XENOPORT, INC. AMENDED AND RESTATED RIEFLIN EMPLOYMENT AGREEMENT
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 Xxxxxxx X. Xxxxxxx
(“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automatically shall be deemed rescinded and terminated (with no obligations due by either party) by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, xxxx xxxxx 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
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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.
0000 Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attn: Chief Executive Officer
0000 Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
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/ Xxxxxx X. Xxxxxxx | |||
| Xxxxxx X. Xxxxxxx, PhD | ||||
| Chief Executive Officer | ||||
| EXECUTIVE: | ||||
| /s/ Xxxxxxx X. Xxxxxxx |
||||
| Xxxxxxx X. Xxxxxxx | ||||
[SIGNATURE PAGE TO AMENDED AND RESTATED
RIEFLIN EMPLOYMENT AGREEMENT]
RIEFLIN EMPLOYMENT AGREEMENT]
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Exhibit A
2007 Change of Control Agreement
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