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EXHIBIT 4.2
OSI PHARMACEUTICALS, INC.
1999 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
1. Purpose
The purpose of this 1999 Incentive and Non-Qualified Stock
Option Plan (the "Plan") is to encourage and enable selected
management, other employees, directors (whether or not employees), and
consultants of OSI Pharmaceuticals, Inc. (the "Company") or a parent or
subsidiary of the Company to acquire a proprietary interest in the
Company through the ownership of common stock, par value $.01 per share
(the "Common Stock"), of the Company. Such ownership will provide such
employees, directors, and consultants with a more direct stake in the
future welfare of the Company, and encourage them to remain with the
Company or a parent or subsidiary of the Company. It is also expected
that the Plan will encourage qualified persons to seek and accept
employment with, or become associated with, the Company or a parent or
subsidiary of the Company. Pursuant to the Plan, the Company may grant
(i) "incentive stock options," within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) stock
options that do not qualify as incentive stock options ("non-qualified
stock options"). No option granted under the Plan shall be treated as
an incentive stock option unless the stock option agreement which
evidences the grant refers to such option as an incentive stock option
and such option satisfies the requirements of Section 422 of the Code.
As used herein, the term "parent" or "subsidiary" shall mean
any present or future corporation which is or would be a "parent
corporation" or "subsidiary corporation" of the Company as the term is
defined in Section 424 of the Code (determined as if the Company were
the employer corporation).
2. Administration of the Plan
The Plan shall be administered by a committee (the
"Committee") as appointed from time to time by the Board of Directors
of the Company, which may be the Compensation Committee of the Board of
Directors. Except as otherwise specifically provided herein, no person,
other than members of the Committee, shall have any discretion as to
decisions regarding the Plan. The Company may engage a third party to
administer routine matters under the Plan, such as establishing and
maintaining accounts for Plan participants and facilitating
transactions by participants pursuant to the Plan.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretations and
decisions made by the Committee with regard to any question arising
under the Plan shall be final and conclusive on all persons
participating or eligible to participate in the Plan. Subject to the
provisions of the Plan, the Committee shall determine the terms of all
options granted pursuant to the Plan, including, but not limited to,
the persons to whom, and the time or times at which, grants shall be
made, the number of shares to be covered by each option, the duration
of options, the exercisability of options, whether options shall be
treated as incentive stock options, and the option price.
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3. Shares of Stock Subject to the Plan
Except as provided in paragraphs 6(h), 6(i) and 7 hereof, the
number of shares that may be issued or transferred pursuant to the
exercise of options granted under the Plan shall not exceed 2,000,000
shares of Common Stock. Such shares may be authorized and unissued
shares or previously issued shares acquired or to be acquired by the
Company and held in treasury. Any shares subject to an option which for
any reason expires or is terminated unexercised as to such shares may
again be subject to an option right under the Plan. The aggregate Fair
Market Value, as defined in paragraph 6(k) below (determined at the
time the option is granted), of the shares with respect to which
incentive stock options are exercisable for the first time by an
optionee during any calendar year (under the Plan and all plans of the
Company and any parent or subsidiary of the Company) shall not exceed
$100,000.
4. Eligibility
Incentive stock options may be granted only to management and
other employees who are employed by the Company or a parent or
subsidiary of the Company. Incentive stock options may be granted to a
director of the Company or a parent or subsidiary of the Company,
provided that the director is also an officer or employee.
Non-qualified stock options may be granted to directors, officers,
employees and consultants of the Company.
5. Granting of options
No options pursuant to this Plan may be granted after the
close of business on June 22, 2009. The date of the grant of any option
shall be the date on which the Committee authorizes the grant of such
option.
6. Options
Options shall be evidenced by stock option agreements in such
form, consistent with the Plan, as the Committee shall approve from
time to time, which agreements need not be identical and shall be
subject to the following terms and conditions:
(a) Option Price. The purchase price under each
incentive stock option shall be not less than 100% of the Fair
Market Value of the Common Stock at the time the option is
granted and not less than the par value of the Common Stock.
In the case of an incentive stock option granted to an
employee owning, actually or constructively under Section
424(d) of the Code, more than 10% of the total combined voting
power of all classes of stock of the Company or of any parent
or subsidiary of the Company (a "10% Stockholder") the option
price shall not be less than 110% of the Fair Market Value of
the Common Stock at the time of the grant. The purchase price
under each non-qualified stock option shall be specified by
the Committee, but shall in no case be less than the greater
of 50% of the Fair Market Value of the Common Stock at the
time the option is granted and the par value of such Common
Stock.
(b) Medium and Time of Payment. Stock purchased
pursuant to the exercise of an option shall at the time of
purchase be paid for in full in cash, or, upon conditions
established by the Committee, by delivery of shares of Common
Stock owned by the recipient. If payment is made by the
delivery of shares, the value of the
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shares delivered shall be the Fair Market Value of such shares
on the date of exercise of the option. In addition, unless
otherwise provided by the Committee an "in the money"
non-qualified stock option may be exercised on a "cashless"
basis in exchange for the issuance to the optionee (or other
person entitled to exercise the option) of the largest whole
number of shares having an aggregate value equal to the value
of such option on the date of exercise. For this purpose, the
value of the shares delivered by the Company and the value of
the option being exercised shall be determined based on the
Fair Market Value of the Common Stock on the date of exercise
of the option. Upon receipt of payment and such documentation
as the Company may deem necessary to establish compliance with
the Securities Act of 1933, as amended (the "Securities Act"),
the Company shall, without stock transfer tax to the optionee
or other person entitled to exercise the option, deliver to
the person exercising the option a certificate or certificates
for such shares. It shall be a condition to the performance of
the Company's obligation to issue or transfer Common Stock
upon exercise of an option or options that the optionee pay,
or make provision satisfactory to the Company for the payment
of, any taxes (other than stock transfer taxes) the Company is
obligated to collect with respect to the issue or transfer of
Common Stock upon such exercise, including any federal, state,
or local withholding taxes.
(c) Waiting Period. The waiting period and time
for exercising an option shall be prescribed by the Committee
in each particular case; provided, however, that no option may
be exercised after 10 years from the date it is granted. In
the case of an incentive stock option granted to a 10%
Stockholder, such option, by its terms, shall be exercisable
only within five years from the date of grant.
(d) Rights as a Stockholder. A recipient of
options shall have no rights as a stockholder with respect to
any shares issuable or transferable upon exercise thereof
until the date a stock certificate is issued to him for such
shares. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock
certificate is issued.
(e) Non-Assignability of Options. No incentive
stock option and, except as may otherwise be specifically
provided by the Committee, no non-qualified stock options,
shall be assignable or transferable by the recipient except by
will or by the laws of descent and distribution. During the
lifetime of a recipient, incentive stock options and, except
as may otherwise be specifically provided by the Committee,
non-qualified stock options, shall be exercisable only by such
recipient. If the Committee approves provisions in any
particular case allowing for assignment or transfer of a
non-qualified stock option, then such option will nonetheless
be subject to a six-month holding period commencing on the
date of grant during which period the recipient will not be
permitted to assign or transfer such option, unless the
Committee further specifically provides for the assignability
or transferability of such option during this period. See
paragraph 8 hereof for restrictions on sale of shares.
(f) Effect of Termination of Employment. If a
recipient's employment (or service as an officer, director or
consultant) shall terminate for any reason, other than death
or Retirement (as defined below), the right of the recipient
to exercise any option otherwise exercisable on the date of
such termination shall expire unless such right is exercised
within a period of 90 days after the date of such termination.
The term
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"Retirement" shall mean the voluntary termination of
employment (or service as an officer, director or consultant)
by a recipient who has attained the age of 55 and who has
completed at least five years of service with the Company. If
a recipient's employment (or service as an officer, director
or consultant) shall terminate because of death or Retirement,
the right of the recipient to exercise any option otherwise
exercisable on the date of such termination shall be
unaffected by such termination and shall continue until the
normal expiration of such option. Notwithstanding the
foregoing, the tax treatment available pursuant to Section 421
of the Code upon the exercise of an incentive stock option
will not be available in connection with the exercise of any
incentive stock option more than three months after the date
of termination of such option recipient's employment due to
Retirement. Option rights shall not be affected by any change
of employment as long as the recipient continues to be
employed by either the Company or a parent or subsidiary of
the Company. In no event, however, shall an option be
exercisable after the expiration of its original term as
determined by the Committee pursuant to subparagraph 6(c)
above. The Committee may, if it determines that to do so would
be in the Company's best interests, provide in a specific case
or cases for the exercise of options which would otherwise
terminate upon termination of employment with the Company for
any reason, upon such terms and conditions as the Committee
determines to be appropriate. Nothing in the Plan or in any
option agreement shall confer any right to continue in the
employ of the Company or any parent or subsidiary of the
Company or interfere in any way with the right of the Company
or any parent or subsidiary of the Company to terminate the
employment of a recipient at any time.
(g) Leave of Absence. In the case of a recipient
on an approved leave of absence, the Committee may, if it
determines that to do so would be in the best interests of the
Company, provide in a specific case for continuation of
options during such leave of absence, such continuation to be
on such terms and conditions as the Committee determines to be
appropriate, except that in no event shall an option be
exercisable after 10 years from the date it is granted.
(h) Recapitalization. In the event that
dividends payable in Common Stock during any fiscal year of
the Company exceed in the aggregate five percent of the Common
Stock issued and outstanding at the beginning of the year, or
in the event there is during any fiscal year of the Company
one or more splits, subdivisions, or combinations of shares of
Common Stock resulting in an increase or decrease by more than
five percent of the shares outstanding at the beginning of the
year, the number of shares available under the Plan shall be
increased or decreased proportionately, as the case may be,
and the number of shares deliverable upon the exercise
thereafter of any options theretofore granted shall be
increased or decreased proportionately, as the case may be,
without change in the aggregate purchase price. Common Stock
dividends, splits, subdivisions, or combinations during any
fiscal year that do not exceed in the aggregate five percent
of the Common Stock issued and outstanding at the beginning of
such year shall be ignored for purposes of the Plan. All
adjustments shall be made as of the day such action
necessitating such adjustment becomes effective.
(i) Sale or Reorganization. In case the Company is
merged or consolidated with another corporation, or in case
the property or stock of the Company is acquired by another
corporation, or in case of a separation, reorganization, or
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liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming
the obligations of the Company hereunder, shall either (i)
make appropriate provisions for the protection of any
outstanding options by the substitution on an equitable basis
of appropriate stock of the Company, or appropriate options to
purchase stock of the merged, consolidated, or otherwise
reorganized corporation, provided only that such substitution
of options shall, with respect to incentive stock options,
comply with the requirements of Section 424(a) of the Code, or
(ii) give written notice to optionees that their options,
which will become immediately exercisable notwithstanding any
waiting period otherwise prescribed by the Committee, must be
exercised within 30 days of the date of such notice or they
will be terminated.
(j) General Restrictions. Each option granted
under the Plan shall be subject to the requirement that, if at
any time the Board of Directors shall determine, in its
discretion, that the listing, registration, or qualification
of the shares issuable or transferable upon exercise thereof
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 such option or the issue,
transfer, or purchase of shares thereunder, such 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.
The Company shall not be obligated to sell
or issue any shares of Common Stock in any manner in
contravention of the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the rules and
regulations of the Securities and Exchange Commission, any
state securities law, the rules and regulations promulgated
thereunder or the rules and regulations of any securities
exchange or over the counter market on which the Common Stock
is listed or in which it is included for quotation. The Board
of Directors may, in connection with the granting of each
option, require the individual to whom the option is to be
granted to enter into an agreement with the Company stating
that as a condition precedent to each exercise of the option,
in whole or in part, he shall, if then required by the
Company, represent to the Company in writing that such
exercise is for investment only and not with a view to
distribution, and also setting forth such other terms and
conditions as the Committee may prescribe. Such agreements may
also, in the discretion of the Committee, contain provisions
requiring the forfeiture of any options granted and/or Common
Stock held, in the event of the termination of employment or
association, as the case may be, of the optionee with the
Company. Upon any forfeiture of Common Stock pursuant to an
agreement authorized by the preceding sentence, the Company
shall pay consideration for such Common Stock to the optionee,
pursuant to any such agreement, without interest thereon.
(k) "Fair Market Value." Fair Market Value for
all purposes under the Plan shall mean the closing price of
shares of Common Stock, as reported in The Wall Street
Journal, in the NASDAQ National Market Issues or similar
successor consolidated transactions reports (or a similar
consolidated transactions report for the exchange on which the
shares of Common Stock are then trading) for the relevant
date, or if no sales of shares of Common Stock were made on
such date, the average of the
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high and low sale prices of shares as reported in such
composite transaction report for the preceding day on which
sales of shares were made. If the shares are not listed on a
national securities exchange or included for quotation in the
NASDAQ National Market System at the time Fair Market Value is
to be determined, then Fair Market Value shall be determined
by the Committee in good faith pursuant to such method as to
the Committee deems appropriate and equitable. Under no
circumstances shall the Fair Market Value of a share of Common
Stock be less than its par value.
7. Termination and Amendment of the Plan
The Board of Directors or the Committee shall have the right
to amend, suspend, or terminate the Plan at any time; provided,
however, that no such action shall affect or in any way impair the
rights of a recipient under any option right theretofore granted under
the Plan; and, provided, further, that unless first duly approved by
the stockholders of the Company entitled to vote thereon at a meeting
(which may be the annual meeting) duly called and held for such
purpose, except as provided in subparagraphs 6(h) and 6(i), no
amendment or change shall be made in the Plan increasing the total
number of shares which may be issued or transferred under the Plan,
materially increasing the benefits to Plan participants or modifying
the requirements as to eligibility for participation in the Plan.
8. Restriction on Sale of Shares
Without the written consent of the Company, no stock acquired
by an optionee upon exercise of an incentive stock option granted
hereunder may be disposed of by the optionee within two years from the
date such incentive stock option was granted, nor within one year after
the transfer of such stock to the optionee; provided, however, that a
transfer to a trustee, receiver, or other fiduciary in any insolvency
proceeding, as described in Section 422(c)(3) of the Code, shall not be
deemed to be such a disposition. The optionee shall make appropriate
arrangements with the Company for any taxes which the Company is
obligated to collect in connection with any such disposition, including
any federal, state, or local withholding taxes.
No stock acquired by an optionee upon exercise of a
non-qualified stock option granted hereunder may be disposed of by the
optionee (or other person eligible to exercise the option) within six
months from the date such non-qualified stock option was granted,
unless otherwise provided by the Committee.
9. Effective Date of the Plan
This Plan is effective as of June 23, 1999, provided, however,
that the Plan be approved by the stockholders of the Company at the
2000 Annual Meeting of Stockholders. If the Plan is not approved by the
stockholders, the Plan and options granted hereunder shall thereupon
terminate. In any event, the Plan shall terminate on June 22, 2009, or
on such earlier date as the Board of Directors or the Committee may
determine. Any option outstanding at the termination date shall remain
outstanding until it has either expired or has been exercised.
10. Compliance with Rule 16b-3
With respect to persons subject to Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors. To the
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extent any provision of the Plan or action by the Committee (or any
other person on behalf of the Committee or the Company) fails to so
comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.
11. Automatic Grant of Options to Non-Employee Directors
The purpose of this Section 11 is to continue the program of
automatic grants of options to non-employee directors of the Company
established pursuant to Section 11 of the Company's 1993 Incentive and
Non-Qualified Stock Option Plan and continued by the Company's 1997
Incentive and Non-Qualified Stock Option Plan (collectively, the "Prior
Plans"). The following options, to the extent not heretofore granted
pursuant to the Prior Plans, shall be automatically awarded:
(a) Each director, who is not also an employee
of the Company or any of its affiliates, or the designee of
any stockholder of the Company pursuant to a right to
designate one or more directors (an "Eligible Director") shall
automatically be awarded a grant of 50,000 non-qualified stock
options upon his or her initial election to the Board of
Directors. Such options shall vest and be exercisable solely
in accordance with the following schedule:
(i) The options may be exercised with respect to
a maximum of one-half of the option shares
during the twelve-month period beginning
after the date of grant.
(ii) The options may be exercised with respect to
all of the option shares upon the Eligible
Director's reelection to the Board of
Directors for a second consecutive term.
(iii) The options will expire and will no longer
be exercisable as of the tenth anniversary
of the date of grant, subject to sooner
expiration upon the occurrence of certain
events as provided elsewhere in this Plan.
(b) In addition to the grant provided in
subsection (a), each Eligible Director shall automatically be
awarded a grant of non-qualified stock options upon the
reelection of such Eligible Director to a third or subsequent,
successive term, in the amount and at the times hereinafter
set forth. Such automatic grants of non-qualified stock
options commenced on June 21, 1995, pursuant to the Prior
Plans, and have occurred and shall continue to occur annually
thereafter on the date of the annual meeting of stockholders
for such year until the termination of the Plan. The number of
options to which each Eligible Director shall be entitled
pursuant to this subsection (b) shall be as follows:
(i) 20,000 on the date of the Eligible
Director's reelection to a third one-year
term;
(ii) 20,000 on the date of the Eligible
Director's reelection to a fourth one-year
term;
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(iii) 15,000 on the date of the Eligible
Director's reelection to a fifth one-year
term;
(iv) 15,000 on the date of the Eligible
Director's reelection to a sixth one-year
term;
(v) 10,000 on the date of the Eligible
Director's reelection to a seventh one-year
term;
(vi) 10,000 on the later of the date of the
annual meeting of stockholders in 2000, or
the date of the Eligible Director's
reelection to an eighth one-year term; and
(vii) 10,000 on the later of the date of the
annual meeting of stockholders in 2001, or
the date of the Eligible Director's
reelection to a ninth one-year term.
Such options shall vest and be exercisable solely in
accordance with the following schedule:
(i) The options shall not be exercisable during
the twelve-month period beginning after the
date of grant.
(ii) The options may be exercised with respect to
one-third of the option shares after the
expiration of twelve months from the date of
grant.
(iii) The remaining two-thirds of the options
shall vest and become exercisable ratably on
a monthly basis over the two-year period
commencing one year from the date of grant
and ending three years from the date of
grant.
(iv) The options will expire and will no longer
be exercisable as of the tenth anniversary
of the date of grant, subject to sooner
expiration upon the occurrence of certain
events as provided elsewhere in this Plan.
(c) The option price for all options awarded
under this Section 11 shall be equal to 100% of the Fair
Market Value of a share of Common Stock on the date of grant.
