Document:

Exhibit
10.66

 

EMPLOYMENT AGREEMENT

 

This Employment
Agreement (this “Agreement”) is entered into as of June 23, 2003 between Media
Arts Group, Inc., a Delaware corporation (the “Company”) and Eric Halvorson
(“Executive”).

 

WHEREAS, the
Company desires to employ Executive as an employee and officer of the Company,
and Executive desires to serve as an employee and officer of the Company, 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 hereby agrees to employ Executive, and Executive hereby
agrees to be employed by the Company, on the terms and subject to the
conditions set forth in this Agreement. 
The parties agree that the term of employment of Executive by the
Company pursuant to this Agreement (the “Contract Term”) shall commence on June
23, 2003  (the
“Start Date”) and shall end on December 31, 2005, unless earlier terminated as
provided herein (the final date of Executive’s employment, under any circumstances,
shall be referred to herein as the “Completion Date”; the actual period of
Executive’s employment from the Start Date until the Completion Date shall be
referred to herein as the “Employment Period”).

 

2.                                       Position and Duties. 
During the Employment Period, the Company shall employ Executive as
President; provided
that if the executive serving as Chief Executive Officer on the Start Date
ceases to serve as the Chief Executive Officer at any time during the
Employment Period, the Company shall employ Executive as Chief Executive
Officer; provided,
further, that Executive may have such other titles in addition to or
in lieu thereof as the Company and Executive may mutually agree.  When employed as President, Executive shall
report to the Chief Executive Officer of the Company, and when employed as
Chief Executive Officer, Executive shall report to the Board of Directors.  During the Employment Period, Executive
shall perform faithfully and loyally and to the best of his abilities the
duties assigned to him hereunder. 
Executive’s duties shall be such duties as are assigned to him by the
Board of Directors (and the Chief Executive Officer during the period Executive
is employed as President), consistent with the powers and duties provided for
the President or Chief Executive Officer, as applicable, in the Company’s
By-Laws.  Executive shall perform his
duties at the Company’s offices in Morgan Hill, California.  During the Employment Period, Executive
shall devote his full business time, attention and effort to the affairs of the
Company and its subsidiaries; provided, however, that Executive may
engage in charitable, civic or community activities to the extent that such
activities do not materially interfere with his duties hereunder, and Executive
may serve as a director of any other corporation or other entity only with the
consent of the Board of Directors and on the condition that Executive does not
devote a material amount of time to such service or participate in the
management or operation of such entity; provided, further, that Executive may
continue to serve on the boards of directors of Salem Communication and
Intuitive Surgical through the 2004 annual meetings of such companies, and
thereafter may serve as a director of such companies only with the consent of
the Board of Directors of the Company. 
Executive agrees to comply with the provisions of the Company’s employee
handbook, as it may be revised

 

 

from time to time during the Employment Period; provided,
however, that if there is a conflict between the terms of the
handbook and this Agreement, this Agreement will control.  If any provision of the handbook is held to
be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
this Agreement.

 

3.                                       Compensation and Benefits.

 

3.1                                 Base Salary. 
During the Employment Period, the Company shall pay to Executive a base
salary (the “Base Salary”) at the rate of (i) from the Start Date to December
31, 2003, $350,000 per annum, (ii) from January 1, 2004 to December 31, 2004,
$400,000 and (iii) from January 1, 2005 and thereafter, $425,000.  Executive’s Base Salary shall be paid to him
according to the regular payroll schedule utilized by the Company with respect
to salary payment of the other executives of the Company.  The Company shall deduct from all amounts
payable to Executive pursuant to this Agreement the amount of all required
federal, state and local withholding taxes in accordance with Executive’s W-4
on file with any, as well as any other authorized deductions.  In the event Executive receives any benefits
under the Company’s long term disability plan or policy during the Employment
Period, any Base Salary accrued during the Employment Period shall be reduced by
the amount of the benefits received.

 

3.2                                 Payment on Signing. 
The Company shall pay to Executive $50,000 upon execution of this
Agreement by Executive and approval of this Agreement by the Board of
Directors.  If, on or before December
31, 2003, Executive’s employment is terminated by the Company for Cause or by
Executive for other than Good Reason, Executive shall repay such $50,000 (with
interest calculated at the prime rate) within five days after the date of
termination.

 

3.3                                 Bonus Plan.  Commencing with
the fiscal year starting January 1, 2004, Executive will be eligible for a
bonus potential of up to 60% of Base Salary per year under the Company’s
Discretionary Management Incentive Bonus Program, contingent upon achievement
of set performance goals to be established by the Compensation Committee of the
Board of Directors of the Company.

 

3.4                                 Participation in the Stock Option Plan.  (a)
The Company will grant to Executive options to purchase a total of 100,000
shares of Media Arts Group, Inc. common stock under the Company’s 2002 Stock
Incentive Plan (the “Stock Option Plan”) at an exercise price equal to the fair
market value of the shares on the date of grant.  The options shall have a term of ten (10) years and shall vest at
the rate of 33,334 on the date of grant, 33,333 on the first anniversary of the
date of grant and 33,333 on the second anniversary of the date of grant, and
any unvested options shall immediately vest and be exercisable upon a change of
control of the Company (as defined in the Stock Option Plan).  The other terms of the options shall be no
less advantageous to Executive than currently in place for executive employees
generally.  Such options shall be treated
as “incentive stock options” under section 422 of the Internal Revenue Code to
the maximum extent permitted under the applicable limitations.

 

(b) Commencing January 1,
2004, Executive shall be eligible to receive stock options in accordance with
the Long Term Incentive Plan established and approved by the Compensation
Committee of the Board of Directors of the Company.

 

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3.5                                 Employee Benefits. Except as otherwise provided in this
Agreement, during the Employment Period, Executive shall be entitled to
participate in the Company’s employee benefit plans generally available to
regular, full-time salaried employees of the Company and any nonqualified
deferred compensation plans generally available to executives and officers of
the Company (such benefits being hereinafter referred to as the “Employee
Benefits”).  As a supplement to the
standard benefits package, Media Arts Group, Inc. will pay the employee portion
of Executive’s benefit contribution for whatever coverage (including family coverage)
that he elects under the Company’s Employee Benefit plans.  Executive’s participation in the Employee
Benefits shall be subject to the terms and conditions of the Employee Benefits
including, without limitation, the Company’s right to amend or terminate the
Employee Benefits at any time and without notice to participants.  During the Employment Period, the Company
will pay for Executive’s dues (but not membership fees) for one health club and
one appropriate country club; provided that the total of such dues does
not exceed $500 per month.

 

3.6                                 Employee Art Purchase and Art Bonus
Credit Program Enhancement.  During the
Employment Period, Executive shall be entitled to participate in the Employee
Art Purchase and Art Bonus Credit Program (the “Art Program”).  In addition, during the Employment Period,
the Company will provide Executive with an enhancement of the Art Program as
follows: (a) Executive shall be entitled to receive, on the Start Date and each
anniversary thereof (provided he is actively employed on that date) four (4)
lithographs of such selection as permitted within and under the terms of the
Art Program, at no cost to Executive; and (b) Executive shall receive ten
thousand (10,000) Art Bonus Credits upon execution of this Agreement by both
parties, subject to use as permitted within and under the terms of the Art
Program.

 

3.7                                 Automobile Expense Reimbursement. 
The Company shall pay Executive an automobile allowance of $1,000.00 per
month for the Employment Period.

 

3.8                                 Flexible Time Off/Vacation. 
Executive shall be entitled to FTO accrued at the rate applicable to
executives of the Company, to be used in accordance with the FTO policy
applicable to executives of the Company as in effect from time to time.  Executive agrees to advise the Board of
Directors (or, during the time Executive is employed as President, the Chief
Executive Officer) of his anticipated vacation dates within a reasonable
period, and such vacation dates shall be subject to approval by the Board of
Directors (or Chief Executive Officer during the time Executive is employed by
as President).

 

3.9                                 Cellular Telephone. 
The Company agrees to provide Executive with a cellular telephone of the
Company’s selection, and to pay normal and customary expenses for the business
use of the telephone during the Employment Period.

 

3.10                           Life Insurance Enhancement. 
The Company will provide Executive with an enhancement of the group term
life insurance and supplemental group term life insurance plans generally made
available to Company employees as follows: 
The Company agrees to pay the premiums for an individual term life
insurance policy for Executive, with a death benefit of one million dollars
($1,000,000), during the Employment Period. 
Executive understands and agrees that, at the end of the Employment
Period, the Company’s obligation to pay premiums for this term life policy
shall cease; that he may elect, subject to the terms of the policy, to assume
responsibility for such premiums in the event he desires to continue that term
life coverage; and

 

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that, if he does not assume payment of said premiums, his term life
insurance will cease as of the Completion Date.

 

3.11                           Expense Reimbursement. 
During the Employment Period, the Company shall reimburse Executive, in
accordance with the Company’s policies and procedures, for all proper expenses
incurred by him in the performance of his duties hereunder.

 

3.12                           Living Expenses. The Company agrees to pay Executive’s
reasonable, duly documented travel, meal and lodging expenses for travel to and
from Morgan Hill, and for lodging and meals in Morgan Hill, during the period
commencing on the Start Date and ending on the date Executive he relocates to
Morgan Hill (but not later than December 31, 2003).  Such expense reimbursements will be grossed up to cover any
related taxes if such payments are deemed taxable income to Executive.

 

3.13                           Relocation.  Executive
shall relocate to the Morgan Hill/Bay Area not later than December 31,
2003.  The Company will reimburse
Executive for the standard and reasonable costs of relocating Executive and his
family to the Morgan Hill/Bay Area. 
This will include the transportation of household goods, standard fees
and commissions related to the sale of Executive’s current home (up to 6%) and
the reasonable closing costs associated with the purchase of a new home.  The relocation expense reimbursements will
be grossed up to cover any related taxes.

 

4.                                       Termination.

 

4.1                                 Death or Disability. 
Executive’s employment shall terminate automatically upon Executive’s
death.  If the Company determines in
good faith that the Disability of Executive has occurred (pursuant to the
definition of Disability set forth below), it may give to Executive written
notice of its intention to terminate Executive’s employment.  In such event, Executive’s employment with
the Company shall terminate effective on the 30th day after receipt of such
notice by Executive, provided that, within the 30 days after such receipt,
Executive shall not have returned to full-time performance of his duties.  For purposes of this Agreement, “Disability”
shall mean a physical or mental impairment which renders Executive unable to
perform the essential functions of his position, even with reasonable
accommodation which does not impose an undue hardship on the Company.  The Company reserves the right, in good
faith, to make the determination of Disability under this Agreement based upon
information supplied by Executive and/or his medical personnel, as well as information
from medical personnel (or others) selected by the Company or its insurers.

 

4.2                                 Termination by Company for Cause. 
(a) The Company may terminate Executive’s employment for Cause.  For purposes of this Agreement, “Cause”
shall mean that the Company, acting in good faith based upon the information
then known to the Company, determines that Executive has engaged in or
committed:  willful misconduct; gross
negligence; theft, fraud or other illegal conduct; refusal or unwillingness to
perform his duties; sexual harassment; conduct which reflects adversely upon,
or making any remarks disparaging of, Thomas Kinkade, the Company, its Board,
officers, directors, advisors or employees or its affiliates or subsidiaries;
insubordination; any willful act that is likely to have the effect of injuring
the reputation, business or a business relationship of the Company; conduct or
behavior

 

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that is immoral; any violation of any fiduciary duty; substandard
performance; violation of any duty of loyalty; failure to relocate to the
Morgan Hill/Bay area within the time frame set forth in Section 3.12 of this
Agreement; and breach of any other term of this Agreement; provided, however, that
Cause shall not include any failure by Executive to perform any specific duties
if such performance is subject to the existence of or satisfaction of
conditions, or the occurrence of events, that are not within Executive’s
control.

 

(b)  Any termination for Cause
shall be authorized by the Board of Directors. 
Executive shall be given written notice by the Company of the intention
to terminate his employment hereunder for Cause (a “Cause Notice”).  Each Cause Notice shall state the particular
action(s) or inaction(s) giving rise to termination for Cause.  If the basis for such termination is one
that is capable of being cured, Executive shall have thirty (30) days
after receipt of the Cause Notice to cure the particular action(s) or
inaction(s). If Executive effects a cure to the satisfaction of the Board of
Directors, exercised in their good faith reasonable business judgment, the
Board of Directors shall provide written notice of the rescission of the Cause
Notice, and it shall be of no further force or effect.  If the basis for termination is not one that
is capable of being cured, the Cause Notice shall serve as the Notice of
Termination and the termination date specified therein shall be the Completion
Date for all other purposes of this Agreement.

 

4.3                                 Other than Cause or Death or Disability
or Good Reason.  Either the Company or Executive may
terminate Executive’s employment at any time, with or without Cause or Good
Reason, upon 30 days’ written notice.

 

4.4                                 Termination by Executive for Good Reason. 
Executive shall be entitled to terminate his employment hereunder for
Good Reason.  “Good Reason” shall mean
any one or more of the following: (i) any failure by the Company to comply with
any material provision of this Agreement, which failure has not been cured
within thirty (30) days after receipt by the Company of notice from
Executive of such noncompliance; or (ii) the assignment to Executive by the
Company of a significant amount of duties inconsistent in a material respect
with Executive’s position (including titles and reporting responsibilities),
authority, duties or responsibilities or any other action which results in a
significant and material diminution in such position, authority, duties or
responsibilities, unless remedied by the Company within thirty (30) days
after receipt of notice thereof given by Executive; or (iii) any failure or
refusal of a successor to the Company or the purchaser of all, or substantially
all, of the assets of the Company, to assume the Company’s obligations under
this Agreement.

 

4.5                                 Notice of Termination. 
Any purported termination of Executive’s employment by the Company or by
Executive shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 8 hereof.  “Notice of Termination” shall mean a notice
that indicates the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive’s employment under the provision
so indicated.

 

4.6                                 Completion Date. 
“Completion Date” shall mean (i) if Executive’s employment is
terminated because of death, the date of Executive’s death; (ii) if
Executive’s employment is terminated for Disability, the date provided pursuant
to Section 4.2 herein; (iii) if Executive’s employment is terminated
for Cause, or for Good Reason, or for any other reason other than

 

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death or Disability, the date specified in the Notice of Termination;
and (iv) if no other termination of Executive’s employment occurs prior to
the expiration of the Contract Term, December 31, 2005.

 

5.                                       Compensation Upon Termination.

 

5.1                                 Death or Disability. 
If Executive’s employment is terminated by reason of Executive’s death
or Disability, this Agreement shall terminate without further obligations to
Executive or his legal representatives under this Agreement, other than for (a)
payment of the sum of (i) Executive’s Base Salary through the date of
termination to the extent not theretofore paid (excluding the Non-Extension
Amount) and (ii) any compensation previously deferred by Executive (together
with any accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts described
in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued
Obligations”), which shall be paid to Executive or his estate or beneficiary,
as applicable, in a lump sum in cash upon termination; and (b) payment to
Executive or his estate or beneficiary, as applicable, any amounts due pursuant
to the terms of any applicable welfare benefit plans.

 

5.2                                 Cause.  If Executive’s employment is terminated
by the Company for Cause, this Agreement shall terminate without further
obligations to Executive other than for the timely payment of Accrued
Obligations.  If it is subsequently
determined that the Company did not have Cause for termination under Section
4.2, then the Company’s decision to terminate shall be deemed to have been made
under Section 4.3 and the amounts payable under Section 5.3 shall be the only
amounts Executive may receive for his termination.

 

5.3                                 Termination for Other than Cause or Death
or Disability.  If the Company terminates Executive’s
employment for other than Cause or death or Disability, or if Executive terminates
his employment for Good Reason, this Agreement shall terminate without further
obligations to Executive other than (a) the timely payment of Accrued
Obligations and (b) payment to Executive of Executive’s Base Salary for the
remainder of the Contract Term (but in no event less than one year’s Base
Salary, even if there is less than one year remaining under the Contract Term
at the time of termination); and (c) payment to Executive of any bonus payments
under Section 3.3 of this Agreement, prorated to the date of termination,
subject to achievement of the applicable metrics and qualitative assessment of
Executive’s performance by the Board of Directors (less standard withholdings
and other authorized deductions).  The
payments in clause (b) of this Section 5.3 shall exclude the Non-Extension
Amount, shall be less standard withholdings and other authorized deductions and
shall be made in a lump sum payment at the time of termination.

 

5.4                                 Termination by Executive for Other than
Good Reason.  If Executive terminates Executive’s employment for any
reason other than Good Reason, this Agreement shall terminate without further
obligations to Executive other than (a) the timely payment of Accrued
Obligations and (b) payment to Executive of any bonus payments under Section
3.3, prorated to the date of termination, subject to achievement of the
applicable metrics and qualitative assessment of Executive’s performance by the
Board of Directors (less standard withholdings and other authorized
deductions).

 

6

 

5.5                                 Extension/Non-Extension of Agreement. 
No less than ninety (90) days prior to December 31, 2005, the
Company shall give notice to Executive if it is interested in extending or
renewing the Agreement or entering into a successor agreement for Executive’s
services.  The parties hereby agree
that, if both parties are interested in extending or renewing the Agreement or
entering into a successor agreement for Executive’s services, they will engage
in good faith negotiation of such terms. 
In the event one or both party(ies) is not interested in extending or
renewing the Agreement or entering into a successor agreement for Executive’s
services, Executive agrees that he will nonetheless complete the Contract Term
to the best of his abilities and will be entitled to all of and only the
compensation provided for in this Agreement and additional compensation and/or
benefits, if any, in accordance with the terms of the plans and programs of the
Company then in effect.

 

If the contract is not renewed at the end of the Contract Term,
Executive will receive a lump sum severance payment as soon as practicable
following the termination of employment equal to one year of Base Salary, plus
continued participation for Executive (and his family) for a period of one year
in the Company’s welfare benefit plans, including without limitation medical,
dental, vision, life insurance, and disability insurance plans (provided,
however, that if Executive is not entitled to continue to participate in such
plans under applicable law or plan terms, the Company shall reimburse Executive
for the cost of obtaining such coverage for Executive (including his family))
(such lump sum payment and the continuation or reimbursement of benefit plans
being referred to herein as the “Non-Extension Amount”).

 

6.                                       Exclusive Remedy. 
Executive agrees that the payments contemplated by this Agreement shall
constitute the exclusive and sole remedy for any termination or non-renewal of
his employment and Executive covenants not to assert or pursue any other
remedies, at law or in equity, with respect to any termination of employment.

 

7.                                       Arbitration.  
(a) Executive recognizes that disputes may arise between Executive and
the Company during or following Executive’s employment with the Company that
the two parties may be unable to resolve. 
By agreeing to this Agreement and the arbitration provisions contained
herein, Executive anticipates gaining the benefits of a speedy, relatively inexpensive
and impartial dispute-resolution procedure, while recognizing that he is
foregoing resort to a court of law and resolution by a judge or jury.

 

(b) The Company and
Executive agree to submit to final and binding arbitration all claims,
disputes and controversies arising out of, relating to or in any way associated
with this Agreement and Executive’s employment or his termination (“Claims”)
that Executive may have against the Company (or its affiliates, or their
officers, directors, employees or agents in their capacities as such), and all
Claims that the Company may have against Executive.  Claims include, but are not limited to: wage and benefits claims;
contract claims; personal injury claims; tort claims; defamation claims; claims
for employment discrimination based on age, sex, race, national origin, color,
religion, disability (perceived or actual), medical condition, marital status
and sexual orientation; claims for harassment, including sexual harassment; and
claims for violation of any federal, state, local or other governmental law,
constitution, statute, regulation or ordinance.  Only the following claims are excluded from this
Agreement: (1) Claims by Executive for workers’ compensation, unemployment
compensation or state disability benefits,

 

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and claims based upon any
pension or welfare benefit plan the terms of which contain an arbitration or
other non-judicial dispute resolution procedure and (2) Claims which are not
permitted by applicable law to be subject to a binding pre-dispute arbitration
agreement.  Even though the Company and
Executive agree to arbitrate the merits of all Claims, Executive understands
that Executive still has the right to file complaints or charges regarding his
employment with the appropriate government agencies.

 

(c) Te Company and
Executive agree that the complaining party must give written notice of
any Claim to the other party, such that the other party receives notice of the
Claim within the applicable statute of limitations for such Claim(s) as specified
under the applicable law.  Failure to
provide timely notice of Claims shall render those Claims waived, and any such
Claims shall be forever extinguished. 
The notice shall identify and describe all claims asserted and the facts
upon which the claims are based, and shall be personally delivered to the other
party or sent to the other party by certified or registered mail, return
receipt requested.  Written notices
shall be sent a provided in Section 8.

 

 

(d) Each party to the arbitration may represent
itself/himself or may be represented by a licensed attorney.  Executive and the Company agree that, except
as otherwise provided in this Agreement, any arbitration shall be in accordance
with the then-current JAMS Arbitration Rules and Procedures for Employment
Disputes, except as modified herein, before a single Arbitrator, who is an
attorney, experienced labor and employment arbitrator or is a retired judge
(the “Arbitrator”).  The Arbitrator must
be a resident of, or have an office in, the San Francisco Bay Area.  The arbitration shall take place in the
County of Santa Clara, California. 
Within 60 days after notice is served, the Executive must file a written
Demand for Arbitration with the Company. 
Failure to file a timely demand for arbitration shall render all late
noticed Claims waived and forever extinguished.  The parties may select any mutually agreeable, qualified
Arbitrator as defined in the Arbitration Procedures section of this Agreement.  In the event that the parties are unable to
agree upon an arbitrator, the Company will secure a list of labor and
employment law arbitrators in the San Francisco Bay Area from JAMS.  The parties will alternatively strike names
off the list until an arbitrator is chosen. 
The first party to strike a name from the list will be chosen by
lot.  A primary purpose of the
parties’ agreement is to resolve disputes quickly and efficiently.  The parties authorize the Arbitrator to
impose reasonable restrictions on the proceedings, including the length of the
hearing and the appropriate limits on discovery, in order to achieve this
purpose.  At least 30 days before the arbitration, the
parties must exchange lists of all witnesses and copies of all exhibits
intended to be used at the arbitration. 
Failure to do so will result in the inability to use any omitted witness
or document at the arbitration unless the Arbitrator, for good cause shown,
excuses the omission.  In deciding the
legal issues related to any Claim and determining an appropriate legal or
equitable remedy, the Arbitrator shall apply the law of the State of
California.  The Arbitrator shall have
exclusive authority to resolve any dispute relating to the arbitrability of any
Claim or matter, or the interpretation, applicability, enforceability or
formation of this Agreement, including, but not limited to, any claim that all
or any part of this Agreement is void or voidable.  The Arbitrator shall have jurisdiction to hear and rule on
pre-hearing disputes and shall entertain and promptly rule on any motions to
dismiss, motions for summary judgment or summary adjudication and motions in
limine.  Absent the Agreement of the
parties, the Arbitrator shall apply the California Rules of Civil Procedure
applicable to any such motion.  When the
Company’s rules or policies

 

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are at issue, the Arbitrator shall have no power to
alter, amend or change any Company rule or policy, but shall only determine
whether they have been violated as alleged. 
Past practice of the Company in interpreting or applying its rules or
policies may be relevant evidence, but shall not be used to effect any
modification of the terms of the Company’s rules or policies.  The Arbitrator’s decision shall be based
solely upon the evidence and arguments presented, and the Arbitrator shall
decide only the issues submitted by the parties.  No stenographic transcription of the arbitration proceedings will
be made unless otherwise mutually agreed in writing.  Either party, upon request at the close of the hearing, shall be
given an opportunity to file a post-hearing brief.  The time for filing such a brief shall be set by the
Arbitrator.  The Arbitrator shall render
a written final and binding award and opinion within 30 days after the close of
the arbitration in the form typically rendered in labor arbitrations.  The Company shall pay the costs of the
arbitration, including any facility charges, arbitrator fees and court reporter
fees.  Each party shall pay its own
costs and attorneys’ fees, if any. 
However, if any party prevails on a statutory claim which affords the
prevailing party attorneys’ fees and costs, or if there is a written agreement
providing for fees and costs, the Arbitrator may award reasonable fees and
costs to the prevailing party.  Any dispute
as to the reasonableness of any fee or cost shall be resolved by the
Arbitrator.  The decision of the
Arbitrator shall be final and binding. 
A reviewing court may only confirm, correct or vacate an award in
accordance with the standards set forth in the California Arbitration Act, Cal.
Civ. Proc. Code §§ 1284 et  seq.

 

8.                                       Notices.  All notices
and other communications required or permitted hereunder shall be in writing
and shall be deemed given when (i) delivered personally or by overnight
courier to the following address of the other party hereto (or such other
address for such party as shall be specified by notice given pursuant to this
Section) or (ii) sent by facsimile to the following facsimile number of
the other party hereto (or such other facsimile number for such party as shall
be specified by notice given pursuant to this Section), with the confirmatory
copy delivered by overnight courier to the address of such party pursuant to
this Section:

 

If to the Company,
to:

 

Media Arts Group,
Inc.

900 Lightpost Way

Morgan Hill, CA
95037

Attn: Chief
Executive Officer

Facsimile:
(408) 201-5082

 

If to Executive,
to:  [INSERT ADDRESS]

 

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9.                                       Severability. 
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement or the validity,
legality or enforceability of such provision in any other jurisdiction, but
this Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.

 

10.                                 Entire Agreement. 
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof except as
expressly provided and incorporated herein, and supersedes and replaces all
prior negotiations, understandings, agreements or representations by or between
the parties, written or oral, which may have related in any manner to the
subject matter hereof.

 

11.                                 Successors and Assigns. 
This Agreement is personal to Executive and shall not be assignable by
Executive.  This Agreement shall inure
to the benefit of and be binding upon the Company and its successors and
assigns; the Company may assign this Agreement or any interest herein, by
operation of law or otherwise, to (a) any successor to all or
substantially all of its equity ownership interests, assets or business by
dissolution, merger, consolidation, transfer of assets, or otherwise; or
(b) with the consent of Executive, any direct or indirect subsidiary of
the Company or of any successor referred to in (a) hereof.  Except as stated herein, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties and their respective successors and permitted assigns any rights or
remedies under or by reason of this Agreement.

 

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

 

13.                                 Amendment and Waiver. 
No waiver of any breach of any term or provision of this Agreement shall
be construed to be, nor shall be, a waiver of any other breach of this Agreement.  No waiver shall be binding unless in writing
and signed by the party waiving the breach. 
No course of conduct or failure or delay in enforcing the provisions of
this Agreement shall affect the validity, binding effect or enforceability of
this Agreement.

 

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

 

15.                                 Construction. 
Each party has cooperated in drafting and preparation of this
Agreement.  Hence, the usual rule of
construction, that ambiguities shall be construed against the drafter, shall
have no force or effect in interpreting this Agreement.

 

16.                                 Confidential Information. 
Executive agrees that all styles, designs, customer lists, files,
reports, correspondence, records, financial data of any kind and all other
confidential documents, regardless of form or medium, (i) developed by
Executive, (ii) received by Executive from or on

 

10

 

behalf of the Company, or (iii) to which
Executive is given access, in the course of Executive’s services hereunder (the
“Confidential Information”) shall remain the sole and exclusive property of the
Company. “Confidential Information” shall not include any item or information
that is known to the public or that becomes known publicly, after the date of
this Agreement, through legitimate means. Executive shall keep the Confidential
Information strictly confidential and shall not sell, trade, publish or
otherwise disclose it to anyone in any manner whatsoever including, without
limitation, by means of photocopy, reproduction or electronic media.  Executive agrees that he shall use the
Confidential Information only for the purpose of providing his services under
this Agreement.  In the event Executive
is requested or required to disclose any Confidential Information pursuant to a
subpoena in the course of a civil or criminal action, Executive shall provide
the Company with prompt notice of any such request or requirement so that the
Company may seek an appropriate protective order to prevent such disclosure
(but in the absence of any order, Executive may comply with the subpoena).  Executive expressly agrees that, upon
termination of his employment, Executive will return all Confidential
Information to the Company.  The parties
expressly agree that this provision shall continue after and survive the
expiration or termination of this Agreement indefinitely.

 

17.                                 Nonsolicitation. 
Executive agrees that, for a period of one (1) year following the
Completion Date, he will not, without the prior written consent of the Board,
directly or indirectly solicit, induce, or attempt to solicit or induce any
“Company Person” (defined hereinafter) to terminate his/her employment or other
relationship with the Company or any of its subsidiaries, affiliates,
successors or assigns for the purpose of associating with any entity engaged in
the business of the Company; or otherwise encourage any Company Person to
terminate his/her employment or other relationship with the Company or any of
its subsidiaries, affiliates, successors or assigns for any other purpose or no
purpose.  As used herein, “Company
Person” is defined as a person known to Executive to be a partner, principal,
member, employee, officer, director of the Company, its parent and/or
subsidiary corporations, or their affiliates, successors or assigns.  Executive further agrees that, for a period
of one year following the Completion Date, he will not, without the prior
written consent of the Board, directly or indirectly use any Company trade
secret, Confidential Information, proprietary information, knowledge or data to
solicit, induce, or attempt to solicit or induce any person, firms,
corporations or entities which were the Company’s customers during the time of
his employment with the Company to enter into business arrangements with him or
any entity or person with whom he is employed or otherwise affiliated with respect
to products or services competitive with those offered or proposed to be
offered by the Company on the Completion Date.

 

18.                                 Nondisparagement. 
Executive agrees that he will not, during and following his
employment with the Company, directly or indirectly, in public or in private,
defame, criticize, disparage or discredit Thomas Kinkade, the Company, any
other artists represented by the Company, any artwork of Thomas Kinkade or
other artists represented by the Company, any officers, directors or employees
of the Company, or the Company’s products, business, finances or operations, or
otherwise cause Thomas Kinkade, the Company, any other artists represented by
the Company, or any of the Company’s officers, directors, or employees to
appear in a negative light or false light. 
In addition, Executive agrees that he will not, following his employment
with the Company, publish, or assist in the publishing of, any book, article,
review, notice, press release, advertisement or report concerning Thomas
Kinkade, the Company, any other artists represented by the Company, any artwork
of Thomas Kinkade or other artists

 

11

 

represented by the Company,
any officers, directors or employees of the Company, or the Company’s products,
business, finances or operations; provided that he may provide positive
comments in industry related interviews, seminars, presentation and similar
forums.

 

19.                                 Executive Representations. 
Executive represents and warrants that he is not under contract of any
kind with any entity or business that would prohibit or restrict him from
entering into this Agreement.  Executive
further warrants, represents and agrees that he neither has nor will enter into
any agreement or other obligation while this Agreement is in effect that might
conflict or interfere with the operation of this Agreement or his obligations
hereunder.

 

20.                                 Legal Representation. 
The parties understand that this is a legally binding contract and
acknowledge and agree that they have had a reasonable opportunity to consult
with legal counsel of their choice prior to execution.

 

21.                                 Counterparts. 
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
original instrument.

 

22.                                 Indemnification. 
Executive agrees that he will indemnify the Company for the costs of
defense and any liability that results from his improper 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 indemnify Executive, both during and after the Employment
Period, for all actions taken in the course and scope of Executive’s duties under
the Agreement, including as a 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 lower limit on indemnification, then such documents will
control, except to the extent such limit is lower than that imposed under the
Company’s current Certificate of Incorporation and By-Laws.  The Company agrees to maintain adequate
Directors and Officers Liability Insurance naming Executive as insured,
covering claims made with respect to occurrences during the Employment Period
and having coverage and policy limits no less favorable to directors and
officers than those in effect at the Start Date.

 

23.                                 Legal Fees.  Company will
reimburse Executive for reasonable legal fees incurred by Executive in the
negotiation and execution of the Agreement.

 

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement.

 

	
   

  	
  MEDIA ARTS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
  6/23/03

  	
   

  	
  By:

  	
  /s/ A. D. Thomopoulos

  	
   

  
	
   

  	
   

  	
  Anthony D. Thomopoulos

  
	
   

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  June 23, 2003

  	
   

  	
  By:

  	
  /s/ Eric H. Halvorson

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Eric Halvorson

  	
   

  
								

 

12EXHIBIT 10.24

 

SECOND AMENDMENT TO RIGHTS AGREEMENT

 

Second
Amendment, dated as of June 12, 2003 (this
“Amendment”), to the Rights Agreement, dated as of October 12, 1999
(the “Rights Agreement”), between
First Essex Bancorp, Inc., a Delaware corporation (the “Company”), and BankBoston, N.A., a
national banking association, as Rights Agent, amended effective November 14,
2001 to appoint EquiServe Trust Company, N.A. the Rights Agent (the “Rights Agent”).  Capitalized terms not otherwise defined in this Amendment shall
have the meaning ascribed to them in the Rights Agreement.

 

WHEREAS,
pursuant to Section 26 of the Rights Agreement, the Company may, prior to the
Distribution Date and subject to the last sentence of Section 26, supplement or
amend any provision of the Rights Agreement without the approval of any holders
of the Rights; and

 

WHEREAS,
the Company now desires to amend the Rights Agreement as set forth in this
Amendment, and pursuant to Section 26 of the Rights Agreement, the Company
hereby directs that the Rights Agreement shall be amended as set forth in this
Amendment.

 

NOW THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereby agree as follows:

 

1. Amendments
to Section 1.

 

(a)
Section 1 of
the Rights Agreement is hereby amended by adding the following definitions:

 

“Sovereign” shall mean Sovereign Bancorp, Inc., a
Pennsylvania corporation.

 

“Merger” shall have the meaning set forth in the
Merger Agreement.

 

“Merger Agreement” shall mean the Agreement and Plan of Merger,
by and among the Company, Sovereign Merger Sub, Inc. and Sovereign, authorized
and approved by the Board of Directors of the Company at the meeting of the
Board of Directors held on June 12, 2003, as it may be amended from time to
time.

 

(b) The definition of “Acquiring Person” in Section 1 of the
Rights Agreement is hereby amended by inserting the following sentence at the
end thereof:

 

“Notwithstanding the foregoing or any other
provision of this Rights Agreement to the contrary, none of Sovereign, any
Subsidiary of Sovereign or any other Person shall be deemed to be an Acquiring
Person by virtue of the Merger Agreement as a result of any of (i) the
announcement or execution of the Merger Agreement, or the announcement or execution
of any other transactions contemplated thereby; (ii) the consummation of the

 

 

Merger
or any other transactions contemplated in the Merger Agreement; (iii) the
consummation of the Bank Merger (as defined in the Merger Agreement) or any
other transactions contemplated in the Bank Plan of Merger (as defined in the
Merger Agreement), or of the merger of any other subsidiaries of the Company or
Sovereign contemplated by the Merger Agreement; or (iv) the announcement or
execution by Sovereign of any form of affiliate letter in connection with the
Merger Agreement, between Sovereign and various stockholders of the Company, or
the exercise by Sovereign of any of its rights thereunder (each of (i), (ii),
(iii) and (iv) are hereinafter referred to as a “Sovereign Transaction”).”

 

2.
Amendments to Section 3(b).  Section 3(b) of
the Rights Agreement is hereby amended to add the following sentence at the end
thereof:

 

“Notwithstanding anything in this Rights Agreement
to the contrary, a Distribution Date shall not be deemed to have occurred as a
result of any Sovereign Transaction.”

 

3.
Amendment to Section 11(c).  Section 11(c) of
the Rights Agreement is hereby amended by adding the following sentence at the
end thereof:

 

“(IV)       Notwithstanding
anything in this Rights Agreement to the contrary, each Sovereign Transaction
shall not be deemed to be a Business Combination and shall not cause the Rights
to be adjusted or exercisable in accordance with, or any other action to be
taken or any obligation or duty to arise pursuant to, this Section 11(c).”

 

4. Amendment
to Section 12(a).  Section 12(a) of the Rights
Agreement is hereby amended by adding the following sentence at the end
thereof:

 

“Notwithstanding anything in this Rights Agreement
to the contrary, each Sovereign Transaction shall not be deemed to be a change
in the Common Shares or the Preferred Shares under this Section 12(a) and shall
not cause the Rights to be adjusted or exercisable in accordance with, or any
other action to be taken or any obligation or duty to arise pursuant to, this
Section 12.”

 

5.
Amendment to Section 22.  Section 22 of the
Rights Agreement is hereby amended by adding the following sentence after the
first sentence:

 

“In the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed to have resigned on the effective date of such termination.”

 

6. New
Section 33.  A new Section 33 is added as follows:

 

“Notwithstanding anything to the contrary contained
herein, the Rights Agent shall not be liable for any delays or failures in
performance resulting from acts beyond its reasonable control including,
without limitation, acts of God, terrorist acts, shortage of supplies,
breakdowns or malfunctions, interruptions or malfunction of computer facilities

 

2

 

or
loss of data due to power failures or mechanical difficulties with information
storage or retrieval systems, labor difficulties, war or civil unrest.”

 

7.
Effectiveness.  This Amendment shall be deemed effective as
of the date first above written, as if executed by the Company on such
date.  Except as expressly set forth
herein, this Amendment shall not by implication or otherwise alter, modify,
amend or in any way affect any of the terms, conditions, obligations, covenants
or agreements contained in the Rights Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect and shall
be otherwise unaffected.  The Company
agrees that it shall not, without the prior written consent of Sovereign, amend
the Rights Agreement in a manner which shall (i) cause Sovereign, or any of its
subsidiaries, to become an Acquiring Person as a result of any Sovereign
Transaction; (ii) cause a Distribution Date to occur as a result of any
Sovereign Transaction; (iii) cause any Right to become exercisable in
accordance with the Rights Agreement as a result of any Sovereign Transaction;
or (iv) cause any Right to be adjusted or become eligible for exchange pursuant
to Section 11 of the Rights Agreement or give any holders of Rights the right
to receive or purchase any securities of any person pursuant to such Section 11
as a result of any Sovereign Transaction. 
Notwithstanding the foregoing, if Sovereign, or any of its subsidiaries,
acquires Beneficial Ownership of any securities of the Company other than
pursuant to a Sovereign Transaction, then the previous sentence shall be
rescinded and be of no further force or effect.

 

8.
Governing Law.  This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.

 

9.
Counterparts.  This Amendment may be executed in any number
of counterparts, each of such counterparts shall for all purposes be deemed an
original, and all such counterparts together shall constitute but one and the
same instrument.

 

3

 

IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as
of the day and year first above written.

 

	
   

  	
  FIRST ESSEX BANCORP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  William F. Burke

  	
   

  
	
   

  	
  William
  F. Burke

  
	
   

  	
  Executive
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EQUISERVE TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Margaret M.. Prentice

  	
   

  
	
   

  	
  Margaret
  M. Prentice

  
	
   

  	
  Managing
  Director

  

 

4

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