Document:

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                                                                   Exhibit 10.37

                    THE PRINCETON REVIEW FRANCHISE AGREEMENT

         AGREEMENT made in the City of Princeton, State of New Jersey, by and
between Princeton Review Management Corp., a Delaware Corporation (hereinafter
referred to as "Franchisor"), and Robert Cohen whose address is 13 Olden Street,
Princeton NJ, 08540 (hereinafter referred to as "Franchisee").

         WITNESSETH:

                                    RECITALS

         Franchisor has developed and acquired a comprehensive method known as
The Princeton Review ("TPR") Method for conducting, operating, and marketing a
test preparation business which prepares students to take college and graduate
school admission tests and other courses ("the business"). The TPR Method,
consisting, in part, of confidential and proprietary educational materials,
teaching aids, techniques, systems, and formats was developed through
considerable expenditures of time, effort and money, and is identified by and
with certain proprietary names and marks owned by Franchisor.

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         Franchisor is in the business of licensing and franchising others, who
desire to engage in the business, rights to use the TPR Method, the Franchisor's
proprietary names and marks associated with it, and teaching aids and materials
as currently developed and as expanded and improved in the future. In order to
assist Franchisees to use the TPR Method efficiently and effectively in the
operation of the business, and to provide high quality and uniform standards of
service, Franchisor provides or makes available to Franchisees various initial
and continuing training and services.

         Franchisee desires to use the Princeton Review Method in the operation
of a franchised The Princeton Review test preparation business under a franchise
granted from Franchisor by, and in conformance with the terms of, this
Agreement, at a location or locations within a territory hereafter described.
Franchisee also desires to obtain and to derive the benefits of Franchisor's
initial and continuing services, training, guidance, expertise, know-how and
information for its use in operating and managing the business.

         Franchisee acknowledges as essential conditions of this Agreement and
the rights granted hereunder, and as consideration exchanged by and for the
mutual benefit of all licensed users of the TPR Method and name, that Franchisee
adhere to the uniform standards of quality, procedure and format prescribed by
the TPR Method; preserve the confidentiality of the TPR Method; and comply fully
with the obligations hereafter set forth.

         In consideration of the foregoing recitals, of the mutual promises
hereafter set forth, and of other good and valuable consideration, Franchisor
and Franchisee hereby agree as follows:

I.       GRANT, TERRITORIAL RIGHTS, AND TERM

         A. Grant of Franchise. Franchisor hereby grants to Franchisee, and
Franchisee hereby

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accepts from Franchisor a franchise and license for the term
and upon the conditions and terms hereafter set forth:

                  1. To use the TPR Method in connection with the operation of a
         franchised Princeton Review test preparation business at specific,
         approved site locations within the following geographical area: NJ
         Counties of Mercer, Ocean, Monmouth, Middlesex, Somerset, Union, Essex,
         Morris, Hudson, Bergen, Passaic and Hunterdon. Franchisor shall not
         unreasonably withhold approval of specific site locations proposed by
         Franchisee. As used herein, the term "site locations" means the place
         or places at which Franchisee conducts courses available under the TPR
         Method. For so long as this Agreement continues in effect, Franchisor
         itself shall not, nor will it franchise or license any other party or
         parties to, nor will it permit any officer of Franchisor to, establish
         and operate a similar test preparation business under any name or mark
         at any location within the geographical area above described, except to
         the extent provided by Subparagraph VI. B. l. c. of this Agreement.

                  2. To use confidential and proprietary educational materials,
         trade secrets and techniques, operating manuals and bulletins, and
         other business methods and know-how disclosed by Franchisor, solely in
         connection with the operation of the business conducted at the
         locations heretofore described and in accordance with the terms of this
         Agreement;

                  3. To use Franchisor's proprietary names, marks, and methods
         franchised and licensed hereunder only in the above described
         geographical area (except with respect to media advertising or with
         Franchisor's advance written consent), and only in the manner provided
         by this Agreement, and only for so long as this Agreement shall remain
         in effect

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         and Franchisee is in compliance with its terms;

         B. Term, Commencement of Operations, and Renewal. The term of this
Agreement and of the franchise and license granted herein shall be for a period
of twenty (20) years commencing on June 1, 1986, and ending on May 31, 2006,
unless sooner terminated in accordance with the terms of this Agreement.
Franchisee hereby agrees to commence operations hereunder no later than no
calendar days following the execution of this Agreement. For purposes of this
Agreement, Franchisee's fiscal year shall begin on the first day of January and
end on the 31st day of December for so long as this Agreement remains in effect,
unless changed with the written consent of Franchisor.

         Franchisee shall have the option to renew the license granted herein
for successive ten (10) year terms provided all of the following conditions have
been fulfilled:

                  1. Franchisee gives written notice to Franchisor of
         Franchisee's intention to so renew no later than one hundred eighty
         (180) days, nor earlier than one (1) year, prior to the expiration of
         this or any renewal term of this Agreement and this Agreement has not
         otherwise been previously terminated; and

                  2. At the scheduled date of renewal, there is no pending
         uncured default or breach of this Agreement constituting cause for
         termination under Paragraph XIII. hereof; and

                  3. Franchisee executes no later than one hundred twenty (120)
         days prior to the expiration of the term of this Agreement or any
         renewal or extension hereof a renewal agreement on the terms and
         conditions then being offered to new licensees, except that (a) no
         initial license fee shall be payable by Franchisee upon renewal; (b)
         periodic

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         payments shall be of no higher percentages nor payable more frequently
         than those provided by this Agreement; and (c) reporting and/or record
         keeping requirements shall be no more extensive or frequent than those
         provided by this Agreement; and

                  4. Franchisee, either in the year immediately preceding the
         expiration date of the renewal option hereby provided, or on an annual
         basis averaged over the last three (3) years preceding the expiration
         date of the renewal option hereby provided, has made royalty payments
         to Franchisor of no less than thirty percent (30%) of Franchisee's
         initial franchise fee hereunder adjusted to correspond with changes in
         the national consumer/price index or makes a supplemental cash payment
         in the amount of the difference between actual payments made and the
         percentage payments provided herein.

II.      INITIAL FRANCHISE FEE

         In consideration of the franchise and license granted by this
Agreement, Franchisee shall pay to Franchisor the sum of $206,176 as an initial
franchise fee payable in consecutive, non-interest bearing installment payments
as follows: 15% upon execution of this Agreement; 15% within each and every 180
day period following thereafter for five payments; and, a final payment of the
full balance remaining outstanding within the next succeeding 180 day period.

         Each installment payment of the initial franchise fee shall be deemed
fully earned by Franchisor upon payment thereof, and no installment payment of
the initial fee shall be refundable, in whole or in part, at any time under any
circumstances except as provided by Paragraph VI. A. l. of this Agreement.

         If prior to the completion of Franchisee's first three (3) years of
operation hereunder, Franchisee is by law required to cease conducting the
business franchised and conducted pursuant

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to the terms of this Agreement by reason of any unlawful act of Franchisor,
Franchisee shall, as liquidated damages therefor, be released and discharged
from any obligation to make any future unpaid initial fee installment payment.

         The initial fee is in addition to the periodic royalty-service fee
payable pursuant to Paragraph III., the advertising fee payable under Paragraph
V., and any other fee or payment which Franchisee may incur or owe to Franchisor
from time to time under this or any other Agreement.

III.     CONTINUING ROYALTY-SERVICE FEES

         A. Amount and Payment of Periodic Fees. In further consideration of the
rights and entitlements granted under this Agreement, Franchisee agrees to pay
to Franchisor monthly, within ten (10) days after the last day of each and every
calendar month ("monthly payment periods") during the term of this Agreement, a
combined royalty-service fee in the amount equal to eight percent (8%) of
Franchisee's gross receipts collected during the preceding monthly payment
period. For purposes of this Paragraph III.A., gross receipts means the total
revenues received by Franchisee for sale of goods or services made by or from
Franchisee's franchised The Princeton Review test preparation business or
businesses, and shall include all revenues that have been received by Franchisee
for purchases of goods or services similar or of the same nature as those
offered by the TPR Method made by current or former students of Franchisee's The
Princeton Review business. There shall be excluded from gross receipts taxes
added to the sales price and collected from the customer, credit card charges,
and bona fide refunds.

         B. Throughout the term of this Agreement, Franchisee shall pay to
Franchisor a minimum annual royalty service fee calculated in accordance with
the following schedule:

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         1st Year of Operation -- 5% of Initial Franchise Fee

                                   $10,308.80

         2nd Year of Operation -- 10% of Initial Franchise Fee

                                   $20,617.60

         3rd and Subsequent Years of Operation -- 15% of Initial Franchise Fee

                                   $30,926.40

Beginning with the fourth year of this Agreement, the dollar amount of the
minimum annual royalty-service fee shall be adjusted as of the anniversary date
of this Agreement to correspond to any change in the national consumer-price
index for the preceding year. If at the end of each year of this Agreement,
total royalty-service fee payments made during the year total less than the
aforesaid minimum annual royalty-service fee due for such year, Franchisee shall
pay Franchisor the difference within thirty (30) days following the end of such
year.

         Royalty-service fee payments received by Franchisor under this
Agreement shall be under no restriction whatever but shall be considered general
funds of Franchisor for all purposes.

         When, in any same calendar year, a majority of individual TPR
franchises fails to attain the minimum fee, the minimum fee percentage
applicable to such year will be reduced to the percentage actually attained by a
majority of franchisees.

IV.      REPORTS AND RECORDS

         A. Franchisee shall submit to Franchisor, at the time each monthly
payment of royalty-service fee is due, an accurate and complete statement of
gross receipts (as defined in Paragraph III. A.) on forms specified, approved or
provided by Franchisor and completed according to their terms.

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         B. Within thirty (30) days after each quarterly period of Franchisee's
fiscal year during the term of this Agreement, Franchisee shall submit to
Franchisor a statement of financial condition (a balance sheet) and a statement
of income and expense relating to the business as of and for the period ending
on such quarterly period, on forms specified, approved, or provided by
Franchisor and completed according to their terms in accordance with generally
accepted accounting practices.

         C. Within sixty (60) days after the close of Franchisee's fiscal year,
Franchisee shall furnish to Franchisor a year-end income and expense statement
in the form requested, and certified to by Franchisee, including an entry
showing the total gross receipts for the said previous fiscal year. If this
statement shows that there has been any underpayment of royalty-service fees for
such fiscal year based on gross receipts as finally adjusted and reconciled
after the closing and review of Franchisee's books and records, Franchisee shall
pay to Franchisor, at the time of submitting such statement, the amount of any
such underpayment. Any overpayment shall be refunded to Franchisee within thirty
(30) days.

         Franchisor shall provide Franchisee with a computer program designed to
generate the financial information required to be supplied by Franchisee under
Subparagraphs IV. B. or C. If said computer program, when used according to
Franchisor's instruction or direction, is defective and fails to generate the
financial information herein required, Franchisee shall be under no obligation
to provide such information during the time such defective condition persists.

         D. Franchisee shall maintain appropriate books and records in such a
manner as to clearly and accurately show gross receipts as defined herein. All
such books and records, and income tax returns applicable to the test
preparation business of Franchisee shall be open at all

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reasonable times to inspection and verification by Franchisor or its duly
authorized representatives. Franchisor shall be entitled at any time during
normal business hours to have Franchisee's books and records examined or audited
at Franchisor's expense upon seventy-two (72) hours' notice and Franchisee shall
cooperate fully with the parties making such examination or audit on behalf of
Franchisor. Franchisee shall promptly pay to Franchisor or Franchisor shall
refund to Franchisee, as the case may be, any under or overpayment or
royalty-service fees revealed by the examination or audit. If an examination or
audit is performed due to Franchisee's failure to submit statements of gross
receipts or to maintain books and records as provided herein, or in the event
that the gross receipts reported by Franchisee for any period of twelve
consecutive months are more than five percent (5%) below the actual gross
receipts of Franchisee for such period as determined by any such examination or
audit, then Franchisee shall within fifteen (15) days following notice, pay to
Franchisor the reasonable and customary cost of such an examination or audit as
well as all additional amounts of royalty-service fee charges, advertising
charges, and any other charges or fees shown to be due. Payment and acceptance
of such amounts shall not waive or prejudice any right of Franchisor to exercise
any other remedy of this Agreement, including termination in accordance with
Paragraph XIII of this Agreement. Any delinquent royalty-service fee or other
fees or charges due Franchisor from Franchisee shall bear interest at the annual
rate of eighteen percent (18%) from thirty (30) days after the date such amount
was due until paid.

V.       PROMOTION AND ADVERTISING

         In addition to, and along with, the Royalty-Service fee provided
herein, Franchisee shall pay monthly to Franchisor an advertising fee equal to
two percent (2%) of Franchisee's gross

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receipts as heretofore defined for the preceding month. All Franchisor-owned TPR
test preparation business units shall make a monthly contribution to the
advertising fund in an amount equal to two percent (2%) of their gross receipts
for the preceding month, and Franchisor shall use all such funds it receives
hereunder for the development, placement, and distribution of regional and
national consumer advertising designed in its discretion to promote consumer
demand for services and products available from The Princeton Review franchises
under the TPR Method.

         Franchisor shall deposit and maintain all unexpended advertising funds
collected from franchisees in an appropriately identified bank account separate
and distinct from any other and used for no other purpose. In the months of
January and July of each year throughout the term of this Agreement, Franchisor
shall distribute to Franchisee a report disclosing receipts of advertising funds
collected and specifically how such funds were expended during the preceding
six-month period.

         Franchisee may in its own right and at its own expense promote and
advertise its franchised business, provided that all such promotional materials
and advertising proposed to be used shall prior to use or publication be
submitted to and approved by Franchisor in the interest of maintaining the
integrity, force, quality, image and goodwill associated with the proprietary
names and marks of Franchisor. Unless Franchisor disapproves proposed
advertising within seven (7) days following its receipt thereof, approval
hereunder shall be deemed to have been given.

VI.      OBLIGATIONS OF FRANCHISOR

         A. Undertakings Prior to Commencement of Operations. Prior to
Franchisee's commencement of operations hereunder Franchisor shall:

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                  1. Training: Conduct a training program for Franchisee
         covering the TPR Method and courses currently available thereunder. The
         training program will be at such location and time as Franchisor shall
         designate, and shall be at no extra charge for not more than two (2)
         persons designated by Franchisee and acceptable to Franchisor. All
         expenses of travel, lodging, meals and other living expenses incurred
         by Franchisee's personnel in attending such program shall be borne and
         paid for by Franchisee.

                  The grant of the franchise herein is conditioned upon
         successful completion of the training program by Franchisee or its
         personnel as determined by Franchisor. If during the course of the
         training program or within fifteen (15) days thereafter Franchisor
         concludes that Franchisee or its designee has not exhibited the
         aptitude, abilities, or personal characteristics necessary or desirable
         to operate successfully a test preparation business in accordance with
         the standards and procedures of the Princeton Review Method and as a
         Franchisee of Franchisor, Franchisor may, in its sole discretion and
         judgement, cancel this Agreement and all rights hereunder, where
         permitted by applicable law, by giving notice to Franchisee and
         tendering to Franchisee a refund of its initial franchise fee.
         Franchisee agrees that such refund shall be the full extent of
         Franchisor's liability and responsibility in the event of such
         cancellation, and that upon cancellation Franchisee shall return to
         Franchisor all materials, manuals, information and all other items that
         Franchisee received from Franchisor, including all copies thereof and
         notes thereon which Franchisee may have or control. Franchisee further
         agrees to maintain strictly the confidentiality of all information
         received relating to the TPR Method and not to use in the operation of
         a test preparation or similar business, any trade secrets or
         confidential information obtained from

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         Franchisor in the course of the training program or otherwise.

                  2. Materials. Lend in trust to Franchisee the computer
         software and data and other course materials needed to conduct the
         franchised business in accordance with the TPR Method which Franchisor
         may revise from time to time to reflect changes, additions and
         improvements to suggested and required course offerings, procedures,
         policies, standards and specifications. Such material shall at all
         times remain the property of Franchisor.

                  Franchisee agrees to follow the procedures and adhere to the
         policies set forth in any operating manuals or bulletin, and to
         maintain their confidentiality. Upon expiration or termination of this
         Agreement, or upon reasonable request of Franchisor, Franchisee shall
         return such materials to Franchisor.

                  3. Provide assistance in locating, selecting and equipping the
         specific business premises within the Franchisee's geographical area
         suitable for conducting the franchised business activities.

         B. Continuing Undertakings. Franchisor shall provide the following
continuing services for the benefit of Franchisee:

                  1. Method Improvements and Program Additions.

                           a. Make available to Franchisee from time to time all
                  improvements and additions to the TPR Method that are
                  circulated generally to all other franchisees, and, except as
                  otherwise provided hereunder, to Franchisor-owned TPR test
                  preparation businesses. Franchisor shall exercise due
                  diligence to keep materials current.

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                           b. New, additional, or improved course programs
                  developed by Franchisor which are designed to prepare students
                  for college or graduate school admissions tests will be
                  offered exclusively for marketing by Franchisees. After any
                  such program has been tested by Franchisor for a period of at
                  least one year, Franchisee shall be required to accept and put
                  into use such program in the franchised business. They may be
                  subject to a fee or charge based only on the Franchisor's
                  costs for providing Franchisee's personnel with training
                  necessary to incorporate and implement such programs in
                  Franchisee's business. Franchisee shall not be required to
                  accept more than two (2) new programs in any calendar year.

                           c. Any new course developed by Franchisor other than
                  one provided for in subparagraph b. above will be offered to
                  Franchisee on a first option basis before being offered to any
                  other party. Until any such program has been tested by
                  Franchisor for a period of at least one year, and Franchisee
                  has been extended a written option notice by Franchisor,
                  Franchisee shall have the first option right to exclusively
                  market each program within the geographical area described in
                  Paragraph I.A.1. of this Agreement. The first option right
                  herein provided shall be exercised by Franchisee by giving
                  Franchisor written notice of its election to do so within
                  thirty (30) days following Franchisee's receipt of a statement
                  of Franchisor describing the program, reciting Franchisee's
                  right to obtain exclusive marketing rights in said
                  geographical area, and setting forth the fee or charge payable
                  by Franchisee to secure such right and program. The fee or
                  charge payable shall be

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                  based on Franchisee's pro rata share of Franchisor's costs to
                  develop the course and program. As used herein, the term "pro
                  rata share" means the proportionate value of the formula
                  amount of Franchisee's initial franchise fee calculated on the
                  basis of factors existing as of a date six (6) months prior to
                  the date the option offer is made ("the adjusted initial fee
                  value") in relation to the total adjusted initial franchise
                  fee value on such date of all TPR franchises and of all
                  Franchisor-owned TPR units assuming they were franchises.

                           In the event Franchisee does not exercise the first
                  option rights herein provided, Franchisor shall have the right
                  to grant said marketing rights to any other party or parties
                  within the aforesaid geographical area, but only under a name
                  or mark other than THE PRINCETON REVIEW or any other
                  proprietary name or mark hereunder licensed to Franchisee.

                           (Except as otherwise agreed, Franchisor unilaterally
                  represents that (i) it will not market any computer or
                  videotape programs purporting to prepare students for a
                  college or graduate school admissions test, but nothing herein
                  shall be understood to preclude Franchisor from publishing
                  and/or marketing any book designed to prepare students for the
                  school admissions process including any admissions or
                  qualifications test; and, (ii) it will not engage in any
                  business under any other name similar to or competitive with
                  the business franchised hereunder.)

                           As used herein, a program "tested by Franchisor" must
                  have included, but is not limited to, conducting the new
                  program among no less than 100 participants, checking the
                  results, and making the results available to Franchisee.

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                  2. Software Warranty. If Franchisee notifies Franchisor of the
         existence of an error in computer software that has been provided to
         Franchisee by Franchisor which materially impairs Franchisee's ability
         to properly conduct its franchised TPR business, Franchisor warrants to
         correct or rectify such error within five (5) days following its
         receipt of written notice from Franchisee ("the grace period"). If any
         such computer software error is not corrected or rectified by
         Franchisor within the said grace period, Franchisor will waive, or
         refund, payment of royalty-service fees otherwise payable in accordance
         with the following formula: 1/60 x D x R, where D represents the number
         of days elapsing between the expiration of the grace period and the day
         on which the error was corrected, and R represents the royalty-service
         fees payable by Franchisee to Franchisor for the specific test in which
         the error occurred for the year in which the error occurred.

                  3. Assistance. Provide telephone counseling to Franchisee at
         reasonable times and frequency with respect to the operation and
         management of the business, and make available to it the benefit of
         Franchisor's information, advice, expertise and know-how.

                  4. Advertising. Make available to Franchisee from time to
         time, national and/or regional TPR advertising programs as they are
         developed with advertising funds collected pursuant to Paragraph V.
         hereof and generally circulated. In the months of January and July of
         each year during the term of this Agreement, Franchisor shall
         distribute to Franchisee a report disclosing receipts of advertising
         funds collected and specifically how such funds were expended during
         the preceding six-month period.

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                  5. Continuing Training. Provide, at the option of Franchisor,
         mandatory training program/meetings. Franchisee agrees to attend (or to
         cause its designated employees to attend) one mandatory
         training/program meeting per year, but failure to attend because of
         illness or other physical incapacity shall not be a default hereunder.
         All mandatory training/program meetings will be held at a location
         within the continental United States designated by Franchisor.
         Franchisor will not charge Franchisee a fee for mandatory meetings, but
         all travel, living, and personal expenses incurred by Franchisee in
         connection with meeting attendance will be the sole obligation of
         Franchisee.

VII.     OBLIGATIONS OF FRANCHISEE

         A.       Promotion of The Princeton Review Method and Business.

                  1. Franchisee agrees during the term of this Agreement to
         promote at all times the sale of test preparation services available
         from Franchisee pursuant to the TPR Method, using its best efforts to
         develop and enlarge Franchisee's market for such services. Franchisee
         agrees to accept new, additional, and improved course programs
         developed by Franchisor and designed to prepare students for college or
         graduate school admissions tests, and to pay to Franchisor a new
         program training fee based on Franchisor's costs for providing such
         training for each such program to personnel of the Franchisee as is
         reasonably necessary to incorporate and implement such programs in
         Franchisee's business, provided, that Franchisor has tested such
         program (in the manner required under Paragraph VI.B.1. hereof) for a
         period of at least one (1) year.

                  New courses or programs developed by Franchisor for inclusion
         in the TPR Method other than those designed to prepare students for
         college or graduate school

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         admissions tests will be offered to Franchisee on a first option basis
         as provided by Paragraph VI.B. of this Agreement.

                  2. Franchisee hereby agrees to operate its franchised business
         in accordance with methods and procedures prescribed by Franchisor in
         its operating manual or other bulletins, as revised from time to time,
         and to equip the franchised business in accordance with the standards
         of the Franchisor, including, specifically, those items listed on
         Appendix A of this Agreement.

         B.       Management Responsibility and Business Conduct.

                  1. Franchisee agrees that at all times during the term of this
         Agreement Robert Cohen, or a successor, shall devote substantial time
         and effort in the active management and operation of its test
         preparation business, shall be responsible for the management and
         operation thereof, and shall act on behalf of Franchisee in all
         dealings with Franchisor. The person herein identified may be changed
         upon giving written notice to Franchisor.

                  Franchisee understands, hereby acknowledges, and agrees that
         the kinds and extent of business results achieved, and the financial
         returns and profits, if any, expected or realized from the investment
         in, and the operation of, the business franchised hereunder depend
         principally and substantially on Franchisee's direct, personal and
         active continuous participation in the management, administration and
         operation of such business.

                  2. Franchisee will at all times give efficient service to the
         public meeting the performance standards set forth in Appendix B of
         this Agreement. Franchisor and Franchisee shall adhere to high
         standards of business ethics, integrity and fair dealing, and

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         do nothing which would tend to discredit or in any manner damage the
         reputation and good will of Franchisor, the TPR Method, Franchisee or
         other Franchisees of Franchisor. Franchisee will in a reasonably timely
         manner provide Franchisor with reports and information concerning the
         identities, test scores and other results of enrolled students in the
         form and manner requested.

                  3. Franchisee shall make all payments and reports provided
         herein, and pay all debts owed to Franchisor, when they shall become
         due.

                  4. Franchisee shall conduct its business in accordance with
         all applicable laws and regulations, and at its own expense shall
         obtain and maintain all permits, certificates, and licenses required to
         engage in the test preparation business franchised hereunder.

                  5. Franchisee warrants and covenants that during the term of
         this Agreement it will not engage in any capacity (a) in any
         educational business activity with high school or college students
         except as provided herein, or (b) in any test preparation service
         business with any person, without the advance, written consent of
         Franchisor.

         C. Mandatory Attendance at Training/Program meetings. Franchisor shall
have the right at its option to require Franchisee or its duly authorized
management representative to attend one training/program meeting per year, and
Franchisee agrees it or its representative will attend one such meeting at
Franchisee's sole expense for all travel, living and incidental costs. Failure
to attend because of illness or other physical incapacity shall not be a default
hereunder. The Franchisor shall charge Franchisee no fee for mandatory meetings.

         D. Insurance. Franchisee alone shall be responsible for all loss or
damage arising out of or relating to the operation of Franchisee's business or
arising out of the acts or omissions of

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Franchisee or any of its agents, employees, servants, or contractors in
connection with services offered or rendered by Franchisee, and for all claims
for damage to property of for injury or death of any persons directly or
indirectly resulting therefrom, and Franchisee agrees to indemnify and hold
Franchisor harmless against and from any and all such claims, loss, and damage,
including costs and reasonable attorneys fees, except for acts of the Franchisor
or those committed at its direction. Franchisee at its own cost and expense
shall obtain and at all times during the term of this agreement maintain in full
force and effect automobile and public liability insurance with limits of
liability for death and bodily injury of not less than $1,000,000.00 for each
person injured and $50,000.00 for property damages on each occurrence or a
combined single limit of $1,000,000.00.

         Said policies of insurance shall be on forms, upon terms and with
insurers reasonably satisfactory to Franchisor.

         Said policies of insurance shall expressly insure and protect both
Franchisee and Franchisor. Franchisee shall furnish to Franchisor a certified
copy of certificate with respect to each such policy which provides that such
policy shall not be canceled or modified except upon 30 days prior written
notice to Franchisor. If Franchisee fails to obtain or maintain in force any
insurance as provided herein or to furnish the certificates required hereunder,
Franchisor may, in addition to other remedies it may have, maintain or obtain
such insurance and/or certificates, and Franchisee shall promptly reimburse
Franchisor for all premiums and other costs incurred thereby.

VIII.    PROPRIETARY MARKS

         A. Validity and Use. The franchise granted hereunder and the Princeton
Review Method are operated in connection with and through the use of various
trademarks, trade names,

                                       19
<PAGE>   20
and service marks along with certain related words, slogans, letters, and
symbols (all of which are hereafter collectively referred to as "the Propriety
Marks"). The Proprietary Marks include, but are not limited to, those
registered, or which may become registered, in the United States Patent and
Trademark Office.

         The following comprise the proprietary names and marks licensed and
protected hereunder: THE PRINCETON REVIEW; TPR.

         Franchisor reserves the right to alter, change or amend the Proprietary
Marks referred to herein and to add proprietary names and marks to those
licensed hereunder. Franchisor does not warrant the availability or validity of
said marks. In the event that the right to use any name or proprietary mark
granted to franchisee in connection herewith is threatened by anyone else, or if
a registration application for any such name or mark is denied or invalidated,
Franchisor at its option shall have the right to either:

                  a. defend against any such claim or action which threatens use
         of the name or mark at Franchisor's sole expense; or

                  b. substitute a different name or mark nationally with all
         franchisees, in which case the substituted name or mark shall be
         accorded the same treatment as provided herein; or

                                       20
<PAGE>   21
                  c. discontinue use of the name or mark only with respect to
         Franchisee hereunder, in which event the parties agree that this
         Agreement shall be modified to provide that, and to limit the extent of
         liability to, a reduction of the royalty rate payable hereunder by
         Franchisee under Paragraph III. A. from eight percent (8%) to four
         percent (4%), and the elimination of Franchisee's obligation to pay any
         advertising fee to Franchisor whatsoever.

         As between the parties hereto, Franchisee acknowledges the validity of
the Proprietary Marks and acknowledges that they are the property of Franchisor.
Franchisee hereby agrees to use the Proprietary Marks only for so long as the
franchise and license granted herein remain in force, and only in connection and
in accord with the Princeton Review Method, and in compliance with this
Agreement and guidelines and bulletins issued by Franchisor relating to the
proper use of the Proprietary Marks.

         Franchisee shall not, either during or after the term of this
Agreement, do anything, or aid or assist any other party to do anything, which
would infringe upon, harm, dilute or contest the rights of Franchisor in any of
the Proprietary Marks or in any other mark or name which incorporates the name
Princeton Review. Franchisee acknowledges and agrees that all rights, benefits
and goodwill that may develop in the Proprietary Marks shall inure and accrue to
the full and exclusive benefit of Franchisor.

                                       21
<PAGE>   22
         B. Firm Name. Franchisee shall operate, advertise, and promote the
business and its services under the name The Princeton Review, and shall
designate in conjunction therewith that Franchisee is an independent franchisee.
Franchisee shall not, however, use the name The Princeton Review, or any other
name containing such name, or any of the Proprietary Marks in or as part of the
firm or corporate name of Franchisee. Franchisee shall, upon request of
Franchisor at any time, immediately stop the use of any such name or word in its
firm or corporate name, and shall promptly take such steps as may be necessary
or appropriate in the judgment of Franchisor to remove any such name or word
from Franchisee's firm or corporate name.

         C. Unauthorized Use. Franchisee shall promptly report to Franchisor any
unauthorized use of the Proprietary Marks that come to its attention in any
manner whatever. Upon request of Franchisor, Franchisee agrees to cooperate with
Franchisor in preventing unauthorized use of the Proprietary Marks, or any
confusingly similar mark, at the sole expense of Franchisor.

IX.      CONFIDENTIALITY OF THE PRINCETON REVIEW METHOD

         Franchisee hereby acknowledges that only Franchisor can license rights
in and to the Princeton Review Method and any parts thereof, including all
material and information divulged to Franchisee relating to the Method.
Franchisee further acknowledges that all parts of the Method whether or not
trade secrets, and which are not generally known to the public, constitute
confidential business information of Franchisor which are revealed to Franchisee
in trust and in confidence, solely for the purpose of enabling Franchisee to
establish and operate the test preparation business franchised by this
Agreement. Such confidential information includes, but is not limited to,
educational software programs, training aids, data, and written materials;
business

                                       22
<PAGE>   23
procedures and processes; supplies, equipment and material lists; instructor
lists; customer information; training and operations manuals; teaching
techniques; promotion and marketing aids; business forms and accounting
procedures; and informational bulletins. Franchisee agrees that during and after
the term of this Agreement, it will not reveal any of such information to any
other person or firm, except to employees of Franchisee, and then only in trust
and in confidence, and only to the extent such knowledge is necessary to perform
the duties of their employment, and Franchisee agrees, further, that it will not
use any of such confidential business information in any manner in connection
with any business or venture in which it has or may acquire any interest, direct
or indirect, in any capacity whatever, other than in connection with the
operation of the business franchised hereunder. Nothing herein shall be
understood as prohibiting Franchisee from selling any of its mailing lists to
any other party.

X.       IMPROVEMENTS TO THE METHOD

         In order to assure maximum uniformity of quality, performance and
service, nationally in all courses conducted by all franchisees. Franchisee
agrees to follow the procedures prescribed by the Princeton Review Method. As
Franchisor develops or learns of improvements, and adopts them for the method,
it will inform franchisees and authorize their use in Franchisee's business. In
return and in consideration therefore, Franchisee agrees that any idea or
suggested innovation or variation, which may tend to enhance or improve the
efficiency or effectiveness of test preparation services compatible with the
Princeton Review Method, that Franchisee discovers or otherwise becomes aware of
during the term of this Agreement shall be submitted to Franchisor for its
evaluation for adoption and use and Franchisee agrees that all proprietary
rights to such ideas, innovations or variations created or acquired by
Franchisee or any of its employees may be

                                       23
<PAGE>   24
adopted and used by Franchisor and may be made available to other franchisees.

XI.      RIGHTS AND LIMITATIONS ON ASSIGNABILITY BY FRANCHISEE

         A. Assignment of Franchise Rights. The franchise rights granted
hereunder are personal in nature to the Franchisee who is a party to this
Agreement. Franchisee hereby agrees not to sell, assign, transfer, convey, or
encumber this Agreement or any right or interest therein or thereunder, or to
suffer or permit any such sale, assignment, transfer, conveyance or encumbrance
to occur by operation of law, without the prior written consent of Franchisor.
Such consent shall not be unreasonably withheld, may not require that there be
any change in the terms of this Agreement or any extension thereof, and shall be
determined on the bases of the personal, business, and financial qualifications
of the proposed transferee, and its acceptance of the obligations and terms of
this Agreement. Franchisor will not charge a transfer fee.

         B. Franchisor's First Option to Acquire. In the event of any proposal
to sell, assign, or transfer any right or interest in the business for which
Franchisee is hereunder franchised to use the Princeton Review Method (except
for Franchisor-approved advertising for offers to purchase), there shall first
be submitted to Franchisor a copy of any bona fide written offer made or
received, or if none, a statement in writing of all the terms of the proposed
purchaser, assignee or transferee. Thereafter, Franchisor shall have the
irrevocable first right and option to purchase or acquire any such right or
interest on the same terms as stated in the offer or statement, and Franchisor
may exercise such right and option by notifying Franchisee in writing of its
election to do so within thirty (30) days after its receipt of the written offer
or statement.

         If Franchisor does not so notify Franchisee within the thirty (30) day
period, then the proposed sale, assignment or transfer of Franchisee's business
may be made to a party other than

                                       24
<PAGE>   25
Franchisor, subject to Franchisor's consent as provided in Subparagraph XI .A.,
but only on the terms set forth in the written offer or statement and only to
the party therein identified. Such sale, assignment or transfer shall constitute
a cancellation and termination of all interest and rights of Franchisee under
this Agreement whereupon all obligations of Franchisee under Paragraph XIV. of
this Agreement shall be effective.

         If the proposed sale, assignment or transfer is not made within
one-hundred-twenty (120) days after receipt by Franchisor of the written offer
or statement, it shall be deemed withdrawn or rejected and the provisions of
this Paragraph XI.B. shall renew and again be fully applicable.

         C. Death or Disability of Franchisee. In the event of the death or
disability of an individual Franchisee, Franchisor will consent to an assignment
and transfer of this Agreement on an interim basis to the personal
representative of Franchisee, and subsequently to an heir, legatee or devisee of
Franchisee, provided that each of the following conditions is fulfilled with
respect to each such assignment and transfer:

             1.  It shall be demonstrated to the satisfaction of Franchisor
         that such personal representative or successor is qualified, on the
         bases of character, business experience and capability, credit
         standing, health, and financial resources, necessary to successfully
         operate Franchisee's business in accordance with the terms of this
         Agreement.

             2.  The person, if any, to be substituted in Paragraph VII.B.
         of this Agreement shall have been approved by Franchisor and shall have
         successfully completed the training courses then in effect for
         franchisees or shall have completed such courses at the next earliest
         time offered by Franchisor.

             3.  There shall not be an existing default in any of the
         obligations of Franchisee

                                       25
<PAGE>   26
         which would constitute cause for termination pursuant to Paragraph
         XIII. hereunder, and all amounts owed to Franchisor as of the date of
         death or disability shall be paid in full.

             4.  Such personal representative or successor shall have
         submitted to Franchisor satisfactory evidence that he has become
         entitled to succeed to the rights of Franchisee hereunder, agrees to
         assume all obligations of Franchisee hereunder and agrees to be bound
         by all the terms and provisions of this Agreement to the same extent
         and manner as Franchisee, and executes such personal undertakings as
         Franchisor shall reasonably require.

         Any consent of Franchisor hereunder shall not constitute consent to any
subsequent assignment or transfer.

XII.     ASSIGNABILITY BY FRANCHISOR

         This Agreement may be assigned by Franchisor or by any successor, to
any party or corporation which may succeed to the business of Franchisor or of
such successor by sale of assets, merger, or consolidation or otherwise, and may
also be assigned by Franchisor or by such successor to the shareholders thereof
in connection with any distribution of the assets of said party or corporation,
provided, the assignee assumes the responsibilities and obligations of
Franchisor under this Agreement.

XIII.    TERMINATION

         Termination by Franchisor for cause. Franchisee agrees that Franchisor
may terminate this Agreement prior to the expiration of its term if any of the
following conditions occur by giving Franchisee written notice of termination,
provided, that wherever a reason for termination is prohibited by, or a period
of notice or a time allowed to cure a default as stated in this Paragraph

                                       26
<PAGE>   27
XIII. is different from, applicable law in effect as of the effective date of
this Agreement, such reason may be deemed deleted, and such period or time shall
be deemed ended, to conform with such applicable law:

         A. Franchisee fails to make any payment of money owed to Franchisor
when due, or fails to submit to Franchisor when due any report required pursuant
to this Agreement, and such default is not fully cured within fifteen (15) days
after Franchisor gives notice of such default to Franchisee;

         B. Franchisee is declared or becomes insolvent or bankrupt or makes an
assignment for the benefit of creditors, or a receiver is appointed for its
assets or business, or a proceeding is commenced by or against Franchisee for
appointment of a receiver or for a reorganization or similar arrangement under
state law or any provisions of Federal bankruptcy law, and, if involuntary, such
proceeding is not dismissed within sixty (60) days of the filing thereof;

         C. Franchisee assigns, sells, encumbers, or transfers this Agreement
without Franchisor's prior written consent;

         D. Subject to Paragraph XI.C. of this Agreement, Franchisee becomes
unable because of its condition of health to perform the obligations required or
contemplated hereunder for a period of more than thirty (30) days.

         E. Franchisee conducts no course authorized by the TPR method during
any consecutive six (6) month period.

         F. Franchisee jeopardizes the goodwill of Franchisor's Proprietary
Marks, the Franchisee's business, the Princeton Review Method, including failure
to meet minimum standards of performance provided by this Agreement, or the
reputation of Franchisor, and fails to cure to

                                       27
<PAGE>   28
the extent possible such default within thirty (30) days following notice to
Franchisee by Franchisor;

         G. Franchisee fails to maintain the confidentiality of the Princeton
Review Method as provided in Paragraph IX. of this Agreement;

         H. Franchisee defaults in the performance of the obligations, assumed
under Paragraph VII. of this Agreement and fails to cure any such default within
thirty (30) days following notice to Franchisee by Franchisor;

         I. Franchisee fails to maintain an independent contractor relationship
with Franchisor pursuant to Paragraph XVI.F., except if caused by Franchisor;

         J. Franchisee is convicted of a felony and has exhausted all available
appeals;

         K. Franchisee fails to perform any material obligation assumed by
Franchisee under this Agreement, other than those specifically referred to in
this Paragraph, and such default is not satisfactorily cured within thirty (30)
days after Franchisor gives written notice of such default to Franchisee, or if
Franchisee repeatedly defaults or breaches obligations assumed under this
Agreement;

         L. Franchisee fails to conduct its business in accordance with all
applicable laws and regulations. This shall not prevent Franchisee from
contesting in good faith the validity or applicability of any purported legal
obligation to the extent and in the manner permitted by law.

         Notwithstanding the foregoing, in the event that Franchisee is given
Notice of Termination by Franchisor for any cause or causes specified in
Subparagraphs XIII. C., D., E., F., G., H., I., J., K., or L. of this Agreement,
Franchisee shall, upon its request, be given the opportunity for a period not to
exceed one hundred twenty (120) days following Franchisee's receipt of the
Notice

                                       28
<PAGE>   29
of Termination, to present in writing to Franchisor the terms of, and the
identity of parties to, a bona fide offer to purchase Franchisee's The Princeton
Review business, and such offer shall be subject to, and processed in accordance
with, the provisions of Subparagraphs XI.A. and XI.B. of this Agreement,
provided, that during the said one hundred twenty (120) day period Franchisee
does nothing to discredit Franchisor or the franchised business, and, provided,
further, that if the Notice of Termination is based on a cause specified in
Subparagraph XIII.J. of this Agreement, Franchisor shall have the option of
taking over exclusive management and operating control of the franchised
business during all or any part of the period following Notice of Termination.

         If a proposed sale hereunder is not completed within sixty (60) days
following Franchisor's written consent to the proposed sale, termination shall
immediately thereafter be effective, and the provisions of Paragraph XIV. of
this Agreement shall thereupon apply.

XIV.     OBLIGATIONS UPON TERMINATION

         Upon termination, expiration, or cancellation of this Agreement for any
reason or in any manner, Franchisee shall cease to be an authorized The
Princeton Review franchisee, and Franchisee shall:

         A. Immediately discontinue the use of the Princeton Review Method in
its entirety, all Proprietary Marks, and any names, masks or signs which may be
confusingly similar thereto, and all other materials which may indicate that
Franchisee is or was an authorized The Princeton Review franchisee or otherwise
associated with Franchisor. Franchisee further agrees to return to Franchisor
all materials containing any reference to Franchisor, and to cancel any pending
advertising and discontinue future advertising which refers to or connotes any
relationship between Franchisee and Franchisor.

                                       29
<PAGE>   30
         B. Promptly pay to Franchisor all sums owing from Franchisee to
Franchisor. Termination of this Agreement under any circumstances shall not
relieve Franchisee of any debt, obligation, or liability to Franchisor which may
have accrued hereunder, and all obligations and agreements of Franchisee which
expressly or by implication are to be performed after the termination of this
Agreement shall survive such termination.

         C. Offer, for a period of acceptance of not less than fifteen (15)
days, to sell to Franchisor at its then market value, all or any portion of
equipment and supplies suitable for use is connection with the Princeton Review
Method, prior to offering the same to any other party.

         D. Assist Franchisor in every way possible to bring about an
immediately effective, complete and orderly transfer of Franchisee's test
preparation business and students to Franchisor or to such persons as Franchisor
may designate. Franchisee specifically agrees hereunder to cooperate fully with
Franchisor to assign immediately to Franchisor any and all business telephone
numbers used by Franchisee in the conduct or promotion of the franchised
business, and hereby irrevocably appoints and authorizes Franchisor to act as
Franchisee's attorney-in-fact and agent to effect such assignment.

         E. Maintain the confidentiality and not disclose to any person any of
the confidential business or trade secrets furnished to Franchisee by Franchisor
under this Agreement or in connection with the operation of the business
licensed hereunder.

         F. Refrain from engaging in, or becoming in any manner financially
interested in, the educational testing or any related business similar to the
franchised business for a period of one year following cessation of this
Agreement within the geographic territory described in Section I.A.1 hereunder
and within twenty-five (25) miles outside the boundary lines of such territory.

                                       30
<PAGE>   31
XV.      INDEMNIFICATION

         A. By Franchisor. In the event Franchisee is sued for damages in any
suit or action based on grounds of Franchisee's infringing use of any
Proprietary Mark licensed to Franchisee by Franchisor, or of Franchisee's
infringing use of materials provided to Franchisee by Franchisor for use in the
franchised The Princeton Review business, Franchisor shall defend the suit or
action and shall indemnify Franchisee for all damages awarded, provided:
Franchisee gives Franchisor immediate notice of any suits or actions instituted
or threatened against Franchisee and reasonably cooperates in its defense, and
Franchisor has the sole right to control the defense of, and the sole discretion
to compromise and settle, any such suit or action.

         B. By Franchisee. In the event Franchisor is sued and found liable by
final judgment for damages in any suit or action based on grounds of
Franchisee's acts or conduct not authorized by Franchisor, Franchisee shall
indemnify Franchisor from all damages awarded and reasonable attorneys' fees,
provided, Franchisor gives Franchisee immediate notice of any such suit or
action instituted or threatened against Franchisor, and Franchisee has the right
to participate in the defense of any such suit or action.

XVI.     MISCELLANEOUS

         A. Grammar. Any personal pronoun shall include the masculine, feminine
and/or the neuter thereof, and the singular of any noun or pronoun shall include
the plural and plural the singular, wherever the context may require.

         B. Section Headings. Section headings are for ease of reference only.
They are not a part of this Agreement and shall not limit or define the meaning
of any provision.

                                       31
<PAGE>   32
         C. Non-waiver. No failure by Licensor to take action on account of any
default by Franchisee, whether in a single instance or repeatedly, shall
constitute a waiver of any such default or of the performance required of
Franchisee.

         D. Invalidity. If any provision of this Agreement shall be invalid or
unenforceable, either in its entirety or partially or because of its application
to particular circumstances, such provision shall, by mutual intention herein
expressed by the parties hereto, be deemed modified to the extent necessary to
render such provision valid or inapplicable, or to be eliminated from this
Agreement, if required, and this Agreement shall be construed and enforced as if
such provision had been originally so modified or eliminated. In the event that
total or partial invalidity or unenforceability of any provision of this
Agreement exists only with respect to the laws of a particular jurisdiction,
this section shall apply only to the extent that the laws of such jurisdiction
are controlling.

         E. Entire Agreement. This Agreement constitutes and contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and it may be modified only by a written document executed by the party
sought to be bound or obligated. The parties acknowledge hereby that there are
no representations, understandings, agreements, terms or conditions not
contained or referred to in this Agreement, and that this Agreement supersedes
any prior written or oral agreements, representations or inducements.

                                       32
<PAGE>   33
         F. Relationship of the Parties. This Agreement does cot create the
relationship of principal and agent, joint ventures, or partners between
Franchisor and Franchisee, and in no circumstances shall Franchisee be
considered an agent of Franchisor. Franchisee agrees that it will do nothing to
give the impression that it is an agent of Franchisor or to attempt to create
any obligation on behalf of or in the name of Franchisor.

         G. Interpretation of the Agreement. This Agreement shall be interpreted
under the laws of the State of New York except to the extent that the law of the
State in which the Franchisee's business is located requires that it be
interpreted under the laws of such state.

         H. Counterparts. This Agreement may be executed in any number of
identical counterparts, and each such counterpart shall be deemed a duplicate
original hereof.

         I. Notices. Any notice required or permitted under this Agreement shall
be in writing and either delivered in person or mailed, return receipt
requested, postage fully prepaid and addressed as follows:

             1.  If to Franchisee, either to the address of Franchisee's
         business as set forth heretofore or to Franchisee's residence address;
         and.

             2.  If to Franchisor, the address of its principal offices as
         heretofore set forth. Addresses for notices may be changed at any time
         upon written notice thereof.

         J. Unless otherwise agreed, this agreement shall become effective on
the date upon which it is executed by all parties hereto.

                                       33
<PAGE>   34
         In witness whereof, Franchisee and Franchisor have executed this
Agreement on the date or dates here below written.

Witness:                                    Franchisee

 /s/ Danielle Beach                         /s/ Robert L. Cohen (SEAL)
-----------------------------               --------------------------
                                            Signature

                                            Robert L. Cohen
                                            ---------------
                                            Full Name (Printed)

                                            Date: 6/1/86
                                                  ------

                                            Address and phone number of
                                            Franchisee's residence:
                                            13 Olden Street
                                            ---------------
                                            Princeton, NJ 08540
                                            -------------------

Attest:                                     PRINCETON REVIEW MANAGEMENT CORP.
                                            (Franchisor)

/s/ Danielle Beach                          By: John S. Katzman
----------------------------                    ------------------------
                                            Title: Chairman
                                                   ---------------------
                                            Date: June 14, 1986
                                                  ----------------------
<PAGE>   35
                    THE PRINCETON REVIEW FRANCHISE AGREEMENT

                      Appendix A (under Paragraph VII. A.)

             EQUIPMENT NECESSARY TO CONDUCT THE FRANCHISED BUSINESS:

*        An IBM Personal Computer or equivalent, with 256K memory, a 10mg hard
         disk, serial and parallel ports.

*        A Hayes compatible 1200 baud modem (internal or external)

*        Two printers: one letter quality and the other dot matrix

*        An optical mark reader made by Scantron Corp-option 1 (optional)

*        A copying machine

*        A telephone answering machine or answering service

The equipment may be purchased from any dealer of such equipment. It may be new
or used, must perform suitably.

                                            /s/ Robert L. Cohen
                                            ------------------------------------
                                            Franchisee

                                       35
<PAGE>   36
                         THE PRINCETON REVIEW FRANCHISE

         The parties hereto, The Princeton Review Management Corp. (the
Franchisor), and Robert Cohen, a natural person (the Franchisee), hereby
acknowledge as follows: That inasmuch as the Franchisee has experience in, and
has engaged in, a test preparation business similar to the business franchised
to the Franchisee by the Franchisor under a Franchise Agreement dated June 1,
1986, Franchisor is not required to expend the resources which otherwise would
he necessary to provide the Franchisee with initial and continuing training,
counseling, and other services, materials and equipment.

         Therefore, it is agreed that the Franchisee shall pay a initial
franchise fee to the Franchisor in the total amount of : $20,000 due
immediately, rather than the formula amount which otherwise would be payable
under the standard terms of the franchise. It is further agreed that the
Franchisee has not and will not be entitled to the same extent of initial and
continuing training, counseling, and other services, materials and equipment as
it would be if it were inexperienced and not engaged in a similar cost
preparation business.

                                           /s/ Robert L. Cohen
                                           ------------------------------------
                                           Franchisee

Date:  6/1/86                              John Katzman
                                           ------------------------------------
                                           The Princeton Review Management Corp.

                                       36
<PAGE>   37
                    THE PRINCETON REVIEW FRANCHISE AGREEMENT

                     APPENDIX B (Under Paragraph VII.B.2. )

Standards of Performance:

         The Franchise represents The Princeton Review in its community; a
serious breach would irreparably damage the reputation of the company and all
franchisees in the system. Any legal judgment that a franchisee has helped a
student cheat, or any conviction of a felony, is cause for termination under
Paragraphs XIII.F. and J. of the Franchise Agreement.

         The results of students who take the program are also very important,
and will be evaluated in the interest of the success of all involved. The method
by which the performance of franchisees will be judged is as follows.

         Results of testing can be measured objectively: the improvement of each
student is the difference between his final test score and his most recent prior
test score. It the student has not previously taken a particular test or
preliminary test before enrolling in the course, a comparison will be made with
the student's first diagnostic test score.

         To be satisfactory, a franchisee's students' results for each test
offered must approximate or exceed nationwide results for that particular test.
A franchisee's performance will be deemed unsatisfactory if, for three
successive terms, his students' testing results for a specific test are more
than twenty-five percent (25%) below the average results of all students of all
The Princeton Review site locations for that test for that term.

         If a franchise fails to meet the test score standard of satisfactory
performance, the franchisee will be liable to Franchisor for a consultation
charge not to exceed five percent (5%) of gross receipts derived from
Franchisee's substandard test business for the year in which

                                       37
<PAGE>   38
performance was below standard. In return, the Franchisor, for a reasonable
charge not to exceed said five percent (5%) will send one or more
representatives to the franchisee's sub-standard location for the purpose of
monitoring the operation, diagnosing the causes of inadequate results, and
making recommendations for improvements. In the event the Franchisee follows the
Franchisor's recommendations for improving performance, and the location's
results are not in fact improved, the full amount of the consultation charge
will be refunded.

                                            /s/ Robert L. Cohen
                                            ------------------------------------
                                            Franchisee

                                       38
<PAGE>   39
            In consideration of the foregoing and of the following mutual
promises and undertakings:

         1. The Franchisor agrees and consents to the assignment of any The
Princeton Review Franchise Agreement between the Franchisor and the Franchisee,
including the aforesaid Franchise Agreement and any separate and independent
franchise agreement growing out of the provisions of the Addendum thereto, to
either an existing or future corporation in which the Franchisee has and
maintains a controlling stock interest, provided, the Franchisee gives the
Franchisor prior notice of assignment along with a copy of a written agreement
effecting the assignment in which the assignee agrees to assume all obligations
of the assignor under the franchise agreement, and provides the Franchisor with
an accurate and complete listing of all stockholders of the assignee corporation
setting forth their respective stock interests. Upon receipt of the foregoing
notice, copy of written assignment agreement and listing of stockholders, the
Franchisee shall be relieved as of the effective date of the assignment of
personal liability under the assigned franchise agreement except for the
obligations set forth in paragraph 2 of this "Consent to Assignment."

         2. The Franchisee promises and agrees:

            a. To provide the Franchisor with the information provided in
paragraph 1 of this Agreement and to keep such information current;

            b. To remain personally liable following an assignment subject to
this Agreement for the obligations of any assignee corporation for payment of
royalty-service fees and advertising fees currently due and payable at any time
during the term of this Agreement to the Franchisor, and for all currently due
and payable fees or charges for materials, training, inventory, software or
equipment provided to the assignee corporation by the Franchisor; and

                                       39
<PAGE>   40
            c. To remain personally obligated to comply with all restrictive
covenants provided under said franchise agreements, including use of the
Franchisor's business information, methods and names (under paragraph I.A.2. &
3. of the Franchise Agreement); use of the proprietary marks (under paragraph
VIII. of the Franchise Agreement); maintenance of confidentiality (under
paragraph IX. of the Franchise Agreement); engaging in conflicting and competing
business activity during the term of the franchise (under paragraph VII. B. 5.
of the Franchise Agreement) and after the term of the franchise (under paragraph
XIV.F. of the Franchise Agreement); and maintaining post-term confidentially
(under paragraph XIV.E. of the Franchise Agreement).

         In Witness Whereof, the parties hereto have executed this Agreement the
day and year first above written.

                                            Franchisee

/s/ Danielle Beach                          /s/ Robert L. Cohen
------------------                          -------------------
       Witness

                                            The Princeton Review Management
                                            Corp. Franchisor

Attest:

/s/ Danielle Beach                          By: /s/ John Katzman
------------------                              ----------------
<PAGE>   41
                  CONSENT TO ASSIGNMENT OF FRANCHISE AGREEMENT

         AGREEMENT made this 1st day of June, 1986, by and between Robert Cohen
(hereinafter referred us as Elie Franchisee), and Princeton Review Management
Corp. (hereinafter referred to as the Franchisor),

         WITNESSETH

         WHEREAS, the Franchisee, a natural person, and the Franchisor have
entered into a The Princeton Review Franchise Agreement dated June 1, 1986, and

         WHEREAS, said Franchise Agreement provides that the Franchisee may not
assign any right or interest in the said Agreement or in any separate and
independent franchise agreement granted under the terms of the Franchise
Agreement and on Addendum Agreement thereto, and

         WHEREAS, the Franchisee desires to obtain in advance the Franchisor's
consent to assign his rights and interests in the aforesaid Franchise Agreement
and in independent, separate The Princeton Review franchise agreements which may
be acquired in the future to a corporation or corporations in which the
Franchisee owns and exercises a controlling stock interest, and

         WHEREAS, the Franchisor is willing to give its consent to such
aforesaid assignment or assignment;

         NOW THEREFORE, it is hereby agreed as follows:
<PAGE>   42
                         ADDENDUM TO FRANCHISE AGREEMENT

         THIS ADDENDUM to the Franchise Agreement dated June 1, 1986 between The
Princeton Review Management Corp. (the "Franchisor") and Robert Cohen (the
"Franchisee") is made by the parties thereto concurrently with the execution of
the said Franchise Agreement and is consideration thereof. The parties intend
this Addendum to add to, modify and interpret the said Franchise Agreement, and
to replace and take precedence over any term, provision or condition thereof
which may be contrary to, inconsistent with, or different from any provision of
this Addendum.

         NOW THEREFORE, the parties agree as follows:

              1. The initial term of the Franchise Agreement as provided under
Paragraph I.B. thereof shall be for a period of twenty (20) years. Subsequent
terms as provided herein shall be for ten (10) years each.

              2. The Franchisor hereby approves the Franchisee as a The
Princeton Review ("TPR") Franchisee and waives any right under Paragraph VI.A.l.
of the Franchise Agreement to cancel the Agreement for the reason therein
provided.

              3. The following franchised business site locations are hereby
approved by the Franchisor pursuant to Paragraph I.A.1. of the Franchise
Agreement:

         Princeton Arts Council (Princeton), Trinity Church (Princeton), Temple
         B'Na Shakn (East Brunswick), YMCA (East Brunswick), The Living Center
         (Brielle), Middletown HS South (Middleton), 3 Olden Street (Princeton),
         Brookside School (Allendale), Holy Spirit Lutheran Church (Leonia),
         Congregation Sons of Israel (Leonia)

         The Franchisor may not withdraw its approval of any of the aforesaid
site locations except with the written consent of the Franchisee.
<PAGE>   43
              4. The provisions of Paragraph VIII .B. of the Franchise Agreement
notwithstanding, the Franchisor hereby authorizes and approves the Franchisee to
use and trade under the following business and/or corporate name(s) in
conducting the operation of the franchised business:

              Princeton Review of New Jersey, Inc.

              5. If in the future the Franchisor charges any other franchisee a
lesser royalty-service fee, advertising fee, or other fee than that which is
provided under the Franchisee Agreement with the Franchisee, then, and upon such
event, the said fee or fees thereafter charged to and payable by the Franchisee
shall be reduced correspondingly to equal such lesser fee or fees.

              6. The initial training program provided under VI. A. 1. of the
Franchise Agreement will be provided to up to two personnel of the Franchisee at
any mutually convenient time or times during the initial term of the Franchise
Agreement, and the persons designated may undertake such training either at the
same time or at different times.

              7. The training fees or charges for mandatory new programs payable
by the Franchisee to the Franchisor for its chargeable cost under Paragraph VI.
B. 1. b. of the Franchise Agreement shall include only necessary and customary
business expenses and shall not exceed a total of $250.00 for training
applicable to any one said program.

              8. The Franchisor's costs under Paragraph VI. B. l. c. of the
Franchise Agreement relative to optional new programs may include only necessary
and customary business expenses of the Franchisor associated with the
development of the program and shall exclude any personal expenses of the
Franchisor.

              9. For so long as the Franchisor, The Princeton Review, Inc., or
any officer, director, or controlling stockholder of either firm is subject to
currently pending litigation with Educational Testing Service, Inc., the
Franchisee shall not be bound under Paragraph VII. B. 2. of the Franchise
Agreement to provide the Franchisor with the identities of enrolled students.
All other information and data described therein shall be provided, including
reports of test scores, but the Franchisee is not required to provide originals
or copies of original actual test score report sheets of tests given or
administered to students by any independent third party.

              10. The Franchisee shall not be required to submit to the
Franchisor any
<PAGE>   44
advertising of offers to sell, or for offers to purchase, the Franchisee's
franchised TPR business.

              11. Any compromise and/or settlement proposed to be made by the
Franchisor under Paragraph XV.A. of the Franchise Agreement shall be reasonable
in relation to the business interests of the Franchisee. Before entering into
any such final compromise or settlement, the Franchisor shall give the
Franchisee reasonable notice of the proposed settlement or compromise which need
not be more than ten (10) days. If within the aforesaid ten (10) day period the
Franchisee gives to the Franchisor written notice stating specific grounds as to
how the proposal would unreasonably injure the Franchisee's business interests
and rights and objecting to the proposal, and the parties are unable themselves
to resolve differences between them within ten (10) days following receipt of
notice by the Franchisor, the parties will submit the issues to binding
arbitration in the City of New York on an expedited basis over a period not to
exceed thirty (30) days without mutual agreement otherwise. If the parties are
unable to agree to a single arbitrator, each party will name one arbitrator and
they, in turn, will name a third. In the event the parties are unable to agree
upon procedures, such will be conducted in accordance with the then current
rules of the American Arbitration Association. The decision of the arbitrator(s)
shall be binding upon the parties and final, and shall be enforceable by any
court of competent jurisdiction.
<PAGE>   45
              12. The geographical area described in Paragraph I.A.1 of this
Franchise Agreement includes within it the counties listed below. At any time or
times during the term of this Agreement or any extension thereof, Franchisee or
its assignee shall have the right upon thirty (30) days' notice in writing to
the Franchisor to delete and separate out from this Agreement (the "primary
agreement") any of the aforesaid counties (in its entirety) from the rest of the
geographical area, and to obtain from the Franchisor a separate and independent
franchise agreement for any one or more of said counties. The primary agreement
shall thereupon be amended to delete the separated county from this agreement.
The initial franchise fee, for purposes of article II only shall remain the
same, but for all other purposes the initial franchise fee shall be deemed to
have been reduced by the amount listed below with regard to the deleted county.
The franchise agreement and addendums to be issued for the new county shall be
issued upon the same terms and provisions of the primary agreement, except that
the geographical area described in Paragraph I. A. 1 shall be the separated
county. No initial franchise fee shall be payable, but for all other purposes of
the Agreement the initial franchise fee shall be deemed to have been set at the
respective amounts set forth below:

<TABLE>
<S>                    <C>
         Mercer        $11,358
         ------        -------
         Ocean         $ 5,860
         -----         ------
         Monmouth      $19,586
         --------      -------
         Middlesex     $23,989
         ---------     -------
         Somerset      $11,512
         --------      -------
         Union         $19,987
         -----         -------
         Essex         $27,860
         -----         -------
         Morris        $22,073
         ------        -------
         Hudson        $10,072
         ------        -------
         Bergen        $40,150
         ------        -------
         Passaic       $ 9,618
         -------       -------
         Hunterdon     $ 4,291
         ---------     -------
</TABLE>

         Any sale, assignment, transfer, conveyance, or encumbrance of any
separate and independent franchise agreement for any separated county to any
party other than the Franchisee under the primary agreement shall be subject to
and governed by all of the terms and provisions of Paragraph XI. of the primary
and/or separate and independent franchise agreement, including, without
limitation, the requisite prior written consent of the Franchisor and the
Franchisor's first option to acquire.

              13. If the Office of the Attorney General of the State of New York
requires
<PAGE>   46
any change to be made to the Franchise Agreement as a condition to the
registration of the TPR franchise in the State of New York, Franchisee shall
have the option to have this Agreement modified to conform to any such change or
changes. Franchisee shall exercise the option granted hereunder by giving
Franchisor written notice thereof within thirty (30) days after receiving notice
from Franchisor of the change or changes.

         IN WITNESS WHEREOF the parties hereto have executed this Addendum
Agreement on this First day of June, 1988, intending thereby to be legally
bound.

WITNESS/ATTEST                              FRANCHISEE

/s/ Danielle Beach                          /s/ Robert L. Cohen
                                            -------------------

                                            THE PRINCETON REVIEW
                                            MANAGEMENT CORP.  (SEAL)<PAGE>   1

                                                                   Exhibit 10.38

                    THE PRINCETON REVIEW FRANCHISE AGREEMENT
         AGREEMENT made in the City of Princeton, State of New Jersey, by and
between Princeton Review Management Corp., a Delaware Corporation (hereinafter
referred to as "Franchisor"), and Matthew Rosenthal whose address is 75 Longwood
Ave, Brookline, Mass. 02146 (hereinafter referred to as "Franchisee").

         WITNESSETH:
         ----------

                                    RECITALS

         Franchisor has developed and acquired a comprehensive method known as
The Princeton Review ("TPR") Method for conducting, operating, and marketing a
test preparation business which prepares students to take college and graduate
school admission tests and other courses ("the business"). The TPR Method,
consisting, in part, of confidential and proprietary educational materials,
teaching aids, techniques, systems, and formats was developed through
considerable expenditures of time, effort and money, and is identified by and
with certain proprietary names and marks owned by Franchisor.
<PAGE>   2
         Franchisor is in the business of licensing and franchising others, who
desire to engage in the business, rights to use the TPR Method, the Franchisor's
proprietary names and marks associated with it, and teaching aids and materials
as currently developed and as expanded and improved in the future. In order to
assist Franchisees to use the TPR Method efficiently and effectively in the
operation of the business, and to provide high quality and uniform standards of
service, Franchisor provides or makes available to Franchisees various initial
and continuing training and services.

         Franchisee desires to use the Princeton Review Method in the operation
of a franchised The Princeton Review test preparation business under a franchise
granted from Franchisor by, and in conformance with the terms of, this
Agreement, at a location or locations within a territory hereafter described.
Franchisee also desires to obtain and to derive the benefits of Franchisor's
initial and continuing services, training, guidance, expertise, know-how and
information for its use in operating and managing the business.

         Franchisee acknowledges as essential conditions of this Agreement and
the rights granted hereunder, and as consideration exchanged by and for the
mutual benefit of all licensed users of the TPR Method and name, that Franchisee
adhere to the uniform standards of quality, procedure and format prescribed by
the TPR Method; preserve the confidentiality of the TPR Method; and comply fully
with the obligations hereafter set forth.

         In consideration of the foregoing recitals, of the mutual promises
hereafter set forth, and of other good and valuable consideration, Franchisor
and Franchisee hereby agree as follows:

I.       GRANT, TERRITORIAL RIGHTS, AND TERM

         A.       Grant of Franchise. Franchisor hereby grants to Franchisee,
and Franchisee hereby

                                       2
<PAGE>   3
accepts from Franchisor a franchise and license for the term and upon the
conditions and terms hereafter set forth:

                  1.       To use the TPR Method in connection with the
         operation of a franchised Princeton Review test preparation business at
         specific, approved site locations within the following geographical
         area: Mass. Counties of Essex, Middlesex, Norfolk, Suffolk, Plymouth,
         Bristol, Worcester, Dukes, Nantucket and Barnstable. Franchisor shall
         not unreasonably withhold approval of specific site locations proposed
         by Franchisee. As used herein, the term "site locations" means the
         place or places at which Franchisee conducts courses available under
         the TPR Method. For so long as this Agreement continues in effect,
         Franchisor itself shall not, nor will it franchise or license any other
         party or parties to, nor will it permit any officer of Franchisor to,
         establish and operate a similar test preparation business under any
         name or mark at any location within the geographical area above
         described, except to the extent provided by Subparagraph VI. B. l. c.
         of this Agreement.

                  2.       To use confidential and proprietary educational
         materials, trade secrets and techniques, operating manuals and
         bulletins, and other business methods and know-how disclosed by
         Franchisor, solely in connection with the operation of the business
         conducted at the locations heretofore described and in accordance with
         the terms of this Agreement;

                  3.       To use Franchisor's proprietary names, marks, and
         methods franchised and licensed hereunder only in the above described
         geographical area (except with respect to media advertising or with
         Franchisor's advance written consent), and only in the manner provided
         by this Agreement, and only for so long as this Agreement shall remain
         in effect

                                       3
<PAGE>   4
         and Franchisee is in compliance with its terms;

         B.       Term, Commencement of Operations, and Renewal. The term of
this Agreement and of the franchise and license granted herein shall be for a
period of twenty (20) years commencing on June 1, 1986, and ending on May 31,
2006, unless sooner terminated in accordance with the terms of this Agreement.
Franchisee hereby agrees to commence operations hereunder no later than no
calendar days following the execution of this Agreement. For purposes of this
Agreement, Franchisee's fiscal year shall begin on the first day of January and
end on the last day of December for so long as this Agreement remains in effect,
unless changed with the written consent of Franchisor.

         Franchisee shall have the option to renew the license granted herein
for successive ten (10) year terms provided all of the following conditions have
been fulfilled:

                  1.       Franchisee gives written notice to Franchisor of
         Franchisee's intention to so renew no later than one hundred eighty
         (180) days, nor earlier than one (1) year, prior to the expiration of
         this or any renewal term of this Agreement and this Agreement has not
         otherwise been previously terminated; and

                  2.       At the scheduled date of renewal, there is no pending
         uncured default or breach of this Agreement constituting cause for
         termination under Paragraph XIII. hereof; and

                  3.       Franchisee executes no later than one hundred twenty
         (120) days prior to the expiration of the term of this Agreement or any
         renewal or extension hereof a renewal agreement on the terms and
         conditions then being offered to new licensees, except that (a) no
         initial license fee shall be payable by Franchisee upon renewal; (b)
         periodic

                                       4
<PAGE>   5
         payments shall be of no higher percentages nor payable more frequently
         than those provided by this Agreement; and (c) reporting and/or record
         keeping requirements shall be no more extensive or frequent than those
         provided by this Agreement; and

                  4.       Franchisee, either in the year immediately preceding
         the expiration date of the renewal option hereby provided, or on an
         annual basis averaged over the last three (3) years preceding the
         expiration date of the renewal option hereby provided, has made royalty
         payments to Franchisor of no less than thirty percent (30%) of
         Franchisee's initial franchise fee hereunder adjusted to correspond
         with changes in the national consumer/price index or makes a
         supplemental cash payment in the amount of the difference between
         actual payments made and the percentage payments provided herein.

II.      INITIAL FRANCHISE FEE

         In consideration of the franchise and license granted by this
Agreement, Franchisee shall pay to Franchisor the sum of $163,715 as an initial
franchise fee payable in consecutive, non-interest bearing installment payments
as follows: 15% upon execution of this Agreement; 15% within each and every 180
day period following thereafter for five payments; and, a final payment of the
full balance remaining outstanding within the next succeeding 180 day period.

         Each installment payment of the initial franchise fee shall be deemed
fully earned by Franchisor upon payment thereof, and no installment payment of
the initial fee shall be refundable, in whole or in part, at any time under any
circumstances except as provided by Paragraph VI. A. l. of this Agreement.

         If prior to the completion of Franchisee's first three (3) years of
operation hereunder, Franchisee is by law required to cease conducting the
business franchised and conducted pursuant

                                       5
<PAGE>   6
to the terms of this Agreement by reason of any unlawful act of Franchisor,
Franchisee shall, as liquidated damages therefor, be released and discharged
from any obligation to make any future unpaid initial fee installment payment.

         The initial fee is in addition to the periodic royalty-service fee
payable pursuant to Paragraph III., the advertising fee payable under Paragraph
V., and any other fee or payment which Franchisee may incur or owe to Franchisor
from time to time under this or any other Agreement.

III.     CONTINUING ROYALTY-SERVICE FEES

         A.       Amount and Payment of Periodic Fees. In further consideration
of the rights and entitlements granted under this Agreement, Franchisee agrees
to pay to Franchisor monthly, within ten (10) days after the last day of each
and every calendar month ("monthly payment periods") during the term of this
Agreement, a combined royalty-service fee in the amount equal to eight percent
(8%) of Franchisee's gross receipts collected during the preceding monthly
payment period. For purposes of this Paragraph III.A., gross receipts means the
total revenues received by Franchisee for sale of goods or services made by or
from Franchisee's franchised The Princeton Review test preparation business or
businesses, and shall include all revenues that have been received by Franchisee
for purchases of goods or services similar or of the same nature as those
offered by the TPR Method made by current or former students of Franchisee's The
Princeton Review business. There shall be excluded from gross receipts taxes
added to the sales price and collected from the customer, credit card charges,
and bona fide refunds.

         B.       Throughout the term of this Agreement, Franchisee shall pay to
Franchisor a minimum annual royalty service fee calculated in accordance with
the following schedule:

                                       6
<PAGE>   7
1st Year of Operation -- 5% of Initial Franchise Fee

                                   $ 8,185.75

2nd Year of Operation -- 10% of Initial Franchise Fee

                                   $16,371.50

3rd and Subsequent Years of Operation -- 15% of Initial Franchise Fee

                                   $24,557.25

Beginning with the fourth year of this Agreement, the dollar amount of the
minimum annual royalty-service fee shall be adjusted as of the anniversary date
of this Agreement to correspond to any change in the national consumer-price
index for the preceding year. If at the end of each year of this Agreement,
total royalty-service fee payments made during the year total less than the
aforesaid minimum annual royalty-service fee due for such year, Franchisee shall
pay Franchisor the difference within thirty (30) days following the end of such
year.

         Royalty-service fee payments received by Franchisor under this
Agreement shall be under no restriction whatever but shall be considered general
funds of Franchisor for all purposes.

         When, in any same calendar year, a majority of individual TPR
franchises fails to attain the minimum fee, the minimum fee percentage
applicable to such year will be reduced to the percentage actually attained by a
majority of franchisees.

IV.      REPORTS AND RECORDS

         A.       Franchisee shall submit to Franchisor, at the time each
monthly payment of royalty-service fee is due, an accurate and complete
statement of gross receipts (as defined in Paragraph III. A.) on forms
specified, approved or provided by Franchisor and completed according to their
terms.

                                       7
<PAGE>   8
         B.       Within thirty (30) days after each quarterly period of
Franchisee's fiscal year during the term of this Agreement, Franchisee shall
submit to Franchisor a statement of financial condition (a balance sheet) and a
statement of income and expense relating to the business as of and for the
period ending on such quarterly period, on forms specified, approved, or
provided by Franchisor and completed according to their terms in accordance with
generally accepted accounting practices.

         C.       Within sixty (60) days after the close of Franchisee's fiscal
year, Franchisee shall furnish to Franchisor a year-end income and expense
statement in the form requested, and certified to by Franchisee, including an
entry showing the total gross receipts for the said previous fiscal year. If
this statement shows that there has been any underpayment of royalty-service
fees for such fiscal year based on gross receipts as finally adjusted and
reconciled after the closing and review of Franchisee's books and records,
Franchisee shall pay to Franchisor, at the time of submitting such statement,
the amount of any such underpayment. Any overpayment shall be refunded to
Franchisee within thirty (30) days.

         Franchisor shall provide Franchisee with a computer program designed to
generate the financial information required to be supplied by Franchisee under
Subparagraphs IV. B. or C. If said computer program, when used according to
Franchisor's instruction or direction, is defective and fails to generate the
financial information herein required, Franchisee shall be under no obligation
to provide such information during the time such defective condition persists.

         D.       Franchisee shall maintain appropriate books and records in
such a manner as to clearly and accurately show gross receipts as defined
herein. All such books and records, and income tax returns applicable to the
test preparation business of Franchisee shall be open at all

                                       8
<PAGE>   9
reasonable times to inspection and verification by Franchisor or its duly
authorized representatives. Franchisor shall be entitled at any time during
normal business hours to have Franchisee's books and records examined or audited
at Franchisor's expense upon seventy-two (72) hours' notice and Franchisee shall
cooperate fully with the parties making such examination or audit on behalf of
Franchisor. Franchisee shall promptly pay to Franchisor or Franchisor shall
refund to Franchisee, as the case may be, any under or overpayment or
royalty-service fees revealed by the examination or audit. If an examination or
audit is performed due to Franchisee's failure to submit statements of gross
receipts or to maintain books and records as provided herein, or in the event
that the gross receipts reported by Franchisee for any period of twelve
consecutive months are more than five percent (5%) below the actual gross
receipts of Franchisee for such period as determined by any such examination or
audit, then Franchisee shall within fifteen (15) days following notice, pay to
Franchisor the reasonable and customary cost of such an examination or audit as
well as all additional amounts of royalty-service fee charges, advertising
charges, and any other charges or fees shown to be due. Payment and acceptance
of such amounts shall not waive or prejudice any right of Franchisor to exercise
any other remedy of this Agreement, including termination in accordance with
Paragraph XIII of this Agreement. Any delinquent royalty-service fee or other
fees or charges due Franchisor from Franchisee shall bear interest at the annual
rate of eighteen percent (18%) from thirty (30) days after the date such amount
was due until paid.

V.       PROMOTION AND ADVERTISING

         In addition to, and along with, the Royalty-Service fee provided
herein, Franchisee shall pay monthly to Franchisor an advertising fee equal to
two percent (2%) of Franchisee's gross

                                       9
<PAGE>   10
receipts as heretofore defined for the preceding month. All Franchisor-owned TPR
test preparation business units shall make a monthly contribution to the
advertising fund in an amount equal to two percent (2%) of their gross receipts
for the preceding month, and Franchisor shall use all such funds it receives
hereunder for the development, placement, and distribution of regional and
national consumer advertising designed in its discretion to promote consumer
demand for services and products available from The Princeton Review franchises
under the TPR Method.

         Franchisor shall deposit and maintain all unexpended advertising funds
collected from franchisees in an appropriately identified bank account separate
and distinct from any other and used for no other purpose. In the months of
January and July of each year throughout the term of this Agreement, Franchisor
shall distribute to Franchisee a report disclosing receipts of advertising funds
collected and specifically how such funds were expended during the preceding
six-month period.

         Franchisee may in its own right and at its own expense promote and
advertise its franchised business, provided that all such promotional materials
and advertising proposed to be used shall prior to use or publication be
submitted to and approved by Franchisor in the interest of maintaining the
integrity, force, quality, image and goodwill associated with the proprietary
names and marks of Franchisor. Unless Franchisor disapproves proposed
advertising within seven (7) days following its receipt thereof, approval
hereunder shall be deemed to have been given.

VI.      OBLIGATIONS OF FRANCHISOR

         A.       Undertakings Prior to Commencement of Operations. Prior to
Franchisee's commencement of operations hereunder Franchisor shall:

                                       10
<PAGE>   11
                  1.       Training: Conduct a training program for Franchisee
         covering the TPR Method and courses currently available thereunder. The
         training program will be at such location and time as Franchisor shall
         designate, and shall be at no extra charge for not more than two (2)
         persons designated by Franchisee and acceptable to Franchisor. All
         expenses of travel, lodging, meals and other living expenses incurred
         by Franchisee's personnel in attending such program shall be borne and
         paid for by Franchisee.

                  The grant of the franchise herein is conditioned upon
         successful completion of the training program by Franchisee or its
         personnel as determined by Franchisor. If during the course of the
         training program or within fifteen (15) days thereafter Franchisor
         concludes that Franchisee or its designee has not exhibited the
         aptitude, abilities, or personal characteristics necessary or desirable
         to operate successfully a test preparation business in accordance with
         the standards and procedures of the Princeton Review Method and as a
         Franchisee of Franchisor, Franchisor may, in its sole discretion and
         judgement, cancel this Agreement and all rights hereunder, where
         permitted by applicable law, by giving notice to Franchisee and
         tendering to Franchisee a refund of its initial franchise fee.
         Franchisee agrees that such refund shall be the full extent of
         Franchisor's liability and responsibility in the event of such
         cancellation, and that upon cancellation Franchisee shall return to
         Franchisor all materials, manuals, information and all other items that
         Franchisee received from Franchisor, including all copies thereof and
         notes thereon which Franchisee may have or control. Franchisee further
         agrees to maintain strictly the confidentiality of all information
         received relating to the TPR Method and not to use in the operation of
         a test preparation or similar business, any trade secrets or
         confidential information obtained from

                                       11
<PAGE>   12
         Franchisor in the course of the training program or otherwise.

                  2.       Materials. Lend in trust to Franchisee the computer
         software and data and other course materials needed to conduct the
         franchised business in accordance with the TPR Method which Franchisor
         may revise from time to time to reflect changes, additions and
         improvements to suggested and required course offerings, procedures,
         policies, standards and specifications. Such material shall at all
         times remain the property of Franchisor.

                  Franchisee agrees to follow the procedures and adhere to the
         policies set forth in any operating manuals or bulletin, and to
         maintain their confidentiality. Upon expiration or termination of this
         Agreement, or upon reasonable request of Franchisor, Franchisee shall
         return such materials to Franchisor.

                  3.       Provide assistance in locating, selecting and
         equipping the specific business premises within the Franchisee's
         geographical area suitable for conducting the franchised business
         activities.

                  B.       Continuing Undertakings. Franchisor shall provide the
following continuing services for the benefit of Franchisee:

                  1.       Method Improvements and Program Additions.

                           a.       Make available to Franchisee from time to
                  time all improvements and additions to the TPR Method that are
                  circulated generally to all other franchisees, and, except as
                  otherwise provided hereunder, to Franchisor-owned TPR test
                  preparation businesses. Franchisor shall exercise due
                  diligence to keep materials current.

                                       12
<PAGE>   13
                           b.       New, additional, or improved course programs
                  developed by Franchisor which are designed to prepare students
                  for college or graduate school admissions tests will be
                  offered exclusively for marketing by Franchisees. After any
                  such program has been tested by Franchisor for a period of at
                  least one year, Franchisee shall be required to accept and put
                  into use such program in the franchised business. They may be
                  subject to a fee or charge based only on the Franchisor's
                  costs for providing Franchisee's personnel with training
                  necessary to incorporate and implement such programs in
                  Franchisee's business. Franchisee shall not be required to
                  accept more than two (2) new programs in any calendar year.

                           c.       Any new course developed by Franchisor other
                  than one provided for in subparagraph b. above will be offered
                  to Franchisee on a first option basis before being offered to
                  any other party. Until any such program has been tested by
                  Franchisor for a period of at least one year, and Franchisee
                  has been extended a written option notice by Franchisor,
                  Franchisee shall have the first option right to exclusively
                  market each program within the geographical area described in
                  Paragraph I.A.1. of this Agreement. The first option right
                  herein provided shall be exercised by Franchisee by giving
                  Franchisor written notice of its election to do so within
                  thirty (30) days following Franchisee's receipt of a statement
                  of Franchisor describing the program, reciting Franchisee's
                  right to obtain exclusive marketing rights in said
                  geographical area, and setting forth the fee or charge payable
                  by Franchisee to secure such right and program. The fee or
                  charge payable shall be

                                       13
<PAGE>   14
                  based on Franchisee's pro rata share of Franchisor's costs to
                  develop the course and program. As used herein, the term "pro
                  rata share" means the proportionate value of the formula
                  amount of Franchisee's initial franchise fee calculated on the
                  basis of factors existing as of a date six (6) months prior to
                  the date the option offer is made ("the adjusted initial fee
                  value") in relation to the total adjusted initial franchise
                  fee value on such date of all TPR franchises and of all
                  Franchisor-owned TPR units assuming they were franchises.

                           In the event Franchisee does not exercise the first
                  option rights herein provided, Franchisor shall have the right
                  to grant said marketing rights to any other party or parties
                  within the aforesaid geographical area, but only under a name
                  or mark other than THE PRINCETON REVIEW or any other
                  proprietary name or mark hereunder licensed to Franchisee.

                          (Except as otherwise agreed, Franchisor unilaterally
                  represents that (i) it will not market any computer or
                  videotape programs purporting to prepare students for a
                  college or graduate school admissions test, but nothing herein
                  shall be understood to preclude Franchisor from publishing
                  and/or marketing any book designed to prepare students for the
                  school admissions process including any admissions or
                  qualifications test; and, (ii) it will not engage in any
                  business under any other name similar to or competitive with
                  the business franchised hereunder.)

                           As used herein, a program "tested by Franchisor" must
                  have included, but is not limited to, conducting the new
                  program among no less than 100 participants, checking the
                  results, and making the results available to Franchisee.

                                       14
<PAGE>   15
                  2.       Software Warranty. If Franchisee notifies Franchisor
         of the existence of an error in computer software that has been
         provided to Franchisee by Franchisor which materially impairs
         Franchisee's ability to properly conduct its franchised TPR business,
         Franchisor warrants to correct or rectify such error within five (5)
         days following its receipt of written notice from Franchisee ("the
         grace period"). If any such computer software error is not corrected or
         rectified by Franchisor within the said grace period, Franchisor will
         waive, or refund, payment of royalty-service fees otherwise payable in
         accordance with the following formula: 1/60 x D x R, where D represents
         the number of days elapsing between the expiration of the grace period
         and the day on which the error was corrected, and R represents the
         royalty-service fees payable by Franchisee to Franchisor for the
         specific test in which the error occurred for the year in which the
         error occurred.

                  3.       Assistance. Provide telephone counseling to
         Franchisee at reasonable times and frequency with respect to the
         operation and management of the business, and make available to it the
         benefit of Franchisor's information, advice, expertise and know-how.

                  4.       Advertising. Make available to Franchisee from time
         to time, national and/or regional TPR advertising programs as they are
         developed with advertising funds collected pursuant to Paragraph V.
         hereof and generally circulated. In the months of January and July of
         each year during the term of this Agreement, Franchisor shall
         distribute to Franchisee a report disclosing receipts of advertising
         funds collected and specifically how such funds were expended during
         the preceding six-month period.

                                       15
<PAGE>   16
                  5.       Continuing Training. Provide, at the option of
         Franchisor, mandatory training program/meetings. Franchisee agrees to
         attend (or to cause its designated employees to attend) one mandatory
         training/program meeting per year, but failure to attend because of
         illness or other physical incapacity shall not be a default hereunder.
         All mandatory training/program meetings will be held at a location
         within the continental United States designated by Franchisor.
         Franchisor will not charge Franchisee a fee for mandatory meetings, but
         all travel, living, and personal expenses incurred by Franchisee in
         connection with meeting attendance will be the sole obligation of
         Franchisee.

VII.     OBLIGATIONS OF FRANCHISEE

         A.       Promotion of The Princeton Review Method and Business.

                  1.       Franchisee agrees during the term of this Agreement
         to promote at all times the sale of test preparation services available
         from Franchisee pursuant to the TPR Method, using its best efforts to
         develop and enlarge Franchisee's market for such services. Franchisee
         agrees to accept new, additional, and improved course programs
         developed by Franchisor and designed to prepare students for college or
         graduate school admissions tests, and to pay to Franchisor a new
         program training fee based on Franchisor's costs for providing such
         training for each such program to personnel of the Franchisee as is
         reasonably necessary to incorporate and implement such programs in
         Franchisee's business, provided, that Franchisor has tested such
         program (in the manner required under Paragraph VI.B.1. hereof) for a
         period of at least one (1) year.

                  New courses or programs developed by Franchisor for inclusion
         in the TPR Method other than those designed to prepare students for
         college or graduate school

                                       16
<PAGE>   17
         admissions tests will be offered to Franchisee on a first option basis
         as provided by Paragraph VI.B. of this Agreement.

                  2.       Franchisee hereby agrees to operate its franchised
         business in accordance with methods and procedures prescribed by
         Franchisor in its operating manual or other bulletins, as revised from
         time to time, and to equip the franchised business in accordance with
         the standards of the Franchisor, including, specifically, those items
         listed on Appendix A of this Agreement.

         B.       Management Responsibility and Business Conduct.

                  1.       Franchisee agrees that at all times during the term
         of this Agreement Matthew Rosenthal, or a successor, shall devote
         substantial time and effort in the active management and operation of
         its test preparation business, shall be responsible for the management
         and operation thereof, and shall act on behalf of Franchisee in all
         dealings with Franchisor. The person herein identified may be changed
         upon giving written notice to Franchisor.

                  Franchisee understands, hereby acknowledges, and agrees that
         the kinds and extent of business results achieved, and the financial
         returns and profits, if any, expected or realized from the investment
         in, and the operation of, the business franchised hereunder depend
         principally and substantially on Franchisee's direct, personal and
         active continuous participation in the management, administration and
         operation of such business.

                  2.       Franchisee will at all times give efficient service
         to the public meeting the performance standards set forth in Appendix B
         of this Agreement. Franchisor and Franchisee shall adhere to high
         standards of business ethics, integrity and fair dealing, and

                                       17
<PAGE>   18
         do nothing which would tend to discredit or in any manner damage the
         reputation and good will of Franchisor, the TPR Method, Franchisee or
         other Franchisees of Franchisor. Franchisee will in a reasonably timely
         manner provide Franchisor with reports and information concerning the
         identities, test scores and other results of enrolled students in the
         form and manner requested.

                  3.       Franchisee shall make all payments and reports
         provided herein, and pay all debts owed to Franchisor, when they shall
         become due.

                  4.       Franchisee shall conduct its business in accordance
         with all applicable laws and regulations, and at its own expense shall
         obtain and maintain all permits, certificates, and licenses required to
         engage in the test preparation business franchised hereunder.

                  5.       Franchisee warrants and covenants that during the
         term of this Agreement it will not engage in any capacity (a) in any
         educational business activity with high school or college students
         except as provided herein, or (b) in any test preparation service
         business with any person, without the advance, written consent of
         Franchisor.

         C.       Mandatory Attendance at Training/Program meetings. Franchisor
shall have the right at its option to require Franchisee or its duly authorized
management representative to attend one training/program meeting per year, and
Franchisee agrees it or its representative will attend one such meeting at
Franchisee's sole expense for all travel, living and incidental costs. Failure
to attend because of illness or other physical incapacity shall not be a default
hereunder. The Franchisor shall charge Franchisee no fee for mandatory meetings.

         D.       Insurance. Franchisee alone shall be responsible for all loss
or damage arising out of or relating to the operation of Franchisee's business
or arising out of the acts or omissions of

                                       18
<PAGE>   19
Franchisee or any of its agents, employees, servants, or contractors in
connection with services offered or rendered by Franchisee, and for all claims
for damage to property of for injury or death of any persons directly or
indirectly resulting therefrom, and Franchisee agrees to indemnify and hold
Franchisor harmless against and from any and all such claims, loss, and damage,
including costs and reasonable attorneys fees, except for acts of the Franchisor
or those committed at its direction. Franchisee at its own cost and expense
shall obtain and at all times during the term of this agreement maintain in full
force and effect automobile and public liability insurance with limits of
liability for death and bodily injury of not less than $1,000,000.00 for each
person injured and $50,000.00 for property damages on each occurrence or a
combined single limit of $1,000,000.00.

         Said policies of insurance shall be on forms, upon terms and with
insurers reasonably satisfactory to Franchisor.

         Said policies of insurance shall expressly insure and protect both
Franchisee and Franchisor. Franchisee shall furnish to Franchisor a certified
copy of certificate with respect to each such policy which provides that such
policy shall not be canceled or modified except upon 30 days prior written
notice to Franchisor. If Franchisee fails to obtain or maintain in force any
insurance as provided herein or to furnish the certificates required hereunder,
Franchisor may, in addition to other remedies it may have, maintain or obtain
such insurance and/or certificates, and Franchisee shall promptly reimburse
Franchisor for all premiums and other costs incurred thereby.

VIII.    PROPRIETARY MARKS

         A.       Validity and Use. The franchise granted hereunder and the
Princeton Review Method are operated in connection with and through the use of
various trademarks, trade names,

                                       19
<PAGE>   20
and service marks along with certain related words, slogans, letters, and
symbols (all of which are hereafter collectively referred to as "the Propriety
Marks"). The Proprietary Marks include, but are not limited to, those
registered, or which may become registered, in the United States Patent and
Trademark Office.

         The following comprise the proprietary names and marks licensed and
protected hereunder: THE PRINCETON REVIEW; TPR.

         Franchisor reserves the right to alter, change or amend the Proprietary
Marks referred to herein and to add proprietary names and marks to those
licensed hereunder. Franchisor does not warrant the availability or validity of
said marks. In the event that the right to use any name or proprietary mark
granted to franchisee in connection herewith is threatened by anyone else, or if
a registration application for any such name or mark is denied or invalidated,
Franchisor at its option shall have the right to either:

                  a.       defend against any such claim or action which
         threatens use of the name or mark at Franchisor's sole expense; or

                  b.       substitute a different name or mark nationally with
         all franchisees, in which case the substituted name or mark shall be
         accorded the same treatment as provided herein; or

                                       20
<PAGE>   21
                  c.       discontinue use of the name or mark only with respect
         to Franchisee hereunder, in which event the parties agree that this
         Agreement shall be modified to provide that, and to limit the extent of
         liability to, a reduction of the royalty rate payable hereunder by
         Franchisee under Paragraph III. A. from eight percent (8%) to four
         percent (4%), and the elimination of Franchisee's obligation to pay any
         advertising fee to Franchisor whatsoever.

         As between the parties hereto, Franchisee acknowledges the validity of
the Proprietary Marks and acknowledges that they are the property of Franchisor.
Franchisee hereby agrees to use the Proprietary Marks only for so long as the
franchise and license granted herein remain in force, and only in connection and
in accord with the Princeton Review Method, and in compliance with this
Agreement and guidelines and bulletins issued by Franchisor relating to the
proper use of the Proprietary Marks.

         Franchisee shall not, either during or after the term of this
Agreement, do anything, or aid or assist any other party to do anything, which
would infringe upon, harm, dilute or contest the rights of Franchisor in any of
the Proprietary Marks or in any other mark or name which incorporates the name
Princeton Review. Franchisee acknowledges and agrees that all rights, benefits
and goodwill that may develop in the Proprietary Marks shall inure and accrue to
the full and exclusive benefit of Franchisor.

                                       21
<PAGE>   22
         B.       Firm Name. Franchisee shall operate, advertise, and promote
the business and its services under the name The Princeton Review, and shall
designate in conjunction therewith that Franchisee is an independent franchisee.
Franchisee shall not, however, use the name The Princeton Review, or any other
name containing such name, or any of the Proprietary Marks in or as part of the
firm or corporate name of Franchisee. Franchisee shall, upon request of
Franchisor at any time, immediately stop the use of any such name or word in its
firm or corporate name, and shall promptly take such steps as may be necessary
or appropriate in the judgment of Franchisor to remove any such name or word
from Franchisee's firm or corporate name.

         C.       Unauthorized Use. Franchisee shall promptly report to
Franchisor any unauthorized use of the Proprietary Marks that come to its
attention in any manner whatever. Upon request of Franchisor, Franchisee agrees
to cooperate with Franchisor in preventing unauthorized use of the Proprietary
Marks, or any confusingly similar mark, at the sole expense of Franchisor.

IX.      CONFIDENTIALITY OF THE PRINCETON REVIEW METHOD

         Franchisee hereby acknowledges that only Franchisor can license rights
in and to the Princeton Review Method and any parts thereof, including all
material and information divulged to Franchisee relating to the Method.
Franchisee further acknowledges that all parts of the Method whether or not
trade secrets, and which are not generally known to the public, constitute
confidential business information of Franchisor which are revealed to Franchisee
in trust and in confidence, solely for the purpose of enabling Franchisee to
establish and operate the test preparation business franchised by this
Agreement. Such confidential information includes, but is not limited to,
educational software programs, training aids, data, and written materials;
business

                                       22
<PAGE>   23
procedures and processes; supplies, equipment and material lists; instructor
lists; customer information; training and operations manuals; teaching
techniques; promotion and marketing aids; business forms and accounting
procedures; and informational bulletins. Franchisee agrees that during and after
the term of this Agreement, it will not reveal any of such information to any
other person or firm, except to employees of Franchisee, and then only in trust
and in confidence, and only to the extent such knowledge is necessary to perform
the duties of their employment, and Franchisee agrees, further, that it will not
use any of such confidential business information in any manner in connection
with any business or venture in which it has or may acquire any interest, direct
or indirect, in any capacity whatever, other than in connection with the
operation of the business franchised hereunder. Nothing herein shall be
understood as prohibiting Franchisee from selling any of its mailing lists to
any other party.

X.       IMPROVEMENTS TO THE METHOD

         In order to assure maximum uniformity of quality, performance and
service, nationally in all courses conducted by all franchisees. Franchisee
agrees to follow the procedures prescribed by the Princeton Review Method. As
Franchisor develops or learns of improvements, and adopts them for the method,
it will inform franchisees and authorize their use in Franchisee's business. In
return and in consideration therefore, Franchisee agrees that any idea or
suggested innovation or variation, which may tend to enhance or improve the
efficiency or effectiveness of test preparation services compatible with the
Princeton Review Method, that Franchisee discovers or otherwise becomes aware of
during the term of this Agreement shall be submitted to Franchisor for its
evaluation for adoption and use and Franchisee agrees that all proprietary
rights to such ideas, innovations or variations created or acquired by
Franchisee or any of its employees may be

                                       23
<PAGE>   24
adopted and used by Franchisor and may be made available to other franchisees.

XI.      RIGHTS AND LIMITATIONS ON ASSIGNABILITY BY FRANCHISEE

         A.       Assignment of Franchise Rights. The franchise rights granted
hereunder are personal in nature to the Franchisee who is a party to this
Agreement. Franchisee hereby agrees not to sell, assign, transfer, convey, or
encumber this Agreement or any right or interest therein or thereunder, or to
suffer or permit any such sale, assignment, transfer, conveyance or encumbrance
to occur by operation of law, without the prior written consent of Franchisor.
Such consent shall not be unreasonably withheld, may not require that there be
any change in the terms of this Agreement or any extension thereof, and shall be
determined on the bases of the personal, business, and financial qualifications
of the proposed transferee, and its acceptance of the obligations and terms of
this Agreement. Franchisor will not charge a transfer fee.

         B.       Franchisor's First Option to Acquire. In the event of any
proposal to sell, assign, or transfer any right or interest in the business for
which Franchisee is hereunder franchised to use the Princeton Review Method
(except for Franchisor-approved advertising for offers to purchase), there shall
first be submitted to Franchisor a copy of any bona fide written offer made or
received, or if none, a statement in writing of all the terms of the proposed
purchaser, assignee or transferee. Thereafter, Franchisor shall have the
irrevocable first right and option to purchase or acquire any such right or
interest on the same terms as stated in the offer or statement, and Franchisor
may exercise such right and option by notifying Franchisee in writing of its
election to do so within thirty (30) days after its receipt of the written offer
or statement.

         If Franchisor does not so notify Franchisee within the thirty (30) day
period, then the proposed sale, assignment or transfer of Franchisee's business
may be made to a party other than

                                       24
<PAGE>   25
Franchisor, subject to Franchisor's consent as provided in Subparagraph XI .A.,
but only on the terms set forth in the written offer or statement and only to
the party therein identified. Such sale, assignment or transfer shall constitute
a cancellation and termination of all interest and rights of Franchisee under
this Agreement whereupon all obligations of Franchisee under Paragraph XIV. of
this Agreement shall be effective.

         If the proposed sale, assignment or transfer is not made within
one-hundred-twenty (120) days after receipt by Franchisor of the written offer
or statement, it shall be deemed withdrawn or rejected and the provisions of
this Paragraph XI.B. shall renew and again be fully applicable.

         C.       Death or Disability of Franchisee. In the event of the death
or disability of an individual Franchisee, Franchisor will consent to an
assignment and transfer of this Agreement on an interim basis to the personal
representative of Franchisee, and subsequently to an heir, legatee or devisee of
Franchisee, provided that each of the following conditions is fulfilled with
respect to each such assignment and transfer:

                  1.       It shall be demonstrated to the satisfaction of
         Franchisor that such personal representative or successor is qualified,
         on the bases of character, business experience and capability, credit
         standing, health, and financial resources, necessary to successfully
         operate Franchisee's business in accordance with the terms of this
         Agreement.

                  2.       The person, if any, to be substituted in Paragraph
         VII .B. of this Agreement shall have been approved by Franchisor and
         shall have successfully completed the training courses then in effect
         for franchisees or shall have completed such courses at the next
         earliest time offered by Franchisor.

                  3.       There shall not be an existing default in any of the
         obligations of Franchisee

                                       25
<PAGE>   26
         which would constitute cause for termination pursuant to Paragraph
         XIII. hereunder, and all amounts owed to Franchisor as of the date of
         death or disability shall be paid in full.

                  4.       Such personal representative or successor shall have
         submitted to Franchisor satisfactory evidence that he has become
         entitled to succeed to the rights of Franchisee hereunder, agrees to
         assume all obligations of Franchisee hereunder and agrees to be bound
         by all the terms and provisions of this Agreement to the same extent
         and manner as Franchisee, and executes such personal undertakings as
         Franchisor shall reasonably require.

         Any consent of Franchisor hereunder shall not constitute consent to any
subsequent assignment or transfer.

XII.     ASSIGNABILITY BY FRANCHISOR

         This Agreement may be assigned by Franchisor or by any successor, to
any party or corporation which may succeed to the business of Franchisor or of
such successor by sale of assets, merger, or consolidation or otherwise, and may
also be assigned by Franchisor or by such successor to the shareholders thereof
in connection with any distribution of the assets of said party or corporation,
provided, the assignee assumes the responsibilities and obligations of
Franchisor under this Agreement.

XIII.    TERMINATION

         Termination by Franchisor for cause. Franchisee agrees that Franchisor
may terminate this Agreement prior to the expiration of its term if any of the
following conditions occur by giving Franchisee written notice of termination,
provided, that wherever a reason for termination is prohibited by, or a period
of notice or a time allowed to cure a default as stated in this Paragraph

                                       26
<PAGE>   27
XIII. is different from, applicable law in effect as of the effective date of
this Agreement, such reason may be deemed deleted, and such period or time shall
be deemed ended, to conform with such applicable law:

         A.       Franchisee fails to make any payment of money owed to
Franchisor when due, or fails to submit to Franchisor when due any report
required pursuant to this Agreement, and such default is not fully cured within
fifteen (15) days after Franchisor gives notice of such default to Franchisee;

         B.       Franchisee is declared or becomes insolvent or bankrupt or
makes an assignment for the benefit of creditors, or a receiver is appointed for
its assets or business, or a proceeding is commenced by or against Franchisee
for appointment of a receiver or for a reorganization or similar arrangement
under state law or any provisions of Federal bankruptcy law, and, if
involuntary, such proceeding is not dismissed within sixty (60) days of the
filing thereof;

         C.       Franchisee assigns, sells, encumbers, or transfers this
Agreement without Franchisor's prior written consent;

         D.       Subject to Paragraph XI.C. of this Agreement, Franchisee
becomes unable because of its condition of health to perform the obligations
required or contemplated hereunder for a period of more than thirty (30) days.

         E.       Franchisee conducts no course authorized by the TPR method
during any consecutive six (6) month period.

         F.       Franchisee jeopardizes the goodwill of Franchisor's
Proprietary Marks, the Franchisee's business, the Princeton Review Method,
including failure to meet minimum standards of performance provided by this
Agreement, or the reputation of Franchisor, and fails to cure to

                                       27
<PAGE>   28
the extent possible such default within thirty (30) days following notice to
Franchisee by Franchisor;

         G.       Franchisee fails to maintain the confidentiality of the
Princeton Review Method as provided in Paragraph IX. of this Agreement;

         H.       Franchisee defaults in the performance of the obligations,
assumed under Paragraph VII. of this Agreement and fails to cure any such
default within thirty (30) days following notice to Franchisee by Franchisor;

         I.       Franchisee fails to maintain an independent contractor
relationship with Franchisor pursuant to Paragraph XVI.F., except if caused by
Franchisor;

         J.       Franchisee is convicted of a felony and has exhausted all
available appeals;

         K.       Franchisee fails to perform any material obligation assumed by
Franchisee under this Agreement, other than those specifically referred to in
this Paragraph, and such default is not satisfactorily cured within thirty (30)
days after Franchisor gives written notice of such default to Franchisee, or if
Franchisee repeatedly defaults or breaches obligations assumed under this
Agreement;

         L.       Franchisee fails to conduct its business in accordance with
all applicable laws and regulations. This shall not prevent Franchisee from
contesting in good faith the validity or applicability of any purported legal
obligation to the extent and in the manner permitted by law.

         Notwithstanding the foregoing, in the event that Franchisee is given
Notice of Termination by Franchisor for any cause or causes specified in
Subparagraphs XIII. C., D., E., F., G., H., I., J., K., or L. of this Agreement,
Franchisee shall, upon its request, be given the opportunity for a period not to
exceed one hundred twenty (120) days following Franchisee's receipt of the
Notice

                                       28
<PAGE>   29
of Termination, to present in writing to Franchisor the terms of, and the
identity of parties to, a bona fide offer to purchase Franchisee's The Princeton
Review business, and such offer shall be subject to, and processed in accordance
with, the provisions of Subparagraphs XI.A. and XI.B. of this Agreement,
provided, that during the said one hundred twenty (120) day period Franchisee
does nothing to discredit Franchisor or the franchised business, and, provided,
further, that if the Notice of Termination is based on a cause specified in
Subparagraph XIII.J. of this Agreement, Franchisor shall have the option of
taking over exclusive management and operating control of the franchised
business during all or any part of the period following Notice of Termination.

         If a proposed sale hereunder is not completed within sixty (60) days
following Franchisor's written consent to the proposed sale, termination shall
immediately thereafter be effective, and the provisions of Paragraph XIV. of
this Agreement shall thereupon apply.

XIV.     OBLIGATIONS UPON TERMINATION

         Upon termination, expiration, or cancellation of this Agreement for any
reason or in any manner, Franchisee shall cease to be an authorized The
Princeton Review franchisee, and Franchisee shall:

         A.       Immediately discontinue the use of the Princeton Review Method
in its entirety, all Proprietary Marks, and any names, masks or signs which may
be confusingly similar thereto, and all other materials which may indicate that
Franchisee is or was an authorized The Princeton Review franchisee or otherwise
associated with Franchisor. Franchisee further agrees to return to Franchisor
all materials containing any reference to Franchisor, and to cancel any pending
advertising and discontinue future advertising which refers to or connotes any
relationship between Franchisee and Franchisor.

                                       29
<PAGE>   30
         B.       Promptly pay to Franchisor all sums owing from Franchisee to
Franchisor. Termination of this Agreement under any circumstances shall not
relieve Franchisee of any debt, obligation, or liability to Franchisor which may
have accrued hereunder, and all obligations and agreements of Franchisee which
expressly or by implication are to be performed after the termination of this
Agreement shall survive such termination.

         C.       Offer, for a period of acceptance of not less than fifteen
(15) days, to sell to Franchisor at its then market value, all or any portion of
equipment and supplies suitable for use is connection with the Princeton Review
Method, prior to offering the same to any other party.

         D.       Assist Franchisor in every way possible to bring about an
immediately effective, complete and orderly transfer of Franchisee's test
preparation business and students to Franchisor or to such persons as Franchisor
may designate. Franchisee specifically agrees hereunder to cooperate fully with
Franchisor to assign immediately to Franchisor any and all business telephone
numbers used by Franchisee in the conduct or promotion of the franchised
business, and hereby irrevocably appoints and authorizes Franchisor to act as
Franchisee's attorney-in-fact and agent to effect such assignment.

         E.       Maintain the confidentiality and not disclose to any person
any of the confidential business or trade secrets furnished to Franchisee by
Franchisor under this Agreement or in connection with the operation of the
business licensed hereunder.

         F.       Refrain from engaging in, or becoming in any manner
financially interested in, the educational testing or any related business
similar to the franchised business for a period of one year following cessation
of this Agreement within the geographic territory described in Section I.A.1
hereunder and within twenty-five (25) miles outside the boundary lines of such
territory.

                                       30
<PAGE>   31
XV.      INDEMNIFICATION

         A.       By Franchisor. In the event Franchisee is sued for damages in
any suit or action based on grounds of Franchisee's infringing use of any
Proprietary Mark licensed to Franchisee by Franchisor, or of Franchisee's
infringing use of materials provided to Franchisee by Franchisor for use in the
franchised The Princeton Review business, Franchisor shall defend the suit or
action and shall indemnify Franchisee for all damages awarded, provided:
Franchisee gives Franchisor immediate notice of any suits or actions instituted
or threatened against Franchisee and reasonably cooperates in its defense, and
Franchisor has the sole right to control the defense of, and the sole discretion
to compromise and settle, any such suit or action.

         B.       By Franchisee. In the event Franchisor is sued and found
liable by final judgment for damages in any suit or action based on grounds of
Franchisee's acts or conduct not authorized by Franchisor, Franchisee shall
indemnify Franchisor from all damages awarded and reasonable attorneys' fees,
provided, Franchisor gives Franchisee immediate notice of any such suit or
action instituted or threatened against Franchisor, and Franchisee has the right
to participate in the defense of any such suit or action.

XVI.     MISCELLANEOUS

         A.       Grammar. Any personal pronoun shall include the masculine,
feminine and/or the neuter thereof, and the singular of any noun or pronoun
shall include the plural and plural the singular, wherever the context may
require.

         B.       Section Headings. Section headings are for ease of reference
only. They are not a part of this Agreement and shall not limit or define the
meaning of any provision.

                                       31
<PAGE>   32
         C.       Non-waiver. No failure by Licensor to take action on account
of any default by Franchisee, whether in a single instance or repeatedly, shall
constitute a waiver of any such default or of the performance required of
Franchisee.

         D.       Invalidity. If any provision of this Agreement shall be
invalid or unenforceable, either in its entirety or partially or because of its
application to particular circumstances, such provision shall, by mutual
intention herein expressed by the parties hereto, be deemed modified to the
extent necessary to render such provision valid or inapplicable, or to be
eliminated from this Agreement, if required, and this Agreement shall be
construed and enforced as if such provision had been originally so modified or
eliminated. In the event that total or partial invalidity or unenforceability of
any provision of this Agreement exists only with respect to the laws of a
particular jurisdiction, this section shall apply only to the extent that the
laws of such jurisdiction are controlling.

         E.       Entire Agreement. This Agreement constitutes and contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof, and it may be modified only by a written document executed by the
party sought to be bound or obligated. The parties acknowledge hereby that there
are no representations, understandings, agreements, terms or conditions not
contained or referred to in this Agreement, and that this Agreement supersedes
any prior written or oral agreements, representations or inducements.

                                       32
<PAGE>   33
         F.       Relationship of the Parties. This Agreement does cot create
the relationship of principal and agent, joint ventures, or partners between
Franchisor and Franchisee, and in no circumstances shall Franchisee be
considered an agent of Franchisor. Franchisee agrees that it will do nothing to
give the impression that it is an agent of Franchisor or to attempt to create
any obligation on behalf of or in the name of Franchisor.

         G.       Interpretation of the Agreement. This Agreement shall be
interpreted under the laws of the State of New York except to the extent that
the law of the State in which the Franchisee's business is located requires that
it be interpreted under the laws of such state.

         H.       Counterparts. This Agreement may be executed in any number of
identical counterparts, and each such counterpart shall be deemed a duplicate
original hereof.

         I.       Notices. Any notice required or permitted under this Agreement
shall be in writing and either delivered in person or mailed, return receipt
requested, postage fully prepaid and addressed as follows:

                  1.       If to Franchisee, either to the address of
         Franchisee's business as set forth heretofore or to Franchisee's
         residence address; and.

                  2.       If to Franchisor, the address of its principal
         offices as heretofore set forth. Addresses for notices may be changed
         at any time upon written notice thereof.

         J.       Unless otherwise agreed, this agreement shall become effective
on the date upon which it is executed by all parties hereto.

                                       33
<PAGE>   34
         In witness whereof, Franchisee and Franchisor have executed this
Agreement on the date or dates here below written.

Witness:                                             Franchisee

 /s/ Pamela J. Kramer                       /s/Matthew Rosenthal (SEAL)
-------------------------------             ---------------------------
                                            Signature

                                            Matthew Rosenthal
                                            ---------------------------
                                            Full Name (Printed)

                                            Date: 6/13/86
                                                  -------

                                            Address and phone number of
                                            Franchisee's residence:
                                            75 Longwood Ave #7F
                                            Brookline, MA 02146

Attest:                                     PRINCETON REVIEW MANAGEMENT CORP.
                                            (Franchisor)

/s/ Andrea Rabney                           By: John S. Katzman
---------------------------                     ------------------------
                                            Title: Chairman
                                                  ---------------------
                                            Date: June 14, 1986
                                                 ----------------------

                                       34
<PAGE>   35
                    THE PRINCETON REVIEW FRANCHISE AGREEMENT

                      Appendix A (under Paragraph VII. A.)

             EQUIPMENT NECESSARY TO CONDUCT THE FRANCHISED BUSINESS:

*        An IBM Personal Computer or equivalent, with 256K memory, a 10mg hard
         disk, serial and parallel ports.

*        A Hayes compatible 1200 baud modem (internal or external)

*        Two printers: one letter quality and the other dot matrix

*        An optical mark reader made by Scantron Corp-option 1 (optional)

*        A copying machine

*        A telephone answering machine or answering service

The equipment may be purchased from any dealer of such equipment. It may be new
or used, must perform suitably.

                                             /s/Matthew Rosenthal
                                             ----------------------------
                                             Franchisee

                                       35
<PAGE>   36
                    THE PRINCETON REVIEW FRANCHISE AGREEMENT

                     APPENDIX B (Under Paragraph VII .B.2. )

Standards of Performance:

         The Franchise represents The Princeton Review in its community; a
serious breach would irreparably damage the reputation of the company and all
franchisees in the system. Any legal judgment that a franchisee has helped a
student cheat, or any conviction of a felony, is cause for termination under
Paragraphs XIII .F. and J. of the Franchise Agreement.

         The results of students who take the program are also very important,
and will be evaluated in the interest of the success of all involved. The method
by which the performance of franchisees will be judged is as follows.

         Results of testing can be measured objectively: the improvement of each
student is the difference between his final test score and his most recent prior
test score. It the student has not previously taken a particular test or
preliminary test before enrolling in the course, a comparison will be made with
the student's first diagnostic test score.

         To be satisfactory, a franchisee's students' results for each test
offered must approximate or exceed nationwide results for that particular test.
A franchisee's performance will be deemed unsatisfactory if, for three
successive terms, his students' testing results for a specific test are more
than twenty-five percent (25%) below the average results of all students of all
The Princeton Review site locations for that test for that term.

         If a franchise fails to meet the test score standard of satisfactory
performance, the franchisee will be liable to Franchisor for a consultation
charge not to exceed five percent (5%) of gross receipts derived from
Franchisee's substandard test business for the year in which performance was
below standard. In return, the Franchisor, for a reasonable charge not to exceed

                                       36
<PAGE>   37
said five percent (5%) will send one or more representatives to the franchisee's
sub-standard location for the purpose of monitoring the operation, diagnosing
the causes of inadequate results, and making recommendations for improvements.
In the event the Franchisee follows the Franchisor's recommendations for
improving performance, and the location's results are not in fact improved, the
full amount of the consultation charge will be refunded.

                                            /s/ Matthew Rosenthal
                                            ---------------------
                                            Franchisee

                                       37
<PAGE>   38
                         ADDENDUM TO FRANCHISE AGREEMENT

         THIS ADDENDUM to the Franchise Agreement dated June 1, 1986 between The
Princeton Review Management Corp. (the "Franchisor") and Matthew Rosenthal (the
"Franchisee") is made by the parties thereto concurrently with the execution of
the said Franchise Agreement and is consideration thereof. The parties intend
this Addendum to add to, modify and interpret the said Franchise Agreement, and
to replace and take precedence over any term, provision or condition thereof
which may be contrary to, inconsistent with, or different from any provision of
this Addendum.

         NOW THEREFORE, the parties agree as follows:

                  1.       The initial term of the Franchise Agreement as
provided under Paragraph I.B. thereof shall be for a period of twenty (20)
years. Subsequent terms as provided herein shall be for ten (10) years each.

                  2.       The Franchisor hereby approves the Franchisee as a
The Princeton Review ("TPR") Franchisee and waives any right under Paragraph
VI.A.l. of the Franchise Agreement to cancel the Agreement for the reason
therein provided.

                  3.       The following franchised business site locations are
hereby approved by the Franchisor pursuant to Paragraph I.A.1. of the Franchise
Agreement:

         The Noble & Greenough School (Brookline), Swampscott HS (Swampscott),
Governor Dummer Academy (Byfield), The Fenn School (Concord), Beaver Country Day
(Chesnut Hill), Randolph HS (Randolph), Newberry Junior College (Brookline),
Montrose School (Monstrose), St. Marks School (Worcester)

         The Franchisor may not withdraw its approval of any of the aforesaid
site locations except with the written consent of the Franchisee.

                                       38
<PAGE>   39
                  4.       The provisions of Paragraph VIII .B. of the Franchise
Agreement notwithstanding, the Franchisor hereby authorizes and approves the
Franchisee to use and trade under the following business and/or corporate
name(s) in conducting the operation of the franchised business:

                  Princeton Review of Boston, Inc.

                  5.       If in the future the Franchisor charges any other
franchisee a lesser royalty-service fee, advertising fee, or other fee than that
which is provided under the Franchisee Agreement with the Franchisee, then, and
upon such event, the said fee or fees thereafter charged to and payable by the
Franchisee shall be reduced correspondingly to equal such lesser fee or fees.

                  6.       The initial training program provided under VI. A. 1.
of the Franchise Agreement will be provided to up to two personnel of the
Franchisee at any mutually convenient time or times during the initial term of
the Franchise Agreement, and the persons designated may undertake such training
either at the same time or at different times.

                  7.       The training fees or charges for mandatory new
programs payable by the Franchisee to the Franchisor for its chargeable cost
under Paragraph VI. B. 1. b. of the Franchise Agreement shall include only
necessary and customary business expenses and shall not exceed a total of
$250.00 for training applicable to any one said program.

                  8.       The Franchisor's costs under Paragraph VI. B. l. c.
of the Franchise Agreement relative to optional new programs may include only
necessary and customary business expenses of the Franchisor associated with the
development of the program and shall exclude any personal expenses of the
Franchisor.

                  9.       For so long as the Franchisor, The Princeton Review,
Inc., or any officer, director, or controlling stockholder of either firm is
subject to currently pending litigation with Educational Testing Service, Inc.,
the Franchisee shall not be bound under Paragraph VII. B. 2. of the Franchise
Agreement to provide the Franchisor with the identities of enrolled students.
All other information and data described therein shall be provided, including
reports of test scores, but the Franchisee is not required to provide originals
or copies of original actual test score report sheets of tests given or
administered to students by any independent third party.

                  10.      The Franchisee shall not be required to submit to the
Franchisor any

                                       39
<PAGE>   40
advertising of offers to sell, or for offers to purchase, the Franchisee's
franchised TPR business.

                  11.      Any compromise and/or settlement proposed to be made
by the Franchisor under Paragraph XV.A. of the Franchise Agreement shall be
reasonable in relation to the business interests of the Franchisee. Before
entering into any such final compromise or settlement, the Franchisor shall give
the Franchisee reasonable notice of the proposed settlement or compromise which
need not be more than ten (10) days. If within the aforesaid ten (10) day period
the Franchisee gives to the Franchisor written notice stating specific grounds
as to how the proposal would unreasonably injure the Franchisee's business
interests and rights and objecting to the proposal, and the parties are unable
themselves to resolve differences between them within ten (10) days following
receipt of notice by the Franchisor, the parties will submit the issues to
binding arbitration in the City of New York on an expedited basis over a period
not to exceed thirty (30) days without mutual agreement otherwise. If the
parties are unable to agree to a single arbitrator, each party will name one
arbitrator and they, in turn, will name a third. In the event the parties are
unable to agree upon procedures, such will be conducted in accordance with the
then current rules of the American Arbitration Association. The decision of the
arbitrator(s) shall be binding upon the parties and final, and shall be
enforceable by any court of competent jurisdiction.

                                       40
<PAGE>   41
                  12.      The geographical area described in Paragraph I.A.1 of
this Franchise Agreement includes within it the counties listed below. At any
time or times during the term of this Agreement or any extension thereof,
Franchisee or its assignee shall have the right upon thirty (30) days' notice in
writing to the Franchisor to delete and separate out from this Agreement (the
"primary agreement") any of the aforesaid counties (in its entirety) from the
rest of the geographical area, and to obtain from the Franchisor a separate and
independent franchise agreement for any one or more of said counties. The
primary agreement shall thereupon be amended to delete the separated county from
this agreement. The initial franchise fee, for purposes of article II only shall
remain the same, but for all other purposes the initial franchise fee shall be
deemed to have been reduced by the amount listed below with regard to the
deleted county. The franchise agreement and addendums to be issued for the new
county shall be issued upon the same terms and provisions of the primary
agreement, except that the geographical area described in Paragraph I. A. 1
shall be the separated county. No initial franchise fee shall be payable, but
for all other purposes of the Agreement the initial franchise fee shall be
deemed to have been set at the respective amounts set forth below:

<TABLE>
<S>                        <C>                       <C>              <C>
         Essex             $20,457                   Bristol          $ 6,924

         Middlesex         62,505                    Worcester         13,959

         Norfolk           29,934                    Dukes                313

         Suffolk           14,207                    Nantucket            112

         Plymouth          11,609                    Barnstable         3,695
</TABLE>

         Any sale, assignment, transfer, conveyance, or encumbrance of any
separate and independent franchise agreement for any separated county to any
party other than the Franchisee under the primary agreement shall be subject to
and governed by all of the terms and provisions of Paragraph XI. of the primary
and/or separate and independent franchise agreement, including, without
limitation, the requisite prior written consent of the Franchisor and the
Franchisor's first option to acquire.

                  13.      If the Office of the Attorney General of the State of
New York requires any change to be made to the Franchise Agreement as a
condition to the registration of the TPR

                                       41
<PAGE>   42
franchise in the State of New York, Franchisee shall have the option to have
this Agreement modified to conform to any such change or changes. Franchisee
shall exercise the option granted hereunder by giving Franchisor written notice
thereof within thirty (30) days after receiving notice from Franchisor of the
change or changes.

         IN WITNESS WHEREOF the parties hereto have executed this Addendum
Agreement on this 13th day of June, 1986, intending thereby to be legally bound.

WITNESS/ATTEST                            FRANCHISEE
/s/ Pamela J. Kramer                      /s/ Matthew Rosenthal
--------------------                          -----------------

                                          THE PRINCETON REVIEW
                                     MANAGEMENT CORP.  (SEAL)
/s/ Andrea Rabney                         By: /s/ John Katzman
-----------------                            -----------------

                                       42
<PAGE>   43
                  CONSENT TO ASSIGNMENT OF FRANCHISE AGREEMENT

                  AGREEMENT made this 1st day of June, 1986, by and between
Matthew Rosenthal (hereinafter referred us as the Franchisee), and Princeton
Review Management Corp. (hereinafter referred to as the Franchisor), WITNESSETH:

                  WHEREAS, the Franchisee, a natural person, and the Franchisor
have entered into a The Princeton Review Franchise Agreement dated June 1, 1986,
and

                  WHEREAS, said Franchise Agreement provides that the Franchisee
may not assign any right or interest in the said Agreement or in any separate
and independent franchise agreement granted under the terms of the Franchise
Agreement and on Addendum Agreement thereto, and

                  WHEREAS, the Franchisee desires to obtain in advance the
Franchisor's consent to assign his rights and interests in the aforesaid
Franchise Agreement and in independent, separate The Princeton Review franchise
agreements which may be acquired in the future to a corporation or corporations
in which the Franchisee owns and exercises a controlling stock interest, and

                  WHEREAS, the Franchisor is willing to give its consent to such
aforesaid assignment or assignment;

                  NOW THEREFORE, it is hereby agreed as follows:

                                       43
<PAGE>   44
                  In consideration of the foregoing and of the following mutual
promises and undertakings:

         14.      The Franchisor agrees and consents to the assignment of any
The Princeton Review Franchise Agreement between the Franchisor and the
Franchisee, including the aforesaid Franchise Agreement and any separate and
independent franchise agreement growing out of the provisions of the Addendum
thereto, to either an existing or future corporation in which the Franchisee has
and maintains a controlling stock interest, provided, the Franchisee gives the
Franchisor prior notice of assignment along with a copy of a written agreement
effecting the assignment in which the assignee agrees to assume all obligations
of the assignor under the franchise agreement, and provides the Franchisor with
an accurate and complete listing of all stockholders of the assignee corporation
setting forth their respective stock interests. Upon receipt of the foregoing
notice, copy of written assignment agreement and listing of stockholders, the
Franchisee shall be relieved as of the effective date of the assignment of
personal liability under the assigned franchise agreement except for the
obligations set forth in paragraph 2 of this "Consent to Assignment."

         2.       The Franchisee promises and agrees:

                  a.       To provide the Franchisor with the information
provided in paragraph 1 of this Agreement and to keep such information current;

                  b.       To remain personally liable following an assignment
subject to this Agreement for the obligations of any assignee corporation for
payment of royalty-service fees and advertising fees currently due and payable
at any time during the term of this Agreement to the Franchisor, and for all
currently due and payable fees or charges for materials, training, inventory,
software or equipment provided to the assignee corporation by the Franchisor;
and

                                       44
<PAGE>   45
                  c.       To remain personally obligated to comply with all
restrictive covenants provided under said franchise agreements, including use of
the Franchisor's business information, methods and names (under paragraph I.A.2.
& 3. of the Franchise Agreement); use of the proprietary marks (under paragraph
VIII. of the Franchise Agreement); maintenance of confidentiality (under
paragraph IX. of the Franchise Agreement); engaging in conflicting and competing
business activity during the term of the franchise (under paragraph VII. B. 5.
of the Franchise Agreement) and after the term of the franchise (under paragraph
XIV.F. of the Franchise Agreement); and maintaining post-term confidentially
(under paragraph XIV.E. of the Franchise Agreement).

                  In Witness Whereof, the parties hereto have executed this
Agreement the day and year first above written.

                                          Franchisee

/s/ Pamela J. Kramer                      /s/  Matthew Rosenthal
--------------------                      ----------------------
Witness

                                          The Princeton Review Management
                                          Corp. Franchisor

Attest:

/s/ Mark Chernis                          By: /s/ John Katzman
----------------                              ----------------

                                       45
<PAGE>   46
                             AGREEMENT OF AMENDMENT

                                       AND

                           MEMORANDUM OF CLARIFICATION

         Matthew Rosenthal, The Princeton Review Management Corp., and The
Princeton Review, Inc., the parties hereto, in consideration of the mutual
desire and intention to clarify, and amend as required, certain previous
agreements and transactions between them, hereby agree and acknowledge as
follows:

                  1.       That the initial franchise fee provided under the
franchise agreement entered into by Matthew Rosenthal (as franchisee) and The
Princeton Review Management Corp. (as franchisor) dated June 1, 1986, and as
amended by an addendum to said franchise agreement dated June 13, 1986, should
have been, and, as required, hereby is amended, modified and/or clarified to be,
in the total sum of One-Hundred-Thousand Dollars ($100,000.00), such sum being
payable in three installments, the first of which in the amount of $25,000.00
was due by June 1, 1986, the second of which in the amount of $25,000.00 was due
by January 1, 1987, and the third and final of which in the amount of $50,000.00
is due by July 1, 1987.

                  2.       That the payment of $50,000.00 by Matthew Rosenthal
on or before June 1, 1986, made payable to The Princeton Review, Inc., was
intended by the parties to be allocated and credited as follows:

                           (a)      The sum of $25,000.00 in the payment of the
first installment payment due under the aforesaid franchise agreement;

                           (b)      The sum of $25,000.00 in repayment of a loan
made by the Princeton Review, Inc. to The Princeton Review of Massachusetts,
Inc.

                                       46
<PAGE>   47
                  In Witness Whereof, the parties hereto have executed this
Agreement on the dates below written intending thereby to be legally bound.

Date:       3/25/87                          /s/ Matthew Rosenthal        (SEAL)
     ---------------------          --------------------------------------------

Date:       4/2/87                  The Princeton Review Management Corp.
     ---------------------

                                    By:      /s/ John Katzman
                                       -----------------------------------------

Date:       4/2/87                  The Princeton Review Inc.
     ---------------------
                                    By:      /s/  John Katzman
                                       -----------------------------------------

                                       47
<PAGE>   48
                         THE PRINCETON REVIEW FRANCHISE

                  The parties hereto, The Princeton Review Management Corp. (the
Franchisor), and Matthew Rosenthal, a natural person (the Franchisee), hereby
acknowledge as follows: That inasmuch as the Franchisee has experience in, and
has engaged in, a test preparation business similar to the business franchised
to the Franchisee by the Franchisor under a Franchise Agreement dated June 1,
1986, Franchisor is not required to expend the resources which otherwise would
he necessary to provide the Franchisee with initial and continuing training,
counseling, and other services, materials and equipment.

                  Therefore, it is agreed that the Franchisee shall pay a
initial franchise fee to the Franchisor in the total amount of: $125,000
($50,000 paid and $25,000 to be paid on or before Jan. 1, 1987 and $50,000 on or
before July 1, 1987, rather than the formula amount which otherwise would be
payable under the standard terms of the franchise. It is further agreed that the
Franchisee has not and will not be entitled to the same extent of initial and
continuing training, counseling, and other services, materials and equipment as
it would be if it were inexperienced and not engaged in a similar cost
preparation business.

                                         /s/ Matthew Rosenthal
                                         ------------------------------
                                         Franchisee

Date:    6/13/86                         /s/ John Katzman
                                         ------------------------------------
                                         The Princeton Review Management Corp.

                                       48

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