Document:

Exhibit 10.2

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) was originally entered into effective as of September 27, 2010 (the “Effective Date”) between K12 INC., a Delaware corporation (“Company”), and RONALD J. PACKARD (“Executive”), on the following terms and conditions and is hereby further amended effective as of January 7, 2013.

 

SECTION 1.                            EMPLOYMENT.

 

1.1                               Responsibilities.  Company hereby employs Executive on the terms and conditions set forth in this Agreement and Executive hereby accepts such employment.  Executive shall serve as the Chief Executive Officer of Company.  Executive also shall serve as a member of the Board of Directors of Company (the “Board of Directors” or the “Board”) and agrees to hold such other executive position(s) with Company and/or its affiliates as the Board of Directors shall from time to time designate.  Executive shall perform such duties and responsibilities commensurate with Executive’s position(s) as may be required by Company from time to time, and Executive further recognizes that he will be required to travel in the ordinary course of performing his responsibilities.  Executive shall carry out all of his employment responsibilities in an efficient, trustworthy, effective and businesslike manner.

 

1.2                               Exclusive Employment.  Executive shall devote Executive’s full business time to Executive’s responsibilities under this Agreement.  Without limiting the generality of the foregoing, Executive shall not render services of a business, professional or commercial nature to any other person, firm or corporation, whether for compensation or otherwise, except that Executive may engage in the following activities so long as such activities do not interfere with Executive’s ability to comply with this Agreement (including Section 4) and are not otherwise in conflict with the policies or interests of Company: (a) serving on civic, industry, or charitable boards or committees and engaging or participating in civic, philanthropic and community service activities, (b) serving as a director or advisory board member of two outside for profit companies, (c) publishing, solely on Executive’s personal time, screen plays, novels and other writings for which Executive may receive and retain separate compensation, (d) accepting and fulfilling a reasonable number of speaking engagements for which Executive may receive and retain separate compensation and (e) managing Executive’s personal, financial, investment, and legal affairs and/or family-owned businesses.  Executive may not serve on any other outside boards of directors of for profit companies without prior approval of the Board.

 

SECTION 2.                            COMPENSATION AND OTHER BENEFITS.

 

2.1                               Compensation/Deductions.  In consideration of Executive’s employment, Executive shall receive from Company while Executive is employed with Company the compensation and benefits described in this Section 2 as full and complete satisfaction of all of Company’s obligations to Executive arising from Executive’s employment.  The compensation and employee benefits made available to Executive pursuant to this Agreement may be changed only by the written agreement of the parties.  Executive authorizes Company to deduct and

 

 

withhold from all compensation to be paid to Executive any and all sums required to be deducted or withheld by Company (including, but not limited to, income tax withholding and payroll taxes) pursuant to the provisions of all applicable laws, regulations, rulings or ordinances of the United States and any other applicable jurisdiction.

 

2.2                               Base Salary.  Executive shall receive, as a fixed base salary for the full time employment referred to in Section 1 hereof and all other obligations of Executive hereunder, compensation at the rate of Six-Hundred Seventy-Five Thousand Dollars ($675,000) per year payable not less frequently than monthly in accordance with Company’s standard payroll practices as in effect from time to time (“Base Salary”).  The Compensation Committee of the Board of Directors (the “Compensation Committee”) shall review the Executive’s Base Salary annually and may recommend to the Board of Directors that Executive’s Base Salary be adjusted at that time, in its sole discretion, based upon a market study that the Compensation Committee may in its discretion commission.

 

2.3                               Bonus.  Executive may receive a bonus in the sole and absolute discretion of the Board of Directors of Company, which bonus shall have a target of one hundred (100) percent of Base Salary (the “Target Bonus”) and shall not exceed an amount equal to two hundred (200) percent of Base Salary (the “Maximum Bonus”) and shall be paid in accordance with the terms of the Company’s bonus policy, but in any event no later than the 15th day of the third month following the end of the calendar year or fiscal year with respect to which such bonus relates or otherwise within the period required by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) such that it qualifies as a “short-term deferral” pursuant to Treasury Regulation Section 1.409A-1(b)(4).  The Executive’s performance goals related to any fiscal year of the Company shall be based on financial, operational, human capital or other defined metrics approved by the Board of Directors.

 

2.4                               Restricted Stock Grants.

 

(a)                                 In consideration for Executive’s entering into this Agreement, on the Effective Date, the Company shall grant to Executive an award of One Hundred Forty Five Thousand Five Hundred Thirty (145,530) shares of Restricted Stock (as defined in the Plan (as defined below)) (the “Initial Restricted Stock Award”).  Seventy Two Thousand Seven Hundred Sixty Five (72,765) of the shares subject to the Initial Restricted Stock Award shall be fully vested as of the Effective Date and the remaining portion shall vest in twelve (12) equal quarterly installments, with the first such quarterly installment vesting on September 30, 2011, provided that Executive remains employed by Company on each applicable vesting date.

 

(b)                                 At the Company’s next regular stockholders meeting following the Effective Date (the “Stockholders Meeting”), the Company shall submit for approval by the Company’s stockholders the list of performance criteria in the Plan (as such list may be revised by the Board prior to the Stockholders Meeting) that may be used for purposes of granting awards that are intended to qualify as performance-based compensation under Section 162(m) of the Code.  Subject to stockholder approval of such performance criteria, the Executive shall be eligible to receive an annual award of Restricted Stock as soon as practicable following the completion of each of the Company’s fiscal years 2011, 2012 and 2013 (each an “Annual

 

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Restricted Stock Award”), with the Annual Restricted Stock Award for 2013 performance made in the ordinary course and in no event later than December 31, 2013.  The number of shares subject to each Annual Restricted Stock Award shall have a Fair Market Value (as of the date of grant of each such Annual Restricted Stock Award) equal to between zero ($0) dollars and One Million Two Hundred Fifty Thousand ($1,250,000) dollars, and the actual amount of each Annual Restricted Stock Award shall be determined based upon the Company’s attainment of one or more pre-established, objective performance goals, with the intent that each such Annual Restricted Stock Award shall be treated as qualified performance based compensation for purposes of Section 162(m) of the Code.  Each Annual Restricted Stock Award, if any, shall vest in twelve equal quarterly installments, with the first installment for each Annual Restricted Stock Award vesting on September 30 of the calendar year in which such Annual Restricted Stock Award is granted, provided that Executive remains employed by Company on each applicable vesting date.

 

(c)                                  Notwithstanding the foregoing, if (i) the Executive’s employment is terminated by the Company without Cause (as defined below) or as a result of Executive’s Disability (as defined in the Plan) (including in the event such termination occurs following the expiration of the Employment Term), (ii) the Executive’s employment is terminated as a result of Constructive Termination (as defined below) (iii) the Executive’s employment terminates due to the Executive’s death (including in the event such termination occurs following the expiration of the Employment Term), or (iv) a Change in Control (as defined in the Plan) occurs, then in each such event, notwithstanding the terms of any award agreement to the contrary: (A) any unvested portion of any stock option award, (B) any unvested portion of the Initial Restricted Stock Award, (C) any unvested portion of an Annual Restricted Stock Award and (D) any other equity-based compensation award (which includes the right to receive the Annual Restricted Stock Awards pursuant to Section 2.4(b)), as applicable, shall become fully vested effective as of immediately prior to the Executive’s date of termination of employment, the date of grant, or the date of the Change in Control, as applicable.  Except as set forth in this Section 2.4, the Initial Restricted Stock Award and Annual Restricted Stock Awards, including the rights to receive the Annual Restricted Stock Awards, shall be subject to the terms of Company’s 2007 Equity Incentive Award Plan, as such plan may be amended from time to time (the “Plan”) and Company’s form of Restricted Stock Agreement under the Plan (the “Restricted Stock Agreement”).

 

2.5                               Expense Reimbursement.  Company shall reimburse Executive for reasonable and necessary out-of-pocket business expenses incurred by Executive in the performance of Executive’s responsibilities hereunder and within the operating budget of Company, subject to Company’s business expense reimbursement policies in effect from time to time, including submission to Company of a written accounting of such expenses, which accounting shall include an itemized list of the expenses incurred, the business purposes for which such expenses were incurred, and appropriate receipts and supporting documentation.

 

2.6                               Vacation.  Executive shall be entitled to paid vacation for each full year of Executive’s employment with Company (prorated for any partial year) in accordance with Company vacation policy in effect from time to time (which as applied to Executive shall not be less than 5 weeks of vacation for each full year of employment with 2 weeks of carryover

 

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permitted).  Said vacation time shall be taken by the Executive in a manner that is consistent with Executive’s duties and obligations hereunder.

 

2.7                               Other Benefits.  Executive shall be entitled to participate in all group employment benefits that are offered by Company to Company’s employees in general, subject to the terms and conditions of such benefit plans including any eligibility requirements.  In addition, Executive shall be entitled to reasonable legal fees incurred by Executive in calendar year 2013 in connection with the negotiation of this Agreement, up to a maximum of $5,000.

 

SECTION 3.                            EMPLOYMENT TERM AND TERMINATION.

 

3.1                               Term.  The term of this Agreement shall commence as of the Effective Date and shall expire on September 30, 2014 (the “Initial Term”), unless terminated earlier as provided in Section 3.2, 3.3, 3.4, 3.5, 3.7 or 3.8 below.  Following the expiration of the Initial Term, the employment term hereunder shall automatically be extended for successive one-year periods (“Extension Terms” and, collectively with the Initial Term, the “Employment Term”) unless either party gives notice of non-extension to the other no later than three (3) months prior to the expiration of the then-applicable Term.  In the event that such notice is given, Executive’s employment shall terminate at the close of business on the last day of the Employment Term.  Upon termination of employment, Executive shall not be entitled to receive any compensation, payments or benefits of any nature whatsoever, except as specifically provided in Section 2.4 or in Sections 3.2, 3.3, 3.4, 3.5, 3.7 or 3.8 below.

 

3.2                               Termination Upon Death.  Executive’s employment with Company shall terminate upon the death of Executive.  In the event of such termination, Company shall continue to pay to the estate of Executive (i) the Accrued Rights (as defined below), (ii) Executive’s Base Salary in equal installments in accordance with Section 2.2 for a period of one hundred eighty (180) days after the date of such termination, commencing with the first regularly scheduled payroll date following the date of such termination and (iii) a lump sum cash payment in an amount equal to a pro-rated portion of Executive’s Target Bonus for the year in which the termination occurs (based upon the number of days during the applicable fiscal year that Executive was employed by Company), payable promptly but in all events within thirty (30) days following the date of such termination.

 

3.3                               Termination Upon Disability.  Executive’s employment with Company shall terminate upon the “disability” of Executive.  In the event of such termination, Company shall pay to Executive the Accrued Rights and a lump sum cash payment in an amount equal to a pro-rated portion of Executive’s Target Bonus for the year in which the termination occurs (based upon the number of days during the applicable fiscal year that Executive was employed by Company), payable promptly but in all events within thirty (30) days following the date of such termination.  As used in this Section 3.3 and in Section 3.5, the term “disability” shall mean a physical or mental disability that renders Executive unable to perform Executive’s normal duties for Company for a period of 90 or more days as determined in the good faith judgment of the Board of Directors of Company.

 

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3.4                               Termination for Cause.  Company shall have the right to terminate Executive’s employment for “Cause” by written notice to Executive.  In the event of such termination, Company shall pay to Executive the Accrued Rights.  For purposes of this Agreement, a termination shall be for Cause if Executive shall: (i) commit a material act of fraud, embezzlement or misappropriation involving Company or any of its affiliates, (ii) be convicted of, or enter a plea of guilty or no contest to, any felony, (iii) materially breach this Agreement or any material written policy of the Company, or (iv) willfully fail or continually neglect to perform Executive’s material responsibilities under this Agreement, in each case, that causes material and demonstrable damage to the Company.  Notwithstanding the foregoing, Company may not terminate Executive’s employment for Cause unless (a)  Executive is provided with a period of at least than thirty (30) days to remedy such condition (if such condition is curable) and Executive does not remedy the condition within such thirty (30) day period and (b) Executive’s termination of employment occurs no later than one hundred eighty (180) days after the initial existence of the condition constituting Cause; provided, that Company is only required to provide Executive with the opportunity to remedy any such condition one time in any six (6) month period.

 

3.5                               Termination Without Cause.  In the event Company terminates Executive’s employment prior to the expiration of the Employment Term for other than death, disability or Cause, which Company shall have the absolute right to do, provided that such termination of employment constitutes a “separation from service” with Company as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto (a “Separation from Service”), and subject to Executive’s execution within 30 days following the date of Executive’s Separation from Service, and non-revocation, of a general release of all claims against the Company and its affiliates in the form provided to the Executive by the Company no later than 8 days following the date of Executive’s Separation from Service (a “Release”), Company shall pay to Executive the Accrued Rights, plus, as severance pay, three times Executive’s Base Salary (the “Severance Amount”).  Fifty (50) percent of the Severance Amount shall be payable in a lump sum within 40 days following the date of Executive’s Separation from Service.  The remaining portion of the Severance Amount (the “Remaining Severance”) shall be payable in equal installments in accordance with Section 2.2 over the 18-month period following date of Executive’s Separation from Service.  In addition, notwithstanding the terms of any stock option agreement to the contrary, upon a termination without Cause, Executive shall be afforded an extended exercise period for all stock options held by Executive as of the date of termination of employment, subject to earlier termination in the event of a Change in Control, until the earlier of (a) the date that is three-hundred sixty five (365) days after the later of (i) the date of such termination, or (ii) the date Executive is no longer a member of the Board, or (b) the expiration of the term of such stock options.  For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.  Notwithstanding anything to the contrary in this Agreement, no portion of the Remaining Severance shall be payable to Executive before the Company’s first regular payroll payment date occurring on or after the 40th day following the date of Executive’s Separation from Service (the “First Pay Date”).  Any Remaining Severance payments that would otherwise be made prior to the First Pay Date shall

 

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be paid to Executive on the First Pay Date and the rest of the Remaining Severance payments shall be made as provided in this Agreement.

 

3.6                               Termination Upon Expiration of Employment Term.  In the event either party elects not to extend the Initial Term or any Extension Term, Executive’s employment terminates upon the expiration of the Employment Term, which either party shall have the absolute right to do, Company shall pay to Executive the Accrued Rights.  Notwithstanding the foregoing, if Company elects not to extend the Initial Term or any Extension Term, such election shall have the same consequences as a termination of Executive’s employment without Cause pursuant to Section 3.5, effective as of the last day Employment Term, unless Executive’s employment is otherwise terminated prior to the last day of the then Employment Term, in which case the consequences of such termination of employment shall be dependent upon the basis for such termination of employment as provided in this Agreement.

 

3.7                               Constructive Termination.  If there is (a) a material reduction by the Company in Executive’s authority, duties, responsibilities or title as provided in Section 1.1 of this Agreement, (b) a material reduction by the Company in the Executive’s Base Salary as provided in Section 2.2, (c) a material breach by the Company of any material provision of this Agreement, and/or (d) the relocation by the Company of Executive’s principal place of employment more than thirty (30) miles from its location as of the Effective Date (a “Constructive Termination”), such an action will be deemed to be a termination of Executive’s employment by the Company without Cause and, provided that Executive resigns his employment as a result of such action and such resignation constitutes a Separation from Service, and subject to Executive’s execution within 30 days following the date of Executive’s Separation from Service, and non-revocation, of a Release, Executive shall be entitled to the Accrued Rights, severance pay as provided in Section 3.5 and all other benefits he is entitled to under this Agreement upon a termination of employment without Cause (including accelerated vesting as provided in Section 2.4(c)).  In the event Executive becomes entitled to severance pay under this Section 3.7 as a result of Executive’s Separation from Service prior to the fiscal year ending June 30, 2013, Executive shall be entitled to receive a pro-rata portion of the bonus (up to the Maximum Bonus) provided under Section 2.3, subject to the determination by the Board that Executive has achieved the corporate and individual performance management objectives approved by the Board for such fiscal year, and provided that the Executive performs his responsibilities as Chief Executive Officer of the Company as determined by the Board in its discretion, including his cooperation with the members of the Board and the Company officers in the Company’s day-to-day business and affairs.  Any pro-rata bonus determined to be given to the Executive shall in no event be paid later than December 31, 2013.  Notwithstanding the foregoing, Executive may not resign his employment for Constructive Termination unless (i) Executive provides Company prior written notice of his intent to resign due to Constructive Termination within one hundred fifty (150) days of the initial existence of any condition constituting Constructive Termination, (ii) Company is provided with a period of at least thirty (30) days to remedy such condition and does not remedy the condition within such thirty (30) day period and (iii) Executive’s termination of employment occurs no later than one hundred eighty (180) days after the initial existence of the condition constituting Constructive Termination.  The Board may, in its sole and absolute discretion, extend the time periods in clauses (i) and (iii) of the previous sentence.

 

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3.8                               Termination by Executive.  If Executive voluntarily elects to terminate his employment with the Company by resignation for any reason other than a Constructive Termination prior to the end of the Employment Term, Executive shall not be entitled to any severance pay or benefits, except Executive shall be entitled to any unpaid salary, reimbursable expenses, and accrued vacation time until the date of termination, plus any vested amount arising from Executive’s participation in, or vested benefits under, any employee benefit plans, programs or arrangements (including without limitation, any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (collectively, the “Accrued Rights”).

 

SECTION 4.                            COVENANTS OF EXECUTIVE.

 

4.1                               Confidential Information.  Executive acknowledges that Executive’s services previously rendered to Company and to be rendered to Company place Executive in a position of confidence and trust with Company and have allowed and will continue to allow Executive access to Confidential Information (as defined below).  Executive agrees that at all times during which Executive is receiving any compensation from Company (including any severance pay) and for a period of three (3) years thereafter, Executive will maintain the Confidential Information in strictest confidence and will not, unless required to do so in the ordinary course of Company’s operations or required by law or ordered by a court or in connection with governmental investigation, disclose to any person, or use for Executive’s own personal use or financial gain, whether individually or on behalf of another person, any Confidential Information.  Without limiting the generality of the foregoing, Executive acknowledges that Company’s agreements and/or relationships with other persons may impose obligations or restrictions regarding the confidential nature of work or information relating to such persons, and Executive agrees to be bound by all such obligations and restrictions.  As used herein, “Confidential Information” shall mean information and compilations of information relating to Company and/or its business including, but not limited to, information regarding any trade secrets, proprietary knowledge, operating procedures, finances, financial condition, ownership, organization, employees, customers, clients, suppliers, distributors, agents, and other personnel, business activities, budgets, strategic or financial plans, objectives, marketing plans, products, services, price and price lists, operating and training materials, data bases and analyses and all other documents relating thereto or strategies of Company; provided, however, that Confidential Information shall not include information that is or becomes generally known to the public through no act or omission of Executive.

 

4.2                               Intellectual Property Rights.  Executive shall assign and transfer to Company, and does hereby assign and transfer to Company, all right, title and interest in and to all Company IP (as defined below).  All Company IP is and shall be the sole property of Company.  Executive shall disclose all Company IP promptly in writing to Company.  Upon the request of Company, Executive shall promptly execute a written assignment of title to Company for all Company IP, and Executive will preserve all such Company IP as Confidential Information.  As used herein, “Company IP” shall mean all inventions and intellectual property rights (including, but not limited to, designs, discoveries, inventions, improvements, ideas,

 

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devices, techniques, processes, writings, trade secrets, trademarks, patents, copyrights and all other intellectual property rights including, without limitation, notes, records, reports, software, plans, memoranda and other tangible information relating to such intellectual property, whether or not subject to protection under applicable laws) that Executive solely or jointly with others conceives, makes, acquires, suggests or participates in at any time during Executive’s employment with Company and that relate to the actual or demonstrably anticipated business, products, processes, work, operations, research and development or other activities of Company.

 

4.3                               Non-Interference.  During the Restricted Period (as defined below), Executive shall not directly or indirectly, individually, or together with, or through any other person: (i) in any manner discourage any person which is or has been a customer or supplier of Company from continuing its relationship with Company, (ii) approach, counsel, or attempt to induce any person who is then in the employ of or an independent contractor of Company, to leave their employment or engagement, or employ, engage or attempt to employ or engage any such person, or (iii) aid or counsel any other person to do any of the above.  As used herein, the “Restricted Period” means the period during which Executive is employed by the Company and for a period of eighteen (18) months thereafter.

 

4.4                               Exclusivity.  During the Restricted Period Executive shall not directly or indirectly on Executive’s own behalf or on behalf of any other person: (a) personally own greater than twenty (20) percent of or control; (b) act as an officer, manager, employee, of or be obligated to, or be connected in any advisory, business or ownership capacity with; (c) lend credit or money of more than twenty (20) percent of total capital raised for the purpose of the establishing or operating; or (d) allow Executive’s name or reputation to be used by or in, any business, venture, activity or organization (including any non-profit organization) that directly competes with the Company or its business (collectively, the “Restricted Business”).

 

4.5                               Return of Records, Equipment and Confidential Information.  Upon the earlier of termination of Executive’s employment hereunder or request by Company, Executive shall promptly return to Company: (i) all Confidential Information and all documents, records, procedures, books, notebooks, and any other documentation in any form whatsoever (including, but not limited to, written, audio, video or electronic) containing any information pertaining to Company which includes Confidential Information, including any and all copies of such documentation then in Executive’s possession or control regardless of whether such documentation was prepared or compiled by Executive, Company, other employees of Company, representatives, agents, or independent contractors, and (ii) all equipment or tangible personal property entrusted to Executive by Company.  Executive will not retain any original, copy, description, document, data base or other form of media that contains or relates to any Confidential Information whether produced by Executive or otherwise.  Without limiting the generality of the foregoing, Executive shall permanently delete all Confidential Information from all computers, disks, CD-ROMS, tapes, and other media owned or used by or accessible to Executive, other than from any of the foregoing owned, used or controlled by Company.  Executive acknowledges that all Confidential Information and all such documentation, copies of such documentation, equipment, and tangible personal property are and shall at all times remain the sole and exclusive property of Company.

 

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4.6                               Post-Employment Cooperation.  Executive agrees that following Executive’s termination of employment with Company, Executive shall, to the extent reasonably requested by Company, cooperate and assist Company at Company’s expense in any dispute, controversy, or litigation in which Company may be involved and with respect to which Executive obtained knowledge while employed by Company or any of its affiliates, successors, or assigns, including, but not limited to, Executive’s participation in any court or arbitration proceedings, giving of testimony, signing of affidavits, or such other personal cooperation as counsel for Company shall reasonably request.

 

SECTION 5.                            REPRESENTATIONS BY EXECUTIVE.  Executive represents and warrants that:

 

(a)                                 Executive is free to enter into and perform each of the terms and conditions of this Agreement.  Executive is not subject to any agreement, judgment, order or restriction that would be violated by Executive being employed by Company or that in any way restricts the services that may be rendered by Executive for Company.  Executive’s execution of this Agreement and performance of Executive’s obligations under this Agreement does not and will not violate or breach any other agreement between Executive and any other person or entity.

 

(b)                                 Executive has carefully considered the nature and extent of the restrictions and covenants in this Agreement and Executive agrees that they will not prevent Executive from earning a livelihood after employment with Company and that they are fair, reasonable and necessary to protect and maintain the proprietary interests, goodwill and other legitimate business interests of Company in view of the following facts: (i) Executive will hold a position of confidence and trust with Company as a result of Executive’s employment with Company, access to confidential financial and other information, and relationship with the customers, suppliers and other employees of Company, (ii) it would be impossible for Executive to be employed or engaged in the Restricted Business without inevitably using Company’s proprietary information, and (iii) Executive has broad skills that will permit gainful employment in many areas and businesses outside the scope of Company’s business.

 

(c)                                  Executive acknowledges that but for the above representations and warranties of Executive, Company would not employ Executive or enter into this Agreement.

 

SECTION 6.                            ASSIGNABILITY.

 

This Agreement is binding upon and inures to the benefit of the parties and their respective heirs, executors, administrators, personal representatives, successors, and permitted assigns.  Company may assign its rights or delegate its duties under this Agreement at any time and from time to time.  The parties acknowledge that this Agreement is personal to Executive and that the availability of Executive to perform services and the covenants provided by Executive hereunder have been a material consideration for Company to enter into this Agreement.  Accordingly, Executive may not assign any of Executive’s rights or delegate any of Executive’s duties under this Agreement, either voluntarily or by operation of law, without the prior written consent of Company, which may be given or withheld by Company in its sole and absolute discretion.

 

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SECTION 7.                            NOTICES.

 

All notices, requests, demands or other communications hereunder shall be deemed to have been duly given when delivered, addressed as follows (or at such other address as the addressed party may have substituted by notice pursuant to this Section 7):

 

	
If   to Executive:
    	
At   Executive’s address as it appears
    
	
 
    	
in   the records of Company
    
	
 
    	
 
    
	
If   to Company:
    	
K12   INC.
    
	
 
    	
2300   Corporate Park Drive, Suite 200
    
	
 
    	
Herndon,   Virginia 22102
    
	
 
    	
Attention:   Compensation Committee
    
	
 
    	
 
    
	
 
    	
with   a copy (not itself constituting notice) to:
    
	
 
    	
 
    
	
 
    	
K12   INC.
    
	
 
    	
2300   Corporate Park Drive, Suite 200
    
	
 
    	
Herndon,   Virginia 22102
    
	
 
    	
Attention:   Office of the General Counsel
    
	
 
    	
Fax:   (703) 483-7496
    

 

SECTION 8.                            MISCELLANEOUS.

 

8.1                               Entire Agreement.  This Agreement supersedes the Employment Agreement, dated as of July 1, 2007 between the Company and the Executive and any amendments made to this Agreement on January 7, 2013 shall only be effective as of January 7, 2013 and thereafter.  This Agreement, together with the Plan, each Restricted Stock Agreement, each stock option agreement between Executive and Company, and that certain agreement Executive and Company relating to relocation assistance embodies the entire representations, warranties, covenants and agreements in relation to the subject matter hereof.  No other representations, warranties, covenants, understandings or agreements in relation hereto exist between the parties except as otherwise expressly provided herein.

 

8.2                               Amendment.  This Agreement may not be amended except by an instrument in writing duly executed by the parties hereto.

 

8.3                               Applicable Law.  This Agreement has been made and executed under, and will be construed and interpreted in accordance with, the laws of the State of Delaware excluding conflict of law principles.

 

8.4                               Provisions Severable.  Every provision of this Agreement is intended to be severable from every other provision of this Agreement.  If any provision of this Agreement is

 

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held to be void or unenforceable, in whole or in part, or unreasonable or excessive in scope or duration with the result that such provision (or portion thereof) as drafted is void or unenforceable, such provision shall be deemed to be reformed to the minimum extent necessary so that such provision as reformed may and shall be legally enforceable.  If any provision of this Agreement is held to be void or unenforceable, in whole or in part, and cannot be reformed and made enforceable as provided in the immediately preceding sentence, the remaining provisions will remain in full force and effect.

 

8.5                               Non-Waiver of Rights and Breaches.  Any waiver by a party of any breach of any provision of this Agreement will not be deemed to be a waiver of any subsequent breach of that provision, or of any breach of any other provision of this Agreement.  Except as otherwise provided in Section 8.6 below, no failure or delay in exercising any right, power, or privilege granted to a party under any provision of this Agreement will be deemed a waiver of that or any other right, power, or privilege.  No single or partial exercise of any right, power, or privilege granted to a party under any provision of this Agreement will preclude any other or further exercise of that or any other right, power, or privilege.

 

8.6                               Expiration of Claims.  All claims that any party has against the other must be presented in writing within one year of the date the claiming party knew or should have known of the facts giving rise to the claim, or, with respect to claims related to termination of Executive’s employment, within one year of the date of termination of employment.  Any claim not brought within said time period shall be waived and forever barred unless the party against whom such claim is made agrees to waive such time period.

 

8.7                               Remedies.  Executive agrees that in the event of any actual or threatened material breach of this Agreement by Executive, Company shall be entitled to specific performance, injunctive relief and other similar equitable remedies.

 

8.8                               Interpretation of Agreement.  Each of the parties has had the opportunity to be represented by counsel in the negotiation and preparation of this Agreement.  The parties agree that this Agreement is to be construed as jointly drafted.  Accordingly, this Agreement will be construed according to the fair meaning of its language, and the rule of construction that ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement.

 

8.9                               Survival of Provisions.  The provisions of Sections 3, 4, 5, 6, 7 and 8 of this Agreement shall survive the Employment Term and any termination of this Agreement in accordance with their respective terms.

 

8.10                        Gender and Number.  Concerning the words used in this Agreement, the singular form shall include the plural form, the masculine gender shall include the feminine or neuter gender, and vice versa, as the context requires, and the word “person” shall include any natural person, partnership, corporation, limited liability company, association, trust, estate or other legal entity.

 

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8.11                        Headings.  The headings of the Sections and Paragraphs of this Agreement are inserted for ease of reference only, and will have no effect in the construction or interpretation of this Agreement.

 

8.12                        Counterparts.  This Agreement and any amendment or supplement to this Agreement may be executed in two or more counterparts, each of which will constitute an original but all of which will together constitute a single instrument.  Transmission by facsimile of an executed counterpart signature page hereof by a party hereto shall constitute due execution and delivery of this Agreement by such party.

 

8.13                        Section 409A.

 

(a)                                 Compliance.  In the event that following the date hereof Company or Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, Company and Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.  No payments under this Agreement that are subject to the requirements of Section 409A shall be accelerated, except in compliance with Treasury Regulation Section 1.409A-3(j)(4).

 

(b)                                 In-Kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement shall be provided in accordance with the requirements of Treasury Regulation Section 1.409A-3(i)(iv), such that any in-kind benefits and reimbursements provided under this Agreement during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and any in-kind benefits and reimbursements shall not be subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be promptly made to Executive following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred.  In no event shall Executive be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred.  This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Executive.

 

(c)                                  Distribution.  Notwithstanding anything to the contrary in this Agreement, to the maximum extent permitted by applicable law, amounts payable to Executive pursuant to Sections 3.5 and 3.7 shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals).  However, to the extent any such payments are treated as non-qualified deferred compensation subject to

 

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Section 409A of the Code, then if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s termination benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service or (ii) the date of Executive’s death.  Upon the earlier of such dates, all payments deferred pursuant to this Section 8.13(c) shall be paid in a lump sum to Executive.  Thereafter, payments will resume in accordance with this Agreement.  The determination of whether Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall be made by Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treas. Reg. Section 1.409A-1(i)).  This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Section 409A(a)(1)(A) of the Code or (b) the interest and additional tax set forth within Section 409A(a)(1)(B) of the Code (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties.  In no event shall Company be required to provide a tax gross-up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties.

 

8.14                        Signatures

 

This Agreement may be executed in two or more counterparts all of which shall be considered one and the same Agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
“Company”
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
K12   INC.
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Nathaniel A. Davis
    
	
 
    	
 
    	
Nathaniel   A. Davis
    
	
 
    	
 
    	
Executive   Chairman
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/   Ronald J. Packard
    
	
 
    	
Ronald   J. Packard
    
	
 
    	
Chief   Executive Officer
    

 

14Exhibit 10.3

	
 
    

 

EMPLOYMENT AGREEMENT

 

Between

 

K12 INC. and NATHANIEL A. DAVIS

 

Effective as of January 7, 2013

	
 
    

 

 

THIS AGREEMENT is entered into as of January 7, 2013, (the “Effective Date”), by and between K12 Inc., a Delaware corporation having a place of business at 2300 Corporate Park Drive, Herndon, Virginia 20171 (alternatively, “K12” or the “Corporation”) and Nathaniel A. Davis (“EMPLOYEE”) a resident of the Commonwealth of Virginia (K12 and EMPLOYEE are referred to collectively herein as the “Parties”).

 

WHEREAS, K12 is engaged in the business of providing children access to exceptional curriculum and books that enable them to maximize success in life regardless of geography, financial, or demographic circumstances;

 

WHEREAS, EMPLOYEE currently serves as Chairman of the Board of Directors of K12 (the “Board”); and

 

WHEREAS, K12 is interested in employing EMPLOYEE as its Executive Chairman of the Board, and EMPLOYEE is interested in being employed in that position subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements of the Parties contained herein, the Parties hereby agree as follows:

 

ARTICLE 1
 DEFINITIONS

 

For purposes of this Agreement, the terms defined in this Article 1 shall have the respective meanings set forth below:

 

1.1.                        “Affiliate” shall mean any corporation, partnership or other entity controlling, controlled by, or under common control with K12; provided, however, that no entity that holds capital stock of K12 and/or with board representation rights incidental to such holdings shall, as a result of such holding of capital stock or board representation rights, be deemed to be an Affiliate of K12 for purposes of this Agreement.  For purposes of this definition, “control” (including the terms “controlling” and “controlled”) means the right to direct or cause the direction of the management and policies of an entity, whether through the ownership of securities, by contract, or otherwise.

 

1.2.                        “Confidential Information” shall mean all information relating to the business of K12 known to EMPLOYEE or learned by EMPLOYEE in connection with and during the term of his employment or any prior service with K12 and its Affiliates which is not generally known to the public, including any and all general and specific knowledge, experience, information and data, technical or non-technical, and whether or not patentable, including, without limitation processes, skills, information, know-how, trade secrets, data, designs, formulae, algorithms, specifications, samples, methods, techniques, compilations, computer programs, devices, concepts, inventions, developments, discoveries, improvements, and commercial or financial information, in

 

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any form, including without limitation, oral, written, graphic, demonstrative, machine recognizable, specimen or sample form.

 

1.3.                        “Conflicting Product or Service” shall mean any product or service of any person or organization other than K12, in existence or under development, which resembles or competes with a product or service of K12.

 

1.4.                        “Conflicting Organization” shall mean any person or organization engaged in research on or development, production, marketing, or selling of a “Conflicting Product or Service.”

 

ARTICLE 2
 TERM OF AGREEMENT— EMPLOYMENT

 

2.1.                        Term.  Subject to the provisions of Section 2.3(b) and Article 4 hereof, this Agreement shall be in effect for a term of three (3) years commencing as of the Effective Date.  The Parties mutually acknowledge that the term of this Agreement shall, subject to Article 4 hereof, cause EMPLOYEE to provide personal services to K12, as an employee, during four (4) separate but consecutive fiscal years of the Corporation, commencing with the Corporation’s twelve-month fiscal year ending June 30, 2013 (each, a “Fiscal Year”).   The period during with EMPLOYEE remains in employment with K12 pursuant to the terms of this Agreement is referred to herein as the “Term.”

 

2.2.                        Employment.  K12 shall employ EMPLOYEE as Executive Chairman and EMPLOYEE shall accept such employment by K12, on and subject to the terms and conditions set forth herein.  EMPLOYEE represents and warrants that neither the execution and delivery nor performance by him of this Agreement will violate any agreement, order, judgment or decree to which he is a party or by which he is bound.  In accepting the position of Executive Chairman, this Agreement specifically contemplates that EMPLOYEE shall not resign as a member of the current Board, but shall remain a member thereof, so long as he remains willing and able to serve on the Board and the requisite majority of the Corporation’s stockholders re-elect him to serve in that capacity as provided under the Corporation’s Certificate of Incorporation and By-Laws as then in effect.

 

2.3.                        Duties.

 

(a)                       During the Term, as Executive Chairman of K12, EMPLOYEE shall have duties and responsibilities related to building the organization and business, including but not limited to, achieving agreed revenue, cost, profit and cash-flow targets, and shall report to the Board.  While acting as Executive Chairman, EMPLOYEE shall continue to serve as Chairman of the Board.  The Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), General Counsel (“GC”) and Chief Financial Officer (“CFO”) shall report directly to EMPLOYEE.  Other executives at K12 may also report directly to EMPLOYEE, as determined by EMPLOYEE or by the Board from time to time.

 

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(b)                       EMPLOYEE’s employment with K12 shall be full-time and exclusive.  During the Term, excepting only those personal services EMPLOYEE performs as a member of the Board, EMPLOYEE shall devote the whole of EMPLOYEE’s business time, attention, skill, and ability to the faithful and diligent fulfillment of EMPLOYEE’s duties hereunder.  EMPLOYEE acknowledges and agrees that EMPLOYEE may be required, without additional compensation, to perform services for any Affiliates, and to accept such office or position with any Affiliate as the Board may require, including, but not limited to, service as an officer or director thereof, provided however, that such services, and such office or position, shall be consistent with EMPLOYEE’s position as Executive Chairman of K12.  Notwithstanding any other provision of this Agreement, in the event that during the Term, the employment of K12’s CEO as of the Effective Date of this Agreement terminates for any reason and EMPLOYEE is asked to assume the role of CEO (other than on an interim basis, while another individual is being sought or hired as CEO), EMPLOYEE and the Board shall negotiate in good faith an appropriate enhancement of EMPLOYEE’s compensation beyond that which is provided in this Agreement, in consideration of the additional duties EMPLOYEE would be expected to perform in such role.  Subject to the foregoing, in the event EMPLOYEE and the Board do not reach mutual agreement regarding the enhancement of EMPLOYEE’s compensation within the sixty (60)-day period commencing with the date the incumbent CEO’s employment with K12 terminates, EMPLOYEE at his discretion may decline the position of CEO and simply continue to serve as Executive Chairman of the Board, subject to Section 3.1(b) below.  So long as EMPLOYEE serves as an employee of K12 covered by this Agreement, EMPLOYEE shall comply with all applicable policies of K12 and all policies of Affiliates that are consistent therewith.

 

(c)                        During the term of employment, it shall not be a violation of Section 2.3(a) or 2.3(b) of this Agreement for EMPLOYEE to, in all cases subject to Articles 5 and 6 hereof, (i) serve on the boards of directors of Unisys Corporation, RLJ Lodging Trust, and/or Mutual of America Capital Management Corporation; (ii) serve as an officer or director of a cooperative housing, or civic or charitable organization or committee; (iii) deliver lectures, fulfill speaking engagements, or teach at university level or equivalent educational institutions; or (iv) manage personal passive investments, so long as such activities (individually or collectively) do not conflict or materially interfere with the performance of EMPLOYEE’s duties hereunder.

 

2.4.                        Indemnification.  During and after the term of this Agreement, K12 shall provide EMPLOYEE with both Side A and Side B directors’ and officers’ insurance, and shall indemnify EMPLOYEE and his legal representatives to the fullest extent permitted by the laws of the State of Delaware and the By-Laws of K12 as in effect on the date hereof, against all damages, costs, expenses and other liabilities reasonably incurred or sustained by EMPLOYEE or his legal representatives in connection with any suit, action or proceeding to which EMPLOYEE or his legal representatives may be made a party by reason of EMPLOYEE being or having been a director or officer of K12 or any Affiliate, or having served in any other capacity or taken any other action purportedly on behalf of or at the request of K12 or any Affiliate.  During and after the term of this Agreement and without the need for further approval

 

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by the Board of Directors of K12 or any Affiliate, K12 will promptly advance or pay any and all amounts for costs or expenses (including but not limited to legal fees and expenses reasonably incurred by counsel of EMPLOYEE’s choice retained by EMPLOYEE) for which EMPLOYEE may claim K12 is obligated to indemnify him.  EMPLOYEE undertakes to repay such amounts if it is ultimately determined that he is not entitled to be indemnified by K12 as provided in this Section 2.4.

 

ARTICLE 3
 COMPENSATION

 

3.1.                        Base Salary.

 

(a)                       Subject to Sections 2.3(b) and 3.1(b) hereof, for the services EMPLOYEE shall render pursuant to this Agreement, K12 shall to pay EMPLOYEE during the Term an annual base salary (“Base Salary”) of at least Four Hundred Eighty Thousand Dollars ($480,000) beginning with the Effective Date.  Subject to Sections 2.3(b) and 3.1(b) hereof, such Base Salary shall not be reduced but, at the discretion of the Board, may be increased from time to time in 2013, 2014 and 2015 during the first quarter of K12’s Fiscal Year (which runs from July 1 to June 30), but no later than September 15  of each year.   Base Salary shall be payable in accordance with K12’s then-prevailing executive payroll practices.  The term “Base Salary” as used herein shall include any adjustment made thereto in accordance with the terms of this Agreement.

 

(b)                       If, during the Term, the employment of K12’s CEO as of the Effective Date of this Agreement terminates for any reason and EMPLOYEE is not asked to assume the role of CEO (or if EMPLOYEE is asked to assume the role of CEO and the EMPLOYEE and the Board are unable to reach a mutual agreement regarding EMPLOYEE’s compensation as CEO and EMPLOYEE therefore declines to serve as the CEO as described above in Section 2.3(b)), but K12 continues to retain EMPLOYEE as Executive Chairman in a more limited role (as compared to the EMPLOYEE’s duties as of immediately following the Effective Date), then EMPLOYEE’s Base Salary shall, effective as of the date the new CEO’s commencement of employment with K12, be reduced to 50% of the Base Salary rate then in effect.

 

3.2.                        Annual Performance Bonus.

 

During the Term, EMPLOYEE will be eligible to receive a bonus (the “Performance Bonus”), based on objective criteria the Board shall establish after consultation with EMPLOYEE at the beginning of such Fiscal Year, but no later than September 15 of that year.  As soon as practicable following the close of each Fiscal Year for which a Performance Bonus is to be paid hereunder, the Board shall authorize, certify and declare the amount of such Performance Bonus based upon K12’s and EMPLOYEE’s performance, as measured against the objective criteria the Board established for EMPLOYEE for such Fiscal Year.  The target for such Performance Bonus shall not be less than 150% of the Base Salary and not more than 300% of the Base Salary then payable to EMPLOYEE for the Fiscal Year covered by such

 

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Performance Bonus.  For the Fiscal Year ending June 30, 2013, EMPLOYEE’s Performance Bonus shall be based on the objective criteria the Board established for the CEO for such Fiscal Year at the beginning of such Year, pro-rated to take into account EMPLOYEE’s partial period of performance.  For the Fiscal Year ending June 30, 2016, in the event EMPLOYEE’s employment by the Corporation ends upon or following the expiration of this Agreement but prior to the end of such Fiscal Year (other than pursuant to Section 4.4 hereof), EMPLOYEE shall be entitled to be paid a pro-rated bonus which takes into account that part of such Fiscal Year EMPLOYEE was so employed, based on EMPLOYEE’s partial satisfaction of the objective criteria established by the Board for such Fiscal Year, without regard to EMPLOYEE’s failure or inability to remain an employee of K12 throughout such Year.   Except as expressly set forth in this Section 3.2 or Article 4, EMPLOYEE’s right to receive a Performance Bonus for any Fiscal Year shall be subject to his continued rendering of services to K12 either as an employee or member of the Board through the last day of the applicable Fiscal Year, provided that in the event the EMPLOYEE ceases to be an employee of K12 during any applicable Fiscal Year, but remains as a member of the Board through the last day of the applicable Fiscal Year, EMPLOYEE’s Performance Bonus for such Fiscal Year shall be pro-rated to reflect the number of days during which he served as an employee for such Fiscal Year.  Each Performance Bonus found to be due and payable hereunder shall be calculated, authorized and paid no later than at the same time performance bonuses are paid to other K12 executives, but in no event later than the September 15th next following the close of the Fiscal Year with respect to which it is earned.

 

3.3.                        Participation in Benefit Plans.  During the Term, subject to any generally-applicable eligibility requirements but also to the specific terms of this Agreement, EMPLOYEE shall be eligible throughout the term of this Agreement to participate in any pension, thrift, profit-sharing, group term life or long- or short-term disability insurance, medical or dental, or other employee benefit plan, program or policy that K12 sponsors and maintains at any time during the term of this Agreement (other than plans providing severance benefits, which are covered exclusively by this Agreement, except to the extent any such plan may, following the Effective Date, expressly provide for EMPLOYEE’s participation therein) for the benefit of its employees, under the same terms and conditions as the Corporation’s other executive employees.  EMPLOYEE shall be generally entitled to paid vacation, paid and unpaid sick leave, and holidays under the same terms and conditions as applied to other K12 executive employees; however, EMPLOYEE shall be entitled to five (5) weeks of paid vacation, with the ability to carry over and use a maximum of two (2) weeks of such vacation during the immediately following ninety (90) day period.

 

3.4.                        Expenses.  During the Term,  K12 shall reimburse EMPLOYEE for all reasonable, ordinary and necessary business expenses actually incurred by EMPLOYEE in connection with the performance of his duties hereunder, including ordinary and necessary expenses incurred by EMPLOYEE in connection with travel on K12 business, and including up to Twenty Thousand Dollars ($20,000) in legal fees incurred in calendar year 2013 in connection with the negotiation and documentation of this Agreement.  All expenses shall be approved by K12 in accordance with and subject to

 

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the terms and conditions of K12’s then-prevailing expense policy.  EMPLOYEE shall provide to K12 any and all statements, bills, or receipts evidencing the expenses for which EMPLOYEE seeks reimbursement, and such related information or materials as K12 may from time to time reasonably require.  EMPLOYEE shall account to K12 for any expenses that are eligible for reimbursement under this Section 3.4 in accordance with K12 policy.

 

3.5.                        Employment and Supplies.  During the Term,  K12 shall provide EMPLOYEE with administrative support relating to the performance of EMPLOYEE’s duties of the same type and at least the same extent as is provided to other executive employees.  K12 shall acquire and/or provide to EMPLOYEE for his business use:  a multimedia portable computer and subscriptions to various trade publications and various trade books.  Such items shall remain the exclusive property of K12, are to be used solely for K12’s benefit, and shall be returned promptly to K12 upon request at the termination of EMPLOYEE’s employment for whatever reason.

 

3.6.                        Withholding.  Anything in this Agreement to the contrary notwithstanding, all payments required to be made by K12 hereunder to EMPLOYEE or EMPLOYEE’s estate or designated beneficiaries in connection with EMPLOYEE’s employment hereunder shall be subject to all applicable tax and other  withholding,  as K12 may reasonably determine pursuant to applicable laws and regulations.

 

3.7.                        Stock Option and Restricted Stock Grants.  Subject to any generally applicable terms and conditions set forth in the Corporation’s shareholder-approved Equity Incentive Award Plan, as currently amended and in effect (the “EIA Plan”), EMPLOYEE shall be granted, and K12 shall award and issue, restricted stock and options to purchase  Common Stock of K12 (“K12 Stock”) under the following terms and conditions:

 

(a)                       On the Effective Date, the Board or its Compensation Committee (as applicable) shall award, and, as soon as practical thereafter, transfer to EMPLOYEE Two Hundred Ten Thousand (210,000) restricted shares of  K12 Common Stock, at no out-of-pocket cost to EMPLOYEE; such restricted shares shall be subject to the vesting provisions set forth in Section 3.7(d) hereof.  On the Effective Date, the Board or its Compensation Committee (as applicable) also shall grant EMPLOYEE an option to purchase Four Hundred Twenty Thousand (420,000) shares of K12 Stock, subject to the vesting provisions set forth in Section 3.7(e) hereof.

 

(b)                       All subsequent grants of stock options, awards of restricted shares or other equity or equity-based awards that may be granted to EMPLOYEE shall be made at the discretion of the Board or its Compensation Committee (as applicable) and under the general terms and conditions of the EIA Plan, as it may be amended, restated, replaced or succeeded from time to time, provided that for each Fiscal Year this Agreement remains in effect after June 30, 2013, EMPLOYEE shall be eligible for an award of restricted shares of K12 Common Stock (each an “Annual Restricted Stock Award”), subject to the Executive’s continued employment with the Company on each applicable date of grant.  The number of shares subject to each Annual Restricted Stock Award

 

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shall have a Fair Market Value (as of the date of grant of each such Annual Restricted Stock Award) equal to between zero ($0) dollars and two million ($2,000,000) dollars, and the actual amount of each Annual Restricted Stock Award shall be determined in the sole discretion of the Board or the Compensation Committee and based upon the attainment of one or more pre-established, objective performance goals, with the intent that each such Annual Restricted Stock Award shall be treated as qualified performance based compensation for purposes of Section 162(m) of the Code; provided further however, that notwithstanding the foregoing, in the event EMPLOYEE’s employment terminates pursuant to Section 4.2 or Section 4.3, the performance goals established with respect to the particular grant or award shall be deemed fulfilled.  In addition to the foregoing, within ninety (90) days following the close of each Fiscal Year this Agreement remains in effect, EMPLOYEE shall be eligible to receive a stock option award in an amount that is consistent with EMPLOYEE’s position as the head of the Corporation’s executive team and competitive with the market for similarly situated executives, as determined in the sole discretion of the Board, taking into account Executive’s total compensation for such Fiscal Year.

 

(c)                        All of the options granted pursuant to Section 3.7(a) hereof will be non-qualified.  The exercise price for such options shall be, with respect to each grant, the fair market value of K12 Common Stock on the date of grant, as further determined in accordance with the EIA Plan or its successor.

 

(d)                       Subject to the provisions of Article 4 hereof, the restricted shares awarded pursuant to Section 3.7(a) hereof will vest, if at all, in twelve (12) equal quarterly installments of 17,500 shares apiece (if at all), based on objective performance criteria mutually agreed to by the Board or its Compensation Committee and the EMPLOYEE and, in each case (except with respect to the first installment) subject to attaining one or more pre-established, objective performance goals, with the intent that the restricted shares awarded pursuant to Section 3.7(a) hereof shall be treated as qualified performance based compensation for purposes of Section 162(m) of the Code; such objective performance criteria shall be used to measure EMPLOYEE’s performance during each such quarterly installment period for the duration of this Agreement, except for the first such quarter following the Execution date and ending on April 6, 2013.   In the event that EMPLOYEE holds unvested restricted shares at the time his employment by K12 terminates, such restricted shares shall vest or shall be forfeited, as the case may be, in accordance with the provisions of Article 4 hereof.

 

(e)                        Subject to the provisions of Article 4 hereof, the options initially granted pursuant to Section 3.7(a) hereof will vest in accordance with the following schedule:  with respect to each such grant, one twelfth (1/12) of the shares shall vest at five o’clock Eastern Standard Time on each April 6, July 6, October 6 and January 6 which arises during the term of this Agreement, commencing with April 6, 2013.  In the event that EMPLOYEE holds non-vested options at the time his employment by K12 terminates, such non-vested options shall vest or shall be forfeited, as the case may be, in accordance with the provisions of Article 4 hereof, subject only to the general provisions of the EIA Plan.

 

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(f)                         All options that vest may be exercised within eight (8) years of the date on which such options were granted.  In the event that EMPLOYEE holds unexercised vested options at the time his employment by K12 terminates, however, such vested options may be exercised within the time periods set forth in Article 4 hereof.

 

(g)                        K12 represents and warrants that the issuance of the K12 Common Stock granted to EMPLOYEE in accordance with the provisions of Section 3.7(a) hereof will have been registered under the Securities Act of 1933, as amended, on an effective Form S-8 registration statement.

 

(h)                       When granting, issuing and transferring restricted stock, stock options and other stock-based rights hereunder, K12 shall use commercially reasonable efforts to not do anything to directly or indirect cause such stock, options and rights  to qualify as, or to constitute, “deferred compensation” within the meaning of  Section 409A of the Internal Revenue Code (the “Code”) and related rulings and regulations.

 

(i)                           Notwithstanding the preceding provisions of this Section 3.7 to the contrary, in the event EMPLOYEE separates from employment with K12 either due to a termination of EMPLOYEE’s employment by K12 Without Cause or EMPLOYEE’s resignation of his employment for Good Reason as specifically described in Section 4.5, the following special vesting provision shall apply: (i) if such separation occurs on or prior to the first anniversary of the Effective Date, all of the then-non-vested awards and grants that would have vested at any time during the one year period following the separation shall immediately and automatically vest; (ii) if such separation occurs after the first anniversary of the Effective Date, all of the then-non-vested awards and grants that would have vested at any time during the two year period following the separation shall immediately and automatically vest; and (iii) if such separation occurs within one year following the occurrence of a “Change in Control” (as defined in the EIA Plan), all of the non-vested awards and grants that are then outstanding shall immediately and automatically vest.

 

ARTICLE 4
 TERMINATION

 

4.1.                        General.  EMPLOYEE’s employment by K12 shall terminate in accordance with the provisions of this Article 4 upon EMPLOYEE’s death or Disability, upon EMPLOYEE’s discharge by K12 with or without Cause, upon EMPLOYEE’s resignation with or without Good Reason, or upon the expiration of the term of this Agreement without extension or renewal.  Upon termination of EMPLOYEE’s rendering of services to K12 either as an employee or member of the Board for any reason, EMPLOYEE will promptly deliver to K12 all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents or property containing Confidential Information.

 

4.2.                        Death.  If EMPLOYEE’s employment terminates because of his death, the date of termination shall be the date of death.

 

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(a)                       If EMPLOYEE’s employment terminates because of his death, K12 shall continue to pay EMPLOYEE’s then-current Base Salary through the end of the third consecutive calendar month following EMPLOYEE’s death, and a pro-rated Performance Bonus based on the Performance Bonus most recently paid or becoming payable to EMPLOYEE. Such payments shall be made to EMPLOYEE’s legal representatives, estate, beneficiaries or heirs, in accordance with K12’s then-prevailing executive payroll practices, subject to any and all then-applicable state and federal laws.  In addition, K12 shall continue to pay and provide for any health,  medical, dental, or vision benefits then being provided to the plan-eligible dependents of EMPLOYEE for a period of one year, provided that in lieu of such benefit continuation, K12 in its discretion may pay EMPLOYEE’s legal representatives, estate, beneficiaries or heirs an amount equal to the out-of-pocket cost EMPLOYEE’s covered dependents otherwise would incur to obtain continuation coverage for such one year period pursuant to COBRA, which amount shall be paid in a single lump sum to EMPLOYEE’s legal representatives, estate, beneficiaries or heirs within ninety (90) calendar days following the date EMPLOYEE’s employment by K12 terminates.

 

(b)                       If EMPLOYEE’s employment terminates because of his death, all of EMPLOYEE’s non-vested options and non-vested restricted stock that would have vested at any time during the one year period following the date of EMPLOYEE’s death shall immediately and automatically vest.  EMPLOYEE’s legal representative, estate, beneficiaries and heirs shall thereupon be entitled to exercise any of EMPLOYEE’s then-vested options within the one (1) year period immediately following such EMPLOYEE’s date of death, based on their respective interests in such options and restricted shares.

 

4.3.                        Disability.  For purposes of this Agreement, EMPLOYEE shall be deemed to have experienced a “Disability” at such time as EMPLOYEE experiences a disability within the meaning of Section 409A of the Code and related rulings and regulations.

 

(a)                       Upon EMPLOYEE’s Disability, the payment of benefits under K12’s short-term and long-term disability insurance plans, if any, shall offset and reduce K12’s obligation to pay Base Salary and a Performance Bonus under Section 3.1 and 3.2, where EMPLOYEE can be shown to have received such payments.

 

(b)                       Subject to any applicable legal requirements, in the event EMPLOYEE shall remain under a Disability for a period exceeding one hundred twenty (120) consecutive days in any twelve (12) month period, K12 shall have the right to terminate EMPLOYEE’s employment hereunder.  K12 shall effect such termination by giving EMPLOYEE a notice specifying the effective date of such termination, which date shall not be earlier than the last day of the calendar month following the giving of notice.

 

(c)                        If K12 terminates EMPLOYEE’s employment because of Disability,   K12 shall continue to pay EMPLOYEE’s then-current Base Salary through the end of the third consecutive calendar month following EMPLOYEE’s Disability, and a pro-rated Performance Bonus based on the Performance Bonus most recently paid or

 

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becoming payable to EMPLOYEE.  Such payments shall be made to EMPLOYEE, or in the event of employee’s subsequent death, EMPLOYEE’s legal representatives, estate, beneficiaries or heirs, in accordance with K12’s then-prevailing executive payroll practices, subject to any and all then-applicable state and federal laws.  In addition, K12 shall continue to pay and provide for any health, medical, dental or vision benefits then being provided to EMPLOYEE and the plan-eligible dependents of EMPLOYEE for a period of one year, provided that in lieu of such benefit continuation, K12 in its discretion may pay EMPLOYEE an amount equal to the out-of-pocket cost EMPLOYEE’s covered dependents otherwise would incur to obtain continuation coverage for such one year period pursuant to COBRA, which amount shall be paid in a single lump sum to EMPLOYEE within ninety (90) calendar days following the date EMPLOYEE’s employment by K12 terminates.

 

(d)                       If K12 terminates EMPLOYEE’s employment because of Disability, all of EMPLOYEE’s non-vested options and non-vested restricted stock that would have vested at any time during the one year period following the date of such termination shall immediately and automatically vest.  EMPLOYEE (or in the event of EMPLOYEE’s death, his legal representative, estate, beneficiaries or heirs, based on their respective interests) shall thereupon be entitled to exercise any of EMPLOYEE’s then-vested options within the one (1)-year period immediately following such EMPLOYEE’s date of termination.

 

4.4.                        Discharge for Cause or Voluntary Resignation.

 

(a)                       For purposes of this Agreement, Cause shall mean a good faith finding by the Board of Directors of:  (i) EMPLOYEE’s willful or gross misconduct, willful or gross negligence in the performance of his duties for K12, intentional or habitual neglect of his duties for K12, or material breach or violation by Employee of this Agreement or any other material agreement between EMPLOYEE and the K12 or any material policy of K12 (such as the K12 Code of Business Conduct and Ethics or any successor policy), provided that K12 shall have given EMPLOYEE notice specifying the conduct it believes to fall within this sentence and EMPLOYEE shall have failed to remedy such conduct within ten (10) days thereafter; or (ii) EMPLOYEE’s theft or misappropriation of funds of K12 or conviction of a felony.  K12 shall effectuate a discharge for Cause by giving EMPLOYEE a notice specifying the effective date of such termination.

 

(b)                       For purposes of this Agreement, voluntary resignation means the EMPLOYEE’s resignation of his employment hereunder without Good Reason (as defined in Section 4.5(b) hereof).  EMPLOYEE shall effect a termination by voluntary resignation by giving K12 a notice specifying the effective date of such termination, which date shall not be earlier than thirty (30) days after the giving of notice.

 

(c)                        In the event EMPLOYEE is discharged by K12 for Cause or  EMPLOYEE terminates his K12 employment by voluntary resignation:

 

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(i)             K12 shall pay or provide to EMPLOYEE, in accordance with K12’s then-prevailing executive payroll practices, all Base Salary, vested benefits and other payments to which EMPLOYEE and his plan-eligible dependents (if any) are entitled hereunder through the effective date of termination.

 

(ii)          EMPLOYEE’s non-vested restricted shares as well as non-vested options shall be immediately forfeited.  EMPLOYEE shall be entitled to exercise any of his vested options within the one hundred eighty (180) consecutive day period immediately following the termination of EMPLOYEE’s employment or the EMPLOYEE’s removal from the Board, whichever is later, provided, however, that if the Company provides EMPLOYEE with a notice of termination for Cause, EMPLOYEE shall be permitted to exercise any vested options for a period not to exceed ninety (90) days after the effective date of a termination for Cause.  In all cases, the foregoing shall be subject to earlier termination of the options upon the regular expiration date of the options or upon the occurrence of a Change in Control or other corporate event or extraordinary transaction as provided in the EIA Plan or its successor.

 

(iii)       Except as set forth in this Section 4.4, K12 shall have no further obligation to EMPLOYEE (or EMPLOYEE’s legal representative, estate, beneficiaries or heirs) for any compensation, benefits or other payments hereunder, provided that nothing herein shall be deemed to affect EMPLOYEE’s entitlement, if any, to any vested pension or similar benefits to which he may be or may become entitled.

 

4.5.                        Discharge Without Cause or Resignation for Good Reason.

 

(a)                       For the purposes of this Agreement, discharge without Cause is any termination by K12 of EMPLOYEE’s employment hereunder without Cause, as defined in Section 4.4(a) hereof.  K12 shall effectuate a discharge without Cause by giving EMPLOYEE a notice specifying the effective date of such discharge, which date shall not be earlier than thirty (30) days after the giving of notice.

 

For the purposes of this Agreement, Good Reason shall mean:  (i) a material diminution of EMPLOYEE’s authority, duties or responsibilities, except that it will not be considered to be a material diminution of EMPLOYEE’s authority, duties or responsibilities if K12 elects to retain a new CEO and modifies EMPLOYEE’s duties as Executive Chairman in connection therewith; or (ii) a material change in the geographic location at which EMPLOYEE must perform his personal services for K12 (at present, the Greater Washington, D.C. area); or (iii) a material breach of this Agreement by K12, so long as in each case EMPLOYEE shall have given K12 notice of the conduct he believes constituted the material diminution, change or breach within ninety (90) days of its occurrence and K12 shall have failed to remedy such diminution, change or breach within thirty (30) days thereafter. EMPLOYEE shall effect an employment termination by resignation for Good Reason by giving K12 a notice specifying the effective date of such employment termination.

 

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(b)                       In the event EMPLOYEE is discharged by K12 Without Cause or  EMPLOYEE terminates his K12 employment by resigning for Good Reason, and subject to EMPLOYEE’s execution within 30 days following the EMPLOYEE’s termination of employment, and non-revocation of a general release of all claims against the Company and its affiliates in the form attached hereto as Exhibit A (as such form may be revised to reflect changes in applicable law), no later than 8 days following the EMPLOYEE’s termination of employment (a “Release”):

 

(i)                       K12 shall pay EMPLOYEE an amount equal to three (3) times EMPLOYEE’s then-current Base Salary, determined as of his date of discharge or termination.  Such amount shall be paid in a single sum, net of any applicable withholding, within ninety (90) calendar days following the date EMPLOYEE’s employment by K12 terminates, or if earlier, on the March 15th next following the close of the taxable year in which EMPLOYEE’s employment by K12 terminates.  In addition, EMPLOYEE shall remain eligible to receive a Performance Bonus for the Fiscal Year in which such termination occurs, subject to the attainment of the performance criteria previously established for such Fiscal Year by the Compensation Committee, which amount shall be pro-rated to reflect the partial year of service and shall be paid at the earlier of the time the amount and entitlement to the performance bonus can be determined or the performance bonuses are paid to other K12 executives and in accordance with the payment timing provisions of Section 3.2.  K12 also shall continue to provide the health,  medical, dental and vision benefits then being provided or made available to EMPLOYEE and his plan-eligible dependents for a period of one (1) year following the date EMPLOYEE’s employment by K12 terminates, provided that in lieu of such benefit continuation, K12 in its discretion may pay EMPLOYEE an amount equal to the out-of-pocket cost EMPLOYEE and his covered dependents otherwise would incur to obtain continuation coverage for such one year period pursuant to COBRA, which amount shall be paid in a single lump sum to EMPLOYEE within ninety (90) calendar days following the date EMPLOYEE’s employment by K12 terminates.   In addition, vesting shall occur as set forth in Section 3.7(i) hereof.  In no event shall amounts payable in one taxable year affect amounts payable in any other taxable year.

 

(ii)                    To the extent the amount payable to EMPLOYEE pursuant to this Section 4.5(b) (other than in connection with and as a result of a Change in Control) exceeds the maximum amount permitted under Income Tax Regulations Section 1.409A-1(b)(9)(iii) (pertaining to certain separation pay plans), determined  as of the first of the year in which EMPLOYEE separates from service, such excess amount shall be paid as a separate single sum, but shall be treated as subject to the requirements of Section 409A of the Code and related regulations and rulings and shall be subjected to the payment protocols set forth in Section 4.7 hereof.

 

(c)                        In the event EMPLOYEE is discharged by K12 without Cause or EMPLOYEE terminates his K12 employment by resigning for Good Reason, and in addition to the special vesting provided pursuant to Section 3.7(i) hereof, EMPLOYEE shall be entitled to exercise any of his vested options through the earlier of three hundred sixty five (365)-consecutive day period immediately following such discharge

 

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or termination or the original expiration date of such options and subject to earlier termination in the event of a Change in Control or other corporate event or extraordinary transaction as provided in the EIA Plan or its successor.

 

4.6.                            Expiration of Contract Term.

 

(a)                       For the purposes of this Agreement, Renewal Offer means a bona  fide offer by K12 to enter into a new employment agreement with EMPLOYEE, on terms at least as favorable to EMPLOYEE as this Agreement, made to EMPLOYEE at least four (4) months before the expiration of this Agreement.

 

(b)                       In the event that K12 makes a Renewal Offer to EMPLOYEE, but the Parties nevertheless do not enter into a new employment agreement and EMPLOYEE’s employment by K12 terminates upon the expiration of this Agreement, any options scheduled to vest on the third anniversary of the Effective Date of this Agreement pursuant to Section 3.7(c) shall immediately vest and EMPLOYEE shall be entitled to exercise any of his vested options within three (3) months after such termination.  In addition thereto, any restricted shares scheduled to vest at the close of the final calendar quarter coincident with or immediately preceding the third anniversary of the Effective Date shall thereupon vest, provided EMPLOYEE has satisfied the performance criteria selected by the Board or the Compensation Committee (as applicable) in accordance with Section 3.7(c) hereof.

 

(c)                        In the event that K12 does not make a Renewal Offer to EMPLOYEE and EMPLOYEE’s employment by K12 therefore terminates at the expiration of the term of this Agreement, and EMPLOYEE is asked to leave the Board of Directors, all options granted to EMPLOYEE shall immediately vest (to the extent not already vested), and EMPLOYEE shall be entitled to exercise any of his vested options within the three hundred sixty five (365)-consecutive day period immediately following the date of such employment termination.  In addition thereto, any restricted shares scheduled to vest at the close of the final calendar quarter coincident with or immediately preceding the third anniversary of the Effective Date shall thereupon vest, provided EMPLOYEE has satisfied the performance criteria selected by the Board or the Compensation Committee (as applicable) in accordance with Section 3.7(c) hereof.  If no Renewal Offer is made to EMPLOYEE, but EMPLOYEE remains on the Board, the vesting and exercise of any shares and options will continue to vest as if EMPLOYEE had continued to remain employed by K12 for purposes of the vesting and exercise of any shares or options.

 

4.7.                            Compliance with Section 409A of the Code.  The provisions of this Section 4.7 (other than subsections (c), (d) and (e) hereof) shall apply solely to any payment, otherwise determined to be due and payable under this Agreement, which constitutes “deferred compensation” subject to Section 409A of the Code and related regulations and rulings.

 

(a)                     General Suspension of Payments.  If, at the time EMPLOYEE incurs a separation from service (within the meaning of subsection (d) hereof), K12 qualifies as a “public company” (within the meaning of Section 409A of the Code and related

 

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regulations and rulings) and EMPLOYEE is then a “specified employee,” as such term is defined within the meaning of Section 409A of the Code and related regulations and rulings, any payments or benefits payable or provided as a result of such separation that would otherwise be paid or provided prior to the first day of the seventh month following such separation (other than due to death or Disability within the meaning of Section 4.3 hereof) shall instead be paid or provided on the earlier of (i) one hundred eighty one (181) days following such separation; or (ii) the date of EMPLOYEE’s death; or (iii) that date certain which otherwise complies with Section 409A of the Code.  In the event that EMPLOYEE is entitled to receive payments during the 181-day suspension period described in  this Section 4.7(a), EMPLOYEE shall receive the accumulated benefits that would have been paid or provided under this Agreement within the suspension period on the earliest day that would be permitted under Section 409A of the Code.

 

(b)                     Reimbursement Payments. The following rules shall be followed when paying any amount under this Agreement that is capable of being treated as a “reimbursement” or a “separation payment” within the meaning of  Income Tax Regulations Section 1.409A-1(b)(9)(v) : (i) the amount of expenses eligible for reimbursement in one calendar year shall not limit the available reimbursements for any other calendar year (other than an arrangement providing for the reimbursement of medical expenses qualifying as such for purposes of Section 105(b) of the Code); (ii) EMPLOYEE shall file a claim for all reimbursement payments not later than thirty (30) days following the end of the calendar year during which such expenses were incurred, (iii) K12 shall make such reimbursement payments within thirty (30) days following the date EMPLOYEE delivers written notice of such expenses to K12; and (iv) EMPLOYEE’s right to such reimbursement payments shall not be subject to liquidation or exchange for any other payment or benefit.

 

(c)                      Separation from Service.  For purposes of this Agreement, any reference to a “termination” of EMPLOYEE’s K12 employment shall be interpreted consistent with the meaning of the term “separation from service” in Section 409A(a)(2)(A)(i) of the Code, Income Tax Regulations Section 1.409A-1(h),  and related regulations and rulings.

 

(d)                     Installment Payments.  For purposes of Section 409A of the Code and related regulations and rulings, and any state law of similar import (including without limitation Treasury Regulations Section 1.409A-2(b)(2)(iii)), any installment payments scheduled to be made under this Agreement will be treated as the right to receive a series of separate payments, causing each such installment payment to at all times be considered a separate and distinct payment.

 

(e)                      General.  Notwithstanding anything to the contrary in this Agreement, the Parties intend that the  payments becoming due and payable under this Agreement shall satisfy, to the greatest extent possible, one (1) or more of the exemptions set forth in Section 409A of the Code and Income Tax Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5), and 1.409A-(b)(9).  This Agreement will be construed to the greatest extent possible as consistent with those provisions.  Without limiting the generality of

 

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the foregoing, to the extent any series of payments to be made hereunder is found to be subject to Section 409A of the Code, the Parties shall not take any action to change the timing of such payments.

 

ARTICLE 5
 RESTRICTIVE COVENANTS

 

5.1.                            Confidentiality.  Except as authorized or directed by K12, EMPLOYEE shall not, at any time during which EMPLOYEE is receiving any compensation from K12, and for a period of three (3) years thereafter, directly or indirectly publish or disclose any Confidential Information of K12 or of any of its Affiliates, or Confidential Information of others that has come into the possession of K12 or of any of its Affiliates, or into the EMPLOYEE’s possession in the course of his employment with K12 or of his services and duties hereunder, to any other person or entity, and EMPLOYEE shall not use any such Confidential Information for EMPLOYEE’s own personal use or advantage or make it available to others for use.  All confidential information, whether oral or written, regarding the business or affairs of K12 or any of its Affiliates, including, without limitation, information as to their products, services, systems, designs, inventions, software, finances (including prices, costs and revenues), marketing plans, programs, methods of operation, prospective and existing contracts, customers and other business arrangements or business plans, procedures, and strategies, shall all be deemed Confidential Information, except to the extent the same shall have been lawfully and without breach of the EMPLOYEE’S confidentiality obligation made available to the general public, or that EMPLOYEE can prove, by documentary evidence, was previously known to EMPLOYEE prior to the term of EMPLOYEE’s employment or other service with K12.  Upon expiration or termination of this Agreement for any reason, EMPLOYEE shall promptly return to K12 all Confidential Information, including all copies thereof in EMPLOYEE’s possession, whether prepared by him or others.

 

5.2.                            Unfair Competition.  During his employment pursuant to this Agreement and for a period of 24 months thereafter (the “Post-Termination Non-Compete Period), EMPLOYEE shall not, within the United States, directly or indirectly, and whether or not for compensation, as a stockholder owning beneficially or of record more than five percent (5%) of the outstanding shares of any class of stock of an issuer, or as an officer, director, employee, consultant, partner, joint venturer, proprietor, or otherwise, engage in or become interested in any Conflicting Organization in connection with research, development, consulting, manufacturing, purchasing, accounting, engineering, marketing, merchandising or selling of any Conflicting Product or Service, directly or indirectly, in competition with K12 or any of its Affiliates (or any of their successors) as conducted from time to time during such period, provided, however, that in the event EMPLOYEE separates from employment with K12 either due to a termination of EMPLOYEE’s employment by K12 Without Cause or EMPLOYEE’s resignation of his employment for Good Reason as specifically described in Section 4.5, and, in either case, the Board elects to continue to require EMPLOYEE’s continued compliance with this Section 5.2, K12 shall pay EMPLOYEE an amount equal to two (2) times EMPLOYEE’s then-current Base Salary, determined

 

15

 

as of his date of discharge or termination.  Such amount shall be paid in a single sum, net of any applicable withholding, within ninety (90) calendar days following the date EMPLOYEE’s employment by K12 terminates, or if earlier, on the March 15th next following the close of the taxable year in which EMPLOYEE’s employment by K12 terminates.

 

5.3.                            Non-Solicitation.

 

(a)                                 EMPLOYEE shall not, at any time during his employment pursuant to this Agreement and for a period of 18 months thereafter (the “Restriction Period”), directly or indirectly, recruit or otherwise solicit or induce any customer, subscriber, vendor, business affiliate, or supplier of K12 or its Affiliates to (i) terminate its arrangement with K12 or its Affiliates, or (ii) otherwise change its relationship with K12 or its Affiliates.

 

(b)                                 EMPLOYEE shall not, at any time during the Restriction Period, directly or indirectly, either on his own account or for any other person or entity, solicit any employee of K12 or its Affiliates to terminate his or her employment with K12 or its Affiliates.

 

5.4.                            Injunctive Relief; Survival.  EMPLOYEE acknowledges that a breach of the covenants contained in this Article 5 and in Article 6 will cause irreparable damage to K12 and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, EMPLOYEE agrees that in the event of a breach of any of the covenants contained in this Article 5 or in Article 6, in addition to any other remedy which may be available at law or in equity, K12 will be entitled to specific performance and injunctive relief.  The provisions of this Article 5 and Article 6 shall survive any termination or expiration of the term of this Agreement.

 

ARTICLE 6
  INVENTIONS, WORKS OF AUTHORSHIP,
 PATENTS AND COPYRIGHTS

 

6.1.                            EMPLOYEE shall assign and transfer to K12, and does hereby assign and transfer to K12 all right title and interest in and to all K12 IP (as defined below).  All K12 IP is and shall be the sole property of K12.  EMPLOYEE shall disclose all K12 IP promptly in writing to K12.  Upon request of K12, EMPLOYEE shall promptly execute a written assignment of title to K12 for all K12 IP, and EMPLOYEE will preserve all such K12 IP as Confidential Information.  As used herein “K12 IP”  shall mean all inventions and intellectual property rights (including, but not limited to, designs, discoveries, inventions, improvements, ideas, devices, techniques, processes, writings, trade secrets, trademarks, patents, copyrights and all plans, memoranda and other tangible information relating to such intellectual property, whether or not subject to protection under applicable laws) that EMPLOYEE solely or jointly with others conceives, makes, acquires, suggests or participates in at any time during

 

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EMPLOYEE’S employment with K12 and that relate to the actual business, products, processes, work, operations, research and development or other activities of K12.

 

ARTICLE 7
 MISCELLANEOUS

 

7.1.                            Assignment.  The rights and obligations of K12 under this Agreement shall be binding upon its successors and assigns and, subject to EMPLOYEE’s rights under Section 4.5 hereof, may be assigned by K12 to the successors in interest of K12.  The rights and obligations of EMPLOYEE under this Agreement shall be binding upon EMPLOYEE’s heirs, legatees, personal representatives, executors or administrators.  This Agreement may not be assigned by EMPLOYEE, but any amount owed EMPLOYEE upon EMPLOYEE’s death shall inure to the benefit of EMPLOYEE’s heirs legatees, personal representatives, executors, or administrators.

 

7.2.                            Notice.  For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when hand delivered, sent by overnight courier, or mailed by first-class, registered, or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, facsimile, or telex addressed as follows:

 

If to EMPLOYEE:  (Copy to K12 Executive Office)

 

Nathaniel A. Davis
 2609 Geneva Hill Court 
 Oakton, VA 22124

 

Telephone:

 

If to K12:

 

K12 Inc.

Attn:                    General Counsel

2300 Corporate Park Drive

Herndon, Virginia 20171

 

Telephone:
 Facsimile:

 

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

7.3.                            Entire Agreement.  From and after the Effective Date, this Agreement constitutes the entire agreement between the Parties hereto, and expressly supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein.

 

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7.4.                            Headings.  Article and Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

 

7.5.                            Severability.  In the event any provision of this Agreement, or any portion thereof, is determined by any arbitrator or court of competent jurisdiction to be unenforceable as written, such provision or portion thereof shall be interpreted so as to be enforceable.  In the event any provision of this Agreement or any portion thereof is determined by any arbitrator or court of competent jurisdiction to be void, the remaining portions of this Agreement shall nevertheless be binding upon K12 and EMPLOYEE with the same effect as though the void provision or portion thereof had been severed and deleted.

 

7.6.                            Arbitration.  Without prejudice to K12’s right to seek an injunction pursuant to Section 5.4 hereof from a court of competent jurisdiction, any dispute between the Parties hereto arising out of this Agreement, or otherwise arising out of or relating to EMPLOYEE’s employment by K12, or the termination thereof, shall be submitted to non-binding mediation before a mediator to be agreed upon by the Parties or, failing agreement, to be appointed by the American Arbitration Association (“AAA”).  In the event that mediation is unsuccessful, such dispute shall be resolved by binding arbitration, before a single arbitrator, under the rules of the AAA.  The arbitrator shall have the authority to apportion the costs of arbitration and to render an award including reasonable attorney’s fees, as and to the extent he deems appropriate under the circumstances.

 

7.7.                            Governing Law.  Except as otherwise provided in Section 2.4 hereof, this Agreement, the rights and obligations of the Parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the substantive laws of the Commonwealth of Virginia (excluding the choice of law rules thereof).

 

7.8.                            Amendment; Modification; Waiver.  No amendment, modification or waiver of the terms of this Agreement shall be valid unless made in writing and duly executed by EMPLOYEE and K12.  No delay or failure at any time on the part of EMPLOYEE or K12 in exercising any right, power or privilege under this Agreement, or in enforcing any provision of this Agreement, shall impair any such right, power, or privilege, or be construed as a waiver of any default or as any acquiescence therein, or shall affect the right of EMPLOYEE or K12 thereafter to enforce each and every provision of this Agreement in accordance with its terms.

 

7.9.                            Additional Obligations.  Both during and after the term of employment, EMPLOYEE shall, upon reasonable notice, furnish K12 with such information as may be in EMPLOYEE’s possession or control, and cooperate with K12, as may reasonably be requested by K12 (and, after the term of employment, with due consideration for EMPLOYEE’s obligations with respect to any new employment or business activity) in connection with any litigation or other adversarial proceedings in which K12 or any

 

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Affiliate is or may become a party.  K12 shall reimburse EMPLOYEE for all reasonable expenses incurred by EMPLOYEE in fulfilling EMPLOYEE’s obligations under this Section 7.9.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the Effective Date.

 

	
 
    	
 
    
	
 
    	
K12   INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
  /s/ 
    	
Andrew   H. Tisch
    
	
 
    	
 
    	
 
    	
Andrew   H. Tisch
    
	
 
    	
 
    	
 
    	
Chairman,   Compensation Committee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
  /s/ 
    	
Nathaniel   A. Davis
    
	
 
    	
 
    	
 
    	
Nathaniel   A. Davis
    
	
 
    	
 
    	
 
    	
Executive   Chairman
    

 

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EXHIBIT A

	
 
    

 

Separation Agreement and Release

 

This Separation Agreement and Release (“Agreement”) is made by and between Nathaniel A. Davis (“Executive”) and K12 Inc. (the “Company”) (collectively, referred to as the “Parties” or individually referred to as a “Party”).  Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Employment Agreement (as defined below).

 

WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of January 7, 2013 (the “Employment Agreement”); and

 

WHEREAS, in connection with Executive’s termination of employment with the Company effective                 , 20    , the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Executive may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Executive’s employment with or separation from the Company or its subsidiaries or affiliates but, for the avoidance of doubt, nothing herein will be deemed to release any rights or remedies in connection with Executive’s rights as a shareholder of the Company or Executive’s right to indemnification by the Company or any of its affiliates pursuant to contract or applicable law, Executive’s rights to Side A and Side B directors’ and officers’ insurance coverage as set forth in the Employment Agreement, and any rights Executive or his dependents have or may have under the Employee Retirement Income Security Act of 1974 (“ERISA”) with respect to any Company-sponsored employee benefit plans in which he or they then have an interest (collectively, the “Retained Claims”).

 

NOW, THEREFORE, in consideration of the severance payments described in Section 4.5 of the Employment Agreement, which, pursuant to the Employment Agreement, are conditioned on Executive’s execution and non-revocation of this Agreement, and in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:

 

1.                                      Severance Payments; Salary and Benefits.  The Company agrees to provide Executive with the severance payments and benefits described in Section 4.5 of the Employment Agreement, payable at the times set forth in, and subject to the terms and conditions of, the Employment Agreement. In addition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay or pay to Executive all amounts of base salary through the date of termination.

 

2.                                      Release of Claims.  Executive agrees that, other than with respect to the Retained Claims, the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company and all of its direct or indirect subsidiaries and Affiliates (as defined in the Employment Agreement), and any of their current and former officers, directors, managers, employees, agents, attorneys, administrators, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”).  Executive, on his own behalf and on behalf of any of Executive’s affiliated companies or entities and any of their respective heirs, family members, executors, agents, and assigns, other than with respect to the Retained Claims,

 

20

 

hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement (as defined in Section 7 below), including, without limitation:

 

(a)                                 any and all claims relating to or arising from Executive’s employment  or service relationship with the Company or any of its direct or indirect subsidiaries or affiliates and the termination of that relationship;

 

(b)                                 any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

 

(d)                                 any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the ERISA (except for any Retained Claims) ; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; and the Sarbanes-Oxley Act of 2002;

 

(e)                                  any and all claims for violation of the federal or any state constitution;

 

(f)                                   any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

 

(g)                                  any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Executive as a result of the Employment Agreement or this Agreement; and

 

(h)                                 any and all claims for attorneys’ fees and costs.

 

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.  This release does not release claims that cannot be released as a matter of law, including, but not limited to, Executive’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that Executive’s release of claims herein bars Executive from recovering such monetary relief from the Company or any Releasee), claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law, claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA, claims to any benefit entitlements vested as the date of separation of Executive’s employment (including but not limited to any claims Executive may have under the Equity Incentive Award Plan or any option or award agreements to which Executive is then a party), pursuant to written terms of any employee benefit plan of the Company or its affiliates and Executive’s right under applicable law and any Retained Claims.    This release further does not release claims for breach of Article 4 of the Employment Agreement.

 

3.                                      Acknowledgment of Waiver of Claims under ADEA.  Executive understands and acknowledges that Executive is waiving and releasing any rights Executive may have under

 

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the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary.  Executive understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement.  Executive understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Executive was already entitled.  Executive further understands and acknowledges that Executive has been advised by this writing that:  (a) Executive should consult with an attorney prior to executing this Agreement; (b) Executive has 21 days within which to consider this Agreement; (c) Executive has 7 days following Executive’s execution of this Agreement to revoke this Agreement pursuant to written notice to the General Counsel of the Company; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.  In the event Executive signs this Agreement and returns it to the Company in less than the 21 day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.

 

4.                                      Severability.  In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.

 

5.                                      No Oral Modification.  This Agreement may only be amended in a writing signed by Executive and a duly authorized officer of the Company.

 

6.                                      Governing Law; Dispute Resolution.  This Agreement shall be subject to the provisions of Sections 7.6 and 7.7 of the Employment Agreement.

 

7.                                      Effective Date.  If Executive has attained or is over the age of 40 as of the date of Executive’s termination of employment, then each Party has seven days after that Party signs this Agreement to revoke it and this Agreement will become effective on the eighth day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).  If Executive has not attained the age of 40 as of the date of Executive’s termination of employment, then the “Effective Date” shall be the date on which Executive signs this Agreement.

 

8.                                      Voluntary Execution of Agreement.  Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executive’s claims against the Company and any of the other Releasees.  Executive acknowledges that:  (a) Executive has read this Agreement; (b) Executive has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement; (c) Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of his own choice or has elected not to retain legal counsel; (d) Executive understands the terms and consequences of this Agreement and of the releases it contains; and (e) Executive is fully aware of the legal and binding effect of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

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EXECUTIVE
    
	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
Nathaniel   A. Davis
    
	
 
    	
 
    
	
 
    	
COMPANY
    
	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
						

 

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