Exhibit 10.1
EMPLOYMENT AGREEMENT
     Employment Agreement effective as of the 15th day of August, 2005, by and
between Action Performance Companies, Inc., an Arizona corporation (“Employer”)
and Herbert M. Baum (“Executive”). For purposes of paragraphs 8, 9, and 10 of
this Agreement, the term “Employer” shall include each of Employer’s
subsidiaries and operating divisions.
WITNESSETH:
     Employer desires to employ Executive, and Executive desires to accept such
employment, all on the terms and conditions hereinafter set forth.
     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth in this Agreement, the parties hereto agree as follows:
     1. Position and Duties. Executive shall be employed as the Executive
Chairman of Employer and shall report only to the Board of Directors of Employer
(the “Board”). It is anticipated that Executive will have primary responsibility
for: (1) dealing with the financial community, (2) analyzing strategic
alternatives, and (3) supervising the management team. Executive shall serve
Employer faithfully, loyally, honestly, and to the best of his ability.
Executive shall spend the equivalent of one week per month at Employer
facilities and will be available daily from his residence or other location
during regular business hours for consultation with other senior executives.
This Agreement, however, shall not preclude Executive from (a) serving on the
board of directors of not more than five other companies (that do not compete
with Employer), (b) serve on the governing body of a reasonable number of trade
associations or charitable organizations, (c) engaging in charitable activities
and community affairs, and (d) managing his personal investments and affairs,
provided that such activities do not conflict or materially interfere with the
effective discharge of his duties and responsibilities to Employer and to the
extent Employer does not reasonably object to any service by Executive on behalf
of any such third party.
     2. Term of Employment. The term of Executive’s employment hereunder shall
commence on the date hereof and shall continue until December 31, 2007 (the
“Initial Term”) and from year to year thereafter (each a “Renewal Term”), unless
and until terminated by either party giving written notice to the other not less
than sixty (60) days prior to the end of the then current term, unless earlier
terminated under the terms of this Agreement.
     3. Compensation and Other Benefits.
          (a) Base Salary. Employer shall pay to Executive a base salary at a
rate of One Hundred Eighty Thousand Dollars ($180,000) per annum to be paid in
equal monthly installments, or in such other periodic installments upon which
Employer and Executive shall mutually agree. On at least an annual basis, the
Compensation Committee of the Board shall review Executive’s base salary and may
increase but not decrease Executive’s base salary in the committee’s discretion.
          (b) Stock Options. Employer will grant to Executive options to acquire
100,000 shares of Employer’s common stock at an exercise price equal to the
closing market

 

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price of Action Performance Companies, Inc. on the effective date of this
Agreement. Such option grant will be subject to the specific terms and
conditions with respect to vesting and other matters as set forth in a separate
stock option agreement to be entered into between Employer and Executive.
          (c) Benefit Plans. Executive shall be entitled to participate in any
benefit plans maintained by Employer, including, but not limited to, retirement
plans, disability plans, life insurance plans, and health and dental plans
available to other executive employees of Employer, subject to any restrictions,
including waiting periods, specified in the plans.
          (d) Other Benefits. Executive shall also receive (i) reimbursement for
reasonable annual tax and financial consulting fees, (ii) reimbursement for the
costs of an annual physical by the doctor of his choice, and (iii) reimbursement
for reasonable legal and accounting fees and expenses incurred by Executive in
connection with this Agreement, all of which shall be subject to a gross up,
which means that Executive will receive an additional payment in an amount such
that after Executive’s payment of taxes on that additional payment, a sufficient
sum remains to pay Executive’s tax liability resulting from such reimbursement.
          (e) Vacations. Executive shall also be entitled to four (4) weeks of
paid vacation each calendar year, with such vacations to be scheduled and taken
by Executive in his discretion, provided no such vacation shall interfere with
the performance of Executive’s duties hereunder and no unused vacation may be
carried over to a succeeding calendar year.
          (f) Business Expenses. Employer shall reimburse Executive for any and
all necessary, customary, and usual expenses, properly receipted in accordance
with Employer’s policies, incurred by Executive on behalf of Employer. If
Executive is required to travel in the performance of his duties under this
Agreement, Executive shall be entitled to use any plane maintained by Employer
or to fly first class on commercial flights at his election at Employer’s cost.
Employer shall also reimburse Executive for hotels and meals relating to his
service to Employer.
          (g) Signing Bonus. Upon execution of this Agreement by Employee and
Executive, Executive will be entitled to a signing bonus of $7,000.00, less
applicable withholding taxes.
     4. Termination by Employer.
          (a) Termination for Cause. Employer may terminate Executive’s
employment under this Agreement for Cause at any time upon written notice to
Executive. For purposes of this Agreement, “Cause” shall be limited to discharge
resulting from a determination by the Board that Executive (i) has been
convicted of a felony, involving dishonesty, fraud, theft, or embezzlement;
(ii) has repeatedly failed or refused, after written notice from Employer along
with failure of Executive to cure within thirty (30) days of receipt of such
notice, in a material respect to follow reasonable policies or directives
established by Employer; (iii) has willfully and persistently failed, after
written notice from Employer within thirty (30) days of receipt of such notice,
to attend to material duties or obligations imposed upon him under this
Agreement; or (iv) has performed an act or failed to act for which if he were
prosecuted and convicted, would

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constitute a felony involving One Thousand Dollars ($1,000) or more of money or
property of Employer. The existence of “Cause” shall be determined by the Board
acting in good faith after prior notice to Executive and after providing
Executive with an opportunity to be heard. If Executive’s employment is
terminated for Cause, Executive shall receive no Severance Benefits pursuant to
paragraph 7.
          (b) Termination without Cause. Employer also may terminate Executive’s
employment under this Agreement without Cause at any time upon written notice to
Executive. In the event Executive’s employment is terminated by Employer without
Cause, Executive shall receive the Severance Benefits pursuant to paragraph 7.
     5. Termination by Executive. Executive may terminate his employment under
this Agreement with or without “Good Reason” in accordance with the provisions
of this paragraph 5.
          (a) Termination for Good Reason. Executive may terminate his
employment under this Agreement for “Good Reason” by giving written notice to
Employer within sixty (60) days, or such longer period as may be agreed to in
writing by Employer, of Executive’s receipt of notice of the occurrence of any
event constituting “Good Reason,” as described below. Executive shall have “Good
Reason” to terminate his employment under this Agreement upon the occurrence of
any of the following events:
               (i) Any reduction in Executive’s status, duties, authority, or
compensation;
               (ii) Executive is demoted to a position of less stature or
importance within Employer than the position described in paragraph 1;
               (iii) Executive is assigned duties inconsistent with the
positions, duties, responsibilities, or status of the Executive Chairman of
Employer;
               (iv) Upon an event of a “Change of Control” of Employer, provided
that a change of control shall not be considered to have taken place for
purposes of this Agreement in the event the Change of Control shall have been
specifically approved by the Board and the provisions of this Agreement remain
in full force and effect as to Executive and Executive suffers no reduction in
Executive’s status, duties, authority, or compensation.
          (b) Change of Control. For the purposes of this paragraph 5, the term
“Change in Control” of Employer shall mean a Change in Control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 as in
effect on the date of this Agreement or, if Item 6(e) is no longer in effect,
any regulations issued by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 that serve similar purposes; provided that,
without limitation, such a Change in Control shall be deemed to have occurred if
and when
               (i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934) directly or
indirectly of equity securities of

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Employer representing thirty percent (30%) or more of the combined voting power
of Employer’s then-outstanding equity securities;
               (ii) during the term of this Agreement, individuals who, at the
beginning of such period, constituted the Board of Directors of Employer (the
“Original Directors”), cease for any reason to constitute at least a majority
thereof unless the election or nomination for election of each new director was
approved (an “Approved Director”) by the unanimous vote of the Board constituted
entirely of Existing Directors and/or Approved Directors;
               (iii) a tender offer or exchange offer is made whereby the effect
of such offer is to take over and control Employer, and such offer is
consummated for the equity securities of Employer representing twenty percent
(20%) or more of the combined voting power of Employer’s then-outstanding voting
securities;
               (iv) Employer is merged, consolidated, or enters into a
reorganization transaction with another person and, as the result of such
merger, consolidation, or reorganization, less than 75 percent (75%) of the
outstanding equity securities of the surviving, or resulting person shall then
be owned in the aggregate by the former stockholders of Employer; or
               (v) Employer transfers substantially all of its assets to another
person or entity which is not a wholly owned subsidiary of Employer.
If Executive terminates this Agreement and his employment for Good Reason,
Executive shall be entitled to receive Severance Benefits pursuant to paragraph
7.
          (c) Termination Without Good Reason. Executive also may terminate his
employment without Good Reason at any time by giving written notice to Employer.
If Executive terminates his employment under this Agreement without Good Reason,
Executive shall not receive Severance Benefits pursuant to paragraph 7.
     6. Death or Disability.
          (a) Death. Executive’s employment shall terminate automatically on
Executive’s death. Any compensation or other amounts due to Executive for
services rendered prior to his death shall be paid to Executive’s surviving
spouse, or if Executive does not leave a surviving spouse, to Executive’s
estate. No other benefits shall be payable to Executive’s heirs pursuant to this
Agreement, but amounts may be payable pursuant to any life insurance or other
benefit plans maintained by Employer.
          (b) Disability. In the event Executive becomes “Disabled,” Executive’s
employment hereunder and Employer’s obligation to pay Executive’s Base Salary
shall continue for a period of twelve (12) months from the date of Executive’s
initial absence due to such Disability and, in the event Executive becomes
“Disabled” during the first year of his employment with Employer. Executive
shall also receive any additional compensation to which Executive may be
entitled pursuant to paragraph 3 (less any amounts payable to Executive pursuant
to any long-term disability insurance policy paid for by Employer). If at the
end of the

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twelve (12) month period, Executive has not recovered from such Disability,
Executive’s employment hereunder shall automatically cease and terminate.
Executive shall be considered “Disabled” or to be suffering from a “Disability”
for purposes of this paragraph 6(b) if, in the judgment of a licensed physician
selected by the Board and confirmed by a licensed physician designated by
Executive, and after any reasonable accommodations required by applicable law,
he is unable to perform the essential functions of his position due to a
physical or mental impairment, and such incapacity is expected to continue for a
period of at least twelve (12) consecutive months from the date of the initial
absence due to such incapacity. The determination by such physicians shall be
binding and conclusive for all purposes. If the physician selected by the Board
and the physician selected by Executive cannot agree, the two (2) physicians
shall select a third (3rd) physician. The decision of the third (3rd) physician
concerning Executive’s Disability then shall be binding and conclusive on all
interested parties.
     7. Severance Benefits. If during the Initial Term or any Renewal Term,
Executive’s employment under this Agreement is terminated without Cause by
Employer pursuant to paragraph 4(b) prior to the last day of the Initial Term or
any Renewal Term, or if Executive elects to terminate his employment for Good
Reason pursuant to paragraph 5(a), Executive shall receive the “Severance
Benefits” provided by this paragraph. In addition, Executive also shall receive
the Severance Benefits if his employment is terminated due to Disability
pursuant to paragraph 6(b).
          (a) Effective Date. The Severance Benefits shall begin immediately
following the effective date of termination of employment and shall continue to
be payable for a period of twenty four months (24) following the effective date,
in all events except as set forth in paragraph 6(b).
          (b) Benefits. The Executive’s Severance Benefits shall consist of two
(2) times the Executive’s then base salary and bonus compensation. The Company
will pay this amount to Executive in a lump sum, within 10 days of termination.
Executive’s bonus compensation shall be the greater of (i) the amount paid to
him as bonus or incentive compensation for the prior year, and (ii) an amount
estimated to be due him under any then current bonus program. By way of example,
if Executive was paid a bonus of $100,000 for the prior year, and is estimated
to earn a $60,000 bonus in the year of termination, he would be paid $200,000 as
his bonus payout upon termination. The Severance shall also consist of the
continuation for two (2) years of any health, life, disability, or other
insurance benefits that Executive was receiving as of the Change of Control
date, but only to the extent permitted under the policies for such benefits. If
a particular insurance benefit may not be continued for any reason, Employer
shall pay to the Executive in a lump sum an amount estimated in good faith for
him to obtain comparable coverage for the two (2) year post-termination period.
Notwithstanding the above, at all times under the terms of this Section 7(b),
the cash portion of the Executive’s Severance Benefit shall be paid no later
than the date that is two and one-half months after the end of the later of
(i) the Employer’s fiscal year, or (ii) the calendar year, in which the payments
are no longer subject to a substantial risk of forfeiture, as determined in
accordance with the guidance promulgated under Section 409A of the Internal
Revenue Code of 1986, as amended (“Code”).

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          (c) Exceptions to Benefits. If Executive voluntarily terminates this
Agreement and his employment without Good Reason prior to the end of the Initial
Term or any Renewal Term, or if Employer terminates the Agreement and
Executive’s employment for Cause, no Severance Benefits shall be paid to
Executive. No Severance Benefits are payable in the event of Executive’s death
while in the active employ of Employer.
          (d) Future Employment. The payment of Severance Benefits shall not be
affected by whether Executive seeks or obtains other employment. Executive shall
have no obligation to seek or obtain other employment, and Executive’s Severance
Benefits shall not be impacted by Executive’s failure to mitigate.
     8. Covenant-Not-to-Compete.
          (a) Interests to be Protected.
               (i) Customers. The parties acknowledge that during the term of
his employment under this Agreement, Executive will perform essential services
for Employer, its employees, and shareholders, and for customers of Employer.
Therefore, Executive will be given an opportunity to meet, work with, and
develop close working relationships with Employer’s customers on a first-hand
basis and will gain valuable insight as to the customers’ operations, personnel,
and need for services. In addition, Executive will be exposed to, have access
to, and be required to work with, a considerable amount of Employer’s
Confidential and Proprietary Information.
               (ii) Employees. The parties also expressly recognize and
acknowledge that the personnel of Employer have been trained by, and are
valuable to Employer, and that if Employer must hire new personnel or retrain
existing personnel to fill vacancies it will incur substantial expense in
recruiting and training such personnel. The parties expressly recognize that
should Executive compete with Employer in any manner whatsoever, it could
seriously impair the goodwill and diminish the value of Employer’s business.
               (iii) Extended Duration. The parties acknowledge that this
covenant has an extended duration; however, they agree that this covenant is
reasonable and it is necessary for the protection of Employer, its shareholders
and employees.
               (iv) Fair and Reasonable. For these and other reasons, and the
fact that there are many other employment opportunities available to Executive
if his employment with Employer should terminate, the parties are in full and
complete agreement that the following restrictive covenants (which together are
referred to as the “Covenant-Not-To-Compete”) are fair and reasonable and are
freely, voluntarily, and knowingly entered into. Further, each party has been
given the opportunity to consult with independent legal counsel before entering
into this Agreement.
          (b) Devotion to Employment. Executive shall devote substantially all
his business time and efforts to the performance of his duties on behalf of
Employer during the term of his employment under this Agreement. During his term
of employment, Executive shall not at any time or place or to any extent
whatsoever, either directly or indirectly, without the express written consent
of Employer, engage in any outside employment, or in any activity competitive

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with or adverse to Employer’s business or affairs, whether alone or as partner,
officer, director, employee, shareholder of any corporation or as a trustee,
fiduciary, consultant or other representative. This is not intended to prohibit
Executive from engaging in nonprofessional activities, such as personal
investments or conducting to a reasonable extent private business affairs, which
may include other boards of directors’ activity, so long as they do not conflict
with Employer’s business. Participation to a reasonable extent in civic, social,
or community activities is encouraged.
          (c) Non-Solicitation of Customers. During the term of Executive’s
employment with Employer under this Agreement and for a period of twenty-four
(24) months after the termination of employment with Employer under this
Agreement, regardless of who initiates the termination and for whatever reason,
Executive shall not directly or indirectly, for himself, or on behalf of, or in
conjunction with, any other person, company, partnership, corporation, or
governmental entity, in any manner whatsoever, call upon, contact, encourage,
handle, or solicit customers of Employer with whom he has worked as an employee
of Employer at any time prior to termination, or at the time of termination, for
the purpose of soliciting or selling such customer the same, similar, or related
services that he provided on behalf of Employer.
          (d) Non-Solicitation of Executives. During the term of Executive’s
employment with Employer under this Agreement and for a period of twenty-four
(24) months after the termination of employment with Employer under this
Agreement, regardless of who initiates the termination and for whatever reason,
Executive shall not directly or indirectly, for himself, or on behalf of, or in
conjunction with, any other person, company, partnership, corporation, or
governmental entity, seek to hire, and/or hire any of Employer’s personnel or
employees for the purpose of having such employee engage in services that are
the same, similar, or related to the services that such employee provided for
Employer.
          (e) Competing Business. During the term of Executive’s employment with
Employer under this Agreement and for a period of twenty-four (24) months after
the termination of employment with Employer under this Agreement, regardless of
who initiates the termination and for whatever reason, Executive shall not,
directly or indirectly, for himself, or on behalf of, or in conjunction with,
any other person, company, partnership, corporation, or governmental entity, in
any manner whatsoever, engage in the same or similar business as Employer, which
would be in direct competition with any Employer line of business, in any
geographical service area where Employer engaged in business at time of
termination. For the purposes of this provision, the term “competition” shall
mean directly or indirectly engaging in or having a substantial interest in a
business or operation which has been, is, or will be, providing the same
products provided by Employer; provided, however the ownership of not more than
5% by Executive of a publicly held corporation shall not constitute competition
which is prohibited by this paragraph 8(e).
          (f) Limitation and Judicial Amendment. Notwithstanding any other
provision of this Agreement, the provisions contained in paragraphs 8(c), 8(d),
and 8(e) shall not apply for more than twelve (12) months after Executive no
longer receives Severance Benefits under this Agreement. If the scope of any
provision of this Agreement is found by the Court to be too broad to permit
enforcement to its full extent, then such provision shall be enforced to the

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maximum extent permitted by law. The parties agree that the scope of any
provision of this Agreement may be modified by a judge in any proceeding to
enforce this Agreement, so that such provision can be enforced to the maximum
extent permitted by law. If any provision of this Agreement is found to be
invalid or unenforceable for any reason, it shall not affect the validity of the
remaining provisions of this Agreement.
          (g) Injunctive Relief, Damages and Forfeiture. Due to the nature of
Executive’s position with Employer, and with full realization that a violation
of this Agreement will cause immediate and irreparable injury and damage, which
is not readily measurable, and to protect Employer’s interests, Executive
understands and agrees that in addition to instituting legal proceedings to
recover damages resulting from a breach of this Agreement, Employer may seek to
enforce this Agreement with an action for injunctive relief, to cease or prevent
any actual or threatened violation of this Agreement on the part of Executive.
          (h) Survival. The provisions of this paragraph shall survive the
termination of Executive’s employment to the extent necessary to enforce such
provisions.
     9. Confidential Information. During the course of his employment under this
Agreement, Executive will become exposed to a substantial amount of confidential
and proprietary information, including, but not limited to, financial
information, annual reports, audited and unaudited financial reports,
operational budgets and strategies, methods of operation, customer lists,
strategic plans, business plans, marketing plans and strategies, new business
strategies, merger and acquisition strategies, management systems programs,
computer systems, personnel and compensation information and payroll data, and
other such reports, documents, or information (collectively the “Confidential
and Proprietary Information”). In the event his employment is terminated by
either party for any reason, Executive agrees that he will not take with him any
copies of such Confidential and Proprietary Information in any form, format, or
manner whatsoever (including computer print-outs, computer tapes, floppy disks,
and CD roms) nor will he disclose the same in whole or in part to any person or
entity, in any manner either directly or indirectly. Excluded from this
Agreement is information that is already disclosed to third parties and is in
the public domain or that Employer consents to be disclosed, with such consent
to be in writing. The provisions of this paragraph shall survive the termination
of this Agreement.
     10. Indemnity by Employer.
          (a) Generally. Unless Executive is covered by an indemnity agreement
covering the directors and executive officers of Employer, Employer shall
indemnify Executive to the fullest extent permitted or required by the laws of
the state of Arizona of and from any “Expenses” incurred by Executive in any
“Proceeding.”
          (b) Expenses. For purposes of this paragraph 10, “Expenses” shall mean
and include all expense, liability, and loss, including expenses of
investigations, judicial or administrative proceedings or appeals, attorney,
accountant and other professional fees and disbursements, judgments, fines, and
amounts paid in settlement.

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          (c) Proceeding. For purposes of this paragraph 10, “Proceeding” shall
mean and include any threatened, pending, or completed action, suit, or
proceeding, whether brought in the right of Employer or otherwise, and whether
of a civil, criminal, administrative, or investigative nature, in which the
Executive may be or may have been involved as a party, witness or otherwise, by
reason of the fact that the Executive is or was an officer of Employer or is or
was serving at the request of Employer as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, whether or not serving in such capacity at the time any liability or
expense is incurred for which indemnification may be provided under this
Agreement.
          (d) Payment of Executive Expenses. Employer shall pay the Expenses
incurred by Executive in any Proceeding in advance of the final disposition of
the Proceeding at the written request of Executive, if Executive (i) furnishes
Employer with a written affirmation of Executive’s good faith belief that he is
entitled to indemnification by Employer; and (ii) furnishes Employer with a
written undertaking to repay the advance to the extent that it is ultimately
determined that Executive is not entitled to be indemnified by Employer. Such
undertaking shall be an unlimited general obligation of Executive, but need not
be secured. Advances pursuant to this paragraph 10 shall be made no later than
twenty (20) days after Employer’s receipt of the affirmation and undertakings
set forth above and shall be made without regard to the Executive’s ability to
repay the amount advanced and without regard to Executive’s ultimate entitlement
to indemnification under this Agreement.
     11. Miscellaneous.
          (a) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given upon (a) personal delivery, (b) transmitter’s
confirmation of the receipt of a facsimile or e-mail transmission, (c) confirmed
delivery by a standard overnight carrier, or (d) the expiration of three
business days after the day when mailed via United States Postal Service by
certified or registered mail, return receipt requested, postage prepaid at the
following addresses:
               (i) If to Employer:
Action Performance Companies, Inc.
1480 South Hohokam Avenue
Tempe, Arizona 85281
Attention: Chief Financial Officer
               (ii) If to Executive:
1480 South Hohokam Avenue
Tempe, Arizona 85281
     Either party may alter the address to which communications are to be sent
by giving notice of such change of address in conformity with the provisions of
this paragraph for the giving of notice.

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          (b) Indulgences. Neither any failure nor any delay on the part of
either party to exercise any right, remedy, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power, or privilege preclude any other or further
exercise of the same or of any other right, remedy, power, or privilege, nor
shall any waiver of any right, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power, or privilege
with respect to any other occurrence.
          (c) Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement, shall be governed by and
construed in accordance with the laws of the state of Arizona, notwithstanding
any Arizona or other conflict-of-interest provisions to the contrary.
          (d) Binding Nature of Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors, and permitted assigns.
          (e) Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of the parties reflected hereon as the signatories.
          (f) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
          (g) Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings,
inducements, and conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
          (h) Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
          (i) Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays, and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday, or holiday, then the final day shall be deemed to be the next
day which is not a Saturday, Sunday, or holiday.
          (j) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of the parties hereto;
provided that because the obligations of Executive hereunder involve the
performance of personal services, such obligations shall not be delegated by
Executive. For purposes of this Agreement, successors and

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assigns shall include, but not be limited to, any individual, corporation,
trust, partnership, or other entity that acquires a majority of the stock or
assets of Employer by sale, merger, consolidation, liquidation, or other form of
transfer. Employer shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all of
the business and/or assets of Employer to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession had taken place. Without limiting
the foregoing, unless the context otherwise requires, the term “Employer”
includes all subsidiaries of Employer.
          (k) Code Section 409A. If any payments under this Agreement are
subject to the provisions of Code Section 409A, it is intended that the
Agreement will comply fully with and meet all the requirements of Code
Section 409A.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

              EMPLOYER:
 
            ACTION PERFORMANCE COMPANIES, INC.,     an Arizona corporation
 
       
 
  By:   /s/ David Riddiford
 
       
 
  Name:   David Riddiford
 
  Its:   Chief Financial Officer
 
            EXECUTIVE:
 
            /s/ Herbert M. Baum      
 
            Herbert M. Baum

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