Exhibit 10.15
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the
“ Agreement ”) is made and entered into by and
between William J. Rieflin (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 $5,000,000.00.
(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 fede
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