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[LEARNING EXPRESS LOGO]
Exhibit 99.10
[LEARNING EXPRESS TRAIN LOGO] LEARNING EXPRESS, INC.
a Massachusetts Corporation
29 Buena Vista Corporation
Ayer, Massachusetts 01432
978/889-1000
MATERIAL MODIFICATION TO FRANCHISE
OFFERING CIRCULAR FOR EXISTING FRANCHISEES
AS REQUIRED BY THE
CALIFORNIA FRANCHISE INVESTMENT LAW
THE CHANGES SET FORTH HEREIN ARE VOLUNTARY. IF FRANCHISEE DOES NOT RECEIVE THE
ATTACHED DISCLOSURE AT LEAST FIVE BUSINESS DAYS BEFORE THE EXECUTION OF THE
BINDING AGREEMENT, THE FRANCHISEE MAY, BY WRITTEN NOTICE, MAILED OR DELIVERED TO
LEARNING EXPRESS, INC., OR KENNETH F. DARROW, ESQ. (AGENT FOR LEARNING EXPRESS,
INC.), 9350 SOUTH DIXIE HIGHWAY, SUITE 1550, MIAMI, FLORIDA 33156, WITHIN FIVE
BUSINESS DAYS FOLLOWING THE EXECUTION OF THE AGREEMENT, RESCIND THE AGREEMENT TO
THE MODIFICATION.
THE COMPANY'S REGISTERED AGENT AUTHORIZED TO RECEIVE SERVICE OF PROCESS IN THE
STATE OF CALIFORNIA IS:
CALIFORNIA COMMISSIONER OF CORPORATIONS
980 NINTH STREET, SUITE 500,
SACRAMENTO, CALIFORNIA 95814
The effective date of this Offering Circular is: May 8, 2000
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TABLE OF CONTENTS
INTRODUCTION 1
ITEM 1 The Franchisor, Its Predecessors and Affiliates 2
ITEM 7 Initial Investment 3
ITEM 12 Territory 3
ITEM 22 Contracts 3
ITEM 23 Receipt 3
ACKNOWLEDGMENT OF RECEIPT (YOUR COPY)
ACKNOWLEDGMENT OF RECEIPT (OUR COPY)
EXHIBITS TO THIS OFFERING CIRCULAR
EXHIBIT 1 - Proposed Amendment to Regional Franchise License Agreement
EXHIBIT 2 - Order of the California Department of Corporations Approving and
Registering this Offering Circular
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INTRODUCTION
Learning Express, Inc. (referred to as the "Company," "we" or "us") offers its
regional owners the opportunity to amend their existing Regional Franchise
License Agreement (the "License Agreement") on the terms stated in the
Amendment to Regional Franchise License Agreement ("Amendment") (see Exhibit 1
to this Offering Circular). Capitalized terms, not defined here, have the same
meaning as in the License Agreement or Offering Circular last on file with the
California Department of Corporations, describing the Regional Owner Program.
LearningExpress.com Holdings LLC, a Delaware limited liability company ("LECH")
is offering an aggregate of 2,607,750 of its Common Shares to our franchisees
and regional owners. LECH is the parent of LearningExpress.com LLC, a Delaware
limited liability company ("LEC"). LEC serves as the e-commerce distribution
channel of Learning Express. LEC will provide similar products and services as
the Learning Express franchised stores, but operate through the
LearningExpress.com World Wide Web site (the "On-Line Store"). LEC's business
operations will be integrated with participating Learning Express Local Store
Franchisees in an effort to minimize the sales channel conflict between the
Local Store Franchisees and the Web site and to maximize the options for
customers seeking to buy Learning Express products. Each regional owner under a
current License Agreement with us as of April 10, 2000 and which remains a
regional owner as of the date when the registration statement of LECH is
declared effective by the Securities and Exchange Commission and executes and
delivers an amendment to its License Agreement in the form of Exhibit 1 to this
Offering Circular, will receive 14,250 Common Shares of LECH for each regional
territory for which it is responsible
The key terms of the Amendment are, in addition to the issuance of 14,250
Common Shares of LECH:
(1) a provision stating that the operation of LEC's Online Store will not
violate the License Agreement; and
(2) Our agreement to pay the regional owner, commencing January 1, 2002, the
greater of 1/2 of the royalty due us from LEC with respect to net sales by
the Online Store to billing addresses within the regional owner's "regional
territory" under the License Agreement or 1 1/2% of the net sales to
billing addresses in the regional owner's regional territory.
Each regional owner which wishes to receive the Common Shares will need to
execute a "LearningExpress.com Holdings LLC First Amended and Restated
Operating Agreement" and an Amendment. LECH is not permitted by the Securities
Act of 1993 and the rules of the Securities and Exchange Commission, to issue
the
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Common Shares to regional owner until the registration statement has been
declared effective by the Securities and Exchange Commission. Accordingly, until
the registration statement has been declared effective and a final prospectus,
together with the operating agreement and the license agreement amendment
bearing the regional owner's signature and also executed by us, in the case of
the amendment and LECH, in the case of the operating agreement, have been
delivered back to the regional owner, the amendment and the operating agreement
will not be binding upon you. Prior to the effective date, execution and
delivery, you may withdraw your executed amendment and operating agreement at
any time by indicating in a written notice received by us at our address or sent
to us by a fax at (978) 889-1010, that you do not wish to continue with the
amendment and receive the Common Shares. If you do not withdraw, the amendment
and operating agreement, if executed and delivered by you to LECH, will become
binding agreements after the registration statement has been declared effective
and the final prospectus and executed amendment and operating agreement are sent
or delivered to you. The operating agreement executed by LECH, will evidence
your ownership of Common Shares.
Execution of the amendment and operating agreement is strictly optional on
your part. All regional owners are being offered the same form of amendment and
operating agreement. If you do not execute the amendment and operating
agreement, you will not receive the Common Shares and not receive a fee from the
operation of the On Line Store. Your status as a Learning Express regional owner
will in no way be altered or modified.
The modifications to the License Agreement, as a result of execution of the
Amendment are described under the applicable Uniform Franchise Offering Circular
item headings which follow. We are not presently offering License Agreements.
Therefore, we do not have a currently effective offering circular registered in
California.
ITEM 1
THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
Our affiliate, LearningExpress.com LLC, is a Delaware limited liability
company formed in November 1999 ("LEC"). LEC maintains its principal business
address at 29 Buena Vista Street, Ayer, Massachusetts 01432. LEC serves as the
e-commerce distribution channel of Learning Express. LEC will provide similar
products and services as the Learning Express franchised stores, but operate
through the LearningExpress.com World Wide Web site (the "On-Line Store"). LEC's
business operations will be integrated with participating Local Store
Franchisees in an effort to minimize the sales channel conflict between the
Local Store Franchisees and the Web site and to maximize the options for
customers seeking to buy Learning Express products. LEC is itself a subsidiary
of LearningExpress.com Holdings, LLC,
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a Delaware limited liability company ("LECH") whose business address is also 29
Buena Vista Street, Ayer, Massachusetts 01432. LECH is partially owned by Local
Store Franchises in existence as of April 10, 2000 and our Regional Owners.
Under the Amendment, you will be entitled to receive certain payments as a
result of the operation of the Online Store (see Item 12).
ITEM 7
INITIAL INVESTMENT
There is no cost to you to receive benefits from the operation of the
Online Store.
ITEM 12
TERRITORY
Under the Amendment, we will pay you a commission for each calendar month
(or portion) during the term of the License Agreement, commencing with the month
ended January 31, 2002, unless LEC is in breach of a certain agreement between
us and LEC (the "LEI/LEC Agreement"), based on sales through the OnLine Store of
products ordered by customers whose "bill to" address is within the "Regional
Territory", as defined in the License Agreement. (See Item 1.)
ITEM 20
LIST OF OUTLETS
As of April 1, 2000, there were 13 Regional Owners in operation, with 2
operating in California. We propose to modify all License Agreements, including
all of those in California.
ITEM 22
CONTRACTS
Exhibit 1 is a copy of the proposed Amendment.
ITEM 23
RECEIPT
The last of this Offering Circular is a detachable receipt in duplicate
for this Offering Circular to be signed by you.
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AMENDMENT TO
REGIONAL FRANCHISE LICENSE AGREEMENT
THIS AMENDMENT, made and entered into this _____ day of
_______________, 2000, by and between The Learning Express, Inc., a Delaware
corporation ("LEI") and ___________________________________, a
("Regional Owner").
__________________________________
RECITALS
A. LEI and Regional Owner entered into a Learning Express
Regional Franchise License Agreement dated __________,
_______________ (as amended from time to time, the "License
Agreement");
B. LEI has entered into a License Agreement dated as of
November 5, 1999 (the "LEI/LEC Agreement"), with
LearningExpress.com, LLC, a Delaware limited liability company
("LEC"), pursuant to the terms and conditions of which LEI has
granted LEC a license (the "License") to use the System, as
defined in the LEI/LEC Agreement, in the development,
operation and promotion of an Internet based, on-line store
(the "On-Line Store");
C. As consideration for the License, LEC will pay LEI a
royalty (the "Royalty"), as defined in the LEI/LEC Agreement
with respect to "Net Sales," as defined in the LEI/LEC
Agreement, accrued by LEC via the On-Line Store;
D. LEI has entered into a Management Services Agreement,
dated as of November 5, 1999 (the "Management Agreement"),
by and among LEI, LEC and LearningExpress.com Holdings LLC,
a Delaware limited liability company ("LECH"), the principal
owner of LEC, pursuant to the terms and conditions of which,
among other matters, LEI has agreed, among other matters, to
(1) support LEC's use of the System in the On-Line Store
through assistance with marketing, promotion and exchange of
information regarding sales, customers, vendors, and (2)
contract with each of LEI's regional owners on the terms and
conditions set forth in an Amendment to each regional
owner's respective Regional Franchise License Agreement; and
E. LEI and Regional Owner wish to amend the License
Agreement and reflect the amendment in writing.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The foregoing recitals are true and correct and are incorporated herein
by this reference.
2. (a) In consideration of Regional Owner's agreement to execute
and consummate the terms and conditions of this Amendment, LEI
shall cause LECH to issue to
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Regional Owner, 14,250 Common Shares of LECH (the "Shares"),
for each Regional Territory granted by LEI to Regional
Owner.
(b) Prior to issuance of the Shares, LECH may require Regional
Owner to execute an investment letter or letters to the
effect that the Shares are being acquired by Regional Owner
for Regional Owner's own account for investment purposes,
that Regional Owner has no present intention of offering,
distributing or otherwise disposing of the Shares, and that
Regional Owner shall agree not to dispose of the Shares
unless a registration statement or appropriate qualification
is then in effect under applicable state "Blue Sky" laws
with respect to the Shares or in the opinion of counsel for
LECH the Shares are exempt from the registration or
qualification requirements of such laws.
(c) Prior to issuance of the Shares, Regional Owner shall execute
and enter into the then current Operating Agreement for LECH
and be bound thereby, as a member of LECH. Such Operating
Agreement shall provide, among other matters, that, until
such time as LECH, or a successor entity, has completed an
"Initial Public Offering" (defined below), that all of the
Shares shall be forfeited to LECH immediately upon the
termination of either or both of the License Agreement or
this Amendment, provided, however, that the Shares shall not
be subject to forfeiture in the case where either or both of
the License Agreement and this Amendment are terminated in
connection with the sale or transfer of Regional Owner's
rights and obligations under the License Agreement to a new
regional owner.
(d) Regional Owner agrees that Regional Owner will not, for a
period of at least 180 days following the effective date of
any "Initial Public Offering" (defined below) by LECH (or
its successor-in-interest) or by LEC (or its
successor-in-interest), directly or indirectly, sell, offer
to sell or otherwise dispose of the Shares other than any
securities which are included in such Initial Public
Offering, provided, however, that LECH shall be under no
obligation to include the Shares or any portion thereof in
any Initial Public Offering. If the managing underwriter of
any such Initial Public Offering determines that a shorter
time period is appropriate, the aforementioned 180 day
period may be shortened consistent with the requirements of
such managing underwriter. An "Initial Public Offering"
shall mean LECH's, or a successor entity's, initial
distribution of securities in a firm commitment underwritten
public offering to the general public pursuant to a
registration statement filed with the Securities and
Exchange Commission.
3. (a) In consideration of Regional Owner's performance of Regional
Owner's obligations hereunder, LEI shall pay Regional Owner
with respect to each calendar month (or portion thereof)
during the Term, commencing with the month ended January 31,
2002, unless LEC is in breach of the LEI/LEC Agreement, a
fee (the "Fee") equal to the greater of (i) 50% of the
Royalty and (ii) 1.5% of "Net Sales," as defined in the
LEI/LEC Agreement, in either case as accrued during such
month from the sale through the On-Line Store of products
ordered by
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customers whose "bill to" address is within the "Regional
Territory", as defined in the License Agreement.
(b) Each installment of the Fee shall be payable to the Regional
Owner within 60 days after the end of the applicable calendar
month. Each payment shall be accompanied by a statement from
LEI, providing the basis for the calculation of the Fee. For
any amount not paid by LEI when due in accordance with the
foregoing, LEI shall pay Regional Owner a late payment penalty
equal to one percent (1%) per month of such unpaid amount, or
if less, the maximum amount permissible under applicable law.
(c) LEI shall have no obligation to pay the Fee in the event LEC
ceases operating the On-Line Store, if LEC becomes insolvent
or makes a general assignment for the benefit of creditors, or
unless otherwise prohibited by law, if a petition in
bankruptcy is filed by LEC, or such a petition is filed
against and consented to by LEC or not dismissed within 30
days, or if a bill in equity or other proceeding for the
appointment of a receiver of LEC or other custodian for LEC's
business or assets is filed and consented to by LEC or if a
receiver or other custodian (permanent or temporary) of LEC's
assets or property, or any part thereof, is appointed.
(d) Within 120 days following the end of each fiscal year, LEI
shall make available for review by Regional Owner, a
statement prepared by LEI's chief financial officer, for all
Net Sales for such fiscal year in the Regional Territory.
LEI shall cause LEC to maintain accurate books and records
pertaining to Net Sales for a period of two (2) years
following the close of the fiscal year for which such
determinations have been made and permit Regional Owner and
its representatives, upon at least 10 days prior written
notice to LEI, to make examinations of such books and
records during the usual business hours (without
interrupting LEC's normal conduct of its business) and at
the place LEC usually keeps its books and records.
4. Except for issuance of the Shares and payment of the Fee, Regional
Owner shall have no rights under the License Agreement or otherwise
against LEI or any other party with respect to the operations and sales
of LEC and the On-Line Store regardless of the billing address,
shipping address or other location of the applicable customer or other
person to whom any product purchased through the On-Line Store is
delivered or otherwise on account of any sale of any such product.
5. Except as modified by this Amendment, the License Agreement remains in
full force and effect.
In Witness Whereof, the parties hereto have executed this Amendment the
day and date first above written.
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LEI:
THE LEARNING EXPRESS, INC.
By: ______________________________
REGIONAL OWNER:
__________________________________
__________________________________
__________________________________
__________________________________
amendment to regional franchise license agreement
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RECEIPT
THIS OFFERING CIRCULAR SUMMARIZES CERTAIN PROVISIONS OF THE AMENDMENT TO
REGIONAL FRANCHISE LICENSE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE.
READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF LEARNING EXPRESS
OFFERS YOU AN AMENDMENT, IT MUST PROVIDE THIS OFFERING CIRCULAR TO YOU AT LEAST:
FIVE BUSINESS DAYS BEFORE YOU SIGN THAT AMENDMENT.
IF LEARNING EXPRESS DOES NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF
IT CONTAINS A FALSE OR MISLEADING STATEMENT OR A MATERIAL OMISSION, A VIOLATION
OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE
FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580 AND THE CALIFORNIA
COMMISSIONER OF CORPORATIONS, 980 NINTH STREET, SUITE 500, SACRAMENTO,
CALIFORNIA 95814.
THIS OFFERING CIRCULAR INCLUDES A COPY OF THE AMENDMENT TO THE REGIONAL
FRANCHISE LICENSE AGREEMENT, AS EXHIBIT 1.
The effective date of this Offering Circular is: May 8, 2000
Print Name:___________________
______________________
Witness
Signed:_______________________
Address:______________________
______________________________
Dated:________________________
Franchisor Copy
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RECEIPT
THIS OFFERING CIRCULAR SUMMARIZES CERTAIN PROVISIONS OF THE AMENDMENT
TO REGIONAL FRANCHISE LICENSE AGREEMENT AND OTHER INFORMATION IN PLAIN
LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF LEARNING
EXPRESS OFFERS YOU AN AMENDMENT, IT MUST PROVIDE THIS OFFERING CIRCULAR TO YOU
AT LEAST:
FIVE BUSINESS DAYS BEFORE YOU SIGN THAT AMENDMENT.
IF LEARNING EXPRESS DOES NOT DELIVER THIS OFFERING CIRCULAR ON TIME
OR IF IT CONTAINS A FALSE OR MISLEADING STATEMENT OR A MATERIAL OMISSION, A
VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO
THE FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580 AND THE CALIFORNIA
COMMISSIONER OF CORPORATIONS, 980 NINTH STREET, SUITE 500, SACRAMENTO,
CALIFORNIA 95814.
THIS OFFERING CIRCULAR INCLUDES A COPY OF THE AMENDMENT TO THE
REGIONAL FRANCHISE LICENSE AGREEMENT, AS EXHIBIT 1.
The effective date of this Offering Circular is: May 8, 2000
Print Name:_____________________
______________________
Witness
Signed:_________________________
Address:________________________
________________________________
Dated:__________________________
Franchisee Copy