Related Party Transactions and Outside Related Director Information

Escala Group, Inc. (ESCL)

10/27/2005 Proxy Information

At October 17, 2005, Afinsa and its wholly owned subsidiary, Auctentia, collectively beneficially owned approximately 68% of the Company's outstanding common stock. Esteban Perez, Chairman of the Board of Directors and an executive officer of the Company, is Chairman of the Board of Directors and Chief Executive Officer of Auctentia. Carlos de Figueiredo is the First Vice Chairman of the Board of the Company and a director of three of the Company's European subsidiaries, and is also a director of Afinsa and the son of a 50% stockholder of Afinsa. Ramon Egurbide, President of European Operations for the Company, is Managing Director of Auctentia.

Escala and its wholly owned subsidiary, GMAI Auctentia Central de Compras, S.L. ("CdC"), are parties to separate agreements with Afinsa, each dated August 1, 2003, pursuant to which Escala and CdC have agreed to act as exclusive suppliers of collectibles for Afinsa, on a worldwide basis. As amended, the purchasing agreements have a ten-year term, terminable by either party upon six months' notice. In addition to paying the purchase price for the goods sold to Afinsa under the contracts, Afinsa pays the Company an amount equal to 10% of the aggregate purchase price of all such goods sold.

On September 8, 2003, the Company consummated three separate transactions with Auctentia. In the first transaction, the Company acquired all of Auctentia's equity interests in the following operating subsidiaries of Auctentia in exchange for the issuance of 3,729,226 shares of the Company's common stock: Corinphila Auktionen; Heinrich Kohler Berliner Briefmarken-Auktionen; Heinrich Kohler Auktionshaus; Heinrich Kohler Briefmarkenhandel; Heinrich Kohler Verwaltungs; Auctentia Deutschland; and Auctentia Subastas. The aggregate purchase price was approximately $6,004,000 (3,729,226 shares at $1.61 per share). In the second transaction, under an inventory purchase agreement and in exchange for the issuance to Auctentia of 6,444,318 shares of stock, the Company acquired from Auctentia all of its right, title and interest to all of the outstanding membership interests of CdC, whose sole assets consisted of an inventory of certain philatelic and art assets. The value of the inventory was recorded based upon the closing trading price of the Company's common stock on the NASDAQ National Market on January 23, 2003, the date on which the agreement was entered into; as such, the fair value of the inventory was approximately $10,118,000 (based upon 6,444,318 shares at $1.57 per share). In the last transaction, the Company issued to Auctentia 2,826,456 shares of its common stock, for a purchase price of the Euro equivalent of US $5.0 million.

In September 2003, the Company granted options to acquire common stock of Escala as follows: (a) 22,500 options to Juan Antonio Cano, Chairman of the Board and a 50% stockholder of Afinsa; (b) 22,500 options to Vincente Martin Pena, a director of Afinsa; (c) 22,500 shares to Emilio Ballester, then an employee of Afinsa; and (d) 22,500 options to Carlos de Figueiredo, a director of both Afinsa and the Company. Each of the options granted vested 50% immediately, and 25% on each of the first and second anniversaries of the date of grant. The exercise price for the options was $4.83, which was the fair market value of the Company's stock on the date of grant.

At June 30, 2005, the Company had outstanding an accounts receivable balance from Afinsa of approximately $8,781,000. During the year ended June 30, 2005, sales to Afinsa were approximately $123,348,000.

DooCollect, S.L., a subsidiary of Afinsa, acts as agent of CdC to sell material owned by CdC to third parties through various channels, including through the Internet. Sales through DooCollect in the twelve months ended June 30, 2005 were $454,000.

CdC has sold and expects to continue to sell certain art inventory through an art gallery (known as Metta Gallery) operated by Mundimer, S.L. which is a subsidiary of Afinsa. Sales through the Metta Gallery in the twelve months ended June 30, 2005 were $169,000.

CdC also sells art material through Finarte Casa D'aste Espana, S.A. (Finarte), a subsidiary of Auctentia, which operates as an auction house. Sales of art through Finarte in the twelve month period ended June 30, 2005 were $46,000.

The Company leases office space from Afinsa in Madrid, Spain, of approximately 2,700 square feet at an annual rental of approximately $139,000. The lease will terminate in December 2005.

On June 17, 2002, the Company entered into an amendment to the employment agreement with Mr. Roberts, a director of the Company. In connection with the amendment, the Company made available to Mr. Roberts a non-interest bearing loan in the amount of $600,000. The loan is required to be repaid on an annual basis in three equal installments commencing February 18, 2006; provided that if Mr. Roberts is employed by the Company on the date that an installment is due, that installment payment will be forgiven, and that if his employment is terminated for death, disability, without cause or by Mr. Roberts with good reason (as defined), then the entire loan will be forgiven at the date of termination. If Mr. Robert's employment terminates for cause or by Mr. Roberts without good reason, then the outstanding amount of the loan will accelerate and be due and payable within 30 days of termination. An aggregate of $600,000 has been disbursed under the loan agreement; this was the outstanding principal amount of the loan throughout fiscal 2005.

Scott S. Rosenblum, a director of the Company, is a partner of the law firm Kramer, Levin, Naftalis & Frankel, LLP, which provides legal services to the Company. Anthony L. Bongiovanni, Jr., who resigned as a director of Escala on September 27, 2005, is president of Micro Strategies, Incorporated, which provides computer services to the Company. Expenditures for services rendered by Micro Strategies were approximately $280,000 for the year ended June 30, 2005.

In June 2004, one of the former minority stockholders of Corinphila Auktionen, then a majority-owned subsidiary of the Company, made a loan to that company in the aggregate amount of $1,200,000. This loan bears interest at the rate of 4% per annum and is repayable on demand, upon six month's notice. As of June 30, 2005 the loan balance was $506,000.