Document:

Exhibit

Exhibit 10.2
CAPELLA EDUCATION COMPANY
EXECUTIVE OFFICER MANAGEMENT INCENTIVE PLAN
[xx] AWARD AGREEMENT
Terms and Conditions

1.    ISSUANCE UNDER INCENTIVE BONUS PLAN

Each [xx] Management Incentive Plan (“MIP”) Award is issued under the Company’s shareholder-approved Incentive Bonus Plan (the “Plan”), a copy of which has been provided to each Plan Participant, and therefore is subject to all the terms and conditions of the Plan.  Each MIP Award is evidenced by an Award agreement (the “Agreement”) consisting of a Notice of Award addressed to the recipient of the MIP Award and these Terms and Conditions, which include the appendix attached hereto (the “Appendix”).  

Each [xx] MIP Award (a “MIP Award”) provides an incentive opportunity on the basis of performance in areas chosen by the Compensation Committee of the Board of Directors to reflect the annual operating plan and the satisfaction and persistence of our learners.  Performance measures are reflected in the Appendix to these Terms and Conditions.  Based on results achieved, the incentive earned can be between [xx]-[xx]% of a Participant’s Target Incentive (as defined below).  The MIP Awards provide an incentive to the recipients of the Awards (the “Participants”) to deliver high quality experiences and outcomes to our learners and achieve strong results. 

2.    DEFINITIONS

The terms defined in this section are used (and capitalized) elsewhere in the Agreement.  All other capitalized terms used but not defined in the Agreement shall have the meanings given to them in the Plan. 

		
	2.1.
	“Actual Earnings” is defined as the sum of the base salary in effect for each Participant for each week during the Performance Period where they were employed for the entire week, divided by the number of payroll weeks in the Performance Period.  Base salary is limited to  regular wages.  Base salary excludes lump sum merit increases and taxable fringes, expense or relocation payments, long-term disability pay, other bonus or incentive awards, earnings from equity grants, vesting or exercises and any other allowances or stipends or other non-standard compensation.  If the Participant is on disability pay for a period of 16 weeks or more during any two year period, the base salary for all weeks greater than 16 shall be considered to be zero for the purposes of this calculation.

		
	2.2.
	“Performance Period” means the calendar year [xx], which consists of [xx] payroll weeks for the purposes of calculating Actual Earnings in 2.1 above. 

		
	2.3.
	“Target Incentive” is the percentage of Actual Earnings that would be paid to a Participant under the MIP if achievement of all metrics for the Performance Period equals 100% of the goals (i.e., target level performance) set at the beginning of the Performance Period.  Each Participant’s Target Incentive percentage [and dollar amount] is specified in the Participant’s Notice of Award.

3.     AWARDS

		
	3.1.  
	Eligibility Criteria.  The Committee will select Eligible Employees to participate in MIP in the manner described in the Plan.  In order to receive payment of a MIP Award, Participants must remain employed with the Company or one of its subsidiaries on the payment date of the MIP Award, except as otherwise provided in Section 6 of the Plan and Section 5 of these Terms and Conditions. 

		
	3.2. 
	Grant of Awards.  Each Participant will have a designated Target Incentive, expressed as a percentage of his or her Actual Earnings, specified in his or her Notice of Award.  Any change in a Participant’s Target Incentive during the Performance Period with respect to a MIP Award that is not intended to be Performance-Based Compensation will be pro-rated based on the date of change.  

		
	3.3.
	Description of Performance Criteria.  Each Participant’s right to receive a payout under his or her MIP Award is also dependent on the attainment over the Performance Period of the applicable performance targets as set forth in the Appendix, and weighted as set forth therein.  

4.    DETERMINATION AND PAYMENT OF AWARDS

Following the conclusion of the Performance Period, the payout of each MIP Award will be determined in accordance with Section 4 of the Plan and the following: 

		
	4.1.
	Verification of Metrics. The Committee will approve financial and other performance results for the metrics listed in the Appendix, ensuring independent verification of the measures where applicable. 

		
	4.2.
	Certification of Payouts. The Committee shall certify the degree to which the performance targets were attained.  These achievement results will be used to calculate final payment amount for each Participant who satisfies the continuing employment requirement specified in Section 3.1 above.  Each such Participant shall receive payment in cash of his or her MIP Award no later than two and a half months after the end of the applicable Performance Period. 

		
	4.3.
	Incentive Compensation Recoupment. This Award is subject to the Company’s Policy Regarding Executive Compensation Recoupment, as adopted by the Board of Directors on February 23, 2011, and as it may be amended from time to time.

5.    TERMINATION OF EMPLOYMENT

		
	5.1.
	Generally.  In the event any Participant ceases to be an employee of the Company and its subsidiaries for any reason other than Retirement, death, Disability or Involuntary Termination without Cause (as defined in the Company’s Senior Executive Severance Plan) prior to the date payment is made of the MIP Awards, he/she will not be eligible to receive any payment under a MIP Award for the applicable Performance Period.  

		
	5.2.
	Retirement, Disability or Termination Without Cause.  A Participants whose employment terminates due to Retirement, Disability or involuntary termination without Cause prior to the date payment is made of the MIP Awards will be eligible to receive a prorated portion (based on the number of weeks during the Performance Period when the Participant was employed in a MIP eligible position).  Such prorated payment will be made when payments are made to other Participants under the MIP.

		
	5.3.
	Death.  The beneficiary or estate of a Participant whose employment terminates due to death prior to the date payment is made of the MIP Awards will be eligible to receive a prorated portion (based on the number of weeks during the Performance Period when the Participant was employed in a MIP eligible position).  Such prorated payment will be made when payments are made to other Participants under the MIP.

6.    NEW HIRES; PROMOTIONS OR OTHER JOB CHANGES

		
	6.1.
	New Hires.  A new hire must commence employment as an Eligible Employee prior to October 1 of the Performance Period in order to be considered as a Participant in the MIP for that Performance Period, and a MIP Award to such a Participant for the Performance Period will be prorated from the date of hire. 

		
	6.2.
	Promotions.  An employee must be promoted into an Eligible Employee position prior to October 1 of the Performance Period in order to be considered as a Participant in the MIP for that Performance Period, and a MIP Award to such a Participant for the Performance Period will be prorated from the date of promotion. 

		
	6.3.
	Job Changes.  An employee who was a Participant in the MIP but, during the Performance Period, transfers into a position in which he or she is no longer eligible to participate in the MIP will be eligible to receive a prorated portion of any payment that otherwise would have been due under the Participant’s MIP Award if the Participant’s transfer had not occurred.  The prorated amount will be based on the number of days during the Performance Period when the Participant was employed in the MIP eligible position, divided by the total number of days in the Performance Period.  Such prorated payment will be made when payments are made to other Participants under the MIP.Exhibit

Exhibit 10.3

January 29, 2015

Mr. Peter M. Ramstad
4139 Lexington Way
Eagan, MN 55123

Dear Pete,

I am pleased to confirm in writing this offer of employment for the position of Senior Vice President - Chief Human Resources Officer for Capella Education Company.  The position reports to me.  Your start date is scheduled for April 1, 2015.

Please note that this offer of employment is contingent upon us completing a background check, you signing a mutually agreed Confidentiality, Non-Competition & Inventions Agreement prior to starting, and you providing proof of employment eligibility under the Immigration Reform and Control Act.

Base Pay
In your role of Senior Vice President - Chief Human Resources Officer you will be paid $13,846.15 on a bi-weekly basis, which equals $360,000 when annualized.  You will be eligible for a performance and salary review in 2016, and annually thereafter.

Cash Payments
You will receive a one-time payment of $150,000, payable on the first full paycheck following your date of hire.  Should you leave Capella voluntarily within twelve (12) months of receiving this bonus, you agree to reimburse Capella for this payment on a pro rata basis, with the proration period commencing on the date of your receipt of the bonus.

Initial Equity Grant
You will be awarded a one-time initial equity grant with a value of $325,000 in the form of Restricted Stock Units (RSUs), as described below.  The grant date for your award will be your date of hire, April 1, 2015.  The number of RSUs granted will be based on the NASDAQ closing price of our common stock on the date of grant.  (Value of grant, $325,000, divided by the closing price equals the number of RSUs.)  The RSUs will vest in equal increments on the first three anniversaries of the grant, subject to your continued employment with Capella.  The terms and conditions of the RSU grant will be outlined in a grant agreement that will be provided to you within one week of the grant.

Management Incentive Plan (MIP)
In addition to your base salary, you will be eligible to participate in our cash-based Management Incentive Plan (MIP) with a target of 50% of your annual base salary earnings.  Payouts can range from zero to two times your target, based on company performance, and are typically made in March following the end of the plan year.  There is no guarantee of payout.  For 2015, any payout to you under this plan will be based on actual salary paid to you after your date of hire, April 1, 2015.  The details of the MIP plan will be specified for you when you join Capella in your grant documentation.

Long Term Incentive (LTI) Awards
As a key management employee with Capella, you will be eligible to be considered for an annual long term incentive award.  While subject to change annually, our current practice provides discretionary equity grants in the form of a relatively equal mix of RSUs, stock options, and long term performance cash.  Your target value will be 90% of your base salary earnings.  Notwithstanding the previous sentence, for 2016 and 2017, your target value will be 121.5% of your base salary earnings, which is 135% of your standard 90% target.

The value of RSUs is based on the NASDAQ closing price for our common stock on the date of grant; the value of stock options is based on the standard financial calculation of Black-Scholes value; and the value of the long-term performance cash is based upon a target award value which will be paid if the company achieves its established three year performance plan.  For the long-term performance cash plan, actual cash payouts may range from 0% to 240% of the target award value based upon company performance following the 3 year performance period.  Annual long term incentive awards are subject to approval by the Board of Director’s Compensation Committee.  The next grant cycle will take place in early 2016.

Retirement

All grant agreements for your long term incentive awards, including your initial equity grant, will be modified such that “Retirement” will be based on the Rule of 65 (age plus years of service equal to or greater than 65).

Benefits
As a full-time employee you will be eligible to enroll in Capella Education Company benefits.  Key benefits include:

		
	•
	Medical/Dental - effective the first day of the month following your hire date, you will be eligible to participate in the company’s medical and dental plans.  Capella will pay 100% of your medical premiums.

		
	•
	PTO (Paid Time Off) - you will be entitled to accrue PTO on a pro-rated bi-weekly basis equal to a maximum of 27 days per year in addition to 10 paid holidays per year.  In addition, you will be awarded 10 days of PTO effective on your date of hire.

		
	•
	401(k) Retirement Plan - You are eligible to begin contributions the first of the month following your start date.  Capella provides a company matching contribution up to 4% of your base salary (subject to IRS limitations).

		
	•
	Capella University and Sophia Pathways to College Credit courses at no charge after 90 days.

All benefits are explained in greater detail in a Benefits Summary that will be provided to you after you accept this offer of employment.  Further benefits information, including enrollment forms and application deadlines, will be covered in your first day New Hire Orientation.

Parking
Capella will provide monthly contract parking for you at our expense.  More information will be provided to you about parking once you start.

Senior Executive Severance Plan
We have established the Capella Education Company Senior Executive Severance Plan to provide severance pay and other benefits to eligible employees.

Noncompetition Agreement
Because your position is critical to Capella’s operations and it is likely you will be receiving information of a highly sensitive nature, you will be required to sign a mutually agreed Confidentiality, Non-Competition & Inventions Agreement.

Conflict of Interest
All Capella employees must avoid conflicts of interest that have not been approved in advance and in writing.  The concept of a conflict of interest involves not only legal considerations, but moral and ethical principles as well.  Generally, a conflict of interests exists when an employee engages in activities or has a personal interest that interferes with the performance of his or her duties to Capella or that affects, or appears to affect, the employee’s ability to act in the best interests of Capella.  Employees must avoid not only actual conflicts of interest, but also those circumstances that create the appearance of a conflict.

As a full-time employee, it is expected that this role is your primary basis of employment and that you do not engage in any other employment which would involve directly or indirectly competing with Capella Education Company or its subsidiaries.  However, employees may hold adjunct teaching positions at other educational institutions provided they do not teach more than one course per quarter/semester at the other institution and that the other institution is not a direct competitor of Capella.  Also, full-time employees may not hold core faculty, administrative or leadership positions at other educational institutions.  Nothing in the preceding sentence is intended to prevent you from teaching at other educational institutions following termination of your employment with Capella, provided those institutions are not direct competitors.

OTHER INFORMATION:

New Hire Orientation
For your first day, please report to the Capella Tower (225 S. 6th St. 9th floor) by 8:00 a.m. and check in with the receptionist as a new employee attending New Hire Orientation. New Hire Orientation starts promptly at 8:15 a. m. During this orientation you will cover facilities information, phone training, and you will have your phot taken for your security badge and Capella’s intranet. You will also have the opportunity to discuss employee benefits with one of our Human Resources representatives. 

Form I-9
The Immigration Reform and Control Act requires employers to ensure that new employees complete Section 1 of Form I-9 and provide documentation that verifies their identity and eligibility to work in the United States.  Employment with Capella is contingent on your ability to provide appropriate documentation within the permitted timeframe, as outline in the Form I-9 “List of Acceptable Documents” included in your offer packet.  As this is a requirement for continued employment, it is critical 

that you bring either one document from List A, or one document from List B and one document from List C on your first day of employment.

If you have any future questions or concerns regarding your employment, please refer to the HR Services page on the intranet, or contact Human Resources at humanresources@capella.edu or (612) 977-4767.

Please note that nothing in this letter or the terms of the Senior Executive Severance Plan is intended as a contract offer or create any contract rights in this employment arrangement.  This is not intended to supersede or otherwise change the “employment at will” status of any Capella Education Company/Capella University employee.  Capella is an at will employer.  This means that either you or Capella may terminate employment at any time for any reason, without advance notice.

Pete, I am pleased to be able to offer you this opportunity to join Capella.  I am confident you will find opportunities to share your ideas and grow personally and professionally at Capella while making valuable contributions to the company’s success!  If you have any questions or concerns in regard to your acceptance of this offer, please do not hesitate to contact me.

Sincerely,

Kevin Gilligan
Chief Executive Officer

Please sign and date your acceptance of this offer and return a copy to me.

/s/ Pete M. Ramstad                                February 4, 2015
_________________________________                        _____________________
Signed                                        Dated
Peter M. Ramstad

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