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                                                                   EXHIBIT 10.34

                           THE TESSERACT GROUP, INC.
                       9977 North 90th Street, Suite 180
                              Scottsdale, AZ 85258

                              EMPLOYMENT AGREEMENT
                                      with
                                 LUCIAN SPATARO

     THIS AGREEMENT is made as of March 15, 1999, between THE TESSERACT GROUP,
INC.,  a Minnesota corporation (the "Company"), and LUCIAN P. SPATARO
("Employee").

                                    RECITALS

     The Company's current business activities include, among other things,
designing, developing, marketing and providing educational services.

     Employee desires to be employed, and the Company desires to employ
Employee, in connection with its business in the position of Executive Vice
President.

     Accordingly, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:

1)   NATURE OF EMPLOYMENT. The Company shall employ Employee and Employee shall
     serve the Company as Executive Vice President upon the terms and conditions
     contained herein. Employee agrees to devote his full time and best efforts
     to the business of the Company and the performance of his duties hereunder.
     Such duties shall be consistent with the position of a senior officer of
     the Company as may be determined by the Chief Executive Officer or the
     Board of Directors from time to time. Employee shall be subject to the
     supervision and direction of the Chief Executive Officer of the Company, as
     to assignment and performance of his duties.

2)   TERM OF EMPLOYMENT. The term of Employee's employment under this Agreement
     shall commence on March 15, 1999, and shall continue upon the terms and
     conditions contained herein, until termination in accordance with paragraph
     3 thereof.

3)   TERMINATION. This Agreement and Employee's employment hereunder may be
     terminated in accordance with the following provisions:

     a)   DISABILITY. If Employee at any time is prevented from performing his
          duties under this Agreement by reason of illness, injury or mental
          incapacity for an aggregate of one hundred twenty (120) days in any
          twelve consecutive months during the term of this Agreement, the
          Company shall have the right to terminate this Agreement and
          Employee's employment hereunder by giving Employee fourteen (14) days'
          prior written notice of termination.
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     b)   Cause. The Company shall have the right to terminate this Agreement
          and Employee's employment hereunder for cause by giving Employee
          thirty (30) days' prior written notice of termination. "Cause" shall
          include gross negligence, gross neglect of duties, gross
          insubordination, Employee's unauthorized appropriation of the
          Company's property, willful violation of any law applicable to the
          conduct of the Company's business and affairs, the violation of which
          could have a material adverse effect upon the business or financial
          condition of the Company, and conviction of, or plea of no contest, to
          any crime involving moral turpitude.

     c)   Without Cause. The Company shall have the right to terminate this
          Agreement and Employee's employment hereunder without cause at any
          time by giving Employee thirty (30) days' prior written notice of
          termination, provided, that the Company shall be obligated to make
          severance payments to Employee (provided that Employee has not
          violated the terms of his non-competition agreement set forth in
          paragraph 9 hereof) in an amount equal to his then current monthly
          compensation (exclusive of any benefits) for (6) six months. Extended
          severance at the same rate will be provided on a month to month basis
          until Employee is re-employed, or up to a maximum of an additional six
          months, whichever comes first.

     d)   By Employee. This Agreement may be terminated at any time by Employee
          upon thirty (30) days' prior written notice to the Company.

     e)   Return of Property. No later than the date of cessation of his
          employment by the Company, Employee shall deliver to an executive
          officer of the Company (or another Company employee designated by an
          executive officer) all keys, credit cards, travel advances, business
          plans and records (including copies and extracts thereof) and other
          property of the Company in Employee's possession, custody or control.

     f)   Right to Receive Compensation and Benefits. Employee's right to
          receive compensation and benefits pursuant to paragraphs 4 and 5 of
          this Agreement (except for disability or other benefits that, by their
          terms, arise or are operative after termination) shall cease upon the
          effective date of termination under this paragraph 3.

4)   Compensation.

     a)   Base Salary. Employee shall receive a base salary of $12,500.00 per
          month ($150,000.00 annualized), payable biweekly one week in arrears,
          or such higher compensation as the Company in its discretion may from
          time to time determine to be appropriate.

     b)   Performance Bonus. Employee shall be eligible to receive annual
          performance bonuses, to be determined by the Board of Directors, at a
          target of 50% of base pay.

5)   Employee Benefits.

     a)   Benefit Plans and Programs. During the term of employment, Employee
          shall be entitled to participate in such benefit plans and programs as
          the Company may make available
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     from time to time. The details of the availability and operation of
     benefits plans and programs are governed by the plan or program documents.
     The Company reserves the right to change or discontinue any benefit plan or
     program at any time upon reasonable notice to employees.

b)   Options. In addition to any benefits received under subparagraph 5(a) above
     and subject to the terms and conditions of the definitive stock option
     agreements between Employee and the Company, Employee shall receive options
     to purchase 100,000 shares of the Company's common stock, par value $.01
     per share, at the closing sale price of a common share on the date
     immediately preceding the date of grant. The Company's Board of Directors
     approved the granting of these options. Fifteen thousand (15,000) shares
     were granted from the Company's 1988 Stock Option Plan, as Amended and
     Restated, on July 14, 1998 at a price of $4.75 per share. These shares vest
     pursuant to the following schedule: one third immediately upon date of
     grant, one third on the first anniversary of the grant date, and one third
     on the second anniversary of the grant date. Thirty-five thousand (35,000)
     shares were granted from the Company's 1992 Long-Term Executive Stock
     Option Plan on July 14, 1998 at a price of $4.75 per share. The vesting of
     these options shall occur one fifth, one fifth, one fifth, one fifth, and
     one fifth after years five, six, seven, eight and nine of employment. This
     vesting schedule for the 35,000 shares from the 1992 Plan may be
     accelerated by the Company's Board of Directors based upon the achievement
     of individual and Company goals. The remaining fifty thousand (50,000)
     shares were granted on March 15, 1999 from the Company's 1992 Long-Term
     Executive Stock Option Plan at a price of $3.38 per share. These options
     will vest pursuant to the following schedule: one fifth, one fifth, one
     fifth, one fifth and one fifth after years five, six, seven, eight and nine
     of employment. Vesting of these 50,000 shares from the 1992 Plan may be
     accelerated by the Company's Board of Directors based upon the achievement
     of individual and Company goals.

     In addition, proposed with this agreement, you may be granted certain stock
     awards based upon performance and achieving company targets.

6.   Reimbursement of Expenses. The Company shall reimburse the Employee for all
     reasonable and necessary business expenses incurred in the performance of
     his duties hereunder.

7.   Trade Secrets. Employee shall not, during the term of this Agreement or at
     any time thereafter, divulge, furnish or make accessible to anyone other
     than the directors, officers, employees and agents of the Company any
     knowledge or information with respect to (a) processes, plans, software,
     formulae, machinery, devices or material relating to the business,
     products, or activities of the Company, its affiliates or subsidiaries
     which is maintained by the Company as secret or confidential or (b) any
     development or research work of the Company, its affiliates or subsidiaries
     which is maintained by the Company as secret or confidential, or (c) any
     other aspect of the business, products, or activities of the Company, its
     affiliates or subsidiaries which is maintained by the Company as secret or
     confidential or (d) any customer or student lists of the Company, its
     affiliates or subsidiaries which are maintained by the Company as secret or
     confidential. This restriction shall not apply to any information (a) that
     becomes generally available to the public other than as a result of

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    unauthorized disclosure by the Employee, (b) that was available to Employee
    on a non-confidential basis prior to the date hereof or is received
    hereafter from a third party without restriction, or (c) that is disclosed
    pursuant to a requirement of a government agency.

8)  Intellectual Property. As one of the conditions of Employee's employment
    hereunder, Employee shall do all in his power to promote the interests of
    the Company and shall exercise his inventive faculties for the benefit of
    the Company. If Employee shall discover or invent anything related to the
    business of the Company, or its affiliates or subsidiaries, at the specific
    request or instruction of the Company, the same shall be the exclusive
    property of the Company. Employee shall forthwith disclose in writing such
    discoveries or inventions to the Company but to no other person and shall
    forthwith assign to the Company full and exclusive rights to any such
    discovery or invention and to any trademark, copyright or patent to the full
    end of the term of such trademark, copyright or patent. Employee, upon
    request of the Company, shall forthwith execute all documents necessary or
    advisable in the opinion of the Company to direct the issuance of
    trademarks, copyrights or patents to the Company or to vest title in the
    Company to such inventions or discoveries. The expense of securing any
    trademark, copyright or patent shall be borne by the Company. The
    continuance of Employee in the Company's employ for a definite period is not
    made obligatory upon either party hereto as a condition hereof. Employee
    shall hold any secret process, software, plans, formula, methods or
    applications developed for the Company or its affiliates or subsidiaries but
    for which no trademark, copyright or patent is issued, as trustee for the
    benefit of the Company. This paragraph does not apply to an invention which
    was developed entirely on Employee's own time and (a) which does not relate
    (i) directly to the business of the Company or (ii) to the Company's actual
    or demonstrably anticipated research or development, or (b) which does not
    result from any work performed by the Employee for the Company.

9)  Non-Competition. Employee covenants and agrees that, commencing on March 15,
    1999, and thereafter during the term of this Agreement and without the
    express consent of the Board of Directors of the Company, Employee will not
    give advice or render services as an employee or consultant to, nor invest
    or acquire any interest in, any corporation or any other business
    organization, a substantial portion of the business of which is the same as,
    related to, or complementary to the business of the Company or its
    affiliates or subsidiaries, provided, however, that Employee may invest in
    securities of any company which is listed on a national securities exchange.
    Employee also covenants and agrees that for one (1) year following
    termination of this Agreement or last severance payment, whichever comes
    later, Employee will not in any manner personally solicit or cause to be
    solicited in competition with the Company or its affiliates or subsidiaries
    any persons or companies who were or are employees, customers or reasonably
    firm prospective customers of the Company or such affiliates or subsidiaries
    during the term of this Agreement. Employee hereby agrees to these
    restrictions in recognition that the imposition of such restrictions may be
    essential to the success of the Company and the livelihood of the Employee's
    associates.

10) Specific Enforcement. Employee acknowledges and agrees that a breach by him
    of the provisions of this Agreement, including without limitation the
    provisions of paragraphs 7, 8, and 9 hereof, may cause the Company
    irreparable injury and damage which cannot be



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     reasonably or adequately compensated by damages at law. Employee,
     therefore, expressly agrees that the Company shall be entitled to
     injunctive relief or other equitable relief to prevent a breach of this
     Agreement or any part thereof, in addition to any other remedies legally
     available to it.

11)  Invalidity.  In case any one or more of the provisions of this Agreement
     should be invalid, illegal or unenforceable in any respect, the validity,
     legality and enforceability of the remaining provisions contained herein
     shall not in any way be affected or impaired thereby.

12)  Notices.  Any notices required to be given to the Company hereunder shall
     be deemed properly given if addressed to its registered office. Any
     notices required to be given to the Employee hereunder shall be deemed
     properly given if addressed to:

                             Lucian P. Spataro, Ph.D.
                             8311 Via De Ventura, E #1003
                             Scottsdale, AZ 85258

13)  Governing Law.  This Agreement shall be construed under and governed by
     the laws of the State of Arizona.

14)  Assignments.  This Agreement shall not be assignable, in whole or in part,
     by either party.

15)  Amendments.  This Agreement may be amended, terminated or superseded only
     by an agreement in writing between the Company and the Employee.

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

THE TESSERACT GROUP, INC.


/s/  John T. Golle                   8/17/99
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Chief Executive Officer               Date


EMPLOYEE


/s/ Lucian P. Spataro                8/22/99
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Lucian P. Spataro, Ph.D.              Date