Document:

exv10w42

 

Exhibit 10.42

MANAGEMENT AGREEMENT

     THIS MANAGEMENT AGREEMENT (the “Agreement”), made as of the 17th day of
May, 2004, is entered into by VistaCare, Inc., a Delaware corporation with its
principal place of business at 4800 N. Scottsdale Road, Suite 5000, Scottsdale,
Arizona 85251 (the “Company”), and Ronald F. Watson, an individual residing at
24955 N. 114th Place, Scottsdale, Arizona 85255 (the “Executive”).

Recitals:

     WHEREAS, the Executive is an executive officer of the Company; and

     WHEREAS, the Company and the Executive wish to provide for certain
payments and benefits to the Executive in the event the Executive’s employment
by the Company is terminated under certain circumstances.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:

     1. Definitions. As used in this Agreement the following terms shall have
the following respective meanings:

          (a) “Board” means the Board of Directors of the Company.

          (b) “Cause” shall mean: (i) the Executive’s willful failure to attempt in
good faith to follow the legal written directions of the Board or the Chief
Executive Officer (the “CEO”), which is not cured within ten (10) days
following receipt by the Executive of written notice from the Board or the CEO
specifying the details thereof, (ii) the Executive’s conviction of a felony
(other than a felony involving a traffic violation or as a result of vicarious
liability), (iii) the Executive’s commission of an act constituting fraud,
embezzlement, larceny or theft with regard to the Company that is of a material
nature (other than good faith expense account reimbursement disputes) or (iv)
willful misconduct by the Executive with regard to the Company that has a
material adverse effect on the Company. For purposes of this definition, no
act, or failure to act, on the Executive’s part shall be considered “willful”
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Company.

          (c) “Change in Control” means (i) the acquisition by a person, party or a
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) of outstanding capital stock of the Company
representing more than 50% of the combined voting power of all voting
securities of the Company entitled to vote generally in the election of
directors, excluding acquisitions from the Company, (ii) a change of a majority
of the Board, without the approval or consent of the members of the Board
before such change, (iii)

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the acquisition of the Company by means of a reorganization, merger,
consolidation, recapitalization or asset sale, unless the owners of the capital
stock of the Company immediately before such transaction continue to own, in
substantially the same proportions as before such transaction, capital stock of
the acquiring or succeeding entity representing more than 50% of the combined
voting power of all voting securities of such acquiring or succeeding entity
entitled to vote generally in the election of directors, or (iv) the approval
of a liquidation or dissolution of the Company.

          (d) “Confidential Information” means all trade secrets and other
information of a business, financial, marketing, technical or other nature
pertaining to the Company or any of its subsidiaries or affiliates, including
information of others that the Company or any of its subsidiaries or affiliates
has agreed to keep confidential; provided, that Confidential Information shall
not include any information that has entered or enters the public domain
through no fault of the Executive, was known by the Executive prior to the
Executive’s affiliation with or employment by the Company or which the
Executive is required to disclose by legal process.

          (e) “Disability” means the failure of the Executive, due to physical or
mental disability, to perform the services reasonably contemplated by his
position for a period of either (i) ninety (90) consecutive days or (ii) one
hundred twenty (120) days, whether or not consecutive, during any 360-day
period.

          (f) “Good Reason” means any of the following events (unless consented to
by the Executive in writing): (i) a material diminution in the Executive’s
duties, responsibilities or the assignment to the Executive of duties or
responsibilities that are inconsistent in a material and adverse way with his
then position; (ii) a reduction in the Executive’s base salary; (iii) a
requirement by the Company that the Executive’s principal place of work be
moved to a location more than thirty-five (35) miles away from Scottsdale,
Arizona; or (iv) a change in the Executive’s title to a lesser title.

          (g) “Per-Share Equity Value” means (i) the total amount of cash and the
fair market value of all other property paid directly or indirectly by an
acquiror to the Company and/or its equity security holders in connection with
a Sale of the Company, divided by (ii) the total number of outstanding shares
of the Company’s Class A Common Stock, $.01 par value per share (the “Common
Stock”), immediately before the closing of a Sale of the Company transaction,
assuming the conversion of all shares of capital stock convertible into the
Company and the exercise of all warrants, options and other rights to purchase
the Common Stock. The value of any securities issuable in connection with a
Sale of the Company (whether debt or equity) freely tradable in an established
public market will be determined on the basis of the last closing price in such
market five (5) days prior to the consummation of the Sale of the Company (the
“Valuation Date”), and the value of securities not freely tradable (or having
no established market) or other property will be the fair market value of such
securities or other property on such Valuation Date as determined in good faith
by the Board.

          (h) “Sale of the Company” means (i) the acquisition by a person, party or
a group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) of outstanding capital stock of the Company
representing more than 50% of

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the combined voting power of all voting securities of the Company entitled to
vote generally in the election of directors, excluding acquisitions from the
Company, or (ii) the acquisition of the Company by means of a reorganization,
merger, consolidation, recapitalization or asset sale, unless the owners of the
capital stock of the Company immediately before such transaction continue to
own, in substantially the same proportions as before such transaction, capital
stock of the acquiring or succeeding entity representing more than 50% of the
combined voting power of all voting securities of such acquiring or succeeding
entity entitled to vote generally in the election of directors.

     2. Employment At-Will Acknowledgement. The Executive acknowledges and
agrees that his employment by the Company is “at-will” and as such may be
terminated by the Company at any time, with or without cause, subject to the
provisions of this Agreement.

     3. Compensation Upon Termination of Employment Prior to Change in Control.
If prior to a Change in Control the Executive’s employment by the Company is
terminated by the Company for any reason other than Cause or the Executive’s
death or Disability or is terminated by the Executive for Good Reason, the
Company shall:

          (a) pay to the Executive within five (5) days after the date of his
employment termination all accrued but unpaid salary, bonus and vacation pay,
if any;

          (b) continue to pay to the Executive his then current salary in bi-weekly
installments for twelve (12) months after the date of his employment
termination;

          (c) continue to provide the Executive for twelve (12) months after the
date of his employment termination with the health and life insurance benefits
he would have received had his employment by the Company not terminated or
substantially the equivalent coverage (or the full value thereof in cash); and

          (d) promptly reimburse the Executive for any and all legal fees and
expenses incurred by him to enforce the provisions of this Agreement.

     4. Compensation Upon Termination of Employment After Change in Control.
If within two (2) years following a Change in Control the Executive’s
employment by the Company is terminated by the Company for any reason other
than Cause or the Executive’s death or Disability or is terminated by the
Executive for Good Reason, the Company shall:

          (a) pay to the Executive within five (5) days after the date of his
employment termination all accrued but unpaid salary, bonus and vacation pay,
if any;

          (b) pay to the Executive within thirty (30) days after the date of his
employment termination a lump sum amount equal to two (2) times his then
current annual salary;

          (c) continue to provide the Executive for two (2) years after the date of
his employment termination with the health and life insurance benefits he would
have received had

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his employment by the Company not terminated or substantially the equivalent
coverage (or the full value thereof in cash); and

          (d) promptly reimburse the Executive for any and all legal fees and
expenses incurred by him to enforce the provisions of this Agreement.

     5. Acceleration of Option Vesting. If the Executive’s employment is
terminated and he is entitled to payments and benefits contemplated by Section
4, the vesting of all options granted by the Company to the Executive to
purchase shares of the Company’s capital stock shall be accelerated in full.

     6. Transaction Fee. (a) If there is a Sale of the Company prior to
December 31, 2006, the Executive shall be entitled to a fee (a “Transaction
Fee”) equal to the amount specified in the table below corresponding to the
date on which such transaction closes; provided, however, that no Transaction
Fee shall be payable if the Executive is not employed by the Company on the
closing date of such transaction.

	 	 	 	 	 
	1/1/04 – 12/31/04
	 	$	600,000	 
	1/1/05 – 12/31/05
	 	$	400,000	 
	1/1/06 – 12/31/06
	 	$	200,000	 

          (b) If the terms of a transaction constituting a Sale of the Company
provide for escrowed, contingent or installment payments, the portion of the
Transaction Fee relating to such payments shall be paid if and when such
payments are actually received by the security holders and/or the Company.

          (c) The Transaction Fee shall be payable in the same form and in the same
proportion as the consideration received by the Company and/or its security
holders in connection with the Sale of the Company.

     7. Confidentiality. (a) The Executive will not at any time, directly or
indirectly, disclose or divulge, except as required in connection with the
performance of the Executive’s duties for the Company, any Confidential
Information acquired by the Executive during or in connection with the
Executive’s affiliation with or employment by the Company.

          (b) The Executive shall make no use whatsoever, directly or indirectly, of
any Confidential Information, except as required in connection with the
performance of the Executive’s duties for the Company.

          (c) Upon the Company’s request at any time and for any reason, the
Executive shall immediately deliver to the Company all materials (including all
copies) in the Executive’s possession which contain or relate to Confidential
Information.

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     8. Non-competition and Non-solicitation. The Executive agrees that prior
to the termination of the Executive’s employment with the Company for whatever
reason, and thereafter for two years:

          (a) the Executive will not directly or indirectly, individually or as a
consultant to, or employee, officer, director, stockholder, partner or other
owner of or participant in any business entity other than the Company, engage
in or assist any other person to engage in the business of providing hospice
services in competition with the Company or any of its subsidiaries; and

          (b) the Executive will not directly or indirectly, individually or as a
consultant to, or employee, officer, director, stockholder, partner or other
owner of or participant in any business entity other than the Company, solicit
or hire from the Company or any of its subsidiaries or affiliates, or otherwise
materially interfere with the business relationship of the Company or any of
its subsidiaries or affiliates with, (i) any person who is, or was within the
six-month period immediately prior to the termination of the Executive’s
employment with the Company, employed by or associated with the Company or any
of its subsidiaries or affiliates or (ii) any person or entity who is, or was
within the six-month period immediately prior to the termination of the
Executive’s employment with the Company, a patient referral source for the
Company or any of its subsidiaries or affiliates.

     9. Remedies. Without limiting the remedies available to the Company, the
Executive acknowledges that a breach of any of the covenants contained in
Sections 7 and 8 herein could result in irreparable injury to the Company for
which there might be no adequate remedy at law, and that, in the event of such
a breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the Executive from engaging in any activities prohibited by
Sections 7 and 8 herein or such other equitable relief as may be required to
enforce specifically any of the covenants of Sections 7 and 8 herein. The
foregoing provisions of Sections 7 and 8 herein shall survive the termination
of this Agreement and shall continue thereafter in full force and effect in
accordance with the terms of Sections 7 and 8 herein for the periods of time
contemplated thereby.

     10. Release. It shall be a condition of the Company’s obligation to make
the payments and provide the benefits contemplated by Sections 3 and 4 that the
Executive execute and deliver to the Company a release in form and substance
satisfactory to the Company pursuant to which the Executive unconditionally and
irrevocably waives, relinquishes and forever releases and discharges the
Company and its officers, directors, shareholders, employees, agents,
subsidiaries, affiliates, predecessors, successors and assigns (collectively,
the “Company Indemnitees”) from any and all claims, duties, causes of actions,
demands, obligations, liabilities, rights, damages (including business,
punitive or exemplary damages) of any kind or nature whether existing or
contingent, then known or unknown, asserted or unasserted, whether in law,
equity and administrative proceeding that the Executive then has or ever had
against the Company Indemnitees since the beginning of the world through the
date thereof including, but not limited to, any and all matters related in any
way to the Executive’s employment with or separation from the Company, as well
as claims under the Employee Retirement Income Security

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Act of 1974, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, any
claim based on state anti-discrimination laws, any claim for wrongful
discharge, and any alleged violation of public policy, contract or tort law, or
any other federal, state, or local law; provided, however, that such release
shall not apply to the terms and conditions of this Agreement, which shall
remain valid and enforceable.

     11. Arbitration. In the case of any dispute under this Agreement, the
Executive may initiate binding arbitration in Phoenix, Arizona, before the
American Arbitration Association by serving a notice to arbitrate upon the
Company or, at the Executive’s election, institute judicial proceedings, in
either case within 90 days of the effective date of his termination or, if
later, his receipt of notice of termination, or such longer period as may be
reasonably necessary for the Executive to take such action if illness or
incapacity should impair his taking such action within the 90-day period. The
Company shall not have the right to initiate binding arbitration, and agrees
that upon the initiation of binding arbitration by Executive pursuant to this
Section 11 the Company shall cause to be dismissed any judicial proceedings it
has brought against the Executive relating to this Agreement. The Company
authorizes the Executive from time to time to retain counsel of his choice to
represent the Executive in connection with any and all actions, proceedings,
and/or arbitration, whether by or against the Company or any director, officer,
shareholder, or other person affiliated with the Company, which may affect
Executive’s rights under this Agreement. The Company agrees (i) to pay the
fees and expenses of such counsel, (ii) to pay the cost of such arbitration
and/or judicial proceeding, and (iii) to pay interest to the Executive on all
amounts owed to the Executive under this Agreement during any period of time
that such amounts are withheld pending arbitration and/or judicial proceedings.
Such interest will be at the base rate as announced from time to time by
Healthcare Business Credit Corporation, or its successor.

     12. Binding on Successors. If the Company is at any time before or after
a Change in Control merged or consolidated into or with any other corporation
or other entity (whether or not the Company is the surviving entity), or if
substantially all of the assets thereof are transferred to another corporation
or other entity, the provisions of this Agreement will be binding upon and
inure to the benefit of the corporation or other entity resulting from such
merger or consolidation or the acquirer of such assets, and this Section 12
will apply in the event of any subsequent merger or consolidation or transfer
of assets. In the event of any such merger, consolidation or sale of assets,
references to the Company in this Agreement shall unless the context suggests
otherwise be deemed to include the entity resulting from such merger or
consolidation or the acquirer of such assets of the Company.

     13. Withholding. All payments required to be made by the Company
hereunder to the Executive or his dependents, beneficiaries, or estate will be
subject to the withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.

     14. No Duty to Mitigate. There shall be no requirement on the part of the
Executive to seek other employment or otherwise mitigate damages in order to be
entitled to the full amount of any payments and benefits to which the Executive
is entitled under this Agreement, and the amount of such payments and benefits
shall not be reduced by any compensation or benefits received by the Executive
from other employment.

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     15. No Contract of Employment. Nothing contained in this Agreement shall
be construed as a contract of employment between the Company and the Executive,
or as a right of the Executive to continue in the employ of the Company, or as
a limitation of the right of the Company to discharge the Executive with or
without Cause; provided that the Executive shall have the right to receive upon
termination of his employment the payments and benefits provided in this
Agreement.

     16. No Other Severance. Payments made by the Company pursuant to this
Agreement shall be in lieu of severance payments, if any, which might otherwise
be available to the Executive.

     17. Successors and Assigns. The provisions of this Agreement, shall be
binding upon and shall inure to the benefit of the Executive, his executors,
administrators, legal representatives, and assigns, and the Company and its
successors.

     18. No Set-off. The Company shall have no right of set-off or
counterclaims, in respect of any claim, debt, or obligation, against any
payments to the Executive, his dependents, beneficiaries, or estate provided
for in this Agreement.

     19. Assignment. No right or interest to or in any payments shall be
assignable by the Executive; provided, however, that this provision shall not
preclude him from designating one or more beneficiaries to receive any amount
that may be payable after his death and shall not preclude the legal
representative of his estate from assigning any right hereunder to the person
or persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to
his estate. The term “beneficiaries” as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such amount, or if no
beneficiary has been so designated, the legal representative of the Executive’s
estate. No right, benefit, or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt, or obligation, or to
execution, attachment, levy, or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void, and of no effect.

     20. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 20.

     21. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement,
including without limitation that certain letter agreement between the Company
and the Executive dated October 14, 2003.

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     22. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.

     23. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Arizona.

     24. Miscellaneous.

          24.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver
or consent given by the Company on any one occasion shall be effective only in
that instance and shall not be construed as a bar or waiver of any right on any
other occasion.

          24.2 The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or substance of
any section of this Agreement.

          24.3 In case any provision of this Agreement shall be invalid, illegal or
otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.

	 	 	 	 	 	 	 
	 	 	VISTACARE, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	 	 	/s/ Richard R. Slager
	 	 	 	 	

	 
	 	 	 	 	 	 
	

	 	Title:
	 	 	 	President/CEO
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	/s/ Ronald F. Watson
	 	 	

	 	 	Ronald F. Watson

8exv10w75

 

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.

 

 

          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

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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

 

     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. Riddiford	 
	 	 	 	 	
 
	

	 	 	 	By:
	 	David M. Riddiford
	

	 	 	 	Its:
	 	Chief Financial Officer, Secretary
& Treasurer
	 

 
	 	 	 	 	 	 
	Dated:
November 18, 2004
	 	 	/s/ R. David Martin	 
	 	 	 	 	
 
	

	 	 	 	By:
	 	R. David Martin

4

 

EXHIBIT A

RESIGNATION LETTER

 

 

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 Martin
	

	 	
 
	

	 	R. David Martin
	Attachment
	 	 

 

 

SCHEDULE I

	 	 	 
	Entity
	 	Offices and Directorships Held

	Action Performance Companies, Inc.

	 	Director, Chief Financial Officer, Secretary, and
Treasurer
	 
	 	 
	Racing Collectables Club of America, Inc.

	 	Director, Vice President, Secretary, and Treasurer
	 
	 	 
	Action Racing Collectables, Inc.

	 	Director, Vice President, Secretary, and Treasurer
	 
	 	 
	Action Corporate Services, Inc.

	 	Director and President
	 
	 	 
	goracing Interactive Services, Inc.

	 	Director, President, Secretary, and Treasurer
	 
	 	 
	RYP, Inc.

	 	Director, Vice President, Chief Financial
Officer, Secretary, and Treasurer
	 
	 	 
	AW Acquisition Corp.

	 	Director, Vice President, Chief Financial
Officer, Secretary, and Treasurer
	 
	 	 
	Creative Marketing & Promotions, Inc.

	 	Director, Vice President, Chief Financial
Officer, Secretary, and Treasurer
	 
	 	 
	goracing.com, inc.

	 	Director, Chief Financial Officer, and Secretary
	 
	 	 
	Action Sports Image, L.L.C.

	 	Director, Chief Financial Officer, Secretary, and
Treasurer of Action Performance Companies, Inc.,
the sole member
	 
	 	 
	The Fan Club Company, L.L.C.

	 	Director, Vice President, Secretary, and
Treasurer of Action Performance Companies, Inc.,
the sole member
	 
	 	 
	McArthur Towel and Sports, Inc.

	 	Director, Vice President, Secretary, and Treasurer
	 
	 	 
	Jeff Hamilton Collection, Inc.

	 	Director, Secretary, and Treasurer
	 
	 	 
	Trevco Trading Corp.

	 	Director, Secretary, and Treasurer
	 
	 	 
	Funline Merchandise Company, Inc.

	 	Director, Executive Vice President, Secretary,
and Treasurer
	 
	 	 
	Action Performance Holding GmbH

	 	Managing Director
	 
	 	 
	APC Europe GmbH

	 	Managing Director
	 
	 	 

 

 

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 ###-##-####

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Options	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Granted or	 	 	 	 	 	 	 	 
	 	 	Expiration	 	Plan	 	 	 	Transferred	 	Option	 	Options	 	Options	 	Date
	Grant Date
	 	Date
	 	ID
	 	Grant Type
	 	to
	 	Price
	 	Outstanding
	 	Exercisable
	 	Exercisable

	8/2/2000

	 	8/2/2010
	 	 	003	 	 	Incentive
	 	 	55,170	 	 	$	5.4375	 	 	 	45,113	 	 	 	45,113	 	 	Current
	8/2/2000

	 	8/2/2010
	 	 	003	 	 	Non-Qualified
	 	 	44,830	 	 	$	5.4375	 	 	 	29,887	 	 	 	29,887	 	 	Current
	3/2/2001

	 	3/2/2011
	 	 	003	 	 	Incentive
	 	 	18,390	 	 	$	5.4375	 	 	 	18,390	 	 	 	18,390	 	 	Current
	3/2/2001

	 	3/2/2011
	 	 	003	 	 	Non-Qualified
	 	 	81,610	 	 	$	5.4375	 	 	 	56,610	 	 	 	56,610	 	 	Current
	7/11/2001

	 	7/11/2011
	 	 	003	 	 	Non-Qualified
	 	 	50,000	 	 	$	20.8000	 	 	 	50,000	 	 	 	50,000	 	 	Current
	1/29/2002

	 	1/29/2012
	 	 	003	 	 	Non-Qualified
	 	 	72,491	 	 	$	39.8500	 	 	 	72,491	 	 	 	50,000	 	 	Current
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	22,491 on
	 	1/29/2005
	1/29/2002

	 	1/29/2012
	 	 	003	 	 	Incentive
	 	 	2,509	 	 	$	39.8500	 	 	 	2,509	 	 	 	0	 	 	Current
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,509 on
	 	1/29/2005
	1/31/2003

	 	1/31/2013
	 	 	003	 	 	Non-Qualified
	 	 	69,325	 	 	$	17.6200	 	 	 	69,325	 	 	 	25,000	 	 	Current
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	25,000 on
	 	1/31/2005
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	19,325 on
	 	1/31/2006
	1/31/2003

	 	1/31/2013
	 	 	003	 	 	Incentive
	 	 	5,675	 	 	$	17.6200	 	 	 	5,675	 	 	 	0	 	 	Current
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5,675 on
	 	1/31/2006
	2/4/2004

	 	2/4/2014
	 	 	003	 	 	Non-Qualified
	 	 	68,229	 	 	$	14.7700	 	 	 	68,229	 	 	 	0	 	 	Current
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	24,999 on
	 	2/04/2005
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	25,000 on
	 	2/4/2006
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	18,230 on
	 	2/4/2007
	2/4/2004

	 	2/4/2014
	 	 	003	 	 	Incentive
	 	 	6,771	 	 	$	14.7700	 	 	 	6,771	 	 	 	0	 	 	Current
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	        1 on	 	2/4/2005
	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,770 on
	 	2/4/2007
	

	Optionee Totals

	 	 	 	 	 	 	 	 	 	 	475,000	 	 	 	 	 	 	 	425,000	 	 	 	275,000	 	 	 

 

EXHIBIT B-2

OPTIONS TO BE EXERCISED WITHIN 90 DAYS OF CESSATION DATE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Type
	 	Option Price
	 	Options Exercisable
	 	Date Last Exercise

	Incentive
	 	$	5.4375	 	 	 	63,503	 	 	 	01/07/04	 
	Non-Qualified
	 	$	5.4375	 	 	 	86,497	 	 	 	01/07/04	 

 

 

EXHIBIT B-3

OPTIONS TO BE EXERCISED WITHIN ONE YEAR OF CESSATION DATE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Type
	 	Option Price
	 	Options Exercisable
	 	Date Last Exercise

	Non-Qualified
	 	$	20.800	 	 	 	50,000	 	 	 	10/07/05	 
	Non-Qualified
	 	$	39.850	 	 	 	75,000	 	 	 	10/07/05	 
	Non-Qualified
	 	$	17.620	 	 	 	50,000	 	 	 	10/07/05	 
	Non-Qualified
	 	$	14.770	 	 	 	25,000	 	 	 	10/07/05

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}]]