FORM OF OPTION AGREEMENT

 

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                                                                    EXHIBIT 10.8

 

                            CAPELLA EDUCATION COMPANY

                    EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT

 

            This Option Agreement (the "Agreement") is made and entered into as

of, _______________ by and between Capella Education Company, a Minnesota

corporation (the "Company") and ________________________, an individual resident

of the State of _________________ ("Employee").

 

            WHEREAS, the Company has adopted the Learning Ventures

International, Inc. 1993 Stock Option Plan (the "Plan") which permits issuance

of stock options for the purchase of shares of common stock of the Company, and

the Company has taken all necessary actions to grant the Option (as defined in

Section 1 below), pursuant and subject to the terms of the Plan.

 

            NOW, THEREFORE, for good and valuable consideration, the receipt and

adequacy of which are hereby acknowledged, the Company and Employee hereby agree

as follows:

 

      1. Grant of Option. The Company hereby grants to Employee the right and

option (the "Option) to purchase all or any part of an aggregate of ____________

(______) shares of the Company's common stock at the option price of

________________ Dollars and ______ Cents ($_________) per share on the terms

and conditions set forth in this Agreement and in the Plan. The Company intends

that the Option shall be an Incentive Stock Option governed by the provisions of

Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The

terms of the Plan and the Option shall be interpreted and administered so as to

satisfy the requirements of the Code. A copy of the Plan will be furnished upon

request of Employee.

 

            2. Vesting of Option Rights. The Option shall not be exercisable the

first time by Employee except in accordance with subsection 422(d) of the Code.

Except as provided in the preceding sentence and except as otherwise provided in

Sections 3 and 4 of this Agreement, the Option may be exercised by Employee in

accordance with the following schedule:

 

<TABLE>

<CAPTION>

On or after                Shares with respect to

the following date         which Option becomes exercisable

------------------         --------------------------------

<S>                        <C>                      

__/__/01                   ___________________

__/__/02                   ___________________

__/__/03                   ___________________

__/__/04                   ___________________

</TABLE>

 

            Provided, however, that (i) if, prior to __________________________,

      Employee dies or becomes "disabled" (as defined below), then the foregoing

      vesting schedule shall not apply, and this Option shall be exercisable

      with respect to all ________________ shares (except as otherwise provided

      in clause (ii) immediately following), and (ii) if

 

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      Employee's employment terminates prior to ___________________, for any

      reason other than death or disability, then this Option shall be

      exercisable only with respect to those shares which Employee has earned

      the right to purchase, in accordance with the foregoing vesting schedule,

      as of the date on which Employee's employment terminates.

 

            In all cases, the Option shall terminate at the close of business

on, _______________________, or such shorter period as is prescribed herein.

Employee shall not have any of the rights of a shareholder with respect to the

shares subject to the Option until such shares shall be issued to Employee upon

the proper exercise of the Option.

 

            For purposes of this Agreement, Employee shall be considered

"disabled" if Employee shall fail or be unable to render and perform the

services required of Employee for a continuous period of 90 successive days, or

for shorter periods aggregating 120 days or more during any 180 consecutive day

period, by reason of physical or mental incapacity or disability stemming from

any cause.

 

            For purposes of this Agreement, the term "Cause" shall be limited to

the following grounds for termination:

 

            (a) Employee's failure or refusal substantially to perform

      Employee's duties to the full extent of Employee's abilities for reasons

      other than death or disability;

 

            (b) Conviction of a felony crime, or commission of any act, the

      conviction for which would be a felony conviction;

 

            (c) Theft or misappropriation of the Company's property;

 

            (d) Knowingly making a material false written statement to the

      Company's Board of Directors or an officer of the Company regarding the

      affairs of the Company; and

 

            (e) Termination upon the discontinuance of the Company's business.

 

            For purposes of this Agreement, "Good Reason" shall be defined as

the demotion or reduction of the job responsibilities of Employee or the

reassignment, without Employee's consent, of Employee's place of work to a

location more than 50 miles from the Employee's place of work immediately prior

to the Change in Control.

 

            For purposes of this Agreement, a "Change in Control" of the Company

shall be deemed to occur if any of the following occur:

 

            (a) Definition.

 

            (1) Any "person" (as such term is used in Sections 13(d) and 14(d)

      of 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

 

                                       2

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      securities of the Company representing the following: (i) 40% or more of

      the combined voting power of the Company's then outstanding securities

      entitled to vote generally in the election of directors ("Voting