Document:

Executive Severance Plan

 Exhibit 10.10 
 CAPELLA EDUCATION COMPANY 
 EXECUTIVE SEVERANCE PLAN 
 (As Originally Effective February 1, 2003 and as Amended 
 May 11, 2005, May 25, 2006, September 11, 2006 and December 13, 2007) 
  

	I.	INTRODUCTION 

 Capella Education Company
(“CEC”) has established the Capella Education Company Executive Severance Plan (the “Plan”) to provide severance pay and other benefits to eligible employees of CEC and its subsidiaries whose employment terminates under certain
covered circumstances. CEC, in its complete and sole discretion, will determine who is an eligible employee, the requirements to receive severance benefits, and the amount of any benefits. 
 The Plan was originally effective February 1, 2003. The Plan was amended effective May 11, 2005 and May 25, 2006. The Plan, as amended in
this document, is effective for eligible employees who terminate on or after September 11, 2006. This Plan supersedes and replaces any policy, plan or practice that may have existed in the past regarding the payment of severance benefits to
eligible employees, with the exception of the Capella Education Company Senior Executive Severance Plan. However, any individual written employment contract or agreement between CEC (or a subsidiary) and an eligible employee that specifically
provides for the payment of severance benefits remains in force, as detailed below. 
 This document is both the “Plan document” and
the “Summary Plan Description” for the Plan. 
 Any reference in this Plan to “Capella” includes CEC and its subsidiaries.

  

	II.	ELIGIBILITY 

 Only those employees who have
been designated in writing by CEC’s Chief Executive Officer (“CEO”) as eligible to participate in the Plan are eligible to become participants in the Plan. However, any employee who is a participant in the Capella Education Company
Senior Executive Severance Plan is not eligible to participate in this Plan while participating in that plan, regardless of any designation to the contrary. 
 The terms of the written designation by the CEO, not the employee’s job title or classification for other purposes, determine whether an employee is eligible for benefits under the Plan. The written designation
for a particular employee may be changed from time to time at the discretion of the CEO. 
  

 If you are designated as an eligible employee, you must also complete 90 days of service with Capella,
measured from your most recent date of hire, prior to becoming a participant in the Plan. 
 You will cease to be a participant in this Plan
when you cease to be designated by CEC as an eligible employee. 
  

	III.	SEVERANCE EVENTS 

 In general, if you are an
eligible participant in this Plan, and you comply with all provisions and requirements of the Plan, you will receive severance benefits if your employment with Capella is involuntarily terminated other than for Cause. A voluntary termination by you
for Good Reason within 24 months following a qualified Change in Control is also a severance eligible event. These concepts are described in detail below. 
 “For Cause”. You will not be eligible for benefits under this Plan if your employment is terminated by Capella “for Cause.” “Cause” means 1) employee’s commission of a crime
or other act that could materially damage the reputation of Capella; 2) employee’s theft, misappropriation, or embezzlement of Capella property; 3) employee’s falsification of records maintained by Capella; 4) employee’s failure
substantially to comply with the written policies and procedures of Capella as they may be published or revised from time to time (in writing, on the Faculty Center website, or on the Stella intranet); 5) employee’s misconduct directed toward
learners, employees, or adjunct faculty; or 6) employee’s failure substantially to perform the material duties of employee’s Capella employment, which failure is not cured within 30 days after written notice from Capella specifying the act
of non-performance. 
 “Good Reason”. If you terminate employment with Capella voluntarily, you will be eligible for Plan
benefits only if you terminated with Good Reason following a qualified Change in Control, as defined below. “Good Reason” means 1) the demotion or reduction of your job responsibilities upon a Change in Control; 2) your total targeted
compensation is decreased by more than ten percent in a twelve month period; or 3) a reassignment of your principal place of work, without your consent, to a location more than 50 miles from your principal place of work upon a Change of
Control. To be eligible for Plan benefits, you must terminate employment for Good Reason within 24 months after the date of the qualified Change in Control. In addition, you must have provided written notice to CEC of the asserted Good Reason not
later than 30 days after the occurrence of the event on which Good Reason is based and at least 30 days prior to your proposed termination date. CEC may take action to cure your stated Good Reason within this 30-day period. If CEC does so, you will
not be eligible for Plan benefits if you voluntarily terminate. 
 “Change in Control”. For purposes of this Plan, a
qualifying “Change in Control” of CEC shall be deemed to occur if any of the following occur: 
  

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 (1) Any “person” (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”)) acquires or becomes a “beneficial owner” (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of securities of CEC representing the
following: (i) 50% or more of the combined voting power of CEC’s then outstanding securities entitled to vote generally in the election of directors (“Voting Securities”) at any time prior to CEC selling any of its shares in a
public offering pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) 35% or more of the combined voting power of CEC’s then outstanding Voting Securities at any
time after CEC sells any of its shares in a public offering pursuant to a registration statement filed under the Securities Act. Provided, however, that the following shall not constitute a Change in Control: 
 (A) any acquisition or beneficial ownership by CEC or a subsidiary; 
 (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by CEC or one or more
of its subsidiaries; 
 (C) any acquisition or beneficial ownership by any corporation with respect to which, immediately
following such acquisition, more than 50% of both the combined voting power of CEC’s then outstanding Voting Securities and the Shares of CEC is then beneficially owned, directly or indirectly, by all or substantially all of the persons who
beneficially owned Voting Securities and Shares of CEC immediately prior to such acquisition in substantially the same proportions as their ownership of such Voting Securities and Shares, as the case may be, immediately prior to such acquisitions;

 (D) any acquisition of Shares or Voting Securities in CEC’s initial public offering pursuant to a registration
statement filed under the Securities Act. 
 (2) A majority of the members of the Board of Directors of CEC shall not be
Continuing Directors. “Continuing Directors” shall mean: (A) individuals who, on the date hereof, are directors of CEC, (B) individuals elected as directors of CEC subsequent to the date hereof for whose election proxies shall
have been solicited by the Board of Directors of CEC or (C) any individual elected or appointed by the Board of Directors of CEC to fill vacancies on the Board of Directors of CEC caused by death or resignation (but not by removal) or to fill
newly-created directorships; 
 (3) Approval by the stockholders of CEC of a reorganization, merger or consolidation of CEC or
a statutory exchange of outstanding Voting Securities of CEC, unless, immediately following such reorganization, merger, consolidation or exchange, all or substantially all of the persons who were the beneficial owners, 

  

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respectively, of Voting Securities and Shares of CEC immediately prior to such reorganization, merger, consolidation or exchange beneficially own, directly
or indirectly, more than 50% of, respectively, the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors and the then outstanding shares of common stock, as the case may be, of the
corporation resulting from such reorganization, merger, consolidation or exchange in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or exchange, of the Voting Securities and
Shares of CEC as the case may be; or 
 (4) Approval by the stockholders of CEC of (x) a complete liquidation or
dissolution of CEC or (y) the sale or other disposition of all or substantially all of the assets of CEC (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other
disposition, more than 50% of, respectively, the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and the then outstanding shares of common stock of such
corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners, respectively, of the Voting Securities and Shares of CEC immediately prior to such sale or other disposition
in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Voting Securities and Shares of CEC, as the case may be. 
 At all times after CEC sells any of its shares in a public offering pursuant to a registration statement filed under the Securities Act, the references to
50% in subsections (1)(C), (3) and (4) above shall be changed to 65%. 
  

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 Release Required. Regardless of the reason for your termination, you will not be eligible for Plan
benefits unless you sign a release form after your employment with CEC or a subsidiary actually terminates. You may obtain a copy of the current release form at any time by contacting the CEC Human Resources Department. However, CEC will determine
the contents of the release form, and may revise it from time to time as appropriate to deal with particular severance situations. As such, the release form you will be required to sign to receive benefits under the Plan may differ from any release
form you previously received. 
 The release will generally include provisions regarding noncompetition with Capella for a period of time
after your employment terminates, confidentiality, return of Capella property and other topics, including a release of all claims against Capella, its employees and its representatives. The release may also include other topics in a given situation,
including non-solicitation of clients and/or employees and compliance with CEC policies (such as code of conduct, business ethics and insider trading, as applicable). Severance benefits will be paid only after any period for rescinding the release
has expired. If you violate the release, CEC will no longer be required to pay you any remaining severance benefits due to you under the Plan. 
 Ineligibility for Benefits. Severance benefits will not be paid under this Plan in any of the following circumstances: 
  

	 	•	 	 You are offered another position with Capella (or the successor/purchasing entity) and you refuse to accept that position, other than for Good Reason in connection
with a qualified Change in Control. 

  

	 	•	 	 You voluntarily terminate your employment with Capella (or the successor/purchasing entity), other than for Good Reason in connection with a qualified Change in
Control. 

  

	 	•	 	 Your termination of employment does not qualify as a “separation from service” under Internal Revenue Code Section 409A or any guidance issued
thereunder. 

  

	 	•	 	 Your employment is terminated by Capella (or the successor/purchasing entity) for Cause, whether or not in connection with a Change in Control.

  

	 	•	 	 You are placed on a temporary layoff. 

  

	 	•	 	 Your employment terminates due to death, disability, or failure to return to work for Capella following a leave of absence, layoff or any other period of authorized
absence from Capella. 

  

	 	•	 	 You refuse to sign the release form prepared by CEC, or you rescind the release before it becomes final. 

  

	 	•	 	 You are a participant in the Capella Education Company Senior Executive Severance Plan at the time of your termination. 

  

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	 	•	 	 You leave Capella under any other program in which management solicits and accepts voluntary terminations (in which case, severance pay will be determined and paid
only under the other program). 

  

	 	•	 	 You are covered by an individual written employment contract or agreement with Capella at the time your employment terminates that provides for severance pay or
other benefits upon termination, except as described below. 

  

	IV.	PLAN BENEFITS 

 A Participant who experiences
a qualifying severance event under Section III will be eligible to receive severance benefits under the Plan, including severance pay, outplacement assistance and continuation coverage under certain employee benefit plans. 
 Severance Pay 
 The amount and
type of severance pay provided under the Plan depends on the severance event. 
 Involuntary Termination. If your employment is
involuntarily terminated by Capella, other than for Cause or within 24 months after a qualified Change in Control, you will be entitled to severance pay equal to six months of your base salary. 
 Change in Control. If you voluntarily terminate for Good Reason following a Change in Control, or if you are involuntarily terminated other than
for Cause, within 24 months after a qualified Change in Control, you will be entitled to severance pay equal to twelve months of your base salary. You will also be entitled to 80% of the amount of any targeted bonus for the year in which you
terminate, prorated to the date of termination, without regard to performance. 
 Your “base salary.” Severance pay under
this Plan is calculated using your base salary at the time your employment terminates. Base salary excludes all bonuses (such as signing bonuses and incentive bonuses), stock options, profit sharing, benefits, taxable fringes, expenses allowances or
reimbursements, imputed income, or any other special compensation. 
 Payment. Generally, you will receive any severance pay you are
entitled to in bi-weekly payments, spread out over the number of months on which your severance amount is based. Severance payments will begin as soon as administratively feasible after the date the release becomes irrevocable. 
 However, if as of the date of your separation from service, (a) you are a “specified employee,” as such term is defined in
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations thereunder; (b) CEC’s stock is then 

  

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publicly traded on an established securities market; and (c) any amount of your total severance pay under this Plan exceeds the applicable separation
pay exclusion determined pursuant to the regulations under Code Section 409A, you will receive that excess amount of your severance pay in accordance with the following rules. To the extent that payment of any portion of such excess amount
would otherwise occur during the first six months after your separation from service, that portion of the excess amount will be paid as of the first bi-weekly payment date occurring on or after the first day of the seventh month following your
separation from service, in addition to any other payment of your severance pay due on that date. After that date, any unpaid amount of your severance pay will continue to be paid bi-weekly for the remainder of the number of months on which your
total severance pay amount is based. 
 Outplacement Assistance 
 Participants eligible for benefits under this Plan will be eligible for up to 6 months of outplacement assistance. Any outplacement assistance provided
under this Plan will be paid directly to the outplacement agency. 
 Continuation Coverage 
 Federal and state laws require CEC to offer certain departing employees (and where applicable, their dependents) the right to continue coverage, at their
own expense, under our group health, dental and life insurance programs. For health and dental benefits, this continuation coverage is called COBRA. Upon termination of employment, you will receive information further describing how this
continuation coverage works, its limitations, and your rights and duties to maintain coverage. 
 If you are eligible for benefits under this
Plan, CEC will pay the regular employer portion towards your continued coverage under CEC’s group health, dental and basic life insurance plans for the number of months upon which your severance pay is based. For example, if you are a entitled
to six months of severance pay, CEC will contribute to your continuation coverage for six months, subject to the limitations described below. After that time, you must pay the entire cost of continuation coverage if you wish to continue coverage.

 To receive this continuation coverage benefit, you must elect continuation coverage in accordance with the documents you receive. In
addition, you must pay the remaining portion of the cost of your continued coverage. If CEC changes the portion it contributes toward benefit coverage for active employees, it may also change its employer portion for purposes of continuation
coverage benefits under this Plan. Any continuation benefit provided under this Plan will be paid directly to the applicable health, dental and/or basic life insurance program. If you are not eligible for continuation coverage at the time of
termination or if you do not properly elect continuation coverage, you will not receive any payments in lieu of this subsidized continuation coverage. 
  

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 If you lose eligibility for COBRA or other continuation coverage, as described in the COBRA documents
you will receive, CEC will stop paying its portion of the premiums for your continuation coverage. 
 Reductions of Severance
Benefits 
 All severance benefits payable under this Plan will be reduced by the amount of any severance or similar payment required
to be paid to you by CEC under applicable federal, state, and local laws. Cash severance payments are also subject to all applicable withholding, including state and federal income tax withholding and FICA and Medicare tax withholding. 

In addition, in no event will the severance amount you receive exceed two times your yearly salary for the twelve months preceding your termination (or
the amount you would have earned had you worked a full year). 
 Severance pay under this Plan will be reduced (offset) by the amount of any
payment made by CEC to you pursuant to an employment contract, agreement or other severance arrangement, to the extent such payment is called a severance payment or otherwise becomes payable due to a termination. If such an agreement, contract or
arrangement provides for severance payments in excess of those provided under this Plan, no severance pay will be due under this Plan, however, you may still be eligible for other benefits under the Plan, to the extent benefits are not duplicative
of what you are receiving under the agreement, contract or arrangement. 
 Termination of Severance Benefits 
 All severance benefits payable under this Plan (including severance pay, outplacement assistance and continuation coverage premiums) will be terminated if
CEC determines that you have violated the noncompetition or confidentiality provisions contained in your release form. 
  

	V.	AMENDMENT AND TERMINATION OF THE PLAN 

 Except as provided below, CEC reserves the right in its discretion to amend or terminate this Plan, or to alter, reduce, or eliminate any severance benefit, practice or policy hereunder, in whole or in part, at any time and for any reason
without the consent of or notice to any employee or any other person having any beneficial interest in this Plan. Such action may be taken by the Board of Directors of CEC, by the Chief Executive Officer of CEC, or by any other individual or
committee to whom such authority has been delegated by the Board of Directors. 
  

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 However, during the 24-month period following a Change in Control, the Plan may not be amended,
terminated or otherwise altered to reduce the amount (or change the terms) of any severance benefit that becomes payable to a Participant who was a Participant in the Plan on the day prior to the Change in Control. 
 In addition, if a Change in Control occurs within the 6-month period following the effective date of an amendment to terminate the Plan or otherwise
reduce the amount (or alter the terms) of any severance benefit under the Plan, such amendment (or portion of such amendment) will become null and void upon the Change in Control. Upon the Change in Control, the Plan will automatically revert to the
terms in effect prior to the adoption of said amendment. 
 Notwithstanding the above limitations, the Plan may be amended at any time (and
such amendment will be given affect) if such amendment is required to bring the Plan into compliance with applicable law, including but not limited to Section 409A of the Internal Revenue Code. 
 This Plan shall terminate immediately upon CEC’s filing for relief in bankruptcy or on such date as an order for relief in bankruptcy is entered
against CEC. A Participant who experiences a severance event after such termination will not be eligible for benefits under this Plan. 
  

	VI.	SUBMITTING CLAIMS FOR BENEFITS 

 Normally,
CEC will determine an employee’s eligibility and benefit amount on its own and without any action on the part of the terminating employee, other than returning the release form. The severance payments will begin as soon as administratively
feasible after the date the release becomes irrevocable. 
 Formal Claims for Benefits. If you think you are entitled to benefits but
have not been so notified by CEC, if you disagree with a decision made by CEC, or if you have any other complaint regarding the Plan that is not resolved to your satisfaction, you or your authorized representative may submit a written claim for
benefits. The claim must be submitted to CEC’s Human Resources Department in Minneapolis, Minnesota within six months after the date you terminated employment. Claims received after that time will not be considered. 
 CEC will ordinarily respond to the claim within 90 days of the date on which it is received. However, if special circumstances require an extension of the
period of time for processing a claim, the 90-day period can be extended for an additional 90 days by giving you written notice of the extension, the reason why the extension is necessary, and the date a decision is expected. 
 CEC will give you a written notice of its decision if it denies your claim for benefits in whole or in part. The notice will explain the specific reasons
for the decision, 

  

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including references to the relevant plan provision upon which the decision is based, with a description of any additional material or information necessary
for you to perfect your claim, and the procedures for appealing the decision. 
 Appeals. If you disagree with the initial claim
determination, in whole or in part, you or your authorized representative can request that the decision be reviewed by filing a written request for review with CEC’s Human Resources Department in Minneapolis, Minnesota within 60 days after
receiving notice that the claim has been denied. You or your representative may present written statements describing reasons why you believe the claim denial was in error, and should include copies of any documents you want us to consider in
support of your appeal. Your claim will be decided based on the information submitted, so you should make sure that your submission is complete. Upon request to CEC, you may review all documents we considered or relied on in deciding your claim.
(You may also receive copies of these documents free of charge.) 
 Any appeal will be reviewed and decided by person(s) other than the
person(s) who made the determination on your original claim. Generally, the decision will be reviewed within 60 days after CEC receives a request for review. However, if special circumstances require a delay, the review may take up to 120 days. (If
a decision cannot be made within the 60-day period, you will be notified of this fact in writing.) You will receive a written notice of the decision on the appeal, which will explain the reasons for the decision by making specific reference to the
Plan provisions on which the decision is based. 
 Limitations Period. The claims procedure above is mandatory. If an employee
has completed the entire claims procedure and still disagrees with the outcome of the employee’s claim, the employee may commence a civil action under § 502(a) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). The employee must commence such civil action within one year of the date of the final denial, or the employee will waive all rights to relief under ERISA. 
  

	VII.	PLAN ADMINISTRATION 

 The following
information relates to the administration of the Plan and the determination of Plan benefits. 
 Name of Plan: 
 Capella Education Company Executive Severance Plan 
 Type of Plan: 
 The Plan is a “welfare benefits plan” that provides severance benefits in the event a
participant’s employment with CEC or its subsidiaries terminates under certain circumstances. All benefits are paid from the general assets of CEC. No trust fund, insurance contract or other pool of assets is maintained to provide Plan
benefits. 
  

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 Plan Administrator/Plan Sponsor: 
 CEC is the “Plan Sponsor” and “Plan Administrator” of this Plan. Communications to CEC regarding the Plan should be addressed to:

 Capella Education Company 
 ATTN: Human Resources Department 
 225 South Sixth Street, 8th Floor 
 Minneapolis, MN 55402 
 Telephone:
(612) 977-5299 
 As Plan Administrator, CEC has complete discretionary authority to interpret the provisions of the Plan and to
determine which employees are eligible to participate and eligible for Plan benefits, the requirements to receive severance benefits, and the amount of those benefits. CEC also has authority to correct any errors that may occur in the administration
of the Plan, including recovering any overpayment of benefits from the person who received it. 
 Employer Identification Number:
41-1717955 
 Plan Number: 506 
 Plan Year: The calendar year. 
 Agent for Service of Legal Process: 
 Legal process regarding the Plan may be served on CEC at the address listed above. 
 Assignment of Benefits: 
 You cannot
assign your benefits under this Plan to anyone else, and your benefits are not subject to attachment by your creditors. CEC will not pay Plan benefits to anyone other than you (or your estate, if you die after having a qualifying severance event but
before receiving the complete severance amount payable to you up to the date of your death). 
 Governing Law: 
 This Plan, to the extent not preempted by ERISA or any other federal law shall be governed by and construed in accordance with, the laws of the sate of
Minnesota. 
  

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 Employment Rights: 
 Establishment of the Plan shall not be construed to in any way modify the parties’ at-will employment relationship, or to give any employee the right to be retained in CEC’s service or to any benefits not
specifically provided by the Plan. The right of an employer to terminate the employment relationship of an employee (or to accelerate the termination date) will not in any way be affected by the terms of this Plan or any release. 
 Statement of Rights of Participants: 
 As a participant in this Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA provides that all Plan participants are entitled to: 
  

	 	1.	Examine, without charge, at CEC’s Human Resources Department and at other specified locations, such as worksites, all documents governing the Plan and a copy of the latest
annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration, if required. 

  

	 	2.	Obtain, upon written request to CEC’s Human Resources Department, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500
Series), if required, and updated summary plan description. CEC may make a reasonable charge for the copies. 

  

	 	3.	Receive a summary of the Plan’s annual financial report (if the Plan is required to file such a report). CEC is required by law to furnish each participant with a copy of this
summary financial report. 

 In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are
responsible for the operation of the Plan. The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA. 
 If
your claim for a welfare benefit is denied or ignored, in whole or in part, you have the right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all with certain time
schedules. 
 Under ERISA there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or
the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require CEC to provide the materials and pay you up to $110 a 

  

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day until you receive the materials, unless the materials were not sent because of reasons beyond its control. If you have a claim for benefits which is
denied or ignored, in whole or in part, and you have exhausted your appeal rights under the Plan’s claims procedure, you may file suit in a state or federal court. If you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in federal court. The court will decide who should pay costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. 
 If you have any questions
about the Plan, you should contact CEC’s Human Resources Department. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from CEC, you should contact the nearest
office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200
Constitution Avenue N.W., Washington, D.C., 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration. 
  

 -13-Offer Letter with addendum

 Exhibit 10.22 
 

 
  

			
	 222 South 9th Street
  

20th Floor
  
 Minneapolis, MN 55402-3389
  
 612-339-7665    PHONE
  
 888-879-6745    TOLL FREE
  
 612-337-5396    FAX
	  	 October 20, 2004
  
  
 Ms, Lois Martin
 2460 Sunrise Drive
 Little Canada, MN 55117

		
	 www.capella.edu
  
 info@capella.edu
	  	 Dear Lois:
  
 We are pleased to formally extend you this offer of employment for the position of Senior Vice President and Chief Financial Officer for Capella Education Company. This
is a corporate officer position and reports to the Chairman and Chief Executive Officer, Steve Shank. This offer is contingent upon signing a Confidentiality, Non-Competition and Inventions Agreement, a copy of which is enclosed, and the successful
completion of a background check.
  
 You will be paid on a bi-weekly basis, an amount
that will equal $265,000 when annualized. You will be eligible for a performance and salary review as of July 1 , 2005. Your next review will be scheduled for March 1, 2006 and, under normal circumstances, annually thereafter. Capella
offers a comprehensive compensation system; more information will be provided to you after your start.
  
 Annual incentive compensation: In addition to your salary, you will be eligible to earn an annual incentive compensation award with a target of 40% of your base salary starting in fiscal 2005. The details of
the incentive compensation program will be specified in the enclosed annual award plan, a copy of which you have received.
  
 Signing Bonus: Capella will pay you a lump sum of $50,000 (before taxes) the first payroll period following your hire date. Should you voluntarily leave Capella
within 1 2 months of your hire date, for other than “Good Reason,” as defined in the Addendum, you agree to reimburse Capella for this payment on a prorata basis.
  
 Benefit Plans: The following will summarize the current benefit plans, for which you would be
eligible as a full-time employee:
  
 Medical – Effective the first day of the
month following employment, you would be eligible to participate in the company’s medical plan. The plan is administered through Medica. Medica offers you a choice of networks and/or benefit levels. Capella will pay 100% of the premium for the
medical coverage.
  
 Dental – You will also be eligible to participate in the
company’s dental plan, administered by Delta Dental. Delta offers you a choice of networks and/or benefit levels.

	  
	  

			
		  	Life Insurance – The company provides paid life insurance in the amount of 1X salary. You may also elect to purchase additional coverage for yourself, spouse and/or
dependents.
		
		  	Disability Benefits – The Company offers short and long-term disability benefits. The short-term disability coverage provides salary replacement for up to 26 weeks of disability. The
amount and length of coverage is based upon length of service with the company. This benefit is paid for by the Company. You may elect to purchase long-term disability coverage. The Plan replaces up to 60% of your salary as long as you are eligible
for disability benefits under the Plan. The Company pays 50% of the cost of this plan.
		
		  	Cafeteria Plan – This plan allows you to pay for medical premiums, unreimbursed medical and child care expenses from pre-tax dollars. You would be eligible for this plan at the same
time you are eligible for the medical insurance.
		
		  	Physical: If you choose to waive company provided medical insurance, Capella will pay for an annual physical at a provider of your choice up to an annual maximum of
$10,000.
		
		  	40IK Retirement Plan – Under this plan, you may contribute up to 35% of your eligible compensation on a pre-tax basis (up to IRS limits).
		
		  	ESOP – The Company will also make an annual discretionary contribution to the ESOP up to 3% of eligible compensation in the form of company stock once you are eligible to
participate. Employer contributions made in your first three years with Capella will vest at the end of your third year of service as defined in the Plan document. Employer contributions made after the end of your third year of service will vest
immediately.
		
		  	Stock Option Grant – You will be granted options to purchase 100,000 shares of Capella Education Company common stock at the exercise price then in effect at the next scheduled Board
of Directors meeting. The terms of the stock option grant will be specified in a definitive stock option agreement (the “Stock Option Agreement”) which will provide that the right to exercise options to purchase 25,000 shares which will
vest on each of your first four anniversary dates of your initial employment with the Company. The Stock Option Agreement will also provide for immediate acceleration of the vesting of your stock option rights if, within the period required for full
vesting of your stock option exercise rights, (1) there is a change of control of the ownership of the Company as defined in the Stock Option Agreement, and (2) within such period your employment is terminated or your job adversely
affected by such changes as a reduction in responsibility or compensation or a relocation of the job.
		
		  	Capella also offers an annual executive option grant award program that becomes effective for eligible participants July 1 following two years of employment. Capella will waive the standard
waiting period and you will become eligible to participate in the program beginning July 1, 2005.
		
		  	The specific amount of the grant is based on your position and base compensation using a “multiple of pay” formula, and calculated using the Black Sholes valuation based on the market
price at the time of the grant. Your multiple of pay percentage is set at 60% of base pay. The number of options is determined by taking your salary as of June 30 (in the year the grant is awarded) multiplied by the multiple of pay percentage.
That amount is divided by the Black Scholes valuation of the FMV of the options at the time of the grant to determine the actual number of options that will be granted. Options granted as part of the annual grant program vest over a 4-year period.

  

 2 

					
		  	Executive Severance Plan. Capella Education Company has established the Capella Education Company Executive Severance Plan to provide severance pay and other benefits to
eligible employees. In your current position as Senior Vice President and Chief Financial Officer, you have been designated as an eligible Level II participant. Please refer to the Plan Document you have already received, for information on the
specific provisions and conditions of the Plan. Special considerations are outlined in the attached Addendum.
		
		  	Confidentiality, Non-Competition and Inventions Agreement: With our growing leadership position in the market, the Company has a great opportunity to build national
recognition of the Capella brand as the brand of choice in the elearning market. However, Capella expects increasing competition from for-profit and not for-profit organizations in the rapidly growing elearning market. Capella believes it is
essential to take certain steps, including the execution of a Confidentiality, Non-Competition, and Inventions Agreement for certain key positions, in order to protect the legitimate business interests of the Company and to ensure the security and
confidentiality of the company’s customers, pricing, sales strategy, and technology. Accordingly, Capella requires as a condition of employment that candidates, such as you, for key positions execute Confidentiality, Non-Competition and
Invention Agreements. This Agreement must be signed and dated no later than your first day of employment.
		
		  	Employment at Will: Your employment will be at will. This means that either you or Capella may terminate the employment at any time for any reason, without advance notice.

		
		  	Other Benefits: You will be entitled to Personal Time Off earned on a prorated monthly basis equal to a maximum 27 days/year, in accordance with the Company benefit statement,
and 10 paid holidays. You are also eligible for paid parking in a designated parking facility. You will also be provided a personal wireless connectivity product such as Blackberry, which includes cell phone service.
		
		  	Lois, we are delighted to be able to offer you this opportunity to join Capella. Your education and experience are impressive and I am confident you will make a valuable contribution
to the Company’s continued success.
		
		  	Please sign and date below your acceptance of this offer and return in the enclosed envelope.
			
		  	Sincerely,	  	
			
		  	CAPELLA EDUCATION COMPANY	  	
			
		  	 /s/ Betsy Rausch
	  	
		  	Betsy Rausch	  	
		  	Vice President Human Resources	  	
			
		  	c.c Steve Shank	  	

  

 3 

									
		  	Acceptance: I hereby accept the offer of employment by Capella Education Company on the terms described in this letter and Addendum A. I understand that I must sign and return
to Capella the Confidentiality, Non-Competition and Inventions Agreement provided to me with this letter before I start my Capella employment.
				
		  	 /s/ Lois Martin
	  		  	10/25/04
		  	Lois Martin	  		  	Date

  

 4 

 

 
 Addendum A to Lois Martin Offer Letter 
  

	1.	As additional consideration for your acceptance of Capella’s offer of employment, Capella and you agree that (a) if your employment is terminated by Capella within two
(2) years of Capella’s “Change in Control” (as defined in the Capella Education Company Executive Severance Plan (the “Plan”)), (b) if your employment is terminated for a reason other than “Cause” (as
defined in the Plan), whether or not preceded by a Change in Control, or (c) if your employment is terminated for “Good Reason” (which is defined as a voluntary termination by you, whether or not preceded by a Change in Control, in
any of the following events: (i) your position is changed to a position with a lower pay grade or lesser responsibilities than the Senior Vice President, Chief Financial Officer position; (ii) your fixed compensation is decreased by more
than ten percent (10%) in any twelve (12) month period; (iii) you are reassigned to a work location more than fifty (50) miles from the location in which you are working immediately prior to the reassignment; or (iv) you are
placed on temporary layoff and not reinstated to permanent employment within ninety (90) days from the date on which the layoff begins), then you shall receive the severance/transition benefits set forth in this Addendum A.

  

	2.	Upon Capella’s termination of your employment within two (2) years of Capella’s “Change in Control” (as defined in the Plan or the Stock Agreement), the
termination of your employment for a reason other than “Cause” (as defined in the Plan), whether or not preceded by a Change in Control, or the termination of your employment for “Good Reason” (as defined in the preceding section
of this Addendum A), whether or not preceded by a Change in Control, you shall receive severance pay in an amount equal to nine (9) months’ base salary, outplacement assistance for up to twelve (12) months, and shall be entitled to
have paid on your behalf the regular employer portion of your Capella group health, dental and basic life insurance benefits for nine (9) months, or such greater severance pay, outplacement assistance and/or continuation coverage
benefits offered to any Capella employee/participant under the Plan, In the event your employment is terminated other than for Cause, or if you voluntarily terminate for Good Reason, within two (2) years following a Change in Control, you will
also be entitled to eighty percent (80%) of the amount of any targeted bonus for the year in which you terminate, prorated to the date of termination, without regard to performance. 

  

	3.	If nine (9) months following Capella’s termination of your employment within two (2) years of Capella’s “Change in Control” (as defined in the Plan or
the Stock Agreement), the termination of your employment for a reason other than “Cause” (as defined in the Plan), whether or not preceded by a Change in Control, or the termination of your employment for “Good Reason” (as
defined in the 

  

 Ms. Lois M. Martin 
 October 20, 2004 
 Page 2 
  

	 	 
preceding sections of this Addendum A), whether or not preceded by a Change in Control, you have not secured employment paying at least 75% of your prior
base salary, you shall receive additional severance pay in an amount equal to three (3) months’ base salary and shall be entitled to have paid on your behalf the regular employer portion of your Capella group health, dental and basic life
insurance benefits for three (3) months, or such greater additional severance pay and/or continuation coverage benefits offered to any Capella employee/participant under the Plan. 

  

					
	 Betsy Rausch
	  		  	
			
	 /s/ Betsy Rausch
	  		  	
			
	Lois Martin

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