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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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(as permitted by Rule 14a-6(e)(2))
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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)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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[Array BioPharma Logo]
3200 WALNUT STREET
BOULDER, COLORADO 80301
October 1, 2001
Dear Fellow Stockholder:
You are cordially invited to attend Array BioPharma Inc.'s Annual Meeting
of Stockholders on November 1, 2001, at 2:00 p.m., Mountain Standard Time, at
the Hotel Boulderado, 2115 13th Street, Boulder, Colorado, 80302.
The matters to be acted on at the Annual Meeting are described in the
enclosed notice and Proxy Statement. A proxy card on which to indicate your vote
and a postage-paid return envelope are also enclosed as well as a copy of our
fiscal year 2001 Annual Report.
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 complete, sign and return the enclosed proxy card to
ensure that your shares are represented. If you decide to attend the Annual
Meeting, you may revoke your proxy at that time and vote your shares in person.
Please remember, this is your opportunity to voice your opinion on matters
affecting the Company. We look forward to receiving your proxy and perhaps
seeing you at the Annual Meeting.
Sincerely,
/s/ ROBERT E. CONWAY
ROBERT E. CONWAY
Chief Executive Officer
Enclosures
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[Array BioPharma Logo]
3200 WALNUT STREET
BOULDER, COLORADO 80301
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 1, 2001
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Array BioPharma Inc. to be held on November 1, 2001, at 2:00 p.m., Mountain
Standard Time, at the Hotel Boulderado, 2115 13th Street, Boulder, Colorado,
80302, to consider and vote upon the following Matters:
1. Election of three Class I directors to serve for a three-year term
of office expiring at the 2004 Annual Meeting of Stockholders;
2. Ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending June 30, 2002; and
3. Any other matter that properly comes before the Annual Meeting.
Only stockholders of record at the close of business on September 24, 2001,
will be entitled to vote at the Annual Meeting or any adjournments thereof.
YOUR VOTE IS VERY IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE ANNUAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY, WHICH IS BEING SOLICITED BY
THE BOARD OF DIRECTORS, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
/s/ ROBERT E. CONWAY
ROBERT E. CONWAY
Chief Executive Officer
Boulder, Colorado
October 1, 2001
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ARRAY BIOPHARMA INC.
3200 WALNUT STREET
BOULDER, COLORADO 80301
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 1, 2001
This Proxy Statement is furnished to stockholders of Array BioPharma Inc.,
a Delaware corporation, in connection with the solicitation of proxies for use
at the Annual Meeting of Stockholders of Array to be held on November 1, 2001,
at 2:00 p.m., Mountain Standard Time, at the Hotel Boulderado, 2115 13th Street,
Boulder, Colorado, 80302, for the purposes set forth in the Notice of Meeting.
This solicitation of proxies is made on behalf of our Board of Directors.
Holders of record of shares of our common stock as of the close of business
on the record date, September 24, 2001, 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. At the close of business on
September 24, 2001, there were 23,414,908 shares of common stock outstanding.
Shares represented by proxies in the form enclosed that are properly
executed and returned and not revoked, will be voted as specified. Where no
specification is made on a properly executed and returned form of proxy, the
shares will be voted FOR the election of all nominees for Class I directors and
FOR the ratification of Ernst & Young LLP as independent auditors for the fiscal
year ending June 30, 2002. We know of no business other than the election of
directors and ratification of the independent auditors 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.
To be voted, proxies must be filed with our Secretary prior to the time of
voting. proxies may be revoked at any time before they are exercised by filing
with our Secretary a notice of revocation or a later dated proxy, or by voting
in person at the Annual Meeting.
Our 2001 Annual Report to Stockholders for the fiscal year ended June 30,
2001, is enclosed with this Proxy Statement. This Proxy Statement, the Proxy
Card and the 2001 Annual Report to Stockholders were mailed to stockholders on
or about October 1, 2001. Our executive offices are located at 3200 Walnut
Street, Boulder, Colorado, 80301.
PROPOSAL 1
ELECTION OF DIRECTORS
BOARD 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 will
be 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., Robert W. Overell, Ph.D. and John D. Zabriskie, Ph.D., all of
whom have been nominated for reelection at the Annual Meeting as directors to
hold office until the 2004 Annual Meeting of Stockholders and until their
successors are elected and qualified. Each of the nominees has consented to
serve a term as a Class I director.
Three nominees for director will be elected upon a favorable vote of a
plurality of the shares of our common stock present, in person or by proxy, and
entitled to vote at the Annual Meeting. Shares represented
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by proxies cannot be voted for more than the three nominees for director. Our
Board of Directors recommends a vote FOR David L. Snitman, Ph.D., Robert W.
Overell, Ph.D. and John D. Zabriskie, Ph.D. as Class I directors to hold office
until the 2004 Annual Meeting of Stockholders and until their successors are
elected and qualified. Should any or all of these 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 2004
The three directors standing for election are as follows:
David L. Snitman, Ph.D., 49, 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 joining us, Dr. Snitman held various positions with
Amgen Inc. since December 1981, including Associate Director of New Products and
Technology and Manager of Amgen's Boulder 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.
Robert W. Overell, Ph.D., 46, has served as a member of our Board of
Directors since December 1999. Since 1996, Dr. Overell has been with Frazier &
Company, a venture capital firm and investor in our company, and has served as a
General Partner since 1998 and a venture partner from 1996 until 1998. Dr.
Overell's operational experience in biotechnology companies includes joining
Immunex Corporation early in its development and co-founding Target Genetics.
Dr. Overell serves on the Board of Directors of Activx, Inc., GeneMachines,
Quantum Dot, Inc., SkeleTech, Inc. and XenoPort, Inc. Dr. Overell received his
B.S. in biological sciences from the University of Newcastle-upon-Tyne and a
Ph.D. in biochemistry from the Institute of Cancer Research at the University of
London.
John D. Zabriskie, Ph.D., 62, has served as a member of our Board of
Directors since January 2001. Dr. Zabriskie is 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 and Upjohn Inc. 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. Prior to joining Upjohn in 1994, Dr.
Zabriskie was Executive Vice President for Merck and Co. Dr. Zabriskie currently
serves on the Boards of Directors of Biomira, Inc., Cubist Pharmaceutical Inc.,
Kellogg Co., MacroChem Corp., AlphaGene Inc., Biospecific LLC, Callisto
Pharmaceuticals and Puretech Ventures. Dr. Zabriskie received his undergraduate
degree in chemistry from Dartmouth College and his Ph.D. in organic chemistry
from the University of Rochester.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH OF
THE NOMINEES FOR ELECTION AS CLASS I DIRECTORS TO THE BOARD.
DIRECTORS CONTINUING IN OFFICE
Term Expiring 2002 -- Class II. The following Class II directors have
terms expiring at the Annual Meeting of Stockholders in 2002.
Robert E. Conway, 47, has served as our Chief Executive Officer and a
member of our Board of Directors since November 1999. From October 1996 to
October 1999, Mr. Conway was the Chief Operating Officer and Executive Vice
President of the Clinical Trials Division of Hill Top Research, Inc. where he
managed 22 company-owned research centers conducting clinical trials for
pharmaceutical and biotechnology companies. From 1979 until 1996, Mr. Conway
held various executive positions with Corning, Inc., including Corporate Vice
President and General Manager of Corning Hazleton, Inc., a preclinical contract
research organization, where he was responsible for North American operations.
Mr. Conway serves on the Board of
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Directors of DEMCO, Inc. Mr. Conway received a B.S. in accounting from Marquette
University and an M.B.A. from the University of Cincinnati, and is a Certified
Public Accountant.
Kyle Lefkoff, 42, 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 Limited, a venture capital firm and an investor in our company. From
June 1986 until June 1995, Mr. Lefkoff was employed by Colorado Venture
Management, a venture capital firm. Mr. Lefkoff serves on the Boards of
Directors of Trust Company of America, Metabolite Laboratories, Inc. and
Lefthand Networks Inc. Mr. Lefkoff received a B.A. in economics from Vassar
College and an M.B.A. from the University of Chicago.
Marvin H. Caruthers, Ph.D., 61, has served as a member of our Board of
Directors since August 1998. Since 1979, Dr. Caruthers has been a Professor of
Biochemistry and Bioorganic Chemistry at the University of Colorado. Dr.
Caruthers is a member of the National Academy of Sciences and the American
Academy of Arts and Sciences and was previously a member of the scientific
advisory board of Amgen Inc. Dr. Caruthers also serves on the Board of Directors
of Oxigene, Inc. Dr. Caruthers received a B.S. in chemistry from Iowa State
University and a Ph.D. in chemistry from Northwestern University.
Term Expiring 2003 -- Class III. The following Class III directors have
terms expiring at the Annual Meeting of Stockholders in 2003:
Francis J. Bullock, Ph.D., 64, has served as a member of our Board of
Directors since May 1998. Since 1993, Dr. Bullock has been a senior consultant
for Arthur D. Little, Inc., concentrating on pharmaceutical and biotechnology
research and development, as well as the fine chemicals and agricultural
chemicals industries. From April 1981 until September 1993, Dr. Bullock served
as Senior Vice President, Research Operations at Schering Plough Research
Institute. Dr. Bullock serves on the Boards of Directors of Genzyme Transgenics
Corporation, Neogenesis, Inc. and Atherex. Dr. Bullock received a B.S. in
pharmacy from the Massachusetts College of Pharmacy, an A.M. in organic
chemistry from Harvard University and a Ph.D. in organic chemistry from Harvard
University.
Kevin Koch, Ph.D., 41, has served as our President, our Chief Scientific
Officer and a member of our Board of Directors since May 1998. Prior to joining
us, Dr. Koch was an Associate Director of Medicinal Chemistry and Project Leader
for the Protease Inhibitor and New Leads project teams from May 1995 to April
1998 for Amgen Inc. From September 1988 until May 1995, Dr. Koch held various
positions with Pfizer Central Research, including Senior Research
Investigator-Project Coordinator for the Cellular Migration and Immunology
Project Teams. Dr. Koch is Chairman of the Strategic Research Institute's
Anti-inflammatory Drug Discovery Summit and is an elected board member 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.
Kirby L. Cramer, 65, has served as a member of our Board of Directors since
August 2000. Mr. Cramer is the Chairman Emeritus of Hazleton Laboratories
Corporation, a Covance company, Chairman of the Board of Directors of
Northwestern Trust and Investors Advisory Company and Chairman of the Board of
Directors of SonoSite, Inc. From 1987 until 1991, Mr. Cramer served as the
Chairman of the Board of Directors of Kirschner Medical Corporation. Mr. Cramer
serves on the Boards of Directors of Immunex Corporation, Northwestern Trust and
Investors Advisory Company, SonoSite, Inc., Huntingdon Life Sciences Group plc,
Landec Corporation, D.J. Orthopedics, Inc. and Commerce Bank of Washington. Mr.
Cramer received a B.A. in history from Northwestern University and an M.B.A.
from the University of Washington, and is a graduate of Harvard Business
School's Advanced Management Program. Mr. Cramer is a Chartered Financial
Analyst.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors held six meetings during the fiscal year ended June
30, 2001. During the fiscal year, none of the directors attended fewer than 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. Our Board of
Directors has established two committees, a Compensation Committee and an Audit
Committee. In addition, our Board of Directors established a pricing committee
in connection with our initial public offering comprised of
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Messrs. Conway, Cramer and Lefkoff, which met once during fiscal year 2001. Our
Board of Directors has not established a nominating committee.
Compensation Committee. The Compensation Committee is responsible for
determining executive officers' compensation and for administering our Amended
and Restated Stock Option and Incentive Plan and our Employee Stock Purchase
Plan. The Compensation Committee held two meetings during the fiscal year ended
June 30, 2001. Dr. Bullock, Mr. Lefkoff and Dr. Overell are members of the
Compensation Committee. None of the current members of our Compensation
Committee are officers or employees of Array. Mr. Conway, our Chief Executive
Officer, was a member of our Compensation Committee during the fiscal year ended
June 30, 2001, until his resignation from the committee in August 2000 prior to
our initial public offering in November 2000.
Audit Committee. The Audit Committee is responsible for (1) making
recommendations about 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) considering the range of
audit and non-audit fees and (5) reviewing our internal accounting controls. The
Audit Committee held three meetings during the fiscal year ended June 30, 2001.
Dr. Bullock, Mr. Cramer and Dr. Zabriskie, none of whom are officers or
employees of Array, are the members of the Audit Committee. Mr. Lefkoff was a
member of our Audit Committee during the fiscal year ended June 30, 2001, until
his resignation from the committee in February 2001, at which time Dr. Zabriskie
was appointed to serve on the Audit Committee.
COMPENSATION OF DIRECTORS
All of our directors are entitled to be reimbursed for reasonable expenses
incurred by them in connection with their attendance at board and committee
meetings. In addition, during the fiscal year ended June 30, 2001, our
non-employee, outside directors, who included Dr. Bullock, Mr. Cramer and Dr.
Zabriskie, were each granted fully vested options to purchase 20,000 shares of
our common stock for service on the board in fiscal year 2001. Dr. Bullock was
also granted a fully vested option to purchase 10,000 shares of our common stock
in July 2000 for his service on the board in the prior fiscal year. In addition,
Dr. Bullock, Mr. Cramer and Dr. Zabriskie were paid cash compensation for their
services as directors of $14,000, $12,000 and $7,000, respectively, during
fiscal year 2001.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
We are asking the stockholders to ratify the Board of Directors' selection
of Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending June 30, 2002.
In the event the stockholders fail to ratify the selection, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors, in its discretion, may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
feels that such a change would be in the best interests of the Company and our
stockholders.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting, and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions. The
affirmative vote of the holders of a majority of the shares represented in
person or by proxy and voting at the Annual Meeting will be required to ratify
the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN
FAVOR OF THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDED JUNE 30, 2002.
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AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors in fiscal year 2001 consisted
of Kirby L. Cramer, Francis J. Bullock, Ph.D. and John D. Zabriskie, Ph.D. Kyle
Lefkoff was a member of our Audit Committee from July 1, 2000, until his
resignation from the committee in February 2001, at which time Dr. Zabriskie was
appointed. Each of the members of our Audit Committee is an independent director
as defined in Rule 4200(a)(15) of the Nasdaq Marketplace Rules. The Audit
Committee's responsibilities are described in a written charter adopted by our
Board of Directors, which is attached as Exhibit A to this Proxy Statement. 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, 2001, with our management and with our
independent auditors, Ernst & Young LLP ("Ernst & Young"). In addition, the
Audit Committee discussed with Ernst & Young the matters required to be
discussed by the Statement on Auditing Standards No. 61 relating to the conduct
of the audit. The Audit Committee also discussed with Ernst & Young the written
disclosures and the letter from Ernst & Young 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 auditors
with the auditors' independence.
The fees that the Company paid to Ernst & Young for the fiscal year ended
June 30, 2001, are discussed in the following paragraphs:
AUDIT FEES
The aggregate fees for professional services rendered for the audit of the
annual financial statements for the fiscal year ended June 30, 2001, and the
reviews of the financial statements included in quarterly financial statements
filed on Forms 10-Q for the fiscal year ended June 30, 2001, were $79,916, of
which all amounts have been billed.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were billed by Ernst & Young for financial information systems
design and implementation services.
ALL OTHER FEES
The aggregate fees billed for services rendered by Ernst & Young, other
than the fees discussed in the foregoing paragraphs, were $227,963, of which
$220,800 related to our initial public offering and $7,163 related to other tax
and accounting services.
Based on the Audit Committee's review of the audited financial statements
and the review and discussions described in the second paragraph of this report,
the Committee recommended to the Board of Directors that the audited financial
statements for the fiscal year ended June 30, 2001, be included in the Annual
Report on Form 10-K for the fiscal year ended June 30, 2001, for filing with the
Securities and Exchange Commission.
Respectfully submitted,
Audit Committee
KIRBY L. CRAMER
FRANCIS J. BULLOCK, PH.D.
JOHN D. ZABRISKIE, PH.D.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of August 31, 2001, by:
- each of our named executive officers,
- each of our directors,
- all of our directors and executive officers as a group; and
- each person (or group of affiliated persons) known by us to beneficially
own more than 5% of our outstanding common stock.
<Table>
<Caption>
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME BENEFICIALLY OWNED BENEFICIALLY OWNED(A)
---- ------------------ ---------------------
NAMED EXECUTIVE OFFICERS
Robert E. Conway(b)............................... 734,037 3.1%
Kevin Koch, Ph.D.(c).............................. 755,698 3.2
David L. Snitman, Ph.D.(d)........................ 1,558,721 6.7
Anthony D. Piscopio, Ph.D.(e)..................... 716,512 3.1
R. Michael Carruthers(f).......................... 120,415 *
DIRECTORS
Kyle Lefkoff(g)................................... 659,279 2.8
Francis J. Bullock, Ph.D.(h)...................... 40,000 *
Marvin H. Caruthers, Ph.D.(i)..................... 427,049 1.8
Kirby L. Cramer................................... -- *
Robert W. Overell, Ph.D.(j)....................... 2,121,113 9.1
John D. Zabriskie, Ph.D.(k)....................... 50,000 *
All directors and executive officers as a group
(11 persons)(l)................................. 7,182,824 29.9
FIVE PERCENT SHAREHOLDERS
ARCH Venture Fund III, L.P.(m).................... 2,309,225 9.9
Falcon Technology Partners, L.P.(n)............... 1,780,702 7.6
Frazier Healthcare II, L.P.(o).................... 2,121,113 9.1
</Table>
---------------
* Less than 1%.
(a) Unless otherwise indicated, each person has sole voting and investment
power with respect to shares shown as beneficially owned by such person.
For purposes of calculating the number and percentage of shares
beneficially owned, the number of shares of common stock deemed
outstanding consists of 23,389,297 shares outstanding on August 31, 2001,
plus the number of shares of common stock underlying stock options held by
the named person that are exercisable as of October 30, 2001. Except as
otherwise specified below, the address of each of the beneficial owners
identified is 3200 Walnut Street, Boulder, Colorado, 80301.
(b) Includes 20,000 shares held in uniform gift to minor accounts for the
benefit of Mr. Conway's children and options to purchase 513,750 shares of
common stock that are exercisable within 60 days of August 31, 2001.
(c) Includes options to purchase 15,320 shares of common stock that are
exercisable within 60 days of August 31, 2001, 99,000 shares held in trust
for the benefit of Dr. Koch's minor children, and the following shares
held by Dr. Koch's spouse: options to purchase 4,380 shares of common
stock that are exercisable within 60 days of August 31, 2001 and 31,912
shares of common stock.
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(d) Includes options to purchase 27,510 shares of common stock that are
exercisable within 60 days of August 31, 2001 and 100,000 shares of common
stock held in trust for the benefit of Dr. Snitman's children.
(e) Includes options to purchase 23,350 shares of common stock that are
exercisable within 60 days of August 31, 2001.
(f) Includes options to purchase 36,223 shares of common stock that are
exercisable within 60 days of August 31, 2001.
(g) Includes 539,753 shares of common stock held by Boulder Ventures II, L.P.,
41,653 shares of common stock held by Boulder Ventures II (Annex), L.P.,
an affiliate of Boulder Ventures II, L.P., and 8,112 shares of common
stock held by BV Partners II, LLC, the general partner of Boulder Ventures
II, L.P. and Boulder Ventures II (Annex), L.P. Mr. Lefkoff is a member and
manager of BV Partners II, LLC, and he shares voting and dispositive power
in these shares. Mr. Lefkoff disclaims beneficial ownership in these
shares except to the extent of his pecuniary interest in them.
(h) Includes options to purchase 30,000 shares of common stock that are
exercisable within 60 days of August 31, 2001.
(i) All shares of stock are held by The Caruthers Family, LLC, of which Dr.
Caruthers is the manager and a member. Dr. Caruthers disclaims beneficial
ownership in these shares except to the extent of his pecuniary interest
in such shares.
(j) Includes 2,121,113 shares of common stock held by Frazier Healthcare II,
L.P. The general partner of Frazier Healthcare II, L.P. is FHMII, L.L.C.,
and the managing member of FHMII, L.L.C. is Frazier Management, L.L.C. Dr.
Overell is a member of Frazier Management, L.L.C., and he shares voting
and dispositive power in these shares. Dr. Overell disclaims beneficial
ownership in these shares except to the extent of his pecuniary interest
in such shares.
(k) Includes options to purchase 20,000 shares of common stock that are
exercisable within 60 days of August 31, 2001.
(l) Includes options to purchase 670,533 shares of common stock that are
exercisable within 60 days of August 31, 2001.
(m) The general partner of ARCH Venture Fund II, L.P. is Arch Venture
Partners, LLC. Steven Lazarus, Robert Nelson, Keith Crandell and Clinton
Bybee are each managers of Arch Venture Partners, LLC and share voting and
dispositive power in these shares. Messrs. Lazarus, Nelsen, Crandell and
Bybee disclaim beneficial ownership in these shares except to the extent
of their respective pecuniary interest in such shares. The business
address of ARCH Venture Fund II, L.P. is 8725 West Higgens Road, Suite
290, Chicago, IL 60631.
(n) The general partner of Falcon Technology Partners, L.P. is James L.
Rathmann. Mr. Rathmann has voting and dispositive power for these shares.
Mr. Rathmann disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in such shares. The business address of
Falcon Technology Partners, L.P. is 600 Dorset Road, Devon, PA 19333.
(o) The general partner of Frazier Healthcare II, L.P. is FHMII, L.L.C., and
the managing member of FHMII, L.L.C. is Frazier Management, L.L.C. Dr.
Overell, one of our directors, Fred E. Silverstein, Alan Frazier, Nadar
Naini and Jon Gilbert are each directly or indirectly members of Frazier
Management, L.L.C. and share voting and dispositive power for these
shares. Dr. Overell, Dr. Silverstein and Messrs. Frazier, Naini and
Gilbert disclaim beneficial ownership in these shares except to the extent
of their respective pecuniary interest in such shares. The business
address of Frazier Healthcare II, L.P. is 601 Union Street, Suite 3300,
Seattle, WA 98101.
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EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
The table below shows the names, ages and positions of our executive
officers and other key employees as of August 31, 2001.
<Table>
<Caption>
NAME AGE POSITION
---- --- --------
Robert E. Conway..................... 47 Chief Executive Officer
Kevin Koch, Ph.D. ................... 41 President and Chief Scientific Officer
David L. Snitman, Ph.D. ............. 49 Chief Operating Officer and Vice President of
Business Development
R. Michael Carruthers................ 44 Chief Financial Officer and Secretary
Anthony D. Piscopio, Ph.D. .......... 39 Vice President, Chemistry and Director of
Process Chemistry
John A. Josey, Ph.D. ................ 40 Senior Director of High-Speed Synthesis
Laurence E. Burgess, Ph.D. .......... 39 Senior Director of Medicinal Chemistry and
Lead Optimization
Steven A. Boyd, Ph.D. ............... 44 Director of Medicinal Chemistry
James P. Rizzi, Ph.D. ............... 45 Director of Computational Technology
</Table>
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 has served as our Chief Financial Officer and
Secretary since December 1998. Prior to joining us, 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 is a
Certified Public Accountant and was previously employed as an accountant with
Coopers & Lybrand, LLP. Mr. Carruthers received a B.S. in accounting from the
University of Colorado and an M.B.A. from the University of Chicago.
Anthony D. Piscopio, Ph.D. has served as our Vice President, Chemistry and
Director of Process Chemistry since May 1998. Prior to joining us, Dr. Piscopio
had been employed by Amgen Inc. since June 1995 in various capacities, including
as a founder of Amgen's small molecule drug discovery program. While at Amgen,
Dr. Piscopio worked in the area of protease inhibition and pioneered novel
high-speed synthesis methodologies for the preparation of B-turn mimetics and
other heterocyclic classes. From August 1992 until June 1995, Dr. Piscopio was
employed with Pfizer, Inc.'s Inflammation Group and worked in the areas of
G-protein coupled receptor modulation and computer-assisted design of protease
inhibitors. Dr. Piscopio received a B.A. in chemistry from West Virginia
University and a Ph.D. in synthetic organic chemistry from the University of
Wisconsin-Madison, and completed his postdoctoral fellowship at the Scripps
Research Institute in La Jolla, California as a National Institutes of Health
Postdoctoral Fellow.
John A. Josey, Ph.D. has served as our Senior Director of High-Speed
Synthesis since May 1998. Prior to joining us, Dr. Josey had been employed by
Amgen Inc. since September 1995 in the New Leads/ Combinatoral Chemistry Group
of Amgen's small molecule drug discovery program. From August 1991 until
September 1995, Dr. Josey was a research investigator in the Medicinal Chemistry
Department of Glaxo Research Institute. Dr. Josey received a B.S. in chemistry
from Colorado State University and a Ph.D. in organic chemistry from the
University of Texas at Austin, and was a Damon Runyon-Walter Winchell Fellow at
the California Institute of Technology.
Laurence E. Burgess, Ph.D. has served as our Senior Director of Medicinal
Chemistry and Lead Optimization since May 1998. Prior to joining us, Dr. Burgess
had been employed by Amgen Inc. since August 1995 in various capacities,
including as a project leader in its small molecule drug discovery research
program in the areas of respiratory and allergic disease. From February 1992
until August 1995, Dr. Burgess was employed by Pfizer Central Research working
in the areas of inflammation and immunology. Dr. Burgess received a B.S. in
chemistry from the Georgia Institute of Technology and a Ph.D. from the
University of Texas, and completed his postdoctoral research at Colorado State
University.
8
12
Steven A. Boyd, Ph.D. has served as our Director of Medicinal Chemistry
since October 2000. Prior to joining us, Dr. Boyd previously was Senior Group
Leader in the Pharmaceutical Products Division of Abbott Laboratories, where his
research areas included drug discovery in cardiovascular, inflammatory,
immunological, and metabolic diseases. Dr. Boyd received a B.A. in chemistry
from the University of Oregon Honors College and a Ph.D. in organic chemistry
from the University of California, Los Angeles. He was a National Cancer
Institute post-doctoral fellow at the University of Wisconsin.
James P. Rizzi, Ph.D. has served as our Director of Computational
Technology since February 2001. Prior to joining us, Dr. Rizzi served as Senior
Director of Business Development for Tripos Inc. from May 1999 to February 2001.
Dr. Rizzi was Head of Chemistry and Structural Biology for Source
Pharmaceuticals from May 1998 to May 1999, and was a Lab Head at Amgen, Boulder
in charge of computational chemistry from October 1995 to May 1998. From July
1981 to September 1995, Dr. Rizzi was at Pfizer Central Research where his early
career focused on medicinal chemistry in the fields of diabetes and immunology.
In September 1989, he joined the computational chemistry group at Pfizer. His
responsibilities included support of the CNS, inflammation, immunology and
infectious disease areas. Dr. Rizzi received a B.S. degree in chemistry from
Hofstra University and a Ph.D. in synthetic chemistry from the University of
Rochester.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid to or earned by our Chief
Executive Officer and each of our four most highly compensated executive
officers who were serving as executive officers as of June 30, 2001. We refer to
all these individuals as the named executive officers.
<Table>
<Caption>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- ---------------------------------
SECURITIES ALL OTHER
FISCAL SALARY BONUS UNDERLYING OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
--------------------------- ------ --------- -------- ------------------ ------------
Robert E. Conway(1)............... 2001 $225,000 $ -- -- $34,778(2)
Chief Executive Officer 2000 141,477 60,000 800,000 78,458(2)
1999 -- -- -- --
Kevin Koch, Ph.D. ................ 2001 175,000 -- 33,789 3,208(3)
President and Chief Scientific 2000 160,500 -- 58,125 --
Officer 1999 155,000 -- -- --
David L. Snitman, Ph.D. .......... 2001 175,000 -- 33,789 2,040(3)
Chief Operating Officer and 2000 160,500 -- 58,125 --
Vice President, Business 1999 155,000 -- -- --
Development
Anthony D. Piscopio, Ph.D. ....... 2001 145,400 -- 29,432 2,454(3)
Vice President, Chemistry and 2000 139,800 -- 50,432 --
Director of Process Chemistry 1999 135,000 -- -- --
R. Michael Carruthers(4).......... 2001 125,000 -- 23,642 2,083(3)
Chief Financial Officer and 2000 112,300 -- 41,250 --
Secretary 1999 61,451 3,300 80,000 --
</Table>
---------------
(1) Mr. Conway's employment commenced November 15, 1999.
(2) Consists of reimbursement for relocation expenses in fiscal year 2000, and
reimbursement of $30,934 for taxes paid by Mr. Conway associated with such
relocation expenses and employer match under our defined contribution plan
of $3,844 in fiscal year 2001.
(3) Consists of employer match under our defined contribution plan.
(4) Mr. Carruthers' employment commenced December 1, 1998.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information relating to options to purchase
common stock granted to the named executive officers during the year ended June
30, 2001:
<Table>
<Caption>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES
NUMBER OF OPTIONS OF SHARE PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(4)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(1) YEAR(2) ($/SH)(3) DATE 5% 10%
---- ---------- ---------- --------- ---------- --------- ---------
Robert E. Conway.............. -- --% $ -- -- $ -- $ --
Kevin Koch, Ph.D. ............ 33,789 2.4 0.60 7/1/10 335,293 544,156
David L. Snitman, Ph.D. ...... 33,789 2.4 0.60 7/1/10 392,517 637,026
Anthony D. Piscopio, Ph.D. ... 29,432 2.1 0.60 7/1/10 334,782 543,327
R. Michael Carruthers......... 23,642 1.7 0.60 7/1/10 257,484 417,878
</Table>
---------------
(1) All options described in the table above become exercisable in forty-eight
equal monthly installments beginning on July 1, 2001, and have a term of ten
years from the date of grant.
(2) Based on options to purchase an aggregate of 1,427,121 shares of common
stock granted to our employees in the fiscal year ended June 30, 2001.
(3) The options were granted prior to our initial public offering and the
exercise price of the options is based on the fair market value of our
common stock on the date of grant as determined by our Board of Directors.
(4) Potential realizable values are computed by multiplying: (1) the difference
between the (i) the product of the initial public offering price of our
common stock of $7.50 per share and the sum of one plus the assumed stock
price appreciation rate, and (ii) the per-share exercise price of the
option; and (2) the number of securities underlying the option grant as of
June 30, 2001. The 5% and 10% assumed annual rates of stock appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of future common stock prices.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table shows information concerning options held by the named
executive officers at June 30, 2001.
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE JUNE 30, 2001(#) JUNE 30, 2001($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
Robert E. Conway............ 240,000 2,040,000 468,750 91,250 $3,984,375 $775,625
Kevin Koch, Ph.D. .......... 20,667 181,415 7,662 56,320 66,896 489,770
David L. Snitman, Ph.D. .... 15,742 139,553 19,852 56,320 173,162 489,770
Anthony D. Piscopio,
Ph.D. .................... 3,777 33,260 16,678 49,056 145,613 426,600
R. Michael Carruthers....... 16,632 146,904 24,148 69,711 212,634 611,336
</Table>
---------------
(1) The value realized upon exercise of stock options has been calculated based
on the fair market value of our common stock on the respective exercise
dates, minus the respective exercise prices for the options. This
calculation does not necessarily indicate that the optionee sold stock on
that date and at that price, or at all.
(2) The value of unexercised in-the-money options has been calculated based on
the closing price of $9.10 per share of common stock on June 29, 2001, as
reported on The Nasdaq National Market, less the applicable exercise price
per share, multiplied by the number of shares underlying these options.
10
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EMPLOYMENT AGREEMENTS
Robert E. Conway. Effective November 15, 1999, we entered into an
employment agreement with Mr. Conway to serve as our Chief Executive Officer.
The agreement is for an initial term of two years and may be then 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. Under the agreement, we will pay Mr. Conway an annual
salary of $225,000 subject to subsequent adjustment. In addition, we granted to
Mr. Conway options to purchase 800,000 shares of our common stock in November
1999, of which 673,750 shares have vested as of the closing of our initial
public offering and all remaining shares vest between December 15, 2000 and
November 22, 2001, subject to his continued employment. If Mr. Conway terminates
his employment agreement, he would be entitled to exercise any vested options
during the 30-day period following such termination. Mr. Conway is also eligible
to receive a cash and/or stock option bonus each fiscal year based on a
percentage of his base salary if he meets performance criteria established by
our Board of Directors. We also agreed to reimburse Mr. Conway for reasonable
out-of-pocket expenses he incurred in connection with his performance of
services under this agreement.
If Mr. Conway's employment is terminated as a result of his disability or
by us without cause, we agreed to pay him a severance payment equal to one year
of his then current base salary in equal monthly installments and he will be
entitled to receive, pro-rated to the date of termination, any cash performance
bonus he would have received for that year and any performance options that
would have vested in that year. Mr. Conway agreed to execute a release
acceptable to us in consideration for our severance obligations under the
agreement. If Mr. Conway terminates his employment without cause, he will not
receive any performance bonus for that year or acceleration of any of his
options granted under the agreement. Mr. Conway is also subject to a non-compete
agreement in which he agreed for a period of two years not to engage in any
competing activities in 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, Dr. Piscopio, Mr. Carruthers,
Dr. Josey and Dr. Burgess. These agreements are for an initial term of two years
and may then be renewed for additional one-year terms. Either party may
terminate for any reason upon 30 days' prior notice to the other. Under these
agreements we will pay the employees annual salaries ranging from $125,000 to
$175,000. If the employee is terminated as a result of disability or by us
without cause, including a reduction in the employee's salary, 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.
Upon a change of control of the company, 75% of each employee's outstanding
options will vest and the remaining 25% of such options will vest one year
later, if the employee is still working for us. Each of these employees is also
subject to a non-compete 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.
In connection with our employment agreements with Dr. Koch and Dr.
Piscopio, we agreed to extend the due dates for a $100,000 secured promissory
note that we hold from Dr. Koch and a $125,000 secured promissory note that we
hold from Dr. Piscopio to coincide with the initial term of their employment
agreements.
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
who work at least 1,000 hours per year and are at least 21 years of age are
eligible to participate in the plan. They may enter the plan at the first
calendar quarter following their original employment date; at this point
participants may make salary deferral contributions to the savings plan, subject
to the limitations imposed by the Internal Revenue Code, with no company match.
We may make discretionary matching contributions after participants have
completed one year of service, beginning at the next calendar quarter after a
participant's one-year anniversary. Participants' contributions may be
11
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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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has prepared the
following report on Array's policies with respect to the compensation of
executive officers for the fiscal year ended June 30, 2001. This report, as well
as the performance graph on page 14, are not soliciting materials, are not
deemed filed with the SEC and are not incorporated by reference in any filing of
Array 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 filing.
The Compensation Committee is authorized to determine the compensation of
Array's executive officers and administer Array's various incentive
compensation, stock and benefit plans, and works closely with the Board of
Directors in carrying out its duties. No current member of the Compensation
Committee is or has been an employee of Array. During fiscal year 2001, the
Compensation Committee consisted of Kyle Lefkoff, Francis J. Bullock, Ph.D. and
Robert W. Overell, Ph.D. Robert E. Conway, Array's Chief Executive Officer, was
a member of the Compensation Committee prior to Array's initial public offering;
he resigned from the Compensation Committee in August 2000.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
Overview. Array's compensation policies are designed to attract, motivate
and retain experienced and qualified executives and support the attainment of
Array's strategic objectives. To achieve these goals, the Compensation Committee
seeks to provide industry competitive salaries, cash and/or stock option bonuses
based on the achievement of certain annual operational and financial objectives
and stock option grants to executives when they are hired.
In setting compensation, the Compensation Committee considers individual
contribution, teamwork and performance level as well as the executive's total
compensation package, including insurance and other benefits. The committee does
not rely exclusively on quantitative methods to set compensation. In determining
the compensation of executive officers in fiscal year 2001, the Compensation
Committee was advised by an independent executive compensation consulting firm.
Base Salaries. Base salaries are initially determined by evaluating the
responsibilities of the position, the experience and knowledge of the individual
and the competitive marketplace for executive talent. The Compensation Committee
annually reviews and adjusts base salaries of executive officers based upon,
among other things, individual performance, responsibilities and the evaluation
of the Chief Executive Officer. The Compensation Committee does not assign
specific weights to any particular factors affecting base salary levels.
Bonuses. Executive officers, including the Chief Executive Officer, are
eligible for annual cash and/or stock option bonuses equal to a varying
percentage of their base salary, based on both corporate and individual
performance targets established annually by the Board of Directors. The annual
bonus amount is based on objective financial targets that include revenues,
profits, new orders and collaborations, and on operational goals related to
staffing, facilities, internal programs and other factors relating to individual
merit.
Stock Options. The Compensation Committee and the Board of Directors
believe that grants of stock options to Array's executives provide meaningful
long-term incentives that increase stockholder value and are critical in
attracting and retaining skilled executive personnel. The Compensation Committee
generally grants options to new executive officers and other key employees under
our Amended and Restated Stock Option and Incentive Plan when they are hired by
Array and annually reviews making additional grants to executives and employees
as bonus awards. Options generally have an exercise price equal to the fair
market value on the grant date, vest over a period of four years and expire ten
years after grant. The full benefit of the options is realized upon appreciation
of the stock price in future periods, thus providing an incentive to create
long-term value for Array's stockholders through appreciation of our stock
price.
12
16
Other. Array has adopted a contributory retirement plan, or 401(k) plan,
for all full-time employees who are at least 21 years of age. Participants may
contribute up to 15% of pretax compensation, subject to certain limitations. In
addition, Array may make discretionary annual contributions to participant's
401(k) plan accounts after participants have completed one year of service at
the rate of 50% of the first 4% of each participant's annual contribution.
The Compensation Committee also administers Array's Employee Stock Purchase
Plan, referred to as the ESPP. The ESPP gives substantially all full time
employees an opportunity to purchase shares of common stock through payroll
deductions of up to 15% of eligible compensation, not to exceed $25,000
annually. Participant account balances are used to purchase stock at the lesser
of 85% of the fair market value of a share of common stock on the first or the
last trading day of the participation period. A total of 800,000 shares of
common stock are available for purchase under the ESPP.
CHIEF EXECUTIVE OFFICER COMPENSATION
The executive compensation policies described above are applied in setting
Mr. Conway's compensation. Accordingly, his compensation also consists of annual
base salary, annual cash and/or stock option bonus and long-term equity-linked
compensation. The Compensation Committee's general approach in establishing Mr.
Conway's compensation is to be competitive with peer companies, but to base a
large percentage of his target compensation, by means of grants of
performance-based stock options, on Array's long-term performance.
COMPENSATION DEDUCTIBILITY POLICY
Under Section 162(m) of the Internal Revenue Code and applicable Treasury
regulations, no tax deduction is allowed for annual compensation in excess of $1
million paid to any of Array's five most highly compensated executive officers.
However, performance-based compensation that has been approved by stockholders
is excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors" as defined for purposes of Section 162(m). The
Compensation Committee intends to maximize the extent of tax deductibility of
executive compensation under the provisions of Section 162(m) so long as doing
so is compatible with the Company's compensation policies outlined above. The
Board of Directors and the Compensation Committee reserve the authority to award
non-deductible compensation in other circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding our efforts, that compensation intended
by Array to satisfy the requirements for deductibility under Section 162(m) does
in fact do so.
Respectfully submitted,
Compensation Committee
KYLE LEFKOFF
FRANCIS J. BULLOCK, PH.D.
ROBERT W. OVERELL, PH.D.
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. Mr. Conway, our
Chief Executive Officer, served as a member of the Compensation Committee from
November 1999 through August 2000, prior to our initial public offering.
13
17
PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of our filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, that might incorporate other filings with the Securities and
Exchange Commission, including this Proxy Statement, in whole or in part, the
following Performance Graph and Report on Executive Compensation shall not be
incorporated by reference into any such filings
The following graph presents a comparison of the cumulative total return on
our common stock, the Nasdaq Stock Market (U.S.) Index and the Nasdaq
Pharmaceutical Index. This graph assumes that $100 was invested at the time of
our initial public offering, on November 17, 2000, in our common stock and in
the other indices, and that all dividends were reinvested and are weighted on a
market capitalization basis at the time of each reported data point. Past
financial performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.
COMPARISON OF 7 MONTH CUMULATIVE TOTAL RETURN*
(PERFORMANCE GRAPH)
<Table>
<Caption>
----------------------------------------------------------------------------------
Value as of: 11/17/00 12/29/00 3/30/01 6/29/01
----------------------------------------------------------------------------------
Array BioPharma Inc. $100.00 $119.17 $71.67 $121.33
The Nasdaq Stock Market Index 100.00 72.95 54.45 64.17
Nasdaq Pharmaceutical Index 100.00 92.14 68.22 84.76
</Table>
* $100 invested on 11/17/2000 in Array common stock or Index, including
reinvestment or dividends.
14
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
On August 31, 2000, we issued and sold 1,666,667 shares of our Series C
preferred stock at a purchase price of $6.00 per share. Each share of Series C
preferred stock converted into one share of common stock upon the closing of our
initial public offering. The following table identifies our executive officers,
directors and five percent stockholders who purchased shares of Series C
preferred stock in the fiscal year ending June 30, 2001.
<Table>
<Caption>
SHARES OF SERIES C
NAME PREFERRED STOCK
---- ------------------
EXECUTIVE OFFICERS
David L. Snitman, Ph.D...................................... 266,667
R. Michael Carruthers....................................... 3,332
Anthony D. Piscopio, Ph.D................................... 1,667
DIRECTORS
Kyle Lefkoff(a)............................................. 161,163
Marvin H. Caruthers, Ph.D.(b)............................... 33,936
Robert W. Overell, Ph.D.(c)................................. 16,667
FIVE PERCENT STOCKHOLDERS
ARCH Venture Fund III, L.P. ................................ 204,779
Falcon Technology Partners L.P. ............................ 156,997
Frazier Healthcare II, L.P. ................................ 16,667
</Table>
---------------
(a) Includes 136,587 shares purchased by Boulder Ventures II, L.P.; 20,410
shares purchased by Boulder Ventures II (Annex), L.P., an affiliate of
Boulder Ventures II, L.P. and 4,166 shares purchased by Mr. Lefkoff's
father. The general partner of Boulder Ventures II L.P. and Boulder
Ventures II (Annex), L.P. is BV Partners II, LLC. Mr. Lefkoff is a member
and manager of BV Partners II, LLC, and he disclaims beneficial ownership
in the above shares except to the extent of his pecuniary interest in such
shares.
(b) All shares were purchased by The Caruthers Family, L.L.C., of which Dr.
Caruthers is the manager and a member. Dr. Caruthers disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest in
the shares.
(c) Includes 16,667 shares purchased by Frazier Healthcare II, L.P. The general
partner of Frazier Healthcare II, L.P. is FHMII, L.L.C., and the managing
member of FHMII, L.L.C. is Frazier Management, L.L.C. Dr. Overell is a
member of Frazier Management, L.L.C., and he disclaims beneficial ownership
in the above shares except to the extent of his pecuniary interest in such
shares.
We believe that the terms of all the above-described transactions were no
less favorable than we could have obtained from unaffiliated third parties.
In connection with the sale and issuance of our Series A preferred stock in
May 1998, our Series B preferred stock between August 1998 and January 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. The holders of up to approximately 10,625,000 shares
of our common stock, or their transferees, are entitled to require the
registration of those shares under the Securities Act. Under an agreement with
these holders, the holders of at least 30% of the outstanding shares entitled to
registration may on up to two occasions require us to register their shares
under the Securities Act, subject to some limitations described in the
agreement. In connection with our initial public offering, some of our
stockholders have agreed with the underwriters not to exercise any demand
registration rights for a period of 365 days from the effective date of this
offering. 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. After we become eligible to register securities on Form S-3, these
holders may require us to register their shares on up to two occasions in any
calendar year on
15
19
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.
Mr. Lefkoff is a manager and member of BV Partners II, LLC, which is the
general partner of Boulder Ventures II, L.P. and Boulder Ventures II (Annex),
L.P., and he was appointed as one of our directors by our stockholders under the
terms of a voting agreement that terminated upon the consummation of our initial
public offering. Dr. Overell is a member of Frazier Management, L.L.C., which is
the managing member of FHMII, L.L.C., which is the general partner of Frazier
Healthcare II, L.P., and he was appointed as one of our directors by Frazier
Healthcare II, L.P. under the terms of a voting agreement that terminated upon
the consummation of our initial public offering.
In connection with Dr. Koch's purchase of 648,655 shares of our common
stock on May 18, 1998, he issued us a full recourse, secured promissory note
with a principal balance of $100,000 and an interest rate of 6.0% per annum. The
note was amended in September 1, 2000, to extend the maturity date to the
earlier of September 1, 2002, or the date Dr. Koch voluntarily terminates his
employment with us. The note is secured with a pledge of 518,723 shares of
common stock held by Dr. Koch, of which 468,723 shares were released on
September 1, 2000.
In connection with Dr. Piscopio's purchase of 648,655 shares of our common
stock on May 18, 1998, he issued us a full recourse, secured promissory note
with a principal balance of $125,000 and an interest rate of 6.0% per annum. The
note was amended in September 1, 2000, to extend the maturity date to the
earlier of September 1, 2002, or the date Dr. Piscopio voluntarily terminates
his employment with us. The note is secured with a pledge of 648,655 shares of
common stock held by Dr. Piscopio, of which 598,655 shares were released on
September 1, 2000.
Stock option grants to our directors and executive officers are described
in this Proxy Statement under the heading "PROPOSAL 1 ELECTION OF
DIRECTORS -- Compensation of Directors" 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, 2001, Marvin
Caruthers was late in reporting two transactions in shares of common stock on
Form 4 and ARCH Venture Fund III, L.P. was late in reporting its initial stock
ownership on Form 3.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has served as our independent auditors since our
inception on February 6, 1998. Representatives from Ernst & Young 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.
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STOCKHOLDER PROPOSALS FOR 2002 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 2002 Array Annual Meeting of
Stockholders must be received by Array no later than June 3, 2002, (120 days
prior to October 1, 2002) 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. Our Bylaws require notice to be
received by the Secretary no sooner than August 5, 2002, and no later than
September 3, 2002. 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 2002 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 for consideration at the 2002
Annual Meeting outside the processes of Rule 14a-8 under the Securities Exchange
Act of 1934, 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. Our Bylaws are on file with the Securities and Exchange Commission and
may be obtained from our Secretary upon request. The officer who will preside at
the stockholders meeting will determine whether the information provided in such
notice satisfies the informational requirements of the Bylaws. Such notice of a
stockholder proposal must be delivered no earlier than August 5, 2002, and no
later than September 3, 2002. Any stockholder proposal that is not submitted in
accordance with the foregoing procedures will not be considered to be properly
brought before the 2002 Annual Meeting.
VOTING PROCEDURES AND COSTS OF PROXY SOLICITATION
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 and the
ratification of the independent auditors will be approved by 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 and abstentions will
not be counted for any purpose in determining the election of directors or the
ratification of the independent auditors and will have no effect on the
proposals.
The cost of preparing, assembling and mailing the proxy materials will be
borne by us. We will also request persons, firms and corporations holding shares
in their names or in the names of their nominees, which shares are beneficially
owned by others, to send the proxy materials to, and to obtain proxies from,
such beneficial owners and will reimburse such holders for their reasonable
expenses in doing so. Original solicitation of proxies by mail may be
supplemented by telephone, telegram or personal solicitation by our directors,
officers or other regular employees. No additional compensation will be paid to
directors, officers or other regular employees for such services.
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
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Your vote is important. Please complete the enclosed Proxy Card and mail it
in the enclosed postage-paid envelope as soon as possible.
By Order of the Board of Directors
/s/ R. MICHAEL CARRUTHERS
R. MICHAEL CARRUTHERS
Secretary
October 1, 2001
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APPENDIX A: AUDIT COMMITTEE CHARTER
ARRAY BIOPHARMA INC.
AUDIT COMMITTEE CHARTER
September 2001
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including
over viewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal accounting and financial controls,
the annual independent audit of the Company's financial statements by the
Company's outside auditors (the "Independent Accountant") and the Company's
legal compliance and ethics programs as established by management and the Board.
In discharging its oversight role, the Committee is empowered to
investigate any matters brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or other experts for this purpose. The Board and the Committee
are in place to represent the Company's shareholders; accordingly, the
Independent Accountant is ultimately accountable to the Board and the Committee.
The Committee will also review the adequacy of this Charter on an annual
basis.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the Nasdaq National Market.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
ATTENDANCE
Members of the Committee should endeavor to be present, in person or by
telephone, at all meetings; however, a majority of Committee members shall
constitute a quorum. As necessary, the Chairperson may request members of
management and representatives of the Independent Accountant, either separately
or together, to be present at meetings.
MINUTES OF MEETINGS
Minutes of each meeting shall be prepared and sent to Committee members and
presented to Company Directors who are not members of the Committee.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the Independent Accountant is responsible for auditing those
financial statements and ultimately accountable to the Board of Directors and to
the Committee. Moreover, the Committee recognizes that the Company's financial
management, as well as the Independent Accountant, have more time, knowledge and
more detailed information concerning the Company
A-1
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than do Committee members; consequently, in carrying out its oversight
responsibilities, the Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the Independent Accountant's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
- The Committee shall review with management and the Independent Accountant
the audited financial statements, including the related footnotes and the
Independent Accountant's audit and report, to be included in the
Company's Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K) and review
and consider with the Independent Accountant the matters required to be
discussed by Statement of Auditing Standards SAS No. 61. Based on the
foregoing review, receipt from the Independent Accountant of the written
disclosure required by Independence Standards Board Standard No. 1 and
discussion with the Independent Accountant of its independence, the
Committee shall make its recommendation to the Board whether the audited
financial statements shall be included in the Company's Annual Report on
Form 10-K.
- As a whole, or through the Committee Chairperson, the Committee shall
review with the Independent Accountant the Company's interim financial
results, including the related footnotes, to be included in the Company's
quarterly reports to be filed with the Securities and Exchange Commission
and the matters required to be discussed by SAS No. 61; this review will
occur prior to the Company's filing of the Form 10-Q.
- The Committee shall prepare the "Report of the Audit Committee" to be
included in the Company's Proxy Statement, as required by the rules of
the Securities and Exchange Commission.
- The Committee shall discuss with management and the Independent
Accountant the quality and adequacy of the Company's internal controls.
- The Committee shall:
i. request from the Independent Accountant annually, a formal written
statement delineating all relationships between the Independent
Accountant and the Company consistent with Independence Standards Board
Standard Number 1;
ii. discuss with the Independent Accountant any such disclosed
relationships and their impact on the Independent Accountant's
independence; and
iii. recommend that the Board take appropriate action in response to
the Independent Accountant's report to satisfy itself of auditor's
independence
- The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate,
replace the Independent Accountant.
* * * * *
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REVOCABLE PROXY APPENDIX B: FORM OF PROXY
ARRAY BIOPHARMA INC.
3200 WALNUT STREET, BOULDER, COLORADO 80301
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 1, 2001
The undersigned stockholder of Array BioPharma Inc. (the "Company") hereby
appoints Robert E. Conway and R. Michael Carruthers, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution and
with authority in each of them to act in the absence of the other, to vote and
act for the undersigned stockholder at the Annual Meeting of Stockholders to be
held at 2:00 p.m., Mountain Standard Time, on November 1, 2001, at the Hotel
Boulderado, 2115 13th Street, Boulder, Colorado, 80302, and at any adjournments
or postponements thereof, upon the following matters and in accordance with the
following instructions, with discretionary authority as to any and all other
business that may properly come before the meeting.
The undersigned hereby acknowledges prior receipt of a copy of the Notice of
Annual Meeting of Stockholders and Proxy Statement dated October 1, 2001 and the
Company's Annual Report to Stockholders, and hereby revokes any proxy or proxies
heretofore given. This proxy may be revoked at any time before it is voted by
delivering to the Secretary of the Company either a written revocation of proxy
or a duly executed proxy bearing a later date, or by appearing at the Annual
Meeting and voting in person.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE TO
ENSURE A QUORUM AT THE ANNUAL MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW
OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
Proposal One: Election of three directors to the Board of Directors to serve a
term of three years, or until their successors have been duly
elected and qualified.
<Table>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees listed below.
contrary below)
Nominees: David L. Snitman, Ph.D. Robert W. Overell, Ph.D.
John D. Zabriskie, Ph.D.
(INSTRUCTION: To withhold authority to vote for an individual nominee,
cross out that nominee's name above.)
</Table>
Proposal Two: Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending June 30, 2002
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IF NO SPECIFICATION IS MADE ON A PROPERLY EXECUTED AND RETURNED FORM, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS ONE AND TWO UNLESS CONTRARY DIRECTION IS GIVEN.
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If you receive more than one proxy card, please sign and return all cards in the
accompanying envelope.
[ ] PLACE AN "X" HERE IF YOU PLAN TO VOTE YOUR SHARES AT THE ANNUAL MEETING.
Date: , 2001.
---------------------------
---------------------------------------
(Signature of Stockholder or Authorized
Representative)
---------------------------------------
(Print name)
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. In the case of stock ownership in the
name of two or more persons, both persons should sign.