Document:

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                                                                   Exhibit 10.11

                              VARSITYBOOKS.COM INC.
                          EMPLOYEE STOCK PURCHASE PLAN
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                                        TABLE OF CONTENTS
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SECTION 1.  PURPOSE OF THE PLAN.....................................................    1
SECTION 2.  DEFINITIONS.............................................................    1
        (a) "ADMINISTRATIVE COMMITTEE"..............................................    1
        (b) "BOARD".................................................................    1
        (c) "CODE"..................................................................    1
        (d) "COMPANY"...............................................................    1
        (e) "COMPENSATION"..........................................................    1
        (f) "CONTINUOUS STATUS AS AN EMPLOYEE"......................................    1
        (g) "CONTRIBUTIONS".........................................................    1
        (h) "DESIGNATED SUBSIDIARIES"...............................................    1
        (i) "ELIGIBLE EMPLOYEE".....................................................    1
        (j) "EXCHANGE ACT"..........................................................    1
        (k) "FAIR MARKET VALUE".....................................................    2
        (l) "IPO"...................................................................    2
        (m) "OFFERING DATE".........................................................    2
        (n) "OFFERING PERIOD".......................................................    2
        (o) "PARTICIPANT"...........................................................    2
        (p) "PLAN"..................................................................    2
        (q) "PURCHASE DATE".........................................................    2
        (r) "PURCHASE PERIOD".......................................................    2
        (s) "STOCK".................................................................    2
        (t) "STOCK PURCHASE ACCOUNT"................................................    2
        (u) "SUBSIDIARY"............................................................    2
SECTION 3.  ADMINISTRATION OF THE PLAN..............................................    2
SECTION 4.  ENROLLMENT AND OFFERING PERIODS.........................................    3
        (a) OFFERING PERIODS........................................................    3
        (b) ENROLLMENT..............................................................    3
        (c) DURATION OF PARTICIPATION...............................................    3
        (d) PROHIBITION ON PARTICIPATION BY FIVE PERCENT OWNERS.....................    3
SECTION 5.  EMPLOYEE CONTRIBUTIONS..................................................    3
        (a) AMOUNT OF PAYROLL DEDUCTIONS............................................    3
        (b) APPLICATION OF PAYROLL DEDUCTIONS.......................................    3
        (c) CHANGING CONTRIBUTION RATE..............................................    3
SECTION 6.  VOLUNTARY WITHDRAWAL....................................................    4
SECTION 7.  AUTOMATIC WITHDRAWALS...................................................    4
        (a) REDUCTION IN FAIR MARKET VALUE..........................................    4
        (b) TERMINATION OF CONTINUOUS STATUS AS AN ELIGIBLE EMPLOYEE................    4
SECTION 8.  PURCHASE OF SHARES......................................................    4
        (a) PURCHASE OF SHARES......................................................    4
        (b) PURCHASE PRICE..........................................................    4
        (c) INSUFFICIENT AVAILABLE SHARES...........................................    5
        (d) MAXIMUM PURCHASE AMOUNT.................................................    5
        (e) UNUSED STOCK PURCHASE ACCOUNT BALANCES..................................    5
        (f) SHARE OWNERSHIP; ISSUANCE OF STOCK......................................    5
SECTION 9.  CONDITIONS UPON ISSUANCE OF SHARES......................................    5
SECTION 10. AUTHORIZED SHARES.......................................................    6
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS......    6
        (a) ADJUSTMENT..............................................................    6
        (b) CORPORATE TRANSACTIONS..................................................    6
SECTION 12. MISCELLANEOUS...........................................................    6
        (a) COLLECTION OF TAXES.....................................................    7
        (b) NO RIGHTS AS AN EMPLOYEE................................................    7
        (c) RIGHTS NOT TRANSFERABLE.................................................    7
        (d) USE OF FUNDS............................................................    7
</TABLE>

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<TABLE>
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        (e) NOTICE OF DISPOSITION OF STOCK..........................................    7
        (f) NOTICES.................................................................    7
        (g) REPURCHASE OF STOCK.....................................................    7
        (h) HEADINGS, CAPTIONS, GENDER..............................................    7
        (i) SEVERABILITY OF PROVISIONS; PREVAILING LAW..............................    7
SECTION 13. AMENDMENT; TERMINATION..................................................    7
SECTION 14. TERM OF PLAN; EFFECTIVE DATE............................................    8
SECTION 15. EXECUTION...............................................................    8
</TABLE>

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                              VARSITYBOOKS.COM INC.

                          EMPLOYEE STOCK PURCHASE PLAN

SECTION 1. PURPOSE OF THE PLAN.

The purpose of The Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to increase their proprietary
interest in the Company by purchasing Stock of the Company on favorable terms
through payroll deductions. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.

SECTION 2. DEFINITIONS.

         (a)      "ADMINISTRATIVE COMMITTEE" means the committee approved by the
                  Board to administer the Plan.

         (b)      "BOARD" means the Board of Directors of the Company.

         (c)      "CODE" means the Internal Revenue Code of 1986, as amended.

         (d)      "COMPANY" means VarsityBooks.com Inc., a Delaware corporation.

         (e) "COMPENSATION" means the total remuneration paid, during the period
of reference, to a Participant by the Company or a Subsidiary, including regular
salary or wages, overtime payments, bonuses, commissions and vacation pay, to
which has been added any pre-tax contributions by the Participant to a plan
meeting the requirements of Section 401(k) or 125 of the Code. There shall be
excluded from "Compensation" for the purposes of the Plan, whether or not
reportable as income by the Participant, expense reimbursements of all types,
payments in lieu of expenses, Company contributions to any qualified retirement
plan or other program of deferred compensation (except as provided above),
Company contributions to Social Security or worker's compensation, the costs
paid by the Company in connection with fringe benefits and relocation, including
gross-ups, any amounts accrued for the benefit of the Participant, but not paid,
during the period of reference, and any gains (realized or unrealized) that may
result from participation in any of the Company's stock option programs.

         (f) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of service as an Eligible Employee. Continuous
Status as an Eligible Employee shall not be considered interrupted in the case
of a bona fide leave of a absence agreed to in writing by the Company, provided
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.

         (g) "CONTRIBUTIONS" means all amounts credited to the Stock Purchase
Account of a Participant pursuant to the Plan.

         (h) "DESIGNATED SUBSIDIARIES" means the Subsidiaries which have been
designated by the Administrative Committee or the Board from time to time in its
sole discretion as eligible to participate in the Plan.

         (i) "ELIGIBLE EMPLOYEE" means each individual who has been an employee
of the Company or a Designated Subsidiary whose customary employment is for more
than twenty (20) hours per week and more than five (5) months in a calendar
year. The foregoing notwithstanding, an individual shall not be considered an
Eligible Employee if the individual's participation is prohibited by the law of
any country which has jurisdiction over such individual.

         (j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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         (k) "FAIR MARKET VALUE" means the market value of the Stock on a given
date as determined by such methods or procedures as shall be established from
time to time by the Administrative Committee, provided, however, that if the
Stock is listed on a national securities exchange or quoted in an interdealer
quotation system, the Fair Market Value of the Stock on a given date shall be
based upon the last sales price or, if unavailable, the average of the closing
bid and asked prices per share of the Stock on such date (or, if there was no
trading or quotation in the Stock on such date, on the next preceding date on
which there was trading or quotation) as provided by one of such organizations.
The Administrative Committee's determination of Fair Market Value shall be
conclusive and binding on all persons.

         (l) "IPO" means the initial public offering of the Stock to the public
pursuant to a registration statement filed with the Securities and Exchange
Commission.

         (m) "OFFERING DATE" means the first business day of each Offering
Period of the Plan.

         (n) "OFFERING PERIOD" means a period of twenty-four (24) months
commencing on or about January 1, April 1, July 1 and October 1 of each year
except as otherwise determined by the Administrative Committee, provided that
the first offering period shall commence on the date of the IPO and end on
December 31, 2001 unless designated otherwise by the Board or the Administrative
Committee; provided, such date shall be not later than twenty-seven (27) months
following the date of the IPO.

         (o) "PARTICIPANT" means an Eligible Employee who elects to participate
in the Plan.

         (p) "PLAN" means this Employee Stock Purchase Plan.

         (q) "PURCHASE DATE" means the last day of each Purchase Period of the
Plan.

         (r) "PURCHASE PERIOD" means periods of approximately three (3) months
within each Offering Period, commencing on or about January 1, April 1, July 1
and October 1 of each year, except as otherwise determined by the Administrative
Committee and provided that the first Purchase Period with respect to the first
Offering Period shall commence on the date of the IPO and end on or about March
31, 2000, unless designated otherwise by the Board or Administrative Committee.

         (s) "STOCK" means the common stock, $.0001 par value, of the Company.

         (t) "STOCK PURCHASE ACCOUNT" means a noninterest bearing bookkeeping
entry which shall record all amounts withheld from a Participant's compensation
for the purpose of purchasing shares of Stock for such employee under the Plan,
reduced by all amounts applied to the purchase of Stock for such Participant
under the Plan. The Company shall not be required to segregate or set aside any
amounts so withheld, and such bookkeeping entry shall not represent an interest
in any assets of the Company.

         (u) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

SECTION 3. ADMINISTRATION OF THE PLAN.

         The Board shall appoint an Administrative Committee, which shall have
the authority and power to administer the Plan and to make, adopt, construe, and
enforce rules and regulations not inconsistent with the provisions of the Plan.
The Administrative Committee shall adopt and prescribe the contents of all forms
required in connection with the administration of the Plan, including, but not
limited to, the enrollment agreements, payroll withholding authorizations,
withdrawal documents, and all other notices required hereunder. The
Administrative Committee shall have the fullest discretion permissible under law
in the discharge of its duties. The Administrative Committee's interpretations
and decisions in respect of the Plan, the rules and regulations pursuant to
which it is operated, and the rights of Participants hereunder shall be final
and conclusive.

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SECTION 4. ENROLLMENT AND OFFERING PERIODS.

         (a) OFFERING PERIODS. The Plan shall be implemented by a series of
Offering Periods of twenty-four (24) months' duration, with new Offering Periods
(other than the first Offering Period) commencing on or about January 1, April
1, July 1 and October 1 of each year (or as such other time or times as may be
determined by the Administrative Committee). Offering periods shall commence on
a continuing and overlapping basis until terminated in accordance with Section
13 hereof. The Administrative Committee shall have the power to change the
duration and/or the frequency of Offering Period with respect to future
offerings if such change is announced at least five (5) days prior to the
scheduled beginning of the first Offering Period to be affected. Eligible
employees may not participate in more than one Offering Period at a time

         (b) ENROLLMENT. Any individual who is an Eligible Employee as of the
Offering Date of a given Offering Period shall be eligible to participate in
such Offering Period under the Plan, subject to the requirements of Section
4(d). An Eligible Employee may become a Participant in the Plan by completing an
enrollment agreement in the form provided by the Administrative Committee and
filing it with the Company at the prescribed location not later than the time
set by the Administrative Committee for all Eligible Employees with respect to a
given Offering Period.

         (c) DURATION OF PARTICIPATION. Once enrolled in the Plan, a Participant
shall continue to Participate in the Plan for future Offering Periods, until the
Participant ceases to be an Eligible Employee, withdraws from the Plan under
Section 6 or reaches the end of an Offering Period in which the Participant's
contributions were discontinued under Section 5(c). A Participant who
discontinued contributions under Section 5(c) or withdrew under Section 6 may
again become a Participant, if then an Eligible Employee, by filing a new
enrollment agreement in accordance with subsection (b) above. A Participant
whose contributions were discontinued automatically under Section 8(d) shall
automatically resume participation as of the first Purchase Period ending in the
next calendar year, if he or she is then an Eligible Employee.

         (d) PROHIBITION ON PARTICIPATION BY FIVE PERCENT OWNERS. Any provisions
of the Plan to the contrary notwithstanding, no Eligible Employee shall be
granted a right to purchase Stock under the Plan if, immediately after the grant
of such right, such Eligible Employee (or any other person whose stock would be
attributed to such an Eligible Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any parent or Subsidiary of the Company.

SECTION 5. EMPLOYEE CONTRIBUTIONS.

         (a) AMOUNT OF PAYROLL DEDUCTIONS. The Participants shall elect to have
payroll deductions made on each payday during the Offering Period in an amount
not less than one percent (1%) and not more than fifteen percent (15%) (in whole
number increments) of such Participant's Compensation on each such payday, or
such other increments as the Administrative Committee shall establish prior to
an Offering Date. All payroll deductions made by a Participant shall be credited
to his or her Stock Purchase Account. A Participant may not make any additional
payments into such account. A Participant's election shall be effective for
successive Offering Periods in which the Participant is eligible to participate,
unless the Participant withdraws from participation in accordance with Section 6
hereof.

         (b) APPLICATION OF PAYROLL DEDUCTIONS. Payroll deductions shall
commence on the first payroll following the Offering Date or such later date
established by the Administrative Committee and shall end on the last payroll
paid prior to the Purchase Date of the Offering Period to which the enrollment
agreement is applicable unless earlier terminated by the Participant as provided
in Sections 5(c) or 6, provided however, that any payroll paid within ten (10)
business days preceding the Purchase Date will be included in the subsequent
Offering Period.

         (c) CHANGING CONTRIBUTION RATE. A Participant may change the rate of
his or her Contributions (including ceasing to make additional Contributions)
during the Offering Period by completing and filing with the Company a new
enrollment form. The change in rate shall be effective as soon as reasonably
practicable after the new enrollment form is received by the Company at the
prescribed location. No Participant may make more than

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one change during each Purchase Period.

                  Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 8(d) of the Plan, a
Participant's Contributions may be decreased to zero for any Purchase Period
scheduled to end in the current calendar year. Contributions shall re-commence
at the rate previously elected by the Participant at the beginning of the next
Purchase Period that is scheduled to end in the following calendar year, unless
otherwise terminated or changed by the Participant.

SECTION 6. VOLUNTARY WITHDRAWAL.

         A Participant may withdraw all but not less than all the Contributions
credited to his or her Stock Purchase Account under the Plan at any time prior
to five (5) business days prior to the Purchase Date of the Offering Period by
completing and filing with the Company an approved notification. All of the
Participant's Contributions credited to his or her Stock Purchase Account will
be paid to him or her as soon as practicable after receipt of his or her notice
of withdrawal and his or her participation for the current Offering Period will
be automatically terminated, and no further Contributions for the purchase of
shares will be made during the Offering Period. A Participant's withdrawal from
an offering will not have any effect upon his or her eligibility to participate
in a succeeding Offering Period or in any similar plan which may hereafter be
adopted by the Company.

SECTION 7. AUTOMATIC WITHDRAWALS

         (a) REDUCTION IN FAIR MARKET VALUE. If the Fair Market Value of the
Shares on any Purchase Date of an Offering Period is less than the Fair Market
Value of the Shares on the Offering Date for such Offering Period, then every
Participant shall automatically (i) be withdrawn from such Offering Period at
the close of such Purchase Date and after the acquisition of Shares for such
Purchase Period, and (ii) be enrolled in the Offering Period commencing on the
first business day subsequent to such Purchase Period.

         (b) TERMINATION OF CONTINUOUS STATUS AS AN ELIGIBLE EMPLOYEE. Upon
termination of the Participant's Continuous Status as an Eligible Employee prior
to the Purchase Date for an Offering Period for any reason, including retirement
or death, the Contributions credited to his or her Stock Purchase Account will
be refunded, and his or her participation will be automatically terminated. In
the event an Eligible Employee fails to remain in Continuous Status as an
Eligible Employee of the Company for at least twenty (20) hours per week during
the Offering Period in which the employee is Participant, he or she will be
deemed to have elected to withdraw from the Plan and the Contributions credited
to his or her Stock Purchase Account will be returned to him or her and his or
her participation terminated.

SECTION 8. PURCHASE OF SHARES.

         (a) PURCHASE OF SHARES. Unless a Participant withdraws from the Plan as
provided in Section 6 or is terminated from participation as provided in Section
7, the balance of his or her Stock Purchase Account will automatically be
applied to the purchase of shares of Stock on each Purchase Date of the Offering
Period, and the maximum number of shares will be purchased at the applicable
purchase price with the accumulated Contributions in his or her Stock Purchase
Account; provided, however, that, subject to adjustment as provided in Section
11, the maximum number of shares an Eligible Employee may purchase during each
Purchase Period during an Offering Period shall be one thousand (1,000) shares
or such other number of shares established by the Administrative Committee or
the Board prior to the Offering Period to be affected, and provided further that
such purchase shall be subject to the limitations set forth in Section 8(c) and
(d). The Administrative Committee may determine with respect to all Participants
that fractional shares shall be (i) rounded down to the next whole share or (ii)
credited as a fractional share.

         (b) PURCHASE PRICE. The purchase price for each share of Stock
purchased at the end of a Purchase Period shall be the lower of:

                  (i)      eighty-five percent (85%) of the Fair Market Value of
                           a share of Stock on the Purchase Date, or

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                  (ii)     eighty-five percent (85%) of the Fair Market Value of
                           a share of Stock on the last trading day before the
                           Offering Date or in the case of the first Offering
                           Period under the Plan, eighty-five percent (85%) of
                           the price at which one share of Stock is offered to
                           the public in the IPO.

         (c) INSUFFICIENT AVAILABLE SHARES. If, on any Purchase Date, the number
of shares of Stock that may be purchased exceeds the number of shares which then
remain authorized for purchase under the Plan, the following events shall occur:

                  (i)      The Administrative Committee shall make a pro rata
                           allocation of the shares available in as uniform a
                           manner as shall be practicable and as it shall
                           determine to be equitable among all Participants
                           purchasing Stock on the Purchase Date and to continue
                           all Offering Periods then in effect (which
                           determination may be made without regard to
                           additional shares subsequently authorized by the
                           Company's shareholders);

                  (ii)     The Plan shall automatically terminate immediately
                           after the Purchase Date as of which the supply of
                           available shares of Stock is exhausted; and

                  (iii)    Any amount then standing to the credit of the Stock
                           Purchase Account of each of the Participants shall be
                           repaid to such Participants.

         (d) MAXIMUM PURCHASE AMOUNT. Notwithstanding anything in this Plan to
the contrary, a Participant may not during a calendar year purchase Stock with a
Fair Market Value, determined as of the Offering Date for such Stock during such
calendar year, of more than $25,000 under the Plan and all other stock purchase
plans (within the meaning of Section 423 of the Code) of the Company's parent or
a Subsidiary. If a Participant is precluded by this subsection (d) from
purchasing additional Stock under the Plan, the Participant's contributions
shall be automatically discontinued and shall resume as of the beginning of the
earliest Purchase Period ending in the next calendar year (if then an Eligible
Employee).

         (e) UNUSED STOCK PURCHASE ACCOUNT BALANCES. Any cash remaining to the
credit of a Participant's Stock Purchase Account under the Plan after a purchase
by him or her of shares of Stock on a Purchase Date, other than amounts
representing fractional shares, will be returned to him or her as soon as
practicable. Amounts representing fractional shares will be carried forward for
use in subsequent Purchase Periods.

         (f) SHARE OWNERSHIP; ISSUANCE OF STOCK. The shares of Stock purchased
by a Participant on a Purchase Date shall, for all purposes, be deemed to have
been purchased at the close of business on the Purchase Date. Prior to that
time, none of the rights or privileges of a shareholders of the Company shall
inure to the Participant with respect to such shares. All the shares of Stock
purchased under the Plan shall be delivered by the Company in a manner as
determined by the Administrative Committee. As promptly as practicable after the
Purchase Date of each Offering Period, the Company shall arrange the delivery to
each Participant, as appropriate, including, but not limited to, direct deposits
into a book entry account or brokerage account, the shares purchased. Shares to
be delivered to a Participant under the Plan may, if so directed by the
Administrative Committee, be registered in the name of the Participant or in the
"Street Name" of a Company approved broker.

SECTION 9. CONDITIONS UPON ISSUANCE OF SHARES.

         (a) Shares shall not be issued with respect to an offer under the Plan
unless the purchase of the shares and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or system upon which the shares may then be
listed or approved for trading, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

         (b) As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for

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investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.

SECTION 10. AUTHORIZED SHARES.

Subject to adjustment as provided in Section 11, the maximum number of shares of
the Company's Stock which shall be made available for sale under the Plan shall
be five hundred thousand (500,000) shares which shall be increased on the first
day each of the Company's fiscal years commencing on or after January 1, 2001,
by the lesser of (i) three hundred thousand (300,000) shares or (ii) two percent
(2%) of the Company's issued and outstanding shares as of the last day of the
preceding fiscal year.

SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.

         (a) ADJUSTMENT. Subject to any required action by the shareholders of
the Company, the number of shares of Stock authorized for issuance under the
Plan ("the Reserves"), the maximum number of shares a Participant may purchase
during a Purchase Period under Section 8(a), as well as the price per share of
Stock subject to an outstanding Offering Period, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Stock or any other increase or decrease in the number
of shares of Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrative Committee or the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company, of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or purchase price of shares of Stock.

         (b) CORPORATE TRANSACTIONS. In the event of the dissolution or
liquidation of the Company, the Purchase Period and any Offering Period will
terminate immediately prior to the consummation of such action, unless otherwise
provided by the Administrative Committee or the Board. In the event of a sale of
all or substantially all of the assets of the Company, or any merger,
consolidation or capital reorganization of Company with or into another
corporation (a "Corporate Event"), the offering of shares under the Plan shall
be assumed or an equivalent offering shall be substituted by such successor
corporation or its parent or subsidiary (as defined in Section 424 of the Code),
unless the Administrative Committee or the Board determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution, to shorten
the Purchase Period and any Offering Period then in progress by setting a new
Purchase Date (the "New Purchase Date"). If the Administrative Committee or the
Board shortens the Purchase Period and any Offering Period then in progress in
lieu of assumption or substitution in the event of a Corporate Event, the
Administrative Committee shall notify each Participant in writing, at least ten
(10) days prior to the New Purchase Date, that the Purchase Date has been
changed to the New Purchase Date and that the balance in his or her Stock
Purchase Account will be automatically applied to purchase Stock on the New
Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 6 or terminated his or her status as an
Eligible Employee as provided in Section 7(b). For purposes of this paragraph,
an offering under the Plan shall be deemed to be assumed if, following the
Corporate Event, the new offering confers the right to purchase, for each share
of Stock subject to purchase immediately prior to the Corporate Event, the
consideration (whether stock, cash or other securities or property) received in
the Corporate Event by holders of Stock for each share of Stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Stock); provided, however, that if such consideration
received in the Corporate Event was not solely common stock of the successor
corporation or its parent or subsidiary (as defined in Section 424 of the Code),
the Board or Administrative Committee may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
purchase right to be solely common stock of the successor corporation or its
parent or subsidiary equal in fair market value to the per share consideration
received by holders of Stock in the Corporate Event.

SECTION 12. MISCELLANEOUS.

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         (a) COLLECTION OF TAXES. The Company and each Designated Subsidiary
shall be entitled to require a Participant to remit, through payroll withholding
or otherwise, any tax that it determines it is so obligated to collect with
respect to the issuance of Stock hereunder, or the subsequent sale or
disposition of such Stock, and the Administrative Committee shall institute such
mechanisms as shall insure the collection of such taxes. The Company or its
Designated Subsidiary may, but is not required to, satisfy such withholding
obligations by withholding from wages, salary or other cash compensation due to
the Participant.

         (b) NO RIGHTS AS AN EMPLOYEE. Neither the adoption of this Plan, nor
any right granted under the Plan, shall confer upon any individual any right to
continue in the employ or service of the Company or a Designated Subsidiary or
in any way affect any right and power of the Company or a Designated Subsidiary
to terminate the employment or service of any individual at any time with or
without cause and without assigning a reason therefor.

         (c) RIGHTS NOT TRANSFERABLE. Neither Contributions credited to a
Participant's Stock Purchase Account nor any rights with regard to the exercise
of an option or to receive shares under the Plan may be assigned, transferred,
pledged, or otherwise disposed of in any way (other than by will or the laws of
descent and distribution) by the Participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as election to withdraw from participation in
accordance with Section 6.

         (d) USE OF FUNDS. All Contributions credited to a Participant's Stock
Purchase Account received or held by the Company may be used by the Company for
any corporate purpose, and the Company shall not be obligated to segregate such
Contributions.

         (e) NOTICE OF DISPOSITION OF STOCK. Each Participant agrees, by
entering the Plan, to promptly give the Company notice of any disposition of
shares of Stock purchased under the Plan where such disposition occurs within
two (2) years after the Offering Date of the Offering Period pursuant to which
such shares were purchased.

         (f) NOTICES. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Administrative Committee
at the location, or by the person, designated by the Administrative Committee
for the receipt thereof.

         (g) REPURCHASE OF STOCK. The Company shall not be required to purchase
or repurchase from any Participant any of the shares of Stock that the
Participant acquired under the Plan.

         (h) HEADINGS, CAPTIONS, GENDER. The headings and captions herein are
for convenience of reference only and shall not be considered as part of the
text. The masculine shall include the feminine, and vice versa.

         (i) SEVERABILITY OF PROVISIONS; PREVAILING LAW. The provisions of the
Plan shall be deemed severable. In the event any such provision is determined to
be unlawful or unenforceable by a court of competent jurisdiction or by reason
of a change in an applicable statute, the Plan shall continue to exist as though
such provision had never been included therein (or, in the case of a change in
an applicable statute, had been deleted as of the date of such change). The Plan
shall be governed by the laws of the State of Delaware, to the extent such laws
are not in conflict with, or superseded by, federal law.

SECTION 13. AMENDMENT; TERMINATION.

(a) The Board of Directors of the Company may at any time terminate or amend the
Plan. Except as provided in Sections 11 and 13, or as may be required to comply
with Section 423 of the Code or applicable law, no such termination or amendment
may make any change in an outstanding Offering Period which adversely affects
the rights of any Participant. In addition, to the extent necessary to comply
with Section 423 of the Code (or any successor rule or provision) or any other
applicable law or regulation, the Company shall obtain shareholder approval in
such a manner and to such a degree as so required.

                                       7
<PAGE>   11
         (b) Without shareholder consent and without regard to whether any
Participant rights may be considered to have been adversely affected, the
Administrative Committee or the Board shall be entitled to change the Offering
Periods and Purchase Dates, terminate an Offering Period and Purchase Period
then in progress if the Board or the Administrative Committee determines such
termination is in the best interests of the Company, limit the frequency and/or
number of changes in the amount withheld during an Offering Period, establish
the exchange ratio applicable to amounts withheld in currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by the
Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Stock for each Participant
properly correspond with amounts withheld from the Participant's Compensation,
and establish such other limitations or procedures as the Administrative
Committee or Board determines in its sole discretion advisable which are
consistent with the Plan.

SECTION 14. TERM OF PLAN; EFFECTIVE DATE.

 The Plan shall become effective upon the earlier to occur of its adoption by
the Board of Directors or its approval by the shareholders of the Company. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 8(c) or 13. No shares of Stock shall be purchased under the Plan
unless and until the Company's shareholders have approved the Plan.

SECTION 15. EXECUTION.

To record the adoption of the Plan by the Board on December 17, 1999, the
Company has caused its authorized officer to execute the same.

                                       VarsityBooks.com Inc.

                                       By: /s/ VarsityBooks.com Inc.
                                          ---------------------------

                                       Title:
                                             ------------------------

                                        8<PAGE>   1
*Certain sections omitted and filed separately with the Commission.

                                                                   Exhibit 10.13

                                CREDIT AGREEMENT

This Credit Agreement ("Agreement") is made and entered into on January 19,
2000, by and between VarsityBooks.com Inc., Delaware corporation, ("Borrower"),
and Imperial Bank, a California banking corporation, ("Bank").

Subject to the terms and conditions of this Agreement, any security agreement(s)
executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loan(s) and or
advance(s) (individually a "Loan" and collectively "Loans") referred to below to
Borrower.

In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:

1.     AMOUNT AND TERMS OF CREDIT

1.01   REVOLVING CREDIT COMMITMENT.

(a)           REVOLVING LINE OF CREDIT. Subject to the terms and conditions of
this Agreement and provided that no Event of Default (as hereinafter defined)
has occurred and is continuing, Bank shall, upon Borrower's request make
advances ("Revolving Loans") to Borrower, for working capital and the issuance
of standby letters of credit, in an aggregate amount outstanding at any one time
not to exceed $7,500,000.00 minus the outstanding amount of all Term Loans (if
any, as such term is hereinafter defined) (the "Revolving Line of Credit") until
December 31, 2000, (the "Revolving Line of Credit Maturity Date"). Revolving
Loans may be repaid and reborrowed, provided that all outstanding principal and
accrued interest on the Revolving Loans shall be payable in full on the
Revolving Line of Credit Maturity Date.

(b)           REVOLVING NOTE. The interest rate, payment terms, maturity date
and certain other terms of the Revolving Loan will be contained in a promissory
note dated the date of this Agreement, as such may be amended or replaced from
time to time.

(c)           LETTER OF CREDIT USAGE. Subject to availability under the
Revolving Line of Credit, at any time and from time to time from the date hereof
through the banking day immediately prior to the Revolving Line of Credit
Maturity Date, Bank shall issue for the account of Borrower such standby letters
of credit ("Letters of Credit") as Borrower may request, which requests shall be
made by delivering to Bank a duly executed letter of credit application on
Bank's standard form; provided, however, that (i) the outstanding and undrawn
amounts of all such Letters of Credit shall not at any time exceed $750,000, and
(ii) shall be deemed to constitute Revolving Loans for the purpose of
calculating availability under the Revolving Line of Credit. Unless agreed to in
writing by Bank, no Letter of Credit shall have an expiration date that is later
than the Revolving Line of Credit Maturity Date. All Letters of Credit shall be
in form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form application and letter of
credit agreement and other agreements required by Bank. Borrower will pay all
usual issuance and other fees that Bank notifies Borrower it will be charged for
issuing and processing Letters of Credit for Borrower.

                                       1
<PAGE>   2

1.02          TERM LOAN COMMITMENT.

(a)           COMMITMENT. Subject to all the terms and conditions of this
Agreement and provided that no Event of Default has occurred and is continuing,
Bank hereby agrees to make loans (each a "Term Loan," and collectively the "Term
Loans") to Borrower in such amounts as Borrower shall request at any time from
the date hereof through the date that is nine (9) months from the date hereof
(the "Term Loan Availability End Date"), in an aggregate principal amount not to
exceed $3,000,000 (the "Term Loan Commitment") for the purchase of new equipment
and software and the financing of equipment and software acquired by Borrower on
or after June 1, 1999; provided, however, that the outstanding amounts under
such Term Loans for the purchase of software shall not at any time exceed
$500,000; and provided, further, that the outstanding amounts under all such
Term Loans (i) shall not at any time exceed the Term Loan Commitment and (ii)
shall be deemed to constitute Revolving Loans for the purpose of calculating
availability under the Revolving Line of Credit. Any commitment of Bank,
pursuant to the terms of this Agreement, to make Term Loans shall expire on the
Term Loan Availability End Date, and the outstanding amount of all such Term
Loans shall thereafter be repaid in twenty four (24) equal monthly payments of
principal and interest. Any Term Loans, which are prepaid by Borrower, may not
be reborrowed.

(b)           TERM LOAN NOTES. The amount of each Term Loan made by Bank to
Borrower hereunder shall be evidenced by a separate promissory note (each a
"Term Note," and collectively, the "Term Notes").

(c)           REQUESTS FOR TERM LOANS. When Borrower desires to obtain a Term
Loan, Borrower shall notify Bank (which notice shall be signed by a duly
authorized officer of Borrower and shall be irrevocable) to be received no later
than 3:00 p.m. Pacific time three (3) banking days before the day on which the
Term Loan is to be made. The notice shall include a copy of the invoice for the
equipment and/or software to be financed. Term Loans may only be used for the
purchase of new equipment and software and the financing of equipment and
software acquired by Borrower on or after June 1, 1999, and will be limited to
100% of the invoice amount for such equipment and software, approved from time
to time by Bank, less any taxes, shipping and freight charges or discounts,
warranty charges, installation expenses and other soft costs. In connection with
any Term Loans made to finance equipment and software acquired by Borrower on or
after June 1, 1999, all such equipment and software shall be free of all liens
except such liens as are granted to Bank in connection with this Agreement and
the Loan Documents.

1.03          PRIOR LOANS. Any loan made by Bank to Borrower prior to the date
of this Agreement and other obligations outstanding from Borrower to Bank are
subject to the terms and conditions of this Agreement and the interest rate,
payments of principal and interest and other the terms contained in any note
evidencing the prior loan remain in full force and effect, and Borrower agrees
to continue to make payments in accordance with the terms of any such prior
note.

1.04          LOAN FEE. In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Revolving Line of
Credit and the Term Loans, Borrower shall pay to Bank a loan fee of $20,000,
which amount shall be fully earned and non-refundable as of the date hereof.

1.05          COLLATERAL. Borrower shall grant or cause to be granted to Bank a
first priority lien on any and all currently existing and hereafter acquired or
arising personal property assets of Borrower which are assigned or hereafter are
assigned to Bank as security or in which Bank now has or hereafter acquires a
security interest or pursuant to the terms of any security agreement, an
intellectual property security agreement, or otherwise as security for the
prompt payment and performance of all Borrower's

                                       2
<PAGE>   3

obligations to Bank under this Agreement and the other Loan Documents, all as
may be subject to Section 5.03 hereof, excluding previously leased equipment,
and including general intangibles. Bank shall obtain a specific filing on all
copyrights, patents, and trademarks, filed at the U.S. Copyright Office and the
U.S. Patent and Trademark Office.

1.06          COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest, fees, costs, and/or expenses due under this Agreement by charging
Borrower's demand deposit account number * with Bank, or any other demand
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such demand deposit account to pay all
such sums when due, the full amount of such deficiency shall be immediately due
and payable by Borrower.

2.     REPRESENTATIONS OF BORROWER

Borrower represents and warrants that:

2.01          EXISTENCE AND RIGHTS. As of the date of this Agreement, Borrower
is a corporation, duly organized and existing and in good standing under the
laws of the state of Delaware; so long as this Agreement shall remain in force
and effect or Borrower shall have any amounts owing to Bank, under this
Agreement or otherwise, Borrower is validly existing, authorized and in good
standing to do business in the state of its incorporation; Borrower has the
appropriate powers and adequate authority, rights and franchises to own its
property and to carry on its business as now conducted, and is duly qualified
and in good standing in each state in which the character of the properties
owned by it therein or the conduct of its business makes such qualification
necessary; and Borrower has the power and adequate authority to make and carry
out this Agreement. Borrower has no investment in any other business entity
unless specified in writing to Bank.

2.02          AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation, by-laws, or similar document
as the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms, subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.

2.03          NO CONFLICT. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by which
it or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.

2.04          LITIGATION. Except as disclosed in writing to Bank by Borrower on
Schedule L-1 to this Agreement, there is no litigation or other proceeding
pending or, to Borrower's knowledge, threatened against or affecting Borrower
which if determined adversely to Borrower or its interest would have a material
adverse effect on the financial condition of Borrower, and Borrower is not in
default with

                                       3
<PAGE>   4

respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.

2.05          FINANCIAL CONDITION. The consolidated balance sheet of Borrower as
of November 30, 1999, and the related profit and loss statement for the eleven
month period ended as of that date, a copy of which has heretofore been
delivered to Bank by Borrower, and all other statements and data submitted in
writing by Borrower to Bank in connection with this request for credit are true
and correct in all material respects, and said balance sheet and profit and loss
statement truly presents the financial condition of Borrower as of the date
thereof, and the results of the operations of Borrower for the period covered
thereby in all material respects, and has been prepared in accordance with
generally accepted accounting principles on a basis consistently maintained.
Since such date there have been no material adverse changes in the financial
condition or business of Borrower. Borrower has no knowledge of any material
liabilities, contingent or otherwise, at such date not reflected in said balance
sheet, and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially adverse
effect upon its financial condition, operations or business as now conducted.

2.06          TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.

2.07          TAX STATUS. Borrower has no liability for any material delinquent
state, local or federal taxes, and, if Borrower has contracted with any
government agency, Borrower has no material liability for renegotiation of
profits.

2.08          TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses
all necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.

2.09          REGULATION U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve System).

2.10          ERISA. All defined benefit pension plans as defined in the
Employees Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.

3.     CONDITIONS PRECEDENT TO LOAN

              Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in form
and substance satisfactory to Bank:

3.01          PROMISSORY NOTE. Original executed promissory notes evidencing the
obligations of Borrower to Bank under this Agreement.

3.02          SECURITY AGREEMENT. Original executed security agreement covering
the personal property collateral securing the Loan.

                                       4
<PAGE>   5

3.03          INTELLECTUAL PROPERTY SECURITY AGREEMENT. Original executed
Intellectual Property Security Agreement covering the intellectual property
securing the loan.

3.04          DISBURSEMENT REQUEST AND AUTHORIZATION. Original executed
Disbursement Request and Authorization.

3.05          AGREEMENT TO PROVIDE INSURANCE. Agreement to provide Insurance
executed by Borrower, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with lenders loss
payable endorsement in favor of Bank.

3.06          FINANCING STATEMENT. Financing statements executed by Borrower.

3.07          INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to that Agreement to Provide Insurance
executed by Borrower, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with lenders loss
payable endorsement in favor of Bank.

3.08          ORGANIZATIONAL DOCUMENTS. Copies of the articles of incorporation,
or similar document as the case may be, of the Borrower.

3.09          AUTHORIZATIONS. Certified copies of all action taken by Borrower
to authorize the execution, delivery and performance of the Loan Documents.

3.10          GOOD STANDING. Good standing certificates from the appropriate
secretary of state of the state in which any Borrower is organized and in each
state in which it is required to be qualified to do business.

3.11          CREDIT AGREEMENT. This Agreement, duly executed by Borrower.

3.12          ADDITIONAL DOCUMENTS. Such other documents, instruments, and
agreements as Bank may reasonably deem necessary.

4.     AFFIRMATIVE COVENANTS OF BORROWER

Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:

4.01          RIGHTS AND FACILITIES. Maintain and preserve all rights,
franchises and other authority adequate for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair;
conduct its business in an orderly manner without voluntary interruption and, if
a corporation or partnership, maintain and preserve its existence.

4.02          USE OF PROCEEDS. Use the proceeds of the Loans only for purposes
specified in Section 1 of this Agreement.

                                       5
<PAGE>   6

4.03          INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as lenders loss payee on such policies.

4.04          TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:

(a)    The same are being contested in good faith and by appropriate proceedings
in such manner as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder; and

(b)    It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it to be adequate
with respect thereto.

4.05          RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours, after having received
notice thereof; and furnish Bank:

(a)           MONTHLY FINANCIAL STATEMENT. As soon as available, and in any
event within 30 days after the close of each month of each fiscal year of
Borrower, commencing on the month next ending, a balance sheet, profit and loss
statement, statement of shareholder's equity and statement of cash flows of
Borrower as of the close of such period and covering operations for the portion
of Borrower's fiscal year ending on the last day of such period, all in
reasonable detail and reasonably acceptable to Bank, stating in comparative form
the figures for the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate officer of
Borrower, subject, however, to year-end adjustments.

(b)           ANNUAL FINANCIAL STATEMENT. As soon as available, and in any event
within 90 days after and as of the close of each fiscal year of Borrower, the
audited balance sheet, profit and loss statement, statement of shareholder's
equity and statement of cash flows of Borrower, all in reasonable detail,
stating in comparative form the figures for the corresponding date and period in
the preceding fiscal year, audited by an independent certified public accountant
selected by Borrower and reasonably acceptable to Bank, in accordance with
generally accepted accounting principles on a basis consistently maintained by
Borrower with the unqualified opinion of such accountant satisfactory to Bank.

(c)           OFFICER'S CERTIFICATE. Within 30 days after the end of each month
of each fiscal year of Borrower, a certificate of the chief financial officer of
Borrower, stating that Borrower has performed and observed each and every
covenant contained in this Agreement to be performed by it and that no event has
occurred and no condition then exists which constitutes an Event of Default,
hereunder or

                                       6
<PAGE>   7

would constitute an Event of Default upon the lapse of time or upon the giving
of notice and the lapse of time specified herein; or, if any such event has
occurred or any such condition exists, specifying the nature thereof.

(d)           AUDIT REPORTS. Promptly after the receipt thereof by Borrower,
copies of any detailed audit reports submitted to Borrower by independent
accountants in connection with each annual or interim audit of the accounts of
Borrower performed by such accountants.

(e)           STOCKHOLDER, SECURITY AND EXCHANGE COMMISSION STATEMENTS AND
REPORTS Promptly after the same are available, copies of all such proxy
statements, financial statements and reports as Borrower or any subsidiary shall
send to its members or stockholders as appropriate, if any, and copies of all
reports which Borrower or any subsidiary may file with the Securities and
Exchange Commission, or any governmental authority at any time substituted
therefor.

(f)           OTHER INFORMATION. Such other information relating to the affairs
of Borrower as the Bank may reasonably request from time to time, specifically
including, but not limited to, at the time Borrower becomes a publicly traded
entity, copies of Borrower's 10Q and 10K reports at the time of filing with SEC.

(g)           NOTICE OF DEFAULT. Promptly notify Bank in writing of the
occurrence of any Event of Default or any event that, upon notice or lapse of
time would be an Event of Default under this Agreement or under any other Loan
Document.

4.06          QUICK RATIO. As of the earlier of February 29, 2000 or the
occurrence of the Equity Event, (as defined below), maintain on a monthly basis
a Quick Ratio of not less than 1.50:1.00. For purposes of this facility, the
Quick Ratio will be calculated as cash and cash equivalents plus billed trade
accounts receivable divided by current liabilities (including all amounts due to
stockholders, officers and affiliates), less deferred maintenance revenue, in
each case as determined in accordance with generally accepted accounting
principles, consistently applied.

4.07          EQUITY EVENT. The Equity Event must occur on or before February
29, 2000. For purposes of this credit facility, the "Equity Event" is defined as
the earlier to occur of, (i) the successful completion of the initial public
offering of the common shares of the capital stock of Borrower or (ii) the
successful sale of Series D preferred stock of Borrower, in each case that shall
yield gross proceeds of not less than $25,000,000.

4.08          WARRANTS. On the date hereof, Bank shall receive warrants to
purchase $375,000 in shares of Borrower's common stock at an initial exercise
price equal to the lesser of (i) $10 per share, or (ii) the per share price
received by Borrower in the sale of the Borrower's Series D preferred stock
referred to above (the "Initial Exercise Price"). If the Equity Event has not
occurred by February 29, 2000, then Bank shall receive warrants to purchase an
additional $150,000 in shares of the Borrower's common stock at the Initial
Exercise Price, and, as of the last day of each month thereafter, if the Equity
Event has not occurred, then Bank shall receive warrants to purchase an
additional $150,000 in shares of the Borrower's common stock at the Initial
Exercise Price.

4.09          MINIMUM REVENUE. Borrower's gross revenues shall be not less than
* for the year ending 12/31/99; * for the quarter ending 3/31/00; * for the
quarter ending

                                       7
<PAGE>   8

6/30/00; * for the quarter ending 9/30/00; and * for the quarter ending
12/31/00, in each case as determined in accordance with generally accepted
accounting principles, consistently applied.

4.10          ERISA. Cause all defined benefit pension plans, as defined in
ERISA, of Borrower to, at all times, meet the minimum funding standards of
Section 302 of ERISA, and ensure that no Reportable Event or Prohibited
Transaction, as defined in ERISA, will occur with respect to any such plan.

4.11          LAWS. At all times comply with, or cause to be complied with, all
laws, statues, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.

4.12          GAAP. Compliance with all financial covenants shall be calculated
based on generally accepted accounting principles applied on a consistent basis
as maintained by Borrower.

4.13          DEPOSIT ACCOUNTS. Maintain, or cause to be maintained, on deposit
with Bank, deposit balances in an aggregate average collected amount of not less
than $1,000,000 (the "Minimum Collected Balance Requirement"). Balances shall be
calculated after reduction for the reserve requirement of the Federal Reserve
Board and uncollected funds.

4.14          NOTICES. Promptly notify Bank in writing of (i) the occurrence of
any Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default; (ii) all litigation affecting Borrower where the
amount is $10,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.

5.            NEGATIVE COVENANTS OF BORROWER

Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:

5.01          TYPE OF BUSINESS; MANAGEMENT; CHANGE IN CONTROL. Make any
substantial change in the character of its business.

5.02          OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated November 30,
1999, excluding those obligations being refinanced by Bank, or sell or transfer,
either with or without recourse, any accounts or notes receivable or any moneys
due or to become due.

5.03          LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or assume
any mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, including but not limited to Borrower's
intellectual property, other than liens for taxes not delinquent and liens in
Bank's favor and other than liens agreed to in writing by Bank.

                                       8
<PAGE>   9

5.04          LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in the securities
of any person or other entity other than the United States Government, Imperial
Bank sponsored paper, or the Monarch Money Market funds; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.

5.05          ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same.

5.06          DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchase, redeem or retire any of such stock other than in dividends
or distributions payable in Borrower's capital stock, except for the repurchase
of Borrower's capital stock from officers, directors, employees or consultants
of Borrower upon termination of their employment with or rendering of service to
Borrower.

6.     EVENTS OF DEFAULT

The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:

6.01          FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to Bank within five (5) days of the
date on which amount is due and payable to Bank under this agreement or any
other Loan Document.

6.02          BREACH OF COVENANT. Failure of Borrower to perform any other term
or condition of this Agreement or any Loan Document binding upon Borrower.

6.03          BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be knowingly false or
misleading in any respect.

6.04          INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.

                                       9
<PAGE>   10

6.05          JUDGMENTS, ATTACHMENTS. Any money judgment writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated, unbonded or unstayed for a period of
fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder.

6.06          BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.

6.07          CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.

6.08          ADVERSE CHANGE. Any change which, in the opinion of Bank, is
materially adverse to the financial condition of Borrower; or should Bank, for
any reason, believe that the prospect of Borrower's payment or performance
hereunder or under any other agreement or instrument with Bank be materially
impaired.

6.09          IMPAIRMENT OF SECURITY. Bank in good faith deems itself insecure.

6.10          OTHER DEFAULTS. Borrower shall commit or do or fail to commit or
do any act or thing which would constitute an event of default under any of the
terms of any other agreement, document or instrument executed or to be executed
by it concerning the obligation to pay money.

6.11          ADVANCES. Notwithstanding anything to the contrary contained
herein, Bank shall have no duty to make advances or other extensions of credit
to Borrower upon the occurrence and during the continuation of any Event of
Default hereunder, notwithstanding any cure period provided for herein.

6.12          RIGHT TO CURE. If any default, other than a default on
indebtedness, is curable, and if Borrower has not been given a prior notice of a
breach of the same provision of this agreement, it may be cured, (and no Event
of Default will have occurred), if Borrower, after Bank sends written notice
demanding cure of such default, (a) cures the default within ten (10) days, or
(b) if the cure requires more than ten (10) days, immediately initiates steps
which Bank deems, in Bank's sole discretion, to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.

7.     MISCELLANEOUS PROVISIONS

7.01          FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of Bank or any holder of notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note (s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

7.02          COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall

                                       10
<PAGE>   11

constitute together but one and the same agreement. This Agreement, and the
other Loan Documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersedes any prior
agreements, written or oral, with respect thereto.

7.03          ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.

7.04          ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.

7.05          INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.

7.06          APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.

7.07          OFFSET. In addition to and not in limitation of all rights of
offset that Bank or other holder of the Loan may have under applicable law, Bank
or other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.

7.08          SEVERABILITY. Should any one or more provisions of the Agreement
be determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.

7.09          TIME OF THE ESSENCE. Time is hereby declared to be of the essence
of this Agreement and of every part hereof.

7.10          ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.

7.11          REFERENCE PROVISION.

(a)    Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or any
note executed by Borrower in favor of Bank or

                                       11
<PAGE>   12

any other agreement or instrument issued in favor of Bank by Borrower
(collectively in this subsection, the "Agreement") which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
(defined as the date on which a party subject to this Agreement gives written
notice to all other parties that a controversy, dispute or claim exists), will
be settled by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
their successor section ("CCP"), which shall constitute the exclusive remedy for
the settlement of any controversy, dispute or claim concerning this Agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP Section 644 in any court in the state of California having jurisdiction. Any
party may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute or
claim, by filing a petition for a hearing and/or trial. All discovery permitted
by this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.

(b)    Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.

(c)    The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the

                                       12
<PAGE>   13

reference. The parties hereto expressly reserve the right to contest or appeal
from the final judgment or any appealable order or appealable judgment entered
by the referee. The parties hereto expressly reserve the right to findings of
fact, conclusions of laws, a written statement of decision, and the right to
move for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.

(d)    In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.

7.12          This Agreement may be modified only by a writing signed by all
parties hereto.

                            [Signature page follows.]

                                       13
<PAGE>   14

This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.

<TABLE>
<S>                                             <C>
IMPERIAL BANK,                                  VARSITYBOOKS.COM INC.,
a California banking corporation ("Bank")       a Delaware corporation ("Borrower")

By: /s/ IMPERIAL BANK                           By: /s/ VARSITYBOOKS.COM INC.
   -------------------------------------           -------------------------------------

Its:                                            Its:
   -------------------------------------           -------------------------------------

                                                By:
                                                   -------------------------------------

                                                Its:
                                                   -------------------------------------
</TABLE>

                                       14
<PAGE>   15

                                  SCHEDULE L-1

                        Pending and Threatened Litigation

                                       1

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