Document:

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                                                                    Exhibit 10.6

     THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY HAS BEEN SUBORDINATED TO
     CERTAIN OBLIGATIONS OF THE MAKER PURSUANT TO A SUBORDINATION AGREEMENT
     AMONG, INTER ALIA, THE LENDERS AND THE CIT GROUP/COMMERCIAL SERVICES, INC.,
     AS AMENDED FROM TIME TO TIME.

                      SECURED SUBORDINATED PROMISSORY NOTE

$1,376,480.00                                                      July 11, 2006

     FOR VALUE RECEIVED, Crown Crafts, Inc., a Delaware corporation ("Maker"),
promises to pay to the order of The Prudential Insurance Company of America, its
successors and assigns ("Lender"), the original principal sum of ONE MILLION
THREE HUNDRED SEVENTY SIX THOUSAND FOUR HUNDRED EIGHTY and No/100 Dollars
($1,376,480.00), without interest thereon, in two equal installments of SIX
HUNDRED EIGHTY EIGHT THOUSAND TWO HUNDRED FORTY and No/100 Dollars ($688,240.00)
each, with the first such installment to be paid on the fourth anniversary of
the date hereof and the second such installment to be paid on the fifth
anniversary of the date hereof.

     1. Acceleration of Payment.

          (a) The entire indebtedness evidenced by this Secured Subordinated
Promissory Note (the "Note") shall, at the option of Lender and upon notice to
Maker, at once become due and payable and may be collected forthwith, regardless
of the stipulated date of maturity, in the event that (i) Maker fails to pay any
principal hereunder on the date such payment is due, (ii) ) Maker fails to pay
any other amount due hereunder within three (3) Business Days (as hereinafter
defined) after the date such payment is due, (iii) there shall occur a Change in
Control (as hereinafter defined), or (iv) there shall occur a Bankruptcy Event
(as hereinafter defined).

          (b) For purposes hereof, "Change in Control" shall mean one or more of
the following shall have occurred:

               (i) a merger or consolidation of Maker with or into another
     corporation other than a merger or consolidation (A) with a subsidiary of
     Maker; (B) in which (1) the holders of voting stock of Maker immediately
     prior to the merger as a class continue to hold immediately after the
     merger at least a majority of all outstanding voting power of the surviving
     or resulting corporation or its parent and (2) all holders of each
     outstanding class or series of voting stock of Maker immediately prior to
     the merger or consolidation have the right to receive substantially the
     same cash, securities or other property in exchange for their voting stock
     of Maker as all other holders of such class or series; (C) in connection
     with which E. Randall Chestnut shall serve as Chief Executive Officer of
     the surviving or resulting corporation or its parent; or (D) in connection
     with which a majority of the persons serving on the board of directors of
     the surviving or resulting corporation or its parent shall be persons who
     were members of the Board of Directors of Maker immediately prior to such
     merger or consolidation;

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               (ii) the sale or other disposition of all or substantially all of
     the assets of Maker (in one transaction or a series of transactions); or

               (iii) the liquidation or dissolution of Maker.

          (c) For purposes hereof, "Bankruptcy Event" shall mean one or more of
the following shall have occurred:

               (i) Maker (A) shall commence a voluntary case or other proceeding
     seeking liquidation, reorganization or other relief with respect to itself
     or its debts under any bankruptcy, insolvency or other similar law now or
     hereafter in effect or seeking the appointment of a trustee, receiver,
     liquidator, custodian or other similar official of it or any substantial
     part of its property, or (B) shall consent to any such relief or to the
     appointment of or taking possession by any such official in an involuntary
     case or other proceeding commenced against it, or (C) shall make a general
     assignment for the benefit of creditors, or (D) shall fail generally, or
     shall admit in writing its inability, to pay its debts as they become due,
     or (E) shall take any corporate action to authorize any of the foregoing;
     or

               (ii) an involuntary case or other proceeding shall be commenced
     against Maker seeking liquidation, reorganization or other relief with
     respect to it or its debts under any bankruptcy, insolvency or other
     similar law now or hereafter in effect or seeking the appointment of a
     trustee, receiver, liquidator, custodian or other similar official of it or
     any substantial part of its property, and such involuntary case or other
     proceeding shall remain undismissed and unstayed for a period of sixty (60)
     days, or an order for relief shall be entered against Maker under the
     federal bankruptcy laws as now or hereafter in effect.

     2. Manner of Payment.

          (a) Each date upon which a payment hereunder must be made (whether
stated, defined or accelerated) shall be referred to herein as a "Payment Date."
Any payment hereunder which is due on a Payment Date which is not a Business Day
(as hereinafter defined) shall be made on the next succeeding Business Day. As
used herein "Business Day" shall mean any day other than a Saturday or Sunday or
a day on which banks in New York, New York are authorized or required by law to
be closed.

          (b) Each payment hereunder shall be by wire transfer of immediately
available funds to an account designated by Lender prior to the applicable
Payment Date.

          (c) If any amount hereunder shall not be paid when due (whether prior
to or on the date specified in this Note or by acceleration or otherwise),
interest shall accrue on such overdue amounts to the extent permitted by law at
the rate of five percent (5%) per annum from the date due to and including the
date of actual payment (after as well as before judgment).

     3. Subordination of Note. This Note is subject in all respects to that
certain Subordination Agreement of even date herewith to which The CIT
Group/Commercial Services, Inc. ("CIT") and Lender, among others, are parties.

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     4. Guaranty; Security Agreement and Mortgages. This Note is one of three
Notes (collectively, the "Notes") issued to Wachovia Bank, National Association,
Banc of America Strategic Solutions, Inc. and The Prudential Insurance Company
of America (collectively, the "Lenders"). Churchill Weavers, Inc., Hamco, Inc.
and Crown Crafts Infant Products, Inc. (collectively, the "Subsidiary
Guarantors") are executing and delivering a Guaranty of even date herewith (the
"Guaranty") pursuant to which they jointly and severally and unconditionally
guaranty the prompt payment in full of all obligations under the Notes. In
addition, as security for the prompt payment in full of all obligations under
the Notes, (i) Maker and each of the Subsidiary Guarantors are executing and
delivering a Security Agreement of even date herewith (the "Security Agreement")
in favor of Wachovia Bank, National Association, in its capacity as collateral
agent for the Lenders (in such capacity, the "Lender Agent"), pursuant to which
they pledge and grant to the Lender Agent, for the ratable benefit of the
Lenders, a continuing, general lien upon, and security interest and security
title in and to, all of the Collateral (as defined in that certain Financing
Agreement of even date herewith among CIT, Maker and the Subsidiary Guarantors
(the "Senior Debt Agreement")) and (ii) Churchill Weavers, Inc. is executing and
delivering a mortgage (the "Mortgage") on the Real Estate (as defined in the
Senior Debt Agreement) in favor of the Lender Agent, for the ratable benefit of
the Lenders, the liens and security titles under the Security Agreement and the
Mortgage being junior to the liens and security titles granted by Maker and the
Subsidiary Guarantors in connection with the Senior Debt Agreement.

     5. Waivers of Maker. Maker hereby waives (a) all presentments, demands for
performance, notice of nonperformance (except to the extent specifically
required by the provisions hereof), (b) any requirement of diligence or
promptness on the part of Lender in the enforcement of its rights under this
Note, (c) except to the extent specifically required by other provisions of this
Note, any and all notices of every kind and description which may be required to
be given by any statute or rule of law, and (d) any defense of any kind which it
may now or hereafter have with respect to its liability under this Note.

     6. Prepayments. Subject to the subordination provisions hereof, Maker may
prepay the principal amount of this Note in whole or in part without penalty.

     7. Interest Limited by Law. If from any circumstances whatsoever, Maker is
at any time required or obligated to pay interest at a rate in excess of the
maximum rate prescribed by any applicable usury statute or any other applicable
law, then, ipso facto, the obligation to be fulfilled shall be reduced to such
maximum rate, so that in no event shall any payment be possible under this Note
that is in excess of such maximum rate.

     8. Severability. Each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note.

     9. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified upon the written consent of Maker and Lender.

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     10. Assignment. The rights and obligations of Maker and Lender hereunder
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties; provided, that Maker may not assign its
obligation hereunder without the prior written consent of the Lender.

     11. Heading; References. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.

     12. Effectiveness of Waiver by Lender. No waiver by Lender of any default
shall be effective unless in writing, nor shall it operate as a waiver of any
other default or of the same default on a future occasion. No delay or omission
by Lender in exercising any of its rights, remedies, powers and privileges
hereunder or at law and no course of dealing between Lender and Maker or any
other person shall be deemed a waiver by Lender of any of such rights, remedies,
powers and privileges even if such delay or omission is continuous or repeated,
nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise thereof by Lender or the
exercise of any other right, remedy, power or privilege by Lender.

     13. Attorneys' Fees. If this Note is placed in the hands of any attorney
for collection, or if collected by suit or through any bankruptcy or other legal
proceedings, Maker hereby agrees to pay all reasonable expenses actually
incurred by Lender with respect thereto, including, without limitation,
attorneys' fees, all of which shall become a part of the principal hereof.

     14. Remedies Cumulative. The remedies of Lender as provided herein and in
any other documents governing or securing repayment hereof shall be cumulative
and concurrent and may be pursued singly, successively or together, at the sole
discretion of Lender, and may be exercised as often as occasion therefore shall
arise.

     15. Applicable Law. This Note shall be construed in accordance with the
laws of the State of New York without giving effect to the conflict of law
principles thereof.

     16. Notice. Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto must be in writing and
delivered personally (including by overnight courier) or sent by certified mail
(postage pre-paid and return receipt requested), or be transmitted by facsimile:

               If to Maker:    Crown Crafts, Inc.
                               916 S. Burnside Avenue
                               Gonzales, Louisiana 70737
                               Attention: Mr. E. Randall Chestnut
                               Facsimile No.: (225) 647-9112

               If to Lender:   The Prudential Insurance Company of America
                               1170 Peachtree Street, Suite 500
                               Atlanta, Georgia 30309
                               Attention: Managing Director

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                               Facsimile No.: (404) 870-3741

or to such other address as may be specified from time to time in a notice given
by such party. All notices and other communications required or permitted
hereunder shall be deemed given when delivered personally, mailed by certified
mail (postage pre-paid and return receipt requested), sent by overnight courier
or faxed (transmission confirmed), or otherwise actually received.

                          [signature on following page]

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     IN WITNESS WHEREOF, Maker has executed this Note as of the date first above
written.

                                        MAKER:

                                        CROWN CRAFTS, INC.

                                        By: /s/ E. Randall Chestnut
                                            ------------------------------------
                                            E. Randall Chestnut
                                            President and Chief Executive
                                            Officer

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                            ACKNOWLEDGEMENT OF LENDER

     Lender hereby acknowledges and agrees that (a) as additional consideration
for Maker's issuance of this Note to Lender, Lender has delivered to Maker for
cancellation both of those certain Series C Common Stock Purchase Warrants of
Maker each dated July 23, 2001, as issued to Lender on April 29, 2003, and (b)
upon cancellation of such Warrant by Maker, Lender shall have no options,
warrants, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of Maker.

                                        THE PRUDENTIAL INSURANCE COMPANY
                                        OF AMERICA

                                        By: /s/ Billy Greer
                                            ------------------------------------
                                        Its: Sr. Vice President<PAGE>

                                                                    Exhibit 10.7

                               SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as of
July 11, 2006, by and among Crown Crafts, Inc. ("Maker"), Churchill Weavers,
Inc., Hamco, Inc. and Crown Crafts Infant Products, Inc. (individually a
"Guarantor" and collectively the "Guarantors"; the Guarantors, together with the
Maker, individually an "Obligor" and collectively the "Obligors"), and Wachovia
Bank, National Association, in its capacity as agent for the ratable benefit of
the Lenders, as defined below (in such capacity, the "Agent").

                                    RECITALS

     WHEREAS, pursuant to the Payoff Letter, the Agent and the Lenders have
agreed to terminate the Existing Documents and accept payment of amounts
specified in the Payoff Letter in cash, together with the Subordinated Notes,
subject to the conditions set forth therein and herein, and subject to the
execution and delivery by the Obligors of this Security Agreement to the Agent
for the benefit of the Agent and the Lenders.

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

     1.   Definitions.

          "Accounts" means all of each Obligor's present and future: (a)
     accounts (as defined in the UCC); (b) instruments, documents, chattel paper
     (including electronic chattel paper) (all as defined in the UCC); (c)
     unpaid seller's or lessor's rights (including rescission, replevin,
     reclamation, repossession and stoppage in transit) relating to the
     foregoing or arising therefrom; (d) rights to any goods represented by any
     of the foregoing, including rights to returned, reclaimed or repossessed
     goods; (e) guaranties, other supporting obligations, payment intangibles
     and letter of credit rights (all as defined in the UCC); (f) insurance
     policies or rights relating to any of the foregoing; (g) general
     intangibles pertaining to any of the foregoing (including rights to
     payment, including those arising in connection with bank and non-bank
     credit cards), and all books and records and any electronic media and
     software relating thereto; (h) notes, deposits or other property of each
     Obligor's account debtors securing the obligations owed by such account
     debtors to such Obligor; and (i) all Proceeds of any of the foregoing.

          "Agent" has the meaning set forth in the preamble hereto.

          "Casualty Proceeds" means (a) payments or other proceeds from an
     insurance carrier with respect to any loss, casualty or damage to
     Collateral, and (b) payments received on account of any condemnation or
     other governmental taking of any of the Collateral.

          "Collateral" means, collectively, all present and future Accounts,
     Factored Accounts, Equipment, Inventory and other Goods, Documents of
     Title, General Intangibles, Investment Property, Real Estate and Other
     Collateral.

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          "Contribution Agreement" means the Contribution Agreement of even date
     herewith, executed and delivered by the Obligors.

          "Copyrights" means all of each Obligor's present and hereafter
     acquired copyrights, copyright registrations, recordings, applications,
     designs, styles, licenses, marks, prints and labels bearing any of the
     foregoing, all reissues and renewals thereof, all licenses thereof, all
     other general intangible, intellectual property and other rights pertaining
     to any of the foregoing, together with the goodwill associated therewith,
     and all income, royalties and other Proceeds of any of the foregoing.

          "Depository Account" means each "Depositary Account" established
     pursuant to and as defined in the Senior Credit Agreement, over which
     control in favor of the Agent (subject to the prior control established in
     favor of the Senior Creditor) shall be established pursuant to one or more
     Depositary Account Control Agreements.

          "Depository Account Control Agreement" shall mean a three-party
     agreement in form and substance satisfactory to the Agent among the Agent,
     the applicable Obligor and the bank which will maintain a Depository
     Account, (a) which provides the Agent with control of such Depository
     Account (subject to the prior control established in favor of the Senior
     Creditor), and (b) pursuant to which such bank agrees that (i) all cash,
     checks, wires and other items received or deposited into the Depository
     Account are the property of the Agent (subject to the interests of the
     Senior Creditor), and (ii) except for the prior lien of the Senior Creditor
     or as otherwise provided in the Depository Account Control Agreement, such
     bank has no lien upon, or right of set off against, the Depository Account
     and any cash, checks, wires and other items from time to time on deposit
     therein.

          "Documents of Title" means all each Obligor's present and future
     documents (as defined in the UCC), and any and all warehouse receipts,
     bills of lading, shipping documents, chattel paper, instruments and similar
     documents, all whether negotiable or non-negotiable, together with all
     Inventory and other Goods relating thereto, and all Proceeds of any of the
     foregoing.

          "Equipment" means all of each Obligor's present and hereafter acquired
     equipment (as defined in the UCC) including, without limitation, all
     machinery, equipment, rolling stock, furnishings and fixtures, and all
     additions, substitutions and replacements thereof, wherever located,
     together with all attachments, components, parts, equipment and accessories
     installed thereon or affixed thereto and all Proceeds of any of the
     foregoing.

          "Existing Documents" means the "Existing Credit Agreement", the "Note
     Purchase Agreement", and the other "Transaction Documents", as those terms
     are defined in the Payoff Letter.

          "Event of Default" has the meaning set forth in Article 4 hereof.

          "Factored Accounts" has the meaning set forth in the Senior Credit
     Agreement.

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          "Factoring Credit Balances" has the meaning set forth in the Senior
     Credit Agreement.

          "GAAP" means generally accepted accounting principles in the United
     States of America as in effect from time to time and for the period as to
     which such accounting principles are to apply.

          "General Intangibles" means all of each Obligor's present and
     hereafter acquired general intangibles (as defined in the UCC), and shall
     include, without limitation, all present and future right, title and
     interest in and to: (a) all Trademarks, (b) Patents, utility models,
     industrial models, and designs, (c) Copyrights, (d) trade secrets, (e)
     licenses, permits and franchises, (f) any other forms of intellectual
     property, (g) all customer lists, distribution agreements, supply
     agreements, blueprints, indemnification rights and tax refunds, (h) all
     monies and claims for monies now or hereafter due and payable in connection
     with the foregoing, including, without limitation, payments for
     infringement and royalties arising from any licensing agreement between any
     Obligor and any licensee of any of such Obligor's General Intangibles, (i)
     the Factoring Credit Balances and (j) all Proceeds of any of the foregoing.

          "Goods" means all of each Obligor's present and hereafter acquired
     "Goods", as defined in the UCC, and all Proceeds thereof.

          "Inventory" means all of the Obligors' present and hereafter acquired
     inventory (as defined in the UCC), including, without limitation, all
     merchandise and inventory in all stages of production (from raw materials
     through work in process to finished goods), and all additions,
     substitutions and replacements thereof, wherever located, together with all
     goods and materials used or usable in manufacturing, processing, packaging
     or shipping of the foregoing, and all Proceeds of any of the foregoing.

          "Investment Property" means all of each Obligor's present and
     hereafter acquired "Investment Property", as defined in the UCC, together
     with all stock and other equity interests in the Obligors' subsidiaries,
     and all Proceeds thereof.

          "Lenders" means (i) Wachovia Bank, National Association, Banc of
     America Strategic Solutions, Inc., and The Prudential Insurance Company of
     America, as holders of the Subordinated Notes, and (ii) any successors or
     assigns of any of them.

          "Obligations" means: (a) the principal of the Subordinated Notes; (b)
     any and all other indebtedness, obligations and liabilities which may be
     owed by the Obligors (or any of them) to the Agent or the Lenders and
     arising out of, or incurred in connection with any of the Subordinated Note
     Documents (including all Out-of-Pocket Expenses), whether (i) now in
     existence or incurred by the Obligors (or any of them) from time to time
     hereafter, (ii) secured by pledge, lien upon or security interest in any
     Obligor's assets or property or the assets or property of any other person,
     firm, entity or corporation, (iii) such indebtedness is absolute or
     contingent, joint or several, matured or unmatured, direct or indirect, or
     (iv) the Obligors are liable to the Agent or the Lenders for such
     indebtedness as principal, surety, endorser, guarantor or otherwise,
     including

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     under the Subordinated Note Guaranty; (c) all indebtedness, obligations and
     liabilities owed by the Obligors (or any of them) to the Agent or the
     Lenders under any other agreement or arrangement now or hereafter entered
     into between the Obligors (or any of them), on the one hand, and the Agent
     or the Lenders, on the other hand, provided that such agreement or
     arrangement relates to the transactions contemplated by the Subordinated
     Note Documents; and (d) indebtedness, obligations and liabilities incurred
     by, or imposed on, the Agent or the Lenders as a result of environmental
     claims relating to any Obligor's operations, premises or waste disposal
     practices or disposal sites with respect to any Owned Real Estate on which
     an Obligor has granted the Agent a mortgage.

          "Other Collateral" means all of each Obligor's: (a) present and
     hereafter established lockbox, blocked account and other deposit accounts
     maintained with any bank or financial institution into which the proceeds
     of Collateral are or may be deposited (including the Depository Accounts);
     (b) cash and other monies and property in the possession or control of the
     Agent or any of the Lenders or the Senior Creditor, as agent for the
     Lenders (including negative balances in the "Revolving Loan Account" under
     the Senior Credit Agreement and cash collateral held by the Senior Creditor
     pursuant to the Senior Credit Agreement); (c) books, records, ledger cards,
     disks and related data processing software at any time evidencing or
     containing information relating to any of the Collateral described herein
     or otherwise necessary or helpful in the collection thereof or realization
     thereon; and (d) all Proceeds of any of the foregoing.

          "Out-of-Pocket Expenses" means all of the Agent's and the Lenders'
     present and future costs, fees and expenses actually incurred in connection
     with the Subordinated Note Documents, including, without limitation, (a)
     the cost of lien searches (including tax lien and judgment lien searches),
     pending litigation searches and similar items (unless copies of those
     obtained by or for the Senior Creditor are furnished to the Agent), (b)
     fees and taxes imposed in connection with the filing of any additional
     financing statements or other personal property security documents; (c)
     note taxes, intangible taxes and mortgage or recording taxes and fees; (d)
     all costs that the Agent or the Lender may incur to maintain the Required
     Insurance, and all reasonable costs, fees and expenses incurred by the
     Agent or the Lenders in connection with the collection of Casualty Proceeds
     and the monitoring of any repair or restoration of any Real Estate; (e) all
     reasonable costs, fees, expenses and disbursements of outside counsel hired
     by the Agent and the Lenders to consummate the transactions contemplated by
     this Financing Agreement (including the documentation and negotiation of
     the Subordinated Note Documents and all amendments, supplements and
     restatements thereto or thereof), and to advise the Agent and the Lenders
     as to matters relating to the transactions contemplated hereby; (f) all
     costs, fees and expenses incurred by the Agent or the Lenders in connection
     with any action taken under Section 5 hereof; and (g) without duplication,
     all costs, fees and expenses incurred by the Agent or the Lenders in
     connection with the collection, liquidation, enforcement, protection and
     defense of the Obligations, the Collateral and the Agent's and the Lenders'
     rights under the Subordinated Note Documents, including, without
     limitation, all reasonable fees and disbursements of in-house and outside
     counsel to the Agent and the Lenders incurred as a result of a workout,
     restructuring, reorganization, liquidation, insolvency proceeding and in
     any appeals arising therefrom, whether incurred before, during or after the
     termination of the Subordinated Note Documents or the commencement of any
     case with respect to the Obligors (or any of

                                       4

<PAGE>

     them) or any subsidiary of an Obligor (as the case may be) under the United
     States Bankruptcy Code or any similar statute.

          "Owned Real Estate" has the meaning set forth in the definition of
     "Real Estate".

          "Patents" means all of the Obligors' present and hereafter acquired
     patents, patent applications, registrations, all reissues and renewals
     thereof, all licenses thereof, all inventions and improvements claimed
     thereunder, all general intangible, intellectual property and other rights
     of any Obligor with respect thereto, and all income, royalties and other
     Proceeds of the foregoing.

          "Payoff Letter" means the letter dated as of July 11, 2006, from the
     Agent (in its capacity as "Agent" and "Collateral Agent") under the
     Existing Documents) to the Obligors and the Senior Creditor.

          "Permitted Encumbrances" means: (a) all liens existing on the date
     hereof on specific items of Equipment; (b) Purchase Money Liens; (c)
     statutory liens of landlords and liens of carriers, warehousemen, bailees,
     mechanics, materialmen and other like liens imposed by law, created in the
     ordinary course of business and securing amounts not yet due (or which are
     being contested in good faith, by appropriate proceedings or other
     appropriate actions which are sufficient to prevent imminent foreclosure of
     such liens), and with respect to which adequate reserves or other
     appropriate provisions are being maintained by the Obligors in accordance
     with GAAP; (d) deposits made (and the liens thereon) in the ordinary course
     of business of any Obligor (including, without limitation, security
     deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
     connection with workers' compensation, unemployment insurance and other
     types of social security benefits or to secure the performance of tenders,
     bids, contracts (other than for the repayment or guarantee of borrowed
     money or purchase money obligations), statutory obligations and other
     similar obligations arising as a result of progress payments under
     government contracts; (e) liens granted to the Senior Creditor pursuant to
     the Senior Credit Agreement; (f) liens of judgment creditors, provided that
     such liens do not exceed $50,000 in the aggregate at any time (other than
     liens bonded or insured to the reasonable satisfaction of the Senior
     Creditor); (g) Permitted Tax Liens; (h) liens granted to the Agent
     hereunder; and (i) easements (including, without limitation, reciprocal
     easement agreements and utility agreements), encroachments, minor defects
     or irregularities in title, variation and other restrictions, charges or
     encumbrances (whether or not recorded) affecting the Real Estate, if
     applicable, and which in the aggregate (i) do not materially interfere with
     the occupation, use or enjoyment by any Obligor of its business or property
     so encumbered and (ii) do not materially and adversely affect the value of
     such Real Estate.

          "Permitted Tax Liens" means liens for Taxes not due and payable and
     liens for Taxes that any Obligor is contesting in good faith, by
     appropriate proceedings which are sufficient to prevent imminent
     foreclosure of such liens, and with respect to which adequate reserves are
     being maintained by such Obligor in accordance with GAAP; provided that in
     either case, such liens (a) are not filed of record in any public office,
     (b) other than with respect to Real Estate, are not senior in priority to
     the liens granted by any of such Obligors to the Agent, or (c) do not
     secure taxes owed to the United States of

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     America (or any department or agency thereof) or any State or State
     authority, if applicable State law provides for the priority of tax liens
     in a manner similar to the laws of the United States of America.

          "Proceeds" has the meaning given to such term in the UCC, including,
     without limitation, all Casualty Proceeds.

          "Purchase Money Liens" means liens on any item of Equipment acquired
     by an Obligor after the date hereof, provided that (a) each such lien shall
     attach only to the Equipment acquired, (b) a description of the Equipment
     so acquired is furnished by the Obligors to the Agent, and (c) the
     indebtedness incurred by the Obligors in connection with such acquisitions
     shall not exceed $50,000 in the aggregate in any fiscal year of the
     Obligors.

          "Real Estate" means all of the Obligors' present and future fee and
     leasehold interests in real property, including the real property owned by
     Weavers as of the date hereof and described on Schedule A attached hereto
     that will be subjected to a mortgage or deed of trust in favor of the
     Agent, subject to the prior mortgage in favor of the Senior Creditor (the
     "Owned Real Estate").

          "Replacement Facility" means any secured credit facility that the
     Maker may obtain in the future in replacement of the facility provided by
     The CIT Group/Commercial Services, Inc. pursuant to the initial Senior
     Credit Agreement, whether or not such facility is obtained on the date of
     termination of the initial Senior Credit Agreement with The CIT
     Group/Commercial Services, Inc. and payment in full of the obligations
     thereunder or at a later date, which shall enjoy the benefits of a
     Replacement Subordination Agreement.

          "Replacement Subordination Agreement" means a subordination agreement
     relating to a Replacement Facility to be executed and delivered by the
     Lenders on substantially similar terms and conditions as the initial
     Subordination Agreement.

          "Required Insurance" has the meaning provided for in Section 3.10
     hereof.

          "Senior Credit Agreement" means the Financing Agreement dated as of
     even date herewith among the Obligors, as Borrowers and the Senior
     Creditor, as it may from time to time after the date hereof be amended,
     restated, supplemented, extended, renewed, replaced or otherwise modified
     in compliance with the terms of this Agreement, including any credit
     agreement for a Replacement Facility.

          "Senior Creditor" means (i) The CIT Group/Commercial Services, Inc.,
     as the Senior Creditor under the Subordination Agreement, and its
     successors and assigns in such capacity, and (ii) any senior creditor (or
     agent for senior creditors) under any Replacement Facility.

          "Subordinated Notes" means the Subordinated Secured Promissory Notes
     of even date herewith in the aggregate amount of $4,000,000 issued by the
     Maker to the Lenders and all notes issued in substitution or replacement
     thereof, as any of the foregoing may

                                       6

<PAGE>

     from time to time be amended, restated, supplemented or otherwise modified
     in compliance with the terms of the Subordination Agreement.

          "Subordinated Note Documents" means the Subordinated Notes, the
     Subordinated Note Guaranty, the Contribution Agreement, this Security
     Agreement and the mortgage referred to in Section 2.1(j) hereof.

          "Subordinated Note Guaranty" means the Guaranty Agreement of even date
     herewith, executed and delivered by the Guarantors in favor of the Agent,
     for the ratable benefit of the Lenders, unconditionally and jointly and
     severally guaranteeing payment of the Subordinated Notes and the other
     Obligations.

          "Subordination Agreement" means (i) the Subordination Agreement of
     even date herewith by and among the Lenders, as "Subordinated Creditors",
     and The CIT Group/Commercial Services, Inc., as the Senior Creditor under
     the Subordination Agreement, and (ii) any Replacement Subordination
     Agreement.

          "Taxes" means all federal, state, municipal and other governmental
     taxes, levies, charges, claims and assessments which are or may be owed or
     collected by the Obligors with respect to their business, operations,
     Collateral or otherwise.

          "Trade Accounts Receivable" means that portion of each Obligor's
     Accounts which arises from the sale of Inventory or the rendition of
     services in the ordinary course of such Obligor's business. For the
     avoidance of doubt, after a Trade Account Receivable has become a Factored
     Account, it is no longer a Trade Account Receivable.

          "Trademarks" means all of the Obligors' present and hereafter acquired
     trademarks, trademark registrations, recordings, applications, tradenames,
     trade styles, corporate names, business names, service marks, logos and any
     other designs or sources of business identities, prints and labels (on
     which any of the foregoing may appear), all reissues and renewals thereof,
     all licenses thereof, all other general intangible, intellectual property
     and other rights pertaining to any of the foregoing, together with the
     goodwill associated therewith, and all income, royalties and other Proceeds
     of any of the foregoing.

          "UCC" means the Uniform Commercial Code as the same may be amended and
     in effect from time to time in the State of New York.

          "Weavers" means Churchill Weavers, Inc.

     2. Conditions Precedent to Termination of Existing Documents. The
     obligation of the Lenders to terminate the Existing Documents and accept
     payment of amounts specified in the Payoff Letter in cash, together with
     the Subordinated Notes, is subject to the satisfaction or waiver in writing
     by the Agent of the following conditions precedent:

          (a) Lien Searches. The Agent shall have received tax lien, judgment
     lien and Uniform Commercial Code searches from all jurisdictions reasonably
     required by the Agent, and such searches shall verify that the Agent has a
     second (by virtue of the

                                       7

<PAGE>

     Subordination Agreement) priority security interest in the Collateral,
     subject to Permitted Encumbrances. Copies of those obtained by or for the
     Senior Creditor will be acceptable.

          (b) Casualty Insurance. Each Obligor shall have delivered to the Agent
     evidence satisfactory to the Agent that all Required Insurance is in full
     force and effect, and the Agent shall have confirmed that the Agent and the
     Lenders, as appropriate, have been named as loss payee or additional
     insured with respect to the Required Insurance in a manner satisfactory to
     the Agent.

          (c) UCC Filings. The Obligors acknowledge and agree that the Agent and
     the Lenders shall rely on existing UCC filings made in connection with the
     Existing Documents to perfect the security interest granted pursuant
     hereto.

          (d) Resolutions. The Agent shall have received a copy of the
     resolutions of the Board of Directors of each Obligor authorizing the
     execution, delivery and performance of the Subordinated Note Documents to
     be executed by each Obligor, certified by the Secretary or Assistant
     Secretary of each Obligor as of the date hereof, together with a
     certificate of such Secretary or Assistant Secretary as to the incumbency
     and signature of the officer(s) executing the Subordinated Note Documents
     on behalf of each Obligor.

          (e) Organizational Documents. The Agent shall have received a copy of
     the Certificate or Articles of Incorporation of each Obligor, certified by
     the applicable authority in each Obligor's State of incorporation, and
     copies of the by-laws (as amended through the date hereof) of each Obligor,
     certified by the respective Secretary or an Assistant Secretary thereof.

          (f) Officer's Certificate. The Agent shall have received an executed
     Officer's Certificate of each Obligor, satisfactory in form and substance
     to the Agent, certifying that as of the date hereof, (i) the
     representations and warranties contained herein are true and correct in all
     material respects, (ii) each Obligor is in compliance with all of the terms
     and provisions set forth herein and (iii) no Event of Default has occurred.

          (g) Subordinated Note Documents. Receipt by the Agent, for the ratable
     benefit of the Lenders, of the Subordinated Note Documents, duly executed
     and delivered by the Obligors party thereto.

          (h) Depository Accounts. (i) The Obligors or the Senior Creditor shall
     have established one or more Depository Accounts with respect to the
     collection of Trade Accounts Receivable and the deposit of proceeds of
     Collateral, and (ii), unless any such Depository Account is established
     with the Agent, except with respect to the Kentucky Depository Account (as
     defined in Section 3.6 below), the Agent, the Senior Creditor (as
     applicable), the applicable Obligor and each depository bank shall have
     entered into a Depository Account Control Agreement with respect to such
     Depository Account.

          (i) Legal Restraints/Litigation. As of the date hereof, there shall be
     no (x) injunction, writ or restraining order restraining or prohibiting the
     execution, delivery and performance of the Subordinated Note Documents, or
     (y) suit, action, investigation or

                                       8

<PAGE>

     proceeding (judicial or administrative) pending against any Obligor, any
     subsidiary of any Obligor or any of their assets, which, in the good faith
     opinion of the Agent, if adversely determined, could reasonably be expected
     to have a material adverse effect on either (i) the business, condition
     (financial or otherwise), operations, performance, properties or prospects
     of any Obligor, (ii) the ability of any Obligor to perform its obligations
     under the Subordinated Note Documents, (iii) the value of the Collateral or
     (iv) the ability of the Agent or the Lenders to enforce the Obligations or
     the rights and remedies of the Agent or the Lenders under the Subordinated
     Note Documents.

          (j) Mortgages. Weavers shall have executed and delivered to the Agent
     executed mortgages and deeds of trust in form and substance satisfactory to
     the Agent covering the Owned Real Estate.

     3. Collateral.

     3.1 Grant of Security Interest. (a) As security for the prompt payment in
full of all Obligations, each Obligor hereby pledges and grants to the Agent,
for the ratable account of the Lenders, a continuing general lien upon, and
security interest in, all of the Collateral in which such Obligor has rights.

     (b) Extent of Security Interests. The security interests granted hereunder
shall extend and attach to:

     (i) all Collateral which is presently in existence or hereafter acquired
and which is owned by any Obligor or in which any Obligor has any interest,
whether held by such Obligor or by others for such Obligor's account, and
wherever located, and, if any Collateral is Equipment, whether such Obligor's
interest in such Equipment is as owner, lessee or conditional vendee;

     (ii) all Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with, or attached to, the Equipment; and

     (iii) all Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Obligors from the
Obligors' customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Obligors, or to the sale, promotion or
shipment thereof.

     3.2 Limited License. Regardless of whether the Agent's security interests
in any of the General Intangibles has attached or is perfected, each Obligor
hereby irrevocably grants to the Agent a royalty-free, non-exclusive license to
use such Obligor's Trademarks, Copyrights, Patents and other proprietary and
intellectual property rights, in connection with the (i) advertisement for sale,
and the sale or other disposition of, any finished goods Inventory by the Agent
in accordance with the provisions of this Financing Agreement, and (ii) the
manufacture, assembly, completion and preparation for sale of any unfinished
Inventory by the Agent in accordance with the provisions of this Financing
Agreement.

                                       9

<PAGE>

     3.3 Representations and Warranties Regarding Collateral Generally. The
Obligors represent and warrant to the Agent that except for the Permitted
Encumbrances, (i) the UCC financing statements filed in connection with the
Existing Documents, together with this Security Agreement, create a valid,
perfected, second priority (subject to the security interests of the Senior
Creditor) security interest in all personal property of the Obligors as to which
perfection may be achieved by filing, (ii) the Agent's security interests in the
Collateral constitute, and will at all times constitute second priority (subject
to the security interests of the Senior Creditor) liens on the Collateral, and
(iii) each Obligor is, or will be at the time additional Collateral is acquired
by such Obligor, the absolute owner of such additional Collateral with full
right to pledge, sell, transfer and create a security interest therein, free and
clear of any and all claims or liens other than Permitted Encumbrances.

     3.4 Covenants and Agreements Regarding Trade Accounts Receivable and
Inventory. Each Obligor agrees to maintain such books and records regarding
Trade Accounts Receivable and Inventory as the Agent reasonably may require and
agrees that the books and records of such Obligor will reflect the Agent's
interest in the Trade Accounts Receivable and Inventory. In support of the
continuing assignment and security interest of the Agent in the Trade Accounts
Receivable and Inventory, the Obligors agree to deliver to the Agent, upon
request, all of the schedules, reports and other information described in
Section 7.2(g) of the Senior Credit Agreement (or any similar provision in any
Replacement Facility). The Obligors' failure to maintain their books in the
manner provided herein or to deliver to the Agent any of the foregoing
information shall in no way affect, diminish, modify or otherwise limit the
security interests granted to the Agent in the Trade Accounts Receivable and
Inventory.

     3.5 General Intangibles. Each Obligor represents and warrants to the Agent
that as of the date hereof, such Obligor possesses all General Intangibles
necessary to conduct its business as presently conducted. Each Obligor agrees to
maintain such Obligor's rights in, and the value of, all such General
Intangibles, and to pay when due all payments required to maintain in effect any
licensed rights. The Obligors shall provide the Agent with adequate notice of
the acquisition of rights with respect to any additional Patents, Trademarks and
Copyrights so that the Agent may, to the extent permitted under the
documentation granting such rights or applicable law, perfect its security
interest in such rights in a timely manner.

     3.6 Depository Accounts. If at any time a Depository Account is established
with a bank or other depository institution other than the Agent, the Obligors
will promptly execute and deliver to the Agent a Depository Account Control
Agreement with respect to such Depository Account; provided, however, with
respect to the Depository Account held at the People's Bank of Kentucky
("Kentucky Depository Account"), the Obligors shall within ninety (90) days of
the date hereof either (i) deliver to the Agent a Depository Account Control
Agreement or (ii) close such Depository Account.

     3.7 Reference to Other Subordinated Debt Documents. Reference is hereby
made to the other Subordinated Debt Documents for additional representations,
covenants and other agreements of the Obligors regarding the Collateral covered
by such Subordinated Debt Documents.

                                       10

<PAGE>

     3.8 Credit Balances; Additional Collateral.

     (a) The rights and security interests granted to the Agent hereunder shall
continue in full force and effect until the termination of this Security
Agreement and the full and final payment and satisfaction of the Obligations.
Any other property or assets of the Obligors (or any of them) in the possession
of the Agent may be held by the Agent as Other Collateral, and applied in whole
or partial satisfaction of such Obligations when due, subject to the terms of
this Security Agreement and the Subordination Agreement. The liens and security
interests granted to the Agent herein and any other lien or security interest
which the Agent may have in any other assets of the Obligors secure payment and
performance of all present and future Obligations.

     (b) Notwithstanding the Agent's security interests in the Collateral, to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral, or by the guaranty, endorsement, assets or
property of any other person, subject to the Subordination Agreement, the Agent
shall have the right in its sole discretion to determine which rights, security,
liens, security interests or remedies the Agent shall at any time pursue,
foreclose upon, relinquish, subordinate, modify or take any other action with
respect to, without in any way modifying or affecting any of such rights,
security, liens, security interests or remedies, or any of the Agent's rights
under this Security Agreement.

     3.9 Further Assurances. Each Obligor agrees to comply with the requirements
of all state and federal laws in order to grant to the Agent valid and perfected
first priority security interests in the Collateral, subject only to the
Permitted Encumbrances. The Agent is hereby authorized by the Obligors to file
any financing statements, continuations and amendments covering the Collateral
without the Obligors' signatures in accordance with the provisions of the UCC.
The Obligors agree to do whatever the Agent reasonably may request from time to
time, by way of (i) filing notices of liens, financing statements, amendments,
renewals and continuations thereof, (ii) cooperating with the Agent's agents and
employees, (iii) keeping Collateral records, (iv) subject to the Subordination
Agreement, transferring proceeds of Collateral to the Agent's possession in
accordance with the terms hereof and (v) performing such further acts as the
Agent reasonably may require in order to effect the purposes of this Security
Agreement, including the execution of control agreements with respect to
Depository Accounts and Investment Property.

     3.10 Insurance. The Obligors agree to maintain insurance on all Real
Estate, Equipment and Inventory under such policies of insurance, with such
insurance companies, in such reasonable amounts and covering such insurable
risks as are at all times reasonably satisfactory to the Agent (the "Required
Insurance"). All policies covering the Real Estate, Equipment and Inventory are,
subject to the rights of any holder of a Permitted Encumbrance having priority
over the security interests of the Agent (including the Senior Creditor, and
subject to the Subordination Agreement), to be made payable solely to the Agent,
in case of loss, under a standard non-contributory "mortgagee", "secured party"
or "lender's loss payable" clause or endorsement, and are to contain such other
provisions as the Agent reasonably may require to fully protect the Agent's
interest in the Real Estate, Inventory and Equipment and to any payments to be
made under such policies. Each loss payable endorsement in favor of the Agent
shall provide (x) for not less than thirty (30) days prior written notice to the
Agent of the exercise of any right of cancellation and (y) that the Agent's
right to payment under any property insurance policy will not be invalidated by
any act or neglect of, or any breach of warranty or

                                       11

<PAGE>

condition by, the Obligors (or any of them) or any other party. If an Event of
Default shall have occurred and remain outstanding, the Agent, subject to the
rights of any holder of a Permitted Encumbrance having priority over the
security interests of the Agent (including the Senior Creditor, and subject to
the Subordination Agreement), shall have the sole right, in the name of the
Agent or the Obligors (or any of them), to file claims under any insurance
policies, to receive, receipt and give acquittances for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.

     4. Events of Default.

     The term "Event of Default" means (i) the occurrence of any "Change in
Control" or "Bankruptcy Event", as those terms are defined in the Subordinated
Notes (but the term "Bankruptcy Event" shall be deemed to refer to each Obligor
for purposes hereof), or (ii) any representation and warranty contained in any
of the Subordinated Debt Documents is untrue or misleading in any material
respect, or (iii) any material breach occurs under any of the Subordinated Note
Documents and is not cured within 30 days after receipt of notice from the Agent
of the existence thereof).

     5. Remedies.

          (a) General Remedies. Upon the occurrence of an Event of Default and
     during continuation thereof, but subject to the Subordination Agreement,
     the Agent and the Lenders shall have, in addition to the rights and
     remedies provided herein, in the Subordinated Note Documents or by law
     (including, but not limited to, levy of attachment, garnishment and the
     rights and remedies set forth in the Uniform Commercial Code of the
     jurisdiction applicable to the affected Collateral), the rights and
     remedies of a secured party under the UCC (regardless of whether the UCC is
     the law of the jurisdiction where the rights and remedies are asserted and
     regardless of whether the UCC applies to the affected Collateral), and
     further, the Agent may, with or without judicial process or the aid and
     assistance of others, (i) enter on any premises on which any of the
     Collateral may be located and, without resistance or interference by the
     Obligors, take possession of the Collateral, (ii) dispose of any Collateral
     on any such premises, (iii) require the Obligors to assemble and make
     available to the Agent at the expense of the Obligors any Collateral at any
     place and time designated by the Agent which is reasonably convenient to
     both parties, (iv) remove any Collateral from any such premises for the
     purpose of effecting sale or other disposition thereof, and/or (v) without
     demand and without advertisement, notice, hearing or process of law, all of
     which each of the Obligors hereby waives to the fullest extent permitted by
     law, at any place and time or times, sell and deliver any or all Collateral
     held by or for it at public or private sale, by one or more contracts, in
     one or more parcels, for cash, upon credit or otherwise, at such prices and
     upon such terms as the Agent deems advisable, in its sole discretion.
     Neither the Agent's compliance with any applicable state or federal law in
     the conduct of such sale, nor its disclaimer of any warranties relating to
     the Collateral shall be considered to affect the commercial reasonableness
     of such sale. In addition to all other sums due the Agent and the Lenders
     with respect to the Obligations, the Obligors shall pay the Agent and each
     of the Lenders all Out-of Pocket Expenses incurred by the Agent

                                       12

<PAGE>

     or any such Lender. To the extent the rights of notice cannot be legally
     waived hereunder, each Obligor agrees that any requirement of reasonable
     notice shall be met if such notice is personally served on or mailed,
     postage prepaid, to the Obligors in accordance with the notice provisions
     of the Subordinated Notes at least ten (10) days before the time of sale or
     other event giving rise to the requirement of such notice. The Agent and
     the Lenders shall not be obligated to make any sale or other disposition of
     the Collateral regardless of notice having been given. To the extent
     permitted by law, the Agent and any Lender may be a purchaser at any such
     sale. To the extent permitted by applicable law, each of the Obligors
     hereby waives all of its rights of redemption with respect to any such
     sale. Subject to the provisions of applicable law, the Agent and the
     Lenders may postpone or cause the postponement of the sale of all or any
     portion of the Collateral by announcement at the time and place of such
     sale, and such sale may, without further notice, to the extent permitted by
     law, be made at the time and place to which the sale was postponed, or the
     Agent and the Lenders may further postpone such sale by announcement made
     at such time and place.

          (b) Remedies Relating to Accounts. Upon the occurrence of an Event of
     Default and during the continuation thereof, whether or not the Agent has
     exercised any or all of its rights and remedies hereunder, subject to the
     Subordination Agreement, the Agent shall have the right to (i) enforce any
     Obligor's rights against any account debtors and obligors on such Obligor's
     Accounts (ii) notify (or cause its designee to notify) any Obligor's
     customers and account debtors that the Accounts of such Obligor have been
     assigned to the Agent or of the Agent's security interest therein, (iii)
     (either in its own name or in the name of an Obligor or both) demand,
     collect, receive, take receipt for, sell, sue for, compound, settle,
     compromise and give acquittance for any and all amounts due or to become
     due on any Account, and (iv) in the Agent's discretion, file any claim or
     take any other action or proceeding to protect and realize upon the
     security interest of the Agent in the Accounts. Each Obligor acknowledges
     and agrees that the Proceeds of its Accounts remitted to or on behalf of
     the Agent in accordance with the provisions hereof shall be solely for the
     Agent's own convenience and that such Obligor shall not have any right,
     title or interest in such Proceeds or in any such other amounts except as
     expressly provided herein. The Agent and the Lenders shall have no
     liability or responsibility to any Obligor for acceptance of a check, draft
     or other order for payment of money bearing the legend "payment in full" or
     words of similar import or any other restrictive legend or endorsement or
     be responsible for determining the correctness of any remittance. Each
     Obligor hereby agrees to indemnify the Agent and the Lenders from and
     against all liabilities, damages, losses, actions, claims, judgments,
     costs, expenses, charges and reasonable attorneys' fees suffered or
     incurred by the Agent or the Lenders (each, an "Indemnified Party") because
     of the maintenance of the foregoing arrangements except as relating to or
     arising out of the gross negligence or willful misconduct of an Indemnified
     Party or its officers, employees or agents. In the case of any
     investigation, litigation or other proceeding, the foregoing indemnity
     shall be effective whether or not such investigation, litigation or
     proceeding is brought by an Obligor, its directors, shareholders or
     creditors or an Indemnified Party or any other Person or any other
     Indemnified Party is otherwise a party thereto.

          (c) Access. In addition to the rights and remedies hereunder, upon the
     occurrence of an Event of Default and during the continuation thereof, the
     Agent shall

                                       13

<PAGE>

     have the right to enter and remain upon the various premises of the
     Obligors without cost or charge to the Agent, and use the same, together
     with materials, supplies, books and records of the Obligors for the purpose
     of collecting and liquidating the Collateral, or for preparing for sale and
     conducting the sale of the Collateral, whether by foreclosure, auction or
     otherwise. In addition, the Agent may remove Collateral, or any part
     thereof, from such premises and/or any records with respect thereto, in
     order to effectively collect or liquidate such Collateral. If the Agent
     exercises its right to take possession of the Collateral, each Obligor
     shall also at its expense perform any and all other steps reasonably
     requested by the Agent to preserve and protect the security interest hereby
     granted in the Collateral, such as placing and maintaining signs indicating
     the security interest of the Agent, appointing overseers for the Collateral
     and maintaining inventory records.

          (d) Nonexclusive Nature of Remedies. Failure by the Agent or the
     Lenders to exercise any right, remedy or option under this Security
     Agreement, any other Subordinated Note Document or as provided by law, or
     any delay by the Agent or the Lenders in exercising the same, shall not
     operate as a waiver of any such right, remedy or option. No waiver
     hereunder shall be effective unless it is in writing, signed by the party
     against whom such waiver is sought to be enforced and then only to the
     extent specifically stated, which in the case of the Agent or the Lenders
     shall only be granted as provided herein. To the extent permitted by law,
     neither the Agent, the Lenders, nor any party acting as attorney for the
     Agent or the Lenders, shall be liable hereunder for any acts or omissions
     or for any error of judgment or mistake of fact or law other than their
     gross negligence or willful misconduct hereunder. The rights and remedies
     of the Agent and the Lenders under this Security Agreement shall be
     cumulative and not exclusive of any other right or remedy which the Agent
     or the Lenders may have.

          (e) Retention of Collateral. The Agent may, subject to the
     Subordination Agreement and after providing the notices required by Section
     9-620 of the UCC or otherwise complying with the requirements of applicable
     law of the relevant jurisdiction, accept or retain the Collateral in full
     or partial satisfaction of the Obligations. Unless and until the Agent
     shall have provided such notices, however, the Agent shall not be deemed to
     have retained any Collateral in satisfaction of any Obligations for any
     reason.

          (f) Deficiency. In the event that the proceeds of any sale, collection
     or realization are insufficient to pay all amounts to which the Agent or
     the Lenders are legally entitled, the Obligors shall be jointly and
     severally liable for the deficiency, together with the related Out-of
     Pocket Expenses. Any surplus remaining after the full payment and
     satisfaction of the Obligations shall be returned to the Obligors or to
     whomsoever a court of competent jurisdiction shall determine to be entitled
     thereto.

          (g) Other Security. To the extent that any of the Obligations are now
     or hereafter secured by property other than the Collateral (including,
     without limitation, real and personal property owned by an Obligor), or by
     a guarantee, endorsement or property of any other Person, then the Agent
     and the Lenders shall have the right, subject to the Subordination
     Agreement, to proceed against such other property, guarantee or endorsement
     upon the occurrence of any Event of Default, and the Agent and the Lenders
     have the right, in their sole discretion, to determine which rights,
     security, liens, security

                                       14

<PAGE>

     interests or remedies the Agent and the Lenders shall at any time pursue,
     relinquish, subordinate, modify or take with respect thereto, without in
     any way modifying or affecting any of them or any of the Agent's and the
     Lenders' rights or the Obligations under this Security Agreement or under
     any other of the Subordinated Note Documents.

     6. Rights of the Agent.

          (a) Power of Attorney. Each Obligor hereby designates and appoints the
     Agent, on behalf of the Lenders, and each of its designees or agents as
     attorney-in-fact of such Obligor, irrevocably and with power of
     substitution, with authority to take any or all of the following actions
     upon the occurrence and during the continuation of an Event of Default,
     subject to the Subordination Agreement,:

               (i) to demand, collect, settle, compromise, adjust, give
          discharges and releases, all as the Agent may reasonably determine;

               (ii) to commence and prosecute any actions at any court for the
          purposes of collecting any Collateral and enforcing any other right in
          respect thereof;

               (iii) to defend, settle, adjust or compromise any action, suit or
          proceeding brought and, in connection therewith, give such discharge
          or release as the Agent may deem reasonably appropriate;

               (iv) to receive, open and dispose of mail addressed to an Obligor
          and endorse checks, notes, drafts, acceptances, money orders, bills of
          lading, warehouse receipts or other instruments or documents
          evidencing payment, shipment or storage of the goods giving rise to
          the Collateral of such Obligor, or securing or relating to such
          Collateral, on behalf of and in the name of such Obligor;

               (v) to sell, assign, transfer, make any agreement in respect of,
          or otherwise deal with or exercise rights in respect of, any
          Collateral or the goods or services which have given rise thereto, as
          fully and completely as though the Agent were the absolute owner
          thereof for all purposes;

               (vi) to adjust and settle claims under any insurance policy
          relating thereto;

               (vii) to execute and deliver all assignments, conveyances,
          statements, financing statements, renewal financing statements,
          security agreements, affidavits, notices and other agreements,
          instruments and documents that the Agent may determine necessary in
          order to perfect and maintain the security interests and liens granted
          in this Security Agreement and in order to fully consummate all of the
          transactions contemplated herein;

                                       15

<PAGE>

               (viii) to institute any foreclosure proceedings that the Agent
          may deem appropriate; and

               (ix) to do and perform all such other acts and things as the
          Agent may reasonably deem to be necessary, proper or convenient in
          connection with the Collateral.

     This power of attorney is a power coupled with an interest and shall be
     irrevocable until all Obligations have been satisfied. The Agent shall be
     under no duty to exercise or withhold the exercise of any of the rights,
     powers, privileges and options expressly or implicitly granted to the Agent
     in this Security Agreement, and shall not be liable for any failure to do
     so or any delay in doing so. The Agent shall not be liable for any act or
     omission or for any error of judgment or any mistake of fact or law in its
     individual capacity or its capacity as attorney-in-fact except acts or
     omissions resulting from its gross negligence or willful misconduct. This
     power of attorney is conferred on the Agent solely to protect, preserve and
     realize upon its security interest in the Collateral.

          (b) Assignment by the Agent. Subject to the terms of the Subordination
     Agreement and the consent of the Lenders, the Agent may from time to time
     assign the Secured Obligations and any portion thereof and/or the
     Collateral and any portion thereof, and the assignee shall be entitled to
     all of the rights and remedies of the Agent under this Security Agreement
     in relation thereto.

          (c) The Agent's Duty of Care. Other than the exercise of reasonable
     care to assure the safe custody of the Collateral while being held by the
     Agent hereunder, the Agent shall have no duty or liability to preserve
     rights pertaining thereto, it being understood and agreed that the Obligors
     shall be responsible for preservation of all rights in the Collateral, and
     the Agent shall be relieved of all responsibility for the Collateral upon
     surrendering it or tendering the surrender of it to the Obligors. The Agent
     shall be deemed to have exercised reasonable care in the custody and
     preservation of the Collateral in its possession if the Collateral is
     accorded treatment substantially equal to that which the Agent accords its
     own property, which shall be no less than the treatment employed by a
     reasonable and prudent agent in the industry, it being understood that the
     Agent shall not have responsibility for taking any necessary steps to
     preserve rights against any parties with respect to any of the Collateral.
     In the event of a public or private sale of Collateral pursuant to Section
     5 hereof, the Agent shall have no obligation to clean-up, repair or
     otherwise prepare the Collateral for sale.

     7. Costs of Counsel. If at any time hereafter, whether upon the occurrence
of an Event of Default or not, the Agent employs counsel to prepare or consider
amendments, waivers or consents with respect to this Security Agreement, or to
take action or make a response in or with respect to any legal or arbitral
proceeding relating to this Security Agreement or relating to the Collateral, or
to protect the Collateral or exercise any rights or remedies under this Security
Agreement or with respect to the Collateral, then the Obligors agree to promptly
pay upon demand any and all Out-of-Pocket Expenses incurred in connection
therewith, all of which costs and expenses shall constitute Obligations
hereunder.

                                       16

<PAGE>

     8. Continuing Agreement.

          (a) This Security Agreement shall be a continuing agreement in every
     respect and shall remain in full force and effect until terminated in
     writing by the Agent. Notwithstanding the foregoing all releases and
     indemnities provided hereunder shall survive termination of this Security
     Agreement.

          (b) This Security Agreement shall continue to be effective or be
     automatically reinstated, as the case may be, if at any time payment, in
     whole or in part, of any of the Secured Obligations is rescinded or must
     otherwise be restored or returned by the Agent or any Lender as a
     preference, fraudulent conveyance or otherwise under any bankruptcy,
     insolvency or similar law, all as though such payment had not been made;
     provided that in the event payment of all or any part of the Obligations is
     rescinded or must be restored or returned, all reasonable costs and
     expenses (including, without limitation, any reasonable legal fees and
     disbursements) incurred by the Agent or any Lender in defending and
     enforcing such reinstatement shall be deemed to be included as a part of
     the Obligations.

     9. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except in a writing executed by the Agent and the Obligors; provided,
however, that, notwithstanding any provision hereof to the contrary, this
Security Agreement shall terminate as to Weavers, which shall thereupon no
longer be bound hereby, immediately upon the occurrence of any of the following
transactions that is consented to by the Senior Creditor: (i) a sale of all or
substantially all of the stock of Weavers; (ii) a merger or other business
combination involving Weavers; or (iii) the liquidation of Weavers. The Agent
agrees to take such further actions and to execute such documents as the Maker
or Churchill may reasonably request in order to acknowledge and confirm the
termination of this Security Agreement with respect to Weavers pursuant to this
Section 9.

     10. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each of
the parties hereto, and their respective successors and assigns, and shall
inure, together with all rights and remedies of each of the parties hereto and
their respective permitted successors and assigns; provided, however, that none
of the Obligors may assign its rights or delegate its duties hereunder without
the prior written consent of each Lender. To the fullest extent permitted by
law, each Obligor hereby releases the Agent and each Lender, each of their
respective officers, employees and agents and each of their respective
successors and assigns, from any liability for any act or omission relating to
this Security Agreement or the Collateral, except for any liability arising from
the gross negligence or willful misconduct of the Agent or such Lender or their
respective officers, employees and agents.

     11. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 16 of the Subordinated
Notes (and the address set forth therein for the Maker shall constitute the
notice address for each of the other Obligors).

     12. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of

                                       17

<PAGE>

which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Security Agreement to produce or account for more than one
such counterpart.

     13. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning,
construction or interpretation of any provision of this Security Agreement.

     14. Governing Law; Waiver of Jury Trial, Submission to Jurisdiction and
Service of Process. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). EACH OBLIGOR AND THE AGENT EACH HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
SUBORDINATED NOTE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH
OBLIGOR HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN
NO EVENT WILL THE AGENT OR THE LENDERS BE LIABLE FOR LOST PROFITS OR OTHER
SPECIAL OR CONSEQUENTIAL DAMAGES.

     15. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.

     16. Entirety. This Security Agreement and the other Subordinated Note
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any correspondence relating to the Subordinated Note Documents or the
transactions contemplated herein and therein.

     17. Survival. All representations and warranties of the Obligors hereunder
shall survive the execution and delivery of this Security Agreement, the other
Subordinated Note Documents and the delivery of the Subordinated Notes.

     18. Marshalling. Neither the Agent nor any Lender shall be under any
obligation to marshal any assets in favor of any Obligor or any other Person or
against or in payment of any or all of the Obligations.

                  [remainder of page intentionally left blank]

                                       18

<PAGE>

     Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.

OBLIGORS:                               CROWN CRAFTS, INC.,
                                        a Delaware corporation

                                        By: /s/ E. Randall Chestunt
                                            ------------------------------------
                                        Name: E. Randall Chestunt
                                        Title: President & CEO

                                        CHURCHILL WEAVERS, INC.
                                        a Kentucky corporation

                                        By: /s/ E. Randall Chestunt
                                            ------------------------------------
                                        Name: E. Randall Chestunt
                                        Title: Vice President

                                        HAMCO, INC.
                                        a Louisiana corporation

                                        By: /s/ E. Randall Chestunt
                                            ------------------------------------
                                        Name: E. Randall Chestunt
                                        Title: President & CEO

                                        CROWN CRAFTS INFANT PRODUCTS, INC.
                                        a Delaware corporation

                                        By: /s/ E. Randall Chestunt
                                            ------------------------------------
                                        Name: E. Randall Chestunt
                                        Title:Vice President
<PAGE>

     Accepted and agreed to as of the date first above written.

                                        WACHOVIA BANK, NATIONAL ASSOCIATION,
                                        as Agent

                                        By: /s/ J. Patrick Moody
                                            ------------------------------------
                                        Name: J. Patrick Moody
                                        Title: Vice President

<PAGE>

                              APPOINTMENT OF AGENT

Each of the undersigned Lenders hereby appoints Wachovia Bank, National
Association, as the Agent for it under each of the Subordinated Note Documents,
and hereby agrees to indemnify the Agent from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges and
reasonable attorneys' fees suffered or incurred by the Agent because of the
maintenance of the foregoing arrangements except as relating to or arising out
of its gross negligence or willful misconduct or its officers, employees or
agents.

LENDERS:                                WACHOVIA BANK, NATIONAL ASSOCIATION

                                        By: /s/ J. Patrick Moody
                                            ------------------------------------
                                        Name: J. Patrick Moody
                                        Title: Vice President

                                        BANC OF AMERICA STRATEGIC SOLUTIONS,
                                        INC.

                                        By: /s/ Kevin M. Behan
                                            ------------------------------------
                                        Name: Kevin M. Behan
                                        Title: Senior Vice President

                                        THE PRUDENTIAL INSURANCE COMPANY OF
                                        AMERICA

                                        By: /s/ Billy Greer
                                            ------------------------------------
                                        Name: Billy Greer
                                        Title: Sr. Vice President

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