Exhibit 10.3

September 19, 2019

Aron M. Knickerbocker

VIA EMAIL DELIVERY

 

Re:Separation Agreement

Dear Aron:

This letter sets forth the substance of the separation agreement (the
“Agreement”) that Five Prime Therapeutics, Inc. (the “Company”) is offering to
you in connection with your employment transition.

1.Separation.  

(a)This will confirm that you have resigned as President and Chief Executive
Officer of the Company, as a member of the Board of Directors of the Company,
and from all other positions you hold with the Company, with such resignations
to become effective on September 19, 2019 (the “Separation Date”), and the
Company has accepted your resignations.  Accordingly, as of the Separation Date,
you will cease to be employed as or to hold any other roles or positions with
the Company.  You will provide the Company with separate written letters of
resignations confirming the same if and as requested by the Board.

(b)On the Separation Date, the Company will pay you all accrued salary, and all
accrued and unused vacation earned through the Separation Date, subject to
standard payroll deductions and withholdings.  At the same time, the Company
will also pay you any accrued but unused amounts withheld from your salary,
through the Separation Date, for purchase of Company stock under the Company’s
Employee Stock Purchase Plan.  You are entitled to these payments regardless of
whether or not you sign this Agreement.

2.Severance Benefits.  If you timely sign and return this Agreement, allow the
releases set forth herein to become effective, and remain in compliance with all
of your legal and contractual obligations to the Company, then in full
satisfaction of the Company’s obligations under the Executive Severance Benefits
Agreement between you and the Company dated December 30, 2009 (as amended by the
Amendment No. 1 to the Executive Severance Benefits Agreement dated December 5,
2012 and the Amendment No. 2 to the Executive Severance Benefits Agreement dated
January 1, 2018) (collectively, the “Executive Severance Benefits Agreement”),
the Company will provide you with the following severance benefits:

3.Severance Pay.  The Company will make cash severance payments to you equal in
aggregate to (i) your base salary in effect as of the Separation Date, which is
$515,000, and (ii) your annual cash target bonus in effect as of the Separation
Date, which is $257,500 ((i) and (ii) together, the “Severance Pay”).  The
Company will pay the Severance Pay in 24 equal installments of $32,187.50 each
over a 12-month period following the Effective Date on the Company’s regular
payroll schedule, with the first payment occurring on the first regularly
scheduled payday no earlier than one week after the Effective Date (as defined
herein). The Severance Pay shall be subject to standard payroll deductions and
withholdings.

 

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Aron M. Knickerbocker

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(a)Paid COBRA.  To the extent provided by the federal COBRA law or, if
applicable, state insurance laws, and by the Company’s current group health
insurance policies, you will be eligible to continue your group health insurance
benefits at your own expense.  Later, you may be able to convert to an
individual policy through the provider of the Company’s health insurance, if you
wish.  If you timely elect continued coverage under COBRA, the Company will pay
the COBRA premiums to continue your coverage (including coverage for eligible
dependents, if applicable) through the period (the “COBRA Premium Period”)
starting on the Separation Date and ending on the earliest to occur of: (i) 12
months from the Separation Date; (ii) the date you become eligible for group
health insurance coverage through a new employer; or (iii) the date you cease to
be eligible for COBRA continuation coverage for any reason, including plan
termination. In the event you become covered under another employer's group
health plan or otherwise cease to be eligible for COBRA during the COBRA Premium
Period, you must immediately notify the Company in writing of such event.

(b)Equity Acceleration.  Notwithstanding the terms of any agreements governing
the equity awards the Company awarded to you, effective as of the Separation
Date, the Company will accelerate the vesting of your outstanding equity awards
such that 50% of the (i) unvested options to purchase shares of common stock of
the Company (“Shares”) you hold will be deemed vested and exercisable as of the
Separation Date and (ii) unvested restricted Shares you hold will be deemed
vested and no longer subject to forfeiture as of the Separation Date.  Except as
modified by this Section 2(c) and Section 2(e) below, all of your equity awards
shall continue to be governed by the terms of the governing grant or award
agreements with the Company and the applicable equity incentive plan. A table
reflecting the acceleration of your outstanding equity awards is attached hereto
as Exhibit A.

(c)Pro-rated 2019 Annual Bonus.  In addition to the above severance benefits,
although the Company has no obligation to provide any additional benefits, if
you timely sign and return this Agreement, allow the releases set forth herein
to become effective, and remain in compliance with all of your legal and
contractual obligations to the Company, then the Company will allow you to
remain eligible for a 2019 performance bonus, pro-rated to reflect your service
to the Company from January through September 2019 (i.e., 75%).  The
Compensation and Management Development Committee of the Board of Directors will
determine, in good faith, using the same criteria applicable to other senior
executives, your 2019 performance bonus when it determines bonuses for all of
the senior executives at the Company (expected to occur in February 2020), and
the Company will pay you any pro-rated bonus for 2019 that the Company awards,
less deductions and withholdings, by no later than March 15, 2020.

(d)Extended Option Exercise Periods.  As an additional severance benefit, the
Company will extend the exercise periods applicable to any and all vested
options to purchase Shares you hold as of the Separation Date, including any
Shares as to which vesting was accelerated under this Agreement (the “Vested
Options”), so that you will have until December 31, 2020 to exercise the Vested
Options.  This extended exercise period will, 90 days after the Separation Date,
convert any of Vested Options that are incentive stock options (“ISOs”) and “in
the money” (i.e. such Vested Options have a per Share exercise price less than

 

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Aron M. Knickerbocker

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the current fair market value of a Share) into non-qualified stock options, and
will cause any of the other Vested Options that are ISOs (i.e. ISOs with a per
share exercise price equal to or greater than the current fair market value of a
Share) to be treated as newly granted for purposes of the ISO holding periods.
Except as set forth herein, the Company makes no representations regarding any
financial, tax or other impact this extended exercise period may have on the
Vested Options, and you are advised to seek independent advice about such
matters.

4.Other Compensation or Benefits.  You acknowledge that, except as expressly
provided in this Agreement, you will not receive any additional compensation,
severance or benefits after the Separation Date, with the exception of any
vested rights you may have under the express terms of a written ERISA-qualified
benefit plan (e.g., 401(k) account).  You further acknowledge and agree that
upon receipt of the benefits provided herein, you will have received all
severance benefits to which you are entitled, whether under the Executive
Severance Benefits Agreement or otherwise.  Following the Separation Date, the
Company will, in all respects, continue to comply with and be bound by the
Indemnification Agreement between the parties, dated as of September 16, 2013
(the “Indemnification Agreement”), attached hereto as Exhibit B.    

5.Expense Reimbursements.  You agree that within 30 days after the Separation
Date, you will submit your final documented expense reimbursement statement
reflecting all business expenses you incurred through the Separation Date, if
any, for which you seek reimbursement.  The Company will reimburse you for these
expenses pursuant to its regular business practice.

6.Return of Company Property.  On September 20, 2019, you must return to the
Company all Company documents (and all copies thereof) and other Company
property in your possession or control.  You agree to make a diligent search to
locate any such documents, property and information within the timeframe
referenced above.  In addition, if you have used any personally owned computer,
server, or e-mail system to receive, store, review, prepare or transmit any
confidential or proprietary data, materials or information of the Company, then
within five business days after the Separation Date, you must provide the
Company with a computer-useable copy of such information and then permanently
delete and expunge such confidential or proprietary information from those
systems without retaining any reproductions (in whole or in part); and you agree
to provide the Company access to your system, as requested, to verify that the
necessary copying and deletion is done.  Notwithstanding the above or any
provision in any other agreement between you and the Company, including the
CIAA, following the Separation Date you may retain, in hardcopy and/or
electronic format, and use the Microsoft Outlook Contacts and similar contact
information maintained by you as of the Separation Date and may also continue to
maintain and use any personal or professional profile, accounts or contacts
contained on any LinkedIn, Facebook or other social media site or system
maintained by you as of the Separation Date.  In addition, the Company consents
to your continued retention and use following the Separation Date of the Apple
iPhone XS mobile device (serial no. [          ]) (“iPhone XS”) provided to you
for use during your employment with the Company and, in further consideration of
your promises and covenants in this Agreement, hereby transfers to you any and
all right, title and interest the iPhone XS as of the Separation Date; provided,
however,

 

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Aron M. Knickerbocker

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that you shall cooperate with the Company’s IT Department to ensure that all
Company data is removed from the phone.  The Company also agrees to transfer to
you the phone number currently associated with the iPhone XS ([           ]) and
will reasonably assist you, as necessary, in transferring the phone number to
your name.   Your timely compliance with the provisions of this paragraph is a
precondition to your receipt of the severance benefits provided hereunder.

7.Proprietary Information Obligations.  You acknowledge your continuing
obligations under your Employee Confidentiality and Inventions Assignment
Agreement, dated September 3, 2009 (“CIAA”), including your obligations not to
use or disclose any confidential or proprietary information of the Company and
all other restrictive covenants between you and the Company that remain
applicable following the Separation Date.  A copy of the CIAA is attached hereto
as Exhibit C.  Notwithstanding anything in the CIAA or any other agreement
between you and the Company: (a) as used in the CIAA “Confidential Information”
shall not include any information that:  (1) is or becomes generally used in the
industry or publicly available through lawful means and absent any wrongful
conduct by you; (2) was known by you or lawfully in your possession prior to
employment with the Company; or (3) was independently developed or lawfully
disclosed to you by a third party that is unrelated to the Company and is not
bound by obligations of confidentiality to the Company with respect thereto; and
(b) nothing prohibits use of general recruiting advertisements or search firm
services which are not targeted at any specific employee, consultant or
independent contractor of the Company.

8.Mutual Nondisparagement.  You agree not to disparage the Company, and the
Company’s officers, directors, employees, shareholders and agents, in any manner
likely to be harmful to them or their business, business reputations or personal
reputations.  Likewise, the Company agrees to direct its officers and directors
not to disparage you in any manner likely to be harmful to you or your personal
or business reputations or relationships.  Notwithstanding the foregoing,
nothing in this Agreement or any other agreement between the parties prohibits
you or the Company from responding accurately and fully to any request for
information or disclosure of documents if required by law, court order, subpoena
or other legal process, in any criminal, civil, or regulatory proceeding or
investigation, or in any legal dispute between the parties. In addition, nothing
in this provision or this Agreement is intended to prohibit or restrain the
parties in any manner from making disclosures that are protected under the
whistleblower provisions of federal or state law or regulation.  You and the
Company will mutually agree, in advance, on a public statement, as set forth in
Exhibit D attached hereto, to be included in the press release regarding your
departure from the Company to be issued on September 19, 2019.  You will direct
any future requests for an employment reference or verification of your
employment with the Company to the Company’s most senior Human Resources
official and, in response to any such request, the Company’s most senior Human
Resources official will disclose only your dates of employment, last position
held and the contents of Exhibit D.

9.No Voluntary Adverse Action; Cooperation. You agree that you will not
voluntarily provide assistance, information or advice, directly or indirectly
(including through agents or attorneys), to any person or entity in connection
with any proposed or pending litigation, arbitration, administrative claim,
cause of action, or other formal proceeding of any

 

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Aron M. Knickerbocker

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kind brought against the Company, its parent or subsidiary entities, affiliates,
officers, directors, employees or agents, nor shall you induce or encourage any
person or entity to bring any such claims; provided that you may respond
accurately and fully to any question, inquiry or request for information when
required by legal process (e.g., a valid subpoena or other similar compulsion of
law), as part of a government investigation or as otherwise permitted under
Section 7 herein.  In addition, upon reasonable request, you agree to
voluntarily and reasonably cooperate with the Company if you have knowledge of
facts relevant to any existing or future litigation or arbitration initiated by
or filed against the Company by making yourself reasonably available without
further compensation for interviews with the Company or its legal counsel, for
preparing for and providing deposition testimony, and for preparing for and
providing trial testimony.  Within 30 days after your submission of supporting
documentation, the Company will reimburse you for any reasonable and necessary
out-of-pocket expenses you may incur for travel or otherwise in complying with
the cooperation provisions in this Section.

10.No Admissions.  You understand and agree that the promises and payments in
consideration of this Agreement shall not be construed to be an admission of any
liability or obligation by the Company to you or to any other person, and that
the Company makes no such admission.

11.Release of Claims.

(a)General Release.  In exchange for the consideration provided to you under
this Agreement to which you would not otherwise be entitled, you hereby
generally and completely release the Company, and its affiliated, related,
parent and subsidiary entities,  and its and their current and former directors,
officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, insurers, affiliates, and assigns (collectively, the “Released
Parties”) from any and all claims, liabilities and obligations, both known and
unknown, that arise out of or are in any way related to events, acts, conduct,
or omissions occurring prior to or on the date you sign this Agreement
(collectively, the “Released Claims”).  

(b)Scope of Release.  The Released Claims include:  (i) all claims arising out
of or in any way related to your employment with the Company, or the termination
of that employment; (ii) all claims related to your compensation or benefits
from the Company, including salary, bonuses, commissions, vacation, paid time
off, expense reimbursements, severance pay, fringe benefits, stock, stock
options, or any other ownership, equity, or profits interests in the Company;
(iii) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing; (iv) all tort claims, including
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (v) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other
claims arising under the federal Civil Rights Act of 1964 (as amended), the
federal Americans with Disabilities Act of 1990, the federal Age Discrimination
in Employment Act of 1967 (as amended) (the “ADEA”), the California Labor Code
(as amended), and the California Fair Employment and Housing Act (as amended).  

(c)ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving
and releasing any rights you may have under the ADEA, and that the

 

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Aron M. Knickerbocker

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consideration given for the waiver and release in this Section is in addition to
anything of value to which you are already entitled.  You further acknowledge
that you have been advised, as required by the ADEA, that:  (i) your waiver and
release do not apply to any rights or claims, under the ADEA or otherwise, that
may arise after the date that you sign this Agreement; (ii) you should consult
with an attorney prior to signing this Agreement (although you may choose
voluntarily not to do so); (iii) you have 21 days to consider this Agreement
(although you may choose voluntarily to sign it earlier); (iv) you have seven
days following the date you sign this Agreement to revoke this Agreement (by
providing written notice of your revocation to me); and (v) this Agreement will
not be effective until the date upon which the revocation period has expired
unexercised, which will be the eighth day after you sign this Agreement
(“Effective Date”).  

(d)Section 1542 Waiver.  YOU UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS.  In giving the release herein, which includes
claims which may be unknown to you at present, you acknowledge that you have
read and understand Section 1542 of the California Civil Code, which reads as
follows:  “A general release does not extend to claims that the creditor or
releasing party does not know or suspect to exist in his or her favor at the
time of executing the release and that, if known by him or her, would have
materially affected his or her settlement with the debtor or released
party.”  You hereby expressly waive and relinquish all rights and benefits under
that section and any law of any other jurisdiction of similar effect with
respect to your release of any unknown or unsuspected claims herein.

(e)Excluded Claims. Notwithstanding the foregoing, the following are not
included in the Released Claims (the “Excluded Claims”): (i) any rights or
claims for indemnification, and/or contribution, advancement or payment of
related expenses you may have pursuant to the Indemnification Agreement, the
Company’s Bylaws and/or under applicable law; (ii) any rights which are not
waivable as a matter of law; (iii) any rights you may have to any insurance
coverage under any directors and officers liability insurance, other insurance
policies of the Company, COBRA or any similar state law; (iv) any rights you may
have as a shareholder of the Company; and (v) any claims for breach of this
Agreement.  You hereby represent and warrant that, other than the Excluded
Claims, you are not aware of any claims you have or might have against any of
the Released Parties that are not included in the Released Claims.  You
understand that nothing in this Agreement limits your ability to file a charge
or complaint with any Governmental Agency.  While this Agreement does not limit
your right to receive an award for information provided to the Securities and
Exchange Commission, you understand and agree that, to maximum extent permitted
by law, you are otherwise waiving any and all rights you may have to individual
relief based on any claims that you have released and any rights you have waived
by signing this Agreement.

12.Taxes.  The payments and benefits under this Agreement are intended to
qualify for exemptions from the application of Section 409A of the Internal
Revenue Code (“Section 409A”), and this letter will be construed to the greatest
extent possible as consistent with those provisions, and to the extent not so
exempt, this Agreement (and any definitions hereunder) will be construed in a
manner that complies with Section 409A to the extent necessary to avoid

 

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Aron M. Knickerbocker

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adverse taxation under Section 409A. If either you or the Company reasonably
determines that any payment or benefit provided to you under this Agreement or
otherwise will violate Section 409A, you and the Company will use best efforts
to restructure the payment or benefit in a manner that is either exempt from or
compliant with Section 409A.  You and the Company will execute any and all
amendments to this Agreement as may be necessary to ensure compliance with the
distribution provisions of Section 409A in an effort to avoid or minimize, to
the extent allowable by law, the tax (and any interest or penalties thereon)
associated with Section 409A.  If it is determined that a payment under this
Agreement or otherwise was (or may be) made in violation of Section 409A, the
Company will cooperate reasonably with any effort by you to mitigate the tax
consequences of such violation, including cooperation with your participation in
any IRS voluntary compliance program or other correction procedure under Section
409A that may be available to you. 

13.Representations.  You hereby represent that you have been paid all
compensation owed and for all hours worked, have received all the leave and
leave benefits and protections for which you are eligible, pursuant to the
Family and Medical Leave Act or otherwise, and have not suffered any on-the-job
injury for which you have not already filed a claim.  

14.Miscellaneous.  This Agreement, including Exhibits A through D , constitutes
the complete, final and exclusive embodiment of the entire agreement between you
and the Company with regard to the subject matter hereof.  It is entered into
without reliance on any promise or representation, written or oral, other than
those expressly contained herein, and it supersedes any other agreements,
promises, warranties or representations concerning its subject matter.  This
Agreement may not be modified or amended except in a writing signed by both you
and a duly authorized officer of the Company.  This Agreement will bind the
heirs, personal representatives, successors and assigns of both you and the
Company, and inure to the benefit of both you and the Company, their heirs,
successors and assigns.  If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination shall not
affect any other provision of this Agreement and the provision in question shall
be modified so as to be rendered enforceable in a manner consistent with the
intent of the parties insofar as possible under applicable law.  This Agreement,
and all claims or causes of action (whether in contract, tort or statute) that
may be based upon, arise out of or relate to this Agreement, or the negotiation,
execution or performance of this Agreement (including any claim or cause of
action based upon, arising out of or related to any representation or warranty
made in or in connection with this Agreement or as an inducement to enter into
this Agreement), shall be construed and enforced in accordance with the laws of
the State of California without regard to conflicts of law principles.  Any
ambiguity in this Agreement shall not be construed against either party as the
drafter.  Any waiver of a breach of this Agreement, or rights hereunder, shall
be in writing and shall not be deemed to be a waiver of any successive breach or
rights hereunder.  This Agreement may be executed in counterparts which shall be
deemed to be part of one original, and facsimile and signatures transmitted by
PDF shall be equivalent to original signatures.

 

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Aron M. Knickerbocker

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If this Agreement is acceptable to you, please sign below and return the
original to me within 21 days.  The Company’s offer contained herein will
automatically expire if we do not receive the fully signed Agreement within this
timeframe.

I wish you good luck in your future endeavors.

Sincerely,

Five Prime Therapeutics, Inc.

By:  /s Francis Sarena

Francis Sarena

Chief Strategy Officer and Secretary

 

Exhibit A – Table of Equity Acceleration

Exhibit B – Indemnification Agreement

Exhibit C – Employee Confidentiality and Inventions Assignment Agreement

Exhibit D – Mutual Statement

 

Accepted and Agreed:

/s/ Aron M. Knickerbocker

Aron M. Knickerbocker

 

September 19, 2019

Date

 

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Aron M. Knickerbocker

Page 9 of 12

 

 

Exhibit A

 

TABLE OF EQUITY ACCELERATION

 

 

Stock Options

 

Grant Number

Grant Date

Plan/Type

Shares Granted

Vested Shares*

Unvested Shares*

Shares to Accelerate

Total Vested**

00002812

01/02/2012

2010/NQ

4,186

4,186

-

-

4,186

00002816

07/19/2013

2010/NQ

14,735

14,735

-

-

14,735

00002817

08/22/2014

2013/ISO

15,597

15,597

-

-

15,597

00002818

08/22/2014

2013/NQ

34,403

34,403

-

-

34,403

00002819

08/17/2015

2013/ISO

5,565

5,565

-

-

5,565

00002820

08/17/2015

2013/NQ

69,435

69,435

-

-

69,435

00003099

08/25/2016

2013/ISO

2,287

-

2,287

1,144

1,444

00003100

08/25/2016

2013/NQ

57,713

45,000

12,713

6,357

51,357

00003293

09/08/2016

2013/NQ

50,000

37,500

12,500

6,250

43,750

00003591

02/07/2017

2013/ISO

1,667

-

1,667

834

834

00003592

02/07/2017

2013/NQ

38,333

25,833

12,500

6,250

32,083

00003983

10/20/2017

2013/NQ

150,000

68,750

81,250

40,625

109,375

00004014

02/26/2018

2013/NQ

90,000

33,750

56,250

28,125

61,875

00004840

02/25/2019

2013/NQ

170,000

21,250

148,750

74,375

95,625

 

 

 

 

 

 

 

 

TOTALS

 

 

703,921

376,004

327,917

163,960

539,964

 

 

Restricted Stock Awards

 

Grant Number

Grant Date

Plan/Type

Shares Granted

Vested Shares*

Unvested Shares*

Shares to Accelerate

Total Vested**

00003724

02/07/2017

2013/RSA

10,310

6,873

3,437

1,719

8,592

00003841

02/07/2017

2013/RSA

5,767

1,922

3,845

1,923

3,845

00004076

02/26/2018

2013/RSA

15,000

5,000

10,000

5,000

10,000

00004687

02/25/2019

2013/RSA

28,000

-

28,000

14,000

14,000

00004947

06/24/2019

2013/PSA

67,400

-

67,400

33,700

33,700

00004948

06/24/2019

2013/PSA

67,400

-

67,400

33,700

33,700

00004949

06/24/2019

2013/PSA

67,400

-

67,400

33,700

33,700

00004950

06/24/2019

2013/PSA

67,400

-

67,400

33,700

33,700

00004951

06/24/2019

2013/PSA

67,400

-

67,400

33,700

33,700

 

 

 

 

 

 

 

 

TOTALS

 

 

396,077

13,795

382,282

191,142

204,937

 

 

* As of the Separation Date.

** Per Agreement.

 

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Aron M. Knickerbocker

Page 10 of 12

 

 

Exhibit B

Indemnification Agreement

 

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Aron M. Knickerbocker

Page 11 of 12

 

 

Exhibit C

Employee Confidentiality and Inventions Assignment Agreement

 

 

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Aron M. Knickerbocker

Page 12 of 12

 

 

Exhibit D

Mutual Statement