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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of April 30, 1998, by and
between Racing Champions, Inc., an Illinois corporation (the "Company"), and
Xxxxxx X. Xxxxxxxxx (the "Employee"). The Company is a wholly owned subsidiary
of Racing Champions Corporation, a Delaware corporation ("Parent"). Certain
capitalized terms used herein are defined in section 10 below.
RECITAL
A. The Company and the Employee desire to terminate any and all
prior agreements, whether oral or written, between the parties and between the
Employee and Parent relating to the Employee's employment.
B. The Company desires to employ the Employee and the Employee is
willing to make his services available to the Company on the terms and
conditions set forth below.
AGREEMENTS
In consideration of the premises and the mutual agreements
which follow, the parties agree as follows:
1. Employment. The Company hereby employs the Employee
and the Employee hereby accepts employment with the Company on the terms and
subject to the conditions set forth in this Agreement.
2. Term. The term of the Employee's employment
hereunder shall commence on the date hereof and shall continue until
terminated as provided in section 6 below.
3. Duties. The Employee shall serve as the Executive
Vice President - Finance and Operations of the Company and, upon the
consummation of Parent's pending acquisition of Wheels Sports Group, Inc. (the
"Wheels Acquisition"), as Managing Director - Wheels Sports Group, and will,
under the direction of the Company's President, faithfully and to the best of
his ability, perform the duties of such position. The Employee shall be one of
the principal executive officers of the Company and shall, subject to the
control of the Company's Board of Directors, supervise the accounting, finance
and operating functions of the Company and, after the consummation of the Wheels
Acquisition, supervise the operations of Wheels Sports Group, Inc. The Employee
shall also perform such additional duties and responsibilities which may from
time to time be reasonably assigned or delegated by the President of the
Company. The
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Employee agrees to devote his entire business time, effort, skill and attention
to the proper discharge of such duties while employed by the Company.
4. Compensation. The Employee shall receive a base
salary of $200,000 per year, payable in regular and equal monthly installments
(the "Base Salary"). The Employee's Base Salary shall be reviewed annually by
the Board of Directors of the Company to determine appropriate increases, if
any, in such Base Salary.
5. Fringe Benefits.
(a) Vacation. The Employee shall be entitled to
two weeks of paid vacation annually, increasing to three weeks after three years
of employment by the Company and four weeks after six years of employment by the
Company (including employment by the Company prior to the term of this
Agreement). The Employee and the Company shall mutually determine the time and
intervals of such vacation.
(b) Medical, Health, Dental, Disability and Life
Coverage. The Employee shall be eligible to participate in any medical, health,
dental, disability and life insurance policy in effect for the senior management
of the Company (excluding Xxxxxx Xxxx, Xxxx Xxxxx and Xxxxx Xxxxx)
(collectively, the "Second Tier Management").
(c) Incentive Bonus and Stock Ownership Plans.
The Employee shall be entitled to participate in any incentive bonus or other
incentive compensation plan developed generally for the Second Tier Management
of the Company, on a basis consistent with his position and level of
compensation with the Company. The Employee shall also be entitled to
participate in any incentive stock option plan or other stock ownership plan
developed generally for the Second Tier Management of the Company, on a basis
consistent with his position and level of compensation with the Company.
(d) Automobile. The Company agrees to reimburse
the Employee up to $400.00 per month, as such amount may be increased from time
to time consistent with the Company's reimbursement policy for the Second Tier
Management of the Company to cover Employee's expenses in connection with his
leasing of an automobile. Additionally, the Company will pay for the gas used
for business purposes. All maintenance and insurance expense for the automobile
is the responsibility of the Employee.
(e) Reimbursement for Reasonable Business
Expenses. The Company shall pay or reimburse the Employee for reasonable
expenses incurred by him in connection with the performance of his duties
pursuant to this Agreement including, but not limited to, travel expenses,
expenses in connection with seminars, professional conventions or similar
professional functions and other reasonable business expenses.
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(f) Key Man Insurance. The parties agree that
the Company has the option to purchase one or more key man life insurance
policies upon the life of the Employee. The Company shall own and shall have the
absolute right to name the beneficiary or beneficiaries of said policy. The
Employee agrees to cooperate fully with the Company in securing said policy,
including, but not limited to submitting himself to any physical examination
which may be required at such reasonable times and places as Company shall
specify.
6. Termination.
(a) Termination of the Employment Period. The
Employment Period shall continue until (i) the third anniversary of the date
hereof unless the parties mutually agree to extend the term of this Agreement
(such anniversary of the date hereof or such extended date being referred to
herein as the "Expected Completion Date"), (ii) the Employee's death or
Disability, (iii) the Employee resigns or (iv) the Board of Directors determines
that termination of Employee's employment is in the best interests of the
Company.
(b) Definitions.
(i) For purposes of this Agreement,
"Disability" shall mean a physical or mental sickness or any injury which
renders the Employee incapable of performing the services required of him as an
employee of the Company and which does or may be expected to continue for more
than six months during any 12-month period. In the event Employee shall be able
to perform his usual and customary duties on behalf of the Company following a
period of disability, and does so perform such duties or such other duties as
are prescribed by the Board of Directors for a period of three continuous
months, any subsequent period of disability shall be regarded as a new period of
disability for purposes of this Agreement. The Company and the Employee shall
determine the existence of a Disability and the date upon which it occurred. In
the event of a dispute regarding whether or when a Disability occurred, the
matter shall be referred to a medical doctor selected by the Company and the
Employee. In the event of their failure to agree upon such a medical doctor, the
Company and the Employee shall each select a medical doctor who together shall
select a third medical doctor who shall make the determination. Such
determination shall be conclusive and binding upon the parties hereto.
(ii) For purposes of this Agreement,
"Cause" shall be deemed to exist if the Employee shall have (1) violated the
terms of section 7 or section 8 of this Agreement; (2) failed to substantially
perform his duties to the reasonable satisfaction of the Board of Directors;
provided that so long as Xxxxxx Xxxx, Xxxx Xxxxx or Xxxxx Xxxxx serves a
director of the Company, any determination pursuant to this
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clause (2) must be approved by the Requisite Founder Directors; (3) committed a
felony or a crime involving moral turpitude; (4) engaged in serious misconduct
which is demonstrably injurious to the Company or any of its Subsidiaries; (5)
engaged in fraud or dishonest with respect to the Company or any of its
Subsidiaries or made a material misrepresentation to the stockholders or
directors of the Company; or (6) committed acts of negligence in the performance
of his duties which are substantially injurious to the Company.
(iii) For purposes of this Agreement,
"Good Reason" shall mean (1) the material diminution of the Employee's duties
set forth in section 3 above or (2) the relocation of the offices at which the
Employee is principally employed to a location which is more than 50 miles from
the offices at which the Employee is principally employed as of the date hereof;
provided, that travel necessary for the performance of the Employee's duties set
forth in section 3 above shall not determine the location where the Employee is
"principally employed."
(c) Termination for Disability or Death. In
the event of termination for Disability or death, payments of the Employee's
Base Salary shall be made to the Employee, his designated beneficiary or his
estate for a period of six months after the Termination Date in accordance
with the normal payroll practices of the Company. During this period, the
Company shall also reimburse the Employee for amounts paid, if any, to
continue medical, dental and health coverage pursuant to the provisions of
the Consolidated Omnibus Budget Reconciliation Act. During this period, the
Company will also continue Employee's life insurance and disability coverage,
to the extent permitted under applicable policies, and will pay to the Employee
the fringe benefits pursuant to section 5 which have accrued prior to the
Termination Date.
(d) Termination by the Company without Cause or
by the Employee for Good Reason. If (i) the Employment Period is terminated by
the Company for any reason other than for Cause, Disability or death, (ii) the
Employment Period is terminated by the Company for what the Company believes is
Cause or Disability, and it is ultimately determined that the Employment Period
was terminated without Cause or Disability or (iii) the Employee resigns for
Good Reason, the Employee shall be entitled to receive, as damages for such a
termination, his Base Salary from the Termination Date to the second anniversary
of the Termination Date, provided, however, that if such termination or
resignation occurs at any time after the occurrence of a Change of Control, then
Employee shall be entitled to receive his Base Salary from the Termination Date
to the third anniversary of the Termination Date. Such payment of Base Salary
shall be made in accordance with the normal payroll practices of the Company.
During this period, the Company shall also reimburse the Employee for amounts
paid, if any, to continue medical, dental and health coverage pursuant to the
provisions of the Consolidated Omnibus Budget Reconciliation Act. During this
period, the Company will also continue Employee's life insurance and disability
coverage, to the extent permitted
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under applicable policies, and will pay to the Employee the fringe benefits
pursuant to section 5 which have accrued prior to the date of termination.
(e) Termination by the Company for Cause or by
the Employee Without Good Reason. If the Employment Period is terminated by the
Company with Cause or as a result of the Employee's resignation without Good
Reason, the Employee shall not be entitled to receive his Base Salary or any
fringe benefits or bonuses for periods after the Termination Date.
(f) Effect of Termination. The termination of
the Employment Period pursuant to section 6(a) shall not affect the Employee's
obligations as described in sections 7 and 8.
7. Noncompetition and Nonsolicitation. The Employee
acknowledges and agrees that the contacts and relationships of the Company and
its Affiliates with its customers, suppliers, licensors and other business
relations are, and have been, established and maintained at great expense and
provide the Company and its Affiliates with a substantial competitive advantage
in conducting their business. The Employee acknowledges and agrees that by
virtue of the Employee's employment with the Company, the Employee will have
unique and extensive exposure to and personal contact with the Company's
customers and licensors, and that he will be able to establish a unique
relationship with those Persons that will enable him, both during and after
employment, to unfairly compete with the Company and its Affiliates.
Furthermore, the parties agree that the terms and conditions of the following
restrictive covenants are reasonable and necessary for the protection of the
business, trade secrets and Confidential Information (as defined in section 8
below) of the Company and its Affiliates and to prevent great damage or loss to
the Company and its Affiliates as a result of action taken by the Employee. The
Employee acknowledges and agrees that the noncompete restrictions and
nondisclosure of Confidential Information restrictions contained in this
Agreement are reasonable and the consideration provided for herein is sufficient
to fully and adequately compensate the Employee for agreeing to such
restrictions. The Employee acknowledges that he could continue to actively
pursue his career and earn sufficient compensation in the same or similar
business without breaching any of the restrictions contained in this Agreement.
The Employee acknowledges that one business of the Company and its Affiliates is
the design, production (including, without limitation, obtaining the licenses
necessary therefor), marketing and sale of die cast metal replicas of vehicles
and collectible pewter figures.
(a) Noncompetition. The Employee hereby
covenants and agrees that during the Employment Period and for two years
thereafter (the "Noncompete Period"), he shall not, directly or indirectly,
either individually or as an employee, principal, agent, partner, shareholder,
owner, trustee, beneficiary, co-venturer, distributor, consultant,
representative or in any other capacity, participate in, become associated with,
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provide assistance to, engage in or have a financial or other interest in any
business, activity or enterprise which is competitive with the Company or any of
its Affiliates or any successor or assign of the Company or any of its
Affiliates. The ownership of less than a one percent interest in a corporation
whose shares are traded in a recognized stock exchange or traded in the
over-the-counter market, even though that corporation may be a competitor of the
Company, shall not be deemed financial participation in a competitor. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this section is invalid or unenforceable, the parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified. The
term "indirectly" as used in this section and section 8 below is intended to
include any acts authorized or directed by or on behalf of the Employee or any
Affiliate of the Employee.
(b) Nonsolicitation. The Employee hereby
covenants and agrees that during the Noncompete Period, he shall not, directly
or indirectly, either individually or as an employee, agent, partner,
shareholder, owner, trustee, beneficiary, co-venturer, distributor, consultant
or in any other capacity:
(i) canvass, solicit or accept from any
Person who is a customer or licensor of the Company or any of its Affiliates
(any such Person is hereinafter referred to individually as a "Customer," and
collectively as the "Customers") any business which in competition with the
business of the Company or any of its Affiliates or the successors or assigns of
the Company or any of its Affiliates, including, without limitation, the
canvassing, soliciting or accepting of business from any Person which is or was
a Customer of the Company within two years preceding the date hereof or with the
Company or any of its Affiliates during the Noncompete Period;
(ii) advise, request, induce or attempt
to induce any of the Customers, suppliers, or other business contacts of the
Company or any of its Affiliates who currently have or have had business
relationships with the Company within two years preceding the date hereof or
with the Company or any of its Affiliates during the Noncompete Period, to
withdraw, curtail or cancel any of its business or relations with the Company or
any of its Affiliates;
(iii) induce or attempt to induce any
employee, sales representative, consultant or other agent of the Company or any
of its Affiliates to terminate his relationship or breach any agreement with the
Company or any of its Affiliates; or
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(iv) hire any person who was an employee,
sales representative, consultant or other agent of the Company or any of its
Affiliates at any time during the Noncompete Period.
8. Confidential Information. The Employee acknowledges
and agrees that the customers, business connections, customer lists, procedures,
operations, techniques, and other aspects of and information about the business
of the Company and its Affiliates (the "Confidential Information") are
established at great expense and protected as confidential information and
provide the Company and its Affiliates with a substantial competitive advantage
in conducting their business. The Employee further acknowledges and agrees that
by virtue of his past employment with the Company, and by virtue of his
employment with the Company, he has had access to and will have access to, and
has been entrusted with and will be entrusted with, Confidential Information,
and that the Company would suffer great loss and injury if the Employee would
disclose this information or use in a manner not specifically authorized by the
Company. Therefore, the Employee agrees that during the Employment Period and
for five years thereafter, he will not, directly or indirectly, either
individually or as an employee, agent, partner, shareholder, owner trustee,
beneficiary, co-venturer distributor, consultant or in any other capacity, use
or disclose or cause to be used or disclosed any Confidential Information,
unless and to the extent that any such information become generally known to and
available for use by the public other than as a result of the Employee's acts or
omissions. The Employee shall deliver to the Company at the termination of the
Employment Period, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined below) or the business of the Company or
any of its Affiliates which he may then possess or have under his control. The
Employee acknowledges and agrees that all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports and all similar or
related information (whether or not patentable) which relate to the Company's or
any of its Affiliate' actual or anticipated business research and development or
existing or future products or services and which are conceived, developed or
made by the Employee while employed by the Company and its Affiliates ("Work
Product") belong to the Company or such Affiliate, as the case may be.
9. Common Law of Torts and Trade Secrets. The parties
agree that nothing in this Agreement shall be construed to limit or negate the
common law of torts or trade secrets where it provides the Company and its
Affiliates with broader protection than that provided herein.
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10. Definitions.
"Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person and
any partner of a Person which is a partnership.
"Change of Control" means:
(a) The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of common
stock of Parent (the "Outstanding Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of Parent entitled to vote
generally in the election of directors (the "Outstanding Voting Securities");
provided, however, that the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from Parent, (ii) any acquisition by
Parent, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Parent or any corporation controlled by Parent or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this definition; or
(b) Individuals who, as of the date hereof,
constitute the Board of Directors of Parent (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors of
Parent; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by Parent's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors of
Parent; or
(c) Approval by the stockholders of Parent of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
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corporation which as a result of such transaction owns Parent through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Common Stock
and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding
any employee benefit plan (or related trust) of Parent or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors of Parent, providing for
such Business Combination; or
(d) Approval by the stockholders of Parent of
(i) a complete liquidation or dissolution of Parent or (ii) the sale or other
disposition of all or substantially all of the assets of Parent, other than to a
corporation, with respect to which following such sale or other disposition, [a]
more than 60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be, [b] less than 20% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or related
trust) of Parent or such corporation), except to the extent that such Person
owned 20% or more of the Outstanding Common Stock or Outstanding Voting
Securities prior to the sale or disposition, and [c] at least a majority of the
members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board of Directors of Parent, providing for such sale or other
disposition of assets of Parent or were elected, appointed or nominated by the
Board of Directors of Parent.
"Founder Director" at any time means Xxxxxx Xxxx, Xxxx Xxxxx
or Xxxxx Xxxxx if at such time such individual is a member of the Company's
Board of Directors.
"Person" means any individual, partnership, corporation,
limited liability company, association, joint stock company, trust, joint
venture, unincorporated
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organization and any governmental entity or any department, agency or political
subdivision thereof.
"Requisite Founder Directors" at any time means (i) if there
are three Founder Directors at such time, any two Founder Directors; (ii) if
there are two Founder Directors at such time, any Founder Director; or (iii) if
there is one Founder Director at such time, such Founder Director.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership, association
or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control any managing director or general partner of such partnership,
association or other business entity.
11. Specific Performance. The Employee acknowledges and
agrees that irreparable injury to the Company may result in the event the
Employee breaches any covenant or agreement contained in sections 7 and 8 and
that the remedy at law for the breach of any such covenant will be inadequate.
Therefore, if the Employee engages in any act in violation of the provisions of
sections 7 and 8, the Employee agrees that the Company shall be entitled, in
addition to such other remedies and damages as may be available to it by law or
under this Agreement, to injunctive relief to enforce the provisions of sections
7 and 8.
12. Waiver. The failure of either party to insist in any
one or more instances, upon performance of the terms or conditions of this
Agreement shall not be construed as a waiver or a relinquishment of any right
granted hereunder or of the future performance of any such term, covenant or
condition.
13. Notices. Any notice to be given hereunder shall be
deemed sufficient if addressed in writing and delivered by registered or
certified mail or delivered personally, in the case of the Company, to its
principal business office, and in the case of the Employee, to his address
appearing on the records of the Company, or to such other address as he may
designate in writing to the Company.
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14. Severability. In the event that any provision shall
be held to be invalid or unenforceable for any reason whatsoever, it is agreed
such invalidity or unenforceability shall not affect any other provision of this
Agreement and the remaining covenants, restrictions and provisions hereof shall
remain in full force and effect and any court of competent jurisdiction may so
modify the objectionable provision as to make it valid, reasonable and
enforceable. Furthermore, the parties specifically acknowledge the above
covenant not to compete and covenant not to disclose confidential information
are separate and independent agreements.
15. Complete Agreement. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way. Without limiting the generality of the foregoing, this
Agreement supersedes the Employment Agreement, dated as of April 30, 1996,
between the Company and the Employee (together with all amendments thereto, the
"Prior Agreement"). The Prior Agreement is hereby terminated and shall cease to
be of any further force or effect.
16. Amendment. This Agreement may only be amended by an
agreement in writing signed by each of the parties hereto.
17. Governing Law. This Agreement shall be governed by
and construed exclusively in accordance with the laws of the State of Illinois,
regardless of choice of law requirements.
18. Benefit. This Agreement shall be binding upon and
inure to the benefit of and shall be enforceable by and against the Company, its
successors and assigns and the Employee, his heirs, beneficiaries and legal
representatives. It is agreed that the rights and obligations of the Employee
may not be delegated or assigned.
IN WITNESS WHEREOF, the parties have executed or caused this
Employment Agreement to be executed as of the date first above written.
RACING CHAMPIONS, INC.
By: /s/ Xxxxxx X. Xxxx
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Its: President
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/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
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