Document:

Exhibit 10.1

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AGREEMENT (the "Agreement"), made in New York, New York as of December 5,
2006, between Escala Group, Inc., a Delaware corporation (the "Company"), and
Matthew Walsh ("Executive").

     WHEREAS, the Company and Executive are parties to an Employment Agreement,
dated as of May 11, 2006 (the "Original Agreement");

     WHEREAS, the parties desire to amend the Original Agreement in certain
respects;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Original Agreement is hereby amended and restated in
its entirety, and the Company and Executive agree as follows:

1. Term.

     Unless earlier terminated in accordance with Section 4 hereof, the term of
     this Agreement shall be the period commencing as of the date hereof and
     ending on June 30, 2009 (the "Term").

2. Employment.

     a.   Employment by the Company. Executive agrees to be employed by the
          Company during the Term upon the terms and subject to the conditions
          set forth in this Agreement. Executive shall serve as the Chief
          Financial Officer, President and Acting Chief Executive Officer of the
          Company and shall report to the Board of Directors of the Company (the
          "Board of Directors"). Executive agrees to (i) serve as a member of
          the Board of Directors, without additional remuneration if appointed
          or elected to such position, (ii) resign as a member of the Board of
          Directors upon termination of his employment for any reason by him or
          the Company, and (iii) execute such documents and take such other
          action, if any, as may be requested by the Company to give effect to
          any such resignation.

     b.   Performance of Duties. Throughout the Term, Executive shall faithfully
          and diligently perform Executive's duties in conformity with the
          directions of the Company and serve the Company to the best of
          Executive's ability. Executive shall devote his full business time and
          best efforts to the business and affairs of the Company. In his
          capacity as the Chief Financial Officer, President and Acting Chief
          Executive Officer of the Company, Executive shall have such duties and
          responsibilities as are customary for Executive's position and any
          other duties or responsibilities consistent with his position he may
          be assigned by the Board of Directors.

     c.   Place of Performance. Executive shall be based at the Company's
          offices in West Caldwell, New Jersey. Executive recognizes that his
          duties will require, at the Company's expense, travel to domestic and
          international locations.

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3. Compensation and Benefits.

     a.   Base Salary. The Company agrees to pay to Executive a base salary
          ("Base Salary") at the annual rate of $450,000. Payments of the Base
          Salary shall be payable in equal installments in accordance with the
          Company's standard payroll practices.

     b.   Annual Performance Bonus for Fiscal Years 2007-2009. Executive shall
          be eligible to receive an annual cash bonus (the "Performance Bonus")
          for each of fiscal years 2007, 2008 and 2009. The Performance Bonus,
          if any, will be based on the extent to which individual and
          Company-wide performance goals established by the Company for each of
          fiscal years 2007, 2008 and 2009 have been met, but in no event will
          the Performance Bonus be less than (i) $100,000 per year, plus (ii) an
          additional amount equal to $100,000 in the event that during such
          fiscal year a sale or disposition of the assets comprising the North
          American Philatelic Auction Division is consummated (such amounts are
          hereinafter referred to as the "Guaranteed Performance Bonus"). Each
          Performance Bonus, if any, shall be paid within thirty days following
          the issuance of financial statements for the fiscal year in respect of
          which such bonus is payable, provided that in no event shall the
          Performance Bonus be paid later than the March 14 next occurring
          following the end of such fiscal year. Except as provided in Sections
          5(c)(ii), 5(d)(ii) and 5(d)(iii), Executive must be employed by the
          Company on the last day of the fiscal year to be eligible for the
          Performance Bonus.

     c.   Restricted Stock. The Company shall grant Executive 50,000 restricted
          shares of the Company's common stock, to vest in substantially equal
          increments on each of June 30, 2007, June 30, 2008 and June 30, 2009.
          The restricted shares shall be granted pursuant to a restricted stock
          agreement substantially in the form set forth on Exhibit A.

     d.   Benefits and Perquisites. Executive shall be entitled to participate
          in, to the extent Executive is otherwise eligible under the terms
          thereof, the benefit plans and programs, and receive the benefits and
          perquisites, generally provided by the Company to executives of the
          Company, including without limitation disability insurance and family
          medical insurance (subject to applicable employee contributions).
          Executive shall be entitled to receive twenty (20) days of annual paid
          vacation.

     e.   Business Expenses. The Company agrees to reimburse Executive for all
          reasonable and necessary travel, business entertainment and other
          business expenses incurred by Executive in connection with the
          performance of his duties under this Agreement. Such reimbursements
          shall be made by the Company on a timely basis upon submission by
          Executive of vouchers in accordance with the Company's standard
          procedures.

     f.   Non-Accountable Expense Allowance. The Company shall pay to Executive
          a non-accountable expense allowance equal to $12,000 per annum during
          the Term, payable in advance by July 31 of each year hereunder.

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     g.   Indemnification. The Company shall indemnify Executive, to the fullest
          extent permitted by law, for any and all liabilities to which he may
          be subject as a result of, in connection with or arising out of his
          employment by the Company hereunder, as well as the costs and expenses
          (including reasonable attorneys' fees) of any legal action brought or
          threatened to be brought against him or the Company or any of its
          affiliates as a result of, in connection with or arising out of such
          employment. Executive shall be entitled to the full protection of any
          insurance policies which the Company may elect to maintain generally
          for the benefit of its directors and officers.

     h.   No Other Compensation or Benefits; Payment. The compensation and
          benefits specified in this Section 3 and in Section 5 of this
          Agreement shall be in lieu of any and all other compensation and
          benefits. Payment of all compensation and benefits to Executive
          specified in this Section 3 and in Section 5 of this Agreement (i)
          shall be made in accordance with the relevant Company policies in
          effect from time to time to the extent the same are consistently
          applied, including normal payroll practices, and (ii) shall be subject
          to all legally required and customary withholdings.

     i.   Cessation of Employment. In the event Executive shall cease to be
          employed by the Company for any reason, then Executive's compensation
          and benefits shall cease on the date of such event, except as
          otherwise specifically provided herein or in any applicable employee
          benefit plan or program or as required by law.

4. Termination of Employment. Executive's employment hereunder may be terminated
prior to the end of the Term under the following circumstances.

     a.   Death. Executive's employment hereunder shall terminate upon
          Executive's death.

     b.   Executive Becoming Totally Disabled. The Company may terminate
          Executive's employment hereunder at any time after Executive becomes
          "Totally Disabled." For purposes of this Agreement, Executive shall be
          "Totally Disabled" in the event Executive is unable to perform the
          duties and responsibilities contemplated under this Agreement for a
          period of 120 consecutive days due to physical or mental incapacity or
          impairment. During any period that Executive fails to perform
          Executive's duties hereunder as a result of incapacity due to physical
          or mental illness (the "Disability Period"), Executive shall continue
          to receive the compensation and benefits provided by Section 3 of this
          Agreement until Executive's employment hereunder is terminated;
          provided, however, that the amount of base compensation and benefits
          received by Executive during the Disability Period shall be reduced by
          the aggregate amounts, if any, payable to Executive under any
          disability benefit plan or program provided to Executive by the
          Company.

     c.   Termination by the Company for Cause. The Company may terminate
          Executive's employment hereunder for Cause at any time after providing
          written notice to Executive. For purposes of this Agreement, the term
          "Cause" shall mean any of the following: (i) Executive's material
          neglect or failure or refusal to perform his duties under this
          Agreement (other than as a result of total or partial incapacity due
          to physical or mental illness); (ii) any act by or omission of
          Executive constituting gross negligence or willful misconduct in
          connection with the performance of his duties that could reasonably be
          expected to materially injure the reputation, business or business
          relationships of the Company or any of its affiliates; (iii)
          Executive's conviction (including conviction on a nolo contendre plea)
          of a felony or any crime involving, in the good faith judgment of the

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          Company, fraud, dishonesty or moral turpitude; (iv) any material
          violation of the Company's Code of Ethics, as may be amended from time
          to time (the "Code of Ethics"); (v) the breach of an obligation set
          forth in Section 6; or (vi) any other material breach of this
          Agreement; provided, however, that a termination by the Company under
          Sections 4(c)(i) or 4(c)(vi) for Cause shall be effective only if,
          within 14 days following delivery of a written notice by the Company
          to Executive that the Company is terminating his employment for Cause
          which specifies in reasonable detail the basis therefor, Executive has
          failed to cure the circumstances giving rise to Cause.

     d.   Termination by the Company Without Cause. The Company may terminate
          Executive's employment hereunder at any time for any reason or no
          reason by giving Executive thirty (30) days prior written notice of
          the termination. Following any such notice, the Company may reduce or
          remove any and all of Executive's duties, positions and titles with
          the Company.

     e.   Termination by Executive for Good Reason. Executive may terminate his
          employment hereunder for Good Reason at any time after providing
          written notice to the Company. For purposes of this Agreement, the
          term "Good Reason" shall mean any of the following: (i) the Company
          decreases or fails to pay the compensation or benefits described in
          Section 3; (ii) Executive no longer holds the office of President;
          (iii) Executive's job site is relocated to a location which is more
          than 100 miles from West Caldwell, New Jersey, unless the parties
          mutually agree to such relocation or (iv) a Change in Control (as
          defined below) occurs; provided, however, that a termination by
          Executive for Good Reason shall be effective only if, within 14 days
          following delivery of a written notice by Executive to the Company
          that Executive is terminating his employment for Good Reason which
          specifies in reasonable detail the basis therefor, the Company has
          failed to cure the circumstances giving rise to Good Reason.

     f.   Termination by Executive Without Good Reason. Executive may terminate
          his employment hereunder at any time for any reason or no reason by
          giving the Company ninety (90) days prior written notice of the
          termination. Following any such notice, the Company may reduce or
          remove any and all of Executive's duties, positions and titles with
          the Company, and any such reduction or removal shall not constitute
          Good Reason.

     g.   Change in Control. For purposes of this Agreement, "Change in Control"
          of the Company shall be conclusively deemed to have occurred if any of
          the following, and only if any of the following, shall have taken
          place:

          i.   any "person" (as such term is used in Sections 13(d) and 14(d)(2)
               of the Securities Exchange Act of 1934, as amended ("Exchange
               Act")), other than Afinsa Bienes Tangibles, S.A. ("Afinsa"), any
               of Afinsa's affiliates, any court-appointed administrator,
               trustee or person acting in similar capacity on behalf of Afinsa,
               the Executive, any person with whom Executive is or was acting in
               concert, or their respective designee(s) or affiliate(s) or any
               combination thereof, is or becomes the "beneficial owner" (as
               defined in Rule 13d-3 under the Exchange Act), directly or
               indirectly, of securities of the Company representing fifty
               percent (50%) or more of the combined voting power of the
               Company's then outstanding securities; provided, however, that a
               Change of Control shall not have occurred if all or some of the
               Company's securities acquired by such person are acquired from
               Afinsa or any of Afinsa's affiliates.

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          ii.  a merger or consolidation of the Company is consummated with any
               other corporation, other than (i) a merger or consolidation which
               would result in the holders of voting securities of the Company
               outstanding immediately prior thereto continuing to hold more
               than 50% of the combined voting power of the voting securities of
               the Company or such surviving entity outstanding immediately
               after such merger or consolidation, or (ii) a merger or
               consolidation effected to implement a recapitalization of the
               Company (or similar transaction) in which no "person" (as such
               term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
               acquires more than 50% of the combined voting power of the
               Company's then outstanding securities or a reverse takeover; or

          iii. a complete liquidation of the Company occurs, or a sale or
               disposition by the Company of all or substantially all of the
               Company's assets is consummated.

5. Compensation Following Termination Prior to the End of the Term. In the event
that Executive's employment hereunder is terminated prior to the end of the
Term, Executive shall be entitled only to the following compensation and
benefits upon such termination:

     a.   General. On any termination of Executive's employment, he shall be
          entitled to:

          i.   any accrued but unpaid Base Salary for services rendered through
               the date of termination; provided, however, that in the event
               Executive's employment is terminated pursuant to Section 4(b),
               the amount of Base Salary received by Executive during the
               Disability Period shall be reduced by the aggregate amounts, if
               any, payable to Executive under any disability benefit plan or
               program provided to Executive by the Company;

          ii.  any Performance Bonus not yet paid for any fiscal year ending
               prior to the date of termination of Executive's employment
               (payable as and when such bonus would have been paid had
               Executive's employment continued);

          iii. any vacation accrued to the date of termination;

          iv.  any accrued but unpaid expenses through the date of termination
               required to be reimbursed in accordance with Sections 3(e) of
               this Agreement; and

          v.   receive any benefits to which he may be entitled upon termination
               pursuant to the plans and programs referred to in Section 3(d)
               hereof in accordance with the terms of such plans and programs or
               as may be required by applicable law, provided that in the event
               of any termination other than pursuant to Sections 4(c) or 4(f)
               hereof, Executive shall, if permissible under the terms of the
               applicable plan or program, be entitled to receive medical
               benefits for the greater of 12 months or the remainder of the
               Term on the same basis that he had been receiving such benefits
               immediately prior to such termination.

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     b.   Termination by the Company for Cause; Termination by Executive Without
          Good Reason. In the event that Executive's employment is terminated
          prior to the expiration of the Term by the Company for Cause pursuant
          to Section 4(c) or by Executive without Good Reason pursuant to
          Section 4(f), Executive shall be entitled only to those items
          identified in Section 5(a).

     c.   Termination by Reason of Death or Executive Becoming Totally Disabled.
          In the event that Executive's employment is terminated prior to the
          expiration of the Term by reason of Executive's death pursuant to
          Section 4(a) or Executive becoming Totally Disabled pursuant to
          Section 4(b), Executive (or his estate, as the case may be) shall be
          entitled only to the following, to be paid as soon as practicable
          following the date of such termination, but in no event prior to the
          time such payment would not be subject to tax under Section 409A of
          the Internal Revenue Code of 1986, as amended (the "Code"):

          i.   those items identified in Section 5(a);

          ii.  a lump sum equal to the prorated portion of the Guaranteed
               Performance Bonus for the fiscal year in which Executive's
               employment terminated, based on the number of days Executive was
               employed by the Company in such fiscal year and

          (iv) A lump sum payment equal to twelve months of the Base Salary (as
               determined pursuant to Section 3(a)).

     d.   Termination by the Company Without Cause; Termination by Executive for
          Good Reason. In the event that Executive's employment is terminated
          prior to the expiration of the Term by the Company without Cause
          pursuant to Section 4(d) or by Executive for Good Reason pursuant to
          Section 4(e), Executive shall be entitled only to the following, to be
          paid as soon as practicable following the date of termination, but in
          no event prior to the time such payment would not be subject to tax
          under Section 409A of the Code:

          i.   those items identified in Section 5(a);

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          ii.  a lump sum equal to the Guaranteed Performance Bonus for the
               fiscal year in which Executive's employment terminated;

          iii. in the event Executive terminates his employment for Good Reason
               pursuant to Section 4(e)(iv) ["Change of Control"], a lump sum
               equal to the Guaranteed Performance Bonus for each fiscal year
               remaining in the Term following the fiscal year in which
               Executive's employment terminated; and

          iv.  a lump sum equal to the Base Salary (as determined pursuant to
               Section 3(a)) for twelve months; provided that such period shall
               be for the greater of (A) the remainder of the Term, and (B)
               twelve months if Executive terminates his employment for Good
               Reason pursuant to Section 4(e)(iv) ["Change of Control"];

     e.   Effect of Material Breach of Section 6 on Compensation and Benefits
          Following Termination of Employment Pursuant to Section 5. If, at the
          time of termination of Executive's employment for any reason prior to
          the expiration of the Term or any time thereafter, Executive is in
          material breach of any covenant contained in Section 6 hereof,
          Executive (or his estate, as applicable) shall not be entitled to any
          payment (or if payments have commenced, any continued payment) under
          Sections 5(c)(ii), 5(c)(iii), 5(d)(ii), 5(d)(iii) or 5(d)(iv).

     f.   No Further Liability; Release. Payment made and performance by the
          Company in accordance with this Section 5 shall operate to fully
          discharge and release the Company and its directors, officers,
          employees, affiliates, stockholders, successors, assigns, agents and
          representatives from any further obligation or liability with respect
          to Executive's employment and termination of employment. Other than
          providing the compensation and benefits provided for in accordance
          with this Section 5, the Company and its directors, officers,
          employees, affiliates, stockholders, successors, assigns, agents and
          representatives shall have no further obligation or liability to
          Executive or any other person under this Agreement. The payment of any
          amounts pursuant to this Section 5 (other than payments required by
          law) is expressly conditioned upon the delivery by Executive to the
          Company of a release in form and substance satisfactory to the Company
          of any and all claims Executive may have against the Company and its
          directors, officers, employees, affiliates, stockholders, successors,
          assigns, agents and representatives arising out of or related to
          Executive's employment by the Company and the termination of such
          employment and his service, if any, as a member of the Board of
          Directors and the cessation of such service.

6. Exclusive Employment; Noncompetition; Nonsolicitation; Nondisclosure of
Proprietary Information; Surrender of Records; Inventions and Patents; Code of
Ethics.

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     6.1   No Conflict; No Other Employment. During the period of Executive's
employment with the Company, Executive shall not: (i) engage in any activity
which conflicts or interferes with or derogates from the performance of
Executive's duties hereunder nor shall Executive engage in any other business
activity, whether or not such business activity is pursued for gain or profit
and including service as a director of any other company, except as approved in
advance in writing by the Company; provided, however, that Executive shall be
entitled to manage his personal investments and otherwise attend to personal
affairs, including charitable, social and political activities, in a manner that
does not unreasonably interfere with his responsibilities hereunder, or (ii)
accept or engage in any other employment, whether as an employee or consultant
or in any other capacity, and whether or not compensated therefor.

     6.2   Noncompetition; Nonsolicitation.

     a.    Executive acknowledges and recognizes the highly competitive nature
of the Company's business and that access to the Company's confidential records
and proprietary information renders him special and unique within the Company's
industry. In consideration of the payment by the Company to Executive of amounts
that may hereafter be paid to Executive pursuant to this Agreement (including,
without limitation, pursuant to Sections 3 and 5 hereof) and other obligations
undertaken by the Company hereunder, Executive agrees that during (i) his
employment with the Company and (ii) the period beginning on the date of
termination of employment for any reason and ending one year after the date of
termination of employment (the "Covered Time"), Executive shall not, directly or
indirectly, engage (as owner, investor, partner, stockholder, employer,
employee, consultant, advisor, director or otherwise) in any Competing Business,
provided that the provisions of this Section 6.2(a) will not be deemed breached
merely because Executive owns less than 1% of the outstanding common stock of a
publicly-traded company. For purposes of this Agreement, "Competing Business"
shall mean (i) any business in which the Company is currently engaged anywhere
in the world, including but not limited to (A) the marketing, production and
sale of collectibles, including numismatic and philatelic material, by auction,
as merchant-dealer or otherwise, and (B) the marketing, production and sale of
third-party and owned material by auction; and (ii) any other business which the
Company engages in anywhere in the world during the Term.

     b.    In further consideration of the payment by the Company to Executive
of amounts that may hereafter be paid to Executive pursuant to this Agreement
(including, without limitation, pursuant to Sections 3 and 5 hereof) and other
obligations undertaken by the Company hereunder, Executive agrees that during
his employment and the Covered Time, he shall not, directly or indirectly, (i)
solicit, encourage or attempt to solicit or encourage any of the employees,
agents, consultants or representatives of the Company or any of its affiliates
to terminate his, her, or its relationship with the Company or such affiliate;
(ii) solicit, encourage or attempt to solicit or encourage any of the employees,
agents, consultants or representatives of the Company or any of its affiliates
to become employees, agents, representatives or consultants of any other person
or entity; (iii) solicit or attempt to solicit any customer, vendor or
distributor of the Company or any of its affiliates with respect to any product
or service being furnished, made, sold or leased by the Company or such
affiliate; or (iv) persuade or seek to persuade any customer of the Company or
any affiliate to cease to do business or to reduce the amount of business which
any customer has customarily done or contemplates doing with the Company or such
affiliate, whether or not the relationship between the Company or its affiliate
and such customer was originally established in whole or in part through
Executive's efforts. For purposes of this Section 6.2(b) only, the terms
"customer," "vendor" and "distributor" shall mean a customer, vendor or
distributor who has done business with the Company or any of its affiliates
within twelve months preceding the termination of Executive's employment.

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     c.    During Executive's employment with the Company and during the Covered
Time, Executive agrees that upon the earlier of Executive's (i) negotiating with
any Competitor (as defined below) concerning the possible employment of
Executive by the Competitor, (ii) receiving an offer of employment from a
Competitor, or (iii) becoming employed by a Competitor, Executive will (A)
immediately provide notice to the Company of such circumstances and (B) provide
copies of Section 6 of this Agreement to the Competitor. Executive further
agrees that the Company may provide notice to a Competitor of Executive's
obligations under this Agreement, including without limitation Executive's
obligations pursuant to Section 6 hereof. For purposes of this Agreement,
"Competitor" shall mean any entity (other than the Company or any of its
affiliates) that engages, directly or indirectly, in any Competing Business.

     d.    Executive understands that the provisions of this Section 6.2 may
limit his ability to earn a livelihood in a business similar to the business of
the Company or its affiliates but nevertheless agrees and hereby acknowledges
that the consideration provided under this Agreement, including any amounts or
benefits provided under Sections 3 and 5 hereof and other obligations undertaken
by the Company hereunder, is sufficient to justify the restrictions contained in
such provisions. In consideration thereof and in light of Executive's education,
skills and abilities, Executive agrees that he will not assert in any forum that
such provisions prevent him from earning a living or otherwise are void or
unenforceable or should be held void or unenforceable.

     6.3   Proprietary Information. Executive acknowledges that during the
course of his employment with the Company he will necessarily have access to and
make use of proprietary information and confidential records of the Company and
its affiliates. Executive covenants that he shall not during the Term or at any
time thereafter, directly or indirectly, use for his own purpose or for the
benefit of any person or entity other than the Company, nor otherwise disclose,
any proprietary information to any individual or entity, unless such disclosure
has been authorized in writing by the Company or is otherwise required by law.
Executive acknowledges and understands that the term "proprietary information"
includes, but is not limited to: (a) the software products, programs,
applications, and processes utilized by the Company or any of its affiliates;
(b) the name and/or address of any customer or vendor of the Company or any of
its affiliates or any information concerning the transactions or relations of
any customer or vendor of the Company or any of its affiliates with the Company
or such affiliate or any of its or their partners, principals, directors,
officers or agents; (c) any information concerning any product, technology, or
procedure employed by the Company or any of its affiliates but not generally
known to its or their customers, vendors or competitors, or under development by
or being tested by the Company or any of its affiliates but not at the time
offered generally to customers or vendors; (d) any information relating to the
computer software, computer systems, pricing or marketing methods, sales
margins, cost of goods, cost of material, capital structure, operating results,
borrowing arrangements or business plans of the Company or any of its
affiliates; (e) any information which is generally regarded as confidential or
proprietary in any line of business engaged in by the Company or any of its

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affiliates; (f) any business plans, budgets, advertising or marketing plans; (g)
any information contained in any of the written or oral policies and procedures
or manuals of the Company or any of its affiliates; (h) any information
belonging to customers or vendors of the Company or any of its affiliates or any
other person or entity which the Company or any of its affiliates has agreed to
hold in confidence; (i) any inventions, innovations or improvements covered by
this Agreement; and (j) all written, graphic and other material relating to any
of the foregoing. Executive acknowledges and understands that information that
is not novel or copyrighted or patented may nonetheless be proprietary
information. The term "proprietary information" shall not include information
generally available to and known by the public or information that is or becomes
available to Executive on a non-confidential basis from a source other than the
Company, any of its affiliates, or the directors, officers, employees, partners,
principals or agents of the Company or any of its affiliates (other than as a
result of a breach of any obligation of confidentiality).

     6.4   Confidentiality and Surrender of Records. Executive shall not during
the Term or at any time thereafter (irrespective of the circumstances under
which Executive's employment by the Company terminates), except as required by
law, directly or indirectly publish, make known or in any fashion disclose any
confidential records to, or permit any inspection or copying of confidential
records by, any individual or entity other than in the course of such
individual's or entity's employment or retention by the Company. Upon
termination of employment for any reason or upon request by the Company,
Executive shall deliver promptly to the Company all property and records of the
Company or any of its affiliates, including, without limitation, all
confidential records. For purposes hereof, "confidential records" means all
correspondence, reports, memoranda, files, manuals, books, lists, financial,
operating or marketing records, magnetic tape, or electronic or other media or
equipment of any kind which may be in Executive's possession or under his
control or accessible to him which contain any proprietary information. All
property and records of the Company and any of its affiliates (including,
without limitation, all confidential records) shall be and remain the sole
property of the Company or such affiliate during the Term and thereafter.

     6.5   Inventions and Patents. All inventions, innovations or improvements
(including policies, procedures, products, improvements, software, ideas and
discoveries, whether patent, copyright, trademark, service mark, or otherwise)
conceived or made by Executive, either alone or jointly with others, in the
course of his employment by the Company, belong to the Company. Executive will
promptly disclose in writing such inventions, innovations or improvements to the
Company and perform all actions reasonably requested by the Company to establish
and confirm such ownership by the Company, including, but not limited to,
cooperating with and assisting the Company in obtaining patents, copyrights,
trademarks, or service marks for the Company in the United States and in foreign
countries.

     6.6   Enforcement. Executive acknowledges and agrees that, by virtue of his
position, his services and access to and use of confidential records and
proprietary information, any violation by him of any of the undertakings
contained in this Section 6 would cause the Company and/or its affiliates
immediate, substantial and irreparable injury for which it or they have no
adequate remedy at law. Accordingly, Executive agrees and consents to the entry
of an injunction or other equitable relief by a court of competent jurisdiction
restraining any violation or threatened violation of any undertaking contained
in this Section 6. Executive waives posting by the Company or its affiliates of
any bond otherwise necessary to secure such injunction or other equitable
relief. Rights and remedies provided for in this Section 6 are cumulative and
shall be in addition to rights and remedies otherwise available to the parties
hereunder or under any other agreement or applicable law.

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     6.7   Code of Ethics. Nothing in this Section 6 is intended to limit,
modify or reduce Executive's obligations under the Company's Code of Ethics.
Executive's obligations under this Section 6 are in addition to, and not in lieu
of, Executive's obligations under the Code of Ethics. To the extent there is any
inconsistency between this Section 6 and the Code of Ethics which would permit
Executive to take any action or engage in any activity pursuant to this Section
6 which he would be barred from taking or engaging in under the Code of Ethics,
the Code of Ethics shall control.

     7.    Key Man Insurance. Executive recognizes and acknowledges that the
Company or its affiliates may seek and purchase one or more policies providing
key man life insurance with respect to Executive, the proceeds of which would be
payable to the Company or such affiliate. Executive hereby consents to the
Company or its affiliates seeking and purchasing such insurance and will provide
such information, undergo such medical examinations (at the Company's expense),
execute such documents, and otherwise take any and all actions reasonably
necessary or desirable in order for the Company or its affiliates to seek,
purchase, and maintain in full force and effect such policy or policies.

     8.    Assignment and Transfer.

     a.    Company. This Agreement shall inure to the benefit of and be
enforceable by, and may be assigned by the Company without Executive's consent
to, any purchaser of all or substantially all of the Company's business or
assets, or to any successor to the Company or any assignee thereof (whether
direct or indirect, by purchase, merger, consolidation or otherwise).

     b.    Executive. The parties hereto agree that Executive is obligated under
this Agreement to render personal services during the Term of a special, unique,
unusual, extraordinary and intellectual character, thereby giving this Agreement
special value. Executive's rights and obligations under this Agreement shall not
be transferable by Executive by assignment or otherwise, and any purported
assignment, transfer or delegation thereof shall be void; provided, however,
that if Executive shall die, all amounts then payable to Executive hereunder
shall be paid in accordance with the terms of this Agreement to Executive's
estate.

     9.    Miscellaneous.

     a.    Other Obligations. Executive represents and warrants that neither
Executive's employment with the Company nor Executive's performance of
Executive's obligations hereunder will conflict with or violate or otherwise are
inconsistent with any other obligations, legal or otherwise, which Executive may
have. Executive covenants that he shall perform his duties hereunder in a
professional manner and not in conflict or violation, or otherwise inconsistent
with other obligations legal or otherwise, which Executive may have.

                                       15
<PAGE>

     b.    Nondisclosure; Other Employers. Executive will not disclose to the
Company, use, or induce the Company to use, any proprietary information, trade
secrets or confidential business information of others. Executive represents and
warrants that Executive does not possess any property, proprietary information,
trade secrets and confidential business information belonging to any prior
employers.

     c.    Cooperation. Following termination of employment with the Company for
any reason, Executive shall cooperate with the Company, as requested by the
Company, to effect a transition of Executive's responsibilities and to ensure
that the Company is aware of all matters being handled by Executive.

     d.    Mitigation. Executive shall not be required to mitigate damages or
the amount of any payment provided to him under Section 5 of this Agreement by
seeking other employment or otherwise, nor shall the amount of any payments
provided to Executive under Section 5 be reduced by any compensation earned by
Executive as the result of employment by another employer after the termination
of Executive's employment or otherwise.

     e.    Protection of Reputation. During the Term and thereafter, Executive
agrees to take no action which is intended, or would reasonably be expected, to
harm the Company or its reputation or which would reasonably be expected to lead
to unwanted or unfavorable publicity to the Company. Nothing herein shall
prevent Executive from making any truthful statement in connection with any
legal, arbitral or regulatory proceeding, or investigation by the Company or any
governmental authority or regulatory agency or self-regulatory organization.

     f.    Governing Law. This Agreement shall be governed by and construed
(both as to validity and performance) and enforced in accordance with the
internal laws of the State of New York applicable to agreements made and to be
performed wholly within such jurisdiction, without regard to the principles of
conflicts of law or where the parties are located at the time a dispute arises.

     g.    Arbitration.

     i.    General. Executive and the Company specifically, knowingly, and
voluntarily agree that they shall use final and binding arbitration to resolve
any dispute (an "Arbitrable Dispute") between Executive, on the one hand, and
the Company (or any affiliate of the Company), on the other hand. This
arbitration agreement applies to all matters relating to this Agreement and
Executive's employment with and/or termination of employment from the Company,
including without limitation disputes about the validity, interpretation, or
effect of this Agreement, or alleged violations of it, any payments due
hereunder and all claims arising out of any alleged discrimination, harassment
or retaliation, including, but not limited to, those covered by Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act
of 1967, as amended, and the Americans With Disabilities Act or any other
federal, state or local law relating to discrimination in employment.

                                       16
<PAGE>

     ii.   Injunctive Relief. Notwithstanding anything to the contrary contained
herein, the Company and any affiliate of the Company (if applicable) shall have
the right to seek injunctive or other equitable relief from a court of competent
jurisdiction to enforce Section 6 of this Agreement. For purposes of seeking
enforcement of Section 6, the Company and Executive hereby consent to the
jurisdiction of any state or federal court sitting in the City, County and State
of New York.

     iii.  The Arbitration. Any arbitration pursuant to this Section 9(g) will
take place in New York, New York, under the auspices of the American Arbitration
Association, in accordance with the Employment Arbitration Rules and Mediation
Procedures of the American Arbitration Association then in effect, and before a
panel of three arbitrators selected in accordance with such rules. Judgment upon
the award rendered by the arbitrators may be entered in any state or federal
court sitting in the City, County and State of New York.

     iv.   Fees and Expenses. In any arbitration pursuant to this Section 9(g),
except as otherwise required by law, each party shall be responsible for the
fees and expenses of its own attorneys and witnesses, and the fees and expenses
of the arbitrators shall be divided equally between the Company, on the one
hand, and Executive, on the other hand.

     v.    Exclusive Forum. Except as permitted by Section 9(g)(ii) hereof,
arbitration in the manner described in this Section 9(g) shall be the exclusive
forum for any Arbitrable Dispute. Except as permitted by Section 9(g)(ii),
should Executive or the Company attempt to resolve an Arbitrable Dispute by any
method other than arbitration pursuant to this Section 9(g), the responding
party shall be entitled to recover from the initiating party all damages,
expenses, and attorneys' fees incurred as a result of that breach.

     h.    Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto in respect of Executive's employment
and supersedes, cancels and annuls any prior or contemporaneous written or oral
agreements, understandings, commitments and practices between them respecting
Executive's employment, including all prior employment agreements between the
Company and Executive (including, without limitation, the letter agreement
between the Company and Executive dated April 3, 2006, the Original Agreement
and the Matthew Walsh Incentive Compensation Program), which agreement(s) hereby
are terminated and shall be of no further force or effect.

     i.    Amendment. This Agreement may be amended only by a writing which
makes express reference to this Agreement as the subject of such amendment and
which is signed by Executive and, on behalf of the Company, by its duly
authorized officer.

     j.    Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction or arbitration panel to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid or unenforceable, shall not be affected thereby,
and each provision hereof shall be enforced to the fullest extent permitted by
law. If any provision of this Agreement, or any part thereof, is held to be
invalid or unenforceable because of the scope or duration of or the area covered
by such provision, the parties hereto agree that the court or arbitration panel

                                       17
<PAGE>

making such determination shall reduce the scope, duration and/or area of such
provision (and shall substitute appropriate provisions for any such invalid or
unenforceable provisions) in order to make such provision enforceable to the
fullest extent permitted by law and/or shall delete specific words and phrases,
and such modified provision shall then be enforceable and shall be enforced. The
parties hereto recognize that if, in any judicial or arbitral proceeding, a
court or arbitration panel shall refuse to enforce any of the separate covenants
contained in this Agreement, then that invalid or unenforceable covenant
contained in this Agreement shall be deemed eliminated from these provisions to
the extent necessary to permit the remaining separate covenants to be enforced.
In the event that any court or arbitration panel determines that the time period
or the area, or both, are unreasonable and that any of the covenants is to that
extent invalid or unenforceable, the parties hereto agree that such covenants
will remain in full force and effect, first, for the greatest time period, and
second, in the greatest geographical area that would not render them
unenforceable.

     k.    Construction. The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in construing
or interpreting this Agreement. The language in all parts of this Agreement
shall be in all cases construed according to its fair meaning and not strictly
for or against the Company or Executive. As used herein, the words "day" or
"days" shall mean a calendar day or days.

     l.    Nonwaiver. Neither any course of dealing nor any failure or neglect
of either party hereto in any instance to exercise any right, power or privilege
hereunder or under law shall constitute a waiver of any other right, power or
privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed
by the party to be charged and, in the case of the Company, by its duly
authorized officer.

     m.    Notices. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
registered or certified mail, postage prepaid, with return receipt requested,
addressed: (i) in the case of the Company, to Escala Group, Inc., 775 Passaic
Avenue, West Caldwell, New Jersey 07006, attn: General Counsel, with a copy to
Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New
York 10036, attn.: Scott S. Rosenblum, Esq.; and (ii) in the case of Executive,
to Executive's last known address as reflected in the Company's records, or to
such other address as Executive shall designate by written notice to the
Company. Any notice given hereunder shall be deemed to have been given at the
time of receipt thereof by the person to whom such notice is given if personally
delivered or at the time of mailing if sent by registered or certified mail.

     n.    Assistance in Proceedings, Etc. Executive shall, without additional
compensation, during and after the Term, upon reasonable notice, furnish such
information and proper assistance to the Company as may reasonably be required
by the Company in connection with any legal or quasi-legal proceeding, including
any external or internal investigation, involving the Company or any of its
affiliates.

     o.    Survival. Cessation or termination of Executive's employment with the
Company shall not result in termination of this Agreement. The respective
obligations of Executive and the Company as provided in Sections 5, 6, 8 and 9
of this Agreement shall survive cessation or termination of Executive's
employment hereunder.

                                       18
<PAGE>

     p.    Section 409A of the Code. The Company makes no representations
regarding the tax implications of the compensation and benefits to be paid to
Executive under this Agreement, including, without limitation, under Section
409A of the Code. Executive and the Company agree that in the event the Company
reasonably determines that the terms hereof would result in Executive being
subject to tax under Section 409A of the Code, Executive and the Company shall
negotiate in good faith to amend this Agreement to the extent necessary to
prevent the assessment of any such tax, including by delaying the payment dates
of any amounts hereunder.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed on its behalf by an individual thereunto duly authorized and Executive
has duly executed this Agreement, all as of the date and year first written
above.

ESCALA GROUP, INC.                           EXECUTIVE:

By:
    --------------------------------         -----------------------------------
    Name:                                    Matthew Walsh
    Title

                                       19
<PAGE>

                               Escala Group, Inc.
                    Employee Restricted Stock Grant Agreement

THIS AGREEMENT, made as of February 7, 2007, between Escala Group, Inc. (the
"Company") and Matthew Walsh (the "Participant").

     WHEREAS, the Company has adopted and maintains its 1997 Stock Incentive
     Plan (the "Plan") to provide for officers, other employees and directors
     of, and consultants to, the Company and its subsidiaries an incentive (a)
     to enter into and remain in the service of the Company, (b) to enhance the
     long-term performance of the Company, and (c) to acquire a proprietary
     interest in the success of the Company;

     WHEREAS, the Plan provides that the Stock Option Committee of the Board of
     Directors of the Company (the "Committee") shall administer the Plan and
     determine the key persons to whom awards shall be granted and the amount
     and type of such awards; and

     WHEREAS, the Company has entered into an employment agreement with the
     Participant, dated as of December 5, 2006 (the "Employment Agreement"),
     which provides that the Company shall grant restricted stock to the
     Participant;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
     hereinafter set forth, the parties hereto hereby agree as follows:

1.   Grant of Restricted Stock. Pursuant to, and subject to, the terms and
     conditions set forth herein and in the Plan, the Committee hereby grants to
     the Participant 50,000 restricted shares (the "Restricted Stock") of common
     stock of the Company ("Common Stock").

2.   Grant Date. The Grant Date of the Restricted Stock is February 7, 2007.

3.   Incorporation of Plan. All terms, conditions and restrictions of the Plan
     are incorporated herein and made part hereof as if stated herein. If there
     is any conflict between the terms and conditions of the Plan and this
     Agreement, the terms and conditions of the Plan, as interpreted by the
     Committee, shall govern. Except as otherwise provided herein, all
     capitalized terms used herein shall have the meaning given to such terms in
     the Plan.

4.   Vesting. Subject to the further provisions of this Agreement, the
     Restricted Stock shall vest on the following dates, each of which shall be
     referred to as a "Vesting Date:"

                                       20
<PAGE>

                                                Number of shares of
                                              Restricted Stock vesting
                  Vesting Date                     on such date
           -------------------------- ------------------------------------------

                  June 30, 2007                        16,666
           -------------------------- ------------------------------------------

                  June 30, 2008                        16,667
           -------------------------- ------------------------------------------

                  June 30, 2009                        16,667
           -------------------------- ------------------------------------------

5.   Restrictions on Transferability. Until a share of Restricted Stock vests,
     the Participant shall not transfer the Participant's rights to such share
     of Restricted Stock or to any rights related thereto. Any attempt to
     transfer unvested shares of Restricted Stock or any rights related thereto,
     whether by transfer, pledge, hypothecation or otherwise and whether
     voluntary or involuntary, by operation of law or otherwise, shall not vest
     the transferee with any interest or right in or with respect to such shares
     of Restricted Stock or such related rights.

6.   Termination of Service. In the event that the Participant's employment with
     the Company terminates for any reason before all the shares of Restricted
     Stock are vested, all unvested shares of Restricted Stock, together with
     any property received in respect of such shares, as set forth in Section 9
     hereof, shall be forfeited as of the date Participant's employment
     terminates, and the Participant promptly shall return to the Company any
     certificates evidencing such shares, together with any cash dividends or
     other property received in respect of such shares.

7.   Issuance of Certificates.

     (a) Reasonably promptly after the Grant Date, the Company shall issue stock
certificates, registered in the name of the Participant, evidencing the shares
of Restricted Stock or shall instruct its transfer agent to issue shares of
Restricted Stock which shall be maintained in book entry form on the books of
the transfer agent. The Restricted Stock, if certificated, shall bear the
following legend:

                                       21
<PAGE>

     "THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, HYPOTHECATION ENCUMBRANCE OR OTHER

     DISPOSAL OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO

     THE TERMS OF THE ESCALA GROUP, INC.'S 1997 STOCK INCENTIVE PLAN AND A

     RESTRICTED STOCK GRANT AGREEMENT BETWEEN ESCALA GROUP, INC. AND THE HOLDER

     OF RECORD OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE. NO TRANSFER OF

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN CONTRAVENTION OF SUCH

     PLAN AND RESTRICTED STOCK GRANT AGREEMENT SHALL BE VALID OR EFFECTIVE.

     COPIES OF SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE

     HOLDER OF RECORD OF THE CERTIFICATE TO THE SECRETARY OF ESCALA GROUP, INC."

If the Restricted Stock is in book entry form, it shall be subject to electronic
coding or stop order indicating that such shares of Restricted Stock are
restricted by the terms of this Agreement and the Plan. Such legend, electronic
coding or stop order shall not be removed until such shares of Restricted Stock
vest.

     (b) Each certificate issued pursuant to Section 7(a) hereof, together with
the stock powers relating to such shares of Restricted Stock, shall be held in
escrow by the Company. The Company shall issue to the Participant a receipt
evidencing the certificates held by it which are registered in the name of the
Participant.

     (c) Reasonably promptly after the Restricted Stock vests pursuant to
Section 4 hereof, (i) in the case of certificated shares, in exchange for the
surrender to the Company of the certificate evidencing the Restricted Stock,
delivered to the Participant under Section 7(a) hereof, and the certificates
evidencing any other securities received in respect of such shares, if any, the
Company shall issue and deliver to the Participant (or the Participant's legal
representative, beneficiary or heir) a certificate evidencing the Restricted
Stock and such other securities, free of the legend provided in Section 7(a)
hereof and (ii) in the case of book entry shares, the Company shall cause to be
lifted and removed any electronic coding or stop order established pursuant to
Section 7(a) hereof.

                                       22
<PAGE>

     (d) The Company may require as a condition of the delivery of stock
certificates or the lifting or removal of any electronic coding or stop order
with respect to book entry shares pursuant to Section 7(b) hereof that the
Participant remit to the Company an amount sufficient in the opinion of the
Company to satisfy any federal, state and other governmental tax withholding
requirements related to the vesting of the shares represented by such
certificate. The Committee, in its sole discretion, may permit the Participant
to satisfy such obligation by delivering shares of Common Stock or by directing
the Company to withhold from delivery shares of Common Stock, in either case
valued at their Fair Market Value on the Vesting Date with fractional shares
being settled in cash.

     (e) The Participant shall not be deemed for any purpose to be, or have
rights as, a shareholder of the Company by virtue of the grant of Restricted
Stock, except to the extent a stock certificate is issued therefor or an
appropriate book entry is made on the books of the transfer agent reflecting the
issuance thereof pursuant to Section 7(a) hereof, and then only from the date
such certificate is issued or such book entry is made. Upon the issuance of a
stock certificate or the making of an appropriate book entry on the books of the
transfer agent, the Participant shall have the rights of a shareholder with
respect to the Restricted Stock, including the right to vote the shares, subject
to the restrictions on transferability and the forfeiture provisions, as set
forth in this Agreement.

8.   Securities Matters. The Company shall be under no obligation to effect the
     registration pursuant to the Securities Act of 1933, as amended (the "1933
     Act") of any interests in the Plan or any shares of Common Stock to be
     issued thereunder or to effect similar compliance under any state laws. The
     Company shall not be obligated to cause to be issued or delivered any
     certificates evidencing shares of Common Stock pursuant hereto unless and
     until the Company is advised by its counsel that the issuance and delivery
     of such certificates is in compliance with all applicable laws, regulations
     of governmental authority and the requirements of any securities exchange
     on which shares of Common Stock are traded. The Committee may require, as a
     condition of the issuance and delivery of certificates evidencing shares of
     Common Stock pursuant to the terms hereof, that the recipient of such
     shares make such covenants, agreements and representations, and that such
     certificates bear such legends, as the Committee, in its sole discretion,
     deems necessary or desirable. The Participant specifically understands and
     agrees that the shares of Common Stock, if and when issued, may be
     "restricted securities," as that term is defined in Rule 144 under the 1933
     Act and, accordingly, the Participant may be required to hold the shares
     indefinitely unless they are registered under such Act or an exemption from
     such registration is available.

                                       23
<PAGE>

9.   Dividends, etc. Unless the Board of Directors otherwise determines, any
     property, including cash dividends, received by the Participant with
     respect to a share of Restricted Stock as a result of any dividend,
     recapitalization, merger, consolidation, combination, exchange of shares or
     otherwise, will not vest until such share of Restricted Stock vests, and
     shall be held in escrow by the Company. The Company shall issue to the
     Participant a receipt evidencing the property held by it in respect of the
     Restricted Stock. Any cash dividends or other property (but not including
     securities) received by a Participant with respect to a share of Restricted
     Stock shall be returned to the Company in the event such share of
     Restricted Stock is forfeited. Any securities received by a Participant
     with respect to a share of Restricted Stock as a result of any dividend,
     recapitalization, merger, consolidation, combination, exchange of shares or
     otherwise will not vest until such share of Restricted Stock vests and
     shall be forfeited if such share of Restricted Stock is forfeited. Unless
     the Committee otherwise determines, such securities shall bear a legend or
     be subject to an electronic coding or stop order, as set forth in Section
     7(a) hereof.

10.  Delays or Omissions. No delay or omission to exercise any right, power or
     remedy accruing to any party hereto upon any breach or default of any party
     under this Agreement, shall impair any such right, power or remedy of such
     party, nor shall it be construed to be a waiver of any such breach or
     default, or an acquiescence therein, or of or in any similar breach or
     default thereafter occurring, nor shall any waiver of any single breach or
     default be deemed a waiver of any other breach or default theretofore or
     thereafter occurring. Any waiver, permit, consent or approval of any kind
     or character on the part of any party of any breach or default under this
     Agreement, or any waiver on the part of any party or any provisions or
     conditions of this Agreement, must be in a writing signed by such party and
     shall be effective only to the extent specifically set forth in such
     writing.

11.  Right of Discharge Preserved. Nothing in this Agreement shall confer upon
     the Participant the right to continue in the employ or other service of the
     Company, or affect any right which the Company may have to terminate such
     employment or service.

12.  Integration. This Agreement contains the entire understanding of the
     parties with respect to its subject matter. There are no restrictions,
     agreements, promises, representations, warranties, covenants or
     undertakings with respect to the subject matter hereof other than those
     expressly set forth herein. This Agreement, including, without limitation,
     the Plan, supersedes all prior agreements and understandings between the
     parties with respect to its subject matter.

13.  Counterparts. This Agreement may be executed in two or more counterparts,
     each of which shall be deemed an original, but all of which shall
     constitute one and the same instrument.

14.  Governing Law. This Agreement shall be governed by and construed and
     enforced in accordance with the laws of the State of New York, without
     regard to the provisions governing conflict of laws.

                                       24
<PAGE>

15.  Obligation to Notify. If the Participant makes the election permitted under
     Section 83(b) of the Internal Revenue Code of 1986, as amended (that is, an
     election to include in gross income in the year of transfer the amounts
     specified in Section 83(b)), the Participant shall notify the Company of
     such election within 10 days of filing notice of the election with the
     Internal Revenue Service and shall within the same 10-day period remit to
     the Company an amount sufficient in the opinion of the Company to satisfy
     any federal, state and other governmental tax withholding requirements
     related to such inclusion in Participant's income. The Participant should
     consult with his or her tax advisor to determine the tax consequences of
     acquiring the Restricted Stock and the advantages and disadvantages of
     filing the Section 83(b) election. The Participant acknowledges that it is
     his or her sole responsibility, and not the Company's, to file a timely
     election under Section 83(b), even if the Participant requests the Company
     or its representatives to make this filing on his or her behalf.

16.  Participant Acknowledgment. The Participant hereby acknowledges receipt of
     a copy of the Plan. The Participant hereby acknowledges that all decisions,
     determinations and interpretations of the Committee in respect of the Plan,
     this Agreement and the Restricted Stock shall be final and conclusive.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its duly authorized officer, and the Participant has hereunto signed
this Agreement on his own behalf, thereby representing that he has carefully
read and understands this Agreement and the Plan as of the day and year first
written above.

                                     ESCALA GROUP, INC.

                                     By:
                                             ------------------------------
                                     Name:
                                             ------------------------------
                                     Title:
                                             ------------------------------

                                     --------------------------------------
                                     Matthew Walsh

                                       25Exhibit 10.53

CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS (“[*]”), HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 

February 13, 2004

VIA HAND DELIVERY

Phillip Berman

VaxGen, Inc.

1000 Marina Blvd.

Brisbane, CA  94005-1835

Dear Phil:

This letter sets forth
the terms of the transition and separation agreement (the “Agreement”) that
VaxGen, Inc. (the “Company” or
“VaxGen”) is offering to you to aid in your employment transition.

          1.          Separation
Date. 
You and
the Company agree that your employment with the Company terminated effective January
31, 2004 (the “Separation Date”), which you agree is also the termination date
of the Employment Agreement between you and the Company signed as of February
7, 2002, attached as Exhibit A (the “Employment Agreement”), notwithstanding
any term of employment or termination notice requirement under the Employment
Agreement.  

          2.          Departure Announcement.  You and the Company agree to make good faith
efforts to develop a mutually agreeable additional announcement, if any,
concerning your departure from the Company, consistent with the press release
previously issued by the Company on January 20, 2004.

          3.          Resignation of Board Membership.  You agree to tender your written resignation
as a member of the Board of Directors of the Company and of any affiliated
entities within ten (10) days of the Separation Date, such resignation to be
immediately effective.   

          4.          Accrued
Salary and PTO Pay. 
You acknowledge that the Company timely paid pay you all accrued salary,
and all accrued and unused Paid Time Off, earned through the Separation Date,
less standard payroll deductions and withholdings.  You are entitled to these payments by law.

          5.          Severance
Benefits.  The
termination of your employment shall be treated as a termination without
“Cause” for the purposes of the Employment Agreement.  If you enter into this Agreement, the Company will provide you
with the following severance benefits (the “Severance Benefits”) as your sole
severance benefits in lieu of the less advantageous severance benefits under
the Employment Agreement:

- 1 -

                       (a)         Bonus
Compensation.  The
Company will pay you a bonus in the amount of $75,000, less required payroll
deductions and withholdings, in lieu of any other bonus or incentive
compensation from the Company, including but not limited to bonuses for 2003 or
any previous years of employment with the Company.  The bonus will be paid within thirty (30) days following the
Effective Date of this Agreement (as defined in Paragraph 18).

                       (b)         Severance
Payments.  The Company
will provide you severance payments during calendar year 2004 that will total,
in the aggregate, twelve (12) months of your base salary in effect as of the
Separation Date, less required payroll deductions and withholdings (the
“Severance Payments”).  The Severance
Payments will be made on the Company’s standard payroll dates, beginning with
the first payroll date following the Effective Date of this Agreement.  All Severance Payments, with the exception
of the Severance Payment provided as of December 31, 2004, shall be in an
amount equal to your regular paycheck amount as of the Separation Date.  The Severance Payment provided as of
December 31, 2004, shall be calculated as an amount equal to the difference
between the following:  (i) twelve (12)
months of your base salary in effect as of the Separation Date; and (ii) the
total amount of Severance Payments paid prior to December 31, 2004 plus the
amount of severance pay provided by the Company prior to the Effective Date of
this Agreement (if any).

                       (c)         Health
Premium Payments.  To the extent provided by the federal
and state COBRA law or, if applicable, state insurance laws, and by the
Company’s current group health insurance policies, you will be eligible to
continue your group health insurance benefits at your own expense after the
Separation Date for a period of up to thirty-six (36) months, regardless of
whether you enter into this Agreement. 
Later, you may be able to convert to an individual policy through the
provider of the Company’s health insurance, if you wish.  The Company will provide you a separate
notice that describes your rights and obligations under COBRA on or after the
Separation Date.  If you timely elect continued
coverage under COBRA, and enter into this Agreement, the Company, as an
additional severance benefit, will pay your COBRA premiums sufficient to
continue your and your dependents’ (if any) health insurance coverage at the
level in effect as of the Separation Date through the earlier of the
following:  (i) the date that you
and your dependents become eligible for group health insurance benefits through
a new employer; or (ii) January 31, 2005. 
You agree to promptly notify the Company in writing if you become
eligible for group health insurance coverage through a new employer prior to
January 31, 2005.

                       (d)         Stock
Option Grants.  All of
your stock option grants (the “Options”) and any other equity interests you may
have with the Company will cease vesting effective as of the Separation
Date.  As an additional severance
benefit, the Company agrees to accelerate the vesting of all Options so that
the Options are fully vested and immediately exercisable effective as of the Separation
Date.  In addition, the Options are
hereby amended to provide that you will be able to exercise the vested and
unexercised shares subject to the Options within the earlier of the following: 
(i) any time within three (3) years following the Separation Date; or
(ii) the date that the Option term expires. 
The Options may cease being incentive stock options under Section 422 of
the Internal Revenue Code three (3) months after the Separation Date, and you
are hereby advised to seek independent advice concerning the tax implications
of the Options.  Your rights to exercise any vested shares subject to the Options are set
forth in the Company’s stock option plan and your individual Options
agreements, except as modified herein. 
Attached, as Exhibit B, is a spreadsheet providing detail regarding your
Options, their respective exercise prices, and expiration dates.

- 2 -

                       (e)         Rent-Free
Office Space.  The Company agrees to make available
rent-free furnished office space for up to six (6) months after the Separation
Date, which you may be required to share with Carter Lee, Donald Francis and
VaxGen employees or designees.  If you
inform the Company that you intend to utilize such office space, the provided
office space shall be large enough to include separate, individual offices for
you, Carter Lee, and Donald Francis (to the extent that each has requested the
office space), such offices to be similar in size to the office that you
occupied while employed by the Company, and shall include shared use of a
common area.  VaxGen will also allow you
to use its conference rooms which are in the same general area as the provided
office space on an advance reservation basis, on such dates and at such times
as these rooms are not already reserved for VaxGen use.  You must inform the Company in writing,
within thirty (30) days after the Separation Date, if you intend to utilize
such office space.  The Company shall
select the office space, which will be located in VaxGen’s corporate headquarters
or within a ten (10) mile radius of its corporate headquarters.  The Company will pay for the lease of this
office space, will pay the electrical bills, and will provide office telephone
service in this office space (up to a total maximum monthly amount of $600 for
telephone service).  Other than as
stated herein, VaxGen will provide no other equipment or materials.  If you wish to vacate this office space
before the expiration of six (6) months after you begin using the office space,
you may do so by providing thirty (30) days written notice to the Company.

                       (f)         Reimbursement
of Travel and Hotel Costs for Geneva Convention.  Prior to the Separation Date, you informed
the Company that you wished to attend the World Health Organization AIDS
conference in Geneva held in early February, even though this is after the
Separation Date, and you requested that VaxGen reimburse certain costs to
attend this conference.  Although you
attended the conference in your individual capacity and not on behalf of
VaxGen, the Company agrees to reimburse your reasonable travel costs and hotel
costs (for the evening prior to your attendance at the conference and the
night(s) of each day of your active participation in the conference), provided that you submit satisfactory
documentation of such costs to the Company. 
These reimbursements will be made within thirty (30) days after the
Company’s receipt of such satisfactory documentation.  These reimbursements will be made on a lump sum basis without withholdings
and deductions, and the Company will issue you an IRS 1099 Form with respect to
these reimbursements.  The Company will
not provide any other compensation for your attendance at this conference.  

          6.          Consulting
Agreement.  Following
the Separation Date, the Company agrees to engage you, and you agree to make
yourself available to perform services, as a consultant under the terms
specified below.

                      (a)         Consulting
Period.  The
consulting relationship (“Consultancy”) shall commence on the Effective Date of
this Agreement, and will continue for six (6) months thereafter, unless
terminated earlier pursuant to section 6(g) of this Agreement (the “Consulting
Period”).  The Consulting Period can be
extended by mutual written agreement of the parties.

- 3 -

                      (b)         Consulting
Services.  During the
Consulting Period, you will be available to consult with the Company in any
areas within your expertise at the specific written request of the Company’s
Chief Executive Officer or his Designee (as defined herein).  As referenced in this Agreement, the
“Designee” shall mean an individual provided written authorization by the Chief
Executive Officer to act as his designee for the purposes of this
Agreement.  You agree to exercise the
highest degree of professionalism and to utilize your expertise and creative
talent in performing these services. 
During the Consulting Period, you shall make yourself available to
perform consulting services for a total of up to two (2) days per month,
although the Company is not obligated to authorize any specific amount of
consulting services during the Consulting Period.  The Company expects that the consulting services will be
performed outside of the Company’s premises except when the Chief Executive
Officer or his Designee informs you such services may be provided on the
Company’s premises.  The Company shall
not require such services in such a manner as to unreasonably interfere with
your other professional or non-profit activities.  You agree that, during the Consulting Period, you will not
represent or purport to represent the Company in any manner whatsoever to any
third party, bind the Company in any agreement, or direct the activities of
Company employees, unless authorized by the Company in writing to do so.  After
the Separation Date, you will not be considered a Company employee and you will
not be entitled to any of the benefits that the Company may make available to
its employees, such as group insurance, workers’ compensation insurance
coverage, profit sharing or retirement benefits, except as specifically
provided in this Agreement.  

                      (c)         Consulting
Fees.  During the
Consulting Period, the Company will provide consulting fees for authorized
consulting services at the rate of $1,000 per day, or pro-rata amount thereof
(the “Consulting Fees”) as your sole compensation for the consulting
services.  You must provide monthly
invoices to the Company for your consulting services.  Due to your status as an independent contractor, the Consulting
Fees will be paid without deductions and withholdings of any kind.  The Company will issue you an IRS 1099 Form
with respect to your Consulting Fees. 
You acknowledge that you will be entirely responsible for the payment of
all taxes due and owing as a result of your Consulting Fees.  You hereby indemnify the Company and hold it
harmless from any liability for any taxes, contributions, penalties, and
interest that may be assessed by any taxing or governmental authority against
the Company with respect to the Consulting Fees.

                      (d)         Expenses.  The Company will reimburse
you for reasonable, documented business expenses incurred by you during the
Consulting Period pursuant to its regular business practice, provided that
these expenses have been pre-approved by the Company in writing.

                      (e)         Protection
of Information.  You
agree that, during the Consulting Period and thereafter, you will not use or
disclose any Confidential Proprietary Information (as defined below) or
materials of the Company that you obtain or develop in the course of performing
consulting services for the Company, except with the advance written permission
of the Company’s Chief Executive Officer or his Designee.  For purposes of this Agreement,
“Confidential Proprietary Information” shall include all information that is
not already in the public domain by virtue of such information having been
disclosed outside of the Company, in the form of authorized publication in
journals, publicly-disseminated reports, and by WebCast, or disclosed in
written form made publicly available in connection with professional
conferences or seminars that are open to the public, or in written form made
publicly available in connection with any other authorized public
disclosure.  In the event of a dispute
under this Paragraph 6(e) concerning information that you used or disclosed,
you will be required to demonstrate, including by providing tangible proof,
that such information was in the public domain as of the date of your
disclosure or use.  In all situations,
it shall not be considered a breach of this Agreement or the Employee’s
Proprietary Information and Inventions Agreement (attached hereto as Exhibit C)
if you provide any form of information when required by legal process.  Any and all work product you create in
connection with the consulting services will be the sole and exclusive property
of the Company.  You hereby assign to
the Company all right, title, and interest in all inventions, techniques,
processes, materials, and other intellectual property developed in the course
of performing consulting services for the Company. 

- 4 -

                      (f)         Other
Work Activities.  Unless
you obtain advance written authorization from the Company’s Chief Executive
Officer or his Designee, during the Consulting Period, you will not carry on
any business or activity (whether directly or indirectly, as a partner,
stockholder, principal, agent, director, affiliate, employee or consultant)
that (i) relates to the Company’s projects concerning AIDSVAX or other vaccines
targeting HIV surface protein, or relates to the Company’s projects concerning
development of vaccines against anthrax, smallpox, plague or Severe Acute
Respiratory Syndrome, which projects you were involved in during your
employment with VaxGen; or (ii) directly relates to or that materially
interferes with any services you are providing to the Company at any time during
the Consulting Period.  Notwithstanding
the restriction in the preceding sentence, you shall not be prohibited from
being a passive shareholder of up to one percent (1%) of the public stock of a
competitive entity.  During the
Consulting Period, you may engage in any form of employment, consulting, or
business activity not prohibited by this paragraph, provided that it shall not
materially interfere with your ability to perform the consulting services for
the Company.

                      (g)         Access
to HIV Information.  The
Company agrees to provide you with access, during the Consulting Period, to its
information and materials (including but not limited to emails, electronic
files, and documents) concerning HIV for the sole purpose of your consulting
services to the Company or for any other purpose authorized in writing by the
Company’s Chief Executive Officer or his Designee.  For the avoidance of doubt, you understand and agree that you
will not be authorized to use or disclose such Company information and
materials other than as specified herein.

                      (h)         Termination.  The Company shall have the right to
terminate the Consultancy for any reason upon fifteen (15) days advance written
notice to you.  In addition, the Company
may terminate the Consultancy immediately in the event of your material breach
of this Agreement or of your Employee’s Proprietary Information and Inventions
Agreement (attached hereto as Exhibit C). 

          7.          No
Other Compensation or Benefits.  You acknowledge that, except as expressly provided in this
Agreement, you have not earned and will not receive from the Company any
additional compensation relating to or arising from employment with the Company
(including base salary, bonus or incentive compensation), severance, or
benefits before or after the Separation Date, with the exception of any vested
right you may have under the express terms of a written ERISA-qualified benefit
plan (e.g., 401(k) account).       

          8.          Expense
Reimbursements.  You
agree that, within sixty (60) days after the Separation Date, you will submit
your final documented expense reimbursement statement reflecting all business
expenses you incurred through the Separation Date, if any, for which you seek reimbursement.  The Company will reimburse you for these
expenses pursuant to its regular business practices.

- 5 -

          9.          Return
of Company Property. 
You agree that, on the Effective Date of this Agreement or earlier if
requested by the Company, you will return to the Company all Company documents
(and all copies thereof) and other Company property in your possession or
control, including, but not limited to, any Company equipment, files,
correspondence, memoranda, reports, lists, proposals, agreements, drafts,
notes, minutes, drawings, records, plans, forecasts, purchase orders, research
and development information, customer information and contact lists, sales and
marketing information, personnel information, vendor information, promotional
literature and instructions, financial and operational information, technical
information, specifications, computer-recorded information, electronic
information (including email and correspondence), other tangible property,
credit cards, entry cards, identification badges and keys; and, any materials
of any kind that contain or embody any proprietary or confidential information
of the Company (and all reproductions thereof in whole or in part).  You agree to make a diligent search to
locate any such documents, property and information on or before the Separation
Date.  In addition, if you have used any
personal computer, server, or e-mail system to receive, store, review, prepare
or transmit any Company confidential or proprietary data, materials or information,
you agree to provide the Company with a computer-useable copy of such
information and then permanently delete and expunge such Company confidential
or proprietary information from those systems; and you agree to provide the
Company access to your system as requested to verify that the necessary copying
and/or deletion is done.  VaxGen has
contractual obligations to third parties, including Genentech, the National
Institute of Health, and the Walter Reed Institute, that could require VaxGen
to provide certain information, documents or other materials to such third
parties in the future.  Therefore, your
obligations set forth in this paragraph include information, documents and
other materials that VaxGen may be required to provide to such third parties,
including information related to technology provided to VaxGen by Genentech
pursuant to their license agreements.  Your timely return of all Company property is a
precondition of your receipt of the Severance Benefits.  Notwithstanding the above, you will be
allowed to retain any specific Company property for which you have obtained
written authorization from the Company’s Chief Executive Officer or his
Designee, and the Company’s Chief Executive Officer and his Designee agree to
use their best efforts to respond, in writing, to your written requests to
retain specific Company property within thirty (30) days of the receipt of your
written request.

          10.        Proprietary
Information Obligations. 
You acknowledge your continuing obligations under the Employee’s
Proprietary Information and Inventions Agreement between you and the Company
signed as of November 21, 1997 (the “Proprietary Information Agreement”).  A copy of the Proprietary Information
Agreement is attached hereto as Exhibit C.  
VaxGen agrees that nothing in the Proprietary Information Agreement will
prohibit you from using or disclosing information that is in the public domain
as of the date of your use or disclosure, provided
that such information is not in the public domain due to your breach
of any written agreement with the Company. 

- 6 -

          11.        Confidentiality.  The provisions of this Agreement will be
held in strictest confidence by you and the Company and will not be publicized
or disclosed in any manner whatsoever; provided, however, that:  (a) you may disclose this Agreement in
confidence to your immediate family; (b) the parties may disclose this
Agreement in confidence to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors; (c) the Company may disclose this
Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or
as otherwise required by law.  In
particular, and without limitation, you agree not to disclose the terms of this
Agreement to any current or former employee of the Company.

          12.        Nondisparagement.  Both you and the Company
(through its officers and directors) agree not to disparage the other party,
and the other party’s officers, directors, employees, shareholders and agents,
in any manner likely to be materially harmful to them or their business,
business reputation or personal reputation; provided that both you and the
Company may at any time respond to any question, inquiry or request for
information when required by legal process. 
In the event that you are concerned about proposed statements you wish
to make regarding scientific or other matters, you may provide the proposed
statement, in writing, to VaxGen’s Chief Executive Officer or his Designee in
order to obtain VaxGen’s written authorization for the proposed statement, and
VaxGen agrees that such authorization will not be unreasonably withheld, and
provided within ten (10) business days. 
Likewise, in the event that the Company is concerned about proposed
statements it wishes to make about you regarding scientific or other matters,
the Company may provide the proposed statement, in writing, to you in order to
obtain your written authorization for the proposed statement, and you agree
that such authorization will not be unreasonably withheld, and provided within
ten (10) business days.  Both you and
VaxGen may submit to the other up to two (2) such proposed statements each
week.  

          13.       No
Voluntary Adverse Action. 
You agree that you will not voluntarily assist any person in bringing or
pursuing any litigation, arbitration, administrative claim or other formal proceeding,
or any proposed litigation, arbitration, administrative claim, or other formal
proceeding, against the Company, its parents, subsidiaries, affiliates,
distributors, officers, directors, employees or agents, unless pursuant to
legal process.  The restrictions set
forth in this Paragraph 13 do not apply to any actions you may bring to enforce
this Agreement or to any actions you may bring based on claims arising after
the date that you sign this Agreement.  

          14.        Cooperation.  Before and after the Separation Date, you
agree to cooperate fully with the Company in connection with its actual or
contemplated defense, prosecution, or investigation of any claims, demands, or
other matters arising from events, acts, or failures to act that occurred
during the time period in which you were employed by the Company.  Such cooperation includes, without
limitation, making yourself available upon reasonable notice, without subpoena,
for interviews, depositions, and trial testimony and you shall be allowed to
provide truthful and accurate information or testimony in any proceeding
subject to this Paragraph 14 of this Agreement.  The Company will reimburse you for reasonable out-of-pocket
expenses you incur in connection with any such cooperation (excluding forgone
wages, salary, or other compensation), and will make reasonable efforts to
accommodate your scheduling needs.  For
the avoidance of doubt, the Company will not pay Consulting Fees or any other
compensation for your cooperation under this Paragraph 14.  To the extent required by law or any
pre-existing agreements between the parties, you will have the right to retain
counsel of your own selection and the Company will pay your reasonable
attorneys’ fees within thirty (30) days after VaxGen’s receipt of satisfactory
documentation of your attorneys’ fees; however, such documentation shall not
require you to waive the attorney-client privilege. 

- 7 -

          15.        Nonsolicitation.  You acknowledge your continuing obligations
under Paragraph 13 of the Employment Agreement, which apply for twelve (12)
months after the Separation Date.  

          16.        No
Admissions.  Nothing
contained in this Agreement shall be construed as an admission by you or the
Company of any liability, obligation, wrongdoing or violation of law.

          17.        Release
of Claims.  Except as
otherwise set forth in this Agreement, in exchange for the consideration under
this Agreement to which you would not otherwise be entitled, you hereby
generally and completely release the Company and its parents, subsidiaries,
successors, predecessors and affiliates, and its and their directors, officers,
employees, shareholders, agents, attorneys, insurers, affiliates and assigns,
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring at any time prior to and including the date you sign this
Agreement.  This general release
includes, but is not limited to: (a) all claims arising out of or in any way
related to your employment with the Company or the termination of that
employment; (b) all claims related to your compensation or benefits,
including salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership or
equity interests in the Company; (c) all claims for breach of contract,
wrongful termination, and breach of the implied covenant of good faith and fair
dealing (including but not limited to claims arising under or based on the
Employment Agreement); (d) all tort claims, including claims for fraud,
defamation, emotional distress, and discharge in violation of public policy;
and (e) all federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination
in Employment Act (as amended) (“ADEA”), and the California Fair Employment and
Housing Act (as amended). 
Notwithstanding the above, you do not release the Company from any
obligation to indemnify you pursuant to contract, the Company’s articles or by-laws,
or applicable law.  You represent that
you have no lawsuits, claims or actions pending in your name, or on behalf of
any other person or entity, against the Company or any other person or entity
subject to the release granted in this paragraph.  

          18.        ADEA
Waiver. You acknowledge that you are knowingly and voluntarily waiving and
releasing any rights you may have under the ADEA, and that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which you are already entitled.  You further acknowledge that you have been
advised, as required by the ADEA, that: 
(a) your waiver and release do not apply to any rights or claims
that may arise after the date that you sign this Agreement; (b) you have the
right to consult with an attorney prior to signing this Agreement (although you
may choose voluntarily not to do so); (c) you have forty-five (45) days to
consider this Agreement (although you may choose voluntarily to sign it earlier);
(d) you have seven (7) days following the date you sign this Agreement to
revoke the Agreement by providing written notice of your revocation to the
Company’s Chief Executive Officer; and (e) this Agreement will not be effective
until the date upon which the revocation period has expired, which will be the
eighth day after the date that this Agreement is signed by you (the “Effective
Date”).  You hereby acknowledge that
with this Agreement, the Company has provided you with an ADEA Disclosure Notice
Under Title 29 U.S. Code Section 626(f)(1)(H) which is attached hereto as
Exhibit D.  Additionally, since you asked for, and received, material changes in
this Agreement in your favor, you agree to waive the additional time for
considering this offer to which you would otherwise be entitled.  Thus, you agree that the required forty-five
(45) day consideration period for this Agreement will be deemed to have started
on January 29, 2004.

- 8 -

          19.        Section
1542 Waiver.  In
giving the releases set forth in this Agreement, which includes claims which
may be unknown to you at present, you acknowledge that you have read and
understand Section 1542 of the California Civil Code which reads as
follows:  “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.”  You hereby expressly waive and relinquish all rights and benefits
under that section and any law or legal principle of similar effect in any
jurisdiction with respect to your release of claims herein, including but not
limited to the release of unknown and unsuspected claims.

          20.        Dispute
Resolution.  To ensure
rapid and economical resolution of any disputes which may arise under this
Agreement, you and the Company agree that any and all claims, disputes or
controversies of any nature whatsoever arising from or regarding the
interpretation, performance, negotiation, execution, enforcement or breach of
this Agreement shall be resolved by confidential, final and binding arbitration
conducted before a single arbitrator with Judicial Arbitration and Mediation
Services, Inc. (“JAMS”) in San Francisco County, California, under the
then-applicable JAMS rules.  The parties
acknowledge
that by agreeing to this arbitration procedure, they waive the right to resolve
any such dispute through a trial by jury, judge or administrative proceeding.  The Company shall bear JAMS’ arbitration
fees and administrative costs.  The
arbitrator shall:  (a) have the
authority to compel adequate discovery for the resolution of the dispute and to
award such relief as would otherwise be permitted by law; and (b) issue a
written arbitration decision including the arbitrator’s essential findings and
conclusions and a statement of the award. 
The arbitrator, and not a court, shall also be authorized to determine
whether the provisions of this paragraph apply to a dispute, controversy or claim
sought to be resolved in accordance with these arbitration procedures.  Nothing in this Agreement is intended to
prevent either you or the Company from obtaining injunctive relief in court to
prevent irreparable harm pending the conclusion of any such arbitration.  

          21.        Miscellaneous.  This Agreement, including all exhibits,
constitutes the complete, final and exclusive embodiment of the entire
agreement between you and the Company with regard to its subject matter.  It is entered into without reliance on any
promise or representation, written or oral, other than those expressly
contained herein, and it supersedes any other such promises, warranties or
representations.  This Agreement may not
be modified or amended except in a writing signed by both you and a duly
authorized officer of the Company.  This
Agreement will bind the heirs, personal representatives, successors and assigns
of both you and the Company, and inure to the benefit of both you and the
Company, their heirs, successors and assigns. 
If any provision of this Agreement is determined to be invalid or
unenforceable, in whole or in part, this determination will not affect any
other provision of this Agreement and the provision in question shall be
modified so as to be rendered enforceable in a manner consistent with the
intent of the parties insofar as possible under the applicable law.  This Agreement will be deemed to have been
entered into and will be construed and enforced in accordance with the laws of
the State of California as applied to contracts made and to be performed
entirely within California without regard to conflicts of law principles.  Any ambiguity in this Agreement shall not be
construed against either party as the drafter. 
Any waiver of a breach of this Agreement shall be in writing and shall
not be deemed to be a waiver of any successive breach.  This Agreement may be executed in
counterparts which shall be deemed to be part of one original, and facsimile
signatures shall be equivalent to original signatures.

- 9 -

          22.        Forfeiture
Actions.  You
understand and agree that your entitlement to receive the Severance Benefits,
and the Company’s obligation to provide Severance Payments, payment of COBRA
premiums, and rent-free office space hereunder, will cease immediately in the
event that you materially breach your Proprietary Information Agreement, or
materially breach Paragraphs 11, 12, 13, 14 or 15 of this Agreement, provided
that, the Company first provides you with written notice and an opportunity to
cure such breach (which must be cured as soon as practicable but in no event
later than thirty (30) days after the breach), if the breach is susceptible to
cure.   

          23.        Continuing
Indemnification Rights and Insurance Coverage. 
You and VaxGen agree that the certain Indemnity
Agreement between you and the Company dated December 2, 2002 (a copy of which
is attached as Exhibit E), and Paragraph 17 of the Employment Agreement, will
continue in effect in accordance with their respective terms.  

          24.        Reimbursement
of Attorney’s Fees. 
Within thirty (30) days following the Effective Date of this Agreement,
the Company agrees to reimburse you for the costs of your reasonable attorneys’
fees and costs for the review and negotiation of this Agreement, up to a
maximum reimbursement of $2,000.  You
must provide satisfactory documentation of your attorneys’ fees and costs in
order to receive reimbursement; however, such documentation shall not require
you to waive the attorney-client privilege.  

- 10 -

If this Agreement is
acceptable to you, please sign below
and return the original to me.   

I wish you the best in
your future endeavors.

Sincerely,

VAXGEN, INC.  

	
   
	
   

	
  By:  
	
  /s/ Lance Gordon

	
   
	
  

  	
   

	
   
	
       Lance Gordon

	
   
	
       Chief Executive
  Officer

Exhibit A – Employment
Agreement

Exhibit B – Stock Option Grant Spreadsheet

Exhibit C -- Proprietary Information Agreement

Exhibit D -- ADEA Disclosure Notice Under
Title 29 U.S. Code Section 626(f)(1)(H)

Exhibit E – Indemnity Agreement

UNDERSTOOD AND AGREED:

	
   

	
  /s/ Phillip Berman 

  
	
  

  	
   

	
  Phillip Berman

Date:
   February 13, 2004

- 11 -

EXHIBIT A

EMPLOYMENT
AGREEMENT

Previously
filed as Exhibit 10.34 on Form 10-Q filed May 15, 2002

- 12 -

EXHIBIT B

STOCK
OPTION GRANT SPREADSHEET

Phillip Berman

Termination Date - 1/31/2004

Exercisable Options

	
  Number
	
   
	
  Grant
Date
	
   
	
  Plan/
Type
	
   
	
  Price
	
   
	
  Shares
Granted
	
   
	
  Shares
Exercised
	
   
	
  Shares
Exercisable
	
   
	
  Vesting

  Stop Date
	
   
	
  Total
Price
	
   
	
  Last Date

  To Exercise
	
   

	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   
	
  

  	
   

	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   
	
   

	
  000155
	
   
	
  5/31/00
	
   
	
  96SO/NQ
	
   
	
  $
	
  13.500000
	
   
	
  13,500
	
   
	
  0
	
   
	
  13,500
	
   
	
  1/31/04
	
   
	
  $
	
  182,250.00
	
   
	
  1/31/07
	
   

	
  000267
	
   
	
  4/6/01
	
   
	
  96SO/NQ
	
   
	
  $
	
  19.440000
	
   
	
  15,000
	
   
	
  0
	
   
	
  15,000
	
   
	
  1/31/04
	
   
	
  $
	
  291,600.00
	
   
	
  1/31/07
	
   

	
  000005
	
   
	
  11/17/97
	
   
	
  96SO/NQ
	
   
	
  $
	
  7.000000
	
   
	
  57,140
	
   
	
  0
	
   
	
  57,140
	
   
	
  1/31/04
	
   
	
  $
	
  399,980.00
	
   
	
  1/31/07
	
   

	
  000313
	
   
	
  11/17/97
	
   
	
  96SO/NQ
	
   
	
  $
	
  7.000000
	
   
	
  142,860
	
   
	
  0
	
   
	
  142,860
	
   
	
  1/31/04
	
   
	
  $
	
  1,000,020.00
	
   
	
  1/31/07
	
   

	
  000315
	
   
	
  4/6/01
	
   
	
  96SO/NQ
	
   
	
  $
	
  9.430000
	
   
	
  15,000
	
   
	
  0
	
   
	
  15,000
	
   
	
  1/31/04
	
   
	
  $
	
  141,450.00
	
   
	
  1/31/07
	
   

	
  000316
	
   
	
  2/7/02
	
   
	
  96SO/NQ
	
   
	
  $
	
  9.430000
	
   
	
  26,854
	
   
	
  0
	
   
	
  26,854
	
   
	
  1/31/04
	
   
	
  $
	
  253,233.22
	
   
	
  1/31/07
	
   

	
  000009
	
   
	
  4/22/99
	
   
	
  96SO/NQ
	
   
	
  $
	
  9.500000
	
   
	
  15,000
	
   
	
  0
	
   
	
  15,000
	
   
	
  1/31/04
	
   
	
  $
	
  142,500.00
	
   
	
  1/31/07
	
   

	
  000466
	
   
	
  7/22/02
	
   
	
  96SO/NQ
	
   
	
  $
	
  5.740000
	
   
	
  15,012
	
   
	
  0
	
   
	
  15,012
	
   
	
  1/31/04
	
   
	
  $
	
  86,168.88
	
   
	
  1/31/07
	
   

	
  000467
	
   
	
  7/22/02
	
   
	
  96SO/NQ
	
   
	
  $
	
  5.740000
	
   
	
  17,988
	
   
	
  0
	
   
	
  17,988
	
   
	
  1/31/04
	
   
	
  $
	
  103,251.12
	
   
	
  1/31/07
	
   

	
  000317
	
   
	
  2/7/02
	
   
	
  96SO/NQ
	
   
	
  $
	
  9.430000
	
   
	
  3,146
	
   
	
  0
	
   
	
  3,146
	
   
	
  1/31/04
	
   
	
  $
	
  29,666.78
	
   
	
  1/31/07
	
   

	
   
	
   
	
   
	
   
	
  TOTALS     
	
   
	
  321,500
	
   
	
  0
	
   
	
  321,500
	
   
	
   
	
   
	
  $ 
	
  2,630,120.00
	
   
	
   
	
   

- 13 -

EXHIBIT C

EMPLOYEE’S
PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

I recognize that VaxGen,
Inc., a Delaware corporation, together with its subsidiaries (hereinafter
collectively called the “Company”) is engaged in a continuous program of
research, development, and production respecting its business, present and
future, including fields generally related to its business.  I understand that:

	
   
	
  A.
	
  As part of my employment by the Company I am
  expected to make new contributions and inventions of value to the Company;

	
   
	
   
	
   

	
   
	
  B.
	
  My employment creates a relationship of confidence
  and trust between me and the Company with respect to any information:

	
   
	
   
	
   
	
   

	
   
	
   
	
  i.
	
  Applicable to the business of the Company; or

	
   
	
   
	
   
	
   

	
   
	
   
	
  ii.
	
  Applicable to the business of any client or customer
  of the Company, which may be made known to me by the Company or by any client
  or customer of Company, or learned by me during the period of my employment.

	
   
	
   
	
   
	
   

	
   
	
  C.
	
  As used in this Agreement, the period of my
  employment by the Company includes any time during which I may be retained by
  the Company as a consultant or independent contractor.

	
   
	
   
	
   

	
   
	
  D.
	
  The Company possesses and will continue to possess
  information that has been created, discovered, developed, or otherwise become
  known to the Company (including, without limitation, information created,
  discovered, developed, or made known by me during the period of or arising
  out of my employment by the Company) and/or in which property rights have
  been assigned or otherwise conveyed to the Company, which information has
  commercial value in the business in which the Company is engaged.  All of the aforementioned information is
  hereinafter called “VaxGen Proprietary Information.”  By way of illustration, but not
  limitation, VaxGen Proprietary Information includes trade secrets, processes,
  formulas, data and know-how, improvements, inventions, techniques, marketing
  plans, strategies, forecasts, and customer lists.

	
   
	
   
	
   

	
   
	
   
	
  By virtue of a License Agreement between the Company
  and Genentech, Inc. (“Genentech”), a Services Agreement between the Company
  and Genentech, and other agreement(s) that may be entered into between the
  Company and Genentech (collectively, the “Genentech Agreements”), the Company
  and its employees have been and will continue to be afforded substantial
  access to proprietary technology and information of Genentech (collectively,
  “Genentech Proprietary Information”). 
  By way of illustration, but not limitation, Genentech Proprietary
  Information includes trade secrets, processes, formulas, data and know-how
  (including computer databases, improvements, inventions, techniques,
  marketing plans, strategies, forecasts, and customer lists.  VaxGen Proprietary Information and
  Genentech Proprietary Information are referred to collectively herein as the
  “Proprietary Information”.

- 14 -

	
  In consideration of my employment or continued
  employment, as the case may be, and the compensation received by me from the
  Company from time to time, I hereby agree as follows:
  
	
   
	
   
	
   

	
   
	
  1.
	
  Subject to Paragraph 5 hereof, all VaxGen
  Proprietary Information shall be the sole property of the Company and its
  assigns, and the Company and its assigns shall be the sole owner of all
  patents and other rights in connection therewith, subject to the terms of the
  Genentech Agreements.  I hereby assign
  to the Company any rights I may have or acquire in such VaxGen Proprietary
  Information.  At all times, both
  during my employment by the Company and after termination of such employment,
  I will keep in confidence and trust all VaxGen Proprietary Information, and I
  will not use or disclose any VaxGen Proprietary Information or anything
  relating to it without the written consent of the Company, except as may be
  necessary in the ordinary course of performing my duties as an employee of
  the Company.

	
   
	
   
	
   

	
   
	
   
	
  All Genentech Proprietary Information shall be the
  sole property of Genentech and its assigns, and Genentech and its assigns
  shall be the sole owner of all patents and other rights in connection
  therewith, subject to the terms of the Genentech Agreements.  I do not have and shall not acquire any
  rights in such Genentech Proprietary Information.  At all times, both during my employment by the Company and
  after termination of such employment, I will keep in confidence and trust all
  Genentech Proprietary Information, and I will not use or disclose any Genentech
  Proprietary Information or anything relating to it without the written
  consent of the Company (to the extent authorized under the Genentech
  Agreements) or Genentech, except as may be necessary in the ordinary course
  of performing my duties as an employee of the Company.  I understand and acknowledge, and the
  Company understands and acknowledges, that Genentech is affording the Company
  and its employees substantial access to Genentech Proprietary Information in connection
  with the Genentech Agreements in reliance on the provisions set forth herein,
  and that breach of such provisions could result in immediate material,
  irreparable harm to Genentech. 
  Genentech is a third party beneficiary of this Agreement.

	
   
	
   
	
   

	
   
	
  2.
	
  I agree that during the period of my employment by
  the Company, I will not, without the Company’s express written consent,
  engage in any employment or activity other than for the Company in any
  business in which the Company is now or may hereafter become engaged.  In the event of the termination of my
  employment by me or by the Company for any reason, I will deliver to the
  Company all documents and data of any nature pertaining to my work with the
  Company and I will not take with me any documents or data of any description,
  or any reproduction thereof, containing or pertaining to any Proprietary
  Information.

- 15 -

	
   
	
  3.
	
  I will promptly disclose to the Company, or any
  persons designated by it, all improvements, inventions, formulas, processes,
  techniques, know-how, and data, whether or not patentable, made or conceived
  or reduced to practice or learned by me, either alone or jointly with others,
  during the period of my employment which are related to or useful in the
  business of the Company, or result from tasks assigned me by the Company or result
  from use of premises owned, leased, or contracted for by the Company (all
  said improvements, inventions, formulas, process, techniques, know-how, and
  data shall be collectively hereinafter called “Inventions”).

	
   
	
   
	
   

	
   
	
  4.
	
  Subject to Paragraph 5 hereof, I agree that all
  Inventions shall be the sole property of the Company and its assigns, and the
  Company and its assigns shall be the sole owner of all patents and other
  rights in connection herewith, subject to the terms of the Genentech
  Agreements.  I hereby assign to the
  Company any rights I may have or acquire in such Inventions.  I further agree as to all Inventions to
  assist the Company and Genentech in every proper way (but at the Company’s
  expense) to obtain and from time to time enforce patents on said Inventions
  in any and all countries, and to that end I will execute all documents for
  use in applying for and for obtaining such patents thereon and enforcing
  same, as the Company or Genentech may desire, together with any assignments
  thereof to the Company or Genentech, as the case may be.  My obligations to assist in obtaining and
  enforcing patents for such Inventions in any and all countries shall continue
  beyond the termination of my employment, but the Company shall compensate me
  at a reasonable rate after such termination for time actually spent by me at
  the Company’s or Genentech’s request on such assistance.

	
   
	
   
	
   

	
   
	
  5.
	
  I understand that the Company’s right with regard to
  certain things invented or co-invented by me are subject to Sections
  2870-2872 of the California Labor Code, under which I have no obligation to
  assign rights in an invention for which no equipment, supplies, facilities or
  trade secret information of the Company was used and which was developed
  entirely on my own time, and (a) which does not relate (1) to the business of
  the Company or (2) to the Company’s actual or demonstrably anticipated
  research of development, or (b) which does not result from any work performed
  by me for the Company.

	
   
	
   
	
   

	
   
	
  6.
	
  As a matter of record I attach hereto a complete
  list of all inventions or improvements relevant to the subject matter of my
  employment by the Company which have been made, conceived or reduced to
  practice by me alone or jointly with others prior to my employment by the
  Company, which I desire to remove from the operation of this Agreement; and I
  covenant that such list is complete. 
  If no such list is attached to this Agreement, I represent that I have
  no such inventions or improvements at the time of signing this Agreement.

	
   
	
   
	
   

	
   
	
  7.
	
  I represent that my performance of all the terms of
  this Agreement and as an employee of the Company does not and will not breach
  any agreement to keep in confidence proprietary information acquired by me in
  confidence or in trust prior to my employment by the Company and I have not
  entered into, nor will I enter into, any agreement (written or oral) in
  conflict herewith.

- 16 -

	
   
	
  8.
	
  I understand that, as part of the consideration of
  the offer of employment extended to me by the Company and of my employment by
  the Company, I will not bring with me to the Company or use in the
  performance of my responsibilities at the Company materials or documents of
  any former employer, unless I have obtained written authorization from the
  former employer for their possession and use.  I certify that:

	
   
	
   
	
   

	
   
	
   
	
  1.
	
  I have brought no proprietary or confidential
  materials or documents to the Company; or

	
   
	
   
	
   
	
   

	
   
	
   
	
  2.
	
  I have brought proprietary or confidential materials
  or documents to the Company and I have attached to this Agreement a list of
  such materials or documents, together with an authorization for their
  possession and use as shown in the attached letter; or

	
   
	
   
	
   
	
   

	
   
	
   
	
  3.
	
  I have brought proprietary or confidential materials
  or documents to the Company but I have not yet attached a list or obtained a
  written authorization for their possession and use.  I understand that a representative from Human Resources will
  contact me within the first week of my employment and request such list and
  authorization.  I further understand
  that in the event I am unable to obtain such authorization, I will NOT USE
  any proprietary or confidential materials or documents during the course of
  my employment with the Company AND I will return any such materials or
  documents to the former employer.

	
   
	
   
	
   
	
   

	
  I also understand that, in my employment with the
  Company, I am not to breach any obligation of confidentiality that I have to
  any former employer, and I agree that I shall fulfill all such obligations
  during my employment with the Company.
	
   
	
   
	
   

	
   
	
  9.
	
  This Agreement shall be effective as of the first
  day of my employment by the Company, which is November 15, 1997.

	
   
	
   
	
   

	
   
	
  10.
	
  This Agreement shall be binding upon me, my heirs,
  executors, assigns, and administrators and shall inure to the benefit of the
  Company, its successors and assigns.

	
   
	
  DATED:  November 21, 1997
	
   
	
  BY:     /s/
  Phillip W. Berman

	
   
	
   
	
  	
   
	
   
	
  

  
	
   
	
   
	
   
	
              PHILLIP
  BERMAN

	
   
	
   	
   
	
   

	
   
	
  ACCEPTED AND AGREED TO:
	
   
	
   

	
   
	
   
	
   
	
   

	
   
	
  VAXGEN, INC.
	
   
	
   

	
   
	
   
	
   
	
   

	
   
	
   
	
   
	
   

	
   
	
  BY:        /s/
  Don Francis
	
   
	
  DATED:  December 01, 1997

	
   
	
   
	
  

  	
   
	
   
	
  
	
   
	
   
	
  Don Francis
	
   
	
   

	
   
	
   
	
  President
	
   
	
   

	
   
	
   
	
   
	
   

	
   
	
   
	
   
	
   

								

- 17 -

	
  

  	
   
	
   
	
   

	
   
	
  Date
	
   
	
   
	
   

VaxGen, Inc.

1000 Marina Boulevard

Suite 200

Brisbane, CA 94005

I,
__________________________, propose to bring to my VaxGen employment the
following tangible materials and previously unpublished documents, which
materials and documents may be used in my VaxGen employment:

	
  

  
	
   

	
  

  
	
   

	
  

  
	
   

	
  

  
	
   

	
  

  

_____Additional sheets
attached

The signature below by a
representative of my current or former employer confirms that my continued
possession and use of these materials is authorized.

	
  AUTHORIZATION:
	
   
	
   

	
   
	
  

  	
   

	
   
	
            SIGNATURE
	
   

	
   
	
   
	
   

	
   
	
   
	
   

	
   
	
  

  	
   

	
   
	
            TITLE
	
   

	
   
	
   
	
   

	
   
	
   
	
   

	
   
	
  

  	
   

	
   
	
   
	
   

	
   
	
            EMPLOYER
	
   

	
  Very truly yours,

  
	
   
	
   
	
   

	
   
	
   
	
   

	
  

  	
   

	
   
	
   
	
  Signature

				

- 18 -

EXHIBIT D

ADEA
DISCLOSURE NOTICE UNDER TITLE 29 US CODE SECTION 626(f)(1)(H)

	
  Confidentiality
  Provision:	
  The
  information contained in this document is private and confidential.  You may not disclose this information to
  anyone except your professional advisors.
	
   
	
   

	
  1.
	
 VaxGen, Inc. employees in the positions of Vice
  President and above have been considered for the severance package program.
	
   
	
   

	
  2.
	
  Employees in the positions of Vice President and
  above whose employment will terminate on or about January 30, 2004 and March
  31, 2004 are eligible to participate in the severance package program.
	
   
	
   

	
  3.
	
  You and all others receiving this disclosure will
  have up to forty-five (45) days to review the terms and conditions of the
  severance package and to decide whether to accept the package.
			

	
  EMPLOYEES
  ELIGIBLE FOR THE SEVERANCE PACKAGE PROGRAM

  
	
   
	
   
	
   

	
  JOB TITLE

  	
   
	
  AGE

  
	
  

  	
   
	
  

  
	
   
  	
   
	
   

	
  President

  	
   
	
  61

	
   
	
   
	
   

	
  Sr. Vice President, Research and Development
	
   
	
  55

	
   
	
   
	
   

	
  Sr. Vice President, Finance and Administration
	
   
	
  51

	
   
	
   
	
   

	
  Vice President, International Clinical Research
	
   
	
  53

- 19 -

	
  EMPLOYEES
  NOT ELIGIBLE FOR THE SEVERANCE PACKAGE PROGRAM

  
	
   

	
  (RETAINED
  VICE PRESIDENTS AND ABOVE)

  
	
   

	
  JOB TITLE

  	
   
	
  AGE

  
	
  

  	
   
	
  

  
	
   
  	
   
	
   

	
  Chief Executive Officer

  	
   
	
  56

	
   
	
   
	
   

	
  Sr. Vice President, Regulatory and Quality Systems
	
   
	
  48

	
   
	
   
	
   

	
  Sr. Vice President, Medical Affairs
	
   
	
  64

	
   
	
   
	
   

	
  Sr. Vice President, Manufacturing
	
   
	
  50

	
   
	
   
	
   

	
  Vice President, Corporate Communications
	
   
	
  47

	
   
	
   
	
   

	
  Vice President, Corporate Development
	
   
	
  41

- 20 -

EXHIBIT E

INDEMNITY
AGREEMENT

THIS AGREEMENT is
made and entered into this 2nd day of December, 2002 by and between VaxGen,
Inc., a Delaware corporation (the “Corporation”), and Phillip W. Berman, Ph.D.
(“Agent”).

Recitals

WHEREAS, Agent
performs a valuable service to the Corporation in his capacity as a director
and/or executive officer of the Corporation;

WHEREAS, the
stockholders of the Corporation have adopted bylaws (the “Bylaws”) providing
for the indemnification of the directors, officers, employees and other agents
of the Corporation, including persons serving at the request of the Corporation
in such capacities with other corporations or enterprises, as authorized by the
Delaware General Corporation Law, as amended (the “Code”);

WHEREAS, the
Bylaws and the Code, by their non-exclusive nature, permit contracts between
the Corporation and its agents, officers, employees and other agents with
respect to indemnification of such persons; and

WHEREAS, in order
to induce Agent to continue to serve as a director and/or executive officer of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;

NOW, THEREFORE, in
consideration of Agent’s continued service as a director and/or executive
officer after the date hereof, the parties hereto agree as follows:

Agreement

          1.          Services
to the Corporation. 
Agent will serve, at the will of the Corporation or under separate
contract, if any such contract exists, as a director and/or executive officer
of the Corporation or as a director, officer or other fiduciary of an affiliate
of the Corporation (including any employee benefit plan of the Corporation)
faithfully and to the best of his ability so long as he is duly elected and
qualified in accordance with the provisions of the Bylaws or other applicable
charter documents of the Corporation or such affiliate; provided, however, that
Agent may at any time and for any reason resign from such position (subject to
any contractual obligation that Agent may have assumed apart from this
Agreement) and that the Corporation or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.

          2.          Indemnity
of Agent.  The
Corporation hereby agrees to hold harmless and indemnify Agent to the fullest
extent authorized or permitted by the provisions of the Bylaws and the Code, as
the same may be amended from time to time (but, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than the Bylaws or the Code permitted prior to adoption of such amendment).

- 21 -

	
            3.         Additional
  Indemnity.  In
  addition to and not in limitation of the indemnification otherwise provided
  for herein, and subject only to the exclusions set forth in Section 4
  hereof, the Corporation hereby further agrees to hold harmless and indemnify
  Agent:
	
   
	
   
	
   

	
   
	
  (a)
	
  against any and all expenses (including attorneys’
  fees), witness fees, damages, judgments, fines and amounts paid in settlement
  and any other amounts that Agent becomes legally obligated to pay because of
  any claim or claims made against or by him in connection with any threatened,
  pending or completed action, suit or proceeding, whether civil, criminal,
  arbitrational, administrative or investigative (including an action by or in
  the right of the Corporation) to which Agent is, was or at any time becomes a
  party, or is threatened to be made a party, by reason of the fact that Agent
  is, was or at any time becomes a director, officer, employee or other agent
  of Corporation, or is or was serving or at any time serves at the request of
  the Corporation as a director, officer, employee or other agent of another
  corporation, partnership, joint venture, trust, employee benefit plan or
  other enterprise; and

	
   
	
   
	
   

	
   
	
  (b)
	
  otherwise to the fullest extent as may be provided
  to Agent by the Corporation under the non-exclusivity provisions of the Code
  and Article 9 of the Bylaws.

	
   
	
   

	
            4.         Limitations
  on Additional Indemnity. 
  No indemnity pursuant to Section 3 hereof shall be paid by the
  Corporation:
	
   
	
   
	
   

	
   
	
  (a)
	
  on account of any claim against Agent solely for an
  accounting of profits made from the purchase or sale by Agent of securities
  of the Corporation pursuant to the provisions of Section 16(b) of the
  Securities Exchange Act of 1934 and amendments thereto or similar provisions
  of any federal, state or local statutory law;

	
   
	
   
	
   

	
   
	
  (b)
	
  on account of Agent’s conduct that is established by
  a final judgment as knowingly fraudulent or deliberately dishonest or that
  constituted willful misconduct;

	
   
	
   
	
   

	
   
	
  (c)
	
  on account of Agent’s conduct that is established by
  a final judgment as constituting a breach of Agent’s duty of loyalty to the
  Corporation or resulting in any personal profit or advantage to which Agent
  was not legally entitled;

	
   
	
   
	
   

	
   
	
  (d)
	
  for which payment is actually made to Agent under a
  valid and collectible insurance policy or under a valid and enforceable
  indemnity clause, bylaw or agreement, except in respect of any excess beyond
  payment under such insurance, clause, bylaw or agreement;

- 22 -

	
   
	
  (e)
	
  if indemnification is not lawful (and, in this
  respect, both the Corporation and Agent have been advised that the Securities
  and Exchange Commission believes that indemnification for liabilities arising
  under the federal securities laws is against public policy and is, therefore,
  unenforceable and that claims for indemnification should be submitted to
  appropriate courts for adjudication); or

	
   
	
   
	
   

	
   
	
  (f)
	
  in connection with any proceeding (or part thereof)
  initiated by Agent, or any proceeding by Agent against the Corporation or its
  directors, officers, employees or other agents, unless (i) such
  indemnification is expressly required to be made by law, (ii) the
  proceeding was authorized by the Board of Directors of the Corporation,
  (iii) such indemnification is provided by the Corporation, in its sole
  discretion, pursuant to the powers vested in the Corporation under the Code,
  or (iv) the proceeding is initiated pursuant to Section 9 hereof.

          5.         Continuation
of Indemnity.  All
agreements and obligations of the Corporation contained herein shall continue
during the period Agent is
a director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Agent shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving
in the capacity referred to herein.

          6.         Partial
Indemnification. 
Agent shall be entitled under this Agreement to indemnification by the
Corporation for a portion of the expenses (including attorneys’ fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay in connection with any
action, suit or proceeding referred to in Section 3 hereof even if not
entitled hereunder to indemnification for the total amount thereof, and the
Corporation shall indemnify Agent for the portion thereof to which Agent is
entitled.

          7.         Notification
and Defense of Claim. 
Not later than thirty (30) days after receipt by Agent of notice of the
commencement of any action, suit or proceeding, Agent will, if a claim in
respect thereof is to be made against the Corporation under this Agreement,
notify the Corporation of the commencement thereof; but the omission so to
notify the Corporation will not relieve it from any liability which it may have
to Agent otherwise than under this Agreement. 
With respect to any such action, suit or proceeding as to which Agent
notifies the Corporation of the commencement thereof:

	
   
	
  (a)

  	
  the Corporation will be entitled to participate
  therein at its own expense;

  

- 23 -

	
   
	
  (b)
	
  except as otherwise provided below, the Corporation
  may, at its option and jointly with any other indemnifying party similarly
  notified and electing to assume such defense, assume the defense thereof, with
  counsel reasonably satisfactory to Agent. 
  After notice from the Corporation to Agent of its election to assume
  the defense thereof, the Corporation will not be liable to Agent under this
  Agreement for any legal or other expenses subsequently incurred by Agent in
  connection with the defense thereof except for reasonable costs of
  investigation or otherwise as provided below.  Agent shall have the right to employ separate counsel in such
  action, suit or proceeding but the fees and expenses of such counsel incurred
  after notice from the Corporation of its assumption of the defense thereof
  shall be at the expense of Agent unless (i) the employment of counsel by
  Agent has been authorized by the Corporation, (ii) Agent shall have
  reasonably concluded, and so notified the Corporation, that there is an
  actual conflict of interest between the Corporation and Agent in the conduct
  of the defense of such action or (iii) the Corporation shall not in fact
  have employed counsel to assume the defense of such action, in each of which
  cases the fees and expenses of Agent’s separate counsel shall be at the
  expense of the Corporation.  The
  Corporation shall not be entitled to assume the defense of any action, suit
  or proceeding brought by or on behalf of the Corporation or as to which Agent
  shall have made the conclusion provided for in clause (ii) above; and

	
   
	
   
	
   

	
   
	
  (c)
	
  the Corporation shall not be liable to indemnify
  Agent under this Agreement for any amounts paid in settlement of any action
  or claim effected without its written consent, which shall not be
  unreasonably withheld.  The
  Corporation shall be permitted to settle any action except that it shall not
  settle any action or claim in any manner which would impose any penalty or
  limitation on Agent without Agent’s written consent, which may be given or
  withheld in Agent’s sole discretion.

          8.         Expenses.  The Corporation shall advance, prior to the
final disposition of any proceeding, promptly following request therefor, all
expenses incurred by Agent in connection with such proceeding upon receipt of
an undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.

          9.         Enforcement.  Any right to indemnification or advances
granted by this Agreement to Agent shall be enforceable by or on behalf of
Agent in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request
therefor.  Agent, in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also
the expense of prosecuting his claim. 
It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action
brought to enforce a claim for expenses pursuant to Section 8 hereof, provided
that the required undertaking has been tendered to the Corporation)
that Agent is not entitled to indemnification because of the limitations set
forth in Section 4 hereof.  Neither
the failure of the Corporation (including its Board of Directors or its
stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper shall
be a defense to the action or create a presumption that Agent is not entitled
to indemnification under this Agreement or otherwise.

          10.       Subrogation.  In the event of payment under this
Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Agent, who shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.

- 24 -

          11.       Non-Exclusivity
of Rights.  The rights
conferred on Agent by this Agreement shall not be exclusive of any other right
which Agent may have or hereafter acquire under any statute, provision of the
Corporation’s Certificate of Incorporation or Bylaws, agreement, vote of
stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.

          12.       Survival
of Rights.

	
   
	
  (a)

  	
  The rights conferred on Agent by this Agreement
  shall continue after Agent has ceased to be a director and executive officer,
  officer, employee or other agent of the Corporation or to serve at the
  request of the Corporation as a director, officer, employee or other agent of
  another corporation, partnership, joint venture, trust, employee benefit plan
  or other enterprise and shall inure to the benefit of Agent’s heirs,
  executors and administrators.

  
	
   
	
   
	
   

	
   
	
  (b)
	
  The Corporation shall require any successor (whether
  direct or indirect, by purchase, merger, consolidation or otherwise) to all
  or substantially all of the business or assets of the Corporation, expressly
  to assume and agree to perform this Agreement in the same manner and to the
  same extent that the Corporation would be required to perform if no such
  succession had taken place.

          13.       Separability.  Each of the provisions of this Agreement is
a separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof.  Furthermore, if this
Agreement shall be invalidated in its entirety on any ground, then the
Corporation shall nevertheless indemnify Agent to the fullest extent provided
by the Bylaws, the Code or any other applicable law.

          14.       Governing
Law.  This Agreement
shall be interpreted and enforced in accordance with the laws of the State of
Delaware.

          15.       Amendment
and Termination.  No
amendment, modification, termination or cancellation of this Agreement shall be
effective unless in writing signed by both parties hereto.

          16.       Identical
Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall for
all purposes be deemed to be an original but all of which together shall
constitute but one and the same Agreement. 
Only one such counterpart need be produced to evidence the existence of
this Agreement.

          17.       Headings.  The headings of the sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.

          18.       Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand to the party to whom
such communication was directed or (ii) upon the third business day after
the date on which such communication was mailed if mailed by certified or
registered mail with postage prepaid:

- 25 -

	
   
	
  (a)
	
  If to Agent, at the address indicated on the
  signature page hereof.

	
   
	
   
	
   

	
   
	
  (b)
	
  If to the Corporation, to:

	
   
	
   

	
   
	
  VAXGEN , INC.

	
   
	
  1000 Marina Blvd., Suite 200

	
   
	
  Brisbane, California 94005

	
   
	
  Attn: Lance K. Gordon

				

or to such other address
as may have been furnished to Agent by the Corporation.

- 26 -

          IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.

	  
	 VAXGEN,
        INC.

	  
	  
	  
	  

	  
	  

	  
	 By: 
        
	 /s/
        Carter A. Lee

	  
	  
	 
 
	  
	  
	  

	  
	 Title:
	   Senior
        Vice President, Finance & Administration

	  
	  
	 
	  
	  

	  
	 AGENT

	  
	  
	  

	  
	  
	  

	  
	 /s/
        Phillip W. Berman

	  
	 
 
	  
	  

	  
	 Name:
	      Phillip
        W. Berman, Ph.D.

	  
	  
	 
	  
	  

	  
	 Address:

	  
	  

	  
	 [*]

	  
	 
	  
	 

	  
	 

[*] = CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS (“[*]”), HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 

- 27 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]