Document:

exv10w17

 

Exhibit 10.17

CHANGE OF CONTROL AGREEMENT

     This Change of Control Agreement (the “Agreement”) is made and entered into by and
between William G. Harris (the “Executive”) and XenoPort, Inc., a Delaware corporation (the
“Company”), effective as of November 7, 2007.

RECITALS

     It is expected that the Company from time to time may consider the possibility of an
acquisition by another company or other change of control. The Board of Directors of the Company
(the “Board”) recognizes that such consideration can be a distraction to the Executive and
can cause the Executive to consider alternative employment opportunities. The Board has determined
that it is in the best interests of the Company and its stockholders to assure that the Company
will have the continued dedication and objectivity of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of the Company.

     The Board believes that it is in the best interests of the Company and its stockholders to
provide the Executive with an incentive to continue his employment and to motivate the Executive to
maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

     Certain capitalized terms used in the Agreement are defined in Section 5 below.

     The parties hereto agree as follows:

1. Term of Agreement. This Agreement shall terminate upon the date that all obligations of
the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and the Executive acknowledge that the Executive’s
employment is and shall continue to be at-will. If the Executive’s employment terminates for any
reason, including (without limitation) any termination prior to a Change of Control, the Executive
shall not be entitled to any payments, benefits, damages, awards or compensation other than as
provided by this Agreement, or as may otherwise be available in accordance with written plans or
agreements with the Company.

3. Termination Following a Change of Control.

     (a) Termination Without Cause or Voluntary Termination For Good Reason. In the event
that a Change of Control (as defined below) of the Company occurs, and during the period beginning
on the closing date of the transaction giving rise to such Change of Control and ending twelve (12)
months after such closing date, the Executive’s employment with the Company (or the successor
entity in such Change of Control transaction) is either (1) terminated by the Company (or its
successor entity) without Cause (as defined below) or (2) terminated by the Executive for Good
Reason (as defined below), then the Executive shall be entitled to receive Termination Benefits (as
defined below); provided, however, that in order for the Executive to terminate for Good Reason,
(i) the Executive must provide written notice to the Company (or the successor
entity in the Change of Control transaction) of the existence of the Good Reason condition within
ninety (90) days following

 

 

the initial existence of the Good Reason condition, and (ii) the Company
(or the successor entity in the Change of Control transaction) shall not be required to provide
Termination Benefits if it is able to remedy the Good Reason condition within a period of thirty
(30) days following such notice.

     (b) Payment of Termination Benefits. If the Executive becomes entitled to receive
Termination Benefits pursuant to Section 3(a), the continued payments of base salary, to the extent
of payments made from the date of the Executive’s 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 Internal Revenue Code of 1986, as
amended (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 the Executive’s termination of
employment if the Executive is a “specified employee” within the meaning of Section
409A(a)(2)(B)(i) of the Code at the time of such termination.

4. Certain Additional Payments by the Company.

     (a) If any payment or benefit the Executive would receive pursuant to a Change of Control from
the Company or otherwise would (i) constitute a “parachute payment” within the meaning of Section
280G of the Code (collectively, the “Payment”) and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties payable with respect to
such excise tax (such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then such Payment shall be reduced to an amount that
results in no portion of the Payment being subject to the Excise Tax, provided that such reduction
would not result in a ten percent (10%) or greater reduction in the amount of the Payment.

     If such reduction would result in a ten percent (10%) or greater reduction in the amount of
the Payment, then there shall be no such reduction and the Executive shall be entitled to receive
from the Company an additional payment (a “Gross-Up Payment”) in an amount such that after payment
by the Executive of all taxes (including, without limitation, any income and employment taxes and
any interest and penalties imposed with respect thereto resulting from any improper reporting by
the Company for employment tax purposes) imposed upon the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment; provided,
however, that the maximum amount of any such Gross-Up Payment shall be $3,000,000.00.

     (b) For purposes of determining the amount of the Gross-Up Payment: (1) the Executive shall be
deemed to have paid federal income taxes calculated at the lower rate between:
(i) 35% (which represents the highest marginal rate of federal income taxation applicable to
ordinary income for the 2007 calendar year (the “2007 Federal Tax Rate”)); and (ii) the highest
marginal rate of federal income taxation applicable to ordinary income then in effect for the
calendar year in which the Gross-Up Payment is to be made; (2) the Executive shall be deemed to
have paid applicable state

 

 

income taxes calculated at the lower rate between: (i) 10.3% (which
represents the highest marginal rate of California state income taxation applicable to ordinary
income for the 2007 calendar year, net of the maximum reduction in federal income taxes that could
be obtained from deduction of such state taxes in the 2007 calendar year (the “2007 State Tax
Rate”)); and (ii) the highest marginal rate of California state income taxation applicable to
ordinary income for the calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes that could be obtained from deduction of such state
taxes; and (3) the Excise Tax rate shall be deemed to equal the lower rate between: (i) 20% (which
represents the Excise Tax rate in effect for the 2007 calendar year (the “2007 Excise Tax Rate”));
and (ii) the actual excise tax rate imposed by Section 4999 of the Code, or by comparable laws and
regulations, then in effect for the calendar year in which the Gross-Up Payment is to be made. Any
Gross-Up Payment shall be paid to the Executive by the end of the calendar year following the
calendar year in which the Executive remits the applicable taxes.

     (c) In the event that: (1) the highest marginal rate of federal income taxation applicable to
ordinary income then in effect for the Executive for the calendar year in which the Gross-Up
Payment could be made is higher than the 2007 Federal Tax Rate; (2) the highest marginal rate of
California state income taxation for the Executive’s applicable state income taxes applicable to
ordinary income for the calendar year in which the Gross-Up Payment could be made is higher than
the 2007 State Tax Rate; and/or (3) the actual excise tax rate imposed by Section 4999 of the Code, or
by comparable laws and regulations then in effect, is higher than the 2007 Excise Tax Rate, then
the amount of the Gross-Up Payment shall be determined based upon the 2007 Federal Tax Rate, 2007
State Tax Rate and 2007 Excise Tax Rate as set forth in Section 4(b) unless the Board of Directors
of the Company amends this Agreement with the Executive pursuant to Section 8(b) to specifically
provide that the amount of the Gross-Up Payment shall be determined for purposes of this Agreement
based upon rates higher than the 2007 Federal Tax Rate, 2007 State Tax Rate and/or 2007 Excise Tax
Rate. In the event that the Board of Directors of the Company elects to amend this Agreement as
set forth in this Section 4(c), the Company shall deliver an amendment to this Agreement to the
Executive for review and execution no later than twenty (20) calendar days after the date on which
the Executive’s right to a Payment is triggered (if requested at that time by the Company or the
Executive).

     (d) Any reduction of the Payment provided for in this Section 4 shall occur in the following
order unless the Executive elects in writing a different order (provided, however, that such
election shall be subject to Company approval if made on or after the date on which the event that
triggers the Payment occurs): (i) reduction of cash payments; (ii) cancellation of accelerated
vesting of Stock Rights; and (iii) reduction of employee benefits. In the event that acceleration
of vesting of Stock Rights compensation is to be reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of the Executive’s Stock Rights unless the
Executive elects in writing a different order for cancellation.

     (e) The accounting firm engaged by the Company for general audit purposes as of the day prior
to the effective date of the Change of 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 of 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. The accounting firm engaged to make the determinations hereunder shall provide its

 

 

calculations, together with detailed supporting documentation, to the Company and the Executive
within fifteen (15) calendar days after the date on which the Executive’s right to a Payment is
triggered (if requested at that time by the Company or the Executive) or such other time as
requested by the Company or the Executive. If the accounting firm determines that no Excise Tax is
payable with respect to a Payment, it shall furnish the Company and the Executive with an opinion
reasonably acceptable to the Executive 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 the Company and the Executive.

5. Definition of Terms. The following terms referred to in this Agreement shall have the
following meanings:

          “Cause” shall mean either: (i) any act of personal dishonesty taken by the Executive
in connection with his responsibilities as an Executive and intended to result in substantial
personal enrichment of the Executive; (ii) the conviction of a felony; (iii) a willful act by the
Executive that constitutes gross misconduct and that is injurious to the Company; or (iv) following
delivery to the Executive of a written demand for performance from the Company that describes the
basis for the Company’s belief that the Executive has not substantially performed his duties,
continued violations by the Executive of the Executive’s obligations to the Company that are
demonstrably willful and deliberate on the Executive’s part.

          “Change of Control” means the completion by the Company of a reorganization, merger or
consolidation, in each case with respect to which persons who were the stockholders of the Company
immediately prior to such reorganization, merger or consolidation would not immediately thereafter
own more than 50% of, respectively, the capital stock and the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or consolidated
corporation’s then-outstanding voting securities, or of a liquidation or dissolution of the Company
or of the sale of all or substantially all of the assets of the Company. For purposes hereof, such
Change of Control shall be deemed to have occurred on the date on which the transaction closes.

          “Good Reason” shall mean any of the following conditions arising without the
Executive’s express written consent:

               (i) an assignment to the Executive of material duties or a material reduction of the
Executive’s duties, either of which results in a significant diminution in the Executive’s position
or responsibilities in effect immediately prior to the closing date of the Change of Control
transaction, or the removal of the Executive from such position and responsibilities;

               (ii) a material reduction by the Company (or the successor entity in the Change of Control
transaction) in the base compensation of the Executive as in effect immediately prior to such
reduction; or

               (iii) a relocation of the Executive’s principal place of employment to a facility or a
location more than 40 miles from the Executive’s then present location.

 

 

          “Stock Rights” shall mean all of the Executive’s options, restricted stock, restricted
stock units or rights to acquire vested ownership of shares of Common Stock of the Company under
plans, agreements or arrangements that are compensatory in nature, including, without limitation,
the Company’s 1999 Stock Plan, the Company’s 2005 Equity Incentive Plan and Restricted Stock
Purchase Agreements between the Company and the Executive.

          “Termination Benefits” shall mean (1) all unvested Stock Rights (as defined above)
shall become fully vested as of the effective date of such termination of employment described in
Section 3(a), and (2) the Executive shall continue to receive for a period of twelve (12) months
following the effective date of such termination of employment described in Section 3(a) continued
payment of the greater of the Executive’s base salary in effect immediately prior to (i) such
termination or (ii) the closing date of the transaction giving rise to a Change of Control. In
addition, the Executive shall have the right to convert his health insurance benefits to individual
coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and any
analogous provisions of applicable state law. Should the Executive so elect, the Company shall
reimburse the Executive for twelve (12) months of such health care coverage following the effective
date of such termination of employment described in Section 3(a).

6. Successors.

     (a) Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company’s business and/or assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the absence of a succession.
For all purposes under this Agreement, the term “Company” shall include any successor to the
Company’s business and/or assets that executes and delivers the assumption agreement described in
this Section 6(a) or that becomes bound by the terms of this Agreement by operation of law.

     (b) Executive’s Successors. The terms of this Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees.

7. Notice.

     (a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In
the case of the Executive, mailed notices shall be addressed to the Executive at his home address
most recently communicated to the Company in writing. In the case of the Company, mailed notices
shall be addressed to its corporate headquarters, and all notices shall be directed to the
attention of its Secretary.

     (b) Notice of Termination. Any termination by the Company for Cause or by the
Executive as a result of a voluntary resignation shall be communicated by a notice of termination
to the other party hereto given in accordance with Section 7(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon, shall set forth in

 

 

reasonable detail the facts and circumstances claimed to provide a basis for termination under the
provision so indicated, and shall specify the termination date (which shall be not more than 30
days after the giving of such notice).

     8. Miscellaneous Provisions.

     (a) No Duty to Mitigate. Except as set forth in Section 4, the Executive shall not be
required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such
payment be reduced by any earnings that the Executive may receive from any other source.

     (b) Amendment; Waiver. No provision of this Agreement shall be amended, modified,
waived or discharged unless the amendment, modification, waiver or discharge is agreed to in
writing and signed by the Executive and by an authorized officer of the Company (other than the
Executive). No waiver by either party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a waiver of any other condition
or provision or of the same condition or provision at another time.

     (c) Whole Agreement. No agreements, representations or understandings (whether oral
or written and whether express or implied) that are not expressly set forth in this Agreement have
been made or entered into by either party with respect to the subject matter hereof. This
Agreement represents the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior arrangements and understandings regarding same, including
the provisions set for in Section 7 of that certain offer letter for Executive, dated May 4, 2001.

     (d) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California as applied to agreements entered
into among California residents to be performed entirely within California, without regard to
conflict of laws rules.

     (e) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.

     (f) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.

 

 

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.

	 	 	 	 	 
	COMPANY:	 	XENOPORT, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Ronald W. Barrett
	 

	 	 	 	 
	 

	 	 	 	Ronald W. Barrett, PhD
	 

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	EXECUTIVE:	 	William G. Harris
	 
	 	 	 	 
	 

	 	 	 	/s/ William G. Harris
	 

	 	 	 	 
	 

	 	 	 	William G. Harris
	 

	 	 	 	Senior Vice President of Finance and Chief
Financial Officer

Signature Page to XenoPort, Inc. Change of Control Agreementexv10w18

 

Exhibit 10.18

XENOPORT, INC.

AMENDED AND RESTATED RIEFLIN EMPLOYMENT AGREEMENT

     This Amended and Restated Rieflin Employment Agreement (the “Agreement”) is entered into as of
November 7, 2007, by and between XenoPort, Inc. (the “Company”), and William J. Rieflin
(“Executive”).

     Whereas the Company and Executive entered into that certain Rieflin Employment Agreement,
dated as of June 18, 2004, to provide certain terms and conditions with respect to the employment
of Executive to serve as President of the Company (the “2004 Agreement”); and

     Whereas, the Company and Executive now wish to amend and restate the 2004 Agreement in its
entirety to make the Agreement compliant with Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), and the final regulations issued thereunder.

     Now, Therefore, in consideration of the foregoing and the provisions and mutual promises
herein contained, the parties hereby agree as follows:

     1. Duties and Scope of Employment.

          (a) Effective Date. Executive will commence employment with the Company on the
“Effective Date,” which shall be the later of (i) August 31, 2004 or (ii) one month following the
closing of the acquisition of Tularik Inc. by Amgen Inc. In the event that the closing of the
acquisition of Tularik Inc. by Amgen Inc. does not occur by September 30, 2004, this Agreement
automatically shall be deemed rescinded and terminated (with no obligations due by either party) by
both the Company and Executive, unless both the Company and Executive provide written authorization
to the contrary.

          (b) Positions and Duties. As of the Effective Date, Executive will serve as President
of the Company. Executive will render such business and professional services in the performance
of his duties, consistent with Executive’s position within the Company, as will reasonably be
assigned to him by the Company’s Board of Directors (the “Board”). These duties will initially
include responsibility for all aspects of the following operations of the Company: legal
(including intellectual property), corporate development, business strategy, business development,
human resources, facilities, information technology, and environmental, health and safety. The
Board may modify Executive’s job title and duties, in a manner consistent with Executive’s training
and experience, as it deems necessary and appropriate in light of the Company’s needs and interests
from time to time. The period of Executive’s employment under this Agreement is referred to herein
as the “Employment Term.”

          (c) Obligations. During the Employment Term, Executive will perform his duties
faithfully and to the best of his ability and will devote his full business efforts and time to the
Company. For the duration of the Employment Term, Executive agrees not to actively engage in any
other employment, occupation or consulting activity for any direct or indirect remuneration

 

 

without
the prior approval of the Board. Notwithstanding the foregoing, during the Employment Term,
Executive will be permitted to serve (i) as a consultant to Amgen Inc. with respect to Tularik Inc.
matters and (ii) as a member of up to two boards of directors; provided, however, that such outside
activities will be permitted only to the extent that they do not interfere or conflict with
Executive’s performance of his duties to the Company, as reasonably determined by the Board.

     2. At-Will Employment. The parties agree that Executive’s employment with the Company
will be “at-will” employment and may be terminated at any time with or without cause or notice.
Executive understands and agrees that neither his job performance nor promotions, commendations,
bonuses or the like from the Company give rise to or in any way serve as the
basis for modification, amendment, or extension, by implication or otherwise, of his
employment with the Company.

     3. Compensation.

          (a) Base Salary. During the Employment Term, the Company will pay Executive an annual
salary of $275,000.00 as compensation for his services (the “Base Salary”). The Base Salary will
be paid periodically in accordance with the Company’s normal payroll practices and be subject to
the usual, required withholding. Executive’s salary will be subject to review and adjustments will
be made based upon the Company’s standard practices.

          (b) Bonus. Executive will be entitled to participate in any bonus plan adopted by the
Company for its employees or executive officers on such terms as the Board may determine in its
discretion, including the existing XenoPort, Inc. Bonus Plan. Executive’s target bonus under the
terms of such Bonus Plan for 2004 equals twenty-five percent (25%) of his Base Salary.

          (c) Restricted Stock Grant. Subject to approval of the Board, Executive will be
issued 200,000 shares of the Company’s Common Stock (the “Restricted Stock”) at an issue price per
share equal to the par value of $0.001 per share of such Common Stock, payable by Executive at the
time of issuance, pursuant to the terms of the Company’s standard restricted stock purchase
agreement (the “Purchase Agreement”). In the event Executive’s services to the Company terminate
for any reason (i) on or prior to the six-month anniversary of the Effective Date, the Company will
have the right to repurchase one hundred percent (100%) of the Restricted Stock at the per share
par value price paid by Executive, or (ii) after such six-month anniversary but on or prior to the
one-year anniversary of the Effective Date, the Company will have the right to repurchase fifty
percent (50%) of the Restricted Stock at the per share par value price paid by Executive; provided,
however, that if Executive’s services to the Company are (1) terminated by the Company without
Cause (as defined below) or (2) terminated by Executive for Good Reason (as defined below), during
either of the periods described in clause (i) or (ii) above, the Company shall not have the right
to repurchase any of the Restricted Stock. The delivery of a stock certificate representing any
applicable vested portion of the Restricted Stock following a termination of Executive’s services
to the Company will be subject to Executive signing and not revoking a separation agreement and
release of claims in a form reasonably acceptable to the Company and Executive. No certificate
representing such vested shares will be delivered until the separation agreement and release
agreement becomes effective.

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          (d) Gross-Up Payment. In connection with the grant to Executive of the Restricted
Stock, Executive shall be entitled to receive an additional cash payment (a “Gross-Up Payment”)
from the Company, or the Company shall pay such amount on Executive’s behalf to the applicable
government agency, in the sole discretion of the Company, in an aggregate amount sufficient to pay
(i) Executive’s applicable federal and state personal income tax liability on the initial value of
the Restricted Stock (the “Primary Payment”), (ii) Executive’s applicable federal and state
personal income tax liability on the Primary Payment (the “Secondary Payment”) and
(iii) Executive’s applicable federal and state personal income tax liability on the Secondary
Payment; provided, however, in no event shall the total Gross-Up Payment exceed $68,000. Executive
shall provide the Company with such documentation as it reasonably requests to confirm the
appropriate amount of such Gross-Up Payment and to process the payment thereof.

          (e) Stock Options. Subject to approval of the Board, Executive will be granted the
following stock options, each of which will be, to the extent possible under the $100,000 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): (i) a stock option to purchase 300,000 shares of
the Company’s Common Stock (as adjusted for stock splits, stock dividends and similar
events) (the “First Option”), which will vest monthly as to 1/48th of the shares
subject to the First Option, so that the First Option will be fully vested four (4) years from the
Effective Date, subject to Executive’s continued service to the Company through the relevant
vesting dates and (ii) a stock option to purchase 400,000 shares of the Company’s Common Stock (as
adjusted for stock splits, stock dividends and similar events) (the “Second Option”), which,
subject to the accelerated vesting provisions set forth herein, will cliff vest in full on the
four-year anniversary of the Effective Date, subject to Executive’s continued service to the
Company through the relevant vesting dates; provided, however, that (1) fifty percent (50%) of the
shares subject to the Second Option will accelerate and vest on the earlier to occur of the filing
by the Company of its first registration statement with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, (the “Registration Statement Filing”) or the closing
of a Major Transaction (as defined below), and (2) fifty percent (50%) of the shares subject to the
Second Option will accelerate and vest at the time the Company first achieves a market
capitalization of $500 million (as reasonably determined by the Board prior to the date on which
the Company’s Common Stock is first traded on a national stock exchange or quotation system, or if
the Company’s Common Stock is so traded, then based on the closing sale price of the Company’s
Common Stock on such exchange or system). The First Option and Second Option will have an exercise
price equal to the fair market value of the Company’s Common Stock on the date of grant as
determined by the Board in its sole discretion and will be subject to the terms, definitions and
provisions of the Company’s 1999 Stock Plan (the “Option Plan”) and the related stock option
agreements by and between Executive and the Company (the “Option Agreements”), all of which
documents are incorporated herein by reference.

          (f) Loan. The Company will permit Executive to early exercise the First Option and
Second Option pursuant to restricted stock purchase agreements and to pay the applicable exercise
price (as of the date hereof estimated to be approximately $315,000, based on the current fair
market value of the Company’s Common Stock) with a full recourse promissory note that is further
secured by a pledge of the Company’s Common Stock owned by Executive (the “Loan”). The Loan,
including principal and outstanding interest thereon, will be payable by Executive at the earlier
of (i) immediately upon Executive’s termination of services to the Company or (ii) immediately
prior to

-3-

 

the Registration Statement Filing. The Loan will be reflected in appropriate promissory
note and security agreement documentation, all of which documents are incorporated herein by
reference.

          (g) Additional Restricted Stock Grant. Subject to approval of the Board, Executive
will be issued 700,000 shares of the Company’s Common Stock (the “Additional Restricted Stock”) at
an issue price per share equal to the par value of $0.001 per share of such Common Stock, payable
by Executive at the time of issuance, pursuant to the terms of the Company’s standard restricted
stock purchase agreement (the “Additional Purchase Agreement”). In the event Executive’s services
to the Company terminate for any reason, the Company will have the right to repurchase the
Additional Restricted Stock at the per share par value price paid by Executive; provided, however,
that the Company’s right of repurchase shall lapse with respect to 1/48th of the
Additional Restricted Stock monthly, so that the Additional Restricted Stock will be fully vested
four (4) years from the Effective Date, subject to Executive’s continued service to the Company
through the relevant vesting dates.

          (h) Severance Payment. If, prior to the four-year anniversary of the Effective Date,
Executive’s services to the Company are (1) terminated by the Company without Cause (as defined
below) or (2) terminated by Executive for Good Reason (as defined below), Executive will be
entitled to receive a lump-sum severance payment in an amount calculated as described in
the following sentence (the “Severance Payment”). At the Effective Date, the Severance
Payment will initially equal $141,435, which amount will decrease at a rate of
1/48th of such initial amount per month following the Effective Date until the Severance
Payment would equal zero at the four-year anniversary of the Effective Date. Notwithstanding
anything to the contrary set forth herein, in the event that: (x) the shares of Additional
Restricted Stock purchased by Executive become fully vested prior to the four-year anniversary of
the Effective Date (pursuant to the Change of Control Agreement (as defined below) or otherwise),
then Executive will not be entitled to any Severance Payment described in this Section 3(h); or
(y) Executive is entitled to receive a credit or other reimbursement from the Internal Revenue
Service for taxes paid by Executive on the Additional Restricted Stock, the Severance Payment
described in this Section 3(h) shall be reduced on a dollar-for-dollar basis to the extent of such
credit or reimbursement. The delivery of the Severance Payment following a termination of
Executive’s services to the Company will be subject to Executive signing and not revoking a
separation agreement and release of claims in a form reasonably acceptable to the Company and
Executive. No portion of the Severance Payment will be delivered until such separation agreement
and release agreement becomes effective.

          If Executive becomes entitled to receive any Severance Payment pursuant to this Section 3(h),
the lump-sum payment shall be paid to Executive no later than fifteen (15) days from the date of
Executive’s termination of employment and thus payable pursuant to the “short-term deferral” rule
set forth in Section 1.409A-1(b)(4) of the Treasury Regulations. Notwithstanding the foregoing,
Executive agrees that the Severance Payment, if any, shall be paid in accordance with Section 409A
of the Code 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 the Executive’s termination of employment if the Executive is
a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code at the time of
such termination.

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     4. Employee Benefits. During the Employment Term, Executive will be entitled to
participate in the employee benefit plans currently and hereafter maintained by the Company of
general applicability to other senior executives of the Company. The Company reserves the right to
cancel or change the benefit plans and programs it offers to its employees at any time.

     5. Vacation. Executive will be entitled to paid vacation time in accordance with the
Company’s vacation policy (including, without limitation, its policy relating to maximum accrual),
with the timing and duration of specific vacations mutually and reasonably agreed to by the parties
hereto.

     6. Expenses. The Company will reimburse Executive for reasonable travel,
entertainment or other expenses incurred by Executive in the furtherance of or in connection with
the performance of Executive’s duties hereunder, in accordance with the Company’s expense
reimbursement policy as in effect from time to time.

     7. Change of Control Agreement. At the Effective Date, Executive and the Company
entered into the Change of Control Agreement in the form attached as Exhibit A to the 2004
Agreement (the “2004 Change of Control Agreement”). Effective as of the date hereof, Executive and
the Company shall enter into the Change of Control Agreement in the form attached hereto as Exhibit
A (the “2007 Change of Control Agreement”). The Company and Executive agree that the 2007 Change
of Control Agreement supersedes the 2004 Change of Control Agreement and the 2004 Change of Control
Agreement shall be deemed terminated upon execution of the 2007 Change of Control Agreement.
Effective as of the date hereof, all references to the “Change of Control Agreement” in this
Agreement shall be deemed to refer to the 2007 Change of Control Agreement.

     8. Additional Definitions.

          (a) Cause. For purposes of this Agreement, “Cause” has the meaning set forth in
Section 5 of the Change of Control Agreement.

          (b) Good Reason. For the purposes of this Agreement, “Good Reason” has the meaning
set forth in Section 5 of the Change of Control Agreement.

          (c) Major Transaction. For the purposes of this Agreement, “Major Transaction” means
a transaction approved by the Board with respect to gabapentin or baclofen.

     9. Confidential Information. Executive agrees to enter into the Company’s standard
Employee Proprietary Information Agreement (the “Proprietary Information Agreement”) upon
commencing employment hereunder.

     10. Non-Solicitation. Until the date one (1) year after the termination of
Executive’s employment with the Company for any reason, Executive agrees not, either directly or
indirectly, to solicit, induce, attempt to hire, recruit, encourage, take away, hire any employee
of the Company or cause an employee to leave his employment either to work for Executive or for any
other entity or person. Executive represents that he (i) is familiar with the foregoing covenant
not to solicit, and (ii) is fully aware of his obligations hereunder, including, without
limitation, the reasonableness of the scope of this covenant.

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     11. Assignment. This Agreement will be binding upon and inure to the benefit of (a)
the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any
successor of the Company. Any such successor of the Company will be deemed substituted for the
Company under the terms of this Agreement for all purposes. For this purpose, “successor” means
any person, firm, corporation or other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires all or substantially all of the assets or
business of the Company. None of the rights of Executive to receive any form of compensation
payable pursuant to this Agreement may be assigned or transferred except by will or the laws of
descent and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive’s right to compensation or other benefits will be null and void.

     12. Notices. All notices, requests, demands and other communications called for
hereunder will be in writing and will be deemed given (i) on the date of delivery if delivered
personally, (ii) one (1) day after being sent by a well established commercial overnight service,
or (iii) four (4) days after being mailed by registered or certified mail, return receipt
requested, prepaid and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:

If to the Company:

XenoPort, Inc.

3410 Central Expressway

Santa Clara, CA 95051

Attn: Chief Executive Officer

If to Executive:

at the last residential address known by the Company.

     13. Severability. In the event that any provision hereof becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue
in full force and effect without said provision.

     14. Arbitration.

          (a) General. In consideration of Executive’s service to the Company, its promise to
arbitrate all employment related disputes and Executive’s receipt of the compensation, pay
raises and other benefits paid to Executive by the Company, at present and in the future,
Executive agrees that any and all controversies, claims, or disputes with anyone (including the
Company and any employee, officer, director, shareholder or benefit plan of the Company in their
capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service
to the Company under this Agreement or otherwise or the termination of Executive’s service with the
Company, including any breach of this Agreement, will be subject to binding arbitration under the
Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2,
including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive
agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any
statutory claims under state or federal law, including, but not limited to, claims under Title VII
of the Civil Rights Act of 1964, the

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Americans with Disabilities Act of 1990, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California
Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or
wrongful termination and any statutory claims. Executive further understands that this Agreement
to arbitrate also applies to any disputes that the Company may have with Executive.

          (b) Procedure. Executive agrees that any arbitration will be administered by the
American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner
consistent with its National Rules for the Resolution of Employment Disputes. The arbitration
proceedings will allow for discovery according to the rules set forth in the National Rules for the
Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the
arbitrator will have the power to decide any motions brought by any party to the arbitration,
including motions for summary judgment and/or adjudication and motions to dismiss and demurrers,
prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written
decision on the merits. Executive also agrees that the arbitrator will have the power to award any
remedies, including attorneys’ fees and costs, available under applicable law. Executive
understands the Company will pay for any administrative or hearing fees charged by the arbitrator
or AAA except that Executive will pay the first $125.00 of any filing fees associated with any
arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct
any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s
National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will
take precedence.

          (c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive
and final remedy for any dispute between Executive and the Company. Accordingly, except as
provided for by the Rules, neither Executive nor the Company will be permitted to pursue court
action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not
have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator
will not order or require the Company to adopt a policy not otherwise required by law which the
Company has not adopted.

          (d) Availability of Injunctive Relief. In addition to the right under the Rules to
petition the court for provisional relief, Executive agrees that any party may also petition the
court for injunctive relief where either party alleges or claims a violation of this Agreement or
the Confidentiality Agreement or any other agreement regarding trade secrets, confidential
information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive
relief, the prevailing party will be entitled to recover reasonable costs and attorneys’ fees.

          (e) Administrative Relief. Executive understands that this Agreement does not
prohibit Executive from pursuing an administrative claim with a local, state or federal
administrative body such as the Department of Fair Employment and Housing, the Equal
Employment Opportunity Commission or the workers’ compensation board. This Agreement does,
however, preclude Executive from pursuing court action regarding any such claim.

          (f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive
is executing this Agreement voluntarily and without any duress or undue influence by the Company or
anyone else. Executive further acknowledges and agrees that Executive has carefully

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read this
Agreement and that Executive has asked any questions needed for Executive to understand the terms,
consequences and binding effect of this Agreement and fully understand it, including that Executive
is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been
provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this
Agreement.

     15. Integration. This Agreement, together with the Purchase Agreement, the Option
Plan, the Option Agreements, the Loan, the Additional Purchase Agreement, the 2007 Change of
Control Agreement and the Proprietary Information Agreement, represent the entire agreement and
understanding between the parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral, including the 2004 Agreement and the 2004
Change of Control Agreement. No waiver, alteration, or modification of any of the provisions of
this Agreement will be binding unless in writing and signed by duly authorized representatives of
the parties hereto.

     16. Waiver of Breach. The waiver of a breach of any term or provision of this
Agreement, which must be in writing, will not operate as or be construed to be a waiver of any
other previous or subsequent breach of this Agreement.

     17. Headings. All captions and section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.

     18. Tax Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable taxes.

     19. Governing Law. This Agreement will be governed by the laws of the State of
California (with the exception of its conflict of laws provisions).

     20. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss
this matter with and obtain advice from his private attorney, has had sufficient time to, and has
carefully read and fully understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.

     21. Counterparts. This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will constitute an effective,
binding agreement on the part of each of the undersigned.

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, each of the parties has executed this Amended and Restated Rieflin Employment
Agreement, in the case of the Company by their duly authorized officers, as of the day and year
first above written.

	 	 	 	 	 
	COMPANY:	 	 
	 
	 	 	 	 
	XENOPORT, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Ronald W. Barrett	 	 
	 

	 	 	 	 
	 

	 	Ronald W. Barrett, PhD	 	 
	 

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	EXECUTIVE:	 	 
	 
	 	 	 	 
	/s/ William J. Rieflin
	 	 
	 	 	 
	William J. Rieflin	 	 

[SIGNATURE PAGE TO AMENDED AND RESTATED

RIEFLIN EMPLOYMENT AGREEMENT]

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Exhibit A

2007 Change of Control Agreement

-10-

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