Credit Agreement

Exhibit 10.77

SECOND AMENDMENT TO
AMENDED AND RESTATED
CREDIT AGREEMENT

THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this " Amendment" ) is made and entered into as of February 8, 2005 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" ), and TREVCO TRADING CORP. , an Arizona corporation (" Trevco" ) (each individually, a " Borrower" and collectively, the " Borrowers" ); the other Loan Parties signatory hereto; BANK ONE, NA, a national banking association, for itself, as Lender, and as agent for Lenders (in such capacity, the " Agent" ); and the other Lenders signatory hereto.

WHEREAS , Borrowers, Loan Parties, Agent and Lenders are parties to that certain Amended and Restated Credit Agreement dated as of June 30, 2004, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of September 3, 2004 (as amended from time to time, the " Credit Agreement" ); and

WHEREAS , Borrowers, Loan Parties, Lenders and Agent desire to amend the Credit Agreement to allow and provide for the foregoing and certain matters, all as hereinafter set forth.

NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I
Definitions

Section 1.01 Definitions . Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement, as amended hereby.

ARTICLE II
Amendments

Section 2.01 Amendment of Article I . Article 1 of the Agreement is hereby amended by amending and restating the following terms in their entirety:

"" Consolidated EBITDA" means Consolidated Net Income plus , to the extent deducted from revenues in determining Consolidated Net Income, (a) Consolidated Interest Expense, (b) expense for taxes paid or accrued, net of tax

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refunds, (c) depreciation, (d) amortization and other non-cash charges (including, without limitation, any intangible impairment charges) and (e) extraordinary losses (as determined in accordance with GAAP) incurred other than in the ordinary course of business, minus , to the extent included in Consolidated Net Income, extraordinary gains (as determined in accordance with GAAP) realized other than in the ordinary course of business, all calculated for the Company and its Subsidiaries on a consolidated basis."

Section 2.02 Amendment of Section 2.15(d) . Effective as of the date hereof, Section 2.15(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

" (d) Excess Cash Flow . Until the Term B Termination Date, the Borrowers shall prepay the Obligations on the date that is ten days after the earlier of (i) the date on which Borrowers' annual audited Financial Statements for the immediately preceding Fiscal Year are delivered pursuant to Section 6.1 or (ii) the date on which such annual audited Financial Statements were required to be delivered pursuant to Section 6.1 , in an amount equal to fifty percent (50%) of the Borrowers' Excess Cash Flow for the immediately preceding Fiscal Year. Notwithstanding the foregoing, for the Fiscal Year ended September 30, 2005, Excess Cash Flow shall be calculated based on the nine month period commencing on January 1, 2005 and ending September 30, 2005. Any such prepayment shall be applied to first , to pay the principal of the Overadvances and Protective Advances, second , to scheduled principal installments of the Term B Loans in inverse order of maturity and third , to pay the principal of the Non-Ratable Loans. Each such prepayment shall be accompanied by a certificate signed by the chief financial officer of the Borrower Representative (on behalf of the Borrowers) certifying the manner in which Excess Cash Flow and the resulting prepayment were calculated, which certificate shall be in form and substance satisfactory to the Agent.

Section 2.03 Amendment of Section 6.1(f) . Effective as of the date hereof, Section 6.1(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

" (f) as soon as available but in any event within 5 days of the end of each calendar week, at such other times as may be necessary to re-determine availability of Advances hereunder or as may be requested by the Agent, as of the period then ended, an Aggregate Borrowing Base Certificate, together with a duly executed Borrowing Base Certificate for each Borrower which calculates such Borrower' s Borrowing Base, and supporting information in connection therewith;"

Section 2.04 Amendment of Section 6.16(a) . Effective as of the date hereof, Section 6.16(a) of the Credit Agreement is hereby amended by adding the following sentence to the end of such section:

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" (a) No Loan Party will or will permit any of their Subsidiaries to declare or pay any dividends or make any distributions on its Capital Stock (other than dividends or distributions payable in its own common stock) or redeem, repurchase or otherwise acquire or retire any of its Capital Stock at any time outstanding, except (i) that any Subsidiary may declare and pay dividends or make distributions to the Borrowers or to a Wholly-Owned Subsidiary of the Borrowers, (ii) any non-Wholly-Owned Subsidiary may declare or pay dividends or make distributions on its Capital Stock to holders thereof other than Loan Parties, in each case, so long as (x) no Default or Unmatured Default exists or will be caused by the payment of such dividend or distribution, (y) the Borrowers are in compliance with Section 6.29.1 after giving effect to such dividend or distribution and (z) the Availability is greater than ten percent (10%) of the Aggregate Borrowing Base after giving effect to such dividend or distribution, or (iii) only after (A) delivering a written good faith estimate of Fixed Charge Coverage Ratio, after taking into account the payment of any such dividend or distribution, for the period ending on the last day of the current Fiscal Quarter and (B) receiving the prior written consent of the Agent and Required Lenders, any Loan Party may declare or pay dividends or make distributions on its Capital Stock or redeem, repurchase or otherwise acquire or retire any of its Capital Stock at any time outstanding."

Section 2.05 Amendment of Section 6.29.1 . Effective as of the date hereof, Section 6.29.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

" 6.29.1 Fixed Charge Coverage Ratio . At all times while the Term B Loan is outstanding, the Borrowers will not permit the Fixed Charge Coverage Ratio, determined as of the end of each of the Company' s Fiscal Quarter for the then most-recently ended four Fiscal Quarters, (A) to be less than 0.80 to 1.0 as of the end of the Fiscal Quarter ending March 31, 2005, (B) to be less than 1.50 to 1.0 as of the end of each Fiscal Quarter ending June 30, 2005 and September 30, 2005 and (C) to be less than 1.15 to 1.0 as of the end of the Fiscal Quarter ending December 31, 2005 and as of the end of each Fiscal Quarter thereafter; provided that (i) for the Fiscal Quarter ending March 31, 2005, the Fixed Charge Coverage Ratio shall be calculated using the most-recently ended Fiscal Quarter, (ii) for the Fiscal Quarter ending June 30, 2005, the Fixe ...