<PAGE>

                                                                    Exhibit 10.7
                                                                    ------------


                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
                                      ---------
effective December 31, 2001 (the "Effective Date"), by and between LearningStar
                                  --------------
Corp., a Delaware corporation (hereinafter referred to as, the "Company"), and
                                                                -------
Ronald Elliott (hereinafter referred to as, "Employee").
                                             --------

                                   Recitals

     WHEREAS, on April 30, 2001, Earlychildhood LLC ("Earlychildhood") and
SmarterKids.com, Inc. combined their respective businesses and, in connection
therewith, each became a wholly-owned subsidiary of the Company (the
"Combination");

     WHEREAS, prior to the Combination, Employee was President and Chief
Executive Officer of Earlychildhood pursuant to an Employment Agreement dated as
of May 5, 1999;

     WHEREAS, the Company desires the services of Employee in order to retain
Employee's experience, abilities, and knowledge, and is therefore willing to
engage Employee's services on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions set forth in this Agreement, it is agreed as follows:

          1    TERM OF AGREEMENT

     Except as may otherwise be provided herein, the term of this Agreement
shall commence on the Effective Date and terminate on May 5, 2002, unless sooner
terminated as hereinafter provided (such period of employment, the "Employment
                                                                    ----------
Period").
------

          2    DUTIES AND PERFORMANCE

          (a) During the term of this Agreement, Employee shall be employed by
     the Company on a full-time basis as its Chief Executive Officer and shall
     have such authority and shall perform such duties consistent with his
     position as may be reasonably assigned to him and shall report to the Board
     of Directors of the Company (the "Board"). The Board shall retain full
     direction and control of the means and methods by which Employee performs
     the above services. Employee shall use all reasonable efforts to further
     the interests of the Company and shall devote substantially all of his
     business time and attention to his duties hereunder.

          (b) Except with the prior written approval of the Board (which the
     Board may grant or withhold in its sole discretion), Employee, during the
     term of this Agreement or any renewal thereof, will not (i) accept any
     other employment, (ii) serve on the board of directors or similar body of
     any other business entity, (iii) engage, directly or indirectly, in any
     other business activity (whether or not pursued for pecuniary advantage)
     that is or may be competitive with, or that might place him in a competing
     position to, that of the Company or any of its Affiliates (as hereinafter
     defined) or (iv) engage in any venture

                                       1
<PAGE>

          (c) presented to him by virtue of his position with the Company
     wherein the profits of such venture are not made available to the Company.

          (d) Employee shall be entitled to be reimbursed in accordance with the
     policies of the Company, as adopted and amended from time to time, for all
     reasonable and necessary expenses incurred by him in connection with the
     performance of his duties of employment hereunder; provided that Employee
     shall, as a condition of such reimbursement, submit verification of the
     nature and amount of such expenses in accordance with the reimbursement
     policies from time to time adopted by the Company.

          3    BASE SALARY AND OTHER COMPENSATION

          (a) Base Salary. The Company shall pay to Employee a base salary at
              -----------
     the rate of Two Hundred Fifty-Six Thousand Dollars ($256,000.00) per annum
     (the "Base Salary") through the term of this Agreement as specified in
           -----------
     Section 1 hereof, payable every two (2) weeks as per the normal pay
     practices of the Company (e.g., standard employee deductions such as income
     tax withholdings, social security, etc.). The Base Salary shall be reviewed
     in connection with Employee's annual performance review and may be adjusted
     in the sole discretion of the Board.

          (b) Automobile Allowance.  In addition to the Base Salary, as an
              --------------------
     executive benefit, the Company shall provide Employee with an automobile
     allowance of an amount up to Eight Hundred Dollars ($800.00) per month
     payable in accordance with the Company's normal pay procedures.

          (c) Bonus Compensation. In addition to the Base Salary, Employee shall
              ------------------
     be eligible during the term of this Agreement, upon the terms and subject
     to the conditions set forth herein, to receive a bonus for each year in an
     amount to be determined in the sole discretion of the Board (the "Bonus").
                                                                       -----
     Employee's Bonus each year shall be determined and, if appropriate,
     awarded, based upon meeting certain performance objectives which will be
     set by the mutual agreement of the Board and Employee. Such performance
     objectives each year shall be fixed at the beginning of each calendar year
     (or another date agreed upon by Employee and the Board) and shall be
     subject to any adjustments thereof from time to time as agreed upon by
     Employee and the Board.

          4    BENEFITS

     Employee shall be entitled to participate, in any group medical and
hospitalization, profit sharing, retirement, life insurance or other employee
benefit plan maintained by the Company for its full time employees (collectively
referred to herein as, "Benefits").  Nothing herein, however, is intended or
                        --------
shall be construed to require the Company to institute or continue all, or any
particular, plan or Benefits.  Employee shall be entitled to six (6) weeks of
vacation per year and leave in accordance with the Company's policies in effect
from time to time.

          5    TERMINATION OF AGREEMENT

                                       2
<PAGE>

          (a) Termination.  Employee's employment hereunder shall or may be
              -----------
     terminated, as the case may be, under the following circumstances:

                    (i)    Cause. The Company may terminate Employee's
                           -----
          employment hereunder for "cause" by delivery of a written notice to
          Employee concerning the same. "Cause" shall mean by reason of any of
                                         -----
          the following: (A) a material breach by Employee of the provisions of
          this Agreement; (B) Employee's conviction of, or plea of nolo
          contendere to, any felony or to any crime causing substantial harm to
          the Company or any of its Affiliates (whether or not for personal
          gain) or involving acts of theft, fraud, embezzlement, moral turpitude
          or similar conduct; (C) misuse or diversion of the Company's or any of
          its Affiliate's funds, embezzlement, or fraudulent misrepresentations
          or concealments on any written reports submitted by Employee to the
          Company or any of its Affiliates; (D) misconduct, failure to perform
          the duties of Employee's employment or his habitual neglect thereof;
          or (E) failure to follow or comply with the lawful directives of the
          Board of the Company; provided, however, that in the case of the
          foregoing clauses (A), (D) and (E), if any such breach, misconduct or
          failure is capable of cure, as determined in the Board's reasonable
          discretion, "Cause" shall mean any continuation of such breach,
                       -----
          misconduct or failure after a period of (x) in the case of the
          foregoing clauses (A) and (D), thirty (30) calendar days, and (y) in
          the case of the foregoing clause (E), ten (10) calendar days, in each
          case, from the date on which Employee shall first have been informed,
          in writing, thereof.

                    (ii)   Disability. Employee's employment hereunder shall
                           ----------
          terminate if, because of a mental or physical disability or infirmity,
          Employee is unable to perform the essential functions of his duties,
          with or without reasonable accommodation, for a consecutive period of
          one hundred twenty (120) days or a non-consecutive period of one
          hundred twenty (120) days during any twelve (12) month period, or such
          other greater period as may be required by applicable employment laws.

                    (iii)  Death. Employee's employment hereunder shall
                           -----
          terminate upon the death of Employee.

                    (iv)   Employment-At-Will; Termination For Any Reason.
                           ----------------------------------------------
          Notwithstanding anything to the contrary contained herein, including
          in Section 1 of this Agreement, Employee's employment with the Company
          is not for any specified term and may be terminated by the Company at
          any time, for any reason, with or without cause, and without liability
          except with respect to the payments provided for by Section 5(b)
          hereof.  In particular, and not by way of limitation, Employee
          understands and acknowledges and hereby agrees that the Company may
          terminate Employee's employment by delivery from the Company to
          Employee of written notice of such termination, without regard (A) to
          any general or specific policies (whether written or oral) of the
          Company relating to the employment or termination of its employees, or
          (B) to any statements made to Employee, whether made orally or
          contained in any document, pertaining to Employee's relationship with
          the Company.

                                       3
<PAGE>

               (v)    Voluntary Resignation. Employee may voluntarily resign his
                      ---------------------
          position and terminate his employment with the Company at any time by
          delivery of a written notice of resignation to the Company (the
          "Notice of Resignation"). The Notice of Resignation shall set forth
           ---------------------
          the date such resignation shall become effective (the "Date of
                                                                 -------
          Resignation"), which date shall, in any event, be no more than thirty
          -----------
          (30) days from the date the Notice of Resignation is delivered to the
          Company; provided that the Company shall, in its discretion and by
          sending written notice to Employee, be entitled to deem Employee's
          resignation effective at any time within such thirty (30) day period,
          and such date specified by the Company shall then become the Date of
          Resignation. Notwithstanding any such action by the Company,
          Employee's severance and his rights thereunder shall be set as if
          Employee voluntarily resigned on the Date of Resignation.

               (vi)   Resignation For Good Reason.  Employee may terminate his
                      ---------------------------
          employment pursuant to this Agreement "for good reason" by delivery of
          a Notice of Resignation to the Company at least thirty (30) days prior
          to the Date of Resignation.  For purposes of this Agreement the phrase
          "for good reason" and variations of it shall mean any of the
          following:  (A) the assignment of Employee without his consent to a
          position, responsibilities or duties of a materially lesser status or
          degree of responsibility than his position, responsibilities or duties
          at the Effective Date; (B) the failure to pay Employee the Base Salary
          at a rate or in an amount at least equal to the amount or rate paid to
          him at the Effective Date; (C) any material diminution in Employee's
          aggregate Benefits; or (D) the relocation of Employee's place of
          business at least thirty (30) miles from Employee's business location
          as of the Effective Date; or

               (vii)  Expiration Date.  If not terminated sooner pursuant to any
                      ---------------
          of Sections 5(a)(i) through 5(a)(vi) above, then Employee's employment
          hereunder shall terminate on the Expiration Date.

          (b) Compensation Upon Termination.  In the event of the termination of
              -----------------------------
     Employee's employment:

               (i)  Cause. If Employee's employment shall be terminated for
                    -----
          Cause pursuant to Section 5(a)(i) hereof, then the Company shall pay
          Employee the Base Salary through the Date of Termination (as
          hereinafter defined), together with reimbursable business expenses
          actually and reasonably incurred by Employee prior to the Date of
          Termination and accrued but unpaid vacation compensation up to an
          aggregate maximum amount equal to six (6) weeks of the Base Salary
          (such amount being referred to herein as, the "Accrued Vacation
                                                         ----------------
          Payment") (each of which shall be paid consistent with the policies of
          -------
          the Company in effect at such time). Employee and his dependents shall
          also be entitled to any continuation of coverage rights required by
          COBRA (as hereinafter defined).

               (ii) Death or Disability.  If Employee's employment shall be
                    -------------------
          terminated pursuant to Section 5(a)(ii) or 5(a)(iii) hereof, then the
          Company shall pay Employee or his estate, as applicable, (A) the Base
          Salary through the Date of

                                       4
<PAGE>

          Termination, (B) a bonus in an amount equal to a pro rata portion of
          Employee's Bonus for the immediately preceding year, and (C)
          reimbursable business expenses actually and reasonably incurred by
          Employee prior to the Date of Termination and the Accrued Vacation
          Payment (each of which shall be paid consistent with the policies of
          the Company in effect at such time). By way of illustration, if, in
          the immediately preceding year, Employee had received (or, in the case
          where his employment is terminated prior to the end of one year, had
          been eligible to receive) a Bonus of Fifty Thousand Dollars ($50,000),
          and Employee's Date of Termination pursuant to Section 5(a)(ii) or
          5(a)(iii) above occurs on the two hundredth (200th) day of the year,
          Employee would be entitled to receive a pro rata bonus equal to Fifty
          Thousand Dollars ($50,000) multiplied by a fraction, the numerator of
          which is two hundred (200) and the denominator of which is three
          hundred sixty-five (365). Notwithstanding the foregoing, if Employee's
          employment is terminated prior to the end of Employee's first year of
          employment, the Company shall pay Employee or his estate, as
          applicable, in lieu of the pro rata bonus referenced in clause (B)
          above, within sixty (60) days after completion of the Company's then
          current fiscal year, a pro rata portion of any Bonus Employee would
          actually have received for such year pursuant to Section 3(b) above.
          In addition, the Company shall keep in force existing Benefits
          covering Employee and his dependents for a period of eighteen (18)
          months from the Date of Termination on the basis in effect at the Date
          of Termination, subject to the Company's right to amend, modify or
          terminate any such plan; provided, however, that such amendment,
          modification or termination applies generally to all of the Company's
          employees. Employee and his dependents shall also be entitled to any
          continuation of coverage rights required by COBRA.

               (iii)  Other Terminations by the Company or Resignation for Good
                      ---------------------------------------------------------
          Reason.  If the Company shall terminate Employee's employment without
          ------
          cause pursuant to Section 5(a)(iv) hereof or Employee resigns for good
          reason pursuant to Section 5(a)(vi) hereof, then the Company shall pay
          Employee (A) the Base Salary payable semi-monthly and in accordance
          with the Company's normal pay practices for a period equal to the
          lesser of two (2) years after the Date of Termination or the remaining
          term hereunder, (B) a bonus in an amount equal to a pro rata portion
          of Employee's Bonus for the immediately preceding year, and (C)
          reimbursable business expenses actually and reasonably incurred by
          Employee prior to the Date of Termination and the Accrued Vacation
          Payment (each of which shall be paid consistent with the policies of
          the Company in effect at such time).  (See illustration of Bonus
          calculation in Section 5(b)(ii) above).  Notwithstanding the
          foregoing, if Employee's employment is terminated prior to the end of
          Employee's first year of employment, the Company shall pay Employee or
          his estate (as applicable) in lieu of the pro rata bonus referenced in
          clause (B) above, within sixty (60) days after completion of the
          Company's then current fiscal year, a pro rata portion of any Bonus
          Employee would actually have received for such year pursuant to
          Section 3(b) above.  In addition, the Company shall keep in force
          existing Benefits covering Employee and his dependents for a period of
          eighteen (18) months from the Date of Termination on the basis in
          effect at the Date of Termination, subject to the Company's right to

                                       5
<PAGE>

          amend, modify or terminate any such plan; provided, however, that such
          amendment, modification or termination applies generally to all of the
          Company's employees. Employee and his dependents shall also be
          entitled to any continuation of coverage rights required by COBRA.

               (iv)  Voluntary Resignation. If Employee terminates his
                     ---------------------
          employment with the Company pursuant to Section 5(a)(v) hereof, then
          the Company shall pay Employee the Base Salary through the Date of
          Termination together with reimbursable business expenses actually and
          reasonably incurred by Employee prior to the Date of Termination and
          the Accrued Vacation Payment (each of which shall be paid consistent
          with the policies of the Company in effect at such time). Employee and
          his dependents shall also be entitled to any continuation of coverage
          rights required by COBRA.

               (v)   Expiration Date. If Employee's employment terminates
                     ---------------
          pursuant to Section 5(a)(vii) hereof, then the Company shall pay
          Employee (A) the Base Salary through the Date of Termination, (B) a
          bonus in an amount equal to a pro rata portion of Employee's Bonus for
          the immediately preceding year, and (C) reimbursable business expenses
          actually and reasonably incurred by Employee prior to the Date of
          Termination and the Accrued Vacation Payment (each of which shall be
          paid consistent with the policies of the Company in effect at such
          time). Employee and his dependents shall also be entitled to any
          continuation of coverage rights required by COBRA.

     As used herein, "COBRA" shall mean Section 4980B of the Internal Revenue
                      -----
     Code of 1986, as amended, and Sections 601 through 608 of the Employee
     Retirement Income Security Act of 1974, as amended, and any applicable
     state law establishing employer requirements for continuation of health
     care, life insurance or other welfare plan benefits for the benefit of
     certain current and former employees or dependents thereof.

          (c) The payments to Employee described in the foregoing Section 5(b)
     shall sometimes be referred to herein as "Severance Payments" and the
                                               ------------------
     period during which any Severance Payments are being made shall be referred
     to herein as the "Severance Period."
                       ----------------

          (d) "Date of Termination" shall mean (i) if Employee's employment is
               -------------------
     terminated pursuant to Section 5(a)(i), the date specified in the written
     notice of termination delivered to Employee by the Company, (ii) if
     Employee's employment is terminated pursuant to Section 5(a)(ii), the date
     which is (A) the one hundred twentieth (120th) consecutive day of such
     inability or (B) the one hundred and twentieth (120th) day in any twelve
     (12) month period of such inability, (iii) if Employee's employment is
     terminated pursuant to Section 5(a)(iii), the date of Employee's death,
     (iv) if Employee's employment is terminated pursuant to Section 5(a)(iv),
     the date specified in the written notice of termination delivered to
     Employee by the Company, (v) if Employee's employment is terminated
     pursuant to Section 5(a)(v) or (vi), the Date of Resignation and (vi) if
     Employee's employment is terminated pursuant to Section 5(a)(vii), the
     Expiration Date.

                                       6
<PAGE>

          (e)  Termination Obligations.  Employee hereby acknowledges and agrees
               -----------------------
     that all Personal Property (as hereinafter defined) and equipment furnished
     to or prepared by Employee in the course of or incident to his employment,
     belongs to the Company and shall be promptly returned to the Company upon
     termination of Employee's employment hereunder.  "Personal Property"
                                                       -----------------
     includes, without limitation, all books, manuals, records, reports, notes,
     contracts, lists, encoded media, and other documents or materials, or
     copies thereof (including computer files), and all other proprietary
     information relating to the business of the Company.  Following
     termination, Employee will not retain any written or other tangible
     material containing any proprietary information of the Company.  Upon
     termination of Employee's employment hereunder, Employee shall be deemed to
     have resigned from all offices-and directorships then held with the Company
     or any Affiliate.

          6      CONFIDENTIALITY; COVENANT NOT TO COMPETE

          (a)  Confidentiality. Except as consented to by the Company and as and
               ---------------
     to the extent required by law, Employee hereby agrees that Employee will
     not, either during the Employment Period or any period thereafter,
     directly, indirectly or otherwise, disclose, publish, make available to, or
     use for his own benefit or the benefit of any person, firm, corporation,
     association or other entity for any reason or purpose whatsoever, any
     Confidential Information (as hereinafter defined).  Employee agrees that,
     upon termination of his employment hereunder, all Confidential Information
     in his possession that is in written or other tangible form (together with
     all copies or duplicates thereof, including computer files) shall be
     returned to the Company and shall not be retained by Employee or furnished
     to any third party, in any form, including, without limitation, any
     document, record, notebook, computer program or similar repository of or
     containing any such Confidential Information, except as provided herein;
     provided, however, that Employee shall not be obligated to treat as
     confidential, or return to the Company copies of any Confidential
     Information that (i) was publicly known at the time of disclosure to
     Employee, (ii) becomes publicly known or available thereafter other than by
     any means in violation of this Agreement or any other duty owed to the
     Company by any person or entity or (iii) is lawfully disclosed to Employee
     by a third party.  As used in this Agreement, the term "Confidential
                                                             ------------
     Information" means information disclosed to Employee or known by Employee
     -----------
     as a consequence of, or through his relationship with, the Company, about
     the customers, employees (including compensation paid to employees or other
     terms of employment), operations, processes, products, inventions, business
     methods, principals, marketing methods, costs, prices, contractual
     relationships, regulatory status, trade secrets, public relations methods,
     organization, procedures or finances, including, without limitation,
     information of or relating to customer lists of the Company and its
     Affiliates.  The parties hereto stipulate and agree that the foregoing
     matters are important, material and confidential proprietary information
     and trade secrets that affect the successful conduct of the business of the
     Company (and any successor or assignee of the Company).

          (b)  Non-Solicitation. In addition, Employee hereby agrees that during
               ----------------
     (i) the Employment Period and any Severance Period or (ii) the Employment
     Period and for one (1) year thereafter, whichever is longer, Employee will
     not, either on his own account or

                                       7
<PAGE>

     jointly with or as an advisor, director, agent, representative, officer,
     manager, employee, principal, partner, joint venturer, owner or security
     holder, consultant or otherwise on behalf of any other person, firm,
     corporation, partnership, profit or non-profit business or organization
     ("Person"), (A) in competition with the Company, directly or indirectly
       ------
     carry on or be engaged or interested in, or solicit, the manufacture or
     sale of goods or provision of services to any Person which, at any time
     during the term hereof has been, is a customer of, is a potential customer
     of, or is in the habit of dealing with the Company in its business, (B)
     endeavor directly or indirectly to canvas or solicit in competition with
     the Company or to interfere with the supply of orders for goods or services
     from or by any Person which during the term hereof has been or is a
     supplier of goods or services to the Company or (C) directly or indirectly
     solicit or attempt to solicit away from the Company, or otherwise interfere
     with the employment relationship with, any officer, employee,
     representative, consultant or other agent of the Company or offer
     employment to any person who, on or during the six (6) months immediately
     preceding the date of such solicitation or offer, is or was an officer,
     employee, representative, consultant or other agent of the Company;
     provided, however, that Employee may own, directly or indirectly, solely as
     a passive investment, equity securities of any entity which is required to
     file periodic reports with the U.S. Securities and Exchange Commission
     under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
     amended, the securities of which corporation are listed on any securities
     exchange, quoted on the National Association of Securities Dealers
     Automated Quotation System or traded in the over-the-counter market, if
     such Employee is not a controlling person of, or a member of a group which
     controls, such entity and does not, directly or indirectly, own five
     percent (5%) or more of any class of securities of such entity.

          (c)  Covenant Not to Compete.  Employee agrees that during (i) the
               -----------------------
     Employment Period and any Severance Period or (ii) the Employment Period
     and for one (1) year thereafter, whichever is longer, Employee will not
     directly or indirectly engage in, have any interest in, own, manage,
     operate, join, control or otherwise participate in any activity with any
     Person (whether as an advisor, director, officer, employee, agent,
     representative, principal, partner, joint venturer, owner, security holder,
     consultant or otherwise) which, directly or indirectly, competes with, or
     in any way interferes with, the business of the Company or any of its
     Affiliates (that engages or otherwise is in the business of selling
     wholesale and retail school supplies or educational products), in any part
     of the counties listed on Schedule 1 attached hereto or in the counties or
     subdivision of any geographic area in which the Company now or shall then
     be doing business; provided, however, that Employee may own, directly or
     indirectly, solely as a passive investment, equity securities of any entity
     which is required to file periodic reports with the U.S. Securities and
     Exchange Commission under Section 13 or 15(d) of the Securities Exchange
     Act of 1934, as amended, the securities of which corporation are listed on
     any securities exchange, quoted on the National Association of Securities
     Dealers Automated Quotation System or traded in the over-the-counter
     market, if such Employee is not a controlling person of, or a member of a
     group which controls, such entity and does not, directly or indirectly, own
     five percent (5%) or more of any class of securities of such entity.

                                       8
<PAGE>

     (b)    (d)  Injunctive Relief and Enforcement.  In the event of breach by
                 ---------------------------------
     Employee of the terms of this Section 6, the Company shall be entitled to
     institute legal proceedings to obtain damages for any such breach, or to
     enforce the specific performance of this Agreement by Employee and to
     enjoin Employee from any further violation of this Section 6, and to
     exercise such remedies cumulatively or in conjunction with all other rights
     and remedies provided by law.  Employee expressly agrees and acknowledges
     that the Company will or would suffer irreparable injury if Employee were
     to compete with the Company or any Affiliate in violation of this
     Agreement, that the remedies at law for any violation of this Section 6
     would be inadequate and that the Company would by reason of such
     competition be entitled to injunctive relief.  In addition, in the event
     that any provision of this Section 6 shall be determined by any court of
     competent jurisdiction to be unenforceable by reason of extending for too
     great a period of time or over too great a geographical area or by reason
     of being too extensive in any other respect, it shall be interpreted to
     extend over the maximum period of time for which it may be enforceable and
     to the maximum extent in all other respects as to which it may be
     enforceable, and enforced as so interpreted, all as determined by such
     court in such action.

     (c)

            7   AFFILIATES

     As used in this Agreement, "Affiliate" or "Affiliates" shall mean any
                                 ---------      ----------
partnership, joint venture, limited liability company or corporation that,
directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, the Company. The term "Control"
                                                                       -------
includes, without limitation, the possession, directly or indirectly, of the
power to direct the management and policies of a partnership, joint venture,
limited liability company or corporation, whether through the ownership of
voting securities, by contract or otherwise.

            8   NOTICE

     For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered, when transmitted by
telecopy with receipt confirmed, or one day after delivery to an overnight air
courier guaranteeing next day delivery, addressed as follows:

            If to Employee:             Ronald Elliott
            --------------              Chief Executive Officer
                                        c/o LearningStar Corp.
                                        2 Lower Ragsdale Dr., #200
                                        Monterey, California 93940
                                        Telephone: (831) 333-2500
                                        Telecopy: (831) 333-5510

                                       9
<PAGE>

          If to the Company:        LearningStar Corp.
          -----------------         2 Lower Ragsdale Drive, #200
                                    Monterey, California 93940
                                    Attn: Board of Directors
                                    Telephone: (831) 333-2500
                                    Telecopy: (831) 333-5510

          With copies to:
          --------------

                                    Latham & Watkins
                                    633 W. Fifth Street, Suite 4000
                                    Los Angeles, California 90071-2007
                                    Attn: Angelee Fox, Esq.
                                    Telephone: (213) 891-8478
                                    Telecopy: (213) 891-8763

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

          9    DIVISIBILITY OF AGREEMENT

     In the event that any term, condition or provision of this Agreement is for
any reason rendered void, all remaining terms, conditions and provisions shall
remain and continue as valid and enforceable obligations of the parties hereto.

          10   CHOICE OF LAW

     This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of California
(without giving effect to the choice of law provisions thereof), except with
respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.

          11   ARBITRATION

     Notwithstanding anything herein to the contrary, in the event that there
shall be a dispute among the parties arising out of or relating to this
Agreement or the breach thereof, other than Section 6 or Section 13 hereof, the
parties agree that such dispute shall be resolved by final and binding
arbitration before a sole arbitrator in San Francisco, California administered
by the American Arbitration Association ("AAA"), in accordance with AAA's Labor
                                          ---
Arbitration Rules then in effect. Depositions may be taken and other discovery
may be obtained during such arbitration proceedings to the same extent as
authorized in civil judicial proceedings. Any award issued as a result of such
arbitration shall be final and binding between the parties thereto, and shall be
enforceable by any court having jurisdiction over the party against whom
enforcement is sought. The fees and expenses of such arbitration (including
reasonable attorneys' fees) or any action to enforce an arbitration award shall
be paid as may be awarded by the arbitrator.

                                       10
<PAGE>

          12    SERVICE OF PROCESS; CONSENT TO JURISDICTION

          (a) Service of Process. Each of the parties hereto irrevocably
              ------------------
     consents to the service of any process, pleading, notices or other papers
     by the mailing of copies thereof by registered, certified or first class
     mail, postage prepaid, to such party at such party's address set forth
     herein, or by any other method provided or permitted under California law.

          (b) Consent to Jurisdiction. Each party hereto irrevocably and
              -----------------------
     unconditionally (i) agrees that any suit, action or other legal proceeding
     arising out of this Agreement shall be brought in the United States
     District Court for the Northern District of California or, if such court
     does not have jurisdiction or will not accept jurisdiction, in any court of
     general jurisdiction in the County of San Francisco, California, (ii)
     consents to the jurisdiction of any such court in any such suit, action or
     proceeding, and (iii) waives any objection which such party may have to the
     laying of venue of any such suit, action or proceeding in any such court.

          13    LIMITATION ON LIABILITIES

     If Employee is awarded any damages as compensation for any breach or action
related to this Agreement, a breach of any covenant contained in this Agreement
(whether express or implied by either law or fact), or any other cause of action
based in whole or in part on any breach of any provision of this Agreement, such
damages shall be limited to contractual damages and shall exclude (a) punitive
damages, and (b) consequential and/or incidental damages (e.g., lost profits and
other indirect or speculative damages). The maximum amount of damages that
Employee may recover for any reason shall be the amount equal to all amounts
owed (but not yet paid) to Employee pursuant to this Agreement through its
natural term or through any period for which severance is due pursuant to
Section 5(b) hereof (including any amounts due to QTL in accordance with this
Agreement upon exercise of the Call pursuant to Section 7 hereof).

          14    COMPLETE AGREEMENT

     This Agreement contains the entire understanding of the parties with
respect to the employment of Employee and supersedes all prior arrangements or
understandings with respect thereto and all oral or written employment
agreements or arrangements between the Company (and any of its Affiliates) and
Employee. This Agreement may not be altered or amended except by a writing, duly
executed by the party against whom such alteration or amendment is sought to be
enforced.

          15    ASSIGNMENT

  This Agreement is personal and non-assignable by Employee.  It shall inure to
the benefit of any corporation or other entity with which the Company shall
merge or consolidate or to which the Company shall lease or sell all or
substantially all of its assets and may be assigned by the Company to any
Affiliate of the Company or to any corporation or entity with which such
Affiliate shall merge or consolidate or which shall lease or acquire all or
substantially all of the assets of such Affiliate; provided that as a condition
to such sale of assets or merger, the

                                       11
<PAGE>

purchaser or surviving company, as the case may be, shall have assumed all of
the obligations and duties of the Company under this Agreement.

          16    COUNTERPARTS

     This Agreement may be executed in counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.

          17    EMPLOYEE'S ACKNOWLEDGMENT

     Employee acknowledges (a) that he has consulted with or has had the
opportunity to consult with independent counsel of his own choice concerning
this Agreement and has been advised to do so by the Company, and (b) that he has
read and understands the Agreement, is fully aware of its legal effect, and has
entered into it freely based on his own judgment.

                           [Signature Page Follows]

                                       12
<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.

                              "EMPLOYEE"


                                 /s/ Ronald Elliott
                              -----------------------------------
                                 Ronald Elliott


                              "COMPANY"

                              LearningStar Corp.,
                              a Delaware corporation

                                    /s/ Richard Delaney
                              -----------------------------------
                              By:    Richard Delaney
                              Title: Chief Financial Officer
                                     Member - Board of Directors

                                      S-1
<PAGE>

                                  Schedule 1
                                  ----------

                              PROHIBITED COUNTIES

                                  California
                                  ----------

Alameda                  Madera                   San Luis Obispo
Alpine                   Marin                    San Mateo
Amador                   Mariposa                 Santa Barbara
Butte                    Mendocino                Santa Clara
Calaveras                Merced                   Santa Cruz
Colusa                   Modoc                    Shasta
Contra Costa             Mono                     Sierra
Del Norte                Monterey                 Siskiyou
El Dorado                Napa                     Solano
Fresno                   Nevada                   Sonoma
Glenn                    Orange                   Stanislaus
Humboldt                 Placer                   Sutter
Imperial                 Plumas                   Tehama
Inyo                     Riverside                Trinity
Kern                     Sacramento               Tulare
Kings                    San Benito               Tuolumne
Lake                     San Bernardino           Ventura
Lassen                   San Diego                Yolo
Los Angeles              San Francisco            Yuba

                                      A-1