EXHIBIT 10.18

June 17, 2003

Dear Paul,

         This letter agreement formalizes our prior discussions and agreement on
the terms of a severance arrangement, as previously agreed upon by the company's
board of directors,  in order to incent you to remain with the company.  Virage,
Inc.  and you  agree,  for good and  valuable  consideration,  the  receipt  and
sufficiency of which are hereby acknowledged, as follows:

         In the event that both (A) Virage, Inc. executes a definitive agreement
for an acquisition,  merger, consolidation,  sale of all or substantially all of
its  assets,   change  in  control   transaction  or  other  similar   corporate
reorganization,  and (B)  thereafter  you are ever  subject  to  termination  or
constructive  termination  by Virage,  Inc. or its successor  entity(ies),  then
Virage,  Inc. and its  successor  entity(ies)  shall  immediately  pay you, at a
minimum, the greater of (a) twelve (12) months of your then-current base salary,
or (b) Two Hundred Fifty Thousand  Dollars (US  $250,000).  For purposes of this
agreement,  "constructive  termination"  includes,  without  limitation,  (i)  a
reduction   of  your   duties,   title,   authority,   reporting   structure  or
responsibilities, relative to your duties, title, authority, reporting structure
or  responsibilities  as in effect  immediately prior to such reduction,  or the
assignment to you of such reduced duties, title, authority,  reporting structure
or responsibilities, or (ii) a reduction in your base salary or bonus plan as in
effect  immediately  prior  to  such  reduction,  or  (iii) a  reduction  in the
aggregate  level of  employee  benefits to which you were  entitled  immediately
prior to such reduction with the result that your aggregate  benefits package is
reduced,  or (iv) the  relocation  of you to a facility or a location  more than
twenty-five (25) 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. Any acquisition,  merger, sale of
all or substantially all of the assets,  change in control  transaction or other
similar  corporate  reorganization  of  Virage,  Inc.  shall be  subject  to the
successor  entity  agreeing  in  writing  to  assume  and be  bound  by all  the
obligations  of Virage,  Inc.  herein,  to agree in writing to the assignment of
this  letter  agreement  to it,  and to agree to bind any  subsequent  successor
entities to it to these same obligations.

         This  letter  agreement  shall be  governed by the laws of the state of
California and both parties agree to the exclusive jurisdiction in the state and
federal courts in San Francisco,  California.  The prevailing party in any legal
action  or  proceeding  related  to this  letter  agreement  shall  recover  its
reasonable attorneys' fees incurred in connection therewith.

         Signatures  below  indicate both  parties'  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,
                   Virage, Inc.
                   /s/ Scott Gawel                   /s/ William H. Younger, Jr.

                   Scott Gawel                       William H. Younger, Jr.
                   Vice President, Finance           Compensation Committee
                   Virage, Inc.                      Chairman


Agreed to and Accepted by:

Paul G. Lego

/s/ Paul G. Lego
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Signature


June 17, 2003
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Date