U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant To Section 14(a)
of the Securities Exchange Act of 1934

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ARRAY BIOPHARMA INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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3200 WALNUT STREET
BOULDER, CO 80301

 

September 21, 2010

 

Dear Fellow Stockholder:

 

You are cordially invited to attend Array BioPharma Inc.’s Annual Meeting of Stockholders on November 4, 2010, at 1:00 p.m., Mountain Standard Time, at the offices of Array, located at 1825 33rd Street, Boulder, Colorado 80301.

 

The matters to be acted on at the Annual Meeting are described in the enclosed notice and Proxy Statement.

 

We realize that you may not be able to attend the Annual Meeting and vote your shares in person. However, regardless of your meeting attendance, we need your vote. We urge you to ensure that your shares are represented by voting in advance of the meeting on the Internet, via a toll-free telephone number as instructed in the Notice of Internet Availability of Proxy Materials, or if you have elected to receive a paper or e-mail copy of the proxy materials, by completing, signing and returning the proxy card that is provided. If you decide to attend the Annual Meeting, you may revoke your proxy at that time and vote your shares in person.

 

Please remember that this is your opportunity to voice your opinion on matters affecting Array. We look forward to receiving your proxy and perhaps seeing you at the Annual Meeting.

 

Sincerely,

 

Robert E. Conway

Chief Executive Officer

 

3200 WALNUT STREET
BOULDER, CO 80301

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To be held on November 4, 2010

 

You are cordially invited to attend the 2010 Annual Meeting of Stockholders of Array BioPharma Inc. to be held on November 4, 2010, at 1:00 p.m., Mountain Standard Time, at the offices of Array located at 1825 33rd Street, Boulder, Colorado 80301, to consider and vote upon the following matters:

 

 

The foregoing items of business are more fully described in the proxy statement accompanying this Notice of Annual Meeting of Stockholders.

 

The Board of Directors has fixed the close of business on September 7, 2010 as the record date for the determination of stockholders entitled to notice of, and to vote at, this Annual Meeting and any continuation, postponement or adjournment thereof. Your vote is very important to Array and all proxies are being solicited by the Board of Directors. So, whether or not you plan on attending the 2010 Annual Meeting, we encourage you to submit your proxy as soon as possible (i) by accessing the Internet site or by calling the toll-free number described in the proxy materials; or (ii) by signing, dating and returning a proxy card or instruction form provided to you. By submitting your proxy promptly, you will save the Company the expense of further proxy solicitation. Please note that all votes cast by telephone or on the Internet must be cast prior to 11:59 p.m., Eastern Standard Time, on November 3, 2010.

 

By Order of the Board of Directors,

 

John R. Moore

Secretary

 

Boulder, Colorado

September 21, 2010

 

3200 WALNUT STREET
BOULDER, CO 80301

 

PROXY STATEMENT

 

INFORMATION CONCERNING VOTING AND SOLICITATION

 

General

 

This Proxy Statement is furnished to stockholders of Array BioPharma Inc., a Delaware corporation, or Array, in connection with the solicitation of proxies for use at the Annual Meeting of Stockholders of Array to be held on November 4, 2010, at 1:00 p.m., Mountain Standard Time, at the offices of Array, 1825 33rd Street, Boulder, Colorado 80301, for the purposes set forth in the Notice of Meeting. This solicitation of proxies is made on behalf of our Board of Directors.

 

Important Notice Regarding the Availability of Proxy Materials for the Fiscal 2010 Stockholder Meeting to be Held on November 4, 2010

 

Pursuant to the rules adopted by the Securities and Exchange Commission, or the SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials to certain of our stockholders of record. We are also sending a paper copy of the proxy materials and proxy card to other stockholders of record who have indicated they prefer receiving such materials in paper form. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice Regarding the Availability of Proxy Materials. We intend to mail the Notice Regarding the Availability of Proxy Materials or paper copies of the proxy statement and proxy card, as applicable, on or about September 21, 2010 to all stockholders entitled to vote at the Annual Meeting.

 

Stockholders will have the ability to access the proxy materials on the website referred to in the Notice Regarding the Availability of Proxy Materials or may request to receive a paper copy of the proxy materials by mail or electronic copy by electronic mail on a one-time or ongoing basis. Instructions on how to request a printed copy by mail or electronically may be found on the Notice Regarding the Availability of Proxy Materials and on the website referred to in that notice.

 

The Notice of Internet Availability of Proxy Materials will also identify the date, the time and location of the Annual Meeting; the matters to be acted upon at the meeting and the Board of Directors’ recommendation with regard to each matter; a toll-free telephone number, an e-mail address, and a website where stockholders can request to receive, free of charge, a paper or e-mail copy of the Proxy Statement, our Annual Report and a form of proxy relating to the Annual Meeting; information on how to access and vote the form of proxy; and information on how to obtain directions to attend the meeting and vote in person should stockholders choose to do so.

 

Our Fiscal Year

 

In this proxy statement, when we refer to our fiscal year, we mean the twelve-month period ending June 30th of the stated year (for example, Fiscal 2010 is July 1, 2009 through June 30, 2010), unless specifically stated otherwise.

What Are You Voting On?

 

You will be asked to vote on the following proposals at the 2010 Annual Meeting of Stockholders:

 

 

Who Can Vote

 

Only holders of record of shares of our Common Stock, $.001 par value, as of the close of business on the record date, September 7, 2010, are entitled to receive notice of, and to vote at, the Annual Meeting. The Common Stock constitutes the only class of securities entitled to vote at the Annual Meeting, and each share of common stock entitles the holder thereof to one vote. Your shares may be voted at the Annual Meeting, or any adjournments thereof only if you are present in person or your shares are represented by a valid proxy.

 

Difference between a Stockholder of Record and a “Street Name” Holder

 

If your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares.

 

If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you are still considered to be the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot submit a proxy or vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the methods described below under the heading “Voting Your Shares.”

 

Shares Outstanding and Quorum

 

At the close of business on September 7, 2010, there were 53,475,730 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. The presence of a majority of the outstanding shares of our Common Stock entitled to vote constitutes a quorum, which is required in order to hold and conduct business at the Annual Meeting. Your shares are counted as present at the Annual Meeting if you:

 

 

If you submit your proxy, regardless of whether you abstain from voting on one or more matters, your shares will be counted as present at the Annual Meeting for the purpose of determining a

quorum. If your shares are held in “street name,” your shares are counted as present for purposes of determining a quorum if your broker, bank, trust or other nominee submits a proxy covering your shares. Your broker, bank, trust or other nominee is entitled to submit a proxy covering your shares as to certain “routine” matters, even if you have not instructed your broker, bank, trust or other nominee on how to vote on those matters.

 

Please see “If You Do Not Specify How You Want Your Shares Voted” below.

 

Voting Your Shares

 

You may vote by attending the Annual Meeting and voting in person or you may vote by submitting a proxy. The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy, and (2) for shares held as a record holder and shares held in “street name.”

 

If you hold your shares of Common Stock as a record holder and you are viewing this proxy statement on the Internet, you may vote by submitting a proxy over the Internet or by telephone by following the instructions on the website referred to in the Notice Regarding Availability of Proxy Materials previously mailed to you. You may request a paper copy of the proxy statement and proxy card by following the instructions on the website and in the Notice Regarding Availability of Proxy Materials provided to you.

 

If you hold your shares of Common Stock as a record holder and you are reviewing a paper copy of this proxy statement, you may vote your shares by submitting a proxy over the Internet or by telephone by following the instructions on the proxy card, or by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the pre-addressed, postage-paid envelope provided to you.

 

If you hold your shares of Common Stock in street name you will receive a Notice Regarding Availability of Proxy Materials from your broker, bank, trust or other nominee that includes instructions on how to vote your shares. Your broker, bank, trust or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone or by completing, dating and signing the proxy card included with your proxy materials if you request a paper copy of them by following the instructions on the Notice Regarding Availability of Proxy Materials provided by your broker, bank, trust or other nominee.

 

Deadline for Submitting Your Proxy on the Internet or by Telephone

 

The Internet and telephone voting facilities will close at 11:59 P.M., Eastern Standard Time, on November 3, 2010. Stockholders who submit a proxy through the Internet should be aware that they may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers and that these costs must be borne by the stockholder. Stockholders who submit a proxy by Internet or telephone need not return a proxy card or the form forwarded by your broker, bank, trust or other holder of record by mail.

 

YOUR VOTE IS VERY IMPORTANT. You should submit your proxy even if you plan to attend the Annual Meeting.

 

Voting in Person

 

If you plan to attend the Annual Meeting and wish to vote in person, you will be given a ballot at the Annual Meeting. Please note that if your shares are held of record by a broker, bank, trust or other nominee, and you decide to attend and vote at the Annual Meeting, your vote in person at the Annual Meeting will not be effective unless you present a legal proxy, issued in your name from the record holder, your broker, bank, trust or other nominee. Even if you intend to attend the Annual

Meeting, we encourage you to submit your proxy to vote your shares in advance of the Annual Meeting. Please see the important instructions and requirements below regarding “Attendance at the Annual Meeting.”

 

Changing Your Vote

 

As a stockholder of record, if you vote by proxy, you may revoke that proxy at any time before it is voted at the Annual Meeting. Stockholders of record may revoke a proxy prior to the Annual Meeting by (i) delivering a written notice of revocation to the attention of the Secretary of the Company at our principal executive office at 3200 Walnut Street, Boulder, Colorado 80301 (ii) duly submitting a later-dated proxy over the Internet, by mail, or if applicable, by telephone, or (iii) attending the Annual Meeting in person and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.

 

If your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee.

 

If You Receive More Than One Proxy Card or Notice

 

If you receive more than one proxy card or Notice Regarding Availability of Proxy Materials, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card or Notice Regarding Availability of Proxy Materials you receive.

 

How Your Shares Will Be Voted

 

Shares represented by proxies that are properly executed and returned, and not revoked will be voted as specified. YOUR VOTE IS VERY IMPORTANT.

 

If You Do Not Specify How You Want Your Shares Voted

 

Where no specification is made if a proxy is voted by telephone, on the Internet, or on a properly executed and returned form of proxy, the shares will be voted as follows:

 

 

We know of no other business to be transacted at the Annual Meeting. If other matters requiring a vote do arise, the persons named in the proxy intend to vote in accordance with their judgment on such matters.

 

A “broker non-vote” occurs when a nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and does not have discretionary authority to vote the shares. If you hold your shares in street name and do not provide voting instructions to your broker or other nominee, your shares will be considered to be broker non-votes and will not be voted

on any proposal on which your broker or other nominee does not have discretionary authority to vote. Shares that constitute broker non-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum, but will not be considered entitled to vote on the proposal in question. Brokers generally have discretionary authority to vote on the ratification of the selection of KPMG LLP as our independent registered public accountants. Brokers, however, do not have discretionary authority to vote on the election of directors to serve on our Board of Directors or on any stockholder proposal.

 

In their discretion, the proxy holders named in the proxy are authorized to vote on any other matters that may properly come before the Annual Meeting and at any continuation, postponement or adjournment thereof. The Board of Directors knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this proxy statement. In addition, no stockholder proposal or nomination was received on a timely basis, so no such matters may be brought to a vote at the Annual Meeting.

 

Counting of Votes

 

All votes will be tabulated by the inspector of election appointed for the Annual Meeting who will separately tabulate affirmative and negative votes, abstentions and shares represented by brokers who are prohibited from exercising discretionary authority because the beneficial owners of such shares have not provided voting instructions, commonly referred to as “broker non-votes.” Shares represented by proxies that reflect abstentions and broker non-votes will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum. The election of directors will be approved by a plurality of the votes duly cast. Abstentions and broker “non-votes” are not counted for purposes of the election of directors. The approval of PROPOSAL 2 and PROPOSAL 3 and the ratification of the independent registered public accountants under PROPOSAL 4 will each require a favorable vote of a majority of the shares of our common stock present in person or by proxy, and entitled to vote at the Annual Meeting. Broker non-votes are not treated as present and entitled to vote for purposes of determining whether a proposal has been approved and, therefore, will not be counted for any purpose in determining the approval of PROPOSAL 2 or PROPOSAL 3 or the ratification of the independent registered public accountants under PROPOSAL 4, and will have no effect on these proposals. Abstentions represent shares entitled to vote and, therefore, the effect of an abstention will be a vote against these proposals.

 

Inspector of Election

 

All votes will be tabulated by the inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

 

Solicitation of Proxies

 

We will bear the entire cost of solicitation of proxies, including preparation, assembly and mailing of this proxy statement, the proxy, the Notice Regarding Availability of Proxy Materials and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares of our Common Stock in their names that are beneficially owned by others to forward to those beneficial owners. We may reimburse persons representing beneficial owners for their costs of forwarding the solicitation materials to the beneficial owners. Original solicitation of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or staff members. No additional compensation will be paid to our directors, officers or staff members for such services.

 

A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder at the Annual Meeting and for 10 days prior to the Annual Meeting.

Attendance at the Annual Meeting

 

You must bring certain documents with you in order to be admitted to the Annual Meeting. The purpose of this requirement is to help us verify that you are actually a stockholder of the Company. Please read the following rules carefully, because they specify the documents that you must bring with you to the Annual Meeting in order to be admitted. The items that you must bring with you differ depending upon whether or not you were a record holder of the Company’s Common Stock as of the close of business on September 7, 2010.

 

A “record holder” of stock is someone whose shares of stock are registered in his or her name in the records of the Company’s transfer agent. Many stockholders are not record holders because their shares of stock are registered in the name of their broker, bank, trust or other nominee, and the broker, bank, trust or other nominee is the record holder instead.

 

All persons must bring his or her Notice Regarding Availability of Proxy Materials or proxy card AND a valid personal photo identification (such as a driver’s license or passport).

 

If you are a record holder, at the Annual Meeting, we will check your name for verification purposes against our list of record holders as of the close of business on September 7, 2010.

 

If a broker, bank, trust or other nominee was the record holder of your shares of Common Stock as of the close of business on September 7, 2010, then you must also bring to the Annual Meeting:

 

 

Examples of proof of ownership include the following: (1) an original or a copy of the voting information from from your bank or broker with your name on it; (2) a letter from your bank or broker stating that you owned shares of our Common Stock as of the close of business on September 7, 2010; or (3) a brokerage account statement indicating that you owned shares of our Common Stock as of the close of business on September 7, 2010.

 

If you are a proxy holder for an Array stockholder who owned shares of our Common Stock as of the close of business on September 7, 2010, then you must also bring to the Annual Meeting:

 

 

PROPOSAL 1
ELECTION OF DIRECTORS

 

Our Board of Directors is composed of nine members divided into three classes having staggered three-year terms. At each Annual Meeting of Stockholders, the successors to the class of Directors whose terms expired are elected to serve three-year terms. The terms of the Class I directors will expire at the Annual Meeting. The current Class I directors are David L. Snitman, Ph.D., Gil J. Van Lunsen and John L. Zabriskie, Ph.D. Dr. Snitman, Mr. Van Lunsen and Dr. Zabriskie have been nominated for re-election at the Annual Meeting as directors to hold office until the 2013 Annual Meeting of Stockholders or until their successors are elected and qualified. Each of the nominees has consented to serve a term as a Class I director. Should any or all of the nominees become unable to serve for any reason prior to the Annual Meeting, the Board of Directors may designate substitute nominees, in which event the persons named in the enclosed proxy will vote for the election of such substitute nominee or nominees, or may reduce the number of directors on the Board of Directors.

 

Class I Director Nominees for Election to Term Expiring 2013

 

Below is a biography of each of the three directors standing for election at the Annual Meeting and a description of the specific experience, qualifications, attributes or skills or each nominee that led the Corporate Governance Committee to recommend that person as a nominee for director:

 

David L. Snitman, Ph.D.

 

Dr. Snitman, 58, is a Co-Founder of Array and has served as our Chief Operating Officer, our Vice President of Business Development and a member of our Board of Directors since May 1998. Prior to forming Array, Dr. Snitman held various positions with Amgen Inc. since December 1981, including Associate Director, New Products and Technology and Manager of Amgen’s Boulder research facility. Dr. Snitman received a B.S. in Chemistry from Northeastern University and a Ph.D. in the Synthesis of Natural Products from the University of Colorado, and was a National Institutes of Health Postdoctoral Fellow at the Massachusetts Institute of Technology.

 

Dr. Snitman has been our Vice President of Business Development since our inception in May 1998 and brings to the Board significant expertise in complex licensing and other key strategic business relationships that are critical to our business. Dr. Snitman also has extensive scientific knowledge and a broad understanding of our industry, the markets in which we are competing and of our development activities and operations.

 

Gil J. Van Lunsen

 

Mr. Van Lunsen, 68, has served as a member of our Board of Directors since October 2002. Prior to his retirement in June 2000, Mr. Van Lunsen was a Managing Partner of KPMG LLP and led the firm’s Tulsa, Oklahoma office. During his 33-year career, Mr. Van Lunsen held various positions of increasing responsibility within KPMG and was elected to the partnership in 1977. Mr. Van Lunsen is currently Vice Chairman of the Audit Committee at ONEOK Partners, GP, L.L.C. in Tulsa, Oklahoma. Additionally, Mr. Van Lunsen was the Audit Committee Chairman at Sirenza Microdevices, Inc. and its predecessor entities in Broomfield, Colorado, from July 2002 until December 2007. Mr. Van Lunsen received a B.S./B.A. in Accounting from the University of Denver.

 

Mr. Van Lunsen has extensive experience with complex financial and accounting issues and, as a former Managing Partner of KPMG LLP, vice chairman of the Audit Committee and former chairman of the Audit Committee of two other public companies, provides valuable leadership and insights to the Board of Directors on financial as well as governance matters. During his tenure on our Board of Directors and the Audit Committee, Mr. Van Lunsen has also developed an intimate knowledge of critical operational and financial issues facing our company and our industry.

John L. Zabriskie, Ph.D..

 

Dr. Zabriskie, 71, has served as a member of our Board of Directors since January 2001. Dr. Zabriskie is Co-Founder and Director of Puretech Ventures, LLC, and the past Chairman of the Board, Chief Executive Officer and President of NEN Life Science Products, Inc., a leading supplier of kits for labeling and detection of DNA. Prior to joining NEN Life Science Products, Dr. Zabriskie was President and Chief Executive Officer of Pharmacia & Upjohn Inc. (“Upjohn”). As Chairman of the Board and Chief Executive Officer of Upjohn, Dr. Zabriskie led the Upjohn project, which resulted in the $12 billion merger of equals with Pharmacia Corporation. Prior to joining Upjohn in 1994, Dr. Zabriskie was Executive Vice President for Merck & Co., Inc. Dr. Zabriskie currently serves on the Board of Directors of publicly-traded Kellogg Company and ARCA biopharma, Inc. and privately-held Puretech Ventures LLC. He previously served on the Board of Directors of publicly-traded MacroChem Corp. Dr. Zabriskie received a B.S degree in Chemistry from Dartmouth College and his Ph.D. in Organic Chemistry from the University of Rochester.

 

As a former Chief Executive Officer of Upjohn and as a member of the boards of directors of several publicly-traded and private companies, Dr. Zabriskie brings strong leadership capabilities to the Board of Directors as well as his experience with financial and governance matters. Through his extensive experience in the pharmaceutical and biotechnology industry at the senior executive level, he also brings important strategic insights and perspectives to the Board of Directors and a deep understanding of the operational challenges facing our business.

 

Required Vote

 

The three nominees for director will be elected upon a favorable vote of a plurality of the votes cast at the Annual Meeting. Shares represented by proxies cannot be voted for more than the three nominees for director.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH OF THE NOMINEES FOR ELECTION AS CLASS I DIRECTORS TO THE BOARD.

 

Class II Directors Continuing in Office—Term Expiring 2011

 

The following Class II directors have terms expiring at the Annual Meeting of Stockholders in 2011:

 

Marvin H. Caruthers, Ph.D.

 

Dr. Caruthers, 70, has served as a member of our Board of Directors since August 1998. Since 1979, Dr. Caruthers has been a Distinguished Professor of Biochemistry and Chemistry at the University of Colorado, Boulder. Dr. Caruthers is a member of the National Academy of Sciences and the American Academy of Arts and Sciences and was a founding scientist and a member of the Scientific Advisory Board of Amgen Inc. Dr. Caruthers serves on the Board of Directors of privately-held mirage Therapeutics. Dr. Caruthers received a B.S. in chemistry from Iowa State University and a Ph.D. in Chemistry from Northwestern University.

 

Dr. Caruthers distinguished scientific career and his leadership role at the University of Colorado provides special insight into the research and development activities of our company, and he brings a significant understanding of our industry through his active involvement in the biotechnology industry. As a scientific founder and a director of Array since our inception in 1998, Dr. Caruthers has a strong knowledge of the key strategic and operational issues we face.

Robert E. Conway

 

Mr. Conway, 56, has served as our Chief Executive Officer and a member of our Board of Directors since November 1999. Prior to joining Array, Mr. Conway was the Chief Operating Officer and Executive Vice President of Hill Top Research, Inc. from 1996 to 1999. From 1979 until 1996, Mr. Conway held various executive positions for Corning Incorporated, including Corporate Vice President and General Manager of Corning Hazleton, Inc., a preclinical contract research organization. Mr. Conway serves on the Board of Directors of DEMCO, Inc. and PRA International. In addition, Mr. Conway is a member of the Strategic Advisory Committee of Genstar Capital, LLC and is on the Board of Directors of the Biotechnology Industry Organization. Mr. Conway received a B.S. in Accounting from Marquette University and an M.B.A. from the University of Cincinnati.

 

During his career prior to joining Array and during his tenure as our President and Chief Executive Officer since 1999, Mr. Conway has acquired an extensive knowledge of our operations, our industry and the markets in which we operate, as well as of complex financial issues affecting our company. This knowledge coupled with Mr. Conway’s active involvement in the biotechnology industry on the boards of directors of other companies in our industry and the Biotechnology Industry Organization provides critical insights to the Board of Directors on important strategic issues. Mr. Conway also brings an important management perspective to the oversight function of the Board of Directors.

 

Kyle A. Lefkoff

 

Mr. Lefkoff, 51, has served as the Chairman of our Board of Directors since May 1998. Since 1995, Mr. Lefkoff has been a General Partner of Boulder Ventures, Ltd, a venture capital firm and a founding investor in our company. From 1986 until 1995, Mr. Lefkoff was employed by Colorado Venture Management, a venture capital firm. Mr. Lefkoff serves on the Board of Directors for a number of private companies, including: BaroFold, Inc., miRagen Therapeutics and Trust Company of America, and previously served on the Board of Directors of publicly-traded ARCA biopharma, Inc. Mr. Lefkoff received a B.A. in Economics from Vassar College and an M.B.A. from the University of Chicago.

 

Mr. Lefkoff’s career as a venture capitalist and investor in a number of biotechnology companies and his extensive knowledge of our industry provide important strategic insights to the Board of Directors. As a prior investor in Array and member of our Board of Directors since inception, Mr. Lefkoff has a deep understanding of the operational and financial issues affecting our company. Mr. Lefkoff also brings strong leadership skills to our Board of Directors and, as our Chairman, serves as a critical link between management and our Board of Directors.

 

Class III Directors Continuing in Office—Term Expiring 2012

 

The following Class III directors have terms expiring at the Annual Meeting of Stockholders in 2012:

 

Francis J. Bullock, Ph.D.

 

Dr. Bullock, 73, has served as a member of our Board of Directors since May 1998. Dr. Bullock is currently an independent consultant. From 2005 to 2009, Dr. Bullock served on the Board of Directors of ARCA biopharma, Inc. From 2002 to 2003, Dr. Bullock was a Senior Advisor for the Strategic Decisions Group, a management consulting firm. From 1993 to 2002, Dr. Bullock was a senior consultant for Arthur D. Little, Inc., focused on pharmaceutical and biotechnology research and development, as well as the fine chemicals and agricultural chemicals industries. From 1981 to 1993, Dr. Bullock served as Senior Vice President, Research Operations at Schering-Plough Research Institute. Dr. Bullock serves on the Board of Directors of publicly-traded GTC Biotherapeutics, Inc. and

Atherex, a privately-held company. Dr. Bullock received a B.S. in Pharmacy from the Massachusetts College of Pharmacy, an A.M. in Organic Chemistry and a Ph.D. in Organic Chemistry from Harvard University.

 

Dr. Bullock has extensive experience in the pharmaceutical and biotechnology industry as a senior executive and more recently as a consultant and advisor to investors in life sciences companies. He brings important strategic insights to the Board of Directors on research and development issues in particular as well as experience with compensation and governance matters for public companies.

 

Kevin Koch, Ph.D.

 

Dr. Koch, 50, is a co-founder of Array and has served as our President, Chief Scientific Officer and a member of our Board of Directors since May 1998. Prior to forming Array, Dr. Koch was an Associate Director of Medicinal Chemistry and Project Leader for the Protease Inhibitor and New Leads project teams for Amgen Inc. from 1995 to 1998. From 1988 until 1995, Dr. Koch held various positions with Pfizer Central Research, including Senior Research Investigator and Project Coordinator for the cellular migration and immunology project teams. From 1998 to 2003, Dr. Koch was an elected to the Board of Directors of the Inflammation Research Association. Dr. Koch received a B.S. in Chemistry and Biochemistry from the State University of New York at Stony Brook and a Ph.D. in Synthetic Organic Chemistry from the University of Rochester.

 

Dr. Koch brings to the Board of Directors extensive scientific knowledge and strong understanding of the pharmaceutical and biotechnology industry, as well as of the research and development activities in the markets in which we compete. He has an intimate knowledge of our discovery and development activities and, as one of the founders of Array, of our operations.

 

Douglas E. Williams, Ph.D.

 

Dr. Williams, 52, has served as a member of our Board of Directors since April 2004. He currently serves as Chief Executive Officer of ZymoGenetics, Inc. From September 2003 to August 2004, Dr. Williams served as Seattle Genetics, Inc.’s Chief Scientific Officer, Executive Vice President and a member of their Board of Directors. Prior to joining Seattle Genetics, Inc., from November 2002 to August 2003, Dr. Williams was Head of Health and Strategic Development for Genesis Research and Development Corporation Limited, a biotechnology company located in New Zealand. From July to October 2002, he served as Senior Vice President, Washington Site Leader and a member of the Executive Committee for Amgen Inc. Dr. Williams joined Amgen in July 2002 when it acquired Immunex Corporation, where he worked for 14 years, most recently serving as Executive Vice President, Chief Technology Officer and a member of Immunex’s Board of Directors. Prior to his work at Immunex, Dr. Williams served on the faculty of the Indiana University School of Medicine and the Department of Laboratory Medicine at the Roswell Park Memorial Institute. He serves on the boards of publicly-traded Oncothyreon Inc. and privately-held Aerovance Inc. and is a member of the Board of Trustees of the Fred Hutchinson Cancer Research Center. Dr. Williams holds a B.S. magna cum laude in Biological Sciences from the University of Massachusetts, Lowell and a Ph.D. in Physiology from the State University of New York at Buffalo, Roswell Park Division.

 

As the Chief Executive Officer of ZymoGenetics, Dr. Williams brings leadership skills, scientific expertise and an extensive knowledge of operational and financial issues affecting companies in our industry and at our stage of development. He has a detailed understanding of the biotechnology and pharmaceutical industry, including the markets in which we operate, and brings his experience with compensation and governance matters he has gained as the Chief Executive Officer and director of ZymoGenetics and a director of another public company.

Meetings of the Board of Directors and Committees of the Board of Directors

 

Our Board of Directors held six meetings during the fiscal year ended June 30, 2010. During the fiscal year, all of the directors attended at least 75% of the aggregate of (i) all meetings of the Board of Directors and (ii) all meetings of committees of which such director was a member, except Dr. Zabriskie, who attended five of the seven Audit Committee meetings, and Dr. Caruthers, who attended four of the six Board of Directors meetings. The Board of Directors has determined that Mr. Lefkoff, Dr. Bullock, Dr. Caruthers, Mr. Van Lunsen, Dr. Williams and Dr. Zabriskie, comprising six of its nine members, are independent as defined by applicable rules of the NASDAQ Stock Market.

 

Board Leadership Structure and Role in Risk Oversight

 

Currently, we have an independent Chairman of the Board separate from our Chief Executive Officer. Our Corporate Governance Guidelines provide that the role of Chairman and Chief Executive Officer may be separate or, if the Board of Directors determines, combined. If the Chief Executive Officer serves as Chairman, the Board of Directors will select one of the independent directors to act as a lead director to coordinate the other independent directors and to chair the executive sessions of independent directors. If these offices are separated, the Chairman will act as the lead director and the Chief Executive Officer will be responsible to the Board of Directors for the overall management and functioning of the company. The Board of Directors believes that having flexibility in determining whether to separate the roles of Chairman and Chief Executive Officer from time to time is in the best interest of our company and our stockholders by allowing the Board to take into account the varying needs of the company and the structure and composition of the Board of Directors at any particular time.

 

Our management is responsible for identifying risks facing our company, including strategic, financial, operational and regulatory risks, implementing risk management policies and procedures and managing our day to day risk exposure. Although we do not have a formal risk oversight policy, the Board of Directors through the Audit Committee discusses with management our significant financial risk exposures and monitors the adequacy of our risk assessment and risk management policies. In addition, the Board of Directors is regularly presented with information at its regularly scheduled and special meetings regarding risks facing our company, and management provides more frequent, informal communications to the Board between regularly scheduled meetings which are designed to give the Board of Directors regular updates about our business. The Board of Directors considers this information and provides feedback, makes recommendations, and, as appropriate, authorizes or directs management to address particular exposures to risk.

 

Committees of the Board of Directors

 

Our Board of Directors has established three standing committees, a Compensation Committee, an Audit Committee and a Corporate Governance Committee. Each of the standing committees has adopted a written charter which is available on the Investor Relations portion of our website at www.arraybiopharma.com. The Corporate Governance Guidelines adopted by the Board of Directors are also available on our website.

 

Compensation Committee

 

The Compensation Committee is responsible for determining executive officers’ compensation, evaluating the performance of the Chief Executive Officer and administering the Amended and Restated Array BioPharma Inc. Stock Option and Incentive Plan, the Array BioPharma Inc. Amended and Restated Employee Stock Purchase Plan and our Deferred Compensation Plan. The Compensation Committee held four meetings during the fiscal year ended June 30, 2010. Mr. Lefkoff (chair), Dr. Bullock, Dr. Caruthers and Dr. Williams are the members of the Compensation Committee. The Board of Directors has determined that all of the current members of our Compensation

Committee are independent as defined by applicable rules of the NASDAQ Stock Market. The report of the Compensation Committee is included elsewhere in this Proxy Statement.

 

Audit Committee

 

The Audit Committee is responsible for (1) retaining, overseeing and approving the fees of our independent public accountants, (2) reviewing audit plans and results with our independent public accountants, (3) reviewing the independence of the independent public accountants, (4) pre-approving all audit and non-audit fees, and (5) reviewing our internal accounting controls and discussing the adequacy of those controls with our Chief Executive Officer and Chief Financial Officer. The Audit Committee is also responsible for reviewing and approving transactions in which Array participates and in which related parties have a direct or indirect material interest. The Audit Committee held seven meetings during the fiscal year ended June 30, 2010. The members of the Audit Committee are Mr. Van Lunsen (chair), Dr. Zabriskie and Mr. Lefkoff. The Board of Directors has determined that all of the members of the Audit Committee meet the independence standards for audit committee members under applicable rules of the Securities and Exchange Commission and the applicable rules of the NASDAQ Stock Market. The Board of Directors has also determined that Mr. Lefkoff, Mr. Van Lunsen and Dr. Zabriskie qualify as “audit committee financial experts” as defined by applicable rules of the SEC. The report of the Audit Committee is included elsewhere in this Proxy Statement.

 

Corporate Governance Committee

 

The Corporate Governance Committee is responsible for the implementation of Array’s Corporate Governance Guidelines and the evaluation and recommendation to the Board of Directors of candidates for election to the Board. The Committee also recommends policies and standards for evaluating the overall effectiveness of the Board of Directors in the governance of Array and such other activities as the Board of Directors may delegate to it from time to time. The Corporate Governance Committee will consider director nominations from our stockholders. The Corporate Governance Committee has not received any recommended nominations from any stockholders in connection with the 2010 Annual Meeting. See the sections below entitled “Stockholder Proposals for 2011 Annual Meeting” and “Stockholder Nominations to the Board of Directors” for information on submitting director nominations and other proposals for annual stockholder meetings. The Corporate Governance Committee held one meeting during the fiscal year ended June 30, 2010. Dr. Zabriskie (chair), Mr. Lefkoff and Dr. Bullock are members of the Corporate Governance Committee, and the Board of Directors has determined that all of them are independent as defined by applicable rules of the NASDAQ Stock Market.

 

Stockholder Communications with the Board of Directors

 

Stockholders and other interested parties may communicate with members of the Board of Directors by e-mail at BoardofDirectors@arraybiopharma.com or by writing to them at the following address:

 

Array BioPharma Board of Directors
c/o Array BioPharma Inc.
3200 Walnut Street
Boulder, CO 80301

 

Our General Counsel will receive all communications addressed to the Board of Directors and, after copying them for the company’s files, will forward each communication (by United States mail or other reasonable means determined by the General Counsel) to the director or directors to whom the communication is addressed.

Our General Counsel is not required to forward any communication determined in good faith to be frivolous, hostile, threatening, illegal or similarly unsuitable or to be unrelated to the duties and responsibilities of the Board. The General Counsel will retain copies of such communications in the company’s files and make them available to any member of the Board of Directors at their request.

 

Any communication subject to this policy that is addressed to the Chairman of the Audit Committee, the non-management members of the Board of Directors as a group or the independent members of the Board of Directors as a group will be shared with management only upon the instruction of the Chairman of the Audit Committee. All other communications will be shared with management at the time they are forwarded to the Board of Directors.

 

Director Attendance at Annual Meetings

 

All directors are strongly encouraged to attend each of our annual stockholder meetings, unless a director is not standing for reelection and his or her term is to expire at that meeting. All of our directors attended our 2009 Annual Meeting, except Mr. Lefkoff, Dr. Bullock and Dr. Williams who were unable to attend due to illness or adverse weather conditions.

 

PROPOSAL 2
APPROVAL OF AMENDMENT TO
ARRAY BIOPHARMA INC.
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

 

The Array BioPharma Inc. Amended and Restated Employee Stock Purchase Plan, or the ESPP, allows eligible employees of Array to acquire shares of our common stock at a discount through payroll deductions. The ESPP is intended to benefit Array and our stockholders by motivating our employees to contribute to the growth and success of our operations and encouraging them to remain employed by us by giving them an ownership stake in our company. Highly qualified employees are critical to our success and to our ability to achieve our strategic goals. We believe that equity incentives are essential for us to remain competitive in the marketplace for qualified personnel and that the ESPP is an important ingredient in our equity compensation offerings.

 

On September 7, 2009, the Board of Directors unanimously adopted, subject to stockholder approval, an amendment to the ESPP to increase the number of shares of common stock reserved for issuance under the ESPP by 600,000 shares, to an aggregate of 2,850,000 shares. Stockholders approved this amendment to the ESPP on October 29, 2009.

 

As of September 1, 2010, there were 498,190 shares of common stock authorized and available for future issuance under the ESPP. Although we do not expect our headcount to continue to grow at the rate it has historically, we expect participation in the ESPP to continue and that the shares remaining for issuance under the ESPP will not be sufficient to complete the purchase scheduled for December 31, 2010 or support this participation beyond 2010. Accordingly, the Board of Directors believes that the remaining authorized shares under the ESPP are insufficient to meet our needs and that an increase in the number of shares available for issuance under the ESPP is necessary to allow us to continue to provide this form of equity compensation that we believe helps us to attract, motivate and retain key employees. Therefore, on August 5, 2010 the Board of Directors unanimously adopted, subject to stockholder approval, an amendment to the ESPP to increase the number of shares of common stock reserved for issuance under the ESPP by 600,000 shares, to an aggregate of 3,450,000 shares.

 

As of September 1, 2010, there were 189 employees participating in the ESPP. Because participation in the ESPP is subject to the discretion of each eligible employee and the amounts received by participants under the ESPP are subject to the fair market value of our common stock on future dates, the benefits or amounts that will be received by any participant or groups of participants if the ESPP is approved are not currently determinable. As of September 1, 2010, there were five executive officers and 363 other employees of Array who were eligible to participate in the ESPP.

 

We intend to register the additional 600,000 shares in a Registration Statement on Form S-8 under the Securities Act of 1933 as soon as practicable after receiving stockholder approval.

 

The summary of the material provisions of the ESPP set forth below is qualified in its entirety by the complete text of the ESPP, a copy of which is attached as Appendix A to this Proxy Statement.

 

Summary of Material Provisions of the ESPP

 

Our Board of Directors adopted and our stockholders approved the ESPP in September 2000, effective upon the closing of our initial public offering in November 2000. Amendments to our ESPP were subsequently adopted by our Board of Directors on November 17, 2000, on September 12, 2002 (which amendments were approved by our stockholders on October 31, 2002), on April 29, 2004, on December 9, 2005 (which amendments were approved by our stockholders on November 2, 2006) and on September 11, 2008 (which amendments were approved by our stockholders on October 30, 2008), and on September 7, 2009 (which amendment was approved by our stockholders on October 29, 2009) and on August 5, 2010, which amendment is subject to the approval by

stockholders at the 2010 Annual Meeting. The ESPP permits eligible employees to elect to have a portion of their pay deducted by us to purchase shares of our common stock at a discount. The Compensation Committee determines the length and duration of the periods, known as offering periods, during which payroll deductions will be accumulated to purchase shares of common stock. Within a single offering period, we may permit periodic purchases of stock during periods, known as purchase periods.

 

We currently have a 12-month offering period that ends on December 31st of each year and two six-month purchase periods ending on June 30th and December 31st of each year. However, if our closing stock price on July 1st is lower than our closing stock price on January 1st, then the original 12-month offering period terminates and the purchase rights under the original offering period roll forward into a new six-month offering period with a corresponding purchase period that begins July 1st and ends December 31st. As a result, the purchase price for purchases made on behalf of the participants on December 31st is equal to 85% of the lowest stock price on January 1st, July 30th or December 31st, of that year. The Compensation Committee may modify the duration of the offering periods and the purchase periods in the future.

 

Administration

 

The ESPP is administered by the Compensation Committee. The Compensation Committee has the authority to interpret the ESPP, to prescribe, amend and rescind rules relating to it, and to make all other determinations necessary or advisable in administering the ESPP. All of the Compensation Committee’s determinations will be final and binding.

 

Shares Subject to the ESPP

 

Currently, we have reserved 2,850,000 shares of common stock for issuance under our ESPP. Our stockholders are being asked to approve at this Annual Meeting an increase in this number to an aggregate of 3,450,000 shares. If there is any increase or decrease in the number of shares of common stock without receipt of consideration by Array (for instance, by a recapitalization or stock split), there may be a proportionate adjustment to the number and kinds of shares that may be purchased under the ESPP.

 

Eligibility

 

All of our employees whose customary employment is for more than five months in any calendar year are eligible to participate in this plan, provided that any employee who would own 5% or more of the total combined voting power or value of our common stock immediately after any grant is not eligible to participate. An employee must be employed on the last day of the purchase period in order to acquire stock under the ESPP, unless the employee has retired, died or become disabled, been laid off or is on an approved leave of absence.

 

Participation Election

 

An eligible employee may become a participant in the ESPP by completing an election to participate in the ESPP in an online form provided by our stock plan administrator. The form authorizes us to have deductions, not to exceed 15% of pay, made from pay on each payday following enrollment in the ESPP. The deductions or contributions are credited to the employee’s account under the ESPP. A participating employee may only increase or decrease his or her payroll deduction or periodic cash payments to take effect on the first day of the next purchase period, by notifying our stock plan administrator regarding election to participate in the ESPP. A participating employee may terminate payroll deductions or contributions at any time, and the amounts in the employee’s account will be returned to the employee, and the employee’s option to purchase shares under the ESPP will

terminate, unless the employee notifies us not to have such amounts distributed, in which case the amounts will remain in the employee’s account and available to purchase shares during the applicable offering period under the ESPP.

 

Purchase Price

 

Rights to purchase shares of our common stock are deemed granted to participating employees as of the first trading day of each offering period. The purchase price for each share, or the Purchase Price, is set by the Compensation Committee, but may not be less than 85% of the fair market value of our common stock on (i) the first trading day of the offering period or (ii) the day on which the shares are purchased, or the Purchase Date, whichever is lower. The Compensation Committee has approved a Purchase Price equal to 85% of the lower of these two amounts, but may modify this Purchase Price in the future subject to the limitation described in this paragraph.

 

Purchase Limit

 

No employee may purchase common stock in any calendar year under the ESPP having an aggregate fair market value in excess of $25,000, determined as of the first trading date of the offering period. The value of any shares acquired under any other “employee stock purchase plans” that may be adopted by Array or any parent or subsidiary are included in calculating this maximum.

 

Purchase of Common Stock

 

On the Purchase Date, a participating employee is credited with the number of whole shares of common stock purchased under the ESPP for the applicable offering period. Common stock purchased under the ESPP is held by a broker we designate. We may require shares be retained with such broker for a designated period of time, and may impose a holding period requirement of up to twelve months from the Purchase Date for shares of common stock purchased by participating employees under the ESPP. We may also establish procedures to permit tracking of disqualifying dispositions of such shares or to restrict transfer of such shares.

 

If in any purchase or offering period the number of unsold shares that may be made available for purchase under the ESPP is insufficient to permit eligible employees to exercise their rights to purchase shares, a participation adjustment will be made, and the number of shares purchasable by all participating employees will be reduced proportionately. Any funds remaining in a participating employee’s account will be refunded.

 

Termination of Participation

 

A participating employee will be refunded all monies in his or her account, and his or her participation in the ESPP will be terminated, if, prior to the Purchase Date: (i) the employee ceases to be eligible to participate in the ESPP, (ii) the Board of Directors terminates the ESPP (provided that termination of the ESPP will not impair the vested rights of the participant), or (iii) the participating employee leaves the employ of Array, other than by retirement, or is discharged for cause.

 

If a participating employee terminates participation in the ESPP because of his or her retirement or death, or because of an involuntary termination of employment without cause, the employee (or his or her representative in the event of death) can choose to either: (i) purchase common stock on the Purchase Date with the amounts then accumulated in the employee’s account or (ii) have all monies in the employee’s account refunded.

Lay-off, Authorized Leave of Absence or Disability

 

During any period of absence of the employee from work due to lay-off, authorized leave of absence or disability, the employee can elect (i) to have payroll deductions suspended or (ii) to make periodic payments to the ESPP in cash. If the participating employee returns to active service prior to the Purchase Date, the employee’s payroll deductions will be resumed. If the employee did not make periodic cash payments during the employee’s period of absence, the employee may elect to either: (x) make up any deficiency in the employee’s account resulting from a suspension of payroll deductions by an immediate cash payment; (y) not to make up the deficiency in his or her account, in which event the number of shares to be purchased by the employee will be reduced to the number of whole shares which may be purchased with the amount, if any, credited to the employee’s account on the Purchase Date; or (z) withdraw the amount in the employee’s account and terminate the employee’s option to purchase. If a participating employee’s period of lay-off, authorized leave of absence or disability terminates on or before the Purchase Date, and the employee has not resumed active employment with Array or a participating affiliate, the employee will receive a distribution of his or her account.

 

Assignment

 

No participating employee may assign his or her rights to purchase shares of common stock under the ESPP, whether voluntarily, by operation of law or otherwise. Any payment of cash or issuance of shares of common stock under the ESPP may be made only to the participating employee (or, in the event of the employee’s death, to the employee’s estate). Once stock has been issued to the employee or for his or her account, such stock may be assigned the same as any other stock.

 

Amendment of Plan

 

The Board of Directors may, at any time, amend the ESPP in any respect; however, our stockholders must also approve amendments (i) increasing the number of shares that may be made available for purchase under the ESPP or (ii) changing the eligibility requirements for participating in the ESPP. In addition, no amendment may be made to the ESPP that impairs the vested rights of participating employees.

 

Termination of Plan

 

The Board of Directors may terminate the ESPP at any time and for any reason or for no reason, provided that such termination shall not impair any rights of participants that have vested at the time of termination. The ESPP will, without further action of the Board of Directors, terminate at the earlier of (i) the expiration of the term of the ESPP, which is currently September 8, 2020, and (ii) such time as all shares of common stock that may be made available for purchase under the ESPP have been issued.

 

Reorganizations

 

Upon a reorganization in which we are not the surviving corporation or a sale of assets or stock, the ESPP and all rights outstanding shall terminate, except to the extent provision is made in writing in connection with such transaction for the continuation or assumption of the ESPP, or for the substitution of the rights under the ESPP with rights covering the stock of the successor corporation.

No Employment Rights

 

Neither the ESPP nor any right to purchase common stock under the ESPP confers upon any employee any right to continued employment with Array or a participating affiliate.

 

Federal Income Tax Consequences

 

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Amounts withheld from pay under the ESPP are taxable income to participating employees in the year in which the amounts otherwise would have been received, but the participating employees will not be required to recognize additional income for federal income tax purposes either at the time the employee is deemed to have been granted a right to purchase common stock (on the first day of an offering period) or when the right to purchase common stock is exercised (on the last day of the purchase period).

 

If the participating employee holds the common stock purchased under the ESPP for at least two years after the first day of the offering period in which the common stock was acquired (the ‘‘Grant Date”) and for at least one year after the date the common stock is purchased, when the participating employee disposes of the common stock, he or she will recognize as ordinary income an amount equal to the lesser of:

 

(i) the excess of the fair market value of the common stock on the date of disposition over the price paid for the common stock; or

 

(ii) the fair market value of the common stock on the Grant Date multiplied by the discount percentage for stock purchases under the ESPP. The discount percentage is currently 15%, although we may use a lesser discount percentage, including a zero discount percentage.

 

If the participating employee disposes of the common stock within two years after the Grant Date or within one year after the date the common stock is purchased, he or she will recognize ordinary income equal to the fair market value of the common stock on the last day of the purchase period in which the common stock was acquired less the amount paid for the common stock. The ordinary income recognition pertains to any disposition of common stock acquired under the ESPP (such as by sale, exchange or gift).

 

Upon disposition of the common stock acquired under the ESPP, any gain realized in excess of the amount reported as ordinary income will be reportable by the participating employee as a capital gain, and any loss will be reportable as a capital loss. Amounts required to be reported as ordinary income on the disposition of the common stock may be added to the purchase price in determining any remaining capital gain or loss. Capital gain or loss will be long-term if the employee has satisfied the two-year holding period requirement described above or, in any event, if the employee has held the common stock for at least one year. Otherwise, the capital gain or loss will be short-term.

 

If the participating employee satisfies the two-year holding period for common stock purchased under the ESPP, we will not receive any deduction for federal income tax purposes with respect to that common stock or the right under which it was purchased. If the employee does not satisfy the two-year holding period, we will be entitled to a deduction in an amount equal to the amount that is considered ordinary income. Otherwise, the ESPP has no tax effect on Array.

 

The foregoing tax discussion is a general description of certain expected federal income tax results under current law. No attempt has been made to address any state and local, foreign or estate and gift tax consequences that may arise in connection with participation in the ESPP.

Plan Benefits Under the Array BioPharma Inc. Amended and Restated Employee Stock Purchase Plan 

 

The following table sets forth, for our Chief Executive Officer, our Chief Financial Officer and the three other most highly compensated executive officers named in this Proxy Statement, all current executive officers as a group and all other employees who participated in the ESPP as a group: (a) the number of shares of common stock purchased under the ESPP during the year ended June 30, 2010, and (b) the dollar value of the benefit, which is calculated as the fair market value per share of the common stock on the date of purchase, minus the purchase price per share of common stock under the ESPP:

 

		Number of				Dollar
		Shares				Value of
Name of Individual and Position or Identity of Group		Purchased(1)				Benefit(1)
Robert E. Conway, Chief Executive Officer			2,176			$	914
Kevin Koch, Ph.D., President and Chief Scientific Officer			—				—
David L. Snitman, Ph.D., Chief Operating Officer and Vice President, Business Development			—				—
R. Michael Carruthers, Chief Financial Officer			1,151				483
John R. Moore, Vice President and General Counsel			—				—
All current executive officers as a group (5 persons)			3,327				1,397
All other employees as a group			522,368				219,395

 

 

Equity Compensation Plan Information

 

The following table provides information as of June 30, 2010 about the shares of common stock that may be issued upon the exercise of options, under our existing equity compensation plans, which include the Amended and Restated Array BioPharma Inc. Stock Option and Incentive Plan and the Array BioPharma Inc. Amended and Restated Employee Stock Purchase Plan. Array has no equity compensation plans that have not been approved by our stockholders.

 

 

 

 

Required Vote

 

The approval by the affirmative vote of the holders of a majority of the shares of common stock present or represented and entitled to vote at the Annual Meeting is required to approve the amendment to the ESPP. Abstentions will have the same effect as a negative vote. Broker “non-votes” will not be counted for purposes of approving Proposal 2.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN CONTAINED IN PROPOSAL 2.

 

PROPOSAL 3
APPROVAL OF MATERIAL TERMS OF
THE PERFORMANCE CRITERIA FOR EXECUTIVE INCENTIVE COMPENSATION

 

We are asking our stockholders to consider and vote upon a proposal to approve the material terms of the performance criteria for incentive compensation to our most highly compensated executive officers under the Array BioPharma Inc. Stock Incentive Plan, as amended and restated, or the Plan. The Plan allows us to make awards of cash, stock or other awards to these executive officers, contingent upon attainment of certain goals that are based on performance criteria set forth in the Plan. These awards are intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. If the stockholders approve this proposal, Section 162(m) allows us to fully deduct the performance-based compensation paid pursuant to the material terms of these performance criteria.

 

Section 162(m)

 

Section 162(m) generally provides that no federal income tax business expense deduction is allowed for annual compensation in excess of $1 million paid by a publicly-traded corporation to its chief executive officer and four other most highly compensated officers (the “covered executive officers”), as determined in accordance with the applicable rules under the Securities Exchange Act of 1934, as amended. However, there is no limitation on the deductibility of “qualified performance-based compensation.”

 

To qualify as performance-based compensation, it must be paid solely on account of the attainment of one or more objective performance goals established in writing while the attainment of such goals is substantially uncertain. Performance goals may be based on one or more business criteria that apply to an individual, a business unit or the company as a whole, but need not be based on an increase or positive result under the business criteria selected. If a performance goal is met, the amount of compensation payable cannot be increased, but it may be reduced or eliminated.

 

Material Terms of Performance Criteria

 

As provided in the Plan, performance goals (which may be stated as alternative goals) may be established in writing by the Compensation Committee for a covered executive officer for a performance period, which is generally a fiscal year, based on one or more of the following performance criteria: (1) total stockholder return; (2) total stockholder return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard & Poor’s 500 Stock Index; (3) net income; (4) pretax earnings; (5) earnings before interest expense, taxes, depreciation and amortization; (6) pretax operating earnings after interest expense and before bonuses, service fees, and extraordinary or special items; (7) operating margin; (8) earnings (loss) per share; (9) return on equity; (10) return on capital; (11) return on investment; (12) operating earnings; (13) working capital; (14) cash and cash equivalents; (15) ratio of debt to stockholders’ equity; (16) revenue (17) discovery research or clinical development goals; (18) financial or operational goals relating to new or existing collaborations or proprietary drug programs.

 

As described below under the heading Compensation Discussion and Analysis, the Compensation Committee considers many factors in establishing and approving compensation for our executive officers and takes into account the deductibility of compensation under Section 162(m). The Compensation Committee may choose one or any combination of the foregoing performance criteria to apply to performance based compensation it approves based on its determination of the performance criteria that support the strategic goals and priorities of the company and that provide appropriate incentives to our executive officers which are aligned with achievement of these goals and priorities.

Maximum Incentive Awards

 

Under the Plan, the maximum amount that may be earned as an annual performance award or other cash award in any fiscal year by any one covered executive officer is $1 million, and the maximum amount that may be earned as a performance award or other cash award in any other performance period, including a multi-year award, by any one covered executive officer is $3 million. The maximum number of shares of stock subject to stock options that can be awarded under the Plan to any one covered executive officer is 2,000,000 shares, and the maximum number of shares of stock other than pursuant to a stock option that can be awarded under the Plan to any one covered executive officer is 400,000 shares per year.

 

It is our policy to qualify executive compensation for deductibility to the extent that such policy is consistent with our overall objectives in attracting, motivating and retaining our executives. However, the Compensation Committee may determine from time to time that it is necessary or appropriate to approve discretionary incentive compensation based on other business criteria, or based solely on service, in order to meet our overall objectives in attracting, motivating and retaining our executives. This discretionary compensation would not qualify for the exclusion from the $1 million limitation of deductible compensation under Section 162(m).

 

The payment of incentive compensation for fiscal year 2010 to one or more covered executive officers may be subject to attainment of one or more of the performance goals described above. The payment and maximum amount of annual incentive compensation would be contingent upon our attainment of pre-established performance goals and our performance for the applicable performance period. In addition, the actual annual incentive compensation to a covered executive officer may be reduced in the discretion of the Compensation Committee from the amount otherwise payable upon attainment of the performance goal. Consequently, the annual incentive compensation that would have been payable in the last fiscal year or that would be payable in the future based on such performance goals cannot be determined.

 

Required Vote

 

The approval by the affirmative vote of the holders of a majority of the shares of common stock present or represented and entitled to vote at the Annual Meeting is required to approve the foregoing material terms of the performance criteria for payment of executive incentive compensation. Abstentions will have the same effect as a negative vote. Broker “non-votes” will not be counted for purposes of approving Proposal 3.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” APPROVAL OF THE FOREGOING MATERIAL TERMS OF THE PERFORMANCE CRITERIA FOR PAYMENT OF EXECUTIVE INCENTIVE COMPENSATION.

 

PROPOSAL 4
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

 

KPMG LLP has served as our independent registered public accountants since October 14, 2004. Representatives from KPMG LLP are expected to be present at the Annual Meeting, and will have an opportunity to make a statement at the Annual Meeting if they desire to do so and are expected to be available to respond to appropriate questions at the Annual Meeting.

 

We are asking the stockholders to ratify the Audit Committee’s selection of KPMG LLP as our independent registered public accountants for the fiscal year ending June 30, 2011. If the stockholders do not ratify the selection, the Audit Committee will reconsider its selection. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee feels that such a change would be in the best interests of Array and our stockholders.

 

Required Vote

 

The approval by the affirmative vote of the holders of a majority of the shares of common stock present or represented and entitled to vote at the Annual Meeting is required to ratify the selection of KPMG LLP. Abstentions will have the same effect as a negative vote. Broker “non-votes” will not be counted for purposes of approving Proposal 4.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 2011.

 

AUDIT COMMITTEE REPORT

 

The information in this report is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in any such filings.

 

The Audit Committee reviewed and discussed the audited financial statements for the fiscal year ended June 30, 2010, with our management and with our independent registered public accountants, KPMG LLP. In addition, the Audit Committee discussed with KPMG LLP the matters required to be discussed by the statement on Auditing Standards No. 114, as amended, relating to the conduct of the audit. The Audit Committee also discussed with KPMG LLP the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and considered the compatibility of the non-audit services provided by the independent registered public accountants with their independence.

 

Based on the Audit Committee’s review of the audited financial statements and the review and discussions described in the preceding paragraph, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended June 30, 2010 be included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2010, for filing with the Securities and Exchange Commission.

 

Audit Committee of the Board of Directors

 

Gil J. Van Lunsen (Chair)
Kyle A. Lefkoff
John L. Zabriskie, Ph.D.

 

Fees Billed by the Principal Accountant

 

We were billed the following fees by our independent registered public accountants for the fiscal years ended June 30, 2010 and 2009:

 

		Years Ended June 30,
		2010				2009
Audit Fees(1)		$	502,387			$	684,101
Audit-Related Fees(2)			141,733				26,129
Tax Fees(3)			—				—
All Other Fees(4)			—				—

 

 

 

Pre-Approval of Services

 

The Audit Committee pre-approves all audit and non-audit services rendered by our independent auditor. The Audit Committee has not adopted a formal written policy or procedures for the pre-approval of audit and non-audit services rendered by our independent auditor. The Audit Committee generally pre-approves specified services in the defined categories of audit services, audit-related services, and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent auditor or on an individual explicit case-by-case basis before the independent auditor is engaged to provide each service. The Audit Committee approved all audit fees for fiscal year 2010.

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of September 1, 2010, by:

 

 

		Number of Shares				Percentage of Shares
Name		Beneficially Owned				Beneficially Owned(a)
Named Executive Officers:
Robert E. Conway(b)			1,375,038				2.5	%
R. Michael Carruthers(c)			296,507				*
Kevin Koch, Ph.D.(d)			1,431,900				2.6	%
David L. Snitman, Ph.D.(e)			2,041,317				3.8	%
John R. Moore(f)			191,553				*
Directors:
Kyle A. Lefkoff(g)			149,585				*
Francis J. Bullock, Ph.D.(h)			115,000				*
Marvin H. Caruthers, Ph.D.(i)			544,234				1.0	%
Gil J. Van Lunsen(j)			76,260				*
Douglas E. Williams, Ph.D.(k)			72,500				*
John L. Zabriskie, Ph.D.(l)			175,000				*
All directors and executive officers as a group (11 persons)(m)			6,468,894				11.5	%
Five percent shareholders:
FMR LLC(n)			4,758,770				8.9	%
Deerfield Management Company, LP(o)			5,336,878				9.9	%
Kopp Investment Advisors, LLC(p)			4,738,324				8.9	%
Capital Research Global Investors(q)			3,615,000				6.8	%
BlackRock, Inc.(r)			3,134,653				5.9	%
Columbia Wanger Asset Management, LP(s)			5,363,700				10.0	%

 

 

 

 

EXECUTIVE OFFICERS

 

The table below shows the names, ages and positions of our executive officers as of September 1, 2010.

 

Name		Age				Position
Robert E. Conway			56			Chief Executive Officer
Kevin Koch, Ph.D.			50			President and Chief Scientific Officer
David L. Snitman, Ph.D.			58			Chief Operating Officer and Vice President, Business Development
R. Michael Carruthers			52			Chief Financial Officer
John R. Moore			46			Vice President, General Counsel and Secretary

 

Please see “PROPOSAL 1 ELECTION OF DIRECTORS—Board of Directors” above for the biographies of Mr. Conway, Dr. Koch and Dr. Snitman.

 

R. Michael Carruthers

 

Mr. Carruthers, 52, has served as our Chief Financial Officer since December 1998, and served as Secretary from December 1998 until October 2002. Prior to joining Array, Mr. Carruthers was Chief Financial Officer from October 1993 until December 1998 of Sievers Instrument, Inc. From May 1989 until October 1993, Mr. Carruthers was the treasurer and controller for the Waukesha division of Dover Corporation. Mr. Carruthers was previously employed as an accountant with Coopers & Lybrand, LLP. He currently serves on the Board of Directors of Pyxant Labs, a private company. Mr. Carruthers received a B.S. in accounting from the University of Colorado and an M.B.A. from the University of Chicago.

 

John R. Moore

 

Mr. Moore has served as our Vice President and General Counsel since May 2002 and as Secretary since October 2002. Prior to joining Array, Mr. Moore was an associate for three years with the law firm of Wilson Sonsini Goodrich & Rosati where he negotiated transactions involving technology, intellectual property and products. From September 1992 to July 1996, and August 1996 to June 1999, Mr. Moore was an associate with the law firms of Kenyon & Kenyon and Arnold White & Durkee, respectively, where he focused on intellectual property matters. Mr. Moore received a J.D. from the University of North Carolina at Chapel Hill School of Law, a M.S. in Biochemistry from the University of Illinois at Urbana-Champaign and a B.S. in Chemistry from the University of North Carolina at Chapel Hill.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee of the Board of Directors of Array BioPharma Inc. oversees Array’s compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement.

 

In reliance on the review and discussion referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and our Proxy Statement to be filed in connection with our 2010 Annual Meeting of Stockholders, each of which will be filed with the Securities and Exchange Commission.

 

COMPENSATION COMMITTEE

 

Kyle Lefkoff (Chair)
Francis Bullock, Ph.D.
Marvin Caruthers, Ph.D.
Douglas Williams, Ph.D.

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This section provides information regarding the compensation program in place for our named executive officers, or NEOs, who consist of our principal executive officer, principal financial officer and the three most highly-compensated executive officers other than the principal executive officer and principal financial officer, for our fiscal year ended June 30, 2010. It includes information regarding, among other things, the overall objectives of our compensation program and each element of compensation that we provide.

 

General

 

The Compensation Committee of our Board of Directors, or the Committee, has responsibility for determining the compensation of our NEOs for approval by our independent directors. The Committee also administers our Amended and Restated Stock Option and Incentive Plan, or the Option Plan, and our ESPP, and considers and approves new hire and periodic retention grants under the Option Plan to NEOs and other members of management and determines the terms of performance-based compensation under our annual Performance Bonus Program applicable to our NEOs and other salaried employees. The Committee acts pursuant to a charter that has been approved by our Board, a copy of which is available on the Investor Relations section of our website at www.arraybiopharma.com.

 

Objectives and Philosophy of Our Compensation Program

 

The compensation program for our NEOs is designed to attract, retain, motivate and reward talented executives who can contribute to our long-term success and thereby build value for our stockholders. Our compensation program is based on the following key principles:

 

 

Other factors specific to our company weigh heavily into our NEO compensation decisions, such as the following:

 

Evolution of Business

 

Our NEOs are executing our long-term business strategy to build a commercial-stage biotechnology company, as well as nearer term strategies that support our long-term objectives, and we believe their compensation should create appropriate incentives that are consistent with these strategies. Accordingly, the Committee evaluates and adjusts the performance metrics annually for performance-based compensation for our NEOs to align them with our strategic goals. In addition, our senior team, which has not appreciably increased in size, is managing a changing and increasingly complex business. We strive to recognize these efforts by compensating NEOs for the increased demands and risks associated with our business model, such as through annual merit pay increases and stock option awards.

Intense Competition for Management Talent

 

Like any company, we strive to recruit top talent at all levels of our organization. It is Array’s strategy to build an integrated, commercial-stage biopharmaceutical company. The competition for executive talent in certain areas of our business, most notably clinical development talent, is especially intense. As we build our clinical capabilities, we may on occasion find it necessary to exceed the total compensation offered by more established competitors, including our peer group, to attract the talent we need in this area.

 

Compensation Methodology

 

The Committee annually reviews target salary, performance bonus and equity compensation for our NEOs and other members of senior management, and periodically reviews other elements of compensation. Compensation decisions are based primarily on the following:

 

 

 

 

Following the end of each fiscal year, the Committee reviews and determines the base salaries of Mr. Conway and the other NEOs and approves the target bonus amounts under the Performance Bonus Program for the upcoming fiscal year based on a percentage of base salary for the NEOs and the rest of the management team. The Committee determines the annual performance goals under the Performance Bonus Program for the upcoming year through an iterative process with management, adjusting as appropriate the recommendations of management regarding the performance metrics and the target amounts in light of the Company’s near- and long-term strategic goals and operating plan for the upcoming year. Following completion of the audit of our annual financial statements, the Committee approves the specific bonus amounts payable to the NEOs and other members of management under the Performance Bonus Program based on actual company and individual performance.

 

The Committee’s approach in establishing Mr. Conway’s compensation is consistent with the approach in establishing the compensation of the other NEOs, but to base a larger percentage of his target compensation on Array’s long-term performance. Accordingly, under Mr. Conway’s employment agreement, Mr. Conway is eligible to receive an annual performance-based bonus, anticipated to

range between 25% and 75%, with a target of 50%, of Mr. Conway’s base salary, provided that minimum performance criteria are achieved under the Performance Bonus Program.

 

The Committee has the authority to engage outside compensation consultants to advise it in determining executive compensation and during fiscal 2008 retained Watson Wyatt Worldwide to perform a comprehensive analysis of our executive compensation programs. The Committee did not retain compensation consultants during fiscal 2010. The Committee principally uses outside consultants to provide a competitive assessment of our compensation programs against a group of peer companies in our industry and with whom we compete for executive talent and to provide input to the Committee on structuring and implementing these programs in fulfilling our compensation objectives.

 

Peer and Industry Data

 

As a point of reference to ensure our compensation is competitive, the Committee considers peer company and industry survey data. In setting NEO compensation for fiscal 2010, the Committee analyzed publicly available data for the following 12 peer pharmaceutical and biotechnology companies.

 

•		Arena Pharmaceuticals, Inc.		•		Infinity Pharmaceuticals, Inc.
•		Ariad Pharmaceuticals, Inc.		•		InterMune Inc.
•		Arqule Inc.		•		Lexicon Pharmaceuticals, Inc./DE
•		Cytokinetics Inc.		•		Rigel Pharmaceuticals, Inc.
•		Exelixis, Inc.		•		Xenoport Inc.
•		Idenix Pharmaceuticals Inc.		•		Zymogenetics, Inc.

 

These peer companies were selected from among publicly-held U.S. pharmaceutical and biotechnology companies based on the following criteria: companies with comparable operations, a market capitalization of not less than approximately $150 million or more than $800 million, not fewer than 100 or more than 700 employees, clinical development-stage operations and a substantial portion of their revenues not related to marketed products. These companies are the same companies we use in comparing our overall performance. We also take into account broader based life sciences industry survey data for executive compensation among companies of our size published by Radford Surveys and Consulting as we believe that this information provides us with a statistically significant sample that supplements our peer group data. We generally target total compensation for our NEOs at the 50th percentile of the survey group; however total compensation for several of our NEOs in fiscal 2010 and historically has been below this level because an NEO may have fewer responsibilities than the comparable executive level in the survey group, or as a result of other factors, including historical pay, individual performance and marketplace demands for the position.

 

As our business model evolves, the Committee will reevaluate the peer companies used in benchmarking executive compensation to ensure the peer companies are comparable in size, market capitalization and the scope and nature of their operations to Array.

 

Elements of Our Compensation Program

 

The primary components of executive compensation are industry competitive salaries, bonuses of cash and/or equity based on annual operational and financial objectives and on individual merit, and equity compensation grants of stock options upon hiring and periodically through retention grants.

 

Salary

 

We believe base salary is the key compensation-related reference point for individuals considering an employment change and that we must offer industry competitive base salaries. Our peer group analysis and industry survey data therefore serve as a starting point in setting salaries for our NEOs. We generally target a base salary for NEOs at the 50th percentile of the survey group,

although for fiscal 2010 and historically base salary for several of our NEOs has been below this level, with limited exceptions where an NEO takes on additional responsibilities or has unique and valuable experience. Although peer data is an important reference point, the Committee recognizes that titles and levels of responsibility vary greatly from company to company and considers other factors, such as industry experience and competition for talent in certain areas.

 

Performance Bonus Program

 

As more fully described below, we have established a Performance Bonus Program under which bonuses are paid to our NEOs and other employees based on achievement of company performance goals and objectives established by the Committee as well as on individual performance. The bonus program is intended to strengthen the connection between individual compensation and company success; reinforce our pay-for-performance philosophy by awarding higher bonuses to higher performing employees; and help ensure that our compensation is competitive. We have historically paid bonuses under the Performance Bonus Program in cash, although in accordance with the terms of the Performance Bonus Program, the Committee may determine to pay bonuses in shares of common stock, stock options, cash or any combination. For the bonus payouts in fiscal 2009, the Committee has approved the issuance of shares of common stock under our Amended and Restated Stock Option and Incentive Plan, primarily as a means of helping Array conserve its capital resources, and intends to do so for fiscal 2010 performance bonuses as well.

 

Each NEO is eligible to receive a bonus under the program calculated by multiplying his base salary by a percentage value assigned to him or to his position by the Committee. During fiscal 2010, the target bonus amounts were 35% or 40% of base salary for our executive officers other than Mr. Conway, and Mr. Conway’s target bonus amount was 50% of his base salary. Following the end of each fiscal year, the Committee determines in its discretion the extent to which the company-wide and individual performance goals were attained. Based on this assessment, the Committee awards bonuses equal to a varying percentage of an employee’s target bonus amount. The Committee may award a bonus in an amount less than or greater than the amount earned by a participant under the bonus program, and individual bonuses can vary significantly based on performance. No bonuses are guaranteed under the program and the Committee can amend the program at any time until bonuses are paid.

 

Performance Metrics

 

The performance bonuses for fiscal 2010 were based both on individual performance and on our performance relative to the following performance criteria:

 

 

In determining the bonus awards for fiscal 2010, the foregoing goals were weighted as follows: financial goals 10%; discovery research goals 10%; development goals 30%; and the partnering goals 50%.

 

Annual Performance Goals.  The Committee establishes minimum, target and stretch goals for each performance metric annually based on the company’s internal forecasts and through an iterative process with management. For fiscal 2010, the minimum, target and stretch financial goals were revenue of $35 million, $40 million and $45 million, respectively; loss per share of ($2.00), ($1.88) and ($1.80), respectively; and fiscal year end cash and cash equivalents of $80 million, $90 million and $100 million, respectively. The minimum, target and

stretch discovery research goals for fiscal 2010 were 3, 4 and 5, respectively, for filed INDs (or EU equivalent) or initiated GLP toxicology studies. The fiscal 2010 minimum, target and stretch development goals were achievement of 8, 10 and 14, respectively, for reaching milestones consisting Phase 1, Phase 1b and/or Phase 2 trials that were initiated, fully enrolled, or for which maximum tolerated dosing was achieved, or were completed. Finally, upfront or milestone payments aggregating $63 million, $78 million or $93 million were the minimum, target and stretch partnering goals, respectively, for fiscal 2010. Identical performance goals form the basis for the bonus structure for almost all of our salaried employees, and we believe there is an intangible benefit to focusing all levels of personnel on consistent goals. We also believe there is a strong correlation between achievement of these goals and the success of our business as measured by our stock performance and the perception of analysts and investors.

 

The Committee strives to set the stretch performance goals at ambitious levels to provide a meaningful incentive. We have not historically met the stretch goals and have met or slightly exceeded the target level goals. For fiscal 2010, 2009 and 2008, we achieved 127.5%, 80% and 95% of the target level goals, respectively, established by the Committee. Generally, the Committee sets the minimum, target and stretch goals such that the relative level of difficulty of achieving the target level is consistent from year to year. The Committee considers the minimum goals to be likely to be achieved, the target goals to be difficult to achieve and the stretch goals to be improbable to achieve. A percentage of each NEO’s target bonus amount may be awarded following the end of the fiscal year based on whether the minimum, target or stretch goals are met and the weighting of those goals. The Committee has discretion to award bonuses under the program if a particular performance goal is not met.

 

In determining the bonus awards for fiscal 2010, the Compensation Committee determined that the stretch goal for revenue at $45.0 million, the stretch goal for loss per share at ($1.80) and the stretch goal for year-end cash at $100 million were met, resulting in a rate of 150% of the target financial goals. The Compensation Committee also determined that we achieved the stretch discovery research goal after filing six INDs or commencement of regulated toxicology studies resulting in achievement of 150% of the target discovery research goal. The Compensation Committee also approved achievement of 75% of the target development goal, with commencement of three Phase 1 or 1b trials and with enrollment completed or maximum tolerated dosing achieved for six Phase 1 or 1b trials. Finally, the Compensation Committee determined that the stretch partnering goal of $93 million was achieved resulting in a rate of 150% of the target partnering goal. After applying the weighting factors previously established by the Compensation Committee to each of the goals, this performance resulted in a total weighted average score of 127.5%, which was the percentage the Compensation Committee used to calculate the fiscal 2010 bonus amounts to be paid under the Performance Bonus Program in accordance with the formulas set forth in the Performance Bonus Program. The Compensation Committee also determined to pay the fiscal 2010 performance bonus to the NEOs, and to all of the other eligible employees under the program, in a combination of shares of our common stock and cash equal approximately to the amount of tax withholding payable as a result of the bonus.

 

Individual Performance.  The Committee also evaluates individual performance in approving the specific bonus amount that an NEO or other participant is entitled to based on the individual’s performance review.

 

Equity Compensation

 

We provide equity compensation to our NEOs in the form of stock option grants under our Amended and Restated Stock Option and Incentive Plan. The Committee believes stock option awards to our NEOs and other employees encourage retention, because the recipient must remain employed with the company to receive the award. The Committee also believes stock options align the interests of management and our stockholders, since they are of no value to the executive if our

stock’s value does not increase. For these reasons, the Committee considers stock options to be an important part of total compensation for our executives.

 

Our implementation of Financial Accounting Standards ASC Topic 718, “Stock Compensation” makes granting stock options somewhat less attractive by requiring that we expense the fair value of the grant for financial accounting purposes. Although this accounting treatment is one of the factors we consider in awarding options, it has not had a significant impact on our granting practices, since we believe stock options remain a highly valued component of the overall compensation package for management of a growth company such as ours and are the primary means by which our executives share in the company’s growth.

 

Stock options are awarded to all of our salaried employees, including NEOs, upon hiring. In addition, following the end of each fiscal year the Committee considers whether to award retention grants to existing employees, including NEOs. If awarded, retention grants historically were approved on four-year cycles for employees, including our NEOs, to correspond to the duration of the standard vesting schedule of option grants. Effective in fiscal 2009, retention grants are made on an annual basis and will vest in four equal annual installments. The Committee approved this change due to its observation that grants every four years can result in a significant portion of our employees with options that are not in-the-money for the four-year vesting term due to the historical volatility of our stock price. The Committee believes that annual retention grants will minimize the distortion created by stock price volatility while continuing to provide a meaningful ongoing incentive for our NEOs and other employees to remain with Array. In addition, with annual grants, employees will have a significant number of unvested options each year and there will be fewer instances in which options will fully vest prior to the next retention grants later in the year, thereby providing a stronger retention incentive.

 

The Committee also considers on an annual basis whether to award shares of common stock or options rather than cash under our performance bonus program described above, and has discretion to approve additional stock option awards for reasons such as strong individual performance or internal pay equity considerations.

 

Stock options generally vest in four equal annual installments beginning on the one-year anniversary of the hire date for new hire grants. New hire grants are approved each month with a grant date of the last trading day of the month, and grant dates for other types of awards are on the date approved by the Committee. The exercise price of all employee stock options is equal to the fair market value of our common stock on the date of grant, measured as the closing price of our common stock on the grant date as reported by the NASDAQ Stock Market.

 

In establishing award levels, including for NEOs, the Committee takes into account an analysis of peer group data and industry survey data and, for retention grants, individual performance. The Committee also considers individual contribution and performance, based in part on input from our Chief Executive Officer for grants to other NEOs and employees, and the difficulty in replacing certain individuals within the organization. We believe that competitors who might try to hire away our employees would offer new equity awards to our employees without regard to the value of any prior awards made by us. Therefore, we do not consider the equity ownership levels of the recipients, the size of prior awards that are fully vested or amounts realized by the executives for previous awards.

 

Option Grant Practices.  Historically, the timing of our grants of stock options has been based on internal, operational factors. New hire grants are typically awarded on the last trading day of each month and retention grants are awarded following the end of each fiscal year. We have not had, and do not intend to implement, a practice of “timing” our grant awards to give effect to the pending public release of material information, and any grants we may have made to senior executives in proximity to a release of earnings or other material information is coincidental. The Committee has delegated authority to three of its members, Mr. Lefkoff, Dr. Bullock and Dr. Caruthers, to approve option grants for non-executives. These may be awards for new hires and are reported on a periodic basis to the Committee.

Deferred Compensation Plan.  We established a Deferred Compensation Plan, or the DCP, to provide NEOs and other eligible participants with an opportunity to defer all or a portion of their compensation and to earn tax-deferred returns on the deferrals. Officers and other key employees selected by the Committee (including each of the NEOs) are eligible to participate in the DCP. Participants may defer up to a maximum of 100% of their annual base salary and their annual incentive bonus. Under the DCP, the Committee may, in its sole discretion, make matching contributions which vest over a four-year vesting schedule beginning upon commencement of employment, or may make discretionary contributions in any amount it desires to any participant’s account based on vesting provisions determined in the Committee’s discretion. Participants become fully vested in any matching or discretionary contributions upon a change in control of the company and upon termination of their service with the company other than for cause.

 

During fiscal year 2009, all of the NEOs were participants under the DCP and they were all 100% vested. As of June 30, 2010, the Committee has not approved any discretionary contributions, and has approved matching contributions of up to 4% of the executive’s total base salary and bonus compensation for the year.

 

The DCP is intended to both qualify as a “top hat” plan within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and to comply with the requirements of Section 409A of the Internal Revenue Code that govern nonqualified deferred compensation plans. The DCP is an unfunded plan for tax purposes and for purposes of Title I of ERISA. A “rabbi trust” has been established to satisfy our obligations under the DCP.

 

The Committee selects investment indices consisting of mutual funds, insurance company funds, indexed rates or other methods for participants to choose from for the purpose of providing the basis on which gains and losses are attributed to account balances under the DCP. Participants are entitled to select one or more investment indices and they do not have an ownership interest in the investment indices they select. The Committee may, in its sole discretion, discontinue, substitute or add investment indices at any time.

 

Payments from the DCP are made in a lump sum or in annual installments for up to ten years at the election of the participant. In addition, participants may elect to receive a short-term payout of a deferral as soon as January 1 of the fourth year after the end of the option plan year in which the deferral was made.

 

Payments Upon Termination or Change in Control.  We have entered into employment agreements with each of our NEOs which provide for severance payments upon certain terminations of employment, including in connection with a change in control of Array, and for the acceleration of vesting of outstanding stock options upon a change in control. Based on our analysis of industry compensation data, post-termination protection through severance compensation for executive officers is common among our peer group, and the Committee believes that it is essential to our ability to attract and retain talented executives. The Committee believes having a mutually agreed-to severance package in place prior to any termination event provides us with more flexibility to make a change in senior management if such a change is in our and our stockholders’ best interest. In addition, we believe post-termination compensation if an officer is terminated as a result of a change of control transaction promotes the ability of our officers to act in the best interests of our stockholders even though they could be terminated as a result of the transaction. Our obligation to pay severance to Mr. Conway and our other NEOs is conditioned on their continued compliance with confidentiality and non-competition obligations for two years after termination, as well as on the execution of a mutually acceptable release agreement.

 

The terms of the employment agreements, including the severance compensation, are described in more detail below under the headings “Employment Agreements” and “Potential Payments upon Termination or Change-in-Control” included elsewhere in this Proxy Statement.

 

Employee Stock Purchase Plan.  We have a tax-qualified employee stock purchase plan, or ESPP, that is made available to all employees, including our NEOs. The ESPP allows participants to acquire shares of our common stock at a discount of 15% to the market price with up to 15% of their

base salary, subject to a $25,000 per calendar year maximum. The purpose of the ESPP is to encourage employees to become stockholders of Array to better align their interests with those of our other stockholders.

 

Perquisites.  Substantially all benefits we provide to our executives are made available to all of our other salaried employees on a non-discriminatory basis, and for this reason are not considered “perquisites”. Benefits we provide on a non-discriminatory basis include our medical and dental insurance, life insurance, 401(k) plan and the ESPP. Relocation expenses also are reimbursed but are individually negotiated when they occur. The aggregate incremental cost to us of all the perquisites we provided to any NEO in fiscal 2009 was less than $10,000.

 

Deductibility of Compensation.  Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1,000,000 on the amount of non-performance-based compensation that we may deduct in any one year with respect to each of our five most highly-paid executive officers. We have taken actions necessary to ensure the deductibility of payments under the annual Incentive Bonus Program as performance-based compensation under Section 162(m). To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Committee has not adopted a policy requiring all compensation to be deductible. However, the Committee considers the impact of Section 162(m) when making pay changes to each NEO and its normal practice is to take such action as is necessary to preserve our tax deduction to the extent consistent with our compensation policies. However, we reserve the right to forgo any or all of the tax deduction if we believe it to be in the best long-term interests of our stockholders.

 

Compensation Risk Assessment.  The Committee has reviewed our material compensation practices and policies, with input from our management team, and concluded that these policies and procedures do not create risks that are reasonably likely to have a material adverse effect on our company.

Summary Compensation Table

 

The following table sets forth compensation earned during the fiscal year ended June 30, 2010 by each of our named executive officers who were serving as executive officers as of June 30, 2010 (amounts in dollars).

 

																Non-Equity
Name and Principal								Stock				Option				Incentive Plan				All Other
Position		Year		Salary				Awards(1)				Awards(2)				Compensation(3)				Compensation(4)				Total
Robert E. Conway, Chief Executive Officer		2010 2009 2008		$	520,000 513,750 477,500			$	178,745 121,782 —			$	169,745 566,916 —			$	152,755 86,218 235,125			$	30,600 39,755 36,790			$	1,051,845 1,328,421 749,415
R. Michael Carruthers, Chief Financial Officer		2010 2009 2008			297,500 271,250 252,500				71,524 45,081 —				84,873 212,594 —				64,582 31,919 86,450				22,600 23,808 22,948				541,079 584,652 361,898
Kevin Koch, Ph.D., President and Chief Scientific Officer		2010 2009 2008			421,250 405,000 382,500				149,384 83,376 —				127,309 425,187 —				67,366 47,824 148,200				27,100 31,728 30,818				792,409 993,115 561,518
David L. Snitman, Ph.D., Vice President, Business Development and Chief Operating Officer		2010 2009 2008			348,750 326,250 310,854				109,182 63,682 —				127,309 283,458 —				49,237 28,718 104,738				24,500 26,739 25,986				658,978 728,847 441,578
John R. Moore, Vice President and General Counsel		2010 2009 2008			317,750 291,250 272,500				74,763 48,361 —				84,873 212,594 —				70,268 34,239 93,100				23,400 24,874 24,030				571,054 611,318 389,630

 

 

 

												Company
				Perquisites				Company				Contributions to
				and Other				Contributions to				Nonqualified
				Personal				Retirement and				Deferred
Name		Year		Benefits				401(k) Plans				Compensation Plan				Total
Robert E. Conway		2010 2009 2008			— — —			$	9,800 9,800 9,700			$	20,800 29,955 27,090			$	30,600 39,755 36,790
R. Michael Carruthers		2010 2009 2008			— — —				10,700 9,500 9,600				11,900 14,308 13,348				22,600 23,808 22,948
Kevin Koch, Ph.D.		2010 2009 2008			— — —				10,250 9,600 9,600				16,850 22,128 21,218				27,100 31,728 30,818
David L. Snitman, Ph.D.		2010 2009 2008			— — —				10,550 9,500 9,300				13,950 17,239 16,686				24,500 26,739 25,986
John R. Moore		2010 2009 2008			— — —				10,700 9,500 9,600				12,700 15,374 14,430				23,400 24,874 24,030

 

Grants of Plan-Based Awards

 

The following table sets forth information about grants of awards to our named executive officers during the fiscal year ended June 30, 2010.

 

																		All Other								Grant Date
						Estimated Future Payouts												Option Awards:				Exercise or				Fair Value
						Under Equity Incentive Plan												Number of				Base Price				of Stock
						Awards - Equity Payouts are												Securities				of Option				Option
		Grant				Based on Number of Shares(1)												Underlying				Awards				and Option
Name		Date				Threshold				Target				Maximum				Options(2)				per Share				Awards(3)
Robert E. Conway			10/29/2009 3/31/2010			$	130,000			$	260,000			$	390,000				100,000			$	2.74			$	169,745
R. Michael Carruthers			10/29/2009 3/31/2010				53,375				106,750				160,125				50,000				2.74				84,873
Kevin Koch, Ph.D.			10/29/2009 3/31/2010				85,000				170,000				255,000				75,000				2.74				127,309
David L. Snitman, Ph.D.			10/29/2009 3/31/2010				62,125				124,250				186,375				75,000				2.74				127,309
John R. Moore			10/29/2009 3/31/2010				56,875				113,750				170,625				50,000				2.74				84,873

 

 

 

Outstanding Equity Awards at Fiscal Year End

 

The following table shows equity awards granted to our named executive officers outstanding as of June 30, 2010. All awards represent grants of stock options and shares of common stock under our Amended and Restated Stock Option and Incentive Plan, as amended.

 

		Securities Underlying				Securities Underlying				Option				Option
		Unexercised Options -				Unexercised Options -				Exercise				Expiration
Name		Exercisable				Unexercisable				Price				Date
Robert E. Conway			25,000	(1) 300,000(2) 24,750(3) 31,429(4) 17,337(5) 400,000(6) 25,000(7) —(8) —(9)			— — — — — — 75,000 100,000 100,000			$	9.00 10.90 4.75 3.75 6.68 6.51 6.22 3.01 2.74			8/6/2011 11/20/2011 1/15/2013 8/1/2013 7/30/2014 8/4/2015 9/9/2018 4/29/2019 3/31/2020
R. Michael Carruthers			19,500	(10) 85,000(11) 12,090(3) 15,321(4) 8,453(5) 75,000(12) 9,375(13) —(14) —(15)			— — — — — 25,000 28,125 37,500 50,000				8.60 9.22 8.48 3.75 6.68 6.51 6.22 3.01 2.74			7/2/2011 4/29/2012 7/1/2012 8/1/2013 7/30/2014 8/4/2015 9/9/2018 4/29/2019 3/31/2020
Kevin Koch, Ph.D.			27,300	(10) 200,000(16) 17,550(3) 22,286(4) 12,296(5) 300,000(17) 37,500(18) —(19) —(20)			— — — — — — 37,500 75,000 75,000				8.60 9.22 8.48 3.75 6.68 6.51 6.22 3.01 2.74			7/2/2011 4/29/2012 7/1/2012 8/1/2013 7/30/2014 8/4/2015 9/9/2018 4/29/2019 3/31/2020
David L. Snitman, Ph.D.			27,300	(10) 200,000(16) 16,770(3) 21,357(4) 11,783(5) 200,000(17) 25,000(18) 12,500(19) —(20)			— — — — — — 25,000 37,500 75,000				8.60 9.22 8.48 3.75 6.68 6.51 6.22 3.01 2.74			7/2/2011 4/29/2012 7/1/2012 8/1/2013 7/30/2014 8/4/2015 9/9/2018 4/29/2019 3/31/2020
John R. Moore			50,000	(21) 4,759(4) 5,252(5) 60,000(22) 15,000(23) 18,750(24) 9,375(25) —(26)			— — — — 5,000 18,750 28,125 50,000				11.29 3.75 6.68 6.51 8.37 6.22 3.01 2.74			3/26/2012 8/1/2013 7/30/2014 8/4/2015 9/13/2016 9/9/2018 4/29/2019 3/31/2020

 

 

 

 

Option Exercises and Stock Vested

 

The following table shows information concerning shares of common stock acquired upon exercise of option awards and upon vesting of stock awards by the named executive officers during the fiscal year ended June 30, 2010.

 

		Option Awards								Stock Awards
		Number of								Number of
		Shares								Shares
		Acquired				Value Realized				Acquired				Value Realized
Name		on Exercise				on Exercise(1)				on Vesting				on Vesting(2)
Robert E. Conway			103,426			$	452,927				50,532			$	121,782
R. Michael Carruthers			—				—				18,706				45,081
Kevin Koch, Ph.D.			28,863				40,408				34,596				83,376
David L. Snitman, Ph.D.			33,789				86,161				26,424				63,682
John R. Moore			—				—				20,067				48,361

 

 

Non-Qualified Deferred Compensation Table

 

The following table sets forth compensation paid to or earned by each of our named executive officers who were serving as executive officers during the fiscal year ended June 30, 2010, pursuant to the Array BioPharma Inc. Amended and Restated Deferred Compensation Plan, as amended.

 

										Aggregate
		Executive				Company				Earnings								Aggregate
		Contribtions				Contributions				or (Loss)				Aggregate				Balance as of
		in Last				in Last				in Last				Withdrawals/				June 30,
Name		Fiscal Year(1)				Fiscal Year(2)				Fiscal Year				Distributions				2010(3)
Robert E. Conway		$	20,800			$	20,800			$	(4,956	)		$	28,550			$	101,614
R. Michael Carruthers			11,900				11,900				11,245				20,396				65,801
Kevin Koch, Ph.D.			16,850				16,850				11,550				32,246				92,258
David L. Snitman, Ph.D.			13,950				13,950				6,526				31,565				77,236
John R. Moore			12,700				12,700				9,670				22,152				67,476

 

 

 

Name		Fiscal 2010				Prior Years(1)				Total(1)
Robert E. Conway		$	41,600			$	137,412			$	179,012
R. Michael Carruthers			23,800				55,312				79,112
Kevin Koch, Ph.D.			33,700				86,692				120,392
David L. Snitman, Ph.D.			27,900				67,850				95,750
John R. Moore			25,400				59,608				85,008

 

 

 

Deferred Compensation Plan

 

The Array BioPharma Inc. Amended and Restated Deferred Compensation Plan, or the DCP, provides eligible participants with an opportunity to defer all or a portion of their compensation and to

earn tax-deferred returns on the deferrals. Officers and other key employees selected by the Compensation Committee (including each of the Named Executive Officers) are eligible to participate in the DCP. Participants may defer up to a maximum of 100% of their annual base salary and their annual incentive bonus. Under the DCP, the Compensation Committee may, in its sole discretion, make matching contributions which vest in equal annual installments over a four-year period, or may make discretionary contributions in any amount it desires to any participant’s account based on vesting provisions determined in the Compensation Committee’s discretion. Participants become fully vested in any matching or discretionary contributions upon a change in control of the company and upon termination of their service with the company other than for cause. Mr. Conway, Mr. Carruthers, Dr. Koch, Dr. Snitman and Mr. Moore were participants under the DCP in fiscal 2010, and they were all 100% vested. The Compensation Committee has approved matching contributions up to 4% of each of the named executive officers’ total salary and bonus for the year.

 

Employment Agreements

 

Robert E. Conway

 

On March 1, 2006, we entered into an employment agreement with Mr. Conway to serve as our Chief Executive Officer, following expiration of Mr. Conway’s prior employment agreement with us. The agreement has a term of four years, commencing as of the November 19, 2005 effective date of the agreement, and may be renewed for additional one-year terms. Either party may terminate the agreement for any reason upon 30 days’ prior notice to the other party during the initial term or any additional term. The agreement provides for an initial annual salary of $375,000, subject to subsequent adjustment at the discretion of the Board of Directors. Mr. Conway is also eligible to receive a cash and/or equity performance bonus each fiscal year based on a percentage of his base salary if he meets performance criteria established by our Board of Directors under our Performance Bonus Program. It is anticipated that the performance bonus for any particular fiscal year will range between 25% and 75%, with a target of 50%, of Mr. Conway’s base salary, provided that the minimum performance criteria are achieved. We also agreed to reimburse Mr. Conway for reasonable out-of-pocket expenses he incurs in connection with his performance of services under this agreement.

 

If Mr. Conway’s employment is terminated by us without cause, as a result of his disability or because he no longer holds the title of Chief Executive Officer, his duties are materially diminished or he is not elected to serve as a member of the Board of Directors, we agreed to pay him a severance payment equal to (i) one year of his then current base salary (provided that if Mr. Conway’s termination results from a change in control of Array, the severance amount is two years’ current base salary), plus (ii) a pro rata portion of the performance bonus Mr. Conway would have been eligible to receive in the year of termination. The cash severance is payable to Mr. Conway beginning on the date amounts may be paid without incurring additional tax under Section 409A of the Internal Revenue Code, which is referred to as the Section 409A Time Period, in a lump sum based on the number of months in the Section 409A Time Period and then monthly thereafter. The pro rata portion of any performance bonus Mr. Conway would be entitled to receive is payable within 60 days from receipt of our audited financial statements for that fiscal year (but not sooner than the expiration of the Section 409A Time Period). We also agreed to pay 12 months of Mr. Conway’s health insurance premiums under COBRA following a termination of service that results in the payment of severance. Severance payments are conditioned on Mr. Conway entering into a mutually acceptable release with us and his compliance with his existing Noncompete Agreement and Confidentiality and Invention Agreement. Under the agreement, all outstanding and unvested options held by Mr. Conway will also vest in full upon a change of control of Array or upon his death. If Mr. Conway terminates his employment without cause or if we terminate his employment for cause, he will not receive any severance payments, performance bonus or acceleration of any of his options granted to him under the agreement.

Mr. Conway is also subject to a Noncompete Agreement and Confidentiality and Invention Agreement in which he agreed during the term of his employment and for the two years thereafter not to engage in any competing activities in the U.S. or within a 50-mile radius of any area where we are doing business and not to recruit or solicit any of our employees or customers.

 

Other Executive Officers

 

Effective September 1, 2000, we entered into employment agreements with Dr. Koch, Dr. Snitman and Mr. Carruthers, and effective as of March 4, 2002, we entered into an employment agreement with Mr. Moore. The initial terms of the agreements with Dr. Koch, Dr. Snitman and Mr. Carruthers expired in September 2004 and, for Mr. Moore, in March 2004 and have renewed each year since then for additional one-year terms. Array or the employee may terminate the agreement for any reason upon 30 days’ prior notice to the other. Under these agreements we pay the employees annual salaries ranging from $165,000 to $240,000, subject to subsequent adjustment. During fiscal 2010, annual salaries ranged from $305,000 to $425,000. If the employee is terminated as a result of disability or by us without cause, or if the employee terminates his employment following a reduction in his salary which is treated as a termination without cause by Array, we have agreed to pay the employee a severance payment equal to the greater of one year, or the remaining term, of his then-current base salary in equal monthly installments, and to cause any unvested options to vest. Upon a change of control of the company, 75% of the employee’s outstanding options will vest and the remaining 25% of his options will vest one year later if the employee is still working for us. If an employee decides to terminate his employment following a change of control, he would be entitled to receive the same severance payments described above as if his employment were terminated by us without cause, except that only 75% of his outstanding options will vest. Each of these employees is also subject to a Noncompete Agreement in which he has agreed for a period of two years following his termination not to engage in any competing activities within a 50-mile radius of any area where we are doing business and not to recruit or solicit any of our employees or customers, provided that Mr. Moore’s noncompete agreement is limited to competing activities with a peer group identified in his employment agreement.

 

Potential Payments upon Termination or Change in Control

 

We have entered into employment agreements with each of our named executive officers that provide for certain payments and acceleration and continuation of benefits upon specified terminations of employment or upon a change in control of Array. The post-termination arrangements under these agreements are described above under “Employment Agreements.” In addition, upon a change in control or upon termination of employment other than for cause, any matching or discretionary contributions under the DCP held by a named executive officer that have not vested, fully vest. As of June 30, 2010, each of our named executive officers was fully vested in the DCP.

The following table reflects the estimated potential payments upon termination or change in control that would be payable to each of the named executive officers who were employed on June 30, 2010. For purposes of calculating the potential payments set forth in the tables below, we have assumed that (i) the date of termination was June 30, 2010 and (ii) the value of each share subject to a stock option that would be accelerated in the circumstances set forth in the table below equals $3.05, the closing market price of our common stock on June 30, 2010, the last business day of the 2010 fiscal year.

 

 

 

Actual amounts that a named executive officer could receive in the future could differ materially from the amounts reported above as a result of many factors, including changes in our stock price, changes in base salary, target and actual bonus amounts, and the vesting provisions and grants of additional equity awards.

 

Retirement Savings Plan

 

We maintain a 401(k) savings plan that is intended to be a qualified retirement plan under the Internal Revenue Code. Generally, all of our employees, excluding leased and intern employees, are eligible to participate in the 401(k) Plan. They may enter the 401(k) Plan at the first calendar quarter following their original employment date and make salary deferral contributions to the savings plan, subject to the limitations imposed by the Internal Revenue Code. Array matches 100% of the first 4% of each participant’s semi-monthly contribution. In addition, Array may make annual discretionary profit sharing contributions in an amount to be determined at the 401(k) Plan year-end by the Board of Directors; no discretionary contributions were made in fiscal 2009. Participants’ contributions may be invested in any of several investment alternatives. Participants become vested in our contributions according to a graduated vesting schedule based upon length of service with us. Each of our named executive officers was fully vested in these contributions as of fiscal 2010.

 

COMPENSATION OF DIRECTORS

 

Cash compensation to our non-employee directors consists of quarterly retainers and meeting fees. The Compensation Committee periodically reviews and analyzes compensation data among the same peer group as is used in determining executive compensation and, as appropriate, adjusts Director compensation to ensure that we are able to attract and retain individuals with the experience and expertise we need to help us achieve our strategic goals. During fiscal 2010, the quarterly retainer for non-employee Board of Directors members was $5,000 and meeting fees were $1,000 for each Board of Directors meeting they attended. Members of the Compensation Committee and the Corporate Governance Committee received $1,000 for each committee meeting they attended, and the chairs of these committees received an additional $1,000 for each committee meeting that they chaired. Audit Committee members received $2,000 for each Audit Committee meeting they attended and the chair received an additional $2,000 for each Audit Committee meeting that he chaired. Our non-employee directors were compensated at a rate of 50% of the foregoing meeting fees if a Board of Directors or committee meeting was held via teleconference. In addition, each non-employee director is reimbursed for his reasonable out-of-pocket expenses incurred by him while attending any meeting of the Board of Directors or of a committee of the Board of Directors.

 

We also grant to our non-employee directors stock options to purchase our common stock under our Amended and Restated Stock Option and Incentive Plan, as amended, at an exercise price equal to the fair market value on the date of grant. In prior years, these grants were made every three years and vested in three equal annual installments, subject to continued service on the Board of Directors. In December 2008, our Board of Directors, on the recommendation of the Compensation Committee, approved a change in stock options to be issued to our independent directors to an annual grant of 15,000 shares of common stock vesting in three equal annual installments subject to continued service on the Board of Directors. The number of shares underlying the annual grants are approximately one-third of the number of shares underlying the grants that would be made if grants were made once every three years. The last tranches of previously granted stock option grants will vest on November 1, 2010, November 1, 2011 and November 1, 2012. On October 29, 2009, new grants for 15,000 shares, each vesting in three equal annual installments, were made to all our non-employee directors subject to continued service on the Board of Directors.

 

Director Compensation Table

 

The following table sets forth compensation paid to or earned by each of our directors who were serving as directors as of June 30, 2010. Our employee directors do not receive any separate compensation in consideration for their service on the Board of Directors.

 

		Fees Earned or				Option Awards
Name		Paid in Cash				(1)(2)				Total
Kyle A. Lefkoff, Chairman		$	43,500			$	16,134			$	59,634
Francis J. Bullock, Ph.D.			28,000				16,134				44,134
Marvin H. Caruthers, Ph.D.			27,000				16,134				43,134
Gil J. Van Lunsen			47,000				16,134				63,134
Douglas E. Williams, Ph.D.			27,500				16,134				43,634
John L. Zabriskie, Ph.D.			35,000				16,134				51,134

 

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

No current member of the Compensation Committee has been an officer or employee of Array at any time. None of our executive officers serve as a member of the Board of Directors or Compensation Committee of any other company that has one or more executive officers serving as a member of our Board of Directors, nor has such a relationship existed in the past.

 

CERTAIN RELATIONSHIPS AND TRANSACTIONS

 

Policies and Procedures with Respect to Related Person Transactions

 

Our Audit Committee charter requires that the Audit Committee approve all related person transactions requiring disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934. During 2007, the Audit Committee adopted a written policy governing its review of transactions with related persons. Pursuant to this policy, identified transactions in which related persons have a direct or indirect material interest, are subject to approval or ratification by the Audit Committee. Certain transactions that are not required to be disclosed under Item 404 of Regulation S-K, including compensation and compensation-related transactions, are not subject to this policy. Our policy also requires approval or ratification for any material amendments to ongoing related person transactions. In determining whether to approve a related person transaction, the Audit Committee will consider all relevant facts and circumstances available to it, which may include the benefits of the transaction to the Company, the impact of the transaction on a director’s independence, the availability of other sources for comparable products or services, and the terms of the transaction as compared with those available to or from unrelated third parties. No director will participate in the discussion of any related person transaction in which that director has a direct or indirect interest, other than to provide material information about the transaction to the Audit Committee. For purposes of this policy, the term “related person” has the meaning contained in Item 404 of Regulation S-K and includes our executive officers, directors and director nominees (and their respective immediate family members or persons sharing their household), stockholders owning in excess of 5% of our outstanding capital stock or any entity owned or controlled by any of the foregoing or in which any of the foregoing has a substantial ownership interest.

 

Related Person Transactions

 

Prior to our initial public offering and in connection with the sale and issuance of our Series A preferred stock in May 1998, and August 1998, our Series B preferred stock in November 1999, and our Series C preferred stock in August 2000, we entered into an agreement with the investors in such financings providing for registration rights with respect to the shares of common stock, including those issuable upon conversion of each series of preferred stock, held and subsequently acquired by these investors. Currently, 3.6 million shares of our common stock are entitled to registration rights pursuant to terms and conditions of this agreement. The registration rights under this agreement allow the holders of at least 30% of the shares of common stock held by such holders then outstanding to require us to register their shares under the Securities Act on up to two occasions, subject to limitations described in the agreement. In addition, these holders can require us to include their shares in future registrations of our shares for our account or the account of another stockholder. These holders may also require us to register their shares on up to two occasions in any calendar year on Form S-3. These registration rights are subject to limitations and conditions, including the right of underwriters to limit the number of shares of common stock held by existing stockholders to be included in a registration. The registration rights as to any holder will terminate when all securities held by the holder entitled to registration rights can be sold within a three-month period under Rule 144 of the Securities Act and when the number of shares held by the holder is less than 1% of our outstanding capital stock on an as converted to common stock basis. In addition, we are generally required to bear all expenses of registration, including the reasonable fees of a single counsel acting on behalf of all selling stockholders, except underwriting discounts and selling commissions.

 

Stock option grants to our directors and executive officers are described in this Proxy Statement under the heading “COMPENSATION OF DIRECTORS—Director Compensation Table” and “EXECUTIVE COMPENSATION.” The beneficial ownership of shares of our common stock held by our officers, directors and 5% stockholders is described under “PRINCIPAL STOCKHOLDERS.” In addition, we have employment agreements with our executive officers and some of our other employees, which are discussed under “EXECUTIVE COMPENSATION—Employment Agreements.”

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and certain stockholders to file reports with the SEC on Forms 3, 4 and 5 for the purpose of reporting their ownership of and transactions in common stock. During the fiscal year ended June 30, 2010, to our knowledge and based solely on copies of these reports furnished to us by our directors, executive officers and 10% beneficial shareholders, all Section 16(a) reports were timely filed except that one stock option exercise by Dr. Snitman was filed late on a Form 4.

 

STOCKHOLDER PROPOSALS FOR 2011 ANNUAL MEETING

 

Submission of Stockholder Proposals for Inclusion in next year’s Annual Meeting
Proxy Statement

 

Any proposal or proposals by a stockholder intended to be included in the Proxy Statement and form of proxy relating to the 2011 Array Annual Meeting of Stockholders must be received by Array no later than May 24, 2011, (120 days prior to September 21, 2010) according to the proxy solicitation rules of the SEC, and must comply with the other proxy solicitation rules promulgated by the SEC and with the procedures set forth in our Bylaws. Proposals should be sent to the Secretary of Array at 3200 Walnut Street, Boulder, Colorado 80301. Nothing in this paragraph shall be deemed to require Array to include in its Proxy Statement and proxy relating to the 2011 Annual Meeting of Stockholders any stockholder proposal which may be omitted from the proxy materials according to applicable regulations of the SEC in effect at the time the proposal is received.

 

Other Stockholder Proposals for Presentation at Next Year’s Annual Meeting

 

A stockholder who wishes to submit a proposal or nominate a candidate to serve as a director for consideration at the 2011 Annual Meeting outside the processes of Rule 14a-8 under the Securities Exchange Act of 1934 and that will not be included in the Proxy Statement for such meeting must, in accordance with Section 2.2 of our Bylaws, file a written notice with the Secretary of Array which conforms to the requirements of the Bylaws and any additional information required for nominations to the Board of Directors described below. Only nominations or proposals made by a stockholder who is a stockholder of record both on the date of giving such notice and on the record date for the determination of stockholders entitled to vote at such Annual Meeting will be considered eligible to serve as a director or be transacted at an Annual Meeting. Our Bylaws are on file with the Securities and Exchange Commission, and may be obtained from our Secretary upon request and are available under the Investor Relations portion of our website at www.arraybiopharma.com. The officer who will preside at the stockholders meeting will determine whether the information provided in such notice satisfies the requirements of the Bylaws. Such notice of a stockholder proposal must be delivered no earlier than July 31, 2011, and no later than August 30, 2011. Any stockholder proposal that is not submitted in accordance with the foregoing procedures will not be considered to be properly brought before the 2011 Annual Meeting.

 

Stockholder Nominations to the Board of Directors

 

The Corporate Governance Committee of the Board of Directors will consider nominating directors to the Board of Directors who are recommended by stockholders pursuant to the procedures described above for submission of stockholder proposals and the procedures set forth below. The Corporate Governance Committee has adopted the following set of minimum qualifications for candidates nominated for election or reelection to the Board of Directors:

 

 

 

 

 

The Corporate Governance Committee will also consider other relevant factors, such as the existence of any relationship that would interfere with the exercise of a candidate’s independent judgment. The Board of Directors does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Corporate Governance Committee believes the qualifications described above enable it to identify director candidates that possess the diversity in backgrounds, industry knowledge, skills and experiences that are important to the Board’s overall effectiveness.

 

The Corporate Governance Committee has not received any nominations for director from stockholders for the 2010 Annual Meeting. The Corporate Governance Committee must receive proposals for stockholder nominations on or before the deadline for the submission of stockholder proposals for such Annual Meeting set forth in our bylaws and required by the rules of the Securities and Exchange Commission, as described above. As required by our Bylaws, stockholder proposals must include the following information:

 

 

 

 

Following verification of this information, the Corporate Governance Committee will make an initial analysis of the qualifications of the candidate based on Array’s general criteria for director nominations, and if the Corporate Governance Committee believes the candidate meets the criteria, the Committee would further evaluate the candidate which generally would involve a review of background materials, internal discussions and interviews with the candidate. If the Corporate Governance Committee supports the candidate, it would recommend the candidate for consideration by the Board. The Corporate Governance Committee has historically not retained a recruiting firm or third party to assist in the identification or evaluation of potential nominees and will evaluate all candidates to the Board of Directors in the same manner regardless of whether the nominee is recommended by a stockholder or some other source.

 

Appendix A

 

AMENDED AND RESTATED
ARRAY BIOPHARMA INC.
EMPLOYEE STOCK PURCHASE PLAN
As amended and restated on August 5, 2010,
subject to the approval of the stockholders

 

The Board of Directors of Array BioPharma Inc. (the “Company”) has adopted this Employee Stock Purchase Plan (the “Plan”) to enable eligible employees of the Company and its participating Affiliates (as defined below), through payroll deductions or other cash contributions, to purchase shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”). The Plan is for the benefit of the employees of Array BioPharma Inc. and any participating Affiliates. The Plan is intended to benefit the Company by increasing the employees’ interest in the Company’s growth and success and encouraging employees to remain in the employ of the Company or its participating Affiliates. The provisions of the Plan are set forth below:

 

 

Subject to adjustment as provided in Section 26 below, the aggregate number of shares of Common Stock that may be made available for purchase by participating employees under the Plan is 3,450,000. The shares issuable under the Plan may, in the discretion of the Board of Directors of the Company (the “Board”), be either authorized but unissued shares or treasury shares.

 

 

The Plan shall be administered under the direction of the Compensation Committee of the Board (the “Committee”). No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan.

 

 

It is intended that the Plan will meet the requirements for an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986 (the “Code”), and it is to be so applied and interpreted. Subject to the express provisions of the Plan, the Committee shall have authority to interpret the Plan, to prescribe, amend and rescind rules relating to it, and to make all other determinations necessary or advisable in administering the Plan (including any determinations that are reserved by the Board under this Plan), all of which determinations will be final and binding upon all persons.

 

 

Any employee of the Company or any of its participating Affiliates may participate in the Plan, except the following, who are ineligible to participate: (a) an employee whose customary employment is for less than five months in any calendar year; and (b) an employee who, after exercising his or her rights to purchase shares under the Plan, would own shares of Common Stock (including shares that may be acquired under any outstanding options) representing five percent or more of the total combined voting power of all classes of stock of the Company. The term “participating Affiliate” means any company or other trade or business that is a subsidiary of the Company (determined in accordance with the principles of Sections 424(e) and (f) of the Code and the regulations thereunder). The Board may at any time in its sole discretion, if it deems it advisable to do so, terminate the participation of the employees of a particular participating Affiliate.

 

An eligible employee may become a participating employee in the Plan by completing an election to participate in the Plan on a form provided by the Company and submitting that form to the Payroll Department of the Company. The form will authorize payroll deductions (as provided in Section 6 below) and authorize the purchase of shares of Common Stock for the employee’s account in accordance with the terms of the Plan. Enrollment will become effective upon the first day of the first Offering Period. Notwithstanding the forgoing, the Board may, in its discretion, also choose to automatically enroll eligible employees in the Plan in connection with the first Offering Period coinciding with the Company’s initial public offering. Eligible employees who are automatically enrolled in the Plan shall be deemed to have elected to purchase Common Stock with a total Purchase Price fixed by the Board at the time of the first Offering Period and payable as a lump sum, which total Purchase Price shall in no event be more than $25,000.

 

 

At the time an eligible employee submits his or her election to participate in the Plan (as provided in Section 5 above), the employee shall elect to have deductions made from his or her pay on each pay day following his or her enrollment in the Plan, and for as long as he or she shall participate in the Plan. The deductions will be credited to the participating employee’s account under the Plan. Pursuant to Section 5 above, the Board shall also have the authority to authorize in the election form the payment for shares of Common Stock through cash payments from participating employees. An employee may not during any Offering Period change his or her percentage of payroll deduction for that Offering Period, nor may an employee withdraw any contributed funds, other than in accordance with Sections 14 through 20 below.

 

 

The Offering Periods shall be determined by the Board. The first Offering Period under the Plan shall commence on the date determined by the Board.

 

If the Purchase Price (as defined below) is determined on the last trading day of a Purchase Period (as defined below) as provided in Section 8 below because the price per share on such date is less than the price per share on the first trading date of the Offering Period, the Board may provide for the automatic termination of the Offering Period and the automatic commencement of a new Offering Period.

 

 

Rights to purchase shares of Common Stock will be deemed granted to participating employees as of the first trading day of each Offering Period for a number of shares equal to $25,000 divided by 85% of the fair market value of the Common Stock on the first day of the Offering Period. The purchase price of each share of Common Stock (the “Purchase Price”) shall be the lesser of 85 percent of the fair market value of the Common Stock (i) on the first trading day of the Offering Period or (ii) on the last trading day of such Offering Period; provided, further, that in no event shall the Purchase Price be less than the par value of the Common Stock. For purposes of the Plan, “fair market value” means the value of each share of Common Stock subject to the Plan on a given date determined as follows: if on such date the shares of Common Stock are listed on an established national or regional stock exchange, are admitted to quotation on The Nasdaq Stock Market, or are publicly traded on an established securities market, the fair market value of the shares of Common Stock shall be the closing price of the shares of Common Stock on such exchange or in such market (the highest such closing price if there is more than one such exchange or market) on such date or, if such date is not a trading day, on the trading day immediately preceding such date (or if there is no such reported closing price, the fair market value shall be the mean between the highest bid and

lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of the shares of Common Stock is reported for such trading day, on the next preceding day on which any sale shall have been reported. If the shares of Common Stock are not listed on such an exchange, quoted on such system or traded on such a market, fair market value shall be determined by the Board in good faith. Notwithstanding the foregoing, the fair market value of each share of Common Stock on the first day of the Offering Period that commences with the Company’s initial public offering shall be the public offering price at which the shares of Common Stock are offered for sale in the initial public offering. On the first day of each Purchase Period that: (i) is not also the start of a new Offering Period and (ii) occurs in the same calendar year as an earlier Purchase Period, each participating employee’s right to purchase shares of Common Stock granted under this Section 8 shall be reduced by the number of shares of Common Stock purchased on behalf of such participating employee in the immediately preceding Purchase Period.

 

The Board may adopt several purchase periods (each a “Purchase Period”) within a given Offering Period. If the Board adopts several purchase periods within an Offering Period, the Purchase Price shall be the lesser of 85 percent of the fair market value of the Common Stock (i) on the first trading day of the Offering Period or (ii) on the last trading day of such Purchase Period; provided, further, that in no event shall the Purchase Price be less than the par value of the Common Stock.

 

 

Unless a participating employee has given prior written notice terminating such employee’s participation in the Plan, or the employee’s participation in the Plan has otherwise been terminated as provided in Sections 14 through 20 below, such employee will be deemed to have exercised automatically his or her right to purchase Common Stock on the last trading day of the Offering Period (except as provided in Section 14 below) for the number of shares of Common Stock which the accumulated funds in the employee’s account at that time will purchase at the Purchase Price, subject to the participation adjustment provided for in Section 13 below and subject to adjustment under Section 26 below. Notwithstanding any other provision of the Plan, no employee may purchase in any one calendar year under the Plan and all other “employee stock purchase plans” of the Company and its participating Affiliates shares of Common Stock having an aggregate fair market value in excess of $25,000, determined as of the first trading date of the Offering Period as to shares purchased during such period. Effective upon the last trading day of the Offering Period, a participating employee will become a stockholder with respect to the shares purchased during such period, and will thereupon have all dividend, voting and other ownership rights incident thereto. Notwithstanding the foregoing, no shares shall be sold pursuant to the Plan unless the Plan is approved by the Company’s stockholders in accordance with Section 25 below.

 

 

On the last trading day of the Offering Period, a participating employee will be credited with the number of shares of Common Stock purchased for his or her account under the Plan during such Offering Period. The Board may permit or require that shares be deposited directly with a broker designated by the Board or to a designated agent of the Company, and the Board may utilize electronic or automated methods of share transfer. The Board may require that shares be retained with such broker or agent for a designated period of time (and may restrict dispositions for a period of up to 12 months from the date of purchase) and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares or to restrict transfer of such shares. The Company shall retain the amount of payroll deductions or the lump-sum payment used to purchase shares of Common Stock as full payment for the shares of Common Stock and the shares of Common Stock shall then be fully paid and non-assessable.

 

To the extent that a participating employee realizes income in connection with an acquisition, sale or other transfer of any shares of Common Stock acquired under the Plan, the Company may withhold amounts needed to cover such taxes from any payments otherwise due and owing to the participating employee or from shares that would otherwise be issued to the participating employee hereunder. Any participating employee who sells or otherwise transfers shares purchased under the Plan within two years after the beginning of the Offering Period in which the shares were purchased must within 30 days of such transfer notify the Payroll Department of the Company in writing of such transfer. Notwithstanding any implication herein to the contrary, this Section 11 shall not be interpreted in a manner to impose an withholding obligations on an entity other than the Company.

 

 

The Company will cause a statement to be delivered to each participating employee for each Offering Period during which the employee purchases Common Stock under the Plan, reflecting the amount of payroll deductions or other cash contributions during the Offering Period, the number of shares purchased for the employee’s account, the price per share of the shares purchased for the employee’s account and the number of shares held for the employee’s account at the end of the Offering Period.

 

 

If in any Offering Period the number of unsold shares that may be made available for purchase under the Plan pursuant to Section 1 above is insufficient to permit exercise of all rights deemed exercised by all participating employees pursuant to Section 9 above, a participation adjustment will be made, and the number of shares purchasable by all participating employees will be reduced proportionately. Any funds then remaining in a participating employee’s account after such exercise will be refunded to the employee.

 

 

(a) A participating employee may, at any time prior to the last trading day of the Offering Period, by written notice to the Company, direct the Company to cease payroll deductions (or, if the payment for shares is being made through periodic cash payments, notify the Company that such payments will be terminated), and the amount in the employee’s account will be distributed and the employee’s option to purchase will terminate, unless the employee elects, by written notice to the Company, not to have such amount distributed, in which event such amount shall remain in the employee’s account and available to exercise his or her option to purchase shares under the Plan during such Offering Period.

 

(b) Any participating employee may increase or decrease his or her payroll deduction or periodic cash payments, to take effect on the first day of the next Offering Period, by delivering to the Company a new form regarding election to participate in the Plan under Section 5 above.

 

(c) Notwithstanding subsection 14(b) above, any participating employee may increase (subject to the maximum limitation on purchases under the Plan provided for in Section 9 and any additional limitations imposed by section 423 of the Code) or decrease his or her payroll deduction, to take effect on the first day of the next Purchase Period, by delivering to the Company a new form regarding election to participate in the Plan under Section 5 above. The Company may impose reasonable administrative restrictions on the frequency of changes in payroll deductions, required advance notice for changes in payroll deductions and on the minimum amount of payroll deductions.

 

In the event a participating employee voluntarily leaves the employ of the Company or a participating Affiliate, otherwise than by retirement under a plan of the Company or a participating Affiliate, or is discharged for cause prior to the last day of the Offering Period, the amount in the employee’s account will be distributed and the employee’s option to purchase will terminate.

 

 

In the event a participating employee who has an option to purchase shares leaves the employ of the Company or a participating Affiliate because of retirement under a plan of the Company or a participating Affiliate, or because of termination of the employee’s employment by the Company or a participating Affiliate for any reason except discharge for cause, the participating employee may elect, within 10 days after the date of such retirement or termination, one of the following alternatives:

 

(a) The employee’s option to purchase shall be reduced to the number of shares which may be purchased, as of the last day of the Offering Period, with the amount then credited to the employee’s account; or

 

(b) Withdraw the amount in such employee’s account and terminate such employee’s option to purchase.

 

In the event the participating employee does not make an election within the aforesaid 10-day period, he or she will be deemed to have elected subsection 16(b) above.

 

 

Payroll deductions for shares for which a participating employee has an option to purchase may be suspended during any period of absence of the employee from work due to lay-off, authorized leave of absence or disability or, if the employee so elects, periodic payments for such shares may continue to be made in cash.

 

If such employee returns to active service prior to the last day of the Offering Period, the employee’s payroll deductions will be resumed and if said employee did not make periodic cash payments during the employee’s period of absence, the employee shall, by written notice to the Company’s Payroll Department within 10 days after the employee’s return to active service, but not later than the last day of the Offering Period, elect:

 

(a) To make up any deficiency in the employee’s account resulting from a suspension of payroll deductions by an immediate cash payment;

 

(b) Not to make up such deficiency, in which event the number of shares to be purchased by the employee shall be reduced to the number of whole shares which may be purchased with the amount, if any, then credited to the employee’s account plus the aggregate amount, if any, of all payroll deductions to be made thereafter; or

 

(c) Withdraw the amount in the employee’s account and terminate the employee’s option to purchase.

 

A participating employee on lay-off, authorized leave of absence or disability on the last day of the Offering Period shall deliver written notice to his or her employer on or before the last day of the Offering Period, electing one of the alternatives provided in the foregoing clauses (a), (b) and (c) of this Section 17. If any employee fails to deliver such written notice within 10 days after the employee’s return to active service or by the last day of the Offering Period, whichever is earlier, the employee shall be deemed to have elected subsection 17(c) above.

If the period of a participating employee’s lay-off, authorized leave of absence or disability shall terminate on or before the last day of the Offering Period, and the employee shall not resume active employment with the Company or a participating Affiliate, the employee shall receive a distribution in accordance with the provisions of Section 16 of this Plan.

 

 

In the event of the death of a participating employee while the employee’s option to purchase shares is in effect, the legal representatives of such employee may, within three months after the employee’s death (but no later than the last day of the Offering Period) by written notice to the Company or participating Affiliate, elect one of the following alternatives:

 

(a) The employee’s option to purchase shall be reduced to the number of shares which may be purchased, as of the last day of the Offering Period, with the amount then credited to the employee’s account; or

 

(b) Withdraw the amount in such employee’s account and terminate such employee’s option to purchase.

 

In the event the legal representatives of such employee fail to deliver such written notice to the Company or participating Affiliate within the prescribed period, the election to purchase shares shall terminate and the amount, then credited to the employee’s account shall be paid to such legal representatives.

 

 

Under any of the circumstances contemplated by this Plan, where the purchase of shares is to be made through periodic cash payments in lieu of payroll deductions, the failure to make any such payments shall reduce, to the extent of the deficiency in such payments, the number of shares purchasable under this Plan.

 

 

A participating employee will be refunded all moneys in his or her account, and his or her participation in the Plan will be terminated if either (a) the Board elects to terminate the Plan as provided in Section 25 below, or (b) the employee ceases to be eligible to participate in the Plan under Section 4 above. As soon as practicable following termination of an employee’s participation in the Plan, the Company will deliver to the employee a check representing the amount in the employee’s account and a stock certificate representing the number of whole shares held in the employee’s account. Once terminated, participation may not be reinstated for the then current Offering Period, but, if otherwise eligible, the employee may elect to participate in any subsequent Offering Period.

 

 

No participating employee may assign his or her rights to purchase shares of Common Stock under the Plan, whether voluntarily, by operation of law or otherwise. Any payment of cash or issuance of shares of Common Stock under the Plan may be made only to the participating employee (or, in the event of the employee’s death, to the employee’s estate). Once a stock certificate has been issued to the employee or for his or her account, such certificate may be assigned the same as any other stock certificate.

 

All funds received or held by the Company under the Plan may be used for any corporate purpose until applied to the purchase of Common Stock and/or refunded to participating employees. Participating employees’ accounts will not be segregated.

 

 

Neither the Plan nor any right to purchase Common Stock under the Plan confers upon any employee any right to continued employment with the Company or any of its participating Affiliates, nor will an employee’s participation in the Plan restrict or interfere in any way with the right of the Company or any of its participating Affiliates to terminate the employee’s employment at any time.

 

 

The Board may, at any time, amend the Plan in any respect (including an increase in the percentage specified in Section 8 above used in calculating the Purchase Price); provided, however, that without approval of the stockholders of the Company no amendment shall be made (a) increasing the number of shares specified in Section 1 above that may be made available for purchase under the Plan (except as provided in Section 26 below) or (b) changing the eligibility requirements for participating in the Plan. No amendment may be made that impairs the vested rights of participating employees.

 

 

The Plan shall be effective as of the date of adoption by the Board, which date is set forth below, subject to approval of the Plan by a majority of the votes present and entitled to vote at a duly held meeting of the shareholders of the Company at which a quorum representing a majority of all outstanding voting stock is present, either in person or by proxy; provided, however, that upon approval of the Plan by the shareholders of the Company as set forth above, all rights to purchase shares granted under the Plan on or after the effective date shall be fully effective as if the shareholders of the Company had approved the Plan on the effective date. If the shareholders fail to approve the Plan on or before one year after the effective date, the Plan shall terminate, any rights to purchase shares granted hereunder shall be null and void and of no effect, and all contributed funds shall be refunded to participating employees. The Board may terminate the Plan at any time and for any reason or for no reason, provided that such termination shall not impair any rights of participating employees that have vested at the time of termination. In any event, the Plan shall, without further action of the Board, terminate on September 8, 2020 or, if earlier, at such time as all shares of Common Stock that may be made available for purchase under the Plan pursuant to Section 1 above have been issued.

 

 

 

If the number of outstanding shares of Common Stock is increased or decreased or the shares of Common Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend, or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the effective date of the Plan, the number and kinds of shares that may be purchased under the Plan shall be adjusted proportionately and accordingly by the Company. In addition, the number and kind of shares for which rights are outstanding shall be similarly adjusted so that the proportionate interest of a participating employee immediately following such event shall, to

the extent practicable, be the same as immediately prior to such event. Any such adjustment in outstanding rights shall not change the aggregate Purchase Price payable by a participating employee with respect to shares subject to such rights, but shall include a corresponding proportionate adjustment in the Purchase Price per share. Notwithstanding the foregoing, in the event of a spin-off that results in no change in the number of outstanding shares of stock of the Company, the Company may, in such manner as the Company deems appropriate, adjust (i) the number and kind of shares for which rights are outstanding under the Plan, and (ii) the Purchase Price per share.

 

 

Subject to Subsection (c) of this Section 26, if the Company shall be the surviving corporation in any reorganization, merger or consolidation of the Company with one or more other corporations, all outstanding rights under the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to such rights would have been entitled immediately following such reorganization, merger or consolidation, with a corresponding proportionate adjustment of the Purchase Price per share so that the aggregate Purchase Price thereafter shall be the same as the aggregate Purchase Price of the shares subject to such rights immediately prior to such reorganization, merger or consolidation.

 

 

Upon any dissolution or liquidation of the Company, or upon a merger, consolidation or reorganization of the Company with one or more other corporations in which the Company is not the surviving corporation, or upon a sale of all or substantially all of the assets of the Company to another corporation, or upon any transaction (including, without limitation, a merger or reorganization in which the Company is the surviving corporation) approved by the Board that results in any person or entity owning more than 50 percent of the combined voting power of all classes of stock of the Company, the Plan and all rights outstanding hereunder shall terminate, except to the extent provision is made in writing in connection with such transaction for the continuation of the Plan and/or the assumption of the rights theretofore granted, or for the substitution for such rights of new rights covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and exercise prices, in which event the Plan and rights theretofore granted shall continue in the manner and under the terms so provided. In the event of any such termination of the Plan, the Offering Period shall be deemed to have ended on the last trading day prior to such termination, and in accordance with Section 10 above the rights of each participating employee then outstanding shall be deemed to be automatically exercised on such last trading day. The Board shall send written notice of an event that will result in such a termination to all participating employees not later than the time at which the Company gives notice thereof to its stockholders.

 

 

Adjustments under this Section 26 related to stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding, and conclusive.

 

 

The grant of a right pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets.

 

The Company’s obligation to issue, sell and deliver shares of Common Stock pursuant to the Plan is subject to such approval of any governmental authority and any national securities exchange or other market quotation system as may be required in connection with the authorization, issuance or sale of such shares.

 

 

Any dividends paid on shares held by the Company for a participating employee’s account will be transmitted to the employee. The Company will deliver to each participating employee who purchases shares of Common Stock under the Plan, as promptly as practicable by mail or otherwise, all notices of meetings, proxy statements, proxies and other materials distributed by the Company to its stockholders. Any shares of Common Stock held for an employee’s account will be voted in accordance with the employee’s duly delivered and signed proxy instructions. There will be no charge to participating employees in connection with such notices, proxies and other materials.

 

 

Transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or any successor provision under the Securities Exchange Act of 1934, as amended. If any provision of the Plan or action by the Board fails to so comply, it shall be deemed null and void to the extent permitted by law and deemed advisable by the Board. Moreover, in the event the Plan does not include a provision required by Rule 16b-3 to be stated herein, such provision (other than one relating to eligibility requirements, or the price and amount of awards) shall be deemed automatically to be incorporated by reference into the Plan.

 

 

The Company will bear all costs of administering and carrying out the Plan.

 

* * *

This Plan was duly adopted and approved by the Board of Directors of the Company on the 8th day of September 2000 and approved by the stockholders of the Company on the 8th day of September 2000, in each case effective upon the closing of the initial public offering of the Company’s common stock. This Plan was duly amended:

 

 

John R. Moore,
Secretary

ARRAY BIOPHARMA INC. 3200 WALNUT STREET BOULDER, CO 80301		YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. We encourage you to take advantage of Internet or telephone voting, available 24 hours a day, 7 days a week through 11:59 pm. Eastern Time the day before the meeting date. VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Have your proxy card in hand when you call and then follow the instructions. If you vote your proxy by Internet or by phone, you do NOT need to mail back your proxy card. Your vote by Internet or phone authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card by mail. To vote by mail, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

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