Exhibit
      10.3

     

    THIS
      AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO THE FEDERAL ARBITRATION ACT
      AND
      IF THE FEDERAL ARBITRATION ACT IS INAPPLICABLE, THE SOUTH CAROLINA UNIFORM
      ARBITRATION ACT, § 15-48-10, ET. SEQ., CODE OF LAWS OF SOUTH CAROLINA (1976), AS
      AMENDED.


     

    
      	 STATE OF SOUTH CAROLINA	  ) 	 
	 COUNTY OF GREENVILLE	  )	 NEGATIVE
              PLEDGE AGREEMENT


    

     

    THIS
      NEGATIVE PLEDGE AGREEMENT (“Negative
      Pledge”)
      is
      entered into this 5th
      day of
      June, 2007, by Span-America
      Medical Systems, Inc.
      (“Borrower”)
      to
      Carolina First Bank ("Bank").

    


    Statement
      of Purpose.
      Simultaneously with the execution of this Negative Pledge, Borrower and Bank
      have entered into a Loan Agreement (“Loan
      Agreement”)
      to
      provide, inter alia,
      to the
      Borrower a revolving line of credit loan in the amount of Ten Million and no/100
      Dollars ($10,000,000.00) (the "Loan")
      upon
      the terms and conditions more particularly described therein. As a condition
      precedent to the making of the Loan, the Bank has required Borrower to provide
      the pledge, promises, and assurances more particularly set forth
      hereinbelow.

    


    Agreement.
      In
      consideration of the foregoing premises, and for other good and valuable
      consideration, the legal sufficiency of which are hereby acknowledged, Borrower
      hereby (i) represents and warrants to the Bank that, as of the date hereof,
      it
      has not pledged, granted any security interests in, transferred, leased,
      mortgaged, assigned, abandoned or otherwise disposed of any material part of
      its
      assets (including promissory notes and mortgages), whether consensual or
      otherwise, whether real or personal, except those in favor of lenders on a
      purchase money security interest basis or those previously released or otherwise
      disclosed to Bank in writing prior to the date hereof; (ii) covenants and agrees
      with the Bank that it shall not (A) pledge, grant any security interest in,
      or
      mortgage (except for granting Permitted Liens as defined in the Loan Agreement),
      or (B) except in the transfer of inventory in the ordinary course of business,
      transfer, lease, assign, abandon or otherwise dispose of, any of its right,
      title, and interest in and to any material part of its assets (including
      promissory notes and mortgages), whether real, personal or otherwise, whether
      now owned or hereafter acquired to any other party, for so long as any
      obligations are owed to the Bank in connection with the Loan or any commitment
      to lend shall exist under the Loan, without the prior written consent of Bank,
      and (iii) covenants and agrees with Bank that, upon the occurrence of an Event
      of Default (as defined in the Loan Agreement) under the Loan and the request
      of
      Bank, Borrower shall grant to Bank a first-priority, perfected security interest
      in and to all of Borrower's Accounts, Instruments, and Chattel Paper (as defined
      in the South Carolina Uniform Commercial Code), or if such security interest
      has
      already been granted take such steps as are commercially reasonable to perfect
      it in a manner senior to all other creditors other than creditors holding
      Permitted Liens as defined in the Loan Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Arbitration.
      This
      Negative Pledge shall be subject to arbitration under the terms and conditions
      provided in the Loan Agreement.

    


    This
      Negative Pledge is executed to be effective as of the date first written
      above.

     

    
      	 WITNESSES: 	 	 	 SPAN-AMERICA
              MEDICAL SYSTEMS, INC.
	 	 	 	 
	 	 	 	 
	/s/
              Deborah S.
              Crain	 	 By:
              	/s/ Richard
              C. Coggins  (Seal)
	
              

            	 	 	
              
Its:
              Chief
              Financial Officer
	/s/ Brenda L. H. Russell	 	 	
            
	
              

            	 	 	 


    

     

    
      	STATE OF SOUTH CAROLINA 	  ) 	 
	 	 	 ACKNOWLEDGMENT
	 COUNTY OF GREENVILLE	  )	
            


    

     

    I,
      the
      undersigned, a Notary Public, do hereby certify that Span-America
      Medical Systems, Inc. by
      Richard
      Coggins  its
      duly authorized CFO, personally
      appeared before me this day and acknowledged the due execution of the foregoing
      instrument.

     

    Witness
      my hand and seal, this 5th
      day
      of
      June, 2007.

    
      	 	 	 
	
            	
            	 /s/
              Kathy W.
              Young                                        
	 
              
              (Seal)  

            	
              
                

              

               Notary
                Public for South Carolina

              My Commission Expires:    01-05-2014