Document:

<PAGE>   1
                                                                   EXHIBIT 10.36

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 506 of the Securities Act of 1933, as amended.

                           RESEARCH SERVICES AGREEMENT

                              ELI LILLY AND COMPANY

                                       AND

                              ARRAY BIOPHARMA, INC.

                                 MARCH 22, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                              <C>
ARTICLE I DEFINITIONS  ...........................................................................................1
     1.1   Array Alliance Manager  ...............................................................................1
     1.2   Array Confidential Information  .......................................................................1
     1.3   Array FTE  ............................................................................................2
     1.4   Array Process  ........................................................................................2
     1.5   Array Project Leader  .................................................................................2
     1.6   Array Technology  .....................................................................................2
     1.7   Associate Chemist  ....................................................................................2
     1.8   Calendar Quarter  .....................................................................................2
     1.9   Calendar Year  ........................................................................................3
     1.10  cGCP  .................................................................................................3
     1.11  cGLP  .................................................................................................3
     1.12  cGMP  .................................................................. ..............................3
     1.13  Chemistry Invention  ..................................................................................3
     1.14  FTE Rate  .............................................................................................3
     1.15  Lilly Chemistry Research Services Director  ...........................................................3
     1.16  Lilly Confidential Information  .......................................................................3
     1.17  Lilly Project Leader  .................................................................................4
     1.18  Project  ..............................................................................................4
     1.19  Project Rights  .......................................................................................4
     1.20  Project Services  .....................................................................................4
     1.21  Project Team  .........................................................................................4
     1.22  Senior Chemist  .......................................................................................4
     1.23  Target Family  ........................................................................................4
     1.24  Third Party  ..........................................................................................4
     1.25  Work Plan  ............................................................................................5

ARTICLE 2  PROJECT SERVICES  .....................................................................................5
     2.1   Project Services and Other Services  ..................................................................5
     2.2   Conflicts of Interest  ................................................................................5
     2.3   Project Management; Meetings  .........................................................................6
     2.4   Commitment to Project Staffing  .......................................................................6
     2.5   Array Employees Assigned to Each Project  .............................................................6
     2.6   [  *  ]................................................................................................8
     2.7   Communication and Access to Array Employees  ..........................................................8
     2.8   Reports, Records and Project Rights Transfer  .........................................................8
     2.9   Project Diligence  ....................................................................................9
     2.10  Governing Authority of Projects  .....................................................................10
     2.11  Array's Alliance Management  .........................................................................10

ARTICLE 3 CONSULTING SERVICES  ..................................................................................10
</TABLE>

                                       i
<PAGE>   3

<TABLE>
<S>                                                                                                              <C>
ARTICLE 4 PROJECT RESOURCES AND COSTS  ..........................................................................11
     4.1   Project Resources and Costs  .........................................................................11
     4.2   Subcontracting Project Services or Other Services  ...................................................12
     4.3   Training  ............................................................................................13

ARTICLE 5 PROJECT OWNERSHIP, PROCEDURAL SAFEGUARDS AND SECURITY  ................................................12
     5.1   [  *  ]...............................................................................................13
     5.2   Safeguards to Protect Confidentiality and Project Rights Ownership  ..................................15
     5.3   Security  ............................................................................................15

ARTICLE 6 RECORD-KEEPING AND AUDIT  .............................................................................15
     6.1   Records Retention; Maintenance of Project Records  ...................................................15
     6.2   Financial Audit  .....................................................................................16
     6.3   Scientific and Legal Audit  ..........................................................................16
     6.4   Quality Assurance and Security Audits; On-Site Lilly Personnel  ......................................17

ARTICLE 7 CONFIDENTIALITY AND NON-USE  ..........................................................................17
     7.1   Disclosure of Agreement  .............................................................................17
     7.2   Array's Confidentiality Obligations  .................................................................18
     7.3   Lilly's Confidentiality Obligations  .................................................................18

ARTICLE 8 TERM AND TERMINATION  .................................................................................19
     8.1   Term  ................................................................................................19
     8.2   Lilly Voluntary Termination  .........................................................................19
     8.3   Termination for Default  .............................................................................21
     8.4   Termination Due to Array Ownership Change  ...........................................................21
     8.5   Termination Due to Insolvency or Liquidation  ........................................................21
     8.6   Surviving Rights and Obligations  ....................................................................21

ARTICLE 9 REPRESENTATIONS AND WARRANTIES  .......................................................................22
     9.1   Lilly's Authority to Perform Agreement  ..............................................................22
     9.2   Array's Authority to Perform Agreement  ..............................................................22
     9.3   No Debarment  ........................................................................................22
     9.4   Year 2000  ...........................................................................................23

ARTICLE 10 MUTUAL INDEMNIFICATION  ..............................................................................23
     10.1  Array's Right to Indemnification  ....................................................................23
     10.2  Lilly's Right to Indemnification  ....................................................................23
     10.3  Indemnification Notice and Defense Procedures  .......................................................24

ARTICLE 11 MISCELLANEOUS  .......................................................................................25
     11.1  Further Assurances  ..................................................................................25
     11.2  No Agency; Independent Contractor  ...................................................................25
     11.3  Compliance with Laws  " ..............................................................................25
     11.4  Compliance with Work Plan and Lilly Protocols and Specifications   ...................................25
     11.5  Insurance  ...........................................................................................26
</TABLE>

                                       ii
<PAGE>   4

<TABLE>
<S>                                                                                                            <C>
     11.6   Amendment  ........................................................................................26
     11.7   Notices and Reports  ..............................................................................26
     11.8   Governing Law  ....................................................................................26
     11.9   Assignment  .......................................................................................26
     11.10  Headings  .........................................................................................26
     11.11  Severance of Clauses  .............................................................................26
     11.12  No Waiver  ........................................................................................26
     11.13  Entire Agreement  .................................................................................27
     11.14  Force Majeure  ....................................................................................27
     11.15  Counterparts  .....................................................................................27
     11.16  No Licenses  ......................................................................................27
     11.17  Jointly Prepared  .................................................................................27
</TABLE>

Schedule 1.25 Work Plan(s)

Exhibit A: Initial Press Release

                                      iii
<PAGE>   5

                           RESEARCH SERVICES AGREEMENT

     THIS RESEARCH SERVICES AGREEMENT (the "Agreement") is made and entered into
effective as of March 22, 2000 (the "Effective Date"), by and between Eli Lilly
and Company, Lilly Corporate Center, Indianapolis, IN, 46285 ("Lilly"), and
Array BioPharma, Inc., 188533 d Street, Boulder, CO, 80301 ("Array") (together
Lilly and Array, the "Parties").

                                    RECITALS

     WHEREAS, Lilly is engaged in the discovery, development, manufacturing and
marketing of pharmaceutical products; and

     WHEREAS, Array provides research services in all aspects of chemistry, high
through-put screening, structural biology, and information management; and

     WHEREAS, Lilly proposes to retain Array for the specific purpose of
providing chemical research, analysis, manufacturing of specialty chemical
products or related services that Array may offer.

     NOW, THEREFORE, it is agreed as follows:

                                    ARTICLE I

                                   DEFINITIONS

     Terms defined in this Article I and parenthetically elsewhere shall have
the same meaning throughout this Agreement, including the recitals. Defined
terms may be used in the singular or plural.

     1.1 "ARRAY ALLIANCE MANAGER" shall have the meaning set forth in Section
2.11.

     1.2 "ARRAY CONFIDENTIAL INFORMATION" means (1) any and all Array Technology
and (2) any and all information, items, material or know-how (whether or not
patentable), except Project Rights and Array Processes, that is disclosed to
and/or received by Lilly from Array (whether orally, in writing, through
observation, or otherwise) during the term of this Agreement or prior to the
Effective Date, including, without limitation, any and all suggestions,
descriptions, ideas, inventions (whether or not patentable) discoveries,
know-how, trade secrets, techniques, data, strategies, methods, syntheses,
processes, practices, documents, apparatus, devices, chemical formulations,
chemical synthesis, compounds, composition of matter, chemical samples, assays,
cell lines, vectors, screens, databases, database structures, and data analysis
methods.

                                       1
<PAGE>   6

     Array Confidential Information shall not include any information that Lilly
can prove by competent evidence: (a) is now, or hereafter becomes, through no
act or failure to act on the part of Lilly, generally known or available; (b) is
known by Lilly at the time of receiving such information; (c) is hereafter
disclosed to Lilly by a Third Party, as a matter of right and without
restriction on disclosure; (d) is independently developed by Lilly without the
aid, application, or use of Array Confidential Information; (e) is the subject
of a written permission to disclose provided by Array; or (f) is required to be
disclosed by law, government agency, court order or valid discovery request in
connection with a legal proceeding

     1.3 "ARRAY FTE" means a full time equivalent scientific person year
consisting of no less than a total of [ * ] of Project Services carried out by a
Lilly approved, Array employee who is either (except as the Parties may
otherwise agree in writing) (i) the Array Alliance Manager or (ii) an Array
Project Leader, Senior Chemist, or Associate Chemist exclusively assigned and
fully dedicated to Projects. Time spent by Array FTEs will qualify for
reimbursement under Subsection (a) of Section 4.1 only if it involves Project
Services on or directly related to a Project.

     1.4 "ARRAY PROCESS" means a chemical method or process that Array owns or
has a right to license and that Array used, by its choice, in at least one
Project, but the term expressly excludes all high-speed synthesis technology and
methods of Array.

     1.5 "ARRAY PROJECT LEADER" means an Array employee assigned to lead other
Array employees working on a particular Project who, unless otherwise agreed to
by the Parties in writing, has a Ph.D. in organic chemistry, at least [ * ] of
professional medicinal chemistry experience, and previous project leadership
experience. Each Array Project Leader shall be responsible for managing the
day-to-day activities of Array FTEs assigned to his/her particular Project to
achieve the Project's goals in accordance with the Work Plan. An Array Project
Leader is subordinate to a Project's Lilly Project Leader regarding all aspects
of such Project, and therefore, any disagreements between them regarding the
direction, priorities, goals or other aspects of the Project shall be resolved
ultimately by the Lilly Project Leader.

     1.6 "ARRAY TECHNOLOGY" means Array inventions (whether or not patentable)
and Array know-how. Array Technology expressly excludes all Project Rights
regardless of Array's contribution to such Rights and, for purposes of this
Agreement, also expressly excludes Array Processes.

     1.7 "ASSOCIATE CHEMIST" means an Array employee who has at least a Masters
Degree in organic chemistry or its equivalent (i.e., a Bachelor Degree in
organic chemistry with several years of chemistry experience), but who is
neither an Array Project Leader, nor a Senior Chemist, nor the Array Alliance
Manager.

     1.8 "CALENDAR QUARTER" means a three-month period ending on March 3 1, June
30, September 30, or December 31.

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       2
<PAGE>   7

     1.9 "CALENDAR YEAR" means the twelve-month period ending on December 31.

     1.10 "cGCP" means the then-current Good Clinical Practice Standards
promulgated or endorsed by the FDA (or in the case of foreign jurisdictions,
comparable regulatory standards), including those regulations or guidelines
expressed or implied in the regulatory filings made with respect to a particular
compound or product at issue with the FDA or foreign regulatory agents.

     1.11 "cGLP" means the then-current Good Laboratory Practices promulgated or
endorsed by the FDA (or in the case of foreign jurisdictions, comparable
regulatory standards), including those procedures expressed or implied in the
regulatory filings made with respect to a particular compound or product at
issue with the FDA or foreign regulatory agents.

     1.12 "cGNIP" means current Good Manufacturing Practices as defined in the
U.S. regulations 21 CFR Section 210 et seq., and the EEC Guide to Good
Manufacturing Practices for Medicinal Products (Vol. IV Rules Governing
Medicinal Products in the European Community 1992).

     1.13 "CHEMISTRY INVENTION" means a [ * ] that is conceived and invented by
Array (by itself or jointly with Lilly) as a direct or indirect result of
performing Project Services or Other Services.

     1.14 "FTE RATE" means [ * ] (12) month period ending December 31, 2000. The
FTE Rate for any Calendar Year after December 31, 2000 shall be adjusted
annually by Lilly in accordance with the annual percentage change in the
Consumer Price Index for all Urban Consumers as published by the United States
Department of Labor, Bureau of Labor Statistics.

     1.15 "LILLY CHEMISTRY RESEARCH SERVICES DIRECTOR" means [ * ] (or his
successor as appointed by Lilly). As the Lilly Chemistry Research Services
Director, [ * ] (or his successor) will be responsible for, among other things,
(i) issuing Projects to Array, (ii) discontinuing Projects, (iii) reviewing
Array FTE rosters, (iv) informing Array of each Project's initial staffing
needs, (v) communicating changes in staffing levels, (vi) coordinating Lilly's
communications with Array, and (vii) facilitating the smooth operations of all
Projects.

     1.16 "LILLY CONFIDENTIAL INFORMATION" means (1) any and all Project Rights
and (2) any and all other information, items, material or know-how (whether or
not patentable) that is disclosed to and/or received by Array from Lilly
(whether orally, in writing, through observation, or otherwise) during the term
of this Agreement or prior to the Effective Date, including, without limitation,
any and all suggestions, descriptions, ideas, inventions (whether or not
patentable) discoveries, know-how, trade secrets, techniques, data, strategies,
methods, syntheses, processes, practices, documents, apparatus, devices,
chemical formulations, chemical synthesis, compounds, composition of matter,
chemical samples, assays, cell lines, vectors, screens, databases, database
structures, and data analysis methods.

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       3
<PAGE>   8

     Lilly Confidential Information shall not include any information that Array
can prove by competent evidence: (a) is now, or hereafter becomes, through no
act or failure to act on the part of Array, generally known or available; (b) is
known by Array at the time of receiving such information; (c) is hereafter
disclosed to Array by a Third Party, as a matter of right and without
restriction on disclosure; (d) is independently developed by Array without the
aid, application, or use of Lilly Confidential Information; (e) is the subject
of a written permission to disclose provided by Lilly; or (f) is required to be
disclosed by law, government agency, court order or valid discovery request in
connection with a legal proceeding.

     1.17 "LILLY PROJECT LEADER" means a Lilly employee assigned by Lilly to
lead a particular Project. Each Lilly Project Leader shall, with appropriate
input from Array, establish the direction, priorities, and goals of the Project
assigned to such Lilly Project Leader. However, the Lilly Project Leader shall
be the ultimate authority with respect to all issues and decisions pertaining to
such Project and as such, may at any time accept, reject, or modify any portion
of such Project or its Work Plan, except as specified in Section 2.10, to the
extent he or she deems appropriate.

     1.18 "PROJECT" means a chemistry project for a specific biological target
submitted by Lilly and accepted by Array under the terms of this Agreement and
which is fully described in a Work Plan. "PROJECTS" means each and every Project
under the terms of this Agreement.

     1.19 "PROJECT RIGHTS" shall have the meaning set forth in Subsection (a) of
Section 5.1.

     1.20 "PROJECT SERVICES" shall have the meaning set forth in Section 2.1.

     1.21 "PROJECT TEAM" means the Array FTEs who are assigned to and Lilly's
employees, independent contractors, and research collaboration partners who are
working on a particular Project.

     1.22 "SENIOR CHEMIST" means an Array employee who has a Ph.D. in organic
chemistry and at least [ * ] of organic synthesis chemistry experience
subsequent to obtaining such Ph.D.

     1.23 "TARGET FAMILY" means a group of targets related to each other by, for
example, [ * ]. Although the term is broader than a single target such as
"[ * ]" or "[ * ]", it is not as broad as "all [ * ]" or "all [ * ]". The
following non-comprehensive list contains examples of Target Families; [ * ],
and [ * ], [ * ] and [ * ].

     1.24 "THIRD PARTY" means any person or organization, incorporated or
unincorporated, other than Array, Lilly, or an employee of Array or Lilly.

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       4
<PAGE>   9

     1.25 "WORK PLAN" means the detailed plan established and submitted by Lilly
to Array for each Project that defines the parameters, scope, and deliverables
of such Project. Each Work Plan shall include, without limitation: (i) a
detailed plan for the Project at issue including specific milestones to be
accomplished throughout the Project; (ii) a determination of the Array FTEs
(including the composition thereof) reasonably necessary to carry out the
Project; and (iii) a designation by Lilly of whether the Project is a "[ * ],"
"[ * ]," or "[ * ]". It is anticipated that before finalizing a Work Plan the
Parties shall attempt to fully discuss and reach consensus regarding the
parameters, scope, deliverables, and other details of the Project described in
that Work Plan, but in the absence of such consensus, Lilly shall make the final
determination with respect to all issues and decisions related to a Project and
its Work Plan. All Work Plans shall be subsequently appended hereto as part of
SCHEDULE 1.25.

                                    ARTICLE 2

                                PROJECT SERVICES

     2.1 PROJECT SERVICES AND OTHER SERVICES. Lilly hereby retains Array to
perform, and Array hereby agrees to perform, for Projects usual and customary
chemistry services and related services in the areas of compound design,
synthesis, isolation, and purification, structure, confirmation, and composition
and purity determination, in accordance with the applicable Work Plans ("Project
Services"). Depending on the Project, Project Services may include, without
limitation, consulting and technical assistance, chemical synthesis (including,
without limitation, design and synthesis of organic compounds), routine
computational analysis customary to compound design, synthetic chemical
research, medicinal chemistry, compound identification and quantification,
compound physical chemical characterization, and compound purification.

     From time to time, Lilly may request Array to provide for Projects
chemistry and other services that are not Project Services ("Other Services"),
but Lilly recognizes that Array has the option to provide Other Services on a
case-by-case basis. Other Services may include, without limitation, synthesis of
general use chemical libraries, process research & development, and large scale
compound preparation, but expressly excludes the consulting services described
in Article 3. [ * ]

     2.2 CONFLICTS OF INTEREST. Lilly recognizes that Array provides research
services to Third Parties: therefore, at the time the Lilly Chemistry Research
Services Director proposes a Project, he or she will identify the Project's
target and Target Family. If a Project that Lilly desires to issue to Array
deals with the same target or Target Family as that of a project,

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       5
<PAGE>   10

assignment, or task on which Array is working or has agreed to work for a Third
Party, Array shall immediately, but no later than five (5) business days after
Lilly's proposed issuance of the Project, notify Lilly in writing of this
potential conflict of interest. In such cases, the Project will be issued to
Array only by mutual consent of the Parties.

     2.3 PROJECT MANAGEMENT; MEETINGS. Each project shall be conducted in
accordance with its Work Plan and under the overall direction and guidance of
the Array Project Leader and Lilly Project Leader assigned to it (the "Project
Steering Committee"), but subject to the Lilly Project Leader's ultimate
authority. Each Project Steering Committee shall hold meetings regularly, and
except as the Lilly Project Leader may reasonably determine otherwise, shall
hold such meetings weekly. Such meetings may be held in-person, via video
conference and/or teleconference, provided that at least quarterly the Project
Steering Committee shall meet in-person, unless they otherwise agree. The Lilly
Project Leader, after consultation with the Array Project Leader, will determine
in good faith whether individual members of the Project Team or other persons
should also be in attendance at a Project Steering Committee meeting; however,
for in-person Project Steering Committee meetings, the in-person attendance of
individuals other than the Project Steering Committee members will be required
only upon the mutual consent of the Parties. In-person, Project Steering
Committee meetings will alternate between Lilly's Indianapolis, Indiana
facilities and Array's Boulder, Colorado facilities, unless the Parties
otherwise agree. Each [ * ] with the attendance of its employees and consultants
at such meetings.

     2.4 COMMITMENT TO PROJECT STAFFING. During the term of this Agreement,
Array hereby agrees to have at least the following number of Array FTEs
available for Projects:

          [ * ]

     If Lilly desires to increase the number of Array FTEs beyond [ * ], all
such increases must be mutually agreed upon by the Parties in writing. Array,
however, will notify Lilly in writing each Calendar Quarter as to: (i) how many
Array employees are then-currently available to serve as Array FTEs for
Projects; and (ii) its forecast of how many such persons will be available
during the next three Calendar Quarters.

     2.5 ARRAY EMPLOYEES ASSIGNED TO EACH PROJECT. Critical to the ultimate
success of each Project is the quality, make-up, and continuity of Array
employees assigned thereto. To that end, the Parties hereby agree as follows:

     (a)  Qualifications and Make-Up. Array hereby agrees that Array employees
          assigned to perform Project Services or Other Services shall have the
          skills necessary to efficiently perform such services in a form and of
          a quality suitable to Lilly.

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       6
<PAGE>   11

     Moreover, except as the Parties may otherwise agree in writing, Array
hereby agrees that each Array FTE shall consist only of Array employees that are
either: (i) the Array Alliance Manager or (ii) Array Project Leaders, Senior
Chemists, or Associate Chemists exclusively assigned and fully dedicated to
Projects. Moreover, except as the Parties may otherwise agree in writing, each
Project shall have at least one Array Project Leader and a ratio of Senior
Chemists to Associate Chemists no lower than as follows (the "Experience
Ratio"):

<TABLE>
<CAPTION>
         Type of Project                     Ratio - Senior/Associate
         ---------------                     ------------------------
<S>                                          <C>
[ * ]
</TABLE>

     For purposes of calculating the Experience Ratio, an Array Project Leader,
to the extent he is actually conducting work on a particular Project, shall
count as a Senior Chemist.

     [ * ]

     (b) Continuity to Projects. Array hereby agrees that: (1) [ * ]. An Array
employee assigned to a Project as an Array FTE, however, will not be required to
continue work on Projects under the following circumstances:

     (i)  [ * ];

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       7
<PAGE>   12

     (ii)  [ * ]

     (iii) [ * ]

     (iv)  [ * ]

     2.6   [ * ]

     (c)   Subsequent Increases in Array FTEs. If, after a reduction of Array
           FTEs under this Section, Lilly requests additional Array FTEs, Array
           agrees to use reasonable efforts to satisfy Lilly's requests up to
           the [ * ] FTEs threshold in Section 2.4. Any increase in the number
           of Array FTEs beyond such threshold must be mutually agreed upon by
           the Parties in writing.

     2.7 COMMUNICATION AND ACCESS TO ARRAY EMPLOYEES. In addition to the
meetings described in Section 2.3, during the term of the Agreement, Lilly shall
have reasonable and informal access to and communication and interaction with
Array employees assigned to each Project. It is anticipated that such access,
communication and interaction shall be similar to the access, communication, and
interaction that would occur between scientists in a fully integrated, drug
discovery project team effort. Furthermore, upon Lilly's request, Array shall
interact and communicate with Lilly regarding any issue raised by Lilly about a
Project as soon as reasonably practical.

     2.8 REPORTS, RECORDS AND PROJECT RIGHTS TRANSFER. Array will provide to
Lilly the following reports and records:

     (a)   Quarterly Status Reports. For each Project, Array shall provide the
           applicable Lilly Project Leader with a quarterly status report that
           summarizes Array's efforts on such Project during the Calendar
           Quarter at issue and that includes, without limitation, a general
           summary of important events and/or milestones achieved, personnel
           changes (if any), learning points and other matters that Lilly may
           reasonably deem appropriate, and a general description of Project
           Rights (if any) discovered, invented, developed and/or conceived. The
           Lilly Project Leader of each Project, with appropriate consultation
           from the Array Project Leader assigned thereto, shall determine the
           appropriate format of the quarterly status report for his or her
           Project. In addition to the foregoing, each quarterly status report
           shall include for each compound discovered or made

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       8
<PAGE>   13

          during the Calendar Quarter at issue: (i) the structure of such
          compound; (ii) the name of the discover/maker of such compound; (iii)
          the date such compound was discovered or made; (iv) the list of
          analytical methods for which data was obtained on such compound [ * ]
          and (v) the quantity of such compound made.

     (b)  Project Reports. For each Project, Array will provide the applicable
          Lilly Project Leader a report fully summarizing the results and
          experimental procedures of the Project and include, without
          limitation, a description of all Project Rights, compound structures,
          analytical data, physical chemical characterization data, compound
          numbers, lot numbers, names of compound (including the name of the
          person who prepared such compound), dates when compounds were
          prepared, full details of synthesis methods (especially new methods or
          modifications and new applications of existing methods), compound
          purification conditions and protocols, chemical reaction schemes,
          conditions, protocols, yields, certificate of analysis, other items
          relevant to such Project, and such other matters as Lilly may
          reasonably request. Array shall provide such a report within thirty
          (30) days after the earlier of: (i) Lilly's written request, (11) the
          completion or termination of a Project, or (iii) the termination or
          expiration of this Agreement.

     (c)  Records. Array will provide the applicable Lilly Project Leader copies
          of all experimental and other Project records and laboratory notebooks
          containing experimental descriptions and data generated from work
          conducted under a Project within thirty (30) days after the earlier
          of: (i) Lilly's written request, (ii) the completion or termination of
          a Project, or (iii) the termination or expiration of this Agreement.

     (d)  Project Rights & Other Lilly Confidential Information. To the extent
          not already transferred to Lilly in accordance with Subsection (b) of
          Section 5.1 or otherwise under this Agreement, Array shall disclose
          and transfer ownership to Lilly [ * ], within thirty (30) days of the
          earlier of: (i) Lilly's written request, (ii) the completion or
          termination of a particular Project, or (iii) the termination or
          expiration of this Agreement.

     2.9 PROJECT DILIGENCE. Array shall diligently use its best efforts to
render Project Services and Other Services hereunder in accordance with
prevailing high professional standards and will make all reasonable efforts to
produce consistently high levels of accuracy and expertise

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       9
<PAGE>   14

and to meet timetables set forth under this Agreement for completion of Project
Services and Other Services.

     2.10 GOVERNING AUTHORITY OF PROJECTS. Each Project shall be conducted by
its Project Team in accordance with its Work Plan and under the overall
directions and guidance of its Project Steering Committee, [ * ].

     2.11 ARRAY'S ALLIANCE MANAGEMENT. Array hereby designates Kevin Koch, Ph.D.
(and any successor President/Chief Science Officer) as the Array officer who is
ultimately responsible for ensuring its performance under this Agreement. Array
also agrees to designate, with Lilly's prior written approval, an Array employee
to oversee Array's day-to-day activities on all Projects, to coordinate Array's
communications with Lilly, and to otherwise facilitate the smooth operations of
all Projects (the "Array Alliance Manager"). Along with his other
responsibilities for this Agreement, the Parties agree that Dr. Koch will serve
as the interim Array Alliance Manager until a successor Array Alliance Manager
is appointed in accordance with this Section. However, notwithstanding Section
1.2 and Subsection (a) of Section 2.5, Array is not entitled to any compensation
from Lilly for Dr. Koch's work as the interim Array Alliance Manager.

                                    ARTICLE 3

                               CONSULTING SERVICES

     Array employees who, as reasonably determined by a Lilly Project Leader
after consultation with the Array Project Leader, possess useful technical
expertise to a Project but who are not assigned to that Project shall be made
available at such times as Lilly reasonably requests for technical consultations
with Lilly personnel via telephone or in-person. Such Array employees may
include, without limitation, senior management of Array. In the event that such
consultation is in the form of an in-person consultation, the time and location
of such consultation shall be mutually agreed upon by the Parties in good faith
[ * ].

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       10
<PAGE>   15

                                    ARTICLE 4

                           PROJECT RESOURCES AND COSTS

     4.1  PROJECT RESOURCES AND COSTS.

     (a)  FTE Funding and Reimbursement of Other Costs. [ * ] In addition, in
          the event that (i) Other Services are used by Array in accordance with
          Section 2. 1, (ii) Third Parties are used by Array in accordance with
          Section 4.2, or (iii) Array incurs reimbursable expenses under
          Subsection (e) of this Section 4. 1, Lilly shall reimburse Array for
          only the incremental actual costs incurred by Array for such services
          or items (i.e., no mark-up) and not according to the FTE Rate.

     (b)  Invoice. Within thirty (30) days [ * ], Array shall provide the Lilly
          Chemistry Research Services Director with an invoice detailing: (i)
          the name, number, and title of each Array FTE performing Project
          Services during the preceding [ * ]; (ii) the total Project Service
          hours worked by each Array FTE during the preceding [ * ]; (iii) the
          Project Service hours worked on each Project during the preceding
          [ * ]; (iv) the number of Project Services hours that were United
          States-based; (v) the Other Services performed by Array during the
          preceding [ * ] (if any); (vi) the permitted Third Parties' services
          used by Array during the preceding [ * ] (if any); and (vii) the
          actual costs incurred by Array during the preceding [ * ] for items
          reimbursable under Subsection (e) of this Section 4.1 (if any).
          Array's invoice for the last [ * ] in a Calendar Year will also
          contain sufficient information and documentation to calculate the year
          end Array FTE true-up, if any, under Subsection (d) of this Section.
          Lilly, or its representatives, shall have the right to audit Array
          records with respect to any invoice in accordance with Section 6.2.

     (c)  Project Payments. [ * ]

     (d)  Year End Array FTE True-Up. If:

          (i)  an Array FTE [ * ];

          (ii) Lilly, under Subsection (a) of this Section, paid a pro-rated FTE
               Rate for that Array FTE's reduced work hours during that [ * ];
               and

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       11
<PAGE>   16

          (iii) that Array FTE worked [ * ] on Project Services in another month
                during the Calendar Year,

          Lilly, to the extent of such excess hours, will pay Array the
          difference between the pro-rated amount it paid Array for the Array
          FTE's reduced hours month and [ * ] of the FTE Rate. Lilly's payment
          of such amount, if any, will accompany Lilly's payment made under
          Subsection (c) of this Section for the last month in a Calendar Year.
          An Array FTE's excess hours do not carry over to the next Calendar
          Year nor are they applicable to another Array FTE.

     (e)  Equipment, Supplies, and Reasonable Capital Expenditures. Except for
          non-commodity chemicals or except as the Parties otherwise agree in
          writing, the Parties acknowledge and agree that Array is solely
          responsible for the cost of all equipment, supplies, commodity
          chemicals (e.g., chemicals that are readily available in bulk
          quantities and obtainable from multiple suppliers and whose cost is
          generally considered relatively low, fairly well-defined, and
          consistent across the chemical supply industry), solvents, reagents,
          materials, and reasonable capital items that Array uses (or is
          required to use) in connection with the Projects. Lilly agrees to
          reimburse Array for its purchases of non-commodity chemicals that are
          necessary for a Project, but only if Lilly pre-approved such purchase
          in writing.

          When Lilly reimburses Array for necessary and pre-approved
          non-commodity chemicals or in the event, Lilly, in its sole
          discretion, supplies, leases, or purchases (or reimburses Array for)
          any equipment, supplies, commodity chemicals, non-commodity chemicals,
          solvents, reagents, materials, or other capital items in connection
          with Array's efforts on a Project, Lilly shall be the sole owner of
          such item, and, Array shall, to the extent not already done so,
          transfer sole ownership in such item to Lilly and deliver possession
          of such item to Lilly at the earlier of: (i) the completion or
          termination of the Project at issue, (ii) Lilly's request, or (iii)
          the termination or expiration of this Agreement. In certain cases
          (e.g., Lilly determines that the item might be useful in another
          Project), Lilly may reasonably delay transfer of ownership and/or
          possession of such item by notifying Array of the same.

     (f)  Research Tax Credits. To the extent permitted by law, Lilly shall be
          entitled to any tax credits due on account of research and development
          expenses it pays to Array under this Agreement.

     4.2 SUBCONTRACTING PROJECT SERVICES OR OTHER SERVICES. The Parties
acknowledge and agree that subcontracting (including, without limitation, any
consultation by Third Parties) of Project Services or Other Services by Array is
generally prohibited under this Agreement. However, Array may subcontract
Project Services or Other Services if, prior to such subcontract:

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       12
<PAGE>   17
            (i)   The Lilly Chemistry Research Services Director approves, in
                  writing, that such subcontract would be useful or beneficial
                  to a Project and that the selected Third Party is an
                  appropriate subcontractor for the particular Project Services
                  or Other Services at issue;

            (ii)  The Lilly Chemistry Research Services Director approves, in
                  writing, the cost associated therewith;

            (iii) Array and/or Lilly, as appropriate, obtain written
                  confidentiality and nonuse agreements from the Third Party;

            (iv)  Array and/or Lilly, as appropriate, obtain written assignments
                  from the Third Party of all patent rights and know-how that
                  such Third Party may develop by reason of work performed under
                  this Agreement (which, in turn, shall ultimately be assigned
                  to Lilly in accordance with Section 5.1); and

            (v)   Array and/or Lilly, as appropriate, obtain a certification
                  from the Third Party that such work will be performed
                  according to cGLPs, cGCPs and/or cGMPs, as applicable.

To be reimbursed for the incremental actual costs incurred from such approved
Third Parties' services, Array shall provide Lilly with all documentation of
such costs as Lilly may reasonably require. The foregoing prohibition is
intended to apply only to Array's ability to subcontract Project Services or
Other Services and is not intended to limit Lilly's ability to subcontract in
any respect.

      4.3 TRAINING. Except as the Parties otherwise agree in writing, the
Parties acknowledge and agree that Array is solely responsible for providing and
paying for training, including attendance at scientific meetings, as may be
necessary for its employees and permitted subcontractors to perform their duties
under this Agreement.

                                    ARTICLE 5

              PROJECT OWNERSHIP, PROCEDURAL SAFEGUARDS AND SECURITY

      5.1   [ * ]

      (a)   [ * ]. Lilly shall be [ * ] information, items, material, and
            know-how that is either (i) [ * ] Project Services or Other
            Services, including, without limitation, any and all

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       13
<PAGE>   18

            suggestions, descriptions, ideas, inventions (whether or not
            patentable) discoveries, know-how, trade secrets, techniques, data,
            strategies, methods, syntheses, processes, practices, documents,
            apparatus, devices, chemical formulations, chemical synthesis,
            compounds, composition of matter, chemical samples, assays, cell
            lines, vectors, screens, databases, database structures, and data
            analysis methods (collectively, "[ * ]").

      (b)   [ * ], after the conception, discovery, invention and/or development
            of Project Rights, shall (and shall cause its employees, permitted
            subcontractors, and other agents providing Project Services or Other
            Services hereunder to) [ * ] in completing any patent applications
            relating to such [ * ], as well as executing and delivering any
            instrument that may be reasonably required to assign, convey and
            [ * ] interest, if any, that Array or its employees, permitted
            subcontractors, and other agents providing Project Services or Other
            Services hereunder may have in such [ * ].

            Moreover, after the [ * ] (and shall cause its employees, permitted
            subcontractors, and other agents providing Project Services or Other
            Services to) [ * ], items, material, and know-how encompassed in
            [ * ] together with any other information, items, material, and
            know-how [ * ]. Finally, [ * ] with reasonable technical assistance
            in connection with such disclosure and transfer of [ * ].

      (c)   [ * ]. Pursuant to Subsection (a) above, Lilly has exclusive rights
            to [ * ]. Array shall have the right to practice a [ * ] for
            purposes other than a Project [ * ].

      (d)   Non-Exclusive License to [ * ]. Array hereby grants to Lilly [ * ]
            to practice [ * ]. [ * ] only to Third Parties that are involved
            with Lilly in research and development collaborations, and such
            sublicenses shall be only for the purpose of carrying out such
            collaborations. Lilly shall not have any other sublicense rights.

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       14
<PAGE>   19

      5.2 SAFEGUARDS TO PROTECT CONFIDENTIALITY AND PROJECT RIGHTS OWNERSHIP.

      (a)   As a means reasonably designed to protect Lilly's sole ownership
            rights in [ * ] and otherwise to ensure Array's compliance with its
            obligations set forth in Section 5.1 and Section 7.2, Array agrees
            [ * ]. In addition, Array agrees that [ * ]. Array's obligations
            under this Subsection shall survive until [ * ] after the expiration
            or termination date of this Agreement.

      (b)   Array hereby agrees that, each of its employees and permitted
            subcontractors will, prior to commencing work on any Project,
            execute an instrument agreeing to: (i) assign to Array all [ * ]
            arising during the course of and as a result of their association
            with Array (which shall ultimately be assigned by Array to Lilly in
            accordance with the assignment provisions of Subsection (b) of
            Section 5.1); and (ii) to abide by confidentiality and non-use
            restrictions regarding the terms of the Agreement and Lilly
            Confidential Information in a manner consistent with Array's
            obligations under Section 7.1 and Section 7.2.

      5.3 SECURITY. As a means reasonably designed to protect Lilly's sole
ownership rights in [ * ], to protect the secrecy and confidentiality of all
[ * ] and other Lilly Confidential Information, and to otherwise ensure Array's
compliance with its obligations set forth in Section 5.1 and Section 7.2, Array
agrees to maintain appropriate security measures no less stringent than measures
that are customary in the industry. In addition to customary security measures,
Array shall: (i) conduct all [ * ] and Other Services in a facility or
facilities solely dedicated and exclusively used for Projects; and (ii) maintain
informational technology systems that are compatible with Lilly's informational
technology systems and that ensure confidential communications and data
transfers between Array and Lilly.

                                    ARTICLE 6

                            RECORD-KEEPING AND AUDIT

      6.1 RECORDS RETENTION; MAINTENANCE OF PROJECT RECORDS. In addition to
providing copies of records and other Project Rights in accordance with Section
2.8, during the term of this Agreement and consistent with Array's security
obligations set forth in Section 5.3, Array shall retain and maintain all
written materials and all other data and information obtained or generated by
Array in the course of providing Project Services and Other Services in a secure
area

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       15
<PAGE>   20

reasonably protected from fire, theft and destruction for up to ten (10) years
after the expiration or termination of this Agreement. Upon the expiration or
termination of this Agreement, such items, at Lilly's option, may be (i)
delivered to Lilly or its designee in such form as is then currently in the
possession of Array, (ii) retained by Array for Lilly for a period of time
mutually agreed upon by the Parties, or (iii) disposed of, at the direction and
written request of Lilly, unless such materials are otherwise required to be
stored or maintained by Array as a matter of law or regulation. In no event
shall Array dispose of any materials, data, or other information obtained or
generated by Array in the course of providing Project Services and Other
Services without first giving, Lilly sixty (60) days prior written notice of
Array's intent to do so.

      For those records pertaining to the accuracy and correctness of an Array
invoice, such records shall be maintained for a three (3) year period following
the year in which such invoice was paid by Lilly.

      Array shall keep complete and accurate records pertaining to each Project
that are reasonably useful to confirm the efforts. Array shall record all
information relating to Projects in written or electronic form. Such records
shall be kept separately from written records documenting other research and
development that may be conducted by Array. All such written records shall be
maintained in a form sufficient to satisfy regulatory authorities. Moreover,
from time to time, upon Lilly's request Array will promptly provide copies of
any of the records that it maintains for Lilly.

      6.2 FINANCIAL AUDIT. Upon written notice from Lilly, Array shall permit
Lilly or Lilly's representative to have access during normal business hours to
audit the books and records of Array and its permitted subcontractors as may be
reasonably necessary to verify the accuracy of any payments made under this
Agreement. The audit shall be limited to books and records for any Calendar Year
ending not more than twenty-four (24) months prior to the date of such notice.
All reports, invoices and payments not disputed as to correctness by Lilly
within three (3) years after receipt thereof shall thereafter conclusively be
deemed correct for all purposes. Such audit shall be at Lilly's expense unless
the audit establishes that Lilly's payments for the period examined exceeded the
amount that should have been paid by five percent (5%) or more, in which case
Array shall be responsible for the reasonable expenses of such audit. Within
thirty (30) days after both Parties have received an audit report, Lilly or
Array, as appropriate, will compensate the other Party for any errors or
omissions revealed by an audit. This audit night shall survive for a period of
two (2) years from the date this Agreement terminates or expires.

      6.3 SCIENTIFIC AND LEGAL AUDIT. Upon written notice from Lilly, Array
shall permit Lilly or Lilly's representative to have access during normal
business hours to audit the books and records of Array and its permitted
subcontractors as may be reasonably necessary to confirm that Project Services
and Other Services have been performed accurately and in compliance with (i)
prevailing professional standards of quality, (ii) applicable Lilly protocols
and/or specifications of which Array was reasonably advised, (iii) applicable
laws and regulations, and (iv) applicable Work Plans. Such an audit shall be at
Lilly's expense unless the audit establishes a material error by Array. In such
case, in addition to other remedies Lilly may have against Array for such
material error, Array shall be responsible for the reasonable expenses of the
audit. This audit

                                       16
<PAGE>   21

right shall survive for a period of ten (10) years from the date this Agreement
terminates or expires.

      6.4   QUALITY ASSURANCE AND SECURITY AUDITS; ON-SITE LILLY PERSONNEL.
During the term of this Agreement, Lilly retains the right at reasonable times
and upon reasonable prior written notice to conduct quality assurance and
security audits of Array's research and development facilities, as well as of
the facilities of Array's permitted subcontractors (if any), where work on a
Project is conducted. Furthermore, from time to time, upon Lilly's reasonable
written request, Array will allow Lilly personnel to be located at Array
facilities where Projects are conducted to further a particular Project as well
as to ensure that such facilities meet Lilly and regulatory authority standards
and the security standards set forth in Section 5.3. Array hereby agrees to
cooperate with Lilly and take such other acts as may be reasonably necessary or
appropriate to carry out the purpose and intent of this Section.

                                    ARTICLE 7

                           CONFIDENTIALITY AND NON-USE

      7.1   DISCLOSURE OF AGREEMENT.

      (a)   Existence of the Agreement. Except as the Parties otherwise agree,
            neither Array nor Lilly shall release any information to any Third
            Party with respect to the existence of this Agreement (including,
            without limitation, either Party's name) until the Parties issue the
            press release, which has been agreed to by both Parties and a copy
            of which is attached as Exhibit A. Afterwards, each Party may use
            the substance of such press release and the substance of other
            public announcements of the other Party without prior notice.

      (b)   Terms of the Agreement. Except as required by law or except for a
            request from an authorized representative of a U.S. and/or foreign
            tax authority for a copy of the Agreement, neither Array nor Lilly
            shall release any information to any Third Party with respect to the
            terms of this Agreement without the prior written consent of the
            other. This prohibition includes, but is not limited to, any press
            releases, educational and scientific conferences, publications,
            promotional materials, governmental filings, and discussions with
            public officials and the media.

      If a Party determines a release of information regarding the terms of this
Agreement is required by law, that Party will notify the other Party as soon as
practical and give as much detail as possible in relation to the disclosure
required. The Parties will then cooperate with respect to determining what
information will actually be released.

                                       17
<PAGE>   22

      If a Party receives a request from an authorized representative of a U.S.
      and/or foreign tax authority for a copy of the Agreement, that Party may
      provide a copy of the Agreement to such tax authority representative
      without advance notice to or the consent or cooperation of the other
      Party, but the disclosing Party must notify the other Party of the
      disclosure as soon as practical. The release of any additional information
      to a tax authority is subject to the notice and cooperation requirements
      for other disclosures required by law as set forth in this Section.

      7.2   ARRAY'S CONFIDENTIALITY OBLIGATIONS. Except upon obtaining Lilly's
prior written consent to the contrary, Array agrees that while this Agreement is
in effect and for [ * ] after the date this Agreement terminates or expires:

            (i)   it will not, nor will it permit any of its employees or
                  Permitted Third Parties to, use Lilly Confidential Information
                  other than for the purposes of this Agreement;

            (ii)  it will not, nor will it permit any of its employees or
                  Permitted Third Parties to, disclose any Lilly Confidential
                  Information to a Third Party (including Third Party
                  consultants, representatives, or agents of Array);

            (iii) it will not, nor will it permit any of its employees or
                  Permitted Third Parties to, disclose any Lilly Confidential
                  Information. to any Array employee or Permitted Third Party
                  who does not need to know such Lilly Confidential Information
                  to further a Project; and

            (iv)  it will not, nor will it permit any of its employees or
                  Permitted Third Parties to, publish or submit for publication
                  Lilly Confidential Information.

A "Permitted Third Party" is a Third Party for whom Lilly has given written
consent to Array for Array's disclosure of specified Lilly Confidential
Information. For the sole purpose of monitoring its obligations hereunder, Array
may retain in its legal files one copy of all Lilly Confidential Information
that it receives.

      7.3   LILLY'S CONFIDENTIALITY OBLIGATIONS.

      (a)   Array Confidential Information. Except upon obtaining Array's prior
            written consent to the contrary, Lilly agrees that while this
            Agreement is in effect and for [ * ] after the date this Agreement
            terminates or expires:

            (i)   it will not, nor will it permit any of its employees or
                  Excepted Third Parties to, use Array Confidential Information
                  other than for the purposes of this Agreement;

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       18
<PAGE>   23

            (ii)  it will not, nor will it permit any of its employees or
                  Excepted Third Parties to, disclose any Array Confidential
                  Information to a Third Party;

            (iii) it will not, nor will it permit any of its employees or
                  Excepted Third Parties to, disclose any Array Confidential
                  Information to any Lilly employee or Excepted Third Party who
                  does not need to know such Array Confidential Information to
                  further a Project; and

            (iv)  it will not, nor will it permit any of its employees or
                  Excepted Third Parties to, publish or submit for publication
                  Array Confidential Information.

            An "Excepted Third Party" is a Third Party for whom Array has given
            written consent to Lilly for Lilly's disclosure of specified Array
            Confidential Information. Lilly agrees that its Excepted Third
            Parties shall be bound by confidentiality and non-use obligations
            regarding the terms of this Agreement and Array Confidential
            Information consistent with Lilly's under Section 7.1 and this
            Subsection. For the sole purpose of monitoring its obligations
            hereunder, Lilly may retain in its legal files one copy of all Array
            Confidential Information that it receives.

      (b)   Array Processes. Lilly agrees that, while this Agreement is in
            effect and for [ * ] after the date this Agreement terminates or
            expires, it may disclose Array Processes to a Third Party only with
            Array's prior written consent, except that Lilly may, without
            Array's consent, disclose Array Processes to a Third Party (i)
            working on behalf of Lilly or (ii) involved with Lilly in a research
            and development collaboration. Lilly agrees that Third Parties to
            whom Array Processes are disclosed under this Subsection shall be
            bound by confidentiality obligations regarding Array Processes
            consistent with Lilly's under this Subsection.

                                    ARTICLE 8

                              TERM AND TERMINATION

      8.1   TERM. This Agreement shall commence on the Effective Date and shall
continue in effect until [ * ] thereafter, unless earlier terminated as provided
in this Agreement or extended by mutual written agreement of the Parties.

      8.2   LILLY VOLUNTARY TERMINATION. At any time after the Effective Date,
with or without cause, Lilly may terminate this Agreement upon providing Array
with thirty (30) days advance written notice of the same. Such termination shall
be effective upon the expiration of such thirty (30) day period. In the event
that Lilly terminates the Agreement under this Section (and only under this
Section), Lilly shall pay Array the applicable, one-time lump sum termination
payment below:

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       19
<PAGE>   24

            (i) [ * ] Array FTEs. If [ * ] Array FTEs were charged to Projects
      during the Calendar Quarter immediately preceding Lilly's notice of
      termination, then Lilly shall pay Array an amount equal to [ * ] of the
      Array FTE funding obligation incurred by Lilly under Subsection (a) of
      Section 4.1 with respect to such [ * ] (i.e., only the amount of such
      obligation incurred with respect to Array FTEs, specifically excluding any
      other reimbursable items described in Subsection (a) of Section 4.1).

            (ii) [ * ] Array FTEs. If [ * ] Array FTEs were charged to Projects
      during the Calendar Quarter immediately preceding Lilly's notice of
      termination, then Lilly shall pay Array an amount equal to [ * ] of the
      Array FTE funding obligation incurred by Lilly under Subsection (a) of
      Section 4.1 with respect to such [ * ] (i.e., only the amount of such
      obligation incurred with respect to Array FTEs, specifically excluding any
      other reimbursable items described in Subsection (a) of Section 4.1).

            (iii) [ * ] Array FTEs. If [ * ] Array FTEs were charged to Projects
      during the Calendar Quarter immediately preceding Lilly's notice of
      termination, then Lilly shall pay Array an amount equal to [ * ] of the
      Array FTE funding obligation incurred by Lilly under Subsection (a) of
      Section 4.1 with respect to such [ * ] (i.e., only the amount of such
      obligation incurred with respect to Array FTEs, specifically excluding any
      other reimbursable items described in Subsection (a) of Section 4.1).

            (iv) [ * ] Array FTEs. If [ * ] Array FTEs were charged to Projects
      during the Calendar Quarter immediately preceding Lilly's notice of
      termination, then Lilly shall pay Array an amount equal to [ * ] of the
      Array FTE funding obligation incurred by Lilly under Subsection (a) of
      Section 4.1 with respect to such [ * ] (i.e., only the amount of such
      obligation incurred with respect to Array FTEs, specifically excluding any
      other reimbursable items described in Subsection (a) of Section 4.1).

            (v) [ * ] Array FTEs. If greater then [ * ] Array FTEs were charged
      to Projects during the Calendar Quarter immediately preceding Lilly's
      notice of termination, then Lilly shall pay Array an amount equal to [ * ]
      of the Array FrE funding obligation incurred by Lilly under Subsection (a)
      of Section 4.1 with respect to such [ * ] (i.e., only the amount of such
      obligation incurred with respect to Array FTEs, specifically excluding any
      other reimbursable items described in Subsection (a) of Section 4.1).

      The lump sum termination payment due under this Section shall be paid by
Lilly within thirty (30) days of the later of: (i) Lilly's receipt of all
reports, records, and other items due to Lilly under Section 2.8; (ii) the
completed transfer and assignment of all Project Rights by Array to Lilly in
accordance with Section 5. 1; (iii) the completed transfer to Lilly of any and
all Lilly

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                       20
<PAGE>   25

Confidential Information that Array possesses; and (iv) the transfer of
possession and ownership to Lilly of any equipment, supplies, commodity
chemicals, non-commodity chemicals, solvents, reagents, materials, and other
capital items that Lilly supplied, leased, or purchased (or reimbursed Array
for) as described in Subsection (e) of Section 4.1.

      In addition, the lump sum payment due under this Section shall be in lieu
of Lilly's payment obligations under Subsection (a) of Section 4.1 during the
thirty (30) day notice period. Therefore, Lilly shall neither be required nor
obligated to fund Array FTEs under Subsection (a) of Section 4.1 during such
thirty (30) day notice period. Similarly, Array FTEs need not work on Projects
during such thirty (30) day notice period, except to the extent necessary to
wind-down the Projects in an orderly and efficient fashion including, without
limitation, (i) furnishing Lilly with all required reports, records, and other
items as described in and in accordance with Section 2.8; (ii) transferring and
assigning all Project Rights to Lilly in accordance with Section 5. 1; (ill)
transferring to Lilly of any and all Lilly Confidential Information that Array
possesses; and (iv) transferring ownership and possession to Lilly of any
equipment, supplies, commodity chemicals, non-commodity chemicals, solvents,
reagents, materials, and other capital items that Lilly either supplied, leased,
or purchased (or reimbursed Array for) as described in Subsection (e) of Section
4.1.

      8.3 TERMINATION FOR DEFAULT. If a Party believes the other Party is in
default of any material obligation under this Agreement, it may give notice of
such default to the other Party. Upon receipt of such notice, the defaulting
Party shall have thirty (30) days to remedy such default. If such default is not
remedied within those thirty (30) days, the Party claiming default may give
notice of termination, and termination of this Agreement shall be effective
immediately upon the defaulting Party's receipt of such notice.

      8.4 TERMINATION DUE TO ARRAY OWNERSHIP CHANGE. In the event that Array is
reorganized, acquired by or merged with a Third Party, or substantially all of
its assets to which this Agreement relates are acquired by a Third Party
(collectively and individually, an "Ownership Change Event"), Lilly may, in its
sole discretion, terminate this Agreement upon thirty (30) days written notice
to Array (or, if applicable, Array's successor). Lilly may provide Array (or, if
applicable, Array's successor) with such notice at any time within twelve (12)
months of the occurrence of an Ownership Change Event.

      8.5 TERMINATION DUE TO INSOLVENCY OR LIQUIDATION. Upon written notice to
the other Party, a Party may terminate this Agreement immediately if: (1) the
other Party goes into liquidation, other than for the purpose of a bona fide
reorganization, (ii) a receiver or trustee is appointed for the other Party's
property or estate, or (iii) the other Party makes an assignment for the benefit
of its creditors (whether or not any of the aforesaid acts are the outcome of a
voluntary act of the non-terminating Party). Termination of the Agreement under
this Section shall be effective as the occurrence of the applicable event.

      8.6 SURVIVING RIGHTS AND OBLIGATIONS. The obligations of the Parties under
Section 5.1 (Ownership of Project Rights), Section 5.2 (Procedural Safeguard
Restrictions to Protect Confidentiality and Project Right Ownership), Article 6
(Record Keeping and Audit), Article 7

                                       21
<PAGE>   26

(Confidentiality), the applicable termination provisions of Article 8
(Termination), Article 9 (Representations & Warranties), Article 10
(Indemnification), and Article 11 (Miscellaneous) will survive the termination
or expiration of this Agreement. Also, termination or expiration of this
Agreement shall not relieve either Party from obligations that are expressly
indicated to survive termination or expiration of the Agreement. Finally, except
as specifically provided to the contrary in this Agreement, termination or
expiration of the Agreement for any reason shall be without prejudice to any
rights that shall have accrued to the benefit of either Party prior to such
termination or expiration and shall not relieve the Parties of any obligations
accrued hereunder prior to such termination or expiration.

      Moreover, to the extent not already done so under this Agreement, Array
shall promptly (but in no event later than thirty (30) days after the effective
date of the termination of expiration of the Agreement): (i) submit to Lilly all
required reports, records, and other items as described in and in accordance
with Section 2.8; (ii) transfer ownership and possession to Lilly of all Project
Rights and Lilly Confidential Information as described further in Sections 2.8
and 5. 1; and (iii) transfer ownership and possession to Lilly of any equipment,
supplies, commodity chemicals, non-commodity chemicals, solvents, reagents,
materials, and other capital items that Lilly either supplied, leased, or
purchased (or reimbursed Array for) as described in Subsection (e) of Section
4.1.

                                   ARTICLE 9

                         REPRESENTATIONS AND WARRANTIES

      9.1 LILLY'S AUTHORITY TO PERFORM AGREEMENT. Lilly represents and warrants
to Array that (i) it is free to enter into and perform this Agreement; (ii) it
has no agreement, policy, or other understanding with any other person, firm, or
entity exists that would interfere or conflict with its obligations hereunder;
and (iii) it has and will maintain all regulatory or governmental permits,
licenses, and approvals necessary for it to perform its obligations legally in
accordance with this Agreement. Moreover, Lilly represents and warrants to
Array that this Agreement is a legal, valid, and binding obligation of it,
enforceable against it in accordance with the terms of this Agreement.

      9.2 ARRAY'S AUTHORITY TO PERFORM AGREEMENT. Array represents and warrants
to Lilly that (i) it is free to enter into and perform this Agreement; (ii) it
has no agreement, policy, or other understanding with any other person, firm or
entity exists that would interfere or conflict with its obligations hereunder;
and (iii) it has and will maintain all regulatory or governmental permits,
licenses, and approvals necessary for it to perform its obligations legally in
accordance with this Agreement. Moreover, Array represents and warrants to Lilly
that this Agreement is a legal, valid, and binding obligation of it, enforceable
against it in accordance with the terms of this Agreement.

      9.3 NO DEBARMENT. Array hereby represents and warrants that it is in
compliance with the provisions of the Generic Drug Enforcement Act of 1992 and
covenants that at all times

                                       22
<PAGE>   27

during this Agreement, it, its employees, and its permitted subcontractors will
comply with such Act. Array agrees, upon Lilly's request, to certify in writing
that neither it nor its employees or permitted subcontractors have been debarred
under the provisions of such Act.

      9.4 YEAR 2000. Array hereby represents and warrants that its business
systems and/or computer systems and the business systems and/or computer systems
of any Third Party on which it is dependent are Year 2000 compliant. Array also
covenants to Lilly that it shall use commercially reasonable efforts to ensure
its obligations under this Agreement are not materially delayed, interrupted, or
otherwise hindered to the detriment of Lilly due to: (i) the business systems
and/or computer systems of Array ceasing to function or otherwise malfunctioning
because of date-based problems related to the Year 2000; or (ii) the business
systems and/or computer systems of any Third Party on which Array is dependent
ceasing to function or otherwise malfunctioning because of date-based problems
related to the Year 2000.

                                   ARTICLE 10

                             MUTUAL INDEMNIFICATION

      10.1 ARRAY'S RIGHT TO INDEMNIFICATION. Lilly shall indemnify and hold
harmless Array, its successors and assigns, and the directors, officers,
employees, agents and counsel thereof (the "Array Indemnitees") from and against
any and all liabilities, damages, losses, penalties, fines, costs, interest, or
expenses, including, without limitation reasonable attorneys, fees, ("Damages")
arising from or occurring as a result of a Third Party's, Lilly employee's, or
governmental agency's claim, action, suit, judgment, or settlement against an
Array Indemnitee that is due to or based upon: (i) the failure of Lilly to
disclose to Array any chemical handling and exposure hazards information related
to a Project known by Lilly; (ii) any breach of this Agreement by Lilly; (iii) a
clinical trial conducted or authorized by Lilly or its designee that is based
upon a compound transferred to Lilly by Array; or (iv) a product developed,
manufactured, used, sold, or otherwise distributed by or under authority of
Lilly or its designees that is based upon a compound transferred to Lilly by
Array (a "Third Party Claim"). However, Lilly shall not indemnify or hold
harmless Array Indemnitees from a Third Party Claim to the extent that Damages
from such Third Party Claim are finally determined to have resulted from the
acts or omissions of an Array Indemnitee, including the failure of Array to
disclose to Lilly any chemical handling and exposure hazards information known
by Array that was related to a compound that it transferred to Lilly.

      10.2 LILLY'S RIGHT TO INDEMNIFICATION. Array shall indemnify and hold
harmless Lilly, its successors and assigns, and the directors, officers,
employees, agents and counsel thereof (the "Lilly Indemnitees") from and against
any and all Damages, payroll taxes, employment taxes, and employee benefits
arising from or occurring as a result of a Third Party's, Array employee's, or
governmental agency's claim, action, suit, judgment, or settlement against a
Lilly Indemnitee that is due to or based upon: (i) the failure of Array to
disclose to Lilly any chemical handling and exposure hazards information related
to a Project

                                       23
<PAGE>   28

known by Array; (ii) any breach of this Agreement by Array; or (iii) the
Parties' classification or characterization of an Array employee or independent
contractor as a non-Lilly employee or the denial to an Array employee or
independent contractor of benefits extended to Lilly employees (a "Lilly Third
Party Claim"). However, Array shall not indemnify or hold harmless Lilly
Indemnitees from a Lilly Third Party Claim to the extent that Damages from such
Lilly Third Party Claim are finally determined to have resulted from the acts or
omissions of a Lilly Indemnitee.

      10.3  INDEMNIFICATION NOTICE AND DEFENSE PROCEDURES.

      (a)   Notice. Promptly after a Lilly Indemnitee or an Array Indemnitee
            (each, an "Indemnitee") receive notice of a pending or threatened
            Third Party Claim or Lilly Third Party Claim, as the case may be (an
            "Action"), such Indemnitee shall give written notice of the Action
            to the Party to whom the Indemnitee is entitled to look for
            indemnification pursuant to this Article 10 (the "Indemnifying
            Party"). However, an Indemnitee's delay in providing or failure to
            provide such notice shall not relieve the Indemnifying Party of its
            indemnification obligations, except to the extent it can demonstrate
            prejudice due to the delay or lack of notice.

      (b)   Defense. The Indemnifying Party shall be entitled to participate in
            and, if it so desires, to assume the defense of an Action with
            counsel reasonably satisfactory to the Indemnitee. Once the
            Indemnifying Party notifies the Indemnitee of its election to assume
            the defense of an Action, the Indemnifying Party is not liable to
            the Indemnitee for the fees of other counsel or any other expenses
            subsequently incurred by the Indemnitee in connection with such
            defense, other than reasonable costs of investigation. However, the
            Indemnitee shall have the right to employ separate counsel and to
            participate in the defense of an Action (and the Indemnifying Party
            shall bear the reasonable fees, costs, and expenses of such separate
            counsel) if:

            (i)   the use of the counsel chosen by the Indemnifying Party would
                  present such counsel with a conflict of interest;

            (ii)  the actual or potential defendants in, or targets of, such
                  Action include both the Indemnifying Party and the Indemnitee,
                  and the Indemnitee reasonably concludes that there may be
                  legal defenses available to it that are different from or
                  additional to those available to the Indemnifying Party (in
                  which case the Indemnifying Party shall not have the right to
                  assume the defense of such Action on the Indemnitee's behalf);

            (iii) the Indemnifying Party does not employ counsel satisfactory to
                  the Indemnitee to represent the Indemnitee within a reasonable
                  time after the Indemnitee's notice of such Action; or

                                       24
<PAGE>   29

            (iv)  the Indemnifying Party authorizes the Indemnitee to employ
                  separate counsel at the Indemnifying Party's expense.

      (c)   Settlement. If an Indemnifying Party assumes the defense of an
            Action, no compromise or settlement of such Action may be effected
            by the Indemnifying Party without the Indemnitee's written consent
            (which consent shall not be unreasonably withheld or delayed),
            unless (i) there is no finding or admission of any violation of law
            or any violation of the rights of any person and no effect on any
            other claims that may be made against the Indemnitee and (ii) the
            sole relief provided is monetary damages that are paid in full by
            the Indemnifying Party.

                                   ARTICLE 11

                                  MISCELLANEOUS

      11.1 FURTHER ASSURANCES. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

      11.2 NO AGENCY; INDEPENDENT CONTRACTOR. It is understood and agreed that
nothing in this Agreement shall be construed as authorization for either Array
or Lilly to act as agent for the other. Lilly shall not incur any liability for
any act or failure to act by employees of Array, and Array shall not incur any
liability for any act or failure to act by employees of Lilly. Array shall
perform all of its services under this Agreement as an independent contractor,
and nothing herein shall be construed as creating any other relationship between
the Parties, including, without limitation, a joint venture, partnership, agency
relationship or employment relationship. Neither Array nor its employees or
agents shall be deemed for any purpose to be employees of Lilly nor participants
in any programs, insurance, or other benefits extended to Lilly's employees.
Array has sole authority and responsibility to hire, fire, supervise, and
otherwise control its employees and is solely responsible for all employee
benefits, wages, and employment taxes of its employees.

      11.3 COMPLIANCE WITH LAWS. Array hereby covenants that its Project
Services and Other Services shall be carried out in compliance with all
applicable laws including, without limitation, federal, state, or local laws,
regulations, or guidelines governing the work at the site where such work is
being conducted. Array further covenants that its Project Services and Other
Services will be performed in accordance with current cGLP, cGCP, and cGMP, as
applicable.

      11.4 COMPLIANCE WITH WORK PLAN AND LILLY PROTOCOLS AND SPECIFICATIONS.
Except as otherwise required by law, Array covenants that Project Services and
Other Services shall be conducted in compliance with the applicable Work Plan,
as well as with applicable Lilly protocols and/or specifications of which Array
is reasonably advised.

                                       25
<PAGE>   30

      11.5 INSURANCE. Array has obtained and shall maintain insurance coverage
covering risks associated with its business in such amounts as are customary in
the industry including, without limitation, covering liabilities that may arise
due to injuries to its employees or the negligent performance of Project
Services and Other Services hereunder.

      11.6 AMENDMENT. This Agreement may not be amended, supplemented, or
otherwise modified except by an instrument signed by the Parties.

      11.7 NOTICES AND REPORTS. All notices required by this Agreement shall be
in writing. All notices and reports shall be deemed given if delivered
personally or by registered or certified mail, return receipt requested and
postage prepaid or sent by express courier service, to the Parties at the
following addresses or such other addresses as may be designated in writing by
the respective Parties:

      To Lilly:     Eli Lilly and Company
                    Lilly Corporate Center
                    Indianapolis, Indiana 46285
                    Attn: General Counsel

      To Array:     Array BioPharma, Inc.
                    1885 33rd Street
                    Boulder, Colorado 80301
                    Attn: President

      11.8 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Indiana, excluding any choice
of law rules which may direct the application of the law of any other
jurisdiction.

      11.9 ASSIGNMENT. Array may not assign its rights and obligations under
this Agreement without Lilly's prior written consent. This Agreement shall be
binding upon and shall inure to the benefit of the successors and permitted
assigns of the Parties.

      11.10 HEADINGS. The captions or headings of the articles, sections, and
other subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions.

      11.11 SEVERANCE OF CLAUSES. Should any provision of this Agreement be
determined by a court of competent jurisdiction to violate or contravene any
applicable law or policy, such provision will be severed or modified by the
court to the extent necessary to comply with the applicable law or policy, and
such modified provision and the remainder of the provisions hereof will continue
in full force and effect.

      11.12 NO WAIVER. The waiver of a breach hereunder may be effected only by
a writing signed by the waiving Party and shall not constitute a waiver of any
other breach.

                                       26
<PAGE>   31

      11.13 ENTIRE AGREEMENT. The Agreement constitutes the entire Agreement of
the Parties relating to the subject matter.

      11.14 FORCE MAJEURE. Neither Party shall be liable to the other for loss
or damages or shall have any right to terminate this Agreement for any default
or delay attributable to any force majeure event, including but not limited to
acts of God, acts of government, war, fire, flood, earthquake, strike, labor
dispute and the like, if the Party affected shall give prompt notice of any such
cause to the other Party. The Party giving such notice shall thereupon be
excused from such of its obligations hereunder as it is thereby disabled from
performing for so long as it is so disabled and for sixty (60) days thereafter;
provided, however, that such affected Party commences and continues to take
reasonable and diligent actions to cure such cause.

      11.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts; each of which shall constitute an original, but which together
shall constitute the same instrument.

      11.16 NO LICENSES. Except as specifically provided for in this Agreement,
neither Party grants, expressed or implied, any license to the other Party under
this Agreement.

      11.17 JOINTLY PREPARED. This Agreement has been prepared jointly and shall
not be strictly construed against either Party.

      IN WITNESS WHEREOF, each Party, through its duly-authorized
representative, has executed this Agreement as of the Effective Date.

     ELI LILLY AND COMPANY                       ARRAY BIOPHARMA, INC.

     /s/ August M. Watanabe  3/22/2000           /s/ Robert E. Conway 3/20/2000
     ---------------------------------           ------------------------------
     August M. Watanabe, M.D.                    Robert E. Conway
     Executive Vice President                    Chief Executive Officer

                                       27
<PAGE>   32

                                                                   CONFIDENTIAL

                                AMENDMENT NO. 1
                                       TO
                          RESEARCH SERVICES AGREEMENT

         THIS AMENDMENT NO. 1 TO RESEARCH SERVICES AGREEMENT (the "Amendment")
amends the Research Services Agreement, dated March 22, 2000 (the "Agreement"),
by and between Eli Lilly and Company, Lilly Corporate Center, Indianapolis, IN
46285 ("Lilly") and Array BioPharma, Inc., 1885 33rd Street, Boulder, CO 80301
("Array") (together with Lilly and Array, the "Parties") and is made and
entered into by and between the Parties, pursuant to Section 11.6 of the
Agreement, effective as of July 19, 2000 (the "Amendment Effective Date").

         Terms defined in the Agreement will have the same meaning in this
Amendment, unless specifically noted otherwise.

         1. The following new sections are added to Article 5 of the Agreement:

         "5.4     NON-SOLICITATION OF LILLY EMPLOYEES.

         (a)      Prohibition. Except as provided in Subsection (b) below,
                  while the [ * ] after the termination or expiration of the
                  Agreement, Array agrees that it will not, directly or
                  indirectly, (i) solicit or recruit for employment, (ii) offer
                  to employ, or (iii) employ any Lilly employee.

         (b)      Exceptions. Array may offer to employ a Lilly employee who
                  approaches Array for the purpose of employment: (i) on his or
                  her own initiative; or (ii) as a result of Array's use of a
                  general solicitation (such as an advertisement) not
                  specifically directed to Lilly employees.

         5.5      NON-SOLICITATION OF ARRAY EMPLOYEES.

         (a)      Prohibition. Except as provided in Subsection (b) below,
                  while the [ * ] after the termination or expiration of the
                  Agreement, Lilly agrees that it will not, directly or
                  indirectly, (i) solicit or recruit for employment, (ii) offer
                  to employ, or (iii) employ any Array employee.

         (b)      Exceptions. Lilly may offer to employ an Array employee who
                  approaches Lilly for the purpose of employment: (i) on his or
                  her own initiative; or (ii) as a result of Lilly's use of a
                  general solicitation (such as an advertisement) not
                  specifically directed to Array employees.

<PAGE>   33

         2. Except as specifically amended herein, all other provisions of the
         Agreement remain in full force and effect.

         IN WITNESS WHEREOF, each Party, through its duly-authorized
representative, has executed this Amendment as of the Amendment Effective Date.

ELI LILLY AND COMPANY                       ARRAY BIOPHARMA, INC.

By: /s/ Robert W. Armstrong, Ph.D.          /s/ Robert E. Conway
    ------------------------------          ------------------------------
    Robert W. Armstrong, Ph.D.              Robert E. Conway
    Vice President, LRL                     Chief Executive Officer
    Discovery Chemistry Research

                                       2<PAGE>   1
                                                                   EXHIBIT 10.37

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 506 of the Securities Act of 1933, as amended.

                                CUSTOM SYNTHESIS
                        DEVELOPMENT AND SUPPLY AGREEMENT

                                 By and Between

                                MERCK & CO., INC.

                                       and

                              ARRAY BIOPHARMA INC.

--------------------------------------------------------------------------------

This Agreement (the "Agreement") confirms the mutual understanding by and
between Merck & Co., Inc., a corporation organized and existing under the laws
of the State of New Jersey with its principal place of business at One Merck
Drive, Whitehouse Station, NJ 08889 ("MERCK"), and Array BioPharma Inc., a
corporation organized and existing under the laws of the State of Delaware with
a place of business at 1885 33rd Street, Boulder, Colorado 80301 ("ARRAY").

WHEREAS, ARRAY has the ability and expertise to prepare collections of drug-like
small molecule compounds which are amenable to high-speed synthesis ("Custom
Libraries"); and

WHEREAS, MERCK desires for ARRAY to annually synthesize a certain number of
Custom Libraries solely for MERCK on an exclusive basis.

NOW THEREFORE, MERCK AND ARRAY agree as follows:

1.   Purpose: Following execution of this Agreement, MERCK shall identify Custom
     Libraries it would like ARRAY to synthesize. ARRAY agrees to diligently
     perform services for the purpose of synthetically preparing such Custom
     Libraries for MERCK (the "Services").

2.   Library Design Committee: Within thirty days of the Effective Date of this
     Agreement, the parties shall form a Library Design Committee ("LDC")
     comprised of two representatives from each party.

     (a)  MERCK shall submit all requests for the development of Custom
          Libraries to the LDC. The LDC shall review all MERCK requests, advise
          regarding the feasibility of such requests, and approve and/or modify
          such requests where reasonable.

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 506 of the Securities Act of 1933, as amended.
<PAGE>   2

     (b)  The LDC shall meet every other month, at ARRAY's offices in Boulder,
          Colorado, to review the ongoing status and any scientific issues
          raised by the Services performed hereunder.

     (c)  The parties agree that they will cooperate to reasonably resolve any
          scientific disputes related to the development of Custom Libraries. In
          the event that the parties cannot reasonable resolve any such
          disputes, the LDC shall meet to try to reach a final resolution.

3.   Materials: MERCK shall provide to ARRAY such non-commercially available
     materials in MERCK's internal collection necessary for Array to perform the
     Services. Additionally, Merck shall be responsible for providing or
     reimbursing (if approved by MERCK prior to purchase) Array for all other
     reagents which are necessary for the synthesis of any requested Custom
     Libraries (the aforementioned "non-commercially available materials and the
     reagents provided or paid for by MERCK shall hereinafter be "Materials").
     These Materials are not to be used in humans. It is understood that such
     materials are provided solely for the Services being performed hereunder
     and shall not be used for any other purpose nor shall such samples or any
     derivatives, analogs, modifications or components thereof be transferred,
     delivered or disclosed to any third party without the advance written
     consent of MERCK. Any unused Materials shall be returned to MERCK promptly
     upon completion of such Services or otherwise disposed of in accordance
     with instructions from MERCK.

4.   Custom Library Supply:

     (a)  ARRAY shall develop and provide approximately [ * ] Custom Libraries
          for MERCK each year. Each compound provided within a Custom Library
          shall be provided in [ * ] mg amounts and in two sets of vials
          provided by MERCK. The number of compounds per Custom Library will
          vary; but ARRAY hereby agrees to synthesize approximately [ * ]
          compounds per year with approximately [ * ] compounds per Custom
          Library.

     (b)  The Custom Libraries generated hereunder and all compounds included
          therein shall be the sole and exclusive property of MERCK. ARRAY shall
          deliver to MERCK, each Custom Library [ * ] of the requested amount
          for each compound within a Custom Library, accompanied by a writing,
          in English, describing the step-wise synthetic procedure to prepare
          each compound within the Custom Libraries ("Product Report"), HPLC
          analysis (detection technique to be determined by the LDC on a Custom
          Library by Custom Library basis) and mass spectral (MS) analyses to
          prove chemical identity and confirm minimum purity of [ * ] and an
          average purity of at least [ * ]. MERCK shall have no obligation to
          accept or pay for any Custom Libraries for which any of this data is
          not provided.

     (c)  [ * ]

[ * ] Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   3

5.   Term: The Term of this Agreement shall be [ * ] years with the Services
     commencing on [ * ] (the "Effective Date") and ending on [ * ], unless
     sooner terminated pursuant to Article 15 herein.

6.   Amount: Each time MERCK requests the development of a Custom Library, MERCK
     shall pay a non-refundable except as provided under Article 15(b)(2),
     process development fee, of [ * ] per compound, for such Custom Library.
     ARRAY shall have no obligation to develop or provide Custom Libraries which
     are not approved by the LDC pursuant to Article 2(a). MERCK shall have no
     obligation to make any payment hereunder until its Custom Library Request
     is approved by the LDC pursuant to Article 2(a). Within thirty days after
     receipt of any Custom Library compound(s), MERCK shall pay ARRAY an
     additional and final amount of [ * ] per compound meeting the
     specifications set forth herein. If MERCK fails to notify ARRAY within
     thirty days of its receipt of compound(s) that such compounds do not meet
     the applicable specifications, then such compound(s) shall be deemed
     accepted. Within thirty days after receiving the remaining compound(s) for
     each Custom Library and the Product Report, MERCK shall pay ARRAY an
     additional and final amount of [ * ] per compound meeting the
     specifications set forth herein in such final Custom Library delivery. If
     MERCK fails to notify ARRAY within thirty days of its receipt of a final
     Custom Library delivery and Product Report , that such Custom Library
     compound(s) do not meet the applicable specifications or that the Product
     Report is incomplete, then such Custom Library compounds and Product Report
     shall be deemed accepted. MERCK shall have no obligation to make any
     payments whatsoever or bear any costs or expenses for any Custom Libraries
     other than those set forth hereunder. Additionally, MERCK shall pay ARRAY
     for [ * ], quarterly in advance, starting on the Effective Date at an
     annual rate per FTE of [ * ]. All fees and schedule payments to Array shall
     be adjusted on an annual basis to reflect the aggregate increase in the
     Producer Price Index for Pharmaceutical Manufacturers (Table 3 - Producer
     Price Indexes for Selected Commodity Groupings Unadjusted Index Commodity
     Code 06-3) during the preceding year.

7.   Confidentiality: ARRAY agrees to keep confidential and not to use, except
     for the purpose described in Article 1 above, all information supplied by
     MERCK and all information, reports and Custom Libraries generated by ARRAY
     as a result of the Services performed hereunder. These obligations of
     confidentiality and non-use shall continue at all times beyond the term of
     this Agreement. This Agreement shall not restrict ARRAY's use or disclosure
     of information which (i) is in the public domain by use and/or publication
     before its receipt from MERCK; (ii) was already in ARRAY's possession prior
     to receipt from MERCK, except if such information was received or developed
     under a prior agreement with MERCK; (iii) is properly obtained by ARRAY
     from a third party which has a valid legal right to disclose such
     information to ARRAY and is not under a confidentiality obligation to
     MERCK; or (iv) is required to be disclosed by a Court of competent
     jurisdiction provided ARRAY gives MERCK prompt notice of such disclosure
     requirement.

[ * ] Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   4

8.   Reports/ Use of Information: ARRAY shall provide MERCK with written reports
     on a monthly basis for each of the Custom Libraries, and the Product Report
     upon delivery of each Custom Library as outlined in Articles 4 and 6 of
     this Agreement.

     [ * ]

9.   [ * ]

10.  Compliance with Law: ARRAY shall conduct the Services in accordance with
     all applicable laws, rules and regulations, including without limitation,
     all current governmental regulatory requirements concerning Good Laboratory
     Practices. ARRAY hereby certifies that it will not or has not employed or
     otherwise used, in performing the Services, any person debarred under
     Section 306 (a) or (b) of the Federal Food, Drug and Cosmetic Act.

[ * ] Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   5

11.  Limitation of Liability: MERCK assumes no responsibility and shall have no
     liability for the conduct of the Services, testing or other work performed
     by ARRAY under this Agreement. Notwithstanding the foregoing, ARRAY assumes
     no responsibility and shall have no liability for any use or other
     disposition of the compound(s) by MERCK or its Affiliates.

12.  Indemnification

     (a)  ARRAY hereby agrees to indemnify, defend and hold harmless, MERCK, its
          subsidiaries and Affiliates and their respective officers, employees
          and directors against any and all claims for liability, loss, damages,
          costs or expenses (including attorneys' fees and expenses and costs of
          investigation) brought by a third party, which any of them may incur,
          suffer or be required to pay as the result of any damage suffered or
          alleged to be suffered, including, without limitation, death or
          personal injury and any direct, consequential, special and/or punitive
          damages, which result from the gross negligence or willful misconduct
          of ARRAY in the course of performing the Services performed by ARRAY,
          hereunder, provided, however, that such loss, liability or damage is
          not attributable to the fraud, gross negligence, or willful misconduct
          of MERCK.

     (b)  MERCK hereby agrees to indemnify, defend and hold harmless, ARRAY, its
          subsidiaries and Affiliates and their respective officers, employees
          and directors against any and all liability, loss, damages, costs or
          expenses (including attorneys' fees and expenses and costs of
          investigation) which any of them may incur, suffer or be required to
          pay as the result of any damage suffered or alleged to be suffered,
          including, without limitation, death or personal injury and any
          direct, consequential, special and/or punitive damages, for claims
          that result from the commercialization (including Product Liability)
          by MERCK of any compound(s) delivered by ARRAY, hereunder, provided,
          however, that such loss, liability or damage is not attributable to
          the fraud, gross negligence, or willful misconduct of ARRAY.

13.  Use of Name: Neither party shall use the name, trade name, trademark or
     logo of the other party in any publicity, news releases or advertising
     related to this Agreement or the subject matter hereof without the prior
     written consent of the other party. Subject to the foregoing, ARRAY may
     issue a one-time press-release, (a copy of which is attached hereto as
     Exhibit A) regarding this Agreement and the Services provided to MERCK,
     hereunder. Such press-release shall be subject to MERCK's prior review and
     approval. Thereafter, ARRAY may discuss the specific content of the
     original press-release with third parties without advance written consent
     from MERCK, but ARRAY may not issue any other press-release(s) or issue any
     publicity or advertising using Merck's name, trade name, trademarks or
     logo, except as expressly stated herein, without the prior written consent
     of MERCK.

[ * ] Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   6

14.  Governing Law: This Agreement shall be governed by the laws of the State of
     New Jersey and the United States as applicable herein.

15.  Termination:

     (a)  Following the [ * ] anniversary of this Agreement, MERCK may terminate
          this Agreement at any time, upon [ * ] written notice. [ * ] following
          the date that the termination notice is sent shall be considered the
          "Termination Date." MERCK will have no further financial obligations
          to ARRAY following the Termination Date.

     (b)  Either party may terminate this Agreement, at any time, for cause,
          upon [ * ] written notice if such non-conforming performance is not
          cured within such [ * ] period. In such event:

          (1)  [ * ]; and

          (2)  [ * ]

     (c)  [ * ]

16.  Assignment: [ * ]

17.  Force Majeure: Neither party shall be held liable or responsible to the
     other party nor be deemed to have defaulted under or breached the Agreement
     for failure or delay in fulfilling or performing any term of the Agreement
     when such failure or delay is caused beyond the reasonable control of the
     affected party such as fire, floods, embargoes, war, acts of war,
     insurrections, riots, civil commotions, strikes, lockouts or other labor
     disturbances, acts of God or acts, omissions or delays in

[ * ] Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   7

     acting by any governmental authority or the other party. The affected party
     shall notify the other party of such force majeure circumstances as soon as
     reasonably practical.

18.  Contacts: All notices which are required or permitted hereunder shall be in
     writing and sufficient if sent by e-mail, telecopier or
     nationally-recognized overnight courier or sent by registered or
     certified-mail, postage prepaid, and addressed as follows:

If to MERCK:      Merck & Co., Inc.
                  Attn:  Office of the Secretary
                  One Merck Drive
                  Whitehouse Station, NJ  08889

With a copy to:   [ * ]

If to ARRAY:      Array BioPharma, Inc.
                  Attn: Chief Operating Officer
                  1885 33rd Street
                  Boulder, CO  80301

19.  Entire Agreement: This Agreement constitutes the entire agreement between
     the parties with regard to the Custom Library Services provided by ARRAY
     hereunder. All express or implied agreements and understandings, either
     oral or written, heretofore made are expressly merged in and made a part of
     the Agreement. The Agreement may be amended, or any term hereof modified,
     only by a written instrument duly executed by both parties hereto.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives, effective as of the later date set forth
below.

MERCK & CO., INC.                       ARRAY BIOPHARMA, INC.

By:     /s/ Edward M. Scolnick, M.D.        /s/ David Snitman
        ----------------------------        ----------------------------

Title:  President                           Chief Operating Officer
        ----------------------------        ----------------------------

Date:   9/6/00                              8/22/00
        ----------------------------        ----------------------------

[ * ] Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   8

                                    Exhibit A

                                     [ * ]

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 506 of the Securities Act of 1933, as amended.

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