Exhibit 10.13

August 13, 2002


Dear Scott,

         This letter formalizes our prior discussions and agreement on the terms
of potential bonus and severance arrangements,  as previously discussed with the
Board of Directors, as follows:

         The terms and conditions of your original  signed offer letter continue
in full force and effect, except as amended pursuant to the terms and conditions
described in this letter. In the event there is a conflict in terms, definitions
or other  interpretations  between  your  original  signed offer letter and this
letter agreement,  this letter agreement shall supersede those conflicting terms
and govern that aspect of your  employment  arrangement.  Nothing herein changes
the fact that your employment with Virage is for no specified period of time and
constitutes  at-will  employment.  As a result,  Virage is free to terminate its
employment relationship with you at any time, with cause or without cause.

         As of August  13,  2002,  your title has been  changed to Acting  Chief
Financial Officer, Vice President of Finance and Controller,  although Virage is
free to modify your title at any time for any reason or for no reason.

         In the  event  that  you  continue  to be  employed  and  are  actively
performing  duties for Virage through August 13, 2003, then Virage shall pay you
a one-time  lump sum bonus in the gross  amount of Forty  Thousand  Dollars  (US
$40,000),  less applicable withholding (including without limitation withholding
for applicable taxes)  ("Retention  Bonus").  This Retention Bonus is in lieu of
all other  bonuses for the period  August 13, 2002 to August 13,  2003,  and you
will  not be  eligible  for any  other  bonus  based  on  your or the  Company's
performance  for the period  August 13, 2002 to August 13, 2003.  Subsequent  to
August 13, 2003,  you will fully  participate in the Company's  executive  bonus
program and  potentially  earn a target  bonus  (currently  20% of base  salary)
consistent with other  non-commissioned vice presidents of the Company. You will
also be eligible to participate in any other  employee  benefits  offered by the
Company that are applicable to other executive vice presidents at the Company to
the full extent provided for under such benefits.

         Should  the  Company  execute a  definitive  agreement  for a Change of
Control  (as  defined  herein)  and any of the events  described  herein per the
following  paragraphs  occur  such that you earn the  Double  Trigger  Severance
Amount (as defined herein) on or before November 13, 2003, or should you receive
a  Termination  Without Cause  Severance  Amount (as defined  herein),  you will
forego and not receive (or will return) the Retention Bonus referred to above.


<PAGE>

         If, at any time, Virage mutually executes a definitive  agreement for a
Change of Control, and there is (i) a material reduction of your duties,  title,
authority  or  responsibilities,  relative to your duties,  title,  authority or
responsibilities  as in  effect  immediately  prior  to such  reduction,  or the
assignment to you of such reduced duties, title,  authority or responsibilities,
or (ii) a reduction by the Company in your base salary as in effect  immediately
prior to such  reduction  (other  than a  reduction  that  generally  applies to
Company officers), or (iii) a material reduction by the Company in the aggregate
level of employee benefits,  including  participation in the Company's executive
bonus program,  to which you were entitled  immediately  prior to such reduction
with the result  that your  aggregate  benefits  package is  materially  reduced
(other than a reduction that generally applies to Company officers), or (iv) the
relocation of you to a facility or a location more than  thirty-five  (35) miles
from your then present location, or (v) any act or set of facts or circumstances
which would,  under  California  case law or statute  constitute a  constructive
termination of you,  then,  subject to you executing and not revoking a standard
form of  mutual  release  of  claims  with  the  Company  and not  breaking  any
confidentiality or other similar terms and conditions  pursuant to your original
signed offer letter,  you will receive a one-time lump sum severance  payment in
the gross amount of Eighty  Thousand  Dollars (US  $80,000.00),  less applicable
withholding  (including without limitation withholding for applicable taxes), in
accordance  with the  Company's  standard  payroll  practices  ("Double  Trigger
Severance  Amount").  The Company shall pay the Double Trigger  Severance Amount
prior to the  completion of the  associated  Change of Control.  Notwithstanding
anything to the contrary herein,  in no event shall the Double Trigger Severance
Amount be owed or paid if the  definitive  agreement  is  terminated  or expires
prior to the  completion of the  associated  Change of Control or otherwise does
not directly effectuate and result in a corresponding Change of Control.

         If, at any time prior to a Change of Control  but not after  August 13,
2003,  your  employment  with  the  Company  terminates  due  to an  involuntary
termination  by the Company  other than for "Cause" (as defined  herein),  then,
subject to you executing  and not revoking a standard form of mutual  release of
claims with the Company and not breaching any  confidentiality  or other similar
terms and  conditions  pursuant to your original  signed offer letter,  you will
receive a one-time,  lump-sum  payment in the gross amount of a prorated portion
of  Forty  Thousand  Dollars  (US  $40,000.00),   less  applicable   withholding
(including without  limitation  withholding for applicable taxes), in accordance
with  the  Company's  standard  payroll  practices,  with  the  prorated  amount
calculated based on the percentage of time passed from August 13, 2002 until the
effective  date of  termination  compared  with  August 13,  2003  ("Termination
Without Cause Severance Amount").

         For  purposes  of this  Agreement,  "Cause"  shall  mean  (i) an act of
personal dishonesty taken by you in connection with your  responsibilities as an
employee and intended to result in personal enrichment of you, or (ii) you being
convicted of, or plea of nolo contendere to, a felony or misdemeanor, or (iii) a
willful act by you which  constitutes  misconduct  and which is injurious to the
Company,  or (iv) following  delivery to you of a written demand for performance
from the Company which describes the basis for the Company's  reasonable  belief
that you have not substantially or adequately  performed your duties,  continued
indequate  performance  or failure  to meet  reasonable  expectations  of senior
management for your position.

         For  purposes of this  Agreement,  "Change of  Control"  shall mean the
occurrence of any of the following  events in either a single  transaction  or a
series of related transactions:

          (i) Any "person" (as such term is used in Sections  13(d) and 14(d) of
the Securities  Exchange Act of 1934, as amended) becomes the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company  representing  fifty  percent  (50%) or more of the total  voting
power represented by the Company's then outstanding voting securities; or

         (ii) The  consummation of the sale or disposition by the Company of all
or substantially all the Company's assets; or

         (iii) The consummation of a merger or consolidation of the Company with
any other corporation,  other than a merger or consolidation  which would result
in the voting  securities of the Company  outstanding  immediately prior thereto
continuing to represent  (either by remaining  outstanding or by being converted
into voting  securities of the surviving entity) at least fifty percent (50%) of
the total voting power  represented  by the voting  securities of the Company or
such   surviving   entity   outstanding   immediately   after  such   merger  or
consolidation.


<PAGE>

         The terms of your  stock  option  agreements  remain as stated per your
stock option agreements.

         Your signature  below  indicates your assent and agreement to the terms
and conditions of this letter  agreement,  and executes this letter agreement as
of the date first set forth above.

                                  Sincerely,



                                  Paul G. Lego
                                  C.E.O. and President
                                  Virage, Inc.


Agreed to and Accepted by:

Scott Gawel


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Date