EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of October 20, 2000, by and
between Racing Champions Corporation, a Delaware corporation (the "Company"),
and Xxxxx X. Xxxxxxxx (the "Employee"). Certain capitalized terms used herein
are defined in section 10 below.
RECITALS
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
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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. The term of the Employee's employment hereunder shall
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commence on the date hereof and shall continue until terminated as provided in
section 6 below.
3. Duties. The Employee shall serve as the President of the
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Company and will, under the direction of the Company's Chief Executive Officer,
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, have the
normal duties, responsibilities and authority associated with such position.
The Employee shall also perform such additional duties and responsibilities
which may from time to time be reasonably assigned or delegated by the Chief
Executive Officer or Board of Directors of the Company. The 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
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$250,000 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.
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(a) Vacation. The Employee shall be entitled to three weeks
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of paid vacation annually, increasing to 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.
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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
"Non-Board Senior Management") or for Vice Presidents (collectively, the "Second
Tier Management").
(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 Non-Board Senior Management or 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 Non-Board Senior Management or 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
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up to $600.00 per month, as such amount may be increased from time to time
consistent with the Company's reimbursement policy for the Non-Board Senior
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
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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
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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.
6. Termination.
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(a) Termination of the Employment Period. The Employment
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Period shall continue until April 30, 2002, unless the parties mutually agree to
extend the term of this Agreement (such 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.
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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 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
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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
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Employee for Good Reason. If (i) the Employment Period is terminated by the
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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 or in contemplation of a
Change of Control, the 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
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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 date of termination.
(e) Termination by the Company for Cause or by the Employee
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Without Good Reason. If the Employment Period is terminated by the Company with
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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
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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
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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.
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(a) Noncompetition. The Employee hereby covenants and agrees
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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, 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
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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;
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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
Affiliates to terminate his relationship or breach any agreement with the
Company or any of its Affiliates; or
(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
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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 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.
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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 Affiliates with
broader protection than that provided herein.
10. Definition.
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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 (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
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(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
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
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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
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Xxxxx if at such time such individual is a member of the Company's Board of
Directors.
"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.
"Requisite Founder Directors" at any time means (i) if there are three
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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,
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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, 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.
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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 address appearing on the records
of the Company, or to such other address as he 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 otherwise 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. 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
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in writing signed by each of the parties hereto.
17. Governing Law. This Agreement shall be governed by and
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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
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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.
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IN WITNESS WHEREOF, the parties have executed or caused this
Employment Agreement to be executed as of the date first above written.
RACING CHAMPIONS CORPORATION
By:/s/ Xxxxxx X. Xxxx
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Its: Chairman and CEO
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/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
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