Document:

Unassociated Document

    SETTLEMENT
      AGREEMENT 

     

    

    This
      Settlement Agreement (the “Settlement Agreement”) is made and entered into as of
      the 21st day of August 2008, by and between Capstone Business Credit, LLC
      (“CBC”), Capstone Capital Group I, LLC (“CCG”, and with CBC, “Capstone”) and
      Harbrew Imports, Ltd. (the “Borrower”).

    RECITALS

    WHEREAS,
      CBC and Borrower entered into a Discount Factoring Agreement dated January
      22,
      2007 (the “Factoring Agreement”), pursuant to which CBC provided certain
      financing to Borrower;

    WHEREAS,
      as of the date of this Settlement Agreement, Borrower owes CBC $101,498.42
      under
      the Factoring Agreement, against which such amount $57,555.72 held in the
      Reserve Account (as defined in the Factoring Agreement) shall be
      applied;

    WHEREAS,
      CCG and Borrower entered into a certain Purchase Order Financing Agreement
      dated
      as of January 22, 2007 (the “PO Financing Agreement”, and with the Factoring
      Agreement, the “Financing Agreements”), pursuant to which CCG provided certain
      financing to Borrower;

    WHEREAS,
      as of the date of this Settlement Agreement, Borrower owes CCG $2,875,406.04
      under the PO Financing Agreement (collectively with the amount owed under the
      Factoring Agreement, the “Capstone Claim”);

    WHEREAS,
      pursuant to his Guarantees dated January 22, 2007, Richard DeCicco (“Guarantor”)
      has agreed to guaranty all obligations of Borrower under the Financing
      Agreements (the “Guarantees”);

    WHEREAS,
      Capstone and Borrower desire to adjust and settle the Capstone Claim and to
      avoid the expense, inconvenience and uncertainty of litigation; and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    WHEREAS,
      the parties, after careful consideration of all facts and circumstances and
      consultation with their respective attorneys, desire to settle the Capstone
      Claim on the terms and conditions set forth in this Settlement
      Agreement.

    NOW,
      THEREFORE, in consideration of the mutual promises, agreements, warranties,
      representations and covenants contained herein, Capstone and Borrower hereby
      agree as follows:

    1.    The
      Settlement. For
      and
      in consideration of the full settlement of any and all claims that are, could
      have been, or might in the future be asserted by Capstone against Borrower
      arising out of, or in connection with, the Capstone Claim, the parties agree
      as
      follows: 

    (a)    In
      payment under the Financing Agreements, and in settlement of the Capstone Claim,
      Borrower shall deliver to Capstone $1,500,000 in readily available funds (the
      “Settlement Payment”), which shall be paid by Borrower to Capstone as
      follows:

     

    (i)    a
      good
      faith nonrefundable deposit of $150,000 shall be paid upon the execution and
      delivery of this Settlement Agreement (the “Deposit”). 

     

    (ii)    $1,350,000
      (the “Payment Balance”) shall be paid on or before the October 21, 2008, TIME
      BEING OF THE ESSENCE (the “Settlement Payment Due Date”). Upon the execution and
      delivery of this Settlement Agreement, Borrower shall execute and deliver its
      Promissory Note with respect to the Payment Balance, to Capstone. The Promissory
      Note shall be secured by the Collateral (as defined in the PO Financing
      Agreement and the Factoring Agreement).

     

    
      
         

      

      
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    (b)    The
      Borrower hereby assigns to Capstone under and pursuant to the Discount Factoring
      Agreement all of Borrower’s rights, title and interest in and to the accounts
      receivables identified on Schedule
      1
      attached
      hereto and made a part hereof (the “Assigned Receivables”). Borrower represents
      and warrants to Capstone that Borrower has, and is transferring to Capstone,
      good and indefeasible title to all of the Assigned Receivables, free and clear
      of all liens, claims and encumbrances of any kind or type, whatsoever.

    (c)    The
      Financing Agreements shall remain in place, in accordance with their respective
      terms, and Borrower and Capstone shall continue to comply therewith until full
      and indefeasible payment of the Settlement Payment has been made to Capstone,
      at
      which time (x) the Financing Agreements shall be terminated and (y) all of
      Capstone’s right, title and interest in and to the Interim Receivables (defined
      below) that have not been collected by CBC shall be assigned by CBC to the
      Borrower.

    (d)    Upon
      the
      later to occur of (i) the full and indefeasible payment of the Settlement
      Payment to Capstone (the “Settlement Payment Date”), and (ii) the payment by
      Borrower of all amounts due and payable by it during the Interim Factoring
      Period (defined below) under the Factoring Agreement, if any 

     

    (i)    Capstone
      shall execute and deliver the release letter (the “Release Letter”) to Guarantor
      in substantially the form attached hereto as Exhibit
      A;
      

     

    
      
         

      

      
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    (ii)    Capstone
      shall file UCC-3 termination statements terminating their liens on Borrower’s
      assets granted pursuant to the Financing Agreements; and 

     

    (iii)    Capstone
      and Borrower shall execute and deliver the Release Agreement (the “Release
      Agreement”) in substantially the form attached hereto as Exhibit
      B.
      

     

    (e)    From
      the
      date of this Agreement until the Settlement Payment Date (the “Interim Factoring
      Period”) Borrower shall submit all of its Accounts Receivable (as defined in the
      Factoring Agreement) to CBC for collection only, and not for factoring under
      the
      Factoring Agreement (the “Interim Receivables”). The aggregate amount of funds
      collected by CBC with respect to the Interim Receivables (the “Interim
      Receivables Collection Amount”) shall be credited against the Payment Balance.
      For the purposes of this Agreement, the Assigned Receivables shall not be deemed
      to be, and shall not be included in the Interim Receivables.

    (f)    Notwithstanding
      anything contained in this Agreement to the contrary, including without
      limitation Section 1(e), in the event that the Settlement Payment is not paid
      in
      full by 5:00 pm on the Settlement Payment Due Date, TIME BEING OF THE ESSENCE,
      the Interim Receivables Collection Amount shall not be credited against the
      Payment Balance.

    (g)    During
      the Interim Factoring Period all governmental fees, charges and taxes relating
      to, or arising out of, the sale of goods giving rise to the Interim Receivables
      (the “Receivables Expenses”) shall be timely paid by Borrower. In the event that
      any Receivables Expense becomes past due, Borrower shall have ten (10) days
      from
      the date that any such Receivable Expense became due and payable to pay such
      Receivables Expense in full (the “Expense Cure Period”). In the event that
      Borrower fail to pay any such Receivables Expense within the Expense Cure
      Period, CBC shall have the right, but not the obligation, to pay all amounts
      necessary to satisfy such Receivables Expense (the “Cure Amount”), in which case
      an amount equal to the product of (i) two (2) and (ii) the Cure Amount shall
      be
      deducted from the Interim Receivables Collection Amount. 

     

    
      
         

      

      
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    (h)    Notwithstanding
      anything to the contrary contained in this Settlement Agreement, in the event
      that at any time Capstone is required to return all or any portion of the
      Settlement Payment to Borrower or its successors or assigns, the Release Letter
      and the Release Agreement shall be null and void, ab initio.

    2.    Binding
      Agreement. This
      Settlement Agreement shall be binding upon and inure the benefits of the parties
      hereto and their respective heir, executors, administrators, predecessors,
      successors and assigns and upon any corporation or other entity into or with
      which any party hereto may merge or consolidate.

    3.    Counterparts.
      The
      Settlement Agreement may be executed in one or more counterparts, which may
      be
      executed by facsimile or electronically, each of which shall be deemed to be
      an
      original, but all of which together shall constitute one and the same
      instrument.

    4.    Brokers.
      Each
      party hereto hereby confirms that no brokers or finders were employed by such
      party or any of its officers, directors employees or shareholders in connection
      with the Financing Agreements.

    5.    Governing
      Law.
      The
      validity, interpretation and effect of this Settlement Agreement shall be
      governed exclusively by the laws of the State of New York, without giving effect
      to the provisions, policies or principles of any state law relating to the
      choice or conflict of laws. All disputes, litigation, proceedings or other
      legal
      actions by any party to this Settlement Agreement in connection with or relating
      to this Settlement Agreement or any matters described or contemplated in this
      Settlement Agreement shall be instituted in the courts of the State of New
      York
      or of the United States in the State of New York, in either case sitting in
      New
      York County, New York. Each party to this Settlement Agreement irrevocably
      submits to the exclusive jurisdiction of the courts of the State of New York
      and
      of the United States sitting in the County of New York, New York in connection
      with any such dispute, litigation, action or proceeding arising out of or
      relating to this Settlement Agreement. 

     

    
      
         

      

      
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    6.    Enforceability.
      Should
      any provision of the Settlement Agreement be declared or determined by any
      court, arbitrator or body of competent jurisdiction to be illegal, invalid
      or
      unenforceable, the legality, validity and enforceability of the remaining parts,
      terms or provisions shall not be affected thereby, and said illegal,
      unenforceable or invalid part, term or provision shall be deemed not to be
      a
      part of this Settlement Agreement. 

    7.    Not
      Construed Against Drafter. This
      Settlement Agreement shall be construed without regard to any presumptions
      against the party causing the same to be prepared.

    8.    Authority.
      The
      parties hereto, each for themselves or on behalf of the parties they represent,
      hereby represent and warrant that each has the full power, capacity and
      authority to enter into and perform the obligations under and in connection
      with
      this Settlement Agreement, and that this Settlement Agreement, when executed,
      will constitute a valid, legal and binding agreement, enforceable against
      themselves in accordance with the terms hereof.

     

    
      
         

      

      
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    9.    Amendments
      and Waver. No
      modification or amendment to this Settlement Agreement shall be binding upon
      the
      parties hereto unless in writing signed by the parties, and no waiver of any
      of
      the provisions of this Settlement Agreement shall be binding unless agreed
      to in
      writing by the party or parties against which such waiver is sought to be
      enforced.

    10.    Merger.
      Any
      and
      all previous understanding with respect to the subject matter of this Settlement
      Agreement are superceded by and merged into this Settlement Agreement, which
      fully and completely expresses the parties’ agreement with respect to the
      subject matter hereof.

    11.    Entire
      Agreement. The
      foregoing constitutes the entire agreement between the parties herein with
      respect to the subject matter contained herein, superseding all negotiations,
      prior discussions and communications, preliminary agreements and agreements
      related to the subject matter hereof made prior to the date hereof. The Recitals
      are incorporated herein by reference.

     

    
      
         

      

      
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    IN
      WITNESS WHEREOF, the
      Settlement Agreement has been entered into between Capstone and Borrower as
      of
      the date first set forth above

     

     

    
      	 	 	 
	 	HARBREW
              IMPORTS,
              LTD.
	 
 	 
 	 
 
	 	By:  	/s/ Richard
              John DeCicco
	 	
              
Name:
              Richard John DeCicco
	 	Title:
              President

    

    
      	
            	 	 
	 	CAPSTONE
              BUSINESS
              CREDIT, LLC
	 
 	 
 	 
 
	 	By:  	/s/ Joseph
              Ingrassia
	 	
              
Name:
              Joseph Ingrassia
	 	Title:
              Managing Member

    

    
      	
            	 	 
	 	CAPSTONE
              CAPITAL
              GROUP I, LLC
	 
 	 
 	 
 
	 	By:  	/s/ Joseph
              Ingrassia
	 	
              
Name:
              Joseph Ingrassia
	 	Title:
              Managing Member

    

     

    
      
         

      

      
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    EXHIBIT
      A

    

    
      
        	 	______ ___,
                2008

      

    

    

    Richard
      DeCicco

    3379
      Jason Court

    Bellmore,
      NY 11710

    

    Dear
      Mr.
      DeCicco,

    

    Reference
      is made to the Guarantees made by you, both dated January 22, 2007
      (collectively, the Guarantees), guarantying the obligations of Harbrew Imports,
      Ltd. (“Harbrew”) in favor of Capstone Business Credit, LLC and Capstone Capital
      Group I, LLC (collectively “Capstone”).

    

    As
      you
      had satisfied the conditions for the release of the Guarantees as provided
      for
      in the Settlement Agreement dated August __, 2008 by and between Harbrew and
      Capstone (the “Settlement Agreement”), Capstone, for itself and on behalf of its
      affiliates, does hereby forever release, discharge and acquit, and covenant
      not
      to sue you, of, from and regarding any and all liability under the
      Guarantees.

    

    Notwithstanding
      anything to the contrary contained in this letter, in the event that at anytime
      Capstone is required to return all or any portion of the Settlement Payment
      (as
      defined in the Settlement Agreement) to Borrower or its successors or assigns,
      this release letter shall be null and void, ab initio.

    

    This
      Release shall be effective on the date first above written.

    

    
      	 	Very truly yours,
	 	 
	 	CAPSTONE BUSINESS CREDIT, LLC
	 	 
	 	 
	 	 
	 	By: ___________________________
	 	
              Name:
                Joseph Ingrassia

            
	 	
              Title:
                Managing Member

            
	 	 
	 	CAPSTONE CAPITAL GROUP I, LLC
	 	 
	 	 
	 	 
	 	By: ___________________________
	 	
              Name:
                Joseph Ingrassia

            
	 	
              Title:
                Managing Member

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      B

    

    RELEASE
      AGREEMENT

    This
      Release Agreement is made and entered into as of the ___ day of ________, 2008
      (this “Agreement”), by and between Harbrew Imports, Ltd., a New York corporation
      having offices at 102 Buffalo Avenue, Freeport, New York (“Borrower”), Capstone
      Business Credit, LLC, a Delaware limited liability company having offices at
      1350 Avenue of the Americas, 24th Floor New York, New York 10019 (“CBC”) and
      Capstone Capital Group I, LLC, a Delaware limited liability company having
      an
      address at 1350 Avenue of the Americas, 24th Floor New York, New York 10019
      (“CCG”, and with CBC, “Capstone”). Borrower and Capstone are sometimes referred
      to herein collectively as the “Parties” and each as a “Party.”

    Recitals:

    A.    Borrower
      and Capstone have, pursuant to that certain Settlement Agreement dated August
      __, 2008 (the “Settlement Agreement”) agreed to execute and deliver this Release
      Agreement.

    B.    The
      conditions set forth in the Settlement Agreement with respect to the delivery
      of
      this Release Agreement have been satisfied.

    NOW,
      THEREFORE, for good and valuable consideration, the Parties agree as
      follows:

    1.    Releases.

    (a)    Capstone,
      for itself and its predecessors, successors, subsidiaries and affiliates, and
      each of their respective, members, stockholders, directors, managers, employees
      and agents (collectively, the “Capstone Releasing Parties”) hereby releases,
      waives and forever discharges Borrower and its predecessors, successors,
      assigns, subsidiaries, and affiliates, and each of their respective members,
      stockholders, directors, managers, employees and agents (collectively, the
      “Borrower Released Parties”) from any and all actions, suits, damages, claims
      and demands which the Capstone Releasing Parties may have as of the date hereof
      against the Borrower Released Parties (whether known or unknown, liquidated
      or
      unliquidated, due or to become due, direct or derivative, and whether absolute,
      accrued, contingent or otherwise, and whether heretofore arising from tort,
      statute, fiduciary duties or contract), arising out of, under or in connection
      with the Discount Factoring Agreement dated January 22, 2007 by and between
      CBC
      and Borrower, including without limitation, the Minimum Commission pursuant
      to
      Section 13 of the Discount Factoring Agreement, and the Purchase Order Financing
      Agreement dated January 22, 2007 by and between CCG and Borrower (collectively,
      the “Financing Agreements”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (b)    Borrower,
      for itself and its predecessors, successors, assigns, subsidiaries, and
      affiliates, and each of their respective members, stockholders, directors,
      managers, employees and agents (collectively, the “Borrower Releasing Parties”)
      hereby release, waive and forever discharge Capstone and its predecessors,
      successors, assigns, subsidiaries and affiliates, and each of their respective
      members, stockholders, directors, managers, employees and agents (collectively,
      the “Capstone Released Parties”) from any an all actions, suits, damages, claims
      and demands which the Borrower Releasing Parties may have as to the date hereof
      against the Capstone Released Parties (whether known or unknown, liquidated
      or
      unliquidated, due or to become due, direct or derivative, and whether absolute,
      accrued, contingent or otherwise, and whether heretofore arising from tort,
      statute, fiduciary duties or contract), arising out of, under or in connection
      with any of the Financing Agreements.

     

    
      
         

      

      
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    (c)    The
      releases provided for in this Section 1 (the “Releases”) apply in all
      jurisdictions. Nothing contained in the foregoing Releases shall be construed
      to
      impair any representation, obligations, promise, covenant or condition contained
      in the Settlement Agreement;

    (d)    Notwithstanding
      anything to the contrary contained in this Agreement, in the event that at
      any
      time Capstone is required to return all or any portion of the Settlement Payment
      (as defined in the Settlement Agreement) to Borrower or its successors or
      assigns, this Agreement, including the Releases, shall be null and void, ab
      initio.

    2.    Miscellaneous

    (a)    Entire
      Agreement.
      This
      Agreement contains the entire agreement between the Parties with respect to
      the
      transactions contemplated hereunder, and supersedes all negotiations,
      representations, warranties, commitments, offers, contracts and writings prior
      to the date hereof. No waiver and no modification or amendment of any provision
      of this Agreement shall be effective unless specifically made in writing and
      duly signed by the Party or Parties to be bound thereby.

    (b)    Counterparts.
      This
      Agreement may be executed in one or more counterparts, which may be executed
      by
      facsimile, each of which shall be deemed an original, but all of which,
      together, shall constitute one and the same instrument.

    (c)    Assignment,
      Successors and Assigns.
      The
      respective rights and obligations of the parties hereto shall not be assignable,
      without the prior written consent of the other parties. This Agreement shall
      be
      binding upon and inure to the benefit of the parties hereto and their successors
      and permitted assigns.

     

    
      
         

      

      
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    (d)    Severability.
      In the
      event any provision of this Agreement or portion thereof is found to be wholly
      or partially invalid, illegal or unenforceable in any judicial proceeding,
      then
      such provision shall be deemed to be modified or restricted to the extent and
      in
      the manner necessary to render the same valid and enforceable, or shall be
      deemed excised from this Agreement, as the case may require, and this Agreement
      shall be construed and enforced to the maximum extent permitted by law, as
      if
      such provision had been originally incorporated herein as so modified or
      restricted, or as if such provisions had not been originally incorporated
      herein, as the case may be.

    (e)    Governing
      Law; Dispute Resolution.
      The
      validity, interpretation and effect of this Agreement shall be governed
      exclusively by the laws of the State of New York, without giving effect to
      the
      provisions, policies or principles of any state law relating to the choice
      or
      conflict of laws. All disputes, litigation, proceedings or other legal actions
      by any Party to this Agreement in connection with or relating to this Agreement
      or any matters described or contemplated in this Agreement shall be instituted
      in the courts of the State of New York or of the United States in the State
      of
      New York, in either case sitting in New York County, New York. Each party to
      this Agreement irrevocably submits to the exclusive jurisdiction of the courts
      of the State of New York and of the United States sitting in the County of
      New
      York, New York in connection with any such dispute, litigation, action or
      proceeding arising out of or relating to this Agreement. Each Party irrevocably
      waives any defense or objection it may now or hereafter have based on forum
      non
      conveniens and waives any objection to venue of any action instituted
      hereunder.

     

    
      
         

      

      
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    (f)    No
      Third-Party Beneficiary.
      This
      Agreement is for the sole benefit of the parties hereto and their permitted
      assigns and nothing herein expressed or implied shall give or be construed
      to
      give to any person or entity, other than the parties hereto and such assigns,
      any legal or equitable rights hereunder.

    (g)    Specific
      Performance.
      Each of
      the parties hereto acknowledges and agrees that in the event of any breach
      of
      this Agreement, the non-breaching party or parties would be irreparably harmed
      and could not be made whole by monetary damages. It is accordingly agreed that
      the parties hereto will waive the defense in any action for specific performance
      that a remedy at law would be adequate and that the parties hereto, in addition
      to any other remedy to which they may be entitled at law or in equity, shall
      be
      entitled to compel specific performance of this Agreement.

    In
      Witness Whereof, the Parties hereto have executed this Agreement the day and
      year first above written.

    

    HARBREW
      IMPORTS, LTD

    

    By:
      _________________________     

    Name:

    Title:

    

    

    CAPSTONE
      BUSINESS CREDIT, LLC

    

    

    By:
      _________________________      

    Name:
      Joseph Ingrassia

    Title:
      Managing Member

    

    
      
         

      

      
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    CAPSTONE
      CAPITAL GROUP I, LLC

    

    

    By:
      _________________________      

    Name:
      Joseph Ingrassia

    Title:
      Managing Member

     

    
      
         

      

      
        6EXHIBIT 10.1

                        AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this "Agreement"), dated as of
August 12, 2008 and effective as of March 5, 2008 (the "Amendment Date"), is
between ESCALA GROUP, INC., a Delaware corporation (the "Company"), and GREG
ROBERTS, an individual ("Mr. Roberts").

     WHEREAS, the Company and Mr. Roberts are parties to an Employment
Agreement, dated December 28, 2007 (the "Original Agreement"), pursuant to which
Mr. Roberts has been employed by the Company as President of the Company's
Numismatics and Trading Divisions.

     WHEREAS, the parties desire to amend and extend the Original Agreement.

     NOW, THEREFORE, the parties agree as follows:

1.   Effective as of the Amendment Date, the first sentence of paragraph (a) of
     Section 2 of the Original Agreement is hereby amended to read as follows:

          "2. Duties. (a) During the Term, Mr. Roberts shall serve as President
          and Chief Executive Officer of the Company, as Chief Executive Officer
          of the Company's Coin Division and as Chief Executive Officer of the
          Company's Trading Division."

2.   Effective as of the Amendment Date, there shall be added new paragraph (h)
     to Section 3 ("Compensation") of the Original Agreement, reading as
     follows:

               "(h) The Company shall pay to Mr. Roberts a one-time cash bonus
          (the "Filing Bonus") of $100,000 promptly following the date that the
          Company becomes current in its filings under the Securities Act of
          1934, as amended (the "Securities Act")."

3.   Effective as of the Amendment Date, subparagraph (2) of paragraph (e) of
     Section 4 ("Termination") of the Original Agreement, is hereby amended to
     delete the words "President of the Numismatics Division and President of
     the Trading Division (or, in each case, an office of equivalent stature)"
     and inserting in lieu thereof the words "President and Chief Executive
     Officer of the Company". For the avoidance of doubt, effective as of the
     Amendment Date, subparagraph (2) of paragraph (e) of Section 4 is hereby
     amended to read in its entirety as follows:

<PAGE>

          "(2) Mr. Roberts no longer holds the offices of both President and
          Chief Executive Officer of the Company, or his functions and/or duties
          are materially diminished;"

4.   Effective as of the Amendment Date, subparagraph (2) of paragraphs (a), (b)
     and (c) of Section 5 ("Compensation Following Termination Prior to the End
     of the Term") is hereby amended in each case to read in its entirety as
     follows:

          "(2) the Performance Bonus, if any, not yet paid for any fiscal year
          ending prior to the date of termination of Mr. Roberts' employment,
          and, if the Company has become current in its filings under the
          Securities Act prior to the date of termination of Mr. Roberts'
          employment, the Filing Bonus (if not previously paid), in each case
          payable as and when such bonuses would have been paid had Mr. Roberts'
          employment continued;"

5.   Effective as of the Amendment Date, there shall be added a new subparagraph
     (7) to paragraph (c) of Section 5 ("Compensation Following Termination
     Prior to the End of the Term"), reading as follows:

          "(7) in the event that the Company has become current in its filings
          under the Securities Act on or prior to the date that is 90 days
          following the date of termination of Mr. Roberts' employment, the
          Filing Bonus (if not previously paid)."

6.   This Agreement is governed by the laws of the State of California, without
     giving effect to principles of conflict of laws.

7.   Except as specifically amended hereby, the Original Agreement shall remain
     in full force and effect in accordance with its terms. This Agreement shall
     not constitute an amendment to or modification of any other agreement
     between the parties hereto. Capitalized terms used herein and not otherwise
     defined will have their meanings as set forth in the Original Agreement.

                                            ESCALA GROUP, INC.

                                            By: /s/ Carol Meltzer
                                                    -------------
                                                Carol Meltzer
                                                Chief Administrative Officer and
                                                Executive Vice President

                                            /s/ Gregory Roberts
                                                ---------------
                                            GREGORY N. ROBERTS

                                       2

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