TESSERACT GROUP INC, S-8, 1998-01-05

TESSERACT GROUP INC
S-8, 1998-01-05
EDUCATIONAL SERVICES

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<PAGE>
As filed with the Securities and Exchange Commission on January 5, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
______________________

FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________

THE TESSERACT GROUP, INC.
(Exact name of Registrant as specified in its charter)

MINNESOTA 41-1581297
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1300 NORWEST FINANCIAL CENTER 55431
7900 XERXES AVENUE SOUTH (Zip Code)
MINNEAPOLIS, MINNESOTA
(Address of principal executive offices)

THE TESSERACT GROUP, INC. 1988 STOCK OPTION PLAN
(Full title of the plan)

John T. Golle
Chairman and Chief Executive Officer
The TesseracT Group, Inc.
1300 Norwest Financial Center
7900 Xerxes Avenue South
Minneapolis, Minnesota 55431
(Name and address of agent for service)

Telephone number, including area code, of agent for service: (612) 832-0092
______________________

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proposed
Proposed maximum
Title of Amount maximum aggregate Amount of
securities to to be offering price offering registration
be registered registered (1) per share (1) (2) price (1) (2) fee
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock, 900,000
$.01 par value shares $4.375 $3,937,500 $1,161.57
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) The Registration Statement relates to an additional 900,000 shares of
Common Stock to be offered pursuant to the Registrant's 1988 Stock Option
Plan, for which 1,000,000 shares of Common Stock have previously been
registered pursuant to the Registrant's Registration Statement Nos.
33-47486 and 33-87644.

(2) Estimated solely for the purpose of the registration fee pursuant to
Rule 457(h)(1) based on the average of the high and low sales prices per
share of the Registrant's Common Stock on December 30, 1997, as reported
on the Nasdaq National Market.
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- --------------------------------------------------------------------------------

<PAGE>

THE TESSERACT GROUP, INC.

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

There are incorporated in this Registration Statement by
reference the contents of the Registrant's Registration Statements Nos.
33-47486 and 33-87644.

ITEM 8. EXHIBITS.

Exhibit Description
------- -----------

4 The TesseracT Group, Inc. 1988 Stock Option Plan.

5 Opinion of Faegre & Benson LLP.

23.1 Consent of Faegre & Benson LLP (contained in Exhibit 5 to
this Registration Statement).

23.2 Consent of Arthur Andersen LLP

24 Powers of Attorney.

II-1

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on January 5, 1998.

THE TESSERACT GROUP, INC.

By /s/ John T. Golle
------------------------------------------
John T. Golle
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 5, 1998.

Signature Title
- --------- -----

/s/ John T. Golle Chairman of the Board of Directors and Chief
- ------------------------- Executive Officer
John T. Golle (Principal Executive Officer)

/s/ Gerald A. Haugen Chief Financial and Administrative Officer
- -------------------------
Gerald A. Haugen (Principal Financial and Accounting Officer)

Richard T. Burke* Director

Robert I. Karon* Director

Gale R. Mellum* Director

John T. Walton* Director

Martha Taylor Thomas* Director

* John T. Golle, by signing his name hereto, does hereby sign this document
on behalf of each of the above named directors of the Registrant pursuant
to powers of attorney duly executed by each person.

By /s/ John T. Golle
-------------------------------------
John T. Golle, Attorney in Fact

<PAGE>

INDEX TO EXHIBITS

Method
Exhibit Description of Filing
------- ----------- ---------
<S> <C> <C>
4 The TesseracT Group, Inc. 1988 Stock Option Plan . . . . . . . . . . . . . . Filed Electronically

5 Opinion of Faegre & Benson LLP . . . . . . . . . . . . . . . . . . . . . . . Filed Electronically

23.1 Consent of Faegre & Benson LLP
(contained in its opinion filed as Exhibit 5 to this Registration Statement)

23.2 Consent of Arthur Andersen LLP . . . . . . . . . . . . . . . . . . . . . . . Filed Electronically

24 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Filed Electronically

</TABLE>

<PAGE>

EXHIBIT 4

THE TESSERACT GROUP, INC. 1988 STOCK OPTION PLAN

1. PURPOSE OF PLAN. The purpose of this The TesseracT Group, Inc.
1988 Stock Option Plan (the "Plan"), is to promote the interests of The
TesseracT Group, Inc., a Minnesota corporation (the "Company"), and its
shareholders by providing personnel of the Company and its subsidiaries with an
opportunity to acquire a proprietary interest in the Company and thereby develop
a stronger incentive to put forth maximum effort for the continued success and
growth of the Company and its subsidiaries. In addition, the opportunity to
acquire a proprietary interest in the Company will aid in attracting and
retaining key personnel of outstanding ability.

2. ADMINISTRATION OF PLAN. This Plan shall be administered by a
committee of two or more directors (the "Committee") appointed by the Company's
board of directors (the "Board"). No director shall serve as a member of the
Committee unless such director shall be a "disinterested person" as that term is
defined in Rule 16b-3(c), promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), or any successor statute or regulation comprehending the
same subject matter. A majority of the members of the Committee shall
constitute a quorum for any meeting of the Committee, and the acts of a majority
of the members present at any meeting at which a quorum is present or the acts
unanimously approved in writing by all members of the Committee shall be the
acts of the Committee. Subject to the provisions of this Plan, the Committee
may from time to time adopt such rules for the administration of this Plan as it
deems appropriate. The decision of the Committee on any matter affecting this
Plan or the rights and obligations arising under this Plan or any option granted
hereunder, shall be final, conclusive and binding upon all persons, including
without limitation the Company, shareholders, employees and optionees. To the
full extent permitted by law, no member of the Committee shall be liable for any
action or determination taken or made in good faith with respect to this Plan or
any option granted hereunder.

Notwithstanding any contrary provisions of this Plan, the Committee
shall have no discretion with respect to the granting of options to any Outside
Director (as hereinafter defined) or to alter or amend any terms, conditions or
eligibility requirements of an option granted or to be granted to any Outside
Director under this Plan, it being understood that the granting and terms,
conditions and eligibility requirements of such options are governed solely by
the provisions set forth in this Plan pertaining thereto.

3. SHARES SUBJECT TO PLAN. The shares that may be made subject to
options granted under this Plan shall be authorized and unissued shares of
Common Stock (the "Common Shares") of the Company, par value $.01 per share, and
they shall not exceed 1,900,000 in the aggregate, except that, if any option
lapses or terminates for any reason before such option has been completely
exercised, the Common Shares covered by the unexercised portion of such option
may again be made subject to options granted under this Plan. Appropriate
adjustments in the number of shares and in the purchase price per share may be
made by the Committee in its sole discretion to give effect to adjustments made
in the number of outstanding Common Shares of the Company through a merger,
consolidation, recapitalization, reclassification, combination, stock dividend,
stock split or other relevant change, provided that fractional shares shall be
rounded to the nearest whole share.

<PAGE>

4. ELIGIBLE PARTICIPANTS. Options may be granted under this Plan to
any employee of the Company or any subsidiary thereof, including any such
employee who is also an officer or director of the Company or any subsidiary
thereof. Nonstatutory stock options, as defined in paragraph 5(a) hereof, shall
be granted to directors of the Company who are not employees of the Company or
any subsidiary thereof (the "Outside Directors") in accordance with paragraph 6
hereof and may also be granted to other individuals or entities who are not
"employees" but who provide services to the Company or a parent or subsidiary
thereof in the capacity of an advisor or consultant. Options granted to Outside
Directors shall have the terms and conditions specified in paragraph 6 and
elsewhere in this Plan (other than paragraph 5) and options granted to employees
and other individuals or entities shall have the terms and conditions specified
in paragraph 5 and elsewhere in this Plan (other than paragraph 6). References
herein to "employment" and similar terms shall include the providing of services
in any such capacity or as a director.

5. TERMS AND CONDITIONS OF EMPLOYEE OPTIONS.

(a) Subject to the terms and conditions of this Plan (other than
paragraph 6), the Committee may, from time to time prior to September 30, 1998,
grant to such eligible employees as the Committee may determine options to
purchase such number of Common Shares of the Company on such terms and
conditions as the Committee may determine. In determining the employees to whom
options shall be granted and the number of Common Shares to be covered by each
option, the Committee may take into account the nature of the services rendered
by the respective employees, their present and potential contributions to the
success of the Company, and such other factors as the Committee in its sole
discretion shall deem relevant. The date and time of approval by the Committee
of the granting of an option shall be considered the date and the time of the
grant of such option. The Committee in its sole discretion may designate
whether an option is to be considered an "incentive stock option" (as that term
is defined in Section 422A of the Internal Revenue Code of 1986, as amended, or
any amendment thereto (the "Code")) or a "nonstatutory stock option" (an option
granted under this Plan that is not intended to be an "incentive stock option").
The Committee may grant both incentive stock options and nonstatutory stock
options to the same individual. However, if an incentive stock option and a
nonstatutory stock option are awarded simultaneously, such options shall be
deemed to have been awarded in separate grants, shall be clearly identified, and
in no event shall the exercise of one such option affect the right to exercise
the other. To the extent that the aggregate Fair Market Value (as defined in
paragraph 5(c)) of Common Shares with respect to which incentive stock options
(determined without regard to this sentence) are exercisable for the first time
by any individual during any calendar year (under all plans of the Company and
its parent and subsidiary corporations) exceeds $100,000, such options shall be
treated as nonstatutory stock options.

(b) The purchase price of each Common Share subject to an option
granted pursuant to this paragraph 5 shall be fixed by the Committee. For
nonstatutory stock options, such purchase price may be set at not less than 85%
of the Fair Market Value of a Common Share on the date of grant. For incentive
stock options, such purchase price shall be no less than 100% of the Fair Market
Value of a Common Share on the date of grant, provided that if such incentive
stock option is granted to an employee who owns, or is deemed under Section
425(d) of the Code to own, at the time such option is granted, stock of the
Company (or of any parent or subsidiary of the Company) possessing more than 10%
of the total combined voting power of all classes of stock therein (a "10%

<PAGE>

Shareholder"), such purchase price shall be no less than 110% of the Fair Market
Value of a Common Share on the date of grant.

(c) For purposes of this Plan, the "Fair Market Value" of a Common
Share at a specified date shall, unless otherwise expressly provided in this
Plan, means the closing sale price of a Common Share on the date immediately
preceding such date or, if no sale of such shares shall have occurred on that
date, on the next preceding day on which a sale of such shares occurred, on the
Composite Tape for New York Stock Exchange listed shares or, if such shares are
not quoted on the Composite Tape for New York Stock Exchange listed shares on
the National Association of Securities Dealers, Inc. Automated Quotation
System/National Market System or any similar system then in use or, if such
shares are not included in the National Association of Securities Dealers, Inc.
Automated Quotation System/National Market System or any similar system then in
use, the mean between the closing "bid" and the closing "asked" quotation of
such a share on the date immediately preceding the date as of which such Fair
Market Value is being determined, or, if no closing bid or asked quotation is
made on that date, on the next preceding day on which a quotation is made, on
the National Association of Securities Dealers, Inc. Automated Quotation System
or any similar system then in use, provided that if the shares in question are
not quoted on any such system, Fair Market Value shall be what the Committee
determines in good faith to be 100% of the fair market value of such a share as
of the date in question. Notwithstanding anything stated in this paragraph 5,
if the applicable securities exchange or system has closed for the day by the
time the determination is being made, all references in this paragraph to the
date immediately preceding the date in question shall be deemed to be references
to the date in question.

(d) Each option agreement provided for in paragraph 14 hereof shall
specify when each option granted under this Plan shall become exercisable.

(e) Each option granted pursuant to this paragraph 5 and all rights
to purchase shares thereunder shall cease on the earliest of:

(i) ten years after the date such option is granted (or in the
case of an incentive stock option granted to a 10% Shareholder, five years
after the date such option is granted) or on such date prior thereto as may
be fixed by the Committee on or before the date such option is granted;

(ii) the expiration of the period after the termination of the
optionee's employment within which the option is exercisable as specified
in paragraph 8(b) or 8(c), whichever is applicable; or

(iii) the date, if any, fixed for cancellation pursuant to
paragraph 9 of this Plan.

In no event shall any option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.

<PAGE>

6. TERMS AND CONDITIONS OF OUTSIDE DIRECTOR OPTIONS.

(a) Subject to the terms and conditions of this Plan (other than
paragraph 5), the Committee shall grant options to each Outside Director, on the
terms and conditions set forth in this paragraph 6. During the term of this
Plan, and provided that sufficient Common Shares are available pursuant to
paragraph 3:

(i) each person who is such an Outside Director on January 12,
1996 shall be granted a nonstatutory stock option. The date of grant for
such options shall be January 12, 1996. The number of Common Shares
covered by each such option shall be 30,000;

(ii) each person who is such an Outside Director at the
conclusion of each Annual Meeting of Shareholders shall be granted a
nonstatutory stock option on the date of such Annual Meeting of
Shareholders. The date of such Annual Meeting of Shareholders also shall
be the date of grant for options granted pursuant to this
subparagraph 6(a)(ii). The number of Common Shares covered by each such
option shall be 10,000;

(iii) each person who is elected to be an Outside Director
between Annual Meetings of Shareholders shall be granted a nonstatutory
stock option. The date such person is elected to be an Outside Director of
the Company (the "Date of Election") by the Board shall be the date of
grant for such options granted pursuant to this subparagraph 6(a)(iii).
The number of Common Shares covered by each such option shall be 10,000
multiplied by a fraction, the numerator of which shall be 12 minus the
number of whole 30-day months that have elapsed from the date of the most
recent Annual Meeting of Shareholders to the Date of Election of such
Outside Director, and the denominator of which shall be 12.

(b) The purchase price of each Common Share subject to an option
granted to an Outside Director pursuant to this paragraph 6 shall be the Fair
Market Value of a Common Share on the date of grant.

(c) Subject to the provisions of subparagraph 6(d) hereof, any option
granted to an Outside Director pursuant to subparagraph 6(a) shall vest and
become exercisable on the earlier of (x) one year after the date of grant or
(y) the date of the first Annual Meeting of Shareholders following the date of
grant if the Outside Director to whom the option was granted does not stand for
re-election at such Annual Meeting of Shareholders.

(d) Each option granted to an Outside Director pursuant to this
paragraph 6 and all rights to purchase shares thereunder shall terminate on the
earliest of:

(i) ten years after the date such option is granted;

<PAGE>

(ii) the expiration of the period specified in paragraph 8(b)
or 8(c), whichever is applicable, after an Outside Director ceases to be a
director of the Company; or

(iii) the date, if any, fixed for cancellation pursuant to
paragraph 9 of this Plan.

In no event shall such option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.

7. MANNER OF EXERCISING OPTIONS. A person entitled to exercise an
option granted under this Plan may, subject to its terms and conditions and the
terms and conditions of this Plan, exercise it in whole at any time, or in part
from time to time, by delivery to the Company at its principal executive office,
to the attention of its Chief Financial Officer, of written notice of exercise,
specifying the number of shares with respect to which the option is being
exercised, accompanied by payment in full of the purchase price of the shares to
be purchased at the time. The purchase price of each share on the exercise of
any option shall be paid in full in cash (including check, bank draft or money
order) at the time of exercise or, at the discretion of the holder of the
option, by delivery to the Company of unencumbered Common Shares having an
aggregate Fair Market Value on the date of exercise equal to the purchase price,
or by a combination of cash and such unencumbered Common Shares; provided,
however, that no optionee shall be permitted to pay any portion of the purchase
price with Common Shares if the Committee believes that payment in such manner
could have an adverse effect on the Company's financial statements. No shares
shall be issued until full payment therefor has been made, and the granting of
an option to an individual shall give such individual no rights as a shareholder
except as to shares issued to such individual.

8. TRANSFERABILITY AND TERMINATION OF OPTIONS.

(a) During the lifetime of an optionee, only such optionee or his or
her guardian or legal representative may exercise options granted under this
Plan. No option granted under this Plan shall be assignable or transferable by
the optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act ("ERISA"), or the rules
thereunder.

(b) During the lifetime of an optionee, an option may be exercised
only while the optionee is an employee of the Company or of a parent or
subsidiary thereof, and only if such optionee has been continuously so employed
since the date the option was granted, except that:

(i) an option granted to an individual who is not an Outside
Director shall continue to be exercisable for three months after
termination of such individual's employment but only to the extent that the
option was exercisable immediately prior to such individual's termination
of employment, and an option granted to an individual who is an Outside
Director shall continue to be exercisable after such Outside Director
ceases to be a director of the Company but only to the extent that the
option was exercisable immediately prior to such Outside Director's ceasing
to be a director;

<PAGE>

(ii) in the case of an employee who is disabled (within the
meaning of Section 22(e)(3) of the Code) while employed, such individual or
his or her legal representative may exercise the option within one year
after termination of such individual's employment; and

(iii) as to any individual whose termination occurs following a
declaration pursuant to paragraph 9 of this Plan, such individual may
exercise the option at any time permitted by such declaration.

(c) An option may be exercised after the death of the optionee by
such individual's legal representatives, heirs or legatees, but only within one
year after the death of such optionee.

(d) In the event of the disability (within the meaning of Section
22(e)(3) of the Code) or death of an optionee, any option held by such
individual or his or her legal representative that was not previously
exercisable shall become immediately exercisable in full if the disabled or
deceased individual shall have been continuously employed by the Company or a
parent or subsidiary thereof between the date such option was granted and the
date of such disability, or, in the event of death, a date not more than three
months prior to such death.

9. DISSOLUTION, LIQUIDATION, MERGER. In the event of (a) a proposed
merger or consolidation of the Company with or into any other corporation,
regardless of whether the Company is the surviving corporation, unless
appropriate provision shall have been made for the protection of the outstanding
options granted under this Plan by the substitution, in lieu of such options, of
options to purchase appropriate voting common stock (the "Survivor's Stock") of
the corporation surviving any such merger or consolidation or, if appropriate,
the parent corporation of the Company or such surviving corporation, or,
alternatively, by the delivery of a number of shares of the Survivor's Stock
which has a Fair Market Value as of the effective date of such merger or
consolidation equal to the product of (i) the excess of (x) the Event Proceeds
per Common Share (as hereinafter defined) covered by the option as of such
effective date, over (y) the option price per Common Share, times (ii) the
number of Common Shares covered by such option, or (b) the proposed dissolution
or liquidation of the Company (such merger, consolidation, dissolution or
liquidation being herein called an "Event"), the Committee shall declare, at
least ten days prior to the actual effective date of an Event, and provide
written notice to each optionee of the declaration, that each outstanding
option, whether or not then exercisable, shall be cancelled at the time of, or
immediately prior to the occurrence of, the Event (unless it shall have been
exercised prior to the occurrence of the Event) in exchange for payment to each
optionee, within ten days after the Event, of cash equal to the amount (if any),
for each Common Share covered by the cancelled option, by which the Event
Proceeds per Common Share (as hereinafter defined) exceeds the exercise price
per Common Share covered by such option. At the time of the declaration
provided for in the immediately preceding sentence, each option shall
immediately become exercisable in full and each optionee shall have the right,
during the period preceding the time of cancellation of the option, to exercise
his or her option as to all or any part of the Common Shares covered thereby.
Each outstanding option granted pursuant to this Plan that shall not have been
exercised prior to the Event shall be cancelled at the time of, or immediately
prior to, the Event, as provided in the declaration, and this Plan shall
terminate at the time of such cancellation, subject to the payment obligations
of the Company provided in this paragraph 9. For purposes of this paragraph,

<PAGE>

"Event Proceeds per Common Share" shall mean the cash plus the fair market
value, as determined in good faith by the Committee, of the non-cash
consideration to be received per Common Share by the shareholders of the Company
upon the occurrence of the Event.

10. SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company or a subsidiary of
the Company, or whose employer is about to become a subsidiary of the Company,
as the result of a merger or consolidation of the Company or a subsidiary of the
Company with another corporation, the acquisition by the Company or a subsidiary
of the Company of all or substantially all the assets of another corporation or
the acquisition by the Company or a subsidiary of the Company of at least 50% of
the issued and outstanding stock of another corporation. The terms and
conditions of the substitute options so granted may vary from the terms and
conditions set forth in this Plan to such extent as the Board at the time of the
grant may deem appropriate to conform, in whole or in part, to the provisions of
the stock options in substitution for which they are granted, but with respect
to stock options which are incentive stock options, no such variation shall be
permitted which affects the status of any such substitute option as an incentive
stock option under Section 422A of the Code.

11. TAX WITHHOLDING. Delivery of Common Shares upon exercise of any
nonstatutory stock option granted under this Plan shall be subject to any
required withholding taxes. A person exercising such an option may, as a
condition precedent to receiving the Common Shares, be required to pay the
Company a cash amount equal to the amount of any required withholdings. In lieu
of all or any part of such a cash payment, the Committee may, but shall not be
required to, permit the individual to elect to cover all or any part of the
required withholdings, and to cover any additional withholdings up to the
amount needed to cover the individual's full FICA and federal, state and local
income tax liability with respect to income arising from the exercise of the
option, through a reduction of the number of Common Shares delivered to the
person exercising the option or through a subsequent return to the Company of
shares delivered to the person exercising the option; provided, however, that
the Committee is required to permit an Outside Director to make such an
election. Any such election by an individual who is subject to the reporting
requirements of Section 16 of the Act (a "Section 16 Individual"), also is
subject to the following:

(a) Any such election by a Section 16 Individual may be made only
during certain specified time periods, as follows:

(i) the election may be made during the period beginning on
the third business day following the date of public release of the
Company's quarterly or annual financial statements and ending on the
twelfth business day following such date of public release; or

(ii) the election may be made at least six months prior to the
date as of which the amount of tax to be withheld is determined;

provided, however, an election by such a person pursuant to clause (i) or (ii)
may not be made within six months of the date of grant of the option being
exercised unless death or disability of the individual to whom the option was
granted occurs during said six-month period; and

<PAGE>

(b) The Committee's approval of such an election by a Section 16
Individual, if given, may be granted in advance, but is subject to revocation by
the Committee at any time; provided, however, that such an election by a
Section 16 Individual who is an Outside Director is not subject to approval nor
to revocation by the Committee. Once such an election is made by a Section 16
Individual, he or she may not revoke it.

12. TERMINATION OF EMPLOYMENT. Neither the transfer of employment of
an individual to whom an option is granted between any combination of the
Company, a parent corporation or a subsidiary thereof, nor a leave of absence
granted to such individual and approved by the Committee, shall be deemed a
termination of employment for purposes of this Plan. The terms "parent" or
"parent corporation" and "subsidiary" as used in this Plan shall have the
meaning ascribed to "parent corporation" and "subsidiary corporation",
respectively, in Sections 425(e) and (f) of the Code.

13. OTHER TERMS AND CONDITIONS. The Committee shall have the power,
subject to the terms and conditions of paragraph 6 hereof and subject to the
other limitations contained herein, to fix any other terms and conditions for
the grant or exercise of any option under this Plan. Nothing contained in this
Plan, or in any option granted pursuant to this Plan, shall confer upon any
employee holding an option any right to continued employment by the Company or
any parent or subsidiary of the Company or limit in any way the right of the
Company or any such parent or subsidiary to terminate an employee's employment
at any time.

14. OPTION AGREEMENTS. All options granted under this Plan shall be
evidenced by a written agreement in such form or forms as the Committee may from
time to time determine, which agreement shall, among other things, designate
whether the options being granted thereunder are nonstatutory stock options or
incentive stock options under Section 422A of the Code.

15. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any time
amend, suspend or discontinue this Plan; provided, however, that the Board shall
not amend paragraph 6 hereof more than once every six months other than to
comport with changes in the Code, ERISA, or the rules thereunder; and provided,
further, that no amendment by the Board shall, without further approval of the
shareholders of the Company, if required in order for the Plan to continue to
satisfy the conditions of Rule 16b-3 promulgated under the Act, or any successor
statute or regulation comprehending the same subject matter or to meet the
requirements of the Code:

(a) change the class of employees eligible to receive options;

(b) except as provided in paragraph 3 hereof, increase the total
number of Common Shares of the Company which may be made subject to options
granted under this Plan;

<PAGE>

(d) increase the maximum period during which options may be exercised
or otherwise materially increase the benefits accruing to participants under
this Plan;

(e) extend the term of this Plan beyond September 30, 1998; or

(f) change the terms, conditions or eligibility requirements of an
option granted or, subject to the right of the Board to discontinue this Plan,
to be granted to each Outside Director under this Plan.

No amendment to this Plan shall, without the consent of the holder of the
option, alter or impair any options previously granted under this Plan.

16. EFFECTIVE DATE. This Plan shall be effective upon approval
thereof by the Board; provided, however, that no option granted under this Plan
may be exercised prior to such time, if any, as the shareholders of the Company
shall have approved this Plan at a duly held shareholders meeting of the
Company.

<PAGE>

EXHIBIT 5

January 5, 1998

Board of Directors
The TesseracT Group, Inc.
1300 Norwest Financial Center
7900 Xerxes Avenue South
Minneapolis, Minnesota 55431

In connection with the proposed registration under the Securities Act
of 1933, as amended, of shares of Common Stock of The TesseracT Group, Inc., a
Minnesota corporation (the "Company"), offered or to be offered pursuant to The
TesseracT Group, Inc. 1988 Stock Option Plan (the "Plan"), we have examined the
Company's Restated Articles of Incorporation, its By-Laws, and such other
documents, including the Registration Statement on Form S-8, dated the date
hereof, to be filed with the Securities and Exchange Commission relating to such
shares (the "Registration Statement"), and have reviewed such matters of law as
we have deemed necessary for this opinion. Accordingly, based upon the
foregoing, we are of the opinion that:

1. The Company is duly and validly organized and existing and in
good standing under the laws of the State of Minnesota.

2. The Company has duly authorized the issuance of the shares of
Common Stock which may be issued pursuant to the Plan.

3. The shares which may be issued pursuant to the Plan will be, upon
issuance, validly issued and outstanding and fully paid and nonassessable.

4. All necessary corporate action has been taken by the Company to
adopt the Plan, and the Plan is a validly existing plan of the Company.

We consent to the filing of this opinion as an exhibit to the
Registration Statement.

Very truly yours,

FAEGRE & BENSON LLP

/sln

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 6, 1997,
included in The TesseracT Group, Inc.'s (f/k/a Education Alternatives, Inc.)
Form 10-K for the year ended June 30, 1997, and to all references to our Firm
included in this registration statement.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
December 31, 1997

<PAGE>

EXHIBIT 24

THE TESSERACT GROUP, INC.