
                              EMPLOYMENT AGREEMENT



                          DATED AS OF NOVEMBER 7, 1996



                                     BETWEEN



                       ACTION PERFORMANCE COMPANIES, INC.


                                       AND


                                   JOE MATTES





<PAGE>
                                TABLE OF CONTENTS

                                                            Page
                                                            ----

1.       Employment........................................   1

2.       Full Time Occupation..............................   1

3.       Compensation and other Benefits...................   1
         (a)      Salary...................................   1
         (b)      Bonus....................................   1
         (c)      Stock Options............................   1
         (d)      Fringe Benefits..........................   1
         (e)      Reimbursement............................   2

4.       Term of Employment................................   2
         (a)      Employment Term..........................   2
         (b)      Termination Under Certain Circumstances..   2
         (c)      Result of Termination....................   2

5.       Competition and Confidential Information..........   2
         (a)      Interests to be Protected................   2
         (b)      Non-Competition..........................   3
         (c)      Non-Solicitation of Employees............   3
         (d)      Confidential Information.................   3
         (e)      Return of Books and Papers...............   3
         (f)      Disclosure of Information................   4
         (g)      Assignment...............................   4
         (h)      Equitable Relief.........................   4
         (i)      Restrictions Separable...................   4

6.       Miscellaneous.....................................   4
         (a)      Notices..................................   4
         (b)      Indulgences..............................   5
         (c)      Controlling Law..........................   5
         (d)      Binding Nature of Agreement..............   5
         (e)      Execution in Counterpart.................   5
         (f)      Provisions Separable.....................   5
         (g)      Entire Agreement.........................   5
         (h)      Paragraph Headings.......................   6
         (i)      Gender...................................   6
         (j)      Number of Days...........................   6

7.       Successors And Assigns............................   6
                                        i
<PAGE>
                              EMPLOYMENT AGREEMENT


                  EMPLOYMENT AGREEMENT dated as of the 7th day of November, 1996
by and  between  ACTION  PERFORMANCE  COMPANIES,  INC.,  an Arizona  corporation
("Employer") and JOE MATTES ("Employee").

                  Employer's wholly owned subsidiary, SII Acquisition,  Inc., an
Arizona  corporation  ("SII"),  has  purchased  substantially  all the assets of
Sports Image, Inc., a North Carolina corporation ("SNC"). Employee served as the
President  of SNC prior to the  acquisition.  SII,  which  plans to  change  its
corporate  name to Sports  Image,  Inc.,  will  continue  the  business  of SNC.
Employer  desires that  Employee  serve as President of SII and perform  various
other services for Employer and Employee  desires to accept such employment upon
the terms and conditions contained herein.

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

                  1.       Employment.

                  Employer hereby employs Employee,  and Employee hereby accepts
such  employment,  as Vice  President of Employer and as President of Employer's
SII  subsidiary  and in such  other  capacities  and for such  other  duties and
services  of an  executive  nature as shall  from time to time be  specified  by
Employer.

                  2.       Full Time Occupation.

                  Employee  shall  devote   Employee's   entire  business  time,
attention,  and  efforts to the  performance  of  Employee's  duties  under this
Agreement,  shall serve Employer faithfully and diligently, and shall not engage
in any other employment while employed by Employer.

                  3.       Compensation and other Benefits.

                           (a)  Salary.  Employer  shall  pay  to  Employee,  as
compensation for the services rendered by Employee during Employee's  employment
under this  Agreement,  a salary at a rate of $225,000 per annum,  to be paid in
equal monthly  installments  or in such other periodic  installments  upon which
Employer and Employee mutually agree.

                           (b) Bonus.  Employee  shall be eligible to receive an
annual bonus in an amount of up to 30% of  Employee's  salary with the amount to
be determined  by the Board of Directors of Employer  based upon such factors as
may be deemed relevant by the directors, including the performance of Employee.

                           (c)  Stock  Options  and  Awards.  Employee  shall be
granted qualified stock options under Employer's Stock Option Plan to purchase a
total of 50,000  shares of  Employer's  Common Stock at a price equal to $14.875
per  share at any time or from  time to time  within  five  years of the date of
grant,  such  options  to  vest  60% on the  date  of  grant,  20% on the  first
anniversary of the grant, and 20% on the second anniversary of the grant.

                           (d) Fringe  Benefits.  Employee  shall be entitled to
participate  in any group  insurance,  pension,  retirement,  vacation,  expense
reimbursement,  and other plans,  programs,  or benefits  approved by Employer's
Board of Directors and made available  from time to time to executive  personnel
of Employer generally during the term of Employee's  employment  hereunder.  The
foregoing shall not obligate  Employer to adopt or maintain any particular plan,
program, or benefit.
<PAGE>
                           (e) Reimbursement.  Employer shall reimburse Employee
for all travel and  entertainment  expenses  and other  ordinary  and  necessary
business  expenses  incurred  by  Employee in  connection  with the  business of
Employer and Employee's  duties under this Agreement;  provided,  however,  that
Employee  shall not incur such  expenses in an amount in excess of $5,000 during
any month  without  written  authorization  from  Employer.  The term  "business
expenses"  shall  not  include  any item not  deductible  in whole or in part by
Employer for federal income tax purposes. To obtain reimbursement, Employee must
submit to Employer  receipts,  bills, or sales slips for the expenses  incurred.
Reimbursements  will be made by Employer  monthly within 10 days of presentation
by Employee of satisfactory evidence of the expenses incurred.

                  4.       Term of Employment.

                           (a)   Employment   Term.   The  term  of   Employee's
employment  under this Agreement shall be for a period of three years commencing
on the date of this  Agreement  and  continuing  from  year to year  thereafter,
unless and until  terminated by either party giving  written notice to the other
not less than 60 days prior to the end of the  then-current  term of  Employee's
employment under this Agreement.

                           (b)   Termination   Under   Certain    Circumstances.
Notwithstanding anything to the contrary herein contained:

                                    (i)  Death.   Employee's   employment  shall
automatically  terminate,  without notice, effective upon the date of Employee's
death.

                                    (ii) Disability. If Employee shall fail, for
a period of more than 60  consecutive  days,  or for 60 days  within any 180-day
period,  to perform any of Employee's  duties under this Agreement as the result
of  illness or other  incapacity,  Employer,  at its  option and upon  notice to
Employee,  may  terminate  Employee's  employment  effective on the date of that
notice.

                                    (iii)   Unilateral   Decision  of  Employer.
Employer,  at its option and upon notice to Employee,  may terminate  Employee's
employment effective on the date of that notice.

                                    (iv)   Unilateral   Decision  by   Employee.
Employee,  at his option, may terminate Employee's employment upon 90 days prior
notice to Employer.

                                    (v) Certain Acts. If Employee  engages in an
act or acts involving a crime, moral turpitude, fraud, or dishonesty,  Employer,
at its option and upon notice to Employee,  may terminate Employee's  employment
effective on the date of that notice.

                           (c)  Result  of  Termination.  In  the  event  of the
termination of Employee's employment pursuant to Sections 4(b)(i),  (ii), or (v)
above,  Employee shall receive no further compensation under this Agreement.  In
the event of the  termination  of  Employee's  employment  pursuant  to  Section
4(b)(iii)   above,   Employee  shall  continue  to  receive   Employee's   fixed
compensation  during  the  remainder  of the  then-current  term  of  Employee's
employment  under this  Agreement  prior to such  termination  if termination is
before  the 24th  month.  After the 24th  month and  during  any  renewal  term,
Employee shall have a rolling 12 month severance  compensation.  In the event of
the termination of Employee's  employment  pursuant to 4(b)(iv) above,  Employee
shall be  entitled  to receive an amount  equal to  Employee's  fixed  salary as
provided  in  Section  3(a)  above  during  the  four-month  period  immediately
following the termination.

                  5.       Competition and Confidential Information.

                           (a)   Interests   to  be   Protected.   The   parties
acknowledge  that Employee  will perform  essential  services for Employer,  its
employees, and its stockholders during the term of Employee's employment with
                                        2
<PAGE>
Employer.  Employee  will be exposed  to,  have  access  to,  and work  with,  a
considerable amount of Confidential  Information (as defined below). The parties
also  expressly  recognize and  acknowledge  that the personnel of Employer have
been  trained by, and are valuable to,  Employer  and that  Employer  will incur
substantial recruiting and training expenses if Employer must hire new personnel
or retrain existing personnel to fill vacancies. The parties expressly recognize
that it could seriously impair the goodwill and diminish the value of Employer's
business should  Employee  compete with Employer in any manner  whatsoever.  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 stockholders,  and employees. For these and other reasons, and the
fact that there are many other employment opportunities available to Employee if
he  should  terminate  his  employment,  the  parties  are in full and  complete
agreement that the following  restrictive  covenants are fair and reasonable and
are entered into freely, voluntarily, and knowingly. Furthermore, each party was
given the opportunity to consult with independent  legal counsel before entering
into this Agreement.

                           (b)  Non-Competition.  During the term of  Employee's
employment  with  Employer  and for the  period  ending  six  months  after  the
termination  of Employee's  employment  with Employer,  provided  termination is
pursuant to Section  4(b)(iv) (but 12 months if pursuant to Section  4(b)(ii) or
Section 4(b)(v)),  Employee shall not (whether directly or indirectly, as owner,
principal,  agent, stockholder,  director,  officer, manager, employee, partner,
participant,  or in any other capacity) engage or become financially  interested
in any  competitive  business  conducted  within the  Restricted  Territory  (as
defined below). As used herein,  the term "competitive  business" shall mean any
business  that sells or  provides  or  attempts  to sell or provide  products or
services the same as or  substantially  similar to the products or services sold
or provided by Employer during  Employee's  employment  hereunder,  and the term
"Restricted  Territory" shall mean any state in which Employer sells products or
provides  services during  Employee's  employment  hereunder.  If termination of
employment pursuant to Section 4(b)(iii), then this Section is not applicable.

                           (c) Non-Solicitation of Employees. During the term of
Employee's  employment  and for a period of 12 months after the  termination  of
Employee's employment with Employee, regardless of the reason therefor, Employee
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 or hire  any of  Employer's  personnel  or
employees  for the purpose of having any such  employee  engage in services that
are the same as or  similar  or  related  to the  services  that  such  employee
provided for Employer.

                           (d) Confidential Information. Employee shall maintain
in strict secrecy all confidential or trade secret  information  relating to the
business of Employer (the  "Confidential  Information")  obtained by Employee in
the course of  Employee's  employment,  and  Employee  shall not,  unless  first
authorized in writing by Employer, disclose to, or use for Employee's benefit or
for the  benefit of, any person,  firm,  or entity at any time either  during or
subsequent to the term of Employee's employment,  any Confidential  Information,
except  as  required  in the  performance  of  Employee's  duties  on  behalf of
Employer.  For purposes hereof,  Confidential  Information shall include without
limitation any materials, trade secrets,  knowledge, or information with respect
to management,  operational,  or investment  policies and practices of Employer;
any  business  methods or forms;  any names or addresses of customers or data on
customers or suppliers;  and any business policies or other information relating
to or dealing  with the  management,  operational,  or  investment  policies  or
practices of Employer.

                           (e) Return of Books and Papers.  Upon the termination
of Employee's  employment  with Employer for any reason,  Employee shall deliver
promptly to Employer  all files,  lists,  books,  records,  manuals,  memoranda,
drawings,  and specifications;  all cost, pricing, and other financial data; all
other  written or printed  materials  that are the property of Employer (and any
copies  of  them);  and  all  other  materials  that  may  contain  Confidential
Information  relating to the business of Employer,  which Employee may then have
in Employee's possession, whether prepared by Employee or not.
                                        3
<PAGE>
                           (f)   Disclosure  of   Information.   Employee  shall
disclose  promptly to  Employer,  or its  nominee,  any and all ideas,  designs,
processes,  and  improvements  of any kind relating to the business of Employer,
whether  patentable  or not,  conceived  or made by  Employee,  either  alone or
jointly with others, during working hours or otherwise, during the entire period
of Employee's employment with Employer or within six months thereafter.

                           (g)  Assignment.  Employee hereby assigns to Employer
or its nominee,  the entire right, title, and interest in and to all inventions,
discoveries,  and  improvements,  whether  patentable  or not, that Employee may
conceive or make  during  Employee's  employment  with  Employer,  or within six
months thereafter, and which relate to the business of Employer.

                           (h) Equitable Relief. In the event a violation of any
of the restrictions contained in this Section is established,  Employer shall be
entitled to preliminary and permanent  injunctive  relief as well as damages and
an equitable  accounting of all earnings,  profits,  and other benefits  arising
from such  violation,  which  right shall be  cumulative  and in addition to any
other rights or remedies to which  Employer  may be entitled.  In the event of a
violation of any provision of subsection  (b), (c), (f), or (g) of this Section,
the period for which those  provisions  would remain in effect shall be extended
for a  period  of time  equal  to that  period  beginning  when  such  violation
commenced and ending when the activities  constituting such violation shall have
been finally terminated in good faith.

                           (i)  Restrictions  Separable.  If  the  scope  of any
provision of this Agreement (whether in this Section 5 or otherwise) 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. Each and every  restriction set
forth in this Section 5 is  independent  and severable  from the others,  and no
such restriction shall be rendered unenforceable by virtue of the fact that, for
any  reason,  any other or others  of them may be  unenforceable  in whole or in
part.

                  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,  made,  and received (i) if
personally   delivered,   on  the  date  of  delivery,   (ii)  if  by  facsimile
transmission,  upon  receipt,  (iii) if mailed,  three days after deposit in the
United States mail, registered or certified,  return receipt requested,  postage
prepaid,  and  addressed  as provided  below,  or (iv) if by a courier  delivery
service  providing  overnight or "next-day"  delivery,  on the next business day
after deposit with such service addressed as follows:

                                    (1)       If to Employer:

                                              2401 West First Street
                                              Tempe, Arizona 85281
                                              Attention: Fred W. Wagenhals
                                        4
<PAGE>
                                             with a copy given in the manner
                                             prescribed above, to:

                                             O'Connor, Cavanagh, Anderson,
                                               Killingsworth & Beshears, P.A.
                                             One East Camelback Road
                                             Phoenix, Arizona  85012
                                             Attention:  Robert S. Kant, Esq.

                                    (2)      If to Employee:

                                             5301 West WT Harris Boulevard
                                             Charlotte, North Carolina 28269


                                             with a copy given in the manner
                                             prescribed above, to:

                                             Gray, Layton, Drum, Kersh, Solomon,
                                               Sigmon & Furr, P.A.
                                             516 South New Hope Road
                                             Gastonia, North Carolina  28053
                                             Attention:  David Furr, Esq.

Either party may alter the address to which  communications  or copies are to be
sent by  giving  notice  of such  change  of  address  in  conformity  with  the
provisions of this Section 6 for the giving of notice.

                           (b) Indulgences; Waivers. 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.  No waiver shall be
binding unless executed in writing by the party making the waiver.

                           (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 assigns, except that
no party may assign or transfer such party's  rights or  obligations  under this
Agreement without the prior written consent of the other party.

                           (e) Execution in  Counterpart.  This Agreement may be
executed in any number of  counterparts,  each of which shall be deemed to be an
original as against any party whose signature appears thereon,  and all of which
shall together  constitute  one and the same  instrument.  This Agreement  shall
become  binding  when one or more  counterparts  hereof,  individually  or taken
together,  shall bear the  signatures  of the  parties  reflected  hereon as the
signatories.
                                        5
<PAGE>
                           (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)  Gender.  Words used  herein,  regardless  of the
number and gender  specifically  used,  shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine,
or neuter, as the context requires.

                           (j) 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 that is not a Saturday, Sunday, or holiday.

                  7.  Successors And Assigns.  This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto;
provided  that  because  the  obligations  of  Employee  hereunder  involve  the
performance of personal  services,  such  obligations  shall not be delegated by
Employee.  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 will
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 including SII.

                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first above written.

                                        ACTION PERFORMANCE COMPANIES, INC.


                                        By:_____________________________________

                                        Its:____________________________________



                                        ________________________________________
                                        JOE MATTES
                                        6
