exv10w37






Exhibit 10.37




May 30, 2008



David A. Stamler, M.D.



Dear David:



On behalf of XenoPort, Inc. (the “Company”), I am pleased to invite you to join the Company as
Senior Vice President, Chief Medical Officer. In this position, you will initially report directly
to me. You will be expected to devote all of your business time, attention and energies to the
performance of your duties with the Company. The effective date (the “Effective Date”) of your
employment will be July 15, 2008, or as mutually agreed upon with the Company.



The terms of this offer of employment are as follows:





	1.	 	Compensation. The Company will pay you a starting salary of $29,166.67 per month
(equivalent to $350,000.00 per year), payable in periodic installments on our regular paydays
in accordance with the Company’s standard payroll policies. Your salary will begin as of the
Effective Date of employment. The first and last payment by the Company to you will be
adjusted, if necessary, to reflect a commencement or termination date other than the first or
last working day of a pay period.
	 
	2.	 	Bonuses. The Company will offer you a sign-on bonus in the amount of $50,000.00
(subject to applicable payroll taxes) to be payable on the first payroll date following the
Effective Date of your employment. If you voluntarily terminate your employment prior to the
one year anniversary of the Effective Date, you will return to the Company one hundred percent
(100%) of this bonus.
	 
	3.	 	Bonus Plan. You will be entitled to participate in any bonus plan adopted by the
Company for its employees on such terms as the Company’s Board of Directors (the “Board”) may
determine in its discretion, including the existing XenoPort, Inc. Corporate Bonus Plan. The
target bonus for 2008 at your level is 30%. Under the terms of the plan, target bonus awards
are determined and communicated to eligible employees annually. For the 2008 bonus year, your
bonus will be based entirely on the performance of the Company against its corporate goals.
Starting in 2009, unless modified by the Board in connection with the annual compensation
review of executives and pursuant to the terms of the plan, fifty percent of your bonus will
be based on the performance of the Company against its corporate goals, and 50% of your bonus
will be based on your performance against your individual goals.
	 
	4.	 	Benefits. During the term of your employment, you will be entitled to the Company’s
standard vacation and benefits covering employees, as such may be in effect from time to time.
	 
	5.	 	Moving and Relocation Related Expenses. The Company will reimburse you for customary
relocation expenses actually incurred, such expenses not to exceed $175,000.00 (the
“Relocation Amount”), including (i) closing costs associated with purchasing a home in the Bay
Area, (ii) real estate fees incurred in selling your home in Maryland and (iii) the cost of
packing and shipping your household goods to the Bay Area. Reimbursements for all taxable
expenses will be ‘grossed-up’ to compensate for applicable taxes.
	 
	 	 	If you voluntarily terminate your employment: (i) prior to the one-year anniversary of the
Effective Date, you will return to the Company one hundred percent (100%) of any amounts paid
as the Relocation Amount under this Section 5; or (ii) after the one-year anniversary of the
Effective Date but prior to the two-year anniversary of the Effective Date, you will return
to the





 









 






	 	 	Company fifty percent (50%) of any amounts paid as the Relocation Amount under this Section
5.
	 
	6.	 	Housing Subsidies. In accordance with the Company’s normal payroll practices and
subject to the usual, required withholding:






	 	a.	 	until the earlier to occur of the sale or rental of your current
residence in Maryland or March 31, 2009, the Company will: (i) pay you the cost
of reasonable temporary housing in the Bay Area; and (ii) pay or reimburse you for
reasonable and customary travel expenses, including airline transportation (coach
class), in connection with your services while your family continues to reside in
Maryland; and
	 
	 	b.	 	in connection with your purchase of a new home in the Bay Area, the
Company will negotiate in good faith the terms to pay you additional housing
assistance, which could include either (i) a cash bonus payment when you finalize
a loan with a third-party bank; (ii) monthly housing cash supplements paid for up
to four years; or (iii) some combination of (i) and (ii); provided, however, that
in no event shall the housing assistance provided pursuant to this Section 6(b)
exceed $250,000.00 in the aggregate.






	 	 	Each of these payments (collectively, the “Housing Subsidy”) will be subject to your
continued service to the Company through the relevant payment dates. If you voluntarily
terminate your employment: (i) prior to the one-year anniversary of the Effective Date, you
will return to the Company one hundred percent (100%) of any amounts paid as the Housing
Subsidy under this Section 6; or (ii) after the one-year anniversary of the Effective Date
but prior to the two-year anniversary of the Effective Date, you will return to the Company
fifty percent (50%) of any amounts paid as the Housing Subsidy under this Section 6.
	 
	7.	 	Stock Options. Upon the approval of the Compensation Committee of the Board as soon
as practicable following your Effective Date, you will be granted a stock option, which will
be, to the extent possible under the $100,000.00 rule of Section 422(d) of the Internal
Revenue Code of 1986, as amended (the “Code”), an “incentive stock option” (as defined in
Section 422 of the Code), to purchase 150,000 shares of the Company’s Common Stock (as
adjusted for stock splits, stock dividends and similar events) pursuant to the Company’s 2005
Equity Incentive Plan (the “2005 Plan”) or outside of the 2005 Plan. The exercise price of
such options will be set at the fair market value on the date of grant. Common stock subject
to the option shall vest, assuming uninterrupted full-time service to the Company, over a
4-year period, with 25% of the shares subject to the option vesting one year from your
Effective Date, and 1/48th of the shares subject to the option vesting each month
thereafter subject to your continued service to the Company through the relevant vesting
dates.
	 
	8.	 	Restricted Stock Award. On the first practicable business day of the month following
your Effective Date, you will be granted 10,000 restricted stock units (as adjusted for stock
splits, stock dividends and similar events), which may be settled in stock, pursuant to the
2005 Plan or outside of the 2005 Plan. Such restricted stock units shall vest, assuming
uninterrupted full-time service to the Company, over a four-year period in equal annual
installments, with 25% cliff vesting at each anniversary of the grant date of the restricted
stock award, subject to your continued service to the Company through the relevant vesting
dates.
	 
	9.	 	Severance. If, prior to the two-year anniversary of the Effective Date, your
services to the Company are terminated by the Company without Cause (as defined below) and not
in the





 









 






	 	 	context of a change of control of the Company, you will be entitled to receive
Severance Benefits (as defined below).






	 	 	If you become entitled to receive such Severance Benefits pursuant to this Section 9, the
continued payments of base salary, to the extent of payments made from the date of your
termination of employment through March 15 of the calendar year following such termination,
are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the
Treasury Regulations and thus payable pursuant to the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations; to the extent such payments are made
following said March 15, they are intended to constitute separate payments for purposes of
Section 1.409A-2(b)(2) of the Treasury Regulations made upon an involuntary termination from
service and payable pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations, to
the maximum extent permitted by such provision, with any excess amount being regarded as
subject to the distribution requirements of Section 409A(a)(2)(A) of the Code, including,
without limitation, the requirement of Section 409A(a)(2)(B)(i) of the Code that payment be
delayed until six (6) months after your termination of employment if you are a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code at the time of such
termination.
	 
	 	 	For the purposes of this Section 9, “Cause” shall mean either: (i) any act of personal
dishonesty taken by you in connection with your responsibilities as an officer or employee of
the Company; (ii) the conviction of a felony or misdemeanor involving moral turpitude; (iii)
a willful act that constitutes misconduct and that is injurious to the Company; (iv) conduct
that, in the good faith and reasonable determination of the Board, demonstrates gross
unfitness to serve; or (v) following delivery to you of a written demand for performance from
the Company that describes the basis for the Company’s belief that you have not substantially
performed your duties, continued violations of your obligations to the Company that are
demonstrably willful and deliberate.
	 
	 	 	For purposes of this Section 9, “Severance Benefits” shall mean continued payment of your
base salary in effect immediately prior to such termination of employment for a period of 12
months following the effective date of such termination of employment. In addition, you
shall have the right to continue your health insurance benefits pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and any analogous provisions of
applicable state law. Should you so elect, the Company shall reimburse you for 12 months of
such health care coverage following the effective date of such termination of employment.
	 
	 	 	Notwithstanding the foregoing, the payment of Severance Benefits, if any, pursuant to this
Section 9 will cease immediately and terminate permanently at the earlier of (i) 12 months
following the effective date of such termination of employment and (ii) such time as you
commence full-time employment (or a comparable consulting engagement) after your termination
of employment with the Company.
	 
	 	 	The receipt of any Severance Benefits pursuant to this Section 9 shall be subject to you
executing and not revoking a separation agreement and release of all claims in a form
acceptable to the Company.
	 
	10.	 	At-Will Employment. You should be aware that your employment with the Company is for
no specified period and constitutes “at-will” employment. As a result, you are free to
terminate your employment at any time, for any reason or for no reason. Similarly, the
Company is free to terminate your employment at any time, for any reason or for no reason.





 









 






	11.	 	Proprietary Information Agreement. As a condition of accepting this offer of
employment, you will be required to complete, sign and return the Company’s standard form of
Employee Proprietary Information Agreement (sent under separate cover).






	12.	 	Immigration Laws. For purposes of federal immigration laws, you will be required to
provide to the Company documentary evidence of your identity and eligibility for employment in
the United States. Such documentation must be provided within 3 business days of the
Effective Date, or your employment relationship with the Company may be terminated.
	 
	13.	 	General. This offer letter, the Employee Proprietary Information Agreement, the
XenoPort employee handbook, the stock award agreements covering the grants described in
Sections 7 and 8 above, the Change of Control Agreement, and Indemnification Agreement, when
signed by you, set forth the terms of your employment with the Company and supersede any and
all prior representations and agreements, whether written or oral. This agreement can only be
amended in writing, signed by you and an officer of the Company. Any waiver of a right under
this agreement must be in writing. This agreement will be governed by California law.




We look forward to your joining the Company. If the foregoing terms are agreeable, please indicate
your acceptance by signing the enclosed copy of this letter in the space provided below and
returning it to me, along with your completed and signed Employee Proprietary Information
Agreement. This offer will terminate if not accepted on or before June 23, 2008.




	 	 	 	 	 
	 	Sincerely,

XENOPORT, INC.

 	 
	 	By:  	/s/ William J. Rieflin
 	 
	 	 	William J. Rieflin 	 
	 	 	President 	 
	 



	 	 	 
	AGREED AND ACCEPTED:

	 	DATE
	 
	 	 
	/s/ David A. Stamler

	 	 6/20/08                    
	 

David A. Stamler