**Exhibit10.52**

**EMPLOYMENT AGREEMENT**

 

This EmploymentAgreement (this “Agreement”) is entered into as of January 9, 2002 (“ContractDate”) between MEDIA ARTS GROUP, INC., a Delaware corporation (the “Company”)and Herbert D. Montgomery (“Executive”).

WHEREAS, theCompany hired Executive on May 14, 2001 to serve as an employee and officer ofthe Company;

WHEREAS, theCompany desires to continue to employ Executive as an employee and officer ofthe Company and Executive desires to serve as an employee and officer of theCompany on the terms and subject to the conditions set forth herein;

NOW, THEREFORE,the parties hereby agree as follows:

# 1.             Employment and Term.

The Company herebyagrees to employ Executive, and Executive hereby agrees to be employed by theCompany, on the terms and subject to the conditions set forth in thisAgreement.  The parties agree that theterm of employment of Executive by the Company pursuant to this Agreement isthree years (the “Contract Term”), which term commenced on January 9,  2002******(“Start Date”) and shall end on January 9, 2005, unlessearlier terminated or extended as expressly provided herein (the final date ofExecutive’s employment, under any circumstances, shall be referred to herein asthe “Completion Date”; the actual period of Executive’s employment from StartDate until Completion Date shall be referred to herein as “Employment Period”).

# 2.             Position and Duties.

The Company shallemploy Executive during the Employment Period as Executive Vice President,Chief Financial Officer and Treasurer; *provided, however,* that Executive may havesuch other titles in addition to or in lieu thereof as the Company andExecutive may mutually agree.  Executiveshall report to the Chief Executive Officer of the Company (“CEO”) or, in the eventthe CEO is determined by the Board of Directors of the Company (“Board”) to beincapacitated for any reason, Executive shall report directly to theBoard.  During the Employment Period,Executive shall perform faithfully and loyally and to the best of his abilitiesthe duties assigned to him hereunder. Executive shall perform his duties at the Company offices in MorganHill, California every Monday through Thursday of the Employment Period thatExecutive is not on vacation, and shall be permitted to work from his home onFriday of each week of the Employment Period. Executive shall have suchresponsibilities as may from time to time be duly authorized or directed by theCEO or the Board 

 

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consistent with his position as Executive Vice President, ChiefFinancial Officer and Treasurer or such other positions as to which he and theCompany have mutually agreed.  Duringthe Employment Period, Executive shall devote his full business time, attentionand effort to the affairs of the Company and its subsidiaries;*provided,however,*that Executive may engage in charitable, civic or communityactivities to the extent that such activities do not materially interfere withhis duties hereunder, and Executive may serve as a director of any othercorporation or other entity only with the consent of the CEO and on thecondition that the Executive does not devote a material amount of time to suchservice or participate in the management or operation of such entity.  Executive agrees to comply with theprovisions of the Company’s employee handbook, as it may be revised from timeto time during the Employment Period; provided, however, that if there is aconflict between the terms of the handbook and this Agreement, this Agreementwill control.  If any provision of thehandbook is held to be invalid, illegal or unenforceable, such invalidity,illegality or unenforceability shall not affect the validity, legality orenforceability of this Agreement.

# 3.             Compensation and Benefits.

## 3.1           Base Salary.  During the Employment Period, the Companyshall pay to Executive a base salary no less than $300,000 per annum (the “BaseSalary”).  Executive’s Base Salary maybe increased at the sole discretion of the Board, upon recommendation from theCompensation Committee.  Executive’sBase Salary shall be paid to him according to the regular payroll scheduleutilized by the Company with respect to salary payment of the other executivesof the Company. The Company shall deduct from all amounts payable to Executivepursuant to this Agreement the amount of all required federal, state and localwithholding taxes in accordance with Executive’s W-4 on file with the Company,as well as any other authorized deductions. In the event Executive receives any benefits under the Company’s longterm disability plan or policy during the Employment Period, any Base Salaryaccrued during the Employment Period shall be reduced by the amount of thebenefits received.

## 3.2           Participation in the Stock OptionPlan.** **Executive acknowledges and agreesthat he has been granted two separate options to purchase a total of 130,000shares of Media Arts Group, Inc. common stock pursuant to the Media Arts Group,Inc. 1998 Stock Incentive Plan (“Stock Option Plan”).  Such options are subject to the terms and conditions of the StockOption Plan and the Incentive Stock Option Agreement (Date of Grant: May 14,2001 or the Non-Qualified Stock Option Agreement (Date Of Grant: May 14, 2001),as applicable with the exception of change of control as defined in 4.4.2 at which time such options notcurrently vested become 100 % vested. Executive acknowledges that any additional option grants to Executiveshall be at the sole discretion of the Board or Committee as defined in theStock Option Plan, as it may be amended from time to time, or any successorplan, and shall be governed by the terms of the applicable plan and optionagreement.

## 3.3           Employee Benefits. Except asotherwise provided in this Agreement, during the Employment Period Executiveshall be entitled to participate in the Company’s employee benefit plansgenerally available to regular, full-time salaried employees of the Company andany nonqualified deferred compensation plans and management bonus programsgenerally available to executives and officers of the Company (such benefitsbeing hereinafter referred to as the “Employee Benefits”).  Executive’s participation in the EmployeeBenefits shall be subject to the 

 

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## terms and conditions ofthe Employee Benefits including, without limitation, the Company’s right toamend or terminate the Employee Benefits at any time and without notice toparticipants.

## 3.4           Employee Art Purchase and ArtBonus Credit Program Enhancement. During the Employment Period, the Company will provide Executive with anenhancement of the Employee Art Purchase and Art Bonus Credit Program (the “ArtProgram”) in addition to the four(4) lithographs previously granted on May 14,2001, as follows: (a) Executive shall be entitled to receive, on each of thethree years of the Start Date in the term of this Agreement, provided he isactively employed on that  date, four(4) lithographs of such selection as permitted within and under the terms ofthe Art Program, at no cost to Executive; and (b) Executive shall receive tenthousand (10,000) Art Bonus Credits upon execution of this Agreement by bothparties, subject to use as permitted within and under the terms of the ArtProgram.

## 3.5           Automobile Expense Reimbursement.  The Company shall pay Executive anautomobile allowance of $1,000 per month for the Employment Period, andExecutive agrees that such allowance shall reimburse him for all costs ofowning and operating said vehicle, including insurance with the exception of mileage.

## 3.6           Flexible Time Off/Vacation.   Executive shall be entitled to FTO accruedat the rate of 13.33 hours per month, to be used in accordance with the FTOpolicy applicable to employees of the Company as in effect from time to time.  Executive agrees to advise the CEO of hisanticipated vacation dates within a reasonable period, and such vacation datesshall be subject to approval by the CEO.

## 3.7           Cellular Telephone.  The Company agrees to provide Executive witha cellular telephone of the Company’s selection, and to pay normal andcustomary expenses for the business use of the telephone during the EmploymentPeriod.

## 3.8           Life Insurance Enhancement.  The Company will provide Executive with anenhancement of the group term life insurance and supplemental group term lifeinsurance plans generally made available to Company employees as follows:  The Company agrees to pay the premiums foran individual term life insurance policy for Executive, with a death benefit ofone million dollars ($1,000,000), during the Employment Period.  Executive understands and agrees that, atthe end of the Employment Period, the Company’s obligation to pay premiums forthis term life policy shall cease; that he may elect, subject to the terms ofthe policy, to assume responsibility for such premiums in the event he desiresto continue that term life coverage; and that, if he does not assume payment ofsaid premiums, his term life insurance will cease as of the Completion Date.

## 3.9           Expense Reimbursement.  During the Employment Period, the Companyshall reimburse Executive, in accordance with the Company’s policies andprocedures, for all proper expenses incurred by him in the performance of hisduties hereunder.

## 3.10         Living Expenses. In lieu ofbenefits under the Company’s Relocation Policy, the Company agrees to payExecutive’s lodging expenses, as the term “lodging expenses” is used anddefined in the Company’s Travel Policy, as needed per week during which Executive is 

 

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## physically located andworking at the Company’s offices in Morgan Hill from the Start Date until theearlier of the first anniversary date of the Start Date, and the CompletionDate.

# 4.             Termination.

## 4.1           Death.  Upon the death of Executive, this Agreementshall automatically terminate and all rights of Executive and his heirs,executors and administrators to compensation and other benefits under thisAgreement shall cease, except as provided in Section 5.2 hereof.

## 4.2           Disability.  The Company may, in its sole discretion,terminate this Agreement upon written notice to Executive if Executive, becauseof physical or mental incapacity or disability, fails to perform the essentialfunctions of his position required of him hereunder for a continuous period of45 days within any 60  consecutive dayswithin any twelve-month period.  Uponsuch termination, all obligations of the Company hereunder shall cease, exceptas provided in Section 5.2 hereof.  Inthe event of any dispute regarding the existence of Executive’s incapacityhereunder, the matter shall be resolved in good reasonable business judgementby the Board after receiving and reviewing reports submitted by two physicians,one selected by the Executive and one selected by the Company.  Executive agrees that he will submit toappropriate medical examinations for purposes of such determination.

## 4.3           Termination by the Company.

### 4.3.1         The Company may terminate Executive’s employment hereunder at any time,whether or not for Cause.  Anytermination for Cause shall be authorized by the CEO with approval of the Board..  Executive shall be given writtennotice by the Company of the intention to terminate his employment hereunderfor Cause (a “Cause Notice”).  EachCause Notice shall state the particular action(s) or inaction(s) giving rise totermination for Cause.  If the basis forsuch termination is one that is capable of being cured, Executive shall havethirty (30) days after the Cause Notice is given to cure the particular action(s)or inaction(s). If Executive effects a cure to the satisfaction of the CEO withBoard approval, exercised in their good faith reasonable business judgement,the CEO with approval by the Board shall provide written notice of therescission of the Cause Notice, and it shall be of no further force or effect.If, in the sole discretion of the Board, the basis for termination is not onethat is capable of being cured, the Cause Notice shall serve as the Notice ofTermination and the date thirty (30) calendar days after the date of the CauseNotice shall be the Completion Date for all other purposes of this Agreement.

### 4.3.2        “Cause” shall mean any one or more ofthe following:

#### 4.3.2.1       any willful and material failure orrefusal by Executive to perform his duties under this Agreement (other than byreason of Executive’s death or disability); *excluding, however,* any failure byExecutive to perform any specific duties because such performance is subject tothe existence of or satisfaction of conditions, or the occurrence of events,that are not within Executive’s control;

#### 4.3.2.2       anyintentional act of fraud or embezzlement by Executive in connection with hisduties hereunder or in the course of his employment hereunder, or the admissionor conviction of, or entering of a plea of *nolo*

 

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#### *contendere* by, Executive of any felony or anylesser crime involving moral turpitude, fraud, embezzlement or theft;

#### 4.3.2.3       anygross negligence or willful misconduct of Executive which in good businessjudgement determination by the CEO with approval of the Board resulting,  in a loss to the Company or any of theirsubsidiaries, or in damage to the reputation of the Company or any of theirsubsidiaries; and/or

#### 4.3.2.4       anymaterial breach by Executive of any of his covenants contained in thisAgreement.

## 4.4           Termination by Executive.

### 4.4.1        Executive shall be entitled to terminatehis employment hereunder for Good Reason or otherwise.  “Good Reason” shall mean any one or more ofthe following:

#### 4.4.1.1       anyfailure by the Company to comply with any material provision of this Agreement,including, but not limited to (1) an unconsented change in the reportingstructure identified in Paragraph 2 above, (2) a material reduction inExecutive’s duties and responsibilities as described in Paragraph 2,or (3) anunconsented change in Executive’s job title such that he is no longer a SeniorExecutive of the Company ,  whichfailure has not been cured within thirty (30) days after receipt by the Companyof notice from Executive of such noncompliance; or

#### 4.4.1.2       withinthe twelve (12) months following any Change of Control, as that term is definedbelow, the assignment to Executive by the Company of a significant amount ofduties inconsistent in a material respect with Executive’s position (includingtitles and reporting responsibilities), authority, duties or responsibilitiesor any other action which results in a significant and material diminution insuch position, authority, duties or responsibilities, unless remedied by theCompany within thirty (30) days after receipt of notice thereof given byExecutive; or

#### 4.4.1.3       anyfailure or refusal of a successor to the Company or the purchaser of all, orsubstantially all, of the assets of the Company to assume the Company’sobligations under this Agreement.

#### 4.4.1.4       theCompany relocates the administrative functions of the Company to a locationoutside the San Francisco Bay Area from the current Morgan Hill ,CA Companylocation.

#### 4.4.1.5       therequirement the Executive travel away from the San Francisco Bay Area or MorganHill CA. In connection with the performance of his duties for more than 120 days in any given calendar year.

### 4.4.2        “Change of Control” shall mean (i) thedisposition by the Company or its subsidiaries of all or substantially all ofits assets, in contemplation of the distribution of 

 

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### the net proceedsof such sale to the Company’s stockholders, or (ii) a merger or consolidationin which the shares of Common Stock are converted into securities of anotherentity and/or the right to receive cash or other property and as a result ofwhich the stockholders of the Company immediately prior to such transaction ownless than 50% of the surviving entity; or (iii) an event after which any “person”(as that term is used in Sections 13(d) and 14(d) of the Securities ExchangeAct of 1934, as amended) is or becomes the “beneficial owner” (as defined inRule 13d-j of the Securities Exchange Act of 1934, as amended), directly orindirectly, of securities of the Company representing 51% or more of thecombined voting power of the Company’s then outstanding securities; provided,that, this subparagraph (iii) shall not apply to ownership by (x) any trusteeor other fiduciary holding securities under an employee benefit plan of theCompany; or (y) ownership by any corporation or entity owned, directly orindirectly, by the stockholders of the Company in substantially the sameproportions as their ownership of the stock of the Company.

## 4.5           Notice of Termination.  Any purported termination of Executive’semployment by the Company or by Executive shall be communicated by writtenNotice of Termination to the other party hereto in accordance with Section 7hereof.  “Notice of Termination” shallmean a notice that indicates the specific termination provision in thisAgreement relied upon and shall set forth in reasonable detail the facts andcircumstances claimed to provide a basis for termination of Executive’semployment under the provision so indicated

## 4.6           Completion Date.  “Completion Date” shall mean (i) ifExecutive’s employment is terminated because of death, the date of Executive’sdeath; (ii) if Executive’s employment is terminated for disability, the date ofsuch notice to Executive pursuant to Section 4.2 herein; (iii) if Executive’semployment is terminated for Cause pursuant to Section 4.3.1 and 4.3.2, or forGood Reason pursuant to Section 4.4.1 hereof, or for any other reason otherthan death or disability, the date specified in the Notice of Termination; and(iv) if the parties have not mutually agreed to engage in good faithnegotiations as provided hereinafter in Section 5.1, and no other terminationof the Agreement occurs prior to the expiration of the Contract Term, January9, 2005.

# 5.             Compensation Upon Termination.

## 5.1           Extension of Agreement.  No less than ninety (90) days prior toJanuary 9, 2005, the Company shall give notice to Executive if it is interestedin extending or renewing the Agreement or entering into a successor agreementfor Executive’s services.  The partieshereby agree that, if both parties are interested in extending or renewing theAgreement or entering into a successor agreement for Executive’s services, theywill engage in good faith negotiation of such terms.  In the event one or both party(ies) is not interested inextending or renewing the Agreement or entering into a successor agreement forExecutive’s services, Executive agrees that he will nonetheless complete theContract Term to the best of his abilities and will be entitled to one yearbase salary and benefits as  providedfor in this Agreement and additional compensation and/or benefits, if any, inaccordance with the terms of the plans and programs of the Company then ineffect .

 

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## 5.2           Death/Disability/Non-GoodReason/Cause Termination Payment. If Executive’s employment is terminated prior to the end of the ContractTerm (i) by reason of Executive’s death or disability,  (ii) by Executive for other than Good Reason,or (iii) by the Company for Cause, Executive shall be entitled to receive onlyany Base Salary accrued for the time period up to the Completion Date and notpreviously paid.  Executive’sparticipation in the Art Program, FTO accrual, life insurance, reimbursementfor automobile expense, cellular telephone expense, living expense (if still ineffect), and business expenses described in Sections 3.4 through and including3.10 shall cease on and/or be paid on a pro rata basis, as applicable, throughthe Completion Date. Executive’s participation in and right and obligationsunder Employee Benefits pursuant to Section 3.3 shall be governed by the termsof the plans and programs of the Company then in effect; and Executive’s rightsand obligations under any incentive stock option agreement and/or non-qualifiedstock option agreement to which he is a party, including the agreements listedin Section 3.2, shall be governed by the terms and conditions of the applicableoption agreement and the terms of the Stock Option Plan then in effect.

## 5.3           Non-Cause/Good Reason TerminationPayment.  If Executive’s employmentis terminated prior to the end of the Contract Term by the Company for otherthan Cause, or by Executive for Good Reason, then Executive shall be entitledto receive the Base Salary for the Contract Term or one year base salarywhichever is greater, payable in one lump sum on the next  regularly scheduled  payroll date utilized by the Company withrespect to salary payment of the other executives of the Company and beginningafter the Completion Date, or according to such other payment schedule asrequested by executive and determined in the sole discretion of the Company, Inaddition the Executive shall be entitled to continued participation forExecutive(and Family) for one year in the Company’s welfare benefitplans,.  Executive’s participation inthe Art Program, FTO accrual, life insurance, reimbursement for automobileexpense, cellular telephone expense, living expense (if still in effect), andbusiness expenses described in Sections 3.4 through and including 3.10 shallcease on and/or be paid on a pro rata basis, as applicable, through theCompletion Date except as modified herein; Executive’s participation in andrights and obligations under Employee Benefits pursuant to Section 3.3 shall begoverned by the terms of the plans and programs of the Company then in effectexcept modified herein; and Executive’s rights and obligations under anyincentive stock option agreement and/or non-qualified stock option agreement towhich he is a party, shall be governed by the terms and conditions of theapplicable option agreement and the terms of the Stock Option Plan then ineffect except modified herein.

## 5.4            Executive and Company agree that thesalary continuation and other post employment severance payments made pursuantto this Agreement are in the nature of severance payments that would not bereduced by mitigation or other earnings received by Executive after thetermination of his employment .

# 6.             Arbitration. Any dispute or controversy between the Company and Executive, whetherarising out of or relating to this Agreement, Executive’s employment with theCompany, the termination of such employment, or otherwise, shall be submittedto binding arbitration before a single arbitrator as set forth in Appendix Aattached hereto and incorporated herein in its entirety.  This provision expressly waives all rightsto a civil court action before a judge or jury for disputes between Executiveand the Company.****Company agrees to pay up to $50,000  expenses toward the retention of Counsel and legal fees forthe  Executive (“Legal Fees”), should 

 

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# the Executive have anydispute or controversy between the Company and the Executive. Any Legal Feespaid by the Company to Executive under this section shall not be recoverable bythe Company under any circumstances.

# 7.             Notices. All notices and other communications required or permitted hereundershall be in writing and shall be deemed given when (i) delivered personally orby overnight courier to the following address of the other party hereto (orsuch other address for such party as shall be specified by notice givenpursuant to this Section) or (ii) sent by facsimile to the following facsimilenumber of the other party hereto (or such other facsimile number for such partyas shall be specified by notice given pursuant to this Section), with theconfirmatory copy delivered by overnight courier to the address of such partypursuant to this Section:

If to the Company, to:

MediaArts Group, Inc.

900Lightpost Way

MorganHill, CA 95037

Attn:Chief Executive Officer

Facsimile: (408) 201-5082

If to Executive, to:

132 Diablo Ranch Court

Danville, CA  94506-2072

Facsimile: [ 925-552-5244]

# 8.             Severability. Whenever possible, each provision of this Agreement shall be interpretedin such manner as to be effective and valid under applicable law, but if anyprovision of this Agreement is held to be invalid, illegal or unenforceable inany respect under applicable law or rule in any jurisdiction, such invalidity,illegality or unenforceability shall not affect the validity, legality orenforceability of any other provision of this Agreement or the validity,legality or enforceability of such provision in any other jurisdiction, butthis Agreement shall be reformed, construed and enforced in such jurisdictionas if such invalid, illegal or unenforceable provision had never been containedherein.

# 9.             Entire Agreement.  This Agreement constitutes the entire agreement and understandingbetween the parties with respect to the subject matter hereof except asexpressly provided and incorporated herein, and supersedes and replaces allprior negotiations, understandings, agreements or representations by or betweenthe parties, written or oral, which may have related in any manner to thesubject matter hereof.

# 10.           Successors and Assigns.  This Agreement is personal to Executive andshall not be assignable by Executive. This Agreement shall inure to the benefit of and be binding upon theCompany and its successors and assigns; the Company may assign this Agreementor any interest herein, by operation of law or otherwise, to (a) any successorto all or substantially all of its equity ownership interests, assets or businessby dissolution, merger, consolidation, transfer of assets, or otherwise; or (b)any direct or indirect subsidiary of the Company or of any successor referredto in (a) hereof.  Except as statedherein, nothing in this Agreement, expressed or 

 

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# implied, is intended toconfer on any person other than the parties and their respective successors andpermitted assigns any rights or remedies under or by reason of this Agreement.

# 11.           Governing Law.  This Agreement shall be governed by,construed and enforced in accordance with the internal laws of the State ofCalifornia without regard to principles of conflict of laws.

# 12.           Amendment and Waiver.  No waiver of any breach of any term orprovision of this Agreement shall be construed to be, nor shall be, a waiver ofany other breach of this Agreement.  Nowaiver shall be binding unless in writing and signed by the party waiving thebreach.  No course of conduct or failureor delay in enforcing the provisions of this Agreement shall affect thevalidity, binding effect or enforceability of this Agreement.

# 13.           Modification.  This Agreement may not be extended, renewed,amended or modified other than by a written agreement executed by Executive andthe Company, and approved by the Board.

# 14.           Construction.  Each party has cooperated in drafting andpreparation of this Agreement.  Hence,the usual rule of construction, that ambiguities shall be construed against thedrafter, shall have no force or effect in interpreting this Agreement.

# 15.           Confidential Information.  Executive agrees that all styles, designs,customer lists, files, reports, correspondence, records, financial data of anykind and all other confidential documents, regardless of form or medium,(i) developed by Executive, (ii) received by Executive from or on behalfof the Company, or (iii) to which Executive is given access, in the course ofExecutive’s services hereunder (the “Confidential Information”) shall remainthe sole and exclusive property of the Company.  Employee shall keep the Confidential Information strictlyconfidential and shall not sell, trade, publish or otherwise disclose it toanyone in any manner whatsoever including, without limitation, by means ofphotocopy, reproduction or electronic media. Employee agrees that it shall use the Confidential Information only forthe purpose of providing his services under this Agreement.  In the event Employee is requested orrequired to disclose any Confidential Information pursuant to a subpoena in thecourse of a civil or criminal action, Employee shall provide the Company withprompt notice of any such request or requirement so that the Company may seekan appropriate protective order to prevent such disclosure.  Executive expressly agrees that, upon terminationof his employment, Executive will return all Confidential Material to theCompany.  The parties expressly agreethat this provision shall continue after and survive the expiration ortermination of this Agreement indefinitely.

# 16.           Nonsolicitation.  Executive agrees that, for a period of one(1) year following the Completion Date, he will not, without the prior writtenconsent of the Board, directly or indirectly solicit, induce, or attempt tosolicit or induce any “Company Person” (defined hereinafter) to terminatehis/her employment or other relationship with the Company or any of itssubsidiaries, affiliates, successors or assigns for the purpose of associatingwith any entity engaged in the business of the Company; or otherwise encourageany Company Person to terminate his/her employment or other relationship withthe Company or any of its subsidiaries, affiliates, successors or assigns forany other purpose or no purpose.  Asused herein, “Company Person” is defined as a person known to Executive to be apartner, principal, member, employee, 

 

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# officer, director  of the Company, its parent and/or subsidiarycorporations, or their affiliates, successors or assigns.  Executive further agrees  that, for a period of one year following theCompletion Date, he will not, without the prior written consent of the Board,directly or indirectly use any Company trade secret, Confidential Material,proprietary information, knowledge or data to solicit, induce, or attempt tosolicit or induce any person, firms, corporations or entities which were theCompany’s customers during the time of his employment with the Company to enterinto business arrangements with him or any entity or person with whom he isemployed or otherwise affiliated with respect to products or servicescompetitive with those offered or proposed to be offered by the Company on theCompletion Date.

# 17.           Nondisparagement.  Executive agrees that he will not, atany time in the future, disparage or discredit the Company, or Thomas Kinkade,in any  communication, and the Companyagrees that it will not, at any time in the future, disparage or discreditExecutive in any private communication. Any public communication shall begoverned by Securities Exchange Commission rules and regulations and applicablelaw.

# 18.           Executive Representations.  Executive represents and warrants that he isnot under contract of any kind with any entity or business that would prohibitor restrict him from entering into this Agreement.  Executive further warrants, represents and agrees that he neitherhas nor will enter into any agreement or other obligation while this Agreementis in effect that might conflict or interfere with the operation of thisAgreement or his obligations hereunder.

# 19.           Legal Representation.  The parties understand that this is alegally binding contract and acknowledge and agree that they have had areasonable opportunity to consult with legal counsel of their choice prior toexecution.

# 20.           Counterparts.  This Agreement may be executed incounterparts, each of which shall be deemed an original, and all of whichtogether shall constitute one and the same original instrument.

# 21.           Indemnification.  Executive agrees that he will indemnify theCompany for the costs of defense and any liability that results from hisimproper conduct as an employee and/or officer including, but not limited to,all conduct outside the course and scope of employment.  The Company agrees that it will indemnifyExecutive, both during and after the Employment Period, for all actions takenin the course and scope of Executive’s duties under the Agreement, including asa director, to the fullest extent permitted under Delaware Corporation Law,including an undertaking to advance litigation expenses; provided, however,that if the Company’s Certificate of Incorporation and By-Laws impose a lowerlimit on indemnification, then such documents will control, except to theextent such limit is lower than that imposed under the Company’s currentCertificate of Incorporation and By-Laws. The Company agrees to maintain adequate Directors and Officers LiabilityInsurance naming Executive as insured, covering claims made with respect tooccurrences during the Employment Period and having coverage and policy limitsno less favorable to directors and officers than those in effect at the StartDate.

 

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| Dated:  ____________________ |   | By:    | /s/ Anthony D.  Thomopoulos            |   |
|-----------------------------------|--------|--------|----------------------------------------|--------|
|                              |   |   | Anthony D.  Thomopoulos                |   |
|                              |   |   | Chairman of the  Board and Interim CEO |   |
|                              |   |   |                                   |   |
| Dated:  ____________________ |   |   | /s/ Herbert  D. Montgomery        |   |
|                              |   |   | Herbert  D. Montgomery            |   |
|                              |   |   |                                   |   |

 

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**APPENDIX A**

**AGREEMENT TO ARBITRATE**

 

                Employee understands and agrees that any disputearising out of his employment with the Company will be governed by FederalArbitration Act, 9 U.S.C. §1 et seq., and resolved by a neutral arbitrator in abinding arbitration administered by the American Arbitration Association(“AAA”) under its National Rules for the Resolution of Employment Disputes(“National Rules”), such arbitration to take place within 50 miles of theCompany’s offices.

                Executive further understands and agrees that thisagreement to arbitrate applies to any claims or disputes Executive may haveagainst the Company (including its shareholders, officers, directors,employees, agents, attorneys, affiliates or benefit plans), and it also appliesto any claims or disputes that the Company may have against Executive.  Executive understands and agrees that itapplies to all statutory claims, except claims filed under workers’compensation and unemployment insurance statutes and administrative chargesfiled under the National Labor Relations Act. Executive understands and agrees that it is not intended to supersedeany binding arbitration provision that may exist in an ERISA benefit plan.  Further, Executive understands and agreesthat preliminary injunctive relief and other provisional remedies in aid ofarbitration may be sought by either Executive or the Company in a court underapplicable state laws.

                Executive and the Company will jointly select theneutral arbitrator in the manner provided in the National Rules.  The arbitrator’s award will be provided inwriting, as required by the National Rules. Discovery will be permitted prior to the arbitration hearing in thenature and manner as the arbitrator considers necessary to obtain a full andfair exploration of the issues in dispute, pursuant to the National Rules.

                Executive understands and agrees that if the Companyor Executive files a claim under this arbitration agreement regarding aviolation of the Agreement, Executive and the Company shall share equally inthe fees and costs associated therewith, including the AAA’s administrativefees for such disputes, and the fees and expenses of the arbitrator.  Executive expressly acknowledges and agreesthat this arbitration agreement was freely negotiated and the parties agreed tothe cost provisions contained herein with the specific intent of limitingmeritless claims.  Each party shall bearits own fees and costs; *provided, however*, that the prevailingparty shall be entitled to recover said fees and costs, including attorneys’fees, incurred as a result of the arbitration.

                Executive understands and agrees that if theExecutive files a claim under this arbitration provision other than for aviolation of this Agreement, Executive will pay part of the AAA’s filing feefor disputes arising under employer-promulgated plans, in the same amount thatExecutive would be required to pay to file a lawsuit in state court.  Under these circumstances, Employer will paythe remaining part of the filing fee, the AAA’s administrative fees for such disputes,and the fees and expenses of the arbitrator, and it will provide the hearingfacilities.  Employer acknowledge thatthe Company’s payment of such fees shall in no way affect the neutrality of thearbitrator, and will stipulate to same prior to the commencement of thearbitration.

 

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                Executive understands that a claim under thisarbitration provision must be filed with the AAA within the time limitestablished by the applicable statute of limitations.  Executive understands and agrees that any claim not filed withinthe applicable time limit will be waived.

                Executive understands that this arbitration provisionand requirement that arbitration be used instead of a court as the forum inwhich to resolve employment disputes does not limit any of Executive’sstatutory rights or remedies, except the right to file a lawsuit in court, orreceive a remedy arising in any lawsuit in court.

 

                Except as necessary in court proceedings to enforcethis arbitration provision or an award rendered hereunder, or to obtain interimrelief, neither a party nor an arbitrator may disclose the existence, contentor results of any arbitration hereunder without the prior written consent ofthe Company and Executive.

 

 

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