SHARE-BASED COMPENSATION

Share-based compensation expense for all equity awards issued pursuant to the Array BioPharma Amended and Restated Stock Option and Incentive Plan (the "Option and Incentive Plan") and for estimated shares to be issued under the Employee Stock Purchase Plan ("ESPP") for the current purchase period was approximately $8.3 million and $4.7 million for the three months ended March 31, 2019 and 2018, respectively, and $18.7 million and $13.5 million for the nine months ended March 31, 2019 and 2018, respectively.

We use the Black-Scholes option pricing model to estimate the fair value of our share-based awards. In applying this model, we use the following assumptions:


•	Risk-free interest rate - We determine the risk-free interest rate by using a weighted average assumption equivalent to the expected term based on the U.S. Treasury constant maturity rate.


•	Expected term - We estimate the expected term of our options based upon historical exercises and post-vesting termination behavior.


•	Expected volatility - We estimate expected volatility using daily historical trading data of our common stock.


•	Dividend yield - We have never paid dividends and currently have no plans to do so; therefore, no dividend yield is applied.

Option Awards

The fair values of our employee option awards were estimated using the assumptions below, which yielded the following weighted average grant date fair values for the periods presented:



	Nine Months Ended March 31, 2019
	2019	2018
Risk-free interest rate	2.5% - 3.0%	1.6% - 2.4%
Expected option term in years	3.8 - 5.1	3.8 - 4.1
Expected volatility	63.5% - 67.0%	66.1% - 67.3%
Dividend yield	0%	0%
Weighted average grant date fair value	$9.07	$5.81

The following table summarizes our stock option activity under the Option and Incentive Plan for the nine months ended March 31, 2019:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding balance at June 30, 2018	15,326,350		$	7.68
Granted	4,576,163		$	16.15
Exercised	(2,717,053	)	$	5.28
Forfeited	(885,692	)	$	10.88
Expired	(6,000	)	$	6.22
Outstanding balance at March 31, 2019	16,293,768		$	10.29	7.8	$	229,659
Exercisable at March 31, 2019	5,686,232		$	6.87	6.1	$	99,541

The aggregate intrinsic value in the above table is calculated as the difference between the closing price of our common stock at March 31, 2019 of $24.38 per share and the exercise price of the stock options that had strike prices below the closing price. The total intrinsic value of all options exercised was $38.5 million during the nine months ended March 31, 2019. The total intrinsic value of all options exercised during the nine months ended March 31, 2018 was $24.4 million. The grant date fair value of options that vested during the nine months ended March 31, 2019 and 2018 was $12.7 million and $7.0 million, respectively.

As of March 31, 2019, we had approximately $60.7 million of total unrecognized compensation expense related to the unvested stock options shown in the table above, which is expected to be recognized over a weighted average period of 3.1 years.

Restricted Stock Units

The Option and Incentive Plan provides for the issuance of restricted stock units ("RSUs") that each represent the right to receive one share of our common stock, cash or a combination of cash and stock, typically following achievement of time- or performance-based vesting conditions. Our RSU grants that vest subject to continued service over a defined period of time will typically vest between one to four years, with a percentage vesting on each anniversary date of the grant, or they may be vested in full on the date of grant. Vested RSUs will be settled in shares of common stock upon the vesting date, upon a predetermined delivery date, upon a change in control of Array, or upon the employee leaving Array. All outstanding RSUs may only be settled through the issuance of common stock to recipients, and we intend to continue to grant RSUs that may only be settled in stock. RSUs are assigned the value of our common stock at date of grant, and the grant date fair value is amortized over the applicable vesting period.

The following table summarizes the status of our unvested RSUs under the Option and Incentive Plan as of March 31, 2019 and changes during the nine months ended March 31, 2019:



	Number of RSUs		Weighted Average Grant Date Fair Value
Unvested at June 30, 2018	959,730		$	9.28
Granted	617,518		15.87
Vested	(252,108	)	10.46
Forfeited	(64,845	)	12.20
Unvested at March 31, 2019	1,260,295		$	12.12

As of March 31, 2019, we had $13.1 million of total unrecognized compensation cost related to unvested RSUs granted under the Option and Incentive Plan. The cost is expected to be recognized over a weighted-average period of approximately 3.1 years. The fair market value for RSUs that vested during the nine months ended March 31, 2019 and 2018 was $2.6 million and $1.8 million, respectively. RSUs granted during the nine months ended March 31, 2019 and 2018 had a fair value of $9.8 million and $5.8 million, respectively.

Employee Stock Purchase Plan

The ESPP allows qualified employees (as defined in the ESPP) to purchase shares of our common stock at a price equal to 85% of the lower of (i) the closing price at the beginning of the offering period or (ii) the closing price at the end of the offering period. Effective each January 1, a new 12-month offering period begins that will end on December 31 of that year. However, if the closing stock price on July 1 is lower than the closing stock price on the preceding January 1, then the original 12-month offering period terminates, and the purchase rights under the original offering period roll forward into a new six-month offering period that begins July 1 and ends on December 31. As of March 31, 2019, we had 0.7 million shares available for issuance under the ESPP. The Company issued 0.2 million shares under the ESPP during each of fiscal 2019 and 2018.