EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 30, 2001,
by and between Racing Champions Corporation, a Delaware corporation (the
"Company") and Subsidiaries, including Racing Champions Ertl, Inc. and Racing
Champions South, Inc., and Xxxxx Xxxx (the "Employee").
RECITAL
The Company desires to employ the Employee and the Employee is willing to
make his/her services available to the Company on the terms and conditions set
forth below. Certain capitalized terms used herein are defined in Section 10
below.
AGREEMENTS
In consideration of the promises and the mutual agreements which follow,
the parties agree as follows:
1. Employment. The Company hereby employs the Employee and the
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Employee hereby accepts employment with the Company on the terms and subject to
the conditions set forth in this Agreement.
2. Term. This Agreement is effective as of the date referred to
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above. The Agreement is not intended to create a promise or contract of
employment for a specific term. Employee's employment shall be at will, and it
expressly understood that either the Company or Employee may terminate the
employment relationship at any time for any reason. It is also expressly
understood that during the course of Employee's employment, the job title,
duties, responsibilities and all other terms and conditions of his/her
employment may be modified at any time for any reason and that such modification
shall not alter his/her obligations under this Agreement.
3. Duties. The Employee shall serve as the Senior Vice President
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of Motorsports Licensing of the Company and will, under the direction of the
Parent Company's Chief Executive Officer, President, and Chief Operating Officer
("Top Management"), faithfully and to the best of his/her ability, perform the
duties of such position. The Employee shall also perform such additional duties
and responsibilities which may from time to time be reasonably assigned or
delegated by Top Management. The Employee agrees to devote his/her 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
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$106,000 per year (increasing to $125,000 per year on July 1, 2001), payable in
regular and equal monthly installments (the "Base Salary"). The Employee's Base
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Salary shall be reviewed annually by Top Management of the Company to determine
appropriate increases, if any, in such Base Salary.
5. Fringe Benefits.
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(a) Vacation. The Employee shall be entitled to four weeks
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of paid vacation annually, under the terms of the Company's stated vacation
policy. The Employee and the Company shall mutually determine the time and
intervals of such vacation.
(b) Medical, Health, Dental, Disability and Life Coverage.
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The Employee shall be eligible to participate in any medical, health, dental,
disability and life insurance policy in effect for management of the Company on
a basis consistent with his/her position and level of compensation and
contribution within the Company as determined solely by Top Management, as long
as such coverages can be obtained by the Company at a cost that is consistent
with rest of the management group.
(c) Incentive Bonus and Stock Ownership Plans. The Employee
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shall be entitled to participate in any incentive bonus or other incentive
compensation plan developed generally for the management of the Company on a
basis consistent with his/her position and level of compensation and
contribution within the Company, as determined solely by Top Management. The
Employee shall also be entitled to participate in any incentive stock option
plan or other stock ownership plan developed generally for the management of the
Company on a basis consistent with his/her position and level of compensation
and contribution within the Company, as determined solely by Top Management.
(d) Automobile. The Company agrees to reimburse the Employee
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up to $500 per month (effective June 1, 2001), as such amount may be increased
from time to time consistent with the Company's reimbursement policy for
management of the Company to cover Employee's expenses in connection with
his/her leasing or owning 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
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Company shall pay or reimburse the Employee for reasonable expenses incurred by
him/her in connection with the performance of his/her 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.
(f) Key Man Insurance. The parties agree that the Company
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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.
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6. Termination.
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(a) Termination of the Employment Period. The employment
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period (the "Employment Period") shall continue until the earliest of (i) the
Employee's death or Disability, (ii) the Employee resigns or (iii) the Top
Management determines that termination of Employee's employment is in the best
interests of the Company (the date of the earliest of these events shall be
referred to herein as the "Termination Date").
(b) Definitions.
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(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/her as an employee of the
Company and which does or may be expected to continue for more than six (6)
months during any 12-month period. In the event Employee shall be able to
perform his/her 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 or the President of the Company, 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 sections 7
or 8 of this Agreement; (2) failed to substantially perform his/her duties to
the reasonable satisfaction of Top Management; (3) committed a felony or a crime
involving moral turpitude; (4) engaged in serious misconduct which is
demonstrably injurious to the Company, or the Parent Company or any of its
Subsidiaries; (5) engaged in fraud or dishonesty with respect to the Company, or
the Parent Company or any of its Subsidiaries or made a material
misrepresentation to the stockholders or directors of the Company or the Parent
Company; or (6) committed acts of negligence in the performance of his/her
duties which are substantially injurious to the Company, or the Parent Company
or any of its subsidiaries.
(c) Termination for Disability or Death. In the event of
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termination for Disability or death, payments of the Employee's Base Salary
shall be made to the Employee, for a period of three (3) 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 or Employee's
estate for amounts paid, if any, to continue medical, dental and health coverage
pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act
and will pay to the Employee or Employee's estate the fringe benefits pursuant
to section 5 which have accrued prior to the Termination Date. Incentive bonus,
in any, for the year of termination will be prorated based on the Termination
Date and paid in accordance with the annual bonus payment schedule.
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(d) Termination by the Company without Cause. If (i) the
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Employee is terminated by the Company for any reason other than for Cause,
Disability or death, (ii) if the Employee is terminated by the Company for what
the Company believes is Cause or Disability, and it is ultimately determined
that the Employee was terminated without Cause or Disability, the Employee shall
be entitled to receive, as severance, his/her Base Salary for a period of one
year following the Termination Date; provided, however, that if such termination
occurs at any time within one year after the occurrence of, or in contemplation
of, a Change of Control then Employee shall be entitled to receive his/her Base
Salary for a period of one year following the Termination Date. Such payment of
Base Salary shall be made in accordance with the normal payroll practices of the
Company, net of applicable taxes, tax withholdings and employee portions of
medical and dental insurance premiums, if any. During this period, the Company
shall also continue to pay the Company portion of premiums, if any, to continue
medical and dental coverage pursuant to the provisions of the existing plan or
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. Incentive bonus, in any, for the year of termination will be
prorated based on the Termination Date and paid in accordance with the annual
bonus payment schedule. Notwithstanding the forgoing, the Company shall not be
obligated to make any of the payments or provide the other benefits called for
by this section 6(d) unless (i) Employee signs a waiver and release of all
claims against the Company, the Parent Company and its subsidiaries in a form
acceptable to the Company, and (ii) Employee is not in breach of this Agreement,
including sections 7 and 8.
(e) Termination, by the Company for Cause or by Resignation
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by the Employee. If the Employee's employment is terminated by the Company with
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Cause or as a result of the Employee's resignation, the Employee shall not be
entitled to receive any future Base Salary, fringe benefits or incentive bonus
payments or any other payments or benefits for periods after the Termination
Date; Bonuses will be paid only if employee is employed at the time of the
annual bonus payments.
(f) Effect of Termination. The termination of the Employment
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Period pursuant to section 6 shall not affect the Employee's obligations as
described in sections 7 and 8.
7. Noncompetition and Nonsolicitation. The Employee acknowledges
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and agrees that the contacts and relationships of the Company and its
Subsidiaries 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 Subsidiaries 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/her, both during and after
employment, to unfairly compete with the Company and its Subsidiaries.
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
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secrets and Confidential Information (as defined in section 8 below) of the
Company and its Subsidiaries and to prevent great damage or loss to the Company
and its Subsidiaries 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 she could continue to actively pursue his/her 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 Subsidiaries is the design, production
(including, without limitation, the obtaining of the licenses necessary
therefor), marketing and sale of collectibles, toys, apparel, souvenirs and
trading cards.
(a) Noncompetition. The Employee hereby covenants and agrees
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that during the Employment Period he/she 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,
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 Subsidiaries or any successor or assign of the Company or any of its
Subsidiaries. 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. 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
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agrees that during the Employment Period and for a period of 18 months
thereafter (the "Noncompete Period"), he/she 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 Subsidiaries (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 Subsidiaries or the successors or assigns of the Company or any of
its Subsidiaries, 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
Subsidiaries 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 Subsidiaries 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 Subsidiaries during the Noncompete Period, to withdraw, curtail or cancel
any of its business or relations with the Company or any of its Subsidiaries;
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(iii) induce or attempt to induce any employee, sales
representative, consultant or other agent of the Company or any of its
Subsidiaries to terminate his/her relationship or breach any agreement with the
Company or any of its Subsidiaries; or
(iv) hire any person who was an employee, sales
representative, consultant or other agent of the Company or any of its
Subsidiaries at any time during the Noncompete Period.
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.
8. Confidential Information. The Employee acknowledges and agrees
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that the customers, business connections, customer lists, procedures,
operations, techniques, and other aspects of and information about the business
of the Company and its Subsidiaries (the "Confidential Information") are
established at great expense and protected as confidential information and
provide the Company and its Subsidiaries with a substantial competitive
advantage in conducting their business. The Employee further acknowledges and
agrees that by virtue of his/her past employment with the Company, and by virtue
of his/her employment with the Company, she 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 (5) years thereafter, she 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 Subsidiary which she may then possess or have
under his/her 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 Subsidiaries' 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 Subsidiaries ("Work Product") belong to the
Company or such Subsidiary, as the case may be.
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9. Common Law of Torts and Trade Secrets. The parties agree that
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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 Subsidiaries
with broader protection than that provided herein.
10. Definitions.
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"Affiliate" means with respect to any Person, any other Person
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controlling, controlled by or under common control with such Person and any
partner of a Person which is a partnership.
"Change of Control" means:
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(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 Company (the "Outstanding Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of Parent Company 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
Company, (ii) any acquisition by Parent Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by Parent
Company or any corporation controlled by Parent Company 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 Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of Parent
Company; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by Parent
Company'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
Company; or
(c) Approval by the stockholders of Parent Company 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
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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 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
Company, providing for such Business Combination; or
(d) Approval by the stockholders of Parent Company of (i) a
complete liquidation or dissolution of Parent Company or (ii) the sale or other
disposition of all or substantially all of the assets of Parent Company, 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 Company 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 Company, providing for such sale or
other disposition of assets of Parent Company or were elected, appointed or
nominated by the Board of Directors of Parent Company.
"Person" means any individual, partnership, corporation, limited
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liability company, association, joint stock company, trust, joint venture,
unincorporated organization and any governmental entity or any department,
agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
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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,
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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
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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
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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
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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/her address appearing
on the records of the Company, or to such other address as she may designate in
writing to the Company.
14. Severability. In the event that any provision shall be held
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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 other-wise expressly set forth
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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.
16. Amendment. This Agreement may only be amended by an agreement
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in writing signed by each of the parties hereto.
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17. Governing Law; Arbitration. This Agreement shall be governed
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by and construed exclusively in accordance with the laws of the State of
Illinois, regardless of choice of law requirements. The parties hereby consent
to the jurisdiction of the state courts of the State of Illinois and of any
federal court in the venue of Illinois for the purpose of any suit, action or
proceeding arising out of or related to this Agreement, and expressly waive any
and all objections they may have as to venue in any of such courts. Any
controversy or claim arising out of or relating to this Agreement, other than a
claim that would entitle the Employee or the Company to injunctive relief, shall
be settled by expedited arbitration (i.e., 15 day presentation of evidence; 15
day decision by arbitrator) in accordance with the rules of the American
Arbitration Association in such place as the Company's headquarters are then
located.
18. Benefit. This Agreement shall be binding upon and inure to
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the benefit of and shall be enforceable by and against the Company, its
successors and assigns and the Employee, her heirs, beneficiaries and legal
representatives. It is agreed that the rights and obligations of the Employee
may not be delegated or assigned.
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IN WITNESS HEREOF, the parties hereto have executed this Employment
Agreement on the day and year first above written.
RACING CHAMPIONS CORPORATION
By: /s/ Xxxxxx X. Xxxx
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Its: Chief Executive Officer
/s/ Xxxxx Xxxx
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Xxxxx Xxxx
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