Mortgage Of Shares With Amav

MORTGAGE OF SHARES


Dated 12th June, 1997


BETWEEN


AMAV INDUSTRIES, INC.


as Chargor


- and -


CREDIT SUISSE FIRST BOSTON


as Administrative Agent


ALLEN & OVERY
London 2


INDEX


CLAUSE PAGE 1. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Covenant To Pay . . . . . . . . . . . . . . . . . . . . . . . . 5 3. Secured Liabilities . . . . . . . . . . . . . . . . . . . . . . 6 4. Charges On Shares . . . . . . . . . . . . . . . . . . . . . . . 6 5. Continuing Security . . . . . . . . . . . . . . . . . . . . . . 7 6. Representations And Warranties . . . . . . . . . . . . . . . . . 9 7. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . 10 8. Special Provisions Relating To The Shares . . . . . . . . . . 11 9. When Security Becomes Enforceable . . . . . . . . . . . . . . 13 10. Enforcement Of Security . . . . . . . . . . . . . . . . . . . 13 11. Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 12. Application Of Proceeds . . . . . . . . . . . . . . . . . . . 16 13. No Liability As Mortgagee In Possession . . . . . . . . . . . 16 14. Protection Of Third Parties . . . . . . . . . . . . . . . . . 16 15. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 16. Delegation By Administrative Agent . . . . . . . . . . . . . . 17 17. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 17 18. Redemption Of Prior Mortgages . . . . . . . . . . . . . . . . 18 19. Power Of Attorney . . . . . . . . . . . . . . . . . . . . . . 18 20. New Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 19 21. Stamp Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 19 22. Administrative Agent . . . . . . . . . . . . . . . . . . . . . 19 23. Waivers, Remedies Cumulative . . . . . . . . . . . . . . . . . 22 24. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 22 25. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 23 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 27. Covenant To Release . . . . . . . . . . . . . . . . . . . . . 23 28. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 24 29. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 24


Signatories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3 THIS MORTGAGE OF SHARES is dated 12th June, 1997 and is made BETWEEN:


(1) AMAV INDUSTRIES, INC., a Delaware Corporation (the "CHARGOR"); and


(2) CREDIT SUISSE FIRST BOSTON (the "ADMINISTRATIVE AGENT") as agent and
trustee for itself and each of the Secured Parties (as defined below).


WHEREAS:


(A) The Lenders have agreed to make available to the Borrower credit
facilities on and subject to the terms of the Credit Agreement.


(B) Pursuant to the Master Guarantee and Collateral Agreement the Chargor
(among others) has, inter alia, guaranteed to the Secured Parties the
payment of the Borrower Obligations.


(C) The Chargor has agreed to enter into this Deed to secure the payment of
the Secured Liabilities to the Secured Parties.


(D) It is intended by the parties hereto that this document shall take
effect as a deed notwithstanding the fact that a party may only execute
this document under hand.


NOW IT IS AGREED as follows:


1. INTERPRETATION


1.1 DEFINITIONS


In this Deed:


"BORROWER"


means Hedstrom Corporation.

"BORROWER OBLIGATIONS"


has the meaning given to it in the Master Guarantee and Collateral
Agreement.


"COMPANY"


means AMAV Industries Limited, an English incorporated company
(Registered no. 2465222).


"CREDIT AGREEMENT"


means the credit agreement dated as of 12th June, 1997 between Hedstrom
Holdings, Inc. as Parent, the Borrower, the Lenders, Societe Generale as
documentation agent, UBS Securities as syndication agent and Credit
Suisse First Boston as administrative agent, and any and each other
agreement or instrument supplementing or amending it.


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2


"CREDIT DOCUMENTS"


has the meaning given to it in the Credit Agreement.


"CREDIT PARTIES"


has the meaning given to it in the Credit Agreement.


"DEFAULT RATE"


at any time means the rate determined in accordance with Section 7.8(c)
of the Credit Agreement.


"DEFAULT"


has the meaning given to it in the Credit Agreement.


"EVENT OF DEFAULT"


has the meaning given to it in the Credit Agreement.


"FINANCE DOCUMENTS"


means:


(a) the Credit Agreement;


(b) the Security Documents;


(c) any Letter of Credit;


(d) the other Credit Documents;


(e) any Hedge Agreement entered into by the Borrower with any Lender
(or any Affiliate of any Lender);


(f) any document designated in writing as such by the Administrative
Agent (on the instructions of the Required Lenders) and the
Borrower; and


(g) any other document made, delivered or given in connection with
any of the foregoing.


"HEDGE AGREEMENT"


has the meaning given to it in the Master Guarantee and Collateral
Agreement.


"LENDERS"


has the meaning given to it in the Credit Agreement. 5
3


"LETTER OF CREDIT"


has the meaning given to it in the Credit Agreement.


"LIEN"


has the meaning given to it in the Credit Agreement.


"MASTER GUARANTEE AND COLLATERAL AGREEMENT"


has the meaning given to it in the Credit Agreement.


"RECEIVER"


means a receiver and manager of (if the Administrative Agent so
specifies in the relevant appointment) a receiver.


"REIMBURSEMENT OBLIGATION"


has the meaning given to it in the Credit Agreement.


"RELATED RIGHTS"


means, in relation to the Shares, all dividends and other distributions
paid or payable after the date hereof on all or any of the Shares and
all stocks, shares, securities (and the dividends or interest thereon),
rights, money or property accruing or offered at any time by way of
redemption, bonus, preference, option rights or otherwise to or in
respect of any of the Shares or in substitution or exchange for any of
the Shares.


"REQUIRED LENDERS"


has the meaning given to it in the Credit Agreement.


"SECURED LIABILITIES"


has the meaning given to it in Clause 3.1 (Scope).


"SECURED PARTIES"


means the Lenders (in any capacity under any Finance Document), (in the
case of a Hedge Agreement) any Affiliate of a Lender, the Documentation
Agent (as defined in the Credit Agreement), the Syndication Agent (as
defined in the Credit Agreement) and the Administrative Agent.


"SECURITY ASSETS"


means all assets, rights and property of the Chargor the subject of any
security created by this Deed or any other Security Document.


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4


"SECURITY DOCUMENT"


means this Deed and the other Security Documents (as defined in the
Credit Agreement).


"SECURITY PERIOD"


means the period beginning on the date hereof and ending on the date (as
stated by the Administrative Agent) upon which all the Secured
Liabilities which have arisen have been unconditionally and irrevocably
paid and discharged in full and after which no further Secured
Liabilities are reasonably likely to arise or the security hereby
created has been unconditionally and irrevocably released and
discharged.


"SHARES"


means the 650 ordinary shares represented by share certificate numbered
of the Company owned by the Chargor (being 65 per cent. of
the issued ordinary share capital of Company), including all Related
Rights.


1.2 INTERPRETATION


(a) Save as expressly herein defined, capitalised terms defined in the
Credit Agreement shall have the same meaning herein.


(b) The provisions of Section 1.2 of the Credit Agreement shall also apply
hereto as if expressly set out herein (mutatis mutandis) with each
reference to the Credit Agreement being deemed to be a reference to this
Deed.


(c) The terms of the other Finance Documents and of any side letters
between the parties hereto in relation to the Finance Documents are
incorporated herein to the extent required for any purported disposition
of the Security Assets contained herein to be a valid disposition in
accordance with Section 2(1) of the Law of Property (Miscellaneous
Provisions) Act 1989.


(d) If the Administrative Agent (as appropriate, on the basis of legal
advice received by it for this purpose) considers that an amount paid by
any Credit Party to either the Administrative Agent or any of the
Secured Parties under any Finance Document is capable of being avoided
or otherwise set aside on the liquidation or administration (or
equivalent) of the Chargor or otherwise, then such amount shall not be
considered to have been irrevocably paid for the purposes hereof.


(e) For the avoidance of doubt, an obligation in this Deed (or any
part thereof) which constitutes financial assistance within the meaning
of Section 151 of the Companies Act 1985, shall not be excluded by the
proviso to the definition of "Secured Liabilities" in Clause 3.1 (Scope)
if in relation to such obligation the provisions of Sections 155-158 of
the Companies Act 1985 have been complied with.


1.3 CONSTRUCTION


(a) In this Deed, unless the contrary intention appears, a reference to:


(i) "ASSETS" means properties, revenues and rights of every
description; 7
5


an "AUTHORISATION" means an authorisation, consent, approval,
resolution, license, exemption, filing, registration and
notarisation.


a "MONTH" or two or more "MONTHS" is a reference to a period
starting on one day in a calendar month and ending on the
numerically corresponding day in the next or relevant subsequent
calendar month, except that, if there is no numerically
corresponding day in the month in which that period ends, that
period shall end on the last Business Day in that calendar
month;


a "REGULATION" means any regulation, rule, official directive,
request or guideline (whether or not having the force of law,
but, if not having the force of law with which persons of the
relevant category would customarily comply) of any governmental
body, agency, department or regulatory, self-regulatory or other
authority or organisation;


(ii) a provision of a law is a reference to that provision as amended
or re-enacted;


(iii) a Clause or a Schedule is a reference to a clause of or a
schedule to this Deed;


(iv) a person includes its successors and assigns;


(v) a Finance Document or another document is a reference to that
Finance Document or that other document as amended, novated or
supplemented; and


(vi) a time of day is a reference to London time.


(b) The index to and the headings in this Deed are for convenience only and
are to be ignored.


1.4 CERTIFICATES


A certificate of the Administrative Agent setting forth the amount of
any Secured Liability due from the Chargor shall be prima facie evidence
of such amount against the Chargor in the absence of manifest error.


2. COVENANT TO PAY


2.1 COVENANT


The Chargor hereby, as primary obligor and not merely as surety,
covenants with the Administrative Agent (as agent and trustee as
aforesaid) that it will pay or discharge the Secured Liabilities on the
due date therefor in the manner provided in the relevant Finance
Document. Any amount not paid hereunder when due as set forth in the
Credit Agreement shall bear interest (as well after as before judgement
and payable on demand) at the Default Rate from time to time (or, if
higher, the default rate applicable to the Secured Liability concerned)
from the due date until the date such amount is unconditionally and
irrevocably paid and discharged in full.


2.2 RIGHT OF APPROPRIATION


Upon and after the occurrence of an Event of Default and for so long as
the same is continuing, the Administrative Agent shall be entitled to
appropriate moneys and/or assets to Secured


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6


Liabilities in such manner or order as it sees fit (subject to Clause
12 (Application of Proceeds)) and any such appropriation shall override
any appropriation by the Chargor. This Clause 2.2 shall not, however,
override the principle that the Secured Parties are to share in
recoveries on a pro rata basis.


3. SECURED LIABILITIES


3.1 SCOPE


The security constituted by the Security Documents secures the "SECURED
LIABILITIES", being the collective reference to:


(i) the Chargor's guarantee of the Borrower Obligations pursuant to
Section 2 of the Master Guarantee and Collateral Agreement; and


(ii) all obligations and liabilities of the Chargor which may arise
under or in connection with the Master Guarantee and Collateral
Agreement or any other Credit Document to which the Chargor is a
party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all reasonable fees
and disbursements of counsel to the Administrative Agent or to
the Lenders that are required to be paid by the Chargor
pursuant to the terms of the Master Guarantee and Collateral
Agreement or any other Credit Document),


provided always that any obligation which, if it were so included within
the definition of "Secured Liabilities", would result in this Deed
contravening Section 151 of the Companies Act 1985 shall not be included
within the definition of "Secured Liabilities".


3.2 COVENANT TO MAKE FACILITIES AVAILABLE


Each Secured Party, by the Administrative Agent's execution of this
Deed, hereby severally covenants with the Chargor that it will, upon and
subject to the terms of the relevant Finance Document, make advances and
further advances or other financial accommodation to the extent (if at
all) it is provided for in the relevant Finance Document.


4. CHARGES ON SHARES


(a) The Chargor hereby as continuing security for the payment, discharge
and performance of all the Secured Liabilities mortgages and charges and
agrees to mortgage and charge to the Administrative Agent (as agent and
trustee for the benefit of itself and each of the Secured Parties) all
Shares held now or in the future by it and/or any nominee on its behalf,
the same to be a security by way of a first mortgage,


PROVIDED THAT:


(i) whilst no Event of Default exists all dividends and other
distributions paid or payable with respect to the Shares may be
paid directly to the Chargor (in which case the Administrative
Agent or its nominee shall execute any necessary dividend
mandate) and, if paid directly to the Administrative Agent,
shall be paid promptly by it to the Chargor; and 9
7


(ii) unless an Event of Default is continuing, the Chargor may exercise
all voting rights attaching to the relevant Shares or, where the
shares have been registered in the name of the Administrative Agent
or its nominee, as the relevant Chargor may direct in writing (and
the Administrative Agent and any nominee of the Administrative Agent
in whose name such Shares are registered shall execute any form of
proxy or other document reasonably required in order for the Chargor
to do so) provided that no vote shall be cast or exercised which in
the reasonable opinion of the Administrative Agent would be likely to
be materially prejudicial to the rights or interest of the Secured
Parties under any of the Finance Documents.


(b) The mortgages and charges on shares created by this Clause 4 are made with
full title guarantee.


5. CONTINUING SECURITY


5.1 CONTINUING SECURITY


The security constituted by this Deed shall be continuing and will extend
to the ultimate balance of the Secured Liabilities, regardless of any
intermediate payment or discharge in whole or in part.


5.2 REINSTATEMENT


Where any discharge (whether in respect of any amounts hereby secured or
otherwise) is made in whole or in part or any arrangement is made on the
faith of any payment, security or other disposition which is avoided or
must be repaid on bankruptcy, liquidation or otherwise without limitation,
the liability of the Chargor under this Deed shall continue as if there had
been no such discharge or arrangement. The Secured Parties shall be
entitled to concede or compromise any claim that any such payment, security
or other disposition is liable to avoidance or repayment.


5.3 WAIVER OF DEFENCES


The liability of the Chargor hereunder shall not be prejudiced, affected or
diminished by any act, omission, circumstance, matter or thing which but
for this provision might operate to release or otherwise exonerate the
Chargor from its obligations hereunder in whole or in part, including
without limitation and whether or not known to the Chargor or to any
Secured Party;


(a) any time or waiver granted to or composition with any Credit Party or
any other person;


(b) the taking, variation, compromise, renewal or release of or refusal or
neglect to perfect or enforce any rights, remedies or securities
against any Credit Party or any other person;


(c) any legal limitation, disability, incapacity or other circumstances
relating to the Chargor or the death, bankruptcy, liquidation or
change in the name or constitution of any Credit Party or any other
person;


(d) any variation of, or extension of the due date for performance of any
term of, any Finance Document or any other document or security so
that references to such 10
8


documents in this Deed shall include each such variation or
extension or any increase, exchange, acceleration, renewal,
surrender, release or loss of or failure to perfect any security
or any non-presentment or non-observance of any formality in
respect of any instruments; and


(e) any irregularity, unenforceability, invalidity or frustration
of any obligations of any Credit Party or any other person under
the Finance Documents or any other document or security, to
the intent that the Chargor's obligations hereunder shall remain
in full force and this Deed be construed accordingly as if there
were no such irregularity, unenforceability, invalidity or
frustration.


5.4 IMMEDIATE RECOURSE


The Chargor waives any right it may have of first requiring any Secured
Party to proceed against or enforce any other rights or security of or
claim payment from any Credit Party or any other person before claiming
from the Chargor hereunder.


5.5 PRESERVATION OF RIGHTS


Until all the Secured Liabilities have been irrevocably paid and
discharged in full, each Secured Party (or any trustee or the
Administrative Agent on its behalf) may:


(a) refrain from applying or enforcing any other security, moneys
or rights held or received by that Secured Party in respect of
such amounts or apply and enforce the same in such manner and
order as it sees fit (whether against such amounts or otherwise)
and the Chargor shall not be entitled to the benefit of the
same; and


(b) hold in suspense account any moneys received from the Chargor or
on account of the Chargor's liability hereunder, on which the
Secured Party shall pay interest at the rate reasonably
determined by it to be usual for accounts of that type.


5.6 NON-COMPETITION


Until the Secured Liabilities have been irrevocably paid in full, the
Chargor shall not by virtue of any payment made, security realised or
moneys received for or on account of the Chargor's liability hereunder:


(a) be subrogated to any rights, security or moneys held, received
or receivable by any Secured Party or be entitled to any right
of contribution;


(b) be entitled and shall not claim to rank as creditor against the
estate or in the bankruptcy or liquidation of any Credit Party
in competition with any Secured Party;


(c) receive, claim or have the benefit of any payment, distribution
or security from or on account of any Credit Party or exercise
any right of set-off as against any Credit Party or any other
person liable hereunder or claim the benefit of any security or
moneys held by or for the account of the Secured Parties, and
the Secured Parties shall be entitled to apply such security and
moneys as they see fit.


The Chargor shall forthwith pay to the Administrative Agent (for the
Secured Parties) an amount equal to any such set-off in fact exercised
by it and shall hold in trust for and forthwith 11
9


pay or transfer, as the case may be, to the Administrative Agent any
such payment or distribution or benefit of security in fact received by
it. If the Chargor exercises any right of set-off contrary to the
above, it will forthwith pay an amount equal to the amount set off to
the Administrative Agent.


5.7 ADDITIONAL SECURITY


The security constituted by this Deed shall be in addition to and shall
not in any way be prejudiced by any other security now or hereafter held
by the Administrative Agent as security for the Secured Liabilities.
The Secured Parties' rights hereunder are in addition to and not
exclusive of those provided by law.


5.8 CERTIFICATE


A certificate of the Administrative Agent as to the amount of the
Secured Liabilities shall be prima facie evidence of that amount as
against the Chargor, save in the case of manifest error.


5.9 SECURITY


The Chargor will not without the prior written consent of the
Administrative Agent hold any security from any Credit Party in respect
of the Secured Liabilities. The Chargor will hold any security held by
it in breach of this provision in trust for the Secured Parties.


6. REPRESENTATIONS AND WARRANTIES


6.1 TO WHOM MADE


The Chargor makes the representations and warranties set out in Clause
6.2 (Matters represented) to each Secured Party.


6.2 MATTERS REPRESENTED


(a) SHARES


(i) The Chargor is and will remain the sole beneficial owner of the
Shares and save where the Shares have been registered in the
name of the Administrative Agent or its nominee pursuant hereto,
it is and will remain the absolute legal owner thereof
(together with its nominee(s)), except to the extent permitted
by the Credit Agreement;


(ii) the Chargor has not transferred, assigned, pledged or in any way
encumbered the Shares other than pursuant to the Security
Documents or as permitted pursuant to the Credit Agreement;


(iii) the Chargor will not take any action whereby the rights
attaching to the Shares are altered in any way prejudicial to
the Secured Parties or diluted;


(iv) the Shares are fully paid and are not subject to any options to
purchase or similar rights of any person; ...