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EXHIBIT 10.3

AGREEMENT

THIS AGREEMENT (the Agreement) made as of the 18th day of August 2003 by and
between VARSITY GROUP INC., a Delaware corporation (the Company), and JEFF
GATTO (the Executive).

The Executive is presently employed by the Company as its Vice President of
Operations.

The Board of Directors of the Company desires to set forth the nature and
amount of compensation and other benefits to be provided to the Executive and
any of the rights of the Executive in the event of his termination of
employment with the Company. The Executive is willing to commit himself to
continue to serve the Company, on the terms and conditions herein provided.

In order to effect the foregoing, the Company and the Executive wish to enter
into this Agreement under the terms and conditions set forth below.
Accordingly, in consideration of the promises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:

1. Employment. The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.

2. Term. The term of Executives employment under Section 1 will terminate upon
the termination of Executives employment with the Company for any reason
whatsoever. No such termination shall affect any of the Companys other
obligations under this Agreement arising at or after such termination of
employment.

3. Position and Duties. The Executive shall serve as Vice President of
Operations of the Company and shall have such responsibilities and authority as
may normally be exercised by a person in such positions at a company.

4. Place of Performance. The Executive shall be based at the current or future
headquarters of the Company, provided that any future headquarters is not more
than twenty-five (25) miles from the location of the Companys headquarters on
the date hereof.

5. Compensation and Related Matters.

(a)  Base Salary. During the Executives employment with the Company, the
Company shall pay to the Executive a salary at a rate of not less than One
Hundred Twenty Thousand Dollars ($120,000) per annum in equal installments as
nearly as practicable on the normal payroll periods for employees of the
Company generally (the Base Salary). The Base Salary may be increased from
time to time and, if so increased, shall not thereafter be decreased during the
term of this Agreement.

(b)  Bonus. The Executive shall be eligible to receive an annual bonus as
determined by the Chief Executive Officer (the Annual Bonus) payable in
accordance with goals to be developed by the Companys Compensation Committee
in accordance with Executive on an annual basis.

(c)  Expenses. During the term of the Executives employment hereunder, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in performing services hereunder, including
all expenses of travel and living expenses while away from home on business or
at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company.

(d)  Benefits. During the term of the Executives employment hereunder, the
Company shall maintain in full force and effect, and the Executive shall be
entitled to continue to participate in, all of its employee benefit plans and
arrangements in effect on the date hereof in which the Executive participates
or receives benefits, or plans or arrangements providing the Executive with at
least equivalent benefits thereunder. The Company shall not make any changes in
such plans and arrangements which would adversely affect the Executives rights
or benefits thereunder, unless such change occurs pursuant to a program
applicable to all officers of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to the Executive
as compared with any other officers of the Company. The Executive shall be
entitled to participate in or receive benefits under any employee benefit plan
or arrangement made available by the Company in the future to its officers and
key management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Nothing
paid to the Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of any amounts payable to
the Executive pursuant to this Section 5.

6. Termination and Definitions.

(a)  Cause. The Executives rights under Section 5 of this Agreement shall
immediately be terminated if the Executives employment is terminated for
Cause.





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(b)  Termination by the Executive. The Executive may terminate his employment
hereunder for Good Reason.

(c)  Notice of Termination. Any termination of the Executives employment by the
Company or by the Executive shall be communicated by written Notice of
Termination to the other party hereto.

(d)  Definitions.

(i)  For purposes of this Agreement, termination for Cause shall arise where
termination results from (A) conviction of, or the pleading of nolo contendere
to, a felony; (B) a material breach of this Agreement which materially and
adversely affects the Companys business and operations; (C) the failure of
Executive for any reason, within ten (10) days after receipt by Executive of
written notice thereof from the Company, to correct, cease or otherwise alter
any failure to comply with instructions or other action or omission to act
which will materially or adversely affect its business or operations; (D)
misconduct by Executive which is of such a serious and substantial nature that
a reasonable likelihood exists that such misconduct will materially injure the
reputation of the Company if Executive was to remain employed by the Company;
and (E) proven gross negligence.

(ii)  For purposes of this Agreement, Good Reason shall mean a Change of
Control of the Company followed, within two years after such Change of Control,
by (i) the termination of Executives employment with the Company other than
for Cause, or (ii) the Executives voluntary termination of employment with the
Company within ninety (90) days following any of (x) a decrease in Executives
base salary below its level in effect on the date prior to such termination,
(y) a material reduction in Executives job responsibilities without
Executives consent, or (z) a geographical relocation of the Executive more
than twenty-five (25) miles from the current location of the Company without
his consent.

(iii)  For purposes of this Agreement, a Change in Control of the Company
shall be deemed to have occurred if (A) any person (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the Exchange Act)), is or becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company (not including any securities acquired directly from the Company)
representing more than 50% of the combined voting power of the Companys then
outstanding securities; (B) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Company in which no person acquires more
than 50% of the combined voting power of the Company and outstanding
securities; or (C) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Companys assets.

(iv)  For purposes of this Agreement, a Notice of Termination shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executives
employment under the provision so indicated.

7. Compensation upon Termination upon a Change in Control.

(a)  Termination Upon a Change in Control. If there is a Change in Control of
the Company or there has been a public announcement of a Change in Control of
the Company (provided, however, that consummation of the Change in Control of
the Company shall be a condition precedent to the effectiveness of this
provision) and at any time thereafter the employment of the Executive under
this Agreement is terminated other than pursuant to Section 6(a) hereof by the
Company or a successor entity or is terminated with Good Reason by the
Executive, then:

(i)  the Company shall pay to the Executive, upon his termination, his Base
Salary through the date of termination at the rate in effect at the time Notice
of Termination is given together with pro-rata bonus; and

(ii)  in lieu of any further salary or bonus payments to the Executive for
periods subsequent to the date of termination, the Company shall pay on the
date of termination, as severance pay to the Executive, a payment in an amount
equal to seventy five percent (75%) of the Executives Base Salary in effect as
of the date of termination payable monthly in nine (9) equal installments.

(b)  Continuation of Benefit Plans. Upon any termination of the Executives
employment pursuant to Section 7 hereof, the Company shall maintain in full
force and effect for the continued benefit of the Executive for nine (9)
months, all employee benefit plans and programs in which the Executive was
entitled to participate.

(c)  Participation in Benefit Plans after Termination of Employment. The
Executive shall be entitled to continue to participate in any benefit plan or
program of the Company for twelve (12) months after the expiration of the
period provided for in Section 7(b), provided, that the Executive pays the
direct cost of any such benefit plan or program.





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8. Non Compete; Non Solicitation. During the period the Executive is
receiving compensation pursuant to Section 7, the Executive agrees that,
without the prior written consent of the Company or its successors (i) he will
not, directly or indirectly, either as principal, manager, agent, consultant,
officer, partner, or employee or in any other capacity, carry on, be engaged in
any business which is in competition with the business of the Company and/or
its subsidiaries, affiliates or successors and (ii) he shall not, on his own
behalf or on behalf of any person or company, directly or indirectly,
communicate with any person who is employed by the Company and/or its
subsidiaries, affiliates or successors at any time in order to encourage,
solicit or suggest that such person terminate his or her employment with the
Company, or to solicit or offer employment to such person.

9. Successors; Binding Agreement.

(a)  Successors. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, Company shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 8 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.

(b)  Binding Agreement. This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executives personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executives devisee, legatee, or other
designee or, if there be no such designee, to the Executives estate.

10. Notice. For the purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed, if to the Executive, to his address as it appears in the
records of the Company, or if to the Company, as follows:

Varsity Group Inc.
1850 M Street, NW
Suite 1150
Washington, DC 20036


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

11. Prior Agreement. All prior agreements between the Company and the Executive
with respect to the employment of the Executive are hereby superseded and
terminated effective as of the date hereof and shall be without further force
or effect.

12. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the District of Columbia.

13. Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date and year first above written.

VARSITY GROUP INC.:

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EXECUTIVE:

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