Document:

Composite
      Technology Corporation 

    2008
      STOCK OPTION PLAN 

     

            1.
          Establishment,
      Purpose and Term of Plan.     
      

     

            1.1
          Establishment.
          The
      Composite Technology Corporation’s 2008 Stock Option Plan (the "Plan"
      )
      is
      hereby established effective as of January 11, 2008. 

     

            1.2
          Purpose.
          The
      purpose of the Plan is to advance the interests of the Participating Company
      Group and its stockholders by providing an incentive to attract, retain and
      reward persons performing services for the Participating Company Group and
      by
      motivating such persons to contribute to the growth and profitability of the
      Participating Company Group. 

     

            1.3
          Term
      of Plan.     The
      Plan shall continue in effect until the earlier of its termination by the Board
      or the date on which all of the shares of Stock available for issuance under
      the
      Plan have been issued and all restrictions on such shares under the terms of
      the
      Plan and the agreements evidencing Options granted under the Plan have lapsed.
      However, all Options shall be granted, if at all, within ten (10) years
      from the earlier of the date the Plan is adopted by the Board or the date the
      Plan is duly approved by the stockholders of the Company. 

     

            2.
          Definitions
      and Construction.     
      

     

            2.1
          Definitions.
          Whenever
      used herein, the following terms shall have their respective meanings set forth
      below: 

     

    
      	(a)  	
              "
                Board
                "
                means
                the Board of Directors of the Company.

            

    

     

    
      	(b)  	
              "
                Code
                "
                means
                the Internal Revenue Code of 1986, as amended, and any applicable
                regulations promulgated thereunder.

            

    

     

    
      	(c)  	
              "
                Committee
                "
                means
                the Compensation Committee or other committee of the Board duly appointed
                to administer the Plan and having such powers as shall be specified
                by the
                Board. If no such Committee has been appointed, then “Committee” shall
                mean the Board. Each member of the Committee, while serving as such,
                shall
                be a disinterested person with the meaning of Rule 16b-3 promulgated
                under
                the Securities Act of 1934.

            

    

     

    
      	(d)  	
              "
                Company
                "
                means
                Composite Technology Corporation, a Nevada corporation, or any successor
                corporation thereto and any parent or subsidiary corporation of Composite
                Technology Corporation, as such terms are defined in Sections 425(e)
                and
                425(f), respectively, of the Code.

            

    

     

    
      	(e)  	
              "
                Consultant
                "
                means
                a person engaged to provide consulting or advisory services (other
                than as
                an Employee or a Director) to a Participating Company, provided that
                the
                identity of such person, the nature of such services or the entity
                to
                which such services are provided would not preclude the Company from
                offering or selling securities to such person pursuant to the Plan
                in
                reliance on either the exemption from registration provided by
                Rule 701 under the Securities Act or, if the Company is required to
                file reports pursuant to Section 13 or 15(d) of the Exchange Act,
                registration on a Form S-8 Registration Statement under the
                Securities Act. 

            

    

     

    
      	(f)  	
              "
                Director
                "
                means
                a member of the Board or of the board of directors of any other
                Participating Company. 

            

    

     

    
      	(g)  	
              "
                Disability
                "
                means
                the inability of the Optionee, in the opinion of a qualified physician
                acceptable to the Company, to perform the major duties of the Optionee's
                position with the Participating Company Group because of the sickness
                or
                injury of the Optionee. 

            

    

     

    
      	(h)  	
              "
                Employee
                "
                means
                any person treated as an employee (including an officer or a Director
                who
                is also treated as an employee) in the records of a Participating
                Company
                and, with respect to any Incentive Stock Option granted to such person,
                who is an employee for purposes of Section 422 of the Code; provided,
                however, that neither service as a Director nor payment of a director's
                fee shall be sufficient to constitute employment for purposes of
                the Plan.
                

            

    

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

     

    
      	(i)  	
              "
                Exchange
                Act "
                means
                the Securities Exchange Act of 1934, as amended.
                

            

    

     

    
      	(j)  	
              "
                Fair
                Market Value "
                means,
                as of any date, the value of a share of Stock or other property as
                determined by the Committee, in its discretion, or by the Company,
                in its
                discretion, if such determination is expressly allocated to the Company
                herein, subject to the following: 

            

    

     

            (i)    If,
      on such date, the Stock is listed on a national or regional securities exchange
      or market system, the Fair Market Value of a share of Stock shall be the closing
      price of a share of Stock (or the mean of the closing bid and asked prices
      of a
      share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq Global
      Market, the Nasdaq Capital Market, the Over-the-Counter Bulletin Board or such
      other national or regional securities exchange or market system constituting
      the
      primary market for the Stock, as reported in The
      Wall Street Journal or
      such
      other source as the Company deems reliable. If the relevant date does not fall
      on a day on which the Stock has traded on such securities exchange or market
      system, the date on which the Fair Market Value shall be established shall
      be
      the last day on which the Stock was so traded prior to the relevant date, or
      such other appropriate day as shall be determined by the Committee, in its
      discretion. 

     

            (ii)   If,
      on such date, the Stock is not listed on a national or regional securities
      exchange or market system, the Fair Market Value of a share of Stock shall
      be as
      determined by the Committee in good faith without regard to any restriction
      other than a restriction which, by its terms, will never lapse. 

     

    
      	(j)  	
              "
                Incentive
                Stock Option "
                means
                an Option intended to be (as set forth in the Option Agreement) and
                which
                qualifies as an incentive stock option within the meaning of
                Section 422(b) of the Code. 

            

    

     

    
      	(k)  	
              "
                Insider
                "
                means
                an officer or a Director of the Company or any other person whose
                transactions in Stock are subject to Section 16 of the Exchange Act.
                

            

    

     

    
      	(l)  	
              "
                Nonstatutory
                Stock Option "
                means
                an Option not intended to be (as set forth in the Option Agreement)
                or
                which does not qualify as an Incentive Stock Option.
                

            

    

     

    
      	(m)  	
              "
                Option
                "
                means
                a right to purchase Stock (subject to adjustment as provided in
                Section 4.2) pursuant to the terms and conditions of the Plan. An
                Option may be either an Incentive Stock Option or a Nonstatutory
                Stock
                Option. 

            

    

     

    
      	(n)  	
              "
                Option
                Agreement "
                means
                a written agreement between the Company and an Optionee setting forth
                the
                terms, conditions and restrictions of the Option granted to the Optionee
                and any shares acquired upon the exercise thereof. An Option Agreement
                may
                consist of a form of "Notice of Grant of Stock Option" and a form
                of
                "Stock Option Agreement" incorporated therein by reference, or such
                other
                form or forms as the Committee may approve from time to time.
                

            

    

     

    
      	(o)  	
              "
                Optionee
                "
                means
                a person who has been granted one or more Options.
                

            

    

     

    
      	(p)  	
              "
                Parent
                Corporation "
                means
                any present or future "parent corporation" of the Company, as defined
                in
                Section 424(e) of the Code. 

            

    

     

    
      	(q)  	
              "
                Participating
                Company "
                means
                the Company or any Parent Corporation or Subsidiary Corporation.
                

            

    

     

    
      	(r)  	
              "
                Participating
                Company Group "
                means,
                at any point in time, all corporations collectively which are then
                Participating Companies. 

            

    

     

    
      	(s)  	
              "
                Rule 16b-3
                "
                means
                Rule 16b-3 under the Exchange Act, as amended from time to time, or
                any successor rule or regulation. 

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	(t)  	
              “Sarbanes-Oxley”,
                Sarbanes-Oxley Act, or SOX”
                means
                the Sarbanes-Oxley Act of 2002.

            

    

     

    
      	(u)  	
              "
                Securities
                Act "
                means
                the Securities Act of 1933, as amended.

            

    

     

    
      	(v)  	
              "
                Service
                "
                means
                an Optionee's employment or service with the Participating Company
                Group,
                whether in the capacity of an Employee, a Director or a Consultant.
                An
                Optionee's Service shall not be deemed to have terminated merely
                because
                of a change in the capacity in which the Optionee renders Service
                to the
                Participating Company Group or a change in the Participating Company
                for
                which the Optionee renders such Service, provided that there is no
                interruption or termination of the Optionee's Service. Furthermore,
                an
                Optionee's Service with the Participating Company Group shall not
                be
                deemed to have terminated if the Optionee takes any military leave,
                sick
                leave, or other bona fide leave of absence approved by the Company;
                provided, however, that if any such leave exceeds ninety (90) days,
                on the ninety-first (91st) day of such leave the Optionee's Service
                shall
                be deemed to have terminated unless the Optionee's right to return
                to
                Service with the Participating Company Group is guaranteed by statute
                or
                contract. Notwithstanding the foregoing, unless otherwise designated
                by
                the Company or required by law, a leave of absence shall not be treated
                as
                Service for purposes of determining vesting under the Optionee's
                Option
                Agreement. The Optionee's Service shall be deemed to have terminated
                either upon an actual termination of Service or upon the corporation
                for
                which the Optionee performs Service ceasing to be a Participating
                Company.
                Subject to the foregoing, the Company, in its discretion, shall determine
                whether the Optionee's Service has terminated and the effective date
                of
                such termination. 

            

    

     

    
      	(w)  	
              "
                Stock
                "
                means
                the common stock of the Company, as adjusted from time to time in
                accordance with Section 4.2. 

            

    

     

    
      	(x)  	
              "
                Subsidiary
                Corporation "
                means
                any present or future "subsidiary corporation" of the Company, as
                defined
                in Section 424(f) of the Code.

            

    

     

    
      	(y)  	
              "
                Ten
                Percent Owner Optionee "
                means
                an Optionee who, at the time an Option is granted to the Optionee,
                owns
                stock possessing more than ten percent (10%) of the total combined
                voting
                power of all classes of stock of a Participating Company within the
                meaning of Section 422(b)(6) of the Code.

            

    

     

            2.2
          Construction.
          Captions
      and titles contained herein are for convenience only and shall not affect the
      meaning or interpretation of any provision of the Plan. Except when otherwise
      indicated by the context, the singular shall include the plural and the plural
      shall include the singular. Use of the term "or" is not intended to be
      exclusive, unless the context clearly requires otherwise. 

     

            3.
          Administration.
          
      

     

            3.1
          Administration
      by the Committee.     The
      Plan shall be administered by the Committee. All questions of interpretation
      of
      the Plan or of any Option shall be determined by the Committee, and such
determinations
      shall be final and binding upon all persons having an interest in the Plan
      or
      such Option. 

     

            3.2
          Authority
      of Officers.     Any
      officer of a Participating Company shall have the authority to act on behalf
      of
      the Company with respect to any matter, right, obligation, determination or
      election which is the responsibility of or which is allocated to the Company
      herein, provided the officer has apparent authority with respect to such matter,
      right, obligation, determination or election. 

     

            3.3
          Powers
      of the Committee.     In
      addition to any other powers set forth in the Plan and subject to the provisions
      of the Plan, the Committee shall have the full and final power and authority,
      in
      its discretion: 

     

            (a)   to
      determine the persons to whom, and the time or times at which, Options shall
      be
      granted and the number of shares of Stock to be subject to each Option;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

            (b)   to
      designate Options as Incentive Stock Options or Nonstatutory Stock Options;
      

     

            (c)   to
      determine the Fair Market Value of shares of Stock or other property;

     

            (d)   to
      determine the terms, conditions and restrictions applicable to each Option
      (which need not be identical) and any shares acquired upon the exercise thereof,
      including, without limitation, (i) the exercise price of the Option,
      (ii) the method of payment for shares purchased upon the exercise of the
      Option, (iii) the method for satisfaction of any tax withholding obligation
      arising in connection with the Option or such shares, including by the
      withholding or delivery of shares of stock, (iv) the timing, terms and
      conditions of the exercisability of the Option or the vesting of any shares
      acquired upon the exercise thereof, (v) the time of the expiration of the
      Option, (vi) the effect of the Optionee's termination of Service with the
      Participating Company Group on any of the foregoing, and (vii) all other
      terms, conditions and restrictions applicable to the Option or such shares
      not
      inconsistent with the terms of the Plan; 

     

            (e)   to
      approve one or more forms of Option Agreement; 

     

            (f)    to
      amend, modify, extend, cancel or renew any Option or to waive any restrictions
      or conditions applicable to any Option or any shares acquired upon the exercise
      thereof; 

     

            (g)   to
      accelerate, continue, extend or defer the exercisability of any Option or the
      vesting of any shares acquired upon the exercise thereof, including with respect
      to the period following an Optionee's termination of Service with the
      Participating Company Group; 

     

            (h)   to
      prescribe, amend or rescind rules, guidelines and policies relating to the
      Plan,
      or to adopt supplements to, or alternative versions of, the Plan, including,
      without limitation, as the Committee deems necessary or desirable to comply
      with
      the laws of, or to accommodate the tax policy or custom of, foreign
      jurisdictions whose citizens may be granted Options; and 

     

            (i)    to
      correct any defect, supply any omission or reconcile any inconsistency in the
      Plan or any Option Agreement and to make all other determinations and take
      such
      other actions with respect to the Plan or any Option as the Committee may deem
      advisable to the extent not inconsistent with the provisions of the Plan or
      applicable law. 

     

            3.4
          Administration
      with Respect to Insiders.     With
      respect to participation by Insiders in the Plan, at any time that any class
      of
      equity security of the Company is registered pursuant to Section 12 of the
      Exchange Act, the Plan shall be administered in compliance with the
      requirements, if any, of Rule 16b-3 and the Sarbanes-Oxley
      Act.

     

            3.5
          Indemnification.
          In
      addition to such other rights of indemnification as they may have as members
      of
      the Board or officers or employees of the Participating Company Group, members
      of the Board and any officers or employees of the Participating Company Group
      to
      whom authority to act for the Board or the Company is delegated shall be
      indemnified by the Company against all reasonable expenses, including attorneys'
      fees, actually and necessarily incurred in connection with the defense of any
      action, suit or proceeding, or in connection with any appeal therein, to which
      they or any of them may be a party by reason of any action taken or failure
      to
      act under or in connection with the Plan, or any right granted hereunder, and
      against all amounts paid by them in settlement thereof (provided such settlement
      is approved by independent legal counsel selected by the Company) or paid by
      them in satisfaction of a judgment in any such action, suit or proceeding,
      except in relation to matters as to which it shall be adjudged in such action,
      suit or proceeding that such person is liable for gross negligence, bad faith
      or
      intentional misconduct in duties; provided, however, that within sixty
      (60) days after the institution of such action, suit or proceeding, such
      person shall offer to the Company, in writing, the opportunity at its own
      expense to handle and defend the same. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

            4.
          Shares
      Subject to Plan.     
      

     

            4.1
          Maximum
      Number of Shares Issuable.     Subject
      to adjustment as provided in Section 4.2, the maximum aggregate number of
      shares of Stock that may be issued under the Plan shall be 25,000,000 and shall
      consist of authorized but unissued or reacquired shares of Stock or any
      combination thereof. If an outstanding Option for any reason expires or is
      terminated or canceled or if shares of Stock are acquired upon the exercise
      of
      an Option subject to a Company repurchase option and are repurchased by the
      Company at the Optionee's exercise price, the shares of Stock allocable to
      the
      unexercised portion of such Option or such repurchased shares of Stock shall
      again be available for issuance under the Plan. Notwithstanding the foregoing,
      at any such time as the offer and sale of securities pursuant to the Plan is
      subject to compliance with Section 260.140.45 of Title 10 of the California
      Code of Regulations ( "
      Section 260.140.45
      "
      ),
      the
      total number of shares of Stock issuable upon the exercise of all outstanding
      Options (together with options outstanding under any other stock option plan
      of
      the Company) and the total number of shares provided for under any stock bonus
      or similar plan of the Company shall not exceed thirty percent (30%) (or such
      other higher percentage limitation as may be approved by the stockholders of
      the
      Company pursuant to Section 260.140.45) of the then outstanding shares of
      the Company as calculated in accordance with the conditions and exclusions
      of
      Section 260.140.45. 

     

            4.2
          Adjustments
      for Changes in Capital Structure.     In
      the event of any stock dividend, stock split, reverse stock split,
      recapitalization, combination, reclassification or similar change in the capital
      structure of the Company, appropriate adjustments shall be made in the number
      and class of shares subject to the Plan and to any outstanding Options and
      in
      the exercise price per share of any outstanding Options. If a majority of the
      shares which are of the same class as the shares that are subject to outstanding
      Options are exchanged for, converted into, or otherwise become (whether or
      not
      pursuant to an Ownership Change Event, as defined in Section 8.1) shares of
      another corporation (the "
      New
      Shares "),
      the
      Committee may unilaterally amend the outstanding Options to provide that such
      Options are exercisable for New Shares. In the event of any such amendment,
      the
      number of shares subject to, and the exercise price per share of, the
      outstanding Options shall be adjusted in a fair and equitable manner as
      determined by the Committee, in its discretion. Notwithstanding the foregoing,
      any fractional share resulting from an adjustment pursuant to this
      Section 4.2 shall be rounded down to the nearest whole number, and in no
      event may the exercise price of any Option be decreased to an amount less than
      the par value, if any, of the stock subject to the Option. The adjustments
      determined by the Committee pursuant to this Section 4.2 shall be final,
      binding and conclusive. 

     

            5.
          Eligibility
      and Option Limitations.     
      

     

            5.1
          Persons
      Eligible for Options.     Options
      may be granted only to Employees, Consultants, and Directors. For purposes
      of
      the foregoing sentence, "Employees," "Consultants" and "Directors" shall include
      prospective Employees, prospective Consultants and prospective Directors to
      whom
      Options are granted in connection with written offers of an employment or other
      service relationship with the Participating Company Group. Eligible persons
      may
      be granted more than one (1) Option. 

     

            5.2
          Option
      Grant Restrictions.     Any
      person who is not an Employee on the effective date of the grant of an Option
      to
      such person may be granted only a Nonstatutory Stock Option. An Incentive Stock
      Option granted to a prospective Employee upon the condition that such person
      become an Employee shall be deemed granted effective on the date such person
      commences Service with a Participating Company, with an exercise price
      determined as of such date in accordance with Section 6.1. 

     

            5.3
          Fair
      Market Value Limitation.     To
      the extent that options designated as Incentive Stock Options (granted under
      all
      stock option plans of the Participating Company Group, including the Plan)
      become exercisable by an Optionee for the first time during any calendar year
      for stock having a Fair Market Value greater than One Hundred Thousand Dollars
      ($100,000), the portions of such options which exceed such amount shall be
      treated as Nonstatutory Stock Options. For purposes of this Section 5.3,
      options designated as Incentive Stock Options shall be taken into account in
      the
      order in which they were granted, and the Fair Market Value of stock shall
      be
      determined as of the time the option with respect to such stock is granted.
      If
      the Code is amended to provide for a different limitation from that set forth
      in
      this Section 5.3, such different limitation shall be deemed incorporated
      herein effective as of the date and with respect to such Options as required
      or
      permitted by such amendment to the Code. If an Option is treated as an Incentive
      Stock Option in part and as a Nonstatutory Stock Option in part by reason of
      the
      limitation set forth in this Section 5.3, the Optionee may designate which
      portion of such Option the Optionee is exercising. In the absence of such
      designation, the Optionee shall be deemed to have exercised the Incentive Stock
      Option portion of the Option first. Separate certificates representing each
      such
      portion shall be issued upon the exercise of the Option. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

            6.
          Terms
      and Conditions of Options.     Options
      shall be evidenced by Option Agreements specifying the number of shares of
      Stock
      covered thereby, in such form as the Committee shall from time to time
      establish. No Option or purported Option shall be a valid and binding obligation
      of the Company unless evidenced by a fully executed Option Agreement. Option
      Agreements may incorporate all or any of the terms of the Plan by reference
      and
      shall comply with and be subject to the following terms and conditions:

     

            6.1
          Exercise
      Price.     The
      exercise price for each Option shall be established in the discretion of the
      Committee; provided, however, that (a) the exercise price per share for an
      Incentive Stock Option shall be not less than the Fair Market Value of a share
      of Stock on the effective date of grant of the Option, (b) the exercise
      price per share for a Nonstatutory Stock Option shall be not less than
      eighty-five percent (85%) of the Fair Market Value of a share of Stock on the
      effective date of grant of the Option, and (c) no Option granted to a Ten
      Percent Owner Optionee shall have an exercise price per share less than one
      hundred ten percent (110%) of the Fair Market Value of a share of Stock on
      the
      effective date of grant of the Option. Notwithstanding the foregoing, an Option
      (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
      granted with an exercise price lower than the minimum exercise price set forth
      above if such Option is granted pursuant to an assumption or substitution for
      another option in a manner qualifying under the provisions of
      Section 424(a) of the Code. 

     

            6.2
          Exercisability
      and Term of Options.     Options
      shall be exercisable at such time or times, or upon such event or events, and
      subject to such terms, conditions, performance criteria and restrictions as
      shall be determined by the Committee and set forth in the Option Agreement
      evidencing such Option; provided, however, that (a) no Option shall be
      exercisable after the expiration of ten (10) years after the effective date
      of grant of such Option, (b) no Incentive Stock Option granted to a Ten
      Percent Owner Optionee shall be exercisable after the expiration of five
      (5) years after the effective date of grant of such Option, (c) no
      Option granted to a prospective Employee, prospective Consultant or prospective
      Director may become exercisable prior to the date on which such person commences
      Service with a Participating Company, and (d) with the exception of an
      Option granted to an officer, Director or Consultant, no Option shall become
      exercisable at a rate less than twenty percent (20%) per year over a period
      of
      five (5) years from the effective date of grant of such Option, subject to
      the Optionee's continued Service. Subject to the foregoing, unless otherwise
      specified by the Committee in the grant of an Option, any Option granted
      hereunder shall terminate ten (10) years after the effective date of grant
      of the Option, unless earlier terminated in accordance with its provisions.
      

     

            6.3
          Payment
      of Exercise Price.     
      

     

            (a)
          Forms
      of Consideration Authorized.     Except
      as otherwise provided below, payment of the exercise price for the number of
      shares of Stock being purchased pursuant to any Option shall be made (i) in
      cash, by check or cash equivalent, (ii) by tender to the Company, or
      attestation to the ownership, of shares of Stock owned by the Optionee having
      a
      Fair Market Value (as determined by the Company without regard to any
      restrictions on transferability applicable to such stock by reason of federal
      or
      state securities laws or agreements with an underwriter for the Company) not
      less than the exercise price, (iii) by delivery of a properly executed
      notice together with irrevocable instructions to a broker providing for the
      assignment to the Company of the proceeds of a sale or loan with respect to
      some
      or all of the shares being acquired upon the exercise of the Option (including,
      without limitation, through an exercise complying with the provisions of
      Regulation T as promulgated from time to time by the Board of Governors of
      the Federal Reserve System) (a "
      Cashless
      Exercise "
      ),
      (iv) provided that the Optionee is an Employee (unless otherwise not
      prohibited by law, including, without limitation, any regulation promulgated
      by
      the Board of Governors of the Federal Reserve System) and in the Company's
      sole
      discretion at the time the Option is exercised, by delivery of the Optionee's
      promissory note in a form approved by the Company for the aggregate exercise
      price, provided that, if the Company is incorporated in the State of Delaware,
      the Optionee shall pay in cash that portion of the aggregate exercise price
      not
      less than the par value of the shares being acquired, (v) by such other
      consideration as may be approved by the Committee from time to time to the
      extent permitted by applicable law, or (vi) by any combination thereof. The
      Committee may at any time or from time to time, by approval of or by amendment
      to the standard forms of Option Agreement described in Section 7, or by
      other means, grant Options which do not permit all of the foregoing forms of
      consideration to be used in payment of the exercise price or which otherwise
      restrict one or more forms of consideration. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

            (b)
          Limitations
      on Forms of Consideration.     
      

     

            (i)
          Tender
      of Stock.     Notwithstanding
      the foregoing, an Option may not be exercised by tender to the Company, or
      attestation to the ownership, of shares of Stock to the extent such tender
      or
      attestation would constitute a violation of the provisions of any law,
      regulation or agreement restricting the redemption of the Company's stock.
      Unless otherwise provided by the Committee, an Option may not be exercised
      by
      tender to the Company, or attestation to the ownership, of shares of Stock
      unless such shares either have been owned by the Optionee for more than six
      (6) months or were not acquired, directly or indirectly, from the Company.

     

            (ii)
          Cashless
      Exercise.     The
      Company reserves, at any and all times, the right, in the Company's sole and
      absolute discretion, to establish, decline to approve or terminate any program
      or procedures for the exercise of Options by means of a Cashless Exercise.
      At no
      time shall a cashless exercise be allowed if by so doing it would violate any
      section of the Sarbanes-Oxley Act.

     

            (iii)
          Payment
      by Promissory Note.     No
      promissory note shall be permitted if the exercise of an Option using a
      promissory note would be a violation of any law including the applicable
      sections of the Sarbanes-Oxley Act. Any permitted promissory note shall be
      on
      such terms as the Committee shall determine at the time the Option is granted.
      The Committee shall have the authority to permit or require the Optionee to
      secure any promissory note used to exercise an Option with the shares of Stock
      acquired upon the exercise of the Option or with other collateral acceptable
      to
      the Company. Unless otherwise provided by the Committee, if the Company at
      any
      time is subject to the regulations promulgated by the Board of Governors of
      the
      Federal Reserve System or any other governmental entity affecting the extension
      of credit in connection with the Company's securities, any promissory note
      shall
      comply with such applicable regulations, and the Optionee shall pay the unpaid
      principal and accrued interest, if any, to the extent necessary to comply with
      such applicable regulations. 

     

            6.4
          Tax
      Withholding.     The
      Company shall have the right, but not the obligation, to deduct from the shares
      of Stock issuable upon the exercise of an Option, or to accept from the Optionee
      the tender of, a number of whole shares of Stock having a Fair Market Value,
      as
      determined by the Company, equal to all or any part of the federal, state,
      local
      and foreign taxes, if any, required by law to be withheld by the Participating
      Company Group with respect to such Option or the shares acquired upon the
      exercise thereof. Alternatively or in addition, in its discretion, the Company
      shall have the right to require the Optionee, through payroll withholding,
      cash
      payment or otherwise, including by means of a Cashless Exercise, to make
      adequate provision for any such tax withholding obligations of the Participating
      Company Group arising in connection with the Option or the shares acquired
      upon
      the exercise thereof. The Fair Market Value of any shares of Stock withheld
      or
      tendered to satisfy any such tax withholding obligations shall not exceed the
      amount determined by the applicable minimum statutory withholding rates. The
      Company shall have no obligation to deliver shares of Stock or to release shares
      of Stock from an escrow established pursuant to the Option Agreement until
      the
      Participating Company Group's tax withholding obligations have been satisfied
      by
      the Optionee. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

            6.5
          Repurchase
      Rights.     Shares
      issued under the Plan may be subject to a right of first refusal, one or more
      repurchase options, or other conditions and restrictions as determined by the
      Committee in its discretion at the time the Option is granted. The Company
      shall
      have the right to assign at any time any repurchase right it may have, whether
      or not such right is then exercisable, to one or more persons as may be selected
      by the Company. Upon request by the Company, each Optionee shall execute any
      agreement evidencing such transfer restrictions prior to the receipt of shares
      of Stock hereunder and shall promptly present to the Company any and all
      certificates representing shares of Stock acquired hereunder for the placement
      on such certificates of appropriate legends evidencing any such transfer
      restrictions. 

     

            6.6
          Effect
      of Termination of Service.     
      

     

            (a)
          Option
      Exercisability.     Subject
      to earlier termination of the Option as otherwise provided herein and unless
      otherwise provided by the Committee in the grant of an Option and set forth
      in
      the Option Agreement, an Option shall be exercisable after an Optionee's
      termination of Service only during the applicable time period determined in
      accordance with this Section 6.6 and thereafter shall terminate:

     

            (i)
          Disability.
          If
      the Optionee's Service with the Participating Company Group terminates because
      of the Disability of the Optionee, the Option, to the extent unexercised and
      exercisable on the date on which the Optionee's Service terminated, may
be
      exercised by the Optionee (or the Optionee's guardian or legal representative)
      at any time prior to the expiration of twelve (12) months (or such longer
      period of time as determined by the Committee, in its discretion) after the
      date
      on which the Optionee's Service terminated, but in any event no later than
      the
      date of expiration of the Option's term as set forth in the Option Agreement
      evidencing such Option (the "
      Option
      Expiration Date "
      ).
      

     

            (ii)
          Death.
          If
      the Optionee's Service with the Participating Company Group terminates because
      of the death of the Optionee, the Option, to the extent unexercised and
      exercisable on the date on which the Optionee's Service terminated, may be
      exercised by the Optionee's legal representative or other person who acquired
      the right to exercise the Option by reason of the Optionee's death at any time
      prior to the expiration of twelve (12) months (or such longer period of
      time as determined by the Committee, in its discretion) after the date on which
      the Optionee's Service terminated, but in any event no later than the Option
      Expiration Date. The Optionee's Service shall be deemed to have terminated
      on
      account of death if the Optionee dies within three (3) months (or such
      longer period of time as determined by the Committee, in its discretion) after
      the Optionee's termination of Service. 

     

            (iii)
          Termination
      After Change in Control.     
      See section 8.2 for the treatment of options upon a Change in Control
      event.

     

    (iv)
          Other
      Termination of Service.     If
      the Optionee's Service with the Participating Company Group terminates for
      any
      reason, except Disability or death or as described in section 8.2, the Option,
      to the extent unexercised and exercisable by the Optionee on the date on which
      the Optionee's Service terminated, may be exercised by the Optionee at any
      time
      prior to the expiration of three (3) months (or such longer period of time
      as determined by the Committee, in its discretion) after the date on which
      the
      Optionee's Service terminated, but in any event no later than the Option
      Expiration Date.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

            (b)
          Extension
      if Exercise Prevented by Law.     Notwithstanding
      the foregoing or as described in section 8.2, if the exercise of an Option
      within the applicable time periods set forth in Section 6.6(a) is prevented
      by the provisions of Section 10 below, the Option shall remain exercisable
      until three (3) months (or such longer period of time as determined by the
      Committee, in its discretion) after the date the Optionee is notified by the
      Company that the Option is exercisable, but in any event no later than the
      Option Expiration Date. 

     

            (c)
          Extension
      if Optionee Subject to Section 16(b).     Notwithstanding
      the foregoing, if a sale within the applicable time periods set forth in
      Sections 6.6(a) or 8.2 of shares acquired upon the exercise of the Option
      would subject the Optionee to suit under Section 16(b) of the Exchange Act,
      the Option shall remain exercisable until the earliest to occur of (i) the
      tenth (10th) day following the date on which a sale of such shares by the
      Optionee would no longer be subject to such suit, (ii) the one hundred and
      ninetieth (190th) day after the Optionee's termination of Service, or
      (iii) the Option Expiration Date. 

     

            6.7
          Transferability
      of Options.     During
      the lifetime of the Optionee, an Option shall be exercisable only by the
      Optionee or the Optionee's guardian or legal representative. No Option shall
      be
      assignable or transferable by the Optionee, except by will or by the laws of
      descent and distribution. Notwithstanding the foregoing, to the extent permitted
      by the Committee, in its discretion, and set forth in the Option Agreement
      evidencing such Option, a Nonstatutory Stock Option shall be assignable or
      transferable subject to the applicable limitations, if any, described in
      Section 260.140.41 of Title 10 of the California Code of Regulations,
      Rule 701 under the Securities Act, and the General Instructions to
      Form S-8 Registration Statement under the Securities Act. 

     

            6.8
          No
      Right to Future Employment.     The
      granting of a Stock Option in any year shall not give the Optionee any right
      to
      similar grants in future years or any right to be retained in the employ or
      service of the Company, and all Employees and Consultants shall remain subject
      to discharge to the same extent as if the Plan were not in effect.

     

            6.9
          No
      Stockholder Rights.     The
      granting of a Stock Option in any year shall not give the Optionee any rights
      as
      a stockholder until the exercise of such Option.

     

            7.
          Standard
      Forms of Option Agreement.     
      

     

            7.1
          Option
      Agreement.     Unless
      otherwise provided by the Committee at the time the Option is granted, an Option
      shall comply with and be subject to the terms and conditions set forth in the
      form of Option Agreement approved by the Committee concurrently with its
      adoption of the Plan and as amended from time to time. 

     

            7.2
          Authority
      to Vary Terms.     The
      Committee shall have the authority from time to time to vary the terms of any
      standard form of Option Agreement described in this Section 7 either in
      connection with the grant or amendment of an individual Option or in connection
      with the authorization of a new standard form or forms; provided, however,
      that
      the terms and conditions of any such new, revised or amended standard form
      or
      forms of Option Agreement are not inconsistent with the terms of the Plan.
      

     

            8.
          Change
      in Control.     
      

     

            8.1
          Definitions.     
      

     

            (a)   An
      "
      Ownership
      Change Event "
      shall
      be
      deemed to have occurred if any of the following occurs with respect to the
      Company: (i) the direct or indirect sale or exchange in a single or series
      of related transactions by the stockholders of the Company of more than thirty
      percent (30%) of the voting stock of the Company; (ii) a merger or
      consolidation in which the Company is a party (except a merger or consolidation
      in which the Company is the surviving entity and the stockholders of the Company
      prior to such transaction hold seventy percent (70%) or more of the surviving
      entity’s outstanding equity securities); (iii) the sale, exchange, or
      transfer of all or substantially all of the assets of the Company; (iv) a
      liquidation or dissolution of the Company; (v) the sale of all or substantially
      all of the assets of the Company or (vi) the termination of employment of Benton
      H Wilcoxon as an officer of the Company.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

            (b)   A
      "
      Change
      in Control "
      shall
      mean an Ownership Change Event or a series of related Ownership Change Events
      (collectively, a "
      Transaction
      "
      )
      wherein
      the stockholders of the Company immediately before the Transaction do not retain
      immediately after the Transaction, in substantially the same proportions as
      their ownership of shares of the Company's voting stock immediately before
      the
      Transaction, direct or indirect beneficial ownership of more than thirty percent
      (30%) of the total combined voting power of the outstanding voting stock of
      the
      Company or the corporation or corporations to which the assets of the Company
      were transferred (the "
      Transferee
      Corporation(s) "
      ),
      as the
      case may be. For purposes of the preceding sentence, indirect beneficial
      ownership shall include, without limitation, an interest resulting from
      ownership of the voting stock of one or more corporations which, as a result
      of
      the Transaction, own the Company or the Transferee Corporation(s), as the case
      may be, either directly or through one or more subsidiary corporations. The
      Committee shall have the right to determine whether multiple sales or exchanges
      of the voting stock of the Company or multiple Ownership Change Events are
      related, and its determination shall be final, binding and conclusive.

     

    
      	8.2  	
              Effect
                of Change in Control on Options.     

            

    

     

    (a)
      In
      the event of a Change in Control, the surviving, continuing, successor, or
      purchasing corporation or other business entity or parent thereof, as the case
      may be (the "
      Acquiring
      Corporation "
      ),
      may,
      without the consent of any Optionee, either 

     

    
      	i)  	
              assume
                the Company's rights and obligations under outstanding Options;
                

            

    

     

    
      	ii)  	
              substitute
                for outstanding Options substantially equivalent options for the
                Acquiring
                Corporation's stock or 

            

    

     

    
      	iii)  	
              pay
                consideration, in cash or a form and manner consistent with the
                consideration given in exchange for common shares of the Company
                and equal
                to the fair value of the outstanding Options (defined as the consideration
                given or closing market price of a share of common stock valued as
                of the
                date of the Change in Control, reduced by the exercise price of the
                option).

            

    

     

    (b)
      In
      the event the Acquiring Corporation elects not to assume or substitute for
      outstanding Options or pay the Optionee the fair value of the outstanding
      Options, as defined in section 8.2(a) in connection with a Change in Control,
      the exercisability and vesting of each such outstanding Option and any shares
      acquired upon the exercise thereof held by Optionees whose Service has not
      terminated prior to such date shall be accelerated, effective as of the date
      ten
      (10) days prior to the date of the Change in Control, to such extent, if
      any, as shall have been determined by the Committee, in its discretion, and
      set
      forth in the Option Agreement evidencing such Option. In such an event, the
      Optionee shall have twelve (12) months from the date of the Change in Control
      to
      exercise the Option and upon such exercise shall have the rights to any
      financial consideration given or provided to an equivalent share of Stock as
      of
      the date of the Change in Control.

     

    (c)
      The
      exercise or vesting of any Option and any shares acquired upon the exercise
      thereof that was permissible solely by reason of this Section 8.2 and the
      provisions of such Option Agreement shall be conditioned upon the consummation
      of the Change in Control. Notwithstanding the foregoing, shares acquired upon
      exercise of an Option prior to the Change in Control and any consideration
      received pursuant to the Change in Control with respect to such shares shall
      continue to be subject to all applicable provisions of the Option Agreement
      evidencing such Option except as otherwise provided in such Option Agreement.
      

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (d)
      The
      Committee may, in its discretion, provide in any Option Agreement that if the
      Optionee's Service terminates either voluntarily with Good Reason or
      involuntarily without Cause (and not due to death or Disability) within twelve
      (12) months following the Change in Control or is substantially modified in
      the
      scope of Service as a result of a “Change in Control" (as defined in such Option
      Agreement), then (1) the Option, to the extent unexercised and exercisable
      on the date on which the Optionee's Service terminated or changed, may be
      exercised by the Optionee (or the Optionee's guardian or legal representative)
      at any time prior to the expiration of twelve (12) months (or such longer
      period of time as determined by the Committee, in its discretion) after the
      date
      on which the Optionee's Service terminated or changed, but in any event no
      later
      than the Option Expiration Date, and (2) the exercisability and vesting of
      the Option and any shares acquired upon the exercise thereof shall be
      accelerated effective as of the date on which the Optionee's Service terminated
      or was substantially modified to such extent, if any, as shall have been
      determined by the Committee, in its discretion, and set forth in the Option
      Agreement. “Good Reason” and “Cause” shall be defined in the Option
      Agreement.         

     

            9.
          Provision
      of Information.     At
      least annually, copies of the Company's balance sheet and income statement
      for
      the just completed fiscal year shall be made available to each Optionee and
      purchaser of shares of Stock upon the exercise of an Option. The Company shall
      not be required to provide such information to key employees whose duties in
      connection with the Company assure them access to equivalent information.

     

            10.
          Compliance
      with Applicable Law.     The
      grant of Options and the issuance of shares of Stock upon exercise of Options
      shall be subject to compliance with all applicable requirements of federal,
      state and foreign law with respect to such securities, including Section 409A
      of
      the Code to the extent applicable. Options may not be exercised if the issuance
      of shares of Stock upon exercise would constitute a violation of any applicable
      federal, state or foreign securities laws or other law or regulations or the
      requirements of any stock exchange or market system upon which the Stock may
      then be listed. In addition, no Option may be exercised unless (a) a
      registration statement under the Securities Act shall at the time of exercise
      of
      the Option be in effect with respect to the shares issuable upon exercise of
      the
      Option or (b) in the opinion of legal counsel to the Company, the shares
      issuable upon exercise of the Option may be issued in accordance with the terms
      of an applicable exemption from the registration requirements of the Securities
      Act. The inability of the Company to obtain from any regulatory body having
      jurisdiction the authority, if any, deemed by the Company's legal counsel to
      be
      necessary to the lawful issuance and sale of any shares hereunder shall relieve
      the Company of any liability in respect of the failure to issue or sell such
      shares as to which such requisite authority shall not have been obtained. As
      a
      condition to the exercise of any Option, the Company may require the Optionee
      to
      satisfy any qualifications that may be necessary or appropriate, to evidence
      compliance with any applicable law or regulation and to make any representation
      or warranty with respect thereto as may be requested by the Company.

     

            11.
          Termination
      or Amendment of Plan.     The
      Committee may terminate or amend the Plan at any time. However, subject to
      changes in applicable law, regulations or rules that would permit otherwise,
      without the approval of the Company's stockholders, there shall be (a) no
      increase in the maximum aggregate number of shares of Stock that may be issued
      under the Plan (except by operation of the provisions of Section 4.2),
      (b) no change in the class of persons eligible to receive Incentive Stock
      Options, and (c) no other amendment of the Plan that would require approval
      of the Company's stockholders under any applicable law, regulation or rule.
      No
      termination or amendment of the Plan shall affect any then outstanding Option
      unless expressly provided by the Committee. In any event, no termination or
      amendment of the Plan may adversely affect any then outstanding Option without
      the consent of the Optionee, unless such termination or amendment is required
      to
      enable an Option designated as an Incentive Stock Option to qualify as an
      Incentive Stock Option or is necessary to comply with any applicable law,
      regulation or rule. 

     

            12.
          Stockholder
      Approval.     The
      Plan or any increase in the maximum aggregate number of shares of Stock issuable
      thereunder as provided in Section 4.1 (the "Authorized
      Shares"
      )
      shall
      be approved by the stockholders of the Company within twelve (12) months of
      the date of adoption thereof by the Board. Options granted prior to stockholder
      approval of the Plan or in excess of the Authorized Shares previously approved
      by the stockholders shall become exercisable no earlier than the date of
      stockholder approval of the Plan or such increase in the Authorized Shares,
      as
      the case may be. 

     

    
      
        
        

      

      
        11Unassociated Document

    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.

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
              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.

            

    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    
      	
              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.

            

    

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    
      	
              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

               

            

    

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    
      	 
      	
              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.

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    
      	
               

               

               
      

            	
               

              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

               

            

    

    

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    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.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    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. 

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

      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.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    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

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    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:

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    
      	

              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

            

    

    

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    
 

    
      	 
      	
               

              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

               

            

    

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
               

              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

               

               

            

    

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    

    
      	 
      	
              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.

               

            

    

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    

    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.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    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”).

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

     

    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. 

     

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

    

     

    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:

     

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

     

    
      	
              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.

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

     

    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:

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

     

    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”).

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

     

    
      	
              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.

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

    

     

    
      	
              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.

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

    

     

    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

               

            

    

     

    
      
        
        

      

      
        60

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
               

              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.

            

    

     

    
      
        
        

      

      
        61

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
               

              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

               

               

            

    

    

    

    

    62

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