Document:

exv10w1

 

EXHIBIT 10.1

CHANGE OF CONTROL AGREEMENT

DATED AS OF JUNE 2, 2005

BETWEEN

ACTION PERFORMANCE COMPANIES, INC.

AND

DAVID M. RIDDIFORD

 

 

CHANGE OF CONTROL AGREEMENT

     Change of Control Agreement dated as of June 2, 2005, by and between Action Performance
Companies, Inc., an Arizona corporation (“Employer”) and David M. Riddiford (“Executive”).

RECITALS

     Executive currently serves as Chief Financial Officer, Secretary and Treasurer of Employer.

     The Board of Directors of the Employer (the “Board”), has determined that it is in the best
interests of the Employer and its stockholders to assure that the Employer will have the continued
dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined below) of the Employer. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the Executive’s full attention and
dedication to the Employer currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants set forth in this
Agreement, the parties hereto agree as follows:

AGREEMENT

     1. Term. The term of this Agreement 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” and collectively with the Initial Term, the “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. If a Change in Control
occurs during the Term, then the provisions of Sections 3 and 4 hereof shall continue for the
periods set forth therein. Notwithstanding the foregoing, this Agreement will terminate upon the
effective date of any termination for Cause of, voluntary resignation (other than for Good Reason
after a Change in Control, as each term is defined below) by, or death or disability of, Executive
(an “Involuntary Termination”), and thereafter Executive shall not be entitled to any of the
benefits hereunder.

     2. Certain Definitions.

          (a) “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

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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 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 Original 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
seventy-five 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.

          (b) “Good Reason” shall mean 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 the recitals of this Agreement;

               (iii) Executive is assigned duties inconsistent with the positions, duties, responsibilities,
or status of the Chief Financial Officer of Employer; or

               (iv) Executive is required to relocate to an employment location that is more than twenty-five
(25) miles from his current employment location which the parties agrees is Employer’s present
corporate headquarters.

          (c) “Cause” shall be limited to discharge resulting from a determination by the Board
that Executive:

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               (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 a failure
of Executive to cure within thirty (30) days or receipt of such notice, in a material respect to
follow reasonable policies or directors 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 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.

     3. Change in Control Benefits.

          (a) Length of Benefit. If during the Term there is a Change of Control and within two
(2) years thereafter Executive shall be terminated without Cause or shall resign for Good Reason,
then Executive shall receive the “Change in Control Benefits” provided below.

          (b) Benefits. The Executive’s Change in Control 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 Change in Control Benefits 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.

          (c) Future Employment. The payment of Change in Control 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 Change in Control Benefits shall not be
impacted by Executive’s failure to mitigate.

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     4. Covenant-Not-to-Compete.

          (a) Interests to be Protected.

               (i) Customers. The parties acknowledge that Executive’s employment during the term of
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 as a result of a Change of Control, 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) Non-Solicitation of Customers. During the Term and any Guaranteed Payment Term,
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.

          (c) Non-Solicitation of Executives. During the Term and any Guaranteed Payment Term,
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.

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          (d) Competing Business. During the Term and any Guaranteed Payment Term, 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).

          (e) Limitation and Judicial Amendment. Notwithstanding any other provision of this
Agreement, the provisions contained in paragraphs 4(b), 4(c) and 4(e) shall not apply for more than
twelve (12) months after Executive fails to receive Change in Control Benefits under this
Agreement. Moreover, if the scope of any provision of this Agreement is found by a court to be too
broad to permit enforcement to its full extent, then such provision shall be enforced to the
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.

          (f) 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.

          (g) Survival. The provisions of this paragraph shall survive the termination of
Executive’s employment to the extent necessary to enforce such provisions.

     5. Confidential Information. During the course of his employment during the term of 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.
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, is excluded

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from this Agreement. The provisions of this paragraph shall survive the termination of this
Agreement.

     6. 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 Executive Officer
	 
	 	(ii)  	If to Executive:
	 
	 	  	10840 N. 52nd Street

Scottsdale, Arizona 85254

Either party may alter the address to which communications are to be sent by giving notice of such
change of Laddress in conformity with the provisions of this paragraph for the giving of notice.

          (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

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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. For purposes of this Agreement,
successors and 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) Withholding. All amounts due hereunder shall be subject to withholding as
required by law.

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     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/ Fred W. Wagenhals
	

	 	 	 	 
	

	 	Name:
	 	Fred W. Wagenhals
	

	 	Its:
	 	President and Chief Executive Officer
	 
	 	 	 	 
	 	 	EXECUTIVE:
	 
	 	 	 	 
	 	 	/s/ David M. Riddiford
	 	 	 
	 	 	David M. Riddiford

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EXHIBIT 10.2

CHANGE OF CONTROL AGREEMENT

DATED AS OF JUNE 2, 2005

BETWEEN

ACTION PERFORMANCE COMPANIES, INC.

AND

MELODEE L. VOLOSIN

 

 

CHANGE OF CONTROL AGREEMENT

     Change of Control Agreement dated as of June 2, 2005, by and between Action Performance
Companies, Inc., an Arizona corporation (“Employer”) and Melodee L. Volosin (“Executive”).

RECITALS

     Executive currently serves as Chief Operating Officer and Executive Vice President of
Employer.

     The Board of Directors of the Employer (the “Board”), has determined that it is in the best
interests of the Employer and its stockholders to assure that the Employer will have the continued
dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined below) of the Employer. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the Executive’s full attention and
dedication to the Employer currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants set forth in this
Agreement, the parties hereto agree as follows:

AGREEMENT

     1. Term. The term of this Agreement 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” and collectively with the Initial Term, the “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. If a Change in Control
occurs during the Term, then the provisions of Sections 3 and 4 hereof shall continue for the
periods set forth therein. Notwithstanding the foregoing, this Agreement will terminate upon the
effective date of any termination for Cause of, voluntary resignation (other than for Good Reason
after a Change in Control, as each term is defined below) by, or death or disability of, Executive
(an “Involuntary Termination”), and thereafter Executive shall not be entitled to any of the
benefits hereunder.

     2. Definitions.

          (a) “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 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 Original 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
seventy-five 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.

          (b) “Good Reason” shall mean 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 the recitals of this Agreement;

               (iii) Executive is assigned duties inconsistent with the positions, duties, responsibilities,
or status of the Chief Operating Officer of Employer; or

               (iv) Executive is required to relocate to an employment location that is more than twenty-five
(25) miles from her current employment location which the parties agrees is Employer’s present
corporate headquarters.

          (c) “Cause” shall be limited to discharge resulting from a determination by the Board that
Executive:

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               (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 a failure
of Executive to cure within thirty (30) days or receipt of such notice, in a material respect to
follow reasonable policies or directors 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 her
under this Agreement; or

               (iv) has performed an act or failed to act for which if she were prosecuted and convicted,
would 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.

     3. Change in Control Benefits.

          (a) Length of Benefit. If during the Term there is a Change of Control and within two
(2) years thereafter Executive shall be terminated without Cause or shall resign for Good Reason,
then Executive shall receive the “Change in Control Benefits” provided below.

          (b) Benefits. The Executive’s Change in Control 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 her as bonus or incentive compensation for the prior year,
and (ii) an amount estimated to be due her 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, she would be paid $200,000 as her bonus payout upon
termination. The Change in Control Benefits 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 her to obtain comparable
coverage for the two (2) year post-termination period.

          (c) Future Employment. The payment of Change in Control 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 Change in Control Benefits shall not be
impacted by Executive’s failure to mitigate.

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     4. Covenant-Not-to-Compete.

          (a) Interests to be Protected.

               (i) Customers. The parties acknowledge that Executive’s employment during the term of
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 her employment with Employer should
terminate as a result of a Change of Control, 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) Non-Solicitation of Customers. During the Term and any Guaranteed Payment Term,
Executive shall not, directly or indirectly, for herself, 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 she
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 she provided on behalf of Employer.

          (c) Non-Solicitation of Executives. During the Term and any Guaranteed Payment Term,
Executive shall not directly or indirectly, for herself, 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.

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          (d) Competing Business. During the Term and any Guaranteed Payment, Executive shall
not, directly or indirectly, for herself, 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).

          (e) Limitation and Judicial Amendment. Notwithstanding any other provision of this
Agreement, the provisions contained in paragraphs 4(b), 4(c) and 4(e) shall not apply for more than
twelve (12) months after Executive fails to receive Change in Control Benefits under this
Agreement. Moreover, if the scope of any provision of this Agreement is found by a court to be too
broad to permit enforcement to its full extent, then such provision shall be enforced to the
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.

          (f) 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.

          (g) Survival. The provisions of this paragraph shall survive the termination of
Executive’s employment to the extent necessary to enforce such provisions.

     5. Confidential Information. During the course of her employment during the term of 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 her employment is
terminated by either party for any reason, Executive agrees that she will not take with her 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 she disclose
the same in whole or in part to any person or entity, in any manner either directly or indirectly.
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, is excluded

-5-

 

from this Agreement. The provisions of this paragraph shall survive the termination of this
Agreement.

     6. 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 Executive Officer
	 
	 	(ii)  	If to Executive:
	 
	 	  	2489 E. Marlene Drive

Gilbert, Arizona 85296

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.

          (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

-6-

 

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. For purposes of this Agreement,
successors and 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) Withholding. All amounts due hereunder shall be subject to withholding as
required by law.

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     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/ Fred W. Wagenhals
	

	 	 	 	 
	

	 	Name:
	 	Fred W. Wagenhals
	

	 	Its:
	 	President and Chief Executive Officer
	 
	 	 	 	 
	 	 	EXECUTIVE:
	 
	 	 	 	 
	 	 	/s/ Melodee L. Volosin
	 	 	 
	 	 	Melodee L. Volosin

-8-

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