax benefits from stock-based compensation		5			456			—
Net cash (used in) provided by financing activities		(72,208	)		92,483			24,755
Net increase (decrease) in cash and cash equivalents		(174,271	)		112,269			120,443
Effect of exchange rate changes on cash and cash equivalents		(486	)		(2,070	)		266
Cash and cash equivalents at beginning of year		272,936			162,737			42,028
Cash and cash equivalents at end of year	$	98,179		$	272,936		$	162,737
Cash paid for income taxes	$	2,665		$	2,108		$	1,400
Cash paid for interest	$	11,548		$	9,770		$	7,175
Non-cash financing and investing activities:
Stock and warrants received from sale of intellectual property	$	—		$	—		$	3,892

See accompanying notes to consolidated financial statements.

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In this Annual Report on Form 10-K, “OSI,” “our company,” “we,” “us,” and “our” refer to OSI Pharmaceuticals, Inc. and subsidiaries.

(1)   Summary of Significant Accounting Policies

(a)   Principles of Consolidation

The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States. Our consolidated financial statements include the accounts of OSI Pharmaceuticals, Inc., and our wholly-owned subsidiaries, Oldtech Inc. (formerly known as (OSI) Eyetech, Inc.), Prosidion Limited, OSI Pharmaceuticals (U.K.) Limited, or OSI U.K., OSI Delaware Corp. and OSI Investment Holdings GmbH. This report on Form 10-K includes the statement of operations, statement of cash flows and statement of stockholders’ equity for the years ended December 31, 2009, 2008 and 2007. All intercompany balances and transactions have been eliminated in consolidation.

(b)   Reclassifications

Certain reclassifications have been made to the consolidated statements of operations for the years ended December 31, 2007 and 2008 to conform to the presentation for the fiscal year ended December 31, 2009. These reclassifications include reclassification of debt issuance costs within other income (expense) and the reclassification of deferred tax assets and liabilities within the consolidated balance sheets, to conform to the 2009 fiscal year presentation.

(c)   Revenue Recognition

Tarceva-related revenues includes net revenue from unconsolidated joint business and Tarceva-related milestones and royalties. Other revenues include license, milestone, royalty and commission from sources other than Tarceva. Our revenue recognition polices with respect to these revenue sources are described below.

(i)   Tarceva-Related Revenues: Net Revenue from Unconsolidated Joint Business

Net revenue from unconsolidated joint business is related to our co-promotion and manufacturing agreements with Genentech for Tarceva. It consists of our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva, the reimbursement from Genentech of our sales and marketing costs related to Tarceva and the reimbursement from Genentech of most of our manufacturing costs related to Tarceva. Under the co-promotion arrangement, all U.S. sales of Tarceva and associated costs and expenses, except for a portion of our sales-related costs, are recognized by Genentech. Genentech is also responsible for estimating reserves for anticipated returns of Tarceva and monitoring the adequacy of these reserves. We record our 50% share of the co-promotion pretax profit as set forth in our agreement with Genentech. Pretax co-promotion profit under the co-promotion arrangement is derived by calculating U.S. net sales of Tarceva to third-party customers and deducting costs of sales, distribution and selling and marketing expenses incurred by Genentech and us. If actual future results differ from our and Genentech’s estimates, we may need to adjust these estimates, which would have an effect on earnings in the period of adjustment. The reimbursement of sales and marketing costs related to Tarceva is recognized as revenue as the related costs are incurred. We defer the recognition of the reimbursement of our manufacturing costs related to Tarceva until the time Genentech ships the product to third-party customers, at which time our risk of inventory loss no longer exists. The unearned revenue related to shipments by our third party manufacturers of Tarceva to Genentech that have not been shipped to third-party customers was $6.3 million and $6.6 million as of December 31, 2009 and 2008, respectively, and is included in unearned revenue-current in the accompanying consolidated balance sheets.

For the years ended December 31, 2009, 2008 and 2007, revenues from our share of the pretax co-promotion profit generated from our co-promotion arrangement with Genentech for Tarceva and the reimbursement from Genentech of our sales and marketing costs related to Tarceva were $199.5 million, $186.2 million and

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$159.0 million, respectively, and revenues from the reimbursement of our manufacturing costs were $9.3 million, $9.9 million and $9.7 million, respectively.

(ii)   Royalties

We estimate royalty revenue and royalty receivables in the periods these royalties are earned, in advance of collection. Our estimate of royalty revenue and royalty receivables is based upon communication with our collaborators and our licensees. Differences between actual royalty revenue and estimated royalty revenue are adjusted in the period in which they become known, typically the following quarter. Historically, such adjustments have not been material to our consolidated financial position or results of operations.

The royalty amount with respect to Tarceva sales in the rest of the world is calculated by converting the Tarceva sales for each country in their respective local currency into Roche’s functional currency (Swiss francs) and then to U.S. dollars. The royalties are paid to us in U.S. dollars on a quarterly basis. As a result, fluctuations in the value of the U.S. dollar against foreign currencies will impact our royalty revenue.

(iii)   License and Milestones

Our revenue recognition policies for all nonrefundable upfront license fees and milestone arrangements are in accordance with the guidance provided in the Securities and Exchange Commission’s, or SEC’s, SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” as amended by SEC Staff Accounting Bulletin No. 104, “Revenue Recognition.” In addition, we follow the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, FASB ASC Subtopic No. 605-25, which includes the accounting literature formerly known as Emerging Issues Task Force Issue, or EITF Issue, 00-21, “Revenue Arrangements with Multiple Deliverables,” for multiple-element revenue arrangements entered into or materially amended after June 30, 2003. As a result of an amendment to our collaboration agreement with Genentech in June 2004, $1.8 million milestone payments received from Genentech after June 2004 and the remaining unearned portion of the upfront fee as of June 2004 are being recognized over the expected performance period of our Manufacturing and Supply Agreement with Genentech.

We received a total of $25.0 million in upfront fees from Genentech and Roche, our ex-U.S. collaborator for Tarceva, in January 2001, which was being recognized on a straight-line basis over the expected performance period of our required research and development, or R&D, efforts under the Tripartite Agreement with Genentech and Roche. The upfront fee from Roche was fully recognized as of December 31, 2004.

Since September 2004, we have received $34.0 million in milestone payments from Genentech based upon certain U.S. Food and Drug Administration, or the FDA, filings and approvals of Tarceva in accordance with our agreement with Genentech. As a result of the amendment to our collaboration agreement with Genentech in June 2004, these payments are, and any future milestone payments will be, recognized in accordance with FASB ASC Subtopic 605-25. The unrecognized unearned revenue related to the milestones and upfront payment received from Genentech was $25.0 million as of December 31, 2009, of which $2.3 million was classified as short-term and the balance of $22.7 million was classified as long-term in the accompanying consolidated balance sheets. The unrecognized unearned revenue related to the milestones and upfront payment received from Genentech was $27.3 million as of December 31, 2008, of which $2.3 million was classified as short-term and the balance of $25.0 million was classified as long-term in the accompanying consolidated balance sheets.

In March 2005, we agreed to a further global development plan and budget with our collaborators, Genentech and Roche, for the continued development of Tarceva. For revenue recognition purposes, the revised development plan and budget for Tarceva was deemed a material amendment to our Roche agreement and therefore, future milestones received from Roche will be recognized in accordance with FASB ASC Subtopic No. 605-25. Accordingly, milestone payments received from Roche after March 2005 have been, and will be, initially recorded

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as unearned revenue and recognized over the expected performance period of the research collaboration on a straight-line basis.

Since March of 2005, we have received $14.0 million of milestone payments from Roche as a result of various approvals. The unearned revenue related to the milestones we received from Roche was $8.3 million as of December 31, 2009, of which $1.4 million was classified as short-term and the balance of $6.9 million was classified as long-term in the accompanying consolidated balance sheets. The unearned revenue related to the milestones we received from Roche was $9.7 million as of December 31, 2008, of which $1.6 million was classified as short-term and the balance of $8.1 million was classified as long-term in the accompanying consolidated balance sheets.

We have entered into several worldwide non-exclusive license agreements under our dipeptidyl peptidase IV, or DPIV, patent portfolio covering the use of DPIV inhibitors for the treatment of type 2 diabetes and related indications. In addition to upfront fees received from these agreements, we are entitled to receive milestone payments upon the achievement of certain events and royalty payments on net sales. Under the terms of the agreements, we recognized total revenues of $67.0 million, $41.1 million and $34.7 million for the years ended December 31, 2009, 2008 and 2007, respectively.

In January 2007, we licensed our glucokinase activator, or GKA, program, including our clinical candidate PSN010, to Eli Lilly and Company for an upfront fee of $25.0 million and up to $360.0 million in potential development and sales milestones and other payments, plus royalties on any compounds successfully commercialized from this program. We recognized the upfront fee as revenue in 2007 since we had no future performance obligation under the agreement beyond the end of 2007.

Included in other revenues are sales commissions earned on the sales of the drug, Novantrone, in the United States for oncology indications pursuant to a co-promotion agreement dated March 11, 2003 with Ares Trading S.A., an affiliate of Merck Serono, S.A. Merck Serono markets Novantrone in multiple sclerosis indications and records all U.S. sales for all indications including oncology indications. Sales commissions from Novantrone on net oncology sales are recognized in the period the sales occur based on the estimated split between oncology sales and multiple sclerosis sales.

(d)   Research and Development Costs

R&D costs are charged to operations as incurred and include direct costs of R&D-related personnel and equipment, contracted costs and an allocation of laboratory facility and other core scientific services. Included in R&D costs are our net share of development expenses related to the Tripartite Agreement with Genentech and Roche (see Note 2(a)). Our R&D costs related to the Tripartite Agreement include estimates by the parties to the agreement. If actual future results vary, we may need to adjust these estimates, which could have an effect on our earnings in the period of adjustment. Historically such adjustments have not been material to our consolidated financial condition or results of operations.

(e)   Acquired In-Process Research and Development

In accordance with FASB ASC Topic No. 730, “Research and Development,” formerly known as Statement of Financial Accounting Standards, or SFAS, No. 2, “Accounting for Research and Development Costs,” costs to acquire in-process R&D projects and technologies which have no alternative future use and which have not reached technological feasibility at the date of acquisition are expensed as incurred.

(f)   Cash and Cash Equivalents

We characterize money market funds, treasury bills, commercial paper and time deposits with maturities of three months or less at the date of purchase as cash equivalents. Such cash equivalents amounted to $60.7 million and $194.3 million as of December 31, 2009 and 2008, respectively.

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(g)   Investment Securities

Investment securities at December 31, 2009 and 2008 consisted primarily of U.S. government securities, U.S. government agency securities and debt securities of financial institutions and corporations with strong credit ratings. We classify our investments as available-for-sale securities. These securities are recorded at their fair value. Unrealized holding gains and losses, net of the related tax effect, if any, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, until realized or recognized. The specific identification basis is utilized to calculate the cost to determine realized gains and losses from the sale of available-for-sale securities. Dividend and interest income are recognized when earned. A portion of our marketable investments have stated maturities greater than one year. We have classified these investments as current assets based upon the classification as available-for-sale and the underlying liquidity of the assets.

Certain of our facility leases have outstanding letters of credit issued by commercial banks which serve as security for our performance under the leases. Included in restricted investment securities as of December 31, 2009 and 2008 were $2.4 million and $2.2 million, respectively, of investments to secure these letters of credit.

We have certain investments in privately-owned companies that are carried on the cost method of accounting. Our investments are recorded as a cost-based investment and will be reviewed for impairment each reporting period based upon, among other things, any negative changes in investments business or future prospects or other impairment indicators. Losses are recorded against earnings in the period that the decrease in value of the investment is deemed to be other than temporary.

(h)   Other-Than-Temporary Impairments of Available-For-Sale Marketable Securities

A decline in the fair value of any available-for-sale marketable security below its cost that is deemed to be other-than-temporary results in a reduction in its carrying amount to fair value. The impairment is charged to operations and a new cost basis for the security is then established. The determination of whether an available-for-sale marketable security is other-than-temporarily impaired requires significant judgment and consideration of available quantitative and qualitative evidence in evaluating the potential impairment. Factors evaluated to determine whether the investment is other-than-temporarily impaired include: (i) significant deterioration in the issuer’s earnings performance, credit rating or asset quality; (ii) the business prospects of the issuer; (iii) adverse changes in the general market conditions in which the issuer operates; (iv) the length of time that the fair value has been below our cost; (v) our expected future cash flows from the security; and (vi) our intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment. However, even if a investor does not expect to sell a debt security expected cash flows to be received must be evaluated to determine if credit losses have occurred. In the event of a credit loss, only the amount associated with the credit loss is recognized in income. The amount of losses relating to other factors, including those related to changes in interest rates, are recorded in accumulated other comprehensive income. The other-than-temporary impairment model for debt securities also requires additional disclosure regarding the calculation of credit losses and the factors considered in reaching a conclusion that an investment is not other-than-temporarily impaired. Assumptions associated with these factors are subject to future market and economic conditions, which could differ from our assessment. During 2009 and 2008, we recorded a $663,000 and $1.2 million impairment charge, respectively, in other income (expense) related to an other-than-temporary decline in the fair value of common stock and warrants that we previously received as part of a licensing transaction. During 2007, we did not recognize any other-than-temporary impairments.

(i)   Goodwill and Intangible Assets

We account for goodwill and other intangible assets in accordance with FASB ASC Topic No. 805, “Business Combinations,” and FASB ASC Topic No. 350, “Intangibles — Goodwill and Other.” The accounting guidance in ASC Topic No. 805 requires that the purchase method of accounting be used for all business combinations. It

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specifies the criteria which intangible assets acquired in a business combination must meet in order to be recognized and reported apart from goodwill. ASC Topic No. 350 requires that goodwill and intangible assets determined to have indefinite lives no longer be amortized but instead be tested for impairment at least annually and whenever events or circumstances occur that indicate impairment might have occurred. ASC Topic No. 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment whenever events or circumstances indicate that impairment might have occurred.

As a result of our R&D programs, including programs funded pursuant to R&D funding agreements, we have applied for a number of patents in the United States and abroad. Costs incurred in connection with patent applications for our R&D programs have been expensed as incurred.

(j)   Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of

In accordance with FASB ASC Subtopic No. 360-10, “Assets: Property, Plant and Equipment: Impairment,” we review long-lived assets to determine whether an event or change in circumstances indicates the carrying value of the asset may not be recoverable. We base our evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets and any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flows analysis at the lowest level for which identifiable cash flows exist. If impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. Fair value is the amount at which the asset could be bought or sold in a current transaction between a willing buyer and seller other than in a forced or liquidation sale and can be measured at the asset’s quoted market price in an active market or, where an active market for the asset does not exist, our best estimate of fair value based on discounted cash flow analysis. Assets to be disposed of by sale are measured at the lower of carrying amount or fair value less estimated costs to sell.

(k)   Inventory

Inventory is stated at the lower of cost or market, with cost being determined using the weighted average method. Included in inventory are raw materials and work-in-process that may be used in the production of pre-clinical and clinical product, which will be expensed to R&D cost when consumed for these uses. Inventory is comprised of three components: raw materials, which are purchased directly by us, work-in-process, which is primarily active pharmaceutical ingredient, or API, where title has transferred from our contract manufacturer to us, and finished goods, which is packaged product ready for commercial sale.

(l)   Depreciation and Amortization

Depreciation of fixed assets is recognized over the estimated useful lives of the respective assets on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful lives or the remainder of the lease term.

Amortization of compounds acquired by us (which are included in other assets on the accompanying consolidated balance sheets) is on a straight-line basis over five years.

(m)   Computer Software Costs

We record the costs of computer software in accordance with FASB ASC Subtopic 350-40, “Internal Use Software,” which requires that certain internal-use computer software costs be capitalized and amortized over the useful life of the asset.

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(n)   Accrual for Clinical Research Organization and Clinical Site Costs

We record accruals for estimated clinical study costs. Clinical study costs represent costs incurred by clinical research organizations, or CROs, and clinical sites. These costs are recorded as a component of R&D expenses. We analyze the progress of the clinical trials, including levels of patient enrollment and/or patient visits, invoices received and contracted costs when evaluating the adequacy of the accrued liabilities. Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period. Actual costs incurred may or may not match the estimated costs for a given accounting period.

(o)   Foreign Currency Translation

The assets and liabilities of our non-U.S. subsidiaries, which operate in their local currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date with resulting translation adjustments directly recorded as a separate component of accumulated other comprehensive income (loss). Income and expense accounts are translated at the average exchange rates during the year.

(p)   Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(q)   Capitalized Interest

We capitalize interest on capital invested in projects in accordance with guidance under FASB ASC Topic No. 835, “Capitalization of Interest Cost.” The interest capitalization period begins when the expenditures have been incurred and activities necessary to prepare the asset for its intended use have begun, and ends when the project is substantially completed or placed into service. The interest rate used in determining the amount of interest capitalized is the weighted average rate applicable to the company’s borrowings. Upon the assets being placed into service, the capitalized interest, as a component of the total cost of the asset, is amortized over the estimated useful life of the asset.

(r)   Change in Accounting Principle

The accompanying consolidated statements of operations for the years ended December 31, 2008 and 2007, the consolidated balance sheet as of December 31, 2008, and the consolidated statements of stockholders’ equity for the years ended December 31, 2008 and 2007 reflect the retrospective application of FASB ASC Subtopic No. 470-20, which includes the accounting literature formerly known as FASB Staff Position Accounting Principles Board, or FSP APB, 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) Note 15 to the consolidated financial statements provides the detailed disclosures related to the retrospective application to prior years’ financial statements.” The table below provides a summary of the retroactive

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application of this accounting literature the adjustments to our historically reported information (in thousands except per share amounts):

Statement of Operations Impact:	Year Ended December 31,
	2008			2007
Increase in interest expense	$	12,963		$	6,027
Decrease in debt issuance costs amortization		(479	)		(233	)
Decrease in net income		(29,892	)		(5,794	)
Decrease in diluted EPS	$	(0.26	)	$	(0.04	)

Balance Sheet and Stockholders’ Equity Impact:	As of December 31,
	2008			2007			2006
Increase in additional paid-in-capital	$	67,916		$	32,156		$	32,156
Decrease in retained earnings		(40,917	)		(11,025	)		(5,230	)

(s)   Debt Issuance Costs

Costs incurred in issuing our 3% Convertible Senior Subordinated Notes due 2038, or 2038 Notes, our 2% Convertible Senior Subordinated Notes due 2025, or 2025 Notes, and our 3.25% Convertible Senior Subordinated Notes due 2023, or 2023 Notes, are amortized over a five-year term which represents the earliest date that notes can be redeemed by the holders. The amortization of debt issuance costs is included in interest expense in the accompanying consolidated statements of operations.

(t)   Stock-Based Compensation

We recognize the total fair value of employee stock awards as compensation expense over the vesting period of the grant. We have used, and expect to continue to use, the Black-Scholes option-pricing model to compute the estimated fair value of stock-based awards on the date of grant. The Black-Scholes option-pricing model includes assumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. We estimate expected volatility based upon a combination of historical, implied and adjusted historical volatility. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. The expected option term determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates.

The assumptions used in computing the fair value of stock-based awards reflect our best estimates but involve uncertainties relating to market and other conditions, many of which are outside of our control. As a result, if other assumptions or estimates had been used, the stock-based compensation expense that was recorded for the years ended December 31, 2009, 2008 and 2007 could have been materially different.

(u)   Segment Information

Operating segments are determined based on a company’s management approach. The management approach is based on the way that the chief operating decision-maker organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. While our results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker manages the enterprise in two operating segments: (i) oncology; and (ii) diabetes and obesity. Given the similar economic characteristics of the two operating segments, we determined that we have one reportable segment.

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(v)   Use of Estimates

We have made a number of estimates and assumptions related to the reported amounts in our financial statements and accompanying notes to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates and assumptions.

(w)   Subsequent Events

We evaluated all events or transactions that occurred after December 31, 2009 up through the filing of this Form 10-K on February 24, 2010. During this period we did not have any material recognized or unrecognized subsequent events.

(2)   Product Development, Commercialization Agreements and Licensing Agreements

As part of our business strategy, we periodically enter into collaboration agreements that provide either us or our collaborators with rights to develop, manufacture and sell drug products using certain know-how, technology and patent rights. The terms of these collaboration agreements may entitle us to receive or make milestone payments upon the achievement of certain product R&D objectives and receive or pay milestones or royalties on future sales of commercial products resulting from the collaboration.

On January 1, 2009, we adopted a new accounting standard which provides for enhanced disclosure of collaborative relationships and requires that certain transactions between collaborators be recorded in the income statement on either a gross or net basis, depending on the characteristics of the collaboration relationship. We evaluated our collaborative agreements for proper income statement classification based on the nature of the underlying activity. If payments to and from our collaborative partners are not within the scope of other authoritative accounting literature, the income statement classification for the payments is based on a reasonable, rational analogy to authoritative accounting literature that is applied in a consistent manner. Amounts due from our collaborative partners related to development activities are generally reflected as a reduction of R&D expense because the performance of contract development services is not central to our operations. For collaborations for commercialized products, if we are the principal, as defined, we record revenue and the corresponding operating costs in their respective line items within our consolidated statement of operations. If we are not the principal, we record operating costs as a reduction of revenue. The principal is the party that is responsible for delivering the product or service to the customer, has latitude with respect to establishing price, and bears the risks and rewards of providing product or service to the customer, including inventory and credit risk. The application of this new accounting standard did not affect our financial position or results of operations for the year ended December 31, 2009, however, it resulted in enhanced disclosure of our collaboration activities.

For the years ended December 31, 2009, 2008 and 2007, we recorded $20.5 million, $13.3 million and $19.9 million, respectively, of reimbursed costs from our collaborators as a reduction in R&D expenses.

(a)   Genentech and Roche

On January 8, 2001, we entered into an alliance with Genentech and Roche for the global co-development and commercialization of Tarceva. We have entered into separate agreements with both Genentech and Roche with respect to the alliance, as well as a Tripartite Agreement.

Under the Tripartite Agreement, we agreed with Genentech and Roche to: optimize the use of each party’s resources to develop Tarceva in certain countries around the world and share certain global development costs; to share information generated under a global development plan; to facilitate attainment of necessary regulatory approvals of Tarceva for commercial marketing and sale in certain countries around the world; and to work together on such matters as the parties agree from time to time during the development of Tarceva. We, as well as Genentech and Roche, may conduct clinical and pre-clinical activities for additional indications for Tarceva not called for under the global development plan, subject to certain conditions. The Tripartite Agreement will terminate when

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either the OSI/Genentech collaboration agreement or the OSI/Roche agreement terminates. Any reimbursement from or payments to Genentech or Roche for R&D costs under the cost sharing arrangement of the Tripartite Agreement are recorded as an increase or decrease to R&D expenses in the accompanying consolidated statements of operations.

Under the OSI/Genentech collaboration agreement, we agreed to collaborate in the product development of Tarceva with the goals of obtaining regulatory approval for commercial marketing and sale in the United States of products resulting from the collaboration, and subsequently, supporting the commercialization of the product. Consistent with the development plan and with the approval of a joint steering committee, we agreed with Genentech as to who will own and be responsible for the filing of drug approval applications with the FDA, other than the first new drug application, or NDA, which we owned and filed, and the first supplemental NDA, which we owned and filed. Genentech has primary responsibility for the design and implementation of all product launch activities and the promotion, marketing and sales of all products resulting from the collaboration in the United States, its territories and Puerto Rico.

We have certain co-promotion rights under the OSI/Genentech collaboration agreement, which are defined in amendments to the agreement effective as of June 4, 2004 and April 11, 2007, and a letter agreement dated April 14, 2008. We have agreed with Genentech that OSI employees will comprise 50% of the combined U.S. sales force through the end of the 2010 calendar year, after which time the size and composition of the sales force may be adjusted. We share equally in the operating profits or losses on products resulting from the collaboration. Under the OSI/Genentech collaboration agreement, we granted to Genentech a royalty-free non-transferable (except under certain circumstances), non-sublicensable (except under certain circumstances), co-exclusive license under our patents and know-how related to Tarceva to use, sell, offer for sale and import products resulting from the collaboration in the United States, its territories and Puerto Rico. In addition, Genentech granted to us a royalty-free non-transferable (except under certain circumstances), non-sublicensable (except under certain circumstances), co-exclusive license to certain patents and know-how held by Genentech to use, make, have made, sell, offer for sale and import products resulting from the collaboration in the United States, its territories and Puerto Rico. We have primary responsibility for patent filings for the base patents protecting Tarceva and, in addition, we have the right, but not the obligation, to institute, prosecute and control patent infringement claims relating to the base patents.

In connection with our collaboration with Genentech, Genentech recognizes all U.S. sales of Tarceva. We recognize revenues from our alliance with Genentech, which consists of our 50% share of the pre-tax profits (loss) generated from the sales of Tarceva in the United States. We also recognize manufacturing revenue from the sale of inventory to Genentech for commercial sales of Tarceva in the United States and reimbursement from Genentech of our Tarceva-related commercial expenses. In addition, we are entitled to milestones under certain circumstances.

The OSI/Genentech collaboration agreement continues until the date on which neither we nor Genentech are entitled to receive a share of the operating profits or losses on any products resulting from the collaboration, that is, until the date that we and Genentech mutually agree to terminate the collaboration or until either party exercises its early termination rights. The OSI/Genentech collaboration agreement is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. The provisions of the agreement allowing us to co-promote are also subject to termination by Genentech upon a material breach by us of the agreement, which remains uncured, or upon a pattern of nonmaterial breaches which remains uncured. In addition, Genentech has the right to terminate the OSI/Genentech collaboration agreement with six months’ prior written notice.

Effective June 4, 2004, we entered into a Manufacturing and Supply Agreement with Genentech that defined each party’s responsibilities with respect to the manufacture and supply of clinical and commercial quantities of Tarceva. Under certain circumstances, if we fail to supply such clinical and commercial quantities, Genentech has the right, but not the obligation, to assume responsibility for such supply. The Manufacturing and Supply Agreement will terminate upon the termination of the OSI/Genentech collaboration agreement.

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Under the OSI/Roche agreement, we granted to Roche a license to our intellectual property rights with respect to Tarceva. Roche is collaborating with us and Genentech in the continued development of Tarceva and is responsible for marketing and commercialization of Tarceva outside of the United States in certain territories as defined in the agreement. The grant is royalty-bearing, non-transferable (except under certain circumstances), non-sublicensable (except under certain circumstances), and provides for the sole and exclusive license to use, sell, offer for sale and import products resulting from the development of Tarceva worldwide, other than the territories covered by the OSI/Genentech collaboration agreement. In addition, Roche has the right, which it has exercised, to manufacture commercial supplies of Tarceva for its territory, subject to certain exceptions. Roche is obligated to pay us certain milestone payments and royalty payments on sales of products resulting from the collaboration including Tarceva. We have primary responsibility for patent filings for the base patents protecting Tarceva and, in addition, we have the right, but not the obligation, to institute, prosecute and control patent infringement claims relating to the base patents. The OSI/Roche agreement continues until the date on which we are no longer entitled to receive a royalty on products resulting from the development of Tarceva, that is, until the date of expiration or revocation or complete rejection of the last to expire patent covering Tarceva or, in countries where there is no valid patent covering Tarceva, on the tenth anniversary of the first commercial sale of Tarceva in that country, or until either party exercises early termination rights. The OSI/Roche agreement is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In addition, Roche has the right to terminate the agreement on a country-by-country basis with six months’ prior written notice and we have the right to terminate the agreement on a country-by-country basis if Roche has not launched or marketed a product in such country under certain circumstances.

(b)   AVEO Pharmaceuticals, Inc.

In September 2007, we entered into a small molecule drug discovery and translational research collaboration with AVEO Pharmaceuticals, Inc. The purpose of this collaboration is the development of therapies that target the underlying mechanisms of epithelial-to-mesenchymal transition, or EMT, in cancer. EMT is a process of emerging significance in tumor development and disease progression and the focal point of our proprietary oncology research under the collaboration. We are collaborating with AVEO to develop proprietary target-driven tumor models for use in drug screening and biomarker validation, and intend to employ these models in support of our oncology drug discovery and clinical programs. Under the terms of the original collaboration agreement (i.e., the September 2007 agreement), we paid AVEO a $10.0 million upfront cash payment, consisting of $7.5 million for access to certain AVEO technology and $2.5 million to fund the first year of research under the collaboration, and purchased $5.5 million of AVEO’s preferred stock. We also agreed to provide AVEO with future research funding, as well as milestones and royalties upon successful development and commercialization of products from the collaboration. We expensed the $7.5 million upfront payment as acquired in-process R&D in the third quarter of 2007. The $2.5 million of first year research funding was recognized as a prepaid asset and was amortized over one year, the period AVEO delivered research services under the collaboration. The acquired preferred stock is recorded as a cost based investment in other assets in the accompanying consolidated balance sheets.

In July 2009, we expanded our drug discovery and translational research collaboration with AVEO in an effort to validate cancer targets and deploy key elements of AVEO’s proprietary translational research platform in support of our clinical development programs. Under the terms of the expanded collaboration, we paid AVEO a $5.0 million upfront cash payment and purchased $15.0 million of AVEO’s preferred stock. We expensed the $5.0 million upfront payment as acquired in-process R&D in the third quarter of 2009 because it was deemed to be related to in-process technology, which was deemed to have no alternative future use. We also agreed to provide AVEO with research funding through June 2011 to support the collaboration and we obtained an option to further expand the collaboration which would require us to make an additional payment to AVEO. We are also required to pay AVEO milestones and royalties upon achievement of certain clinical and regulatory events and successful development and commercialization of products coming out of the collaboration.

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(c)   Eli Lilly

In January 2007, we licensed our GKA program, including our clinical candidate PSN010, to Eli Lilly. Under the terms of the agreement, Eli Lilly is responsible for all aspects of clinical development, manufacturing and commercialization of PSN101 or any back-up compound included within the licensed GKA program. In return for such rights, we received an upfront payment of $25.0 million and will potentially receive milestones and other payments of up to $360.0 million and a royalty percentage on net sales of products arising from the licensed GKA program. The license agreement will remain in effect so long as Eli Lilly is required to pay royalties to us under the agreement. Eli Lilly is required to pay royalties on a country-by-country basis until, among other things, the expiration of the last to expire patent covering PSN010 or any back-up compound included in the licensed program in such country. The license agreement with Eli Lilly is subject to early termination in the event of certain customary defaults, such as material breach of the agreement and bankruptcy. In the event of a termination of the agreement, licenses granted to Eli Lilly shall revert back to us. We recognized the upfront fee as license revenue in 2007 since we have no future performance obligation under the agreement beyond the end of 2007.

(d)   PhaseBio Pharmaceuticals, Inc.

In December 2009, we entered into an option agreement and stock purchase agreement with PhaseBio Pharmaceuticals, Inc. Under the option agreement, we paid $1.5 million for an exclusive option to acquire, for additional consideration, a compound linked to elastin-like peptides. Under the stock purchase agreement, we purchased preferred shares for $800,000, and are obligated to purchase additional shares of preferred stock for $1.2 million if certain events occur. We expensed the $1.5 million option payment as acquired in — process research and development because the option is for assets which were deemed to relate to in-process technology, which was deemed to have no alternative future use.

(e)   Simcere Pharmaceutical Co., Ltd.

In October 2009, we licensed the rights to develop, manufacture, and market in China our multi-targeted tyrosine kinase inhibitor, OSI-930, to Simcere Pharmaceutical Co., Ltd., for a $2.5 million upfront fee, potential development and sales milestones, plus potential future sales royalties. We deferred the initial recognition of the $2.5 million upfront fee based upon our obligation to provide technical and other support for a period of approximately 12 months from the date of execution of the license agreement. For the year ended December 31, 2009, we recognized approximately $625,000 of the upfront payment as revenue. As of December 31, 2009, $1.9 million of the unrecognized upfront payment was included in the current portion of unearned revenue in the accompanying balance sheet.

(f)   TGF ß3

In February 2008, we licensed our transforming growth factor, or TGF ß3, compound for certain indications for an upfront fee of $2.0 million. We recognized the $2.0 million payment as license revenue in 2008 since we had no future performance obligations. Pursuant to the terms of a cross license with Novartis AG, approximately $350,000 of the amount we received was paid to Novartis.

(g)   OncoVista

During 2007, we recognized $2.4 million of revenue from the consideration received as a result of outlicensing OSI-7904L, an oncology clinical candidate for which we had ceased development, to OncoVista Innovative Therapies, Inc. The consideration included cash of $500,000 and OncoVista common stock and warrants with a fair value at the time of purchase of $1.9 million. The common stock is publicly traded and recorded as an available-for-sale security. The warrants are recorded at their estimated fair value in other assets. Upon assessment that the decline in the fair value of the common stock and warrants was other-than-temporary, we recorded

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impairment charges of $663,000 and $1.2 million for the years ended December 31, 2009 and 2008, respectively, which is included in other income (expense) on the accompanying consolidated statements of operations.

(h)   Patent Estate Licenses

We have entered into various license agreements with third parties to grant the use of our proprietary assets. These licenses include the use of our patented gene transcription estate as well as the use of our DPIV patent estate acquired from Probiodrug AG in fiscal 2004. Licensees may be obligated to pay us license fees, annual fees, and milestones and royalties on net sales of product based on the development and sale of products derived from the licensed patents. Generally, the duration of each license is to be coextensive with the life of the last to expire of the underlying patents. For the years ended December 31, 2009, 2008 and 2007, we recognized as revenue $67.0 million, $41.1 million and $34.7 million, respectively, of license, milestone and royalty payments from our DPIV patent estate.

(3)   Income Per Share

Basic income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted income per common share is computed by dividing net income plus after-tax interest expense on dilutive convertible debt by the weighted-average number of common shares outstanding during the reporting period, increased to include all additional common shares that would have been outstanding assuming potentially dilutive common share equivalents had been issued. Dilutive common share equivalents include the dilutive effect of the common stock underlying in-the-money stock options, and are calculated based on the average share price for each period using the treasury stock method.

Under the treasury stock method, the exercise price of an option, the average amount of compensation cost, if any, for future service that we have not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital, if any, when the option is exercised, are assumed to be used to repurchase shares in the current period. Dilutive common share equivalents also reflect the dilutive effect of unvested restricted stock units, deferred stock units and restricted stock and the conversion of convertible debt which is calculated using the “if-converted” method. In addition, in computing the dilutive effect of convertible debt, the numerator is adjusted to add back the after-tax amount of interest and debt issuance cost recognized in the period. As of December 31, 2009, our outstanding convertible senior debt consisted of our 2023 Notes, our 2025 Notes and our 2038 Notes.

As discussed in Notes 14 and 15 below, our retrospective adoption of FASB ASC Subtopic No. 470-20, which includes the accounting literature formerly known as FSP APB 14-1, resulted in our recognition of additional interest expense, decreasing our net income for the years ended December 31, 2008 and 2007 and causing us to resequence our senior subordinated convertible notes for dilutive calculation purposes under the “if-converted” method for the years ended December 31, 2008 and 2007.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The computations for basic and diluted income per share from continuing operations were as follows (in thousands, except per share amounts):

	Year Ended December 31,
	2009		2008		2007
Net income from continuing operations — basic	$	75,995	$	436,709	$	96,813
Add: Interest and debt issuance cost related to convertible notes — net of tax		1,842		26,830		—
Net income from continuing operations — diluted	$	77,837	$	463,539	$	96,813
Weighted-average common shares outstanding — basic		57,939		57,316		57,665
Dilutive effect of options and restricted stock		554		729		668
Dilutive effect of 2023 Notes		1,959		2,308		—
Dilutive effect of 2025 Notes		—		3,908		—
Dilutive effect of 2038 Notes		—		2,650		—
Weighted-average common shares and dilutive potential common shares — diluted		60,452		66,911		58,333
Net income per share from continuing operations:
Basic	$	1.31	$	7.62	$	1.68
Diluted	$	1.29	$	6.93	$	1.66

Under the “if-converted” method, approximately 3.9 million common share equivalents related to our 2025 Notes, and approximately 2.7 million common share equivalents related to our 2038 Notes, were not included in diluted income per share for the year ended December 31, 2009 because their effect would be anti-dilutive. For the year ended December 31, 2008, diluted income per share included all of the share equivalents related to our convertible notes, as the 2023 Notes, the 2025 Notes and the 2038 Notes were all dilutive. For the year ended December 31, 2007, both the 2023 Notes and the 2025 Notes were not included in diluted income per share because their effect would be anti-dilutive. The table below sets forth (in thousands) the common share equivalents related to convertible notes and equity plans and the interest expense related to the convertible notes not included in dilutive shares because their effect would be anti-dilutive.

	Year Ended December 31,
	2009		2008		2007
Common share equivalents — convertible notes		6,592		—		6,907
Common share equivalents — equity plans		3,018		2,865		3,285
Convertible note interest and debt issuance expense not added back under the “if-converted” method	$	14,137	$	—	$	14,652

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(4)   Comprehensive Income

Comprehensive income includes foreign currency translation adjustments, post-retirement adjustments, unrealized gains or losses on our available-for-sale securities and unrealized gains or losses on our qualified derivative instruments, (in thousands):

	Year Ended December 31,
	2009			2008			2007
Net income	$	75,931		$	441,593		$	60,525
Other comprehensive income:
Foreign currency translation adjustments		6,099			(8,081	)		366
Post-retirement plan		(141	)		378			1,316
Unrealized holding gains (losses) arising during period		4,957			(727	)		486
Unrealized gains on derivative instruments		145			—			—
		11,060			(8,430	)		2,168
Total comprehensive income	$	86,991		$	433,163		$	62,693

The components of accumulated other comprehensive income (loss) were as follows (in thousands):

	As of December 31,
	2009		2008
Cumulative foreign currency translation adjustment	$	2,360	$	(3,739	)
Post-retirement plan		237		378
Unrealized gains (losses) on available-for-sale securities		4,410		(547	)
Unrealized gains on derivative instruments		145		—
Accumulated other comprehensive income (losses)	$	7,152	$	(3,908	)

(5)   Fair Value Measurements

FASB ASC Subtopic No. 820-10, which incorporates accounting literature formerly known as Statement of Financial Accounting Standards, or SFAS, No. 157, “Fair Value Measurements” and FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions that Are Not Orderly,” defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).

FASB ASC Section No. 820-10-35 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The three tiers include:

(i) Level 1 — quoted prices in active markets for identical assets and liabilities.

(ii) Level 2 — inputs other than quoted prices included within Level that are observable for the asset or liability, either directly or indirectly, or quoted prices for similar assets or liabilities in active markets.

(iii) Level 3 — unobservable inputs for which little or no market data exists, requiring management to develop its own assumptions.

A majority of our financial assets and liabilities have been classified as Level 2. These assets and liabilities have been initially valued at the transaction price and subsequently valued typically utilizing third party pricing services. The pricing services use many inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. We

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validate the prices provided by our third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

Investment securities at December 31, 2009 and 2008 consisted primarily of U.S. government agency securities and debt securities of financial institutions and corporations. The following tables summarizes the fair value at December 31, 2009 and 2008 and the classification by level of input within the fair value hierarchy set forth above of our cash equivalents, investment securities, restricted investments, derivatives and convertible senior subordinated notes (in thousands):

			Quoted
	As		Prices in
	Reflected		Active
	on the		Market		Significant
	Balance		for		Other		Significant
	Sheet		Identical		Observable		Unobservable
	Line		Assets		Inputs		Inputs
December 31, 2009	Items		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash equivalents	$	82,173	$	82,173	$	—	$	—	$	82,173
Investment securities		371,410		—		371,410		—		371,410
Restricted investments		2,306		—		2,306		—		2,306
Other Assets-Strategic investments		46,323		46,323		—		—		46,323
Other assets		1,655		—		1,653		—		1,653
Derivatives (see Note 7)		323		—		323		—		323
Liabilities:
Derivatives (see Note 7)		88		—		88		—		88
2038 Notes (Face value $160,000)		140,795		—		146,900		—		146,900
2025 Notes (Face value $115,000)		107,062		—		133,472		—		133,472
2023 Notes (Face value $60,467)		60,467		—		55,441		—		55,441

			Quoted
			Prices in
			Active
	As		Market		Significant
	Reflected		for		Other		Significant
	on the		Identical		Observable		Unobservable
	Balance		Assets		Inputs		Inputs
	Sheet		(Level 1)		(Level 2)		(Level 3)		Total
December 31, 2008
Assets:
Cash equivalents	$	250,380	$	248,181	$	2,201	$	—	$	250,382
Investment securities		240,328		—		240,328		—		240,328
Restricted investments		2,247		—		2,247		—		2,247
Other assets		1,104		—		1,104				1,104
Liabilities:
2038 Notes (Face value $200,000)		169,326		—		161,220		—		161,220
2025 Notes (Face value $115,000)		99,819		—		157,010		—		157,010
2023 Notes (Face value $99,950)		99,950		—		85,407		—		85,407

The $98.2 million of cash and cash equivalents reported in the accompanying consolidated balance sheet as of December 31, 2009 includes $82.2 million of cash equivalents consisting of money market funds and commercial paper with original maturities at the date of purchase of three months or less, which are carried at cost, and not

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marked-to-market. The $272.9 million of cash and cash equivalents reported in the accompanying consolidated balance sheet as of December 31, 2008 includes $250.4 million of cash equivalents consisting of money market funds and commercial paper with original maturities of three months or less, which are carried at cost, and not marked-to-market.

Included in other assets in the accompanying consolidated balance sheet, but not included above, as of December 31, 2009 and 2008 are $23.3 million and $7.5 million respectively, of cost-based equity investments in non-public biotechnology companies. The determination of fair value of these investments was not deemed practical given that the cost of such determination would be excessive relative to the materiality of these investments to our financial position. We do not believe that any of these investments were impaired as of December 31, 2009.

The carrying amounts reflected in the accompanying consolidated balance sheets for cash, accounts receivable, due from unconsolidated joint business, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term nature.

Our convertible senior subordinated notes are not marked-to-market and are shown in the accompanying consolidated balance sheets at their original issuance value, net of amortized discount. The estimated fair value of our convertible senior subordinated notes as of December 31, 2009 and December 31, 2008 is provided as enhanced disclosure only.

Investment securities at December 31, 2008 consisted primarily of U.S. government agency securities and debt securities of financial institutions and corporations. The following table summarizes the fair value at December 31, 2008 and the classification by level of input within the fair value hierarchy set forth above of our cash equivalents, investment securities, restricted investments and convertible senior subordinated notes (in thousands):

(6)   Investments

As of December 31, 2009, approximately 53% of our cash equivalents and investment securities consisted of AAA rated long-term and short-term A1 rated securities, including our money market funds, which are AAA rated. The principal weighted-average credit rating of our portfolio of cash equivalents and investment securities was AA/Aa2 as of December 31, 2009. We have established guidelines relative to the diversification of our investments and their maturities with the principle objective of capital preservation and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.

The following is a summary of available-for-sale securities as of December 31, 2009 and 2008 (in thousands):

			Unrealized		Unrealized
December 31, 2009	Costs		Gains		Losses			Fair Value
U.S. government and U.S. government agency securities	$	44,679	$	137	$	(5	)	$	44,811
Corporate and financial institutions debt		325,700		1,107		(208	)		326,599
Total investment securities		370,379		1,244		(213	)		371,410
Restricted investments		2,306		—		—			2,306
Strategic investments (available-for-sale equity investments)		40,254		6,069		—			46,323
Total	$	412,939	$	7,313	$	(213	)	$	420,039

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

			Unrealized		Unrealized
December 31, 2008	Costs		Gains		Losses			Fair Value
U.S. government and U.S. government agency securities	$	66,007	$	607	$	—		$	66,614
Corporate and financial institutions debt		170,634		74		(1,247	)		169,461
Municipal securities		4,237		16		—			4,253
Total investment securities		240,878		697		(1,247	)		240,328
Restricted investments		2,244		3		—			2,247
Total	$	243,122	$	700	$	(1,247	)	$	242,575

As of December 31, 2009, the strategic investment of $46.3 million is included in other assets in the accompanying balance sheet.

Net realized gains (losses) on sales of investment securities during the years ended December 31, 2009, 2008 and 2007 were $988,000 gain, $12,000 gain and ($4,000) loss, respectively.

The gross unrealized losses on our investments were $213,000 as of December 31, 2009, all of which occurred during 2009. For available-for-sale debt securities with unrealized losses, management performs an analysis to assess whether we intend to sell or whether we would more likely than not be required to sell the security before the expected recovery of the amortized cost basis. Where we intend to sell a security, or may be required to do so, the security’s decline in fair value is deemed to be other-than-temporary and the full amount of the unrealized loss is recorded within earnings as an impairment loss.

Regardless of our intent to sell a security, we perform additional analysis on all securities with unrealized losses to evaluate losses associated with the creditworthiness of the security. Credit losses are identified where we do not expect to receive cash flows sufficient to recover the amortized cost basis a security.

As of December 31, 2008, the gross unrealized losses on our investments were $1.2 million, all of which occurred during 2008. Because we have the ability and intent to hold these investments until a recovery of fair value, which may be maturity, we did not consider these investments to be other-than-temporarily impaired as of December 31, 2008.

Maturities of investment securities classified as available-for-sale, excluding restricted investments and strategic investments, were as follows at December 31, 2009 (in thousands):

			Unrealized		Unrealized			Fair
	Costs		Gains		Losses			Value
2010	$	170,136	$	422	$	(22	)	$	170,536
2011		177,788		773		(170	)		178,391
2012		22,455		49		(21	)		22,483
	$	370,379	$	1,244	$	(213	)	$	371,410

(7)  Derivatives

Our business is subject to foreign exchange rate risk resulting primarily from our operations in the United Kingdom and the U.S. dollar royalties we receive from Roche which are derived from local country sales of Tarceva outside of the United States. In the second quarter of 2009, we initiated a foreign currency hedging program with a risk management objective to reduce volatility to earnings and cash flows due to changes in foreign exchange rates, primarily through the use of foreign currency forwards and collars. We do not use derivatives for speculative trading purposes and are not a party to leveraged derivatives.

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We recognize our derivative instruments as either assets or liabilities at fair value in the accompanying consolidated balance sheets. As discussed further in Note 5 to the consolidated financial statements, fair value is determined in accordance with FASB ASC Subtopic No. 820-10. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. For derivatives designated as hedges under FASB ASC Section No. 815-20-35, which incorporates the accounting literature formerly known as SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” we formally assess, both at inception and each reporting period thereafter, whether the hedging derivatives are highly effective in offsetting changes in either the fair value or cash flows of the hedged item.

We enter into foreign currency forwards and collars to protect against possible changes in value of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates, primarily associated with royalties received from Euro-denominated sales or non-functional currency royalty revenues earned by our international operations. We hedge a portion of our projected international royalties over a short-term period, generally less than one year. As of December 31, 2009, we had $49.7 million notional equivalent of outstanding foreign currency collars.

Our foreign exchange contracts are designated as cash flow hedges, and accordingly, the effective portion of gains and losses on these contracts is reported as a gain or loss in accumulated other comprehensive income, or AOCI, in the accompanying consolidated balance sheets and reclassified to earnings in the same periods during which the hedged transactions affect earnings. At that time, the effective portion of the fair value of these foreign exchange contracts is included in royalty revenue in the accompanying consolidated statement of operations. As of December 31, 2009, the amount of gains expected to be reclassified into earnings over the next 12 months was approximately $145,000.

The fair values of our derivative financial instruments designated as hedging instruments and included in the accompanying consolidated balance sheets as of December 31, 2009 are presented as follows (in thousands):

	Foreign
	Currency
	Contracts
Fair Value of Derivative Instruments	December 31, 2009
Prepaid expenses and other current assets	$	323
Accounts payable and accrued expenses	$	88
Accumulated other comprehensive income (net of tax)	$	145

The amounts of the gains and losses recorded in and reclassified from AOCI related to our derivative financial instruments designated as hedging instruments are presented as follows (in thousands):

	Income Statement	For the Year
Accumulated Other Comprehensive	Classification for	Ended
Income (Loss) (Net of Taxes)	Reclassifications	December 31, 2009
Opening balance as of January 1, 2009		$	—
Net gains recognized during the year in AOCI (effective portion)			116
Losses reclassified from AOCI (effective portion)	Royalty revenue		29
Gains/(losses) reclassified from AOCI because of ineffectiveness	Other income/ (expense)		—
Balance at December 31, 2009		$	145

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the year ended December 31, 2009, we recognized $38,000 as a reduction in royalty revenue from the effective portion of our foreign currency hedges upon settlement. For the year ended December 31, 2009, we recognized $39,000 of losses in other income and expenses related to the ineffective portion of our foreign currency hedges. There were no amounts excluded from the assessment of hedge effectiveness for the year ended December 31, 2009.

As a matter of policy, we assess the creditworthiness of our counterparties prior to entering into a foreign exchange contract as well as periodically throughout the contract period to assess credit risk. The counterparties to these contracts are major financial institutions. We do not have significant exposure to any one counterparty. Our exposure to credit loss in the event of nonperformance by any of the counterparties is limited to only the recognized, but not realized, gain attributable to the contracts. Management believes risk of default under these hedging contracts is remote and in any event would not be material to our consolidated financial results. Our foreign exchange contracts are also subject to certain financial and default based termination provisions as outlined within the counterparty agreements. If these events were to occur without satisfactory and timely remediation, the counterparties would have the right, but not the obligation, to close the contracts under early termination provisions. In such circumstances, the counterparties could request immediate settlement for amounts that approximate the then-current fair values of the contracts.

(8)   Inventory

Tarceva is stated at the lower of cost or market, with cost being determined using the weighted average method. Inventory is comprised of three components: raw materials, which are purchased directly by us, work-in-process, which is primarily API and finished goods, which are packaged product ready for commercial sale.

Inventory at December 31, 2009 and 2008 consisted of the following (in thousands):

	December 31,		December 31,
	2009		2008
Raw materials	$	628	$	676
Work-in-process		7,054		8,532
Finished goods on hand		5,688		4,897
Inventory subject to return		5,768		6,034
Total inventory	$	19,138	$	20,139

Inventory subject to return represents the amount of Tarceva shipped to Genentech which has not been recognized as revenue.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(9)   Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are recorded at cost, including capitalized interest and consist of the following (in thousands):

	Estimated Life	December 31,
	(years)	2009			2008
Land	—	$	18,068		$	3,600
Building and improvements	10-35		44,548			23,249
Laboratory equipment	5-15		28,513			26,917
Office furniture and equipment and computer equipment	3-7		13,905			13,503
Capitalized software	1-3		8,103			7,114
Manufacturing equipment	3-7		224			135
Leasehold improvements	Shorter of lease term or estimated useful life		30,852			30,634
Construction in progress	—		27,388			—
Total			171,601			105,152
Less: accumulated depreciation and amortization			(70,057	)		(61,709	)
Property, equipment and leasehold improvements, net		$	101,544		$	43,443

Construction in progress represents the acquisition cost assigned to the buildings, and any subsequent renovation costs incurred during 2009, related to our facility in Ardsley, New York. Additionally, in connection with the construction of the Ardsley site, we capitalized interest costs of $799,000 in 2009. Depreciation expense relating to continuing operations for the years ended December 31, 2009, 2008 and 2007 was $9.7 million, $7.4 million and $7.3 million, respectively. As a result of our intent to eventually cease to use our current sites in Farmingdale, New York, Boulder, Colorado and Cedar Knolls, New Jersey, we have revised the estimated useful life of the leasehold improvements and have recorded an additional $2.4 million depreciation charge in 2009. We anticipate that these charges will continue through the end of 2010.

There was no depreciation expense related to discontinued operations for the year ended December 31, 2009. Depreciation expense related to discontinued operations for the years ended December 31, 2008 and 2007 was $751,000 and $929,000, respectively.

(10)   Goodwill and Other Intangible Assets — Net

The carrying amount of goodwill was $38.9 million and $38.6 million as of December 31, 2009 and 2008, respectively. The balance of goodwill as of December 31, 2009 and 2008 was reduced by $226,000 and $764,000, respectively, as a result of foreign currency exchange rate fluctuations during fiscal 2009 and 2008.

We account for goodwill and other intangible assets in accordance with FASB ASC Topic No. 805, “Business Combinations,” and FASB ASC Topic No. 350, “Intangibles — Goodwill and Other.” The accounting guidance in ASC Topic No. 805 requires that the purchase method of accounting be used for all business combinations. It specifies the criteria which intangible assets acquired in a business combination must meet in order to be recognized and reported apart from goodwill. ASC Topic No. 350 requires that goodwill and intangible assets determined to have indefinite lives no longer be amortized but instead be tested for impairment at least annually and whenever events or circumstances occur that indicate impairment might have occurred. ASC Topic No. 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2009, all of our $38.9 million of goodwill was associated with our oncology business. Our annual impairment assessment (step 1 analysis) indicated the current value of our oncology business was substantially in excess of the carrying value of its assets, including the goodwill. As a result, we concluded that there was no impairment of our goodwill as of December 31, 2009.

The components of other intangible assets-net are as follows (in thousands):

	December 31, 2009							December 31, 2008
						Net							Net
	Carrying		Accumulated			Book				Accumulated			Book
	Amount		Amortization			Value		Carrying Amount		Amortization			Value
Acquired intangibles	$	10,386	$	(2,748	)	$	7,638	$	9,386	$	(1,675	)	$	7,711

In the first quarter of 2008, we entered into an amended license agreement pursuant to which we terminated our obligation to pay royalties to a licensor of certain intellectual property with whom we had a cross-license related to our DPIV patent estate in consideration for an $8.0 million upfront payment and potential future milestones. The upfront payment has been recorded as an intangible asset and is being amortized on a straight-line basis from February 2008 through February 2019, the expiration date of the last to expire patent covered under the license agreement. Future milestones, if any, will be recorded when probable and amortized to expense from that date

Certain of our other intangible assets are recorded on the books of our subsidiary, Prosidion Limited, and denominated in British pounds sterling. As a result, the balances reported fluctuate based upon the changes in exchange rates.

Amortization expense related to continuing operations for our intangible assets for the years ended December 31, 2009, 2008 and 2007 was $920,000, $2.5 million and $1.8 million, respectively. Amortization expense is estimated to be $900,000 for each of the years 2010 through 2014.

(11)   Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at December 31, 2009 and 2008 are comprised of (in thousands):

	December 31,
	2009		2008
Accounts payable	$	4,423	$	6,659
Accrued payroll, incentive compensation and employee benefits		12,105		11,766
Accrued exit costs		1,428		492
Accrued interest		2,912		3,856
Accrued CRO and site costs		6,341		4,094
Accrued and development costs		6,569		7,272
Other accrued expenses		28,515		14,913
	$	62,293	$	49,052

As of December 31, 2009 and 2008, $1.2 million and $1.5 million, respectively, of accounts payable and accrued expenses related to (OSI) Eyetech have been classified as liabilities related to discontinued operations.

(12)   Consolidation of Facilities

Ardsley, New York

In July 2009, we announced our plan to consolidate our U.S. operations and completed the purchase of a 43 acre pre-existing research and development campus, located in Ardsley, New York, for approximately $27 million. We will be consolidating approximately 350 current employees from our facilities in Melville and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Farmingdale, New York, Boulder, Colorado and Cedar Knolls, New Jersey, into our Ardsley campus. We expect to incur approximately $100 million of capital-related renovation costs in 2010. In addition to the $4.5 million of costs recognized in 2009, we expect to incur approximately $30 million in restructuring-related costs over the next two years, which primarily relate to labor-related and relocation costs. We also expect to recognize additional charges related to exiting our leased facilities in the United States, when these facilities cease to be used.

During 2009, we made payments of approximately $12.9 million in retention bonuses and reimbursed employee relocation expense. These retention bonuses will be recognized as an expense over the requisite service period which is expected to end on September 2011 (the date through which employees must continue employment in order to retain the full amount of the bonus payments). The reimbursed employee relocation expenses will be recognized as an expense over the requisite service period which is expected to be 18-24 months from the date of payment. For the year ended December 31, 2009, $2.6 million of retention bonuses and reimbursed employee relocation expenses have been amortized and are included in the restructuring costs line item on the accompanying consolidated statements of operations. The remaining $10.3 million of unamortized retention bonus and reimbursed employee relocation expenses are included in prepaid expenses and other assets on the accompanying consolidated balance sheets as of December 31, 2009. In addition, we accrued $1.1 million in severance charges associated with those employees who have chosen not to relocate and we expect to incur an additional $2.2 million of charges in 2010.

As a result of our intent to eventually cease to use our current leased sites in Farmingdale, New York, Boulder, Colorado and Cedar Knolls, New Jersey, we have revised the estimated useful life of the leasehold improvements and have recorded an additional $2.4 million depreciation charge in 2009. We anticipate that these charges will continue through the end of 2010. We expect to continue to utilize our purchased facility in Melville, New York as we assess our options for this facility.

The payments and accruals related to the consolidation of our U.S. operations for the year ended December 31, 2009 was as follows (in thousands):

	Year Ended
	December 31, 2009
Opening balance, prepaid retention bonus	$	—
Cash payments and accrual for retention bonuses and relocation costs		12,884
Amortization of paid retention bonuses and relocation costs		(2,552	)
Ending balance	$	10,332

	Year Ended
	December 31, 2009
Opening balance	$	—
Accrual for severance payments		1,077
Ending balance, accrued severance	$	1,077

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(13)   Income Taxes

The income tax (benefit) provision from continuing operations for the years ended December 31, 2009, 2008 and 2007 included the following (in thousands):

	Year Ended December 31,
	2009			2008			2007
Current:
Federal	$	3,323		$	2,008		$	2,190
State and Local		761			1,033			196
Foreign		428			132			346
Total	$	4,512		$	3,173		$	2,732
Deferred:
Federal	$	53,730		$	(286,052	)	$	—
State and Local		17,557			(33,170	)		—
Foreign		(18,515	)		—			—
Total	$	52,772		$	(319,222	)	$	—
Total	$	57,284		$	(316,049	)	$	2,732

Based on our ability to fully offset current taxable income with our net operating losses, or NOLs, our current provision for income taxes for the 2009, 2008 and 2007 years was principally related to the U.S. alternative minimum tax. For the year ended December 31, 2009, we recorded a current provision for income taxes of $4.5 million related to income from continuing operations and a tax benefit of $43,000 from discontinued operations. For the year ended December 31, 2008, we recorded a current provision for income taxes of $3.2 million related to income from continuing operations and a tax benefit of $1.3 million related to discontinued operations. The deferred tax provision for 2008 includes the recognition of $319.2 million of net tax benefits as a result of reducing certain valuation allowances previously established in the United States as further discussed below. For the year ended December 31, 2007, we recorded a current provision for income taxes of $2.7 million related to income from continuing operations and a tax benefit of $640,000 related to our loss from discontinued operations.

As part of our evaluation of deferred tax assets, we recognized a tax benefit of approximately $319.2 million at the end of the 2008 fourth quarter relating to the reduction of certain valuation allowances previously established in the United States. As our U.K. operations have not achieved profitability, we were unable to conclude that the utilization of our U.K. NOLs would be more likely than not and therefore, did not reduce any U.K.-based valuation allowances at December 31, 2008. Our evaluation encompassed (i) a review of our recent history of profitability in the United States for the past three years; (ii) a review of internal financial forecasts demonstrating our expected utilization of NOLs prior to expiration; and (iii) a reassessment of tax benefits recognition under FASBASC Topic 740.

In 2009, we recorded a deferred tax provision of $52.8 million, which included the recognition of $18.5 million of deferred tax benefits as a result of reducing certain valuation allowances previously established in the United Kingdom. The reduction of this valuation allowance is based on the fact that we determined that it was more likely than not that we will generate sufficient taxable income in the United Kingdom to realize the benefits of these deferred tax assets, which principally consist of NOLs. The reduction in the U.K. valuation allowance did not result in a benefit to the consolidated income tax provision because, concurrently, we recognized an offsetting deferred tax liability of $18.5 million in the United States. The recognition of the U.S. deferred tax liability is a result of previously recognized deferred tax assets recorded in the U.S. from the treatment of Prosidion losses as a branch for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

U.S. income tax purposes. We also recorded a tax charge of $3.3 million related to state NOLs that no longer met the threshold for recognition as a result of our decision to consolidate our U.S. operations in Ardsley, New York.

The components of earnings before income taxes from continuing operations were as follows (in thousands):

	Year Ended December 31,
	2009		2008			2007
United States	$	108,125	$	120,696		$	87,677
Foreign		25,154		(36	)		11,868
Earnings before income taxes	$	133,279	$	120,660		$	99,545

Royalties earned from Roche’s international sales of Tarceva are included in our domestic tax returns and are therefore included in U.S. earnings before taxes in the table above.

Our effective tax rate differs from the statutory U.S. Federal income tax rate as a result of the following:

	Year Ended December 31,
	2009			2008			2007
Statutory U.S. federal tax rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		6.4			0.6			0.2
Foreign taxes		—			0.1			0.3
Current utilization of NOLs and other deferred tax assets		—			(33.4	)		(35.1	)
U.S. R&D tax credit carry forwards		(2.0	)		—			—
Equity compensation		0.5			—			—
Reversal of valuation allowance		2.5			(264.6	)		—
Other, net		0.6			0.4			2.2
Total		43.0	%		(261.9	)%		2.6	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effect of NOLs, R&D tax credit carry forwards and temporary differences as of December 31, 2009 and 2008 was as follows (in thousands):

	December 31,
	2009			2008
Deferred tax assets:
NOL carry forwards	$	270,220		$	333,443
R&D tax credit carry forwards		14,874			12,115
Intangible assets		9,644			11,021
Unearned revenue		15,995			17,108
Purchased R&D		35,827			39,498
Capitalized R&D		3,436			5,278
Other		44,586			27,559
		394,582			446,022
Valuation allowance		(77,146	)		(96,801	)
		317,436			349,222
Deferred tax liability:
Depreciation		(7,523	)		(7,385	)
Contingent note interest		(4,540	)		(3,479	)
FSP-APB 14-1 note amortization		(12,321	)		(17,395	)
U.S. deferred tax liability related to recognition of U.K. deferred tax asset		(18,515	)		—
Other		(7,450	)		(1,741	)
		(50,349	)		(30,000	)
	$	267,087		$	319,222

As of December 31, 2009, we had available U.S., and U.K. NOLs of approximately $656 million and $77 million, respectively. The U.S. and New York State NOLs expire in various years from 2021 to 2026 and may be subject to certain annual limitations. The U.K. NOLs do not have an expiration date. Included in the $270.2 million deferred tax asset NOLs, noted in the table above, as of December 31, 2009 was approximately $65.4 million of deductions for equity-based compensation for which the tax benefit will be credited to additional paid-in capital, if and when realized. As of December 31, 2009, we also had $14.9 million of R&D tax credit carry forwards, which expire in various years from 2010 through 2029. Approximately $3.5 million of our R&D tax credit carry forwards relate to equity-based compensation and will be recorded as an increase to additional paid-in capital, if and when realized. We recorded a valuation allowance of approximately $69 million with respect to equity-based compensation included in our NOLs and R&D tax credits to be credited to paid-in capital, as these tax benefits can only be recognized when realized.

Certain of our NOLs and R&D tax credit carry forwards may be subject to significant limitations under Section 382 of the Internal Revenue Code.

As part of our evaluation of our deferred tax assets, we recognized a tax benefit of approximately $19 million at the end of the fourth quarter of 2009 related to the reduction of certain valuation allowances associated with our U.K. NOLs. Our evaluation encompassed: (i) a review of our history of profitability in the U.K. for the past three years; (ii) a review of internal financial forecasts demonstrating our expected utilization of our U.K. NOLs prior to expiration; and (iii) a reassessment of tax benefits recognized under FASB ASC Topic 740, “Income Taxes,” which incorporates the accounting literature formerly known as FIN 48. As indicated above, an offsetting $19 million deferred tax liability was recorded in the United States concurrently with this term.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

FASB ASC Topic 740 clarifies when a company is able to recognize a tax benefit in its financial statements related to a position taken on its tax return. Under FASB ASC Topic 740, a company can record a tax benefit on its financial statement when it is more-likely-than-not that it will be able to utilize such tax benefit in the future. This FASB ASC also requires the recognition of liabilities created by differences between tax positions taken on a tax return and amounts recognized in the financial statements.

At December 31, 2009, we had tax effected uncertain tax benefits of $48.6 million which includes $23.1 million of deferred tax assets related to temporary differences and $25.5 million in permanent differences which, if recognized, would impact the effective tax rate. A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows (in thousands):

Balance as of December 31, 2008	$	52,048
Gross decreases — tax positions in prior period		(4,156	)
Gross increases — current period		690
Lapse of statute of limitations		—
Balance as of December 31, 2009	$	48,582

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding or reducing amounts for current year tax positions, expiration of statute of limitations on open income tax returns, changes in management’s judgment about the level of uncertainty, status of tax examinations and legislative activity. We do not expect the unrecognized tax benefits to significantly change during the 2010 year.

A list of open tax years by major jurisdiction follows:

United States	1992-2009
United Kingdom	2007-2009
New York	2000-2009
Colorado	2001-2009

As of December 31, 2009, approximately $65 million of our deferred tax assets related to our U.S. NOLs consists of deductions for equity-based compensation for which the tax benefit will be credited to additional paid-in capital if and when realized. These deferred tax assets relate to equity-based compensation deductions that were recognized on our U.S. income tax returns prior to the adoption of FASB ASC Topic 718 on January 1, 2006. In addition, through December 31, 2009, we have an additional $11.0 million of post-adoption benefits related to equity-based compensation deductions that have been, or will be, recorded on our U.S. income tax returns for calendar years 2006 through 2009, for which no deferred tax asset has been recorded. The tax benefit for these post-adoption deductions will also be recorded to additional paid-in capital, if and when realized.

The valuation allowance for our deferred tax assets for the year ended December 31, 2009 decreased by approximately $21 million compared to the year ended December 31, 2008. This decrease was principally attributable to our recognition of the approximately $19 million tax benefit related to the partial reversal of the valuation allowance related to our U.K. NOLs discussed above. The remainder of the decrease was due to the reversal of other temporary differences and the impact of foreign currency translation adjustments and equity-based compensation.

The valuation allowance as of December 31, 2009 and 2008 relates principally to the NOLs and R&D tax credit carry forwards related to equity-bond compensation incurred prior to our adoption of FASB ASC Topic 718 and certain U.K. NOLs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(14)   Convertible Senior Subordinated Notes

The principal amount of our convertible senior subordinated notes totaled approximately $335 million and $415 million at December 31, 2009 and December 31, 2008, respectively, and was comprised of our 2023 Notes, our 2025 Notes and our 2038 Notes. Interest capitalized during 2009 amounted to $799,000. There was no interest capitalized during 2008 and 2007.

In 2009, we adopted FASB ASC Subtopic No. 470-20, which incorporates the accounting literature formerly known as FSP APB 14-1. ASC Subtopic No. 470-20 is effective for financial statements issued for fiscal years beginning after December 15, 2008. It requires an issuer of certain convertible debt instruments that have a net settlement feature and may be settled in cash upon conversion to separately account for the liability (i.e., debt) and equity (i.e., conversion feature) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The issuer must determine the carrying amount of the liability component of any outstanding debt instruments by estimating the fair value of a similar liability without the conversion option. The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the convertible debt instrument.

The application of FASB ASC Subtopic No. 470-20 impacted the carrying value of our 2025 Notes and 2038 Notes, and we retrospectively recognized this impact from the date that the notes were originally issued.

The following is a summary of the outstanding indebtedness under our convertible senior subordinated notes as of December 31, 2009 and 2008 (in thousands):

	December 31, 2009						December 31, 2008
					Net Carrying						Net Carrying
	Principal		Discount		Value		Principal		Discount		Value
2023 Notes — 3.25%	$	60,467	$	—	$	60,467	$	99,950	$	—	$	99,950
2025 Notes — 2.00%		115,000		7,938		107,062		115,000		15,181		99,819
2038 Notes — 3.00%		160,000		19,205		140,795		200,000		30,674		169,326
	$	335,467	$	27,143	$	308,324	$	414,950	$	45,855	$	369,095

The effective interest rate used in determining the liability component of our 2038 Notes and 2025 Notes was 7.51% and 9.39%, respectively. As a result of bifurcating the conversion feature from the debt component for our convertible notes at the effective interest rate, we recorded $33.3 million and $37.0 million as a debt discount with a corresponding increase to additional paid-in capital for the 2025 Notes and 2038 Notes, respectively. The discount on the 2025 Notes and 2038 Notes will be amortized through December 2010 and January 2013, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The table below summarizes the interest expense recorded for the three years ended December 31, 2009, 2008 and 2007:

	Year Ended December 31,
	2009		2008		2007
2023 Notes
Cash interest	$	3,096	$	3,757	$	4,875
Imputed interest		—		—		—
Amortization of debt issuance costs		—		707		1,061
2025 Notes
Cash interest		2,227		2,300		2,300
Imputed interest		7,014		6,607		6,028
Amortization of debt issuance costs		569		569		569
2038 Notes
Cash interest		5,760		5,850		—
Imputed interest		6,401		6,356		—
Amortization of debt issuance costs		1,798		1,071		—
Total interest expense	$	26,865	$	27,217	$	14,833

(a)   3.0% Convertible Senior Subordinated Notes

On January 9, 2008, we issued $200.0 million aggregate principal amount of 2038 Notes in a private placement resulting in net proceeds to us of approximately $193 million. We used a portion of the proceeds to repurchase approximately 1.5 million shares of our common stock concurrently with the offering for an aggregate price of $65.0 million. In December 2009, we repurchased $40.0 million principal amount of our 2038 Notes in open market transactions, which reduced the outstanding aggregate principal amount of the 2038 Notes to $160.0 million. The 2038 Notes bear interest semi-annually in arrears through maturity at an annual rate of 3% and mature on January 15, 2038. We may redeem for cash, all or part of the 2038 Notes at any time on or after January 15, 2013, at a price equal to 100% of the principal amount of the 2038 Notes, plus accrued and unpaid interest. Holders of the 2038 Notes have the right to require us to purchase, for cash, all or any portion of their 2038 Notes on January 15, 2013, 2018, 2023, 2028 and 2033 at a price equal to 100% of the principal amount of the 2038 Notes to be purchased, plus accrued and unpaid interest.

The 2038 Notes will be convertible only under certain circumstances, as described below. If, at the time of conversion, the daily volume-weighted average price per share for a 20 trading day period, or VWAP, of our common stock is less than or equal to approximately $73.82 per share, which is referred to as the base conversion price, the 2038 Notes will be convertible into 13.5463 shares of our common stock per $1,000 principal amount of 2038 Notes, which is referred to as the base conversion rate, subject to adjustment upon the occurrence of certain events, as set forth in the indenture. If, at the time of conversion, the VWAP of the common stock exceeds the base conversion price of $73.82 per share, the conversion rate will be determined pursuant to a formula resulting in the holders’ receipt of up to a maximum of 20.9968 shares of our common stock per $1,000 principal amount of 2038 Notes, subject to adjustment upon the occurrence of certain events. From and after January 15, 2013, the conversion rate for the 2038 Notes will be fixed.

The 2038 Notes are convertible until the close of business on the business day immediately preceding the maturity date, in multiples of $1,000 in principal amount, at the option of the holder only under the following circumstances: (1) during any fiscal quarter beginning after March 31, 2008, and only during such fiscal quarter, if the closing sale price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is more than 130% of the base conversion price per

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share; (2) during the five business day period after any period of five consecutive trading days in which the trading price per $1,000 principal amount of 2038 Notes for each trading day of that period was less than 97% of the product of the closing sale price of our common stock on such day and the applicable daily conversion rate for such day; (3) if we call the 2038 Notes for redemption, at any time prior to the close of business on the business day prior to the redemption date; (4) if specified distributions to holders of our common stock are made; (5) if a fundamental change occurs; or (6) beginning on December 15, 2037 and ending at the close of business on the business day immediately preceding the maturity date. Upon conversion, we will have the right to deliver, in lieu of shares of common stock, cash or a combination of cash and shares of common stock.

A holder will receive in respect of each $1,000 principal amount of the 2038 Notes converted, a number of shares of our common stock equal to the sum of the “daily share amounts” for each of the 20 consecutive trading days in the applicable conversion reference period. With respect to trading days prior to January 15, 2013, the daily share amount for a given trading day in the applicable conversion reference period is an amount equal to the fraction of (i) the VWAP for such trading day multiplied by the “applicable daily conversion rate,” divided by (ii) the VWAP on such trading day multiplied by 20. If the VWAP is less than or equal to the base conversion price, then the applicable daily conversion rate will be equal to the base conversion rate. If the VWAP is greater than the base conversion price, then the applicable daily conversion rate will be equal to the sum of the base conversion rate plus the product of: (i) 55% of the base conversion rate, multiplied by (ii) a fraction equal to the VWAP less the base conversion price, divided by the VWAP for the pertinent trading day. We will have the right to deliver cash in lieu of all or a portion of such shares, subject to certain limitations. If a fundamental change transaction occurs before January 15, 2013, and a holder elects to convert 2038 Notes in connection with the transaction, we may be required to pay a “make whole premium” by delivering additional shares of stock (or cash in lieu of such shares) based on an increase in the applicable base conversion rate for the 2038 Notes determined by the effective date of the fundamental change and the stock price paid per share in such transaction. Notwithstanding the foregoing, in no event will the conversion rate under the 2038 Notes exceed 22.3513 shares of our common stock per $1,000 principal amount of the 2038 Notes, subject to certain proportional adjustments applicable to the base conversion rate.

The 2038 Notes are unsecured obligations and are subordinate to all of our existing and future senior indebtedness. The 2038 Notes rank equally with all of our existing and future senior subordinated indebtedness, and are effectively subordinated to all of our existing and future secured indebtedness to the extent of the security therefore.

As of January 1, 2010, the 2038 Notes were not eligible for conversion because the 2038 Notes did not meet any of the conversion criteria.

(b)   2.0% Convertible Senior Subordinated Notes

In December 2005, we issued $115.0 million aggregate principal amount of 2025 Notes in a private placement for net proceeds to us of approximately $111 million. The 2025 Notes bear interest at 2.0% per annum, payable semi-annually, and mature on December 15, 2025. The 2025 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock based on an initial conversion rate, subject to adjustment, of 33.9847 shares per $1,000 principal amount of notes (which represents an initial conversion price of $29.43 per share), only in the following circumstances and to the following extent: (i) prior to December 15, 2020, during any fiscal quarter after the fiscal quarter ending March 31, 2006, if the closing sale price of our common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 120% of the conversion price in effect on the last trading day of the immediately preceding fiscal quarter; (ii) prior to December 15, 2020, during the five business day period after any five consecutive trading day period, or the note measurement period, in which the average trading price per $1,000 principal amount of notes was equal to or less than 97% of the average conversion value of the notes during the note measurement period; (iii) upon the occurrence of specified corporate transactions, as described in the indenture for

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the 2025 Notes; (iv) if we call the 2025 Notes for redemption; or (v) any time on or after December 15, 2020. Upon conversion, we will have the right to deliver, in lieu of shares of common stock, cash or a combination of cash and shares of common stock.

At any time before the maturity date, we may irrevocably elect, in our sole discretion, to satisfy our conversion obligation in cash for up to 100% of the principal amount of the notes converted, with any remaining amount to be satisfied in shares of our common stock. If certain fundamental changes occur before December 15, 2010, the conversion rate may increase or, under certain circumstances, we may elect to change our conversion obligations to provide for conversion of the notes into the acquiring company’s common stock. We may redeem the 2025 Notes, in whole or in part, for cash, at any time on or after December 15, 2010 for a price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest. The holders of the 2025 Notes have the right to require us to purchase, for cash, all of the 2025 Notes, or a portion thereof, on December 15, 2010, December 15, 2015, on December 15, 2020 and under certain other circumstances as set out in the indenture, for a price equal to 100% of the principal amount of the 2025 Notes plus any accrued and unpaid interest.

Concurrent with the sale of the 2025 Notes, we used $11.8 million of the net proceeds for the purchase of 500,000 shares of our common stock and we also purchased a call spread overlay transaction from UBS, AG at a cost of $12.2 million. The call spread is a European-type option with a lower strike price of $29.425 and an upper strike price of $40.00 and involves an aggregate of 3.4 million shares of our common stock and expires on December 15, 2010. The call spread overlay agreement has the effect of increasing the effective conversion price of the 2025 Notes from our perspective to $40.00 per share on the intended sale of $100.0 million (excluding the sale of $15.0 million of 2025 Notes related to the exercise of the overallotment). The agreement calls for settlement using net shares. Under the agreement, bankers associated with the debt offering will deliver to us the aggregate number of shares we are required to deliver to a holder of 2025 Notes that presents such notes for conversion. If the market price per share of our common stock is above $40.00 per share, we will be required to deliver shares of our common stock representing the value in excess of the strike price. We recorded the purchase of the call spread overlay option agreement as a reduction in additional paid — in capital, and will not recognize subsequent changes in fair value of the agreement.

As of January 1, 2010, the 2025 Notes were not eligible for conversion because the 2025 Notes did not meet any of the conversion criteria.

The 2025 Notes have been classified as a current liability in the accompanying December 31, 2009 consolidated balance sheets, as the holders have the right to require us to purchase all of the 2025 Notes, or a portion thereof, on December 15, 2010. If holders of the notes make this election, we are required to settle the notes for cash.

As of December 31, 2009 the if-converted value of the 2023 Notes exceeded the principal amount by $6.4 million.

(c)   3.25% Convertible Senior Subordinated Notes

In September 2003, we issued $150.0 million aggregate principal amount of 2023 Notes in a private placement for net proceeds to us of approximately $145 million. During 2008 and 2009, we repurchased $50.1 million and $39.5 million, respectively, of principal amount of our 2023 Notes in open market transactions, reducing the outstanding aggregate principal of the 2023 Notes to $60.5 million as of December 31, 2009.

The 2023 Notes bear interest at 3.25% per annum, payable semi-annually, and mature on September 8, 2023. The 2023 Notes are convertible into shares of our common stock at a conversion price of $50.02 per share, subject to normal and customary adjustments such as stock dividends or other dilutive transactions. The holders of the Notes had the right to require us to purchase all of the 2023 Notes, or a portion thereof, on September 8, 2008. As discussed below, a significant portion of the holders did not exercise their right.

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We may redeem the 2023 Notes, in whole or in part, for cash, at any time after September 8, 2008 for a price equal to 100% of the principal amount of the 2023 Notes to be redeemed, plus any accrued and unpaid interest. The holders of the 2023 Notes have the right to require us to purchase all of the 2023 Notes, or a portion thereof, on September 8, 2013 and September 8, 2018 for a price equal to 100% of the principal amount of the 2023 Notes plus any accrued and unpaid interest. If the holders of the 2023 Notes make this election, we can pay the purchase price in cash or by issuing our common stock. Upon a change in control, as defined in the indenture governing the 2023 Notes, the holders of the 2023 Notes will have the right to require us to purchase all of the 2023 Notes, or a portion thereof, not previously called for redemption at a purchase price equal to 100% of the principal amount of the 2023 Notes purchased, plus accrued and unpaid interest.

Upon the exercise by the holders of the right to require us to purchase the 2023 Notes or upon a change of control, we may elect to pay the purchase price in common stock instead of cash. The number of shares of common stock a holder will receive will equal the purchase price divided by 95% of the average of the closing prices of our common stock for the five-trading day period ending on the third business day prior to the purchase date.

In connection with the issuance of the 2023 Notes, we used $19.0 million of the net proceeds for the purchase of 503,800 shares of our common stock.

The holders had the right to require us to purchase all of the 2023 Notes, or a portion thereof, in September 2008. This purchase right expired on September 8, 2008. Prior to this expiration date, holders of an aggregate of $50,000 principal amount of our 2023 Notes exercised their right to require us to repurchase their notes. The remaining holders of the 2023 Notes do not have the right to require us to purchase the 2023 Notes again until September 2013, except under certain other circumstances set forth in the indenture for the 2023 Notes. Therefore, the 2023 Notes are classified as a long-term liability on the accompanying consolidated balance sheets.

(15)   Change in Accounting Principle

On January 1, 2009, we adopted the provisions of FASB ASC Subtopic No. 470-20 as a change in accounting principle. We have retrospectively adopted FASB ASC Subtopic No. 470-20 using the five year retrospective application beginning in 2005 and restated the accompanying consolidated statement of operations, statements of stockholders’ equity and the statement of cash flows for the years ended December 31, 2008 and 2007 and also restated the accompanying December 31, 2008 consolidated balance sheets for the cumulative impact of adopting this guidance.

The application of accounting literature FASB ASC Subtopic No. 470-20 resulted in our recognition of additional interest expense related to our senior subordinated convertible notes, decreasing our net income for the years ended December 31, 2008 and 2007. It also required us to resequence our notes for dilutive calculation purposes under the “if-converted” method.

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The impact of retrospective adoption on our statement of operations for the years ended December 31, 2008 and 2007 was as follows (in thousands):

				As Adjusted									As Adjusted
				and									and
	As Originally			Currently			Effect of			As Originally			Currently			Effect of
	Reported			Reported			Change			Reported			Reported			Change
	Year Ended December 31, 2008									Year Ended December 31, 2007
Revenues	$	379,388		$	379,388		$	—		$	341,030		$	341,030		$	—
Operating expenses		246,078			246,078			—			243,593			243,593			—
Operating income from continuing operations		133,310			133,310			—			97,437			97,437			—
Investment income		12,961			12,961			—			12,830			12,830			—
Interest expense		(14,759	)		(27,243	)		(12,484	)		(9,098	)		(14,892	)		(5,794	)
Other income (expense) — net		1,632			1,632			—			4,170			4,170			—
Income from continuing operations before income taxes		133,144			120,660			(12,484	)		105,339			99,545			(5,794	)
Income tax (benefit) provision		(333,457	)		(316,049	)		17,408			2,732			2,732			—
Net income from continuing operations		466,601			436,709			(29,892	)		102,607			96,813			(5,794	)
Loss from discontinued operations		4,884			4,884			—			(36,288	)		(36,288	)		—
Net income	$	471,485		$	441,593		$	(29,892	)	$	66,319		$	60,525		$	(5,794	)

The following table reflects the impact of retrospective adoption on our diluted income per share as originally reported for the years ended December 31, 2008 and 2007 (in thousands except per share amounts):

			As Adjusted							As Adjusted
			and							and
	As Originally		Currently		Effect of			As Originally		Currently		Effect of
	Reported		Reported		Change			Reported		Reported		Change
	Year Ended December 31, 2008							Year Ended December 31, 2007
Net income from continuing operations — basic		$466,601		$436,709		$(29,892	)		$102,607		$96,813		$(5,794	)
Add: Interest and issuance costs related to convertible debt — net of tax		14,351		26,830		12,484			3,040		—		(3,040	)
Net income from continuing operations — diluted		$480,952		$463,539		$(17,408	)		$105,647		$96,813		$(8,834	)
Weighted average common shares outstanding — basic		57,316		57,316		—			57,665		57,665		—
Dilutive effect of options and restricted stock		729		729		—			668		668		—
Dilutive effect of 2023 Notes		2,308		2,308		—			—		—		—
Dilutive effect of 2025 Notes		3,908		3,908		—			3,908		—		(3,908	)
Dilutive effect of 2038 Notes		2,650		2,650		—			—		—		—
Weighted average common shares and dilutive potential common shares — diluted		66,911		66,911		—			62,241		58,333		(3,908	)
Net income per share from continuing operations:
Basic		$8.14		$7.62		$(0.52	)		$1.78		$1.68		$(0.10	)
Diluted		$7.19		$6.93		$(0.26	)		$1.70		$1.66		$(0.04	)

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The impact of retrospectively adopting FASB ASC Subtopic No. 470-20 on our consolidated balance sheet as of December 31, 2008 was as follows (in thousands):

				As Adjusted
	December 31,			and
	2008			Currently			Effect of
	As Reported			Reported			Change
Current assets	$	690,451		$	690,451		$	—
Deferred tax assets		303,727			303,727			—
Debt issuance costs		7,080			5,632			(1,448	)
Other Assets — non current		104,393			104,393			—
Total assets	$	1,105,651		$	1,104,203		$	(1,448	)
Current liabilities	$	61,121		$	61,121		$	—
Non-current liabilities		45,442			45,442			—
Convertible senior subordinated notes — non- current		414,950			369,095			(45,855	)
Deferred tax liabilities		12,592			30,000			17,408
Total liabilities		534,105			505,658			(28,447	)
Common and preferred stock, net of treasury stock		(101,608	)		(101,608	)		—
Additional paid-in-capital		1,693,263			1,761,179			67,916
Accumulated deficit		(1,016,201	)		(1,057,118	)		(40,917	)
Accumulated other comprehensive income		(3,908	)		(3,908	)		—
Total stockholders’ equity		571,546			598,545			26,999
Total liabilities and stockholders’ equity	$	1,105,651		$	1,104,203		$	(1,448	)

The impact of retrospectively adopting FASB ASC Subtopic No. 470-20 on our consolidated statements of stockholders’ equity for the years ended December 31, 2008 and 2007 was as follows (in thousands):

				As Adjusted									As Adjusted
	December 31,			and						December 31,			and
	2008			Currently			Effect of			2007			Currently			Effect of
	As Reported			Reported			Change			As Reported			Reported			Change
Common Stock	$	611		$	611		$	—		$	604		$	604		$	—
Additional paid-in capital		1,693,263			1,761,179			67,916			1,658,737			1,690,893			32,156
Accumulated deficit		(1,016,201	)		(1,057,118	)		(40,917	)		(1,487,686	)		(1,498,711	)		(11,025	)
Accumulated other comprehensive income		(3,908	)		(3,908	)		—			4,522			4,522			—
Treasury stock		(102,219	)		(102,219	)		—			(37,221	)		(37,221	)		—
Total stockholders’ equity	$	571,546		$	598,545		$	26,999		$	138,956		$	160,087		$	21,131

As of December 31, 2006, and as reported as the opening balance in the accompanying Consolidated Statement of Stockholders’ Equity for the three years ended December 31, 2009, 2008 and 2007, paid in capital increased $32.2 million and retained earnings decreased $5.2 million.

(16)   Employee Savings and Investment Plans

We sponsor an Employee Savings and Investment Plan under Section 401(k) of the Internal Revenue Code. The plan allows our U.S. employees to defer from 2% to 70% of their income on a pre-tax basis through contributions into designated investment funds provided the total contribution does not exceed the Internal Revenue

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Code’s mandatory limits. We match each employee’s contribution to the plan on a dollar-for-dollar basis up to 4% of such employee’s salary, and then match 50% of such employee’s contribution above 4% up to 6% of his or her salary. During the years ended December 31, 2009, 2008 and 2007, our expenses related to the plan were $2.1 million, $2.0 million and $2.0 million, respectively.

We also sponsor four pension plans covering the employees of OSI U.K. and Prosidion. The Group Personal Pension Plan allows employees to contribute a portion of their income on a post-tax basis into designated investment funds. The tax paid on the contribution is then recovered from the Inland Revenue. We generally contribute from 4% to 9% depending on the employees’ contributions. The British Biotechnology Limited Pension Scheme covers employees retained from the acquisition of certain assets from British Biotechnology Limited, as well as certain former employees of British Biotechnology hired by us subsequent to the acquisition. The plan allows the employees to defer up to 15% of their income on a pre-tax basis through contributions into designated pension funds. For each period the employee invests, we will contribute up to 9% into the funds. For the years ended December 31, 2009, 2008 and 2007, our expenses related to the plans were $721,000, $754,000 and $704,000, respectively.

(17)   Employee Post-retirement Plan and Other

(a)   Employee Post-retirement Plan

Prior to April 18, 2007, we provided post-retirement medical and life insurance benefits to eligible employees, board members and qualified dependents. Eligibility was determined based on age and service requirements. These benefits are subject to deductibles, co-payment provisions and other limitations. On April 18, 2007, we curtailed our post-retirement medical and life insurance plan and grandfathered those employees, board members and qualified dependants who were eligible to participate in the plan on that date. As a result of the curtailment, we reduced our liability for this plan by $5.5 million and recognized a gain of $4.3 million and recorded an adjustment to accumulated other comprehensive income of $1.3 million. The curtailment had the effect of decreasing the accumulated benefit obligation at April 18, 2007 to $3.0 million. Only those grandfathered participants will continue to be entitled to receive benefits under the plan. These benefits are subject to deductibles, co-payments and other limitations. The cost of post-retirement medical and life insurance benefits is being accrued over the active service periods of employees to the date they attain full eligibility for such benefits.

Net post-retirement benefit cost (excluding the $4.3 million curtailment gain recognized in 2007) for the years ended December 31, 2009, 2008 and 2007 included the following components (in thousands):

	Year Ended December 31,
	2009			2008		2007
Service cost for benefits earned during the period	$	—		$	—	$	337
Interest cost on accumulated post-retirement benefit obligation		135			176		252
Amortization of initial benefits attributed to past service		—			—		2
Amortization of (gain)/loss		(32	)		—		6
Net post-retirement benefit cost	$	103		$	176	$	597

The accrued post-retirement benefit cost at December 31, 2009 and 2008 totaled $2.7 million and $2.7 million, respectively.

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The changes in the accumulated post-retirement benefit obligation during years ended December 31, 2009 and 2008 were as follows (in thousands):

	2009			2008
Balance at beginning of year	$	2,651		$	3,163
Benefit payments		(146	)		(182	)
Loss experience		109			(506	)
Interest cost		135			176
Balance at end of year	$	2,749		$	2,651

For the year ended December 31, 2009, the health care cost trend assumption remained at an initial level of 8%, decreasing to an ultimate estimated rate of 5% by 2014 and thereafter. Increasing the assumed health care cost trend rates by one percentage point in each year and holding all other assumptions constant would increase the accumulated post-retirement benefit obligation as of December 31, 2009 by $275,000 and the 2009 net post-retirement service and interest cost by $14,000. Decreasing the assumed health care cost trend rate by one percentage point in each year and holding all other assumptions constant would decrease the accumulated post-retirement benefit obligation as of December 31, 2009 by $235,000 and the 2009 net post-retirement service and interest cost by $12,000. Benefits paid in the years ended December 31, 2009, 2008 and 2007 were $146,000, $182,000 and $118,000, respectively.

The weighted average assumptions used in determining benefit obligations and net periodic benefits costs are as follows:

	2009			2008			2007
Discount rate		5.00	%		5.25	%		5.72	%
Expected long-term rate of return on plan assets		N/A			N/A			N/A

The discount rate was computed using Moodys Aa Corporate Bond Index and Merrill Lynch 10+ Bond Index as of December 31, 2009.

For the years ended 2010 through 2014, we anticipate paying benefits of $162,000, $177,000, $181,000, $194,000, and $181,000, respectively. We anticipate paying aggregate benefits of $895,000 for the years of 2015 through 2019.

(b)   Sabbatical Leave Accrual

Sabbatical leave is generally defined as an employee’s entitlement to paid time off after working for an entity for a specified period of time. The employee continues to be a compensated employee and is not required to perform any duties for the entity during the sabbatical leave. We provide a sabbatical leave of four weeks for employees who have achieved 15 years of service. Included in accrued post-retirement benefit costs and other as of December 31, 2009 and 2008 was $571,000 and $468,000, respectively, of accrued sabbatical leave.

(c)   Nonqualified Deferred Compensation Plan

Effective July 2007, we adopted a nonqualified deferred compensation plan which permits certain employees and directors to elect annually to defer a portion of their compensation, and as of December 31, 2009 and 2008, we had accrued $1.7 million and $682,000 related to this plan, respectively. The employees select among various investment alternatives, with the investments held in a separate trust.

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(18)   Stockholders’ Equity

(a)   Equity Plans

We have six equity plans pursuant to which there are outstanding grants issued to our employees, officers, directors and consultants. The Amended and Restated Stock Incentive Plan is the only plan which still has shares available for future grant. The plans are administered by the Compensation Committee of the Board of Directors, which may grant stock options and, in the case of the Amended and Restated Stock Incentive Plan, restricted stock, restricted stock units and deferred stock units. The Compensation Committee determines the terms of all equity grants under the plans. Our equity grants vest over various periods and expire no later than 10 years from date of grant. The total authorized shares under these plans are 17,759,500, of which 2,704,855 shares were available for future grant as of December 31, 2009.

On March 17, 2004, at our 2004 annual meeting of stockholders, our stockholders approved an amendment and restatement of the 2001 Stock Option Plan in the form of the Amended and Restated Stock Incentive Plan, or the Plan, which was adopted by the Board of Directors on January 23, 2004. On March 16, 2005, at our 2005 annual meeting of stockholders, our stockholders approved an amendment to the Plan to increase the number of equity awards issuable under the Plan from 4 million shares to 6.8 million shares. On June 13, 2007, our stockholders approved an amendment to the Plan to increase the number of equity awards issuable under the Plan from 6.8 million to 13.8 million. Participation in the Plan is limited to our directors, officers, employees and consultants of our parent or subsidiaries.

We have an employee stock purchase plan under which eligible employees may contribute up to 10% of their base earnings toward the quarterly purchase of our common stock. The employee’s purchase price is derived from a formula based on the fair market value of the common stock. During the years ended December 31, 2009, 2008 and 2007, approximately 25,000, 20,000 and 24,000 shares, respectively, were issued with approximately 146, 140 and 150 employees participating in the plan, respectively. At December 31, 2009, we had 250,501 shares of our authorized common stock available for future grant in connection with these plans.

We sponsor a stock purchase plan for our U.K.-based employees. Under the terms of the plan, eligible employees may contribute between £5 and £250 of their base earnings, in 36 monthly installments, towards the purchase of our common stock. The employee purchase price is determined at the beginning of the 36-month period and compensation expense is recorded over the 36-month period. There were 57 employees, 30 employees, and 13 employees that participated in our U.K. stock purchase plan in 2009, 2008 and 2007, respectively. At December 31, 2009, we had 96,249 shares of our common stock available for future grant in connection with the plan.

In January 2006, we adopted the provisions of FASB ASC Topic No. 718, which incorporates the accounting literature formerly known as SFAS No. 123(R), which establishes the accounting for employee stock-based awards. Under the provisions of FASB ASC Topic No. 718, stock-based compensation is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant). We adopted FASB ASC Topic No. 718 using the modified prospective method.

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Compensation expense related to continuing operations for the years ended December 31, 2009, 2008 and 2007 were as follows (in thousands):

	Year Ended December 31,
	2009		2008		2007
Cost of sales	$	809	$	620	$	338
Research and development expenses		9,020		7,373		4,683
Selling, general and administrative expenses		15,440		12,789		10,406
Stock-based compensation expense	$	25,269	$	20,782	$	15,427

We did not record stock-based compensation expense related to discontinued operations for the year ended December 31, 2009. Stock-based compensation expense related to discontinued operations for the year ended December 31, 2008 was $(193,000), primarily related to forfeiture activity in 2008. Stock-based compensation expense related to discontinued operations for the year ended December 31, 2007 was $2.2 million. At December 31, 2009, the total remaining unrecognized compensation cost related to unvested stock-based payment awards was $78.7 million. This cost is expected to be recognized over a weighted average period of approximately 3.15 years.

(b)   Stock Options

We estimate the fair value of stock options using the Black-Scholes option-pricing model. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in estimating the fair value of our stock options granted. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards.

Historically, we have satisfied the exercise of options by issuing new shares. We estimate expected volatility based upon a combination of historical, implied and adjusted historical volatility. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. We assumed an expected dividend yield of zero since we have not historically paid dividends and do not expect to pay dividends in the foreseeable future. The expected option term is determined using a Monte Carlo simulation model that incorporates historical employee exercise behavior and post-vesting employee termination rates. The fair values of the options were estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions, which are based upon the weighted average for the periods reflected below:

	Year Ended December 31,
	2009			2008			2007
Expected dividend yield		0	%		0	%		0	%
Expected volatility		47.62	%		50.20	%		46.40	%
Risk-free interest rate		2.47	%		2.32	%		3.83	%
Expected term (years)		5.81			5.36			4.65
Per share weighted average fair value of stock options grants	$	16.67		$	15.81		$	19.26

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A summary of our stock option programs at December 31, 2009, 2008, and 2007 and changes during the years is presented below:

						Aggregate
				Weighted		Intrinsic		Weighted Average
	No. Shares			Average Exercise		Value(1)		Contractual Life
	(In thousands)			Price		(In millions)		Remaining in Years
Outstanding at December 31, 2006		6,727		$	36.01
Granted		665		$	44.25
Exercised		(1,042	)	$	24.65
Forfeitures		(765	)	$	39.42
Outstanding at December 31, 2007		5,585		$	38.69
Granted		956		$	34.90
Exercised		(569	)	$	27.69
Forfeitures		(259	)	$	41.56
Outstanding at December 31, 2008		5,713		$	39.07
Granted		1,063		$	35.18
Exercised		( 256	)	$	22.23
Forfeitures		( 281	)	$	42.00
Outstanding at December 31, 2009		6,239		$	38.97	$	6.9		4.62
Exercisable at December 31, 2009		3,990		$	40.56	$	6.6		4.06
Unvested at December 31, 2009		2,249		$	36.14	$	0.03		5.49

(1) The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option for in the money stock options.

The total intrinsic value of stock options exercised during the years ended December 31, 2009, 2008 and 2007 was $4.0 million, $10.7 million, $15.9 million, respectively.

All of our options have exercise prices equal to the fair value of the stock on the date of the grant. Generally, our grants have contractual terms of between 7 and 10 years and have vesting periods between 4 and 5 years.

(c)   Restricted Stock, Restricted Stock Units, and Deferred Stock Units

Our outstanding shares of restricted stock, restricted stock units, and deferred stock units generally vest annually over a four-year period depending on the award, are valued at the stock price on date of grant and are subject to certain additional terms and conditions, including but not limited to the continued service of the employee or director. An aggregate of 1,270,748 restricted shares and units were outstanding as of December 31, 2009, including 25,625 of deferred stock units, representing $45.1 million of unrecognized compensation expense which is expected to be recognized over a weighted average period of 3.02 years.

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The following is a summary of the status of our restricted stock, restricted stock units and deferred stock units for the years ended December 31, 2009, 2008 and 2007:

				Weighted
	No. Shares			Average Grant
	(In thousands)			Date Fair Value
Outstanding at December 31, 2006		623		$	35.69
Granted		498		$	46.77
Vested		(127	)	$	36.22
Forfeited		(97	)	$	35.59
Outstanding at December 31, 2007		897		$	41.90
Granted		538		$	33.96
Vested		(276	)	$	40.26
Forfeited		(52	)	$	43.12
Outstanding at December 31, 2008		1,107		$	38.46
Granted		580		$	35.23
Vested		(338	)	$	38.59
Forfeited		(78	)	$	39.03
Outstanding at December 31, 2009		1,271		$	36.84

(d)   Shareholder Rights Plan

We have a shareholder rights plan, commonly referred to as a “poison pill.” The purpose of the shareholder rights plan is to protect stockholders against unsolicited attempts to acquire control of us that do not offer a fair price to our stockholders as determined by our Board of Directors. On September 27, 2000, our Board of Directors adopted a shareholder rights plan, declared a dividend distribution of one Series SRPA Junior Participating Preferred Stock Purchase Right on each outstanding share of its common stock, and authorized the redemption of the rights issued pursuant to our then current shareholder rights plan. We distributed rights to all shareholders of record at the close of business on September 27, 2000, the record date. These rights entitle the holder to buy one one-thousandth of a share of Series SRPA Junior Participating Preferred Stock upon a triggering event as discussed below.

Upon the actual acquisition of 17.5% or more of our outstanding common stock by a person or group, the rights held by all holders other than the acquiring person or group will be modified automatically to be rights to purchase shares of common stock (instead of rights to purchase preferred stock) at 50% of the then-market value of such common stock. Furthermore, such rightholders will have the further right to purchase shares of common stock at the same discount if we merge with, or sell 50% or more of our assets or earning power to, the acquiring person or group or any person acting for or with the acquiring person or group. If the transaction takes the form of a merger of us into another corporation, these rightholders will have the right to acquire at the same percentage discount shares of common stock of the acquiring person or other ultimate parent of such merger party.

We can redeem the rights at any time before (but not after) a person has acquired 17.5% or more of our common stock, with certain exceptions. The rights will expire on August 31, 2010 if not redeemed prior to such date.

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(e)   Authorized Common and Preferred Stock

We have 200 million shares of authorized common stock, with a par value of $.01 per share, and five million shares of preferred stock with a par value of $.01 per share, with such designations, preferences, privileges, and restrictions as may be determined from time to time by our Board of Directors.

(19)   Commitments and Contingencies

(a)   Lease Commitments

We lease office, operating and laboratory space under various lease agreements. Rent expense for continuing and discontinued operations was approximately $4 million, $6 million and $6 million for the years ended December 31, 2009, 2008 and 2007, respectively. Rent expense for 2008 includes the Oxford, England facility leases, Boulder, Colorado facility leases, Cedar Knolls, New Jersey facility lease and Farmingdale, New York facility lease. We completed the purchase of the previously leased research facilities in Oxford, England during the first and second quarters of 2009 for $3.8 million and $23.0 million, respectively.

The following is a schedule of future minimum rental payments for the next five years and thereafter required as of December 31, 2009. In addition to the facilities noted above, the schedule includes subleased facilities in New York City and Lexington, Massachusetts, exclusive of sub-rental income from these subleased facilities. Also included in the amounts below are commitments for equipment under various operating leases (in thousands).

2010	$	8,896
2011		8,947
2012		8,571
2013		8,513
2014		8,038
2015 and thereafter		47,526
	$	90,491

Rental obligations and deferred rent in the accompanying consolidated balance sheets reflects the rent expense recognized on a straight-line basis in excess of the required lease payments in connection with our facility leases and the present value of net operating lease payments for exited facilities. Included in rent and deferred rent as of December 31, 2009 is $2.6 million related to deferred rental payments and $622,000 of accruals related to exited facilities and refurbishment costs.

(b)   Contingencies

Under certain license and collaboration agreements with pharmaceutical companies and educational institutions, we are required to pay royalties, milestones and/or other fees upon the successful development and commercialization of products.

From time to time, we have received letters from companies and universities advising us that various products under R&D by us may be infringing existing patents of such entities. These matters are reviewed by management, including in-house legal counsel, and if necessary, by our outside counsel. Where valid patents of other parties are found by us to be in place, management will consider entering into licensing arrangements with the universities and/or companies or modify the conduct of its research. Our future royalties, if any, may be reduced if our licensees or collaborative partners are required to obtain licenses from third parties whose patent rights are infringed by our products, technology or operations. In addition, should any infringement claims result in a patent infringement lawsuit, we could incur substantial costs in defense of such a suit, which could have a material adverse effect on our business, financial condition and results of operations, regardless of whether we were successful in the defense.

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(20)   Acquisitions

(a)   7TM Pharma

In the fourth quarter of 2008, Prosidion acquired intellectual property and other assets from 7TM Pharma A/S for $4.0 million. The $4.0 million was recorded as an in-process R&D charge, since it was associated with the intellectual property which was deemed early stage with no alternative use.

(b)   Acquisition of AdipoGenix Assets

In the fourth quarter of 2007, Prosidion acquired intellectual property and other laboratory equipment assets from AdipoGenix Inc. for $2.3 million. Of the $2.3 million purchase price, $2.2 million was recorded as an in-process R&D charge, since it was associated with the intellectual property which was deemed early stage and to have no alternative use. The remainder of the cost was allocated to the laboratory equipment acquired, based upon its fair value, and capitalized.

(21)   Eyetech Discontinued Operations

(a)   Divestiture of Eye Disease Business

As a result of our decision to exit the eye disease business in November 2006, we committed to a plan to re-scale the eye disease business. The plan included the consolidation of facilities as well as a reduction in the workforce for transitional employees throughout 2007 and 2008.

We finalized our exit plan during the first quarter of 2007 and began to actively market our eye disease business. In order to facilitate the divestiture of our eye disease business, on April 20, 2007, we terminated our existing collaboration agreement with Pfizer, Inc. Prior to the April 2007 amendment, we shared sales and marketing responsibility for sales of Macugen in the United States and reported product revenue on a gross basis for these sales. After April 20, 2007, we no longer shared the gross profits of U.S. sales with Pfizer and no longer received royalties from Pfizer from rest of the world sales.

In July 2007, we entered into an agreement with Ophthotech Corporation to divest our anti-platelet derived growth factor, or PDGF, aptamer program for an upfront cash payment, shares of Ophthotech preferred stock and potential future milestones and royalties. Included in the loss from discontinued operations for the year ended December 31, 2007 was a gain of approximately $6 million, recognized as a result of the agreement.

On August 1, 2008, we completed the sale of the remaining assets of our eye disease business to Eyetech, Inc., a newly formed corporation whose shareholders consisted primarily of members of the Macugen sales team. Under the terms of the transaction, the principal assets we transferred to Eyetech Inc. consisted of Macugen-related intellectual property and inventory, as well as $5.8 million in working capital primarily in the form of Macugen trade receivables, in exchange for potential sales-related milestones of up to $185 million, a royalty percentage on net sales depending upon the level of Macugen sales and the potential for an additional payment in the event of a change of control transaction with respect to Eyetech Inc. Our consideration for the transaction also included payments in the event of any subsequent change-of-control affecting Eyetech Inc., as well as Eyetech Inc.’s agreement to assume certain obligations of (OSI) Eyetech. We also agreed to provide certain transition services to Eyetech Inc. for the period commencing with the closing through December 31, 2009. Michael G. Atieh, our former Executive Vice President, Chief Financial Officer and Treasurer, agreed to join Eyetech Inc. in a part-time executive chairman role upon his retirement from OSI in December 2008. Mr. Atieh also holds stock in Eyetech Inc. that became voting and participating with respect to dividends and distribution following his retirement from our company.

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(b)   (OSI) Eyetech Milestone Revenue and Expense

In the second quarter of 2006, we received a $35.0 million milestone payment from Pfizer upon the launch of Macugen in select European countries. The milestone payment was recorded as unearned revenue and was being recognized as revenue on a straight-line basis over the expected term of our collaboration and license agreements with Pfizer, which approximates the expected level of performance under these agreements with Pfizer. In April 2007, we terminated our collaboration and license agreements with Pfizer and entered into an amended and restated license agreement. Under the terms of the amended and restated license agreement, Pfizer returned to us all rights to develop and commercialize Macugen in the United States, and we granted to Pfizer an exclusive right to develop and commercialize Macugen in the rest of the world. We also agreed with Pfizer to provide each other with certain transitional services related to Macugen. These ongoing obligations to Pfizer required us to amortize the $35.0 million milestone payment over the term of the original agreement and include this unearned revenue in loss from discontinued operations. In connection with the sale of the remaining assets of our eye disease business to Eyetech Inc. on August 1, 2008, we assigned certain of our obligations under our amended and restated license agreement with Pfizer to Eyetech Inc. Accordingly, we believe that the earnings process with respect to the milestone payment is now complete. As a result, we have recognized $27.9 million, the remaining unamortized balance of the $35.0 million milestone payment from Pfizer, in net revenue from discontinued operations in 2008. We also recognized a $2.0 million expense in the third quarter of 2008 related to a third-party milestone obligation for Macugen.

(c)   (OSI) Eyetech Operating Results

As a result of our decision to divest the eye disease business, in accordance with the provision of FASB ASC Topic No. 360, the results of operations of (OSI) Eyetech for the current and prior periods were reported as discontinued operations. In addition, assets and liabilities of (OSI) Eyetech were classified as assets and liabilities related to discontinued operations, including those held for sale. In the third and fourth quarters of 2007, we assessed the net realizable carrying amount or fair value of the assets held for sale and recognized impairment charges of $5.6 million and $5.1 million, respectively. Second quarter of 2008 results reflected an additional $9.4 million impairment charge related to the adjustment of the assets held for sale down to their net realizable value. In the third quarter of 2008, as a result of our completion of the sale of the remaining assets of our eye disease business, we adjusted the remaining assets classified as held for sale to their final net realizable value, resulting in an additional charge of $1.4 million. We also incurred expenses of $3.3 million associated with the divestiture.

Operating results of (OSI) Eyetech for the years ended December 31, 2009, 2008 and 2007 are summarized as follows (in thousands):

	Year Ended
	December 31,
	2009			2008			2007
Net revenue	$	1,263		$	44,314		$	37,435
Gain on sale of PDGF aptamer research program		—			—			6,012
Loss on sale of eye disease business		—			(14,135	)		—
Operating income (loss)		(107	)		18,267			(35,797	)
Pretax income (loss)		(107	)		3,582			(36,930	)
Net income (loss) from discontinued operations	$	(64	)	$	4,884		$	(36,288	)

At December 31, 2009 and 2008, certain assets and liabilities related to the eye disease business were classified as assets or liabilities related to discontinued operations except for certain lease obligations that we continue to retain.

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The summary of the assets and liabilities related to discontinued operations as of December 31, 2009 and 2008 is as follows (in thousands):

	Year Ended December 31,
	2009		2008
Assets:
Accounts receivable	$	427	$	917
Assets related to discontinued operations	$	427	$	917
Liabilities:
Accounts payable and accrued expenses	$	1,238	$	1,522
Liabilities related to discontinued operations	$	1,238	$	1,522

(d)   Variable Interest Entities

We have determined that, in accordance with the relevant literature, Eyetech Inc. qualifies as a variable interest entity, or VIE, but as we are not its primary beneficiary, consolidation is not required. Under this guidance, an entity is to be classified as a VIE where: (i) the reporting company, or its related parties, participated significantly in the design of the entity, or where substantially all of the activities of the entity either involve or are conducted on behalf of the reporting company or its related parties; and (ii) its equity investors do not have a controlling financial interest or where the entity is unable to finance its activities without additional financial support from other parties. Based on this test, Eyetech Inc. qualifies as a VIE due to its inability at the time of its acquisition of the remaining assets of our eye disease business to finance its activities without additional financial support from third parties, and due to the fact that Mr. Atieh, our former Executive Vice President, Chief Financial Officer and Treasurer, a stockholder in Eyetech Inc., participated in the design of the entity and agreed to serve as its part-time executive chairman following his retirement from OSI in December 2008.

The relevant literature further requires the consolidation of entities which are determined to be VIEs when the reporting company determines itself to be the primary beneficiary — in other words, the entity that will absorb a majority of the VIE’s expected losses or receive a majority of the VIE’s expected residual returns. We have determined that OSI is not the primary beneficiary of Eyetech Inc. as: (i) OSI does not hold an equity position in Eyetech Inc.; (ii) OSI’s ongoing interest in this entity is limited to OSI’s contingent right to receive future royalties and milestones; and (iii) OSI does not have liability for the future losses.

(e)   (OSI) Eyetech Divestiture — Severance Costs

As a result of our decision to exit our eye disease business in November 2006, we committed to a plan to re-scale the eye disease business. The plan included the consolidation of facilities as well as a reduction in the workforce. The remaining liability is expected to be paid during 2010.

The activity for the years ended December 31, 2009 and 2008 was as follows (in thousands):

	Year Ended December 31,
	2009			2008
Opening liability	$	387		$	800
Accrual for severance, relocation and retention bonuses		108			1,376
Cash paid for severance		(180	)		(1,789	)
Ending liability	$	315		$	387

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(22)   Accounting Pronouncements

(a)   Adopted Standards

In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) “Measuring Liabilities at Fair Value.” This update provides guidance on the allowable techniques to use when a quoted price in an active market for an identical liability is not available. It also clarifies the classification of the liability for Level 1 fair value measurement. The adoption of FASB ASU No. 2009-05 in the third quarter of 2009 did not have a material impact on our financial position, results of operations or cash flows for year ended December 31, 2009.

In April 2009, the FASB issued FASB ASC Subtopic No. 320-10-65, formerly FASB Staff Position FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments”. This accounting standard changed the amount of an other-than-temporary impairment that is recognized in earnings when there are credit losses on debt security that management does not intend to sell and it is more-likely-than-not that the entry will not have to sell prior to recovery of the noncredit impairment. It is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of FASB ASC Subtopic No. 320-10 did not have a material impact on our financial position, results of operations or cash flows for the year ended December 31, 2009.

In April 2009 the FASB issued FSP FAS 157-4 (included in ASC Topic 820), “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Indentifying Transactions that are not Orderly.” This accounting literature provides guidelines for making fair value measurements more consistent with principles presented in SFAS 157. It also provides additional authoritative guidance in determining whether a market is active or inactive, and whether a transaction is distressed, is applicable to all assets and liabilities or will require enhanced disclosures. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows for the year ended December 31, 2009.

In May 2008, the FASB issued FASB Staff Position, or FSP, No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”, now referred to as FASB ASC Topic 470. This accounting literature clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.” Additionally, this accounting literature specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This guidance was effective beginning with our financial statements issued for the first quarter of 2009. The adoption of this guidance had a material impact on the carrying value and the interest expense associated with our 2025 Notes and 2038 Notes.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations”, now referred to as FASB ASC Topic No. 805. FASB ASC Topic No. 805 establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the financial effects of the business combination. The guidance is effective for us in our fiscal year beginning January 1, 2009, to be applied prospectively to business combinations entered into on or after January 1, 2009.

(b)   Recently Issued Standards (Not Yet Adopted)

In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605), “Multiple-Deliverable Revenue Arrangements,” which establishes a hierarchy for determining the selling price of a deliverable and provides guidance on determining a best estimate of selling price. ASU No. 2009-13 provides accounting principles and application guidance on whether multiple deliverables exist, how these arrangements should be separated, and

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the consideration allocated. This guidance eliminates the requirement to establish the fair value of undelivered products and services and instead provides for separate revenue recognition based upon management’s estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are assessing the potential impact of adoption of this standard.

In October 2009, the FASB issued ASU No. 2009-17, “Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” It requires reporting entities to evaluate former qualifying special purpose entities for consolidation, changes the approach to determining a VIE’s primary beneficiary from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. It also clarifies, but does not significantly change, the characteristics that identify a VIE. This ASU also requires additional year-end and interim disclosures and is effective for fiscal years commencing after November 15, 2009. We are assessing the potential impact of adoption of this standard.

In September 2009, the FASB issued ASU No. 2009-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2009-06 amends certain disclosure requirements of Subtopic 820-10. This ASU provides additional disclosures for transfers in and out of Levels I and II and for activity in Level III. This ASU also clarifies certain other existing disclosure requirements including level of desegregation and disclosures around inputs and valuation techniques. The final amendments to the Accounting Standards Codification will be effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the Level III activity disclosures for purchases, sales, issuances, and settlements on a gross basis. That requirement will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are assessing the potential impact of adoption of this standard.

(23) Quarterly Financial Data (unaudited)

The tables below summarize our unaudited quarterly operating results for the years ended December 31, 2009 and 2008. The retrospective adoption of FASB ASC Topic 470, which impacted the carrying value and related interest expense associated with our 2025 and 2038 Notes, resulted in adjusting the historically reported information for each of the quarters presented for the year ended December 31, 2008.

	Three Months Ended
	(in thousands, except per share data)
	March 31,		June 30,		September 30,		December 31,
	2009		2009		2009		2009
Revenues from continuing operations	$	93,677	$	99,066	$	111,447	$	123,958
Net income from continuing operations	$	16,504	$	16,508	$	17,864	$	25,119
Net income	$	16,400	$	16,531	$	17,566	$	25,434
Basic income per share from continuing operations	$	0.29	$	0.29	$	0.31	$	0.43
Diluted income per share from continuing operations	$	0.28	$	0.28	$	0.30	$	0.42
Basic net income per share	$	0.28	$	0.29	$	0.30	$	0.44
Diluted net income per share	$	0.28	$	0.28	$	0.30	$	0.42

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	Three Months Ended
	(in thousands, except per share data)
	March 31,		June 30,		September 30,		December 31,
	2008		2008		2008		2008
Revenues from continuing operations	$	90,735	$	95,654	$	94,572	$	98,427
Net income from continuing operations	$	28,596	$	34,166	$	31,362	$	342,585
Net income	$	26,170	$	22,247	$	51,643	$	341,533
Basic income per share from continuing operations	$	0.50	$	0.60	$	0.55	$	5.95
Diluted income per share from continuing operations	$	0.49	$	0.59	$	0.53	$	5.24
Basic net income per share	$	0.46	$	0.39	$	0.90	$	5.93
Diluted net income per share	$	0.45	$	0.39	$	0.87	$	5.22

The basic and diluted net income per common share calculation for each of the quarters are based on the weighted average number of shares outstanding and the effect of common stock equivalents in each period. Therefore, the sum of the quarters in a fiscal year does not necessarily equal the basic and diluted net income per common share for the full year.

113

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

ITEM 9A.   CONTROLS AND PROCEDURES

CEO/CFO CERTIFICATIONS

Attached to this Annual Report on Form 10-K as Exhibits 31.1 and 31.2, there are two certifications, or the Section 302 Certifications, one by each of our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO. This Item 9A contains information concerning the evaluation of our disclosure controls and procedures and internal control over financial reporting that is referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Procedures.  Our disclosure controls and procedures are designed to provide reasonable assurance that the controls and procedures will meet their objectives. The Securities and Exchange Commission requires that as of the end of the period covered by this Annual Report on Form 10-K, the CEO and the CFO evaluate the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, or the Exchange Act, and report on the effectiveness of the design and operation of our disclosure controls and procedures. Accordingly, under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K.

CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and Procedures.  Based upon their evaluation of the disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level to ensure that material information relating to OSI and our consolidated subsidiaries is made known to management, including the CEO and CFO, on a timely basis and during the period in which this Annual Report on Form 10-K was being prepared.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act).

Under the supervision of and with the participation of our CEO and our CFO, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that, as of December 31, 2009, our internal control over financial reporting was effective. The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by KPMG LLP, our independent registered public accounting firm, as stated in its report which is included in this Annual Report on Form 10-K.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act), identified in connection with the evaluation of such internal control over financial reporting that occurred during the fourth quarter of fiscal 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

114

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

OSI Pharmaceuticals, Inc.:

We have audited OSI Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). OSI Pharmaceuticals, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, OSI Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of OSI Pharmaceuticals, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated February 24, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Melville, NY

February 24, 2010

115

ITEM 9B.   OTHER INFORMATION

In September, 2009, we entered into a Design-Build Agreement, with Eagle Interiors Inc., or Eagle, for the design and renovation of our Ardsley campus. Under the terms of the Design-Build Agreement, Eagle shall provide certain pre-construction services and design-build services on a cost of work plus a design-builder’s fee. In addition, Eagle shall receive a bonus if the design-build services meet approved budget and completion dates. The preceding summary of the Design-Build Agreement is not intended to be complete, and is qualified in its entirety by reference to the full text of the Design-Build Agreement, which is filed as Exhibit 10.41 to this Annual Report on Form 10-K.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to the similarly named section of our Proxy Statement for our 2010 Annual Meeting to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2009.

ITEM 11.   EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the similarly named section of our Proxy Statement for our 2010 Annual Meeting to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2009.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the similarly named section of our Proxy Statement for our 2010 Annual Meeting to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2009.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the similarly named section of our Proxy Statement for our 2010 Annual Meeting to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2009.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to the similarly named section of our Proxy Statement for our 2010 Annual Meeting to be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2009.

116

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) The following consolidated financial statements are included in Part II, Item 8 of this report:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(2) All schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.

(3) The exhibits listed in the Index to Exhibits are attached and incorporated herein by reference and filed as a part of this report.

117

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

OSI PHARMACEUTICALS, INC.

By:  /s/  COLIN GODDARD, Ph.D.

Colin Goddard, Ph.D.

Chief Executive Officer

Date: February 24, 2010

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the days indicated.

Signature	Title	Date
/s/  ROBERT A. INGRAM Robert A. Ingram	Chairman of the Board	February 24, 2010
/s/  COLIN GODDARD, Ph.D. Colin Goddard, Ph.D.	Director and Chief Executive Officer (principal executive officer)	February 24, 2010
/s/  PIERRE LEGAULT Pierre Legault	Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)	February 24, 2010
/s/  SANTO J. COSTA Santo J. Costa	Director	February 24, 2010
/s/  JOSEPH KLEIN, III Joseph Klein, III	Director	February 24, 2010
/s/  KENNETH B. LEE, Jr. Kenneth B. Lee, Jr.	Director	February 24, 2010
/s/  VIREN MEHTA Viren Mehta	Director	February 24, 2010
/s/  DAVID W. NIEMIEC David W. Niemiec	Director	February 24, 2010
/s/  HERBERT PINEDO, M.D., Ph.D. Herbert Pinedo, M.D., Ph.D.	Director	February 24, 2010
/s/  KATHARINE B. STEVENSON Katharine B. Stevenson	Director	February 24, 2010
/s/  JOHN P. WHITE, ESQUIRE John P. White, Esquire	Director	February 24, 2010

118

EXHIBIT INDEX

Exhibit
	2	.1†+	Asset Purchase Agreement, dated as of June 17, 2004, by and between Probiodrug AG, Halle and Prosidion Limited, filed by the Company as an exhibit to the Form 8-K filed on July 6, 2004 (file no. 000-15190), and incorporated herein by reference.
	3	.1	Restated Certificate of Incorporation of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-K for the fiscal year ended September 30, 2001 (file no. 000-15190), and incorporated herein by reference.
	3	.2	Second Amended and Restated Bylaws of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190) and incorporated herein by reference.
	4	.1	Rights Agreement, dated September 27, 2000, between OSI Pharmaceuticals, Inc. and The Bank of New York as Rights Agent, including Terms of Series SRP Junior Participating Preferred Stock, Summary of Rights to Purchase Preferred Stock and Form of Right Certificate, filed by the Company as an exhibit to the Form 8-A filed on September 27, 2000 (file no. 000-15190), and incorporated herein by reference.
	4	.2	Form of Contingent Value Rights Agreement by and between OSI Pharmaceuticals, Inc. and the Bank of New York, filed by the Company as an exhibit to the registration statement on Form S-4 (file no. 333-103644), and incorporated herein by reference.
	4	.3	Indenture, dated September 8, 2003, by and between OSI Pharmaceuticals, Inc. and The Bank of New York, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended September 30, 2003 (file no. 000-15190) and incorporated herein by reference.
	4	.4	Form of 3.25% Convertible Senior Subordinated Note Due 2023 (included in Exhibit 4.3), filed by the Company as an exhibit to the Form 10-K for the fiscal year ended September 30, 2003 (file no. 000-15190) and incorporated herein by reference.
	4	.5	Registration Rights Agreements, dated September 8, 2003, by and among OSI Pharmaceuticals, Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated, and Morgan Stanley & Co., Incorporated, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended September 30, 2003 (file no. 000-15190) and incorporated herein by reference.
	4	.6	Indenture, dated December 21, 2005, by and between OSI Pharmaceuticals, Inc. and The Bank of New York, filed by the Company as an exhibit to the Form 8-K filed on December 28, 2005 (file no. 000-15190), and incorporated herein by reference.
	4	.7	Form of 2% Convertible Senior Subordinated Note Due 2025 (included in Exhibit 4.6), filed by the Company as an exhibit to the Form 8-K filed on December 28, 2005 (file no. 000-15190), and incorporated herein by reference.
	4	.8	Registration Rights Agreement, dated December 21, 2005, by and between OSI Pharmaceuticals, Inc. and UBS Securities LLC, filed by the Company as an exhibit to the Form 8-K filed on December 28, 2005 (file no. 000-15190), and incorporated herein by reference.
	4	.9	Indenture, dated January 9, 2008, by and between OSI Pharmaceuticals, Inc. and The Bank of New York, filed by the Company as an exhibit to the Form 8-K filed on January 15, 2008 (file no. 000-15190), and incorporated herein by reference.
	4	.10	Form of 3% Convertible Senior Subordinated Note Due 2038 (included in Exhibit 4.9), filed by the Company as an exhibit to the Form 8-K filed on January 15, 2008 (file no. 000-15190), and incorporated herein by reference.
	4	.11	Registration Rights Agreement, dated January 9, 2008, by and between OSI Pharmaceuticals, Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc., filed by the Company as an exhibit to the Form 8-K filed on January 15, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.1*	1989 Incentive and Non-Qualified Stock Option Plan, filed by the Company as an exhibit to the registration statement on Form S-8 (file no. 33-38443), and incorporated herein by reference.
	10	.2*	1995 Employee Stock Purchase Plan, filed by the Company as an exhibit to the registration statement on Form S-8, filed on December 4, 1995 (file no. 333-06861), and incorporated herein by reference.

119

Exhibit
	10	.3*	1997 Incentive and Non-Qualified Stock Option Plan, filed by the Company as an exhibit to the registration statement on Form S-8, filed on November 4, 1997 (file no. 333-39509), and incorporated herein by reference.
	10	.4*	1999 Incentive and Non-Qualified Stock Option Plan, as amended, filed by the Company as an exhibit to the Form 10-Q for the quarter ended September 30, 2006 (file no. 000-15190), and incorporated herein by reference.
	10	.5*	Amended and Restated Stock Incentive Plan, as amended, filed by the Company as an exhibit to the Form 10-Q for the quarter ended September 30, 2007 (file no. 000-15190), and incorporated herein by reference.
	10	.6	OSI Pharmaceuticals, Inc. Non-Qualified Stock Option Plan for Former Employees of Cadus Pharmaceutical Corporation, filed by the Company as an exhibit to the Form 10-Q for the quarter ended June 30, 1999 (file no. 000-15190), and incorporated herein by reference.
	10	.7	OSI Pharmaceuticals, Inc. Non-Qualified Stock Option Plan for Former Employees of Gilead Sciences, Inc., filed by the Company as an exhibit to the Form 8-K filed on January 7, 2002 (file no. 000-15190), and incorporated herein by reference.
	10	.8	OSI Pharmaceuticals, Inc. Stock Incentive Plan for Pre-Merger Employees of Eyetech Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 8-K filed on November 16, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.9	OSI Pharmaceuticals, Inc. Stock Plan for Assumed Options of Pre-Merger Employees of Eyetech Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 8-K filed on November 16, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.10*	Form of Non-Qualified Stock Option Agreement, issued under the Amended and Restated Stock Incentive Plan, as amended, for option grants made in December, 2008 to U.S.-Based Executive Officers of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.11*	Form of Non-Qualified Stock Option Agreement, issued under the Amended and Restated Stock Incentive Plan, as amended, for option grants made in December, 2008 to U.K.-Based Executive Officers of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.12*	Form of Non-Qualified Stock Option Agreement, issued under the Amended and Restated Stock Incentive Plan, as amended, to U.S.-Based Executive Officers of OSI Pharmaceuticals, Inc. (Filed herewith).
	10	.13*	Form of Non-Qualified Stock Option Agreement, issued under the Amended and Restated Stock Incentive Plan, as amended, to the Chief Executive Officer of OSI Pharmaceuticals, Inc. (Filed herewith).
	10	.14*	Form of Non-Qualified Stock Option Agreement, issued under the Amended and Restated Stock Incentive Plan, as amended, to Dr. Anker Lundemose. (Filed herewith).
	10	.15*	Form of Non-Qualified Stock Option Agreement, issued under the Amended and Restated Stock Incentive Plan, as amended, to Dr. Jonathan Rachman. (Filed herewith).
	10	.16*	Form of Restricted Stock Unit Agreement, issued under the Amended and Restated Stock Incentive Plan, for grants made to the Chief Executive Officer and Chief Financial Officer in December, 2009 to U.S.-Based Executive Officers of OSI Pharmaceuticals, Inc. (Filed herewith).
	10	.17*	Form of Restricted Stock Unit Agreement, issued under the Amended and Restated Stock Incentive Plan, for grants made to U.S.-Based Executive Officers of OSI Pharmaceuticals, Inc. (Filed herewith).
	10	.18*	Form of Restricted Stock Unit Agreement, issued under the Amended and Restated Stock Incentive Plan, for grants made to Dr. Anker Lundemose. (Filed herewith).
	10	.19*	Form of Restricted Stock Unit Agreement, issued under the Amended and Restated Stock Incentive Plan, for grants made to Dr. Jonathan Rachman. (Filed herewith).
	10	.20*	Form of Non-Qualified Stock Option Agreement for Non-Management Directors of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 8-K filed on June 22, 2006 (file no. 000-15190), and incorporated herein by reference.

120

Exhibit
	10	.21*	Form of Restricted Stock Unit Agreement for Non-Management Directors of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 8-K filed on July 12, 2006 (file no. 000-15190), and incorporated herein by reference.
	10	.22*	Form of Restricted Stock Agreement for Non-Management Directors of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 8-K filed on July 12, 2006 (file no. 000-15190), and incorporated herein by reference.
	10	.23*	OSI Pharmaceuticals, Inc. Nonqualified Deferred Compensation Plan, effective July 1, 2007, filed by the Company as an exhibit to the Form 10-Q for the quarter ended June 30, 2007 (file no. 000-15190), and incorporated herein by reference.
	10	.24*	Form of Deferred Stock Unit Agreement for the Non-Employee Directors of OSI Pharmaceuticals, Inc., filed by the Company as an exhibit to the Form 10-Q for the quarter ended June 30, 2007 (file no. 000-15190), and incorporated herein by reference.
	10	.25†	Collaborative Research Agreement, dated April 1, 1996, between OSI Pharmaceuticals, Inc. and Pfizer Inc., filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 1996, as amended (file no. 000-15190), and incorporated herein by reference.
	10	.26†	License Agreement, dated April 1, 1996, between OSI Pharmaceuticals, Inc. and Pfizer Inc., filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 1996, as amended (file no. 000-15190), and incorporated herein by reference.
	10	.27†	Amended and Restated License Agreement, dated April 20, 2007, by and between OSI Pharmaceuticals, Inc. and Pfizer, Inc., filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 2007 (file no. 000-15190), and incorporated herein by reference.
	10	.28	Agreement, dated May 23, 2000, by and between OSI Pharmaceuticals, Inc. and Pfizer, Inc., filed by the Company as an exhibit to the Form 8-K filed on June 20, 2000 (file no. 000-15190), and incorporated herein by reference.
	10	.29†	Development and Marketing Collaboration Agreement, dated January 8, 2001, between OSI Pharmaceuticals, Inc. and Genentech, Inc., filed by the Company as an exhibit to the Form 8-K filed on February 14, 2001 (file no. 000-15190), and incorporated herein by reference.
	10	.30†	Amendment No. 1 to Development and Marketing Collaboration Agreement, dated as of June 4, 2004, between OSI Pharmaceuticals, Inc. and Genentech, Inc., filed by the Company as an exhibit to the Form 8-K filed on June 28, 2004 (file no. 000-15190), and incorporated herein by reference.
	10	.31†	Manufacturing and Supply Agreement, dated as of June 4, 2004, by and between OSI Pharmaceuticals, Inc. and Genentech, Inc., filed by the Company as an exhibit to the Form 8-K filed on June 28, 2004 (file no. 000-15190), and incorporated herein by reference.
	10	.32†	Development Collaboration and Licensing Agreement, dated January 8, 2001, between OSI Pharmaceuticals, Inc. and F. Hoffman — La Roche Ltd., filed by the Company as an exhibit to the Form 8-K filed on February 14, 2001 (file no. 000-15190), and incorporated herein by reference.
	10	.33†	Tripartite Agreement, dated January 8, 2001, by and among OSI Pharmaceuticals, Inc., Genentech, Inc., and F. Hoffman La Roche Ltd., filed by the Company as an exhibit to the Form 8-K filed on February 14, 2001 (file no. 000-15190), and incorporated herein by reference.
	10	.34†	Supply Agreement, dated February 2, 2005, by and between Schwarz Pharma Manufacturing, Inc. and OSI Pharmaceuticals, Inc. filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.35†	Manufacturing and Supply Agreement, dated December 27, 2004, by and among OSI Pharmaceuticals, Inc., Charkit Chemical Corporation and Sumitomo Chemical Co., Ltd., filed by the Company as an exhibit to the Form 10-Q for the quarter ended September 30, 2009 (file no. 000-15190), and incorporated herein by reference.
	10	.36†	Manufacturing and Supply Agreement, dated November 10, 2005, by and among OSI Pharmaceuticals, Inc., Davos Chemical Corporation and Dipharma SpA., filed by the Company as an exhibit to the Form 10-Q for the quarter ended September 30, 2009 (file no. 000-15190), and incorporated herein by reference.

121

Exhibit
	10	.37	Agreement of Sale and Purchase, dated March 15, 2005, by and between Swissair, Swiss Air Transport Co., Ltd. and OSI Pharmaceuticals, Inc. filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.38	Purchase and Sale Agreement, dated July 6, 2009, by and between OSI Pharmaceuticals, Inc. and Millsaw Realty L.P., filed by the Company as an exhibit to the Form 10-Q for the quarter ended June 30, 2009 (file no. 000-15190), and incorporated herein by reference.
	10	.39	Agreement relating to Windrush Court, Oxford, dated May 29, 2009, by and between Matrix Portfolio No. 1 Limited and Oxford Real Estate Owner No. 2 Limited, filed by the Company as an exhibit to the Form 10-Q for the quarter ended June 30, 2009 (file no. 000-15190), and incorporated herein by reference.
	10	.40†	Exclusive License Agreement, effective as of January 4, 2007, by and between Eli Lilly and Company and Prosidion Limited, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2006 (file no. 000-15190), and incorporated herein by reference.
	10	.41†	Design-Build Agreement, dated September 22, 2009, by and between OSI Ardsley LLC, and Eagle Interiors Inc. (Filed herewith).
	10	.42*	Employment Agreement, dated June 14, 2006, by and between OSI Pharmaceuticals, Inc. and Colin Goddard, Ph.D., as amended on June 21, 2006, filed by the Company as an exhibit to the Form 8-K filed on June 22, 2006, and incorporated herein by reference.
	10	.43*	Amendment to Employment Agreement, dated December 18, 2008, by and between OSI Pharmaceuticals, Inc. and Colin Goddard, Ph.D., filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.44*	Employment Agreement, dated December 16, 2008, by and between OSI Pharmaceuticals, Inc. and Pierre Legault, filed by the Company as an exhibit to the Form 8-K filed on December 16, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.45*	Letter Agreement, dated November 15, 2001, by and between OSI Pharmaceuticals, Inc. and Mr. Robert L. Simon filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.46*	Amended Letter Agreement, dated September 20, 2005, by and between OSI Pharmaceuticals, Inc. and Robert L. Simon, filed by the Company as an exhibit to the Form 8-K filed on September 26, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.47*	Amendment to Letter Agreement, dated December 18, 2008, by and between OSI Pharmaceuticals, Inc. and Robert L. Simon, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.48*	Change of Control Arrangement, dated October 4, 2001, by and between OSI Pharmaceuticals, Inc. and Barbara A. Wood, Esq., filed by the Company as an exhibit to the Form 10-Q for the quarter ended March 31, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.49*	Amended Change of Control Arrangement, dated September 20, 2005, by and between OSI Pharmaceuticals, Inc. and Barbara A. Wood, Esq. filed by the Company as an exhibit to the Form 8-K filed on September 26, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.50*	Amendment to Change of Control Arrangement, dated December 18, 2008, by and between OSI Pharmaceuticals, Inc. and Barbara A. Wood, Esq., filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.51*	Employment Agreement, dated May 16, 2003, by and between OSI Pharmaceuticals, Inc. and Gabriel Leung, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended September 30, 2003 (file no. 000-15190), and incorporated herein by reference.
	10	.52*	Addendum to Employment Agreement, dated January 5, 2004, by and between OSI Pharmaceuticals, Inc. and Gabriel Leung, filed by the Company as an exhibit to the Form 10-QT for the transition period ended December 31, 2004 (file no. 000-15190), and incorporated herein by reference.
	10	.53*	Amendment to Employment Agreement, dated December 18, 2008, by and between OSI Pharmaceuticals, Inc. and Gabriel Leung, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.

122

Exhibit
	10	.54*	Service Contract, dated September 20, 2005, by and between OSI Pharmaceuticals, Inc. and Dr. Anker Lundemose, filed by the Company as an exhibit to the Form 8-K filed on September 26, 2005 (file no. 000-15190), and incorporated herein by reference.
	10	.55*	Change in Control Arrangement, dated December 4, 2007, by and between OSI Pharmaceuticals, Inc. and Linda E. Amper, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2007 (file no. 000-15190), and incorporated herein by reference.
	10	.56*	Amendment to Change in Control Arrangement, dated December 18, 2008, by and between OSI Pharmaceuticals, Inc. and Linda E. Amper, filed by the Company as an exhibit to the Form 10-K for the fiscal year ended December 31, 2008 (file no. 000-15190), and incorporated herein by reference.
	10	.57*	Consulting and Confidential Disclosure Agreement, dated October 1, 2009, between OSI Pharmaceuticals, Inc. and Herbert M. Pinedo, M.D., Ph.D., filed by the Company as an Exhibit to the Form 10-Q for the quarter ended September 30, 2009 (file no. 000-15190), and incorporated herein by reference.
	10	.58*†	Employment Agreement, dated March 2, 2005, between Prosidion Limited and Dr. Jonathan Rachman. (Filed herewith).
	10	.59*	Compensatory Arrangements for Non-Employee Directors. (Filed herewith).
	10	.60*	Compensatory Arrangements for Executive Officers. (Filed herewith).
	10	.61*	Consulting and Confidential Disclosure Agreement, dated June 30, 2009, by and between OSI Pharmaceuticals, Inc. and Dr. Daryl Granner, filed by the Company as an Exhibit to the Form 10-Q for the quarter ended June 30, 2009 (file no. 000-15190) and incorporated herein by reference.
	10	.62*	Consulting Agreement, dated November 20, 2008, by and between OSI Pharmaceuticals, Inc. and Mehta Partners, LLC, filed by the Company as an Exhibit to the Form 8-K filed on November 21, 2008 (file no. 000-15190) and incorporated herein by reference.
	21		Significant Subsidiaries of OSI Pharmaceuticals, Inc. (Filed herewith).
	23		Consent of KPMG LLP, independent registered public accounting firm. (Filed herewith).
	31	.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-14(a). (Filed herewith).
	31	.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15(d)-14(a). (Filed herewith).
	32	.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
	32	.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).

*	Indicates a management contract or compensatory plan, contract or arrangement in which directors or executive officers participates.
†	Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
+	The schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the Securities and Exchange Commission. The omitted schedules from this filing will be provided upon request.

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EX-10.12

Exhibit 10.12

OSI PHARMACEUTICALS, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”) and [EMPLOYEE NAME] (the “Optionee”), an employee of the Company, is entered into as of the date set forth beneath the Optionee’s name below.

     Pursuant to the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant to the Optionee of a non-qualified stock option to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), as hereinafter set forth. The option granted herein is not intended to qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended.

W I T N E S S E T H:

     1. Grant. On the Grant Date, the Company granted to the Optionee an option (the “Option”) to purchase on the terms and conditions set forth herein and in the Plan all or any part of an aggregate of [NUMBER OF OPTIONS GRANTED] shares of Common Stock (the “Option Shares”), at the purchase price of [OPTION PRICE] per share (the “Option Price”).

     2. Vesting. Subject to the terms and conditions of this Option and the Plan, the Optionee shall have the cumulative right to exercise the Option over a period of four years, with one quarter (25%) of the Option Shares becoming exercisable on each of the next four anniversaries of the Grant Date, with any fractional number of Option Shares that would otherwise become exercisable as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee.

     3. Term. The Option shall terminate in all events at 5:00 p.m. (local New York, New York time) on [INSERT DATE ONE DAY IMMEDIATELY PRIOR TO TENTH ANNIVERSARY OF GRANT DATE] (the “Termination Date”), unless sooner terminated as provided in Subparagraphs (a) or (b) below.

          (a) Termination of Employment or Service. The Option shall terminate and shall no longer be exercisable ninety (90) days after the Optionee’s employment (or service as an officer or consultant) with the Company and any parent or subsidiary of the Company terminates, unless such termination of employment or service was caused by the Optionee’s death or Retirement (as defined in the Plan). The death or Retirement of the Optionee shall not affect the remaining term of the Option. Following a termination of employment or service

(including due to death or Retirement), the Optionee (or the Optionee’s heirs or personal representatives if Optionee is deceased) may, during the remaining term of the Option, purchase any remaining Option Shares which could have been purchased on the date Optionee’s employment or service was terminated, but may not purchase any Option Shares which would otherwise have first become purchasable following such termination of employment or service.

          (b) Sale or Reorganization. As provided in Section 6(h) of the Plan, if the Company is merged or consolidated with another corporation, or if the property or stock of the Company is acquired by another corporation, or if there is a separation, reorganization or liquidation of the Company, the Board of Directors of the Company may, in its discretion, give Optionee a written notice that the Option will terminate thirty (30) days after the date of such written notice. In any such case, the Option will become immediately exercisable in full, notwithstanding Paragraph 2 above.

     4. Method of Exercise and Payment.

          (a) Method of Exercise. The Option shall be exercised through the Company’s broker-assisted stock option program (the “Broker Program”) in accordance with the terms and conditions of the Broker Program as may be in effect from time to time.

          (b) Taxes. It shall be a condition to the performance of the Company’s obligation to issue or transfer Option Shares upon the exercise of the Option that the Optionee remit an amount sufficient to satisfy any federal, state and/or local tax withholding requirements arising in connection with the exercise of the Option or the issuance of Option Shares, other than stock transfer taxes, in each case in accordance with the terms and conditions of the Broker Program as may be in effect from time to time. If the Company for any reason does not require the Optionee to make a payment sufficient to satisfy such withholding requirements, any tax withholding payments made by the Company to any federal, state or local tax authority with respect to the exercise of the Option shall constitute a personal obligation of the Optionee to the Company, payable upon demand or, at the option of the Company, by deduction from future compensation payable to the Optionee.

          (c) Partial Exercise. To the extent otherwise exercisable, the Option may be exercised in whole or in part, except that the Option may in no event be exercised with respect to fractional shares.

     5. Transfers. The Option is not transferable by the Optionee otherwise than by will or pursuant to the laws of descent and distribution in the event of the Optionee’s death, in which event the Option may be exercised by the heirs or legal representatives of the Optionee. The Option may be exercised during the lifetime of the Optionee only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option.

     6. Adjustments on Changes in Common Stock. In the event that dividends payable in Common Stock during any fiscal year of the Company exceed in the aggregate five percent (5%)

2

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 (5%) of the shares of Common Stock outstanding at the beginning of the year, the number of Option Shares deliverable upon the exercise thereafter of the Option shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price payable upon exercise of the Option. Common Stock dividends, splits, subdivisions or combinations during any fiscal year which do not exceed in the aggregate five percent (5%) of the Common Stock issued and outstanding at the beginning of such year shall not result in any adjustment under the Option. All adjustments shall be made as of the day such action necessitating such adjustment becomes effective.

     7. Legal Requirements.

          (a) Listing Requirements. If at any time the Board of Directors shall determine, in its discretion, that the listing, registration, or qualification of any of the Option Shares 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 Option or the issue, transfer or purchase of Option Shares hereunder, the Option may not be exercised 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.

          (b) Securities Laws. The Company shall not be obligated to sell or issue any Option Shares in any manner in contravention of the Securities Act of 1933, as amended, or any state securities law. The Board of Directors or the Committee may, at any time, require, as a condition to the exercise of the Option, the representation or agreement of the Optionee to the effect that the Option Shares issuable upon exercise of the Option are acquired by the Optionee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws.

     8. Administration. The Option has been granted pursuant to, and is subject to the terms and provisions of, the Plan. All terms used herein which are defined in the Plan and not otherwise defined herein shall have the same meanings as in the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee (as designated under the Plan) regarding any issue or question arising under the Option or the Plan shall be final, binding and conclusive on the Company and the Optionee.

     9. Rights as Stockholder. The Optionee shall have none of the rights of a stockholder with respect to the Option Shares unless and until such Option Shares shall be issued to the Optionee upon the exercise of the Option. Except as provided in Paragraph 6 above, no adjustments shall be made for dividends or other rights for which the record date is prior to the date the stock certificate is issued.

3

     10. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service 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, services, responsibilities or duties of the Optionee at any time for any reason whatsoever.

     11. Sale of Option Shares. Unless otherwise provided by the Committee, no Option Shares acquired upon exercise of the Option may be sold or otherwise disposed of by the Optionee within six months from the Grant Date.

     12. Notices. Any notice to be given to the Company hereunder shall be delivered personally to the Secretary of the Company or mailed or delivered to the Company at its principal executive office, addressed to the attention of the Secretary, and any notice to be given to the Optionee hereunder shall be delivered personally or mailed or delivered to the Optionee at the address then appearing on the records of the Company. Such addresses may be changed at any time by notice from one party to the other. Notices given hereunder shall be in writing, and shall be deemed to have been duly given upon delivery thereof, if personally delivered, or three days after being deposited in the United States mail, registered or certified mail, properly addressed, with proper postage and fees prepaid, or one day after being deposited with a delivery service guaranteeing overnight delivery, properly addressed, with fees paid by the sender.

     13. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

     14. Binding Effect. This agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company and the heirs and personal representatives of the Optionee.

     15. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

4

IN WITNESS WHEREOF, the parties hereto have entered into this Non-Qualified Stock Option Agreement as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

ACCEPTED BY (OPTIONEE):

Name:

Date

5

EX-10.13

Exhibit 10.13

OSI PHARMACEUTICALS, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”) and [CHIEF EXECUTIVE OFFICER] (the “Optionee”), an employee of the Company, is entered into as of the date set forth beneath the Optionee’s name below.

     Pursuant to the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant to the Optionee of a non-qualified stock option to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), as hereinafter set forth. The option granted herein is not intended to qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended.

W I T N E S S E T H:

     1. Grant. On the Grant Date, the Company granted to the Optionee an option (the “Option”) to purchase on the terms and conditions set forth herein and in the Plan all or any part of an aggregate of [NUMBER OF OPTIONS GRANTED] shares of Common Stock (the “Option Shares”), at the purchase price of [OPTION PRICE] per share (the “Option Price”).

     2. Vesting. Subject to the terms and conditions of this Agreement and the Plan, one-third of the Option Shares will become exercisable on each of the third, fourth and fifth anniversaries of the Grant Date, with any fractional number of Option Shares that would otherwise become exercisable as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee.

     3. Term. The Option shall terminate in all events at 5:00 p.m. (local New York, New York time) on [ENTER DATE ONE DAY IMMEDIATELY PRIOR TO THE TENTH ANNIVERSARY OF THE GRANT DATE] (the “Termination Date”), unless sooner terminated as provided in Subparagraphs (a) or (b) below.

          (a) Termination of Employment or Service. The Option shall terminate and shall no longer be exercisable ninety (90) days after the Optionee’s employment (or service as an officer or consultant) with the Company and any parent or subsidiary of the Company terminates, unless such termination of employment or service was caused by the Optionee’s death or Retirement (as defined in the Plan). The death or Retirement of the Optionee shall not affect the remaining term of the Option. Following a termination of employment or service (including due to death or Retirement), the Optionee (or the Optionee’s heirs or personal

representatives if Optionee is deceased) may, during the remaining term of the Option, purchase any remaining Option Shares which could have been purchased on the date Optionee’s employment or service was terminated, but may not purchase any Option Shares which would otherwise have first become purchasable following such termination of employment or service.

          (b) Sale or Reorganization. As provided in Section 6(h) of the Plan, if the Company is merged or consolidated with another corporation, or if the property or stock of the Company is acquired by another corporation, or if there is a separation, reorganization or liquidation of the Company, the Board of Directors of the Company may, in its discretion, give Optionee a written notice that the Option will terminate thirty (30) days after the date of such written notice. In any such case, the Option will become immediately exercisable in full, notwithstanding Paragraph 2 above.

     4. Method of Exercise and Payment.

          (a) Method of Exercise. The Option shall be exercised through the Company’s broker-assisted stock option program (the “Broker Program”) in accordance with the terms and conditions of the Broker Program as may be in effect from time to time.

          (b) Taxes. It shall be a condition to the performance of the Company’s obligation to issue or transfer Option Shares upon the exercise of the Option that the Optionee remit an amount sufficient to satisfy any federal, state and/or local tax withholding requirements arising in connection with the exercise of the Option or the issuance of Option Shares, other than stock transfer taxes, in each case in accordance with the terms and conditions of the Broker Program as may be in effect from time to time. If the Company for any reason does not require the Optionee to make a payment sufficient to satisfy such withholding requirements, any tax withholding payments made by the Company to any federal, state or local tax authority with respect to the exercise of the Option shall constitute a personal obligation of the Optionee to the Company, payable upon demand or, at the option of the Company, by deduction from future compensation payable to the Optionee.

          (c) Partial Exercise. To the extent otherwise exercisable, the Option may be exercised in whole or in part, except that the Option may in no event be exercised with respect to fractional shares.

     5. Transfers. The Option is not transferable by the Optionee otherwise than by will or pursuant to the laws of descent and distribution in the event of the Optionee’s death, in which event the Option may be exercised by the heirs or legal representatives of the Optionee. The Option may be exercised during the lifetime of the Optionee only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option.

     6. Adjustments on Changes in Common Stock. In the event that dividends payable in Common Stock during any fiscal year of the Company exceed in the aggregate five percent (5%) of the Common Stock issued and outstanding at the beginning of the year, or in the event there is

2

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 (5%) of the shares of Common Stock outstanding at the beginning of the year, the number of Option Shares deliverable upon the exercise thereafter of the Option shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price payable upon exercise of the Option. Common Stock dividends, splits, subdivisions or combinations during any fiscal year which do not exceed in the aggregate five percent (5%) of the Common Stock issued and outstanding at the beginning of such year shall not result in any adjustment under the Option. All adjustments shall be made as of the day such action necessitating such adjustment becomes effective.

     7. Legal Requirements.

          (a) Listing Requirements. If at any time the Board of Directors shall determine, in its discretion, that the listing, registration, or qualification of any of the Option Shares 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 Option or the issue, transfer or purchase of Option Shares hereunder, the Option may not be exercised 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.

          (b) Securities Laws. The Company shall not be obligated to sell or issue any Option Shares in any manner in contravention of the Securities Act of 1933, as amended, or any state securities law. The Board of Directors or the Committee may, at any time, require, as a condition to the exercise of the Option, the representation or agreement of the Optionee to the effect that the Option Shares issuable upon exercise of the Option are acquired by the Optionee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws.

     8. Administration. The Option has been granted pursuant to, and is subject to the terms and provisions of, the Plan. All terms used herein which are defined in the Plan and not otherwise defined herein shall have the same meanings as in the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee (as designated under the Plan) regarding any issue or question arising under the Option or the Plan shall be final, binding and conclusive on the Company and the Optionee.

     9. Rights as Stockholder. The Optionee shall have none of the rights of a stockholder with respect to the Option Shares unless and until such Option Shares shall be issued to the Optionee upon the exercise of the Option. Except as provided in Paragraph 6 above, no adjustments shall be made for dividends or other rights for which the record date is prior to the date the stock certificate is issued.

     10. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service of the Company or any parent or subsidiary

3

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, services, responsibilities or duties of the Optionee at any time for any reason whatsoever.

     11. Sale of Option Shares. Unless otherwise provided by the Committee, no Option Shares acquired upon exercise of the Option may be sold or otherwise disposed of by the Optionee within six months from the Grant Date.

     12. Notices. Any notice to be given to the Company hereunder shall be delivered personally to the Secretary of the Company or mailed or delivered to the Company at its principal executive office, addressed to the attention of the Secretary, and any notice to be given to the Optionee hereunder shall be delivered personally or mailed or delivered to the Optionee at the address then appearing on the records of the Company. Such addresses may be changed at any time by notice from one party to the other. Notices given hereunder shall be in writing, and shall be deemed to have been duly given upon delivery thereof, if personally delivered, or three days after being deposited in the United States mail, registered or certified mail, properly addressed, with proper postage and fees prepaid, or one day after being deposited with a delivery service guaranteeing overnight delivery, properly addressed, with fees paid by the sender.

     13. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

     14. Binding Effect. This agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company and the heirs and personal representatives of the Optionee.

     15. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

4

     IN WITNESS WHEREOF, the parties hereto have entered into this Non-Qualified Stock Option Agreement as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

ACCEPTED BY (OPTIONEE):

Name:

Date

5

EX-10.14

Exhibit 10.14

OSI PHARMACEUTICALS, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION

     THIS NON-QUALIFIED STOCK OPTION (this “Option”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), to Anker Lundemose (the “Optionee”), an employee of OSI Pharmaceuticals (UK) Limited (the “UK Subsidiary”), is entered into as of the date set forth beneath the Optionee’s name below. The Option is granted subject to a condition that any liability of the UK Subsidiary (as employer or former employer of the Optionee) to pay secondary national insurance contributions (“Secondary NIC”) in respect of the exercise, assignment or release of the Option shall be the liability of the Optionee and payable by the Optionee and that the Optionee shall be required to enter into an election in the form envisaged in Paragraph 313(1) of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (“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 Optionee from this liability or reduce his liability thereunder unless that Election has been entered into between the UK Subsidiary and the Optionee 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. For the avoidance of doubt the terms of the Election shall include a statement to the effect that the Optionee is liable to pay any Secondary NIC arising on the exercise of the Option even if he is no longer an employee of the UK Subsidiary and/or no longer resident in the United Kingdom at the date of exercise.

     The Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [DATE OF GRANT] (the “Grant Date”) the grant to the Optionee of a non-qualified stock option to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), as hereinafter set forth. The option granted herein is (i) pursuant to the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”), a copy of which has been provided to Optionee as of the date hereof, and (ii) not intended to qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended.

W I T N E S S E T H:

     1. Grant. On the Grant Date, the Company granted to the Optionee an option (the “Option”) to purchase on the terms and conditions set forth herein and in the Plan all or any part of an aggregate of [NUMBER OF OPTIONS GRANTED] shares of Common Stock (the “Option Shares”), at the purchase price of [OPTION PRICE] per share (the “Option Price”).

     2. Vesting. Subject to the terms and conditions of this Option and the Plan, the Optionee shall have the cumulative right to exercise the Option over a period of four years, with one quarter (25%) of the Option Shares becoming exercisable on each of the next four anniversaries of the Grant Date, with any fractional number of Option Shares that would otherwise become exercisable as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee.

     3. Term. The Option shall terminate in all events at 5:00 p.m. (local New York, New York time) on [INSERT DATE ONE DAY IMMEDIATELY PRIOR TO THE TENTH ANNIVERSARY OF THE GRANT DATE] (the “Termination Date”), unless sooner terminated as provided in Subparagraphs (a) or (b) below.

          a. Termination of Employment or Service. The Option shall terminate and shall no longer be exercisable ninety (90) days after the Optionee’s employment (or service as an officer or consultant) with the Company and any parent or subsidiary of the Company terminates, unless such termination of employment or service was caused by the Optionee’s death or Retirement (as defined in the Plan). The death or Retirement of the Optionee shall not affect the remaining term of the Option. Following a termination of employment or service (including due to death or Retirement), the Optionee (or the Optionee’s heirs or personal representatives if Optionee is deceased) may, during the remaining term of the Option, purchase any remaining Option Shares which could have been purchased on the date Optionee’s employment or service was terminated, but may not purchase any Option Shares which would otherwise have first become purchasable following such termination of employment or service.

          b. Sale or Reorganization. As provided in Section 6(h) of the Plan, if the Company is merged or consolidated with another corporation, or if the property or stock of the Company is acquired by another corporation, or if there is a separation, reorganization or liquidation of the Company, the Board of Directors of the Company may, in its discretion, give Optionee a written notice that the Option will terminate thirty (30) days after the date of such written notice. In any such case, the Option will become immediately exercisable in full, notwithstanding Paragraph 2 above.

     4. Method of Exercise and Payment.

          a. Method of Exercise. Subject to Paragraph 4(c) below, the Option shall be exercised through the Company’s broker-assisted stock option program (the “Broker Program”), in accordance with the terms and conditions of the Broker Program as may be in effect from time to time.

          b. Taxes. It shall be a condition to the performance of the Company’s obligation to issue or transfer Option Shares upon the exercise of the Option that the Optionee remit an amount on an indemnity basis sufficient to satisfy any federal, state and/or local tax withholding requirements (including any interest or penalties due in respect of such sums) arising in connection with the exercise of the Option or the issuance of Option Shares, other than stock transfer taxes, in each case in accordance with any terms and conditions of the Broker Program as may be in effect from time to time. If the Company for any reason does not require the Optionee to make a payment sufficient to satisfy such withholding requirements, any tax

-2-

withholding payments (including any interest or penalties due in respect of such sums) made by the Company to any federal, state or local tax authority with respect to the exercise of the Option shall constitute a personal obligation of the Optionee to the Company, payable upon demand or, at the option of the Company, by deduction from future compensation payable to the Optionee.

          c. National Insurance Contributions. No stock shall be allotted or transferred to the Optionee by the Company until the UK Subsidiary has received an amount in cash equal to the amount of the Secondary NIC for which the Optionee is liable under the terms of the Election (the “NIC Amount”). The Optionee shall by completing the Election grant to the UK Subsidiary (as employer or former employer of the Optionee) the irrevocable authority, as agent of the Optionee and on his behalf, to appoint an Independent Transfer Agent to act as agent of the Optionee and on his behalf to sell or procure the sale of sufficient of the Option Shares acquired on the exercise, assignment or release of the 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 NIC Amount and the UK Subsidiary shall account to the Optionee for any balance. In this paragraph 4(c), “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 Optionee.

          d. Partial Exercise. To the extent otherwise exercisable, the Option may be exercised in whole or in part, except that the Option may in no event be exercised with respect to fractional shares.

     5. Transfers. The Option is not transferable by the Optionee otherwise than by will or pursuant to the laws of descent and distribution in the event of the Optionee’s death, in which event the Option may be exercised by the heirs or legal representatives of the Optionee. The Option may be exercised during the lifetime of the Optionee only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option.

     6. Adjustments on Changes in Common Stock. In the event that dividends payable in Common Stock during any fiscal year of the Company exceed in the aggregate five percent (5%) 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 (5%) of the shares of Common Stock outstanding at the beginning of the year, the number of Option Shares deliverable upon the exercise thereafter of the Option shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price payable upon exercise of the Option. Common Stock dividends, splits, subdivisions or combinations during any fiscal year which do not exceed in the aggregate five percent (5%) of the Common Stock issued and outstanding at the beginning of such year shall not result in any adjustment under the Option. All adjustments shall be made as of the day such action necessitating such adjustment becomes effective.

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     7. Legal Requirements.

          a. Listing Requirements. If at any time the Board of Directors of the Company shall determine, in its discretion, that the listing, registration, or qualification of any of the Option Shares 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 Option or the issue, transfer or purchase of Option Shares hereunder, the Option may not be exercised 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 of the Company.

          b. Securities Laws. The Company shall not be obligated to sell or issue any Option Shares in any manner in contravention of the Securities Act of 1933, as amended, or any state or foreign securities law. The Board of Directors of the Company or the Committee may, at any time, require, as a condition to the exercise of the Option, the representation or agreement of the Optionee to the effect that the Option Shares issuable upon exercise of the Option are acquired by the Optionee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws.

     8. Administration. The Option has been granted pursuant to, and is subject to the terms and provisions of, the Plan. All terms used herein which are defined in the Plan and not otherwise defined herein shall have the same meanings as in the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee (as designated under the Plan) regarding any issue or question arising under the Option or the Plan shall be final, binding and conclusive on the Company and the Optionee.

     9. Rights as Stockholder. The Optionee shall have none of the rights of a stockholder with respect to the Option Shares unless and until such Option Shares shall be issued to the Optionee upon the exercise of the Option. Except as provided in Paragraph 6 above, no adjustments shall be made for dividends or other rights for which the record date is prior to the date the stock certificate is issued.

     10. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service of the UK Subsidiary, the Company or any parent or other subsidiary of the Company or interfere in any way with the right of the UK Subsidiary, the Company or any parent or other subsidiary of the Company to terminate the employment, services, responsibilities or duties of the Optionee at any time for any reason whatsoever.

     11. Sale of Option Shares. Unless otherwise provided by the Committee, no Option Shares acquired upon exercise of the Option may be sold or otherwise disposed of by the Optionee within six months from the Grant Date.

     12. Notices. Any notice to be given to the Company hereunder shall be delivered personally to the Secretary of the Company or mailed or delivered to the Company at its

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principal executive office, addressed to the attention of the Secretary, and any notice to be given to the Optionee hereunder shall be delivered personally or mailed or delivered to the Optionee at the address then appearing on the records of the Company. Such addresses may be changed at any time by notice from one party to the other. Notices given hereunder shall be in writing, and shall be deemed to have been duly given upon delivery thereof, if personally delivered, or three days after being deposited in the United States mail, registered or certified mail, properly addressed, with proper postage and fees prepaid, or one day after being deposited with a delivery service guaranteeing overnight delivery, properly addressed, with fees paid by the sender.

     13. Governing Law. This Option, the documents to be entered into pursuant thereto, and all matters arising from or connected with it are governed by and shall be construed in accordance with the laws of England and Wales.

     14. Binding Effect. This Option shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company and the heirs and personal representatives of the Optionee.

     15. Counterparts. This Option may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties have entered into this Non-Qualified Stock Option as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

ACCEPTED BY (OPTIONEE):

Name:

Date:

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EX-10.15

Exhibit 10.15

OSI PHARMACEUTICALS, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION

     THIS NON-QUALIFIED STOCK OPTION (this “Option”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), to Jonathan Rachman (the “Optionee”), an employee of Prosidion Limited (the “UK Subsidiary”), is entered into as of the date set forth beneath the Optionee’s name below. The Option is granted subject to a condition that any liability of the UK Subsidiary (as employer or former employer of the Optionee) to pay secondary national insurance contributions (“Secondary NIC”) in respect of the exercise, assignment or release of the Option shall be the liability of the Optionee and payable by the Optionee and that the Optionee shall be required to enter into an election in the form envisaged in Paragraph 313(1) of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (“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 Optionee from this liability or reduce his liability thereunder unless that Election has been entered into between the UK Subsidiary and the Optionee 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. For the avoidance of doubt the terms of the Election shall include a statement to the effect that the Optionee is liable to pay any Secondary NIC arising on the exercise of the Option even if he is no longer an employee of the UK Subsidiary and/or no longer resident in the United Kingdom at the date of exercise.

     The Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant to the Optionee of a non-qualified stock option to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), as hereinafter set forth. The option granted herein is (i) pursuant to the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”), a copy of which has been provided to Optionee as of the date hereof, and (ii) not intended to qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended.

W I T N E S S E T H:

     1. Grant. On the Grant Date, the Company granted to the Optionee an option (the “Option”) to purchase on the terms and conditions set forth herein and in the Plan all or any part of an aggregate of [NUMBER OF OPTIONS GRANTED] shares of Common Stock (the “Option Shares”), at the purchase price of [OPTION PRICE] per share (the “Option Price”).

     2. Vesting. Subject to the terms and conditions of this Option and the Plan, the Optionee shall have the cumulative right to exercise the Option over a period of four years, with

one quarter (25%) of the Option Shares becoming exercisable on each of the next four anniversaries of the Grant Date, with any fractional number of Option Shares that would otherwise become exercisable as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee. Notwithstanding the foregoing, in the event the Company is sold or merged with another company resulting in a change of control (a “Change of Control”), all unvested Options shall immediately vest if the Optionee’s employment with the controlling company is terminated (including a voluntary termination of employment by the Optionee for “Good Reason”) at any time within six (6) months following the effective date of a Change of Control, unless such termination is for cause, death, disability or a resignation without “Good Reason”. For the purposes of this Agreement, “Good Reason” for termination of employment means (i) a decrease in the Optionee’s total compensation package, (ii) the assignment of duties or responsibilities which are not commensurate with the Optionee’s position immediately prior to the sale or Change of Control, or (iii) the Optionee is required to relocate to an office or facility more than forty (40) miles from the Optionee’s present location or forty (40) miles from the Optionee’s home.

     3. Term. The Option shall terminate in all events at 5:00 p.m. (local New York, New York time) on [ENTER DATE ONE DAY IMMEDIATELY PRIOR TO THE TENTH ANNIVERSARY OF THE GRANT DATE] (the “Termination Date”), unless sooner terminated as provided in Subparagraphs (a) or (b) below.

          a. Termination of Employment or Service. The Option shall terminate and shall no longer be exercisable ninety (90) days after the Optionee’s employment (or service as an officer or consultant) with the Company and any parent or subsidiary of the Company terminates, unless such termination of employment or service was caused by the Optionee’s death or Retirement (as defined in the Plan). The death or Retirement of the Optionee shall not affect the remaining term of the Option. Following a termination of employment or service (including due to death or Retirement), the Optionee (or the Optionee’s heirs or personal representatives if Optionee is deceased) may, during the remaining term of the Option, purchase any remaining Option Shares which could have been purchased on the date Optionee’s employment or service was terminated, but may not purchase any Option Shares which would otherwise have first become purchasable following such termination of employment or service.

          b. Sale or Reorganization. As provided in Section 6(h) of the Plan, if the Company is merged or consolidated with another corporation, or if the property or stock of the Company is acquired by another corporation, or if there is a separation, reorganization or liquidation of the Company, the Board of Directors of the Company may, in its discretion, give Optionee a written notice that the Option will terminate thirty (30) days after the date of such written notice. In any such case, the Option will become immediately exercisable in full, notwithstanding Paragraph 2 above.

     4. Method of Exercise and Payment.

          a. Method of Exercise. Subject to Paragraph 4(c) below, the Option shall be exercised through the Company’s broker-assisted stock option program (the “Broker Program”), in accordance with the terms and conditions of the Broker Program as may be in effect from time to time.

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          b. Taxes. It shall be a condition to the performance of the Company’s obligation to issue or transfer Option Shares upon the exercise of the Option that the Optionee remit an amount on an indemnity basis sufficient to satisfy any federal, state and/or local tax withholding requirements (including any interest or penalties due in respect of such sums) arising in connection with the exercise of the Option or the issuance of Option Shares, other than stock transfer taxes, in each case in accordance with any terms and conditions of the Broker Program as may be in effect from time to time. If the Company for any reason does not require the Optionee to make a payment sufficient to satisfy such withholding requirements, any tax withholding payments (including any interest or penalties due in respect of such sums) made by the Company to any federal, state or local tax authority with respect to the exercise of the Option shall constitute a personal obligation of the Optionee to the Company, payable upon demand or, at the option of the Company, by deduction from future compensation payable to the Optionee.

          c. National Insurance Contributions. No stock shall be allotted or transferred to the Optionee by the Company until the UK Subsidiary has received an amount in cash equal to the amount of the Secondary NIC for which the Optionee is liable under the terms of the Election (the “NIC Amount”). The Optionee shall by completing the Election grant to the UK Subsidiary (as employer or former employer of the Optionee) the irrevocable authority, as agent of the Optionee and on his behalf, to appoint an Independent Transfer Agent to act as agent of the Optionee and on his behalf to sell or procure the sale of sufficient of the Option Shares acquired on the exercise, assignment or release of the 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 NIC Amount and the UK Subsidiary shall account to the Optionee for any balance. In this paragraph 4(c), “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 Optionee.

          d. Partial Exercise. To the extent otherwise exercisable, the Option may be exercised in whole or in part, except that the Option may in no event be exercised with respect to fractional shares.

     5. Transfers. The Option is not transferable by the Optionee otherwise than by will or pursuant to the laws of descent and distribution in the event of the Optionee’s death, in which event the Option may be exercised by the heirs or legal representatives of the Optionee. The Option may be exercised during the lifetime of the Optionee only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option.

     6. Adjustments on Changes in Common Stock. In the event that dividends payable in Common Stock during any fiscal year of the Company exceed in the aggregate five percent (5%) 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 (5%) of the shares of Common Stock outstanding at the beginning of the year, the number of Option Shares

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deliverable upon the exercise thereafter of the Option shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price payable upon exercise of the Option. Common Stock dividends, splits, subdivisions or combinations during any fiscal year which do not exceed in the aggregate five percent (5%) of the Common Stock issued and outstanding at the beginning of such year shall not result in any adjustment under the Option. All adjustments shall be made as of the day such action necessitating such adjustment becomes effective.

     7. Legal Requirements.

          a. Listing Requirements. If at any time the Board of Directors of the Company shall determine, in its discretion, that the listing, registration, or qualification of any of the Option Shares 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 Option or the issue, transfer or purchase of Option Shares hereunder, the Option may not be exercised 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 of the Company.

          b. Securities Laws. The Company shall not be obligated to sell or issue any Option Shares in any manner in contravention of the Securities Act of 1933, as amended, or any state or foreign securities law. The Board of Directors of the Company or the Committee may, at any time, require, as a condition to the exercise of the Option, the representation or agreement of the Optionee to the effect that the Option Shares issuable upon exercise of the Option are acquired by the Optionee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws.

     8. Administration. The Option has been granted pursuant to, and is subject to the terms and provisions of, the Plan. All terms used herein which are defined in the Plan and not otherwise defined herein shall have the same meanings as in the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee (as designated under the Plan) regarding any issue or question arising under the Option or the Plan shall be final, binding and conclusive on the Company and the Optionee.

     9. Rights as Stockholder. The Optionee shall have none of the rights of a stockholder with respect to the Option Shares unless and until such Option Shares shall be issued to the Optionee upon the exercise of the Option. Except as provided in Paragraph 6 above, no adjustments shall be made for dividends or other rights for which the record date is prior to the date the stock certificate is issued.

     10. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service of the UK Subsidiary, the Company or any parent or other subsidiary of the Company or interfere in any way with the right of the UK Subsidiary, the Company or any parent or other subsidiary of the Company to terminate the employment, services, responsibilities or duties of the Optionee at any time for any reason whatsoever.

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     11. Sale of Option Shares. Unless otherwise provided by the Committee, no Option Shares acquired upon exercise of the Option may be sold or otherwise disposed of by the Optionee within six months from the Grant Date.

     12. Notices. Any notice to be given to the Company hereunder shall be delivered personally to the Secretary of the Company or mailed or delivered to the Company at its principal executive office, addressed to the attention of the Secretary, and any notice to be given to the Optionee hereunder shall be delivered personally or mailed or delivered to the Optionee at the address then appearing on the records of the Company. Such addresses may be changed at any time by notice from one party to the other. Notices given hereunder shall be in writing, and shall be deemed to have been duly given upon delivery thereof, if personally delivered, or three days after being deposited in the United States mail, registered or certified mail, properly addressed, with proper postage and fees prepaid, or one day after being deposited with a delivery service guaranteeing overnight delivery, properly addressed, with fees paid by the sender.

     13. Governing Law. This Option, the documents to be entered into pursuant thereto, and all matters arising from or connected with it are governed by and shall be construed in accordance with the laws of England and Wales.

     14. Binding Effect. This Option shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company and the heirs and personal representatives of the Optionee.

     15. Counterparts. This Option may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties have entered into this Non-Qualified Stock Option as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

ACCEPTED BY (OPTIONEE):

Name:

Date:

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EX-10.16

Exhibit 10.16

OSI PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT

     THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and [EMPLOYEE NAME] (the “Employee”), is entered into as of the date set forth beneath the Employee’s name below. Capitalized terms, unless otherwise defined herein, shall have their respective meanings as set forth in the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”).

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant of Restricted Stock Units (as defined below) to the Employee, as described herein;

     NOW, THEREFORE, the parties hereto mutually agree to the following terms and conditions of this Agreement:

          1. Grant of Restricted Stock Units. The Company hereby grants to the Employee [UNITS GRANTED] Restricted Stock Units. For the purposes of this Agreement, a “Restricted Stock Unit” shall mean the contractual right to receive one share of Common Stock of the Company, par value $.01 per share (the “Common Stock”), subject to the terms and conditions of this Agreement and the Plan.

          2. Vesting and Forfeiture. Subject to the terms and conditions of this Agreement and the Plan, Restricted Stock Units granted under this Agreement shall vest over a period of four (4) years, with one quarter (25%) of the Restricted Stock Units vesting on each of the next four anniversaries of the Grant Date, with any fractional number of Restricted Stock Units that would otherwise become vested as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee. Except as otherwise may be provided in any other written agreement with the Employee, including, without limitation, the Employment Agreement between the Company and Employee, dated [EMPLOYMENT AGREEMENT EFFECTIVE DATE], on the date that the Employee’s employment (or service as an officer, consultant or member of the Board of Directors of the Company) with the Company and any parent or subsidiary of the Company terminates, including, without limitation, due to death or Retirement (an “Employee Termination Event”), all unvested Restricted Stock Units granted hereunder shall be forfeited, and the Employee shall have no further rights with respect to such forfeited Restricted Stock Units.

          3. Settlement of Restricted Stock Units. Settlement for any vested Restricted Stock Units shall be in shares of Common Stock (collectively, the “Settlement Shares”). For the purposes of this Agreement, the “Settlement Date” shall mean the date upon which one or more Restricted Stock Units vest pursuant to this Agreement. The Company shall deliver the Settlement Shares to the Employee as soon as reasonably practicable following the applicable Settlement Date. Such Settlement Shares will be issued and evidenced in such

manner as the Committee in its discretion shall deem appropriate, including, without limitation, book-entry, registration or issuance of one or more stock certificates. Upon issuance of the Settlement Shares, the number of Restricted Stock Units equal to the Settlement Shares shall be extinguished and such number of Restricted Stock Units will no longer be considered to be held by the Employee for any purpose.

          4. Restriction on Transferability. Restricted Stock Units granted hereunder shall not be sold, assigned, transferred, exchanged, pledged or otherwise encumbered or disposed of in any manner by the Employee, except as otherwise approved by the Committee.

          5. Securities Laws. The Company shall not be obligated to issue or deliver any shares of Common Stock under this Agreement in any manner in contravention of the Securities Act of 1933, as amended, any other federal or state securities law or the rules of any exchange or market system upon which the Common Stock is traded. The Board of Directors of the Company or the Committee may, at any time, require, as a condition to the issuance or delivery of shares of Common Stock hereunder, the representation or agreement of the Employee to the effect that the shares issuable hereunder are acquired by the Employee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws or the rules of any applicable exchange or market system.

          6. Withholding of Applicable Taxes. It shall be a condition to the Company’s obligation to deliver of the Settlement Shares to the Employee that all applicable federal, state, or local withholding or employment taxes (such amount, the “Withholding Amount”) must first be satisfied. The Employee agrees that the Company, or any Affiliate, as the case may be, will have the right to withhold from the Settlement Shares a sufficient number of shares of Common Stock to be sold in order to satisfy in full the Withholding Amount on behalf of the Employee.

          7. Subject to Terms of Plan. The Restricted Stock Units are subject to the terms and provisions of the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee regarding any issue or question arising under this Agreement or the Plan shall be final, binding and conclusive on the Company and the Employee.

          8. No Rights as Stockholder. The Restricted Stock Units granted under this Agreement do not provide the Employee with any of the rights of a stockholder of the Company, including, without limitation, the right to vote or receive any dividends declared or paid on the Common Stock, unless and until shares of Common Stock relating to the Restricted Stock Units have been issued to the Employee.

          9. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service 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, services, responsibilities or duties of the Employee at any time for any reason whatsoever.

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          10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company.

          11. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

          12. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have entered into this Restricted Stock Unit Agreement as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

EMPLOYEE

[Name]

Date

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EX-10.17

Exhibit 10.17

OSI PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT

     THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and [EMPLOYEE NAME] (the “Employee”), is entered into as of the date set forth beneath the Employee’s name below. Capitalized terms, unless otherwise defined herein, shall have their respective meanings as set forth in the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”).

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant of Restricted Stock Units (as defined below) to the Employee, as described herein;

     NOW, THEREFORE, the parties hereto mutually agree to the following terms and conditions of this Agreement:

          1. Grant of Restricted Stock Units. The Company hereby grants to the Employee [UNITS GRANTED] Restricted Stock Units. For the purposes of this Agreement, a “Restricted Stock Unit” shall mean the contractual right to receive one share of Common Stock of the Company, par value $.01 per share (the “Common Stock”), subject to the terms and conditions of this Agreement and the Plan.

          2. Vesting and Forfeiture. Subject to the terms and conditions of this Agreement and the Plan, Restricted Stock Units granted under this Agreement shall vest over a period of four (4) years, with one quarter (25%) of the Restricted Stock Units vesting on each of the next four anniversaries of the Grant Date, with any fractional number of Restricted Stock Units that would otherwise become vested as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee. On the date that the Employee’s employment (or service as an officer, consultant or member of the Board of Directors of the Company) with the Company and any parent or subsidiary of the Company terminates, including, without limitation, due to death or Retirement (an “Employee Termination Event”), all unvested Restricted Stock Units granted hereunder shall be forfeited, and the Employee shall have no further rights with respect to such forfeited Restricted Stock Units. Notwithstanding the foregoing, all unvested Restricted Stock Units shall immediately vest upon a “Change of Control”. For the purposes of this Agreement, a “Change of Control” shall mean the approval by the stockholders of the Company of (a) a merger or consolidation involving the Company if the stockholders of the Company immediately before such merger or consolidation do not, as a result of such merger or consolidation, directly or indirectly, continue to hold a majority of the voting power in the resulting entity, or (b) an agreement for the sale or other disposition of all or substantially all of the assets of the Company.

          3. Settlement of Restricted Stock Units. Settlement for any vested Restricted Stock Units shall be in shares of Common Stock (collectively, the “Settlement

Shares”). For the purposes of this Agreement, the “Settlement Date” shall mean the date upon which one or more Restricted Stock Units vest pursuant to this Agreement. The Company shall deliver the Settlement Shares to the Employee as soon as reasonably practicable following the applicable Settlement Date. Such Settlement Shares will be issued and evidenced in such manner as the Committee in its discretion shall deem appropriate, including, without limitation, book-entry, registration or issuance of one or more stock certificates. Upon issuance of the Settlement Shares, the number of Restricted Stock Units equal to the Settlement Shares shall be extinguished and such number of Restricted Stock Units will no longer be considered to be held by the Employee for any purpose.

          4. Restriction on Transferability. Restricted Stock Units granted hereunder shall not be sold, assigned, transferred, exchanged, pledged or otherwise encumbered or disposed of in any manner by the Employee, except as otherwise approved by the Committee.

          5. Securities Laws. The Company shall not be obligated to issue or deliver any shares of Common Stock under this Agreement in any manner in contravention of the Securities Act of 1933, as amended, any other federal or state securities law or the rules of any exchange or market system upon which the Common Stock is traded. The Board of Directors of the Company or the Committee may, at any time, require, as a condition to the issuance or delivery of shares of Common Stock hereunder, the representation or agreement of the Employee to the effect that the shares issuable hereunder are acquired by the Employee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws or the rules of any applicable exchange or market system.

          6. Withholding of Applicable Taxes. It shall be a condition to the Company’s obligation to deliver of the Settlement Shares to the Employee that all applicable federal, state, or local withholding or employment taxes (such amount, the “Withholding Amount”) must first be satisfied. The Employee agrees that the Company, or any Affiliate, as the case may be, will have the right to withhold from the Settlement Shares a sufficient number of shares of Common Stock to be sold in order to satisfy in full the Withholding Amount on behalf of the Employee.

          7. Subject to Terms of Plan. The Restricted Stock Units are subject to the terms and provisions of the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee regarding any issue or question arising under this Agreement or the Plan shall be final, binding and conclusive on the Company and the Employee.

          8. No Rights as Stockholder. The Restricted Stock Units granted under this Agreement do not provide the Employee with any of the rights of a stockholder of the Company, including, without limitation, the right to vote or receive any dividends declared or paid on the Common Stock, unless and until shares of Common Stock relating to the Restricted Stock Units have been issued to the Employee.

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          9. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service 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, services, responsibilities or duties of the Employee at any time for any reason whatsoever.

          10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company.

          11. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

          12. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have entered into this Restricted Stock Unit Agreement as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

EMPLOYEE

[EMPLOYEE NAME]

Date

-3-

EX-10.18

Exhibit 10.18

OSI PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT

     THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and Dr. Anker Lundemose (the “Employee”), is entered into as of the date set forth beneath the Employee’s name below. Capitalized terms, unless otherwise defined herein, shall have their respective meanings as set forth in the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”).

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant of Restricted Stock Units (as defined below) to the Employee, as described herein; and

     WHEREAS, the grant of Restricted Stock Units is subject to a condition that any liability of the Company and its affiliates to pay secondary national insurance contributions in respect of the Restricted Stock Units shall be the liability of the Employee and that the Employee shall be required to enter into an election pursuant to Paragraph 3B(1) of Schedule 1 of the Social Security Contributions and Benefits Act 1992;

     NOW, THEREFORE, the parties hereto mutually agree to the following terms and conditions of this Agreement:

          1. Grant of Restricted Stock Units. The Company hereby grants to the Employee [UNITS GRANTED] Restricted Stock Units. For the purposes of this Agreement, a “Restricted Stock Unit” shall mean the contractual right to receive one share of Common Stock of the Company, par value $.01 per share (the “Common Stock”), subject to the terms and conditions of this Agreement and the Plan.

          2. Vesting and Forfeiture. Subject to the terms and conditions of this Agreement and the Plan, Restricted Stock Units granted under this Agreement shall vest over a period of four (4) years, with one quarter (25%) of the Restricted Stock Units vesting on each of the next four anniversaries of the Grant Date, with any fractional number of Restricted Stock Units that would otherwise become vested as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee. On the date that the Employee’s employment (or service as an officer, consultant or member of the Board of Directors of the Company) with the Company and any parent or subsidiary of the Company terminates, including, without limitation, due to death or Retirement (an “Employee Termination Event”), all unvested Restricted Stock Units granted hereunder shall be forfeited, and the Employee shall have no further rights with respect to such forfeited Restricted Stock Units. Notwithstanding the foregoing, all unvested Restricted Stock Units shall immediately vest upon a “Change of Control”. For the purposes of this Agreement, a “Change of Control” shall mean the approval by the stockholders of the Company (or in case of a transaction involving Prosidion Limited, a wholly-owned subsidiary of the Company (“Prosidion”), the approval of the Company) of (a) a

merger or consolidation involving the Company if the stockholders of the Company immediately before such merger or consolidation do not, as a result of such merger or consolidation, directly or indirectly, continue to hold a majority of the voting power in the resulting entity, (b) an agreement for the sale or other disposition of all or substantially all of the assets of the Company or Prosidion Limited, or (c) any transaction involving Prosidion if the Company does not, as a result of such transaction, continue to hold a majority of the voting power in Prosidion or the resulting entity.

          3. Settlement of Restricted Stock Units. Settlement for any vested Restricted Stock Units shall be in shares of Common Stock (collectively, the “Settlement Shares”). For the purposes of this Agreement, the “Settlement Date” shall mean the date upon which one or more Restricted Stock Units vest pursuant to this Agreement. The Company shall deliver the Settlement Shares to the Employee as soon as reasonably practicable following the applicable Settlement Date. Such Settlement Shares will be issued and evidenced in such manner as the Committee in its discretion shall deem appropriate, including, without limitation, book-entry, registration or issuance of one or more stock certificates. Upon issuance of the Settlement Shares, the number of Restricted Stock Units equal to the Settlement Shares shall be extinguished and such number of Restricted Stock Units will no longer be considered to be held by the Employee for any purpose.

          4. Restriction on Transferability. Restricted Stock Units granted hereunder shall not be sold, assigned, transferred, exchanged, pledged or otherwise encumbered or disposed of in any manner by the Employee, except as otherwise approved by the Committee.

          5. Securities Laws. The Company shall not be obligated to issue or deliver any shares of Common Stock under this Agreement in any manner in contravention of the Securities Act of 1933, as amended, any other federal or state securities law or the rules of any exchange or market system upon which the Common Stock is traded. The Board of Directors of the Company or the Committee may, at any time, require, as a condition to the issuance or delivery of shares of Common Stock hereunder, the representation or agreement of the Employee to the effect that the shares issuable hereunder are acquired by the Employee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws or the rules of any applicable exchange or market system.

          6. Withholding of Applicable Taxes. It shall be a condition to the Company’s obligation to deliver the Settlement Shares to the Employee and the Company or its affiliates shall be entitled to deduct from the Settlement Shares under the Plan any taxes, social security contributions, or any other amounts required by any government to be withheld from any such Settlement Shares, including applicable federal, state or local withholding taxes (such amount, the “Withholding Amount”). The Employee agrees that the Company, or any affiliate, as the case may be, will have the right to withhold from the Settlement Shares a sufficient number of shares of Common Stock to be sold in order to satisfy in full the Withholding Amount on behalf of the Employee. The Employee shall be solely and personally responsible for the payment of any applicable taxes (including interest and penalties thereon) due on the Settlement Shares hereunder (including the removal of any restrictions or variation of any rights relating to

-2-

the Settlement Shares), and the Employee agrees to indemnify the Company and its affiliates against payment of such amounts.

          7. Subject to Terms of Plan. The Restricted Stock Units are subject to the terms and provisions of the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee regarding any issue or question arising under this Agreement or the Plan shall be final, binding and conclusive on the Company and the Employee.

          8. No Rights as Stockholder. The Restricted Stock Units granted under this Agreement do not provide the Employee with any of the rights of a stockholder of the Company, including, without limitation, the right to vote or receive any dividends declared or paid on the Common Stock, unless and until shares of Common Stock relating to the Restricted Stock Units have been issued to the Employee.

          9. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service 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, services, responsibilities or duties of the Employee at any time for any reason whatsoever.

          10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company.

          11. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

          12. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-3-

     IN WITNESS WHEREOF, the parties hereto entered into this Restricted Stock Unit Agreement as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

EMPLOYEE

DR. ANKER LUNDEMOSE

Date

EX-10.19

Exhibit 10.19

OSI PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT

     THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and Dr. Jonathan Rachman (the “Employee”), is entered into as of the date set forth beneath the Employee’s name below. Capitalized terms, unless otherwise defined herein, shall have their respective meanings as set forth in the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as amended (the “Plan”).

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant of Restricted Stock Units (as defined below) to the Employee, as described herein; and

     WHEREAS, the grant of Restricted Stock Units is subject to a condition that any liability of the Company and its affiliates to pay secondary national insurance contributions in respect of the Restricted Stock Units shall be the liability of the Employee and that the Employee shall be required to enter into an election pursuant to Paragraph 3B(1) of Schedule 1 of the Social Security Contributions and Benefits Act 1992;

     NOW, THEREFORE, the parties hereto mutually agree to the following terms and conditions of this Agreement:

          1. Grant of Restricted Stock Units. The Company hereby grants to the Employee [UNITS GRANTED] Restricted Stock Units. For the purposes of this Agreement, a “Restricted Stock Unit” shall mean the contractual right to receive one share of Common Stock of the Company, par value $.01 per share (the “Common Stock”), subject to the terms and conditions of this Agreement and the Plan.

          2. Vesting and Forfeiture. Subject to the terms and conditions of this Agreement and the Plan, Restricted Stock Units granted under this Agreement shall vest over a period of four (4) years, with one quarter (25%) of the Restricted Stock Units vesting on each of the next four anniversaries of the Grant Date, with any fractional number of Restricted Stock Units that would otherwise become vested as of any such anniversary rounded to a whole integer as determined in the discretion of the Committee. On the date that the Employee’s employment (or service as an officer, consultant or member of the Board of Directors of the Company) with the Company and any parent or subsidiary of the Company terminates, including, without limitation, due to death or Retirement (an “Employee Termination Event”), all unvested Restricted Stock Units granted hereunder shall be forfeited, and the Employee shall have no further rights with respect to such forfeited Restricted Stock Units. Notwithstanding the foregoing, in the event the Company is sold or merged with another company resulting in a change of control (a “Change of Control”), all unvested Restricted Stock Units shall immediately

vest if the Employee’s employment with the controlling company is terminated (including a voluntary termination of employment by the Employee for “Good Reason”) at any time within six (6) months following the effective date of a Change of Control, unless such termination is for cause, death, disability or a resignation without “Good Reason”. For the purposes of this Agreement, “Good Reason” for termination of employment means (i) a decrease in the Employee’s total compensation package, (ii) the assignment of duties or responsibilities which are not commensurate with the Employee’s position immediately prior to the sale or Change of Control, or (iii) the Employee is required to relocate to an office or facility more than forty (40) miles from the Employee’s present location or forty (40) miles from the Employee’s home.

          3. Settlement of Restricted Stock Units. Settlement for any vested Restricted Stock Units shall be in shares of Common Stock (collectively, the “Settlement Shares”). For the purposes of this Agreement, the “Settlement Date” shall mean the date upon which one or more Restricted Stock Units vest pursuant to this Agreement. The Company shall deliver the Settlement Shares to the Employee as soon as reasonably practicable following the applicable Settlement Date. Such Settlement Shares will be issued and evidenced in such manner as the Committee in its discretion shall deem appropriate, including, without limitation, book-entry, registration or issuance of one or more stock certificates. Upon issuance of the Settlement Shares, the number of Restricted Stock Units equal to the Settlement Shares shall be extinguished and such number of Restricted Stock Units will no longer be considered to be held by the Employee for any purpose.

          4. Restriction on Transferability. Restricted Stock Units granted hereunder shall not be sold, assigned, transferred, exchanged, pledged or otherwise encumbered or disposed of in any manner by the Employee, except as otherwise approved by the Committee.

          5. Securities Laws. The Company shall not be obligated to issue or deliver any shares of Common Stock under this Agreement in any manner in contravention of the Securities Act of 1933, as amended, any other federal or state securities law or the rules of any exchange or market system upon which the Common Stock is traded. The Board of Directors of the Company or the Committee may, at any time, require, as a condition to the issuance or delivery of shares of Common Stock hereunder, the representation or agreement of the Employee to the effect that the shares issuable hereunder are acquired by the Employee for investment purposes and not with a view to the resale or distribution thereof, and may require such other representations and documents as may be required to comply with applicable securities laws or the rules of any applicable exchange or market system.

          6. Withholding of Applicable Taxes. It shall be a condition to the Company’s obligation to deliver the Settlement Shares to the Employee and the Company or its affiliates shall be entitled to deduct from the Settlement Shares under the Plan any taxes, social security contributions, or any other amounts required by any government to be withheld from any such Settlement Shares, including applicable federal, state or local withholding taxes (such amount, the “Withholding Amount”). The Employee agrees that the Company, or any affiliate, as the case may be, will have the right to withhold from the Settlement Shares a sufficient

-2-

number of shares of Common Stock to be sold in order to satisfy in full the Withholding Amount on behalf of the Employee. The Employee shall be solely and personally responsible for the payment of any applicable taxes (including interest and penalties thereon) due on the Settlement Shares hereunder (including the removal of any restrictions or variation of any rights relating to the Settlement Shares), and the Employee agrees to indemnify the Company and its affiliates against payment of such amounts.

          7. Subject to Terms of Plan. The Restricted Stock Units are subject to the terms and provisions of the Plan. To the extent that the provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All decisions or interpretations made by the Committee regarding any issue or question arising under this Agreement or the Plan shall be final, binding and conclusive on the Company and the Employee.

          8. No Rights as Stockholder. The Restricted Stock Units granted under this Agreement do not provide the Employee with any of the rights of a stockholder of the Company, including, without limitation, the right to vote or receive any dividends declared or paid on the Common Stock, unless and until shares of Common Stock relating to the Restricted Stock Units have been issued to the Employee.

          9. Continued Employment or Service. Nothing contained herein or in the Plan shall confer any right to continue in the employ or service 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, services, responsibilities or duties of the Employee at any time for any reason whatsoever.

          10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, including the successors and assigns of the Company.

          11. Governing Law. This Agreement will be interpreted and enforced under the laws of the State of New York, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to, personal jurisdiction and venue in such courts for such purpose.

          12. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

-3-

     IN WITNESS WHEREOF, the parties have entered into this Restricted Stock Unit Agreement as of the date set forth below.

OSI PHARMACEUTICALS, INC.

Name:

Title:

EMPLOYEE

DR. JONATHAN RACHMAN

Date

-4-

EX-10.41

Exhibit 10.41

CONFIDENTIAL MATERIALS
OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE OMISSIONS.

AIA ^® Document A141^TM — 2004

Standard Form of Agreement Between Owner and Design-Builder

AGREEMENT made as of the 22 day of September in the year 2009
(In words, indicate day, month and year.)

BETWEEN the Owner:
(Name, legal status, address and other information)

OSI Ardsley LLC,
a Delaware limited liability company
41 Pinelawn Road
Melville, New York 11797

and the Design-Builder:
(Name, legal status, address and other information)

Eagle Interiors, Inc.,
a New York corporation
85 Toledo Street
Farmingdale, New York 11735

for the following Project:
(Name, location and detailed description)

Renovations to and fit out of a multi-building Office/Laboratory campus, known as Ardsley Park Science and Technology Center, located at 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, New York.

The Owner and Design-Builder agree as follows.

ADDITIONS AND DELETIONS:

The author of this document has added information needed for its completion. The author may also have revised the text of the original AIA standard form. An Additions and Deletions Report that notes added information as well as revisions to the standard form text is available from the author and should be reviewed. A vertical line in the left margin of this document indicates where the author has added necessary information and where the author has added to or deleted from the original AIA text.

This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification.

Consultation with an attorney is also encouraged with respect to professional licensing requirements in the jurisdiction where the Project is located.

AIA Document A141™ — 2004. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:38:07 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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1

TABLE OF ARTICLES

1	THE DESIGN-BUILD DOCUMENTS
2	WORK OF THIS AGREEMENT
3	DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4	CONTRACT SUM
5	PAYMENTS
6	DISPUTE RESOLUTION
7	MISCELLANEOUS PROVISIONS
8	ENUMERATION OF THE DESIGN-BUILD DOCUMENTS
TABLE OF EXHIBITS
A	TERMS AND CONDITIONS
B	DETERMINATION OF THE COST OF THE WORK
C	INSURANCE AND BONDS
D	SALES TAX EXEMPTION LETTER

ARTICLE 1 THE DESIGN-BUILD DOCUMENTS

§ 1.1 The Design-Build Documents form the Design-Build Contract. The Design-Build Documents consist of this Agreement between Owner and Design-Builder (hereinafter, the “Agreement”) and its attached Exhibits; Supplementary and other Conditions; Addenda issued prior to execution of the Agreement; the Project Criteria, including changes to the Project Criteria proposed by the Design-Builder and accepted by the Owner, if any; the Design-Builder’s Proposal and written modifications to the Proposal accepted by the Owner, if any; other documents listed in this Agreement; and Modifications issued after execution of this Agreement. The Design-Build Documents shall not be construed to create a contractual relationship of any kind (1) between the Architect and Owner, (2) between the Owner and a Contractor or Subcontractor, or (3) between any persons or entities other than the Owner and Design-Builder, including but not limited to any consultant retained by the Owner to prepare or review the Project Criteria. An enumeration of the Design-Build Documents, other than Modifications, appears in Article 8.

§ 1.2 The Design-Build Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral.

§ 1.3 The Design-Build Contract may be amended or modified only by a Modification. A Modification is (1) a written amendment to the Design-Build Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the Work issued by the Owner.

ARTICLE 2 THE WORK OF THE DESIGN-BUILD CONTRACT

§ 2.1 The Design-Builder shall fully execute the Work described in the Design-Build Documents, except to the extent specifically indicated in the Design-Build Documents to be the responsibility of others.

§ 2.2 PRECONSTRUCTION PHASE

§ 2.2.1 PRELIMINARY EVALUATION

The Design-Builder shall provide a preliminary evaluation of the Owner’s program and Project budget requirements, each in terms of the other.

AIA Document A141™ — 2004. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:38:07 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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2

§ 2.2.2 CONSULTATION

In consultation with the Development Manager, the Design-Builder with the Architect shall jointly schedule and attend regular meetings with the Owner. The Design-Builder shall consult with the Owner and Architect regarding site use and improvements and the selection of materials, building systems and equipment. The Design-Builder shall provide recommendations on construction feasibility; actions designed to minimize adverse effects of labor or material shortages; time requirements for procurement, installation and construction completion; and factors related to construction cost, including estimates of alternative designs or materials, preliminary budgets and possible economies.

§ 2.2.3 PRELIMINARY PROJECT SCHEDULE

Design-Builder agrees that the schedule prepared by the Design-Builder for construction of the Project shall be consistent with the goals for occupancy identified by the Development Manager and Owner, except as otherwise approved by the Owner in its sole discretion. The Design-Builder shall prepare, and periodically update, a preliminary Critical Path Project schedule for the Development Manager’s review and the Owner’s approval. The Design-Builder shall obtain the Owner’s approval of the portion of the preliminary Project schedule relating to the performance of the Architect’s services. The Design-Builder shall coordinate and integrate the preliminary Project schedule with the services and activities of the Owner and Development Manager. As design proceeds, the preliminary Project schedule shall be updated to indicate proposed activity sequences and durations, milestone dates for receipt and approval of pertinent information, submittal of budgets, preparation and processing of shop drawings and samples, delivery of materials or equipment requiring long-lead-time procurement, Owner’s occupancy requirements showing portions of the Project having occupancy priority, and proposed date of Substantial Completion, commissioning and closeout of the Project. If preliminary Project schedule updates indicate that previously approved schedules may not be met, the Design-Builder shall make appropriate recommendations to the Owner and Architect.

§ 2.2.4 PHASED CONSTRUCTION

The Design-Builder shall make recommendations to the Owner and Development Manager regarding the phased issuance of Drawings and Specifications to facilitate phased construction of the Work, if such phased construction is appropriate for the Project, taking into consideration such factors as economies, time of performance, availability of labor and materials, and provisions for temporary facilities.

§ 2.2.5 CONTRACTORS AND SUPPLIERS

The Design-Builder shall seek to develop contractor interest in the Project and shall furnish to the Owner and Development Manager for their information a list of possible contractors, including suppliers who are to furnish materials or equipment fabricated to a special design, from which proposals will be requested for each principal portion of the Work. The Development Manager or Owner will promptly reply in writing to the Design-Builder if the Development Manager or Owner knows of any objection to such contractor or supplier. The receipt of such list shall not require the Owner or Development Manager to investigate the qualifications of proposed contractors or suppliers, nor shall it waive the right of the Owner or Development Manager later to object to or reject any proposed contractor or supplier.

§ 2.2.5.1 The Design-Builder shall develop bid packages for the components of the Work and prepare a list of qualified bidders for each component of the Work not being performed by Design-Builder. The bid list and bid packages shall be subject to approval, modification and additions by the Owner and Development Manager. Whenever practical, the Design-Builder shall obtain at least three (3) bids from qualified bidders for each contracting or subcontracting trade in excess of ** (the “Major Contractors”). The Design-Builder shall ensure that the drawings and specifications included in the bid package are complete and up to date and shall include an appropriate contract form approved by the Development Manager and Owner for inclusion in the solicitation. The Design-Builder shall ensure that the final solicitation package includes all accepted comments, changes and corrections from the final design review.

§ 2.2.5.2 The Design-Builder shall review all accepted bids for completeness, responsiveness, scope overlaps and omissions, prepare a record of bidding and detailed bid analysis in a spreadsheet format, and recommend to the Development Manager and Owner, those Contractors and material suppliers necessary and sufficient to provide a completed and fully operational Project in accordance with the Contract Documents and the Project Budget. The Development Manager and Owner reserve the right to be present during the contractor bid and clarification process, and shall have the right to review all bids. The Design-Builder shall review all Contractors’ proposed substitutions for suitability and cost effectiveness, financial strength, past performance, current work load, and shall make corresponding recommendations to the Owner. The final selection shall be made by the Design-Builder, subject to the Owner’s right to reject any Contractor or supplier recommended by the Design-Builder. In the event of such rejection, the Design-Builder shall select another contractor or supplier acceptable to the Owner. The Design-Builder shall work closely with the Owner and Development Manager to identify potential areas of cost savings that can be achieved, and shall negotiate all final contracts in the Owner’s best interests.

^** This portion has been redacted pursuant to a confidential treatment request.

AIA Document A141™ — 2004. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:38:07 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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3

§ 2.2.5.3 Design-Builder shall also identify all portions of the Work to be performed by Design-Builder’s own personnel and shall provide a sufficiently detailed summary of the cost thereof for Owner and Development Manager to analyze such cost.

§ 2.2.6 LONG-LEAD-TIME ITEMS

The Design-Builder shall recommend to the Owner and Development Manager a schedule for procurement of long-lead-time items which will constitute part of the Work as required to meet the Project schedule. The Design-Builder shall expedite the delivery of long-lead-time items.

§ 2.2.7 EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION

The Design-Builder shall comply and cause all Contractors to comply with applicable laws and regulations regarding equal employment opportunity and affirmative action programs.

§ 2.2.8 DESIGN REVIEW

Without limiting the responsibilities of the Architect, the Design-Builder shall assist the Owner and Development Manager during all design phases by assisting with the coordination of design, performing design constructability reviews, assisting with problem resolution, performing schedule control and identifying conflicts. At the following design states (each “Design Stage” and collectively the “Design Stages”) for each stage of the work: schematic design, design development and construction documents unless otherwise specified by Owner. Constructability reviews shall include, without limitation, review of the design documents at each design phase to discover any non-constructible or impractical construction details or conflicts between the trades. Design-Builder shall also perform a formal review of the Project and cost estimates and verify that previous stage review comments are included in the design submissions and shall report any variances discovered to Owner and Development Manager.

§ 2.2.9 REPORTING REQUIREMENTS

The Design-Builder shall prepare and maintain a Change Estimate Log, Change Order Log, and a Shop Drawing/Submittal Log (each to be reviewed on a weekly basis) and a Cost-to-Complete Budget, Cost Status Report, and a Contract Documents Log (each to be reviewed on a monthly basis). In addition, the Design-Builder shall prepare a Request for Information (RFI) Log and Open Issues and Nonconforming Issues Log each to be reviewed at weekly meeting with the Development Manager and Owner. The above-referenced Logs, Budgets and Reports are to be prepared and maintained as part of a Project control system to be established by the Design-Builder, in accordance with standards set by the Owner and its Development Manager (the “Project Control System”).

§ 2.2.10 QUALITY ASSURANCE AND QUALITY CONTROL PLAN

A detailed quality assurance and quality control plan or process shall be provided by the Design-Builder. This program or process shall integrate Owner, Development Manager, Design-Builder and Architect processes and procedures that will assure a project that meets Owner’s needs. This plan shall include a description of Design-Builder’s methods and procedures for ensuring that each aspect of the Project is subject to appropriate checks and balances, including the use of Design-Builder’s personnel, and other quality assurance staff, if necessary, to ensure that Owner will receive a state-of-the-art, first-class construction services. Design-Builder shall promptly notify the Owner if Design-Builder becomes aware of discrepancies that could impact compliance with applicable laws, ordinances or regulations.

§ 2.2.11 ENVIRONMENTAL CONTROL PLAN

A detailed plan regarding Design-Builder’s strategy for coordinating the Project’s compliance with applicable environmental laws, regulations and ordinances shall be provided by the Design-Builder.

AIA Document A141™ — 2004. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:38:07 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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4

§ 2.2.12 OCCUPANCY

A detailed plan regarding the coordination of the Construction Phase and occupancy activities, which shall take place during the completion of its work for each building in the Project. Design-Builder shall be required to assist the Owner in developing a schedule for coordinating the occupancy of the buildings.

§ 2.2.13 DESIGN-BUILDER’S ADDITIONAL DUTIES

In consultation with the Development Manager, Design-Builder shall prepare a detailed description of Design-Builder’s duties and responsibilities for implementing the Project and Design-Builder’s strategy for maintaining communication with Owner and Development Manager through progress reports, meetings, etc. This description shall include; arranging, organizing and attending as often as necessary or appropriate, meetings and other communications among staff of Development Manager, Owner, Architect, Design-Builder and other participants in the Project; preparing and circulating notices, agenda and minutes thereof; and preparing monthly written reports for review and acceptance by Development Manager, Owner and other including information regarding the work of Design-Builder and Contractors, percentage of completion, number and amount of modification and claims, analysis of the schedule and budget, and the other analysis necessary to compare actual performance with planned performance.

§ 2.2.14 OTHER PRE-CONSTRUCTION SERVICES

Without limiting Design-Builder’s obligations under Paragraph 2.2 the pre-construction services of Design-Builder shall also include, but are not limited to, the following;

1.	Attendance at all weekly meetings (by key personnel who are fully knowledgeable of and familiar with the current Project status and authorized to make decisions and statements to maintain effective progress and have the authority to bind Design-Builder) during the design stages;
2.	Participating (by key personnel who are fully knowledgeable of and familiar with current Project status and authorized to make decisions and statements to maintain effective progress and have the authority to bind Design-Builder) in review of the plans and specifications and preparation of required formal submissions of detailed reports to Owner and Development Manager including, but not limited to, a budget estimate, detailed schedule, value engineering options with associated costs, and constructability analysis for each Design Stage.
3.	Detailed review of existing construction budgets prepared by or for Owner. Design-Builder’s review shall also include a comparison of Design-Builder’s estimates with those estimates provided by others.
4.	Continuous cost estimating and value engineering services through the Preconstruction Phases;
5.	Preliminary long lead list and pre-purchasing of long lead time items (including submittal process);
6.	All schedules should be supported by documented input from the Contractor community, if practical;
7.	Identification and pricing of value engineering/cost-savings options at the time of each Design Package review;
8.	Review of issues regarding constructability and assistance in the identification of coordination discrepancies, incomplete details, errors and omissions, etc. at the time of each Design Package review;
9.	Provide construction market updates as necessary for the Development Manager and Owner to understand material and labor availability;
10.	Provide a cost accounting plan for review and acceptance by Development Manager and approval by Owner. The plan shall include the procedures for providing “open book” Contractor bidding and bid analysis and the Project accounting process;
11.	Provide a safety program satisfying requirements of all applicable laws and regulations;

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12.	Provide or describe quality control program or process for review and acceptance of Development Manager and approval in writing by Owner;
13.	Provide field office at the site, if required.
14.	Provide all safety equipment including hard hats, eye protection and ear protection for all visitors and for each member of the Project Team. Logos and names for equipment to be determined. Design-Builder shall be permitted to place signage subject to Owner’s reasonable approval.
15.	Provide site utilization plan including staging areas, traffic control, fencing, etc.
16.	Jointly, with the Architect, schedule and attend regular meetings with Development Manager and Owner. Design-Builder shall consult with Owner and Development Manager regarding site use, improvements, logistics and the selection (based upon availability and other relevant factors) of materials, building systems and equipment. Design-Builder shall provide recommendations on construction feasibility; actions designed to minimize adverse effects of labor or material shortages; time requirements for procurement, installation and construction completion, and factors relating to construction costs including estimates of alternative designs or materials, preliminary budgets and possible economies.
17.	Provide the staged issuance of Drawings and Specifications to facilitate construction of the Work in stages as provided under Subparagraph 2.2.4, taking into consideration such factors as economies, time of performance, availability of labor and materials, and provisions for temporary facilities.

ARTICLE 3 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

§ 3.1 The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice issued by the Owner.

(Insert the date of commencement if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.)

The date will be fixed in a notice to proceed.

If, prior to the commencement of Work, the Owner requires time to file mortgages, documents related to mechanic’s liens and other security interests, the Owner’s time requirement shall be as follows:

(Insert Owner’s time requirements.)

N.A.

§ 3.2 The Contract Time shall be measured from the date of commencement, subject to adjustments of this Contract Time as provided in the Design-Build Documents.

(Insert provisions, if any, for liquidated damages relating to failure to complete on time or for bonus payments for early completion of the Work.)

§ 3.3 The Design-Builder shall achieve Substantial Completion of the Work (Paragraphs deleted) on a date to be agreed upon between Owner and Design-Builder in writing, after the execution of this Agreement.

(Table deleted)

ARTICLE 4 CONTRACT SUM

§ 4.1 The Owner shall pay the Design-Builder the Contract Sum in current funds for the Design-Builder’s performance of the Design-Build Contract. The Contract Sum shall be one of the following:

(Check the appropriate box.)

o Stipulated Sum in accordance with Section 4.2 below;

þ Cost of the Work Plus Design-Builder’s Fee in accordance with Section 4.3 below;

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o Cost of the Work Plus Design-Builder’s Fee with a Guaranteed Maximum Price in accordance with Section 4.4 below.

(Based on the selection above, complete either Section 4.2, 4.3 or 4.4 below.)

§ 4.2 INTENTIONALLY DELETED

(Paragraphs deleted)
(Table deleted)
(Paragraphs deleted)
(Table deleted)
(Paragraphs deleted)

§ 4.3 COST OF THE WORK PLUS DESIGN-BUILDER’S FEE

§ 4.3.1 The Cost of the Work is as defined in Exhibit B.

§ 4.3.2 The Design-Builder’s Fee is:

(Paragraph deleted)

For the first ** of the Cost of the Work: A ** fee + ** bonus if the Cost of the Work meets the approved “Budget” & “Milestone Dates” (which will be specified in the “Project Plan”, as hereinafter defined) + a ** Administrative Fee. Design-Builder shall be entitled to an additional ** bonus pass-through fee, payable to the Architect, if the Cost of the Work meets the approved Budget & Milestone Dates.

For the next ** of the Cost of the Work: A ** fee + ** bonus if the Cost of the Work meets the approved Budget & Milestone Dates (which will be specified in the Project Plan). Design-Builder shall be entitled to an additional ** bonus pass through fee, payable to the Architect, if the Cost of the Work meets the approved Budget & Milestone Dates.

Any Cost of the Work over **: A ** fee + ** bonus profit if the Cost of the Work meets the approved Budget & Milestone Dates (which will be specified in the Project Plan). Design-Builder shall be entitled to an additional ** bonus pass through fee, payable to the Architect, if the Cost of the Work meets the approved Budget & Milestone Dates.

After the date of this Agreement, Owner and Design-Builder shall meet to discuss a scope of work, a “ Budget” (as hereinafter defined) and milestone dates for the Work, or portions or phases of the Work (“Milestone Dates”). Upon agreement to a scope of Work, a Budget and the Milestone Dates, the parties shall memorialize such understanding in a written agreement (the “Project Plan”). The Project Plan may be amended from time to time in a written agreement signed by both Design-Builder and Owner. The term “Budget” shall be synonymous with the “Construction Budget” (as defined in Exhibit B annexed hereto).

§ 4.4 INTENTIONALLY DELETED

(Paragraphs deleted)
(Table deleted)
(Paragraphs deleted)
(Table deleted)
(Paragraphs deleted)

§ 4.5 CHANGES IN THE WORK

§ 4.5.1 Adjustments of the Contract Sum on account of changes in the Work may be determined by any of the methods listed in Article A.7 of Exhibit A, Terms and Conditions.

§ 4.5.2 Where the Contract Sum is the Cost of the Work, with or without a Guaranteed Maximum Price, and no specific provision is made in Sections 4.3.2 or 4.4.2 for adjustment of the Design-Builder’s Fee in the case of Changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment will cause substantial inequity to the Owner or Design-Builder, the Design-Builder’s Fee shall be equitably adjusted on the basis of the Fee established for the original Work, and the Contract Sum shall be adjusted accordingly.

ARTICLE 5 PAYMENTS

§ 5.1 PROGRESS PAYMENTS

^** This portion has been redacted pursuant to a confidential treatment request.

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§ 5.1.1 Based upon Applications for Payment submitted to the Owner by the Design-Builder, the Owner shall make progress payments on account of the Contract Sum to the Design-Builder as provided below and elsewhere in the Design-Build Documents.

§ 5.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows:

On the 25^th calendar day of each month (or in the event such day is a holiday or weekend day, the preceding business day) the Owner, Architect, Development Manager and the Design-Builder shall meet to review a preliminary draft of such Application for Payment (a “Pencil Draw”), with supporting documentation, prepared by the Design-Builder. Within three (3) days after the meeting described in the previous sentence, the Design-Builder shall (a) revise the Pencil Draw in accordance with any objection or recommendations of either the Owner, Architect or Development Manager that is consistent with the requirements for the Contract Documents, and (b) resubmit the revised Pencil Draw to the Owner, Development Manager and Architect as the Application for Payment. Such Pencil Draw and subsequent Application for Payment shall include a projection of the Cost of the Work through the then-current month.

§ 5.1.3 Provided that an Application for Payment is received not later than the 1st day of month, the Owner shall make payment to the Design-Builder not later than the thirtieth (30^th) day of the same month. If an Application for Payment is received by the Owner after the application date fixed above, payment shall be made by the Owner not later than thirty (30) days after the Owner receives the Application for Payment.

§ 5.1.4 With each Application for Payment where the Contract Sum is based upon the Cost of the Work, or the Cost of the Work with a Guaranteed Maximum Price, the Design-Builder shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner to demonstrate that cash disbursements already made by the Design-Builder on account of the Cost of the Work equal or exceed (1) progress payments already received by the Design-Builder, less (2) that portion of those payments attributable to the Design-Builder’s Fee; plus (3) payrolls for the period covered by the present Application for Payment.

§ 5.1.5 With each Application for Payment where the Contract Sum is based upon a Stipulated Sum or Cost of the Work with a Guaranteed Maximum Price, the Design-Builder shall submit the most recent schedule of values in accordance with the Design-Build Documents. The schedule of values shall allocate the entire Contract Sum among the various portions of the Work. Compensation for design services shall be shown separately. Where the Contract Sum is based on the Cost of the Work with a Guaranteed Maximum Price, the Design-Builder’s Fee shall be shown separately. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner may require. This schedule of values, unless objected to by the Owner, shall be used as a basis for reviewing the Design-Builder’s Applications for Payment.

§ 5.1.6 In taking action on the Design-Builder’s Applications for Payment, the Owner shall be entitled to rely on the accuracy and completeness of the information furnished by the Design-Builder and shall not be deemed to have made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Sections 5.1.4 or 5.1.5, or other supporting data; to have made exhaustive or continuous on-site inspections; or to have made examinations to ascertain how or for what purposes the Design-Builder has used amounts previously paid on account of the Agreement. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner’s accountants acting in the sole interest of the Owner.

§ 5.1.7 Except with the Owner’s prior approval, the Design-Builder shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site.

§ 5.2 INTENTIONALLY DELETED

(Paragraphs deleted)

§ 5.3 PROGRESS PAYMENTS — COST OF THE WORK PLUS A FEE

§ 5.3.1 Where the Contract Sum is based upon the Cost of the Work plus a fee without a Guaranteed Maximum Price, Applications for Payment shall show the Cost of the Work actually incurred by the Design-Builder through the end of the period covered by the Application for Payment and for which Design-Builder has made or intends to make actual payment prior to the next Application for Payment.

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§ 5.3.2 Subject to other provisions of the Design-Build Documents, the amount of each progress payment shall be computed as follows:

.1	Take the Cost of the Work as described in Exhibit B;
.2	Add the Design-Builder’s Fee, less retainage on the sum of the Cost of the Work, plus the Design-Builder’s Fee, of ** . The Design-Builder’s Fee shall be computed upon the Cost of the Work described in the preceding Section 5.3.2.1 at the applicable rate stated in Section 4.3.2;
.3	Subtract the aggregate of previous payments made by the Owner;
.4	Subtract the shortfall, if any, indicated by the Design-Builder in the documentation required by Section 5.1.4 or resulting from errors subsequently discovered by the Owner’s accountants in such documentation; and
.5	Subtract amounts, if any, for which the Owner has withheld or withdrawn a Certificate for Payment as provided in the Section A.9.5 of Exhibit A, Terms and Conditions.

§ 5.3.3 Retainage in addition to the retainage stated at Section 5.3.2.2, if any, shall be as follows:

N.A.

§ 5.3.4 Except with the Owner’s prior approval, payments for the Work, other than for services provided by design professionals and other consultants retained directly by the Design-Builder, shall be subject to retainage of not less than **. The Owner and Design-Builder shall agree on a mutually acceptable procedure for review and approval of payments and retention for Contractors.

§ 5.3.5 In addition to the documents and invoices, Design-Builder shall submit monthly with each Application for Payment the following: (1) a sworn statement, in a form reasonably approved by Owner, identifying all Contractors who performed portions of the Work and all vendors who delivered materials during the month and the amounts due and owing to each; (2) a waiver and release by Design-Builder, in a form reasonably approved by Owner, of all claims or liens in connection with the Work performed through the period covered by Design-Builder’s last Application for Payment subject only to claims, if any, by Design-Builder for amounts that remain due and owing hereunder that are set forth in the waiver; (3) a log that (a) identifies each Contractor and vendor who has performed portions of the Work or who has supplied materials during the prior months, (b) confirms that each such Contractor or vendor has delivered to Design-Builder a waiver of lien ( in a form reasonably approved in writing in advance by Owner) which Design-Builder maintains at Design-Builder’s office, and (c) identifies all other actual expenditures by Design-Builder during the month preceding the period covered by the present Applications for Payment; (4) such other reports, documentation and updated progress schedules as may be required by the General Conditions of the Contract or reasonably required by the Owner or Development Manager, and (5) matching Contractor and vendor invoices/applications for payment that document and support Design-Builder’s progress payment.

Waivers of lien provided by Contractors or vendors as stated above shall confirm that all amounts due to such Contractor(s) or vendor(s) for months prior to the month covered by the current Application for Payment have been paid (subject to retainage in accordance with applicable contracts or subcontract(s)). All references in this agreement to an Application for Payment shall mean an Application for Payment that is in the form reasonably approved by the Owner and complete, and is accompanied by all documents, schedules and information required in accordance with this Agreement.

§ 5.3.6 Within five (5) business days after receiving payment form the Owner, Design-Builder shall pay to Contractors, fabricators and suppliers, all amounts approved by Architect (which shall not exceed the amount received by Design-Builder in each Certificate for Payment). Design-Builder shall notify Owner and Development Manager in writing at the time of each Application for Payment of any disputes with Contractors or the Subcontractors. Design-Builder shall not withhold any sum received from the Owner from Contractors, fabricators and suppliers, unless (1) the Owner approves such withholding in writing (such approval not to be unreasonably withheld), or (2) Design-Builder forthwith refunds to the Owner the amount so withheld.

^** This portion has been redacted pursuant to a confidential treatment request.

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§ 5.3.7 Progress payments shall not constitute acceptance by the Owner of such completed work in-place or stored materials, nor shall they be construed as a waiver of any right or claim by the Owner in connection with such work or stored materials.

§ 5.3.8 Upon five (5) days notice to Design-Builder and upon reasonable cause, in Owner’s reasonable judgment, in the event of any payment default by Design-Builder under its contracts (including, without limitation, any failure to pay amounts due to Contractors as and when required in accordance with the contract documents, Owner may, in its discretion, but without any obligation to do so, at any time or from time to time, choose to pay any amounts due to Contractors in accordance with approved Applications for Payments, either directly to such Contractors or by joint checks payable to Design-Builder and such Contractors.

§ 5.4 INTENTIONALLY DELETED

(Paragraphs deleted)

§ 5.5 FINAL PAYMENT

§ 5.5.1 Final payment (the “Final Payment”) shall be made by the Owner to Design-Builder within thirty (30) days of when (1) the Design-Build Contract has been fully performed (including all punch list items) by Design-Builder and all disputes have been resolved provided that such payment shall not relieve except for Design-Builder’s continuing responsibility to correct nonconforming Work, as provided in the General Conditions of the Contract, and to satisfy other requirements, if any, which necessarily survive final payment; (2) a final Application for Payment and a final accounting for the Cost of the Work have been submitted by Design-Builder and reviewed and acceptance by the Development Manager and Owner’s accountants and approved in writing by Owner; (3) a final Certificate for Payment has then been issued by the Architect and approved by the Development Manager, and (4) Design-Builder has delivered to Owner the Design-Builder’s As-Built Record Prints and all required operations and maintenance manuals, and final waivers of liens (in the form approved in writing by Owner) from Design-Builder and all Contractors, Subcontractors and material suppliers. Such final payment shall be due not more than thirty (30) calendar days after the issuance of the Architect’s final Certificate for Payment, and written approval thereof by Development Manager, except for the Design-Builder’s responsibility to correct non-conforming Work discovered after final payment or to satisfy other requirements, if any, which extend beyond final payment. Design-Builder’s final accounting shall be in a form reasonably prescribed by the Owner.

ARTICLE 6 DISPUTE RESOLUTION

§ 6.1 The parties appoint the following individual to serve as a Neutral pursuant to Section A.4.2 of Exhibit A, Terms and Conditions:

(Insert the name, address and other information of the individual to serve as a Neutral. If the parties do not select a Neutral, then the provisions of Section A.4.2.2 of Exhibit A, Terms and Conditions, shall apply.)

N.A.

§ 6.2 If the parties do not resolve their dispute through mediation pursuant to Section A.4.3 of Exhibit A, Terms and Conditions, the method of binding dispute resolution shall be the following:

(If the parties do not select a method of binding dispute resolution, then the method of binding dispute resolution shall be by litigation in a court of competent jurisdiction.)

(Check one.)

þ Arbitration pursuant to Section A.4.4 of Exhibit A, Terms and Conditions

o Litigation in a court of competent jurisdiction

o Other (Specify)

§ 6.3 ARBITRATION

§ 6.3.1 If Arbitration is selected by the parties as the method of binding dispute resolution, then any claim, dispute or other matter in question arising out of or related to this Agreement shall be subject to arbitration as provided in Section A.4.4 of Exhibit A, Terms and Conditions.

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ARTICLE 7 MISCELLANEOUS PROVISIONS

§ 7.1 The Architect, other design professionals and consultants engaged by the Design-Builder shall be persons or entities duly licensed to practice their professions in the jurisdiction where the Project is located and are listed as follows:

(Insert name, address, license number, relationship to Design-Builder and other information.)

		Relationship to
Name and Address	License Number	Design-Builder	Other Information
TPG Architecture, LLP 1300 Walt Whitman Road Melville, NY 11747	03019830	Contractual

§ 7.2 Consultants, if any, engaged directly by the Owner, their professions and responsibilities are listed below:

(Insert name, address, license number, if applicable, and responsibilities to Owner and other information.)

		Responsibilities
Name and Address	License Number	to Owner	Other Information
Joseph J. Galeno C.P.M., C.C.I. **		Development Manager, to advise the Owner on the progress of the Work and the administration of this Agreement.	See Exhibit A for the responsibilities of the Development manager and its role in this Agreement.

§ 7.3 Separate contractors, if any, engaged directly by the Owner, their trades and responsibilities are listed below:

(Insert name, address, license number, if applicable, responsibilities to Owner and other information.)

		Responsibilities
Name and Address	License Number	to Owner	Other Information
N.A.

§ 7.4 The Owner’s Designated Representative is:

(Insert name, address and other information.)

Either:
Joseph Talamo
or
Pierre Legault
OSI Ardsley, LLC
41 Pinelawn Road
Melville, NY 11797

§ 7.4.1 The Owner’s Designated Representative identified above shall be authorized to act on the Owner’s behalf with respect to the Project.

§ 7.5 The Design-Builder’s Designated Representative is:

(Insert name, address and other information.)

Carmine A. Sorvillo, AIA
Eagle Interiors, Inc.
85 Toledo Street
Farmingdale, NY 11735
Tel: (631) 293-5503
Fax: (631) 293-4971
Cell: (516) 695-1422
e-mail: csorvillo.eagleinteriors@verizon.net

^** This portion has been redacted pursuant to a confidential treatment request.

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§ 7.5.1 The Design-Builder’s Designated Representative identified above shall be authorized to act on the Design-Builder’s behalf with respect to the Project.

§ 7.6 The Design-Builder’s Designated Representative shall not be changed without ten (10) days written notice to the Owner, but the Owner may change either or both of the parties who are designated as its Designated Representative upon written notice to Design-Builder, but without any time limitation on such notice.

§ 7.7 Other provisions:

§ 7.7.1 Where reference is made in this Agreement to a provision of another Design-Build Document, the reference refers to that provision as amended or supplemented by other provisions of the Design-Build Documents.

§ 7.7.2 Payments due and unpaid under the Design-Build Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located.

(Insert rate of interest agreed upon, if any.)

** percent (**) per annum

§ 7.7.3 Design-Builder hereby conditionally assigns to the Owner all rights of Design-Builder under contracts, subcontracts, agreements, purchase orders, rental agreements or other arrangements entered by Design-Builder in connection with the Work. If this Agreement is terminated by Owner in accordance with the terms of this Agreement (excepting any termination for convenience of Owner), the Owner may, but shall have no obligation to, exercise this assignment by written notice as to any or all of such contracts, subcontracts, agreements, purchase orders, rental agreements or arrangements as the Owner may elect.

§ 7.7.4 Notwithstanding anything to the contrary contained herein, if the Work or any designated portion thereof falls more than ** behind the Construction Schedule approved by the Owner and such delay jeopardizes timely completion of the Project, the Owner may request that Design-Builder provide either (i) reasonable evidence that the Work or such designated portion thereof can still be completed by the scheduled date of Substantial Completion, or (ii) a plan for acceleration of the Work or such designated portion thereof necessary to achieve the scheduled date of Substantial Completion as adjusted in accordance with this Agreement. If Design-Builder fails to provide reasonable evidence that the Work or such designated portion thereof can be completed by the scheduled date of Substantial Completion, the Owner may require Design-Builder to accelerate the Work or the designated portion thereof in accordance with a plan submitted by Design-Builder and approved in writing by the Owner.

§ 7.7.5 Design-Builder represents, covenants, and agrees that all services to be provided by Design-Builder under this Agreement will be performed at a level of quality consistent with the highest level of care and skill ordinarily exercised by Design-Builders and general contractors in other nationally recognized general contracting firms operating in the State of New York. Nothing in this Agreement shall be interpreted in such a manner as to impose a lower standard of care upon Design-Builder or any Contractors or Subcontractors.

§ 7.7.6 Design-Builder shall at all times provide an adequate supply of workers to perform the services required by this Agreement in an expeditious and economical manner consistent with the interests of Owner. Notwithstanding anything to the contrary in this Paragraph 7.7.6, Design-Builder’s relationship with Owner under this Agreement shall not create any partnership or joint venture between Owner or Development Manager and Design-Builder.

§ 7.7.7 Before proceeding with any services or Work for which Design-Builder believes it is entitled to a Change Order or which Design-Builder believes will give rise to a claim hereunder by Design-Builder, Design-Builder shall first give written notice to Owner and Development Manager objecting to the provision of such services or Work without a written agreement by Owner to pay therefore and stating Design-Builder’s grounds for such objection.

§ 7.7.8 Owner has appointed Joseph J. Galeno, CCI, CPM, as its Development Manager to advise Owner on the administration of this Agreement and the Work. The Development Manager is a consultant to the Owner and shall have no right to issue change orders or bind the Owner and Design-Builder shall not be entitled to rely on any instructions or changes authorized by the Development Manager.

^** This portion has been redacted pursuant to a confidential treatment request.

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§ 7.7.9 Owner has entered into a lease/subleaseback arrangement with the County of Westchester Industrial Development Agency (“WIDA”) that, among other benefits, provides Owner with an exemption from New York sales and use taxes for all purchases, services and materials related to the Project, as the agent for WIDA. As evidence of such arrangement, WIDA has issued a sales tax exemption letter to Owner, in the form of Exhibit D attached hereto and Design-Builder agrees to present a copy of the sales tax exemption letter to each party from which Design-Builder buys supplies, materials or rents equipment or contracts, including without limitation any Contractors, Subcontractors or material suppliers and shall contractually require all such parties to utilize such sales tax exemption in their purchases or rentals within the Contracts, Subcontracts, agreements and purchase orders with such parties. Design-Builder also agrees to provide Owner with monthly reports of all purchases to enable Owner to comply with the requirements of such sales tax exemption and the procedures to enable Owner to implement such requirements. Owner shall indemnify and hold Design-Builder harmless for all liability, penalty, interest, fine, tax assessment, attorneys’ fees or other expense or cost incurred by the Design-Builder based on Owner’s direction to claim such exemption in accordance with the sales tax exemption described above, but Design-Builder shall be required to enforce such exemption in its purchases and those of its Contractors, Subcontractors and material suppliers.

ARTICLE 8 ENUMERATION OF THE DESIGN-BUILD DOCUMENTS

§ 8.1 The Design-Build Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows:

§ 8.1.1 The Agreement is this executed edition of the Standard Form of Agreement Between Owner and Design-Builder, AIA Document A141-2004.

§ 8.1.2 The Supplementary and other Conditions of the Agreement, if any, are as follows:

(Either list applicable documents below or refer to an exhibit attached to this Agreement.)

As of the date of the execution of this Agreement, other than Exhibits A, B and C to this Agreement, there are no Supplementary or other Conditions of this Agreement, Project Criteria, Proposals or Addenda, which are part of or modify this Agreement and any such documents shall, if agreed upon by the parties, in writing, be deemed amendments to this Agreement.

(Table deleted)

§ 8.1.3
(Paragraphs deleted)
Exhibit A, Terms and Conditions.
(Table deleted)

§ 8.1.4
(Paragraphs deleted)
Exhibit B, Determination of the Cost of the Work.

§ 8.1.5

(Paragraphs deleted)
Exhibit C, Insurance and Bonds.

§ 8.1.6 Other documents, if any, forming part of the Design-Build Documents are as follows:

(Either list applicable documents below or refer to an exhibit attached to this Agreement.)

N.A.

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This Agreement entered into as of the day and year first written above.

OWNER		DESIGN-BUILDER
OSI ARDSLEY LLC		EAGLE INTERIORS, INC.
By:	/s/ Pierre Legault	By:	/s/ M. Perrotta
	(Signature)		(Signature)
Pierre Legault/CFO		Michael Perrotta, President
(Printed name and title)		(Printed name and title)

(Table deleted) (Paragraphs deleted)

AIA Document A141™ — 2004. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:38:07 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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AIA ^® Document A141 ^TM — 2004

Exhibit A

Terms and Conditions

for the following PROJECT:
(Name and location or address)

Renovations to and fit out of a multi-building Office/Laboratory campus, known as Ardsley Park Science and Technology Center, located at 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, New York.

THE OWNER:
(Name, legal status and address)

OSI Ardsley LLC,
a Delaware limited liability company
41 Pinelawn Road
Melville, New York 11797

THE DESIGN-BUILDER:
(Name, legal status and address)

Eagle Interiors, Inc.,
a New York corporation
85 Toledo Street
Farmingdale, New York 11735

ADDITIONS AND DELETIONS:

The author of this document has added information needed for its completion. The author may also have revised the text of the original AIA standard form. An Additions and Deletions Report that notes added information as well as revisions to the standard form text is available from the author and should be reviewed. A vertical line in the left margin of this document indicates where the author has added necessary information and where the author has added to or deleted from the original AIA text.

This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification.

Consultation with an attorney is also encouraged with respect to professional licensing requirements in the jurisdiction where the Project is located.

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TABLE OF ARTICLES

A.1	GENERAL PROVISIONS
A.2	OWNER
A.3	DESIGN-BUILDER
A.4	DISPUTE RESOLUTION
A.5	AWARD OF CONTRACTS
A.6	CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
A.7	CHANGES IN THE WORK
A.8	TIME
A.9	PAYMENTS AND COMPLETION
A.10	PROTECTION OF PERSONS AND PROPERTY
A.11	INSURANCE AND BONDS
A.12	UNCOVERING AND CORRECTION OF WORK
A.13	MISCELLANEOUS PROVISIONS
A.14	TERMINATION OR SUSPENSION OF THE DESIGN-BUILD CONTRACT

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ARTICLE A.1 GENERAL PROVISIONS

§ A.1.1 BASIC DEFINITIONS

§ A.1.1.1 THE DESIGN-BUILD DOCUMENTS

The Design-Build Documents are identified in Section 1.1 of the Agreement.

§ A.1.1.2 PROJECT CRITERIA

The Project Criteria are identified in Section 8.1.3 of the Agreement and may describe the character, scope, relationships, forms, size and appearance of the Project, materials and systems and, in general, their quality levels, performance standards, requirements or criteria, and major equipment layouts.

§ A.1.1.3 ARCHITECT

The Architect is the person lawfully licensed to practice architecture or an entity lawfully practicing architecture identified as such in the Agreement and having a direct contract with the Design-Builder to perform design services for all or a portion of the Work, and is referred to throughout the Design-Build Documents as if singular in number. The term “Architect” means the Architect or the Architect’s authorized representative.

§ A.1.1.4 CONTRACTOR

A Contractor is a person or entity, other than the Architect, that has a direct contract with the Design-Builder to perform all or a portion of the construction required in connection with the Work. The term “Contractor” is referred to throughout the Design-Build Documents as if singular in number and means a Contractor or an authorized representative of the Contractor. The term “Contractor” does not include a separate contractor, as defined in Section A.6.1.2, or subcontractors of a separate contractor.

§ A.1.1.5 SUBCONTRACTOR

A Subcontractor is a person or entity who has a direct contract with a Contractor to perform a portion of the construction required in connection with the Work at the site. The term “Subcontractor” is referred to throughout the Design-Build Documents as if singular in number and means a Subcontractor or an authorized representative of the Subcontractor.

§ A.1.1.6 THE WORK

The term “Work” means the design, construction and services required by the Design-Build Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Design-Builder to fulfill the Design-Builder’s obligations. The Work may constitute the whole or a part of the Project.

§ A.1.1.6.1 Nothing in these General Conditions shall be interpreted as imposing on the Owner or the Development Manager, or their respective agents, employees, officers, directors or consultants, any duty, obligation or authority with respect to any items that are not intended to be incorporated into the completed Project, or that do not comprise the Work, including, but not limited to, the following: shoring, scaffolding, hoists, weatherproofing, or any temporary facility or activity, because these are the sole responsibility of the Design-Builder.

§ A.1.1.7 THE PROJECT

The Project is the total design and construction of which the Work performed under the Design-Build Documents may be the whole or a part, and which may include design and construction by the Owner or by separate contractors.

§ A.1.1.8 NEUTRAL

The Neutral is the individual appointed by the parties to decide Claims and disputes pursuant to Section A.4.2.1.

§ A.1.1.9 OTHER DEFINITIONS

§ A.1.1.9.1 “Equal”, “accepted equal” and “approval equal” shall mean as accepted in writing by the Architect as being of equivalent quality, utility, efficiency, functionality and appearance, as determined in consultation with the Development Manager.

§ A.1.1.9.2 “By Owner” refers to work that will be performed by the Owner and/or its agents at the Owner’s expense.

§ A.1.1.9.3 “By others” refers to work that is not part of the Contract.

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§ A.1.1.9.4 “Furnish” shall mean supply only, do not install.

§ A.1.1.9.5 “Install shall mean install only, do not furnish.

§ A.1.1.9.6 “Provide shall mean to properly coordinate, fabricate, complete, transport, deliver, install, erect, construct, test and furnish all labor, materials, equipment, apparatus, appurtenances, and all items and expenses necessary or desirable properly to complete in place, and render operational or usable under the terms of the specifications.

§ A.1.1.8.7 The term “as required” shall mean as required by regulatory bodies, by referenced standards, by existing conditions, by generally accepted construction practice, or by the Contract Documents. The term “as required” is not used in derogation of the Architect’s responsibility to design the Project in accordance with applicable laws, codes, ordinances, and regulations.

§ A.1.2 COMPLIANCE WITH APPLICABLE LAWS

§ A.1.2.1 If the Design-Builder believes that implementation of any instruction received from the Owner would cause a violation of any applicable law, statute, ordinance, building code, rule or regulation, the Design-Builder shall notify the Owner in writing. Neither the Design-Builder nor any Contractor or Architect shall be obligated to perform any act which they believe will violate any applicable law, ordinance, rule or regulation.

§ A.1.2.2 The Design-Builder shall be entitled to rely on the completeness and accuracy of the information contained in the Project Criteria, but not that such information complies with applicable laws, regulations and codes, which shall be the obligation of the Design-Builder to determine. In the event that a specific requirement of the Project Criteria conflicts with applicable laws, regulations and codes, the Design-Builder shall furnish Work which complies with such laws, regulations and codes. In such case, the Owner shall issue a Change Order to the Design-Builder unless the Design-Builder recognized such non-compliance prior to execution of this Agreement and failed to notify the Owner.

§ A.1.2.3 The Design-Builder shall comply with all applicable laws, including without limitation laws related to safety. Design-Builder expressly agrees that it is primarily and solely responsible for the safety conditions of the work areas. Design-Builder specifically agrees that it is fully responsible for the compliance with all current and hereinafter enacted requirements and provisions under the Occupational Safety and Health Act of 1970 (“OSHA”), and/or any special standards and/or requirements promulgated by the Owner and applicable to work by the Design-Builder, its Contractors and Subcontractors and all employees, agents and other parties acting by, under or through any such party with regard to its work, work areas and workmen.

§ A.1.3 CAPITALIZATION

§ A.1.3.1 Terms capitalized in these Terms and Conditions include those which are (1) specifically defined, (2) the titles of numbered articles and identified references to sections in the document, or (3) the titles of other documents published by the American Institute of Architects.

§ A.1.4 INTERPRETATION

§ A.1.4.1 In the interest of brevity, the Design-Build Documents frequently omit modifying words such as “all” and “any” and articles such as “the” and “an,” but the fact that a modifier or an article is absent from one statement and appears in another is not intended to affect the interpretation of either statement.

§ A.1.4.2 Unless otherwise stated in the Design-Build Documents, words which have well-known technical or construction industry meanings are used in the Design-Build Documents in accordance with such recognized meanings.

§ A.1.5 EXECUTION OF THE DESIGN-BUILD DOCUMENTS

§ A.1.5.1 The Design-Build Documents shall be signed by the Owner and Design-Builder.

§ A.1.5.2 Execution of the Design-Build Contract by the Design-Builder is a representation that the Design-Builder has visited the site, become generally familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Design-Build Documents. In particular and without limitation, execution of the Design-Build Contract by the Design-Builder shall constitute a representation by the Design-Builder that the Design-Builder and the Architect have evaluated and satisfied themselves as to the conditions and limitations under which the Work is to be performed, including without limitation: (1) the Project site and surrounding areas and structures; (2) generally prevailing climatic conditions; (3) anticipated labor supply and costs, in light of anticipated market conditions; (4) availability and costs of materials, tools and equipment; and (5) all other pertinent issues. The Owner assumes no responsibility or liability for the physical condition or safety for the Project site or any improvements located on or near the Project site. The Design-Builder shall be solely responsible for providing a safe place for the performance of the Work.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.1.6 OWNERSHIP AND USE OF DOCUMENTS AND ELECTRONIC DATA

§ A.1.6.1 Drawings, specifications, and other documents including those in electronic form, prepared by the Architect and furnished by the Design-Builder are Instruments of Service. The Design-Builder, Design-Builder’s Architect and other providers of professional services individually shall retain all common law, statutory and other reserved rights, including copyright in those Instruments of Services furnished by them. Drawings, specifications, and other documents and materials and electronic data are furnished for use solely with respect to this Project.

§ A.1.6.2 Upon execution of the Design-Build Contract, the Design-Builder grants to the Owner a non-exclusive license to reproduce and use the Instruments of Service solely in connection with the Project, including the Project’s further development by the Owner and others retained by the Owner for such purposes, provided that the Owner shall comply with all obligations, including prompt payment of sums when due, under the Design-Build Documents. Subject to the Owner’s compliance with such obligations, such license shall extend to those parties retained by the Owner for such purposes, including other design professionals. The Design-Builder shall obtain similar non-exclusive licenses from its design professionals, including the Architect. The Owner shall not otherwise assign or transfer any license herein to another party without prior written agreement of the Design-Builder. Any unauthorized reproduction or use of the Instruments of Service by the Owner or others shall be at the Owner’s sole risk and expense without liability to the Design-Builder and its design professionals. Except as provided in Section A.1.6.4, termination of this Agreement prior to completion of the Design-Builder’s services to be performed under this Agreement shall terminate this license.

§ A.1.6.3 Prior to any electronic exchange by the parties of the Instruments of Service or any other documents or materials to be provided by one party to the other, the Owner and the Design-Builder shall agree in writing on the specific conditions governing the format thereof, including any special limitations or licenses not otherwise provided in the Design-Build Documents.

§ A.1.6.4 If this Agreement is terminated for any reason other than the default of the Owner, each of the Design-Builder’s design professionals, including the Architect, shall be contractually required to convey to the Owner a non-exclusive license to use that design professional’s Instruments of Service for the completion, use and maintenance of the Project, conditioned upon the Owner’s written notice to that design professional of the Owner’s assumption of the Design-Builder’s contractual duties and obligations to that design professional and payment to that design professional of all amounts due to that design professional and its consultants. If the Owner does not assume the remaining duties and obligations of the Design-Builder to that design professional under this Agreement, then the Owner shall indemnify and hold harmless that design professional from all claims and any expense, including legal fees, which that design professional shall thereafter incur by reason of the Owner’s use of such Instruments of Service. The Design-Builder shall incorporate the requirements of this Section A.1.6.4 in all agreements with its design professionals.

§ A.1.6.5 Submission or distribution of the Design-Builder’s documents to meet official regulatory requirements or for similar purposes in connection with the Project is not to be construed as publication in derogation of the rights reserved in Section A.1.6.1.

ARTICLE A.2 OWNER

§ A.2.1 GENERAL

§ A.2.1.1 The Owner is the person or entity identified as such in the Agreement and is referred to throughout the Design-Build Documents as if singular in number. The term “Owner” means the Owner or the Owner’s authorized representative. The Owner shall designate in writing a representative who shall have express authority to bind the Owner with respect to all Project matters requiring the Owner’s approval or authorization. The Owner shall render decisions in a timely manner and in accordance with the Design-Builder’s schedule submitted to the Owner.

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§ A.2.1.2 The Owner shall furnish to the Design-Builder within 15 days after receipt of a written request information necessary and relevant for the Design-Builder to evaluate, give notice of or enforce mechanic’s lien rights. Such information shall include a correct statement of the record legal title to the property on which the Project is located, usually referred to as the “Site” or “site”, and the Owner’s interest therein.

§ A.2.1.3 Development Manager shall have no control over, nor charge of, and shall not be responsible for (i) the design or engineering of the Work since these are solely the Architect’s rights and responsibilities, or (ii) the construction means, methods, techniques, sequences or procedures, or for the safety precautions and programs in connection with the Work, since these are solely the Design-Builder’s rights and responsibilities under the Contract Documents. Development Manager shall not be responsible for the Design-Builder’s or Architect’s failure to perform the Work in accordance with the requirements of the Contract Documents. The Development Manager will not have control over or charge of and will not be responsible for acts or omissions of the Architect or its design consultants or the Design-Builder, Subcontractors, or their agents or employees, or any other persons or entities performing portions of the Work.

§ A.2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER

§ A.2.2.1 Information or services required of the Owner by the Design-Build Documents shall be furnished by the Owner with reasonable promptness. Any other information or services relevant to the Design-Builder’s performance of the Work under the Owner’s control shall be furnished by the Owner after receipt from the Design-Builder of a written request for such information or services.

§ A.2.2.2 The Owner shall be responsible to provide such surveys as are in its possession and control, if not required by the Design-Build Documents to be provided by the Design-Builder, describing physical characteristics, legal limitations, and utility locations for the site of this Project, and a written legal description of the site. The surveys and legal information shall include, as applicable, grades and lines of streets, alleys, pavements, and adjoining property and structures; adjacent drainage; rights-of-way, restrictions, easements, encroachments, zoning, deed restriction, boundaries, and contours of the site; locations, dimensions, and necessary data pertaining to existing buildings, other improvements and trees; and information concerning available utility services and lines, both public and private, above and below grade, including inverts and depths. All the information on the survey shall be referenced to a Project benchmark.

§ A.2.2.3 The Owner shall provide, to the extent available to the Owner and if not required by the Design-Build Documents to be provided by the Design-Builder, the results and reports of prior tests, inspections or investigations conducted for the Project involving structural or mechanical systems, chemical, air and water pollution, hazardous materials or environmental and subsurface conditions and information regarding the presence of pollutants at the Project site.

§ A.2.2.4 The Owner may obtain independent review of the Design-Builder’s design, construction and other documents by a separate architect, engineer, and contractor or cost estimator under contract to or employed by the Owner. Such independent review shall be undertaken at the Owner’s expense in a timely manner and shall not delay the orderly progress of the Work.

§ A.2.2.5 The Owner shall cooperate with the Design-Builder in securing building and other permits, licenses and inspections. The Owner shall not be required to pay the fees for such permits, licenses and inspections unless the cost of such fees is excluded from the responsibility of the Design-Builder under the Design-Build Documents.

§ A.2.2.6 The services, information, surveys and reports required to be provided by the Owner under Section A.2.2, shall be furnished at the Owner’s expense, and the Design-Builder shall be entitled to rely upon the accuracy and completeness thereof, except as otherwise specifically provided in the Design-Build Documents or to the extent the Owner advises the Design-Builder to the contrary in writing.

§ A.2.2.7 If the Owner observes or otherwise becomes aware of a fault or defect in the Work or non-conformity with the Design-Build Documents, the Owner shall give prompt written notice thereof to the Design-Builder.

§ A.2.2.8 The Owner shall communicate through the Design-Builder with persons or entities employed or retained by the Design-Builder, unless otherwise directed by the Design-Builder.

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(Paragraphs deleted)

§ A.2.3 OWNER REVIEW AND INSPECTION

§ A.2.3.1 The Owner shall review and approve or take other appropriate action upon the Design-Builder’s submittals, including but not limited to design and construction documents, required by the Design-Build Documents, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Design-Build Documents. The Owner’s action shall be taken with such reasonable promptness as to cause no delay in the Work or in the activities of the Design-Builder or separate contractors. Review of such submittals is not conducted for the purpose of determining the accuracy and completeness of other details, such as dimensions and quantities, or for substantiating instructions for installation or performance of equipment or systems, all of which remain the responsibility of the Design-Builder as required by the Design-Build Documents.

§ A.2.3.2 Upon review of the design documents, construction documents, or other submittals required by the Design-Build Documents, the Owner shall take one of the following actions:

.1	Determine that the documents or submittals are in conformance with the Design-Build Documents and approve them.
.2	Determine that the documents or submittals are in conformance with the Design-Build Documents but request changes in the documents or submittals which shall be implemented by a Change in the Work.
.3	Determine that the documents or submittals are not in conformity with the Design-Build Documents and reject them.
.4	Determine that the documents or submittals are not in conformity with the Design-Build Documents, but accept them by implementing a Change in the Work.
.5	Determine that the documents or submittals are not in conformity with the Design-Build Documents, but accept them and request changes in the documents or submittals which shall be implemented by a Change in the Work.

§ A.2.3.3 The Design-Builder shall submit to the Owner for the Owner’s approval, pursuant to Section A.2.3.1, any proposed change or deviation to previously approved documents or submittals. The Owner shall review each proposed change or deviation to previously approved documents or submittals which the Design-Builder submits to the Owner for the Owner’s approval with reasonable promptness in accordance with Section A.2.3.1 and shall make one of the determinations described in Section A.2.3.2.

§ A.2.3.4 Notwithstanding the Owner’s responsibility under Section A.2.3.2, the Owner’s review and approval of the Design-Builder’s documents or submittals shall not relieve the Design-Builder of responsibility for compliance with the Design-Build Documents unless a) the Design-Builder has notified the Owner in writing of the deviation prior to approval by the Owner or, b) the Owner has approved a Change in the Work reflecting any deviations from the requirements of the Design-Build Documents. In addition, in no event shall Owner’s approval of any documents be deemed a representation that Design-Builder’s documents or submittals comply with applicable laws and regulations.

§ A.2.3.5 The Owner may visit the site to keep informed about the progress and quality of the portion of the Work completed. However, the Owner shall not be required to make exhaustive or continuous on-site inspections to check the quality or quantity of the Work. Visits by the Owner shall not be construed to create an obligation on the part of the Owner to make on-site inspections to check the quantity or quality of the Work. The Owner shall neither have control over or charge of, nor be responsible for, the construction means, methods, techniques, sequences or procedures, or for the safety precautions and programs in connection with the Work, since these are solely the Design-Builder’s rights and responsibilities under the Design-Build Documents, except as provided in Section A.3.3.7.

§ A.2.3.6 The Owner shall not be responsible for the Design-Builder’s failure to perform the Work in accordance with the requirements of the Design-Build Documents. The Owner shall not have control over or charge of and will not be responsible for acts or omissions of the Design-Builder, Architect, Contractors, or their agents or employees, or any other persons or entities performing portions of the Work for the Design-Builder.

§ A.2.3.7 The Owner may reject Work that does not conform to the Design-Build Documents. Whenever the Owner considers it necessary or advisable, the Owner shall have authority to require inspection or testing of the Work in accordance with Section A.13.5.2, whether or not such Work is fabricated, installed or completed. However, neither this authority of the Owner nor a decision made in good faith either to exercise or not to exercise such authority shall give rise to a duty or responsibility of the Owner to the Design-Builder, the Architect, Contractors, material and equipment suppliers, their agents or employees, or other persons or entities performing portions of the Work.

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§ A.2.3.8 The Owner may appoint an on-site project representative to observe the Work and to have such other responsibilities as the Owner and the Design-Builder agree to in writing.

§ A.2.3.9 The Owner shall conduct inspections to determine the date or dates of Substantial Completion and the date of final completion.

§ A.2.4 OWNER’S RIGHT TO STOP WORK

§ A.2.4.1 If the Design-Builder fails to correct Work which is not in accordance with the requirements of the Design-Build Documents as required by Section A.12.2 or fails to carry out Work in accordance with the Design-Build Documents in any material respect, the Owner may issue a written order to the Design-Builder to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the right of the Owner to stop the Work shall not give rise to a duty on the part of the Owner to exercise this right for the benefit of the Design-Builder or any other person or entity, except to the extent required by Section A.6.1.3.

§ A.2.5 OWNER’S RIGHT TO CARRY OUT THE WORK

§ A.2.5.1 If the Design-Builder defaults or neglects to carry out the Work in accordance with the Design-Build Documents and fails within a seven-day period after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, the Owner may after such seven-day period give the Design-Builder a second written notice to correct such deficiencies within a three-day period. If the Design-Builder within such three-day period after receipt of such second notice fails to commence and continue to correct any deficiencies, the Owner may, without prejudice to other remedies the Owner may have, correct such deficiencies. In such case, an appropriate Change Order shall be issued deducting from payments then or thereafter due the Design-Builder the reasonable cost of correcting such deficiencies. If payments due the Design-Builder are not sufficient to cover such amounts, the Design-Builder shall pay the difference to the Owner.

§ A.2.6 OWNER’S RIGHT TO AUDIT

§ A.2.6.1 The Design-Builder shall keep full and accurate records of all costs incurred and items billed in connection with the performance of the Work, which records shall be open to audit by the Owner or its authorized representatives during performance of the Work and until three (3) years after Final Payment. In addition, the Design-Builder shall make it a condition of all subcontracts relating to the Work that any and all Subcontractors and Sub-subcontractors will keep accurate records of costs incurred and items billed in connection with their work and that such records shall be open to audit by the Owner or its authorized representatives during performance of the Work and until three (3) years after its completion.

§ A.2.7 CONTRACTUAL RELATIONSHIP

§ A.2.7.1 Nothing contained in the Contract Documents or in any written approval or recommendation given by Owner or Development Manager hereunder shall create any contractual relationship or special promise between Owner or Development Manager and any Subcontractor or Sub-subcontractor an employee of the Owner or Development Manager or in any way entitle any Subcontractor or Sub-subcontractor, materialman or workman to any decree or judgment against the Owner or Development Manager.

ARTICLE A.3 DESIGN-BUILDER

§ A.3.1 GENERAL

§ A.3.1.1 The Design-Builder is the person or entity identified as such in the Agreement and is referred to throughout the Design-Build Documents as if singular in number. The Design-Builder may be an architect or other design professional, a construction contractor, a real estate developer or any other person or entity legally permitted to do business as a design-builder in the location where the Project is located. The term “Design-Builder” means the Design-Builder or the Design-Builder’s authorized representative. The Design-Builder’s representative is authorized to act on the Design-Builder’s behalf with respect to the Project.

§ A.3.1.2 The Design-Builder shall perform the Work in accordance with the Design-Build Documents.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.3.2 DESIGN SERVICES AND RESPONSIBILITIES

§ A.3.2.1 When applicable law requires that services be performed by licensed professionals, the Design-Builder shall provide those services through the performance of qualified persons or entities duly licensed to practice their professions. The Owner understands and agrees that the services performed by the Design-Builder’s Architect and the Design-Builder’s other design professionals and consultants are undertaken and performed in the sole interest of and for the exclusive benefit of the Design-Builder.

§ A.3.2.2 The agreements between the Design-Builder and Architect or other design professionals identified in the Agreement, and in any subsequent Modifications, shall be in writing. These agreements, including services and financial arrangements with respect to this Project, shall be promptly and fully disclosed to the Owner upon the Owner’s written request.

§ A.3.2.3 The Design-Builder shall be responsible to the Owner for acts and omissions of the Design-Builder’s employees, Architect, Contractors, Subcontractors and their agents and employees, and other persons or entities, including the Architect and other design professionals, performing any portion of the Design-Builder’s obligations under the Design-Build Documents.

§ A.3.2.4 The Design-Builder shall carefully study and compare the Design-Build Documents, materials and other information provided by the Owner pursuant to Section A.2.2, shall take field measurements of any existing conditions related to the Work, shall observe any conditions at the site affecting the Work, and report promptly to the Owner any errors, inconsistencies or omissions discovered.

§ A.3.2.5 The Design-Builder shall provide to the Owner for Owner’s written approval design documents sufficient to establish the size, quality and character of the Project; its architectural, structural, mechanical and electrical systems; and the materials and such other elements of the Project to the extent required by the Design-Build Documents. Deviations, if any, from the Design-Build Documents shall be disclosed in writing.

§ A.3.2.6 Upon the Owner’s written approval of the design documents submitted by the Design-Builder, the Design-Builder shall provide construction documents for review and written approval by the Owner. The construction documents shall set forth in detail the requirements for construction of the Project. The construction documents shall include drawings and specifications that establish the quality levels of materials and systems required. Deviations, if any, from the Design-Build Documents shall be disclosed in writing. Construction documents may include drawings, specifications, and other documents and electronic data setting forth in detail the requirements for construction of the Work, and shall:

.1	be consistent with the approved design documents;
.2	provide information for the use of those in the building trades; and
.3	include documents customarily required for regulatory agency approvals.

§ A.3.2.7 The Design-Builder shall meet with the Owner and/or Development Manager periodically to review progress of the design and construction documents.

§ A.3.2.8 Upon the Owner’s written approval of construction documents, the Design-Builder, with the assistance of the Owner, shall prepare and file documents required to obtain necessary approvals of governmental authorities having jurisdiction over the Project.

§ A.3.2.9 The Design-Builder shall obtain from each of the Design-Builder’s professionals and furnish to the Owner certifications with respect to the documents and services provided by such professionals (a) that, to the best of their knowledge, information and belief, the documents or services to which such certifications relate (i) are consistent with the Project Criteria set forth in the Design-Build Documents, except to the extent specifically identified in such certificate, (ii) comply with applicable professional practice standards, and (iii) comply with applicable laws, ordinances, codes, rules and regulations governing the design of the Project; and (b) that the Owner and its consultants shall be entitled to rely upon the accuracy of the representations and statements contained in such certifications.

§ A.3.2.10 If the Owner requests the Design-Builder, the Architect or the Design-Builder’s other design professionals to execute certificates other than those required by Section A.3.2.9, the proposed language of such certificates shall be submitted to the Design-Builder, or the Architect and such design professionals through the Design-Builder, for review and negotiation at least 14 days prior to the requested dates of execution. Neither the Design-Builder, the Architect nor such other design professionals shall be required to execute certificates that would require knowledge, services or responsibilities beyond the scope of their respective agreements with the Owner or Design-Builder.

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§ A.3.3 CONSTRUCTION

§ A.3.3.1 The Design-Builder shall perform no construction Work prior to the Owner’s review and approval of the construction documents. The Design-Builder shall perform no portion of the Work for which the Design-Build Documents require the Owner’s review of submittals, such as Shop Drawings, Product Data and Samples, until the Owner has approved each submittal.

§ A.3.3.2 The construction Work shall be in accordance with approved submittals, except that the Design-Builder shall not be relieved of responsibility for deviations from requirements of the Design-Build Documents by the Owner’s approval of design and construction documents or other submittals such as Shop Drawings, Product Data, Samples or other submittals unless the Design-Builder has specifically informed the Owner in writing of such deviation at the time of submittal and (1) the Owner has given written approval to the specific deviation as a minor change in the Work, or (2) a Change Order or Construction Change Directive has been issued authorizing the deviation. The Design-Builder shall not be relieved of responsibility for errors or omissions in design and construction documents or other submittals such as Shop Drawings, Product Data, Samples or other submittals by the Owner’s approval thereof.

§ A.3.3.3 The Design-Builder shall direct specific attention, in writing or on resubmitted design and construction documents or other submittals such as Shop Drawings, Product Data, Samples or similar submittals, to revisions other than those requested by the Owner on previous submittals. In the absence of such written notice, the Owner’s approval of a resubmission shall not apply to such revisions.

§ A.3.3.4 When the Design-Build Documents require that a Contractor provide professional design services or certifications related to systems, materials or equipment, or when the Design-Builder in its discretion provides such design services or certifications through a Contractor, the Design-Builder shall cause professional design services or certifications to be provided by a properly licensed design professional, whose signature and seal shall appear on all drawings, calculations, specifications, certifications, Shop Drawings and other submittals prepared by such professional. Shop Drawings and other submittals related to the Work designed or certified by such professionals, if prepared by others, shall bear such design professional’s written approval. The Owner shall be entitled to rely upon the adequacy, accuracy and completeness of the services, certifications or approvals performed by such design professionals.

§ A.3.3.5 The Design-Builder shall be solely responsible for and have control over all construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work under the Design-Build Documents.

§ A.3.3.6 The Design-Builder shall keep the Owner informed of the progress and quality of the Work.

§ A.3.3.7 The Design-Builder shall be responsible for the supervision and direction of the Work, using the Design-Builder’s best skill and attention. If the Design-Build Documents give specific instructions concerning construction means, methods, techniques, sequences or procedures (including without limitation safety programs), the Design-Builder shall evaluate the jobsite safety thereof and, except as stated below, shall be fully and solely responsible for the jobsite safety of such means, methods, techniques, sequences or procedures. If the Design-Builder determines that such means, methods, techniques, sequences or procedures may not be safe, the Design-Builder shall give timely written notice to the Owner and shall not proceed with that portion of the Work without further written instructions from the Owner. If the Design-Builder is then instructed to proceed with the required means, methods, techniques, sequences or procedures without acceptance of changes proposed by the Design-Builder, the Owner shall be solely responsible for any resulting loss or damage.

§ A.3.3.8 The Design-Builder shall be responsible for inspection of portions of Work already performed to determine that such portions are in proper condition to receive subsequent Work.

§ A.3.3.9 The Design-Builder is responsible for ensuring that the Work will be completed in accordance with the Project Schedule and in connection therewith shall ensure that all material suppliers, Contractors and Subcontractors and their agents, and employees (1) adhere to the Contract Documents; (2) order materials on time, taking into consideration current market and delivery conditions; and (3) provide materials on time, taking into consideration current market and delivery conditions. The Design-Builder shall inspect all materials delivered to the site and shall reject all materials which will not conform with the Contract Documents when properly installed and the Design-Builder shall also coordinate its Work with that of all others on the Project including, but not limited to, coordinating deliveries, storage and installations, and use of all construction utilities. The Design-Builder shall be responsible for the space requirements, location and routing of its equipment. In areas and locations where the proper and most effective space requirements, locations and routing cannot be made as indicated, the Design-Builder shall meet with all others involved before installation to plan the most effective and efficient method of overall installation.

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§ A.3.3.10 The Design-Builder shall give notices and comply with applicable laws, ordinances, rules, regulations and lawful orders of public authorities bearing on the Work, including those with respect to the safety of persons and property and their protection from damages, injury or loss and shall coordinate any and all inspections required by governmental authorities. The Contractor shall promptly remedy damage and loss to property at the site caused in whole or in part by the Design-Builder, its Contractors, Subcontractors, or anyone directly or indirectly employed by any of them or by anyone for whose acts they may be liable, except for damage or loss attributable solely to acts or omissions of the Owner or Development Manager or by anyone for whose acts any of them may be liable and not attributable to the fault or negligence of the Design-Builder, its Contractors, or anyone directly or indirectly employed by them. The foregoing obligations of the Design-Builder are in addition to the Design-Builder’s obligations under other provisions hereunder.

§ A.3.3.11 If any of the Work is required to be inspected or approved by any public authority, the Design-Builder shall cause such inspection or approval to be performed and shall coordinate such inspections with progress of the Work as necessary to avoid delays in issuance of the final certificates of occupancy and Project Closeout (as defined in the Agreement). No inspection performed or failed to be performed by the Owner or Development Manager hereunder shall be a waiver of any of the Design-Builder’s obligations hereunder or be construed as an approval or acceptance of the Work or any part thereof.

§ A.3.3.12 The Design-Builder shall establish and maintain benchmarks and all other grades, lines and levels necessary for the Work report errors or inconsistencies to the Owner and Development Manager before commencing work. The Design-Builder shall provide access to the Work for Owner, Development Manager and other persons designated by the Owner, and governmental inspectors. Any encroachments made by the Design-Builder, Contractors or Subcontractors on adjacent properties caused by construction, except for encroachments arising from errors or omissions not reasonably discoverable by the Design-Builder in the Contract Documents, shall be the sole responsibility of the Design-Builder, and the Design-Builder shall correct such encroachments within thirty (30) days of the improvement survey (or as soon thereafter as reasonably possible), at the Design-Builder’s sole cost and expense, either by the removal of the encroachment (and subsequent reconstruction of the Project site), or agreement with Owner (in form and substance satisfactory to the Owner in its sole discretion) allowing the encroachments to remain.

§ A.3.3.13 Where the Design-Build Documents refer to particular construction means, methods, techniques, sequences or procedures or indicate or imply that such are to be used in the Work, such mention is intended only to indicate that the operations of the Design-Builder shall be such as to produce at least the quality of Work implied by the operations described, but the actual determination of whether or not the described operations may be safely and suitably employed on the Work shall be the responsibility of the Design-Builder, who shall notify the Owner and Development Manager in writing of the actual means, methods, techniques, sequences or procedures which will be employed on the Work, if these differ from those mentioned in the Design-Build Documents. All loss, damage or liability, or cost of correcting defective Work arising from the employment of any construction means, methods, techniques, sequences or procedures referred to, indicated or implied by the Design-Build Documents, shall be borne by the Design-Builder, unless the Design-Builder has given timely notice to the Owner and Development Manager in writing that such means, methods, techniques, sequences or procedures are not safe or suitable and the Design-Builder has then been instructed in writing to proceed at the Owner’s risk.

§ A.3.3.14 All Work shall be set or laid out on the premises by Design-Builder, who will be held responsible for its correctness. If there is any discrepancy between actual lines and levels in drawings, Design-Builder shall notify Owner and Development Manager in writing, describing such discrepancy, and shall not proceed with any work affected thereby until written instructions are received from the Owner.

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§ A.3.3.15 If any of the Work is required to be inspected or approved by any public authority, Design-Builder shall cause such inspection or approval to be performed. No inspection performed or failed to be performed by Owner hereunder shall be a waiver of any of Design-Builder’s obligations hereunder or be construed as an approval or acceptance of the Work or any part thereof.

§ A.3.3.16 Design-Builder acknowledges that it is Design-Builder’s responsibility to hire all personnel for the proper and diligent prosecution of the Work and Design-Builder shall use its best efforts to maintain labor peace for the duration of the Work.

§ A.3.4 LABOR AND MATERIALS

§ A.3.4.1 Unless otherwise provided in the Design-Build Documents, the Design-Builder shall provide or cause to be provided and shall pay for design services, labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work.

§ A.3.4.2 When a material is specified in the Design-Build Documents, the Design-Builder may make substitutions only with the consent of the Owner and, if appropriate, in accordance with a Change Order.

§ A.3.4.3 The Design-Builder shall enforce strict discipline and good order among the Design-Builder’s employees and other persons carrying out the Design-Build Contract. The Design-Builder shall not permit employment of unfit persons or persons not skilled in tasks assigned to them. The Design-Builder shall also at all times use best efforts and its judgment as an experienced contractor to adopt and implement policies and practices which are designed to avoid work stoppages, slowdowns, disputes, or strikes, and shall, at all times, use best efforts to maintain project-wide labor harmony.

§ A.3.4.4 In making a request for substitution, Design-Builder will be deemed to have represented that:

1.	The Design-Builder has investigated the proposed substitution and has determined that it is equal to or superior in all respects to that specified including warranties; and
2.	That the cost data presented with the request for substitution is complete and includes all costs of labor, materials, equipment, profit, and overhead, as well as any costs required to adapt and/or coordinate the substitution with adjacent or existing construction.
3.	Will coordinate the installation of the accepted substitute, making such changes as may be required for the Work to be complete in all respects.

§ A.3.5 WARRANTY

§ A.3.5.1 The Design-Builder warrants to the Owner that materials and equipment furnished under the Design-Build Documents will be of good quality and new unless otherwise required or permitted by the Design-Build Documents, that the Work will be free from defects not inherent in the quality required or permitted by law or otherwise, and that the Work will conform to the requirements of the Design-Build Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Design-Builder’s warranty excludes remedy for damage or defect caused by abuse, modifications not executed by the Design-Builder, improper or insufficient maintenance, improper operation, or normal wear and tear and normal usage. If required by the Owner, the Design-Builder shall furnish satisfactory evidence as to the kind and quality of materials and equipment.

§ A.3.5.2 Except when a longer warranty and guarantee time is specifically called for in the Specifications or other Contract Documents or is otherwise required by law, the warranties and guarantees provided for in the Contract Documents shall be for **, shall apply to all corrected or repair work performed in connection with Work performed under the Contract Documents, and shall be in form and content otherwise reasonably satisfactory to the Owner. Warranties shall become effective on the date of Substantial Completion (or acceptance, testing and commissioning of the corresponding component of the Work, if later) of the entire Work and delivery thereof to Owner for occupancy.

§ A.3.5.3 In addition to the foregoing stipulations, the Contractor shall comply with all other warranties referred to in any portions of the Contract Documents or that are otherwise provided by law or in equity. To the extent such warranties overlap, the more stringent requirement shall govern.

^** This portion has been redacted pursuant to a confidential treatment request.

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§ A.3.6 TAXES

§ A.3.6.1 In accordance with Subparagraph 7.7.16 of the AIA A141 Agreement between Owner and Design-Builder, Owner is exempt from sales and use taxes with respect to the Project, as agent for County of Westchester Industrial Development Agency (“WIDA”). Accordingly, the Design-Builder shall not be required to pay sales or use taxes for the Work provided by the Design-Builder and if it does, such taxes shall not be included in the cost of the Work..

§ A.3.7 PERMITS, FEES AND NOTICES

§ A.3.7.1 The Design-Builder shall secure and pay for building and other permits and governmental fees, licenses and inspections necessary for the proper execution and completion of the Work which are customarily secured after execution of the Design-Build Contract and which were legally required on the date the Owner accepted the Design-Builder’s proposal. Building permits and other authorizations from appropriate governmental agencies shall be obtained prior to the commencement of construction and shall be posted in a prominent place within the Project, in accordance with applicable law.

§ A.3.7.2 The Design-Builder shall comply with and give notices required by laws, ordinances, rules, regulations and lawful orders of public authorities relating to the Project. The Design-Builder shall timely arrange for necessary inspections by governmental authorities to enable the Owner to obtain all necessary occupancy permits.

§ A.3.7.3 It is the Design-Builder’s responsibility to ascertain that the Work is in accordance with applicable laws, ordinances, codes, rules and regulations.

§ A.3.7.4 If the Design-Builder performs Work contrary to applicable laws, ordinances, codes, rules and regulations, the Design-Builder shall assume responsibility for such Work and shall bear the costs attributable to correction.

§ A.3.8 ALLOWANCES

§ A.3.8.1 The Design-Builder shall include in the Contract Sum all allowances stated in the Design-Build Documents. Items covered by allowances shall be supplied for such amounts and by such persons or entities as the Owner may direct, but the Design-Builder shall not be required to employ persons or entities to which the Design-Builder has reasonable objection.

§ A.3.8.2 Unless otherwise provided in the Design-Build Documents:

.1	allowances shall cover the cost to the Design-Builder of materials and equipment delivered at the site and all required taxes, less applicable trade discounts;
.2	Design-Builder’s costs for unloading and handling at the site, labor, installation costs, overhead, profit and other expenses contemplated for stated allowance amounts shall be included in the Contract Sum but not in the allowances; and
.3	whenever costs are more than or less than allowances, the Contract Sum shall be adjusted accordingly by Change Order. The amount of the Change Order shall reflect (1) the difference between actual costs and the allowances under Section A.3.8.2.1 and (2) changes in Design-Builder’s costs under Section A.3.8.2.2.

§ A.3.8.3 Materials and equipment under an allowance shall be selected by the Owner in sufficient time to avoid delay in the Work.

§ A.3.9 DESIGN-BUILDER’S SCHEDULE

§ A.3.9.1 The Design-Builder, promptly after execution of the Design-Build Contract, shall prepare and submit for the Owner’s information the Design-Builder’s preliminary Project schedule for the Work. The schedule shall not exceed time limits and shall be in such detail as required under the Design-Build Documents, shall be revised at appropriate intervals as required by the conditions of the Work and Project, shall be related to the entire Project to the extent required by the Design-Build Documents, shall provide for expeditious and practicable execution of the Work and shall include allowances for periods of time required for the Owner’s review and for approval of submissions by authorities having jurisdiction over the Project.

§ A.3.9.2 The Design-Builder shall prepare and keep current a schedule of submittals required by the Design-Build Documents.

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§ A.3.9.3 The Design-Builder shall perform the Work in general accordance with the most recent schedules submitted to the Owner.

§ A.3.9.4 Recurrent failure of the Design-Builder to submit or keep current the Project schedule as required by conditions of the Work, shall be grounds for withholding of payments due the Design-Builder by the Owner, until such Project schedule is provided. In the event that the Design-Builder fails to maintain, update and provide the Owner and Development Manager with copies of the Project schedule required by the Contract Documents, the Owner shall have the right, in addition to its other rights and remedies, to engage a competent professional to prepare and/or maintain such Project schedule, at the Design-Builder’s expense, and the Design-Builder and all Contractors and Subcontractors shall cooperate fully in such activity.

§ A.3.9.5 In the event that the Owner determines that the performance of the Work, as of any date, has not progressed or reached the level of completion contemplated by the Milestones set out in the Contract Documents as of such date and the scheduled delivery and/or substantial completion dates are clearly in jeopardy, the Owner shall have the right to order the Design-Builder to take corrective measures necessary to expedite the progress of construction (“Extraordinary Measures”), including without limitation: (1) working additional shifts or overtime; (2) supplying additional manpower, equipment, and facilities; and (3) other similar measures. Such Extraordinary Measures shall continue until the progress of the Work as of the pertinent date complies with the stage of completion contemplated by the Contract Documents as of such date.

§ A.3.9.6 In addition, Design-Builder shall perform the Work in accordance with the construction milestones set forth on Exhibit D to the Contract (A141). In the event the Design-Builder fails to keep the Construction Milestones, the Design-Builder shall notify the Owner and the Development Manager of such failure and shall propose an “Action Plan” to the Owner and the Development Manager that would result in a timely delivery of the Project in accordance with the Project schedule. The Owner’s rights to receive an Action Plan shall be in addition to, and not in derogation of, any other rights of the Owner.

§ A.3.10 DOCUMENTS AND SAMPLES AT THE SITE

§ A.3.10.1 The Design-Builder shall maintain at the site for the Owner one record copy of the drawings, specifications, addenda, Change Orders and other Modifications, in good order and marked currently to record field changes and selections made during construction, and one record copy of approved Shop Drawings, Product Data, Samples and similar required submittals. These shall be delivered to the Owner upon completion of the Work.

§ A.3.10.2 During the progress of the Work, the Design-Builder shall also keep on file at the site a complete and separate set of black line prints of the Drawings and Specifications on which shall be accurately and promptly noted, as the Work progresses, the following: (1) the progress of the Work installed; and (2) all revisions (including, without limitation, revisions to partition locations, plumbing, heating and ventilation, electrical work and site utility lines, and fire protection systems) wherever the Work installed is other than as shown on the Contract Drawings, or described in the Specifications. The Design-Builder shall be responsible for assuring that of the progress of the Work and the revisions are delineated by the specific trade involved.

§ A.3.10.3 At the completion of the Work the Design-Builder shall submit to the Development Manager and Owner for approval by them, complete sets of as-built drawings as required under the Contract Documents. The Design-Builder shall prepare three (3) complete sets of manufacturer’s catalogs, instructions, and other similar data, including, without limitation, the necessary photographic cuts, diagrams, value charts, and similar material, covering all mechanical and manually operated devices furnished and/or installed in any permanent structure. This information is intended to serve to instruct and assist maintenance personnel in the care, operation, maintenance and repair of all such devices. The above copies shall be delivered to the Owner prior to Final Payment.

§ A.3.11 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES

§ A.3.11.1 Shop Drawings are drawings, diagrams, schedules and other data specially prepared for the Work by the Design-Builder or a Contractor, Subcontractor, manufacturer, supplier or distributor to illustrate some portion of the Work.

§ A.3.11.2 Product Data are illustrations, standard schedules, performance charts, instructions, brochures, diagrams and other information furnished by the Design-Builder to illustrate materials or equipment for some portion of the Work.

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§ A.3.11.3 Samples are physical examples that illustrate materials, equipment or workmanship and establish standards by which the Work will be judged.

§ A.3.11.4 Shop Drawings, Product Data, Samples and similar submittals are not Design-Build Documents. The purpose of their submittal is to demonstrate for those portions of the Work for which submittals are required by the Design-Build Documents the way by which the Design-Builder proposes to conform to the Design-Build Documents.

§ A.3.11.5 The Design-Builder shall review for compliance with the Design-Build Documents and approve and submit to the Owner only those Shop Drawings, Product Data, Samples and similar submittals required by the Design-Build Documents with reasonable promptness and in such sequence as to cause no delay in the Work or in the activities of the Owner or of separate contractors.

§ A.3.11.6 By approving and submitting Shop Drawings, Product Data, Samples and similar submittals, the Design-Builder represents that the Design-Builder has determined and verified materials, field measurements and field construction criteria related thereto, or will do so, and has checked and coordinated the information contained within such submittals with the requirements of the Work and of the Design-Build Documents.

§ A.3.11.7 Submittals shall not be used as a substitution for Change Orders, the substitution of materials or manufacturer or other procedures required by the Contract Documents and shall not constitute approval or authorization for change in the Contract Documents which change may be made only through an approved Change Order or directive in accordance with the Contract.

§ A.3.12 USE OF SITE

§ A.3.12.1 The Design-Builder shall confine operations at the site to areas permitted by law, ordinances, permits and the Design-Build Documents, and shall not unreasonably encumber the site with materials or equipment.

§ A.3.13 CUTTING AND PATCHING

§ A.3.13.1 The Design-Builder shall be responsible for cutting, fitting or patching required to complete the Work or to make its parts fit together properly.

§ A.3.13.2 The Design-Builder shall not damage or endanger a portion of the Work or fully or partially completed construction of the Owner or separate contractors by cutting, patching or otherwise altering such construction or by excavation. The Design-Builder shall not cut or otherwise alter such construction by the Owner or a separate contractor except with written consent of the Owner and of such separate contractor; such consent shall not be unreasonably withheld. The Design-Builder shall not unreasonably withhold from the Owner or a separate contractor the Design-Builder’s consent to cutting or otherwise altering the Work.

§ A.3.13.3 The Design-Builder shall locate, protect and save from injury utilities of all kinds, either above or below grade, inside or outside of any structure, found in the areas affected by its work. The Design-Builder shall be responsible for all damage caused to such utility by the operation of equipment, or delivery of materials, or as the direct or indirect result of any of its work and shall repair all such damages at its expense and as part of the work included in the Contract Documents. The Contractor shall not be entitled to any increase in the Cost of the Work or the Contract Time on account of such damage to any utility.

§ A.3.14 CLEANING UP

§ A.3.14.1 The Design-Builder shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Design-Build Contract. At completion of the Work, the Design-Builder shall remove from and about the Project waste materials, rubbish, the Design-Builder’s tools, construction equipment, machinery and surplus materials.

§ A.3.14.2 If the Design-Builder fails to clean up as provided in the Design-Build Documents, the Owner may do so and the cost thereof shall be charged to the Design-Builder.

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§ A.3.15 ACCESS TO WORK

§ A.3.15.1 The Design-Builder shall provide the Owner and Development Manager access to the Work in preparation and progress wherever located.

§ A.3.16 ROYALTIES, PATENTS AND COPYRIGHTS

§ A.3.16.1 The Design-Builder shall pay all royalties and license fees. The Design-Builder shall defend suits or claims for infringement of copyrights and patent rights or other intellectual property and shall hold the Owner harmless from loss on account thereof, but shall not be responsible for such defense or loss when a particular design, process or product of a particular manufacturer or manufacturers is required or where the copyright violations are contained in drawings, specifications or other documents prepared by or furnished to the Design-Builder by the Owner. However, if the Design-Builder has reason to believe that the required design, process or product is an infringement of a copyright or a patent or other intellectual property, the Design-Builder shall be responsible for such loss unless such information is promptly furnished to the Owner.

§ A.3.17 INDEMNIFICATION

§ A.3.17.1 To the fullest extent permitted by law, the Design-Builder shall defend, indemnify and hold harmless the Owner, OSI Pharmaceuticals, Inc., Development Manager, WIDA, Owner’s consultants, and agents and employees of any of them (the “Indemnitees”) from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance or lack of performance of the Work, including without limitation: (i) all liability, claims and demands on account of injury to persons, including death resulting therefrom, and damage to property arising out of the performance, or lack of performance, by Design-Builder and all Contractors and Subcontractors, their respective employees and agents (the “Indemnitors”), (ii) from and against all claims, obligations, fines, liens, penalties, actions, damages, liabilities, costs, charges and expenses in connection with and/or due to any accident or event in or about the Project site, due to any fraudulent, wrongful, negligent, willful act, error, omission, breach of contract, or infringement of any patent right, by any of the Indemnitors, (iii) from any claim, cost, loss, damage, expense or liability, including legal fees, which it might incur by reason of any action, law suit or proceeding arising out of a failure to work in accordance with any requirement or provision of OSHA, and from any costs, fines, penalties levied by any governmental authority, and the legal expenses incurred in connection therewith, which the Indemnitees may suffer by reason of the Indemnitors’ failure to work in accordance with any requirement or provision of this Contract, OSHA or Owner, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death or to injury to or destruction of tangible property other than the Work itself, but only to the extent caused by the negligent acts or omissions of the Indemnitor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge or reduce other rights or obligations of indemnity that would otherwise exist as to a party or person described in this Section A.3.17.

§ A.3.17.2 In claims against any person or entity indemnified under this Section A.3.17 by an employee of the Design-Builder, the Architect, a Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Section A.3.17.1 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Design-Builder, the Architect or a Contractor or a Subcontractor under workers’ compensation acts, disability benefit acts or other employee benefit acts.

§ A.3.17.3 The provisions of paragraphs A.3.16 and A.3.17 shall survive substantial and final completion of the Work, and the termination or expiration of this Contract and no payment or partial payment, nor the issuance of any certificate of substantial completions, shall waive or release any rights afforded by this Section A.3.17.

ARTICLE A.4 DISPUTE RESOLUTION

§ A.4.1 CLAIMS AND DISPUTES

§ A.4.1.1 Definition. A Claim is a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Design-Build Contract terms, payment of money, extension of time or other relief with respect to the terms of the Design-Build Contract. The term “Claim” also includes other disputes and matters in question between the Owner and Design-Builder arising out of or relating to the Design-Build Contract. Claims must be initiated by written notice. The responsibility to substantiate Claims shall rest with the party making the Claim.

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§ A.4.1.2 Time Limits on Claims. Claims by either party must be initiated within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be initiated by written notice to the other party.

§ A.4.1.3 Continuing Performance. Pending final resolution of a Claim, except as otherwise agreed in writing or as provided in Section A.9.7.1 and Article A.14, the Design-Builder shall proceed diligently with performance of the Design-Build Contract and the Owner shall continue to make payments in accordance with the Design-Build Documents.

§ A.4.1.4 Claims for Concealed or Unknown Conditions. If conditions are encountered at the site which are (1) subsurface or otherwise concealed physical conditions which differ materially from those indicated in the Design-Build Documents or (2) unknown physical conditions of an unusual nature which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Design-Build Documents, then the observing party shall give notice to the other party (with copies to the Development Manager) promptly before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The Owner or development manager shall promptly investigate such conditions and, if they differ materially and cause an increase or decrease in the Design-Builder’s cost of, or time required for, performance of any part of the Work, shall negotiate with the Design-Builder an equitable adjustment in the Contract Sum or Contract Time, or both. If the Owner determines that the conditions at the site are not materially different from those indicated in the Design-Build Documents and that no change in the terms of the Design-Build Contract is justified, the Owner or development manager shall so notify the Design-Builder in writing, stating the reasons. Claims by the Design-Builder in opposition to such determination must be made within 21 days after the Owner has given notice of the decision. If the conditions encountered are materially different, the Contract Sum and Contract Time shall be equitably adjusted, but if the Owner and Design-Builder cannot agree on an adjustment in the Contract Sum or Contract Time, the adjustment shall proceed pursuant to Section A.4.2. All claims for delay arising from such conditions shall be barred if notice is not given within such twenty one (21) day period, and a claim made within seven (7) days thereafter.

§ A.4.1.5 Claims for Additional Cost. If the Design-Builder wishes to make Claim for an increase in the Contract Sum, written notice as provided herein shall be given before proceeding to execute the Work. Prior notice is not required for Claims relating to an emergency endangering life or property arising under Section A.10.6.

§ A.4.1.6 If the Design-Builder believes additional cost is involved for reasons including but not limited to (1) an order by the Owner to stop the Work where the Design-Builder was not at fault, (2) a written order for the Work issued by the Owner, (3) failure of payment by the Owner, (4) termination of the Design-Build Contract by the Owner, (5) Owner’s suspension or (6) other reasonable grounds, Claim shall be filed in accordance with this Section A.4.1.

§ A.4.1.7 Claims for Additional Time

§ A.4.1.7.1 If the Design-Builder wishes to make Claim for an increase in the Contract Time, written notice as provided herein shall be given. The Design-Builder’s Claim shall include an estimate of the time and its effect on the progress of the Work. In the case of a continuing delay, only one Claim is necessary. Claim for delay may only be made if delay adversely affects the critical path of the Design-Builder’s schedule and adversely affects a portion of the Work that must be completed as scheduled to avoid delay to the substantial completion of the Work as a whole.

§ A.4.1.7.2 If adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction.

§ A.4.1.7.3 Extensions of time will not be granted for delays caused by inadequate construction forces, or the failure of the Design-Builder to place orders for equipment or materials sufficiently in advance to ensure delivery when needed.

§ A.4.1.8 Injury or Damage to Person or Property. If either party to the Design-Build Contract suffers injury or damage to person or property because of an act or omission of the other party or of others for whose acts such party is legally responsible, written notice of such injury or damage, whether or not insured, shall be given to the other party within a reasonable time not exceeding 21 days after discovery. The notice shall provide sufficient detail to enable the other party to investigate the matter.

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§ A.4.1.9 If unit prices are stated in the Design-Build Documents or subsequently agreed upon, and if quantities originally contemplated are materially changed in a proposed Change Order or Construction Change Directive so that application of such unit prices to quantities of Work proposed will cause substantial inequity to the Owner or Design-Builder, the applicable unit prices shall be equitably adjusted.

§ A.4.1.10 Claims for Consequential Damages. Design-Builder and Owner waive Claims against each other for consequential damages arising out of or relating to the Design-Build Contract. This mutual waiver includes:

.1	damages incurred by the Owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons; and
.2	damages incurred by the Design-Builder for principal office expenses including the compensation of personnel stationed there, for losses of financing, business and reputation, and for loss of profit except anticipated profit arising directly from the Work.

This mutual waiver is applicable, without limitation, to all consequential damages due to either party’s termination in accordance with Article A.14. Nothing contained in this Section A.4.1.10 shall be deemed to preclude an award of liquidated direct damages, when applicable, in accordance with the requirements of the Design-Build Documents.

§ A.4.1.11 If the enactment or revision of codes, laws or regulations or official interpretations which govern the Project cause an increase or decrease of the Design-Builder’s cost of, or time required for, performance of the Work, the Design-Builder shall be entitled to an equitable adjustment in Contract Sum or Contract Time. If the Owner and Design-Builder cannot agree upon an adjustment in the Contract Sum or Contract Time, the Design-Builder shall submit a Claim pursuant to Section A.4.1.

§ A.4.2 RESOLUTION OF CLAIMS AND DISPUTES

§ A.4.2.1 Decision by Neutral. If the parties have identified a Neutral in Section 6.1 of the Agreement or elsewhere in the Design-Build Documents, then Claims, excluding those arising under Sections A.10.3 through A.10.5, shall be referred initially to the Neutral for decision. An initial decision by the Neutral shall be required as a condition precedent to mediation of all Claims between the Owner and Design-Builder arising prior to the date final payment is due, unless 30 days have passed after the Claim has been referred to the Neutral with no decision having been rendered by the Neutral. Unless the Neutral and all affected parties agree, the Neutral will not decide disputes between the Design-Builder and persons or entities other than the Owner.

§ A.4.2.2 Decision by Owner. If the parties have not identified a Neutral in Section 6.1 of the Agreement or elsewhere in the Design-Build Documents then, except for those claims arising under Sections A.10.3 and A.10.5, the Owner shall provide an initial decision. An initial decision by the Owner shall be required as a condition precedent to mediation of all Claims between the Owner and Design-Builder arising prior to the date final payment is due, unless 30 days have passed after the Claim has been referred to the Owner with no decision having been rendered by the Owner.

§ A.4.2.3 The initial decision pursuant to Sections A.4.2.1 and A.4.2.2 shall be in writing, shall state the reasons therefore and shall notify the parties of any change in the Contract Sum or Contract Time or both. The initial decision shall be final and binding on the parties but subject first to mediation under Section A.4.3 and thereafter to such other dispute resolution methods as provided in Section 6.2 of the Agreement or elsewhere in the Design-Build Documents.

§ A.4.2.4 In the event of a Claim against the Design-Builder, the Owner may, but is not obligated to, notify the surety, if any, of the nature and amount of the Claim. If the Claim relates to a possibility of a Design-Builder’s default, the Owner may, but is not obligated to, notify the surety and request the surety’s assistance in resolving the controversy.

§ A.4.2.5 If a Claim relates to or is the subject of a mechanic’s lien, the party asserting such Claim may proceed in accordance with applicable law to comply with the lien notice or filing deadlines prior to initial resolution of the Claim.

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§ A.4.3 MEDIATION

§ A.4.3.1 Any Claim arising out of or related to the Design-Build Contract, except those waived as provided for in Sections A.4.1.10, A.9.10.4 and A.9.10.5, shall, after initial decision of the Claim or 30 days after submission of the Claim for initial decision, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable or other binding dispute resolution proceedings by either party.

§ A.4.3.2 The parties shall endeavor to resolve their Claims by mediation which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Mediation Rules of the American Arbitration Association currently in effect at the time of the mediation. Request for mediation shall be filed in writing with the other party to the Design-Build Contract and with the American Arbitration Association. The request may be made concurrently with the filing of a demand for arbitration or other binding dispute resolution proceedings but, in such event, mediation shall proceed in advance thereof or of legal or equitable proceedings, which shall be stayed pending mediation for a period of 60 days from the date of filing, unless stayed for a longer period by agreement of the parties or court order.

§ A.4.3.3 The parties shall share the mediator’s fee and any filing fees equally. The mediation shall be held in the place where the Project is located, unless another location is mutually agreed upon. Agreements reached in mediation shall be enforceable as settlement agreements in any court having jurisdiction thereof.

§ A.4.4 ARBITRATION

§ A.4.4.1 Claims, except those waived as provided for in Sections A.4.1.10, A.9.10.4 and A.9.10.5, for which initial decisions have not become final and binding, and which have not been resolved by mediation but which are subject to arbitration pursuant to Sections 6.2 and 6.3 of the Agreement or elsewhere in the Design-Build Documents, shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect at the time of the arbitration. The demand for arbitration shall be filed in writing with the other party to the Design-Build Contract and with the American Arbitration Association. The parties agree that any award issued by the American Arbitration Association shall be a reasoned award and provide, in writing, an explanation of any finding and rulings contained in the award.

§ A.4.4.2 A demand for arbitration may be made no earlier than concurrently with the filing of a request for mediation, but in no event shall it be made after the date when institution of legal or equitable proceedings based on such Claim would be barred by the applicable statute of limitations as determined pursuant to Section A.13.6.

§ A.4.4.3 An arbitration pursuant to this Section A.4.4 may be joined with an arbitration involving common issues of law or fact between the Owner or Design-Builder and any person or entity with whom the Owner or Design-Builder has a contractual obligation to arbitrate disputes which does not prohibit consolidation or joinder. No other arbitration arising out of or relating to the Design-Build Contract shall include, by consolidation, joinder or in any other manner, an additional person or entity not a party to the Design-Build Contract or not a party to an agreement with the Owner or Design-Builder, except by written consent containing a specific reference to the Design-Build Contract signed by the Owner and Design-Builder and any other person or entities sought to be joined. Consent to arbitration involving an additional person or entity shall not constitute consent to arbitration of any claim, dispute or other matter in question not described in the written consent or with a person or entity not named or described therein. The foregoing agreement to arbitrate and other agreements to arbitrate with an additional person or entity duly consented to by the parties to the Agreement shall be specifically enforceable in accordance with applicable law in any court having jurisdiction thereof. Notwithstanding the foregoing, Design-Builder shall include an arbitration provision in all contracts it enters into with Contractors.

§ A.4.4.4 Claims and Timely Assertion of Claims. The party filing a notice of demand for arbitration must assert in the demand all Claims then known to that party on which arbitration is permitted to be demanded.

§ A.4.4.5 Judgment on Final Award. The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

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ARTICLE A.5 AWARD OF CONTRACTS

§ A.5.1 Unless otherwise stated in the Design-Build Documents or the bidding or proposal requirements, the Design-Builder, as soon as practicable after award of the Design-Build Contract, shall furnish in writing to the Owner the names of additional persons or entities not originally included in the Design-Builder’s proposal or in substitution of a person or entity (including those who are to furnish design services or materials or equipment fabricated to a special design) proposed for each principal portion of the Work. The Owner will promptly reply to the Design-Builder in writing stating whether or not the Owner has reasonable objection to any such proposed additional person or entity. Failure of the Owner to reply promptly shall constitute notice of no reasonable objection. The Owner shall have the right to investigate any proposed Contractor or material supplier, but shall have no duty to do so.

§ A.5.2 The Design-Builder shall not contract with a proposed person or entity to whom which the Owner has made reasonable and timely objection. The Design-Builder shall not be required to contract with anyone to whom the Design-Builder has made reasonable objection.

§ A.5.3 If the Owner (in consultation with Development Manager) has reasonable objection to a person or entity proposed by the Design-Builder, the Design-Builder shall propose another to whom the Owner has no reasonable objection. If the proposed but rejected additional person or entity was reasonably capable of performing the Work, the Contract Sum and Contract Time shall be increased or decreased by the difference, if any, occasioned by such change, and an appropriate Change Order shall be issued before commencement of the substitute person’s or entity’s Work. However, no increase in the Contract Sum or Contract Time shall be allowed for such change unless the Design-Builder has acted promptly and responsively in submitting names as required.

§ A.5.4 The Design-Builder shall not change a person or entity previously selected if the Owner makes reasonable objection to such substitute.

§ A.5.5 CONTINGENT ASSIGNMENT OF CONTRACTS

§ A.5.5.1 Each agreement for a portion of the Work is assigned by the Design-Builder to the Owner provided that:

.1	assignment is effective only after termination of the Design-Build Contract by the Owner for cause pursuant to Section A.14.2 and only for those agreements which the Owner accepts by notifying the contractor in writing; and
.2	assignment is subject to the prior rights of the surety, if any, obligated under bond relating to the Design-Build Contract.

§ A.5.5.2 Upon such assignment, if the Work has been suspended for more than 30 days, the Contractor’s compensation shall be equitably adjusted for increases in cost resulting from the suspension.

ARTICLE A.6 CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS

§ A.6.1 OWNER’S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS

§ A.6.1.1 The Owner reserves the right to perform construction or operations related to the Project with the Owner’s own forces and to award separate contracts in connection with other portions of the Project or other construction or operations on the site. The Design-Builder shall cooperate with the Owner and separate contractors whose work might interfere with the Design-Builder’s Work. If the Design-Builder claims that delay or additional cost is involved because of such action by the Owner, the Design-Builder shall make such Claim as provided in Section A.4.1.

§ A.6.1.2 The term “separate contractor” shall mean any contractor retained by the Owner pursuant to Section A.6.1.1.

§ A.6.1.3 The Owner shall provide for coordination of the activities of the Owner’s own forces and of each separate contractor with the work of the Design-Builder, who shall cooperate with them. The Design-Builder shall participate with other separate contractors and the Owner in reviewing their construction schedules when directed to do so. The Design-Builder shall make any revisions to the construction schedule deemed necessary after a joint review and mutual agreement. The construction schedules shall then constitute the schedules to be used by the Design-Builder, separate contractors and the Owner until subsequently revised.

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§ A.6.2 MUTUAL RESPONSIBILITY

§ A.6.2.1 The Design-Builder shall afford the Owner and separate contractors reasonable opportunity for introduction and storage of their materials and equipment and performance of their activities and shall connect and coordinate the Design-Builder’s construction and operations with theirs as required by the Design-Build Documents.

§ A.6.2.2 If part of the Design-Builder’s Work depends for proper execution or results upon design, construction or operations by the Owner or a separate contractor, the Design-Builder shall, prior to proceeding with that portion of the Work, promptly report to the Owner apparent discrepancies or defects in such other construction that would render it unsuitable for such proper execution and results. Failure of the Design-Builder so to report shall constitute an acknowledgment that the Owner’s or separate contractor’s completed or partially completed construction is fit and proper to receive the Design-Builder’s Work, except as to defects not then reasonably discoverable.

§ A.6.2.3 The Owner shall be reimbursed by the Design-Builder for costs incurred by the Owner which are payable to a separate contractor because of delays, improperly timed activities or defective construction of the Design-Builder. The Owner shall be responsible to the Design-Builder for costs incurred by the Design-Builder because of delays, improperly timed activities, damage to the Work or defective construction of a separate contractor.

§ A.6.2.4 The Design-Builder shall promptly remedy damage wrongfully caused by the Design-Builder to completed or partially completed construction or to property of the Owner or separate contractors.

§ A.6.2.5 The Owner and each separate contractor shall have the same responsibilities for cutting and patching as are described in Section A.3.13.

§ A.6.3 OWNER’S RIGHT TO CLEAN UP

§ A.6.3.1 If a dispute arises among the Design-Builder, separate contractors and the Owner as to the responsibility under their respective contracts for maintaining the premises and surrounding area free from waste materials and rubbish, the Owner may clean up and the Owner shall allocate the cost among those responsible.

ARTICLE A.7 CHANGES IN THE WORK

§ A.7.1 GENERAL

§ A.7.1.1 Changes in the Work may be accomplished after execution of the Design-Build Contract, and without invalidating the Design-Build Contract, by Change Order or Construction Change Directive, subject to the limitations stated in this Article A.7 and elsewhere in the Design-Build Documents. All requests by Design-Builder for a Change Order shall be made to both Owner and Development Manager, so that Development Manager can advise Owner about the proposed Change Order.

§ A.7.1.2 A Change Order shall be based upon agreement between the Owner and Design-Builder. A Construction Change Directive may be issued by the Owner with or without agreement by the Design-Builder.

§ A.7.1.3 Changes in the Work shall be performed under applicable provisions of the Design-Build Documents, and the Design-Builder shall proceed promptly, unless otherwise provided in the Change Order or Construction Change Directive.

§ A.7.2 CHANGE ORDERS

§ A.7.2.1 A Change Order is a written instrument signed by the Owner and Design-Builder stating their agreement upon all of the following:

.1	a change in the Work;
.2	the amount of the adjustment, if any, in the Contract Sum; and
.3	the extent of the adjustment, if any, in the Contract Time.

§ A.7.2.2 If the Owner requests a proposal for a change in the Work from the Design-Builder and subsequently elects not to proceed with the change, a Change Order shall be issued to reimburse the Design-Builder for any costs incurred for estimating services, design services or preparation of proposed revisions to the Design-Build Documents.

§ A.7.2.3 Methods used in determining adjustments to the Contract Sum shall include those listed in Section A.7.3.3.

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§ A.7.3 CONSTRUCTION CHANGE DIRECTIVES

§ A.7.3.1 A Construction Change Directive is a written order signed by the Owner directing a change in the Work prior to agreement on adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may by Construction Change Directive, without invalidating the Design-Build Contract, order changes in the Work within the general scope of the Design-Build Documents consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly.

§ A.7.3.2 A Construction Change Directive shall be used in the absence of total agreement on the terms of a Change Order.

§ A.7.3.3 If the Construction Change Directive provides for an adjustment to the Contract Sum, the adjustment shall be based on one of the following methods:

.1	mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation;
.2	unit prices stated in the Design-Build Documents or subsequently agreed upon, or equitably adjusted as provided in Section A.4.1.9;
.3	cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or
.4	as provided in Section A.7.3.6.

§ A.7.3.4 Upon receipt of a Construction Change Directive, the Design-Builder shall promptly proceed with the change in the Work involved and advise the Owner of the Design-Builder’s agreement or disagreement with the method, if any, provided in the Construction Change Directive for determining the proposed adjustment in the Contract Sum or Contract Time.

§ A.7.3.5 A Construction Change Directive signed by the Design-Builder indicates the agreement of the Design-Builder therewith, including adjustment in Contract Sum and Contract Time or the method for determining them. Such agreement shall be effective immediately and shall be recorded as a Change Order.

§ A.7.3.6 If the Design-Builder does not respond promptly or disagrees with the method for adjustment in the Contract Sum, the method and the adjustment shall be determined by the Owner on the basis of reasonable expenditures and savings of those performing the Work attributable to the change, including, in case of an increase in the Contract Sum, a reasonable allowance for overhead and profit. In such case, and also under Section A.7.3.3.3, the Design-Builder shall keep and present, in such form as the Owner may prescribe, an itemized accounting together with appropriate supporting data. Unless otherwise provided in the Design-Build Documents, costs for the purposes of this Section A.7.3.6 shall be limited to the following:

.1	additional costs of professional services;
.2	costs of labor, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers’ compensation insurance;
.3	costs of materials, supplies and equipment, including cost of transportation, whether incorporated or consumed;
.4	rental costs of machinery and equipment, exclusive of hand tools, whether rented from the Design-Builder or others;
.5	costs of premiums for all bonds and insurance, permit fees, and sales, use or similar taxes related to the Work; and
.6	additional costs of supervision and field office personnel directly attributable to the change.

§ A.7.3.7 The amount of credit to be allowed by the Design-Builder to the Owner for a deletion or change that results in a net decrease in the Contract Sum shall be actual net cost. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of net increase, if any, with respect to that change.

§ A.7.3.8 Pending final determination of the total cost of a Construction Change Directive to the Owner, amounts not in dispute for such changes in the Work shall be included in Applications for Payment accompanied by a Change Order indicating the parties’ agreement with part or all of such costs. For any portion of such cost that remains in dispute, the Owner shall make an interim determination for purposes of monthly payment for those costs. That determination of cost shall adjust the Contract Sum on the same basis as a Change Order, subject to the right of the Design-Builder to disagree and assert a Claim in accordance with Article A.4.

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§ A.7.3.9 When the Owner and Design-Builder reach agreement concerning the adjustments in the Contract Sum and Contract Time, or otherwise reach agreement upon the adjustments, such agreement shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order.

§ A.7.4 MINOR CHANGES IN THE WORK

§ A.7.4.1 The Owner shall have authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and not inconsistent with the intent of the Design-Build Documents. Such changes shall be effected by written order and shall be binding on the Design-Builder. The Design-Builder shall carry out such written orders promptly.

§ A,7.5 CHANGE ORDER REQUESTS

§ A.7.5.1 Owner may propose Changes in the Work by issuing supplementary instructions to the Design-Builder describing the Change and requesting from the Design-Builder the submission of a Change Order Request. Where time does not permit the processing of a Change Order prior to commencing the Work, Design-Builder shall, upon written order from the Owner, proceed with the Work while concurrently proceeding with preparation and submission of a Change Order Request.

§ A.7.5.2 Within five (5) days of receipt of supplemental instructions or a written order to proceed with a Change in the Work, Design-Builder shall provide to the Owner a preliminary estimate of any change in the Contract Sum or Contract Time for such Change in the Work. In no more than fifteen (15) days thereafter, Design-Builder shall submit a Change Order Request to the Owner indicating the requested adjustment in the Contract Sum and Contract Time, if any, justified with an itemization of all costs of labor, materials, supplies, equipment and reasonable overhead and profit. Any request for an extension of time shall be justified by reference to the then current construction schedule. If no Change Order Request is submitted by Design-Builder within twenty (20) days of the initial Owner request therefore, and the Design-Builder does not submit such Change Order Request within five (5) days after written notice from the Owner to the Design-Builder following the expiration of such twenty (20) day period, it shall be conclusively presumed that the Change proposed in the supplementary instructions to the Design-Builder will not result in an increase in the Contract Sum or in the Contract Time and that the Design-Builder will perform the Work without any such increases. If Design-Builder is unable to submit the above information within the specified time limit, it shall notify the Owner in writing, setting forth for approval a date by which it will submit the information as well as a schedule for the performance of the Work.

§ A.7.5.3 Upon Owner’s acceptance of a Change Order Request, the Design-Builder shall prepare a Change Order for execution by the Owner and the Design-Builder adjusting the Contract Sum and Contract Time.

§ A.7.5.4 In the event that the Owner and Design-Builder do not agree on an adjustment in the Contract Sum or a change in the Contract Time, Design-Builder shall perform such work and the adjustment to the Contract Sum and Contract Time shall be submitted to arbitration unless such Change has been authorized by a Change Order executed in accordance with the Contract Documents.

§ A.7.5.5 No changes in the Work shall be the basis of an addition to the Contract Sum or a change in the Contract Time unless such Change has been authorized by a Change Order executed in accordance with the Contract Documents.

ARTICLE A.8 TIME

§ A.8.1 DEFINITIONS

§ A.8.1.1 Unless otherwise provided, Contract Time is the period of time, including authorized adjustments, allotted in the Design-Build Documents for Substantial Completion of the Work.

§ A.8.1.2 The date of commencement of the Work shall be the date stated in the Agreement unless provision is made for the date to be fixed in a notice to proceed issued by the Owner.

§ A.8.1.3 The date of Substantial Completion is the date determined by the Owner in accordance with Section A.9.8.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.8.1.4 The term “day” as used in the Design-Build Documents shall mean calendar day unless otherwise specifically defined.

§ A.8.2 PROGRESS AND COMPLETION

§ A.8.2.1 Time limits stated in the Design-Build Documents are of the essence of the Design-Build Contract. By executing the Design-Build Contract, the Design-Builder confirms that the Contract Time is a reasonable period for performing the Work.

§ A.8.2.2 The Design-Builder shall not knowingly, except by agreement or instruction of the Owner in writing, prematurely commence construction operations on the site or elsewhere prior to the effective date of insurance required by Article A.11 to be furnished by the Design-Builder and Owner. The date of commencement of the Work shall not be changed by the effective date of such insurance. Unless the date of commencement is established by the Design-Build Documents or a notice to proceed given by the Owner, the Design-Builder shall notify the Owner in writing not less than five days or other agreed period before commencing the Work to permit the timely filing of mortgages, mechanic’s liens and other security interests.

§ A.8.2.3 The Design-Builder shall proceed expeditiously with adequate forces and shall achieve Substantial Completion within the Contract Time.

§ A.8.3 DELAYS AND EXTENSIONS OF TIME

§ A.8.3.1 If the Design-Builder is delayed at any time in the commencement or progress of the Work by an act or neglect of the Owner or of a separate contractor employed by the Owner, or by changes ordered in the Work, or by labor disputes, fire, unusual delay in deliveries, unavoidable casualties or other causes beyond the Design-Builder’s control, or by delay authorized by the Owner pending resolution of disputes pursuant to the Design-Build Documents, or by other causes which the Owner determines may justify delay (collectively, “Force Majeure”), then the Contract Time shall be extended by Change Order for such reasonable time as the Owner may determine. Contractor shall give written notice of any such delay to Owner and Development Manager within five (5) business days of Contractor’s knowledge of the occurrence of such event. Notwithstanding anything to the contrary in this Section A.8.3.1, Force Majeure shall not excuse (i) Design-Builder’s failure to the extent the event of Force Majeure in question was caused by the negligent or intentional act or failure to act in violation of a contractual duty under this Agreement by Design-Builder; (ii) any material, equipment, or labor shortage that could have been reasonably anticipated, or (iii) a delay that could have been limited or avoided by timely notice to Owner and Development Manager of the delay. Each Major Contract (as defined below) shall provide that the Major Contractor has confirmed, to the best of its knowledge, that there are no material, equipment or labor shortages that will prevent its timely performance under the Major Contract. To the extent such Major Contractor cannot so confirm, Design-Builder shall notify Owner and Development Manager. “Major Contract” shall be defined as a contract for portions of the Work valued in excess of **.

§ A.8.3.2 Claims relating to time shall be made in accordance with applicable provisions of Section A.4.1.7.

§ A.8.3.3 This Section A.8.3 does not preclude recovery of damages for delay by either party under other provisions of the Design-Build Documents.

§ A.8.3.4 In the event of any delay in the process of the Work, the Design-Builder shall promptly update all construction schedules and schedules of values.

ARTICLE A.9 PAYMENTS AND COMPLETION

§ A.9.1 CONTRACT SUM

§ A.9.1.1 The Contract Sum is stated in the Design-Build Documents and, including authorized adjustments, is the total amount payable by the Owner to the Design-Builder for performance of the Work under the Design-Build Documents.

§ A.9.2 SCHEDULE OF VALUES

§ A.9.2.1 Before the first Application for Payment, where the Contract Sum is based upon a Stipulated Sum or the Cost of the Work plus Contractor’s Fee with a Guaranteed Maximum Price, the Design-Builder shall submit to the Owner an initial schedule of values allocated to various portions of the Work prepared in such form and supported by such data to substantiate its accuracy as the Owner may require. This schedule, unless objected to by the Owner, shall be used as a basis for reviewing the Design-Builder’s Applications for Payment. The schedule of values may be updated periodically to reflect changes in the allocation of the Contract Sum.

^** This portion has been redacted pursuant to a confidential treatment request.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.9.3 APPLICATIONS FOR PAYMENT

§ A.9.3.1 In accordance with Section 5.1., the Design-Builder shall submit to the Owner an itemized Application for Payment for operations completed in accordance with the current schedule of values. Such application shall be notarized, if required, and supported by such data substantiating the Design-Builder’s right to payment as the Owner may require, such as copies of requisitions from Contractors and material suppliers, and reflecting retainage if provided for in the Design-Build Documents:

§ A.9.3.1.1 As provided in Section A.7.3.8, such applications may include requests for payment on account of Changes in the Work which have been properly authorized by Construction Change Directives but are not yet included in Change Orders.

§ A.9.3.1.2 Such applications may not include requests for payment for portions of the Work for which the Design-Builder does not intend to pay to a Contractor or material supplier or other parties providing services for the Design-Builder, unless such Work has been performed by others whom the Design-Builder intends to pay.

§ A.9.3.2 Unless otherwise provided in the Design-Build Documents, payments shall be made on account of materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work. If approved in advance by the Owner, payment may similarly be made for materials and equipment suitably stored off the site at a location agreed upon in writing. Payment for materials and equipment stored on or off the site shall be conditioned upon compliance by the Design-Builder with procedures satisfactory to the Owner to establish the Owner’s title to such materials and equipment or otherwise protect the Owner’s interest and shall include the costs of applicable insurance, storage and transportation to the site for such materials and equipment stored off the site.

§ A.9.3.3 The Design-Builder warrants that title to all Work other than Instruments of Service covered by an Application for Payment will pass to the Owner no later than the time of payment. The Design-Builder further warrants that, upon submittal of an Application for Payment, all Work for which Certificates for Payment have been previously issued and payments received from the Owner shall, to the best of the Design-Builder’s knowledge, information and belief, be free and clear of liens, Claims, security interests or encumbrances in favor of the Design-Builder, Contractors, Subcontractors, material suppliers, or other persons or entities making a claim by reason of having provided labor, materials and equipment relating to the Work. The filing by any person or entity of a notice of mechanic’s lien against the Project with respect to Work as to which the Owner has previously paid the Design-Builder (less any retainage or permitted offset) shall constitute a default if not bonded off, discharged or recorded, or satisfied within thirty (30) days after the Owner notifies the Design-Builder thereof. In the event of such a default, the Owner, without prejudice to any other right or remedy, shall have the right but not the obligation to pay, settle, or compromise such lien as it deems appropriate, and the Owner shall have no liability to the Design-Builder in respect of such payment, settlement, or compromise, and shall have the right to offset the cost thereof (including without limitation reasonable attorney’s fees and other costs) against the next payment to the Design-Builder.

§ A.9.3.4 Prior to each Application for Payment and as a condition to submission thereof, the Design-Builder shall submit to the Development Manager for review accurate and legible working copies of up-to-date record drawings of the Work, reflecting all changes in the Work effected in construction to date. Prior to final completion, working drawings maintained in an orderly fashion at the site office may be used for such purpose. A final, fully consolidated set of sepias shall be submitted as a condition to final completion. The Design-Builder shall make such drawings available to the Owner for duplication during the progress of the Work and when reasonably requested by the Owner.

§ A.9.4 ACKNOWLEDGEMENT OF APPLICATION FOR PAYMENT

§ A.9.4.1 The Owner shall, within thirty (30) days after receipt of the Design-Builder’s Application for Payment, issue to the Design-Builder a written acknowledgement of receipt of the Design-Builder’s Application for Payment indicating the amount the Owner has determined to be properly due and, if applicable, the reasons for withholding payment in whole or in part.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.9.5 DECISIONS TO WITHHOLD PAYMENT

§ A.9.5.1 The Owner may withhold a payment in whole or in part to the extent reasonably necessary to protect the Owner due to the Owner’s determination that the Work has not progressed to the point indicated in the Application for Payment or that the quality of Work is not in accordance with the Design-Build Documents. The Owner may also withhold a payment or, because of subsequently discovered evidence, may nullify the whole or a part of an Application for Payment previously issued to such extent as may be necessary to protect the Owner from loss for which the Design-Builder is responsible, including loss resulting from acts and omissions, because of the following:

.1	defective Work not remedied;
.2	third-party claims filed or reasonable evidence indicating probable filing of such claims unless security acceptable to the Owner is provided by the Design-Builder;
.3	failure of the Design-Builder to make payments properly to Contractors or for design services labor, materials or equipment;
.4	reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Sum;
.5	damage to the Owner or a separate contractor;
.6	reasonable evidence that the Work will not be completed within the Contract Time and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay; or
.7	persistent failure to carry out the Work in accordance with the Design-Build Documents.
.8	rejection of the Work or any material part of the Work by any governmental or quasi-governmental authority having jurisdiction over the Project.

§ A.9.5.2 When the above reasons for withholding payment are removed, payment will be made for amounts previously withheld.

§ A.9.6 PROGRESS PAYMENTS

§ A.9.6.1 After the Owner has issued a written acknowledgement of receipt of the Design-Builder’s Application for Payment, the Owner shall make payment of the amount, in the manner and within the time provided in the Design-Build Documents. The Owner may refuse to make payment in whole or in part on any Certificate for Payment to the extent necessary in Development Manager’s judgment to correct or protect against any default of the Contractor, including but not limited to, those defaults set forth in Clauses 9.5.1.1 through 9.5.1.8. The Owner shall not be deemed in default by reasons of withholding payment of any amount which is up to two (2) times the amount which the Development Manager estimates to be necessary to protect against and correct any such default while such default remains uncured.

§ A.9.6.2 The Design-Builder shall promptly pay the Architect, each design professional and other consultants retained directly by the Design-Builder, upon receipt of payment from the Owner, out of the amount paid to the Design-Builder on account of each such party’s respective portion of the Work, the amount to which each such party is entitled.

§ A.9.6.3 The Design-Builder shall promptly pay each Contractor, upon receipt of payment from the Owner, out of the amount paid to the Design-Builder on account of such Contractor’s portion of the Work, the amount to which said Contractor is entitled, reflecting percentages actually retained from payments to the Design-Builder on account of the Contractor’s portion of the Work. The Design-Builder shall, by appropriate agreement with each Contractor, require each Contractor to make payments to Subcontractors in a similar manner.

§ A.9.6.4 The Owner shall have no obligation to pay or to see to the payment of money to a Contractor except as may otherwise be required by law.

§ A.9.6.5 Payment to material suppliers shall be treated in a manner similar to that provided in Sections A.9.6.3 and A.9.6.4.

§ A.9.6.6 A progress payment, or partial or entire use or occupancy of the Project by the Owner, shall not constitute acceptance of Work not in accordance with the Design-Build Documents.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.9.6.7 Unless the Design-Builder provides the Owner with a payment bond in the full penal sum of the Contract Sum, payments received by the Design-Builder for Work properly performed by Contractors and suppliers shall be held by the Design-Builder for those Contractors or suppliers who performed Work or furnished materials, or both, under contract with the Design-Builder for which payment was made by the Owner. Nothing contained herein shall require money to be placed in a separate account and not be commingled with money of the Design-Builder, shall create any fiduciary liability or tort liability on the part of the Design-Builder for breach of trust or shall entitle any person or entity to an award of punitive damages against the Design-Builder for breach of the requirements of this provision.

§ A.9.7 FAILURE OF PAYMENT

§ A.9.7.1 If for reasons other than those enumerated in Section A.9.5.1, the Owner does not issue a payment within the time period required by Section 5.1.3 of the Agreement, then the Design-Builder may, upon seven additional days’ written notice to the Owner, stop the Work until payment of the amount owing has been received. The Contract Time shall be extended appropriately and the Contract Sum shall be increased by the amount of the Design-Builder’s reasonable costs of shutdown, delay and start-up, plus interest as provided for in the Design-Build Documents. Notwithstanding anything herein to the contrary, the Design-Builder may not stop the Work or make any claim as a result of any payment or portion thereof being properly withheld in accordance with Subparagraph 9.5.1 or Subparagraph 9.6.1. If the Design-Builder does order the Work stopped, or if the Work is stopped in whole or in part as a result of any payment or portion thereof being properly withheld, the Design-Builder shall be liable for any damages from delay or otherwise that arise because of such stoppage.

§ A.9.8 SUBSTANTIAL COMPLETION

§ A.9.8.1 Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Design-Build Documents and all final inspections have been passed successfully and all permits (including issuance of a temporary certificate of occupancy for such work) have been obtained, so that the Owner can occupy or use the Work or a portion thereof for its intended use. The following shall also be required as a condition to Substantial Completion: (i) all extra or stock items have been received by the Owner checked against the Design-Builder’s inventory, and stored in good condition in the on-site locations designated by the Owner, (ii) final readings have been take of all utility meters used for construction purposes, and all utility charges have been paid in full, (iii) all necessary instruction and training has been provided to the Owner’s personnel, as required by the Contract Documents, (iv) the Owner and the Design-Builder have agreed on all punch list items and the aggregate value thereof, (v) all warranties, operation manuals, material data sheets, and similar documents have been organized, indexed and delivered to the Owner, (vi) all project systems included in the Work are operational as designed, scheduled and commissioned, (vii) the only remaining Work shall be minor in nature so that (1) the building could be occupied without material inconvenience (affecting the Owner’s ability to use the buildings for its intended purposes), on that date; (2) the incomplete Work would not materially detract from the appearance of the Project as a completed facility; and (3) substantially all of the punchlist Work (excepting only items which due to season or their nature cannot be completed within such sixty (60) day period) can be completed within sixty (60) consecutive calendar days following the date of Substantial Completion, and (viii) final, fully consolidated, accurate and legible record drawings of the work on sepias.

§ A.9.8.2 When the Design-Builder considers that the Work, or a portion thereof which the Owner agrees to accept separately, is substantially complete, the Design-Builder shall prepare and submit to the Owner a comprehensive list of items to be completed or corrected prior to final payment. Failure to include an item on such list does not alter the responsibility of the Design-Builder to complete all Work in accordance with the Design-Build Documents.

§ A.9.8.3 Upon receipt of the Design-Builder’s list, the Owner shall make an inspection to determine whether the Work or designated portion thereof is substantially complete. If the Owner’s inspection discloses any item, whether or not included on the Design-Builder’s list, which is not substantially complete, the Design-Builder shall complete or correct such item. In such case, the Design-Builder shall then submit a request for another inspection by the Owner to determine whether the Design-Builder’s Work is substantially complete.

§ A.9.8.4 In the event of a dispute regarding whether the Design-Builder’s Work is substantially complete, the dispute shall be resolved pursuant to Article A.4.

§ A.9.8.5 When the Work or designated portion thereof is substantially complete, the Design-Builder shall prepare for the Owner’s signature an Acknowledgement of Substantial Completion which, when signed by the Owner, shall establish (1) the date of Substantial Completion of the Work, (2) responsibilities between the Owner and Design-Builder for security, maintenance, heat, utilities, damage to the Work and insurance, and (3) the time within which the Design-Builder shall finish all items on the list accompanying the Acknowledgement. When the Owner’s inspection discloses that the Work or a designated portion thereof is substantially complete, the Owner shall sign the Acknowledgement of Substantial Completion. Warranties required by the Design-Build Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Acknowledgement of Substantial Completion.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.9.8.6 Upon execution of the Acknowledgement of Substantial Completion and consent of surety, if any, the Owner shall make payment of retainage applying to such Work or designated portion thereof. Such payment shall be adjusted for Work that is incomplete or not in accordance with the requirements of the Design-Build Documents.

§ A.9.9 PARTIAL OCCUPANCY OR USE

§ A.9.9.1 The Owner may occupy or use any completed or partially completed portion of the Work at any stage when such portion is designated by separate agreement with the Design-Builder, provided such occupancy or use is consented to by the insurer, if so required by the insurer, and authorized by public authorities having jurisdiction over the Work. Such partial occupancy or use may commence whether or not the portion is substantially complete, provided the Owner and Design-Builder have accepted in writing the responsibilities assigned to each of them for payments, retainage, if any, security, maintenance, heat, utilities, damage to the Work and insurance, and have agreed in writing concerning the period for completion or correction of the Work and commencement of warranties required by the Design-Build Documents. When the Design-Builder considers a portion substantially complete, the Design-Builder shall prepare and submit a list to the Owner as provided under Section A.9.8.2. Consent of the Design-Builder to partial occupancy or use shall not be unreasonably withheld. The stage of the progress of the Work shall be determined by written agreement between the Owner and Design-Builder.

§ A.9.9.2 Immediately prior to such partial occupancy or use, the Owner and Design-Builder shall jointly inspect the area to be occupied or portion of the Work to be used to determine and record the condition of the Work.

§ A.9.9.3 Unless otherwise agreed upon, partial occupancy or use of a portion or portions of the Work shall not (i) constitute acceptance of Work not complying with the requirements of the Design-Build Documents, or (ii) relieve Design-Builder of responsibility for loss of damages arising from defects in, or malfunctioning of, any work, material or equipment nor from any other unfilled obligations of Design-Builder under the Contract Documents..

§ A.9.10 FINAL COMPLETION AND FINAL PAYMENT

§ A.9.10.1 Upon receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Owner shall promptly make such inspection and, when the Owner finds the Work acceptable under the Design-Build Documents and fully performed, the Owner shall, subject to Section A.9.10.2, promptly make final payment to the Design-Builder.

§ A.9.10.2 Neither final payment nor any remaining retained percentage will become due until the Design-Builder submits to the Owner (1) an affidavit that payrolls, bills for materials and equipment, and other indebtedness connected with the Work for which the Owner or the Owner’s property might be responsible or encumbered (less amounts withheld by Owner) have been paid or otherwise satisfied, (2) a certificate evidencing that insurance required by the Design-Build Documents to remain in force after final payment is currently in effect and will not be cancelled or allowed to expire until at least 30 days’ prior written notice has been given to the Owner, (3) a written statement that the Design-Builder knows of no substantial reason that the insurance will not be renewable to cover the period required by the Design-Build Documents, (4) consent of surety, if any, to final payment, (5) receipts, releases and waivers of liens, claims, security interests or encumbrances arising out of the Design-Build Contract, to the extent and in such form as may be designated by the Owner, (6) a full set of reproducible as-built drawings, consisting of the Construction Documents marked by the Construction Manager to show all Change Orders, Construction Change Directive, field conditions, field deviations, and all other “as-built” conditions, and (7) a final certificate of occupancy for each of the buildings which are part of the Project. If a Contractor refuses to furnish a release or waiver required by the Owner, the Design-Builder may furnish a bond satisfactory to the Owner to indemnify the Owner against such lien. If such lien remains unsatisfied after payments are made, the Design-Builder shall refund to the Owner all money that the Owner may be liable to pay in connection with the discharge of such lien, including all costs and reasonable attorneys’ fees.

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§ A.9.10.3 If, after the Owner determines that the Design-Builder’s Work or designated portion thereof is substantially completed, final completion thereof is materially delayed through no fault of the Design-Builder or by issuance of a Change Order or a Construction Change Directive affecting final completion, the Owner shall, upon application by the Design-Builder, make payment of the balance due for that portion of the Work fully completed and accepted. If the remaining balance for Work not fully completed or corrected is less than retainage stipulated in the Design-Build Documents, and if bonds have been furnished, the written consent of surety to payment of the balance due for that portion of the Work fully completed and accepted shall be submitted by the Design-Builder. Such payment shall be made under terms and conditions governing final payment, except that it shall not constitute a waiver of claims. If final completion has not occurred within ** after Substantial Completion, other than for reasons not the fault of the Design-Builder, then, in addition to whatever rights it may have, the Owner shall have the right, upon ten (10) days additional notice to Design-Builder, to complete the Work and then receive payment for the reasonable cost thereof from the Design-Builder, and to offset any such costs from any payments remaining due to the Design-Builder.

§ A.9.10.4 The making of final payment shall constitute a waiver of Claims by the Owner except those arising from:

.1	liens, Claims, security interests or encumbrances arising out of the Design-Build Documents and unsettled;
.2	failure of the Work to comply with the requirements of the Design-Build Documents; or
.3	terms of special warranties required by the Design-Build Documents.

§ A.9.10.5 Acceptance of final payment by the Design-Builder, a Contractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment.

§ A.9.10.6 With the final Application for Payment, the Design-Builder shall submit a certification signed on its behalf, in form and substance reasonable acceptable to the Owner, certifying that the Work has been fully completed in accordance with the plans and specifications therefore.

ARTICLE A.10 PROTECTION OF PERSONS AND PROPERTY

§ A.10.1 SAFETY PRECAUTIONS AND PROGRAMS

§ A.10.1.1 The Design-Builder shall be responsible for initiating and maintaining all safety precautions and programs in connection with the performance of the Design-Build Contract.

§ A.10.2 SAFETY OF PERSONS AND PROPERTY

§ A.10.2.1 The Design-Builder shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to:

.1	employees on the Work and other persons who may be affected thereby;
.2	the Work and materials and equipment to be incorporated therein, whether in storage on or off the site or under the care, custody or control of the Design-Builder or the Design-Builder’s Contractors or Subcontractors; and
.3	other property at the site or adjacent thereto, such as trees, shrubs, lawns, walks, pavements, roadways, structures and utilities not designated for removal, relocation or replacement in the course of construction.

§ A.10.2.2 The Design-Builder shall give notices and comply with applicable laws, ordinances, rules, regulations and lawful orders of public authorities bearing on safety of persons or property or their protection from damage, injury or loss.

§ A.10.2.2.1 If the Design-Builder fails to give such notices or fails to comply with such laws, ordinances, rules, regulations and lawful orders, it shall be liable for an shall indemnify and hold harmless. the Owner, OSI Pharmaceuticals, Inc., Development Manager and WIDA and their respective partners, principals, officers, shareholders, directors, employees, officers and agents, against any resulting fines, penalties, judgments, or damages, including reasonable attorney’s fees, imposed on or incurred by the parties indemnified hereunder.

§ A.10.2.3 The Design-Builder shall erect and maintain, as required by existing conditions and performance of the Design-Build Documents, reasonable safeguards for safety and protection, including posting danger signs and other warnings against hazards, promulgating safety regulations and notifying owners and users of adjacent sites and utilities.

^** This portion has been redacted pursuant to a confidential treatment request.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.10.2.4 When use or storage of explosives or other hazardous materials or equipment or unusual methods are necessary for execution of the Work, the Design-Builder shall exercise utmost care and carry on such activities under supervision of properly qualified personnel.

§ A.10.2.5 The Design-Builder shall promptly remedy damage and loss (other than damage or loss insured under property insurance required by the Design-Build Documents) to property referred to in Sections A.10.2.1.2 and A.10.2.1.3 caused in whole or in part by the Design-Builder, the Architect, a Contractor, a Subcontractor, or anyone directly or indirectly employed by any of them or by anyone for whose acts they may be liable and for which the Design-Builder is responsible under Sections A.10.2.1.2 and A.10.2.1.3, except damage or loss attributable to acts or omissions of the Owner or anyone directly or indirectly employed by the Owner, or by anyone for whose acts the Owner may be liable, and not attributable to the fault or negligence of the Design-Builder. The foregoing obligations of the Design-Builder are in addition to the Design-Builder’s obligations under Section A.3.17.

§ A.10.2.6 The Design-Builder shall designate in writing to the Owner a responsible individual whose duty shall be the prevention of accidents.

§ A.10.2.7 The Design-Builder shall not load or permit any part of the construction or site to be loaded so as to endanger its safety.

§ A.10.2.8 The Design-Builder shall promptly report to the Owner and Development Manager in writing all accidents arising out of or in connection with the Work that cause death, personal injury, or property damage. The report shall give full details, including statements of witnesses, hospital reports and other information in the possession of the Design-Builder. In addition, in the event of any serious injury or damage, the Design-Builder shall immediately notify the Owner and Development Manager by telephone of such accident.

§ A.10.3 HAZARDOUS MATERIALS

§ A.10.3.1 If reasonable precautions will be inadequate to prevent foreseeable bodily injury or death to persons resulting from a material or substance, including but not limited to asbestos or polychlorinated biphenyl (PCB), encountered on the site by the Design-Builder, the Design-Builder shall, upon recognizing the condition, immediately stop Work in the affected area and report the condition to the Owner.

§ A.10.3.2 The Owner shall obtain the services of a licensed laboratory to verify the presence or absence of the material or substance reported by the Design-Builder and, in the event such material or substance is found to be present, to verify that it has been rendered harmless. Unless otherwise required by the Design-Build Documents, the Owner shall furnish in writing to the Design-Builder the names and qualifications of persons or entities who are to perform tests verifying the presence or absence of such material or substance or who are to perform the task of removal or safe containment of such material or substance. The Design-Builder shall promptly reply to the Owner in writing stating whether or not the Design-Builder has reasonable objection to the persons or entities proposed by the Owner. If the Design-Builder has an objection to a person or entity proposed by the Owner, the Owner shall propose another to whom the Design-Builder has no reasonable objection. When the material or substance has been rendered harmless, work in the affected area shall resume upon written agreement of the Owner and Design-Builder. The Contract Time shall be extended appropriately, and the Contract Sum shall be increased in the amount of the Design-Builder’s reasonable additional costs of shutdown, delay and start-up, which adjustments shall be accomplished as provided in Article A.7.

§ A.10.3.3 To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Design-Builder, Contractors, Subcontractors, Architect, Architect’s consultants and the agents and employees of any of them from and against Claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work in the affected area if in fact the material or substance exists on site as of the date of the Agreement, is not disclosed in the Design-Build Documents and presents the risk of bodily injury or death as described in Section A.10.3.1 and has not been rendered harmless, provided that such Claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death or to injury to or destruction of tangible property (other than the Work itself) to the extent that such damage, loss or expense is not due to the negligence of the Design-Builder, Contractors, Subcontractors, Architect, Architect’s consultants and the agents and employees of any of them. The Design-Builder agrees to indemnify, defend and hold the Owner, OSI Pharmaceuticals, Inc., the Development Manager and WIDA and their agents, employees, principals, officers, shareholders, directors and consultants harmless from and against any and all claims, suits, demands, losses and expenses, including attorney’s fees and all legal expenses incurred on appeal accruing or resulting to any and all persons, firms or any legal entity on account of any damage or loss to property or persons, including death, arising out of portions of the Work, which contain injurious amounts of Hazardous Materials not required by Contract and brought onsite by Design-Builder, except to the extent that the indemnified party is found to be liable for such damages or losses by a court of competent jurisdiction.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.10.4 The Owner shall not be responsible under Section A.10.3 for materials and substances brought to the site by the Design-Builder unless such materials or substances were required by the Design-Build Documents.

§ A.10.5 If, without negligence on the part of the Design-Builder, the Design-Builder is held liable for the cost of remediation of a hazardous material or substance solely by reason of performing Work as required by the Design-Build Documents, the Owner shall indemnify the Design-Builder for all cost and expense thereby incurred.

§ A.10.6 EMERGENCIES

§ A.10.6.1 In an emergency affecting safety of persons or property, the Design-Builder shall act, at the Design-Builder’s discretion, to prevent threatened damage, injury or loss. Additional compensation or extension of time claimed by the Design-Builder on account of an emergency shall be determined as provided in Section A.4.1.7 and Article A.7.

ARTICLE A.11 INSURANCE AND BONDS

§ A.11.1 Except as may otherwise be set forth in the Agreement or elsewhere in the Design-Build Documents, the Owner and Design-Builder shall purchase and maintain the following types of insurance with limits of liability and deductible amounts and subject to such terms and conditions, as set forth in this Article A.11.

§ A.11.2 DESIGN-BUILDER’S LIABILITY INSURANCE

§ A.11.2.1 The Design-Builder shall purchase from and maintain in a company or companies lawfully authorized to do business in the State of New York and having an A.M. Best’s rating of at least A-/VIII, such insurance as will protect the Design-Builder from claims set forth below that may arise out of or result from the Design-Builder’s operations under the Design-Build Contract and for which the Design-Builder may be legally liable, whether such operations be by the Design-Builder, by a Contractor or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable:

.1	claims under workers’ compensation, disability benefit and other similar employee benefit acts which are applicable to the Work to be performed;
.2	claims for damages because of bodily injury, occupational sickness or disease, or death of the Design-Builder’s employees;
.3	claims for damages because of bodily injury, sickness or disease, or death of any person other than the Design-Builder’s employees;
.4	claims for damages insured by usual personal injury liability coverage;
.5	claims for damages, other than to the Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom;
.6	claims for damages because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle;
.7	claims for bodily injury or property damage arising out of completed operations; and
.8	claims involving contractual liability insurance applicable to the Design-Builder’s obligations under Section A.3.17.

§ A.11.2.2 The insurance required by Section A.11.2.1 shall be written for not less than limits of liability specified in Exhibit C of the Design-Build Documents or required by law, whichever coverage is greater. Coverages, whether written on an occurrence or claims-made basis, shall be maintained without interruption from date of commencement of the Work until date of final payment and termination of any coverage required to be maintained after final payment.

§ A.11.2.3 Certificates of insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. These certificates and the insurance policies required by this Section A.11.2 shall contain a provision that coverages afforded under the policies will not be canceled or allowed to expire until at least 30 days’ prior written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment and are reasonably available, an additional certificate evidencing continuation of such coverage shall be submitted with the final Application for Payment as required by Section A.9.10.2. Information concerning reduction of coverage on account of revised limits or claims paid under the General Aggregate, or both, shall be furnished by the Design-Builder with reasonable promptness in accordance with the Design-Builder’s information and belief.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.11.3 OWNER’S LIABILITY INSURANCE

§ A.11.3.1 The Owner shall be responsible for purchasing and maintaining the Owner’s usual liability insurance, which shall be non-contributory to the insurance provided by the Contractor.

§ A.11.4 PROPERTY INSURANCE

§ A.11.4.1 Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance written on a builder’s risk, “all-risk” or equivalent policy form in the amount of the initial Contract Sum, plus the value of subsequent Design-Build Contract modifications and cost of materials supplied or installed by others, comprising total value for the entire Project at the site on a replacement cost basis with a deductible not to exceed **. Such property insurance shall be maintained, unless otherwise provided in the Design-Build Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Section A.9.10 or until no person or entity other than the Owner has an insurable interest in the property required by this Section A.11.4 to be covered, whichever is later. This insurance shall include interests of the Owner, Design-Builder, Contractors and Subcontractors in the Project.

§ A.11.4.1.1 Property insurance shall be on an “all-risk” or equivalent policy form and shall include, without limitation, insurance against the perils of fire (with extended coverage) and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, earthquake, flood, windstorm, falsework, testing and startup, temporary buildings and debris removal, including demolition occasioned by enforcement of any applicable legal requirements, and shall cover reasonable compensation for Design-Builder’s services and expenses required as a result of such insured loss.

§ A.11.4.1.2 If the Owner does not intend to purchase such property insurance required by the Design-Build Contract and with all of the coverages in the amount described above, the Owner shall so inform the Design-Builder in writing prior to commencement of the Work. The Design-Builder may then effect insurance that will protect the interests of the Design-Builder, Contractors and Subcontractors in the Work, and, by appropriate Change Order, the cost thereof shall be charged to the Owner. If the Design-Builder is damaged by the failure or neglect of the Owner to purchase or maintain insurance as described above without so notifying the Design-Builder in writing, then the Owner shall bear all reasonable costs properly attributable thereto.

§ A.11.4.1.3 If the property insurance requires deductibles, the Owner shall pay costs not covered because of such deductibles.

§ A.11.4.1.4 This property insurance shall cover portions of the Work stored off the site and also portions of the Work in transit.

§ A.11.4.1.5 Partial occupancy or use in accordance with Section A.9.9 shall not commence until the insurance company or companies providing property insurance have consented to such partial occupancy or use, by endorsement or otherwise. The Owner and the Design-Builder shall take reasonable steps to obtain consent of the insurance company or companies and shall, without mutual written consent, take no action with respect to partial occupancy or use that would cause cancellation, lapse or reduction of insurance.

§ A.11.4.2 Boiler and Machinery Insurance. The Owner shall purchase and maintain boiler and machinery insurance required by the Design-Build Documents or by law, which shall specifically cover such insured objects during installation and until final acceptance by the Owner; this insurance shall include interests of the Owner, Design-Builder, Contractors and Subcontractors in the Work, and the Owner and Design-Builder shall be named insureds.

^** This portion has been redacted pursuant to a confidential treatment request.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.11.4.3 Loss of Use Insurance. The Owner, at the Owner’s option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner’s property due to fire or other hazards, however caused. The Owner waives all rights of action against the Design-Builder, Architect, the Design-Builder’s other design professionals, if any, Contractors and Subcontractors for loss of use of the Owner’s property, including consequential losses due to fire or other hazards, however caused.

§ A.11.4.4 If the Design-Builder requests in writing that insurance for risks other than those described herein or other special causes of loss be included in the property insurance policy, the Owner shall, if possible, include such insurance, and the cost thereof shall be charged to the Design-Builder by appropriate Change Order.

§ A.11.4.5 If during the Project construction period the Owner insures properties, real or personal or both, at or adjacent to the site by property insurance under policies separate from those insuring the Project, or if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Section A.11.4.7 for damages caused by fire or other causes of loss covered by this separate property insurance. All separate policies shall provide this waiver of subrogation by endorsement or otherwise.

§ A.11.4.6 Before an exposure to loss may occur, the Owner shall file with the Design-Builder a copy of each policy that includes insurance coverages required by this Section A.11.4. Each policy shall contain all generally applicable conditions, definitions, exclusions and endorsements related to this Project. Each policy shall contain a provision that the policy will not be canceled or allowed to expire and that its limits will not be reduced until at least 30 days’ prior written notice has been given to the Design-Builder.

§ A.11.4.7 Waivers of Subrogation. The Owner and Design-Builder waive all rights against each other and any of their consultants, separate contractors described in Section A.6.1, if any, Contractors, Subcontractors, agents and employees, each of the other, and any of their contractors, subcontractors, agents and employees, for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Section A.11.4 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary. The Owner or Design-Builder, as appropriate, shall require of the separate contractors described in Section A.6.1, if any, and the Contractors, Subcontractors, agents and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein. The policies shall provide such waivers of subrogation by endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, even though the person or entity did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.

§ A.11.4.8 A loss insured under Owner’s property insurance shall be adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Section A.11.4.10. The Design-Builder shall pay Contractors their just shares of insurance proceeds received by the Design-Builder, and, by appropriate agreements, written where legally required for validity, shall require Contractors to make payments to their Subcontractors in similar manner.

§ A.11.4.9 If required in writing by a party in interest, the Owner as fiduciary shall, upon occurrence of an insured loss, give bond for proper performance of the Owner’s duties. The cost of required bonds shall be charged against proceeds received as fiduciary. The Owner shall deposit in a separate account proceeds so received, which the Owner shall distribute in accordance with such agreement as the parties in interest may reach. If after such loss no other special agreement is made and unless the Owner terminates the Design-Build Contract for convenience, replacement of damaged property shall be performed by the Design-Builder after notification of a Change in the Work in accordance with Article A.7.

§ A.11.4.10 The Owner as fiduciary shall have power to adjust and settle a loss with insurers unless one of the parties in interest shall object in writing within five days after occurrence of loss to the Owner’s exercise of this power.; The Owner as fiduciary shall, in the case of a decision or award, make settlement with insurers in accordance with directions of a decision or award. If distribution of insurance proceeds by arbitration is required, the arbitrators will direct such distribution.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.11.5 PERFORMANCE BOND AND PAYMENT BOND

§ A.11.5.1 The Owner has elected not to require that the Design-Builder furnish bonds covering the performance of the Design-Build Contract and payment of obligations arising thereunder.

ARTICLE A.12 UNCOVERING AND CORRECTION OF WORK

§ A.12.1 UNCOVERING OF WORK

§ A.12.1.1 If a portion of the Work is covered contrary to requirements specifically expressed in the Design-Build Documents, it must be uncovered for the Owner’s examination and be replaced at the Design-Builder’s expense without change in the Contract Time.

§ A.12.1.2 If a portion of the Work has been covered which the Owner has not specifically requested to examine prior to it’s being covered, the Owner may request to see such Work and it shall be uncovered by the Design-Builder. If such Work is in accordance with the Design-Build Documents, costs of uncovering and replacement shall, by appropriate Change Order, be at the Owner’s expense. If such Work is not in accordance with the Design-Build Documents, correction shall be at the Design-Builder’s expense unless the condition was caused by the Owner or a separate contractor, in which event the Owner shall be responsible for payment of such costs.

§ A.12.2 CORRECTION OF WORK

§ A.12.2.1 BEFORE OR AFTER SUBSTANTIAL COMPLETION.

§ A.12.2.1.1 The Design-Builder shall promptly correct Work rejected by the Owner or failing to conform to the requirements of the Design-Build Documents, whether discovered before or after Substantial Completion and whether or not fabricated, installed or completed. Costs of correcting such rejected Work, including additional testing, shall be at the Design-Builder’s expense.

§ A.12.2.2 AFTER SUBSTANTIAL COMPLETION

§ A.12.2.2.1 In addition to the Design-Builder’s obligations under Section A.3.5, if, within one year after the date of Substantial Completion or after the date for commencement of warranties established under Section A.9.8.5 or by terms of an applicable special warranty required by the Design-Build Documents, any of the Work is found to be not in accordance with the requirements of the Design-Build Documents, the Design-Builder shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Design-Builder a written acceptance of such condition. The Owner shall give such notice promptly after discovery of the condition. During the one-year period for correction of Work, if the Owner fails to notify the Design-Builder and give the Design-Builder an opportunity to make the correction, the Owner waives the rights to require correction by the Design-Builder and to make a claim for breach of warranty. If the Design-Builder fails to correct non-conforming Work within a reasonable time during that period after receipt of notice from the Owner, the Owner may correct it in accordance with Section A.2.5.

§ A.12.2.2.2 The one-year period for correction of Work shall be extended with respect to portions of Work first performed after Substantial Completion by the period of time between Substantial Completion and the actual performance of the Work.

§ A.12.2.2.3 The one-year period for correction of Work shall not be extended by corrective Work performed by the Design-Builder pursuant to this Section A.12.2.

§ A.12.2.3 The Design-Builder shall remove from the site portions of the Work which are not in accordance with the requirements of the Design-Build Documents and are neither corrected by the Design-Builder nor accepted by the Owner.

§ A.12.2.4 The Design-Builder shall bear the cost of correcting destroyed or damaged construction, whether completed or partially completed, of the Owner or separate contractors caused by the Design-Builder’s correction or removal of Work which is not in accordance with the requirements of the Design-Build Documents.

§ A.12.2.5 Nothing contained in this Section A.12.2 shall be construed to establish a period of limitation with respect to other obligations the Design-Builder might have under the Design-Build Documents. Establishment of the one-year period for correction of Work as described in Section A.12.2.2 relates only to the specific obligation of the Design-Builder to correct the Work, and has no relationship to the time within which the obligation to comply with the Design-Build Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Design-Builder’s liability with respect to the Design-Builder’s obligations other than specifically to correct the Work.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.12.3 ACCEPTANCE OF NONCONFORMING WORK

§ A.12.3.1 If the Owner prefers to accept Work not in accordance with the requirements of the Design-Build Documents, the Owner may do so instead of requiring its removal and correction, in which case the Contract Sum will be equitably adjusted by Change Order. Such adjustment shall be effected whether or not final payment has been made.

ARTICLE A.13 MISCELLANEOUS PROVISIONS

§ A.13.1 GOVERNING LAW

§ A.13.1.1 The Design-Build Contract shall be governed by the law of the place where the Project is located.

§ A.13.2 SUCCESSORS AND ASSIGNS

§ A.13.2.1 The Owner and Design-Builder respectively bind themselves, their partners, successors, assigns and legal representatives to the other party hereto and to partners, successors, assigns and legal representatives of such other party in respect to covenants, agreements and obligations contained in the Design-Build Documents. Except as provided in Section A.13.2.2, neither party to the Design-Build Contract shall assign the Design-Build Contract as a whole without written consent of the other. If either party attempts to make such an assignment without such consent, that party shall nevertheless remain legally responsible for all obligations under the Design-Build Contract.

§ A.13.2.2 The Owner may, without consent of the Design-Builder, assign the Design-Build Contract to OSI Pharmaceuticals, Inc. or an institutional lender providing construction financing for the Project. In such event, the lender shall assume the Owner’s rights and obligations under the Design-Build Documents. The Design-Builder shall execute all consents reasonably required to facilitate such assignment.

§ A.13.3 WRITTEN NOTICE

§ A.13.3.1 Written notice shall be deemed to have been duly served if delivered by hand, sent by national next business day courier service (e.g. Federal Express, etc.) or mailed by registered or certified mail, return receipt requested, addressed to the authorized representative of the party for whom it was intended, at its address appearing on the Owner-Contractor Agreement or to any other address which any such party may designate by like notice to the others. Notices given by telecopier shall be for information only and shall only be deemed effective if also delivered, mailed or sent, at the same time, by hand, by national next business day courier service (e.g. Federal Express, etc.) or by registered or certified mail, return receipt requested. The parties hereby designate and appoint the following persons as their representatives to receive all notices and communications hereunder:

Owner:
OSI Ardsley LLC
41 Pinelawn Road
Farmingdale, New York 10502
Attn: Mr. Joseph Talamo
     and Mr. Pierre Legault
Tel: (631) 962-2000
Fax: (631) 962-2024

With a copy to:

Mintz Levin Cohn Ferris Glovsky and Popeo, P.C.
666 Third Avenue
New York, New York 10017
Attn: Stephen E. Friedberg, Esq.
Tel: (212) 692-6875
Fax: (212) 983-3115

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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Development Manager:

Joseph J. Galeno, C.P.M., C.C.I.
**
Tel: **
Fax:

Design-Builder:

Eagle Interiors, Inc.
85 Toledo Street
Farmingdale, New York 11735
Attn: Michael Perretta
Tel: (631) 293-5503
Fax: (631) 293-4971

Architect:

TPG Architecture, LLP
1300 Walt Whitman Road
Melville, NY 11747
Attn:
Tel: (631) 547 7307
Fax: (631) 547 7301

§ A.13.4 RIGHTS AND REMEDIES

§ A.13.4.1 Duties and obligations imposed by the Design-Build Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights and remedies otherwise imposed or available by law and any such rights and remedies shall survive the acceptance of the Work and/or any termination of the Contract Documents.

§ A.13.4.2 No action or failure to act by the Owner or Design-Builder shall constitute a waiver of a right or duty afforded them under the Design-Build Documents, nor shall such action or failure to act constitute approval of or acquiescence in a breach thereunder, except as may be specifically agreed in writing.

§ A.13.5 TESTS AND INSPECTIONS

§ A.13.5.1 Tests, inspections and approvals of portions of the Work required by the Design-Build Documents or by laws, ordinances, rules, regulations or orders of public authorities having jurisdiction shall be made at an appropriate time. Unless otherwise provided, the Design-Builder shall make arrangements for such tests, inspections and approvals with an independent testing laboratory or entity acceptable to the Owner or with the appropriate public authority, and shall bear all related costs of tests, inspections and approvals. The Design-Builder shall give timely notice of when and where tests and inspections are to be made so that the Owner may be present for such procedures.

§ A.13.5.2 If the Owner or public authorities having jurisdiction determine that portions of the Work require additional testing, inspection or approval not included under Section A.13.5.1, the Owner shall in writing instruct the Design-Builder to make arrangements for such additional testing, inspection or approval by an entity acceptable to the Owner, and the Design-Builder shall give timely notice to the Owner of when and where tests and inspections are to be made so that the Owner may be present for such procedures. Such costs, except as provided in Section A.13.5.3, shall be at the Owner’s expense.

§ A.13.5.3 If such procedures for testing, inspection or approval under Sections A.13.5.1 and A.13.5.2 reveal failure of the portions of the Work to comply with requirements established by the Design-Build Documents, all costs made necessary by such failure, including those of repeated procedures, shall be at the Design-Builder’s expense.

^** This portion has been redacted pursuant to a confidential treatment request.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.13.5.4 Required certificates of testing, inspection or approval shall, unless otherwise required by the Design-Build Documents, be secured by the Design-Builder and promptly delivered to the Owner.

§ A.13.5.5 If the Owner is to observe tests, inspections or approvals required by the Design-Build Documents, the Owner will do so promptly and, where practicable, at the normal place of testing.

§ A.13.5.6 Tests or inspections conducted pursuant to the Design-Build Documents shall be made promptly to avoid unreasonable delay in the Work.

§ A.13.6 COMMENCEMENT OF STATUTORY LIMITATION PERIOD

§ A.13.6.1 As between the Owner and Design-Builder:

.1	Before Substantial Completion. As to acts or failures to act occurring prior to the relevant date of Substantial Completion, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion;
.2	Between Substantial Completion and Final Application for Payment. As to acts or failures to act occurring subsequent to the relevant date of Substantial Completion and prior to issuance of the final Application for Payment, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the date of issuance of the final Application for Payment; and
.3	After Final Application for Payment. As to acts or failures to act occurring after the relevant date of issuance of the final Application for Payment, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the date of any act or failure to act by the Design-Builder pursuant to any Warranty provided under Section A.3.5, the date of any correction of the Work or failure to correct the Work by the Design-Builder under Section A.12.2, or the date of actual commission of any other act or failure to perform any duty or obligation by the Design-Builder or Owner, whichever occurs last.

§ A.13.7 LOAN REQUIREMENTS

§ A.13.7 If the Owner furnishes to the Design-Builder a loan agreement, mortgage or similar agreement between the Owner and any lender for the Project, the Design-Builder agrees fully to cooperate with the Owner in complying with the provisions thereof and agrees to furnish any and all reasonable information, reports and certificates which are required or appropriate thereunder.

§ A.13.8 CONSTRUCTION

§ 13.8.1 The Contract shall not be construed for or against either the Design-Builder or the Owner on the grounds that either party or its counsel was the drafter of any modifications to the standard AIA forms.

ARTICLE A.14 TERMINATION OR SUSPENSION OF THE DESIGN/BUILD CONTRACT

§ A.14.1 TERMINATION BY THE DESIGN-BUILDER

§ A.14.1.1 The Design-Builder may terminate the Design-Build Contract if the Work is stopped for a period of 30 consecutive days through no act or fault of the Design-Builder or a Contractor, Subcontractor or their agents or employees or any other persons or entities performing portions of the Work under direct or indirect contract with the Design-Builder, for any of the following reasons:

.1	issuance of an order of a court or other public authority having jurisdiction which requires all Work to be stopped;
.2	an act of government, such as a declaration of national emergency which requires all Work to be stopped; or
.3	the Owner has failed to make payment to the Design-Builder in accordance with the Design-Build Documents.

§ A.14.1.2 The Design-Builder may terminate the Design-Build Contract if, through no act or fault of the Design-Builder or a Contractor, Subcontractor or their agents or employees or any other persons or entities performing portions of the Work under direct or indirect contract with the Design-Builder, repeated suspensions, delays or interruptions of the entire Work by the Owner, as described in Section A.14.3, constitute in the aggregate more than 100 percent of the total number of days scheduled for completion, or 120 days in any 365-day period, whichever is less.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.14.1.3 If one of the reasons described in Sections A.14.1.1 or A.14.1.2 exists, the Design-Builder may, upon seven days’ written notice to the Owner, terminate the Design-Build Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead and profit.

§ A.14.1.4 If the Work is stopped for a period of 60 consecutive days through no act or fault of the Design-Builder or a Contractor or their agents or employees or any other persons performing portions of the Work under a direct or indirect contract with the Design-Builder because the Owner has persistently failed to fulfill the Owner’s obligations under the Design-Build Documents with respect to matters important to the progress of the Work, the Design-Builder may, upon seven additional days’ written notice to the Owner, terminate the Design-Build Contract and recover from the Owner as provided in Section A.14.1.3.

§ A.14.2 TERMINATION BY THE OWNER FOR CAUSE

§ A.14.2.1 The Owner may terminate the Design-Build Contract if the Design-Builder:

.1	persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials;
.2	fails to make payment to Contractors for services, materials or labor in accordance with the respective agreements between the Design-Builder and the Architect and Contractors;
.3	persistently disregards laws, ordinances or rules, regulations or orders of a public authority having jurisdiction;
.4	otherwise is guilty of substantial breach of a provision of the Design-Build Documents; or
.5	if a petition is filed by the Design-Builder, or against the Design-Builder with its consent, under any federal or state law concerning bankruptcy, reorganization, insolvency or relief from creditors, or if such petition is filed against the Design-Builder without its consent and is not dismissed within sixty (60) days; or if the Contractor is generally not paying its debts as they become due; or if the Contractor becomes insolvent; or if the Contractor consents to the appointment of a receiver, trustee, liquidator, custodian or the like of the Contractor or of all or any substantial portion of its assets; or if a receiver, trustee liquidator, custodian or the like is appointed with respect to the Contractor or takes possession of all or any substantial portion of its assets and such appointment or possession is not terminated within sixty (60) days or if the Contractor makes an assignment for the benefit of creditors.

§ A.14.2.2 When any of the above reasons exist, the Owner may without prejudice to any other rights or remedies of the Owner and after giving the Design-Builder and the Design-Builder’s surety, if any, seven days’ written notice, terminate employment of the Design-Builder and may, subject to any prior rights of the surety:

.1	take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Design-Builder;
.2	accept assignment of contracts pursuant to Section A.5.5.1; and
.3	finish the Work by whatever reasonable method the Owner may deem expedient. Upon request of the Design-Builder, the Owner shall furnish to the Design-Builder a detailed accounting of the costs incurred by the Owner in finishing the Work.

§ A.14.2.3 When the Owner terminates the Design-Build Contract for one of the reasons stated in Section A.14.2.1, the Design-Builder shall not be entitled to receive further payment until the Work is finished.

§ A.14.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the Work and other damages incurred by the Owner and not expressly waived, such excess shall be paid to the Design-Builder. If such costs and damages exceed the unpaid balance, the Design-Builder shall pay the difference to the Owner. This obligation for payment shall survive the termination of the Contract.

§ A.14.2.5 Upon any termination by either party hereunder, all of the Design-Builder’s obligations as to portions of the Work already performed (such as, without limitation, warranties or obligations with respect to defective Work) or arising prior to the date of termination shall survive termination and continue in effect.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ A.14.2.6 The failure of the Owner to terminate this Agreement for any reason and Owner’s allowing the Design-Builder to complete the Work shall not be deemed a waiver on the part of the Owner of any rights and remedies the Owner may have at law or in equity to recover damages, including for delay, from the Design-Builder. The failure of the Design-Builder to enforce one or more of its rights or remedies herein provided shall not be deemed a waiver on the part of the Design-Builder of any rights and remedies the Design-Builder may have at law or in equity to recover damages or other relief under the Contract Documents.

§ A.14.2.7 Without limiting Owner’s rights in accordance with Section A.14.2.2, Owner may also terminate this Agreement for cause if the Design-Builder fails to cause the discharge (by payment, bond or otherwise) of any mechanic’s or material suppliers’ lien within thirty (30) days after notice of the lien is received by the Design-Builder. In the event the Design-Builder fails to timely discharge any such lien, Owner may, with or without terminating the Agreement, elect to withhold payment to the Design-Builder of a sum equivalent to two times the amount of such lien and discharge such lien accordingly. In such event, all costs associated with Owner’s discharge of such lien shall be deducted from such sum and shall be deemed to have been paid to Design-Builder in accordance with this Agreement.

§ A.14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE

§ A.14.3.1 The Owner may, without cause, order the Design-Builder in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine.

§ A.14.3.2 The Contract Sum and Contract Time shall be adjusted for increases in the cost and time caused by suspension, delay or interruption as described in Section A.14.3.1. Adjustment of the Contract Sum shall include profit. No adjustment shall be made to the extent:

.1	that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Design-Builder is responsible; or
.2	that an equitable adjustment is made or denied under another provision of the Design-Build Contract.

§ A.14.4 TERMINATION BY THE OWNER FOR CONVENIENCE

§ A.14.4.1 The Owner may, at any time, terminate the Design-Build Contract for the Owner’s convenience and without cause.

§ A.14.4.2 Upon receipt of written notice from the Owner of such termination for the Owner’s convenience, the Design-Builder shall:

.1	cease operations as directed by the Owner in the notice;
.2	take actions necessary, or that the Owner may direct, for the protection and preservation of the Work; and
.3	except for Work directed to be performed prior to the effective date of termination stated in the notice, terminate all existing contracts and purchase orders and enter into no further contracts and purchase orders.

§ A.14.4.3 In the event of termination for the Owner’s convenience prior to commencement of construction, the Design-Builder shall be entitled to receive payment for design services performed, costs incurred by reason of such termination and reasonable overhead and profit on design services not completed. In case of termination for the Owner’s convenience after commencement of construction, the Design-Builder shall be entitled to receive payment for Work executed and costs incurred by reason of such termination, along with reasonable overhead and profit on the Work not executed.

AIA Document A141™ — 2004 Exhibit A. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:50:57 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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AIA^® Document A141™ — 2004

Exhibit B

Determination of the Cost of the Work

for the following PROJECT:
(Name and location or address)

Renovations to and fit out of a multi-building Office/Laboratory campus, known as Ardsley Park Science and Technology Center, located at 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, New York.

THE OWNER:
(Name, legal status and address)

OSI Ardsley LLC,
a Delaware limited liability company
41 Pinelawn Road
Melville, New York 11797

THE DESIGN-BUILDER:
(Name, legal status and address)

Eagle Interiors, Inc.,
a New York corporation
85 Toledo Street
Farmingdale, New York 11735

ADDITIONS AND DELETIONS: The author of this document has added information needed for its completion. The author may also have revised the text of the original AIA standard form. An Additions and Deletions Report that notes added information as well as revisions to the standard form text is available from the author and should be reviewed. A vertical line in the left margin of this document indicates where the author has added necessary information and where the author has added to or deleted from the original AIA text.

This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification.

Consultation with an attorney is also encouraged with respect to professional licensing requirements in the jurisdiction where the Project is located.

AIA Document A141™ — 2004 Exhibit B. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:53:12 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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ARTICLE B.1 PROJECT COST ESTIMATES AND BUDGETS

(Paragraphs deleted)
§ B.1.1 PRELIMINARY COST ESTIMATES

§ B.1.1.1 The Design-Builder shall prepare, for the review of the Development Manager and approval of the Owner, a preliminary cost estimate utilizing area, volume or similar conceptual estimating techniques.

§ B.1.1.2 When schematic design documents have been prepared by the Architect and approved by the Owner, the Design-Builder shall prepare, for the review of the Development Manager and approval of the Owner, a more detailed estimate with supporting data (the “Schematic Design Budget Check”). The Schematic Design Budget Check shall be in sufficient detail to identify major elements of the Project and within each trade and all assumptions and qualifications. During the preparation of the Design Development Documents, the Design-Builder shall update and refine this estimate at appropriate intervals agreed to by the Owner and Development Manager.

§B.1.1.3 When Design Development Documents have been prepared by the Architect and approved by the Owner, the Design-Builder shall prepare a detailed estimate with supporting data for review by the Development Manager and approval by the Owner (the “Design Development Budget Check”). The Design Development Budget Check shall conform to the same requirements as the Schematic Design Budget Check. During the preparation of the Construction Documents, the Design-Builder shall update and refine this estimate at appropriate intervals agreed to by the Owner and Development Manager. Continuously throughout the design process, the Design-Builder shall provide “value engineering” services consisting of a review of the cost, quality and schedule influences of proposed building materials, systems and construction methods relative to design objectives in order to identify optimal values for the Owner. Particular factors evaluated shall include, but not be limited to: overall construction cost, initial vs. life-cycle cost, alternative materials and methods of construction, impacts on related trades and building systems, major cost variables and risks, impact on local manpower and schedule, local availability of systems, materials and equipment, ability of components to interact with other building components, no overlap in sub-pricing or specifications, regulatory considerations, and environmental impact. The Design Development Budget Check shall be updated as necessary to incorporate value engineering items, as requested by Development Manager and Owner. If any estimate submitted to the Owner exceeds Owner’s budget for the Project or any phase of the project, the Design-Builder shall make appropriate recommendations to the Owner and Development Manager.

§B.1.1.4 The Construction Budget for the Project shall be a detailed Construction Budget by building trade categories of the Work (prepared by Design-Builder for review and acceptance by Development Manager and approval by Owner) which shall not exceed the amount to be agreed upon between Design-Builder and Owner, for construction of the Work and performance of Design-Builder’s services hereunder (for the scope of the Work covered by such Construction Budget). The Design-Builder’s Construction Budget shall also designate the portion of the Design-Builder’s General Conditions Costs (as hereinafter defined) and Design-Builder’s Fee allocable to the Work, and the estimated total cost of completing each phase of the Work, as well as the overall Work (the “Construction Budget.”) Design-Builder shall also gather, maintain, analyze and provide Owner and Development Manager with cost and pricing data for all subcontractors and with respect to all change orders in a manner that satisfies the Owner’s requirements.

§ B.1.1.5 If any estimate submitted by Design-Builder to the Owner for the Work or any stage thereof (or for any building trade itemized on the Construction Budget) exceeds previously approved estimates or the Construction Budget therefore, then without limiting Design-Builder’s obligations under Subparagraph 2.2.3, Design-Builder shall identify all such discrepancies in writing; endeavor to reconcile or explain the cause of the same and make appropriate written recommendations to Owner and Development Manager of changes in the drawings and specifications or other cost saving alternatives and shall provide Owner and Development Manager such supporting documentation with respect thereto as Owner and Development Manager may reasonably require. Owner may, if it so elects, approve the increased estimate of costs, adopt the Design-Builder’s recommendations of changes or, if applicable, exercise the rights and remedies provided in Paragraph 2.2.

§ B.1.1.6 The Design-Builder shall prepare and submit to the Owner prior to the Design-Builder’s first Application for Payment, in writing, a Control Estimate. The Control Estimate shall include the estimated Cost of the Work plus the Design-Builder’s Fee. The Control Estimate shall be used to monitor actual costs.

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§ B.1.1.7 The Control Estimate shall include:

.1	the documents enumerated in Article 8 of the Agreement, including all Addenda thereto and the Terms and Conditions of the Contract;
.2	a statement of the estimated Cost of the Work showing separately the compensation for design services, construction costs organized by trade categories or systems and the Design-Builder’s Fee; and
.3	contingencies for further development of design and construction.

§ B.1..1.8 The Design-Builder shall meet with the Owner to review the Control Estimate. In the event that the Owner discovers any inconsistencies or inaccuracies in the information presented, it shall promptly notify the Design-Builder, who shall make appropriate adjustments to the Control Estimate. When the Control Estimate is acceptable to the Owner, the Owner shall acknowledge its acceptance in writing. The Owner’s acceptance of the Control Estimate does not imply that the Control Estimate constitutes a Guaranteed Maximum Price.

§ B.1.1.9 The Design-Builder shall develop and implement a detailed system of cost control approved by the Owner and Development Manager, that will provide the Owner with timely information as to the anticipated total Cost of the Work. The cost control system shall compare the Control Estimate with the actual cost for activities in progress and estimates for uncompleted tasks and proposed changes. This information shall be reported to the Owner, in writing, no later than the Design-Builder’s first Application for Payment and shall be revised monthly or at other intervals as mutually agreed.

(Paragraphs deleted)

ARTICLE B.2 COSTS TO BE REIMBURSED

§ B.2.1 COST OF THE WORK

The term Cost of the Work shall mean costs necessarily incurred by the Design-Builder in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article B.2.

§ B.2.2 LABOR COSTS

§ B.2.2.1 Wages of construction workers directly employed by the Design-Builder to perform the construction of the Work at the site or, with the Owner’s approval, at off-site locations.

§ B.2.2.2 Wages or salaries of the Design-Builder’s supervisory and administrative personnel when stationed at the site with the Owner’s approval.

§ B.2.2.3 Wages and salaries of the Design-Builder’s supervisory or administrative personnel engaged at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work.

§ B.2.2.4 Costs paid or incurred by the Design-Builder for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs are based on wages and salaries included in the Cost of the Work under Sections B.2.2.1 through B.2.2.3.

§ B.2.3 CONTRACT COSTS

§ B.2.3.1 Payments made by the Design-Builder to Contractors in accordance with the requirements of their contracts.

§ B.2.4 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION

§ B.2.4.1 Costs, including transportation and storage, of materials and equipment incorporated or to be incorporated in the completed construction.

§ B.2.4.2 Costs of materials described in the preceding Section B.2.4.1 in excess of those actually installed to allow for reasonable waste and spoilage. Unused excess materials, if any, shall become the Owner’s property at the completion of the Work or, at the Owner’s option, shall be sold by the Design-Builder. Any amounts realized from such sales shall be credited to the Owner as a deduction from the Cost of the Work.

AIA Document A141™ — 2004 Exhibit B. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:53:12 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ B.2.5 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS

§ B.2.5.1 Costs, including transportation and storage, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers, that are provided by the Design-Builder at the site and fully consumed in the performance of the Work; and cost (less salvage value) of such items if not fully consumed, whether sold to others or retained by the Design-Builder. The basis for the cost of items previously used by the Design-Builder shall mean the fair market value.

§ B.2.5.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers that are provided by the Design-Builder at the site, whether rented from the Design-Builder or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner’s prior approval.

§ B.2.5.3 Costs of removal of debris from the site.

§ B.2.5.4 Cost of document reproductions, facsimile transmissions and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office.

§ B.2.5.5 That portion of the reasonable expenses of the Design-Builder’s personnel incurred while traveling in discharge of duties connected with the Work.

§ B.2.5.6 Costs of materials and equipment suitably stored off the site at a mutually acceptable location, if approved in advance by the Owner.

§ B.2.6 DESIGN AND OTHER CONSULTING SERVICES

§ B.2.6.1 Actual out of pocket compensation, including fees and reimbursable expenses, paid by the Design-Builder for design and other consulting services required by the Design-Build Documents .

§ B.2.7 MISCELLANEOUS COSTS

§ B.2.7.1 That portion of insurance and bond premiums that can be directly attributed to this Design-Build Contract.

§ B.2.7.2 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Design-Builder is required by the Design-Build Documents to pay.

§ B.2.7.3 Fees of laboratories for tests required by the Design-Build Documents, except those related to defective or non-conforming Work for which reimbursement is excluded by Section A.13.5.3 of Exhibit A, Terms and Conditions, or other provisions of the Design-Build Documents, and which do not fall within the scope of Section A.13.5.3.

§ B.2.7.4 Royalties and license fees paid for the use of a particular design, process or product required by the Design-Build Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement of the Design-Build Documents; and payments made in accordance with legal judgments against the Design-Builder resulting from such suits or claims and payments of settlements made with the Owner’s consent. However, such costs of legal defenses, judgments and settlements shall not be included in the calculation of the Design-Builder’s Fee or subject to the Guaranteed Maximum Price. If such royalties, fees and costs are excluded by the last sentence of Section A.3.16.1 of Exhibit A, Terms and Conditions, or other provisions of the Design-Build Documents, then they shall not be included in the Cost of the Work.

§ B.2.7.5 Data processing costs related to the Work.

§ B.2.7.6 Deposits lost for causes other than the Design-Builder’s negligence or failure to fulfill a specific responsibility to the Owner as set forth in the Design-Build Documents.

(Paragraphs deleted)

§ B.2.8 OTHER COSTS AND EMERGENCIES

§ B.2.8.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner.

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§ B.2.8.2 Costs due to emergencies incurred in taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Section A.10.6 of Exhibit A, Terms and Conditions.

§ B.2.8.3 Cost of repairing or correcting damaged or non-conforming Work executed by the Design-Builder, Contractors, Subcontractors or suppliers, provided that such damaged or non-conforming Work was not caused by negligence or failure to fulfill a specific responsibility of the Design-Builder and only to the extent that the cost of repair or correction is not recoverable by the Design-Builder from insurance, sureties, Contractors, Subcontractors or suppliers.

ARTICLE B.3 COSTS NOT TO BE REIMBURSED

§ B.3.1 The Cost of the Work shall not include:

§ B.3.1.1 Salaries and other compensation of the Design-Builder’s personnel stationed at the Design-Builder’s principal office or offices other than the site office, except as specifically provided in Sections B.2.2.2 and B.2.2.3.

§ B.3.1.2 Expenses of the Design-Builder’s principal office and offices other than the site office.

§ B.3.1.3 Overhead and general expenses, except as may be expressly included in Article B.2 of this Exhibit.

§ B.3.1.4 The Design-Builder’s capital expenses, including interest on the Design-Builder’s capital employed for the Work.

§ B.3.1.5 Rental costs of machinery and equipment, except as specifically provided in Section B.2.5.2.

§ B.3.1.6 Except as provided in Section B.2.8.3 of this Agreement, costs due to the negligence or failure of the Design-Builder to fulfill a specific responsibility of the Design-Builder, Contractors, Subcontractors and suppliers or anyone directly or indirectly employed by any of them or for whose acts any of them may be liable.

§ B.3.1.7 Any cost not specifically and expressly described in Article B.2, Costs to be Reimbursed.

§ B.3.1.8 The cost of any bonus or gift to Design-Builder’s employees.

§ B.3.1.9 Costs of lost or stolen machinery, materials or equipment owned by Design-Builder, a Contractor or Subcontractor, excepting only the deductible under builder’s risk insurance carried by Owner in accordance with this Agreement. However, Owner shall not bear cost of any deductible for any loss under this paragraph which is caused by the acts or omissions of the Design-Builder or its Contractors or Subcontractors.

§ B.3.1.10 Losses or expenses sustained by Design-Builder in connection with the Work and for which Design-Builder is required hereunder to carry insurance (excepting the agreed-upon deductible thereunder) or for which Design-Builder is compensated by Contractors, Subcontractors, suppliers, or other third parties.

§ B.3.1.10 Sales or use taxes.

§ B.3.1.11 Deposits lost attributable to the fault of the Design-Builder.

§ B.3.1.12 Legal, mediation and arbitration costs.

§ B.3.1.13 Other General Conditions Costs.

ARTICLE B.4 DISCOUNTS, REBATES AND REFUNDS

§ B.4.1 Cash discounts obtained on payments made by the Design-Builder shall accrue to the Owner if (1) before making the payment, the Design-Builder included them in an Application for Payment and received payment from the Owner, or (2) the Owner has deposited funds with the Design-Builder with which to make payments; otherwise, cash discounts shall accrue to the Design-Builder. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Design-Builder shall make provisions so that they can be secured.

AIA Document A141™ — 2004 Exhibit B. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:53:12 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ B.4.2 Amounts that accrue to the Owner in accordance with the provisions of Section B.4.1 shall be credited to the Owner as a deduction from the Cost of Work.

ARTICLE B.5 CONTRACTS AND OTHER AGREEMENTS OTHER THAN FOR DESIGN PROFESSIONALS HIRED BY THE DESIGN - -BUILDER

§ B.5.1 Those portions of the Work that the Design-Builder does not customarily perform with the Design-Builder’s own personnel shall be performed by others under contracts or by other appropriate agreements with the Design-Builder. The Owner may designate specific persons or entities from whom the Design-Builder shall obtain bids. The Design-Builder shall obtain bids from Contractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the Owner. The Owner shall then determine which bids will be accepted. The Design-Builder shall not be required to contract with anyone to whom the Design-Builder has reasonable objection.

§ B.5.2 Contracts or other agreements shall conform to the applicable payment provisions of this Design-Build Contract, and shall not be awarded on the basis of cost plus a fee without the Owner’s prior consent.

ARTICLE B.6 ACCOUNTING RECORDS

§ B.6.1 The Design-Builder or any affiliated person or entity which performs a portion of the Work shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Agreement, and the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner’s accountants shall be afforded access to, and shall be permitted to audit and copy, the Design-Builder’s records, books, correspondence, instructions, receipts, contracts, purchase orders, vouchers, memoranda and other data relating to this Agreement on an “open-book” basis, and the Design-Builder shall preserve these for a period of three years after final payment, or for such longer period as may be required by law.

§ B.6.2 When the Design-Builder believes that all the Work required by the Agreement has been fully performed, the Design-Builder shall deliver to the Owner’s accountant a final accounting of the Cost of the Work.

§ B.6.3 The Owner’s accountants will review and report in writing on the Design-Builder’s final accounting within 21 days after delivery of the final accounting. Based upon such Cost of the Work as the Owner’s accountants report to be substantiated by the Design-Builder’s final accounting, and provided the other conditions of Section A.9.10 of the Agreement have been met, the Owner will, within seven days after receipt of the written report of the Owner’s accountants, notify the Design-Builder in writing of the Owner’s intention to make final payment or to withhold final payment.

§ B.6.4 If the Owner’s accountants report the Cost of the Work as substantiated by the Design-Builder’s final accounting to be less than claimed by the Design-Builder, the Design-Builder shall be entitled to initiate resolution of the dispute pursuant to Article 6 of the Agreement and Article A.4 of Exhibit A, Terms and Conditions, for the disputed amount. If the Design-Builder fails to so initiate resolution of the dispute within the period of time required by Section A.4.1.2 of Exhibit A, Terms and Conditions, the substantiated amount reported by the Owner’s accountants shall become binding on the Design-Builder. Pending a final resolution pursuant to Article 6 of the Agreement and Article A.4 of Exhibit A, Terms and Conditions, the Owner shall pay the Design-Builder the amount, if any, determined by the Owner’s accountant to be due the Design-Builder.

§ B.6.5 If, subsequent to final payment and at the Owner’s request, the Design-Builder incurs costs in connection with the correction of defective or non-conforming work as described in Article B.2, Costs to be Reimbursed, and not excluded by Article B.3, Costs Not to be Reimbursed, the Owner shall reimburse the Design-Builder such costs and the Design-Builder’s Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price, if any. If the Design-Builder has participated in savings as provided in Section 4.4.3.1 of the Agreement, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Design-Builder.

AIA Document A141™ — 2004 Exhibit B. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 19:53:12 on 08/06/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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6

AIA^® Document A141™ — 2004

Exhibit C

Insurance and Bonds

for the following PROJECT:
(Name and location or address)

Renovations to and fit out of a multi-building Office/Laboratory campus, known as Ardsley Park Science and Technology Center, located at 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, New York.

THE OWNER:
(Name, legal status and address)

OSI Ardsley LLC,
a Delaware limited liability company
41 Pinelawn Road
Melville, New York 11797

THE DESIGN-BUILDER:
(Name, legal status and address)

Eagle Interiors, Inc.,
a New York corporation
85 Toledo Street
Farmingdale, New York 11735

ADDITIONS AND DELETIONS: The author of this document has added information needed for its completion. The author may also have revised the text of the original AIA standard form. An Additions and Deletions Report that notes added information as well as revisions to the standard form text is available from the author and should be reviewed. A vertical line in the left margin of this document indicates where the author has added necessary information and where the author has added to or deleted from the original AIA text.

This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion or modification.

Consultation with an attorney is also encouraged with respect to professional licensing requirements in the jurisdiction where the Project is located.

AIA Document A141™ — 2004 Exhibit C. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 13:43:13 on 08/17/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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ARTICLE C.1

Design-Builder shall provide policies of liability insurance follows:

(Specify changes, if any, to the requirements of the Design-Build Documents, and for each type of insurance identify applicable limits and deductible amounts.)

§ C.1.1 The insurance required by Section A.11.2 of Exhibit A, the Terms and Conditions, shall be written for not less than the following limits and coverages, or greater limits and coverages where required by law:

1. Worker’s Compensation

a.	**
b.	**
c.	**

2. Commercial General Liability (including Premise/Operations, Independent Contractor’s Protective, Products, and Completed Operations, Broad Form Property Damage

a.	**
b.	**
c.	**
d.	**
e.	**
f.	**
g.	**
h.	Owner, OSI Pharmaceuticals, Inc., WIDA, Development Manager and Architect shall be included as Additional Insureds.

3. Business Auto Liability (Including Owned, non-owned and hired vehicles)

**

4.	Pollution Liability, When work involving hazardous abatement is required of subcontractors, the Design- Builder shall require that such Subcontractors carry Pollution Liability insurance coverage in amounts with limits of ** per occurrence and ** aggregate. This insurance shall remain in effect for no less than ** after Final Completion.
5.	Notwithstanding the above limits of insurance in items “1.” and “3.” above, Contractors and Subcontractors shall require limits of ** per occurrence and ** in the aggregate annually. The Owner, in its reasonable discretion, may choose to increase limits above ** for certain Contractors or Subcontractors that have major work on the Project or have operations that are considered to involve hazardous exposures.
6.	When work involving professional stamps or certifications is required of Contractors or Subcontractors the Design-Builder shall require that such Contractors or Subcontractors provide evidence, prior to work commencing of Errors and Omissions coverage in amounts approved by Owner. This insurance shall remain in effect for no less than ** after Final Completion.
7.	Umbrella Liability insurance policy covering excess over the limits specified for all Employer’s liability commercial general liability, business auto liability, watercraft liability, and aircraft liability insurance required hereunder with minimum limits of ** aggregate per policy year.
8.	Each policy of liability issued shall designate the Owner, OSI Pharmaceuticals, Inc., Development Manager and WIDA as additional insureds.

§ C.1.2 Copies of insurance policies and certificates of insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. These certificates and the insurance policies required by this Section C.1 shall contain a provision that coverages afforded under the policies will not be modified, canceled or allowed to expire until at least thirty (30) days’ prior written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment and are reasonably available, an additional certificate evidencing continuation of such coverage shall be submitted with the final Application for Payment. Information concerning reduction of coverage on account of revised limits or claims paid under the General Aggregate, or both, shall be furnished by the Design-Builder with reasonable promptness in accordance with the Design-Builder’s information and belief. All required insurance policies shall be maintained with insurance companies licensed within the State of New York and holding an AM Best rating of no less than A-, VIII. Said policies shall contain a provision that that coverage will not be canceled, non-renewed or materially changed, until at least thirty (30) days prior written notice has been provided to Owner and Development Manager.

^** This portion has been redacted pursuant to a confidential treatment request.

AIA Document A141™ — 2004 Exhibit C. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 13:43:13 on 08/17/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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§ C.1.3 If the Design-Builder fails to secure and maintain any required insurance, Owner shall have the right (but not the obligation) to secure such required insurance in the name and for the account of the Design-Builder, in which even Design-Builder shall pay the cost thereof and shall furnish upon demand all information that may be required in connection herewith.

§ C.1.4 As a condition precedent to commencing the Work and subsequent Design-Builder payments, the Design-Builder shall furnish a Certificate of Insurance evidencing the insurance coverage required by subparagraphs C.1.1. The Design-Builder shall furnish to the Owner copies of any endorsements that are subsequently issued amending coverages or limits, and a copy of (i) the declaration page of the insurance policy that indicates policy period, policy limits and type of coverage and (ii) the additional insured endorsement page from such policy which lists all the additional insureds. Failure of the Owner to collect certificates does not void the requirements to obtain insurance.

§ C.1.5 The acceptance of any Certificate of Insurance not fully evidencing the insurance coverages and limits required in the Contract shall not constitute approval or agreement by the Owner that the insurance requirements have been met or that the insurance policies shown are in compliance with the contract requirements.

§ C.1.6 Design-Builder agrees that the insurance specified in Section C.1 shall be primary over any insurance of self-insurance program maintained by Owner. Insurance effected or procured by Design-Builder shall not reduce or limit the Design-Builder’s contractual obligation to indemnify and defend the Owner for claims made or suits brought which result from or are in connection with the performance of this Contract.

§ C.1.7 Design-Builder shall provide Owner and Development Manager with a written report each month with Design-Builder’s monthly application for payment, advising Owner and Development Manager of each claim against Design-Builder’s insurance arising in connection with the Work, the status of each claim and any reserves maintained by Design-Builder in connection herewith.

ARTICLE C.2

The Design-Builder shall not be required to provide surety bonds.

(Table deleted)
(Paragraph deleted)

AIA Document A141™ — 2004 Exhibit C. Copyright © 2004 by The American Institute of Architects. All rights reserved. WARNING: This AIA^® Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIA^® Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 13:43:13 on 08/17/2009 under Order No.7579329132_1 which expires on 07/16/2010, and is not for resale. User Notes:

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[COUNTY OF WESTCHESTER
INDUSTRIAL DEVELOPMENT AGENCY LETTERHEAD]

AMENDED AND RESTATED
PRELIMINARY LETTER FOR AUTHORIZATION FOR SALES TAX EXEMPTION

As of August 6, 2009

TO WHOM IT MAY CONCERN:

     Re: 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, NY

Ladies and Gentlemen:

     The County of Westchester Industrial Development IDA (the “IDA”), by this notice, hereby advises you as follows:

     (a) The IDA constitutes a corporate governmental agency and a public benefit corporation under the laws of the State of New York and is, therefore, exempt from the imposition of any sales and use tax. The tax identification number of the IDA is 52-1294265.

     (b) Pursuant to a resolution passed by the IDA on July 14, 2009 (the “Inducement Resolution”), as amended by resolution passed by the IDA on August 6, 2009, (OSI) Ardsley LLC, a Delaware limited liability company, and its affiliates (collectively, the “Company”) is authorized and appointed by the IDA to act as agent for and on behalf of the IDA in connection with its renovation of existing improvements and its purchases, leases, installation, construction, reconstruction, maintenance, repair and equipping of Project Property (as defined below); and the IDA, based on its understanding of the IDA’s statute and tax law as of the date hereof, advises that purchases, leases and rentals of, and demolition, installation, construction, maintenance and repair contracts relating to Project Property (as defined below), made and/or entered into by or on behalf of the Company in its capacity as agent for the IDA, are exempt from New York State and local sales and use taxes. The Company may perform any of its duties as agent of the IDA through sub-agents which sub-agents may include contractors, sub-contractors or any of the Company’s subsidiaries, affiliates or related companies (any such sub-agent, a “Sub-Agent”). It is expressly agreed that the Company will remain responsible for any and all acts of any such Sub-Agents as if such acts were performed by the Company itself.

     (c) As used herein, “Project Property” shall mean and include (i) so much of the building and improvements to be constructed, and the materials incorporated into or installed therein, as are intended upon completion to be occupied by the Company (the “Project Facility”) at 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, NY, and located in the Town of Greenburgh, County of Westchester, State of New York, together with (ii) furniture, fixtures, furnishings, machinery and equipment to be installed in the Project Facility for use in the operation thereof; provided, however, that any Project Property shall have a useful life of one year or more and shall be for the use of the Company and/or its affiliates and/or a contractor or subcontractor engaged by the Company, as agent for the IDA, and for no other entity. In the case of rental arrangements of Project Property, such arrangements either (x) provide for a purchase option on the part of the Company, or (y) constitute a capital lease. Any maintenance contracts relating to Project Property shall only be with respect to Project Property having a useful life of one year or more, the replacement of parts (other than parts that contain materials or substances that are consumed in the operation of such Project Property where such parts must be replaced whenever the substance is consumed), or the making of repairs, but shall not include maintenance of the type as shall constitute janitorial services.

     (d) Accordingly, all vendors, lessors, contractors and subcontractors are hereby authorized to rely on this letter (or on a photocopy or facsimile of this letter) as evidence that purchases, leases and rentals of, and maintenance and repair contracts relating to, Project Property, to the extent they are consistent with this letter and or entered into by the Company [or by a contractor or subcontractor engaged by the Company], as agent for the IDA, are exempt from all New York State and local sales and use taxes.

     (e) The Company agrees that it shall include the provision set forth on Attachment I annexed hereto (through an attached rider or otherwise) in and as part of each contract, invoice, bill or purchase order entered into by the Company as agent for the IDA in connection with the Project Property.

     (f) The Company should be aware that the New York State General Municipal Law requires that it file an annual statement with the New York State Department of Taxation and Finance regarding the value of sales tax exemptions that the Company and its agents, consultants or subcontractors have claimed with respect to the Property. The penalty for failure to file such statement is the suspension or removal of the Company’s authority to act as the IDA’s agent and the recapture of any benefits claimed pursuant to this letter. Prior to any purchase being made under this Preliminary Letter for Authorization of Sales Tax Exemption, the Company, and any sub-agent appointed by the Company, must complete and submit to the IDA Form ST-60 which is published by the New York State Department of Taxation and Finance. This Preliminary Letter for Authorization of Sales Tax Exemption will not be effective with respect to any purchases made by the Company, or by any such sub-agent, until Form ST-60 has been completed and received by the IDA. Failure to comply with the above requirements may result in the loss of sales and use tax exemptions obtained pursuant to this Preliminary Letter for Authorization of Sales Tax Exemption.

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     (g) In exercising this agency appointment, the Company, its agents, sub-agents, contractors and subcontractors (the “Company Agents”) should give the supplier, lessor or vendor a copy of this letter to show that the Company and/or Company Agents are each acting as agent for the IDA. The supplier, lessor or vendor should identify the Project Facility as the “(OSI) Ardsley, LLC, Greenburgh, New York Facility” on each bill or invoice and indicate thereon that the Company and/or Company Agents acted as agent for the IDA in making the purchase, lease or contract.

     A copy of this letter retained by any vendor or seller may be accepted by such vendor or seller as an “affidavit, statement or additional evidence, documentary or otherwise, * * * demonstrating that the purchaser is an exempt organization described in section eleven hundred sixteen” of the New York Tax Law (the “Tax Law”), as provided by Tax Law §1132(c)(1), thereby relieving such vendor or seller from the obligation to collect sales and use tax with respect to the Project Property.

     (h) The IDA, its members, officers, employees and counsel shall have no liability, including, liability relating to the payment of sales or use tax, or performance obligations under any contract, invoice, purchase order, lease, sublease, license or sublicense of, or relating to, the Project Property.

     (i) If, for any reason, sales or use tax is due and payable in connection with the Project Property, the Company will be liable for the payment of any such sales or use tax.

     (j) The Company agrees that if (i) the Project does not fulfill the purpose for which the exemptions referred to herein and in the Inducement Resolution are being granted, or (ii) the Company does not obtain all necessary approvals in order to commence and complete the Project, then the IDA, in its sole discretion, may require the Company and the Company hereby agrees to reimburse the IDA for the full amount of any exemptions obtained pursuant to this Preliminary Letter for Authorization of Sales Tax Exemption.

     (k) The Company releases the IDA and the Company agrees that the IDA shall not be liable for and agrees to indemnify and hold the IDA and its members, officers, employees and counsel harmless against, any demands, expenses, taxes, liability, damage, injury, loss or claims caused, arising out of, or resulting from, or in any way connected with the use or issuance of this Preliminary Letter for Authorization of Sales Tax Exemption.

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     (l) This Preliminary Letter for Authorization of Sales Tax Exemption shall expire on October 31, 2009, unless sooner terminated by the IDA in accordance with the Preliminary Project Agreement.

     (m) The signature of a representative of the Company where indicated below will indicate that the Company has accepted the terms hereof.

COUNTY OF WESTCHESTER INDUSTRIAL DEVELOPMENT AGENCY
By:	/s/ Theresa G. Waivada
	Theresa G. Waivada
	Executive Director

Accepted and Agreed by:

(OSI) Ardsley LLC

By:	/s/ Joseph Talamo
	Name: Joseph Talamo
	Title: Vice President and Controller

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Attachment I

     “This contract is being entered into by (OSI) Ardsley LLC., a Delaware limited liability company, [if Sub-Agent is being appointed, list Sub-Agent] (the “Company”), in its capacity [as agent for and on behalf of the County of Westchester Industrial Development Agency (the “Agency”)] [if Sub-Agent is being appointed, provide “as Sub-Agent of OSI Pharmaceuticals, Inc., agent of the County of Westchester Industrial Development Agency (the “Agency”)”] in connection with a certain project of the Agency (the “Project”), consisting of the acquisition and installation of certain materials, machinery, equipment, trade fixtures, furniture, furnishings and other tangible personal property at the Company’s facilities located in the Town of Greenburgh, County of Westchester, State of New York, in premises known as 410, 420, 430, 440, 444 and 460 Saw Mill River Road, Ardsley, New York. The materials, machinery, equipment, trade fixtures, furniture, furnishings and other tangible personal property to be used for the Project which is the subject of this [contract, agreement, invoice, bill or purchase order] shall be exempt from the sales and use tax levied by the State of New York, the County of Westchester and the Town of Greenburgh, if any, if effected in accordance with the terms and conditions set forth in the attached Preliminary Letter of Authorization for Sales Tax Exemption of the Agency, and the Company hereby represents that this [contract, agreement, invoice, bill or purchase order] is in compliance with the terms of the Preliminary Letter of Authorization for Sales Tax Exemption. The liability of the Agency hereunder is limited as set forth in the Preliminary Letter of Authorization for Sales Tax Exemption. By execution or acceptance of this [contract, agreement, invoice, bill or purchase order], the vendor, contractor or supplier hereby acknowledges the terms and conditions set forth in this paragraph.”

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EX-10.58

Exhibit 10.58

CONFIDENTIAL MATERIALS
OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE OMISSIONS.

PROSIDION LIMITED

Statement of Particulars of Employment

This statement sets out the particulars of the terms and conditions of your employment with Prosidion Limited (hereafter referred to as “the Company”) of Watlington Road, Oxford, OX4 6LT as required by law.

1	NAME: DR JONATHAN RACHMAN
2	ROLE
2.1	Your initial role is VP Clinical Development
2.2	The Company reserves the right to require you to fill other roles or work in other departments from time to time within the flexibility expected in your role provided it is within your range of skills and competence.
3	LOCATION
	Your normal place of work is at the Company’s offices, as set out above or such other location as the Company may from time to time require. During the course of your employment you may be required to work at other locations within the U.K. You may also be required to travel in the U.K. or overseas as the Company may from time to time require. You will not be required to be absent from the UK for periods in excess of one month at any one time.
4	DATE OF COMMENCEMENT OF EMPLOYMENT: TO BE AGREED
5	DATE OF COMMENCEMENT OF ANY PREVIOUS EMPLOYMENT TO COUNT AS CONTINUOUS WITH CURRENT EMPLOYMENT: TO BE AGREED
6	REMUNERATION
6.1	Your employment is on a salaried basis. Your current salary is £100,000 per annum and will be paid monthly in arrears. All payments are by credit transfer into your nominated bank or building society account and will be equal to 1/12th of your annual salary for each full month worked.
6.2	Salary reviews will be carried out annually. Your salary may (but will not necessarily) be increased with effect from the review date. You will be notified in writing of any such change in salary.
6.3	Any bonuses or additional payments you may be eligible to receive will be governed by the rules relating to such payments.
7	HOURS OF WORK
7.1	The normal working hours are 371/2 hours per week commencing between 9.00 a.m. and ending at 5.30 p.m., Monday to Friday, with a minimum of 45 minutes for lunch each day, but you agree to work such additional hours at such times and on such

days as the Company shall, in its absolute discretion, stipulate in order to meet the requirements of the business.

7.2	The Company reserves the right, at its absolute discretion, to offer a flexible hours system, always provided that either you or the Company may elect for your working hours to return to the hours and days set out in 7.1 above, on reasonable notice. The guidelines detailing the Company’s flexible working principles are located on the Company’s intranet under the Section entitled Human Resources.
7.3	The Company will observe the limits and entitlements set out in the Working Time Regulations 1998, or any subsequent legislation relating to working time, where these apply. Your time commitment will not exceed the limits laid down in the prevailing legislation or will be as agreed between yourself and the Company insofar as such agreement is allowed by the legislation in force.
8	RIGHT OF ABODE
	It is the Company’s policy to insist that all employees provide original documentation proving that they have a right to work in the UK.
9	HOLIDAYS
9.1	The holiday year will run from 1st April to 31st March of the following year. In addition to normal bank and public holidays in England, you will be entitled in every holiday year to 28 working days paid holiday (and pro rata to the period employed in every such year in which your service is for less than the holiday year). This holiday entitlement is inclusive of your statutory holiday entitlement under the Working Time Regulations 1998, which shall, in each holiday year, be deemed to be taken first. The Company reserves the right to require you to take holiday on certain days determined by the Company and it is agreed that Regulation 15 of the Working Time Regulations 1998 is excluded. Holidays may only be taken with the prior written consent of the Company. The guidelines detailing the Company’s stance on Annual Leave can be found on the Company Intranet under the Section entitled HR Policies.
9.2	On termination of your employment you are required to take any unused holiday entitlement during any period of notice unless notified to the contrary (and in writing) by the Company. Only if you are unable to take your unused entitlement because of the Company’s requirements of you during the notice period, or to the extent, if any, that such unused entitlement exceeds your period of notice, will a payment in lieu of such accrued but untaken holiday entitlement be made. Deductions from sums due to you on termination of employment will include a sum in respect of any day’s holiday you may have taken in excess of your actual holiday entitlement on termination. A day’s pay for the purposes of this clause means 1/260th of your annual salary.
10	PENSION SCHEME
	The Company is not contracted out of the State Earnings Related Pension Scheme and all employees contribute at ordinary rates to the National Insurance Scheme. The Company operates a contributory group personal pension plan. Eligibility to join the scheme is determined by the Company and eligible employees may join the Scheme at the earliest opportunity following the month in which they commence employment.

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11	PRIVATE MEDICAL INSURANCE
	You are invited to join a free medical scheme and pay for dependents to be included. The Company reserves the right to change the provider and the scheme as necessary.
12	PERMANENT HEALTH INSURANCE
	Subject to the provisions outlined in Paragraph 14.1 and you also meeting the Insurers eligibility criteria, the Company will provide free permanent health insurance of 50% of salary for absences over twenty-six continuous weeks. The amount will be based on basic salary at the time of becoming ill and will not be increased during payment. In addition to your salary payments this benefit also covers your employer pension contribution and up to 5% (of salary) of your employee pension contribution in place at the time of becoming ill.
13	LIFE ASSURANCE
	You will be provided with Life Assurance by the Company to the amount of four times your current salary at the time.
14	BENEFITS
14.1	The Company is entitled to terminate your employment (for any reason including redundancy) notwithstanding the fact that this may result in your ceasing to be eligible for any benefit (actual or prospective) whether payable by the Company or from an insurer and whether pursuant to an insurance scheme or otherwise, which provides salary or remuneration in the event of your ill health or disability.
15	NOTICE
15.1	You are required to give the Company, in writing, the following prior notice to terminate your employment: Six months
15.2	You are entitled to receive the following prior written notice from the Company to terminate your employment: Six months
	Or, following completion of one month’s service, the statutory minimum notice. The statutory minimum notice is at least one week and, for periods of service greater than two years, one week for each complete year of service up to a maximum of 12 weeks. The notice period that you will be entitled to receive will either be the contractual amount or the statutory minimum, whichever is the greatest.
15.3	During any Probationary Period of employment the period of prior notice required from either party to terminate your employment will be as specified in the clause relating to that Probationary Period and the entitlements and requirements shown in 15.1 and 15.2 above will only become effective following the completion of that Probationary Period to the Company’s satisfaction.

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15.4	The Company’s normal retirement age, when your employment will automatically terminate, is 65 for both men and women.
16	DEDUCTIONS FROM SALARY
	For the purposes of the Employment Rights Act 1996, sections 13-27, you agree that the Company may deduct from your remuneration, any sums due from you to the Company including, without limitation, your pension contributions (if any) and any overpayments, holiday pay paid in excess of your entitlement accrued at the termination of your employment, and loans or advances made to you by the Company.
17	SICK PAY
	The Company operates a Company Sick Pay Scheme under which the Company may, in its discretion, pay salary during some periods of sickness absence. The rules relating to notification of sickness absence and an explanation of the discretionary Company Payments scheme applicable during sickness absence are contained on the Company intranet under the section entitled HR Policies. The Company reserves the right to postpone your return to work, whether you are still eligible for payment of any kind or not, pending clearance that you are fit to return to work, from the Company’s chosen medical practitioner.
18	OVERTIME
	You may, from time to time, be required to work additional hours in excess of those laid down in clause 7.1. You are not eligible for overtime pay or “time off in lieu” but on occasions, time off in lieu may be arranged at the discretion of your line manager. Hours worked under any flexible hours scheme will not attract any compensatory payment and will be subject to the rules of that scheme.
19	SEARCH
	The Company reserves the right to require employees to submit to a search of person, clothing, vehicles and effects at any time on the Company’s premises by a duly authorised officer of the Company. You have the right to be accompanied by an employee of your choice if you so wish. Refusal to submit to a search will constitute an act of Gross Misconduct, which may result in Summary Dismissal. In all cases of theft or dishonesty involving Company property or the property of fellow employees, the offender is liable to Summary Dismissal and prosecution.
20	DISCIPLINE & GRIEVANCE
	A copy of the Company’s prevailing grievance and disciplinary procedures may be obtained, at any time, from the Human Resources Director (UK). A copy of the relevant procedure will always be given to you prior to any disciplinary action being initiated or your wishing to register a grievance. For the avoidance of doubt, any grievance, complaint or problem relating to your employment (including an appeal against any disciplinary penalty) should first be raised with your line manager. Subsequent steps in the grievance and disciplinary procedures are set out in the relevant documents. The grievance, disciplinary and appeals procedures are not contractually binding on the Company and the Company may alter them or omit any or all of their stages where it considers it appropriate.

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21

CONFIDENTIAL INFORMATION AND PUBLICATION

You undertake that you will not without the prior consent in writing of the Company during the term of employment by the Company, or at any time after termination of employment either make known or divulge in any manner whatsoever (and will use reasonable endeavors to prevent disclosure of) any information that you acquire by reason of your said employment not already generally available to the public, concerning:

(a)	any technical secrets, confidential research work, technical processes, formulae, inventions, patents,
(b)	any transactions, finances or business affairs of the Company, associated companies or of customers of the said Company or companies.

All notes, memoranda, records, papers, documents, correspondence, writings, drawings, plans, designs or other such documents which come into your possession relating to the business of the Company, are the property of the Company and you will deliver them together with any equipment or other property belonging to the Company immediately upon request and in any event on the termination of your employment and you will not make or keep any copies or extracts of such documents.

	It is mutually agreed that this undertaking shall in no way affect your right to make use of the general knowledge and skill that you acquire in the service of the Company.
22	ADDITIONAL EMPLOYMENTS

	If you wish to undertake any other work for any other employer, whilst employed by the Company, you will be required to inform your line manager as to the nature and hours of any other proposed employment and seek the line manager’s written permission before commencing such work. You are not allowed to engage in any other business or profession that is prejudicial to, or in direct competition with, the Company.
23	VARIATION IN TERMS OF SERVICE
	You will be notified of any individual variation in your terms of service.
24	COLLECTIVE AGREEMENTS
	There are no collective agreements applicable to you or which affect your terms of employment.
25	DATA PROTECTION
	By signing this statement you acknowledge and agree that the Company is permitted to hold personal information about you as part of its personnel and other business records and may use such information in the course of the Company’s business. You agree that the Company may disclose such information to third parties (including where such third parties are based outside the European Economic Area) in the event that such disclosure is in the Company’s view required for the proper conduct of the Company’s business or that of any associated company. This Clause applies to information held, used or disclosed in any medium.

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26	HEALTH AND SAFETY
	Every employee has a legal duty to take reasonable care for the health and safety of themselves and of other persons who may be affected by their acts or omissions at work. The employee must also co-operate with their employer so that the employer can discharge his statutory obligations. No employee shall intentionally or recklessly interfere with, or misuse, anything that is provided in the interests of health, safety or welfare.
	Employees may be required, in order to enable the Company to fulfil its statutory obligations to undergo periodic medical checks and examinations. Employees shall be deemed to have agreed to the results of such checks and examinations being released to the Company.
	Further Health and Safety information can be found on the Company intranet under the sections entitled Health and Safety and HR Policies.
	The Company has a non-smoking policy that all employees must observe. Failure to observe this policy will result in disciplinary action.
27	DUTIES
	Whilst employed by the Company you must:-

(a)	during your hours of work devote the whole of your time, attention and abilities to the business of the Company and carry out your duties with due care and attention;
(b)	not, without the Company’s prior written consent, be in any way directly or indirectly engaged or concerned with any other business or employment whether during or outside your hours of work for the Company;
(c)	use your best efforts to promote and protect the interests of the Company and observe the utmost good faith towards the Company; and
(d)	comply with all the Company’s rules, regulations, policies and operating procedures from time to time in force and any rules which the Company’s clients may require you to observe whilst working on their premises. The Company maintains a section entitled HR Policies on the Company’s intranet which includes key HR policies and which all employees should regularly review as it is updated from time to time.

28	TERMINATION OF EMPLOYMENT
28.1	The Company reserves the right in its absolute discretion to terminate your employment immediately either instead of or at any time after notice of termination is given by either party and to make a payment in lieu of notice. Such payment will consist of basic salary and benefits for that period by excluding any payment for holiday accruing during that period. For the avoidance of doubt, the Company’s right to make a payment in lieu of notice does not give you a right to receive such a payment in lieu of notice.
28.2	The Company may, at its absolute discretion, require you not to attend at work and/or not to undertake all or any of your duties hereunder during any period of notice (whether given by the Company or you), provided always that the Company

6

shall continue to pay your salary and contractual benefits. For the avoidance of doubt, there is no obligation on the Company to provide you with any work during any period of notice and you will not be entitled to work on your own account or on account of any other person, firm or company during that period.

29	INVENTIONS AND OTHER WORKS
29.1	For the purposes of this Clause, “Intellectual Property Rights” means any and all existing and future intellectual or industrial property rights including, without prejudice to the generality of the foregoing, all existing and future patents, copyrights, design rights (whether registered or unregistered), database rights, trade marks (whether registered or unregistered), semiconductor topography rights, plant varieties rights, internet rights/domain names, know-how, confidential information and any and all applications for any of the foregoing and any and all rights to apply for any of the foregoing.
29.2	During your employment with the Company, you may either alone or in conjunction with others, generate or assist in the generation of documents, materials, designs, drawings, processes, formulae, computer coding, methodologies, confidential information and other works which relate to the business of the Company or any group company or which are capable of being used or adapted for use therein or in connection therewith (“Works”) and you agree that in respect of any such Works and all Intellectual Property Rights in relation thereto, you are obliged to further the interests of the Company and any group company.
29.3	You must immediately disclose to the Company all Works and all related Intellectual Property Rights. Both the Works and the related Intellectual Property Rights will (subject to sections 39 to 43 of the Patents Act 1977) belong to and be the absolute property of the Company or any other person the Company may nominate.
29.4	You shall immediately on request by the Company (whether during or after the termination of your employment) and at the expense of the Company:-

(a)	apply or join with the Company in applying for any Intellectual Property Rights or other protection or registration (“Protection”) in the United Kingdom and in any other part of the world for, or in relation to, any Works;
(b)	execute all instruments and do all things necessary for vesting the Works or Protection when obtained and all right, title and interest to and in the same absolutely and as sole beneficial owner in the Company or other person as the Company may nominate; and
(c)	sign and execute any documents and do any acts reasonably required by the Company in connection with any proceedings in respect of any applications and any publication or application for revocation of any Protection.

29.5 You hereby irrevocably and unconditionally waive all rights under Chapter IV Copyright, Designs and Patents Act 1988 and any other moral rights which you may have in any Works in whatever part of the world such rights may be enforceable including:

7

(a)	the right conferred by section 77 of that Act to be identified as the author of any such Works; and
(b)	the right conferred by section 80 of that Act not to have any such Works subjected to derogatory treatment.

29.6	You hereby irrevocably appoint the Company to be your attorney and in your name and on your behalf to execute any such act and to sign all deeds and documents and generally to use your name for the purpose of giving to the Company the full benefit of this Clause. You agree that, with respect to any third parties, a certificate signed by any duly authorised officer of the Company that any act or deed or document falls within the authority hereby conferred shall be conclusive evidence that this is the case.
29.7	Nothing in this Clause shall be construed as restricting your rights or those of the Company under sections 39 to 43 of the Patents Act 1977.
30	RESTRICTIONS
30.1	In the course of your employment you will be exposed to confidential information and will acquire other proprietary knowledge relating to the Company’s and group companies’ current and planned operations. Therefore, you will not during the period of your employment with the Company and for a period of twelve months after the termination of your employment, either directly, or indirectly through any other person, firm or other organisation:-

(a)	solicit, entice or induce any person, firm or other organisation which at any time during the last year of your employment with the Company was a supplier of the Company or a group company (and with whom you were actively involved during that time) to reduce the level of business between the supplier and the Company or the group company and you will not approach any supplier for that purpose or authorise or approve the taking of such actions by any other person;
(b)	solicit business which is of the same or similar nature as the business with which you were involved during the last year of your employment with the Company (such business referred to as the “Business”) from any person, firm or other organisation which at any time during the last year of your employment with the Company was a customer or client of the Company or a group company (and with whom you were actively involved during that time) and you will not approach any client or customer for that purpose or authorise or approve the taking of such actions by any other person. For the purposes of this restriction, the expression customer or client shall include all persons from whom the Company or a group company has received inquiries for the provision of goods or services where such inquiries have not been concluded;
(c)	employ or engage or otherwise solicit, entice or induce any person who is an employee of the Company or a group company to become employed or engaged by you or any other person, firm or other organisation and you will not approach any such employee for such purpose or authorise or approve the taking of such actions by any other person; and

30.2 The restrictions contained in Clauses 30.1 (a) to (c) will not apply if:-

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(a)	you have received the prior written consent of the Company to your activities; or
(b)	you will not be in competition with the Business in carrying out those activities.

30.3

If the Company suspends any of your duties under Clause 29.2 during any period after notice of termination has been given by the Company or you, the aggregate of the period of the suspension and the period after the end of your employment with the Company during which the restrictions in this Clause shall apply shall not exceed 6 months and, if the aggregate of the two periods would exceed 6 months, the period after the end of your employment during which the restrictions shall apply shall be reduced accordingly.

30.4

The restrictions in this Clause are separate and severable restrictions and are considered by the parties to be reasonable in all the circumstances. It is agreed that if any such restrictions by themselves, or taken together, shall be adjudged to go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Company but would be adjudged reasonable if part or parts of the wording were deleted or the length or the geographical coverage of the restrictions reduced, the relevant restriction or restrictions shall apply with such deletion(s) or reduction(s) as may be necessary to make it or them valid and effective.

9

I acknowledge receipt of this Statement of Particulars of Employment, which sets out the principal terms of my employment.

I am aware that Employee Handbook and certain Company rules, policies and operating procedures that will apply to my employment can be obtained on the Company intranet under the section entitled HR Policies and I am aware that these may be changed and updated from time to time. I undertake to review these policies regularly during my employment.

I confirm that I understand and agree to abide by the terms and conditions contained in this Statement and in those rules and policies and operating procedures that are specifically stated to form part of my Contract of Employment.

SIGNED by the said Jonathan Rachman /s/ J. Rachman                            

on 02 March 2005

in the presence of:-

Witness /s/ S. Knowles                               

Full Name   Stephen Knowles                     

Address             **                                        

                            **                                        

Occupation   Medical Doctor                     

SIGNED by /s/ G. A. Chapman                    

on March 7  2005

On behalf of Prosidion Limited

^** This portion has been redacted pursuant to a confidential treatment request.

10

EX-10.59

Exhibit 10.59

Compensatory Arrangements for Non-Employee Directors

     OSI Pharmaceuticals, Inc. (“OSI” or the “Company”) compensates its non-employee directors for service on the Company’s Board of Directors (the “Board”) with both cash and equity compensation upon initial election and annual election to the Board. In 2007, the Compensation Committee of the Board (the “Committee”) engaged Radford Consulting (“Radford”), its independent compensation consultant, to evaluate OSI’s Board compensation. Upon evaluation and review, Radford, the Committee and the Board determined that the compensation structure should be revised in order to (1) better align Board members’ compensation with their responsibilities and (2) align Board compensation with the more typical practices at peer companies. OSI’s former Board compensation provided greater compensation upon initial election to the Board as opposed to subsequent elections. Pursuant to Radford’s recommendation and the Committee’s and Board’s review, the Board approved changes to the compensation structure, effective beginning the date of the Company’s 2008 Annual Meeting of Stockholders (the “2008 Annual Meeting”), (1) to compensate the Chairs of Board committees and service on more than one committee and (2) in general, to decrease the amount of compensation upon initial election to the Board and increase the amount of annual compensation. In order to be more equitable and avoid any windfalls, the Board approved a requirement that all members of the Board elected to the Board prior to the 2008 Annual Meeting must serve at least three years on the Board before they are eligible to receive the revised annual equity grants described below. Set forth below is a summary of the current Board compensation.

Annual Retainer Fee:

     Each of the non-employee directors of the Company receives an annual cash retainer fee as set forth in the table below.

Baseline Cash Compensation
Board Member Retainer Fee	$	50,000
Additional Cash Compensation
Chair of Board	$	100,000
Chair of Audit Committee	$	30,000
Chair of Compensation Committee	$	15,000
Chair of Corporate Governance and Nominating Committee	$	10,000
Chair of All Other Committees	$	10,000
Member of Audit Committee	$	15,000
Member of Compensation Committee	$	7,500
Member of Corporate Governance and Nominating Committee	$	5,000
Member of All Other Committees (excluding the Executive Committee)	$	5,000

Option Grants and Other Stock Awards:

Initial Grants

     Each non-employee director receives an initial grant of options to purchase 15,000 shares of common stock and also receives an award of 5,000 shares of restricted stock, restricted stock units or deferred stock units upon his or her initial election to the Board.

Annual Grants

     In addition to initial equity awards, non-employee directors receive annual equity grants. Each non-employee director, not including the Chairman of the Board, receives options to purchase 7,500 shares of common stock and an award of 2,500 shares of restricted stock, restricted stock units or deferred stock units upon each re-election for a one-year Board term, with the exception of those directors who as of the 2008 Annual Meeting had not served three years on the Board. Such directors receive an annual option to purchase 3,000 shares of common stock and an award of 1,500 shares of restricted stock, restricted stock units or deferred stock units until they have served three years on the Board, at which time they would receive the grants described above. The Chairman of the Board receives options to purchase 10,000 shares of common stock and an award of 4,000 shares of restricted stock, restricted stock units or deferred stock units upon re-election for a one-year Board term.

Forms of Awards

     The restricted stock and restricted stock units represent the right of a director to receive one share of OSI common stock upon vesting. Each deferred stock unit represents the right of a director to receive one share of OSI common stock upon the earlier of the director’s termination from service on the Board or on a date no earlier than two years from the date of grant, as designated by the director.

     The stock option awards and restricted stock awards, including restricted stock units and deferred stock units, granted to the directors after June 14, 2006 vest annually over four years of the date of grant. The option awards expire on the seventh anniversary of their respective grant dates, subject to the earlier expiration upon the occurrence of certain events set forth in the Company’s Amended and Restated Stock Incentive Plan. The exercise price of all option awards is equal to 100% of the fair market value of the underlying common stock on the date of grant.

Post-Retirement Medical Benefits:

     Prior to April 2007, we provided post-retirement medical and life insurance benefits to eligible employees and qualified dependents, and members of our Board of Directors. Eligibility was based on age and service requirements. These benefits are subject to deductibles, co-payment provisions and other limitations. In April 2007, we terminated this benefit and grandfathered the directors who were eligible for participation in the plan at the time of termination (Mr. White and Drs. Mehta and Granner).

EX-10.60

Exhibit 10.60

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 2010 salaries and 2009 cash bonuses for OSI’s 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 6, 2009 (the “2009 Proxy”). The following table sets forth the annual base salary level of such named executive officers for 2010 and the 2009 cash bonuses for each such officer:

Name and Position	2010 Base Salary		2009 Bonus
Colin Goddard, Ph.D. Chief Executive Officer	$	700,000	$	608,000
Pierre Legault Executive Vice President, Chief Financial Officer and Treasurer	$	475,000	$	274,860	1
Gabriel Leung Executive Vice President and President, Pharmaceutical Business	$	464,000	$	218,4000	1
Anker Lundemose, M.D., Ph.D., D. Sc. Executive Vice President, Corporate Development and Strategic Planning	£	241,000	£	115,280
Robert L. Simon Executive Vice President, Pharmaceutical and Technical Operations	$	423,000	$	217,700	1

Cash Bonuses

¹ 2009 Bonus does not include the named executive officer’s Retention Bonus as described below.

     The 2009 bonus awards were computed in accordance with the Committee’s policy of awarding annual bonuses for executive officers as disclosed in the Compensation Discussion and Analysis section of the 2009 Proxy. The bonus awards were paid out in February 2010 based on individual and corporate performance measurers considered in December 2009 and February 2010, respectively. 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).

     The actual amount of the bonuses paid to its executive officers, including the CEO, varies depending upon the Company’s performance (which is 80% of the total bonus) and, for executive officers other than the CEO and the CFO, such executive

officers’ individual performance (which is 20% of the total bonus). The CFO’s bonus is comprised of 85% Company performance and 15% individual performance. The corporate component has ranged between 80% and 150% of the corporate component target and the individual performance component has ranged between approximately 80% and 150% of the individual performance component target depending upon an executive’s individual performance rating. In 2009, the Committee set the corporate component at 95% for all executive officers, including the CEO. 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 2009, the individual performance component of the annual cash bonus was set between approximately 100% and 200% for executive officers who received one of the top three performance ratings.

     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 2010 bonus targets (which represent a percentage of base salary) for the named executive officers are as follows:

Name	Target
Colin Goddard, Ph.D.		100	%
Pierre Legault		55	%
Gabriel Leung		50	%
Anker Lundemose, M.D., Ph.D., D. Sc.		50	%
Robert L. Simon		50	%

Retention Bonuses

      In July 2009, the Compensation Committee approved the award of retention bonuses to all of our U.S.-based employees who agreed in writing to relocate to our new facility in Ardsley, New York. Under the terms of the retention bonuses, each employee who executed a commitment letter by October 1, 2009 received a lump sum payment equal to a specified percentage of such employee's 2009 base salary, which varied by employee grade level and other retention considerations. The commitment letter requires that the employee repay 100% of the retention bonus if his or her employment terminates on or prior to September 30, 2010 and 50% of the retention bonus if his or her employment terminates after October 1, 2010 but before September 30, 2011. The retention bonus is not subject to repayment after September 30, 2011. Pierre Legault, Gabriel Leung and Robert Simon each executed a commitment letter and received a retention bonus equal to 50% of their respective 2009 base salaries.

Equity Awards

     OSI grants equity awards of stock options, restricted stock, restricted stock units and/or deferred stock units to certain 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 Senior 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 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. For 2009, the named executive officers received grants within 20% of their target guidelines, with the exception of Mr. Legault who received a grant of options and restricted stock units in excess of his 20% target guideline based on his individual performance rating.

Perquisites

     OSI provides very few perquisites to its executive officers. Certain of its named executive officers receive a reimbursement of relocation expenses and legal fees.

EX-21

Exhibit 21

SIGNIFICANT SUBSIDIARIES OF OSI PHARMACEUTICALS, INC.

OSI Pharmaceuticals (UK) Limited, organized under the laws of the United Kingdom.

Prosidion Limited, organized under the laws of the United Kingdom.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
OSI Pharmaceuticals, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-148211, No. 333-137669, No. 333-129749, No. 333-91118, No. 333-65072, No. 333-42274, No. 333-39509, No. 333-06861 and No. 33-64713) on Form S-8 of OSI Pharmaceuticals, Inc. of our report dated February 24, 2010, relating to the consolidated balance sheets of OSI Pharmaceuticals, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows, for each of the years in the three-year period ended December 31, 2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009 Annual Report on Form 10-K of OSI Pharmaceuticals, Inc.

Our report on the Company’s consolidated financial statements referred to above contains an explanatory paragraph relating to the retrospective application of Financial Accounting Standards Board Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement”), (included in FASB ASC Subtopic 470-20, “Debt — Debt with Conversion and Other Options”), which became effective January 1, 2009.

/s/ KPMG LLP

Melville, New York
February 24, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Colin Goddard, Ph.D. certify that:

     1. I have reviewed this annual report on Form 10-K of OSI Pharmaceuticals, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2010

/s/ Colin Goddard  

Colin Goddard, Ph.D. 

Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Pierre Legault certify that:

     1. I have reviewed this annual report on Form 10-K of OSI Pharmaceuticals, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2010

/s/ Pierre Legault  

Pierre Legault 

Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer) 

EX-32.1

Exhibit 32.1

OSI PHARMACEUTICALS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of OSI Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Colin Goddard, Ph.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 24, 2010

/s/ Colin Goddard  

Colin Goddard, Ph.D. 

Chief Executive Officer 

EX-32.2

Exhibit 32.2

OSI PHARMACEUTICALS, INC.

CERTIFICATION PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of OSI Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Pierre Legault, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 24, 2010

/s/ Pierre Legault  

Pierre Legault 

Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)