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September 6, 2014

Dear Brian:
This letter agreement (this “Agreement”) sets forth the terms and conditions of
your employment with Acucela Inc., a Washington corporation, (the “Company”).
This Agreement has an effective date of September 8, 2014 (the “Effective
Date”). In consideration of the mutual covenants and promises made in this
Agreement, you and the Company agree as follows:
1.    Position and Responsibilities.
(a)    As of the Effective Date, you will serve as a full-time employee as the
Company’s Chief Operating Officer (the “COO”) and President. In this capacity,
your job duties and responsibilities shall be assigned to you from time to time
by the Company’s Chief Executive Officer (“CEO”) and Board of Directors (the
“Board”). You will be responsible for the global operations of the Company. You
shall report directly to the CEO and the Board.
(b)    Your employment location will be at the Company’s US Headquarters in
Seattle, Washington. A material condition of this Agreement is that you must
relocate to Seattle, Washington by the date mutually agreed upon between you,
the CEO and the Board. Until that date, you may telecommute from your San Diego
home, while making all necessary and appropriate trips to the Seattle office and
other travel as needed. To assist in your relocation, the Company shall provide
you with the relocation and commuting benefits set forth in Section 3(e) below.
2.     Term.
(a)    Your employment with the Company is at-will and either you or the Company
may terminate your employment at any time and for any reason or for no reason,
with or without notice or cause, in each case subject to the terms and
provisions of this Agreement. The Company requests that you provide at least
thirty (30) business days advance written notice of resignation.
(b)    Your service to the Board is subject to the provisions of the Company’s
Articles of Incorporation, bylaws and applicable law.

3.    Salary, Incentive Compensation and Stock Options.
(a)    Base Salary. During your employment, you will be paid an annual base
salary of $515,500 (the “Base Salary”), covering all time and service hours that
you render, payable in the time and manner that the Company customarily pays its
employees, and subject to applicable federal and state payroll withholdings.
(b)    Annual Bonus. Beginning in 2015, you will be eligible to receive an
annual bonus equal to 60% of your Base Salary upon achievement of individual and
Company objectives to be mutually agreed upon in writing in advance by you and
the Board (the “Target Bonus”). All bonus amounts (if any) will be paid to you
after the Company’s books have been closed, normally

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no later than March 15th of the year following the year the determination to pay
the bonus was made (“Bonus Payment Date”), and you must be actively employed on
the Bonus Payment Date to be eligible to receive the Target Bonus.
(c)    Interim Performance Bonus. For the period of January 1, 2015 to June 30,
2015 (the “Interim Period”), you will be eligible to receive a one-time bonus
equal to 100% of your Base Salary, upon achievement of individual and Company
objectives for the Interim Period to be mutually agreed upon in writing in
advance by you and the Board (the “Interim Bonus”), including the hiring of a
Chief Financial Officer approved by the Board and initiation of a European
business development initiative. The Interim Bonus (if any) will be paid to you
within 45 days following achievement of the objectives for the Interim Period
(the “Interim Bonus Payment Date”), and you must be employed on the Interim
Bonus Payment Date to be eligible to receive the Interim Bonus.
(d)    Director Compensation. You shall not receive any compensation in
connection with your service to the Board, in any capacity.
(e)    Relocation Assistance; Commuting Expenses. To assist in your timely
relocation to Seattle, Washington pursuant to Section 1(b) above, the Company
will provide you with a relocation package benchmarked by the third party
compensation consultant used by the Company’s Compensation Committee, the terms
of which will be mutually agreed upon in writing in advance by you and the CEO
and the Compensation Committee. The Company shall also provide you with
reimbursement of reasonable commuting expenses (including travel and
accommodations), up to a maximum amount approved by the CEO and the Compensation
Committee.
(f)    Equity. In connection with your employment and subject to the approval of
the Board, prior to the second fiscal quarter of 2015, you will be eligible to
be granted either (i) a stock option to purchase 712,820 shares of the Company’s
common stock, or (ii) a combination of stock options and restricted stock units
(which awards may be less than 712,820 shares of Company common stock in the
event that restricted stock units are granted based on the Company’s
computations practices, as recommended to the Compensation Committee by its
third party compensation consultant) (the “First Award”) under the Company’s
2014 Equity Incentive Plan (the “Plan”).
In addition, subject to the approval of the Board, you will be granted either
(i) a stock option to purchase 712,820 shares of the Company’s common stock or
(ii) a combination of stock options to purchase shares of the Company’s common
stock and a cash award, in calendar year 2015, conditioned on a sufficient
shareholder approved increase to the share reserve under the Plan (the “Second
Award”).
The First Award and the Second Award shall be granted pursuant to the Plan and
shall be subject to all the terms and conditions of the Plan and the applicable
agreements under which the First Award and the Second Award are granted. As a
condition of the grant of the First Award and the Second Award, you will be
required to execute a stock option agreement, restricted stock unit agreement or
a cash bonus agreement, as applicable, with the Company covering the terms and
conditions of each grant. The First Award will vest in equal annual installments
over four years following the date of grant subject to your continued service.
The Second Award will

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vest as determined by the Board of Directors at time of grant. You will be able
to exercise the stock options subject to First Award and the Second Award only
to the extent that such awards are vested. The stock options subject to the
First Award and the Second Award shall have a per share exercise price equal to
the fair market value of a Company common share on the date the award is
granted.
4.    Employee Benefits and Expenses. Subject to the terms herein, during your
employment with the Company, you will be entitled to participate in all Company
employee benefit plans and programs at this time or thereafter made available to
full-time employees such as yourself (the “Benefits”). The Company may amend,
modify or terminate these Benefits at any time and for any reason. In lieu of
any accrual-based vacation or PTO benefits, you may take time off at your
discretion, provided you maintain an acceptable level of performance and
coordinate coverage for your responsibilities during the period of absence. You
will also be reimbursed for reasonable and necessary business expenses upon the
properly completed submission of requisite forms and receipts to the Company.
Such reimbursements shall be in accordance with Company policy and any
applicable laws and regulations.
5.    Consequences of Termination of Employment. Unless the Company requests
otherwise, upon termination of your employment for any reason, you shall be
deemed to have immediately resigned from all positions as an officer or director
with the Company (and its affiliates) as of your last day of employment (the
“Termination Date”). Upon termination of your employment for any reason, you
shall receive payment from the Company on your Termination Date covering all of
the following: (i) all unpaid salary accrued through the Termination Date, (ii)
any payments/benefits to which you are entitled under the express terms of any
applicable Company employee benefit plan and (iii) any unreimbursed valid
business expenses. You shall be entitled to no other compensation or
consideration except as may be provided in this Agreement. The unvested portion
of your Options shall be forfeited upon your Termination Date and the vested
portion of your Options shall expire as provided under the Plan, this Agreement
and/or your stock option agreements with the Company.

6.    Termination without Cause or for Good Reason. In the event that your
employment is terminated by the Company without “Cause” or by you for “Good
Reason,” each as defined below, you shall receive:
(a)    An amount equal to one and a half (1.5) times your annual Base Salary
paid in a single cash payment on or before the 61st date following your
Termination Date;
(b)    A pro-rated annual Target Bonus, paid in a single cash payment on or
before the 61st date following your Termination Date; and
(c)    If you timely elect to continue your group health insurance coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”)
following the Termination Date, then the Company shall continue to pay its
portion of the Company’s monthly insurance premiums for you and your immediate
family until the earliest of (i) eighteen months after the Termination Date,
(ii) the expiration of your continuation coverage under COBRA or (iii) the date
when you become eligible for coverage under the group health plan of another
employer.

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Notwithstanding anything to the contrary, the receipt of any of the payments and
benefits provided by this Section 6 will be subject to you signing and not
revoking, within 60 days following your Termination Date, a separation agreement
and general release of claims in a form acceptable to the Company, which
includes a general release in favor of the Company and its affiliates together
with their respective officers, directors, shareholders, employees, agents and
successors and assigns from any and all claims you may have against them
including but not limited to, arising from your employment and/or termination of
employment (the “Release”). In the event you breach the provisions of this
Agreement or the Release, in addition to any other remedies of law or in equity,
the Company may cease making any payments or benefits to which you otherwise may
be entitled to under Section 6. You will not, however, be entitled to the
payments and benefits provided by this Section 6 upon a termination of your
employment due to your death or Disability.

For the purposes of this Agreement, “Cause” means any one or more of the
following: (i) a material breach by you of the provisions of this Agreement
(which shall include but not be limited to failure to perform duties as
requested by the Board) or the proprietary information and inventions agreement
between you and the Company, (ii) your conviction of (or plea of nolo contendere
to) any felony or any crime of moral turpitude; (iii) your repeated failure to
follow the lawful and reasonable directions of the Board, (iv) engaging in an
act of gross negligence or willful and material misconduct in the performance of
your employment obligation and duties, or (v) your commission of an act of fraud
against, or willful misappropriation of property belonging to, the Company. The
Board shall provide you with 30 days’ advance written notice detailing the basis
for the termination of employment for Cause. During the 30-day period after you
have received such notice, you shall have an opportunity to cure (i) or (iii),
if curable (as determined at the discretion of the Board). You shall continue to
receive the compensation and benefits provided by this Agreement during the
30-day period after you receive the written notice of the Company’s intention to
terminate you employment for Cause.

“Disability” shall have the meaning set forth in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the “Code”).
For the purposes of this Agreement, “Good Reason” means your resignation from
employment based on the occurrence of any of the following events: (i) a
material breach of the provisions of this Agreement by the Company or any
successor thereto; (ii) a reduction of your duties, authority or
responsibilities (it shall be deemed to be a reduction of your duties, authority
or responsibilities if, as a result of Company action, you are no longer a
member of the Board or are no longer the Company’s President and COO), it being
understood that a reduction in your responsibilities or authority shall not
constitute Good Reason if (A) there is no demotion in your title or position or
reduction of the scope of your duties within the Company or (B) in the event of
an acquisition of the Company, you are given a position of materially similar or
greater overall scope and responsibility within an acquiring company, taking
into appropriate consideration that a nominally lower hierarchical role in a
larger company may involve similar or greater scope and responsibility than a
nominally higher role in the hierarchy of a smaller company; (iii) a material
reduction in your Base Salary or Target Bonus (other than an equivalent
percentage reduction in annual base salaries or target bonus opportunities that
applies to the executives of the Company) and for purposes hereof, “material”
means a reduction greater than 10%; or (iv) the relocation of

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the Company’s principal place of business to a location that is outside a 50
mile radius of the Company’s principal place of business as of the Effective
Date; provided, however, that with respect to each occurrence, you must (a)
within 30 days following its occurrence, deliver to the Company a written
explanation specifying the specific basis for your belief that you are entitled
to terminate your employment for Good Reason and (b) give the Company an
opportunity to cure any of the foregoing within 30 days following delivery of
such explanation; and provided the Company has failed to cure any of the
foregoing within such 30 day cure period, you have terminated your employment
within 30 days following expiration of such cure period. Your failure to provide
notice to the Company within such 30 day period will render any resignation a
resignation without Good Reason.
7.    Tax Matters.
(a)    Parachute Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to you (i) constitute
“parachute payments” within the meaning of Section 280G of the Code and (ii) but
for this Section, would be subject to the excise tax imposed by Section 4999 of
the Code, then, at your discretion, your severance and other benefits under this
Agreement shall be payable either (i) in full, or (ii) as to such lesser amount
which would result in no portion of such severance and other benefits being
subject to the excise tax under Section 4999 of the Code, whichever of the
foregoing amounts, taking into account the applicable federal, state and local
income taxes and the excise tax imposed by Section 4999, results in the receipt
by you on an after-tax basis, of the greatest amount of severance benefits under
this Agreement, notwithstanding  that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code.  Any reduction shall be
made in the following manner: first a pro-rata reduction of (i) cash payments
subject to Section 409A of the Code as deferred compensation and (ii) cash
payments not subject to Section 409A of the Code, and second a pro rata
cancellation of (i) equity-based compensation subject to Section 409A of the
Code as deferred compensation and (ii) equity-based compensation not subject to
Section 409A of the Code. Unless the Company and you otherwise agree in writing,
any determination required under this Section shall be made in writing by the
Company’s independent public accountants (the “Accountants”), whose
determination shall be conclusive and binding upon you and the Company for all
purposes.  For purposes of making the calculations required by this Section, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code.  The Company
and you shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section.  The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section.
(b)    Notwithstanding anything to the contrary in this Agreement, to the extent
(i) any payments or benefits to which you become entitled under this Agreement,
or under any other agreement or Company plan, in connection with your
termination of employment with the Company constitute deferred compensation
subject to Section 409A of the Code and (ii) you are deemed at the time of such
termination of employment to be a “specified employee” under Section 409A of the
Code, then such payments shall not be made or commence until the earliest of (A)
the expiration

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of the six-month period measured from the date of your “separation from service”
(as such term is at the time defined in Treasury Regulations under Section 409A
of the Code) from the Company; or (B) the date of your death following such
separation from service; provided, however, that such deferral shall only be
effected to the extent required to avoid adverse tax treatment to you, including
(without limitation) the additional 20% tax for which you would otherwise be
liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral.
Upon the expiration of the applicable deferral period, any payments which would
have otherwise been made during that period (whether in a single sum or in
installments) in the absence of this paragraph shall be paid to you or your
beneficiary in one lump sum (without interest). For purposes of Section 409A of
the Code, each payment is hereby designated as a separate payment. Any
termination of your employment is intended to constitute a “separation from
service” and will be determined consistent with the rules relating to a
“separation from service” as such term is defined in Treasury Regulation Section
1.409A-1. It is further intended that payments hereunder satisfy, to the
greatest extent possible, the exemptions from the application of Section 409A of
the Code (and any state law of similar effect) provided under Treasury
Regulations Section 1.409A-1(b)(4) (as a “short-term deferral”) and Section
1.409A-1(b)(9) (as a “separation pay due to involuntary separation”). To the
extent that any provision of this Agreement is ambiguous as to its compliance
with Section 409A of the Code, the provision will be read in such a manner so
that all payments hereunder comply with Section 409A of the Code.
(c)     Withholding. Anything to the contrary notwithstanding, all payments made
by the Company hereunder to you or your estate or beneficiaries will be subject
to satisfaction of all tax withholding pursuant to any applicable laws or
regulations.
8.    Proprietary Information and Inventions Agreement. You will be required, as
a condition of your employment with the Company, to execute a proprietary
information and inventions agreement.
9.    Indemnification Agreement. In connection with your employment as an
officer of the Company and your service as a director of the Company, the
Company and you will enter into the Company’s standard form of indemnification
agreement.
10.    Assignability; Binding Nature. Commencing on the Effective Date, this
Agreement will be binding upon you and the Company and your respective
successors, heirs, and assigns. This Agreement may not be assigned by you except
that your rights to compensation and benefits hereunder, subject to the
limitations of this Agreement, may be transferred by will or operation of law.
11.    Governing Law; Arbitration. This Agreement will be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
Washington. Any controversy or claim relating to this Agreement and any breach
thereof, and any claims you may have against the Company or any officer,
director or employee of the Company or arising from or relating to your
employment with the Company, will be settled solely and finally by arbitration
in Seattle, Washington in accordance with the rules of the American Arbitration
Association (“AAA”) then in effect in the State of Washington, and judgment upon
such award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof, provided that this Section 11 shall not be construed

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to eliminate or reduce any right the Company or you may otherwise have to obtain
a temporary restraining order or a preliminary or permanent injunction to
enforce any of the covenants contained in this Agreement before the matter can
be heard in arbitration. The arbitrator may provide that the cost of the
arbitration (including reasonable legal fees) incurred by you or the Company
will be borne by the non-prevailing party.
12.    Entire Agreement. Except as otherwise specifically provided in this
Agreement, this Agreement contains all the legally binding understandings and
agreements between you and the Company pertaining to the subject matter of this
Agreement and supersedes all such agreements, whether oral or in writing,
previously entered into between the parties.

13.    Covenants. As a condition of this Agreement, you agree that you will
fully and timely comply with all of the covenants set forth in this Section 13
(which shall survive your termination of employment).
(a)    Upon the Termination Date, you shall execute the Company’s Proprietary
Information Agreement Termination Certification (or its successor agreement);
(b)    Upon the Termination Date, you shall return to the Company all Company
property including, but not limited to, computers, cell phones, pagers, keys,
laboratory notebooks, business cards, intellectual property, etc. and you shall
not retain any copies, facsimiles or summaries of any Company proprietary
information;
(c)    You will submit any outstanding expense reports to the Company prior to
the Termination Date;
(d)    You will not at any time during and subsequent to your period of
employment with the Company make any disparaging statements (oral or written)
about the Company, or any of its affiliated entities, officers, directors,
employees, shareholders, representatives or agents, or any of the Company’s
products or work-in-progress, in any manner that might be harmful to their
businesses, business reputations or personal reputations; and
(e)    As of the Termination Date, you will no longer represent that you are an
officer, director or employee of the Company and you will immediately
discontinue using your Company mailing address, telephone, facsimile machines,
voice mail and e-mail.
14.    Background Check. This offer and your employment is contingent upon a
satisfactory verification of criminal, education, driving and/or employment
background. This offer can be rescinded, and/or your employment terminated,
based upon data received in the verification.
15.    Notice. Any notice that the Company is required to or may desire to give
you as an employee of the Company pursuant to this Agreement shall be given by
personal delivery, recognized overnight courier service, email, telecopy or
registered or certified mail, return receipt requested, addressed to you at your
address of record with the Company, or at such other place as you may from time
to time designate in writing. Any notice that you are required or may desire to
give to the Company hereunder shall be given by personal delivery, recognized
overnight courier service,

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email, telecopy or by registered or certified mail, return receipt requested,
addressed to the Company at its principal office, or at such other office as the
Company may from time to time designate in writing. The date of actual delivery
of any notice under this Section 15 shall be deemed to be the date of delivery
thereof.

16.     Waiver; Severability. No provision of this Agreement may be amended or
waived unless such amendment or waiver is agreed to by you and the Company in
writing. No waiver by you or the Company of the breach of any condition or
provision of this Agreement will be deemed a waiver of a similar or dissimilar
provision or condition at the same or any prior or subsequent time. Failure or
delay on the part of either party hereto to enforce any right, power, or
privilege hereunder will not be deemed to constitute a waiver thereof. In the
event any portion of this Agreement is determined to be invalid or unenforceable
for any reason, the remaining portions shall be unaffected thereby and will
remain in full force and effect to the fullest extent permitted by law.
17.    Voluntary Agreement. You acknowledge that you have been advised to review
this Agreement with your own legal counsel and other advisors of your choosing
and that prior to entering into this Agreement, you have had the opportunity to
review this Agreement with your attorney and other advisors and have not asked
(or relied upon) the Company or its counsel to represent you or your counsel in
this matter. You further represent that you have carefully read and understand
the scope and effect of the provisions of this Agreement and that you are fully
aware of the legal and binding effect of this Agreement. This Agreement is
executed voluntarily by you and without any duress or undue influence on the
part or behalf of the Company.

Please acknowledge your acceptance and understanding of this Agreement by
signing and returning it to the undersigned. A copy of this signed Agreement
will be sent to you for your records.

ACUCELA INC.
 
ACKNOWLEDGED AND AGREED:
 
 
 
 
 
 
/s/Ryo Kubota
 
/s/Brian O'Callaghan
Name: Ryo Kubota
 
Name: Brian O’Callaghan
Title: Founder, Chairman and CEO
 
Date:   10/14/14            

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