Document:

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                                                                    EXHIBIT 10.4

                               LICENSE AGREEMENT

     This License Agreement ("Agreement"), is made on June 30, 2000, between
Sylvan Learning Systems, Inc., with its principal place of business at 1000
Lancaster Street, Baltimore, MD  21202, ("Licensor") and eSylvan, Inc., with a
principal place of business at 1000 Lancaster Street, Baltimore, Maryland 21202
("Licensee").

                                   RECITALS
                                   --------

     Licensor is, and has been, through franchised Sylvan Learning Centers, in
the business of providing a proprietary system (with respect to which Licensor
has retained associated intellectual property rights) of programs, systems,
teaching and management techniques, individualized diagnostic tests and academic
and educational courses and programs, designed to be personally taught,
supervised or administered to students who come to site based businesses or
centers for in-person instruction (the "Sylvan System").

     In order to respond to the actual and anticipated actions of its
competitors and to take advantage of new means of making educational services
available to the public, Licensor has determined that it must and should
develop, in addition to the Sylvan System, an internet version of Licensor's
proprietary programs, systems, and teaching and management techniques to be
administered to end consumers only through the internet (the "eSylvan Internet
Business").

     Licensor has concluded that the most effective way to develop and roll-out
the eSylvan Internet Business is to establish Licensee as a separate company,
and to grant to  Licensee the exclusive right to develop and offer the eSylvan
Internet Business in the United States and Canada, pursuant to this Agreement.
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                                   AGREEMENT
                                   ---------

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties agree as follows:

     1.  RECITALS. The Recitals set forth above are made a part of this
         --------
         Agreement.

     2.  GRANT OF TRADEMARK LICENSE. To the extent that it lawfully may,
         --------------------------
         Licensor grants to Licensee during the term of this Agreement, an
         exclusive license to use the trademarks and service marks set forth on
         Schedule A (collectively, the "Marks"), solely in connection with the
         ----------
         eSylvan Internet Business in the United States and Canada. Licensee
         shall not use the Marks in any other business lines or endeavors.
         Licensor retains all right to use or license the Marks for any other
         purpose, including, without limitation, in connection with the
         operation or franchising of site based businesses or centers and in
         connection with business lines or endeavors not comprising a portion of
         the Sylvan System. Additional trademarks and service marks of Licensor
         may be licensed from time to time upon mutual agreement of the parties;
         provided, however, that if Licensor modifies or revises the Marks set
         forth in Schedule A, Licensor has the right to incorporate such
                  ----------
         modifications or revisions into the Marks licensed hereunder without
         further consideration.

     3.  GRANT OF CONTENT LICENSE.
         ------------------------

         a.   Generally. To the extent that it lawfully may, Licensor grants to
              ---------
              Licensee a nonexclusive, perpetual license to use, copy,
              distribute,

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               perform and display the materials, software and other
               information set forth on Schedule B (collectively, the "Existing
                                        ----------
               Sylvan Content") only in connection with the eSylvan Internet
               Business in the United States and Canada. Licensor retains all
               right to use or license the Existing Sylvan Content for any other
               purpose, including, without limitation, in connection with the
               operation or franchising of site based businesses or centers.
               Pursuant to this license, Licensee may distribute and sublicense
               products embodying the Existing Sylvan Content to end users for
               personal use only in connection with the eSylvan Internet
               Business, and not for sale, distribution or relicensing by such
               end users.  With respect to that portion of the Existing Sylvan
               Content which comprises homework assistance, Licensee may provide
               such homework assistance content to third parties for use by end
               users ("Permissible Homework Assistance").  While Licensor is not
               obligated to modify, enhance or improve the Existing Sylvan
               Content, Licensor shall be obligated to make available to
               Licensee (i) any modifications, enhancements, improvements to the
               Existing Sylvan Content or (ii) new Sylvan materials and software
               related to the Sylvan System ((i) and (ii), collectively, "New
               Sylvan Content") developed or created by Licensor after the date
               hereof and during the term of this Agreement and made
               commercially available to third parties, subject to and in
               accordance with

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               Paragraph 12.b. hereof. Licensee is under no obligation to use
               the Existing Sylvan Content, and may develop other content,
               subject to the provisions of this Agreement, including the right
               of Licensor to license such content under Paragraph 12.c. hereof.

          b.   Manuals.  Licensee shall assist Licensor to develop a
               -------
               Confidential Operations and Instruction Manual (the "Confidential
               Operations Manual") to establish certain programs, policies,
               systems, techniques and materials for the successful operation of
               the eSylvan Internet Business.  The standards, specifications or
               requirements established by Licensor for Licensee, unless
               otherwise indicated, shall be set forth in this Agreement or may,
               from time to time, be set forth by Licensor in the Confidential
               Operations Manual.  Licensee acknowledges that the Confidential
               Operations Manual belongs solely to Licensor and is provided to
               Licensee solely during the term of this Agreement and shall be
               treated as "Confidential Information" in accordance with
               Paragraph 24 hereof.  Licensee understands and acknowledges that
               the Sylvan System serves markets and operates under market
               conditions that are continuously changing and evolving, and that
               new and different standards, procedures, and techniques will be
               developed and recommended by Licensor in response to those
               changes, or other conditions in the Sylvan System, to maintain
               and/or enhance the quality of, among other matters, the Marks,
               and
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               the reputation and goodwill of the Sylvan System. Accordingly,
               Licensee understands and acknowledges that Licensor may, from
               time to time, revise the contents of the Confidential Operations
               Manual to implement new or different requirements for the Marks,
               and Licensee expressly agrees to comply with all such changed
               requirements related to the Marks; provided that the fundamental
               terms and conditions of this Agreement shall not be altered.

     4.   ROYALTIES.  Royalties for the license rights granted to Licensee
          under Paragraph 2 hereof will be payable to Licensor as follows:

          a.   Initial License Fee. Licensee will pay an initial license fee of
               -------------------
               $1,000,000, due upon execution of this Agreement.

          b.   Royalty. In addition to the initial license fee, Licensee will
               -------
               pay Licensor a periodic, running royalty equal to four percent
               (4%) of all net revenues of Licensee received by Licensee during
               the term hereof.  "Net Revenues" shall be calculated and payable
               as follows:

               i.   the aggregate gross amount of all revenues from whatever
                    source derived (based upon a cash method of accounting),
                    which arise from or are derived by Licensee, directly or
                    indirectly, from or in connection with the eSylvan Internet
                    Business;

               ii.  excluding all revenues received by Licensee for the account
                    of a third party for such party's products or services,
                    which

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                    revenues are actually delivered by Licensee to such
                    third party (but including any portion of such revenues
                    retained by Licensee); and

               iii. reduced by all documented refunds, returns and allowances
                    made in good faith by Licensee; and only sales and other tax
                    receipts, the collection of which is required by law.

               In addition, Licensee agrees to pay an additional amount equal to
               any sales, gross receipts, or similar tax imposed on Licensor and
               calculated solely on payments required to be made by Licensee to
               Licensor under this Agreement, unless such tax is an optional
               alternative to an income tax otherwise payable by Licensor.  In
               no event shall Licensee be required to pay any income tax
               otherwise payable by Licensor.

          c.   Guaranteed Minimum Royalty. There will be no guaranteed minimum
               --------------------------
               royalty for the period beginning on the effective date of this
               Agreement and ending on the last day of the first full calendar
               year thereafter.  With respect to each calendar year thereafter
               during the term and any renewal terms and extensions, Licensee
               will pay to Licensor a guaranteed minimum royalty equal to 120%
               of the prior year's guaranteed minimum royalty, with the
               guaranteed minimum royalty for the first calendar year such
               minimum royalty is due being equal to $400,000.

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          d.   Calculation of Royalties. Royalties will be calculated and paid
               ------------------------
               quarterly.  Licensee shall submit payment to Licensor within
               twenty (20) business days after the close of each calendar
               quarter with respect to Net Revenues received during such
               previous quarter, accompanied by a Net Revenues report, described
               in Paragraph 4.e. below. With respect to the period for which no
               guaranteed minimum royalty is due, each such quarterly payment
               shall equal the royalties due for such quarter. With respect to
               each calendar year in which the guaranteed minimum royalty is
               due, each quarterly payment shall equal the greater of (i) the
               royalties due for such quarter, or (ii) one quarter of the
               guaranteed minimum royalties for such calendar year. If payment
               of royalties is subject to any state, local or foreign tax,
               Licensee will be responsible for determining the amount of any
               tax and will pay the taxes.

          e.   Net Revenues Report. Licensee's quarterly royalty payment shall
               -------------------
               be accompanied by fully completed and accurate Net Revenue report
               on forms as required by Licensor, setting forth the gross
               revenues received during the previous month, the adjustments
               required under Paragraph 4.b., the number of students currently
               enrolled by program category (and the associated tuition and
               other charges), and any further information Licensor may
               reasonably request.  Such form and information required therein
               may be changed by Licensor, in its reasonable discretion, from
               time to

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               time. Licensee shall keep adequate records and retain appropriate
               data and receipts to verify the information provided in such
               reports and shall provide such backup data as Licensor may
               request from time to time. Licensee shall certify the accuracy of
               such data in writing on each such report.

      5.  AUDIT OF RECORDS.
          ----------------
          a.   Audit. Licensee shall allow Licensor or its representatives to
               -----
               inspect the premises of Licensee, the books of account and
               federal and state income tax and sales tax returns of Licensee
               pertaining to the eSylvan Internet Business during reasonable
               times of the business day upon two (2) days advance written
               notice.  Licensee shall maintain on its premises, or at a
               mutually agreed upon location, for a period of at least three
               years, all sales slips, cancelled checks and receipts, and all
               books of account relating to the eSylvan Internet Business.  If
               Licensor's audit discloses a liability for any fees due to
               Licensor, Licensee shall pay the amount of the deficiency,
               including late charges due under Paragraph 5.b., within thirty
               (30) days of Licensor's notice to Licensee of the deficiency.
               Should the audit reflect a balance due Licensee, Licensor agrees
               to pay said balance within thirty (30) days of completion of the
               audit report.  If the deficiency (excluding late charges) is
               three percent (3%) or more of the fees Licensee was required to
               pay hereunder for the relevant period, Licensee

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               shall pay Licensor its reasonable costs incurred in performing
               the audit (and, if applicable, in successfully defending such
               audit in arbitration) in addition to the amount of the
               deficiency. Nothing in this paragraph shall limit Licensor's
               right to terminate Licensee under Paragraph 16 for Licensee's
               failure to pay when due royalties owing Licensor. Licensee agrees
               to pay any additional royalties, and penalties as set forth
               below, within thirty (30) days of receipt of the audit report, or
               within said thirty (30) day period, shall submit the dispute to
               arbitration in accordance with Paragraph 25.

          b.   Late Charge. The following late charges (to the extent permitted
               -----------
               by law) shall apply:

               i.   for late payment of royalties, Licensee will pay a late
                    charge equal to 2% of the amount then due; and

               ii.  for underpayment of royalties in excess of 3%, Licensee will
                    pay a late charge of 10% of the amount of the underpayment.

          c.   Confidentiality. Licensor agrees that it will maintain the
               ---------------
               confidentiality of all financial information it shall obtain
               about Licensee's operations in accordance with Paragraph 24, and
               shall not disclose such financial information to any third party
               who is not bound to maintain the confidentiality of such
               information.

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          d.   Licensee to Pay Taxes  .  Licensee shall pay all taxes,
               ---------------------
               regardless of their nature, assessed against it when due and
               before delinquent except when being contested in good faith by
               appropriate proceedings.

     6.   FORM OF MARKS. Licensee will use the Marks in proper trademark form
          -------------
          and with proper notice of their status as trademarks (SM, TM or (R)).
          Licensee will display the Marks only in the forms provided on Schedule
                                                                        --------
          A, or in such other form and style, or in connection with other marks
          -
          or brands as permitted under the Agreement, including as set forth in
          the Confidential Operations Manual, and as may be approved in advance
          in writing by Licensor and not thereafter disapproved, such approval
          not to be unreasonably withheld, delayed or conditioned.  Licensee
          acknowledges that any such new form or style of the Marks adopted by
          Licensee shall be owned by Licensor, including the right to use
          similar stylized form in connection with any other marks.  Licensor
          may direct Licensee (by notice hereunder) to modify the forms of the
          Marks to reflect changes in Licensor's own use of the marks and/or
          changes in registration status of the Marks, all in accordance with
          the then current Confidential Operations Manual.

     7.   USE OF MARKS.  Licensee shall not use any of the Marks in such a way
          ------------
          as may cause any confusion between Licensee and Licensor; provided
          that the uses set forth on Schedule A, including in domain name
                                     ----------
          registrations, have been approved by Licensor; provided further that
          such uses are to be

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          in compliance with the Confidential Operations Manual. In order to
          maintain standards of use with respect to the Marks licensed
          hereunder, Licensee agrees to use the Marks licensed hereunder in
          accordance with the Confidential Operations Manual, as amended. The
          first use of any of the Marks in web pages, software, or in other
          materials shall indicate that the Mark is a "trademark [or service
          mark, or registered trademark or service mark, as appropriate] of
          Sylvan Learning Systems, Inc. Licensee is an authorized licensee of
          Sylvan Learning Systems, Inc." All Existing Sylvan Content and all New
          Sylvan Content (collectively, the "Sylvan Content"), whether
          physically distributed or displayed on-line, will bear the following
          notice: "Copyright (year) Sylvan Learning Systems, Inc. Licensee is an
          authorized Licensee of Sylvan Learning Systems, Inc." If Licensee has
          developed or created Sylvan Derivative Works as permitted in this
          Agreement, the notice may read: "Copyright (year of creation) Sylvan
          Learning Systems, Inc., and (year of modification) eSylvan, Inc.
          Licensee is an authorized Licensee of Sylvan Learning Systems, Inc."

     8.   USE OF eSYLVAN. Licensee may use "eSylvan" in its business names and
          --------------
          in its Internet domain names solely in accordance with Schedule A;
                                                                 ----------
          provided that all other uses require the prior written approval of
          Licensor, which approval shall not be unreasonably withheld. While
          Licensee is permitted such limited use of "eSylvan", Licensee agrees
          that use of "eSylvan" in its business names and in its Internet domain
          names will be terminated and the use of names containing or consisting
          of "eSylvan" and

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          the other Marks or any similar names or marks in its business names
          and in its Internet domain names shall cease upon termination of this
          Agreement in accordance with the terms hereof.

     9.   OWNERSHIP OF THE MARKS AND CONTENT.
          ----------------------------------

          a.   Ownership. Licensee acknowledges and confirms Licensor's
               ---------
               proprietary rights in, and ownership of, the programs, systems,
               techniques, manuals, and trade secrets which will be disclosed to
               Licensee under this Agreement, including without limitation, the
               Marks and the Sylvan Content as well as their validity, and
               agrees not to represent in any manner that Licensee has acquired
               any ownership rights in such assets, including without
               limitation, the Marks. Licensee further acknowledges that
               Licensee does not acquire any right or interest therein
               (including in any Licensor-approved modification to the Marks)
               beyond the rights expressly granted to it under this Agreement.
               Licensee acknowledges that the know-how and operating format
               related to Licensor's proprietary methods and materials is also
               proprietary to Licensor and Licensee shall not disclose such
               methods and materials except in connection with Licensee's
               required activities as authorized by this Agreement. Licensee
               represents and acknowledges that all use of the Marks will inure
               to the benefit of Licensor. Licensee further acknowledges and
               agrees that any and all goodwill associated with the Marks shall
               inure directly and exclusively to the benefit of

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               Licensor and that, upon the expiration or termination of this
               Agreement for any reason, no monetary amount shall be
               attributable to any goodwill associated with Licensee's use of
               the Marks.

          b.   Prohibited Use. In conducting any business or enterprise,
               --------------
               Licensee agrees that it shall not commit, nor permit any of its
               licensees to commit, any act causing an incurable tarnishment of
               the Marks or the reputation and goodwill associated with the
               Sylvan System.  Licensee acknowledges that it may, but is not
               obligated to, use the Marks in connection with the Permissible
               Homework Assistance.  Licensee understands and agrees that any
               use of the Marks other than as expressly authorized by this
               Agreement, without Licensor's prior written consent, is an
               infringement of Licensor's rights in the Marks.  Licensee
               acknowledges that the right to use the Marks granted herein does
               not extend beyond the termination or expiration of this
               Agreement.  Licensee expressly covenants that, during the term of
               this Agreement and thereafter, Licensee shall not, directly or
               indirectly, commit any act of infringement or contest or aid
               others in contesting the validity of Licensor's right to use the
               Marks or take any other action in derogation thereof. Licensee
               will not at any time challenge or dispute the validity of the
               Marks, or the copyrights in the Sylvan Content.

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          c.   Confidentiality. Licensee agrees to maintain adequate security in
               ---------------
               the control, use, and handling of the Confidential Information of
               Licensor in accordance with the practices described in the
               Confidential Operations Manual or as stated otherwise in writing
               from Licensor from time to time.  Unless expressly waived by
               Licensor in writing, Licensee shall require all persons who have
               or could have access to Licensor proprietary materials, to sign
               written confidentiality agreements pertaining to the security of
               Licensor's Confidential Information, which agreement shall be in
               a form reasonably acceptable to, and approved in advance by
               Licensor, and shall name Licensor as a third party beneficiary
               thereof.

          d.   Intellectual Property Protection. Trademark, copyright and other
               --------------------------------
               intellectual property protection relating to the Marks and the
               Sylvan Content will be obtained only by Licensor at its own
               expense. Licensee is not permitted to file trademark or service
               mark applications for the Marks or confusingly similar marks, or
               to file for copyright or other intellectual property protection
               for the Sylvan Content, in each case, in any jurisdiction.

     10.  QUALITY CONTROL.
          ---------------

          a.   Marks.  Licensee agrees to maintain a standard of high quality of
               -----
               goods and services and promotional materials offered in
               connection with the Marks.

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          b.   Quality Assurance Review. Licensor may at any time review all
               ------------------------
               aspects of Licensee's operation of the eSylvan Internet Business
               ("Quality Assurance Review") to determine the extent to which
               Licensee's operations are or are not in compliance with the
               standards, methods and procedures Licensor establishes with
               respect to the Marks.  At Licensee's request, Licensor will
               provide Licensee with the materials and forms used in the Quality
               Assurance Review process for Licensee's use in reviewing
               Licensee's operations.

          c.   Training.  To assist Licensee in the operation of the eSylvan
               --------
               Internet Business, and the proper delivery of the programs
               provided as part of the eSylvan Internet Business, Licensor will
               use its reasonable efforts to assist Licensee in providing
               training programs substantially similar to those set forth in the
               Confidential Operations Manual.

          d.   Web Sites. Licensee agrees that all web sites associated with all
               ---------
               domain names used by Licensee in association with the eSylvan
               Internet Business shall be managed and administered in a
               competent manner, in full compliance with this Agreement, and
               with respect to use of any Marks, in accordance with this
               Agreement and the Confidential Operations Manual so as to
               preserve, maintain and enhance the goodwill associated with the
               Sylvan System and the Marks.  At all times during the term
               hereof,

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               Licensor and Licensee shall each maintain a hypertextual link to
               the other's web site(s) in accordance with the Confidential
               Operations Manual. Licensee acknowledges that Licensor has the
               right to conduct, from time to time, a quality control review of
               the use of the Marks in connection with: (1) all web sites
               associated with all domain names used by Licensee in association
               with the eSylvan Internet Business; and (2) any products or
               services offered, provided or promoted on such sites, regardless
               of whether such products or services bear independent trademarks
               or service marks. Licensee must provide Licensor with the
               opportunity of timely review (which at Licensee's discretion may
               be prior to use on the sites) and approval, which approval shall
               not be unreasonably withheld, of any products or services to be
               provided or promoted on such sites which are not within the scope
               of use of the eSylvan Internet Business.

          e.   Management. In order to maintain the high image and quality
               ----------
               standards of Licensor's proprietary programs and materials,
               including without limitation, the Marks and the Sylvan Content,
               Licensee agrees to provide sufficient and competent management,
               staff and Licensor-certified tutors for use in connection with
               the eSylvan Internet Business to provide adequate instruction for
               students enrolled in all of the diagnostic and prescriptive
               instruction programs. Licensee agrees that if accreditation for

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               supplemental education programs or services offered by Licensee
               is available from an accrediting body or organization, Licensee
               will at Licensor's request comply with the standards necessary to
               attain and maintain such accreditation.

          f.   Compliance with Educational Standards. Licensor will establish,
               -------------------------------------
               and Licensee shall comply with, certain defined standards set
               forth in its Confidential Operations Manual in teaching methods
               and procedures for the delivery of its educational and
               instructional programs, and Licensor will offer help and
               assistance to the Licensee in attaining and maintaining those
               standards.

          g.   Compliance With Law. Licensee agrees that it will comply with all
               -------------------
               applicable U.S. and foreign laws, including with respect to any
               privacy requirements imposed by such laws on the use of
               information developed by or provided to Licensee by Licensor, end
               users, or other third parties.

     11.  ADVERTISING. In order to promote the Marks in connection with the
          -------------
          eSylvan Internet Business, Licensee agrees that it shall expend
          quarterly on advertising at least 6% of Licensee's prior quarterly
          gross revenues on the type of advertising specified in the
          Confidential Operations Manual or on other marketing and advertising
          materials approved by Licensor.  Licensee shall keep appropriate
          records and receipts for all advertising or marketing expenditures for
          at least three years, and shall provide substantiating data for such
          expenditures upon request by Licensor.

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     12.  FUTURE TECHNOLOGY; CONTENT.
          --------------------------

          a.   Technology. The parties contemplate that changes will occur in
               ----------
               optimal methods of conducting business over the Internet. The
               parties contemplate that the provisions of this Agreement may be
               extended to any future method or technology of how to conduct
               business on the Internet or on-line.  However, the provisions of
               this Paragraph 12.a. apply to new methodologies and not to New
               Sylvan Content and eSylvan Content, as defined in Paragraph 12.b.
               and 12.c. below, which rights are controlled by Paragraph 12.b.
               and 12.c., respectively. Licensee shall consult with Licensor for
               permission to modify this Agreement in accordance with changes in
               technology or best practices relating to the Internet or on-line
               technology, and the parties shall negotiate in good faith
               regarding such modifications, which shall be in writing signed by
               both parties.

          b.   New Sylvan Content. To the extent after the date hereof and
               ------------------
               during the term of this Agreement, Licensor develops or creates
               New Sylvan Content which it has made commercially available to
               third parties, on each such occasion, it shall so notify
               Licensee, including a reasonably detailed description and copy
               thereof and the financial terms of such license (based on the
               same basis as the financial terms offered to all of its franchise
               licensees), and Licensee shall have 30 days thereafter to
               evaluate whether it

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               wishes to obtain a license of such New Sylvan Content. If
               Licensee notifies Licensor within said 30 day period of its
               desire to license such New Sylvan Content, then on each such
               occasion, a new Schedule C setting forth the New Sylvan Content
               and the terms and conditions of the license shall be executed by
               both parties and attached hereto as an addendum. Licensee agrees
               that the scope of use and the restrictions on use of such
               licensed New Sylvan Content (including Paragraph 22 hereof) shall
               have the same scope of use and restrictions on use as set forth
               in the licenses granted hereunder with respect to the Existing
               Sylvan Content.

          c.   eSylvan Content. To the extent and during the term of this
               ---------------
               Agreement, Licensee creates or develops software or materials for
               the eSylvan Internet Business, or modifies, enhances or improves
               such software and/or materials ("eSylvan Content"), on each such
               occasion, it shall so notify Licensor, including a reasonably
               detailed description and copy thereof and the financial terms of
               such license (based on a reasonable fee for Licensee to recoup
               its development cost on a proportional basis across all of the
               products or services in which Licensee will commercialize such
               eSylvan Content), and Licensor shall have 30 days thereafter to
               evaluate whether it wishes to license such eSylvan Content.  If
               Licensor notifies Licensee within said 30-day period of its
               desire to license

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               such eSylvan Content, then on each such occasion, a new Schedule
               D setting forth the eSylvan Content and the terms and conditions
               of the license shall be executed by both parties and attached
               hereto as an addendum. Licensor agrees that the scope of use and
               the restrictions on use of such licensed eSylvan Content
               (including Paragraph 22 hereof) shall have the same scope of use
               and restrictions on use as set forth in the licenses granted
               hereunder with respect to the Existing Sylvan Content.

          d.   Sylvan Derivative Works.  Licensee has the right to modify the
               -----------------------
               Existing Sylvan Content and the New Sylvan Content  (if licensed
               in accordance with Paragraph 12.b.) and to create derivative
               works, including, but not limited to, the right to disassemble,
               decompile and/or reverse engineer the Existing Sylvan Content and
               the New Sylvan Content, and to create textual works from digital
               materials and vice versa (collectively, "Sylvan Derivative
               Works"); provided that such Sylvan Derivative Works may be used,
               copied, distributed, performed and/or displayed only in
               connection with the eSylvan Internet Business and not in
               violation of Paragraph 22; and provided further that Licensee
               will not distribute or sublicense products embodying the Sylvan
               Derivative Works other than to end users for personal use only in
               connection with the eSylvan Internet Business, and not for sale,
               distribution or relicensing by such end users.  Licensee will be
               deemed the owner of any

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               copyright in the Sylvan Derivative Works. Licensee shall be
               obligated to license to Licensor the Sylvan Derivative Works
               developed or created by Licensee after the date hereof and during
               the term of this Agreement and made commercially available,
               subject to and in accordance with Paragraph 12.c. hereof.

          e.   eSylvan Derivative Works. Licensor has the right to modify the
               ------------------------
               eSylvan Content (if licensed in accordance with Paragraph 12.c.)
               and to create derivative works, including, but not limited to,
               the right to disassemble, decompile and/or reverse engineer the
               eSylvan Content, and to create digital works from textual
               materials and vice versa (collectively, "eSylvan Derivative
               Works"); provided that such eSylvan Derivative Works may be used,
               copied, distributed, performed and/or displayed only in
               connection with the Sylvan System and not in violation of
               Paragraph 22; and provided further that Licensor will not
               distribute or sublicense products embodying the eSylvan
               Derivative Works other than to Licensor's Sylvan Learning Center
               licensees and to end users for personal use only in connection
               with the Sylvan System, and not for sale, distribution or
               relicensing by such end users.  Licensor will be deemed the owner
               of any copyright in the eSylvan Derivative Works. Licensor shall
               be obligated to license to Licensee the eSylvan Derivative Works
               developed or created by Licensor after the date hereof and during
               the term of this

                                     -21-
<PAGE>

               Agreement and made commercially available, subject to and in
               accordance with Paragraph 12.b. hereof.

          f.   Errors; Corrections.  Notwithstanding anything set forth in this
               -------------------
               Paragraph 12 to the contrary, to the extent that (i) Licensor
               corrects any errors in the Sylvan Content, or (ii) Licensee
               corrects any errors in the eSylvan Content, during the term
               hereof, then in each such case, the corrected content shall be
               licensed to the other for no additional consideration under the
               scope of use and restrictions on use set forth herein.

     13.  INFRINGEMENT BY OTHERS.
          ----------------------

          a.   Marks.  Licensee acknowledges an obligation to monitor its own
               -----
               and other parties' use of the Marks and agrees to do so.
               Licensee will promptly notify Licensor upon learning of any
               potential infringement by third parties of any of the Marks.
               Licensor shall control all litigation against and settlement with
               any and all third party infringers or apparent infringers of the
               Marks, it being expressly understood and agreed by Licensee that
               the determination of whether and how to proceed in any such
               infringement action shall be in the sole judgment of Licensor.
               Licensee will cooperate with Licensor as requested by Licensor,
               in accordance with this Paragraph, in connection with any action
               taken by Licensor in its judgment against any potential
               infringer(s).  Licensee's cooperation will include without
               limitation providing

                                     -22-
<PAGE>

               its personnel to appear as witnesses at depositions or in court,
               furnishing documents and information, executing all necessary
               documents, and being joined as a party to any legal proceedings.
               Licensor will reimburse Licensee for reasonable costs actually
               incurred in connection with activities requested by Licensor
               during such litigation. Any recovery of damages or attorney's
               fees in these actions, or in settlement of the actions or
               disputes, will belong to Licensor.

          b.   Existing Sylvan Content. Licensor has no obligation to take
               -----------------------
               action against third-party infringers of the Existing Sylvan
               Content. Licensee will promptly notify Licensor upon learning of
               any potential infringement by third parties of any of the
               Existing Sylvan Content.  If Licensor, at Licensor's sole
               discretion, decides to take action against such infringers within
               30 days of notice from Licensee of such infringement, the
               provisions of the preceding paragraph will apply.  Should, in the
               absence of Licensor's action within 30 days of such notice,
               Licensee determine to take action against any third-party
               infringers of the Existing Sylvan Content, it shall notify
               Licensor and Licensor shall have an additional 30 days to
               determine whether it wishes to control such action (in which case
               the provisions of the preceding paragraph will apply).  If
               Licensor determines not to undertake such action or fails to so
               notify Licensee of its decision within the second 30 day period,

                                     -23-
<PAGE>

               Licensee shall have the right to undertake such action in its
               sole behalf and at its sole cost (which shall only include a
               claim of damages of such infringement against eSylvan alone),
               with any recovery of damages or attorneys fees belonging to
               Licensee.

          c.   New Sylvan Content; eSylvan Content. If either Licensor or
               -----------------------------------
               Licensee licenses to the other any materials or software pursuant
               to Paragraph 12 hereof, the licensing party shall have no
               obligation to take action against third party infringers with
               respect to such materials or software. The licensee will promptly
               notify the licensing party upon learning of any potential
               infringement by third parties of any of such materials or
               software. If the licensing party, at its sole discretion, decides
               to take action against such infringers within 30 days of notice
               from the licensee of such infringement, the provisions of
               paragraph 13.a. will apply.  Should, in the absence of the
               licensing party's action within 30 days of such notice, the
               licensee determine to take action against any third-party
               infringers of such materials or software, it shall notify the
               licensee and the licensing party shall have an additional 30 days
               to determine whether it wishes to control such action (in which
               case the provisions of paragraph 13.a. will apply).  If the
               licensing party determines not to undertake such action or fails
               to so notify the licensee of its decision within the second 30
               day period, the licensee shall have the right to undertake such
               action in its sole

                                     -24-
<PAGE>

               behalf and at its sole cost (which shall only include a claim of
               damages of such infringement against the licensee alone), with
               any recovery of damages or attorneys fees belonging to the
               licensee.

     14.  TRADEMARK PROCEEDINGS. In the event that Licensee learns of a
          ---------------------
          trademark application (or registration) filed by any third party with
          any  governmental authority, including without limitation, the United
          States Patent and Trademark Office, for a trademark or service mark
          which may be confusingly similar to or otherwise harmful to the Marks,
          Licensee will immediately notify Licensor.  Licensor will have the
          sole option of filing and pursuing an opposition, cancellation or
          other appropriate proceeding. Licensee will have the same assistance
          obligations as set forth in Paragraph 13.a.

     15.  TERM. The initial term of this Agreement will be five (5) years from
          ----
          the effective date of this Agreement and will terminate on the fifth
          anniversary of that date; provided, however, that the license with
          respect to the Sylvan Content and the eSylvan Content is perpetual for
          the duration of applicable copyrights and will not otherwise
          terminate.  Provided that Licensee has complied with all of the terms
          of this Agreement and performed all of its obligations under it,
          Licensee at its sole option may serially renew this Agreement for
          unlimited consecutive five (5) year terms, by providing written notice
          thereof to Licensor at least 120 days prior to termination of the
          initial or any subsequent term, provided Licensee remains in
          compliance with all the terms of this

                                     -25-
<PAGE>

          Agreement and performs all of its obligations under it. No initial
          license fee will be owed for such renewal term.

     16.  TERMINATION.
          -----------

          a.   Generally. Notwithstanding the provisions of Paragraph 15, either
               ---------
               party may terminate this Agreement upon one or more of the
               following events:

               i.   if the other party materially breaches any provision of this
                    Agreement (other than as specifically contemplated in this
                    Paragraph 16), after being provided prior written notice of
                    such material breach, specifying in reasonable detail its
                    nature, and after giving the breaching party an opportunity
                    to cure such breach within thirty (30) days of such notice;

               ii.  if either party fails to comply with Paragraph 22, upon
                    written notice thereof; or

               iii. if a party breaches its confidentiality obligations as set
                    forth in Section 24, with written notice thereof.

               If this Agreement is terminated as a result of any of the events
               set forth in this Paragraph 16.a., the breaching party shall pay
               the other a termination fee of $500,000 (the "Termination Fee"),
               within thirty (30) days of the effective date of such
               termination. If this Agreement is terminated pursuant to this
               Paragraph

                                     -26-
<PAGE>

               16 as a result of Licensor's breach, Paragraph 22 shall continue
               in full force and effect. If this Agreement is terminated
               pursuant to this Paragraph 16 as a result of Licensee's breach,
               Paragraph 22 shall no longer apply to Licensor.

          b.   Licensor's Right to Terminate.  Notwithstanding the provisions of
               -----------------------------
               Paragraph 15, Licensor may terminate this Agreement upon one or
               more of the following events:

               i.   if Licensee misuses the Marks or fails to comply with, or
                    acts inconsistently with Paragraph 7 or 10, after being
                    provided prior written notice of such material breach,
                    specifying in reasonable detail its nature, and after giving
                    Licensee an opportunity to cure such breach within thirty
                    (30) days of such notice;

               ii.  if Licensee undergoes any change in control (other than in
                    connection with financings where a competitor to Licensor's
                    business does not become a controlling person (as defined in
                    the Securities Exchange Act of 1934), or other than an
                    Initial Public Offering); and after an Initial Public
                    Offering if Licensee undergoes any change in control which
                    results in a competitor to Licensor's business (defined as
                    any entity which undertakes any of the activities set forth
                    in Paragraphs 22.a.i, 22.a.ii, or 22.a.iii) being a
                    controlling person (as defined in the Securities Exchange
                    Act of 1934) of Licensee, upon written notice thereof;

                                     -27-
<PAGE>

               iii. if Licensee licenses, transfers or otherwise assigns a
                    material portion of the Sylvan Content to any third party
                    whose business (or those of its affiliates) is competitive
                    with the Sylvan System (other than Permissible Homework
                    Assistance as contemplated by Paragaph 3.a. hereof), upon
                    written notice thereof;

                iv. beginning with the 2002 calendar year, if for any three
                    consecutive quarters the royalties owed to Licensor fall
                    below one-fourth of the guaranteed annual minimum royalty,
                    per quarter, upon written notice thereof;

               v.   if Licensee challenges or otherwise breaches or violates
                    Licensor's ownership rights as set forth in Section 8,
                    without notice or further action;

               vi.  if Licensee fails to pay any royalty payment, after written
                    notice, within thirty (30) days of when due; or

               vii. if Licensee assigns or transfers, or attempts or agrees to
                    assign or transfer, this Agreement or its rights hereunder,
                    without Licensor's prior written consent.

               If this Agreement is terminated as a result of any of the events
               set forth in this Paragraph 16.b., Licensee shall pay to Licensor
               the Termination Fee, within thirty (30) days of the effective
               date of such termination, and Paragraph 22 shall no longer apply
               to Licensor.

                                     -28-
<PAGE>

          c.   Insolvency. If during the term of this Agreement, either party
               ----------
               becomes bankrupt or insolvent or if the business of a party is
               placed in the hands of a receiver or trustee, whether by the
               voluntary act of a party or otherwise or if a party shall cease
               to exist an active business this Agreement shall immediately
               terminate without notice or further action.

          d.   Effect of Termination.
               ---------------------
               i.   The expiration of this Agreement or its earlier termination
                    for any reason, shall in no way affect the license of the
                    Sylvan Content and the eSylvan Content, which shall remain
                    in effect in accordance herewith.

               ii.  Upon expiration of this Agreement, or if this Agreement is
                    terminated by any party for the reasons set forth in
                    Paragraphs 16.a.ii, 16.a.iii, 16.b.i, 16.b.ii, 16.b.iii,
                    16.b.v, 16.b.vi, 16.b.vii, or 16.c., upon such earlier
                    termination, Licensee will immediately cease all use of the
                    Marks, including without limitation, use of "eSylvan" in its
                    business names and in its Internet domain names.

               iii. If this Agreement is terminated by any party for the
                    reasons set forth in Paragraphs 16.a.i, or 16.b.iv, upon 120
                    days after such earlier termination, Licensee will
                    immediately cease all use of the Marks, including without
                    limitation, use

                                     -29-
<PAGE>

                    of "eSylvan" in its business names and in its Internet
                    domain names.

               iv.  Upon expiration of this Agreement, or if this Agreement is
                    terminated by any party for any reason, upon such earlier
                    termination, each party will have the right to terminate the
                    connection or link to the other party's web site(s) and to
                    take such other technical steps to terminate any inter-
                    connectivity, provided that during the 120 day period
                    contemplated by Paragraph 16.d.iii, at the request of either
                    party, the other shall provide a one page screen (including
                    a hypertextual link), that may be used to direct users to a
                    new web site or some other domain name of such party's
                    choosing.

               v.   Licensee's obligation to pay royalties under this Agreement
                    to Licensor for Net Revenues received during the term hereof
                    shall survive termination of this Agreement.

     17.  REPRESENTATIONS AND WARRANTIES.
          ------------------------------
          a.   Title. Licensor represents to Licensee that Licensor has all
               -----
               right, title and interest in, or if applicable, licenses to, the
               Sylvan Content and the Marks in a manner reasonably necessary to
               grant the rights contemplated hereby.  Licensee represents to
               Licensor that Licensee has all right, title and interest, or if
               applicable, licenses to,

                                     -30-
<PAGE>

               the eSylvan Content in a manner reasonably necessary to grant the
               rights contemplated hereby.

          b.   Marks. Licensor represents and warrants that the Marks do not
               -----
               infringe upon or violate any trademark or service mark of any
               third party under United States law. Licensor does not warrant
                                                                  ---
               that the Marks do not infringe upon or violate the trademark or
               service mark rights of any third party under the laws of any
               country other than the United States, and provides no
               indemnification therefor. However, Licensor represents that it
               has received no notice of any such potential violation.

          c.   Sylvan Content; eSylvan Content. Neither Licensee nor Licensor
               -------------------------------
               provides to the other any other representation or warranty as to
               the Sylvan Content or the eSylvan Content, including without
               limitation as to the form, merchantability, fitness for use,
               function or accuracy.  Neither Licensee nor Licensor has any
               obligation of maintenance, update or repair with respect to the
               Sylvan Content or the eSylvan Content. Licensor and Licensee do
               not warrant that the Sylvan Content or the eSylvan Content do not
               ---
               infringe upon or violate the copyrights, patent or other
               intellectual property rights of any third party under the laws of
               any country, and provides no indemnification therefor. However,
               each of Licensee and Licensor represents to the other that it has
               received no notice of any such potential violation.

                                     -31-
<PAGE>

          d.   Third Party Materials.  Neither Licensor nor Licensee provides to
               ---------------------
               the other any representation or warranty with respect to any
               written material, software or any other information obtained from
               third parties, other than its right to license such material to
               the other in accordance with its license with said third party.

     18.  INDEMNITY.
          ---------

          a.   Marks. Licensor will defend at its own expense, and with counsel
               -----
               of its choice, any action, suit, or proceeding brought against
               Licensee in the United States based upon any alleged infringement
               of United States intellectual property rights with respect to the
               Marks.  Licensor agrees to indemnify and hold Licensee harmless
               from any liabilities, claims or demands with respect to any such
               action, suit, or proceeding; provided, however, that Licensor
               shall not be required to indemnify Licensee in an amount greater
               than the amount of royalties paid to Licensor within the 24
               months preceding the date upon which Licensee makes a demand for
               indemnification, including, if applicable, the initial license
               fee. Licensor will have no obligation to indemnify Licensee if
               the Marks are infringing solely or in material part because such
               infringement results from changes made by Licensee or any third
               party to the Marks.

          b.   By Licensor.  Licensor will defend at its own expense, and with
               -----------
               counsel of its choice, any action, suit, or proceeding brought

                                     -32-
<PAGE>

               against Licensee from and against any and all claims, causes of
               action, suits, damages, liabilities, judgments and settlements,
               including all costs, expenses, and reasonable attorney's fees,
               based upon or arising out of Licensor's operation of the Sylvan
               System (other than with respect to claims of infringement
               regarding the eSylvan content).

          c.   By Licensee. Licensee will defend at its own expense, and with
               -----------
               counsel of its choice, any action, suit, or proceeding brought
               against Licensor from and against any and all claims, causes of
               action, suits, damages, liabilities, judgments and settlements,
               including all costs, expenses, and reasonable attorney's fees,
               based upon or arising out of Licensee's operation of the eSylvan
               Internet Business (other than with respect to claims of
               infringement regarding the Sylvan Content).

          d.   Generally. The indemnified party may participate in any
               ---------
               litigation involving through counsel of its own selection and at
               its own expense. However, the indemnifying party will have sole
               control of any negotiations or any suit which may be brought, and
               the indemnified party will provide the indemnifying party with
               all reasonable assistance in defending such action; provided that
               the indemnifying party will not make any settlement of any claim,
               suit or demand for which the indemnified party may become liable
               for other than monetary damages (being indemnified by the

                                     -33-
<PAGE>

               indemnifying party under this Agreement) without the indemnified
               party's written consent, which shall not be unreasonably
               withheld.

          e.   Limitation. The foregoing indemnities are in lieu of any other
               ----------
               rights, express or implied, are the indemnified party's sole
               remedy, and constitutes the indemnifying party's entire liability
               with respect to any such claim from any third party.

     19.  WAIVERS. The failure of either party at any time to require the
          -------
          performance by the other of any of the provisions of this Agreement
          will in no way affect the full right to require that performance at
          any later time.

     20.  NOTICES. Any notices required to be given by either of the parties in
          -------
          connection with this Agreement must be in writing, delivered by
          registered mail or overnight delivery service providing a receipt upon
          delivery, as follows, or to another address provided by a party in the
          manner described in this Paragraph:

               to Licensor:

               Sylvan Learning Systems, Inc.
               1000 Lancaster Street
               Baltimore, MD  21202
               Attn:Peter Cohen

               with a copy to the same address,

               Attn: General Counsel

                                     -34-
<PAGE>

               to Licensee:

               eSylvan, Inc.
               1000 Lancaster Street
               Baltimore, MD  21202
               Attn: President

               with a copy to the same address,
               Attn: General Counsel

     21.  NO ASSIGNMENT. Licensee may not assign this Agreement or its rights
          -------------
          hereunder (except with respect to Permissible Homework Assistance in
          accordance with Paragraph 3.a.) without the prior written approval of
          Licensor.  Any assignee will be bound by all terms and conditions of
          this Agreement. Licensor may assign this Agreement and its rights
          hereunder to any third party that agrees in writing to be bound by the
          terms hereof.

     22.  NONCOMPETE.
          ----------
          a.   By Licensee. Subject to the provisions of Paragraph 22.e. below,
               -----------
               for the duration of this Agreement and for a period of one year
               thereafter, Licensee shall not, directly or indirectly, through a
               license or otherwise, engage in or compete with, the following
               business lines of Licensor:

               i.   site based businesses or centers that offer individualized
                    diagnostic and/or prescriptive tutoring of curriculum
                    subjects for elementary and secondary school students; and

               ii.  site based businesses or centers that offer curriculum
                    homework assistance for elementary and secondary school
                    students; and

               iii. site based businesses or centers that offer SAT/ACT
                    preparation courses, state-based assessment preparation

                                     -35-
<PAGE>

                    courses, AP preparation courses, and/or english as a second
                    language courses.

          b.   By Licensor. Subject to the provisions of Paragraph 22.e. below,
               -----------
               for the duration of this Agreement and for a period of one year
               thereafter, Licensor shall not, directly or indirectly, through a
               license or otherwise, engage in or compete with, the following
               business lines of Licensee:

               i.   fee-based individualized diagnostic and/or prescriptive
                    tutoring of curriculum subjects for elementary and secondary
                    school students delivered to such students by online access
                    which uses the Internet or similar network and which uses
                    the Marks in connection with such activities, other than
                    online access by such students while present at site based
                    businesses or centers;

               ii.  fee-based synchronous and asynchronous curriculum homework
                    assistance for elementary and secondary school students
                    delivered to such students by on-line access which uses the
                    Internet or similar network and which uses the Marks in
                    connection with such activities, other than online access by
                    such students while present at site based businesses or
                    centers; and

               iii. fee based SAT/ACT preparation courses, state-based
                    assessment preparation courses, AP preparation courses,

                                     -36-
<PAGE>

                    and/or english as a second language courses, by online
                    access which uses the Internet or similar network and which
                    uses the Marks in connection with such activities, other
                    than online access by such students while present at site
                    based businesses or centers.

          c.   Exception for Sylvan/ZapMe! Agreement. The provisions of
               -------------------------------------
               Paragraph 22.b above shall not in any way restrict or prohibit
               Licensor from fulfilling its obligations, rights and duties under
               the Products and Services Agreement entered into between Licensor
               and ZapMe! Corporation on March 3, 1999, including all amendments
               ("ZapMe Agreement"). The parties expressly agree that Licensor
               shall have the right to assign all its rights and obligations
               under the ZapMe Agreement to Licensee, and Licensee shall have
               the right to assume all such rights and obligations. In the event
               such an assignment occurs, then the provisions of Paragraph 22.b
               above shall not in any way restrict or prohibit Licensee from
               fulfilling its obligations and duties under the ZapMe Agreement.

          d.   Agreement of Others. Both parties will agree to cause third
               -------------------
               parties contractually or otherwise affiliated with such party to
               abide by the foregoing restrictions.

          e.   Effect of Termination. The provisions of Paragraph 22.a. will
               ---------------------
               survive early termination of this Agreement and will remain in

                                     -37-
<PAGE>

               effect until the first anniversary of the date on which the term
               of this Agreement then in effect would have expired, if the
               reason for such early termination is due to the breach of this
               Agreement by Licensee. The provisions of Paragraph 22.b. will
               survive early termination of this Agreement and will remain in
               effect until the first anniversary of the date on which the term
               of this Agreement then in effect would have expired, if the
               reason for such early termination is due to the breach of this
               Agreement by Licensor.

     23.  BEST EFFORTS; USE OF OTHER MARKS. Licensee agrees to use its best
          --------------------------------
          efforts throughout the term of this Agreement to develop and expand
          the eSylvan Internet Business.  Licensee agrees to use the Marks
          exclusively in connection with the eSylvan Internet Business and
          agrees to refrain from adopting any other Marks or brands without
          prior written approval from Licensor; provided, however, that if this
          Agreement is renewed after the expiration of the initial five-year
          term, Licensee must use the Marks for the duration of the renewal
          term, but Licensee may begin to use other trademarks and service marks
          in addition to, but in conjunction with, the Marks (the "New Marks").
          The New Marks shall not be derived from or confusingly similar to the
          Marks.  Licensee agrees to use domain names including the Mark
          "eSylvan" exclusively in connection with the eSylvan Internet Business
          during the initial term and agrees to refrain from using any other
          domain names in connection with the eSylvan Internet Business without
          the prior written approval from

                                     -38-
<PAGE>

          Licensor; provided, however, that if this Agreement is renewed after
          the expiration of the initial five-year term, Licensee must use domain
          names including the Mark "eSylvan" for the duration of the renewal
          term, but Licensee may begin to use other domain names in addition to,
          but in conjunction with, the domain names including the Mark "eSylvan"
          (the "New Domain Names"). The New Domain Names shall not be derived
          from or confusingly similar to the Marks.

     24.  CONFIDENTIALITY. At all times during the term hereof and at all times
          ---------------
          thereafter, each party shall keep confidential and not disclose,
          directly or indirectly, and shall not use for the benefit of itself or
          any other individual or entity, other than as expressly provided
          herein, any Confidential Information of the other.  "Confidential
          Information" means any trade secrets or confidential or proprietary
          information whether in written, oral, digital or other form which is
          unique, confidential or proprietary to the disclosing party,
          including, but not limited to, the Sylvan Content and, if applicable,
          the eSylvan Content, and any other materials or information related to
          the business or activities of the disclosing party which are not
          generally known to others engaged in similar businesses or activities.
          Either party's failure to mark any confidential Information as
          confidential, proprietary or otherwise shall not affect its status as
          Confidential Information hereunder.

     25.  DISPUTE RESOLUTION. Any party may seek injunctive relief to enforce
          ------------------
          any intellectual property rights or other rights under this

                                     -39-
<PAGE>

          Agreement. Any dispute relating to the interpretation or performance
          of this Agreement, other than claims for which injunctive relief is
          sought, will be resolved at the request of either party through
          binding arbitration. The arbitration will be conducted in accordance
          with the then existing rules of the American Arbitration Association
          in Baltimore, Maryland by a qualified arbitrator selected by the
          American Arbitration Association (or otherwise mutually selected by
          the parties) who will possess knowledge of Licensor's and Licensee's
          industry. The Arbitrator will be selected with the understanding that
          he or she will have the capability of providing an expedited review
          and decision with respect to the matter at issue within 45 days of his
          or her appointment. The discovery rights and procedures provided by
          the Federal Rules of Civil Procedure shall be available and
          enforceable in the arbitration proceeding. Judgment upon any award by
          the arbitrator may be entered in any state or federal court having
          jurisdiction. Any claims which are not submitted to arbitration or for
          which injunctive relief is sought shall be brought solely in the state
          courts of the State of Maryland or the U.S. District Court for the
          District of Maryland, to which personal jurisdiction the parties
          specifically submit.

     26.  CHOICE OF LAW. Maryland substantive law, without regard to its
          -------------
          conflicts of laws, shall apply in all respects in the interpretation
          of this Agreement.

     27.  EXCLUSION OF CONSEQUENTIAL AND INCIDENTAL DAMAGES. In no event shall
          -------------------------------------------------
          either party be liable for any loss, profits or special,

                                     -40-
<PAGE>

          incidental or consequential damages (however arising, including
          negligence) arising out of or in connection with this Agreement.

     28.  BINDING EFFECT. This Agreement shall be binding on and inure to the
          --------------
          benefit of each of the parties and their respective permitted
          successors and assigns.

     29.  ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
          ----------------
          parties with respect to its subject matter, and there are no terms,
          conditions, or provisions except as expressly set forth in it. This
          Agreement may not be amended or modified except by a written
          instrument executed by the authorized representative of the parties to
          this Agreement.

     30.  PARTICIPATION AGREEMENT.  Licensee agrees to use its best efforts to
          -----------------------
          perform, comply with and otherwise effectuate those contractual
          provisions directly relating to Licensee as set forth in those certain
          participation agreements executed and delivered by Licensor and
          certain of Licensor's franchisees, as of and at all times after such
          agreements are valid and enforceable in accordance with their terms
          (the "Participation Agreement Effective Date").

     31.  eSYLVAN BOARD. Licensee acknowledges and agrees that Licensor shall
          -------------
          elect to Licensee's board of directors a nominee mutually acceptable
          to Licensor and the Sylvan Franchise Owners Association, Inc. Board
          (the "FOA Director") as soon as practicable after the Participation
          Agreement

                                     -41-
<PAGE>

          Effective Date. There shall be a designated FOA Director during the
          term of this Agreement and any renewals thereof.

          IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above.

eSylvan, Inc.                           Sylvan Learning Systems, Inc.

By: /s/ DAVID GRAVES                    By: /s/ PETER COHEN
    ----------------                        ---------------
Title: President                        Title: Acting President

                                     -42-
<PAGE>

SCHEDULE A

eSylvan

eSylvan.com, and the associated Internet domain name registration

Sylvan

Sylvan Learning Center

Sylvan Learning Centers

Sylvan Learning Systems

                                     -43-
<PAGE>

SCHEDULE B

The Sylvan system which includes, but is not limited to, Sylvan's proprietary
programs, systems and techniques and certain copyrighted materials, all software
and computer programs necessary to offer online educational services.

Sylvan Ivy Prep materials for the online delivery of college entrance
examination preparation courses.

                                     -44-
<PAGE>

SCHEDULE C

[New Sylvan Content]

                                     -45-
<PAGE>

SCHEDULE D

[eSylvan Content]

                                     -46-<PAGE>

                                                                    Exhibit 10.5

                                 eSylvan, Inc.

                             CONTRIBUTION AGREEMENT
                             ----------------------

     This Contribution Agreement is made as of June 30, 2000 by and between
eSylvan, Inc., a Maryland corporation (the "Company"), and Sylvan Learning
Systems, Inc., a Maryland corporation (the "Stockholder").  In consideration of
the agreement set forth below and of other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties covenant and
agree as follows:

     1.  Purpose.  The Stockholder has entered into the agreements set forth on
         -------
Exhibit A and has created, developed and/or acquired certain proprietary assets
---------
as are set forth in the attached Exhibit B (the assets listed on Exhibit B are
                                 ---------                       ---------
referred to herein as the "Contributed Assets"), all of which Contributed Assets
the Company desires to own and utilize on its own behalf. The Stockholder has
offered to enter into the agreements set forth on Exhibit A, to contribute to
                                                  ---------
the Company the Contributed Assets and a cash payment in the amount of Five
Million Dollars ($5,000,000) (the "Cash Payment") in exchange for the shares of
common stock of the Company, as set forth in the attached Exhibit C (the
                                                          ---------
"Stock").  Accordingly, this Agreement sets forth the terms and conditions of
the contribution of the Contributed Assets and the issuance of the Stock
therefor.

     2.  Contribution of Contributed Assets.  In consideration of the Company's
         ----------------------------------
issuance of the Stock set forth on Exhibit C, the Stockholder agrees to enter
                                   ---------
into the agreements set forth on Exhibit A, hereby contributes, assigns,
                                 ---------
transfers and conveys to the Company the Contributed Assets and agrees to pay to
the Company the Cash Payment.  The Company hereby ratifies and confirms its
acceptance from the Stockholder, of all of such Stockholder's rights, title and
interest in and to the Contributed Assets.  The Stockholder agrees to execute
any instruments and to do all things reasonably requested by the Company to vest
the Company with all ownership rights in the Contributed Assets.  If any such
ownership rights can be protected by copyrights (i) as to those proprietary
rights which fall within the definition of "work made for hire," as defined in
17 U.S.C. Section 101, the copyright to such proprietary rights shall be owned
solely, completely and exclusively by the Company, and (ii) as to those
proprietary rights which do not constitute "work made for hire," the copyright
to such proprietary rights shall be deemed to be irrevocably assigned and
transferred completely and exclusively by the Stockholder.

     3.  Issuance of Stock.  In consideration of the entry by the Stockholder
         -----------------
into the agreements set forth on Exhibit A, the contribution by the Stockholder
                                 ---------
of the Contributed Assets and the Cash Payment to the Company, the Company
issues and delivers the Stock set forth in Exhibit C.
                                           ---------

     4.  Representations and Warranties of the Stockholder.  As of the
         -------------------------------------------------
effective date of this Agreement, the Stockholder represents and warrants to the
Company, as follows:

          (a) Authority; Enforceability. The Stockholder (i) has full right,
              -------------------------
power and authority to enter into this Agreement and the agreements set forth on
<PAGE>

Exhibit A; and (ii) has full right, power and authority to transfer the
---------
Contributed Assets, make the Cash Payment and to perform its other obligations
hereunder.  This Agreement and the agreements set forth on Exhibit A are the
                                                           ---------
legal, valid and binding obligations of the Stockholder and are enforceable
against it in accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application relating to or affecting the enforcement of creditor's
rights and by general principles of equity.

          (b) Conflicting Rights; Governmental Approvals.  To the Stockholder's
              ------------------------------------------
knowledge, this Agreement and the agreements set forth on Exhibit A do not, nor
                                                          ---------
has or will the contribution of the Contributed Assets or the performance or
observance by the Stockholder of any of the matters or things contemplated by
this Agreement, contravene, conflict with, or in any way be restricted by, any
provision of law, including administrative rules and regulations, or order of
court, or any mortgage, indenture, contract or agreement of or affecting the
Stockholder or the Contributed Assets.  To the Stockholder's knowledge, no
authorization, consent, approval, license, exemption, filing or registration
from or with any court or governmental department, agency or instrumentality, is
or will be necessary for the contribution of the Contributed Assets or for the
valid execution, delivery or performance by the Stockholder of this Agreement
and the agreements set forth on Exhibit A.
                                ---------

          (c) Liens; Claims. The Stockholder has good and marketable title to
              -------------
the Contributed Assets, and has the right to contribute, assign, transfer and
convey to the Company all of the Contributed Assets. No third party has been
granted any rights with respect to the Contributed Assets. To the Stockholder's
knowledge, there are no liens, security interests or encumbrances of any kind or
nature on or affecting the Contributed Assets. The Stockholder is not now, nor
has it ever been, the subject of voluntary or involuntary bankruptcy, insolvency
or similar proceeding in any jurisdiction. There are no actions, suits or
proceedings which have been instituted or threatened against or affecting the
Contributed Assets at law or in equity, or before any federal, state, municipal
or other governmental agency or instrumentality, which may affect the validity,
value, enforceability, use or utility of the Contributed Assets or the ability
of the Stockholder to perform its obligations or to consummate the transactions
contemplated by this Agreement.

          (d) Infringement. The Stockholder has no knowledge of (i) any
              ------------
potential infringement or adverse claims of ownership, license to use, or
otherwise, affecting all or any of the Contributed Assets, or (ii) claims or
assertions that the possession or utilization of all or any of the Contributed
Assets by the Company would infringe any patent, copyright, trademark, trade
secret, licensing agreement, or other intellectual property right of any third
party.

     5.  Covenants and Agreements of the Stockholder.  As of the effective date
         -------------------------------------------
of this Agreement and at all times thereafter, the Stockholder covenants and
agrees with the Company, as follows:

         (a) Delivery of Material.  Every item of information and every idea,
             --------------------
invention or improvement, in whatever form, which directly relates to, or is

                                       2
<PAGE>

directly derived from the Contributed Assets, is the property of the Company as
a result of the Stockholder's contribution of the Contributed Assets to the
Company hereunder.

         (b) Acknowledgement. The Stockholder acknowledges and agrees that terms
             ---------------
of this Agreement constitute a full and complete, irrevocable, and legally
binding transfer of all of its rights, title and interest in and to the
Contributed Assets. The Stockholder hereby irrevocably releases the Company and
all of its members, officers and affiliates from and against, and covenants to
refrain from, directly or indirectly, asserting, any claim or demand or
commencing or causing to be commenced any proceeding of any kind against the
Company, based upon the Stockholder's alleged rights, title and interest in and
to the Contributed Assets.

           (c) Further Assurances. The Stockholder agrees to execute and deliver
               ------------------
to the Company such further agreements, and to do all other things, as the
Company may from time to time deem necessary or appropriate, to assure the
validity, enforceability and effective transfer of the Contributed Assets, and
otherwise to vest fully in the Company the rights and interests transferred,
assigned or created by this Agreement, including, (i) the execution of any and
all lawful patent, trademark and copyright applications, assignments and other
legal instruments which the Company may deem necessary or convenient for the
protection of the Contributed Assets, and (ii) to grant an exclusive, perpetual,
royalty free right and license to use any Contributed Assets, which cannot, by
their nature, in the Company's sole and absolute opinion, be effectively and
legally transferred outright to the Company.

     6.  Representations and Warranties of the Company.  As of the effective
         ---------------------------------------------
date of this Agreement, the Company represents and warrants to the Stockholder,
as follows:

              (a) Authority; Enforceability. The Company (i) has the full right,
                  -------------------------
power and authority to accept and receive the contribution of the Contributed
Assets; (ii) has duly and validly authorized the execution and delivery of this
Agreement; and (iii) has all right, power and authority to perform its
obligations hereunder. The Company's performance of its obligations and
agreements hereunder is not restricted by, and will not violate, any contractual
or other obligation of the Company. This Agreement is the legal, valid and
binding obligation of the Company and is enforceable against it in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application relating
to or affecting the enforcement of creditor's rights and by general principles
of equity.

             (b) Authorization of the Issuance of Stock. The Stock has been duly
                 --------------------------------------
authorized and upon the execution hereof, the entry into the agreements set
forth on Exhibit A by the Stockholder and the receipt of the Cash Payment by the
         ---------
Company, will be fully paid, validly issued and nonassessible shares of common
stock.

     7.  Enforcement Rights to Contributed Assets.  The Company shall have the
         ----------------------------------------
right, but not the obligation, at its sole discretion, to bring any legal action
against

                                       3
<PAGE>

persons infringing or violating any rights to the Contributed Assets.
The Stockholder agrees to cooperate, at the Company's expense, in any such legal
action, including, if necessary, joining as a party in any action brought by or
against the Company.  The Company will provide the Stockholder with prompt
notice of the intent to initiate any such action, and such Stockholder will
provide the Company with prompt notice of the threat or initiation of any such
action by a third party.  The Company shall be entitled to the full award or any
settlement amount resulting from any such action.

     8.  Indemnification.  Each party shall protect, indemnify and hold harmless
         ---------------
the others, their respective agents, representatives, permitted successors and
assigns, from and against, any and all liabilities, suits, actions, claims,
demands, losses, expenses, including reasonable attorneys' fees and costs of
every kind and nature incurred by, or asserted or imposed against the
indemnified party, and/or its respective agents, representatives, permitted
successors and assigns, by reason of, resulting from, connected with, or growing
out of any breach of, the inaccuracy of, or the failure to perform, any
representation, warranty, agreement or covenant made in this Agreement by the
indemnifying party.

     9.  Miscellaneous.  This Agreement contains the final and entire agreement
         -------------
between the parties with respect to the contribution of the Contributed Assets,
and neither they nor their agents or representatives shall be bound by any
terms, conditions or representations not herein contained.  Neither this
Agreement nor any of the rights or obligations granted hereunder may be
transferred or assigned by the Stockholder without the prior consent of the
Company.  This Agreement, and the rights and obligations granted hereunder shall
inure to the benefit of any successor to, or assign of, the Company. The parties
bind themselves, their successors and permitted assigns to the faithful
performance of this Agreement.  All warranties, representations, covenants,
undertakings and indemnifications of each party contained in this Agreement
shall survive the execution and performance of this Agreement in perpetuity.
This Agreement shall be given effect and construed by application of the laws of
the State of Maryland, without regard to principles of conflicts of laws, and
any action or proceeding arising hereunder shall be exclusively brought in any
federal or state court within the State of Maryland.

                                       4
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above, as an instrument under seal.

                              SYLVAN LEARNING SYSTEMS, INC.

                              /s/ Robert W. Zentz
                              ____________________________
                              By: Robert W. Zentz
                              Title: Vice President, General Counsel

                              eSYLVAN, INC.

                              /s/ David A. Graves
                              _____________________________
                              By: David A. Graves
                              Title: President

                                       5
<PAGE>

                                   Exhibit A
                                   ---------

                          Schedule of Direct Contracts

 .   eSylvan License Agreement with Sylvan Learning Systems, Inc.
    -----------------------------------------------------------
 .   Facilities Use Agreement with Sylvan Learning Systems, Inc.
    -----------------------------------------------------------
 .   Services Agreement with Sylvan Learning Systems, Inc.
    ----------------------------------------------------
 .   Program Agreement between Sylvan Learning Systems, Inc. and Sylvan Franchise
    ---------------------------------------------------------------------------
    Owners Association, Inc.
    -----------------------
<PAGE>

                                   Exhibit B
                                   ---------

                 Schedule of Other Contracts and Business Plan

 .  The following trademarks: 24-7 TUTORS; 24-7TUTORS.COM; ANYTIMETUTORS.COM;
   and ANYTIME TUTORS.

<PAGE>

                                   Exhibit C
                                   ---------

                            Shares of Common Stock

          Name                                    Number of Shares

Sylvan Learning Systems, Inc.                       13,714,286
Ivy West Educational Services, Inc.                    285,714

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