Exhibit 10.4

KIDVILLE FRANCHISE COMPANY, LLC

FRANCHISE AGREEMENT

TABLE OF CONTENTS

TABLE OF CONTENTS

TABLE OF CONTENTS

EXHIBIT A — LISTING OF OWNERSHIP INTERESTS
EXHIBIT B — TERRITORY
EXHIBIT C — ADDRESSES OF LOCATIONS
EXHIBIT D — CONDITIONAL ASSIGNMENT OF TELEPHONE NUMBER(S)

GUARANTY AND ASSUMPTION OF OBLIGATIONS
NON-MONETARY GUARANTY AND ASSUMPTION OF OBLIGATIONS

KIDVILLE FRANCHISE COMPANY, LLC
FRANCHISE AGREEMENT

      THIS FRANCHISE AGREEMENT ( the “Agreement” ) is made and entered into as of the                      day of                                          , 20                      ( the “Effective Date” ) (regardless of the dates of the parties’ signatures) by and between KIDVILLE FRANCHISE COMPANY, LLC , a New York limited liability company with its principal business address at 163 East 84th Street, New York, New York 10028 ( “we,” “us,” or “our” ), and                                                              , whose principal business address is                                                              ( “you” or “your” ).

1. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE.

     A.  PREAMBLES.

     (1) We and our affiliates have developed (and continue to develop and modify) policies and procedures, confidential information, intellectual property (including software and website), and a distinctive and comprehensive operating system ( collectively, the “Branded System” ) for the operation, identification, and promotion of facilities under the KIDVILLE® trademark and other trademarks, service marks, and commercial symbols (collectively, “Marks”) that provide to newborns through five-year-old children and their families a wide array of developmental classes such as music, gym, art, and enrichment classes, including classes under the LITTLE MAESTROS, MY BIG MESSY ART CLASS®, and RUN, WIGGLE, PAINT & GIGGLE® brands ( collectively, “Classes” ), as well as indoor playgrounds, birthday and themed parties, and related services ( referred to collectively, with Classes, as “Services” ), and also feature retail boutiques selling various children and family-oriented products, many of which bear the Marks ( collectively, “Products” ). Facilities offering and selling Services and Products, operating completely pursuant to the Branded System, and using the KIDVILLE® Mark as their primary trade identity are called “KIDVILLE Facilities” in this Agreement and individually a “Facility . ”

     (2) The Marks have gained and will continue to gain public acceptance and goodwill, and new trademarks, service marks, and commercial symbols periodically may be created, used, and licensed for KIDVILLE Facilities. The Marks, Confidential Information (defined in Section 6 below), and Branded System ( collectively, the “Intellectual Property” ) are owned by our affiliate Kidville, NY, LLC, which has licensed us to use and sublicense the Intellectual Property for KIDVILLE Facilities. You acknowledge that our right to sublicense the Intellectual Property to you is subject to our license agreement with Kidville, NY, LLC.

     (3) Other affiliates of ours periodically may own musical compositions and other non-KIDVILLE brand intellectual property that they license us to use and sublicense others to use during and as part of Classes and other activities at KIDVILLE Facilities. You acknowledge that our right to sublicense that non-KIDVILLE brand

intellectual property to you is subject to our license agreement(s) with such affiliates and may not continue during the entire Term (as defined in Subsection 1.D. below).

     (4) We grant to qualified entities a franchise to operate a KIDVILLE Facility offering and selling the Services and Products we require and authorize and using the Intellectual Property ( the “Franchise System” ).

     (5) As a KIDVILLE Facility franchisee, you must comply with this Agreement and all mandatory specifications, standards, operating procedures, and rules ( collectively, “System Standards” ) that we periodically prescribe for KIDVILLE Facilities in order to maintain high and consistent quality.

     (6) You have applied for a franchise to operate a KIDVILLE Facility.

     B.  ACKNOWLEDGMENTS.

     You acknowledge:

     (1) That you have independently investigated the KIDVILLE Facility franchise opportunity and recognize that, like any other business, the nature of a KIDVILLE Facility will evolve and change over time.

     (2) That an investment in a KIDVILLE Facility involves business risks that could result in the loss of a significant portion or all of your investment.

     (3) That the business abilities and efforts of your owners and other principals, management, and staff are vital to your success.

     (4) That attracting family members for your KIDVILLE Facility will require you to make consistent marketing and promotional efforts.

     (5) That attracting and retaining customers for your KIDVILLE Facility will require you to provide quality Services, to sell quality Products, to have a high level of customer service, and to adhere strictly to our System Standards. You are committed to maintaining System Standards.

     (6) That you have not received from us, and are not relying upon, any representations or guarantees, express or implied, as to the potential volume, sales, income, or profits of a KIDVILLE Facility, that any information you have acquired from other KIDVILLE Facility franchisees regarding their sales, income, profits, or cash flows was not information obtained from us, and that we make no representation about that information’s accuracy.

     (7) That we make no representation regarding any particular Service (including LITTLE MAESTROS Classes) or Product being authorized or made available for KIDVILLE Facilities during your entire franchise term.

     (8) That in all of their dealings with you, our officers, directors, employees, and agents act only in a representative, and not in an individual, capacity and that business dealings between you and them as a result of this Agreement are deemed to be only between you and us.

     (9) That you have represented to us, to induce our entry into this Agreement, that all statements you have made and all information you have given us are accurate and complete and that you have made no misrepresentations or material omissions in obtaining the Franchise.

     (10) That you have read this Agreement and our Franchise Disclosure Document and understand and accept that this Agreement’s terms are reasonably necessary for us to maintain high standards of quality and service, as well as the uniformity of those standards at each KIDVILLE Facility, and to protect and preserve the goodwill of the Marks.

     (11) That we may restrict the brands and sources of various Services, Products, and other items and services needed to operate KIDVILLE Facilities, as provided in various sections of this Agreement.

     (12) That we have not made any representation, warranty, or other claim regarding the KIDVILLE Facility franchise opportunity, other than those made in this Agreement and our Franchise Disclosure Document, and that you have independently evaluated the franchise opportunity, including by using your own business professionals and legal advisors, and have relied solely upon those evaluations in deciding to sign this Agreement.

     (13) That you have had the opportunity to ask any questions you have, and to review any appropriate materials of interest to you, concerning the KIDVILLE Facility franchise opportunity and that we have considered your comments and proposals, if any, on this Agreement.

     (14) That you have had the opportunity, and have been encouraged by us, to have this Agreement and all other agreements and materials that we have given or made available to you reviewed by an attorney and that you have either done so or chosen not to do so.

     (15) That you have a net worth that is sufficient to invest in the KIDVILLE Facility franchise opportunity represented by this Agreement, and you will have sufficient funds to meet all of your obligations under this Agreement.

     C.  ENTITY REQUIREMENTS.

     As a corporation, limited liability company, or general, limited, or limited liability partnership ( each, an “Entity” ), you agree and represent that:

     (1) You have the authority to execute, deliver, and perform your obligations under this Agreement and all related agreements and are duly organized or formed and

validly existing in good standing under the laws of the state of your incorporation or formation;

     (2) Your organizational documents, operating agreement, or partnership agreement, as applicable, will recite that this Agreement restricts the issuance and transfer of certain ownership interests in you, and all certificates and other documents representing ownership interests in you will bear a legend (the wording of which we may prescribe) referring to this Agreement’s restrictions;

     (3) Exhibit A to this Agreement completely and accurately identifies all of your owners and their interests in you as of the Effective Date;

     (4) Each owner whose interest in you (alone or with related persons) equals or exceeds twenty percent (20%) of your total ownership, and any owner who actually has management control of the operation of your FACILITY (defined in Subsection D below) regardless of the size of his or her ownership interest ( all such owners are called “Principal Owners” and individually a “Principal Owner” ), must execute a Guaranty and Assumption of Obligations, in the form attached to this Agreement, undertaking personally to be bound, jointly and severally, by all provisions in this Agreement and any ancillary agreements between you and us. In addition, each owner who is not a Principal Owner must execute a Non-Monetary Guaranty and Assumption of Obligations, in the form attached to this Agreement, undertaking personally to be bound, jointly and severally, by specified non-monetary provisions in this Agreement. Subject to our rights and your obligations under Section 12, you and your owners agree to sign and deliver to us revised Exhibits A to reflect any permitted changes in the information that Exhibit A now contains;

     (5) Throughout this Agreement’s term, one person must be designated as your “Operator,” responsible overall for supervising and overseeing development and operation of the FACILITY and to whom we may give, and from whom we may receive, direction. Your Operator need not have an ownership interest in you but also may be a Principal Owner or a non-Principal Owner. The Operator as of the Effective Date is identified in Exhibit A. If your Operator leaves during this Agreement’s term, you must appoint a new Operator within the timeframe we specify. Your Operator will supervise your managers (sometimes called KIDVILLE Mayors), who in turn will supervise the FACILITY’s non-managerial employees. Your employees are under your day-to-day control in implementing and maintaining System Standards at the FACILITY; and

     (6) The FACILITY (and other KIDVILLE Facilities) will be the only business you operate so that your financial, operating, and other records, including financial statements, will reflect only the business represented by KIDVILLE Facilities and your staff will be committed to the KIDVILLE® brand (although your owners and affiliates may have other, non-competitive business interests).

     D.  GRANT OF FRANCHISE.

     You have applied for a franchise to operate a KIDVILLE Facility from sites physically located within the geographic area described in Exhibit B (the “Territory”). Subject to this Agreement’s terms, we grant you a franchise ( the “Franchise” ) to operate a KIDVILLE Facility ( the “FACILITY” ) within the Territory, and to use the Franchise System in its operation, for a term ( the “Term” ) beginning on the Effective Date and expiring ten (10) years from the date on which your Hub Location (defined below) commences operation. The Term is subject to earlier termination under Section 14. You agree to operate the FACILITY in compliance with this Agreement for the entire Term unless this Agreement is terminated under Section 14. You agree at all times faithfully, honestly, and diligently to perform your obligations under this Agreement and to use your best efforts to promote the FACILITY.

     The Franchise gives you the right to provide Services and sell Products only at the physical premises of the Locations (defined below). You are prohibited from (i) providing Services or selling Products away from the physical premises of the Locations, (ii) selling Services or Products through other distribution channels, (iii) using the Marks in any other business activities that we have not expressly authorized, and (iv) advising others who operate Competitive Businesses (as defined in Section 7 below).

     You may engage in any authorized advertising, promotional, marketing, and related activities ( “Promotional Activities” ) to solicit customers located within and outside your Territory. However, if other KIDVILLE Facilities operate in the areas where, in our reasonable opinion, your Promotional Activities have significant circulation or coverage, you may not include any price information in the materials (written, auditory, or otherwise) used in those Promotional Activities. If there is no KIDVILLE Facility operating in an area where you engage in Promotional Activities, but we later appoint a franchisee whose franchised territory includes all or a portion of that area, you agree (at our direction) to send the new franchisee a list identifying (with applicable contact information) all of your customers who reside in that new franchisee’s territory. We have the unrestricted right to regulate your Promotional Activities and other business activities outside your Territory in order to protect, as we deem best, our interests, other KIDVILLE Facility franchisees, and the Franchise System. Other KIDVILLE Facility franchisees will have the same rights, and will be subject to the same restrictions, in your Territory.

     E.  HUB AND ANNEX LOCATIONS, SITE SELECTION, AND LEASES.

     (1) Hub and Annex Locations Defined. The Franchise to operate the FACILITY requires you to locate, lease (or purchase), develop, maintain, and operate two (2) types of sites: One (1) main “hub” location ( the “Hub Location” ) and at least three (3) “annex” locations ( each an “Annex Location” ). The Hub Location is the larger, main operating center for the Franchise at which you will provide all required Services and sell all required Products associated with a KIDVILLE Facility and maintain your primary management, administrative, staffing, and training functions. Each Annex Location is significantly smaller than the Hub Location, intended for areas within the Territory where a larger Hub Location would be impractical, and will provide some, but not all, of the Services and sell some, but not all, of the Products associated

with KIDVILLE Facilities. The physical sites of the Hub Location and each Annex Location must be within the Territory.

     Unless it is necessary for us to distinguish in this Agreement between your Hub Location and your Annex Locations, references in this Agreement to your “Locations” cover both your Hub Location and your Annex Locations. References in this Agreement to the “FACILITY” cover your entire business operation under this Agreement, including all activities at both your Hub Location and your Annex Locations. Your right to operate at each Annex Location is coterminous with the Term. You may use each Location only for operating the FACILITY.

     (2) Selecting Hub and Annex Locations. The addresses of your Locations are or will be identified in Exhibit C. If you have not found sites for the Locations as of the Effective Date, then we and you will insert their addresses into Exhibit C after you find them in compliance with the following procedures:

     (i) You agree to find, and sign a lease for, a suitable site within the Territory for the Hub Location within one hundred twenty (120) days after the Effective Date.

     (ii) You agree to find, and sign leases for, suitable sites within the Territory for the first two (2) of your minimum three (3) required Annex Locations within one hundred eighty (180) days after the Effective Date.

     (iii) You agree to find, and sign a lease for, a suitable site within the Territory for your third (3rd) required Annex Location within two hundred seventy (270) days after the Effective Date.

You must obtain our written acceptance of each Location’s proposed site before signing any lease. You may operate the Locations only at sites we have formally accepted. We will not conduct site selection activities for you. You are responsible for finding a site for each Location that satisfies our site selection criteria and meets the requirements of your business. We will not unreasonably withhold our acceptance of a site that meets our criteria.

     We will give you site evaluation workbooks to help you assess whether a site satisfies our criteria. You must obtain all information necessary to complete the workbooks and then return the completed workbooks to us. If we are satisfied with the workbooks and believe, based on this preliminary review, that the identified sites might be acceptable for Locations, we will visit your Territory to inspect the proposed sites. We will not charge you for this first site visit to your Territory. However, you must pay us a per diem fee and reimburse all of our out-of-pocket costs and expenses for all subsequent site visits. To avoid these additional costs, we suggest that you find and prepare workbooks for a number of sites that you believe are suitable for Locations so that we can inspect them on one site visit. We will accept or not accept your proposed sites within ten (10) days after returning from our site visit. After you secure the sites, we will insert their addresses into Exhibit C.

     You acknowledge and agree that, if we accept or give you information regarding a Location’s proposed site, that is not a representation or warranty of any kind, express or implied, of the site’s suitability for a KIDVILLE Facility or any other purpose. Our acceptance indicates only that we believe the site meets our then acceptable criteria. Applying criteria that have appeared effective with other sites might not accurately reflect the potential for all sites, and demographic and/or other factors included in or excluded from our criteria could change, altering a site’s potential. The uncertainty and instability of these criteria are beyond our control, and we are not responsible if a site we accepted fails to meet your expectations. You acknowledge and agree that your acceptance of the Franchise was or will be based on your own independent investigation of a site’s suitability for each Location. We are relying on your knowledge of the real estate market in your area and your ability to locate a suitable site.

     (3) Leasing Locations. We have the right to accept or reject the terms of a Location’s proposed lease or sublease ( the “Lease” ) before you sign it. We may require that the Lease contain certain provisions (although we will not directly negotiate your Lease), including those:

     (a) reserving to us the right to receive an assignment of the Lease upon termination or expiration of this Agreement;

     (b) requiring the landlord to give us all sales and other information we request relating to the FACILITY’s operation at the Location;

     (c) requiring the landlord concurrently to send us a copy of any written notice of Lease default sent to you and granting us the right (but without any obligation) to cure any Lease default within fifteen (15) business days after expiration of your cure period (if you fail to do so);

     (d) confirming your right to display the Marks at each Location according to specifications in the Operations Manual (subject only to applicable law);

     (e) specifying that the Location may be used only for a KIDVILLE Facility; and

     (f) allowing us to enter the Location upon expiration or termination of this Agreement in order to remove signage and other items bearing our Marks and otherwise to de-identify the Location.

We may require that the types of provisions referenced above be reflected in a Lease Rider, Collateral Assignment of Lease, or other document. You agree to sign, and have the landlord sign, any documents we deem necessary to record our interest in the Location in public real estate indices and elsewhere to protect our interests. You acknowledge that our acceptance of the Lease is not a guarantee or warranty, express or implied, of the success or profitability of a KIDVILLE Facility operated at the Location. Our acceptance indicates only that we believe that the Location and the Lease’s terms meet our then acceptable criteria. We have the right to receive a final signed copy of

each Lease. You may not modify the Lease if any proposed modification would impact the rights reserved by subparagraphs (a) through (f) above.

     If the Lease expires or is terminated without your fault, or if the Location’s site is destroyed, condemned, or otherwise rendered unusable, we will allow you to relocate to a new site in the Territory acceptable to us. Relocation will be at your sole expense, and we may charge you our then current relocation fee plus our out-of-pocket expenses in connection with any relocation.

     F.  RIGHTS WE RESERVE.

     Except as provided in subparagraph (6) below, we (and any affiliates that we have from time to time) may not during the Term establish and operate, or grant to others the right to establish and operate, another KIDVILLE Facility the Hub Location for which is physically located within the Territory. Except for this Hub Location restriction (but with the carve-out in subparagraph (6) below), your rights under this Agreement are non-exclusive, and we (and any affiliates that we have from time to time) retain the right during the Term to engage in any and all activities that we (and they) desire, at any time or place, and whether or not these activities compete with your FACILITY, including, without limitation, the right:

     (1) To establish and operate, and grant to others the right to establish and operate, KIDVILLE Facilities the Hub Locations for which are located outside the Territory on any terms and conditions we deem appropriate.

     (2) To establish and operate, and grant to others the right to establish and operate, one or more Annex Locations that are located within or outside the Territory on any terms and conditions we deem appropriate (and to require your Hub Location to provide services to such Annex Locations located within the Territory on terms we specify), provided, however, that (a) we will not establish and operate, or grant to others the right to establish and operate, Annex Locations within the Territory for at least two (2) years following the date by which your third (3rd) Annex Location must have opened for business, as provided in Subsection 2.D. below, and (b) we will give you at least six (6) months’ prior written notice of our intent to establish and operate, or grant to others the right to establish and operate, the Annex Location in your Territory. However, if you fail to open your third (3rd) Annex Location for business by the date specified in Subsection 2.D. below, there are no timing or other restrictions whatsoever on (and no notice that we must give with respect to) our right to establish and operate, or grant to others the right to establish and operate, an Annex Location in your Territory. In addition, your failure to open your third (3rd) Annex Location for business by the date specified in Subsection 2.D. below may give rise to your obligation to pay the Assumed Royalty and Assumed Fund Contribution, as defined in Subsections 3.B. and 9.B. below.

     (3) To license to any business that is not a KIDVILLE Facility, wherever that business is located or operating (including within the Territory), the right to offer and sell to its own customers any of the Services (including LITTLE MAESTROS Classes and other LITTLE MAESTROS branded items), whether under the Marks or any other trademarks or service marks.

     (4) To offer and sell Products and other items identified by the Marks or any other trademarks or service marks to any customers, wherever located or operating (including within the Territory), and through any distribution channels (including, but not limited to, the Internet, specialty and other retail stores branded exclusively or primarily under the KIDVILLE® Mark that do not also provide Classes, specialty and other retail stores branded exclusively or primarily under trademarks other than the KIDVILLE® Mark, and other points of distribution), wherever located or operating (including within the Territory).

     (5) To create and conduct, and grant to others the right to create and conduct, plays, stage shows, and musicals, and create, transmit, display, and broadcast television, radio, Internet, and other productions, using (on a featured or non-featured basis) any of the Intellectual Property and non-KIDVILLE brand intellectual property used in or licensed to KIDVILLE Facilities (including LITTLE MAESTROS) and whether associated with the Marks or other trademarks and commercial symbols.

     (6) To establish and operate, and grant to others the right to establish and operate, KIDVILLE Facility Hub Locations at mass gathering locations within the Territory and otherwise to provide, and grant to others the right to provide, Services at mass gathering locations within the Territory. “Mass gathering” locations include casinos, hotels, resorts, cruiseships, military bases, mass transportation facilities (like train stations and airports), sports arenas and other sports facilities, and similar venues.

     (7) To engage in all other activities that this Agreement does not expressly prohibit.

     G.  THE EXERCISE OF OUR JUDGMENT.

     We have the right to develop, operate, and change the Branded System and the Franchise System in any manner not specifically prohibited by this Agreement. Whenever we have reserved in this Agreement the right to take or to withhold an action, or to grant or decline to grant you the right to take or omit an action, we may, except as otherwise specifically provided in this Agreement, make our decision or exercise our rights based on information then available to us and our judgment of what is best for us, KIDVILLE Facility franchisees generally, or the Franchise System at the time our decision is made, regardless of whether we could have made other reasonable or even arguably preferable alternative decisions or whether our decision promotes our financial or other individual interest.

     H.  MODIFICATION OF FRANCHISE SYSTEM.

     Because complete and detailed uniformity under many varying conditions might not be possible or practical, you acknowledge that we specifically reserve the right and privilege, as we deem best, to vary System Standards for, and to provide different levels of service to, any franchisee based upon the peculiarities of any condition or factors that we consider important to that franchisee’s successful operation. You have no right to require us to grant you a similar variation or accommodation or to provide the same level of service.

2. DEVELOPMENT AND OPENING OF FACILITY LOCATIONS.

     A.  FACILITY DEVELOPMENT.

     You are responsible for developing each Location for the FACILITY. We will give you mandatory and suggested specifications and layouts for Locations, including requirements for dimensions, design, image, interior layout, decor, fixtures, equipment, signs, furnishings, and color scheme. These plans might not reflect the requirements of any federal, state, or local law, code, or regulation, including those arising under the Americans with Disabilities Act ( the “ADA” ) or similar rules governing public accommodations for persons with disabilities. You are responsible for preparing a site survey and all required construction plans and specifications to suit the Location and making sure that these plans and specifications comply with our requirements, the ADA and similar rules, other applicable ordinances, building codes, permit requirements, and Lease requirements and restrictions. You (and not we) are responsible for the performance of the architects, contractors, and subcontractors you hire to develop and maintain each Location for the FACILITY and for ensuring that sufficient insurance coverage is in place during the construction process.

     You agree to send us construction plans and specifications for review before you begin constructing each Location and all revised or “as built” plans and specifications during construction. Our designated architect will review your architect’s proposed plans and specifications to ensure they are acceptable. You must pay our architect for that review. Because our review is limited to ensuring your compliance with our design and layout requirements, our review might not assess compliance with federal, state, or local laws and regulations, including the ADA. We may inspect each Location during the development process.

     You must do the following, at your own expense, to develop and commence operation of the FACILITY at each Location:

     (1) secure all financing required to develop and operate the FACILITY;

     (2) obtain all required building, utility, sign, health, sanitation, business, and other permits and licenses;

     (3) construct all required improvements to the Location and decorate the Location according to approved plans and specifications;

     (4) obtain all customary contractors’ sworn statements and partial and final waivers of lien for construction, remodeling, decorating, and installation services;

     (5) purchase or lease, and install, all required fixtures, furniture, furnishings, signs, and equipment (including music systems, required computer, point-of-sale, and other electronic information systems, and all equipment components and software necessary for you to accept and process KIDVILLE® membership cards and participate in our other customer loyalty, affinity, and similar programs) ( collectively, “Operating Assets” ); and

     (6) purchase an opening inventory of required, authorized, and approved Products from us, our affiliates, or other designated sources and other products, materials, and supplies from approved and designated sources.

     B.  OPERATING ASSETS.

     You must use in operating the FACILITY only those Operating Assets that we designate or approve for KIDVILLE Facilities as meeting our standards and specifications for quality, design, appearance, function, and performance. You may not install or use any unauthorized Operating Assets at a Location. You agree to place or display at each Location (interior and exterior) only the signs, emblems, lettering, logos, and display materials that we approve from time to time. You must purchase or lease approved brands, types, and models of Operating Assets only from suppliers we designate or approve (which may include and/or be limited to us and/or our affiliates).

     C.  COMPUTER SYSTEM.

     You agree to obtain and use the computer hardware and/or software we specify, including required computer, point-of-sale, and other electronic information systems and all equipment components and software (including KIDVILLE® customer relationship manager software (“ KIDVILLE Software ”)) necessary for you to process memberships and class registrations on-line, to accept and process KIDVILLE® membership cards, and to participate in our other customer loyalty, affinity, and similar programs ( the “Computer System” ). We may modify specifications for and components of the Computer System. You also agree to use our designated e-mail system for all business related to the Franchise. We have the right to monitor and review your e-mail communications. Our modification of specifications for the Computer System, and/or other technological developments or events, might require you to purchase, lease, and/or license new or modified computer hardware and/or software and to obtain service and support for the Computer System. Although we cannot estimate the future costs of the Computer System or required service or support, and although these costs might not be fully amortizable over the Term, you agree to incur the costs of obtaining the computer hardware and software comprising the Computer System (and additions and modifications) and required service or support. Within sixty (60) days after we deliver notice to you, you must obtain the Computer System components that we designate and to ensure that your Computer System, as modified, is functioning properly. We have no obligation to reimburse you for any Computer System costs. You may not use any unapproved computer software or security access codes. We have the right to know all security access codes.

     You agree that we and our affiliates may condition any license of required or recommended proprietary software to you, and/or your use of technology developed or maintained by or for us, on your signing the software license agreement or similar document, or otherwise agreeing to the terms (for example, by acknowledging your consent to and accepting the terms of a click-through or other shrink-wrapped license agreement), we and our affiliates prescribe to regulate your use of, and our and your respective rights and responsibilities with respect to, the software or technology. We and our affiliates may charge you up-front and ongoing weekly or monthly fees for any required or recommended proprietary software or technology that we and our affiliates license to you and for other maintenance, support, and

access services provided during the Term, including access to and use of KIDVILLE Software, if that is obtained directly from us or an affiliate rather than from designated or approved third party vendors.

     Despite the fact that you must buy, use, and maintain the Computer System according to our standards and specifications, you have sole and complete responsibility for: (1) the acquisition, operation, maintenance, and upgrading of the Computer System; (2) the manner in which your Computer System interfaces with our and any third party’s computer system; and (3) any and all consequences if the Computer System is not properly operated, maintained, and upgraded. The Computer System shall permit twenty-four (24) hours per day, seven (7) days per week electronic communications between you and us, including access to the Internet and our then current Franchise System Website, intranet or extranet.

     D.  FACILITY/LOCATION OPENING.

     You agree not to begin operating the FACILITY at a Location (except for the approved pre-sale activities specified in Subsection 2.E. below) until:

     (1) We notify you in writing that the Location meets our standards and specifications (although our acceptance is not a representation or warranty, express or implied, that a Location complies with any engineering, licensing, environmental, labor, health, building, fire, sanitation, occupational, landlord’s, insurance, safety, tax, governmental, or other statutes, rules, regulations, requirements, or recommendations nor a waiver of our right to require continuing compliance with our requirements, standards, and policies);

     (2) required training (described in Subsection 4.A. below) is satisfactorily completed by all attendees;

     (3) you pay the initial franchise fee and other amounts then due to us and key suppliers;

     (4) you obtain all required licenses and permits and send us copies of the licenses and permits we request; and

     (5) you give us certificates for all required insurance policies.

You agree to comply with these conditions and to begin operating (i) your Hub Location within two hundred seventy (270) days after the Effective Date or on or before the date specified in any Development Rights Rider to which you are a party, (ii) your first two (2) required Annex Locations within two hundred seventy (270) days after the Effective Date, and (iii) your third required Annex Location within three hundred sixty (360) days after the Effective Date. We may terminate this Agreement if you fail to comply with the deadlines specified in subparagraphs (i) or (ii) above. If you fail to comply with the deadline specified in subparagraph (iii) above, we have the rights specified in Subsections 1.F.(2) above and 3.B. and 9.B. below.

     If you begin operating any Location (except for the approved pre-sale activities specified in Subsection 2.E. below) before we notify you in writing that it meets our standards and

specifications (as required in subparagraph (1) above), you must pay us Five Thousand Dollars ($5,000) for each day the Location operates without our approval. In that event, we also may elect to terminate this Agreement under Section 14.B.

     E.  PRESALE OF CLASSES, MEMBERSHIPS, AND BIRTHDAY PARTIES.

     You may not begin offering and pre-selling (that is, before the FACILITY is ready to open for business and begin conducting Classes) FACILITY memberships, Class registrations, and birthday parties until we give you written approval. We may require you to sign and deliver to us a Request for Presale form (which we prepare) in which you certify that you have, among other things, obtained all necessary bonds and/or otherwise have complied, and will comply, with all applicable laws relating to your presale activities. If you fail to complete and return the Request for Presale form as required, you are not authorized to begin offering or pre-selling FACILITY memberships, Class registrations, and birthday parties. You alone are responsible for ensuring that your presale activities comply with all applicable laws. We may require you to deposit with us, or that your customers pay directly to us, all revenue from your presale activities with respect to each Location until we approve the Location for opening, as provided in Subsection 2.D. above. After the particular Location begins operating Classes, we will immediately remit all presale revenue for that Location to you, less our applicable Royalty and Fund contributions, as provided in Subsections 3.B. and 9.B., respectively, of this Agreement. We will not remit any Location’s presale revenue to you until after the Location begins operating Classes. (In other words, we may control the revenue from a Location’s presale activities even if one or more of the FACILITY’s other Locations already have begun operating Classes.)

3. FEES.

     A.  INITIAL FRANCHISE FEE.

     You agree to pay us a one-time and, except as provided in Subsection 4.A.(1), nonrefundable initial franchise fee equal to One Hundred Eighty Thousand Dollars ($180,000), which consists of Seventy-Five Thousand Dollars ($75,000) for the Hub Location and Thirty-Five Thousand Dollars ($35,000) for each Annex Location you have agreed to develop within the Territory (a minimum of three (3)). This initial franchise fee must be paid, and is fully earned by us, when you sign this Agreement. The initial franchise fee is not in exchange for any particular products, services, or assistance but instead is solely in consideration of our signing this Agreement. We will credit toward the initial franchise fee any deposits you previously paid under a Development Rights Rider.

     B.  ROYALTY FEE.

     You agree to pay us, on or before the fifth (5th) day of each calendar month, and in the manner provided below, a Royalty Fee ( the “Royalty” ) equal to the following percentages of the FACILITY’s Gross Sales (defined in Subsection C below) at the Hub Location and each Annex Location during the preceding calendar month:

         (1)  Hub Location .

          (a) Seven percent (7%) of the Hub Location’s Gross Sales on that portion of the Hub Location’s Gross Sales during a calendar year that do not exceed Two Million Dollars ($2,000,000);

          (b) Six and one-half percent (6.5%) of the Hub Location’s Gross Sales on that portion of the Hub Location’s Gross Sales during a calendar year that exceed Two Million Dollars ($2,000,000) but have not exceeded Four Million Dollars ($4,000,000); and

          (c) Six percent (6%) of the Hub Location’s Gross Sales on that portion of the Hub Location’s Gross Sales during a calendar year that exceed Four Million Dollars ($4,000,000).

         (2)  Annex Location .

          (a) Seven percent (7%) of each Annex Location’s Gross Sales on that portion of the Annex Location’s Gross Sales during a calendar year that do not exceed Three Hundred Fifty Thousand Dollars ($350,000);

          (b) Six and one-half percent (6.5%) of each Annex Location’s Gross Sales on that portion of the Annex Location’s Gross Sales during a calendar year that exceed Three Hundred Fifty Thousand Dollars ($350,000) but have not exceeded Seven Hundred Thousand Dollars ($700,000); and

          (c) Six percent (6%) of each Annex Location’s Gross Sales on that portion of the Annex Location’s Gross Sales during a calendar year that exceed Seven Hundred Thousand Dollars ($700,000).

The Gross Sales thresholds specified above are not a representation or guarantee of any kind of the volume, sales, income, or profits you might generate from operating the FACILITY. The thresholds are simply the levels of Gross Sales at which we are willing to reduce the Royalty percentages due under this Agreement. The Royalty is not in exchange for any particular products, service, or assistance but instead is solely in consideration of our granting you the Franchise conferred by this Agreement.

     If you fail to open for business your third (3rd) Annex Location within the Territory by the date specified in Subsection 2.D. above or at all, you nevertheless must pay us a Royalty on the Gross Sales that we assume you would have generated from that Annex Location had you opened and operated that Annex Location in compliance with this Agreement ( the “Assumed Royalty” ). The Assumed Royalty will be equal to the average Royalty that you pay us on account of the operations of your other Annex Locations. The Assumed Royalty is due and payable at the same time and in the same manner as the non-Assumed Royalty described in this Subsection 3.B. Your obligation to pay us the Assumed Royalty shall continue unless and until you commence operating your third (3rd) Annex Location within the Territory or we (or our affiliates) exercise our rights under Subsection 1.F.(2) above and commence operating, or other parties we approve commence operating, a third (3rd) Annex Location within the Territory.

Your failure to pay the Assumed Royalty monthly is a breach of this Agreement for which we may terminate this Agreement under Subsection 14.B.(14) below.

     C.  DEFINITION OF “GROSS SALES”.

     As used in this Agreement, the term “Gross Sales” means all revenue that you derive from selling Services and Products and otherwise operating the FACILITY, whether from cash, check, credit and debit card, barter exchange, trade credit, or other credit transactions, including revenue generated from presales, revenue from selling Services and Products to customers who use gift, loyalty, and affinity cards for payment, and your proceeds from business interruption insurance, but (1) excludes all federal, state, and municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, and (2) is reduced by the amount of any documented refunds and credits the FACILITY in good faith gives to customers (if those amounts originally were included in calculating Gross Sales).

     D.  LATE FEES AND INTEREST.

     You agree to pay us a late fee for each required payment not made on or before its original due date and for each payment not honored by your financial institution. (You also must reimburse our bank charges arising from your dishonored payments.) The late fee, which is equal to ten percent (10%) of the overdue payment, is not interest or a penalty but compensates us for increased administrative and management costs due to your late payment. In addition, all amounts that you owe us that are more than seven (7) days late will bear interest, accruing as of their original due date, at one and one-half percent (1.5%) per month or the highest commercial contract interest rate the law allows, whichever is less. We may debit your EFTA (defined below) automatically for late fees and interest. You acknowledge that this Subsection is not our agreement to accept any payments after they are due or our commitment to extend credit to, or otherwise finance your operation of, the FACILITY.

     E.  APPLICATION OF PAYMENTS.

     Despite any designation you make, we may apply any of your payments to any of your past due indebtedness to us and our affiliates. We may set off any amounts you or your owners owe us or our affiliates against any amounts that we or our affiliates owe you or your owners. You may not withhold payment of any amounts you owe us or our affiliates due to our alleged nonperformance of any of our obligations under this Agreement.

     F.  METHOD OF PAYMENT.

     Before your FACILITY commences operation, you agree to sign and deliver to us the documents we require to authorize us to debit your business checking or other account automatically for the Royalty, Fund contributions (defined in Subsection 9.B. below), and other amounts due under this Agreement or in connection with your operation of the FACILITY, including amounts due for your purchases of Products, other items, and services from us, our affiliates and/or unaffiliated vendors ( the “Electronic Funds Transfer Account” or “EFTA” ). We will debit your EFTA for the Royalty and Fund contributions on or before the fifth (5th) day of each calendar month on account of the previous calendar month’s Gross Sales. We will debit

the EFTA for other amounts you owe us, our affiliates and/or unaffiliated vendors on the day we specify. With respect to Product and other purchases, we may require you to submit payment electronically (and to initiate the electronic payment process) before we prepare for shipment and send you the items you have ordered. You agree to deposit funds into the EFTA to cover our withdrawals and to report your Gross Sales as we require.

     If you fail to report the FACILITY’s Gross Sales, we may debit your EFTA for one hundred twenty percent (120%) of the last Royalty and Fund contribution that we debited (together with the late fee and interest noted in Subsection 3.D. above). If the amounts we debit from your EFTA are less than the amounts you actually owe us (once we have determined the FACILITY’s actual Gross Sales), we will debit your EFTA for the balance on the day we specify. If the amounts we debit exceed the amounts you actually owe us, we will credit the excess against the amounts due during the following calendar month.

     Despite the preceding language in this Subsection F, we reserve the right at any time during the Term to debit your required Royalty and Fund contribution, on a transaction-by-transaction basis, directly from customer payments for Classes and other Services to be provided by the FACILITY where we or our designee administers the on-line registration process through KIDVILLE Software, the Franchise System Website, or other Electronic Media and accepts and processes customer payments.

     We may require you to pay any amounts due to us and our affiliates under this Agreement (or otherwise) other than by automatic debit ( e.g. , by check or wire transfer) whenever we deem appropriate, and you must comply with our payment instructions. While we may, as noted above, debit the EFTA for amounts you owe unaffiliated vendors, we generally intend to do so only if you fail to pay those vendors as and when required.

4. TRAINING AND ASSISTANCE.

     A.  TRAINING.

     (1) Initial Training . If this is your first KIDVILLE Facility, an owner of yours who actually has management control of the operation of your FACILITY must, before you commence pre-sales, attend an initial orientation and training session for approximately two (2) weeks at our principal business address or another designated location. (We refer to this owner with management control who attends training as the “Trained Owner.” )

     Before your FACILITY commences operation, we will provide our training program (which is scheduled to run for approximately four (4) weeks) for your Trained Owner (who also may be your Operator) at no additional charge. (Training may be longer or shorter depending on our opinion of the Trained Owner’s experience and needs.) This training, which focuses on our philosophy, System Standards, and the material aspects of operating a KIDVILLE Facility, will take place at a designated training facility of our choice (at our corporate headquarters and