Document:

EX-10.3

 Exhibit 10.3 
 SPROUTS FARMERS MARKET, INC. 
 PERFORMANCE SHARE AWARD AGREEMENT 

Cover Sheet 
 Sprouts Farmers Market, Inc., a
company incorporated under the laws of the State of Delaware (“Company”), hereby grants an award of performance shares (“Performance Shares”) to the individual named below. The terms and conditions of the Performance Shares are
set forth in this cover sheet (“Cover Sheet”), in the attached Performance Share Award Agreement (the “Agreement”) and in the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “Plan”). All capitalized terms used but
not defined in this Cover Sheet and the Agreement will have the meanings ascribed to such terms in the Plan. 
  

					
	Granted to:	 		 	
			
	 Grant Date:
	 		 	
			
	 Number of Performance Shares:
	 		 	
			
	 Issuance of Shares:
	 		 	
			
	 Vesting Schedule:
	 		 	

 By signing this Cover Sheet, you agree to all of the terms and conditions described in this Cover Sheet, in the Agreement and in
the Plan. If you do not sign and return this Cover Sheet and the attached Irrevocable Standing Order to Sell Shares within 60 days of the Grant Date, the Company will have the right to rescind this award. 

 

					
	Signature:
                                         
               	  	Date:
                                         
   	  	

  

			
	SPROUTS FARMERS MARKET, INC.
		
	By:	 	  

	Name:	 	Doug Sanders
	Title:	 	Chief Executive Officer

 SPROUTS FARMERS MARKET, INC. 

2013 INCENTIVE PLAN 

PERFORMANCE SHARE AWARD AGREEMENT 
  

	 Right to Shares  
	The award of Performance Shares represents your right to receive, and the Company’s obligation to issue, one Share for each Performance Share earned, based on the Company’s 2015 EPS as set forth
in the Cover Sheet. The Shares issued will be subject to the vesting conditions described below. Issuance of Shares equal to the Performance Shares earned will occur as soon as practicable following the date the Compensation Committee certifies 2015
EPS, based on the Company’s 2015 audited financial statements (the “Certification Date”). 

  

	 Vesting 
	The Performance Shares issued to you will vest in accordance with the schedule set forth in the Cover Sheet. 

 

	 	All Performance Shares will cease vesting as of the date your employment with the Company and its Affiliates has terminated for any reason. 

 

	 Termination; Specified Conduct  
	Should your employment with the Company and its Affiliates terminate for any reason or if you engage in Specified Conduct (as defined in Exhibit A) prior to the Certification Date, you shall forfeit all
rights to receive any Performance Shares. Should your employment with the Company and its Affiliates terminate for any reason after the Certification Date or if you engage in Specified Conduct after the Certification Date, you shall forfeit all
Performance Shares that are not then vested, and such Performance Shares shall be returned to the Company automatically and for no consideration. 

  

	 Change in Control 
	Notwithstanding the foregoing: 

  

	 	(A) if there occurs a Change in Control (as defined in Exhibit A), and this award does not continue or is not assumed by an acquiror, then (i) if the Change in Control
occurs prior to the Certification Date, you will be entitled to receive, immediately prior to the Change in Control, the greater of (x) the maximum number of Performance Shares, multiplied by the fraction (not to exceed 1), the numerator of
which is the number of days from January 1, 2015 to the date of the Change in Control, and the denominator of which is 365, or (y) the number of Performance Shares which would have been earned pursuant to the Cover Sheet based on actual
EPS through the end of the fiscal quarter that ended prior to the quarter in which the Change in Control occurs, annualized for a full fiscal year, in either case which Performance Shares shall be immediately vested, and (ii) if the Change in
Control occurs after the Certification Date, all Performance Shares that have not yet vested shall vest immediately prior to the Change in Control; and 

  

	 	 (B) if there occurs a Change in Control, and this award continues or is assumed by an acquiror, and your employment is terminated by the Company or an acquiror without Cause
(as defined in Exhibit A) or by you for Good Reason (as defined in Exhibit A), in each case within 24 months following the Change in Control, then (i) if such termination occurs prior to the Certification Date, you will be entitled to receive,
as soon as practicable following such termination, the 

  
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maximum number of Performance Shares, multiplied by the fraction (not to exceed 1), the numerator of which is the number of days from January 1, 2015 to the date of such termination, and the
denominator of which is 365, which Shares shall be immediately vested, and (ii) if such termination occurs after the Certification Date, all Performance Shares that have not yet vested shall vest immediately upon such termination.

  

	 	For purposes of the foregoing, this award shall not be treated as continued or assumed unless it is continued or assumed on a substantially equivalent basis, including, without
limitation, continuation or assumption of the same Company EPS performance metrics, subject to adjustment in accordance with the Plan only for changes in the number of outstanding Shares by reason of the Change in Control transaction.

  

	 Taxes  
	Unless you make an election under Section 83(b) of the Code within 30 days of the Certification Date, the value of the Performance Shares as and when they vest will be treated as wages subject to
payroll withholding. The Company will satisfy the withholding obligation through a “sell to cover” whereby you irrevocably direct a securities broker approved by the Company to sell a portion of your Performance Shares that are then
scheduled to vest and to deliver the sale proceeds to the Company in payment of the applicable withholding taxes. You agree to provide these directions by signing and returning the Irrevocable Standing Order to Sell Shares attached hereto, along
with a signed copy of the Cover Sheet, within 60 days of the Grant Date. 

  

	 	The number of Shares that the broker will sell will be based on an estimate made by the broker of the Shares required to be sold to satisfy the withholding taxes. You agree that
the proceeds received from the sale of Shares will be used to satisfy the withholding taxes and, accordingly, you authorize the broker to pay such proceeds to the Company for such purpose. To the extent that the proceeds obtained by such sale exceed
the amount necessary to satisfy the withholding taxes, such excess proceeds shall be deposited into your brokerage account and in the event of a shortfall, additional Shares may be sold and/or cash withholding may be required from you. Any remaining
Shares shall be deposited into your brokerage account. 

  

	 	If there is not a market in the Shares or the Company determines in its sole discretion that the sell to cover procedure is not advisable or sufficient, the Company will have the
right to make other arrangements to satisfy the withholding taxes due upon the vesting of the Shares with respect to the Performance Shares, including, but not limited to, the right to deduct amounts from salary or payments of any kind otherwise due
to the Participant or withhold in Shares (by transferring Shares back to the Company, provided that the Company only withholds the amount of Shares necessary to satisfy the statutory minimum withholding amount. If such other arrangements are made,
your Irrevocable Standing Order to Sell Shares will be voided. 

  

	 	 You represent to the Company that, as of the date you sign the Irrevocable Standing Order to Sell Shares, you are not aware of any

  
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material nonpublic information about the Company or the Shares. You and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Shares,
consistent with the affirmative defense to liability under Section 10(b) of the Exchange Act under Rule 10b5-1(c) issued under such Act. 

  

	 Restrictions on Resale 
	By signing this Agreement, you agree not to sell any Performance Shares at a time when applicable laws, regulations or Company policies prohibit a sale. 

 

	 	In addition, until the Performance Shares have vested pursuant to the schedule set forth in the Cover Sheet, they may not be sold, transferred, assigned, pledged, margined, or
otherwise encumbered or disposed of (except for transfers and forfeitures to the Company). 

  

	 	The Company’s obligation to issue Performance Shares upon the Certification Date shall be subject to applicable laws, rules and regulations and also to such approvals by
governmental agencies as may be deemed appropriate to comply with relevant securities laws and regulations. 

  

	 	You shall deliver to the Chief Legal Officer of the Company, at the time of execution of this Agreement and/or at such other time or times as the Chief Legal Officer may request,
one or more executed stock powers, authorizing the transfer of the Performance Shares to the Company upon forfeiture, and you shall take such other steps or perform such other actions as may be requested by the Chief Legal Officer to effect the
transfer of any forfeited Performance Shares. 

  

	 Transfer of right to receive Performance Shares  
	Prior to the Certification Date, you cannot transfer or assign your right to receive Performance Shares. For instance, you may not sell your right to Performance Shares or use such right as security for a
loan. If you attempt to do any of these things, your award will immediately become invalid. 

  

	 	Regardless of any marital property settlement agreement, the Company or a securities broker, as applicable, is not obligated to recognize your former spouse’s interest in
your right to Performance Shares in any way. 

  

	 Stockholder Rights; Dividend Equivalent Rights  
	You, or your estate or heirs, have no rights as a stockholder of the Company in respect of Performance Shares until the Certification Date. No adjustments are made for dividends or other rights if the
applicable record date occurs before Shares are issued, except as described in the Plan. 

  

	 	On and following the Certification Date, you shall have the rights as a stockholder, subject to the restrictions set forth in this Agreement (including, without limitation,
transfer restrictions and forfeiture during the vesting period). 

  

	 Applicable Law  
	This Agreement will be interpreted and enforced under the laws of the State of Delaware. 

  

	 The Plan and Other Agreements 
	The text of the Plan and any amendments thereto are incorporated in this Agreement by reference. 

  
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	 	This Agreement, the Cover Sheet and the Plan constitute the entire understanding between you and the Company regarding the Performance Shares. Any prior agreements, commitments
or negotiations concerning the Performance Shares are superseded. 

 By signing the Cover Sheet of this Agreement, you agree to all of
the terms and conditions described above and in the Plan and evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan. 

  
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 Exhibit A 

Certain Definitions 

“Affiliate” means, when used with reference to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, or owns greater than fifty percent (50%) of the voting power in, the specified Person (the term “control” for this purpose shall mean the ability, whether by the ownership of shares or
other equity interest, by contract or otherwise, to elect a majority of the directors of a corporation, independently to select the managing partner of a partnership or the managing member or the majority of the managers, as applicable, of a limited
liability company, or otherwise to have the power independently to remove and then select a majority of those Persons exercising governing authority over an entity, and control shall be conclusively presumed in the case of the direct or indirect
ownership of fifty percent (50%) or more of the voting equity interests in the specified Person). 
 “Cause” shall have the meaning
ascribed thereto in any effective employment agreement between you and the Company or its Affiliates, or if no employment agreement is in effect that contains a definition of cause, then Cause shall mean that you have (i) committed a felony or
a crime involving moral turpitude, (ii) committed any act of gross negligence or fraud, (iii) failed, refused or neglected to substantially perform your duties (other than by reason of a physical or mental impairment) or to implement the
reasonable directives of the Company (which, if deemed curable in the discretion of the Committee, is not cured within 30 days after notice thereof to you by the Committee), (iv) materially violated any policy of the Company (which, if deemed
curable in the discretion of the Committee, is not cured within 30 days after notice thereof to you by the Committee), or (v) engaged in conduct that is materially injurious to the Company, monetarily or otherwise. 

“Change in Control” shall mean: 
  

	 	(i)	any event occurs the result of which is that any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, becomes the “beneficial
owner”, as defined in Rules l3d-3 and l3d-5 under the Exchange Act directly or indirectly, of more than 50% of the voting stock of the Company or any successor company thereto, including, without limitation, through a merger or consolidation or
purchase of voting stock of the Company; provided that the transfer of 100% of the voting stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a
wholly owned subsidiary of such Person, shall not be treated as a Change in Control; 

  

	 	(ii)	during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such
Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office; 

  

	 	(iii)	the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the
assets of the Company and its consolidated subsidiaries taken as a whole to any Person or group of related Persons; or 

  

	 	(iv)	the adoption of a plan relating to the liquidation or dissolution of the Company. 

 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 

  
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 “Good Reason” shall have the meaning ascribed thereto in any effective employment agreement between you and
the Company or its Affiliates, or if no employment agreement is in effect that contains a definition of good reason, then Good Reason shall mean that the Company or its Affiliates (i) has required that you relocate to a principal place of
employment that is more than 50 miles from your then-current principal place of employment; (ii) has reduced, or has notified you of its intent to reduce, your base salary by more than 10%, unless such reduction is agreed to by you or is
involuntarily imposed upon all other employees of the Company who are similarly situated to you; or (iii) without your consent, materially diminishes your authority or responsibilities; provided, however, that in the event you believe
any of the forgoing conditions exist that constitute Good Reason, prior to Good Reason being established, you will first provide notice to the Company and give the Company a reasonable opportunity (not to exceed thirty (30) calendar days) to
cure the condition you contend establishes Good Reason. 
 “Person” means and includes any individual, partnership, joint venture, corporation,
limited liability company, estate, trust, or other entity. 
 “Specified Conduct” means, if you are party to an employment agreement that
contains post-termination restrictive covenants, a breach of any such covenant, or if you are not party to an employment agreement that contains post-termination restrictive covenants, your (i) unauthorized disclosure of confidential
information relating to the Company or its Affiliates, (ii) engaging, directly or indirectly, as an employee, partner, consultant, director, stockholder (other than as a passive investor in not more than 5% of the shares of any publicly traded
class of securities of any business), owner, or agent in any business that is competitive with the businesses conducted by the Company and its Affiliates at the time of termination of your employment, (iii) soliciting or inducing, directly or
indirectly, any former, present or prospective customer or client of the Company or its Affiliates to purchase any services or products offered by the Company or its Affiliates from any Person other than the Company or its Affiliates, or
(iv) hiring, directly or indirectly, any individual who was an employee of the Company or its Affiliates within the six month period prior to termination of your employment, or soliciting or inducing, directly or indirectly, any such individual
to terminate his or her employment with the Company or its Affiliates. 

  
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 IRREVOCABLE STANDING ORDER TO SELL SHARES 

I have been granted an award in respect of Performance Shares (“Performance Shares”) by Sprouts Farmers Market, Inc. (the “Company”), which is
evidenced by a performance share award agreement between me and the Company (the “Agreement,” copy attached). Provided that I remain employed by the Company on the applicable vesting date, the shares vest according to the provisions of the
Agreement. 
 I understand that on the Certification Date (as defined in the Agreement), the Performance Shares will be deposited into my account at
E*Trade (the “Broker”) and that on the applicable vesting date, I will recognize taxable ordinary income as a result. Pursuant to the terms of the Agreement and as a condition of my receipt of the Shares, I understand and agree that, on
the vesting date, I must sell a number of shares sufficient to satisfy all withholding taxes applicable to that ordinary income. Therefore, I hereby direct the Broker to sell, at the market price and on the vesting date (or the first business day
thereafter if the vesting date should fall on a day when the market is closed), the number of Shares that the Company informs the Broker is sufficient to satisfy the applicable withholding taxes, which shall be calculated based on the closing price
of the Company’s ordinary shares on the last trading day before the vesting date. I understand that the Broker will remit the proceeds to the Company for payment of the withholding taxes. 

I understand and agree that by signing below, I am making an Irrevocable Standing Order to Sell Shares which will remain in effect until the vesting date. I also
agree that this Irrevocable Standing Order to Sell Shares is in addition to and subject to the terms and conditions of any existing Account Agreement that I have with the Broker. 
 Signature 
 Print Name 

  
 -8-ExecutiveEmploymentAgreementJohnGebhart

Exhibit 10.1

EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is made and entered into effective as of May 1, 2015 (the “Effective Date”), by and between John Gebhart (the “Executive”) and Acucela Inc. (the “Company”).
In consideration of the mutual covenants herein contained,  the continuing employment of the Executive by the Company, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.Duties and Scope of Employment.  The Company shall employ Executive in the position of Chief Financial Officer.  Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company, as shall reasonably be assigned to him by the Company’s Chief Executive Officer CEO).  Only the Chief Executive Officer or the Board of Directors (the “Board”) shall have the right to revise such responsibilities from time to time, as they deem necessary or appropriate.  The CEO or Compensation Committee of the Board shall have the right to revise Executive’s compensation as provided for in Section 4(a) and (c) below, consistent with the provisions of this Agreement.  Executive shall be entitled to indemnification from the Company for claims asserted against Executive in connection with Executive’s performance of his duties hereunder and shall be covered under the officer and director liability policy maintained by the Company. 
2.    Obligations.  While employed hereunder, Executive will perform his duties faithfully and to the best of his ability.  Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board; provided, however, that Executive may conclude his current consulting work insofar as such duties do not conflict with Executive’s performance and best efforts for the Company; and also provided that Executive may engage in non-competitive business or charitable activities so long as such activities do not materially interfere with Executive’s responsibilities to the Company.  Any board of director positions with other business or charitable entities entered into after the Effective Date shall be subject to the prior approval of the CEO.
3.    Employment Term.  Unless otherwise terminated earlier as provided in Section 5, Executive’s employment with the Company pursuant to this Agreement shall commence on the Effective Date and shall continue until December 31, 2015 (the “Initial Term”), provided that this Agreement shall automatically renew for successive one-year periods unless either the Company or the Executive provide written notice to the other of its intention not to renew the Agreement at least sixty (60) days prior to the end of any yearly term (each such additional year being an “Extended Term”, and collectively with the Initial Term being the “Employment Term”).
4.    Compensation and Benefits.
(a)    Base Compensation.  The Company shall pay Executive as compensation for Executive’s services hereunder an annual base salary of $317,000 (Three Hundred Seventeen 

Thousand).  Such salary shall be subject to applicable tax withholding and shall be paid periodically in accordance with normal Company payroll practices. The base salary may be increased pursuant to annual review by the CEO and/or Compensation Committee of the Board.
(b)    Signing Bonus.  Executive will receive a one-time signing bonus of Fifty Thousand Dollar ($ 50,000.00), subject to applicable tax withholding and paid at the time of Executive’s first regularly scheduled paycheck in accordance with normal Company payroll practices.
(c)    Incentive Bonus.  In addition to the base salary, Executive may receive a performance bonus relating to each year of employment with the Company under this Agreement equal to an amount to be determined by the Board or its Compensation Committee.  Such bonus shall be paid by March 15 of the year following the year for which the bonus relates.  The maximum amount of such performance bonus shall be 35% of Executive’s then current base salary for the applicable fiscal year.  Such performance bonus, if any, shall be based upon Company performance against objective metrics to be determined annually by the CEO and/or Compensation Committee of the Board. 
(d)    Benefits.  Executive shall be eligible to participate in the employee benefit plans which are available or which become available to other employees of the Company, with the adoption or maintenance of such plans to be in the discretion of the Company, subject in each case to the generally applicable terms and conditions of the plan or program in question and to the determination of any committee administering such plan or program.  Employee may work virtual up to twenty-five percent (25%) of his time providing it does not interfere with the goals and objectives of the Company.  To the extent adopted and maintained by the Company, such benefits shall include participation in the Company’s group medical, life, disability, and retirement plans, and any supplemental plans available to senior executives of the Company from time to time.  Executive will accrue one day of sick leave per month, for a total of twelve (12) sick days per year.  Executive will also be entitled to paid vacation of four (4) weeks per year in accordance with the Company’s vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.  The Company will support Executive’s desire to ride his bike to work and will pay for the additional nominal costs for facility use and to park and store the bike at the bike club.  The Company will also reimburse Executive for monthly office parking expenses.  The Company reserves the right to change or terminate its employee benefit plans and programs at any time pursuant to any notice provisions in such plans.
(e)    Relocation Benefits.  No relocation benefits will be paid under this Agreement.
(f)    Business Expenses.  The Company will reimburse Executive for reasonable business expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.
(g)    Stock Options/Equity Awards.  Subject to Board approval and any required shareholder approval (which Company shall use its best efforts to obtain, if needed), the Company will provide Executive common stock restricted stock units (“RSU”) as set forth in a 

separate agreement pursuant to the 2014 Equity Incentive Plan, as amended, of the Company (the “2014 Plan”).  The grant value of any RSU will be the current fair market value of the Company common stock as determined by the Board consistent with the requirements of IRC Sec. 409A and other applicable statutes and the aggregate number of shares subject to the RSU shall be equal to one percent (1%) of outstanding common stock on the Effective Date on a fully diluted basis.  The RSU will be subject to a four year vesting period, with twenty-five percent (25%) of Executive’s options vesting one-year after the Effective Date, and the remainder vesting thereafter on a monthly basis, provided that 100% vesting shall be triggered upon a Company Change in Control, termination of Executive’s employment by the Company without Cause, and in the event Executive terminates his employment for Good Reason (“Acceleration Triggers”), provided further that in the event the Acceleration Trigger is a Change of Control, the Executive’s employment with the Company’s successor is terminated by the Company successor without Cause or by the Employee with Good Reason..
5.    Termination of Employment.
(a)    Termination by Company for Cause; Voluntary Termination.  In the event Executive’s employment with the Company is terminated for “Cause” (as defined herein) by the Company or voluntarily by Executive (i) the Company shall pay Executive any unpaid base salary due for periods prior to the date of termination of employment (“Termination Date”); (ii) the Company shall pay Executive all of Executive’s accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by Executive, the Company shall reimburse Executive for all expenses reasonably and necessarily incurred by Executive in connection with the business of the Company prior to termination.  These payments shall be made promptly upon termination and within the period of time mandated by applicable law.  Executive shall retain all options that are vested as of the Termination Date and such options may be exercised in accordance with the provisions of the 2014 Plan.  All unvested options will be immediately forfeited as of the Termination Date.
(b)    Termination by Company without Cause.  The Company may terminate Executive’s employment without Cause upon thirty (30) days written notice to Executive.  If Executive’s employment with the Company terminates other than voluntarily or for Cause, and Executive signs and does not revoke a Release, then, subject to Executive’s compliance with Section 7, Executive shall be entitled to:
(i)    Receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his base salary, as then in effect, for a period of nine (9) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies.  
(ii)    The same level of health (i.e., medical, vision and dental) coverage and benefits as in effect for the Executive on the day immediately preceding the day of the Executive’s termination of employment; provided, however, that (a) the Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended; and (b) Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to COBRA.  The Company shall 

continue to provide Executive with Company-paid health coverage until the earlier of (i) the date Executive is no longer eligible to receive continuation coverage pursuant to COBRA, or (ii) nine (9) months from the Termination Date.
(iii)    Any unvested portion of Options shall immediately vest and become exercisable as to that number of shares that would have vested had Executive remained a full-time employee with the Company through the nine (9) month period following the Termination Date and, subject to terms of the 2014 Plan, Executive shall have nine (9) months following the Termination Date to exercise such vested shares.
(c)    Death.  In the event of Executive’s death while employed hereunder, Executive’s beneficiary (or such other person(s) specified by will or the laws of descent and distribution) will receive (i) continuing payments of severance pay (less applicable withholding taxes) at a rate equal to Executive’s base salary for a period of ninety (90) days from Executive’s death, to be paid periodically in accordance with the Company’s normal payroll policies, (ii) Company-paid COBRA benefits as specified in Section 5(b)(ii) above for ninety (90) days from Executive’s death, and (iii) subject to the terms of the 2014 Plan, have the right to exercise the vested options under the 2014 Plan which are vested as of the date of Executive’s death for one (1) year following Executive’s death. 
(d)    Disability.  In the event of Executive’s termination of employment with the Company due to “Disability” (as defined herein), Executive shall be entitled to continuing payments of base salary (less applicable withholding taxes) until Executive is eligible for long-term disability payments under the Company’s group disability policy; provided, however, that in no event shall such period of continued base salary exceed 180 days following termination.  
(e)    Termination by Executive for Good Reason.  If Executive terminates employment with the Company for “Good Reason” (as defined herein) within ninety (90) days of a Good Reason event, and Executive signs and does not revoke a Release, then, subject to Executive’s compliance with Section 7, Executive shall be entitled to the same benefits that he would receive in Section 5(b) above.
6.    No Impediment to Agreement.  Executive hereby represents to the Company that Executive is not, as of the date hereof, and will not be during Executive’s employment with the Company, employed under contract, oral or written, by any other person, firm or entity, and is not and will not be bound by the provisions of any restrictive covenant or confidentiality agreement which would constitute an impediment to, or restriction upon, Executive’s ability to enter this Agreement and to perform the duties of Executive’s employment.
7.    Assignment of Inventions and Confidentiality Agreement.  Executive acknowledges that by reason of his employment, he will have access to trade secrets and confidential or proprietary information, including but not limited to:  confidential processes and technology, long range plans, marketing plans, supplier relationships, contract terms, compensation information, membership and customer data, financial information, pricing and costs information.  Executive agrees, as a condition to Executive’s employment with the Company and the effectiveness of this Agreement, to execute the Company’s form of Intellectual 

Property Agreement attached hereto as Exhibit A; provided, however, to the extent there is any inconsistency between such agreement and this Agreement, this Agreement shall control.
8.    Injunction.  Executive agrees that an injunction may be granted by the Superior Court of King County, Washington, or by any other court or courts having jurisdiction, restraining him from violation of the terms of this Agreement, upon any breach or threatened breach.  This shall not limit Company from any other relief or damages to which it may be entitled as a result of Executive’s breach of this Agreement.
9.    Alternative Dispute Resolution.  Executive agrees that prior to filing any motion or claim against Company or any of its employees, he will offer to engage in formal mediation.  Each party shall bear its own costs of mediation.  
10.    Fees.  The prevailing party shall be entitled to its costs and attorney’s fees incurred in any litigation relating to the interpretation or enforcement of this Agreement, provided that a party’s right to fees and costs in connection with a wage or other statutory employment claim shall be governed exclusively by applicable state or federal law.  
11.    Definitions.
(a)    Cause.  For purposes of this Agreement, “Cause” is defined as any of the following: (i) fraud, illegal conduct, misappropriation or embezzlement on the part of Executive which results in material loss, damage or injury to the Company, (ii) a material breach of this Agreement (including any documents incorporated herein by reference) by Executive, (iii) Executive’s conviction of, or plea of guilty or nolo contendere to, a felony or crime involving moral turpitude, or (iv) conduct by Executive which constitutes willful, wanton or grossly negligent neglect of duties.  Conduct will not be willful or grossly negligent if done, or not done, by Executive in good faith and with reasonable belief that action or omission was in the best interest of the Company.  Any termination for “Cause” hereunder must be determined by a vote of the Board, with Executive first having been given specific written explanation of the basis for the “Cause” determination and an opportunity to appear before the Board prior to final Board action.  If the Company wishes to terminate Executive’s employment for Cause, it shall first give Executive forty‐five (45) days prior written notice of the circumstances constituting Cause and an opportunity to cure unless the circumstances are not subject to being cured.
(b)    Change in Control.  For purposes of this Agreement, Change in Control” is defined as the occurrence of any of the following events:  (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, the “Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; provided, however, that for purposes of this subclause (i) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (iii) the consummation of a merger or consolidation of the Company with any other corporation, 

other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (iv) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company) or (v) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by member of the Board whose appointment or election is not endorsed by as majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (v), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, a transaction will not be deemed a Corporate Transaction unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
(c)    Disability.  For purposes of this Agreement, “Disability” is defined as Executive’s inability to perform his employment duties to the Company hereunder for 180 days (in the aggregate) in any one-year period as determined by concurrence of Executive’s attending physician and an independent physician selected by the Company, and failing concurrence of such physicians, then by an independent physician which they together select.
(d)    Good Reason.  For purposes of this Agreement, “Good Reason” is defined as the occurrence of any of the following:  (i) A relocation of Company headquarters outside of King, Pierce, or Snohomish counties in the State of Washington ; (ii) A material breach of this Agreement by the Company; (iii) Executive has a material reduction in position, status, duties or responsibilities, or is assigned duties materially inconsistent with his position, (iv) Executive’s base salary is reduced, and/or (v) the Company experiences a Change in Control.  If the Executive wishes to terminate his employment for Good Reason, it shall first give Company forty‐five (45) days prior written notice of the circumstances constituting Good Reason and an opportunity to cure unless the circumstances are not subject to being cured.
(e)    Release.  For purposes of this Agreement, “Release” is defined as a full and complete release of all claims of Executive against the Company, known or unknown on the date of its execution, in form and substance acceptable to the Company.
12.    Successors; Personal Services.  The services and duties to be performed by the Executive hereunder are personal and may not be assigned or delegated.  This Agreement shall 

be binding upon and inure to the benefit of the Company, its successors and assigns, and the Executive, the Executive’s heirs and representatives.
13.    Notice.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid.  In the case of the Executive, mailed notices shall be addressed to Executive at the home address, which Executive most recently communicated to the Company in writing.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Operating Officer.
14.    Miscellaneous Provisions.
(a)    Waiver.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(b)    Entire Agreement.  This Agreement and the Company’s Intellectual Property Agreement dated of even date herewith, shall supersede and replace all prior agreements or understandings relating to the subject matter hereof, and no agreement, representations or understandings (whether oral or written or whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the relevant matter hereof.  
(c)    Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the internal substantive laws of the State of Washington without reference to any choice of law rules.  The parties expressly stipulate that any litigation under this Agreement shall be brought in the state courts of King County, Washington or in the United States District Court for the Western District of Washington at Seattle.  The parties agree to submit to the jurisdiction and venue of these courts.
(d)    Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
(e)    No Assignment of Benefits.  The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this subsection shall be void.

(f)    No Duty to Mitigate.  Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that Executive may receive from any other source.
(g)    Employment Taxes.  All payments made pursuant to this Agreement will be subject to withholding of all applicable income, health insurance and employment taxes.
(h)    Assignment by Company.  The Company may assign its rights under this Agreement to an affiliate (as defined under the Securities Exchange Act of 1934), and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company.  In the case of any such assignment, the term “Company” when used in a section of this Agreement shall mean the corporation that actually employs the Executive.
(i)    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
(j)    Attorney Fees.  The Company agrees to directly pay Executive’s reasonable legal fees associated with entering into this Agreement up to $5,000 upon receiving invoices for such services.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
COMPANY:    
Acucela Inc.
By: /s/ Ryo Kubota    [Sign Here] 
Ryo Kubota
Its:  CEO    
EXECUTIVE:    
/s/ John Gebhart    [Sign Here] 
John Gebhart

 [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

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