Employment Contract Margaret Spellings This Employment Contract (?Contract?) is made between the Board of Governors (?Board?) of The University of North Carolina (?University?), 910 Raleigh Road, Chapel Hill, North Carolina 27514, acting for the University pursuant to NC. Gen. Stat. 116-14, and Margaret Spellings (?President?). 1.0 Appointment as President. 1.1 The Board elected Margaret Spellings as President of the University on October 23, 2015. The President is expected to commence service effective March 1, 2016. The Board and the President wish to enter into this written Contract, as permitted by Section 300.1.1 of the UNC Policy Manual. 1.2 The President shall perform all duties required by this Contract consistent with The Code, the policies of The University of North Carolina, and the lawful directions of the Board. In the event of a con?ict between any provision of this Contract and The Code or the UNC Policy Manual concerning the terms and conditions of employment, the provisions of this Contract shall control. 2.0 Devote Best Efforts to the Work as President. 2.1 The President shall serve as the chief administrative and executive of?cer of the University and agrees to apply her experience, ability, and talent, and devote substantially all of her full-time attention and energies to her duties as President. 2.2 The President shall perform her duties and render services as appropriate for the interests, needs, business, or opportunities of the University. 2.3 The expenditure of reasonable amounts of time for personal or outside business, as well as charitable and professional development activities, including the President?s service on up to two boards for which she receives compensation, is permitted and shall not be deemed a breach of this Contract, provided such activities do not interfere with the services required to be rendered under the provisions of this Contract, and are not inconsistent with the North Carolina State Government Ethics Act and the Board?s policies concerning con?icts of interest. 3.0 Term of Appointment. 3.1 This Contract shall be effective beginning on March 1, 2016, for a ?ve-year term ending on February 28, 2021, subject to the termination provisions of Section 13. 3.2 This Contract may be extended by mutual agreement of the President and the Board. 4.0 Evaluation. The President shall be evaluated consistent with Section 200.4, Part of the UNC Policy Manual, Section 200.4.1 of the UNC Policy Manual, and any other president evaluation policies, Page 1 of 8 regulations, and/or guidelines that may be adopted during the term of the Contract, and such administrative processes as the Board may deem appropriate. Among other criteria, evaluations may include an assessment of the President?s achievement of the performance metrics established in strategic plans, as adopted or modi?ed by the Board. 5.0 Salary and Non-Salary Compensation. 5.1 In exchange for all services rendered under this Contract, the Board agrees that the University shall pay the President an annual base salary of no less than $775,000 (Seven hundred seventy-?ve thousand dollars), effective beginning March 1, 2016, and payable in equal installments, less applicable deductions for local, state, and federal taxes and participation in mandatory and voluntary employee bene?t programs. 5.2 Except as expressly provided otherwise herein, the President shall be responsible for any income tax liability incurred as a result of this Contract. 5.3 In connection with the President?s annual performance evaluations, the President shall be considered for and receive any additional salary increases that the Board may approve during the term of this Contract. 5.4 In order to facilitate the University?s transition of administration, the President may be employed by the University at the UNC General Administration of?ce prior to the commencement of the term of this Contract on March 1, 2016. The President shall receive compensation for any services performed prior to March 1, 2016, at a daily rate, based on the annual base salary set forth in Section 5.1, and shall provide services according to a work schedule that is established by the President in consultation with the Chairman of the Board. 5.5 The Board will, in consultation with the President, establish a suitable performance incentive plan for the President to provide an opportunity to earn compensation in addition to base salary upon the achievement of mutually agreed upon annual performance objectives. Such performance incentive plan shall apply to the entire term of this Contract, with all or a portion of any earned performance incentive payable following the completion of each year of this Contract. 5.6 As soon as practicable following the commencement of the President?s service under this Contract, the Board will, in consultation with the President, exercise its best efforts to secure a non-tenured secondary faculty appointment for the President at a constituent institution of the University, commensurate with the President?s training and professional experience. 6.0 Insurance and Retirement Bene?ts. 6.1 The University shall make employer contributions to the State Health Plan of North Carolina as required by applicable law and consistent with the President?s health bene?t elections, to provide the President and her eligible dependents with health care coverage. Page 2 of 8 6.2 The University will make contributions to the Optional Retirement Program of the University of North Carolina as required by applicable law and consistent with the President?s retirement bene?t election. 6.3 The Board has approved the position of president for participation in the University?s quali?ed retirement plan for senior administrative of?cers. The University shall contribute to such plan an amount approved by the Board that is not less than $77,500 following each year of service completed under this Contract. The President shall be vested in all such contributions as they are made. 7.0 Leave. 7.1 The President shall be entitled to accrue 30 workdays of annual leave per year, as well as sick and holiday leave in accordance with Section 300.1 of the UNC Policy Manual. 7.2 Attendance at business and professional meetings and conferences in connection with the President?s of?cial duties shall not be construed as vacation time. 7.3 The President shall be entitled to a payout of accrued vacation leave at the end of her service in accordance with the provisions of Section 301 of the UNC Policy Manual. 8.0 Housing. 8.1 Consistent with Section 300.1.5 of the UNC Policy Manual, the President will, as a condition of employment, live in the of?cial residence of the President at 400 East Franklin Street, Chapel Hill, North Carolina 27514. The President may vacate the residence temporarily while repairs or renovations are being made, or with approval from the Board, in case of serious hardship. 8.2 The University agrees to provide, maintain in good repair, and pay for utilities, and telephone service for the of?cial residence and shall provide for maintenance of the of?cial residence and grounds on which the of?cial residence is situated, and for housekeeping services. The President agrees to make the of?cial residence reasonably available for University business and functions and the University shall pay or reimburse all costs of any such functions. 8.3 The University shall keep the of?cial residence insured for ?re and extended coverage and shall pay for liability insurance covering all risks arising from the use and occupancy of the of?cial residence. The cost of any insurance on the contents of the of?cial residence shall be borne by the President for contents which are her personal property and by the University for the contents that are the property of the University. 9.0 Automobile. The University shall furnish the President with an automobile or an automobile allowance during the term of this Contract consistent with University policy. Page 3 of 8 10.0. Professional Dues and Meetings. The University will provide for reasonable expenses incurred by the President to attend educational conferences, conventions, courses, seminars, and other similar professional growth activities, including memberships in professional organizations. 11.0 Travel for the University. The University will provide for the President and the President?s spouse reasonable travel expenses, including overnight accommodations, subsistence, and other ordinary and reasonable expenses when the President is traveling on University business, except that payments will be made on behalf of the spouse only when the presence of the spouse is necessary to further the interests of the University of North Carolina. 12.0 Relocation. The University shall, in accordance with applicable policy, reimburse the President for reasonable expenses incurred to relocate to the of?cial residence at the beginning of her service, and from the of?cial residence at the conclusion of her service and shall provide a tax gross-up for such reimbursement to the extent such reimbursement is not tax deductible so that the President shall have no after-tax costs as a result of such reimbursement. Reimbursement shall be limited to the costs of moving household goods and furnishings, reasonable temporary storage fees for household goods and furnishings while in transit, and transportation to or from the of?cial residence. Reimbursable expenses shall not include the costs of security deposits, real estate transaction fees, or other related expenses associated with the acquisition or sale of a residence. Reimbursable expenses, exclusive of tax-gross up, shall be limited to a maximum of $35,000. 13.0 Termination and Liquidated Damages. 13.1 Termination by The Board for Just Cause. The following provisions constitute the exclusive grounds on which the Board may terminate the employment of the President for ?just cause? during her service as President under this Contract. Notwithstanding any other Board policy or rule to the contrary, as used in this Contract, ?just cause? means: 13.1.1 Any personal or professional conduct of the President that brings material public scorn, contempt, or ridicule upon the Board or the University, as determined in the reasonable discretion of the Board; 13.1.2 Any act by the President that results in her arrest or conviction for a felony or a violation of the State Government Ethics Act, the latter as determined by the North Carolina Ethics Commission; 13.1.3 A deliberate violation of any material rule or policy of the University or material state or federal law, as determined in the sole discretion of the Board, which is not remedied after thirty (30) days? written notice by the Chairman of the Board to the President; Page 4 of 8 13.1.4 Prolonged absence from duty without the Board?s consent except where such absence is attributable to retreat, personal leave, illness, disability, or death; 13.1.5 Any willful material violation by the President of her obligations as set forth in this Contract, which violation is not remedied after thirty (3 0) days? written notice by the Chairman of the Board to the President; or 13.1.6 Any failure to follow the lawful directions of the Board, which is not remedied after thirty (3 0) days? written notice by the Chairman of the Board to the President. In the event the President is terminated by the Board for just cause, the President shall be noti?ed by the Chairman of the Board in writing of this determination. If the determination is based on conduct that violates Section 13.1.1 or 13.1.2, the President?s employment as President shall be terminated effective the date of the Chairman?s notice of termination. If the determination is based on conduct that violates Section 13.1.3 or 13.1.4, the President?s employment as President shall be terminated effective thirty (30) days from the Chairman?s notice of termination. If the determination is based on conduct that violates Section 13.1.5 or 13.1.6, the President?s employment as President shall be terminated effective sixty (60) days from the Chairman?s notice of termination. The President shall vacate the of?cial residence no later than sixty (60) days after receiving notice of termination for just cause. The President?s base annual compensation shall be prorated to the effective date of the termination for just cause and then discontinued. 13.2 Termination for Death or Disability. The following provisions constitute the grounds under which the President may be terminated from employment due to death or disability. 13.2.1 If the President dies, this Contract shall terminate automatically, without further liability of the University or the Board, except for unpaid base salary earned through date of death and applicable medical, insurance, and vested bene?ts provided in this Contract or other state-sponsored bene?ts in which the President is a participant at death. 13.2.2 If the President becomes permanently disabled or incapacitated and the Board reasonably deems the President incapable of performing the essential functions of her of?ce notwithstanding reasonable accommodation, the Board may terminate this Contract. 13.2.3 If the President: (1) dies or (2) becomes incapable of performing the essential functions of her of?ce notwithstanding a reasonable accommodation due to permanent disability and is terminated, the University shall be liable to the President or the President's personal representative, as the case may be, for any accrued but unpaid compensation together with a proportionate part of any other bene?ts which would be due and payable to the President, or personal representative, as the case may be, by reason of death or disability during her term of employment, as well as any vested bene?ts provided in this Contract or other state-sponsored bene?ts in which the President is a participant as of the date of death or such disability. 13.3. Termination Without Just Cause; Liquidated Damages. The following provisions constitute the terms upon which the employment of the President may be terminated without just cause. Page 5 of 8 13.3.1 This Contract may be terminated at any time by delivery of written notice to the President of the Board?s intent to terminate this Contract without just cause, which notice shall be effective one hundred twenty (120) days after the date the notice is delivered, or February 28, 2021, whichever is sooner. 13.3.2 This Contract does not provide the President with permanent tenure in a full-time faculty position following service as President. Accordingly, if the Board terminates this Contract without just cause under Section 13.3.1, the University shall pay the President, as liquidated damages, an amount equal to twelve (12) months of the President?s base salary (as the same may have been increased) as of the effective date of the termination. No termination under Section 13.3.1 shall cause any retroactive adjustment, abatement, curtailment, cancellation, withholding, forfeiture, or loss of any of the rights and bene?ts conferred upon the President under Sections 5.0 through 12.0 or any future adjustment, abatement, curtailment, cancellation, withholding, forfeiture, or loss of any of the rights and benefits conferred upon the President under University policy. 13.3.3 The parties have bargained for and agreed to the foregoing liquidated damages provision, giving consideration to the fact that termination of this Contract by the Board without just cause prior to its speci?ed expiration may cause loss to the President, which damages are extremely dif?cult to determine with certainty. The parties further agree that the payment of such liquidated damages by the University and acceptance thereof by the President shall constitute adequate and reasonable compensation to the President for the damages and injury suffered. 13.3.4 If the Board elects not to renew this Contract following completion of the term as set forth in Section 3.0, the President may elect to assume research leave status with pay for a period of one calendar year. The President shall during the period of research leave, notwithstanding any University policy to the contrary, be paid her base annual salary as in effect on the effective date of the completion of her term as President under Section 3.0. Salary during research leave shall be payable in equal installments, less applicable deductions for local, state, and federal taxes and participation in any mandatory or voluntary benefit programs. During her research leave, the President shall be a full-time employee of the University, subject to all policies applicable to full-time EHRA employees and will be deemed to have resigned her University employment upon assuming full?time employment with any other employer. Prior to beginning the leave, the President will submit a work plan for the leave period, to include a description of the expected outcomes. The plan will be reviewed for approval by the Board or its designee. At the conclusion of the research leave, the President shall submit a summary report to the Board or its designee. In the event the President for any reason does not assume faculty or non-faculty status at the end of her one-year research leave, whether by reason of health, death, or personal decision, all sums paid to the President under this Section 13.3.4 shall nonetheless be deemed earned and shall not be subject to any refund to, forfeiture, or reclamation by the Board or the University. 13.4 Resignation beresident. The President may resign her employment as President at any time by delivering to the Chairman of the Board ninety (90) days? advance written notice of such resignation. If the Page 6 of 8 President resigns, the Contract shall terminate on the effective date of the resignation without further liability of the University or the Board except for unpaid base salary earned through the effective date of the resignation and applicable medical, insurance, and vested bene?ts provided in this Contract, including those set forth under Section 13.5, below, or other state-sponsored bene?ts in which the President is a participant as of the effective date. No resignation under Section 13.4 shall cause any retroactive adjustment, abatement, curtailment, cancellation, withholding, forfeiture, or loss of any of the rights and bene?ts conferred upon the President under Sections 5.0 through 12.0 and 13.5, or any future adjustment, abatement, curtailment, cancellation, withholding, forfeiture, or loss of any of the rights and bene?ts conferred upon the President under University policy. 13.5 Research Leave Following Resignation or Completion of Contract. In the event of the President?s voluntary resignation as President after at least two full years of service under this Contract, or the President?s election not to renew this Contract after completion of her term as President under Section 3.0, the President may elect to assume research leave status with pay for a period of one calendar year. Provided the President has completed at least two years of service under this Contract, the President shall during the period of research leave, notwithstanding any University policy to the contrary, be paid a percentage of her base annual salary as in effect on the effective date of her resignation or completion of her term as President under Section 3.0, based on completed years of service as follows: 20% of base salary after two years of service; 30% of base salary after three years of service; 40% of base salary after four years of service; or 50% of base salary after ?ve years of service. Salary during research leave shall be payable in equal installments, less applicable deductions for local, state, and federal taxes and participation in any mandatory or voluntary bene?t programs. In no instance shall this amount exceed 50% of the President?s base salary in effect on the effective date of her resignation or the completion of her term under Section 3.0, as applicable. During her research leave, the President shall be a full-time employee of the University, subject to all policies applicable to full-time EHRA employees and will be deemed to have resigned her University employment upon assuming full?time employment with any other employer. Prior to beginning the leave, the President will submit a work plan for the leave period, to include a description of the expected outcomes. The plan will be reviewed for approval by the Board or its designee. At the conclusion of the research leave, the President shall submit a summary report to the Board or its designee. In the event the President for any reason does not assume faculty or non-faculty status at the end of her one-year research leave, whether by reason of health, death, or personal decision, all sums paid to the President under this Section 13.5 shall nonetheless be deemed earned and shall not be subject to any refund to, forfeiture, or reclamation by the Board or the University. 14.0 Entire Agreement; Modi?cation. This Contract constitutes the entire agreement?in?fact between the parties hereto and supersedes any and all prior or contemporaneous representations or agreements, whether written or oral, between the parties, and cannot be changed or modi?ed unless in writing signed by the parties hereto. Page 7 of 8 15.0 Severability. The terms of this Contract are severable such that if any term or provision is declared by a court of competent jurisdiction to be illegal, void, or unenforceable, the remainder of the provisions shall continue to be valid and enforceable. 16.0 Governing Law; Forum. This Contract shall be interpreted and construed in accordance with the laws of the State of North Carolina. The courts of the State of North Carolina, including the federal courts sitting in North Carolina, shall be the exclusive fora for any lawsuit arising from or incident to this Contract. 17.0 Waiver. No delay or failure to enforce any provision of this Contract shall constitute a waiver or limitation of rights enforceable under this Contract. 18.0 Non-Assignable. This Contract is not assignable but shall inure to the bene?t of and bind the successors of both parties, along with the heirs, administrators, personal representatives of the President. IN WITNESS WHEREOF, Margaret Spellings and the Chair of the Board of Governors have executed this Contract on this J. 3 day of October 2015. PRESIDENT THE UNIVERSITY OF NORTH CAROLINA By: By: 6. Margaret ellinggv) Jolyi C. Fennebresque 7 President Chairman Board of Governors Page 8 of 8