exv10w39






Exhibit 10.39 


XenoPort, Inc.

New Hire Option Agreement

(Nonstatutory Stock Option)




     Pursuant to your New Hire Stock Option Grant Notice (“Grant Notice”) and this New Hire Option
Agreement (the “Option Agreement”), XenoPort, Inc. (the “Company”) has granted you an option
outside of any equity incentive plan maintained by the Company to purchase the number of shares of
the Company’s Common Stock indicated in your Grant Notice at the exercise price per share indicated
in your Grant Notice.



     The details of your option are as follows:



     1. General. This option may be granted to you only if you are newly employed by the
Company or an Affiliate. In order to be eligible to receive this option, you either (i) must never
have been an Employee or director of the Company or an Affiliate, or (ii) entered into an
employment relationship with the Company following a bona fide period of non-employment. The grant
of this option must be approved either by a majority of Independent Directors or by the Company’s
independent Compensation Committee. Your option is intended to be exempt from stockholder approval
requirements under the “inducement grant exception” provided by NASDAQ Marketplace Rule
4350(i)(1)(A)(iv).



     2. Administration.



          (a) Your option shall be administered by the Board unless and until the Board delegates
administration to a Committee or Committees. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of your option, the powers theretofore
possessed by the Board that have been delegated to the Committee, including the power to delegate
to a subcommittee any of the administrative powers the Committee is authorized to exercise (and
references in this Option Agreement to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions as may be adopted from time to time by the
Board. The Board may retain the authority to concurrently administer your option with the
Committee and may, at any time, revest in the Board some or all of the powers previously delegated.




          (b) The Board shall have the authority to construe and interpret your option and this Option
Agreement, and to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or inconsistency in this
Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make your
option fully effective. All determinations, interpretations and constructions made by the Board in
good faith shall not be subject to review by any person and shall be final, binding and conclusive
on all persons. No member of the Board shall be personally liable for any action,




 









 




determination,
or interpretation made in good faith with respect to this Option Agreement.




     3. Vesting. Subject to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.



     4. Number of Shares and Exercise Price. In the event of any Capitalization
Adjustments, the Board shall appropriately and proportionately adjust the class(es) and number of
securities subject to your option and the exercise price per share referenced in your Grant Notice.



     5. Method of Payment. Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise price in cash or by
check or in any other manner permitted by your Grant Notice, which may include one or more of the
following:



          (a) In the Company’s sole discretion at the time your option is exercised and provided that at
the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street
Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds.




          (b) In the Company’s sole discretion at the time your option is exercised and provided that at
the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street
Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned
shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these
purposes, in the sole discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of Common Stock in a form
approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender
to the Company of Common Stock to the extent such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock.




          (c) In the Company’s sole discretion at the time your option is exercised, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued
upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed
the aggregate exercise price; provided, however, the Company shall accept a cash payment from you
to the extent of any remaining balance of the aggregate exercise price not satisfied by such
holding back of whole shares; provided, however, shares of Common Stock will no longer be
outstanding under your option and will not be exercisable thereafter to the extent that (i) shares
are used to pay the exercise price pursuant to the “net exercise,” (ii)




 









 




shares are delivered to you
as a result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations.
To the extent that whole shares are not withheld, fractional shares will not be issued but will be
settled upon in cash consideration.




     6. Whole Shares. You may exercise your option only for whole shares of Common Stock.



     7. Securities Law Compliance. Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Securities Act. The
exercise of your option also must comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.



     8. Term. You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires upon
the earliest of the following:



          (a) three (3) months after the termination of your Continuous Service for any reason other
than your Disability or death, provided that if during any part of such three (3) month period your
option is not exercisable solely because of the condition set forth in Section 7, your option shall
not expire until the earlier of the Expiration Date indicated in your Grant Notice or until it
shall have been exercisable for an aggregate period of three (3) months after the termination of
your Continuous Service;




          (b) twelve (12) months after the termination of your Continuous Service due to your
Disability;




          (c) eighteen (18) months after your death if you die either during your Continuous Service or
within three (3) months after your Continuous Service terminates;




          (d) twelve (12) months following the effective date of a Change in Control if your Continuous
Service terminates as of or within twelve (12) months following such Change in Control;




          (e) the Expiration Date indicated in your Grant Notice; or




          (f) the day before the tenth (10th) anniversary of the Date of Grant.




     9. Exercise.



          (a) You may exercise the vested portion of your option during its term by delivering a Notice
of Exercise (in a form designated by the Company) together with the exercise price to the Secretary
of the Company, or to such other person as the




 









 




Company may designate, during regular business
hours, together with such additional documents as the Company may then require.




          (b) By exercising your option you agree that, as a condition to any exercise of your option,
the Company may require you to enter into an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, or (ii) the disposition of shares of Common Stock acquired upon such exercise.




     10. Withholding Obligations.



          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for (including by means of a
“cashless exercise” pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign income and employment
tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with
the exercise of your option.




          (b) Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company may withhold from
fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of
the date of exercise; provided, however, that the number of such shares of Common Stock so withheld
shall not exceed the amount necessary to satisfy the Company’s required tax withholding obligations
using the minimum statutory withholding rates for federal, state, local and foreign tax purposes,
including payroll taxes, that are applicable to supplemental taxable income. Any adverse
consequences to you arising in connection with such share withholding procedure shall be your sole
responsibility.




          (c) You may not exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.




     11. Transferability. Your option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you
may designate a third party who, in the event of your death, shall thereafter be entitled to
exercise your option. In addition, you may transfer your option to a trust if you are considered
to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law)
while your option is held in the



 









 







trust, provided that you and the trustee enter into transfer and
other agreements required by the Company.



     12. Dissolution or Liquidation. In the event of a dissolution or liquidation of the
Company, your option shall terminate immediately prior to the completion of such dissolution or
liquidation; provided, however, that the Board may, in its sole discretion, cause your option to
become fully vested and exercisable (to the extent your option has not previously expired or
terminated) before the dissolution or liquidation is completed but contingent on its completion.



     13. Corporate Transaction.



          (a) In the event of a Corporate Transaction, any surviving corporation or acquiring
corporation (or the surviving or acquiring corporation’s parent company) may assume or continue
your option or may substitute a similar stock award for your option (including but not limited to,
awards to acquire the same consideration paid to the stockholders of the Company pursuant to the
Corporate Transaction). A surviving corporation or acquiring corporation may choose to assume or
continue only a portion of
your option or substitute a similar stock award for only a portion of your option. The terms
of any assumption, continuation or substitution shall be set by the Board.




          (b) In the event of a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue your option or substitute a similar
stock award for your option, then if your Continuous Service has not terminated more than three (3)
months prior to the effective time of the Corporate Transaction, the vesting and exercisability of
your option shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated
in full to a date prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is five (5) days
prior to the effective time of the Corporate Transaction), and your option shall terminate if not
exercised at or prior to the effective time of the Corporate Transaction (contingent upon the
effectiveness of the Corporate Transaction).




          (c) In the event of a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue your option or substitute a similar
stock award for your option, then if your Continuous Service has terminated more than three (3)
months prior to the effective time of the Corporate Transaction, the vesting and exercisability of
your option shall not be accelerated and your option shall terminate if not exercised (if
applicable) prior to the effective time of the Corporate Transaction.




          (d) Notwithstanding the foregoing, in the event your option will terminate if not exercised
prior to the effective time of a Corporate Transaction, the Board may provide, in its sole
discretion, that you may not exercise your option but will receive a payment, in such form as may
be determined by the Board, equal in value to the excess, if any, of (i) the value of the property
you would have received upon the exercise




 









 




of your option, over (ii) any exercise price payable by
you in connection with such exercise.




     14. Change In Control. If your Continuous Service terminates within twelve (12)
months following the effective date of a Change in Control due to (i) an involuntary termination
(excluding death or Disability) without Cause, or (ii) a voluntary termination for Good Reason, the
vesting and exercisability of your option shall be accelerated in full.



     15. Best After-Tax Provision. 



          (a) If any payment or benefit you would receive pursuant to a Change in Control from the
Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced
Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would
result in no portion of the Payment being subject to the Excise Tax, or (y) the largest portion, up
to and including the total, of the Payment, whichever amount, after taking into account all
applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all
computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis,
of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute
payments” is
necessary so that the Payment equals the Reduced Amount, reduction shall occur in a manner
necessary to provide you with the greatest economic benefit. If more than one manner of reduction
of payments or benefits necessary to arrive at the Reduced Amount yields the greatest economic
benefit, the payments and benefits shall be reduced pro rata.




          (b) The accounting firm engaged by the Company for general tax purposes as of the day prior to
the effective date of the Change in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall bear all expenses
with respect to the determinations by such accounting firm required to be made hereunder.




          (c) The accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to you and the Company within
fifteen (15) calendar days after the date on which your right to a Payment is triggered (if
requested at that time by you or the Company) or such other time as requested by you or the
Company. If the accounting firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall furnish you and the
Company with an opinion reasonably acceptable to you that no Excise Tax will be imposed with
respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall
be final, binding and conclusive upon you and the Company.




 









 








     16. Option Not a Service Contract. Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective stockholders, boards of directors, officers or Employees
to continue any relationship that you might have as a Director or Consultant for the Company or an
Affiliate.



     17. Notices. Any notices provided for in your option or this Option Agreement shall
be given in writing and shall be deemed effectively given upon receipt or, in the case of notices
delivered by mail by the Company to you, five (5) days after deposit in the United States mail,
postage prepaid, addressed to you at the last address you provided to the Company.



     18. Definitions. For purposes of this Option Agreement, the following definitions
shall apply:



          (a) “Affiliate” means (i) any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation in the unbroken chain (other than
the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain, and (ii) any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting
power of all classes of stock in one of the other corporations in such chain. The Board shall
have the authority to determine (i) the time or times at which the ownership tests are applied, and
(ii) whether “Affiliate” includes entities other than corporations within the foregoing definition.




          (b) “Board” means the Board of Directors of the Company.




          (c) “Capitalization Adjustment” means any change that is made in, or other events that occur
with respect to, the Common Stock subject to your option without the receipt of consideration by
the Company (whether through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate structure, or similar
transaction). Notwithstanding the foregoing, the conversion of any convertible securities of the
Company shall not be treated as a Capitalization Adjustment.




          (d) “Cause” means the occurrence of any of the following: (i) your commission of any felony or
any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any
state thereof; (ii) your attempted commission of, or participation in, a fraud or act of dishonesty
against the Company; (iii) your intentional, material violation of any material contract or
agreement between you and the Company or any statutory duty owed to the Company; (iv) your
unauthorized use or




 









 




disclosure of the Company’s confidential information or trade secrets; (v) your
gross misconduct; (vi) your repeated, unexcused absences from your regularly assigned workplace
where such absences materially interfere with the performance of your duties; (vii) your repeated
or habitual drug or alcohol use that materially interferes with the performance of your duties;
(viii) your gross insubordination; you’re your intentional, material violation of any written
Company policy; or (x) your poor or inadequate performance of your duties. The determination that
a termination is for Cause shall be made by the Company in its sole discretion; provided, however,
that no determination under clauses (vi), (vii), (viii), (ix) or (x) shall be made unless you have
been given a written warning from the Company that the continuation of your conduct shall
constitute Cause and such conduct continues after a reasonable period of time to cure such conduct
following the receipt by you of such written warning. Any determination by the Company that your
Continuous Service was terminated by reason of dismissal without Cause for the purposes of your
option shall have no effect upon any determination of the rights or obligations of the Company or
you for any other purpose.



         (e) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:




               (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person from the Company in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of equity securities
or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”)
exceeds the designated percentage threshold of the outstanding voting securities as a result
of a repurchase or other acquisition of voting securities by the Company reducing the number of
shares outstanding, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting securities that,
assuming the repurchase or other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated percentage threshold,
then a Change in Control shall be deemed to occur;



               (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly
or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%)
of the combined outstanding voting power of the surviving Entity in such merger, consolidation or
similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the surviving Entity in such merger, consolidation or similar



 









 







transaction, in each
case in substantially the same proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;



               (iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company
shall otherwise occur;



               (iv) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated assets of
the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially
the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or



               (v) individuals who, on the date the Company’s 2005 Equity Incentive Plan was adopted by the
Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least
a majority of the members of the Board; provided, however, that if the appointment or election (or
nomination for election) of any new Board member was approved or recommended by a majority vote of
the members of the Incumbent Board then still in office, such new member shall, for purposes of
your option, be considered as a member of the Incumbent Board.



     The term Change in Control shall not include a sale of assets, merger or other transaction
effected principally for the purpose of changing the domicile of the Company.



          (f) “Code” means the Internal Revenue Code of 1986, as amended, as well as any applicable
regulations and guidance thereunder.




          (g) “Committee” means a committee of one (1) or more members of the Board to whom authority
has been delegated by the Board.




          (h) “Common Stock” means the common stock of the Company.




          (i) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or
(ii) serving as a member of the board of directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a “Consultant” for purposes hereunder.




          (j) “Continuous Service” means that your service with the Company or an Affiliate, whether as
an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in
which you render service to the Company or an Affiliate as an Employee, Consultant or Director or a
change in the entity for which you render such service, provided that there is no interruption or
termination of your service with the Company or an Affiliate, shall not terminate your Continuous
Service. For




 









 




example, a change in status from an employee of the Company to a consultant to an
Affiliate or to a Director shall not constitute an interruption of Continuous Service. To the
extent permitted by law, the Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave, military leave or any
other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as
Continuous Service for purposes of vesting in this Award only to such extent as may be provided in
the Company’s leave of absence policy or in the written terms of your leave of absence.




          (k) “Corporate Transaction” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:




               (i) a sale or other disposition of all or substantially all, as determined by the Board in its
sole discretion, of the consolidated assets of the Company and its Subsidiaries;



               (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;



               (iii) the consummation of a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or



               (iv) the consummation of a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.



          (l) “Director” means a member of the Board.




          (m) “Disability” means your permanent and total disability within the meaning of Section
22(e)(3) of the Code.




          (n) “Employee” means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a Director to be
considered an “Employee” for purposes hereunder.




          (o) “Entity” means a corporation, partnership or other entity.




          (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.




          (q) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(i) the Company or any Subsidiary of the Company; (ii) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the




 









 




Company; (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities; (iv) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the effective date of the
Company’s 2005 Equity Incentive Plan, is the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities.




          (r) “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:




               (i) If the Common Stock is listed on any established stock exchange or traded on any
established market, the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or
market (or the exchange or market with the greatest volume of trading in the Common Stock) on the
date in question, as reported in The Wall Street Journal or such other source as the Board deems
reliable. Unless otherwise provided by the Board, if there is no closing sales price (or closing
bid if no sales were reported) for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price (or closing bid if no sales were reported) on the last
preceding date for which such quotation exists.



               (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith.



          (s) “Good Reason” means that one or more of the following are undertaken by the Company
without your express written consent: (i) the assignment to you of any duties or responsibilities
that results in a material diminution in your function as in effect immediately prior to the
effective date of the Change in Control; provided, however, that neither a change in your title or
reporting relationships nor the Common Stock ceasing to be listed on any established stock exchange
or traded on the Nasdaq Global Market or the
Nasdaq Capital Market shall provide the basis for a voluntary termination with Good Reason;
(ii) a material reduction by the Company in your annual base salary, as in effect on the effective
date of the Change in Control or as increased thereafter; provided, however, that Good Reason shall
not be deemed to have occurred in the event of a reduction in your annual base salary that is
pursuant to a salary reduction program affecting substantially all of the employees of the Company
and that does not adversely affect you to a greater extent than other similarly situated employees;
(iii) any failure by the Company to continue in effect any material benefit plan or program,
including incentive plans or plans with respect to the receipt of securities of the Company, in
which you were participating immediately prior to the effective date of the Change in Control
(hereinafter referred to as “Benefit Plans”), or the taking of any action by the Company that would
materially adversely affect your participation in or materially reduce your benefits under the
Benefit Plans or deprive you of any material fringe benefit that you enjoyed immediately prior to
the effective date of the Change in Control;




 









 




provided, however, that Good Reason shall not be
deemed to have occurred if the Company provides for your participation in benefit plans and
programs that, taken as a whole, are comparable to the Benefit Plans; (iv) a relocation of your
business office to a location more than fifty (50) miles from the location at which you performed
your duties as of the effective date of the Change in Control, except for required travel by you on
the Company’s business to an extent substantially consistent with your business travel obligations
prior to the effective date of the Change in Control; or (v) a material breach by the Company of
any provision of this Option Agreement or any other material agreement between you and the Company
concerning the terms and conditions of your employment.




          (t) “Independent Director” means a Director who is an “independent director” within the
meaning of NASDAQ Marketplace Rule 4200.




          (u) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have
“Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.




          (v) “Securities Act” means the Securities Act of 1933, as amended.




          (w) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).




 









 





XenoPort, Inc.

New Hire Stock Option Grant Notice



XenoPort, Inc. (the “Company”), outside of any equity incentive plan maintained by the Company,
hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common
Stock set forth below. This option is subject to all of the terms and conditions as set forth
herein and in the New Hire Stock Option Agreement, and the Notice of Exercise, all of which are
attached hereto and incorporated herein in their entirety.




	 	 	 	 	 
	Optionholder: 

	 	David Stamler
 

	 	 
	Date of Grant: 

	 	July 14, 2008 
 

	 	 
	Vesting Commencement Date: 

	 	July 14, 2008 
 

	 	 
	Number of Shares Subject to Option: 

	 	139,888
 

	 	 
	Exercise Price (Per Share): 

	 	$39.55 
 

	 	 
	Total Exercise Price: 

	 	$5,532,570.40 
 

	 	 
	Expiration Date: 

	 	July 14, 2018 
 

	 	 





	 	 	 
	Type of Grant:

	 	ý Nonstatutory Stock Option
	 
	 	 
	Exercise Schedule:

	 	1/4th of the shares vest and become exercisable one year after the Vesting
Commencement Date; the balance of the shares vest and become exercisable in a series of
thirty-six (36) successive equal monthly installments measured from the first anniversary of
the Vesting Commencement Date.
	 
	 	 
	Payment:

	 	By one or a combination of the following items (described in the New Hire Stock Option
Agreement):
	 
	 	 
	 

	 	ý By cash or check
	 

	 	ý Pursuant to a Regulation T Program if the Shares are publicly traded
	 

	 	ý By delivery of already-owned shares if the Shares are publicly traded
	 

	 	ý By net exercise





Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and
understands and agrees to, this New Hire Stock Option Grant Notice and the New Hire Stock Option
Agreement. Optionholder further acknowledges that as of the Date of Grant, this New Hire Stock
Option Grant Notice, and the New Hire Stock Option Agreement set forth the entire understanding
between Optionholder and the Company regarding the acquisition of stock in the Company and
supersede all prior oral and written agreements on that subject.




	 	 	 	 	 	 	 	 	 
	XenoPort, Inc.	 	Optionholder:	 	 
	 
	 	 	 	 	 	 	 	 
	By:	 	/s/ William G. Harris	 	/s/ David A. Stamler	 	 
	 	 	 	 	   	 	 
	 	 	     William G. Harris	 	Signature
	 	 
	 

	 	     Senior Vice President of Finance and	 	 	 	 	 	 
	 

	 	     Chief Financial Officer
	 	Date: 
	 	8/6/08
 

	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	July 14, 2008	 	 	 	 	 	 






Attachments: New Hire Stock Option Agreement