PROXY STATEMENT
OF
CLINTON RELATIONAL OPPORTUNITY MASTER FUND,
L.P.
_________________________
PLEASE SIGN, DATE AND MAIL THE ENCLOSED
GOLD
PROXY CARD TODAY
This Proxy Statement and the enclosed
GOLD
proxy card are being furnished by Clinton Relational Opportunity Master Fund, L.P. (“CREL”), Clinton
Magnolia Master Fund, Ltd. (“CMAG”), GEH Capital, Inc. ("GEHC"), Clinton Relational Opportunity, LLC (“CRO”),
Clinton Group, Inc. (“CGI”), George E. Hall (“Mr. Hall” and together with CREL, CMAG, GEHC, CRO and CGI,
“Clinton,” “we” or “us”) and Clinton’s nominees listed below in connection with the solicitation
of proxies (the “Proxy Solicitation”) from the stockholders of XenoPort, Inc. (“XenoPort” or the “Company”).
For the reasons set forth in this proxy
statement (the “Proxy Statement”), we do not believe that the current board of directors of the Company (the “Board”)
is acting in the best interests of the Company’s stockholders. We are therefore seeking your support at the upcoming annual
meeting of stockholders (the “Annual Meeting”) to be held on Wednesday, June 11, 2014, at 8:00 a.m., local time, at
XenoPort's principal executive offices located at 3410 Central Expressway, Santa Clara, California 95051, with respect to the following
(each, a “Proposal” and, collectively, the “Proposals”):
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1.
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To elect Clinton’s three independent director nominees, Kevin J. Cameron, Rael Mazansky, M.D. and Charles A. Rowland, Jr. (the “Nominees” and together with Clinton, the “Participants”), to serve as Class 3 directors on the Board until the 2017 annual meeting of stockholders and until their respective successors are duly elected and qualified, in opposition to the Company’s three director nominees;
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2.
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To ratify the selection by the audit committee of the Board of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2014;
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3.
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To vote against the Company’s proposal to approve, on an advisory basis, the compensation of XenoPort’s named executive officers;
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4.
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To vote on the Company's proposal to approve the XenoPort, Inc. 2014 Equity Incentive Plan;
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5.
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To adopt a resolution that would repeal any provision of the Bylaws of the Company (the “Bylaws”) in effect at the time of the Annual Meeting that was not included in the Bylaws publicly filed with the Securities and Exchange Commission (the “SEC”) on August 11, 2005 (such bylaws, the “August 2005 Bylaws”), and was not adopted by the Company’s stockholders (the “Bylaw Repeal Proposal”);
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To amend the Bylaws to require that proposals with respect to the performance of each incumbent director who is not up for election at the annual meeting of the Company be submitted for a stockholder vote at such annual meeting and that any incumbent director with respect to whom such
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proposal is not approved or is not submitted for a stockholder vote will not be entitled to annual compensation in excess of $35,000 (the “Incumbent Director Performance Proposal”);
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To amend the Bylaws to require that any director nominee who fails to receive at any annual meeting of the Company’s stockholders votes “For” his or her election representing at least a majority of outstanding shares of the Company entitled to vote will immediately cease to be qualified, and will not be entitled to serve, as an officer of the Company (the “Officer Disqualification Proposal”);
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8.
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To adopt a resolution requesting the Board to take all available steps to amend the Amended and Restated Certificate of Incorporation of the Company (the “Charter”) and Bylaws to eliminate any supermajority stockholder approval vote requirements to amend the Bylaws (the “Supermajority Vote Repeal Proposal”);
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To reject a resolution approving the performance of Paul L. Berns as a director of the Company since the Company’s 2013 annual meeting of stockholders (the “2013 Annual Meeting”);
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10.
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To reject a resolution approving the performance of Dennis M. Fenton as a director of the Company since the 2013 Annual Meeting;
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11.
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To reject a resolution approving the performance of John G. Freund as a director of the Company since the 2013 Annual Meeting;
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12.
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To reject a resolution approving the performance of Catherine J. Friedman as a director of the Company since the 2013 Annual Meeting;
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To reject a resolution approving the performance of Ernest Mario as a director of the Company since the 2013 Annual Meeting;
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To reject a resolution approving the performance of William J. Rieflin as a director of the Company since the 2013 Annual Meeting; and
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15.
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To transact such other business as may properly be brought before the meeting or any adjournment thereof.
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We are seeking to change a minority
of the Board to ensure that the interests of the stockholders are appropriately represented in the boardroom. The Board is currently
composed of nine directors, three of whom are up for election at the Annual Meeting. Through this Proxy Statement and enclosed
GOLD
proxy card, we are soliciting proxies to elect the Nominees. There is no assurance that any of the Company's
nominees will serve or continue to serve as directors if any or all of our Nominees are elected.
If the Company, in response to Clinton’s
nomination of directors, the submission of the Proposals and the filing of this Proxy Statement, makes any changes to its Board,
nominates individuals not on its current Board, amends the Bylaws, submits stockholder proposals (other than those proposed by
Clinton), or takes any other action pertinent to the concerns Clinton has expressed about the Company, Clinton specifically reserves
the right to amend this Proxy Statement, including by substituting and/or increasing the number of its director nominees, proposing
additional amendments to the Bylaws, and/or submitting additional stockholder proposals.
The Company has set the record date
for determining stockholders entitled to notice of and to vote at the Annual Meeting as April 15, 2014 (the “Record Date”).
Stockholders of record at the close of business on the Record Date for the Annual Meeting will be entitled to vote at the Annual
Meeting. As of April 22, 2014, Clinton, together with the other Participants in this Proxy Solicitation, beneficially
owned 965,689 shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company, which represents
approximately 1.6% of the
outstanding Common Stock (based upon the 61,893,750 shares
of Common Stock outstanding as of the Record Date, as reported in the Company’s definitive proxy statement on Schedule 14A
in connection with the Annual Meeting, filed with the SEC on April 22, 2014 (the “Company’s Proxy Statement”)). We
intend to vote such shares of Common Stock
FOR
the election of the Nominees,
FOR
the ratification of the selection
of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December
31, 2014,
AGAINST
the advisory vote on approving executive compensation, to
ABSTAIN
with respect to approval of
the XenoPort, Inc. 2014 Equity Incentive Plan,
FOR
the Bylaw Repeal Proposal,
FOR
the Incumbent Director Performance
Proposal,
FOR
the Officer Disqualification Proposal,
FOR
the Supermajority Vote Repeal Proposal,
AGAINST
the adoption of a proposal approving the performance of Paul L. Berns since the 2013 Annual Meeting,
AGAINST
the adoption
of a proposal approving the performance of Dennis M. Fenton since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal
approving the performance of John G. Freund since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving
the performance of Catherine J. Friedman since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving the
performance of Ernest Mario since the 2013 Annual Meeting and
AGAINST
the adoption of a proposal approving the performance
of William J. Rieflin since the 2013 Annual Meeting, in each case as described herein.
This proxy statement and
GOLD
proxy card are first being mailed or given to the Company’s stockholders on or about [ ], 2014.
THIS PROXY SOLICITATION IS BEING MADE BY THE PARTICIPANTS
AND NOT ON BEHALF OF THE BOARD OR MANAGEMENT OF THE COMPANY OR ANY OTHER THIRD PARTY. THE PARTICIPANTS ARE NOT AWARE
OF ANY OTHER MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING OTHER THAN AS DESCRIBED HEREIN. SHOULD OTHER MATTERS, WHICH
THE PARTICIPANTS ARE NOT AWARE OF A REASONABLE TIME BEFORE THE DATE OF THIS PROXY STATEMENT, BE BROUGHT BEFORE THE ANNUAL MEETING,
THE PERSONS NAMED AS PROXIES IN THE ENCLOSED
GOLD
PROXY CARD WILL VOTE ON SUCH MATTERS IN THEIR DISCRETION.
CLINTON URGES YOU TO SIGN, DATE AND RETURN THE
GOLD
PROXY CARD IN FAVOR OF THE ELECTION OF ITS NOMINEES AND ITS PROPOSALS.
If you have already
voted for the incumbent management slate, you have every right to change your vote. THE LATEST DATED PROXY IS THE ONLY ONE THAT
COUNTS. Any proxy may be revoked at any time prior to the Annual Meeting by delivering a written notice of revocation or a later
dated proxy for the Annual Meeting to
CLINTON RELATIONAL OPPORTUNITY MASTER FUND, L.P., C/O OKAPI PARTNERS LLC, 437 MADISON
AVENUE, 28
TH
FLOOR, NEW YORK, NEW YORK 10022
, which is assisting this proxy
solicitation, or to the Secretary of the Company, or by voting in person at the Annual Meeting.
IMPORTANT
PLEASE READ THIS CAREFULLY
If your shares of Common Stock are registered
in your own name, please vote today by signing, dating and returning the enclosed
GOLD
proxy card in the postage-paid
envelope provided.
If you hold your shares of Common Stock
in “street” name with a bank, broker firm, dealer, trust company or other nominee, only that nominee can exercise the
right to vote with respect to the shares of Common Stock that you beneficially own through such nominee and only upon receipt of
your specific instructions. Accordingly, it is critical that you promptly give instructions to your bank, broker firm, dealer,
trust company or other nominee to vote
FOR
the election of the Nominees,
FOR
the ratification of the selection of
Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December
31, 2014,
AGAINST
the advisory vote on approving executive compensation, to
ABSTAIN
with respect to approval of the
XenoPort, Inc. 2014 Equity Incentive Plan,
FOR
the Bylaw Repeal Proposal,
FOR
the Incumbent Director Performance
Proposal,
FOR
the Officer Disqualification Proposal,
FOR
the Supermajority Vote Repeal Proposal,
AGAINST
the
adoption of a proposal approving the performance of Paul L. Berns since the 2013 Annual Meeting,
AGAINST
the adoption of
a proposal approving the performance of Dennis M. Fenton since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal
approving the performance of John G. Freund since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving
the performance of Catherine J. Friedman since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving the
performance of Ernest Mario since the 2013 Annual Meeting and
AGAINST
the adoption of a proposal approving the performance
of William J. Rieflin since the 2013 Annual Meeting. Please follow the instructions provided on the enclosed
GOLD
proxy card. If your bank, broker firm, dealer, trust company or other nominee provides for proxy instructions to be delivered to
them by telephone or Internet, instructions will be included on the enclosed
GOLD
proxy card. We urge you to confirm
in writing your instructions to the person responsible for your account and provide a copy of those instructions to Clinton Relational
Opportunity Master Fund, L.P., c/o Okapi Partners LLC, 437 Madison Avenue, 28th Floor, New York, New York 10022, so that we will
be aware of all instructions given and can attempt to ensure that such instructions are followed.
Execution and delivery of a proxy by
a record holder of shares of Common Stock will be presumed to be a proxy with respect to all shares held by such record holder
unless the proxy specifies otherwise.
Only holders of record of shares of Common
Stock as of the close of business on the Record Date will be entitled to vote on the Proposals. If you are a stockholder of record
as of the close of business on the Record Date, you will retain your right to vote even if you sell your shares of Common Stock
after the Record Date.
If your shares are held in the name of
a brokerage firm, and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect
to that proposal, the brokerage firm cannot vote the shares on that proposal unless it is a “routine” matter. This
is referred to as a “broker non-vote.” Under the rules and interpretations of the New York Stock Exchange (“NYSE”),
there are no “routine” proposals in a contested proxy solicitation. Even though the Common Stock is listed on the NASDAQ
Global Select Market, the NYSE rules apply to brokers who are NYSE members voting on matters being submitted to stockholders at
the Annual Meeting. Because Clinton has initiated a contested proxy solicitation, there will be no “routine” matters
at the Annual Meeting for any broker accounts that are provided with proxy materials by Clinton.
According to the Company’s proxy
statement in connection with the 2013 Annual Meeting (the “2013 Proxy Statement”), (i) votes “withheld”
will not be counted as votes for or against a director nominee pursuant to Proposal 1, (ii) abstentions will be counted for purposes
of determining the number of shares present in person or represented by proxy and entitled to vote and therefore will have the
same effect as votes “against” a Proposal, (iii) with respect to each Proposal (other than the Incumbent Director Performance
Proposal and the Officer Disqualification Proposal), broker non-votes will not be counted for purposes of determining the number
of shares present in person or represented by proxy and entitled to vote and therefore will have no effect on the outcome of such
Proposal and (iv) with respect to each of the Incumbent Director Performance Proposal and the Officer
Disqualification Proposal, broker non-votes will be counted
for purposes of determining the number of then-outstanding shares entitled to vote at the Annual Meeting and therefore will have
the effect of a vote "against" such Proposals.
If you
have any questions regarding your
GOLD
proxy card or need assistance in executing your proxy, please contact
Okapi
Partners LLC at (212) 297-0720 or Toll-Free at (855) 208-8902
.
INFORMATION ON THE PARTICIPANTS
This Proxy Solicitation is being made
by CREL, a Cayman Islands exempted limited partnership; CMAG, a Cayman Islands exempted company; GEHC, a Delaware corporation;
CRO, a Delaware limited liability company, which serves as the investment manager to CREL; CGI, a Delaware corporation, which serves
as the investment manager to CMAG and is the sole member of CRO; Mr. Hall, a United States citizen, who serves as Chief Executive
Officer of CGI; and each of the Nominees, Kevin J. Cameron, Rael Mazansky, M.D. and Charles A. Rowland.
The principal business of GEHC, CREL
and CMAG is to invest in securities, the principal business of CGI and CRO is to provide investment management services to funds,
private individuals and institutions and the principal business of Mr. Hall is to serve as Chief Executive Officer of CGI. The
principal business of each Nominee is disclosed in the section titled “PROPOSAL 1 – ELECTION OF DIRECTORS” on
page 11.
The principal business address of GEHC,
CRO, CGI and Mr. Hall is 601 Lexington Avenue, 51st Floor, New York, New York 10022. The principal business address of CREL and
CMAG is c/o Credit Suisse Administration Services (Cayman) Ltd., Grand Pavilion Commercial Centre, 802 West Bay Road, Georgetown,
Grand Cayman, Cayman Islands, BWI, KY1-1104. The principal business address of each Nominee is disclosed in the section titled
“PROPOSAL 1 – ELECTION OF DIRECTORS” on page 11.
As of the date of this filing, the Participants
beneficially own an aggregate of 965,689 shares of Common Stock, constituting approximately 1.6% of the shares of Common Stock
outstanding, as follows: (a) 659,512 shares of Common Stock are beneficially owned (as such term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934 (the “Exchange Act”)) by CREL, 575 shares of which are owned by CREL in record
name; (b) 4,700 shares of Common Stock are beneficially owned by CMAG; (c) 45,000 shares of Common Stock are beneficially owned
by GEHC; (d) 659,512 shares of Common Stock may be deemed to be beneficially owned by CRO, by virtue of its investment management
agreement with CREL; (e) 920,689 shares of Common Stock may be deemed to be beneficially owned by CGI, by virtue of investment
management agreement with CMAG, its ownership of CRO and a sub-advisory agreement governing a portion of a mutual fund portfolio
(“CASF”) that beneficially owns 256,477 shares of Common Stock; and (f) 965,689 shares of Common Stock may be deemed
to be beneficially owned by Mr. Hall, by virtue of his direct and indirect control of CGI, CRO, GEHC, CREL and CMAG. No Nominee
owns beneficially or of record any securities of the Company. Please see Annex I for all transactions in Common Stock effectuated
by the Participants during the past two years.
Except as set forth in this Proxy Statement
(including the Annexes hereto), (i) during the past ten years, no Participant has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors); (ii) no Participant in this Proxy Solicitation directly or indirectly beneficially
owns any securities of XenoPort; (iii) no Participant owns any securities of XenoPort which are owned of record but not beneficially;
(iv) no Participant has purchased or sold any securities of XenoPort during the past two years; (v) no part of the purchase price
or market value of the securities of XenoPort owned by any Participant is represented by funds borrowed or otherwise obtained for
the purpose of acquiring or holding such securities; (vi) no Participant is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any securities of XenoPort, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies; (vii) no associate of any Participant owns beneficially, directly or indirectly, any securities
of XenoPort; (viii) no Participant owns beneficially, directly or indirectly, any securities of any parent or subsidiary of XenoPort;
(ix) no Participant or any of his or its associates was a party to any transaction, or series of similar transactions, since the
beginning of XenoPort’s last fiscal year, or is a party to any currently proposed transaction, or series of similar transactions,
to which XenoPort or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $120,000; (x) no Participant
or any of his or its associates has any arrangement or understanding with any person with respect to any future employment by XenoPort
or its affiliates, or with respect to any future transactions to which XenoPort or any of its affiliates will or may be a party;
and (xi) no person, including any of the Participants, who is a party to an arrangement or understanding pursuant to which the
Nominees are proposed to be elected has a substantial interest, direct or indirect, by security holdings or otherwise in any matter
to be acted on as set forth in this Proxy
Statement. There are no material proceedings to which any
Participant or any of his or its associates is a party adverse to XenoPort or any of its subsidiaries or has a material interest
adverse to XenoPort or any of its subsidiaries. With respect to each of the Participants, except as set forth in this Proxy Statement
(including the Annexes hereto), none of the events enumerated in Item 401(f)(1)-(8) of Regulation S-K of the Exchange Act occurred
during the past ten years.
REASONS FOR OUR SOLICITATION
We believe the Company should adopt a
new capital allocation strategy and focus its resources on the development of XP23829 (“829”), the Company’s
novel fumaric acid ester compound and pro-drug for monomethyl fumarate (referred to in this proxy statement as “MMF”).
We also believe the Board should hire a new Chief Executive Officer.
Although
we have not conducted any independent review, based on the details regarding 829 disclosed in the Company's public statements
[1]
about the efficacy of 829, we believe that it is likely that 829 can be developed into an effective drug for the treatment of relapsing-remitting
multiple sclerosis (“MS”) and/or psoriasis. As the Company discussed during such investor call, its early studies suggest
that 829 has a pharmacokinetic profile that nearly matches that of Biogen’s Tecfidera (another MMF pro-drug), but
may produce fewer side effects than Tecfidera. The Company's Chief Executive Officer also indicated
during the September 2013 investor call that such early studies also suggest that it might be possible to create a time-release
formulation of 829 that may have superior, equal or lesser efficacy compared with Tecfidera as a result of providing more constant
exposure to MMF and improving upon Tecfidera’s daily, dual-peak MMF exposure.
We believe 829 may be poised to follow
in the footsteps of other “second generation” biotechnology blockbusters that, even with just small improvements in
efficacy, dosing or side effects, have proven to be substantial clinical and commercial successes. We believe the Company should
therefore focus its efforts on 829 and perform as many clinical studies as possible with its remaining capital.
However, the Company is currently spending
more money, and more of its resources, on another asset. The Company is spending tens of millions of dollars in its commercialization
efforts for gabapentin enacarbil (known as “Horizant” in the United States), the Company’s FDA-approved drug
for the treatment of moderate-to-severe primary restless legs syndrome (“RLS”). In the United States, Horizant has
been on the market for more than two years and has garnered aggregate sales of just $21 million, according to Morgan Stanley Research.
[2]
Given competition from two generic RLS treatments, extended-release versions of gabapentin and other branded RLS treatments, we
believe the RLS market is crowded. Moreover, there is no study of which we are aware that demonstrates comparative clinical advantage
for Horizant relative to these other, more established and (in many cases) less expensive treatment options. We therefore do not
believe Horizant will be a commercial success and, as a result, the Company should not be expending precious capital or human resources
on it.
Based on the foregoing, our view is that
the Company’s current capital allocation is suboptimal. In addition, we believe this problem has plagued the Company’s
operating performance for many years. Indeed, since inception, the Company has spent approximately $750 million with what we view
as no significant commercial success. Not surprisingly, the capital markets have assigned an enterprise value to XenoPort of just
$121 million, despite the Company having spent multiples of that amount on research and development since its inception. Although
the Clinton Group has not devised a new, detailed capital allocation plan, we believe new Board members with financial, investment
and corporate governance experience, such as the Nominees, and a new Chief Executive Officer would facilitate the proper allocation
of capital and ultimately increase stockholder value as a result.
In the meantime, the Common Stock has
not performed well. For the one-, three- and five- year periods ended April 15, 2014, the Common Stock is down 41%, 48% and 77%,
respectively, compared with the Nasdaq Biotechnology Index, which is up 29%, 110% and 238%, respectively, during the same periods.
Investors in the Company’s 2005 initial public offering have lost more than half their investment over the last eight years
while biotechnology stocks, as measured by the Nasdaq Biotechnology Index, have tripled.
[1]
Statements made by Ronald W. Barrett, XenoPort's Chief Executive Officer, during the Company's September 2013 investor conference
call.
[2]
David Friedman, Morgan Stanley Research, Financial Model, February 21, 2014.
Accordingly, we believe it is time for a change
in the composition of the Board and management to help the Company re-orient its capital and efforts to emphasize 829 and the substantial
commercial opportunities the compound affords to the Company's stockholders.
BACKGROUND OF THE PROXY SOLICITATION
On September 26, 2013, we contacted Ronald
Barrett (“Dr. Barrett”), the Chief Executive Officer of XenoPort and discussed our concerns that the Company was misallocating
capital by continuing to invest in the commercialization of Horizant, the Company’s FDA-approved drug for the treatment of
moderate-to-severe primary restless legs syndrome. We expressed our view that the Company should focus its efforts and capital
on the development of 829, the Company’s novel fumaric acid ester compound and pro-drug for monomethyl fumarate.
On October 15, 2013, we issued a public
letter to Dr. Barrett that described in detail our views of the Company’s assets and what we believed to be the best way
for the Company to create value for stockholders. In the letter, we also called for Dr. Barrett to be replaced as Chief Executive
Officer.
On November 18, 2013, we had a conference
call with senior members of the Company’s management team, including Dr. Barrett, during which the management team responded
to our October 15, 2013 letter. Among other things, Dr. Barrett said that he “does not disagree with” our analysis
of the value of 829, as set forth in the October 15, 2013 letter.
On December 13, 2013, we met with two
representatives of the Board, John G. Freund (“Dr. Freund”) and Dennis Fenton, to discuss our October 15, 2013 letter
and our views. The directors indicated that they should be held accountable for capital allocation decisions. We suggested that
the Board should amend the Charter to ensure that stockholders have the opportunity to vote on each director each year, which would
enhance the accountability of the directors.
On December 16, 2013, we wrote a letter
to Dr. Freund, the lead director of the Company, to reiterate our views that the Company was undervalued, Dr. Barrett should be
replaced as Chief Executive Officer of the Company and the Board should make necessary changes to implement annual elections of
members of the Board.
On February 10, 2014, pursuant to the
Bylaws, we delivered notice to XenoPort of our intention to nominate the Nominees and present the Proposals at the Annual Meeting.
On February 13, 2014, counsel to the
Company contacted our outside legal counsel and suggested that the largest stockowners of the Company were supportive of the Company’s
capital allocation approach and strategy.
On February 18, 2014, two members of
the Board, Dr. Freund and Catherine Friedman ("Ms. Friedman"), met with us and proposed a settlement to resolve the potential
proxy contest (the “February 18 Proposal”). We agreed to keep the terms of the February 18 Proposal confidential. We
responded later that day indicating that we did not believe the February 18 Proposal adequately addressed our concerns.
On February 21, 2014, we held another
settlement discussion with Dr. Freund and Ms. Friedman during which the Company proposed a slightly modified settlement that did
not address our concerns about the February 18 Proposal. In response, we made a counter-proposal. The parties agreed to also keep
the terms of these various settlement proposals confidential.
On February 27, 2014, Dr. Freund and
Ms. Friedman contacted us and rejected our counter-proposal, stating that they were unwilling to make any proposals beyond that
which they had proposed on February 21, 2014.
PROPOSAL 5—BYLAW REPEAL PROPOSAL
We are proposing
to
adopt, pursuant to Section 109 of the General Corporation Law of the State of Delaware (the “DGCL”), and Section 45
of Article XIII of the Bylaws, a resolution that would repeal any provision of the Bylaws in effect at the time of the Annual Meeting
that was not included in the August 2005 Bylaws and was not adopted by the Company’s stockholders. We are not aware of any
such provision of the Bylaws that has become effective but it is possible that, prior to the adoption of this resolution, such
a provision could be disclosed and/or become effective.
The following is the text of the proposed
resolution:
“RESOLVED, that any provision
of the Bylaws of XenoPort, Inc. as of the date of effectiveness of this resolution that was not included in the Bylaws publicly
filed with the Securities and Exchange Commission on August 11, 2005, and was not adopted by the stockholders, be and hereby is
repealed.”
We intend to submit the Bylaw Repeal Proposal to repeal
any Bylaw which the Company has adopted or adopts subsequent to the publicly-disclosed Bylaws, as publicly amended, that was not
adopted by the stockholders. In our view, the unilateral adoption by the Board of amendments to the Company's governing documents
without obtaining stockholder approval is contrary to best practices of corporate governance. Therefore, we have submitted the
Bylaw Repeal Proposal to give stockholders, in the event the Company unilaterally amends the Bylaws prior to the Annual Meeting,
the ability to protect their rights as stockholders of the Company by repealing any Bylaw amendments that they were not given a
chance to approve. We believe the only potential disadvantage of adopting this Proposal is that it could have the effect of repealing
any stockholder-friendly provision of the Bylaws adopted by the Board after August 11, 2005 that was not adopted by the stockholders.
However, we are not aware of any such Bylaw provisions that could be repealed upon adoption of this Proposal.
Approval of the Bylaw Repeal Proposal requires the affirmative
vote of at least 66 2/3% of the outstanding shares of Common Stock entitled to vote generally in the election of directors.
WE URGE YOU TO VOTE
FOR
THE BYLAW REPEAL PROPOSAL
PURSUANT TO PROPOSAL 5.
PROPOSAL 6—INCUMBENT DIRECTOR
PERFORMANCE PROPOSAL
We are proposing
to,
pursuant to Section 109 of the DGCL, and Section 45 of Article XIII of the Bylaws, amend Section 24 of Article IV of the Bylaws
to require that a proposal with respect to evaluating the performance of an incumbent director who is not up for election at an
annual meeting of the Company be submitted for a stockholder vote at such annual meeting and that any incumbent director with respect
to which such proposal is not approved or is not submitted for a stockholder vote will not be entitled to annual compensation in
excess of $35,000.
The following is the text of the proposed
resolution:
“RESOLVED, that the following
provision shall be added immediately following the last sentence of Section 24 of Article IV of the Bylaws:
Notwithstanding any other provision
of these Bylaws, (x) if at any annual meeting of stockholders for the election of directors a proposal (precatory or otherwise)
with respect to an incumbent director who has not been nominated for election at such meeting but whose term continues beyond the
date of such meeting to approve the performance since the preceding annual meeting of stockholders or the time at which such director
was elected or appointed to the Board (whichever is later) is not submitted to a vote of stockholders, no such incumbent director
shall be entitled, until such time as such proposal is submitted to a vote of stockholders and is approved by stockholders as provided
in the following clause (y), to compensation as a director in excess of $35,000 per year, or (y) if a proposal to approve the performance
of an incumbent director is submitted to a vote of stockholders (including, for the avoidance of doubt, pursuant to any stockholder
proposal brought under Section 5 of these Bylaws), such incumbent director shall not be entitled to compensation as a director
in excess of $35,000 per year if the proposal to approve such director’s performance is not approved by the affirmative vote
of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon, unless and until the next
annual meeting of stockholders at which the proposal to approve such director’s performance is approved by the affirmative
vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon. For purposes of the
prior sentence, director compensation shall include any and all director fees, whether paid in cash, property (including, without
limitation, shares of stock of the corporation (whether or not subject to restrictions) or rights or options with respect thereto)
or otherwise and whether paid as a retainer, meeting fee, performance fee or otherwise, but shall not include reimbursement for
out-of-pocket costs and expenses actually and reasonably incurred by a director. Notwithstanding any other provisions of these
Bylaws, neither this sentence nor the two preceding sentences shall be amended, altered or repealed by the Board of Directors,
and no provision of the Bylaws inconsistent herewith or therewith shall be adopted by the Board of Directors, unless the same shall
have been approved unanimously by the directors then in office.”
We intend to submit the Incumbent
Director Performance Proposal to allow stockholders of the Company to express their opinion on the performance of each director
on an individual and annual basis and, pursuant to Section 141(h) of the DGCL, to set a maximum amount of permissible annual director
compensation for directors as to whose performance the stockholders’ approval is not sought or whose performance has not
been approved by the stockholders.
Most public companies elect their directors annually. We
believe this is a “best practice” and that it helps to ensure greater director accountability than three-year director
terms on a staggered board. We have requested the Board initiate an amendment to the Charter to provide for one-year director terms,
consistent with market practice. The Board has refused our request to do so and instead believes that a staggered board with three-year
director terms are in the interests of shareholders. Because we strongly disagree and believe that directors should be subject
to annual votes, we are proposing this Incumbent Director Performance Proposal, which would have the effect of allowing stockholders
to vote upon all directors every year.
The Incumbent Director Performance Proposal, if adopted,
will permit stockholders to provide input on the performance of directors whose multi-year terms extend beyond the applicable annual
meeting. We believe stockholders should have the right to voice their opinion on the performance of each member of the Board on
an annual basis. In our view, adoption of the Incumbent Director Performance Proposal will increase stockholder feedback regarding
the Board's actions and lead to greater accountability for directors whose performance is not approved by stockholders.
In the Company Proxy Statement, the Company claims that
the adoption of this Proposal may discourage qualified professionals from being willing to serve on the Board. We disagree. Most
public companies have one-year terms for directors. We do not believe that such companies have any difficulty attracting qualified
directors.
The Company also says that a director who does not garner
the support of a majority of the stockholders, and who, if the Proposal passes, will therefore only be entitled to $35,000 in annual
compensation, may find that compensation inadequate. We believe that if a majority of stockholders do not approve of the performance
of a director, that director should not expect extravagant compensation; in our view, stockholders would likely prefer that the
unapproved director resign.
We believe the advantage of adopting this Proposal is that
it will result in greater accountability of the Company's directors to XenoPort stockholders. The disadvantage to adopting this
Proposal is that one or more incumbent directors or potential director nominees may not wish to serve on the Board if their performance
is required to be reviewed annually by stockholders.
Approval of the
Incumbent
Director Performance
Proposal requires the affirmative vote of at least 66 2/3% of the outstanding
shares of Common Stock entitled to vote generally in the election of directors.
WE URGE YOU TO VOTE
FOR
THE
INCUMBENT DIRECTOR PERFORMANCE
PROPOSAL PURSUANT
TO PROPOSAL 6.
PROPOSAL 7—OFFICER DISQUALIFICATION
PROPOSAL
We are proposing
to,
pursuant to Section 109 of the DGCL, and Section 45 of Article XIII of the Bylaws, amend subsection (a) of Section 28 of Article
V of the Bylaws to require that any director nominee who fails to receive at an annual meeting of the Company’s stockholders
votes “For” his or her election representing at least a majority of outstanding shares of the Company entitled to vote
will immediately cease to be qualified, and will not be entitled to serve, as an officer of the Company.
The following is the text of the proposed
resolution:
“RESOLVED, that the following
provision shall be added immediately following the last sentence of subsection (a) of Section 28 of Article V of the Bylaws:
Notwithstanding anything to
the contrary set forth in these Bylaws, and unless such action would violate or result in a default (which shall not be deemed
to result from suffering a “Qualifying Termination” or other similar event) under the terms of any agreement entered
into by the corporation prior to February 10, 2014, any person who has been nominated for election as a director at any meeting
of stockholders (including the 2014 annual meeting of stockholders) and who shall have failed to receive at such election votes
“For” his or her election representing a majority of the outstanding shares of the corporation entitled to vote on
the election of such director shall immediately cease to be qualified as, and shall not be entitled to serve as, an officer of
the corporation. Notwithstanding any other provisions of these Bylaws, neither this sentence nor the preceding sentence shall be
amended, altered or repealed by the Board of Directors, and no provision of the Bylaws inconsistent herewith or therewith shall
be adopted by the Board of Directors, unless the same shall have been approved unanimously by the directors then in office.”
We intend to submit the Officer Disqualification Proposal
to establish an additional qualification for officers of the Company in the Bylaws as permitted by Section 142(b) of the DGCL.
As used in connection with this Proposal, the term "officer" is intended to refer to an "officer" as defined
in Rule 16a-1(f) under the Exchange Act.
We believe that if a majority
of the Company's stockholders do not support a nominee for director, that nominee should not be qualified to serve as an officer
of the Company. In our view, if less than a majority of the stockholders have determined at an annual meeting that they want a
particular individual to serve as their fiduciary in a director capacity, the same individual should not be entitled to serve the
Company or its stockholders in any fiduciary capacity, including as an officer of the Company.
The immediate practical effect of
the Officer Disqualification Proposal, if adopted,
will
be to give stockholders the opportunity to determine whether
Dr. Barrett
should be permitted to continue to serve as Chief Executive Officer if he fails to win votes representing at least a majority of
outstanding shares in favor of his re-election to the Board at the Annual Meeting.
We believe Dr. Barrett should be replaced as the Chief Executive
Officer. The Board has refused to do so. This Proposal essentially provides the stockholders the opportunity to express their views
on Dr. Barrett’s role as Chief Executive Officer.
More generally, the advantage of adopting this Proposal
is that Company stockholders will have direct input into whether a person who is nominated as a director can also serve as an officer
of the Company. The disadvantage of adopting this Proposal is that if a sitting officer of the Company nominated for election to
the Board fails to garner the support of stockholders representing a majority of outstanding shares of Common Stock, that individual
will no longer be able to serve as an officer of the Company, which could cause the Company to have a vacant officer position until
such individual can be replaced.
Approval of the
Officer
Disqualification
Proposal requires the affirmative vote of at least 66 2/3% of the outstanding
shares of Common Stock entitled to vote generally in the election of directors.
WE URGE YOU TO VOTE
FOR
THE
OFFICER DISQUALIFICATION
PROPOSAL PURSUANT
TO PROPOSAL 7.
PROPOSAL 8—SUPERMAJORITY VOTE
REPEAL PROPOSAL
We are
proposing
to adopt a stockholder resolution requesting the Board to take all available steps to amend the Charter and the Bylaws to eliminate
any supermajority stockholder approval vote requirements to amend the Bylaws.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby request the Board of Directors to take necessary and/or available steps
to amend the Amended and Restated Certificate of Incorporation of the Corporation and the Amended and Restated Bylaws of the Corporation,
as applicable, to eliminate any supermajority stockholder vote requirements in respect of amendments to the Bylaws and to provide,
in lieu thereof, that amendments to the Bylaws may be authorized by the affirmative vote of a majority of the stockholders present
in person or by proxy at a meeting and entitled to vote thereon.”
We intend to submit the Supermajority Vote Repeal Proposal
in order to request that the Board take all necessary and available action to will grant stockholders the right to amend the Bylaws
by the vote of a majority of the stockholders present in person or by proxy at a meeting and entitled to vote on amendments to
the Bylaws. Currently, a supermajority vote of 66 2/3% of the outstanding shares of Common Stock entitled to vote is required
for the Company’s stockholders to amend the Bylaws.
We believe that supermajority voting requirements are not
in the interests of stockholders, who should instead be able to modify the Bylaws by simple majority vote. We have submitted this
Proposal to stockholders so that, if adopted, the stockholders can amend the Bylaws in the future with a simple majority vote,
which we believe is more consistent with the majority of public companies and with best practices in corporate governance.
The advantage of adopting this Proposal is that, if adopted,
the Board will be on notice that the Company's stockholders would like the Board to amend the Bylaws to provide that a simple majority
vote of stockholders can amend the Bylaws, which may influence the Board to take action by amending the vote threshold for stockholder
amendments to the Bylaws. The disadvantage of adopting the Proposal is that the Board will be asked to change the existing methodology
for adopting amendments to the Bylaws, and if the Board does not take action to satisfy the stockholders' request, such inaction
could lead to greater hostility between the Board and the Company's stockholders.
Approval of the Supermajority Vote Repeal Proposal requires
the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote.
WE URGE YOU TO VOTE
FOR
THE
SUPERMAJORITY VOTE REPEAL PROPOSAL PURSUANT TO PROPOSAL 8.
PROPOSAL 9—PERFORMANCE OF PAUL
L. BERNS SINCE THE 2013 ANNUAL MEETING
We are
proposing
to vote against a stockholder resolution approving the performance of Paul L. Berns as a director of the Company since the 2013
Annual Meeting.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby approve of the performance of Paul L. Berns as a director of the Corporation
since the 2013 annual meeting of stockholders.”
We intend to submit this Proposal in order to allow stockholders
to express their opinion on the performance of Mr. Berns, who is not up for election at the Annual Meeting because his term of
office continues beyond the Annual Meeting.
During 2013, the Common Stock was down more than 30%, while
the Nasdaq Bitoechnology Index was up more than 60%, and the Company lost $85 million on revenue of $8 million. During the period
beginning on May 15, 2013 (i.e. the day after the 2013 Annual Meeting) and ending on April 15, 2014, the Common Stock was down
37% while the Nasdaq Biotechnology Index rose approximately 18%.
We believe this difference in performance is due to poor
strategic decisions made by the Board and management team relating to the continued investment of Company resources in Horizant
and the failure to focus fully on the development of 829. We believe stockholders should disapprove of Mr. Berns’ performance
during 2013 on this basis.
We also note that Mr. Berns has served on the Board since
November 28, 2005. Since Mr. Berns joined the Board (through April 15, 2014), the price of Common Stock is down approximately 67%
while the Nasdaq Biotechnology Index is up approximately 189%. Furthermore, since January 2006, the Company has incurred aggregate
losses of nearly $400 million. During this period, Mr. Berns has received nearly $1.3 million in compensation from the Company.
[4]
Approval of this Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote. This Proposal is precatory in nature and will not have any
binding effect on the Company unless the Incumbent Director Performance Proposal is approved by stockholders, in which case, Mr.
Berns' compensation will be limited to $35,000 per year if this Proposal is not approved by a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
WE URGE YOU TO VOTE
AGAINST
APPROVAL OF THE PERFORMANCE
OF PAUL L. BERNS SINCE THE 2013 ANNUAL MEETING PURSUANT TO PROPOSAL 9.
[4]
Aggregate compensation derived from data compiled by S&P Capital IQ based on information publicly disclosed by XenoPort in
its proxy statements on Schedule 14A filed with the SEC during the relevant time period.
PROPOSAL 10—PERFORMANCE OF DENNIS
M. FENTON SINCE THE 2013 ANNUAL MEETING
We are
proposing
to vote against a stockholder resolution approving the performance of Dennis M. Fenton as a director of the Company since the 2013
Annual Meeting.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby approve of the performance of Dennis M. Fenton as a director of the Corporation
since the 2013 annual meeting of stockholders.”
We intend to submit this Proposal in order to allow stockholders
to express their opinion on the performance of Dr. Fenton, who is not up for election at the Annual Meeting because his term of
office continues beyond the Annual Meeting.
During 2013, the Common Stock was down more than 30%, while
the Nasdaq Bitoechnology Index was up more than 60%, and the Company lost $85 million on revenue of $8 million. During the period
beginning on May 15, 2013 (i.e. the day after the 2013 Annual Meeting) and ending on April 15, 2014, the Common Stock was down
37% while the Nasdaq Biotechnology Index rose approximately 18%.
We believe this difference in performance is due to poor
strategic decisions made by the Board and management team relating to the continued investment of Company resources in Horizant
and the failure to focus fully on the development of 829. We believe stockholders should disapprove of Dr. Fenton's performance
during 2013 on this basis.
We also note that Dr. Fenton has served on the Board since
August 13, 2009. Since Dr. Fenton joined the Board (through April 15, 2014), the price of Common Stock is down approximately 79%
while the Nasdaq Biotechnology Index is up approximately 185%. Furthermore, since October 2009, the Company has incurred aggregate
losses of nearly $250 million. During this period, Dr. Fenton has received more than $740,000 in compensation from the Company.
[5]
Approval of this Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote. This Proposal is This Proposal is precatory in nature and
will not have any binding effect on the Company unless the Incumbent Director Performance Proposal is approved by stockholders,
in which case, Dr. Fenton's compensation will be limited to $35,000 per year if this Proposal is not approved by a majority of
the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
WE URGE YOU TO VOTE
AGAINST
APPROVAL OF THE PERFORMANCE
OF DENNIS M. FENTON SINCE THE 2013 ANNUAL MEETING PURSUANT TO PROPOSAL 10.
[5]
Aggregate compensation derived from data compiled by S&P Capital IQ based on information publicly disclosed by XenoPort
in its proxy statements on Schedule 14A filed with the SEC during the relevant time period.
PROPOSAL 11—PERFORMANCE OF JOHN
G. FREUND SINCE THE 2013 ANNUAL MEETING
We are
proposing
to vote against a stockholder resolution approving the performance of John G. Freund as a director of the Company since the 2013
Annual Meeting.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby approve of the performance of John G. Freund as a director of the Corporation
since the 2013 annual meeting of stockholders.”
We intend to submit this Proposal in order to allow stockholders
to express their opinion on the performance of Dr. Freund, who is not up for election at the Annual Meeting because his term of
office continues beyond the Annual Meeting.
During 2013, the Common Stock was down more than 30%, while
the Nasdaq Bitoechnology Index was up more than 60%, and the Company lost $85 million on revenue of $8 million. During the period
beginning on May 15, 2013 (i.e. the day after the 2013 Annual Meeting) and ending on April 15, 2014, the Common Stock was down
37% while the Nasdaq Biotechnology Index rose approximately 18%.
We believe this difference in performance is due to poor
strategic decisions made by the Board and management team relating to the continued investment of Company resources in Horizant
and the failure to focus fully on the development of 829. Dr. Freund also serves as the Company's Lead Director and should be held
responsible for the strategic decisions of the Company. We believe stockholders should disapprove of Dr. Freund’s performance
during 2013 on this basis.
We also note that Dr. Freund has served on the Board since
1999 (prior to the Company’s initial public offering) and has served as the Lead Director since July 2008. Since the Company’s
initial public offering (and through April 15, 2014), the price of Common Stock is down approximately 60% while the Nasdaq Biotechnology
Index is up approximately 233%. Furthermore, since inception, the Company has incurred total losses of more than $500 million.
Since 2006, Dr. Freund has received more than $1.3 million in compensation from the Company.
[6]
Approval of this Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote. This Proposal is precatory in nature and will not have any
binding effect on the Company unless the Incumbent Director Performance Proposal is approved by stockholders, in which case, Dr.
Freund's compensation will be limited to $35,000 per year if this Proposal is not approved by a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
WE URGE YOU TO VOTE
AGAINST
APPROVAL OF THE PERFORMANCE
OF JOHN G. FREUND SINCE THE 2013 ANNUAL MEETING PURSUANT TO PROPOSAL 11.
[6]
Aggregate compensation derived from data compiled by S&P Capital IQ based on information publicly disclosed by XenoPort in
its proxy statements on Schedule 14A filed with the SEC during the relevant time period.
PROPOSAL 12—PERFORMANCE OF CATHERINE
J. FRIEDMAN SINCE THE 2013 ANNUAL MEETING
We are
proposing
to vote against a stockholder resolution approving the performance of Catherine J. Friedman as a director of the Company since
the 2013 Annual Meeting.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby approve of the performance of Catherine J. Friedman as a director of the
Corporation since the 2013 annual meeting of stockholders.”
We intend to submit this Proposal in order to allow stockholders
to express their opinion on the performance of Ms. Friedman, who is not up for election at the Annual Meeting because her term
of office continues beyond the Annual Meeting.
During 2013, the Common Stock was down more than 30%, while
the Nasdaq Bitoechnology Index was up more than 60%, and the Company lost $85 million on revenue of $8 million. During the period
beginning on May 15, 2013 (i.e. the day after the 2013 Annual Meeting) and ending on April 15, 2014, the Common Stock was down
37% while the Nasdaq Biotechnology Index rose approximately 18%.
We believe this difference in performance is due to poor
strategic decisions made by the Board and management team relating to the continued investment of Company resources in Horizant
and the failure to focus fully on the development of 829. We believe stockholders should disapprove of Ms. Friedman’s performance
during 2013 on this basis.
We also note that Ms. Friedman has served on the Board since
September 6, 2007. Since Ms. Friedman joined the Board (through April 15, 2014), the price of Common Stock is down approximately
89% while the Nasdaq Biotechnology Index is up approximately 171%. Furthermore, since October 2007, the Company has incurred aggregate
losses of $358 million. During this period, Ms. Friedman has received more than $1.4 million in compensation from the Company.
[7]
Approval of this Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote. This Proposal is precatory in nature and will not have any
binding effect on the Company unless the Incumbent Director Performance Proposal is approved by stockholders, in which case, Ms.
Friedman's compensation will be limited to $35,000 per year if this Proposal is not approved by a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
WE URGE YOU TO VOTE
AGAINST
APPROVAL OF THE PERFORMANCE
OF CATHERINE J. FRIEDMAN SINCE THE 2013 ANNUAL MEETING PURSUANT TO PROPOSAL 12.
[7]
Aggregate compensation derived from data compiled
by S&P Capital IQ based on information publicly disclosed by XenoPort in its proxy statements on Schedule 14A filed with the
SEC during the relevant time period.
PROPOSAL 13—PERFORMANCE OF ERNEST
MARIO SINCE THE 2013 ANNUAL MEETING
We are
proposing
to vote against a stockholder resolution approving the performance of Ernest Mario as a director of the Company since the 2013
Annual Meeting.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby approve of the performance of Ernest Mario as a director of the Corporation
since the 2013 annual meeting of stockholders.”
We intend to submit this Proposal in order to allow stockholders
to express their opinion on the performance of Dr. Mario, who is not up for election at the Annual Meeting because his term of
office continues beyond the Annual Meeting.
During 2013, the Common Stock was down more than 30%, while
the Nasdaq Bitoechnology Index was up more than 60%, and the Company lost $85 million on revenue of $8 million. During the period
beginning on May 15, 2013 (i.e. the day after the 2013 Annual Meeting) and ending on April 15, 2014, the Common Stock was down
37% while the Nasdaq Biotechnology Index rose approximately 18%.
We believe this difference in performance is due to poor
strategic decisions made by the Board and management team relating to the continued investment of Company resources in Horizant
and the failure to focus fully on the development of 829. We believe stockholders should disapprove of Dr. Mario’s performance
during 2013 on this basis.
In 2013, Dr. Mario was initially re-nominated by the Company
for election to the board of directors of VIVUS, Inc. However, immediately prior to VIVUS's 2013 annual meeting, he resigned as
a director of VIVUS in connection with the settlement of an ongoing contested proxy solicitation between VIVUS and certain of its
stockholders. He currently serves on six public company boards of directors and two private company boards. As a result, we believe
Dr. Mario serves on too many boards of directors.
Approval of this Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote. This Proposal is precatory in nature and will not have any
binding effect on the Company unless the Incumbent Director Performance Proposal is approved by stockholders, in which case, Dr.
Mario's compensation will be limited to $35,000 per year if this Proposal is not approved by a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
WE URGE YOU TO VOTE
AGAINST
APPROVAL OF THE PERFORMANCE
OF ERNEST MARIO SINCE THE 2013 ANNUAL MEETING PURSUANT TO PROPOSAL 13.
PROPOSAL 14—PERFORMANCE OF WILLIAM
J. RIEFLIN SINCE THE 2013 ANNUAL MEETING
We are
proposing
to vote against a stockholder resolution approving the performance of William J. Rieflin as a director of the Company since the
2013 Annual Meeting.
The following is the text of the proposed
resolution:
“RESOLVED, that the stockholders
of XenoPort, Inc. (the “Corporation”) hereby approve of the performance of William J. Rieflin as a director of the
Corporation since the 2013 annual meeting of stockholders.”
We intend to submit this Proposal in order to allow stockholders
to express their opinion on the performance of Mr. Rieflin, who is not up for election at the Annual Meeting because his term of
office continues beyond the Annual Meeting.
During 2013, the Common Stock was down more than 30%, while
the Nasdaq Bitoechnology Index was up more than 60%, and the Company lost $85 million on revenue of $8 million. During the period
beginning on May 15, 2013 (i.e. the day after the 2013 Annual Meeting) and ending on April 15, 2014, the Common Stock was down
37% while the Nasdaq Biotechnology Index rose approximately 18%.
We believe this difference in performance is due to poor
strategic decisions made by the Board and management team relating to the continued investment of Company resources in Horizant
and the failure to focus fully on the development of 829. We believe stockholders should disapprove of Mr. Reiflin’s performance
during 2013 on this basis.
We also note that Mr. Reiflin has served on the Board since
September 17, 2010. Since Mr. Reiflin joined the Board (through April 15, 2014), price of Common Stock is down approximately 40%
while the Nasdaq Biotechnology Index is up 157%. Furthermore, since October 2010, the Company has incurred aggregate losses of
nearly $165 million.
Approval of this Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote. This Proposal is precatory in nature and will not have any
binding effect on the Company unless the Incumbent Director Performance Proposal is approved by stockholders, in which case, Mr.
Rieflin's compensation will be limited to $35,000 per year if this Proposal is not approved by a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the Annual Meeting.
WE URGE YOU TO VOTE
AGAINST
APPROVAL OF THE PERFORMANCE
OF WILLIAM J. RIEFLIN SINCE THE 2013 ANNUAL MEETING PURSUANT TO PROPOSAL 14.
VOTING AND PROXY PROCEDURES
Only stockholders of record on the Record
Date will be entitled to notice of and to vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote. Stockholders are not entitled to cumulative voting rights. Stockholders who sell shares of Common Stock before
the Record Date (or acquire them without voting rights after the Record Date) may not vote such shares of Common Stock. Stockholders
of record on the Record Date will retain their voting rights in connection with the Annual Meeting even if they sell such shares
of Common Stock after the Record Date. Based on publicly available information, including the 2013 Proxy Statement,
we believe that the only outstanding class of securities of the Company entitled to vote at the Annual Meeting is the Common Stock.
Shares of Common Stock represented by
properly executed
GOLD
proxy cards will be voted at the Annual Meeting as marked and, in the absence of specific
instructions, will be voted
FOR
the election of the Nominees,
FOR
the ratification of the selection of Ernst &
Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2014,
AGAINST
the advisory vote on approving executive compensation, to
ABSTAIN
with respect to approval of the XenoPort, Inc. 2014 Equity
Incentive Plan,
FOR
the Bylaw Repeal Proposal,
FOR
the Incumbent Director Performance Proposal,
FOR
the Officer
Disqualification Proposal,
FOR
the Supermajority Vote Repeal Proposal,
AGAINST
the adoption of a proposal approving
the performance of Paul L. Berns since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving the performance
of Dennis M. Fenton since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving the performance of John
G. Freund since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving the performance of Catherine J. Friedman
since the 2013 Annual Meeting,
AGAINST
the adoption of a proposal approving the performance of Ernest Mario since the 2013
Annual Meeting and
AGAINST
the adoption of a proposal approving the performance of William J. Rieflin since the 2013 Annual
Meeting and in the discretion of the persons named as proxies on all other matters as may properly come before the Annual Meeting.
Based on publicly available information,
we believe the current Board intends to nominate three candidates for election as directors at the Annual Meeting. This
Proxy Statement is soliciting votes to elect only our three Nominees. Accordingly, the enclosed
GOLD
proxy card may
only be voted for our Nominees and does not confer voting power with respect to the Company’s nominees. The Participants
intend to vote all of their shares of Common Stock in favor of the Nominees.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
According to the 2013 Proxy Statement,
stockholders holding at least a majority of the outstanding shares must be present at the Annual Meeting in person or represented
by proxy in order to have the required quorum for the transaction of business. Votes cast by proxy or in person at the Annual Meeting
will be tabulated by an inspector of election.
Based on the Company's Proxy Statement,
(i) votes “withheld” will not be counted as votes for or against a director nominee pursuant to Proposal 1, (ii) abstentions
will be counted for purposes of determining the number of shares present in person or represented by proxy and entitled to vote
and therefore will have the same effect as votes “against” a Proposal, (iii) with respect to each Proposal (other than
the Incumbent Director Performance Proposal and the Officer Disqualification Proposal), broker non-votes will not be counted for
purposes of determining the number of shares present in person or represented by proxy and entitled to vote and therefore will
have no effect on the outcome of such Proposal and (iv) with respect to each of the Incumbent Director Performance Proposal and
the Officer Disqualification Proposal, broker non-votes will be counted for purposes of determining the number of then-outstanding
shares entitled to vote at the Annual Meeting and therefore will have the effect of a vote "against" such Proposals.
VOTES REQUIRED FOR APPROVAL
Election of Directors
─
According to the Company's Proxy Statement, the three nominees for director receiving the most “FOR” votes from the
holders of shares present in person or represented by proxy and entitled to vote on the election of directors will be elected as
directors of the Company.
Bylaw
Repeal Proposal, Incumbent Director Performance Proposal and Officer Disqualification Proposal
─ According to
the Company's Proxy Statement, approval of the Bylaw Repeal Proposal (Proposal 5), Incumbent Director Performance Proposal (Proposal
6) and Officer Disqualification Proposal (Proposal 7) will each require the affirmative vote of at least 66 2/3% of the outstanding
shares of Common Stock entitled to vote generally in the election of directors.
Ratification
Of Independent Registered Public Accounting Firm, Advisory Vote on Executive Compensation, XenoPort, Inc. 2014 Equity Incentive
Plan, Supermajority Vote Repeal Proposal, Performance of Paul L. Berns, Performance of Dennis M. Fenton, Performance of John G.
Freund, Performance of Catherine J. Friedman, Performance of Ernest Mario and Performance of William J. Rieflin
─ According
to the Company's Proxy Statement, approval of ratification of the appointment of the Company’s independent registered public
accounting firm (Proposal 2), the advisory vote on executive compensation (Proposal 3), the XenoPort, Inc. 2014 Equity Incentive
Plan (Proposal 4), the Supermajority Vote Repeal Proposal (Proposal 8), performance of Paul L. Berns (Proposal 9), performance
of Dennis M. Fenton (Proposal 10), performance of John G. Freund (Proposal 11), performance of Catherine J. Friedman (Proposal
12), and performance of Ernest Mario (Proposal 13), performance of William J. Rieflin (Proposal 14) will each require the affirmative
vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.
IF YOU WISH TO VOTE FOR THE ELECTION OF OUR NOMINEES TO
THE BOARD, FOR THE APPOINTMENT OF ERNST & YOUNG, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM,
AGAINST THE COMPANY’S PROPOSAL ON EXECUTIVE COMPENSATION, TO ABSTAIN WITH RESPECT TO APPROVAL OF THE XENOPORT, INC. 2014
EQUITY INCENTIVE PLAN, FOR
THE BYLAW REPEAL PROPOSAL, FOR THE INCUMBENT DIRECTOR PERFORMANCE PROPOSAL, FOR THE OFFICER DISQUALIFICATION
PROPOSAL, FOR THE SUPERMAJORITY VOTE REPEAL PROPOSAL, AGAINST THE APPROVAL OF THE PERFORMANCE OF PAUL L. BERNS SINCE THE 2013 ANNUAL
MEETING, AGAINST THE APPROVAL OF THE PERFORMANCE OF DENNIS M. FENTON SINCE THE 2013 ANNUAL MEETING, AGAINST THE APPROVAL OF THE
PERFORMANCE OF JOHN G. FREUND SINCE THE 2013 ANNUAL MEETING, AGAINST THE APPROVAL OF THE PERFORMANCE OF CATHERINE J. FRIEDMAN SINCE
THE 2013 ANNUAL MEETING, AGAINST THE APPROVAL OF THE PERFORMANCE OF ERNEST MARIO SINCE THE 2013 ANNUAL MEETING AND AGAINST THE
APPROVAL OF THE PERFORMANCE OF WILLIAM J. RIEFLIN SINCE THE 2013 ANNUAL MEETING, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED
GOLD
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
APPRAISAL/DISSENTER RIGHTS
Stockholders are not entitled to appraisal
or dissenters’ rights under Delaware law in connection with the Proposals or this Proxy Statement.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant
to this Proxy Solicitation is being made by Clinton and the Nominees. Proxies may be solicited by mail, facsimile, telephone, telegraph,
Internet, in person and by advertisements.
Clinton will solicit proxies from individuals,
brokers, banks, bank nominees and other institutional holders. Clinton has requested banks, brokerage houses and other custodians,
nominees and fiduciaries to forward all solicitation materials to the beneficial owners of the shares of Common Stock they hold
of record. Clinton will reimburse these record holders for their reasonable out-of-pocket expenses in so doing.
The entire expense of soliciting proxies
is being borne by the Participants. Costs of the Proxy Solicitation are currently estimated to be approximately $500,000. Clinton
estimates that through the date hereof, expenses incurred in connection with the Proxy Solicitation are approximately $150,000.
If successful, we may seek reimbursement of these costs from the Company. In the event that we decide to seek reimbursement of
our expenses, we do not intend to submit the matter to a vote of the Company’s stockholders. The Board would be required
to evaluate the requested reimbursement consistent with their fiduciary duties to the Company and its stockholders. Costs related
to the solicitation of proxies include expenditures for attorneys, advisors, printing, advertising, postage and related expenses
and fees.
CGI has retained Okapi Partners LLC (“Okapi”)
to provide solicitation and advisory services in connection with this solicitation. Okapi will receive a fee not to exceed $[●],
together with reimbursement for its reasonable out-of-pocket expenses, and will be indemnified by CGI against certain liabilities
and expenses, including certain liabilities under the federal securities laws. Okapi will solicit proxies from individuals,
brokers, banks, bank nominees and other institutional holders. It is anticipated that Okapi will employ approximately 35 persons
to solicit the Company’s stockholders as part of this solicitation. Okapi does not believe that any of its directors,
officers, employees, affiliates or controlling persons, if any, is a “participant” in this Proxy Solicitation.
Important Notice Regarding the Availability of this Proxy
Statement
This Proxy Statement and all other solicitation
materials in connection with this Proxy Solicitation are available on the Internet, free of charge, at [________].
Information Concerning XenoPort
Clinton has omitted from this Proxy Statement
certain disclosure required by applicable law to be included in the Company’s Proxy Statement in reliance on Rule 14a-5(c)
of the Exchange Act. Such disclosure includes, among other things, information regarding securities of the Company beneficially
owned by the Company’s directors, nominees and management; certain stockholders’ beneficial ownership of more than
5% of the Company’s voting securities; information concerning executive compensation; and information concerning the procedures
for submitting stockholder proposals and director nominations intended for consideration at the 2015 annual meeting of stockholders
and for consideration for inclusion in the proxy materials for that meeting. If the Company does not distribute the Company's Proxy
Statement to shareholders at least ten days prior to the Annual Meeting, Clinton will distribute to the shareholders a supplement
to this proxy statement containing such disclosures at least ten days prior to the Annual Meeting. Clinton takes no responsibility
for the accuracy or completeness of information contained in the Company’s Proxy Statement. Except as otherwise noted herein,
the information in this Proxy Statement concerning the Company has been taken from or is based upon documents and records on file
with the SEC and other publicly available information. Although Clinton does not have any knowledge indicating that any statement
contained herein is untrue, we do not take responsibility, except to the extent imposed by law, for the accuracy or completeness
of statements taken from public documents and records that were not prepared by or on behalf of Clinton, or for any failure of
the Company to disclose events that may affect the accuracy or completeness of such information.
Conclusion
We urge you to carefully consider the
information contained in this Proxy Statement and then support our efforts by signing, dating and returning the enclosed
GOLD
proxy card today.
|
Thank you for your support,
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|
|
CLINTON RELATIONAL OPPORTUNITY MASTER FUND, L.P.
|
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CLINTON MAGNOLIA MASTER FUND, LTD.
|
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GEH CAPITAL, INC.
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CLINTON RELATIONAL OPPORTUNITY, LLC
|
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CLINTON GROUP, INC.
|
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GEORGE E. HALL
|
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KEVIN J. CAMERON
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RAEL MAZANSKY, M.D.
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CHARLES A. ROWLAND, JR.
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[_________], 2014
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ANNEX I
TRANSACTIONS BY THE PARTICIPANTS IN
THE SECURITIES OF XENOPORT, INC. DURING THE PAST TWO YEARS
The following tables set forth all transactions effected
during the past two years by the Participants with respect to securities of the Company. The shares of Common Stock reported herein
are held in either cash accounts or margin accounts in the ordinary course of business.
Common Stock
CASF
Trade Date
|
Shares Purchased (Sold)
|
7/11/2013
|
4,237
|
7/19/2013
|
1,000
|
9/13/2013
|
6,200
|
9/30/2013
|
29,986
|
10/3/2013
|
3,500
|
10/14/2013
|
5,000
|
12/31/2013
|
(5,000)
|
1/6/2014
|
(3,446)
|
1/15/2014
|
40,000
|
1/16/2014
|
25,000
|
1/21/2014
|
25,000
|
1/22/2014
|
30,000
|
1/24/2014
|
15,000
|
1/29/2014
|
50,000
|
3/7/2014
|
5,000
|
3/13/2014
|
20,000
|
3/20/2014
|
5,000
|
CREL
Trade Date
|
Shares Purchased (Sold)
|
6/7/2013
|
12,500
|
6/10/2013
|
12,500
|
6/11/2013
|
30,750
|
6/12/2013
|
22,500
|
6/13/2013
|
22,500
|
6/17/2013
|
12,500
|
6/18/2013
|
8,760
|
6/20/2013
|
5,000
|
7/10/2013
|
12,500
|
7/11/2013
|
16,942
|
9/10/2013
|
20,550
|
9/13/2013
|
41,800
|
9/16/2013
|
11,506
|
9/20/2013
|
3,900
|
9/24/2013
|
14,482
|
9/25/2013
|
20,320
|
9/26/2013
|
4,280
|
9/27/2013
|
16,560
|
9/30/2013
|
9,997
|
10/1/2013
|
6,700
|
10/2/2013
|
10,560
|
10/3/2013
|
20,000
|
10/4/2013
|
(4,720)
|
10/4/2013
|
12,480
|
10/7/2013
|
76,600
|
10/8/2013
|
32,000
|
10/9/2013
|
9,837
|
10/10/2013
|
32,000
|
10/11/2013
|
24,500
|
10/14/2013
|
15,000
|
10/18/2013
|
(1,898)
|
10/18/2013
|
53,100
|
11/7/2013
|
10,000
|
11/8/2013
|
(5,600)
|
11/15/2013
|
(52,700)
|
12/20/2013
|
(7,600)
|
12/23/2013
|
(12,343)
|
12/26/2013
|
100,000
|
12/31/2013
|
(24,950)
|
1/3/2014
|
86,559
|
1/6/2014
|
(31,010)
|
1/13/2014
|
25,000
|
1/22/2014
|
21,000
|
1/24/2014
|
35,000
|
2/3/2014
|
25,000
|
2/20/2014
|
34,150
|
2/21/2014
|
36,000
|
2/28/2014
|
(70,000)
|
3/7/2014
|
20,000
|
3/19/2014
|
25,000
|
3/20/2014
|
15,000
|
3/31/2014
|
(155,000)
|
CMAG
Trade
Date
|
Shares
Purchased (Sold)
|
10/8/2013
|
20,000
|
10/9/2013
|
10,450
|
10/11/2013
|
10,500
|
10/14/2013
|
7,000
|
10/18/2013
|
15,000
|
12/31/2013
|
(20,050)
|
1/16/2014
|
25,000
|
1/17/2014
|
(42,900)
|
1/21/2014
|
76,800
|
1/22/2014
|
9,000
|
1/23/2014
|
10,176
|
2/7/2014
|
72,800
|
2/10/2014
|
50,000
|
2/13/2014
|
5,000
|
2/20/2014
|
34,150
|
2/21/2014
|
500
|
2/24/2014
|
(17,391)
|
2/26/2014
|
(91,600)
|
2/27/2014
|
(46,376)
|
2/28/2014
|
70,000
|
3/18/2014
|
(10,000)
|
3/19/2014
|
(35,000)
|
3/20/2014
|
(30,000)
|
3/31/2014
|
155,000
|
4/14/2014
|
(45,903)
|
4/15/2014
|
(100,000)
|
4/16/2014
|
(50,000)
|
4/17/2014
|
(77,456)
|
GEHC
Trade
Date
|
Shares
Purchased (Sold)
|
3/20/2014
|
25,000
|
4/22/2014
|
20,000
|
Dr. Mazansky
Trade
Date
|
Shares
Purchased (Sold)
|
6/5/2013
|
2,000
|
10/14/2013
|
2,000
|
3/24/2014
|
(4,000)
|
Option Agreements
From time to time over the past year, Clinton has entered
into option contracts with respect to the Company's stock. The expiration dates on these options ranged from June 22, 2013 through
March 22, 2014, and strike prices ranged from $5.00 to $6.00. The number of option contracts has ranged from zero to 4,883 (representing
488,300 shares of Common Stock) at times throughout the year.
[FORM OF PROXY CARD]
PRELIMINARY COPY – SUBJECT TO
COMPLETION
DATED APRIL 23, 2014
PROXY OF STOCKHOLDERS OF XENOPORT,
INC. (THE “COMPANY”) IN CONNECTION WITH THE COMPANY’S 2014 ANNUAL MEETING OF STOCKHOLDERS:
THIS
PROXY SOLICITATION IS BEING MADE BY
CLINTON RELATIONAL OPPORTUNITY MASTER FUND, L.P.,
CLINTON MAGNOLIA MASTER FUND, LTD., GEH CAPITAL, INC., CLINTON RELATIONAL OPPORTUNITY, LLC, CLINTON GROUP, INC. AND GEORGE E. HALL
(COLLECTIVELY, “CLINTON”), TOGETHER WITH
KEVIN J. CAMERON, RAEL MAZANSKY, M.D.
AND CHARLES A. ROWLAND, JR.
(COLLECTIVELY, THE “NOMINEES”)
THIS SOLICITATION IS BEING MADE BY
CLINTON AND THE NOMINEES AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OR THE COMPANY
The undersigned appoints [ ]
and [ ],
and each of them, attorneys and agents with full power of substitution to vote all shares of common stock, par value $0.001 per
share (the “Common Stock”), of the Company, which the undersigned would be entitled to vote if personally present at
the 2014 Annual Meeting of Stockholders of the Company scheduled to be held on Wednesday, June 11, 2014, at 8:00 a.m., local time,
at XenoPort's principal executive offices located at 3410 Central Expressway, Santa Clara, California 95051 (including at any adjournments
or postponements thereof and at any meeting called in lieu thereof, the “Annual Meeting”).
The undersigned hereby revokes any other proxy or proxies
heretofore given to vote or act with respect to the shares of Common Stock of the Company held by the undersigned, and hereby ratifies
and confirms all action the herein named attorneys and proxies, their substitutes, or any of them may lawfully take by virtue hereof. If
properly executed, this proxy will be voted as directed on the reverse and in the discretion of the herein named attorneys and
proxies or their substitutes with respect to any other matters as may properly come before the Annual Meeting that are unknown
to Clinton a reasonable time before this solicitation.
IF NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS
ON THE REVERSE, THIS PROXY WILL BE VOTED “FOR ALL NOMINEES” PURSUANT TO PROPOSAL 1, “FOR” PROPOSAL 2, “AGAINST”
PROPOSAL 3, TO "ABSTAIN" WITH RESPECT TO PROPOSAL 4, “FOR” PROPOSAL 5, “FOR” PROPOSAL 6, “FOR”
PROPOSAL 7, “FOR” PROPOSAL 8, “AGAINST” PROPOSAL 9, “AGAINST” PROPOSAL 10, “AGAINST”
PROPOSAL 11, “AGAINST” PROPOSAL 12, “AGAINST” PROPOSAL 13, AND “AGAINST” PROPOSAL 14.
This proxy will be valid until the sooner of one year from
the date indicated on the reverse side and the completion of the Annual Meeting.
|
1.
|
THE ELECTION OF
KEVIN J. CAMERON, RAEL MAZANSKY, M.D. AND CHARLES A. ROWLAND, JR. TO SERVE AS CLASS 3 DIRECTORS UNTIL THE 2017 ANNUAL MEETING OF THE COMPANY
.
|
£
|
£
|
£
|
For All Nominees
|
Withhold Authority to Vote
for all Nominees
|
For all Nominees Except
|
|
|
|
INSTRUCTIONS:
IF YOU DO NOT WISH YOUR SHARES OF COMMON STOCK TO BE VOTED “FOR” A PARTICULAR NOMINEE, MARK THE “FOR ALL NOMINEES
EXCEPT” BOX AND WRITE THE NAME(S) OF THE NOMINEE(S) YOU DO NOT SUPPORT ON THE LINE BELOW. YOUR SHARES OF COMMON STOCK WILL
BE VOTED FOR THE REMAINING NOMINEE(S).
________________________________________________________________________________________
|
2.
|
To ratify the appointment of ernst & young LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2014:
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
3.
|
To approve, on an advisory basis, the compensation of the named executive officers:
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
4.
|
To approve the XENOPORT, INC. 2014 EQUITY INCENTIVE PLAN:
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
5.
|
TO ADOPT A RESOLUTION THAT WOULD REPEAL ANY PROVISION OF THE BYLAWS OF THE COMPANY (THE “BYLAWS”) IN EFFECT AT THE TIME OF THE ANNUAL MEETING THAT WAS NOT INCLUDED IN THE BYLAWS PUBLICLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 2005, AND WAS NOT ADOPTED BY THE COMPANY’S STOCKHOLDERS.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
6.
|
TO AMEND THE BYLAWS TO REQUIRE THAT PROPOSALS WITH RESPECT TO THE PERFORMANCE OF EACH INCUMBENT DIRECTOR NOT UP FOR ELECTION AT THE ANNUAL MEETING OF THE COMPANY BE SUBMITTED FOR A STOCKHOLDER VOTE AT SUCH ANNUAL MEETING AND THAT ANY INCUMBENT DIRECTOR WITH RESPECT TO WHOM SUCH PROPOSAL IS NOT APPROVED OR IS NOT SUBMITTED FOR A STOCKHOLDER VOTE WILL NOT BE ENTITLED TO ANNUAL COMPENSATION IN EXCESS OF $35,000.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
7.
|
TO AMEND THE BYLAWS TO REQUIRE THAT ANY DIRECTOR NOMINEE WHO FAILS TO RECEIVE AT ANY ANNUAL MEETING OF THE COMPANY’S STOCKHOLDERS VOTES “FOR” HIS OR HER ELECTION REPRESENTING AT LEAST A MAJORITY OF
|
|
|
OUTSTANDING SHARES OF THE COMPANY ENTITLED TO VOTE WILL IMMEDIATELY CEASE TO BE QUALIFIED, AND WILL NOT BE ENTITLED TO SERVE, AS AN OFFICER OF THE COMPANY.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
8.
|
TO ADOPT A RESOLUTION REQUESTING THE BOARD TO TAKE ALL AVAILABLE STEPS TO AMEND THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY AND BYLAWS TO ELIMINATE ANY SUPERMAJORITY STOCKHOLDER APPROVAL VOTE REQUIREMENTS TO AMEND THE BYLAWS.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
9.
|
WITH RESPECT TO A RESOLUTION APPROVING THE PERFORMANCE OF PAUL L. BERNS AS A DIRECTOR OF THE COMPANY SINCE THE COMPANY’S 2013 ANNUAL MEETING OF STOCKHOLDERS (THE “2013 ANNUAL MEETING”).
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
10.
|
WITH RESPECT TO A RESOLUTION APPROVING THE PERFORMANCE OF DENNIS M. FENTON AS A DIRECTOR OF THE COMPANY SINCE THE 2013 ANNUAL MEETING.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
11.
|
WITH RESPECT TO A RESOLUTION APPROVING THE PERFORMANCE OF JOHN G. FREUND AS A DIRECTOR OF THE COMPANY SINCE THE 2013 ANNUAL MEETING.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
12.
|
WITH RESPECT TO A RESOLUTION APPROVING THE PERFORMANCE OF CATHERINE J. FRIEDMAN AS A DIRECTOR OF THE COMPANY SINCE THE 2013 ANNUAL MEETING.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
13.
|
WITH RESPECT TO A RESOLUTION APPROVING THE PERFORMANCE OF ERNEST MARIO AS A DIRECTOR OF THE COMPANY SINCE THE 2013 ANNUAL MEETING.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
|
14.
|
WITH RESPECT TO A RESOLUTION APPROVING THE PERFORMANCE OF WILLIAM J. RIEFLIN AS A DIRECTOR OF THE COMPANY SINCE THE 2013 ANNUAL MEETING.
|
£
|
£
|
£
|
FOR
|
AGAINST
|
ABSTAIN
|
IN ORDER FOR YOUR PROXY TO BE VALID, IT MUST BE DATED.
Date:
|
, 2014
|
|
|
Signature
|
|
|
|
Signature (if held jointly)
|
|
|
|
Title(s):
|
|
Please sign exactly as name appears on stock certificates
or on label affixed hereto. When shares of Common Stock are held by joint tenants, both should sign. In case of joint owners, EACH
joint owner should sign. When signing as attorney, executor, administrator, trustee, guardian, corporate officer, etc., give full
title as such.
PLEASE SIGN, DATE AND MAIL YOUR PROXY PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED.