Exhibit 10.74

PLEDGE AND SECURITY AGREEMENT

     THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from
time to time, this “Security Agreement”) is entered into as of June 30, 2004 by
and among ACTION PERFORMANCE COMPANIES, INC., an Arizona corporation (“APC” or
“Company”), ACTION RACING COLLECTABLES, INC., an Arizona corporation (“ARC”),
ACTION SPORTS IMAGE, L.L.C., an Arizona limited liability company (“ASI”),
FUNLINE MERCHANDISE COMPANY, INC., a California corporation (“Funline”), JEFF
HAMILTON COLLECTION, INC., an Arizona corporation (“Hamilton”), MCARTHUR TOWEL
AND SPORTS, INC., an Arizona corporation (“McArthur”), RACING COLLECTABLES CLUB
OF AMERICA, INC., an Arizona corporation (“RCCA”), TREVCO TRADING CORP., an
Arizona corporation (“Trevco”), ACTION CORPORATE SERVICES, INC., an Arizona
corporation, AW ACQUISITION CORP., an Arizona corporation, CREATIVE MARKETING &
PROMOTIONS, INC., a North Carolina corporation, GORACING.COM, INC., an Arizona
corporation, GORACING INTERACTIVE SERVICES, INC., an Arizona corporation, RYP,
INC., a North Carolina corporation, THE FAN CLUB COMPANY, L.L.C., an Arizona
limited liability company (each a “Grantor” and collectively, jointly and
severally, the “Grantors”), and BANK ONE, NA, a national banking association
having its principal office in Chicago, Illinois, in its capacity as agent (the
“Agent”) for itself and the other lenders a party to the Credit Agreement
referred to below.

PRELIMINARY STATEMENT

     The Grantors, the Agent and the Lenders are entering into an Amended and
Restated Credit Agreement dated as of the date hereof (as it may be amended or
modified from time to time, the “Credit Agreement”).

     Each Grantor is entering into this Security Agreement in order to induce
the Lenders to enter into and extend credit to the Borrowers under the Credit
Agreement and to secure the Secured Obligations that it has agreed to guarantee
pursuant to Article XV of the Credit Agreement.

     ACCORDINGLY, the Grantors and the Agent, on behalf of the Lenders, hereby
agree as follows:

ARTICLE I
DEFINITIONS

     1.1. Terms Defined in Credit Agreement. All capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such terms in the
Credit Agreement.

     1.2. Terms Defined in UCC. Terms defined in the UCC which are not otherwise
defined in this Security Agreement are used herein as defined in the UCC.

     1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings:

     “Accounts” shall have the meaning set forth in Article 9 of the UCC.

     “Article” means a numbered article of this Security Agreement, unless
another document is specifically referenced.

(APC) Pledge and Security Agreement

 

--------------------------------------------------------------------------------

 

     “Assigned Contracts” means, collectively, all of the Grantors’ rights and
remedies under, and all moneys and claims for money due or to become due to the
Grantors under those contracts set forth on Exhibit J hereto, and any other
material contracts, and any and all amendments, supplements, extensions, and
renewals thereof including all rights and claims of the Grantors now or
hereafter existing: (a) under any insurance, indemnities, warranties, and
guarantees provided for or arising out of or in connection with any of the
foregoing agreements; (b) for any damages arising out of or for breach or
default under or in connection with any of the foregoing contracts; (c) to all
other amounts from time to time paid or payable under or in connection with any
of the foregoing agreements; or (d) to exercise or enforce any and all
covenants, remedies, powers and privileges thereunder.

     “Borrower Representative” shall have the meaning set forth in the Credit
Agreement.

     “Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

     “Collateral” shall have the meaning set forth in Article II.

     “Collateral Deposit Account” shall have the meaning set forth in Section
7.1(a).

     “Collateral Report” means any certificate (including any Borrowing Base
Certificate), report or other document delivered by any Grantor to the Agent or
any Lender with respect to the Collateral pursuant to any Loan Document.

     “Collection Account” shall have the meaning set forth in Section 7.1(b).

     “Commercial Tort Claims” means the existing commercial tort claims of the
Grantors as described on Exhibit K.

     “Control” shall have the meaning set forth in Article 8 or, if applicable,
in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

     “Copyrights” means, with respect to any Person, all of such Person’s right,
title, and interest in and to the following: (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright
registrations, and copyright applications; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages, and payments now or hereafter due
and/or payable under any of the foregoing, including, without limitation,
damages or payments for past or future infringements for any of the foregoing;
(d) the right to sue for past, present, and future infringements of any of the
foregoing; and (e) all rights corresponding to any of the foregoing throughout
the world.

     “Copyright Security Agreement” means that certain Copyright Security
Agreement, dated the date hereof, among the Grantors and Agent, for the lenders
party to the Credit Agreement.

     “Default” means an event described in Section 5.1.

     “Deposit Accounts” shall have the meaning set forth in Article 9 of the
UCC.

     “Documents” shall have the meaning set forth in Article 9 of the UCC.

APC PLEDGE AND SECURITY AGREEMENT — Page 2

 

--------------------------------------------------------------------------------

 

     “Equipment” shall have the meaning set forth in Article 9 of the UCC.

     “Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.

     “Fixtures” shall have the meaning set forth in Article 9 of the UCC.

     “General Intangibles” shall have the meaning set forth in Article 9 of the
UCC.

     “Goods” shall have the meaning set forth in Article 9 of the UCC.

     “Instruments” shall have the meaning set forth in Article 9 of the UCC.

     “Inventory” shall have the meaning set forth in Article 9 of the UCC.

     “Investment Property” shall have the meaning set forth in Article 9 of the
UCC.

     “IP Security Agreements” means, individually and collectively, the
Copyright Security Agreement, the Patent Security Agreement and the Trademark
Security Agreement.

     “Lenders” means the lenders party to the Credit Agreement and their
successors and assigns.

     “Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of
the UCC.

     “Licenses” means, with respect to any Person, all of such Person’s right,
title, and interest in and to (a) any and all licensing agreements or similar
arrangements in and to its Patents, Copyrights, or Trademarks, (b) all income,
royalties, damages, claims, and payments now or hereafter due or payable under
and with respect thereto, including, without limitation, damages and payments
for past and future breaches thereof, and (c) all rights to sue for past,
present, and future breaches thereof.

     “Lock Boxes” shall have the meaning set forth in Section 7.1(a).

     “Lock Box Agreements” shall have the meaning set forth in Section 7.1(a).

     “Patents” means, with respect to any Person, all of such Person’s right,
title, and interest in and to: (a) any and all patents and patent applications;
(b) all inventions and improvements described and claimed therein; (c) all
reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof; (d) all income, royalties, damages, claims, and
payments now or hereafter due or payable under and with respect thereto,
including, without limitation, damages and payments for past and future
infringements thereof; (e) all rights to sue for past, present, and future
infringements thereof; and (f) all rights corresponding to any of the foregoing
throughout the world.

     “Patent Security Agreement” means that certain Patent Security Agreement,
dated the date hereof, among the Grantors and Agent, for the lenders party to
the Credit Agreement.

     “Pledged Collateral” means all Instruments, Securities and other Investment
Property of the Grantors, whether or not physically delivered to the Agent
pursuant to this Security Agreement.

APC PLEDGE AND SECURITY AGREEMENT — Page 3

 

--------------------------------------------------------------------------------

 

     “Receivables” means the Accounts, Chattel Paper, Documents, Investment
Property, Instruments and any other rights or claims to receive money which are
General Intangibles or which are otherwise included as Collateral.

     “Required Secured Parties” means (a) prior to an acceleration of the
obligations under the Credit Agreement, the Required Lenders, (b) after an
acceleration of the obligations under the Credit Agreement but prior to the date
upon which the Credit Agreement has terminated by its terms and all of the
obligations thereunder have been paid in full, Lenders holding in the aggregate
at least a majority of the total of the Aggregate Credit Exposure, and (c) after
the Credit Agreement has terminated by its terms and all of the obligations
thereunder have been paid in full (whether or not the obligations under the
Credit Agreement were ever accelerated), Lenders holding in the aggregate at
least a majority of the aggregate net early termination payments and all other
amounts then due and unpaid from any Grantor to the Lenders under Rate
Management Transactions, as determined by the Agent in its reasonable
discretion.

     “Section” means a numbered section of this Security Agreement, unless
another document is specifically referenced.

     “Security” has the meaning set forth in Article 8 of the UCC.

     “Stock Rights” means all dividends, instruments or other distributions and
any other right or property which the Grantors shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any Capital Stock constituting Collateral, any right to
receive Capital Stock and any right to receive earnings, in which the Grantors
now have or hereafter acquire any right, issued by an issuer of such Capital
Stock.

     “Supporting Obligations” shall have the meaning set forth in Article 9 of
the UCC.

     “Trademarks” means, with respect to any Person, all of such Person’s right,
title, and interest in and to the following: (a) all trademarks (including
service marks), trade names, trade dress, and trade styles and the registrations
and applications for registration thereof and the goodwill of the business
symbolized by the foregoing; (b) all licenses of the foregoing, whether as
licensee or licensor; (c) all renewals of the foregoing; (d) all income,
royalties, damages, and payments now or hereafter due or payable with respect
thereto, including, without limitation, damages, claims, and payments for past
and future infringements thereof; (e) all rights to sue for past, present, and
future infringements of the foregoing, including the right to settle suits
involving claims and demands for royalties owing; and (f) all rights
corresponding to any of the foregoing throughout the world.

     “Trademark Security Agreement” means that certain Trademark Security
Agreement, dated the date hereof, among the Grantors and Agent, for the lenders
party to the Credit Agreement.

     “UCC” means the Uniform Commercial Code, as in effect from time to time, of
the State of Texas or of any other state the laws of which are required as a
result thereof to be applied in connection with the attachment, perfection or
priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any
Collateral.

     “Unmatured Default” means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default hereunder.

APC PLEDGE AND SECURITY AGREEMENT — Page 4

 

--------------------------------------------------------------------------------

 

     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.

ARTICLE II
GRANT OF SECURITY INTEREST

     Each Grantor hereby pledges, assigns and grants to the Agent, on behalf of
and for the ratable benefit of the Lenders, a security interest in all of its
right, title and interest in, to and under all personal property and other
assets, whether now owned by or owing to, or hereafter acquired by or arising in
favor of such Grantor (including under any trade name or derivations thereof),
and whether owned or consigned by or to, or leased from or to, such Grantor, and
regardless of where located (all of which will be collectively referred to as
the “Collateral”), including:

(i)   all Accounts;   (ii)   all Chattel Paper;   (iii)   all Documents;   (iv)
  all Equipment;   (v)   all Fixtures;   (vi)   all General Intangibles;   (vii)
  all Goods;   (viii)   all Instruments;   (ix)   all Inventory;   (x)   all
Investment Property;   (xi)   all cash or cash equivalents;   (xii)   all
letters of credit, Letter-of-Credit Rights and Supporting Obligations;   (xiii)
  all Deposit Accounts with any bank or other financial institution;   (xiv)  
all Commercial Tort Claims;   (xv)   all Assigned Contracts; and   (xvi)   all
accessions to, substitutions for and replacements, proceeds (including Stock
Rights), insurance proceeds and products of the foregoing, together with all
books and records, customer lists, credit files, computer files, programs,
printouts and other computer materials and records related thereto and any
General Intangibles at any time evidencing or relating to any of the foregoing;

to secure the prompt and complete payment and performance of the Secured
Obligations. Such grant of a security interest shall not extend to, and the term
“Collateral” shall not include, permits, licenses, leases or other contracts of
a Borrower to the extent that (but only to the extent that) (i) they are not
assignable or capable of being encumbered as a matter of law or under the terms
of any license or other agreement applicable

APC PLEDGE AND SECURITY AGREEMENT — Page 5

 

--------------------------------------------------------------------------------

 

thereto (but solely to the extent that any such restriction shall be enforceable
under applicable law) without the consent of the licensor thereof or other
applicable party thereto, and (ii) such consent has not been obtained, but upon
obtaining the consent of any such licensor or other applicable party with
respect to any such matter excluded under the preceding clause as well as any
and all proceeds thereof that might theretofore have been excluded from such
grant of a security interest and from the term “Collateral”, the term
“Collateral” shall thereafter automatically include such permit, license, lease
or other contract.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

     Each Grantor represents and warrants to the Agent and the Lenders that:

     3.1. Title, Perfection and Priority. Such Grantor has good and valid rights
in or the power to transfer the Collateral and title to the Collateral with
respect to which it has purported to grant a security interest hereunder, free
and clear of all Liens except for Liens permitted under Section 4.1(e), and has
full power and authority to grant to the Agent the security interest in such
Collateral pursuant hereto. When financing statements have been filed in the
appropriate offices against such Grantor in the locations listed on Exhibit H,
the Agent will have a fully perfected first priority security interest in that
Collateral of the Grantor in which a security interest may be perfected by
filing, subject only to Liens permitted under Section 4.1(e).

     3.2. Type and Jurisdiction of Organization, Organizational and
Identification Numbers. The type of entity of such Grantor, its state of
organization, the organizational number issued to it by its state of
organization and its federal employer identification number are set forth on
Exhibit A.

     3.3. Principal Location. Such Grantor’s mailing address and the location of
its place of business (if it has only one) or its chief executive office (if it
has more than one place of business), are disclosed in Exhibit A; such Grantor
has no other places of business except those set forth in Exhibit A.

     3.4. Collateral Locations. All of such Grantor’s locations where Collateral
is located are listed on Exhibit A. All of said locations are owned by such
Grantor except for locations (i) which are leased by the Grantor as lessee and
designated in Part VII(b) of Exhibit A and (ii) at which Inventory is held in a
public warehouse or is otherwise held by a bailee or on consignment as
designated in Part VII(c) of Exhibit A.

     3.5. Deposit Accounts. All of such Grantor’s Deposit Accounts are listed on
Exhibit B.

     3.6. Exact Names. Such Grantor’s name in which it has executed this
Security Agreement is the exact name as it appears in such Grantor’s
organizational documents, as amended, as filed with such Grantor’s jurisdiction
of organization.

     3.7. Letter-of-Credit Rights and Chattel Paper. Exhibit C lists all
Letter-of-Credit Rights and Chattel Paper of such Grantor. All action by such
Grantor necessary or desirable to protect and perfect the Agent’s Lien on each
item listed on Exhibit C (including the delivery of all originals and the
placement of a legend on all Chattel Paper as required hereunder) has been duly
taken. The Agent will have a fully perfected first priority security interest in
the Collateral listed on Exhibit C, subject only to Liens permitted under
Section 4.1(e).

APC PLEDGE AND SECURITY AGREEMENT — Page 6

 

--------------------------------------------------------------------------------

 

     3.8. Accounts and Chattel Paper.

          (a) The names of the obligors, amounts owing, due dates and other
information with respect to its Accounts and Chattel Paper are and will be
correctly stated in all records of the Grantor relating thereto and in all
invoices and Collateral Reports with respect thereto furnished to the Agent by
such Grantor from time to time. As of the time when each Account or each item of
Chattel Paper arises, such Grantor shall be deemed to have represented and
warranted that such Account or Chattel Paper, as the case may be, and all
records relating thereto, are genuine and in all respects what they purport to
be.

          (b) With respect to its Accounts, except as specifically disclosed on
the most recent Collateral Report, (i) all Accounts are Eligible Accounts;
(ii) all Accounts represent bona fide sales of Inventory or rendering of
services to Account Debtors in the ordinary course of such Grantor’s business
and are not evidenced by a judgment, Instrument or Chattel Paper; (iii) to such
Grantor’s knowledge, there are no setoffs, claims or disputes existing or
asserted with respect thereto and such Grantor has not made any agreement with
any Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by such Grantor in the ordinary course of its
business; (iv) to such Grantor’s knowledge, there are no facts, events or
occurrences which in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
such Grantor’s books and records and any invoices, statements and Collateral
Reports with respect thereto; (v) such Grantor has not received any notice of
proceedings or actions which are threatened or pending against any Account
Debtor which could reasonably be expected to result in any material adverse
change in such Account Debtor’s financial condition; and (vi) such Grantor has
no knowledge that any Account Debtor is unable generally to pay its debts as
they become due.

          (c) In addition, with respect to all of its Accounts, (i) the amounts
shown on all invoices, statements and Collateral Reports with respect thereto
are actually and absolutely owing to such Grantor as indicated thereon and are
not in any way contingent; (ii) no payments have been or shall be made thereon
except payments promptly delivered to a Lock Box or a Collateral Deposit Account
as required pursuant to Section 7.1; and (iii) to such Grantor’s knowledge, all
Account Debtors have the capacity to contract.

     3.9. Inventory. With respect to any of its Inventory scheduled or listed on
the most recent Collateral Report, (a) such Inventory (other than Inventory in
transit) is located at one of such Grantor’s locations set forth on Exhibit A,
(b) no Inventory (other than Inventory in transit) is now, or shall at any time
or times hereafter be stored at any other location except as permitted by
Section 4.1(g), (c) such Grantor has good, indefeasible and merchantable title
to such Inventory and such Inventory is not subject to any Lien or security
interest or document whatsoever except for the Lien granted to the Agent, for
the benefit of the Agent and Lenders, and except for Permitted Liens, (d) except
as specifically disclosed in the most recent Collateral Report, such Inventory
is Eligible Inventory of good and merchantable quality, free from any defects,
(e) such Inventory is not subject to any licensing, patent, royalty, trademark,
trade name or copyright agreements with any third parties which would require
any consent of any third party upon sale or disposition of that Inventory or the
payment of any monies to any third party upon such sale or other disposition,
(f) such Inventory has been produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder and (g) the completion of manufacture, sale or other disposition of
such Inventory by the Agent following a Default shall not require the consent of
any Person and shall not constitute a breach or default under any contract or
agreement to which such Grantor is a party or to which such property is subject.

APC PLEDGE AND SECURITY AGREEMENT — Page 7

 

--------------------------------------------------------------------------------

 

     3.10. Intellectual Property. Such Grantor does not have any interest in, or
title to, any Patent, Trademark or Copyright except as set forth in Exhibit D.
This Security Agreement is effective to create a valid and continuing Lien and,
upon filing of this Security Agreement with the United States Copyright Office
and the United States Patent and Trademark Office, fully perfected first
priority security interests in favor of the Agent on such Grantor’s Patents,
Trademarks and Copyrights, such perfected security interests are enforceable as
such as against any and all creditors of and purchasers from the Grantor and,
upon the filing of appropriate financing statements listed on Exhibit H and the
IP Security Agreements, all action necessary or desirable to protect and perfect
the Agent’s Lien on such Grantor’s Patents, Trademarks or Copyrights shall have
been duly taken.

     3.11. Filing Requirements. None of its Equipment is covered by any
certificate of title, except for automobiles and other motor vehicles used in
the ordinary course of Grantors’ business. None of the Collateral owned by it is
of a type for which security interests or liens may be perfected by filing under
any federal statute except for (a) the vehicles described in Exhibit E and
(b) Patents, Trademarks and Copyrights held by such Grantor and described in
Exhibit D. The legal description, county and street address of each property on
which any Fixtures are located is set forth in Exhibit F together with the name
and address of the record owner of each such property.

     3.12. No Financing Statements, Security Agreements. No financing statement
or security agreement describing all or any portion of the Collateral which has
not lapsed or been terminated naming such Grantor as debtor has been filed or is
of record in any jurisdiction except (a) for financing statements or security
agreements naming the Agent on behalf of the Lenders as the secured party and
(b) as permitted by Section 4.1(e).

     3.13. Pledged Collateral.

          (a) Exhibit G sets forth a complete and accurate list of all Pledged
Collateral owned by such Grantor. Such Grantor is the direct, sole beneficial
owner and sole holder of record of the Pledged Collateral listed on Exhibit G as
being owned by it, free and clear of any Liens, except for the security interest
granted to the Agent for the benefit of the Lenders hereunder. Such Grantor
further represents and warrants that (i) all Pledged Collateral owned by it
constituting Capital Stock has been (to the extent such concepts are relevant
with respect to such Pledged Collateral) duly authorized, validly issued, are
fully paid and non-assessable, (ii) with respect to any certificates delivered
to the Agent representing Capital Stock, either such certificates are Securities
as defined in Article 8 of the UCC as a result of actions by the issuer or
otherwise, or, if such certificates are not Securities, such Grantor has so
informed the Agent so that the Agent may take steps to perfect its security
interest therein as a General Intangible, (iii) all such Pledged Collateral held
by a securities intermediary is covered by a control agreement among such
Grantor, the securities intermediary and the Agent pursuant to which the Agent
has Control and (iv) all Pledged Collateral which represents Indebtedness owed
to such Grantor has been duly authorized, authenticated or issued and delivered
by the issuer of such Indebtedness, is the legal, valid and binding obligation
of such issuer and such issuer is not in default thereunder.

          (b) In addition, (i) none of the Pledged Collateral owned by it has
been issued or transferred in violation of the securities registration,
securities disclosure or similar laws of any jurisdiction to which such issuance
or transfer may be subject, (ii) there are existing no options, warrants, calls
or commitments of any character whatsoever relating to such Pledged Collateral
or which obligate the issuer of

APC PLEDGE AND SECURITY AGREEMENT — Page 8

 

--------------------------------------------------------------------------------

 

any Capital Stock included in Pledged Collateral to issue additional Capital
Stock, and (iii) no consent, approval, authorization, or other action by, and no
giving of notice, filing with, any governmental authority or any other Person is
required for the pledge by such Grantor of such Pledged Collateral pursuant to
this Security Agreement or for the execution, delivery and performance of this
Security Agreement by such Grantor, or for the exercise by the Agent of the
voting or other rights provided for in this Security Agreement or for the
remedies in respect of the Pledged Collateral pursuant to this Security
Agreement, except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.

          (c) Except as set forth in Exhibit G, such Grantor owns 100% of the
issued and outstanding Capital Stock which constitutes Pledged Collateral and
none of the Pledged Collateral which represents Indebtedness owed to such
Grantor is subordinated in right of payment to other Indebtedness or subject to
the terms of an indenture.

ARTICLE IV
COVENANTS

     From the date of this Security Agreement, and thereafter until this
Security Agreement is terminated:

     4.1. General.

          (a) Collateral Records. Such Grantor will maintain complete and
accurate books and records with respect to the Collateral owned by it, and
furnish to the Agent, with sufficient copies for each of the Lenders, such
reports relating to such Collateral as the Agent shall from time to time
request, subject to any limitations set forth in the Credit Agreement.

          (b) Authorization to File Financing Statements; Ratification. Such
Grantor hereby authorizes the Agent to file, and if requested will deliver to
the Agent, all financing statements and other documents and take such other
actions as may from time to time be requested by the Agent, in its Permitted
Discretion, in order to maintain a first perfected security interest in and, if
applicable, Control of, the Collateral owned by such Grantor. Any financing
statement filed by the Agent may be filed in any filing office in any UCC
jurisdiction and may (i) indicate such Grantor’s Collateral (1) as all assets of
the Grantor or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the UCC
or such jurisdiction, or (2) by any other description which reasonably
approximates the description contained in this Security Agreement, and (ii)
contain any other information required by part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (A) whether such Grantor is an organization, the type of organization
and any organization identification number issued to such Grantor, and (B) in
the case of a financing statement filed as a fixture filing or indicating such
Grantor’s Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real Property to which the Collateral relates. Such
Grantor also agrees to furnish any such information to the Agent promptly upon
request. Such Grantor also ratifies its authorization for the Agent to have
filed in any UCC jurisdiction any initial financing statements or amendments
thereto if filed prior to the date hereof.

          (c) Further Assurances. Such Grantor will, if so requested by the
Agent, furnish to the Agent, as often as the Agent requests, statements and
schedules further identifying and describing the Collateral owned by it and such
other reports and information in connection with its Collateral as the Agent
may, in its

APC PLEDGE AND SECURITY AGREEMENT — Page 9

 

--------------------------------------------------------------------------------

 

Permitted Discretion, request, all in such detail as the Agent may specify. Such
Grantor also agrees to take any and all actions necessary to defend title to the
Collateral owned by it against all persons and to defend the security interest
of the Agent in its Collateral and the priority thereof against any Lien not
expressly permitted hereunder.

          (d) Disposition of Collateral. Such Grantor will not sell, lease or
otherwise dispose of the Collateral owned by it except for dispositions
specifically permitted pursuant to Section 6.20 of the Credit Agreement.

          (e) Liens. Such Grantor will not create, incur, or suffer to exist any
Lien on the Collateral owned by it except (i) the security interest created by
this Security Agreement, and (ii) other Permitted Liens.

          (f) Other Financing Statements. Such Grantor will not authorize the
filing of any financing statement naming it as debtor covering all or any
portion of the Collateral owned by it, except as permitted by Section 4.1(e).
Such Grantor acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to any financing
statement without the prior written consent of the Agent, subject to such
Grantor’s rights under Section 9-509(d)(2) of the UCC.

          (g) Locations. Such Grantor will not (i) maintain any Collateral owned
by it at any location other than those locations listed on Exhibit A, (ii)
otherwise change, or add to, such locations without the Agent’s prior written
consent as required by the Credit Agreement (and if the Agent gives such
consent, the Grantor will concurrently therewith obtain a Collateral Access
Agreement for each such location to the extent required by the Credit
Agreement), or (iii) change its principal place of business or chief executive
office from the location identified on Exhibit A, other than as permitted by the
Credit Agreement.

          (h) Compliance with Terms. Such Grantor will perform and comply with
all obligations in respect of the Collateral owned by it and all agreements to
which it is a party or by which it is bound relating to such Collateral.

     4.2. Receivables.

          (a) Certain Agreements on Receivables. Such Grantor will not make or
agree to make any discount, credit, rebate or other reduction in the original
amount owing on a Receivable or accept in satisfaction of a Receivable less than
the original amount thereof, except that, prior to the occurrence of a Default,
such Grantor may reduce the amount of Accounts arising from the sale of
Inventory in accordance with its present policies and in the ordinary course of
business.

          (b) Collection of Receivables. Except as otherwise provided in this
Security Agreement, such Grantor will, at such Grantor’s sole expense, collect
and enforce, to the extent commercially reasonable, all amounts due or hereafter
due to such Grantor under the Receivables owned by it.

          (c) Delivery of Invoices. Such Grantor will deliver to the Agent
immediately upon its request duplicate invoices with respect to each Account
owned by it bearing such language of assignment as the Agent shall specify.

          (d) Disclosure of Counterclaims on Receivables. If (i) any material
discount, credit or agreement to make a rebate or to otherwise reduce the amount
owing on any Receivable owned by such Grantor

APC PLEDGE AND SECURITY AGREEMENT — Page 10

 

--------------------------------------------------------------------------------

 

exists or (ii) if, to the knowledge of such Grantor, any dispute, setoff, claim,
counterclaim or defense exists or has been asserted or threatened with respect
to any such Receivable, such Grantor will promptly disclose such fact to the
Agent in writing. Such Grantor shall send the Agent a copy of each credit
memorandum in excess of $250,000 as soon as issued, and such Grantor shall
promptly report each credit memo and each of the facts required to be disclosed
to the Agent in accordance with this Section 4.2(d) on the Borrowing Base
Certificates submitted by it.

          (e) Electronic Chattel Paper. Such Grantor shall take all steps
necessary to grant the Agent Control of all electronic chattel paper in
accordance with the UCC and all “transferable records” as defined in each of the
Uniform Electronic Transactions Act and the Electronic Signatures in Global and
National Commerce Act.

     4.3. Inventory and Equipment.

          (a) Maintenance of Goods. Such Grantor will do all things necessary to
maintain, preserve, protect and keep its Inventory and the Equipment in good
repair and working and saleable condition, except for damaged or defective goods
arising in the ordinary course of such Grantor’s business and except for
ordinary wear and tear in respect of the Equipment.

          (b) Returned Inventory. If an Account Debtor returns any Inventory to
such Grantor when no Event of Default exists, then such Grantor shall promptly
determine the reason for such return and shall issue a credit memorandum to the
Account Debtor in the appropriate amount. Such Grantor shall promptly report to
the Agent any return involving an amount in excess of $500,000. Each such report
shall indicate the reasons for the returns and the locations and condition of
the returned Inventory. In the event any Account Debtor returns Inventory to
such Grantor when an Event of Default exists, such Grantor, upon the request of
the Agent, shall: (i) hold the returned Inventory in trust for the Agent;
(ii) segregate all returned Inventory from all of its other property;
(iii) dispose of the returned Inventory solely according to the Agent’s written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Agent’s prior written consent. All returned Inventory shall be
subject to the Agent’s Liens thereon. Whenever any Inventory is returned, the
related Account shall be deemed ineligible to the extent of the amount owing by
the Account Debtor with respect to such returned Inventory and such returned
Inventory shall not be Eligible Inventory.

          (c) Inventory Count; Perpetual Inventory System. Such Grantor will
conduct a physical count of its Inventory at least once per Fiscal Year, and
after and during the continuation of an Event of Default, at such other times as
the Agent requests. Such Grantor, at its own expense, shall deliver to the Agent
the results of each physical verification, which such Grantor has made, or has
caused any other Person to make on its behalf, of all or any portion of its
Inventory. Such Grantor will maintain a perpetual inventory reporting system at
all times.

          (d) Equipment. Such Grantor shall promptly inform the Agent of any
additions to or deletions from its Equipment which individually exceed $100,000.
Such Grantor shall not permit any Equipment to become a fixture with respect to
real property or to become an accession with respect to other personal property
with respect to which real or personal property the Agent does not have a Lien.
Such Grantor will not, without the Agent’s prior written consent, alter or
remove any identifying symbol or number on any of such Grantor’s Equipment
constituting Collateral.

APC PLEDGE AND SECURITY AGREEMENT — Page 11

 

--------------------------------------------------------------------------------

 

     4.4. Delivery of Instruments, Securities, Chattel Paper and Documents. Such
Grantor will (a) deliver to the Agent immediately upon execution of this
Security Agreement the originals of all Chattel Paper, Securities and
Instruments constituting Collateral owned by it (if any then exist), (b) hold in
trust for the Agent upon receipt and immediately thereafter deliver to the Agent
any such Chattel Paper, Securities and Instruments constituting Collateral,
(c) upon the Agent’s request, deliver to the Agent (and thereafter hold in trust
for the Agent upon receipt and immediately deliver to the Agent) any Document
evidencing or constituting Collateral and (d) upon the Agent’s request, deliver
to the Agent a duly executed amendment to this Security Agreement, in the form
of Exhibit I hereto (the “Amendment”), pursuant to which such Grantor will
pledge such additional Collateral. Such Grantor hereby authorizes the Agent to
attach each Amendment to this Security Agreement and agrees that all additional
Collateral owned by it set forth in such Amendments shall be considered to be
part of the Collateral.

     4.5. Uncertificated Pledged Collateral. Such Grantor will permit the Agent
from time to time to cause the appropriate issuers (and, if held with a
securities intermediary, such securities intermediary) of uncertificated
securities or other types of Pledged Collateral owned by it not represented by
certificates to mark their books and records with the numbers and face amounts
of all such uncertificated securities or other types of Pledged Collateral not
represented by certificates and all rollovers and replacements therefor to
reflect the Lien of the Agent granted pursuant to this Security Agreement. With
respect to any Pledged Collateral owned by it, such Grantor will take any
actions necessary to cause (a) the issuers of uncertificated securities which
are Pledged Collateral and (b) any securities intermediary which is the holder
of any such Pledged Collateral, to cause the Agent to have and retain Control
over such Pledged Collateral. Without limiting the foregoing, such Grantor will,
with respect to any such Pledged Collateral held with a securities intermediary,
cause such securities intermediary to enter into a control agreement with the
Agent, in form and substance reasonably satisfactory to the Agent, giving the
Agent Control.

     4.6. Pledged Collateral.

          (a) Changes in Capital Structure of Issuers. Except as expressly
permitted under the Credit Agreement, such Grantor will not (i) permit or suffer
any issuer of Capital Stock constituting Pledged Collateral owned by it to
dissolve, merge, liquidate, retire any of its Capital Stock or other Instruments
or Securities evidencing ownership, reduce its capital, sell or encumber all or
substantially all of its assets (except for Permitted Liens and sales of assets
permitted pursuant to Section 4.1(d)) or merge or consolidate with any other
entity (other than in connection with a Permitted Acquisition), or (ii) vote any
such Pledged Collateral in favor of any of the foregoing.

          (b) Issuance of Additional Securities. Such Grantor will not permit or
suffer the issuer of Capital Stock constituting Pledged Collateral owned by it
to issue additional Capital Stock, any right to receive the same or any right to
receive earnings, except to such Grantor.

          (c) Registration of Pledged Collateral. Such Grantor will permit any
registerable Pledged Collateral owned by it to be registered in the name of the
Agent or its nominee at any time at the option of the Required Secured Parties.

          (d) Exercise of Rights in Pledged Collateral.

(i) Without in any way limiting the foregoing and subject to clause (ii) below,
such Grantor shall have the right to exercise all voting rights or other rights
relating to

APC PLEDGE AND SECURITY AGREEMENT — Page 12

 

--------------------------------------------------------------------------------

 

the Pledged Collateral owned by it for all purposes not inconsistent with this
Security Agreement, the Credit Agreement or any other Loan Document; provided
however, that no vote or other right shall be exercised or action taken which
would have the effect of impairing the rights of the Agent in respect of such
Pledged Collateral.

(ii) Such Grantor will permit the Agent or its nominee at any time after the
occurrence of a Default, without notice, to exercise all voting rights or other
rights relating to the Pledged Collateral owned by it, including, without
limitation, exchange, subscription or any other rights, privileges, or options
pertaining to any Capital Stock or Investment Property constituting such Pledged
Collateral as if it were the absolute owner thereof.

(iii) Such Grantor shall be entitled to collect and receive for its own use all
cash dividends and interest paid in respect of the Pledged Collateral owned by
it to the extent not in violation of the Credit Agreement other than any of the
following distributions and payments (collectively referred to as the “Excluded
Payments”): (A) dividends and interest paid or payable other than in cash in
respect of such Pledged Collateral, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for, such
Pledged Collateral; (B) dividends and other distributions paid or payable in
cash in respect of such Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in capital of an issuer; and (C) cash paid, payable or otherwise
distributed, in respect of principal of, or in redemption of, or in exchange
for, such Pledged Collateral; provided however, that until actually paid, all
rights to such distributions shall remain subject to the Lien created by this
Security Agreement; and

(iv) All Excluded Payments and all other distributions in respect of any of the
Pledged Collateral owned by such Grantor, whenever paid or made, shall be
delivered to the Agent to hold as Pledged Collateral and shall, if received by
such Grantor, be received in trust for the benefit of the Agent, be segregated
from the other property or funds of such Grantor, and be forthwith delivered to
the Agent as Pledged Collateral in the same form as so received (with any
necessary endorsement).

     4.7. Intellectual Property.

          (a) Such Grantor will use its best efforts to secure all consents and
approvals necessary or appropriate for the assignment to or benefit of the Agent
of any License held by such Grantor and to enforce the security interests
granted hereunder.

          (b) Such Grantor shall notify the Agent immediately if it knows or has
reason to know that any application or registration relating to any Patent,
Trademark or Copyright (now or hereafter existing) may become abandoned or
dedicated, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding such Grantor’s ownership of any Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same.

APC PLEDGE AND SECURITY AGREEMENT — Page 13

 

--------------------------------------------------------------------------------

 

          (c) In no event shall such Grantor, either directly or through any the
Agent, employee, licensee or designee, file an application for the registration
of any Patent, Trademark or Copyright with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency without giving the Agent prior written notice thereof, and, upon request
of the Agent, such Grantor shall execute and deliver any and all security
agreements as the Agent may reasonably request to evidence the Agent’s first
priority security interest on such Patent, Trademark or Copyright, and the
General Intangibles of such Grantor relating thereto or represented thereby.

          (d) Such Grantor shall take all actions necessary or requested by the
Agent to maintain and pursue each application, to obtain the relevant
registration and to maintain the registration of each of its Patents, Trademarks
and Copyrights (now or hereafter existing), including the filing of applications
for renewal, affidavits of use, affidavits of noncontestability and opposition
and interference and cancellation proceedings, unless the Agent shall, in its
Permitted Discretion, determine that such Patent, Trademark or Copyright is not
material to the conduct of such Grantor’s business.

          (e) Such Grantor shall, unless it shall reasonably determine that such
Patent, Trademark or Copyright is in no way material to the conduct of its
business or operations, promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other actions as the Agent
shall deem appropriate under the circumstances to protect such Patent, Trademark
or Copyright. In the event that such Grantor institutes suit because any of its
Patents, Trademarks or Copyrights constituting Collateral is infringed upon, or
misappropriated or diluted by a third party, such Grantor shall comply with
Section 4.8.

     4.8. Commercial Tort Claims. Such Grantor shall promptly, and in any event
within two Business Days after the same is acquired by it, notify the Agent of
any commercial tort claim (as defined in the UCC) acquired by it and, unless the
Agent otherwise consents, such Grantor shall enter into an amendment to this
Security Agreement, in the form of Exhibit I hereto, granting to Agent a first
priority security interest in such commercial tort claim.

     4.9. Letter-of-Credit Rights. If such Grantor is or becomes the beneficiary
of a letter of credit, it shall promptly, and in any event within two Business
Days after becoming a beneficiary, notify the Agent thereof and cause the issuer
and/or confirmation bank to (i) consent to the assignment of any
Letter-of-Credit Rights to the Agent and (ii) agree to direct all payments
thereunder to a Deposit Account at the Agent or subject to a Deposit Account
Control Agreement for application to the Secured Obligations, in accordance with
Section 2.18 of the Credit Agreement, all in form and substance reasonably
satisfactory to the Agent.

     4.10. Federal, State or Municipal Claims. Such Grantor will promptly notify
the Agent of any Collateral which constitutes a claim against the United States
government or any state or local government or any instrumentality or agency
thereof, the assignment of which claim is restricted by federal, state or
municipal law.

     4.11. No Interference. Such Grantor agrees that it will not interfere with
any right, power and remedy of the Agent provided for in this Security Agreement
or now or hereafter existing at law or in equity or by statute or otherwise, or
the exercise or beginning of the exercise by the Agent of any one or more of
such rights, powers or remedies.

APC PLEDGE AND SECURITY AGREEMENT — Page 14

 

--------------------------------------------------------------------------------

 

     4.12. Assigned Contracts. Such Grantor will use its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of the Agent of any Assigned Contract held by such Grantor and to
enforce the security interests granted hereunder. Such Grantor shall fully
perform all of its obligations under each of its Assigned Contracts, and shall
enforce all of its rights and remedies thereunder, in each case, as it deems
appropriate in its business judgment; provided however, that such Grantor shall
not take any action or fail to take any action with respect to its Assigned
Contracts which would cause the termination of a material Assigned Contract.
Without limiting the generality of the foregoing, such Grantor shall take all
action necessary or appropriate to permit, and shall not take any action which
would have any materially adverse effect upon, the full enforcement of all
indemnification rights under its Assigned Contracts. Such Grantor shall notify
the Agent and the Lenders in writing, promptly after such Grantor becomes aware
thereof, of any event or fact which could give rise to a material claim by it
for indemnification under any of its Assigned Contracts, and shall diligently
pursue such right (if commercially reasonable) and report to the Agent on all
further developments with respect thereto. Such Grantor shall deposit into a
Deposit Account at the Agent or subject to a Deposit Account Control Agreement
for application to the Secured Obligations, in accordance with Section 2.18 of
the Credit Agreement, all amounts received by such Grantor as indemnification or
otherwise pursuant to its Assigned Contracts. If such Grantor shall fail after
the Agent’s demand to pursue diligently any right under its Assigned Contracts,
or if a Default then exists, the Agent may, and at the direction of the Required
Secured Parties shall, directly enforce such right in its own or such Grantor’s
name and may enter into such settlements or other agreements with respect
thereto as the Agent or the Required Secured Parties, as applicable, shall
determine. In any suit, proceeding or action brought by the Agent for the
benefit of the Lenders under any Assigned Contract for any sum owing thereunder
or to enforce any provision thereof, such Grantor shall indemnify and hold the
Agent and Lenders harmless from and against all expense, loss or damage suffered
by reason of any defense, setoff, counterclaims, recoupment, or reduction of
liability whatsoever of the obligor thereunder arising out of a breach by such
Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing from such Grantor to or in favor of
such obligor or its successors, except to the extent attributable to the gross
negligence or willful misconduct of the indemnified party. All such obligations
of such Grantor shall be and remain enforceable only against such Grantor and
shall not be enforceable against the Agent or the Lenders. Notwithstanding any
provision hereof to the contrary, such Grantor shall at all times remain liable
to observe and perform all of its duties and obligations under its Assigned
Contracts, and the Agent’s or any Lender’s exercise of any of their respective
rights with respect to the Collateral shall not release such Grantor from any of
such duties and obligations. Neither the Agent nor any Lender shall be obligated
to perform or fulfill any of such Grantor’s duties or obligations under its
Assigned Contracts or to make any payment thereunder, or to make any inquiry as
to the nature or sufficiency of any payment or property received by it
thereunder or the sufficiency of performance by any party thereunder, or to
present or file any claim, or to take any action to collect or enforce any
performance, any payment of any amounts, or any delivery of any property.

ARTICLE V
DEFAULTS AND REMEDIES

     5.1. Defaults. The occurrence of any one or more of the following events
shall constitute a Default hereunder:

          (a) Any representation or warranty made by or on behalf of any Grantor
under or in connection with this Security Agreement shall be materially false as
of the date on which made.

APC PLEDGE AND SECURITY AGREEMENT — Page 15

 

--------------------------------------------------------------------------------

 

          (b) The breach by any Grantor of any of the terms or provisions of
Article IV or Article VII which is not remedied within three (3) days after the
earlier of such breach or written notice from the Agent or any Lender.

          (c) The breach by any Grantor (other than a breach which constitutes a
Default under any other Section of this Article V) of any of the terms or
provisions of this Security Agreement which is not remedied within fifteen (15)
days after the earlier of such breach or written notice from the Agent or any
Lender.

          (d) The occurrence of any “Default” under, and as defined in, the
Credit Agreement.

          (e) Any Capital Stock which is included within the Collateral shall at
any time constitute a Security or the issuer of any such Capital Stock shall
take any action to have such interests treated as a Security unless (i) all
certificates or other documents constituting such Security have been delivered
to the Agent and such Security is properly defined as such under Article 8 of
the UCC of the applicable jurisdiction, whether as a result of actions by the
issuer thereof or otherwise, or (ii) the Agent has entered into a control
agreement with the issuer of such Security or with a securities intermediary
relating to such Security and such Security is defined as such under Article 8
of the UCC of the applicable jurisdiction, whether as a result of actions by the
issuer thereof or otherwise.

     5.2. Remedies.

          (a) Upon the occurrence of a Default, the Agent may, exercise any or
all of the following rights and remedies:

(i) those rights and remedies provided in this Security Agreement, the IP
Security Agreements, the Credit Agreement, or any other Loan Document; provided
that, this Section 5.2(a) shall not be understood to limit any rights or
remedies available to the Agent and the Lenders prior to a Default;

(ii) those rights and remedies available to a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) or under any other
applicable law (including, without limitation, any law governing the exercise of
a bank’s right of setoff or bankers’ lien) when a debtor is in default under a
security agreement;

(iii) give notice of sole control or any other instruction under any Deposit
Account Control Agreement or and other control agreement with any securities
intermediary and take any action therein with respect to such Collateral;

(iv) without notice (except as specifically provided in Section 8.1 or elsewhere
herein), demand or advertisement of any kind to any Grantor or any other Person,
enter the premises of any Grantor where any Collateral is located (through
self-help and without judicial process) to collect, receive, assemble, process,
appropriate, sell, lease, assign, grant an option or options to purchase or
otherwise dispose of, deliver, or realize upon, the Collateral or any part
thereof in one or more parcels at public or private sale or sales (which sales
may be adjourned or continued from time to time with or without notice and may
take place at any Grantor’s premises or elsewhere), for cash,

APC PLEDGE AND SECURITY AGREEMENT — Page 16

 

--------------------------------------------------------------------------------

 

on credit or for future delivery without assumption of any credit risk, and upon
such other terms as the Agent may deem commercially reasonable; and

(v) concurrently with written notice to the applicable Grantor, transfer and
register in its name or in the name of its nominee the whole or any part of the
Pledged Collateral, to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations, to exercise the voting and all other rights as a holder
with respect thereto, to collect and receive all cash dividends, interest,
principal and other distributions made thereon and to otherwise act with respect
to the Pledged Collateral as though the Agent was the outright owner thereof.

          (b) The Agent, on behalf of the Lenders, may comply with any
applicable state or federal law requirements in connection with a disposition of
the Collateral and compliance will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral.

          (c) The Agent shall have the right upon any such public sale or sales
and, to the extent permitted by law, upon any such private sale or sales, to
purchase for the benefit of the Agent and the Lenders, the whole or any part of
the Collateral so sold, free of any right of equity redemption, which equity
redemption each Grantor hereby expressly releases.

          (d) Until the Agent is able to effect a sale, lease, or other
disposition of Collateral, the Agent shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving Collateral or its value or for any other purpose deemed
appropriate by the Agent. The Agent may, if it so elects, seek the appointment
of a receiver or keeper to take possession of Collateral and to enforce any of
the Agent’s remedies (for the benefit of the Agent and Lenders), with respect to
such appointment without prior notice or hearing as to such appointment.

          (e) If, after the Credit Agreement has terminated by its terms and all
of the Obligations have been paid in full, there remain Rate Management
Obligations outstanding, the Required Secured Parties may exercise the remedies
provided in this Section 5.2 upon the occurrence of any event which would allow
or require the termination or acceleration of any Rate Management Obligations
pursuant to the terms of the agreement governing any Rate Management
Transaction.

          (f) Notwithstanding the foregoing, neither the Agent nor the Lenders
shall be required to (i) make any demand upon, or pursue or exhaust any of their
rights or remedies against, any Grantor, any other obligor, guarantor, pledgor
or any other Person with respect to the payment of the Secured Obligations or to
pursue or exhaust any of their rights or remedies with respect to any Collateral
therefor or any direct or indirect guarantee thereof, (ii) marshal the
Collateral or any guarantee of the Secured Obligations or to resort to the
Collateral or any such guarantee in any particular order, or (iii) effect a
public sale of any Collateral.

          (g) Each Grantor recognizes that the Agent may be unable to effect a
public sale of any or all the Pledged Collateral and may be compelled to resort
to one or more private sales thereof in accordance with clause (a) above. Each
Grantor also acknowledges that any private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall not
be deemed to have been made in a commercially unreasonable manner solely by
virtue of such sale being private. The Agent shall be under no obligation to
delay a sale of

APC PLEDGE AND SECURITY AGREEMENT — Page 17

 

--------------------------------------------------------------------------------

 

any of the Pledged Collateral for the period of time necessary to permit any
Grantor or the issuer of the Pledged Collateral to register such securities for
public sale under the Securities Act of 1933, as amended, or under applicable
state securities laws, even if the applicable Grantor and the issuer would agree
to do so.

     5.3. Grantor’s Obligations Upon Default. Upon the request of the Agent
after the occurrence of a Default, each Grantor will:

          (a) assemble and make available to the Agent the Collateral and all
books and records relating thereto at any place or places specified by the
Agent, whether at a Grantor’s premises or elsewhere;

          (b) permit the Agent, by the Agent’s representatives and agents, to
enter any premises where all or any part of the Collateral, or the books and
records relating thereto, or both, are located, to take possession of all or any
part of the Collateral or the books and records relating thereto, or both, to
remove all or any part of the Collateral or the books and records relating
thereto, or both, and to conduct sales of the Collateral;

          (c) prepare and file, or cause an issuer of Pledged Collateral to
prepare and file, with the Securities and Exchange Commission or any other
applicable government agency, registration statements, a prospectus and such
other documentation in connection with the Pledged Collateral as the Agent may
request, all in form and substance satisfactory to the Agent, and furnish to the
Agent, or cause an issuer of Pledged Collateral to furnish to the Agent, any
information regarding the Pledged Collateral in such detail as the Agent may
specify;

          (d) take, or cause an issuer of Pledged Collateral to take, any and
all actions necessary to register or qualify the Pledged Collateral to enable
the Agent to consummate a public sale or other disposition of the Pledged
Collateral; and

          (e) at its own expense, cause independent certified public accountants
engaged by each Grantor to prepare and deliver to the Agent and each Lender, at
any time, and from time to time, promptly upon the Agent’s request, the
following reports with respect to the applicable Grantor: (i) a reconciliation
of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts.

     5.4. Grant of Intellectual Property License. For the purpose of enabling
the Agent to exercise the rights and remedies under this Article V and under the
IP Security Agreements, at such time as the Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby (a) grants to the Agent,
for the benefit of the Agent and the Lenders, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to any
Grantor) to use, license or sublicense any Intellectual Property Rights now
owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof and (b) irrevocably agrees
that the Agent may sell any of such Grantor’s Inventory directly to any person,
including without limitation persons who have previously purchased the Grantor’s
Inventory from such Grantor and in connection with any such sale or other
enforcement of the Agent’s rights under this Security Agreement, may sell
Inventory which bears any Trademark owned by or licensed to such Grantor and any
Inventory that is covered by any Copyright owned by or licensed to such Grantor
and the Agent may finish any work in process and affix any Trademark owned by or
licensed to such Grantor and sell such Inventory as provided herein.

APC PLEDGE AND SECURITY AGREEMENT — Page 18

 

--------------------------------------------------------------------------------

 

ARTICLE VI
ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

     6.1. Account Verification. At any time after the occurrence of a Default or
an Unmatured Default or at any time before the occurrence of a Default or an
Unmatured Default that the Agent in its Permitted Discretion determines it has a
reasonable basis for making inquiry, the Agent may, in the Agent’s own name, in
the name of a nominee of the Agent, or in the name of any Grantor communicate
(by mail, telephone, facsimile or otherwise) with the Account Debtors of any
such Grantor, parties to contracts with any such Grantor and obligors in respect
of Instruments of any such Grantor to verify with such Persons, to the Agent’s
satisfaction, the existence, amount, terms of, and any other matter relating to,
Accounts, Instruments, Chattel Paper, payment intangibles and/or other
Receivables.

     6.2. Authorization for Secured Party to Take Certain Action.

          (a) Each Grantor irrevocably authorizes the Agent at any time and from
time to time in the sole discretion of the Agent and appoints the Agent as its
attorney in fact (i) to execute on behalf of such Grantor as debtor and to file
financing statements necessary or desirable in the Agent’s sole discretion to
perfect and to maintain the perfection and priority of the Agent’s security
interest in the Collateral, (ii) to endorse and collect any cash proceeds of the
Collateral, (iii) to file a carbon, photographic or other reproduction of this
Security Agreement or any financing statement with respect to the Collateral as
a financing statement and to file any other financing statement or amendment of
a financing statement (which does not add new collateral or add a debtor) in
such offices as the Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the Agent’s security
interest in the Collateral, (iv) to contact and enter into one or more
agreements with the issuers of uncertificated securities which are Pledged
Collateral or with securities intermediaries holding Pledged Collateral as may
be necessary or advisable to give the Agent Control over such Pledged
Collateral, (v) to apply the proceeds of any Collateral received by the Agent to
the Secured Obligations as provided in Section 7.3, (vi) to discharge past due
taxes, assessments, charges, fees or Liens on the Collateral (except for such
Liens as are specifically permitted hereunder), (vii) to contact Account Debtors
for any reason, (viii) to demand payment or enforce payment of the Receivables
in the name of the Agent or such Grantor and to endorse any and all checks,
drafts, and other instruments for the payment of money relating to the
Receivables, (ix) to sign such Grantor’s name on any invoice or bill of lading
relating to the Receivables, drafts against any Account Debtor of such Grantor,
assignments and verifications of Receivables, (x) to exercise all of such
Grantor’s rights and remedies with respect to the collection of the Receivables
and any other Collateral, (xi) to settle, adjust, compromise, extend or renew
the Receivables, (xii) to settle, adjust or compromise any legal proceedings
brought to collect Receivables, (xiii) to prepare, file and sign such Grantor’s
name on a proof of claim in bankruptcy or similar document against any Account
Debtor of such Grantor, (xiv) to prepare, file and sign such Grantor’s name on
any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables, (xv) to change the address for delivery of mail
addressed to such Grantor to such address as the Agent may designate and to
receive, open and dispose of all mail addressed to such Grantor, and (xvi) to do
all other acts and things reasonably necessary to carry out this Security
Agreement; and such Grantor agrees to reimburse the Agent on demand for any
payment made or any expense incurred by the Agent in connection with any of the
foregoing; provided that, this authorization shall not relieve such Grantor of
any of its obligations under this Security Agreement, the IP Security Agreements
or under the Credit Agreement.

APC PLEDGE AND SECURITY AGREEMENT — Page 19

 

--------------------------------------------------------------------------------

 

          (b) All acts of said attorney or designee are hereby ratified and
approved. The powers conferred on the Agent, for the benefit of the Agent and
Lenders, under this Section 6.2 are solely to protect the Agent’s interests in
the Collateral and shall not impose any duty upon the Agent or any Lender to
exercise any such powers.

     6.3. Proxy. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE
AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION 6.2 ABOVE) WITH
RESPECT TO ITS PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGED
COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT
TO VOTE ANY SUCH PLEDGED COLLATERAL, THE APPOINTMENT OF THE AGENT AS PROXY AND
ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS,
PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL WOULD BE
ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS,
CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH
PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED COLLATERAL ON THE RECORD BOOKS OF
THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED
COLLATERAL OR ANY OFFICER OR THE AGENT THEREOF), DURING THE CONTINUANCE OF A
DEFAULT.

     6.4. Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE
AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY
AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.15. NOTWITHSTANDING
ANYTHING CONTAINED HEREIN, NEITHER THE AGENT, NOR ANY LENDER, NOR OR ANY OF
THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED
HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY
FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO
EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES.

ARTICLE VII
COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS

     7.1. Collection of Receivables.

          (a) Within thirty (30) days of the Closing Date, each Grantor shall
(a) execute and deliver to the Agent Deposit Account Control Agreements for each
Deposit Account maintained by such Grantor into which all cash, checks or other
similar payments relating to or constituting payments made in respect of
Receivables will be deposited (a “Collateral Deposit Account”), which Collateral
Deposit Accounts are identified as such on Exhibit B, and (b) establish lock box
service (the “Lock Boxes”) with the bank(s) set forth in Exhibit B, which lock
boxes shall be subject to irrevocable lockbox agreements in the form provided by
or otherwise acceptable to the Agent in its Permitted Discretion and shall be
accompanied by an acknowledgment by the bank where the Lock Box is located of
the Lien of the Agent granted hereunder and of irrevocable

APC PLEDGE AND SECURITY AGREEMENT — Page 20

 

--------------------------------------------------------------------------------

 

instructions to wire all amounts collected therein to the Collection Account (a
“Lock Box Agreement”). After the Closing Date, each Grantor will comply with the
terms of Section 7.2.

          (b) Each Grantor shall direct all of its Account Debtors to forward
payments directly to Lock Boxes subject to Lock Box Agreements. The Agent shall
have sole access to the Lock Boxes at all times and each Grantor shall take all
actions necessary to grant the Agent such sole access. At no time shall any
Grantor remove any item from a Lock Box or from a Collateral Deposit Account
without the Agent’s prior written consent. If any Grantor should refuse or
neglect to notify any Account Debtor to forward payments directly to a Lock Box
subject to a Lock Box Agreement after notice from the Agent, the Agent shall be
entitled to make such notification directly to Account Debtor. If
notwithstanding the foregoing instructions, any Grantor receives any proceeds of
any Receivables, such Grantor shall receive such payments as the Agent’s
trustee, and shall immediately deposit all cash, checks or other similar
payments related to or constituting payments made in respect of Receivables
received by it to a Collateral Deposit Account. All funds deposited into any
Lock Box subject to a Lock Box Agreement or a Collateral Deposit Account will be
swept on a daily basis into a collection account maintained by the Borrower
Representative with the Agent (the “Collection Account”). The Agent shall hold
and apply funds received into the Collection Account as provided by the terms of
Section 7.3.

     7.2. Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or
replacing any Collateral Deposit Account, other Deposit Account, or establishing
a new Lock Box, each Grantor shall (a) obtain the Agent’s consent in writing to
the opening of such Deposit Account or Lock Box, and (b) cause each bank or
financial institution in which it seeks to open (i) a Deposit Account, to enter
into a Deposit Account Control Agreement with the Agent in order to give the
Agent Control of such Deposit Account, or (ii) a Lock Box, to enter into a Lock
Box Agreement with the Agent in order to give the Agent Control of the Lock Box.
In the case of Deposit Accounts or Lock Boxes maintained with Lenders, the terms
of such letter shall be subject to the provisions of the Credit Agreement
regarding setoffs.

     7.3. Application of Proceeds; Deficiency. All amounts deposited in the
Collection Account shall be deemed received by the Agent in accordance with
Section 2.17 of the Credit Agreement and shall, after having been credited in
immediately available funds to the Collection Account, be applied (and
allocated) by Agent in accordance with Section 2.18 of the Credit Agreement. In
no event shall any amount be so applied unless and until such amount shall have
been credited in immediately available funds to the Collection Account. The
Agent shall require all other cash proceeds of the Collateral, which are not
required to be applied to the Obligations pursuant to Section 2.15 of the Credit
Agreement, to be deposited in a special non-interest bearing cash collateral
account with the Agent and held there as security for the Secured Obligations.
No Grantor shall have any control whatsoever over said cash collateral account.
Any such proceeds of the Collateral shall be applied in the order set forth in
Section 2.18 of the Credit Agreement unless a court of competent jurisdiction
shall otherwise direct. The balance, if any, after all of the Secured
Obligations have been satisfied, shall be deposited by the Agent into the
Borrower Representative’s general operating account with the Agent. The Grantors
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all Secured Obligations,
including any attorneys’ fees and other expenses incurred by Agent or any Lender
to collect such deficiency.

ARTICLE VIII
GENERAL PROVISIONS

APC PLEDGE AND SECURITY AGREEMENT — Page 21

 

--------------------------------------------------------------------------------

 

     8.1. Waivers. Each Grantor hereby waives notice of the time and place of
any public sale or the time after which any private sale or other disposition of
all or any part of the Collateral may be made. To the extent such notice may not
be waived under applicable law, any notice made shall be deemed reasonable if
sent to the Grantors, addressed as set forth in Article IX, at least ten days
prior to (i) the date of any such public sale or (ii) the time after which any
such private sale or other disposition may be made. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages, and
demands against the Agent or any Lender arising out of the repossession,
retention or sale of the Collateral, except such as arise solely out of the
gross negligence or willful misconduct of the Agent or such Lender as finally
determined by a court of competent jurisdiction. To the extent it may lawfully
do so, each Grantor absolutely and irrevocably waives and relinquishes the
benefit and advantage of, and covenants not to assert against the Agent or any
Lender, any valuation, stay, appraisal, extension, moratorium, redemption or
similar laws and any and all rights or defenses it may have as a surety now or
hereafter existing which, but for this provision, might be applicable to the
sale of any Collateral made under the judgment, order or decree of any court, or
privately under the power of sale conferred by this Security Agreement, the IP
Security Agreements or otherwise. Except as otherwise specifically provided
herein or in the Credit Agreement, each Grantor hereby waives presentment,
demand, protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Security Agreement, the IP Security
Agreements or any Collateral.

     8.2. Limitation on Agent’s and Lenders’ Duty with Respect to the
Collateral. The Agent shall have no obligation to clean-up or otherwise prepare
the Collateral for sale. The Agent and each Lender shall use reasonable care
with respect to the Collateral in its possession or under its control. Neither
the Agent nor any Lender shall have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
the Agent or such Lender, or any income thereon or as to the preservation of
rights against prior parties or any other rights pertaining thereto. To the
extent that applicable law imposes duties on the Agent to exercise remedies in a
commercially reasonable manner, each Grantor acknowledges and agrees that it is
commercially reasonable for the Agent (i) to fail to incur expenses deemed
significant by the Agent to prepare Collateral for disposition or otherwise to
transform raw material or work in process into finished goods or other finished
products for disposition, (ii) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) to exercise collection remedies against Account Debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or
not in the same business as such Grantor, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Agent against risks of loss, collection or
disposition of Collateral or to provide to the Agent a guaranteed return from
the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Agent in the
collection or disposition of any of the Collateral. Each Grantor acknowledges
that the purpose of this Section 8.2 is to provide non-exhaustive indications of
what actions or omissions by the Agent would be commercially reasonable in the
Agent’s exercise of remedies against the

APC PLEDGE AND SECURITY AGREEMENT — Page 22

 

--------------------------------------------------------------------------------

 

Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 8.2. Without limitation upon the foregoing, nothing contained in this
Section 8.2 shall be construed to grant any rights to any Grantor or to impose
any duties on the Agent that would not have been granted or imposed by this
Security Agreement or by applicable law in the absence of this Section 8.2.

     8.3. Compromises and Collection of Collateral. The Grantors and the Agent
recognize that setoffs, counterclaims, defenses and other claims may be asserted
by obligors with respect to certain of the Receivables, that certain of the
Receivables may be or become uncollectible in whole or in part and that the
expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect
to a Receivable. In view of the foregoing, each Grantor agrees that the Agent
may at any time and from time to time, if a Default has occurred and is
continuing, compromise with the obligor on any Receivable, accept in full
payment of any Receivable such amount as the Agent in its sole discretion shall
determine or abandon any Receivable, and any such action by the Agent shall be
commercially reasonable so long as the Agent acts in good faith based on
information known to it at the time it takes any such action.

     8.4. Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Agent may perform or pay any obligation which any
Grantor has agreed to perform or pay in this Security Agreement and the Grantors
shall reimburse the Agent for any amounts paid by the Agent pursuant to this
Section 8.4. The Grantors’ obligation to reimburse the Agent pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.

     8.5. Specific Performance of Certain Covenants. Each Grantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1(d),
4.1(e), 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 5.3, or 8.7 or in Article VII
will cause irreparable injury to the Agent and the Lenders, that the Agent and
Lenders have no adequate remedy at law in respect of such breaches and therefore
agrees, without limiting the right of the Agent or the Lenders to seek and
obtain specific performance of other obligations of the Grantors contained in
this Security Agreement, that the covenants of the Grantors contained in the
Sections referred to in this Section 8.5 shall be specifically enforceable
against the Grantors.

     8.6. Use and Possession of Certain Premises. During the continuance of a
Default, the Agent shall be entitled to occupy and use any premises owned or
leased by any Grantor where any of the Collateral or any records relating to the
Collateral are located until the Secured Obligations are paid or the Collateral
is removed therefrom, whichever first occurs, without any obligation to pay any
Grantor for such use and occupancy.

     8.7. Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1(d) and
notwithstanding any course of dealing between any Grantor and the Agent or other
conduct of the Agent, no authorization to sell or otherwise dispose of the
Collateral (except as set forth in Section 4.1(d)) shall be binding upon the
Agent or the Lenders unless such authorization is in writing signed by the Agent
with the consent or at the direction of the Required Secured Parties.

     8.8. No Waiver; Amendments; Cumulative Remedies. No delay or omission of
the Agent or any Lender to exercise any right or remedy granted under this
Security Agreement shall impair such right or remedy or be construed to be a
waiver of any Default or an acquiescence therein, and any single or partial
exercise of any such right or remedy shall not preclude any other or further
exercise thereof or the exercise of any other right or remedy. No waiver,
amendment or other variation of the terms, conditions or provisions of this
Security

APC PLEDGE AND SECURITY AGREEMENT — Page 23

 

--------------------------------------------------------------------------------

 

Agreement whatsoever shall be valid unless in writing signed by the Agent with
the concurrence or at the direction of the Lenders required under Section 8.3 of
the Credit Agreement and then only to the extent in such writing specifically
set forth. All rights and remedies contained in this Security Agreement or by
law afforded shall be cumulative and all shall be available to the Agent and the
Lenders until the Secured Obligations have been paid in full.

     8.9. Limitation by Law; Severability of Provisions. All rights, remedies
and powers provided in this Security Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
law, and all the provisions of this Security Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they shall not render this
Security Agreement invalid, unenforceable or not entitled to be recorded or
registered, in whole or in part. Any provision in any this Security Agreement
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of this Security Agreement are
declared to be severable.

     8.10. Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

     8.11. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Agent and the Lenders and their respective successors and assigns (including all
persons who become bound as a debtor to this Security Agreement), except that no
Grantor shall have the right to assign its rights or delegate its obligations
under this Security Agreement or any interest herein, without the prior written
consent of the Agent. No sales of participations, assignments, transfers, or
other dispositions of any agreement governing the Secured Obligations or any
portion thereof or interest therein shall in any manner impair the Lien granted
to the Agent, for the benefit of the Agent and the Lenders, hereunder.

     8.12. Survival of Representations. All representations and warranties of
the Grantors contained in this Security Agreement shall survive the execution
and delivery of this Security Agreement.

     8.13. Taxes and Expenses. Any taxes (including income taxes) payable or
ruled payable by Federal or State authority in respect of this Security
Agreement shall be paid by the Grantors, together with interest and penalties,
if any. The Grantors shall reimburse the Agent for any and all out-of-pocket
expenses and internal charges (including reasonable attorneys’, auditors’ and
accountants’ fees and reasonable time charges of attorneys, paralegals, auditors
and accountants who may be employees of the Agent) paid or incurred by the Agent
in connection with the preparation, execution, delivery, administration,
collection and enforcement of this Security Agreement and in the audit,
analysis, administration, collection, preservation or sale of the

APC PLEDGE AND SECURITY AGREEMENT — Page 24

 

--------------------------------------------------------------------------------

 

Collateral (including the expenses and charges associated with any periodic or
special audit of the Collateral), subject to any limitations on the amounts
reimbursable set forth in the Credit Agreement. Any and all costs and expenses
incurred by the Grantors in the performance of actions required pursuant to the
terms hereof shall be borne solely by the Grantors.

     8.14. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.

     8.15. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been
indefeasibly paid and performed in full (or with respect to any outstanding
Facility LCs, a cash deposit or Supporting Letter of Credit has been delivered
to the Agent as required by the Credit Agreement) and no commitments of the
Agent or the Lenders which would give rise to any Secured Obligations are
outstanding.

     8.16. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Grantors and the Agent relating to the
Collateral and supersedes all prior agreements and understandings between the
Grantors and the Agent relating to the Collateral.

     8.17. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

     8.18. CONSENT TO JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR TEXAS STATE COURT SITTING
IN DALLAS, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT, THE IP SECURITY AGREEMENTS OR ANY OTHER LOAN DOCUMENT AND
EACH GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE AGENT OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS SECURITY AGREEMENT, THE IP SECURITY AGREEMENTS OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, TEXAS.

     8.19. WAIVER OF JURY TRIAL. EACH GRANTOR, THE AGENT AND EACH LENDER HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS

APC PLEDGE AND SECURITY AGREEMENT — Page 25

 

--------------------------------------------------------------------------------

 

SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.

     8.20. Indemnity. Each Grantor hereby agrees to indemnify the Agent and the
Lenders, and their respective successors, assigns, agents and employees, from
and against any and all liabilities, damages, penalties, suits, costs, and
expenses of any kind and nature (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Agent or any Lender is a
party thereto) imposed on, incurred by or asserted against the Agent or the
Lenders, or their respective successors, assigns, agents and employees, in any
way relating to or arising out of this Security Agreement, or the manufacture,
purchase, acceptance, rejection, ownership, delivery, lease, possession, use,
operation, condition, sale, return or other disposition of any Collateral
(including, without limitation, latent and other defects, whether or not
discoverable by the Agent or the Lenders or any Grantor, and any claim for
Patent, Trademark or Copyright infringement), except that the foregoing
indemnity shall be limited to the extent any indemnified matter is solely
attributable to the gross negligence or willful misconduct of an indemnified
party.

     8.21. Counterparts. This Security Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Security Agreement by signing any
such counterpart.

     8.22. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not part of the agreement between the parties hereto.

     8.23. Amendment and Restatement. This Security Agreement, together with the
IP Security Agreements, are given in amendment, consolidation, restatement,
renewal and extension (but not in novation, extinguishment or satisfaction) of
all security agreements, pledge agreements, assignments and similar agreements
delivered pursuant to the Original Loan Agreement.

ARTICLE IX
NOTICES

     9.1. Sending Notices. Any notice required or permitted to be given under
this Security Agreement shall be sent by United States mail, telecopier,
personal delivery or nationally established overnight courier service, and shall
be deemed received (a) when received, if sent by hand or overnight courier
service, or mailed by certified or registered mail notices or (b) when sent, if
sent by telecopier (except that, if not given during normal business hours for
the recipient, shall be deemed to have been given at the opening of business on
the next Business Day for the recipient), in each case addressed to the Grantors
at the notice address set forth on Exhibit A, and to the Agent and the Lenders
at the addresses set forth in the Credit Agreement.

     9.2. Change in Address for Notices. Each of the Grantors, the Agent and the
Lenders may change the address for service of notice upon it by a notice in
writing to the other parties.

ARTICLE X
THE AGENT

APC PLEDGE AND SECURITY AGREEMENT — Page 26

 

--------------------------------------------------------------------------------

 

     Bank One, NA has been appointed Agent for the Lenders hereunder pursuant to
Article X of the Credit Agreement. It is expressly understood and agreed by the
parties to this Security Agreement that any authority conferred upon the Agent
hereunder is subject to the terms of the delegation of authority made by the
Lenders to the Agent pursuant to the Credit Agreement, and that the Agent has
agreed to act (and any successor Agent shall act) as such hereunder only on the
express conditions contained in such Article X. Any successor Agent appointed
pursuant to Article X of the Credit Agreement shall be entitled to all the
rights, interests and benefits of the Agent hereunder.

[Signature Page Follows]

APC PLEDGE AND SECURITY AGREEMENT — Page 27

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Grantors and the Agent have executed this Security
Agreement as of the date first above written.

                  GRANTORS:
 
                ACTION PERFORMANCE COMPANIES, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Chief Financial Officer, Secretary and Treasurer
 
                ACTION RACING COLLECTABLES, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Secretary and Treasurer
 
                ACTION SPORTS IMAGE, L.L.C.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Chief Financial Officer, Secretary and Treasurer
 
                FUNLINE MERCHANDISE COMPANY, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Executive Vice President, Secretary and Treasurer
 
                JEFF HAMILTON COLLECTION, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Secretary and Treasurer
 
                MCARTHUR TOWEL AND SPORTS, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Secretary and Treasurer
 
                RACING COLLECTABLES CLUB OF AMERICA, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Secretary and Treasurer

APC PLEDGE AND SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

                  TREVCO TRADING CORP.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Secretary and Treasurer
 
                ACTION CORPORATE SERVICES, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, President
 
                AW ACQUISITION CORP.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Chief Financial Officer, Secretary and
Treasurer
 
                CREATIVE MARKETING & PROMOTIONS, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Chief Financial Officer, Secretary and
Treasurer
 
                GORACING.COM, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Chief Financial Officer and Secretary
 
                GORACING INTERACTIVE SERVICES, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, President, Secretary and Treasurer
 
                RYP, INC.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Chief Financial Officer, Secretary and
Treasurer
 
                THE FAN CLUB COMPANY, L.L.C.
 
           

  By:   /s/ R. David Martin    

     

--------------------------------------------------------------------------------

        R. David Martin, Vice President, Secretary and Treasurer

APC PLEDGE AND SECURITY AGREEMENT — Page 29

 

--------------------------------------------------------------------------------

 

                  AGENT:
 
                BANK ONE, NA, as Agent
 
           

  By:   /s/ Gary N. Fowler    

     

--------------------------------------------------------------------------------

          Name: Gary N. Fowler     Title: Director

APC PLEDGE AND SECURITY AGREEMENT — Page 30