##### 



SEVERANCE AGREEMENT AND GENERAL RELEASE This Severance Agreement and Release of All Claims (hereinafter Agreement) is made and
entered into by and between ACTION PERFORMANCE COMPANIES, INC., a corporation organized under the
laws of the state of Arizona (hereinafter referred to as Employer), and R. DAVID MARTIN
(hereinafter referred to as Employee). RECITALS WHEREAS, Employee has been employed by Employer as its Chief Financial Officer, Secretary, and
Treasurer, and as a Director. WHEREAS, Employee has executed the resignation letter attached hereto as Exhibit A,
indicating Employees employment and any other duties with Employer and its subsidiaries have
terminated effective October 8, 2004 (Cessation Date); and WHEREAS, the parties, in order to settle and compromise fully and finally any and all claims
and potential claims arising out of Employees employment and the cessation thereof, have agreed to
resolve these matters on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the
parties agree as follows: 1. Recitals. The recitals set forth above are true, accurate, and correct, and are
incorporated in this Agreement by this reference and made a material part of this Agreement. 2. Consideration. A. Severance Payments. In consideration for Employees execution of and compliance
with this Agreement, Employer agrees tender to Employee severance in the amount of Four Hundred and
One Thousand and Seven Hundred Dollars and 00/100 ($401,700.00) (Severance Pay), which represents
one year of (gross) base pay. Said Severance Pay shall be payable to Employee as follows: (a)
$100,425, minus statutory deductions, by check on the date of execution of this Agreement; and (b)
three payments of $100,425, minus statutory deductions, payable on each of January 8, 2005, April
8, 2005, and July 8, 2005. The period commencing on Cessation Date and ending on October 8, 2005
shall be referred to as the Severance Period. The parties agree that the first
installment shall be tendered to Employee within ten (10) business days of Employees execution of
this Agreement and its presentation to Employer, provided Employee has not revoked this Agreement
under Paragraph 11 hereto. B. Stock Options. The parties hereto acknowledge that, as of the date of this
Agreement, Employee holds the options to purchase common stock of Employer (the Options), as set
forth on Exhibit B-1. The Options set forth on Exhibit B-2 shall be exercised by
Employee within 90 days of the Cessation Date or cancelled pursuant to their terms. As further and
additional consideration for Employees execution of and compliance with this Agreement, and
notwithstanding any provision of Employers stock option plans or any stock option agreement with
Employee covering such Options to the contrary, Employer shall extend the expiration date of the
Options set forth on Exhibit B-3 to, and Employee shall have the right to exercise such
Options set forth on Exhibit B-3 until, the date that is the one year anniversary date of
the Cessation Date. All other Options set forth on Exhibit B-1 that are not set forth on
Exhibits B-2 or B-3 shall be cancelled as of the Cessation Date.




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C. COBRA Premium Reimbursement. As further and additional consideration for
Employees execution of and compliance with this Agreement, Employer shall reimburse the cost of
the premium for continuation of group health insurance coverage for Employee, his spouse and
dependents, to the extent they were plan participants as of Employees Cessation Date, should
Employee, his spouse and dependents (collectively referred to as Employees Qualified
Beneficiaries) elect continuation coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1987, as amended, (COBRA) until November 1, 2005, or until Employee and Employees Qualified
Beneficiaries are covered under another health insurance plan, whichever is earlier. Employee
understands, acknowledges and agrees that in no event shall Employee continue to pay the premium
for continued group health insurance coverage for Employee and/or his Qualified Beneficiaries any
time after November 1, 2005 and, thereafter. Commencing with coverage for the month of December
2005, Employee and his Qualified Beneficiaries shall be fully and solely financially responsible
for the payment of premiums for the continuation of group health insurance coverage for themselves
under COBRA. Further, Employee acknowledges and agrees that, if Employee is eligible for such
coverage, he has received a COBRA notice advising Employee of Employees rights to continuation
coverage for group health insurance. 3. Adequate Consideration. Employee acknowledges and agrees that the consideration to
Employee set forth in Paragraph 2 (including Subparagraphs) of this Agreement is in addition to
anything of value to which Employee is, as a matter of law, otherwise entitled. Employee
represents and agrees that he is not entitled to and shall not receive any further compensation,
including salary, bonuses, vacation pay, or employee benefits after the Cessation Date, provided
Employee is not waiving any rights to vested employee benefits, if any, as provided in applicable
benefit plans. 4. Release. In consideration of his receipt of the severance package set forth in
Paragraph 2 of this Agreement, Employee hereby fully, forever, irrevocably, and unconditionally
releases and discharges Employer, including Employers past and present officers, directors,
stockholders, subsidiaries, affiliates, agents, employees, representatives, lawyers,
administrators, spouses, and all persons acting by, through, under, or in concert with them
(collectively, the Released Parties), from any and all claims or damages which he may
have against them, or any of them, which could have arisen out of any act or omission occurring
from the beginning of time to the effective date of this Agreement, whether now known or unknown,
asserted or unasserted. This release includes, but is not limited to, any and all claims under
Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of
1967, as amended; the Americans with Disabilities Act; the Fair Labor Standards Act, as amended;
the Arizona Civil Rights Act; or under any other provision or theory of law, both in tort and in
contract, and whether statutory or under the common law. 5. Covenant Not to Sue. Employee warrants that he has no pending complaints, charges,
or claims for relief against the Released Parties with any local, state, or federal court or
administrative agency. Employee understands and agrees that this Agreement may be pled as a
complete bar to any action or suit before any administrative body or court with respect to any
complaint, charge, or claim under federal, state, local, or other law relating to any possible
claim that existed or may have existed against the Released Parties arising out of any event
occurring from the beginning of time through the effective date of this Agreement. In the event
Employee acts inconsistent with the provisions of this Agreement, the Company, at its option, may
require Employee to pay Employer the sum total of all payments made pursuant to this Agreement. 6. Duty to Cooperate. Employee agrees to cooperate with Employer and its attorneys in
connection with any threatened or pending litigation against Employer, and shall make himself
available upon reasonable notice to prepare for and appear at deposition or at trial in connection 2




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with any such matters, provided that Employer and Employee are not adverse parties in any such
litigation. Employer shall reimburse Employee for his reasonable out-of-pocket expenses in
connection with his activities under this Section. 7. Non-Disparagement. Employee agrees that neither he nor anyone acting on his behalf
will make any derogatory or disparaging statement about the Released Parties, or any of them. 8. Preservation of Company Confidential Information. Employee acknowledges that,
during the course of his employment with Employer, he had access to, and became familiar with,
information concerning Employer that Employer deems confidential, in that said information is
non-public information which, if it became or were made public, might be disadvantageous to
Employer. Such information includes, but is not limited to, employee information, business plans,
financial matters, operational matters, corporate strategies, and the like. As a material
inducement to cause Employer to enter into this Agreement, Employee agrees that he will not
disclose to any third party, either directly or indirectly, any such confidential information. 9. Return of Company Property. Simultaneously with his tender of this Agreement,
bearing his signature, to Employer, Employee shall return to Employer all Employer property in his
actual or constructive possession. 10. Consultation with an Attorney. Employee specifically understands and acknowledges
that the Age Discrimination in Employment Act of 1967, as amended, provides Employee the right to
bring a claim against Employer if Employee believes that he has been discriminated against on the
basis of age. Employee understands the rights afforded under this Act and agrees that he will not
file any claim or action against Employer and/or Released Parties and waives any rights to assert a
claim for relief available under this Act against Employer and/or Released Parties, including, but
not limited to, back pay, front pay, attorneys fees, damages, reinstatement, or injunctive relief.
Employer has advised Employee to consult with an attorney of his choosing prior to executing this
Agreement. Employee represents and agrees that he has thoroughly discussed all aspects of his
rights and this Agreement, including his waiver of claims under the Age Discrimination in
Employment Act, with an attorney, to the extent he wished to do so. 11. Review. A copy of this Agreement was delivered to Employee on October 8, 2004.
Employee has been advised that he has twenty-one (21) days from the date he is presented with this
Agreement to consider this Agreement. If Employee executes this Agreement before the expiration of
twenty-one (21) days, he acknowledges that he has done so for the purpose of expediting the payment
of severance benefits, and that he has expressly waived his right to take twenty-one (21) days to
consider this Agreement. 12. Revocation. Employee may revoke this Agreement for a period of seven (7) days
after he signs it. Employee agrees that if he elects to revoke this Agreement, he will notify
Employer in writing, via certified mail, on or before the expiration of the revocation period.
Receipt of proper and timely notice of revocation by Employer cancels and voids this Agreement.
Provided that Employee does not provide notice of revocation, this Agreement will become effective
upon expiration of the revocation period. 13. Confidentiality. Employee agrees that he will keep the terms and fact of this
Agreement confidential. He will not disclose the existence of this Agreement or any of its terms to
anyone except his immediate family, attorneys or accountants, unless required by law. 3




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14. Amendment. This Agreement shall be binding upon the parties and may not be
amended, supplemented, changed, or modified in any manner, orally or otherwise, except by an
instrument in writing of concurrent or subsequent date signed by the parties. 15. Entire Agreement. This Agreement may be executed in one or more counterparts, each
of which, when executed, will be deemed an original. This Agreement contains and constitutes the
entire understanding and agreement between the parties hereto with respect to the subject matter
hereof, and, except as otherwise provided herein, cancels all prior or contemporaneous oral or
written understandings, negotiations, agreements, commitments, representations, and promises in
connection herewith. 16. Choice of Law. This Agreement shall be governed by and construed in accordance
with the laws of the state of Arizona. 17. Severability. Should any provision in this Agreement be declared or determined by
any court to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall
not be affected, and the illegal or invalid part, term, or provision shall be deemed not to be a
part of this Agreement. 18. Effect of this Agreement. It is expressly understood and agreed that this
Agreement shall not in any way be construed at any time or for any purpose as an admission by the
parties that either of them has acted wrongfully with respect to the other. 19. Attorneys Fees. Should any legal action be commenced arising out of this
Agreement, the prevailing party in any such action shall be entitled to an award of attorneys fees
incurred therein. By signing below, the parties acknowledge that they have carefully read and fully understand
all of the provisions of this Agreement and that they are voluntarily entering into this Agreement. ACTION PERFORMANCE COMPANIES, INC.Dated:
November 18, 2004
    
    
    /s/ David M. RiddifordBy:
    
    David M. RiddifordIts:
    
    Chief Financial Officer, Secretary
& TreasurerDated:
November 18, 2004
    
    
    /s/ R. David MartinBy:
    
    R. David Martin
 4




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##### 



EXHIBIT A RESIGNATION LETTER




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##### 



October 8, 2004 Board of Directors of
Action Performance Companies, Inc.
1480 S. Hohokam Drive
Tempe, AZ 85281-6915 Ladies and Gentlemen: I hereby resign from the positions set forth on Schedule I hereto of Action
Performance Companies, Inc. and its subsidiaries, effective as of the date hereof. Very truly yours,/s/ R. David MartinR. David MartinAttachment




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SCHEDULE I Entity
    
    Offices and Directorships HeldAction Performance Companies, Inc.
    
    Director, Chief Financial Officer, Secretary, and
TreasurerRacing Collectables Club of America, Inc.
    
    Director, Vice President, Secretary, and TreasurerAction Racing Collectables, Inc.
    
    Director, Vice President, Secretary, and TreasurerAction Corporate Services, Inc.
    
    Director and Presidentgoracing Interactive Services, Inc.
    
    Director, President, Secretary, and TreasurerRYP, Inc.
    
    Director, Vice President, Chief Financial
Officer, Secretary, and TreasurerAW Acquisition Corp.
    
    Director, Vice President, Chief Financial
Officer, Secretary, and TreasurerCreative Marketing & Promotions, Inc.
    
    Director, Vice President, Chief Financial
Officer, Secretary, and Treasurergoracing.com, inc.
    
    Director, Chief Financial Officer, and SecretaryAction Sports Image, L.L.C.
    
    Director, Chief Financial Officer, Secretary, and
Treasurer of Action Performance Companies, Inc.,
the sole memberThe Fan Club Company, L.L.C.
    
    Director, Vice President, Secretary, and
Treasurer of Action Performance Companies, Inc.,
the sole memberMcArthur Towel and Sports, Inc.
    
    Director, Vice President, Secretary, and TreasurerJeff Hamilton Collection, Inc.
    
    Director, Secretary, and TreasurerTrevco Trading Corp.
    
    Director, Secretary, and TreasurerFunline Merchandise Company, Inc.
    
    Director, Executive Vice President, Secretary,
and TreasurerAction Performance Holding GmbH
    
    Managing DirectorAPC Europe GmbH
    
    Managing Director




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EXHIBIT B-1 OPTIONS HELD Optionee Statement Exercisable as of 10/8/2004 Robert D. Martin
6513 E. Gainsborough Road
Scottsdale, AZ 85251 USA SSN ###-##-#### OptionsGranted orExpiration
    
    Plan
    
    
    
    Transferred
    
    Option
    
    Options
    
    Options
    
    DateGrant Date
    
    Date
    
    ID
    
    Grant Type
    
    to
    
    Price
    
    Outstanding
    
    Exercisable
    
    Exercisable8/2/2000
    
    8/2/2010
    
    
    003
    
    
    Incentive
    
    
    55,170
    
    
    $
    5.4375
    
    
    
    45,113
    
    
    
    45,113
    
    
    Current8/2/2000
    
    8/2/2010
    
    
    003
    
    
    Non-Qualified
    
    
    44,830
    
    
    $
    5.4375
    
    
    
    29,887
    
    
    
    29,887
    
    
    Current3/2/2001
    
    3/2/2011
    
    
    003
    
    
    Incentive
    
    
    18,390
    
    
    $
    5.4375
    
    
    
    18,390
    
    
    
    18,390
    
    
    Current3/2/2001
    
    3/2/2011
    
    
    003
    
    
    Non-Qualified
    
    
    81,610
    
    
    $
    5.4375
    
    
    
    56,610
    
    
    
    56,610
    
    
    Current7/11/2001
    
    7/11/2011
    
    
    003
    
    
    Non-Qualified
    
    
    50,000
    
    
    $
    20.8000
    
    
    
    50,000
    
    
    
    50,000
    
    
    Current1/29/2002
    
    1/29/2012
    
    
    003
    
    
    Non-Qualified
    
    
    72,491
    
    
    $
    39.8500
    
    
    
    72,491
    
    
    
    50,000
    
    
    Current22,491 on
    
    1/29/20051/29/2002
    
    1/29/2012
    
    
    003
    
    
    Incentive
    
    
    2,509
    
    
    $
    39.8500
    
    
    
    2,509
    
    
    
    0
    
    
    Current2,509 on
    
    1/29/20051/31/2003
    
    1/31/2013
    
    
    003
    
    
    Non-Qualified
    
    
    69,325
    
    
    $
    17.6200
    
    
    
    69,325
    
    
    
    25,000
    
    
    Current25,000 on
    
    1/31/200519,325 on
    
    1/31/20061/31/2003
    
    1/31/2013
    
    
    003
    
    
    Incentive
    
    
    5,675
    
    
    $
    17.6200
    
    
    
    5,675
    
    
    
    0
    
    
    Current5,675 on
    
    1/31/20062/4/2004
    
    2/4/2014
    
    
    003
    
    
    Non-Qualified
    
    
    68,229
    
    
    $
    14.7700
    
    
    
    68,229
    
    
    
    0
    
    
    Current24,999 on
    
    2/04/200525,000 on
    
    2/4/200618,230 on
    
    2/4/20072/4/2004
    
    2/4/2014
    
    
    003
    
    
    Incentive
    
    
    6,771
    
    
    $
    14.7700
    
    
    
    6,771
    
    
    
    0
    
    
    Current1 on
    
    2/4/20056,770 on
    
    2/4/2007Optionee Totals
    
    
    
    
    
    
    
    
    
    
    475,000
    
    
    
    
    
    
    
    425,000
    
    
    
    275,000




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EXHIBIT B-2 OPTIONS TO BE EXERCISED WITHIN 90 DAYS OF CESSATION DATE Type
    
    Option Price
    
    Options Exercisable
    
    Date Last ExerciseIncentive
    
    $
    5.4375
    
    
    
    63,503
    
    
    
    01/07/04Non-Qualified
    
    $
    5.4375
    
    
    
    86,497
    
    
    
    01/07/04




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EXHIBIT B-3 OPTIONS TO BE EXERCISED WITHIN ONE YEAR OF CESSATION DATE Type
    
    Option Price
    
    Options Exercisable
    
    Date Last ExerciseNon-Qualified
    
    $
    20.800
    
    
    
    50,000
    
    
    
    10/07/05Non-Qualified
    
    $
    39.850
    
    
    
    75,000
    
    
    
    10/07/05Non-Qualified
    
    $
    17.620
    
    
    
    50,000
    
    
    
    10/07/05Non-Qualified
    
    $
    14.770
    
    
    
    25,000
    
    
    
    10/07/05