Exhibit 10.1

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

     
 
IN RE ESCALA GROUP, INC. SECURITIES
LITIGATION
 
 
 
Master File No. 06 Civ. 3518 (AKH)
 
This Document Relates To:  ALL ACTIONS
 
   

 
AGREEMENT
 
 
1.  
This Agreement is dated as of May 30, 2008, and is entered into by and between
the Virginia Retirement System (“VRS” or “Lead Plaintiff”) and Defendants Escala
Group, Inc. (“Escala” or the “Company”), Greg Manning, Larry Crawford, Jose
Miguel Herrero, Esteban Perez, Greg Roberts, Juan Antonio Cano and Amper,
Politziner & Mattia P.C. (“Amper”) (collectively, the “Defendants”) and Scott S.
Rosenblum, Mark Segall, James Davin and Anthony Biongiovanni, each by and
through his, their, or its undersigned attorneys.

 
 
2.  
The parties hereto are prepared to execute, by and through their counsel, and
thereby become bound by the terms of the Stipulation of Settlement in this
Action, attached as Exhibit A hereto, once the exhibits to which are
finalized.  Afinsa and Auctentia, through their duly authorized foreign
representatives, however, have not yet approved the execution of the Stipulation
of Settlement on their behalf.  The parties hereto agree that once the exhibits
to the Stipulation of Settlement are finalized and agreed-to, and once Afinsa
and Auctentia, by and through counsel for Afinsa’s and Auctentia’s duly
authorized foreign representatives, execute the Stipulation of Settlement, that
each of them, by and through their counsel, also will promptly execute the
Stipulation of Settlement.

 
 

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3.  
If the Stipulation of Settlement is not executed on or before April 15, 2008 by
counsel for all of the parties appearing in the signature pages of the
Stipulation of Settlement, then on April 16, 2008, simple interest in the amount
of 5 percent per annum will begin to accrue on the $10 million cash component of
the Settlement Amount described in the Stipulation of Settlement.  No interest
will accrue if either (i) the Stipulation of Settlement is fully executed on or
before April 15, 2008, or (ii) counsel for VRS is the sole counsel not to have
executed the Stipulation of Settlement on or before April 15, 2008.  Interest
will cease to accrue on the first day after April 15, 2008 either (i) the
Stipulation of Settlement is fully executed or (ii) counsel for VRS is the sole
counsel not to have executed the Stipulation of Settlement, provided counsel for
VRS is given reasonable notice that the Stipulation of Settlement is ready for
signing.

 
 
4.  
No interest shall accrue for the date on which the Stipulation of Settlement is
signed and signed pages are transmitted to counsel for VRS.

 
 
5.  
Accrued interest on the $10 million cash component of the Settlement Amount, if
any, shall be paid or caused to be paid solely by Escala at the same time that
the cash component of the Settlement Amount is paid into the Escrow Account
pursuant to the terms of the Stipulation of Settlement.  Neither Amper nor its
insurer(s) shall be responsible to pay any interest that accrues under this
Agreement.

 
 
6.  
If either (a) the Effective Date does not occur, (b) the Stipulation of
Settlement is canceled or terminated pursuant to its terms, or (c) the
Stipulation of Settlement does not become final for any reason, then any accrued
interest paid by or caused to be paid by Escala shall be refunded to it by the
Escrow Agent consistent with Section X of the Stipulation of Settlement.

 
 
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7.  
Any of Lead Plaintiff’s counsel, Escala’s counsel or Amper’s counsel shall have
the right, any time after July 15, 2008, to terminate this Agreement upon
written notice to counsel for all parties hereto if the Stipulation of
Settlement has not been executed consistent with this Agreement on or before
July 15, 2008.  If this Agreement is terminated pursuant to this paragraph 7,
then no accrued interest shall be payable.

 
 
8.  
Because the Settlement of the Action is expressly conditioned upon settlement in
the Derivative Action becoming Final, all parties hereto, except for VRS and
Cano (neither of whom is a party in the Derivative Action) agree that they, by
and through their counsel, will promptly after the execution of this Agreement
execute the Stipulation of Settlement in the Derivative Action, provided that it
is agreed to in substantially the form set forth in the Stipulation of
Settlement attached as Exhibit B hereto and that the parties also reach an
agreement on the exhibits to the Stipulation of Settlement in the Derivative
Action, which still must be finalized.

 
 
9.  
All capitalized terms in this Agreement shall have the same meanings as set
forth in the Stipulation of Settlement in this action.

 
 
10.  
This Agreement may be amended or modified only by a written instrument signed by
counsel for all parties to this Agreement or their successors in interest.

 
 
11.  
This Agreement may be executed in one or more original, photocopied or facsimile
counterparts.  All executed counterparts and each of them shall be deemed to be
one and the same instrument.

 
 
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12.  
This Agreement shall be binding upon, and inure to the benefit of the
successors, assigns, executors, administrators, affiliates (including parent
companies), heirs and legal representatives of the parties hereto.  No
assignment shall relieve any party hereto of obligations hereunder.

 
 
13.  
All terms of this Agreement shall be governed and interpreted according to the
laws of the State of New York without regard to its rules of conflicts of law
and in accordance with the laws of the United States.

 

 
 
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound May 30,
2008.
 
 
KAPLAN FOX & KILSHEIMER LLP
 
By:  /s/Robert N. Kaplan
 
Robert N. Kaplan
Donald R. Hall
Jeffrey P. Campisi
850 Third Avenue, 14th Floor
New York, NY 10022
Tel:           (212) 687-1980
Fax:           (212) 687-7714
 
Lead Counsel for Lead Plaintiff the Virginia Retirement System
 

 
 
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KRAMER LEVIN NAFTALIS & FRANKEL LLP
 
By: /s/ Arthur H. Aufses III
Arthur H. Aufses III
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 715-9100
 
Attorneys for Defendant Escala Group, Inc.
 
 
LOVELLS LLP
 
By: /s/ Scott W. Reynolds
 
Scott W. Reynolds
590 Madison Avenue
New York, New York 10022
Tel: (212) 909-0600
 
Attorneys for Defendants Larry Crawford, Esteban Perez, Jose Miguel Herrero,
Greg Roberts, Scott S. Rosenblum, Mark Segall, James Davin and Anthony
Bongiovanni
 
 
 
GOODWIN PROCTER LLP
 
By: /s/ Stephen D. Poss
Stephen D. Poss
Exchange Place
Boston, Massachusetts 02109
Tel: (617) 570-1000
 
Attorneys for Defendant Amper, Politziner & Mattia, P.C.

 
 
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BRESSLER, AMERY & ROSS, PC
 
By: /s/ Lawrence Fenster
Lawrence Fenster
17 State Street
New York, New York 10004
Tel:  212-425-9300
 
Attorneys for Defendant Juan Antonio Cano
 
 
HOFFMAN AND POLLOK LLP
 
By: /s/ William A. Rome
 
William A. Rome
260 Madison Avenue, 22nd Floor
New York, NY 10016
Tel:  (212) 679-2900
 
Attorneys for Defendant Greg Manning
 

 
 
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Exhibit A

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

     
 
IN RE ESCALA GROUP, INC. SECURITIES
LITIGATION
 
 
 
Master File No. 06 Civ. 3518 (AKH)
 
This Document Relates To:  ALL ACTIONS
 
   

STIPULATION OF SETTLEMENT

This Stipulation of Settlement is dated as of ___ __, 2008.  Subject to the
approval of the Court, it is entered into by and between the Virginia Retirement
System (“VRS” or “Lead Plaintiff”), and the other members of the Settlement
Class (as defined herein), and Defendants Escala Group, Inc. (“Escala” or the
“Company”), Greg Manning (“Manning”), Larry Crawford (“Crawford”), Jose Miguel
Herrero (“Herrero”), Esteban Perez (“Perez”), Greg Roberts (“Roberts”), Juan
Antonio Cano (“Cano”) and Amper, Politziner & Mattia P.C. (“Amper”)
(collectively, the “Defendants”) as well as additional former defendants Afinsa
Bienes Tangibles S.A. ("Afinsa"), Auctentia S.L. ("Auctentia"), Anthony
Bongiovanni, Scott S. Rosenblum, James Davin, and Mark Segall (together, the
"Additional Named Parties") each by and through his, their, or its undersigned
attorneys.  This Stipulation is intended by the parties hereto to fully, finally
and forever resolve, discharge, release and settle the Released Claims, the
Released Parties Claims and the Released Co-Defendant Claims, upon and subject
to the terms and conditions hereof.
 
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RECITALS
 
WHEREAS, the following cases were commenced in the United States District Court
for the Southern District of New York, on or after May 9, 2006:
 

 
Case
Civil No.
Date Filed
1.
Barend Cohen, v. Escala Group, Inc., et al.
06-3518 (AKH)
5/9/2006
2.
Wendy M. Schulman Kalman, v. Escala Group, Inc., et al.
06-3644 (AKH)
5/12/2006
3.
Henri Roman, v. Escala Group, Inc., et al.
06-3699 (AKH)
5/15/2006
4.
Frank Do, v. Escala Group, Inc., et al.
06-3740 (AKH)
5/16/2006
5.
Elvira Everette, v. Escala Group, Inc., et al.
06-3929 (AKH)
5/23/2006
6.
Trustee Abe E. Miller, for the Abe E. Miller and Inez V. Miller Living Trust, v.
Escala Group, Inc., et al.
06-4324 (AKH)
6/8/2006
7.
Spring Partners v. Manning et al.
06-3980 (AKH)
5/24/2006
8.
Hammer et al v. Escala Group, Inc. et al.
06-4049 (AKH)
5/26/2006
9.
Trustee Abe E. Miller, for the Abe E. Miller and Inez V. Miller Living Trust, v.
Escala Group, Inc., et al.
06-4324 (AKH)
6/8/2006
10.
Eddy Lovaglio, v. Escala Group, Inc., et al.
06-4681 (AKH)
6/19/2006
11.
Shapiro et al v. Escala Group, Inc., et al.
06-4919 (RCC)
6/23/2006

 
WHEREAS, on July 10, 2006, VRS and certain other parties moved pursuant to the
Private Securities Litigation Reform Act of 1995 (“PSLRA”) to: 1) consolidate
the cases; 2) appoint Lead Plaintiff; and 3) appoint lead counsel.
 
WHEREAS, by an Order dated August 31, 2006, the above-captioned cases were
consolidated for all purposes under the caption In re Escala Group, Inc.
Securities Litigation, Case No. 06 Civ. 3518 (AKH), and the Court appointed VRS
as Lead Plaintiff, and appointed the law firm of Kaplan Fox & Kilsheimer LLP
(“Kaplan Fox”) as Lead Counsel.
 
WHEREAS, on October 13, 2006, Plaintiffs filed a Consolidated Amended Class
Action Complaint (the “CAC”) alleging violations of the federal securities laws,
specifically, violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 (“Exchange Act”), and Rule 10b-5 promulgated thereunder.  The CAC
was brought on behalf of a purported class of all persons (with certain
exceptions) who purchased the publicly traded common stock of Escala during the
period from September 5, 2003 through May 8, 2006.  The CAC purported to assert
claims against Defendants, as well as the Additional Named Parties.
 
WHEREAS, on December 18, 2006, certain of the Defendants and certain of the
Additional Named Parties moved, pursuant to Rules 9(b) and 12(b)(6) of the
Federal Rules of Civil Procedure and the PSRLA, to dismiss the CAC.
 
WHEREAS, the Court held oral argument on the motions to dismiss on April 17,
2007 and, on April 20, 2007, issued an Opinion and Order granting in part and
denying in part the motions to dismiss and granting Lead Plaintiff leave to file
an amended complaint.
 
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WHEREAS, on June 1, 2007, Lead Plaintiff filed a Second Consolidated Amended
Class Action Complaint (the “Complaint”) that amended the allegations concerning
Crawford, Roberts, Herrero, Perez and Cano and, on or about July 5, 2007, each
of these Defendants moved to dismiss the Complaint.
 
WHEREAS, the Court held oral argument on September 25, 2007 concerning the
motions to dismiss of Crawford, Roberts, Herrero, Perez and Cano and, on October
2, 2007, denied such motions.
 
WHEREAS, on October 30, 2007, Plaintiffs moved the Court to certify a class and
appoint VRS as Class Representative and Kaplan Fox as Counsel to the class.
 
WHEREAS, Afinsa and Auctentia had been, but are not currently defendants in this
Action because the United States Bankruptcy Court for Southern District of New
York entered separate orders granting recognition of Afinsa’s and Auctentia’s
respective insolvency proceedings in Spain, and, among other things, enjoined
continuation of this litigation against Afinsa and Auctentia.
 
WHEREAS, Lead Plaintiff, through its counsel, transmitted a Summons and the
Complaint to the central authority in Spain for service of process on Defendants
Albertino de Figueiredo (“A. Figueiredo”), Carlos de Figueiredo (“C.
Figueiredo”), and Emilio Ballester (“Ballester”), through the Convention on the
Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial
Matters, and was informed that the central authority in Spain served Ballester.
 
WHEREAS, A. Figueiredo, C. Figueiredo, and Ballester, have not appeared in this
litigation.
 
WHEREAS, following arms-length negotiations for many months with the assistance
of an experienced mediator, Lead Plaintiff and the Defendants have agreed to a
settlement (the “Settlement”) of the Action;
 
WHEREAS, Lead Counsel, on behalf of Lead Plaintiff, has conducted an
investigation relating to the claims and the underlying events and transactions
alleged in the Complaint, has engaged in discovery, including the review of
hundreds of thousands of pages of documents, and filed a motion to certify a
class of Escala investors.  Lead Counsel and Lead Plaintiff recognize the
expense, risks and uncertain outcome of any litigation and subsequent appeals,
especially for a complex action such as this with its inherent difficulties and
delays.  Lead Plaintiff, on behalf of itself and all other members of the
Settlement Class (collectively, “Plaintiffs”), desires to settle their claims
against the Defendants in this Action on the terms and conditions set forth in
this Stipulation.  Furthermore, Lead Plaintiff and Lead Counsel deem said
Settlement to be fair, reasonable, adequate and in the best interests of the
members of the Settlement Class; have agreed that the Released Parties should be
released from the Released Claims pursuant to the terms and provisions of this
Stipulation; and have agreed to the dismissal of the Action with prejudice,
after considering the substantial benefits that the Lead Plaintiff and all
members of the Settlement Class will receive from the settlement of the Action;
and
 
WHEREAS, the Defendants, while continuing to deny all allegations of wrongdoing
or liability whatsoever arising out of any of the conduct, statements, acts or
omissions alleged, or that could have been alleged, in the Action, also
recognize the expense, risks and uncertain outcome of any litigation, especially
a complex action such as this, and the Defendants desire to settle the claims
against them so as to avoid lengthy, distracting and time-consuming litigation
and the burden, inconvenience and expense connected therewith, without in any
way acknowledging any fault or liability, such that this Stipulation and all
related documents are not, and shall not in any event be construed or deemed to
be evidence of or an admission or concession on the part of the Defendants with
respect to any claim or of any fault or liability or wrongdoing or damage
whatsoever, or any infirmity in the defenses that the Defendants have asserted,
of or by any of them or of any other person.
 
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NOW, THEREFORE, IT IS HEREBY STIPULATED, CONSENTED TO AND AGREED, between Lead
Plaintiff, the Defendants and the Additional Named Parties, by and through their
respective attorneys or counsel of record, that this Action and the Released
Claims as against the Released Parties shall be settled, compromised, and
dismissed with prejudice, subject to the approval of the Court, in the manner
and upon the terms and conditions hereafter set forth:
 
I. CERTAIN DEFINITIONS
 
A. To the extent not otherwise defined herein, as used in this Stipulation, the
following terms have the meanings specified below:
 
1. “Action” means the consolidated securities class action pending in this Court
under the caption In re Escala Group, Inc. Securities Litigation, Master File
No. 06 Civ. 3518 (AKH), including, without limitation, all cases consolidated
under that caption.
 
2. “Amper-Related Parties” means Amper, along with its present, former and
future employees, insurers, officers, directors, partners, attorneys, legal
representatives and agents; any person or entity which is or was related to or
affiliated with Amper; and the immediate family members, heirs, executors,
administrators, present, former and future parents, subsidiaries, divisions,
affiliates, predecessors, successors, employees, officers, directors, partners,
attorneys, assigns, and agents of all of the foregoing.
 
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3. “Authorized Claimant” means a member of the Settlement Class who submits a
timely and valid Proof of Claim and Release form to the Settlement Administrator
and whose proof of claim is not rejected.  Only those members of the Settlement
Class filing valid and timely Proofs of Claim and Releases shall be entitled to
receive any distributions from the Net Settlement Fund.
 
4. “Court” means the United States District Court for the Southern District of
New York.
 
5. “Derivative Action” means the case pending in this Court under the caption In
re Escala Group, Inc. Derivative Litigation, Master File No. 06 Civ. 03902
(AKH), and any other derivative action filed in any other state or federal court
against any of the Released Parties relating, in whole or in part, to the
allegations set forth in the Action.
 
6. “Effective Date” means the date that is five business days after the date on
which all of the conditions to the Settlement, set forth in Section X(A), are
satisfied.
 
7. “Escala-Related Parties” means Escala, Greg Manning, Larry Crawford, Jose
Miguel Herrero, Esteban Perez, Greg Roberts, Juan Antonio Cano, and each of the
Additional Named Parties, along with each of their present, former and future
employees, insurers, officers, directors, partners, attorneys, legal
representatives, trustees and agents; any person or entity which is or was
related to or affiliated with Escala, Afinsa or Auctentia; and the immediate
family members, heirs, executors, administrators, present, former and future
parents, subsidiaries, divisions, affiliates, predecessors, successors,
employees, officers, directors, partners, attorneys, assigns, and agents of all
of the foregoing.
 
8. “Escrow Account” means the interest-bearing account created pursuant to
Section II.
 
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9. “Execution Date” means the date that this Stipulation has been signed by all
the signatories hereto through their counsel.
 
10. “Escrow Agent” means Lead Counsel or its designees.  The Escrow Agent shall
perform the duties as set forth in this Stipulation.
 
11. “Final” means, with respect to any judgment or order, including but not
limited to the Final Judgment, that such judgment or order represents a final
and binding determination of all issues within its scope and is not subject to
further review on appeal or otherwise.  Without limitation, a judgment or order
becomes “Final” when:  (a) the time within which to seek review, alteration,
amendment or appeal of such judgment or order, including (if applicable) any
three (3) day period for service by mail under Federal Rule of Civil Procedure
6(a) and (e) or any such service period applicable to an action in state court,
has expired without any review, alteration, amendment or appeal having been
sought or taken; or (b) if an appeal, petition for writ of certiorari,  motion
or other application for review, alteration or amendment is filed, sought or
taken, the date as of which such appeal, petition, motion or other application
shall have been finally determined in such a manner as to affirm the Court’s
original order in its entirety and the time, if any, for seeking further review
has expired.
 
12. “Final Settlement Approval Hearing” means the final hearing to be held by
the Court to determine whether the proposed Settlement should be approved as
fair, reasonable and adequate; whether all Released Claims should be dismissed
with prejudice; whether an order approving the Settlement should be entered
thereon; whether the allocation of the Settlement Fund should be approved; and
whether and in what amounts to award attorneys' fees and expenses to Lead
Counsel and reimbursement to Lead Plaintiff.
 
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13. “Gross Settlement Fund” means the Settlement Amount plus all interest earned
thereon.
 
14. “Judgment” or “Final Judgment” means the judgment to be entered by the
Court, substantially in the form of Exhibit B hereto.
 
15. “Lead Counsel” means the law firm of Kaplan Fox & Kilsheimer LLP.
 
16. “Lead Plaintiff” means the Virginia Retirement System.
 
17. “Escala” means Escala Group, Inc.
 
18. “Escala Common Stock” means any common stock of Escala outstanding during
the Settlement Class Period, irrespective of the date of issue.
 
19. “Net Settlement Fund” means the Gross Settlement Fund, less: (i) attorneys'
fees and expenses; (ii) taxes and tax expenses; (iii) Notice and Administration
Expenses and (iv) reimbursement awards to Lead Plaintiff, if any.
 
20. “Notice and Administration Account” means the interest-bearing account to be
established and maintained by the Settlement Administrator from the Gross
Settlement Fund.  The Notice and Administration Account may be drawn upon by the
Settlement Administrator for Notice and Administration Expenses without prior
approval of the Court.
 
21. “Notice and Administration Expenses” means all expenses incurred (whether or
not paid) in connection with the settlement administration, and shall include,
among other things, the cost of publishing summary notice in the national
edition of The Wall Street Journal or other national news service, printing and
mailing the notice and Proof of Claim and Release, as directed by the Court, and
the cost of processing proofs of claim and distributing the Net Settlement Fund
to Settlement Class Members who timely submit a valid Proof of Claim and
Release.
 
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22. “Parties” means the Lead Plaintiff, the Settlement Class Members, and the
Defendants.  The “parties hereto” means all those Persons whose counsel have
signed this stipulation on their behalf.
 
23.  “Person” means any individual, corporation, partnership, association,
affiliate, joint stock company, trust, estate, unincorporated association,
government and any political subdivision thereof, and any other type of legal or
political entity.
 
24. “Plan of Allocation” means the plan or formula of allocation of the Net
Settlement Fund, to be approved by the Court, which plan or formula shall govern
the distribution of the Net Settlement Fund to Authorized Claimants.  The Plan
of Allocation is not a part of this Stipulation, the Defendants shall have no
responsibility or liability with respect thereto, and any order or proceedings
relating to the Plan of Allocation shall not operate to terminate or cancel this
Stipulation or affect the finality of the Final Judgment or any other orders
entered by the Court pursuant to this Stipulation.
 
25. “Released Claims” shall mean any and all actions, suits, claims, debts,
demands, rights, causes of action or liabilities of every nature and description
whatsoever (including, but not limited to, claims for damages, interest,
attorneys’ fees, expert or consulting fees, and any other costs, expenses, or
liability whatsoever), whether based in law or equity, whether fixed or
contingent, accrued or unaccrued, liquidated or unliquidated, matured or not
matured, pursuant to federal, state, local, statutory or common law, or any
other law, rule or regulation, whether foreign or domestic, including both known
claims and Unknown Claims (as defined herein), whether or not concealed or
hidden, (including but not limited to claims for securities fraud, negligence,
gross negligence, professional negligence, breach of duty of care and/or  breach
of duty of loyalty, fraud, breach of fiduciary duty, aiding or abetting a breach
of fiduciary duty, breach of contract, unjust enrichment, or violations of any
statutes, rules, duties or regulations), that have been or could have been or
could in the future be asserted in any forum by Lead Plaintiff, any member of
the Settlement Class, or their successors, assigns, executors, administrators,
representatives, attorneys, agents, affiliates, and partners, and any Persons
they represent or any of them, whether brought directly or indirectly against
any of the Released Parties, which arise out of, are based on, or relate in any
way, directly or indirectly, to any of the allegations, acts, transactions,
facts, events, matters, occurrences, representations or omissions involved, set
forth, alleged or referred to, in the Action, or which could have been alleged
in the Action based upon the facts alleged in the CAC or the Complaint, and
which arise out of, are based upon, or relate in any way, directly or
indirectly, to the purchase, sale, or voting of any Escala common stock by any
Settlement Class member during the Settlement Class Period.
 
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26. “Released Co-Defendant Claims” means any and all actions, suits, claims,
debts, demands, rights, causes of action or liabilities of every nature and
description whatsoever (including, but not limited to, claims for damages,
interest, attorneys’ fees, expert or consulting fees, and any other costs,
expenses, or liability whatsoever), whether based in law or equity, whether
fixed or contingent, accrued or unaccrued, liquidated or unliquidated, matured
or not matured, pursuant to federal, state, local, statutory or common law, or
any other law, rule or regulation, whether foreign or domestic, including both
known claims and Unknown Claims, whether or not concealed or hidden, that have
been or could have been or could in the future be asserted in any forum against
any of the Amper-Related Parties by any of the Escala-Related Parties, or by any
of the Amper-Related Parties against any Escala-Related Party, whether brought
directly, indirectly or derivatively, which arise out of, are based on, or
relate in any way, directly or indirectly, in whole or in part, to any of the
allegations, acts, transactions, facts, events, matters, occurrences,
disclosures, statements, failure to disclose or failure to act involved, set
forth, alleged or referred to, in the Action or the Derivative Action, or which
could have been alleged based upon the facts alleged in the Action, or the
Derivative Action or in any other securities class action or derivative action
filed in any other state or federal court, or in any way relate to, arise out of
or are based on any audit or other work performed by Amper for, on behalf of or
concerning Escala or any of the Escala-Related Parties.
 
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27. “Released Parties” means Defendants, the Additional Named Parties and each
of their immediate family members, heirs, executors, administrators, successors,
and assigns; Defendants’ and the Additional Named Parties’ present, former and
future employees, insurers, officers, directors, partners, attorneys, legal
representatives and agents; any person or entity which is or was related to or
affiliated with any Defendant or Additional Named Party, or in which any
Defendant or Additional Named Party has or had a controlling interest; and the
present, former and future parents, subsidiaries, divisions, affiliates,
predecessors, successors, employees, officers, directors, partners, attorneys,
assigns, and agents of all of the foregoing.
 
28. “Released Parties Claims” means any and all claims, rights, or causes of
action or liabilities whatsoever, whether based in federal, state, local,
statutory or common law or any other law, rule or regulation, including both
known claims and Unknown Claims, that have been or could have been asserted in
the Action or any forum by the Defendants or any of them or the successors and
assigns of any of them, or any Released Parties against the Lead Plaintiff,
Settlement Class Members or their attorneys, which arise out of or relate in any
way to the institution, prosecution, or settlement of the Action (except for
claims to enforce the Settlement).
 
29. “Settlement Administrator” means Complete Claims Solutions, LLC.
 
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30. “Settlement Amount” means (a) $10,000,000 (Ten Million Dollars) in cash and
(b) 4 million shares of common stock with a value of at least $8,000,000 (Eight
Million Dollars) that Escala shall issue in accordance with the provisions set
forth in Section II.
 
31. “Settlement Class” or “Settlement Class Members” means, for purposes of this
Settlement only, all persons or entities who, during the Settlement Class
Period, purchased or otherwise acquired publicly-traded common stock issued by
Escala.  Excluded from the definition of “Settlement Class” and “Settlement
Class Members” are (a) Defendants; any Additional Named Parties; any parent or
subsidiary, present or former director, officer, subsidiary, or affiliate of
Escala, including without limitation, Afinsa and Auctentia; any entity in which
any excluded person has a controlling interest; and their legal representatives,
heirs, successors and assigns, and (b) any putative members of the Settlement
Class who timely and validly exclude themselves from the Settlement Class in
accordance with the requirements set forth in the Mailed Notice and Rule 23 of
the Federal Rules of Civil Procedure.
 
32. “Settlement Class Period” means the period of time from September 5, 2003
through May 8, 2006, inclusive of those dates.
 
33.  “Settlement Fund” means the payments to be made in accordance with Section
II of this Stipulation.
 
34. “Unknown Claims” means any and all claims, demands, rights, liabilities, and
causes of action of every nature and description which Lead Plaintiff, any
member of the Settlement Class or any Defendant or any of the Additional Named
Parties does not know or suspect to exist in his, her or its favor at or after
the Execution Date and including, without limitation, those which, if known by
him, her or it, might have affected his, her or its decision(s) with respect to
the Settlement. 
 
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With respect to any and all Released Claims and Released Co-Defendant Claims,
the parties hereto stipulate and agree that, upon the Effective Date, Lead
Plaintiff, Defendants and the Additional Named Parties shall expressly waive,
and each of the Settlement Class Members shall be deemed to have waived, and by
operation of the Final Judgment shall have waived, any and all provisions,
rights, and benefits conferred by any law of any state or territory of the
United States, or principle of common law, which is similar, comparable, or
equivalent to Cal. Civ. Code § 1542, which provides:
 

 
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
 

 
Lead Plaintiff, Defendants and the Additional Named Parties and the members of
the Settlement Class may hereafter discover facts in addition to or different
from those that any of them now know or believe to be true with respect to the
subject matter of the Released Claims, the Released Parties Claims or the
Released Co-Defendant Claims but Lead Plaintiff, Defendants and the Additional
Named Parties shall expressly have, and each member of the Settlement Class
shall be deemed to have and by operation of the Judgment shall have, fully,
finally, and forever settled and released any and all Released Claims, the
Released Parties Claims and the Released Co-Defendant Claims known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed
or hidden, that now exist, or heretofore have existed upon any theory of law or
equity now existing or coming into existence in the future, including, but not
limited to, conduct that is negligent, reckless, intentional, with or without
malice, or a breach of any duty, law or rule, without regard to the subsequent
discovery or existence of such different or additional facts.
 
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Lead Plaintiff and Defendants and the Additional Named Parties acknowledge, and
the members of the Settlement Class by operation of the Judgment shall be deemed
to have acknowledged, that the waivers contained in this paragraph, and the
inclusion of “Unknown Claims” in the definition of Released Claims, Released
Parties Claims and Released Co-Defendant Claims, were separately bargained for
and are key elements of the Settlement.
 
II. THE SETTLEMENT CONSIDERATION
 
A. In full settlement of the Released Claims, Escala shall pay or cause to be
paid $6 million in cash, and Amper shall pay or cause to be paid $4 million in
cash into a separate, interest-bearing escrow account maintained by the Escrow
Agent on behalf of Lead Plaintiff and the Settlement Class.  Within five (5)
business days of the Execution Date, Escala and Amper shall each pay or cause to
be paid the first $100,000 of their respective payments referenced in the
preceding sentence.  Escala and Amper shall make or cause to be made the balance
of their respective payments, referenced in the first sentence of this
paragraph, within five (5) business days after the Court’s entry of an order
granting preliminary approval of the Settlement.
 
B. Escala will issue 4 million shares (“Shares”) of its authorized but unissued
common stock, with a guaranteed value of at least $2 per share.  The Shares will
be issued free of any restrictions on transfer in accordance with the exemption
from registration contained in Section 3(a)(10) under the Securities Act of
1933, as amended, and will be identical in all respects to Escala’s currently
outstanding common stock.
 
C. Until the Shares are issued in accordance with the Stipulation, the 4 million
shares shall be treated identically to the existing Escala common stock and
shall receive all benefits, except for voting rights, that accrue to the
existing common stock (including but not limited to stock or cash
dividends).  Therefore, the number of shares of common stock issuable hereunder
will be adjusted if the Company: i) Declares a dividend in common stock on any
class of its capital stock; ii) Issues generally to its stockholders rights,
options, or warrants to purchase common stock at less than the then current
market price of the common stock;
 
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iii) Subdivides, combines or reclassifies its outstanding common stock; or iv)
Distributes generally to its stockholders evidences of debt, shares of capital
stock, cash or other assets.
 
D. It is contemplated that there will be at least two dates of distribution for
both cash and securities: (i) the date of the distribution of attorneys’ fees
and costs awarded by the Court to Lead Plaintiff’s counsel; and (ii) the date of
the distribution to Settlement Class Members.
 
E. Five business days before each of the two distribution dates (“Notification
Dates”), Plaintiffs’ Lead counsel shall notify Escala’s transfer agent of the
number of shares of common stock to be distributed for the particular
distribution to Plaintiffs’ counsel or members of the Settlement Class, and the
number of shares to be distributed to each person or entity based on a total
distribution for the two distributions of 4 million shares. (“Notification
Shares”).
 
F. If the Average Closing Price per share for a particular Notification Date is
less than $2 per share, Escala shall issue an additional number of Shares for
that distribution so that the value of the distribution is equivalent to the
number of Notification Shares times $2 per share.  As used herein, “Average
Closing Price” for a valuation period shall mean, with respect to a Notification
Date or Notice Date (as defined below), as the case may be, the average of the
last daily sales prices of Escala common stock as reported in the Pink Sheets
electronic quotation system (or , if the shares of Escala common stock are then
quoted on a stock exchange, then the average closing price on such exchange) for
the 10 trading days ending at the close of trading on the day immediately prior
to the Notification Date or Notice Date, as the case may be.
 
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G. If on a Notification Date, the Average Closing Price for the valuation period
of Escala common stock is less than $2 per share, Escala shall have the right to
“buy back” some or all of those shares in that distribution at a price equal to
$2 per share.
 
H. If on a Notification Date, the Average Closing Price for the valuation period
of Escala common stock exceeds $2 per share, Escala shall have the option,
exercisable in its discretion, to “buy back” some or all of the shares in that
distribution at a price equal to $4 per share, plus 50 percent of the amount by
which the Average Closing Price for the Notification Date for the valuation
period exceeds $4 per share. (“Buyback Price”).  For example, if the average
closing price for a Notification Date is $6 per share, then Escala will have the
right to “buy back” all or any portion of the shares to be issued in that
distribution at a price of $5 per share.
 
I. In the event that the first Notification Date does not occur prior to the
date (the “Six Month Date”) that is 180 days following the Execution Date, then,
at any time thereafter, Escala shall have the right to “buy back” some or all of
the Shares that would otherwise be issued on the Distribution Dates.  Escala may
exercise this right by giving notice thereof to the plaintiffs’ Lead Counsel
(the date on which the notice is given is referred to as the “Notice
Date”).  The price at which Escala may buy back shares shall be as follows: (a)
if the Average Closing Price for the valuation period for the Notice Date is
less than $2 per share, then $2 per share, and (b) if the Average Closing Price
for the valuation period for the Notice Date exceeds $2 per share, then $4 per
share, plus 50 percent of the amount by which the, Average Closing Price for the
Notice Date exceeds $4 per share.
 
J. If Escala exercises the option to buyback Shares, it shall pay via wire
transfer within 5 business days of the Notification Date  or the Notice Date, as
the case may be, to the Escrow Agent for Plaintiff’s Lead Counsel the cash which
Escala is paying instead of issuing shares.
 
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III. THE ESCROW ACCOUNT
 
A. The Escrow Account, including any interest earned thereon net of any taxes on
the income thereof, shall be used to pay: (i) attorneys' fees and expenses, (ii)
taxes and tax expenses, (iii) Notice and Administration Expenses and (iv)
reimbursement awards to Lead Plaintiff.  The balance of the Escrow Account shall
be the Net Settlement Fund and shall be distributed to the Authorized Claimants
as set forth in the Plan of Allocation.  Lead Plaintiff and Settlement Class
Members shall look solely to the Net Settlement Fund for payment and
satisfaction of any and all Released Claims.
 
B. All funds held by the Escrow Agent shall be deemed in custodia legis of the
Court and shall remain subject to the jurisdiction of the Court until such time
as such funds shall be distributed pursuant to the Stipulation and/or further
orders of the Court.  The Escrow Agent shall invest any funds exclusive of the
Notice and Administration Account, in United States Government obligations with
a maturity of 180 days or less, and shall collect and reinvest all interest
accrued thereon.  Any funds held in the Notice and Administration Account may be
held in an interest bearing bank account insured by the FDIC.
 
C. The Escrow Agent shall not disburse the Gross Settlement Fund except as
provided in this Stipulation, by order of the Court, or with the prior written
agreement of counsel for the Defendants and Lead Plaintiff’s Counsel.
 
D. The Escrow Agent shall be authorized to execute only such transactions as are
consistent with the terms of this Stipulation and the order(s) of the Court.
 
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E. After the Effective Date, the Defendants shall have no interest in the Gross
Settlement Fund or in the Net Settlement Fund.
 
F. The Escrow Agent shall indemnify Escala, Amper and their insurers, and hold
them harmless against, any losses arising from (a) the investment of any portion
of the Settlement Fund other than in accordance with this Stipulation, or (b)
the disbursement of any portion of the Gross Settlement Fund other than in
accordance with this Stipulation.

IV. THE NOTICE AND ADMINISTRATION ACCOUNT
 
A. The Settlement Administrator shall establish and administer the Notice and
Administration Account.  The Notice and Administration Account shall be
established using funds in the Gross Settlement Fund (including the $200,000
referenced above) and will be used for the payment of Notice and Administration
Expenses.  The Escrow Agent is authorized to transfer funds from the Gross
Settlement Fund to the Notice and Administration Account for Notice and
Administration Expenses.
 
V. PRELIMINARY APPROVAL ORDER; NOTICE ORDER; AND SETTLEMENT HEARING
 
A. The Parties shall submit the Stipulation together with its Exhibits to the
Court, and the Lead Plaintiff shall apply for entry of an order (the
“Preliminary Approval Order”) substantially in the form and content of Exhibit A
attached hereto, requesting, inter alia, the preliminary approval of the
settlement set forth in the Stipulation, and final approval of forms of notice
to be mailed to all potential Settlement Class Members who can be identified
with reasonable effort (the “Mailed Notice”) and to be published (the “Summary
Notice”), substantially in the forms and contents of Exhibits A-1 and A-2
hereto, respectively.  The Mailed Notice shall include the general terms of the
settlement set forth in the Stipulation and shall set forth the procedure by
which Persons who otherwise would be Members of the Settlement Class may request
to be excluded from the Settlement Class.
 
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B. The Parties shall request that, after the Mailed Notice and Summary Notice
have been mailed and published, respectively, in accordance with this
Stipulation, above, the Court hold the Final Approval Settlement Hearing and
finally approve the settlement of the Actions with respect to the Parties.
 
C. The Parties hereby stipulate to certification of the Settlement Class,
pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, solely for
purposes of this Stipulation and the Settlement set forth herein.  If this
Stipulation is not approved by the Court, however, then (a) Defendants shall
retain all rights to (i) object to and oppose class certification, or (ii)
challenge the standing of Lead Plaintiff or any other intervening plaintiff; and
(b) this Stipulation and any motion or other papers filed in support of its
approval shall not be offered as evidence of any agreement, admission or
concession that any class should be or remain certified in the Action or that
Lead Plaintiff or any other intervening plaintiff has standing or any legal
right to represent any class.
 
VI. FINAL JUDGMENT APPROVING THE SETTLEMENT
 
A. At the Final Settlement Approval Hearing, the Parties shall jointly request
entry of the Final Judgment, substantially in the form attached hereto as
Exhibit B.

VII. ATTORNEYS’ FEES AND EXPENSES
 
A.           Plaintiff’s Lead Counsel's attorneys’ fees and expenses as are
awarded by the Court shall be payable from the Gross Settlement Fund three (3)
business days after the later of (a) the date on which the Judgment becomes
Final, and (b) the date on which an order from the Court on Lead Plaintiff’s fee
and expense application becomes Final.  All such attorneys’ fees and expenses
shall be paid solely from the Gross Settlement Fund, and none of the Released
Parties shall be required to pay any portion of such attorneys’ fees and/or
reimbursement of expenses.
 
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B.           The failure of the Court to award the full amount of any fees and
expenses requested by plaintiff’s Lead Counsel shall not affect the finality of
the Judgment or the Settlement contemplated by this Stipulation.
 
VIII. ADMINISTRATION AND CALCULATION OF CLAIMS, FINAL AWARDS AND DISTRIBUTION OF
NET SETTLEMENT FUND
 
A. Each Settlement Class Member wishing to participate in the Settlement shall
be required to submit a Proof of Claim and Release in the form annexed hereto as
Exhibit A-3, signed under penalty of perjury by the beneficial owner(s) of the
stock or by someone with documented authority to sign for the beneficial
owner(s), and supported by such documentation as specified in the instructions
accompanying the Proof of Claim and Release.
 
B. All Proofs of Claim and Releases must be received within the time prescribed
in the Preliminary Approval Order unless otherwise ordered by the Court.  Any
Settlement Class Member who fails to submit a properly completed Proof of Claim
and Release within such period as shall be authorized by the Court shall be
forever barred from receiving any payments pursuant to this Stipulation or from
the Net Settlement Fund, but will in all other respects be subject to the
provisions of this Stipulation and the Final Judgment, including, without
limitation, the release of the Released Claims and dismissal of the Action.
 
C. The Settlement Administrator shall administer the Settlement subject to such
approvals of the Court as circumstances may require.
 
D. Each Proof of Claim and Release shall be submitted to the Settlement
Administrator who shall determine, in accordance with this Stipulation and the
Plan of Allocation to be formulated by Lead Counsel, for approval by the Court,
the extent, if any, to which each claim shall be allowed, subject to appeal to
the Court.
 
E. The Settlement Administrator shall administer and calculate the claims
submitted by the members of the Settlement Class, determine the extent to which
claims shall be allowed, and oversee distribution of the Net Settlement Fund
subject to appeal to, and jurisdiction of, the Court.  Neither Lead Counsel, its
designees or agents, Lead Plaintiff, the Defendants’ counsel, the Defendants,
the Additional Named Parties or their counsel shall have any liability arising
out of such determination.
 
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F. The administrative determination of the Settlement Administrator accepting
and rejecting claims shall be presented to the Court, on notice to the
Defendants' counsel, for approval by the Court.
 
G. Following the Effective Date, the Net Settlement Fund shall be distributed to
Authorized Claimants by the Settlement Administrator upon application to the
Court by Lead Counsel.
 
H. The Net Settlement Fund shall be distributed to the Authorized Claimants
substantially in accordance with the terms of the Stipulation and a Plan of
Allocation to be approved by the Court, subject to and in accordance with the
following:
 
1. Any such Plan of Allocation is not a part of this Stipulation and it is not a
condition of this Settlement that any particular Plan of Allocation be
approved.  No funds from the Net Settlement Fund shall be distributed to
Authorized Claimants until after the Effective Date.
 
2. Each Settlement Class Member who claims to be an Authorized Claimant shall be
required to submit to the Settlement Administrator a completed Proof of Claim
and Release signed under penalty of perjury and supported by such documents as
specified in the Proof of Claim and Release and as are reasonably available to
such Settlement Class Member.
 
3. Except as otherwise ordered by the Court, all Settlement Class Members who
fail timely to submit a Proof of Claim and Release within such period as may be
ordered by the Court, or otherwise allowed, shall be forever barred from
receiving any payments pursuant to the Stipulation and the Settlement set forth
herein, but shall in all other respects be subject to and bound by the
provisions of the Stipulation, the releases contained herein, and the Final
Judgment.
 
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4. All Persons who fall within the definition of the Settlement Class and who do
not timely and validly request to be excluded from the Settlement Class in
accordance with the instructions set forth in the Mailed Notice (as defined in
Section V.A., above) shall be subject to and bound by the provisions of the
Stipulation, the releases contained herein, and the Final Judgment with respect
to all Released Claims, regardless of whether such Persons seek or obtain by any
means, including, without limitation, by submitting a Proof of Claim and Release
or any similar document, any distribution from the Gross Settlement Fund or the
Net Settlement Fund.
 
I. Neither the Defendants, nor the Additional Named Parties, nor their counsel
shall have any responsibility for, interest in, or liability whatsoever with
respect to the investment or distribution of the Gross Settlement Fund, the Plan
of Allocation, the determination, administration, or calculation of claims, the
distribution of the Net Settlement Fund, or any losses incurred in connection
with any such matters.
 
J. The Defendants and the Additional Named Parties shall have no involvement in
the solicitation of, or review of Proofs of Claim and Releases, or involvement
in the administration process, which will be conducted by the Settlement
Administrator in accordance with this Stipulation.
 
K. Any change in the allocation of the Net Settlement Fund ordered by the Court
shall not affect the validity or finality of this Settlement.
 
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L. No Person shall have any claim against Lead Plaintiff or Lead Counsel, the
Settlement Administrator, the Defendants, the Additional Named Parties or their
respective counsel based on investments or distributions made substantially in
accordance with this Stipulation and the Settlement contained herein, the Plan
of Allocation or further orders of the Court.
 
IX. TAX TREATMENT
 
A. The Parties, their counsel, the Court, and the Escrow Agent shall treat the
Escrow Account as being at all times a “qualified settlement fund” within the
meaning of Treas. Reg. § 1.468B-1 for all periods on and after the date of the
Court order preliminarily approving this Agreement.  The Parties, their counsel,
the Court and the Escrow Agent agree to take no action inconsistent with the
treatment of the Escrow Account in such manner.   In addition, the Escrow Agent,
and as necessary, the Defendants, shall make the “relation back election” (as
defined in Treas. Reg. § 1.468B-1(j)) back to the earliest permitted date.  Such
elections shall be made in compliance with the procedures and requirements
contained in such regulations.  It shall be the responsibility of the Escrow
Agent to timely and properly prepare and deliver the necessary documentation for
signature by all necessary parties and thereafter to cause the appropriate
filing to occur.  All provisions of this Agreement shall be interpreted in a
manner that is consistent with the Escrow Account being a “qualified settlement
fund” within the meaning of Treas. Reg. § 1.468B-1.
 
B. For the purpose of § 468B of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, the “administrator” shall be the
Escrow Agent.  The Escrow Agent shall satisfy the administrative requirements
imposed by Treas. Reg. § 1.468B-2 by e.g., (i) obtaining a taxpayer
identification number, (ii) timely and properly satisfying any information
reporting or withholding requirements imposed on distributions from the Escrow
Account, and
 
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(iii) timely and properly filing or causing to be filed on a timely basis, all
federal, state, local and foreign tax returns and other tax related statements
necessary or advisable with respect to the Escrow Account (including, without
limitation, all income tax returns, all informational returns, and all returns
described in Treas. Reg. § 1.468B-2(1)), and timely and properly paying any
taxes imposed on the Escrow Account.  Such returns and Statements (as well as
the election described in this VIII.B. shall be consistent with this VIII.B. and
in all events shall reflect that all taxes (including any estimated taxes,
interest or penalties) on the income earned by the Escrow Account shall be paid
out of the Escrow Account as provided in VIII.C. hereof.
 
C. All (i) taxes arising with respect to the income earned by the Escrow Account
and (ii) tax expenses shall be paid out of the Escrow Account.  Further, taxes
and the tax expenses shall be treated as, and considered to be, a cost of
administration of the settlement and shall be timely paid by the Escrow Agent
out of the Escrow Account without prior order from the Court, and the Escrow
Agent shall be obligated (notwithstanding anything herein to contrary) to
withhold from distribution to claimants any funds necessary to pay such amounts
(as well as any amounts that may be required to be deducted or withheld under
Treas. Reg. § 1.468B-2(1)(2)).  All parties and their tax attorneys and
accountants shall to the extent reasonably necessary carry out the provisions of
paragraphs A-C of this Section.
 
D. The Defendants and the Additional Named Parties shall have no responsibility
to make any filings relating to the Escrow Account and will have no
responsibility to pay tax on any income earned by the Escrow Account.  In the
event the Stipulation is canceled or terminated, Escala and Amper shall be
responsible for the payment of all taxes (including any interest or penalties),
if any, on their respective portions of said income.
 
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X. CONDITIONS OF SETTLEMENT; EFFECT OF DISAPPROVAL,CANCELLATION OR TERMINATION
 
A. This Stipulation shall be subject to the following conditions and, except as
provided herein, shall be canceled and terminated unless:
 
1. The Court enters the Preliminary Approval Order, as provided in Section V;
 
2. Escala and Amper shall have caused to be timely transferred, or caused to be
transferred, their respective shares of the cash portion of the Settlement
Amount ($10,000,000), and Escala shall have transferred 4 million Escala common
shares with a value of at least $2 per share, as provided in Section II or
otherwise satisfied its obligations under Section II hereof;
 
3. The Court has approved the settlement as described herein, following notice
to the Settlement Class and a Hearing, as prescribed by Rule 23 of the Federal
Rules of Civil Procedure, and has entered the Final Judgment, as provided in
Section VI;
 
4. The time within which Escala or Amper may exercise its option to terminate
this Stipulation in accordance with the terms of the Supplemental Agreement
described in Section X(G) shall have expired without the exercise of that
option;
 
5. The Court shall have entered the Judgment, in all material respects in the
form set forth in Exhibit B attached hereto, or an order and final judgment in a
form that is not in all material respects identical to Exhibit B attached hereto
(an “Alternative Judgment”) and Defendants do not elect to terminate the
settlement following the entry of such Alternative Judgment;
 
6. Counsel for all Persons listed on the signature pages of this Stipulation
have executed this Stipulation;
 
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7.          The Judgment, or any Alternative Judgment, has become Final; and
 
8.           Settlement in the Derivative Action has becomes Final.  The parties
hereto expressly recognize that Settlement pursuant to this Stipulation is
expressly conditioned upon settlement in the Derivative Action becoming Final.
 
B. Upon the Effective Date:
 
1. Lead Plaintiff and each of the members of the Settlement Class, on behalf of
themselves, their heirs, executors, administrators, personal representatives,
attorneys, agents, partners, successors and assigns, and any other Person
claiming (now or in the future) to have acted through or on behalf of them,
shall hereby be deemed to have, and by operation of the Final Judgment shall
have, fully, finally, and forever, released, relinquished, settled and
discharged the Released Parties from the Released Claims and shall be
permanently barred and enjoined from instituting, commencing, or prosecuting any
Released Claim against any of the Released Parties directly, indirectly or in
any other capacity, whether or not such members of the Settlement Class execute
and deliver a Proof of Claim and Release.
 
2. Each of the Escala-Related Parties on the one hand, and the Amper-Related
Parties on the other hand, shall be deemed to have, and by operation of the
Final Judgment shall have, fully, finally, and forever, released, relinquished,
settled and discharged each other from the Released Co-Defendant Claims, and
shall have covenanted not to sue each other with respect to all such Released
Co-Defendant Claims, and shall be permanently barred and enjoined from
instituting, commencing, or prosecuting any such claims against each other
either directly, indirectly, representatively, derivatively, or in any other
capacity.  Escala, Greg Manning, Larry Crawford, José Miguel Herrero, Esteban
Pérez, Greg Roberts, Juan Antonio Cano, and each of the Additional Named Parties
and Amper each represent and warrant that they have not assigned, transferred or
otherwise granted any interest in any Released Co-Defendant Claim to any other
Person.
 
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3. The Released Parties, on behalf of themselves, their heirs, executors,
administrators, personal representatives, attorneys, agents, partners,
successors and assigns, and any other Person claiming (now or in the future) to
have acted through or on behalf of them, shall hereby be deemed to have, and by
operation of the Final Judgment shall have, fully, finally, and forever,
released, relinquished, settled and discharged the Lead Plaintiff, the members
of the Settlement Class and their attorneys from the Released Parties Claims and
shall be permanently barred and enjoined from instituting, commencing, or
prosecuting any Released Parties Claim against any of them directly, indirectly
or in any other capacity.
 
C. If all of the conditions specified in paragraph A of this Section are not
met, then the Stipulation shall be canceled and terminated, unless Lead Counsel
and the Defendants' Counsel mutually agree in writing to proceed with the
Settlement.
 
D. If either (a) the Effective Date does not occur, (b) this Stipulation is
canceled or terminated pursuant to its terms, or (c) the Stipulation does not
become final for any reason, then the Gross Settlement Fund and all interest
earned on the Gross Settlement Fund while held in escrow (less Notice and
Administration Expenses paid or incurred), plus any amount then remaining in the
Notice and Administration Account, including both interest paid and accrued
(less expenses and costs which have not yet been paid but which are properly
chargeable to the Notice and Administration Account), shall be refunded by the
Escrow Agent to Escala, Amper and their respective insurers in accordance with
the amounts contributed by each such Person pursuant to Section II(A) of this
Stipulation.  The Escrow Agent shall make the refund described in the preceding
sentence within ten (10) business days of such cancellation or termination.
 
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E. Upon the occurrence of all of the events specified in paragraph A of this
Section, the obligation of the Escrow Agent to return funds from the Gross
Settlement Fund to the Escala and Amper and/or their respective insurers
pursuant to paragraph D of this Section, shall be absolutely and forever
extinguished.
 
F.  If either (a) the Effective Date does not occur, (b) this Stipulation is
canceled or terminated pursuant to its terms, or (c) the Stipulation does not
become final for any reason, all of the parties to this Stipulation shall be
deemed to have reverted to their respective status prior to the execution of
this Stipulation, and they shall proceed in all respects as if this Stipulation
had not been executed and the related orders had not been entered, preserving in
that event all of their respective claims and defenses in the
Action.  Notwithstanding the foregoing language, the following provisions of
this Stipulation shall survive any termination or cancellation of the
Settlement:  Section X(D) (“Conditions of Settlement, Effect of Disapproval
Cancellation or Termination”); Section XI (“No Admissions”).
 
G. Escala and Amper shall have the option to terminate the settlement in its
entirety in the event that purchasers who collectively purchased more than a
certain amount of Escala common stock choose to exclude themselves from the
Settlement Class, as set forth in a separate agreement (the “Supplemental
Agreement”) executed among the Parties which, if ordered by the Court, shall be
filed under seal.
 
XI. NO ADMISSIONS
 
A. The parties hereto intend the Settlement as described herein to be a final
and complete resolution of all disputes between them with respect to the Action
and to compromise claims that are contested and entry in this Settlement shall
not be deemed an admission by any Defendant or Additional Named Party as to the
merits of any claim or defense or any allegation made in the Action.
 
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B. Neither the Stipulation nor the Settlement, nor any act performed or document
executed pursuant to or in furtherance of the Stipulation or the Settlement: (a)
is or may be deemed to be or may be used as an admission of, or evidence of, the
validity of any Released Claim, of any allegation made in the Action, or of any
wrongdoing or liability of any of the Released Parties; or (b) is or may be
deemed to be or may be used as an admission of, or evidence of, any liability,
fault or omission of any of the Released Parties in any civil, criminal or
administrative proceeding in any court, administrative agency or
other  tribunal.  Neither the Stipulation nor the Settlement, nor any act
performed or document executed pursuant to or in furtherance of the Stipulation
or the settlement shall be admissible in any proceeding for any purpose, except
to enforce the terms of the settlement, and except that any of the Released
Parties may file the Stipulation and/or the Judgment in any action that may be
brought against any of them in order to support a defense or counterclaim based
on principles of res judicata, collateral estoppel, release, good faith
settlement, judgment bar or reduction or any other theory of claim preclusion or
issue preclusion or similar defense or counterclaim.
 
XII. MISCELLANEOUS PROVISIONS
 
A. The parties hereto: (a) acknowledge that it is their intent to consummate the
Settlement contemplated by this Stipulation; (b) agree to cooperate to the
extent necessary to effectuate and implement all terms and conditions of this
Stipulation; and (c) agree to exercise their best efforts and to act in good
faith to accomplish the foregoing terms and conditions of the Stipulation.
 
B. All counsel who execute this Stipulation represent and warrant that they have
authority to do so on behalf of their respective clients.
 
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C. The duly authorized foreign representatives of Afinsa and Auctentia, by
virtue of the signature of their counsel below, represent that they have the
authority to grant the releases set forth herein.
 
D. All of the exhibits attached hereto are hereby incorporated by reference as
though fully set forth herein.
 
E. This Stipulation may be amended or modified only by a written instrument
signed by counsel for all parties to this Stipulation or their successors in
interest.
 
F. This Stipulation, exhibits attached hereto, and the Supplemental Agreement
constitute the entire agreement between Plaintiffs on the one hand, and the
Defendants and Amper on the other hand, and supercede any and all prior
agreements, written or oral, between such parties.   No representations,
warranties or inducements have been made concerning this Stipulation or its
exhibits other than the representations, warranties and covenants contained and
memorialized in such documents, and in a separate interest agreement between
Escala and the Plaintiffs, an indemnity agreement entered into between Escala
and Amper and an agreement between Escala and Amper with respect to interest
accrued.
 
G. This Stipulation may be executed in one or more original, photocopied or
facsimile counterparts.  All executed counterparts and each of them shall be
deemed to be one and the same instrument.  Counsel for the parties to this
Stipulation shall exchange among themselves original signed counterparts and a
complete set of original executed counterparts shall be filed with the Court.
 
H. This Stipulation shall be binding upon, and inure to the benefit of the
successors, assigns, executors, administrators, affiliates (including parent
companies), heirs and legal representatives of the parties hereto.  No
assignment shall relieve any party hereto of obligations hereunder.
 
35

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I. All terms of this Stipulation and all exhibits hereto shall be governed and
interpreted according to the laws of the State of New York without regard to its
rules of conflicts of law and in accordance with the laws of the United States.
 
J. The Defendants, Lead Plaintiff, and each member of the Settlement Class
hereby irrevocably submit to the jurisdiction of the Court with respect to
enforcement of the terms of this Stipulation and for any suit, action,
proceeding or dispute arising out of or relating to this Stipulation or the
applicability of this Stipulation.
 
K. The parties to this Stipulation intend the Settlement to be a final and
complete resolution of all disputes asserted or which could be asserted by the
Settlement Class Members against the Released Parties with respect to the
Released Claims.  Accordingly, Lead Plaintiff, Defendants and the Additional
Named Parties agree not to assert in any forum that the litigation was brought
by Lead Plaintiff or its counsel, or defended by the Defendants, or their
counsel, in bad faith or without a reasonable basis.  The parties hereto shall
assert no claims of any violation of Rule 11 of the Federal Rules of Civil
Procedure relating to the prosecution, defense, or settlement of the
Action.  The Parties agree that the amount paid and the other terms of the
Settlement were negotiated at arm's-length in good faith by the Parties, and
reflect a settlement that was reached voluntarily after consultation with
experienced legal counsel.
 
L. This Stipulation, offer of this Stipulation and compliance with this
Stipulation shall not constitute or be construed as an admission by any of the
Released Parties of any wrongdoing or liability.  This Stipulation is to be
construed solely as a reflection of the desire of the parties hereto to
facilitate a resolution of the claims in the Action and of the Released
Claims.  The parties hereto agree that no party was or is a “prevailing party”
in this case.  In no event shall this Stipulation, any of its provisions, or any
negotiations, statements or court proceedings relating to its provisions in any
way be construed as, offered as, received as, used as or deemed to be evidence
of any kind in the Action, any other action, or any judicial, administrative,
regulatory or other proceeding, except a proceeding to enforce this Stipulation.
 
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M. This Stipulation shall not be construed more strictly against one party than
another merely by virtue of the fact that it, or any part of it, may have been
prepared by counsel for one of the Parties, it being recognized that this
Stipulation is the result of arm’s-length negotiations between the Parties and
all Parties have contributed substantially and materially to its preparation.
 
N. Escala shall use its best efforts to provide Lead Plaintiff with transfer
records, or help Lead Plaintiff procure transfer records or other appropriate
information that will assist in the identification of Settlement Class Members
for the purpose of providing Settlement Class Members with notice of the
proposed Settlement.
 
O. Except as otherwise provided herein, each party shall bear its own fees and
costs.
 
P. The headings herein are used for the purpose of convenience and are not
intended to have legal effect.
 
Q. Notices required or permitted by this Stipulation shall be submitted either
by overnight mail or in person as follows:
 
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Notice to
Plaintiffs:                                                                           
Notice to the Defendants:    
Robert N. Kaplan, Esq.
Donald R. Hall, Esq.
Jeffrey P. Campisi, Esq.
Kaplan Fox & Kilsheimer LLP
850 Third Avenue
New York, NY 10022
Arthur H. Aufses III, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 715-9100
 
 
Scott W. Reynolds, Esq.
Lovells LLP
590 Madison Avenue
New York, New York 10022
Tel: (212) 909-0600
 
William A. Rome, Esq.
Hoffman & Pollok LLP
260 Madison Avenue, 22nd Floor
New York, New York 10016
Tel:  (212) 679-2900
 
Stephen D. Poss, Esq.
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
Tel: (617) 570-1000
 
Notice to Additional Named Parties Scott S.
Rosenblum, Mark Segall, James Davin and
Anthony Bongiovanni:
 
Scott W. Reynolds, Esq.
Lovells LLP
590 Madison Avenue
New York, New York 10022
Tel: (212) 909-0600
 
Notice to Additional Named Parties Afinsa
and Auctentia:
Thomas L. Kent, Esq.
Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York  1002
Tel:  (212) 318-6060

 
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound  ___,
2008.
 
 
KAPLAN FOX & KILSHEIMER LLP
 
By: ___________________________                                                               
 
Robert N. Kaplan
Donald R. Hall
Jeffrey P. Campisi
850 Third Avenue, 14th Floor
New York, NY 10022
Tel:           (212) 687-1980
Fax:           (212) 687-7714
 
Lead Counsel for Lead Plaintiff the Virginia Retirement System
 
 
KRAMER LEVIN NAFTALIS & FRANKEL LLP
 
By: ___________________________
Arthur H. Aufses III
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 715-9100
 
Attorneys for Defendant Escala Group, Inc.
 
 
LOVELLS LLP
 
By: ___________________________
 
Scott W. Reynolds
590 Madison Avenue
New York, New York 10022
Tel: (212) 909-0600
 
Attorneys for Defendants Larry Crawford, Esteban Perez, Jose Miguel Herrero,
Greg Roberts and Additional Named Parties Scott S. Rosenblum, Mark Segall, James
Davin and Anthony Bongiovanni
 

 
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GOODWIN PROCTER LLP
 
By: ___________________________
Stephen D. Poss
Exchange Place
Boston, Massachusetts 02109
Tel: (617) 570-1000
 
Attorneys for Defendant Amper, Politziner & Mattia, P.C.
 
 
BRESSLER, AMERY & ROSS, PC
 
By: ___________________________
Lawrence Fenster
17 State Street
New York, New York 10004
Tel:  212-425-9300
 
Attorneys for Defendant Juan Antonio Cano
 
 
HOFFMAN AND POLLOK LLP
 
By: ___________________________
 
William A. Rome
260 Madison Avenue, 22nd Floor
New York, NY 10016
Tel:  (212) 679-2900
 
Attorneys for Defendant Greg Manning
 
 

 
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PAUL, HASTINGS, JANOFSKY & WALKER LLP
 
By:  __________________________
 
Thomas L. Kent
75 East 55th Street
New York, NY 10022
Tel:  (212) 318-6060
 
Attorneys for Javier Diaz Galvez, Benito Aguera Mann and Ana Fernandez Daza, as
the duly authorized foreign representatives of Afinsa Bienes Tangibles, S.A.
 
 
PAUL, HASTINGS, JANOFSKY & WALKER LLP
 
By:  __________________________
 
Thomas L. Kent
75 East 55th Street
New York, NY 10022
Tel:  (212) 318-6060
 
Attorneys for Javier Diaz Galvez and Benito Aguera Mann, as the duly authorized
foreign representatives of Auctentia, S.A.
 

 
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Exhibit B

Jack G. Fruchter (JF-8435)
Lawrence D. Levit (LL-9507)
ABRAHAM FRUCHTER & TWERSKY LLP
One Penn Plaza, Suite 2805
New York, New York  10119
Telephone:  (212) 279-5050
Facsimile:   (212) 279-3655
Lead Counsel for Plaintiffs

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
 

     
: Lead Civil Action No. 1:06-cv-03902-AKH
 
 
IN RE ESCALA GROUP, INC. DERIVATIVE
LITIGATION
 
:
:  ECF CASE
:  (Derivative Action)
:
:
:
 
:
:
 
This Document Relates To:
:
:
 
ALL ACTIONS
:
:
 
:

 
STIPULATION OF SETTLEMENT
This Stipulation of Settlement ("Stipulation") is entered into as of ___ __,
2008, subject to the approval of the Court, by and between the following, by
their undersigned counsel: (i) Jane Bain and Spring Partners (collectively,
"Plaintiffs"); (ii) nominal Defendant Escala Group, Inc. (“Escala” or the
“Company”); (iii) defendants Greg Manning, Gregory N. Roberts, Mark B. Segall,
José Miguel Herrero, Esteban Pérez, Scott S. Rosenblum, James M. Davin, Antonio
Martins da Cruz ("da Cruz") and Larry Crawford (together, the "Individual
Defendants"); and (iv) Amper, Politziner & Mattia P.C. (“Amper”), for the
purpose of fully, finally and forever resolving, discharging and settling the
Released Claims, upon and subject to the following terms and conditions.
 
WHEREAS:
 
R. On May 22, 2006 and May 24, 2006, Plaintiffs commenced two separate actions,
styled Bain v. Herrero, et al., No. 06-cv-3902 (DC), and Spring Partners v.
Manning, et al., No. 06-cv-3980, respectively, in the United States District
Court for the Southern District of New York (the “Court”), purporting to assert
claims derivatively on behalf of Escala, a Delaware corporation.
 
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S. The actions were consolidated before the Honorable Alvin K. Hellerstein, by
Order dated September 5, 2006, under the caption In re Escala Group, Inc.
Derivative Litigation, Master File No. 06-cv-3902 (AKH).  The Court appointed
the firm of Abraham Fruchter & Twersky LLP as Lead Counsel and ordered
Plaintiffs to file a Consolidated Amended Complaint by September 29, 2006.
 
T. Plaintiffs filed their Consolidated Amended Complaint (the "CAC") on
September 29, 2006, and later filed a substituted corrected version of that
pleading.  The Individual Defendants (except for da Cruz) jointly filed a motion
to dismiss the CAC on December 18, 2006.  The CAC named Escala as a "nominal
defendant."
 
U. After Plaintiffs filed the CAC, and before their response to the motion to
dismiss the CAC was due, the Company announced that it anticipated restating its
financial statements for fiscal years 2003, 2004 and 2005, as well as for the
first three quarters of fiscal year 2006.  According to the Company, the
anticipated restatements related primarily to transactions involving the Company
and its indirect majority shareholder Afinsa Bienes Tangibles, S.A. (“Afinsa”),
a Spanish company that, according to authorities in Spain, allegedly operated as
a pyramid-type scheme.
 
V. On January 18, 2007, the Court entered an Order, upon stipulation, providing
that the motion to dismiss the CAC was withdrawn without prejudice, and
directing Plaintiffs to file another amended complaint.
 
W. On or about February 8, 2007, Plaintiffs filed their Second Amended Complaint
(the “SAC”), purporting to assert claims derivatively on Escala’s behalf against
certain past and present members of Escala’s board of directors and/or senior
executive officers, including the Individual Defendants, as well as Carlos de
Figueiredo (“de Figueiredo”) and Rafael del Valle-Iturriaga Miranda (“Miranda”).
 
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X. In the SAC, Plaintiffs generally alleged that the Individual Defendants and
Messrs. de Figueiredo and Miranda had breached their fiduciary duties by
allowing Escala to become intertwined with and dependent on Afinsa, which,
Plaintiffs alleged, significantly artificially inflated Escala’s revenues and
exposed Escala to substantial liability and damages.  The SAC also alleged
causes of action against all of the Individual Defendants and Messrs. de
Figueiredo and Miranda for allegedly failing to manage the affairs of Escala in
a lawful manner and for the best interests of its stockholders, for contribution
and indemnification, for waste of corporate assets, and a cause of action for
unjust enrichment against defendants Manning, Herrero, Crawford and Pérez
arising out of Afinsa’s alleged violations of law.  The SAC further alleged that
certain of the defendants caused Escala to make materially false and misleading
statements and omissions in various filings Escala made with the Securities and
Exchange Commission (the “SEC”), including an August 13, 2003 Form 14A
distributed to its shareholders (the “2003 Proxy Statement”), and sought
disgorgement of compensation and trading profits from Messrs. Manning, Herrero
and Crawford pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX
304”).
 
Y. On or about March 12, 2007, the Individual Defendants (except for da Cruz)
filed their motion to dismiss the SAC based upon, among other things,
Plaintiffs’ purported lack of standing, lack of subject matter jurisdiction,
failure to state a claim and failure to plead causation under applicable
law.  Plaintiffs filed their opposition on April 12, 2007, and the Individual
Defendants (except for da Cruz) submitted a Reply on May 14, 2007.     Oral
argument on the motion to dismiss the SAC was held on May 17, 2007.
 
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Z. On May 17, 2007, the Court ruled from the bench on the motion to dismiss,
denying that part of the motion that sought dismissal of Plaintiffs’ SOX 304
claim but stating the Court’s intention to certify that portion of its ruling
for interlocutory appeal, finding Plaintiffs’ remaining claims insufficient, and
granting Plaintiffs leave to replead.  By Order filed the next day, the Court
memorialized its May 17, 2007 ruling from the bench.  By subsequent Order (the
“Summary Order”) signed on May 18, 2007, the Court established a schedule for
the filing of Plaintiffs’ third amended complaint.
 
AA. On June 29, 2007, Plaintiffs filed a third amended complaint (the “TAC”),
which, among other things, for the first time named Amper as a
defendant.  Plaintiffs concurrently filed a Motion to Add a Party, seeking to
add Amper as a party to the TAC.  The motion was granted by Order dated July 2,
2007.  Also on June 29, 2007, each of the Plaintiffs filed an Affidavit with the
Court asserting that, if the Court dismissed their federal claims, they would
proceed on substantively similar state law claims in the appropriate state
court.
 
BB. By Order dated August 16, 2007, the Court extended the Individual
Defendants' (except for da Cruz's) time within which to answer the TAC until 20
days after either the Individual Defendants' petition for permission to appeal
was denied or the appeal was decided.  The Court ordered an identical extension
for Mr. da Cruz by Order dated October 23, 2007.
 
CC. Messrs. de Figueiredo and Miranda have never appeared in this litigation.
 
DD. By Order dated September 4, 2007, the Court certified an interlocutory
appeal pursuant to 28 U.S.C. § 1292(b) of its prior order denying the Individual
Defendants’ motion to dismiss Plaintiffs' SOX 304 claim.  On December 20, 2007,
the United States Court of Appeals for the Second Circuit granted Messrs.
Herrero and Crawford’s petition for leave to appeal the Court's denial of their
motion to dismiss Plaintiffs' SOX 304 claim.
 
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EE. On September 13, 2007, Amper moved to dismiss the TAC on the grounds that
Plaintiffs failed to state a claim against it.  Plaintiffs opposed Amper's
motion in a filing dated October 15, 2007, to which Amper submitted a Reply
dated October 31, 2007.  The Court heard oral argument on Amper’s motion to
dismiss on December 12, 2007, and entered an Order that day granting Amper’s
motion to dismiss for lack of subject matter jurisdiction.
 
FF. On or about December 21, 2007, the Court entered a Stipulated Protective
Order and a Scheduling Order setting a fact discovery cut-off of December 1,
2008.
 
GG. Thereafter, Escala began producing documents to Plaintiffs.  More than
77,000 pages of documents were produced, and then reviewed and analyzed by
Plaintiffs’ counsel.
 
HH. During January 2008, Plaintiffs began to draft a complaint against Amper for
professional negligence that was to be filed in New York state court (the "Draft
State Court Complaint").
 
II. Plaintiffs, through their counsel, represent that they have, over the past
almost two years, conducted a thorough investigation relating to the claims and
the underlying events alleged in the TAC, including review and analysis of tens
of thousands of pages of documents produced by Escala and obtained through
public sources, and the analysis of the legal principles applicable to
Plaintiffs’ claims and the potential defenses thereto.
 
JJ. Beginning in or about February 2008, Plaintiffs, the Individual Defendants
and Amper, through their counsel, entered into settlement discussions with a
view to achieving the benefits set forth in this Stipulation and the corporate
governance reforms incorporated by reference herein (the “Settlement”).  These
discussions, when first commenced, included reliance on retired California state
court judge Daniel Weinstein, a mediator with JAMS, who, although not formally
retained in connection with this Action, was acting as a mediator in connection
with the Securities Class Action that arose from many of the same facts that
gave rise to this Action.  After multiple negotiating sessions over a period of
weeks, the parties hereto reached the agreement referenced herein.
 
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KK. Although Plaintiffs believe their claims have merit, they recognize the
expense and length of continued proceedings necessary to prosecute such claims
through trial and subsequent appeals.  Plaintiffs’ counsel also have taken into
account the costs and risks inherent in proceeding further in this
Action.  Moreover, Defendants, without an agreement to resolve the Action, will
continue to vigorously challenge the claims.  The basis for federal jurisdiction
over the Action was being appealed and the outcome of that appeal could be
uncertain.  Although Plaintiffs were preparing a state court complaint against
Amper, their likelihood of prevailing in that action, had it been filed, is
unknown.  In addition, certain of the claims against the Individual Defendants
have not yet been thoroughly tested on a motion to dismiss.  Therefore,
Plaintiffs and Plaintiffs’ counsel believe that the Settlement, on the terms and
conditions set forth herein, is reasonable, adequate and in the best interests
of the Company and its shareholders.
 
LL. The Defendants and Amper have denied, and continue to deny, each and every
allegation of liability and wrongdoing on their part and assert that the claims
asserted against them in the Action are without merit and fail to state a cause
of action; deny that they breached any duty, violated any law or engaged in
wrongdoing of any form; and believe that they have strong factual and legal
defenses to the claims alleged.  Defendants and Amper have agreed to this
Stipulation and the Settlement provided herein solely in order to fully and
finally settle and dispose of all claims that have been or could have been or
could in the future be raised in the Action or in the Draft State Court
Complaint and to avoid the continuing burden, expense, inconvenience and
distraction of protracted litigation.
 
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MM. Defendants acknowledge that the Settlement confers substantial benefits on
Escala, that the Settlement is in the best interests of Escala and its
shareholders, and that the Settlement is fair, reasonable and adequate to Escala
and its shareholders.
 
NOW, THEREFORE, IT IS STIPULATED AND AGREED, by and among the parties hereto,
through their undersigned counsel, as follows:
 
CERTAIN DEFINITIONS
 
To the extent not otherwise defined herein, as used in this Stipulation, the
following terms have the meanings specified below:
 
1. “Action” means the consolidated derivative action pending before the Court
under the caption In re Escala Group, Inc. Derivative Litigation, Master File
No. 06-cv-03902 (AKH), including, without limitation, all cases consolidated
under that caption.
 
2. “Court” means the United States District Court for the Southern District of
New York.
 
3. “Defendants” means Escala, the Individual Defendants, de Figueiredo and
Miranda.
 
4. “Effective Date” means the date that is five business days after the date on
which all of the conditions to the Settlement, set forth in Section VI, are
satisfied.
 
5. “Escala Shareholder” means any Person with a beneficial interest in Escala
common stock.
 
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6. “Execution Date” means the date that this Stipulation has been signed by all
the signatories hereto through their counsel.
 
7. “Final” means, with respect to any judgment or order, including but not
limited to the Final Judgment, that such judgment or order represents a final
and binding determination of all issues within its scope and is not subject to
further review on appeal or otherwise.  Without limitation, a judgment or order
becomes “Final” when:  (a) the time within which to seek review, alteration,
amendment or appeal of such judgment or order, including (if applicable) any
three (3) day period for service by mail under Federal Rule of Civil Procedure
6(a) and (e) or any such service period applicable to an action in state court,
has expired without any review, alteration, amendment or appeal having been
sought or taken; or (b) if an appeal, petition for writ of certiorari, motion or
other application for review, alteration or amendment is filed, sought or taken,
the date as of which such appeal, petition, motion or other application shall
have been finally determined in such a manner as to affirm the Court’s original
order in its entirety and the time, if any, for seeking further review has
expired.
 
8. “Final Settlement Approval Hearing” means the final hearing to be held by the
Court to determine whether the proposed Settlement should be approved; whether
all Released Claims should be dismissed with prejudice; and whether an order
approving the Settlement should be entered thereon.
 
9. “Individual Defendants” means Manning, Roberts, Segall, Herrero, Pérez,
Rosenblum, da Cruz, Davin and Crawford.
 
10. “Judgment” or “Final Judgment” means the judgment to be entered by the
Court, substantially in the form of Exhibit C hereto.
 
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11. “Lead Counsel” means the law firm of Abraham Fruchter & Twersky LLP.
 
12. “Parties” means Plaintiffs and Defendants.  The "parties hereto" or the
"parties to this Stipulation" refers to all those Persons whose counsel have
signed this Stipulation on their behalves.
 
13. “Person” means any individual, corporation, partnership, association,
affiliate, joint stock company, trust, estate, unincorporated association,
government and any political subdivision thereof, and any other type of legal or
political entity.
 
14. “Released Claims” means any and all actions, suits, claims, debts, demands,
rights, or causes of action or liabilities of every nature and description
whatsoever, whether based on federal, state, local, statutory or common law or
any other law, rule, or regulation, whether foreign or domestic, including,
without limitation, Unknown Claims and claims under Delaware statutory and/or
common law, federal and/or state securities laws and claims under any law
governing fiduciaries or the duties of fiduciaries, or for any remedy whether at
equity or law, that were or could have been or could in the future be asserted
against the Released Parties in the Action or the Draft State Court Complaint by
Plaintiffs, by Escala, or by any Escala Shareholder (claiming in the right of,
or on behalf of, the Company), or that arise out of or are related, directly or
indirectly, in any way to any of the facts, allegations, transactions, events,
occurrences, acts, disclosures, representations, statements, omissions, failures
to act, or matters set forth, alleged, referred to, or that could have been
asserted in the Action, in the Draft State Court Complaint, and/or in any other
state or federal derivative actions against any of the Released Parties
relating, in whole or in part, to the allegations in this Action, whether known
or unknown, suspected or unsuspected, matured or not matured, contingent or
non-contingent, accrued or unaccrued, whether or not concealed or hidden by the
Released Parties. Notwithstanding the foregoing, the Released Claims do not
include any claims, counterclaims or defenses asserted by or that could be
asserted directly by Escala against Manning, or by Manning against Escala, in
the arbitration proceeding styled Manning v. Escala Group, Inc., Case No. 50 166
T 00336 07, now pending before the American Arbitration Association.  All such
claims, counterclaims and defenses are expressly preserved by Escala and
Manning. 
 
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15. “Released Parties” means Defendants and Amper and each of their immediate
family members, heirs, executors, administrators, successors, and assigns;
Defendants’ and Amper’s present, former and future employees, insurers,
officers, directors, partners, attorneys, legal representatives and agents; any
person or entity in which any Defendant or Amper has or had a controlling
interest; and the present, former and future parents, subsidiaries, divisions,
affiliates, predecessors, successors, employees, officers, directors, partners,
attorneys, assigns, and agents of all of the foregoing.
 
16. “Securities Class Action” means the consolidated securities class action
pending in this Court under the caption In re Escala Group, Inc. Securities
Litigation, Master File No. 06 Civ. 3518 (AKH), including, without limitation,
all cases consolidated under that caption.
 
17. “Unknown Claims” means any and all claims, demands, rights, liabilities, and
causes of action of every nature and description, which Plaintiffs, Escala, and
any or every Escala Shareholder (claiming in the right of, or on behalf of, the
Company) does not know or suspect to exist in his, her or its favor at or after
the Execution Date and including, without limitation, those which, if known by
him, her or it, might have affected his, her or its decision(s) with respect to
the Settlement.  With respect to any and all Released Claims, Plaintiffs and
Escala stipulate and agree that, upon the Effective Date, they shall expressly
waive, and every Escala Shareholder shall be deemed to have waived, and by
operation of the Final Judgment shall have waived, any and all provisions,
rights, and benefits conferred by any law of any state or territory of the
United States, or principle of common law, which is similar, comparable, or
equivalent to Cal. Civ. Code § 1542, which provides:
 
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
 
Plaintiffs, Escala and/or any Escala Shareholder may hereafter discover facts in
addition to or different from those that any of them now know or believe to be
true with respect to the subject matter of the Released Claims, but Plaintiffs
and Escala shall expressly have, and every Escala Shareholder shall be deemed to
have and by operation of the Judgment shall have, fully, finally, and forever
settled and released any and all Released Claims, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden,
that now exist, or heretofore have existed upon any theory of law or equity now
existing or coming into existence in the future, including, but not limited to,
conduct that is negligent, reckless, intentional, with or without malice, or a
breach of any duty, law or rule, without regard to the subsequent discovery or
existence of such different or additional facts.  Plaintiffs and Escala
acknowledge, and every Escala Shareholder by operation of the Judgment shall be
deemed to have acknowledged, that the waivers contained in this paragraph, and
the inclusion of “Unknown Claims” in the definition of Released Claims were
separately bargained for and are key elements of the Settlement.
 
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XIII.  
THE SETTLEMENT CONSIDERATION

 
1. No later than five (5) business days after entry by the Court of the
Preliminary Approval Order (as defined below) with respect to the Settlement,
the Individual Defendants shall cause their insurance carrier(s) to pay $3.5
million to Escala, and Amper shall cause its insurance carrier(s) to pay $2.0
million to Escala.  These sums would not be paid but for the filing, prosecution
and settlement of the Action.
 
2. Not later than thirty (30) days after the Settlement becomes Final, Escala’s
board of directors will adopt by resolution, or other means as appropriate, or
will have already adopted or implemented, the corporate governance reforms set
forth in Exhibit A hereto, and incorporated by reference herein.
 
XIV.  
PRELIMINARY APPROVAL ORDER; NOTICE ORDER; AND SETTLEMENT HEARING

 
A. The Parties shall submit this Stipulation together with its Exhibits to the
Court, and the Parties shall apply for entry of an order (the “Preliminary
Approval Order”) substantially in the form and content of Exhibit B attached
hereto, requesting, inter alia, the preliminary approval of the Settlement set
forth in the Stipulation, and final approval of forms of notice to be mailed to
all Escala Shareholders who can be identified with reasonable effort (the
“Mailed Notice”) and to be published (the “Summary Notice”), substantially in
the forms and contents of Exhibits B-1 and B-2 hereto, respectively.  The Mailed
Notice shall include the general terms of the Settlement set forth in the
Stipulation.
 
B. The Parties shall request that, after the Mailed Notice and Summary Notice
have been mailed and published, respectively, in accordance with this
Stipulation, above, the Court hold the Final Settlement Approval Hearing and
finally approve the Settlement of the Action.
 
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C. Escala will be responsible for, and will cause to be paid, the costs of
printing, publishing and mailing the Mailed Notice and the Summary
Notice.  Under no circumstances shall Plaintiffs or Amper be responsible for the
costs of printing, mailing or publishing notice or any related expense.
 
XV.  
FINAL JUDGMENT APPROVING THE SETTLEMENT

 
A. At the Final Settlement Approval Hearing, the Parties shall jointly request
entry of the Final Judgment, substantially in the form attached hereto as
Exhibit C.
 
XVI.  
ATTORNEYS’ FEES AND EXPENSES

 
A. Escala or the insurance carriers will pay Lead Counsel, or cause them to be
paid, as follows:  No later than five (5) business days after the entry of the
Final Judgment, (i) $925,000 in cash in exchange for the substantial benefits
received as a result of the filing, prosecution and settlement of this Action;
and (ii) reimbursement of expenses in an amount not to exceed $70,000.  These
fees and expenses will be promptly deposited upon receipt by Lead Counsel into
an interest-bearing escrow account.  Such fees and expenses, plus interest
earned on the escrow account, shall be paid to Lead Counsel from the escrow
account within five (5) business days after the Effective Date.  Neither the
Individual Defendants nor Amper shall be responsible for the payment of any
attorneys' fees or expenses.  Escala agrees that the attorneys' fees and
expenses are fair and reasonable.
 
XVII.  
CONDITIONS OF SETTLEMENT; EFFECT OF DISAPPROVAL, CANCELLATION OR TERMINATION

 
A. This Stipulation shall be subject to the following conditions and, except as
provided herein, shall be canceled and terminated unless:
 
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1. The Court enters the Preliminary Approval Order, as provided in Section III;
 
2. The Court has approved the Settlement as described herein, following
distribution of the Mailed Notice and Summary Notice and a Final Settlement
Approval Hearing, as prescribed by Rule 23.1 of the Federal Rules of Civil
Procedure, and has entered the Judgment, as provided in Section IV;
 
3. The Court shall have entered the Judgment, in all material respects in the
form set forth in Exhibit C attached hereto, or an order and final judgment in a
form that is not in all material respects identical to Exhibit C attached hereto
(an “Alternative Judgment”) if all the parties hereto agree to such Alternative
Judgment;
 
4. No order of the Court, or modification or reversal on appeal of any order of
the Court, concerning the amount of attorneys’ fees or expenses constitutes
grounds for cancellation or termination of this Stipulation or the Settlement;
 
5. The Judgment, or any Alternative Judgment, becomes Final; and
 
6. Settlement in the Securities Class Action has become Final.  The parties
hereto expressly recognize that Settlement pursuant to this Stipulation is
expressly conditioned upon settlement in the Securities Class Action becoming
Final.
 
B. Upon the Effective Date, Plaintiffs, Escala and all current and former Escala
Shareholders, on behalf of themselves, and their respective current, future and
former heirs, executors, administrators, personal representatives, attorneys,
agents, partners, successors and assigns, and any other Person claiming (now or
in the future) to have acted through or on behalf of them, shall hereby be
deemed to have, and by operation of the Final Judgment shall have, fully,
finally, and forever, released, relinquished, settled and discharged the
Released Parties from the Released Claims and shall be permanently barred and
enjoined from instituting, commencing, or prosecuting or asserting any Released
Claim against any of the Released Parties.
 
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C. Upon the Effective Date, each of the Defendants and the Released Parties
shall be deemed to have, and by operation of the Judgment shall have, fully,
finally and forever released, relinquished and discharged Plaintiffs and
Plaintiffs' counsel from all claims that arise out of or in connection with, or
relate to their institution, prosecution, assertion, settlement or resolution of
the Action or the Released Claims.
 
D. If all of the conditions specified in paragraph A of this Section are not
met, then the Stipulation shall be canceled and terminated, unless Plaintiffs,
Defendants and Amper each authorize their counsel to agree in writing to proceed
with the Settlement.
 
E. If either (a) the Effective Date does not occur, (b) this Stipulation is
canceled or terminated pursuant to its terms, or (c) the Settlement does not
become Final for any reason, then any and all sums paid by the Individual
Defendants' insurer(s) and Amper's insurer(s) to Escala pursuant to Section II
hereof, and any amounts paid by Escala or the insurance carriers to Lead Counsel
pursuant to Section V hereof, and all interest earned on such sums, shall be
refunded by Escala to the Individual Defendants' insurer(s) and Amper’s
insurer(s) in the same proportion to the amounts contributed by each such Person
pursuant to Section II hereof, and by Lead Counsel to Escala or the insurance
carriers, respectively. All refunds described in the preceding sentence shall be
made within ten (10) business days of such cancellation or termination.
 
F. If either (a) the Effective Date does not occur, (b) this Stipulation is
canceled or terminated pursuant to its terms, or (c) the Settlement does not
become Final for any reason, all of the parties to this Stipulation shall be
deemed to have reverted to their respective status as of March 7, 2008, and they
shall proceed in all respects as if this Stipulation had not been executed and
the related orders had not been entered, preserving in that event all of their
respective claims and defenses in the Action.  Notwithstanding the foregoing
language, the following provisions of this Stipulation shall survive any
termination or cancellation of the Settlement:  Section VI(D) (“Conditions of
Settlement, Effect of Disapproval Cancellation or Termination”); Section VII
(“No Admissions”).
 
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XVIII.  
NO ADMISSIONS

 
A. The parties hereto intend the Settlement as described herein to be a final
and complete resolution of all disputes between them with respect to the Action
and the Draft State Court Complaint and to compromise claims that are
contested.  Entry into this Settlement shall not be deemed an admission by any
party hereto as to the merits of any claim or defense or any allegation made in
the Action.
 
B. This Stipulation, offer of this Stipulation and compliance with this
Stipulation shall not constitute or be construed as an admission by any Released
Party of any wrongdoing or liability.  This Stipulation is to be construed
solely as a reflection of the desire of the parties hereto to facilitate a
resolution of the claims in the Action and of the Released Claims.  The parties
hereto agree that no party was or is a “prevailing party” in this case.  In no
event shall this Stipulation, any of its provisions, or any negotiations,
statements or court proceedings relating to its provisions in any way be
construed as, offered as, received as, used as or deemed to be evidence of any
kind in the Action, any other action, or any judicial, administrative,
regulatory or other proceeding, except a proceeding to enforce this Stipulation,
and except that the Defendants or Amper or any of the Released Parties may file
the Stipulation and/or the Judgment in any action that may be brought against
any of them in order to support a defense or counterclaim based on principles of
res judicata, collateral estoppel, release, good faith settlement, judgment bar
or reduction or any other theory of claim preclusion or issue preclusion or
similar defense or counterclaim.
 
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XIX.  
MISCELLANEOUS PROVISIONS

 
A. The parties hereto: (a) acknowledge that it is their intent to consummate the
Settlement contemplated by this Stipulation; (b) agree to cooperate to the
extent necessary to effectuate and implement all terms and conditions of this
Stipulation; and (c) agree to exercise their best efforts and to act in good
faith to accomplish the foregoing terms and conditions of the Stipulation.
 
B. All counsel who execute this Stipulation represent and warrant that they have
authority to do so on behalf of their respective clients.
 
C. All of the exhibits attached hereto are hereby incorporated by reference as
though fully set forth herein.
 
D. This Stipulation may be amended or modified only by a written instrument
signed by counsel for all parties to this Stipulation or their successors in
interest.
 
E. This Stipulation and the exhibits attached hereto constitute the entire
agreement between Plaintiffs on the one hand, and the Defendants and Amper on
the other hand, and supercede any and all prior agreements, written or oral,
between such parties.  No representations, warranties or inducements have been
made concerning this Stipulation or its exhibits other than the representations,
warranties and covenants contained and memorialized in such documents.
 
F. This Stipulation may be executed in one or more original, photocopied or
facsimile counterparts.  All executed counterparts and each of them shall be
deemed to be one and the same instrument.  Counsel for the parties to this
Stipulation shall exchange among themselves original signed counterparts and a
complete set of original executed counterparts shall be filed with the Court.
 
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G. This Stipulation shall be binding upon, and inure to the benefit of the
successors, assigns, executors, administrators, affiliates (including parent
companies), heirs and legal representatives of the parties hereto.  No
assignment shall relieve any party hereto of obligations hereunder.
 
H. All terms of this Stipulation and all exhibits hereto shall be governed and
interpreted according to the laws of the State of New York without regard to its
rules of conflicts of law and in accordance with the laws of the United States.
 
I. Plaintiffs, Defendants and Amper hereby irrevocably submit to the
jurisdiction of the Court with respect to enforcement of the terms of this
Stipulation and for any suit, action, proceeding or dispute arising out of or
relating to this Stipulation or the applicability of this Stipulation.  Amper
explicitly states that it does not consent to the jurisdiction of this Court for
any other purpose related to the Action.
 
J. This Stipulation shall not be construed more strictly against one party than
another merely by virtue of the fact that it, or any part of it, may have been
prepared by counsel for one of them, it being recognized that this Stipulation
is the result of arm’s-length negotiations between the parties hereto and that
all of them have contributed substantially and materially to its preparation.
 
K. Except as otherwise provided herein, each party shall bear its own fees and
costs.
 
L. The headings herein are used for the purpose of convenience and are not
intended to have legal effect.
 
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M. The parties to this Stipulation and related agreements intend the Settlement
to be a final and complete resolution of all disputes asserted or which could be
asserted by the Plaintiffs against the Released Parties with respect to the
Released Claims.  Accordingly, Plaintiffs, Defendants and Amper agree not to
assert in any forum that the Action was brought by Plaintiffs or defended by
Defendants or Amper in bad faith or without a reasonable basis.  The parties to
this Stipulation agree that the Settlement was negotiated at arms-length in good
faith by the parties, and reflects a settlement that was reached voluntarily
after consultation with experienced legal counsel.
 
 

 
ABRAHAM FRUCHTER & TWERSKY LLP
 
By:
___________________________                                                               
 
Jack G. Fruchter (JF-8435)
Lawrence D. Levit (LL-9507)
One Penn Plaza, Suite 2805
New York, NY 10119
Tel:           (212) 279-5050
 
Lead Counsel for Plaintiffs
 
 
 
ROBBINS UMEDA & FINK, LLP
 
By:
___________________________                                                           
 
Marc M. Umeda
610 West Ash Street, Suite 1800
San Diego, CA 92101
Tel:           (619) 525-3990
 
Counsel for Plaintiffs
 

 
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KRAMER LEVIN NAFTALIS & FRANKEL LLP
 
By: ___________________________
Arthur H. Aufses III
1177 Avenue of the Americas
New York, NY 10036
Tel: (212) 715-9100
 
Attorneys for Nominal Defendant Escala Group, Inc.
 
 
LOVELLS LLP
 
By: ___________________________
 
Scott W. Reynolds (SR-8457)
590 Madison Avenue
New York, New York 10022
Tel: (212) 909-0600
 
Attorneys for Defendants Larry Crawford, Antonio Martins da Cruz, Esteban Perez,
Jose Miguel Herrero, Greg Roberts, Scott S. Rosenblum, Mark Segall, James Davin
and Rafael del Valle Iturriaga Miranda
 
 
 
GOODWIN PROCTER LLP
 
By: ___________________________
Stephen D. Poss
Exchange Place
Boston, Massachusetts 02109
Tel: (617) 570-1000
 
Attorneys for Amper, Politziner & Mattia, P.C.

 
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HOFFMAN AND POLLOK LLP
 
By: ___________________________
 
William A. Rome
260 Madison Avenue, 22nd Floor
New York, NY 10016
Tel:  (212) 679-2900
 
Attorneys for Defendant Greg Manning
 
 

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