Document:

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                                                                    EXHIBIT 10.2

                             STOCK PLEDGE AGREEMENT

      THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as
of July 11, 2005 among CROWN CRAFTS, INC., a Delaware corporation (the
"Company"), the subsidiaries of the Company identified on the signature pages
hereto and such other subsidiaries of the Company as may from time to time
become party hereto (the "Subsidiary Borrowers") (hereinafter, the Company and
the Subsidiary Borrowers are collectively referred to as the "Pledgors" and,
individually, as a "Pledgor") and THE CIT GROUP/COMMERCIAL SERVICES, INC. (the
"Lender").

                                    RECITALS

      WHEREAS, pursuant to that certain Financing Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Financing Agreement"), among the Company, the Subsidiary Borrowers and the
Lender, the Lender has agreed to make Revolving Loans and to cause Letters of
Credit to be issued upon the terms and subject to the conditions set forth
therein; and

      WHEREAS, it is a condition precedent to the effectiveness of the Financing
Agreement and the obligations of the Lender to make the Revolving Loans and
cause Letters of Credit to be issued under the Financing Agreement that the
Pledgors shall have executed and delivered this Pledge Agreement in favor of the
Lender.

      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. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Financing
Agreement.

      2. Pledge and Grant of Security Interest. To secure the prompt payment and
performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Lender, and grants to the Lender, a continuing
security interest in any and all right, title and interest of such Pledgor in
and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Pledged Collateral"):

            (a) Pledged Capital Stock. (i) 100% of the issued and outstanding
      capital stock of each domestic subsidiary set forth on Schedule 2(a)
      attached hereto and (ii) 65% of the issued and outstanding capital stock
      entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
      ("Voting Equity") and 100% of the issued and outstanding capital stock not
      entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
      ("Non-Voting Equity") of each foreign subsidiary set forth on Schedule
      2(a) attached hereto, in each case together with the certificates (or
      other agreements or instruments), if any, representing such capital stock,
      and all options and other rights, contractual or otherwise, with respect
      thereto (collectively, together with the capital stock described in
      Section 2(b) and 2(c) below, the "Pledged Capital Stock"), including, but
      not limited to, the following:

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                  (y) subject to the percentage restrictions described above,
            all shares, securities, membership interests or other equity
            interests representing a dividend on any of the Pledged Capital
            Stock, or representing a distribution or return of capital upon or
            in respect of the Pledged Capital Stock, or resulting from a stock
            split, revision, reclassification or other exchange therefor, and
            any subscriptions, warrants, rights or options issued to the holder
            of, or otherwise in respect of, the Pledged Capital Stock; and

                  (z) without affecting the obligations of the Pledgors under
            any provision prohibiting such action hereunder or under the
            Financing Agreement, in the event of any consolidation or merger
            involving the issuer of any Pledged Capital Stock and in which such
            issuer is not the surviving entity, all shares (or other interests)
            of each class of the capital stock of the successor entity formed by
            or resulting from such consolidation or merger.

            (b) Additional Interests. (i) 100% (or, if less, the full amount
      owned by such Pledgor) of the issued and outstanding capital stock of any
      Person which hereafter becomes a domestic subsidiary and (ii) 65% (or, if
      less, the full amount owned by such Pledgor) of the Voting Equity and 100%
      (or, if less, the full amount owned by such Pledgor) of the Non-Voting
      Equity of any Person which hereafter becomes a foreign subsidiary, in each
      case together with the certificates (or other agreements or instruments),
      if any, representing such capital stock.

            (c) Other Equity Interests. Subject to the percentage restrictions
      described above, any and all other capital stock owned by any Pledgor in
      any domestic subsidiary or any foreign subsidiary.

            (d) Proceeds. All proceeds and products of the foregoing, however
      and whenever acquired and in whatever form.

      Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional shares of stock (or other interests) to the Lender
as collateral security for the Pledgor Obligations. Upon delivery to the Lender,
such additional shares of stock (or other interests) shall be deemed to be part
of the Pledged Collateral of such Pledgor and shall be subject to the terms of
this Pledge Agreement whether or not Schedule 2(a) is amended to refer to such
additional shares (or other interests).

      3. Security for Pledgor Obligations. The security interest created hereby
in the Pledged Collateral of each Pledgor constitutes continuing collateral
security for all of the following, whether now existing or hereafter incurred
(the "Pledgor Obligations"):

            (a) all Obligations; and

            (b) all expenses and charges, legal and otherwise, incurred by the
      Lender in collecting or enforcing any of the Obligations or in realizing
      on or protecting any security therefor, including without limitation the
      security afforded hereunder.

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      4. Delivery of the Pledged Collateral; Perfection of Security Interest.
Each Pledgor hereby agrees that:

            (a) Delivery of Certificates. Each Pledgor shall deliver to the
      Lender (i) simultaneously with or prior to the execution and delivery of
      this Pledge Agreement, all certificates representing the Pledged Capital
      Stock of such Pledgor and (ii) promptly upon the receipt thereof by or on
      behalf of a Pledgor, all other certificates and instruments constituting
      Pledged Collateral of a Pledgor. Prior to delivery to the Lender, all such
      certificates and instruments constituting Pledged Collateral of a Pledgor
      shall be held in trust by such Pledgor for the benefit of the Lender
      pursuant hereto. All such certificates shall be delivered in suitable form
      for transfer by delivery or shall be accompanied by duly executed
      instruments of transfer or assignment in blank, substantially in the form
      provided in Exhibit 4(a) attached hereto.

            (b) Additional Securities. If such Pledgor shall receive by virtue
      of its being or having been the owner of any Pledged Collateral, any (i)
      certificate, including without limitation, any certificate representing a
      dividend or distribution in connection with any increase or reduction of
      capital, reclassification, merger, consolidation, sale of assets,
      combination of shares or membership or equity interests, stock splits,
      spin-off or split-off, promissory notes or other instrument; (ii) option
      or right, whether as an addition to, substitution for, or an exchange for,
      any Pledged Collateral or otherwise; (iii) dividends payable in
      securities; or (iv) distributions of securities or other equity interests
      in connection with a partial or total liquidation, dissolution or
      reduction of capital, capital surplus or paid-in surplus, then such
      Pledgor shall receive such certificate, instrument, option, right or
      distribution in trust for the benefit of the Lender, shall segregate it
      from such Pledgor's other property and shall deliver it forthwith to the
      Lender in the exact form received together with any necessary endorsement
      and/or appropriate stock power duly executed in blank, substantially in
      the form provided in Exhibit 4(a), to be held by the Lender as Pledged
      Collateral and as further collateral security for the Pledgor Obligations.

      5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Lender that so long as any of the Pledgor Obligations remain
outstanding or any Loan Document is in effect or any Letter of Credit shall
remain outstanding:

            (a) Authorization of Pledged Capital Stock. The Pledged Capital
      Stock is duly authorized and validly issued, fully paid and non assessable
      and is not subject to the preemptive rights of any Person. All other
      shares of capital stock constituting Pledged Collateral will be duly
      authorized and validly issued, fully paid and nonassessable and not
      subject to the preemptive rights of any Person.

            (b) Title. Each Pledgor has good and indefeasible title to the
      Pledged Collateral of such Pledgor and will at all times be the legal and
      beneficial owner of such Pledged Collateral free and clear of any lien.
      There exists no "adverse claim" within the meaning of Section 8-105 of the
      Uniform Commercial Code as in effect in the State of North Carolina (the
      "UCC") with respect to the Pledged Capital Stock of such Pledgor.

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            (c) Exercising of Rights. The exercise by the Lender of its rights
      and remedies hereunder will not violate any law or governmental regulation
      or any material contractual restriction binding on or affecting a Pledgor
      or any of its property.

            (d) Pledgor's Authority. No authorization, approval or action by,
      and no notice or filing with any Governmental Authority, the issuer of any
      Pledged Capital Stock or third party is required either (i) for the pledge
      made by a Pledgor or for the granting of the security interest by a
      Pledgor pursuant to this Pledge Agreement or (ii) for the exercise by the
      Lender of its rights and remedies hereunder (except as may be required by
      laws affecting the offering and sale of securities).

            (e) Security Interest/Priority. This Pledge Agreement creates a
      valid security interest in favor of the Lender in the Pledged Collateral.
      The taking possession by the Lender of any certificates representing
      Pledged Capital Stock and all other certificates and instruments
      constituting Pledged Collateral will perfect and establish the first
      priority of the Lender's security interest in such Pledged Capital Stock
      and such certificates and instruments. Upon obtaining control (as defined
      in Section 8-106 of the UCC) of any Pledged Capital Stock consisting of
      uncertificated securities or securities entitlements pursuant to a control
      agreement between the Lender and the issuer of such uncertificated
      securities or the securities intermediary, as applicable, or upon filing
      financing statements in the appropriate jurisdictions, the Lender will
      acquire a first priority, perfected security interest in such Pledged
      Capital Stock. Except as set forth in this Section 5(e), no action is
      necessary to perfect or otherwise protect such security interest.

            (f) No Other Capital Stock. Except as set forth on Schedule 2(a)
      attached hereto, no Pledgor owns any capital stock of the Company or any
      of its Subsidiaries as of the date hereof.

            (g) Partnership and Limited Liability Company Interests. Except as
      previously disclosed to the Lender, none of the Pledged Capital Stock
      consisting of partnership or limited liability company interests (i) is
      dealt in or traded on a securities exchange or in a securities market,
      (ii) by its terms expressly provides that it is a security governed by
      Article 8 of the UCC, (iii) is an investment company security, (iv) is
      held in a securities account or (v) constitutes a "security" or a
      "financial asset" as such terms are defined in Article 8 of the UCC.

      6. Covenants. Each Pledgor hereby covenants that so long as any of the
Pledgor Obligations remain outstanding or any Loan Document is in effect or any
Letter of Credit shall remain outstanding, such Pledgor shall:

            (a) Books and Records. Mark its books and records (and shall cause
      the issuer of the Pledged Capital Stock owned by such Pledgor to mark its
      books and records) to reflect the security interest granted to the Lender
      pursuant to this Pledge Agreement.

            (b) Defense of Title. Warrant and defend title to and ownership of
      the Pledged Collateral of such Pledgor at its own expense against the
      claims and demands of all other parties claiming an interest therein, keep
      the Pledged Collateral free from all

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      liens, and not sell, exchange, transfer, assign, lease or otherwise
      dispose of Pledged Collateral of such Pledgor or any interest therein,
      except as permitted under the Financing Agreement and the other Loan
      Documents.

            (c) Further Assurances. Promptly execute and deliver at its expense
      all further instruments and documents and take all further action that may
      be reasonably necessary and desirable or that the Lender may reasonably
      request in order to (i) perfect and protect the security interest created
      hereby in the Pledged Collateral of such Pledgor (including, without
      limitation, the filing of UCC financing statements and any and all action
      necessary to satisfy the Lender that the Lender has obtained a first
      priority perfected security interest in all Pledged Capital Stock); (ii)
      enable the Lender to exercise and enforce its rights and remedies
      hereunder in respect of the Pledged Collateral of such Pledgor; and (iii)
      otherwise effect the purposes of this Pledge Agreement, including, without
      limitation and if requested by the Lender, delivering to the Lender
      irrevocable proxies in respect of the Pledged Collateral of such Pledgor.

            (d) Amendments. Not make or consent to any amendment or other
      modification or waiver with respect to any of the Pledged Collateral of
      such Pledgor or enter into any agreement or allow to exist any restriction
      with respect to any of the Pledged Collateral of such Pledgor other than
      pursuant hereto or as may be permitted under the Financing Agreement.

            (e) Compliance with Securities Laws. File all reports and other
      information now or hereafter required to be filed by such Pledgor with the
      United States Securities and Exchange Commission and any other state,
      federal or foreign agency in connection with the ownership of the Pledged
      Collateral of such Pledgor.

            (f) Issuance or Acquisition of Capital Stock. Not without executing
      and delivering, or causing to be executed and delivered, to the Lender
      such agreements, documents and instruments as the Lender may reasonably
      require, issue or acquire any capital stock consisting of an interest in a
      partnership or a limited liability company that (i) is dealt in or traded
      on a securities exchange or in a securities market, (ii) by its terms
      expressly provides that it is a security governed by Article 8 of the UCC,
      (iii) is an investment company security, (iv) is held in a securities
      account or (v) constitutes a "security" or a "financial asset" as such
      terms are defined in Article 8 of the UCC.

      7. Performance of Obligations; Advances by Lender. On failure of any
Pledgor to perform any of the covenants and agreements contained herein, the
Lender may, at its sole option and in its sole discretion, perform or cause to
be performed the same and in so doing may expend such sums as the Lender may
deem advisable in the performance thereof, including, without limitation, the
payment of any insurance premiums, the payment of any taxes, a payment to obtain
a release of a lien or potential lien, expenditures made in defending against
any adverse claim and all other expenditures which the Lender may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Pledgors
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Pledgor Obligations and shall bear
interest from the date said amounts are expended at the Default Rate specified
in Section 4.2 of the Financing Agreement. No such performance of any covenant
or agreement by the Lender on

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behalf of any Pledgor, and no such advance or expenditure therefor, shall
relieve the Pledgors of any default under the terms of this Pledge Agreement or
the other Loan Documents. The Lender may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by a Pledgor in appropriate proceedings
and against which adequate reserves are being maintained in accordance with
GAAP.

      8. Events of Default. The occurrence of an event which under the Financing
Agreement would constitute an Event of Default (as defined in the Financing
Agreement) shall be an event of default hereunder (an "Event of Default").

      9. Remedies.

            (a) General Remedies. Upon the occurrence of an Event of Default and
      during the continuation thereof, the Lender shall have, in respect of the
      Pledged Collateral of any Pledgor, in addition to the rights and remedies
      provided herein, in the Loan Documents or by law, the rights and remedies
      of a secured party under the UCC or any other applicable law.

            (b) Sale of Pledged Collateral. Upon the occurrence of an Event of
      Default and during the continuation thereof, without limiting the
      generality of this Section and without notice, the Lender may, in its sole
      discretion, sell or otherwise dispose of or realize upon the Pledged
      Collateral, or any part thereof, in one or more parcels, at public or
      private sale, at any exchange or broker's board or elsewhere, at such
      price or prices and on such other terms as the Lender may deem
      commercially reasonable, for cash, credit or for future delivery or
      otherwise in accordance with applicable law. To the extent permitted by
      law, any Lender may in such event, bid for the purchase of such
      securities. Each Pledgor agrees that, to the extent notice of sale shall
      be required by law and has not been waived by such Pledgor, any
      requirement of reasonable notice shall be met if notice, specifying the
      place of any public sale or the time after which any private sale is to be
      made, is personally served on or mailed, postage prepaid, to such Pledgor,
      in accordance with the notice provisions of Section 12.6 of the Financing
      Agreement at least ten (10) days before the time of such sale. The Lender
      shall not be obligated to make any sale of Pledged Collateral of such
      Pledgor regardless of notice of sale having been given. The Lender may
      adjourn any public or private sale from time to time by announcement at
      the time and place fixed therefor, and such sale may, without further
      notice, be made at the time and place to which it was so adjourned.

            (c) Private Sale. Upon the occurrence of an Event of Default and
      during the continuation thereof, the Pledgors recognize that the Lender
      may deem it impracticable to effect a public sale of all or any part of
      the Pledged Collateral and that the Lender may, therefore, determine to
      make one or more private sales of any such Pledged Collateral to a
      restricted group of purchasers who will be obligated to agree, among other
      things, to acquire such Pledged Collateral for their own account, for
      investment and not with a view to the distribution or resale thereof. Each
      Pledgor acknowledges that any such private sale may be at prices and on
      terms less favorable to the seller than the prices and other

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      terms which might have been obtained at a public sale and, notwithstanding
      the foregoing, agrees that such private sale shall be deemed to have been
      made in a commercially reasonable manner and that the Lender shall have no
      obligation to delay sale of any such Pledged Collateral for the period of
      time necessary to permit the issuer of such Pledged Collateral to register
      such Pledged Collateral for public sale under the Securities Act of 1933,
      as amended. Each Pledgor further acknowledges and agrees that any offer to
      sell such Pledged Collateral which has been (i) publicly advertised on a
      bona fide basis in a newspaper or other publication of general circulation
      in the financial community of New York, New York (to the extent that such
      offer may be advertised without prior registration under the Securities
      Act of 1933, as amended), or (ii) made privately in the manner described
      above shall be deemed to involve a "public sale" under the UCC,
      notwithstanding that such sale may not constitute a "public offering"
      under the Securities Act of 1933, as amended, and the Lender may, in such
      event, bid for the purchase of such Pledged Collateral.

            (d) Retention of Pledged Collateral. In addition to the rights and
      remedies hereunder, upon the occurrence of an Event of Default and during
      the continuation thereof, the Lender may, after providing the notices
      required by Section 9-621 of the UCC or otherwise complying with the
      requirements of applicable law of the relevant jurisdiction, retain all or
      any portion of the Pledged Collateral in satisfaction of the Pledgor
      Obligations. Unless and until the Lender shall have provided such notices,
      however, the Lender shall not be deemed to have retained any Pledged
      Collateral in satisfaction of any Pledgor Obligations for any reason.

            (e) Deficiency. In the event that the proceeds of any sale,
      collection or realization are insufficient to pay all amounts to which the
      Lender is legally entitled, the Pledgors shall be jointly and severally
      liable for the deficiency, together with interest thereon at the Default
      Rate specified in the Financing Agreement, together with the costs of
      collection and the reasonable fees of any attorneys employed by the Lender
      to collect such deficiency. Any surplus remaining after the full payment
      and satisfaction of the Pledgor Obligations shall be returned to the
      Pledgors or to whomsoever a court of competent jurisdiction shall
      determine to be entitled thereto.

      10. Rights of the Lender.

            (a) Power of Attorney. In addition to other powers of attorney
      contained herein, each Pledgor hereby designates and appoints the Lender
      and each of its designees or agents as attorney-in-fact of such Pledgor,
      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:

                  (i) to demand, collect or settle, compromise, adjust and give
            discharges and releases concerning the Pledged Collateral of such
            Pledgor, all as the Lender may reasonably determine;

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

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

                  (iv) to pay or discharge taxes, liens, security interests, or
            other encumbrances levied or placed on or threatened against the
            Pledged Collateral of such Pledgor;

                  (v) to direct any parties liable for any payment under any of
            the Pledged Collateral to make payment of any and all monies due and
            to become due thereunder directly to the Lender or as the Lender
            shall direct;

                  (vi) to receive payment of and receipt for any and all monies,
            claims, and other amounts due and to become due at any time in
            respect of or arising out of any Pledged Collateral of such Pledgor;

                  (vii) to sign and endorse any drafts, assignments, proxies,
            stock powers, verifications, notices and other documents relating to
            the Pledged Collateral of such Pledgor;

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

                  (ix) to exchange any of the Pledged Collateral of such Pledgor
            or other property upon any merger, consolidation, reorganization,
            recapitalization or other readjustment of the issuer thereof and, in
            connection therewith, deposit any of the Pledged Collateral of such
            Pledgor with any committee, depository, transfer agent, registrar or
            other designated agency upon such terms as the Lender may determine;

                  (x) to vote for a shareholder, partner or member resolution,
            or to sign an instrument in writing, sanctioning the transfer of any
            or all of the Pledged Capital Stock of such Pledgor into the name of
            the Lender or into the name of any transferee to whom the Pledged
            Capital Stock of such Pledgor or any part thereof may be sold
            pursuant to Section 10 hereof; and

                  (xi) to do and perform all such other acts and things as the
            Lender may reasonably deem to be necessary, proper or convenient in
            connection with the Pledged Collateral of such Pledgor.

      This power of attorney is a power coupled with an interest and shall be
      irrevocable for so long as any of the Pledgor Obligations remain
      outstanding or any Loan Document is in effect or any Letter of Credit
      shall remain outstanding. The Lender shall be under no duty to exercise or
      withhold the exercise of any of the rights, powers, privileges and

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      options expressly or implicitly granted to the Lender in this Pledge
      Agreement, and shall not be liable for any failure to do so or any delay
      in doing so. The Lender 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 Lender solely to protect, preserve and
      realize upon its security interest in the Pledged Collateral.

            (b) Assignment by the Lender. Subject to the terms of the Financing
      Agreement, the Lendermay from time to time assign the Pledgor Obligations
      or any portion thereof and/or the Pledged Collateral or any portion
      thereof, and the assignee shall be entitled to all of the rights and
      remedies of the Lender under this Pledge Agreement in relation thereto.

            (c) The Lender's Duty of Care. Other than the exercise of reasonable
      care to ensure the safe custody of the Pledged Collateral while being held
      by the Lender hereunder, the Lender shall have no duty or liability to
      preserve rights pertaining thereto, it being understood and agreed that
      the Pledgors shall be responsible for preservation of all rights in the
      Pledged Collateral of such Pledgor, and the Lender shall be relieved of
      all responsibility for Pledged Collateral upon surrendering it or
      tendering the surrender of it to the Pledgors. The Lender shall be deemed
      to have exercised reasonable care in the custody and preservation of the
      Pledged Collateral in its possession if such Pledged Collateral is
      accorded treatment substantially equal to that which the Lender 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
      Lender shall not have responsibility for (i) ascertaining or taking action
      with respect to calls, conversions, exchanges, maturities, tenders or
      other matters relating to any Pledged Collateral, whether or not the
      Lender has or is deemed to have knowledge of such matters; or (ii) taking
      any necessary steps to preserve rights against any parties with respect to
      any Pledged Collateral.

            (d) Voting Rights in Respect of the Pledged Collateral.

                  (i) So long as no Event of Default shall have occurred and be
            continuing, to the extent permitted by law, each Pledgor may
            exercise any and all voting and other consensual rights pertaining
            to the Pledged Collateral of such Pledgor or any part thereof for
            any purpose not inconsistent with the terms of this Pledge Agreement
            or the Financing Agreement; and

                  (ii) Upon the occurrence and during the continuance of an
            Event of Default, all rights of a Pledgor to exercise the voting and
            other consensual rights which it would otherwise be entitled to
            exercise pursuant to paragraph (i) of this subsection (d) shall
            cease and all such rights shall thereupon become vested in the
            Lender which shall then have the sole right to exercise such voting
            and other consensual rights.

            (e) Dividend and Distribution Rights in Respect of the Pledged
      Collateral.

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                  (i) So long as no Event of Default shall have occurred and be
            continuing and subject to Section 4(b) hereof, each Pledgor may
            receive and retain any and all dividends (other than stock or
            ownership interest dividends and other dividends constituting
            Pledged Collateral which are addressed hereinabove), distributions
            or interest paid in respect of the Pledged Collateral to the extent
            they are allowed under the Financing Agreement.

                  (ii) Upon the occurrence and during the continuation of an
            Event of Default:

                        (A) all rights of a Pledgor to receive the dividends,
                  distributions and interest payments which it would otherwise
                  be authorized to receive and retain pursuant to paragraph (i)
                  of this subsection (e) shall cease and all such rights shall
                  thereupon be vested in the Lender which shall then have the
                  sole right to receive and hold as Pledged Collateral such
                  dividends, distributions and interest payments; and

                        (B) all dividends, distributions and interest payments
                  which are received by a Pledgor contrary to the provisions of
                  paragraph (A) of this clause (ii) shall be received in trust
                  for the benefit of the Lender, shall be segregated from other
                  property or funds of such Pledgor, and shall be forthwith paid
                  over to the Lender as Pledged Collateral in the exact form
                  received, to be held by the Lender as Pledged Collateral and
                  as further collateral security for the Pledgor Obligations.

            (g) Release of Pledged Collateral. The Lender may release any of the
      Pledged Collateral from this Pledge Agreement or may substitute any of the
      Pledged Collateral for other Pledged Collateral without altering, varying
      or diminishing in any way the force, effect, lien, pledge or security
      interest of this Pledge Agreement as to any Pledged Collateral not
      expressly released or substituted, and this Pledge Agreement shall
      continue as a first priority lien on all Pledged Collateral not expressly
      released or substituted.

      11. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Lender in cash or its equivalent, will be applied as follows: first, to all
costs and expenses of the Lender (including, without limitation, reasonable
attorneys' fees and expenses) incurred in connection with the implementation
and/or enforcement of this Pledge Agreement and/or any of the other Loan
Documents; second, to all costs and expenses of the Lender (including, without
limitation, reasonable attorneys' fees and expenses) incurred in connection with
the implementation and/or enforcement of this Pledge Agreement and/or any of the
other Loan Documents; third, to the principal amount of the Pledgor Obligations;
fourth, to such of the Pledgor Obligations consisting of accrued but unpaid
interest and fees; fifth, to all other amounts payable with respect to the
Pledgor Obligations; and sixth, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus. The Pledgors shall
remain liable to the Lender for any deficiency.

      12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Lender employs counsel to prepare
or consider amendments, waivers

                                      10
<PAGE>

or consents with respect to this Pledge Agreement, or to take action or make a
response in or with respect to any legal or arbitral proceeding relating to this
Pledge Agreement or relating to the Pledged Collateral, or to protect the
Pledged Collateral or exercise any rights or remedies under this Pledge
Agreement or with respect to the Pledged Collateral, then the Pledgors agree to
promptly pay upon demand any and all such reasonable costs and expenses of the
Lender, all of which costs and expenses shall constitute Pledgor Obligations
hereunder.

      13. Continuing Agreement.

            (a) This Pledge Agreement shall be a continuing agreement in every
      respect and shall remain in full force and effect so long as any of the
      Pledgor Obligations remain outstanding or any Loan Document is in effect
      or any Letter of Credit shall remain outstanding. Upon such payment and
      termination, this Pledge Agreement shall be automatically terminated and
      the Lender shall, upon the request and at the expense of the Pledgors,
      forthwith release all of the liens and security interests hereunder and
      shall execute and deliver all UCC termination statements and/or other
      documents reasonably requested by the Pledgors evidencing such
      termination. Notwithstanding the foregoing all releases and indemnities
      provided hereunder shall survive termination of this Pledge Agreement.

            (b) This Pledge 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 Pledgor Obligations is rescinded or must
      otherwise be restored or returned by the 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 Pledgor 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 Lender in defending and enforcing such
      reinstatement shall be deemed to be included as a part of the Pledgor
      Obligations.

      14. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 12.2 of the Financing Agreement.

      15. Consent and Waiver. Each Pledgor hereby consents to the pledge by each
other Pledgor of such other Pledgor's interests in each issuer of Pledged
Capital Stock (each an "Issuer"). Each Pledgor agrees that, without the prior
written consent of the Lender, no Pledgor shall take any action that would
operate to dilute the interest of any Pledgor in any Issuer other than as
permitted by this Pledge Agreement and the Financing Agreement. Each Pledgor
further agrees that, upon the written request of the Lender after an Event of
Default has occurred and is continuing, any Pledgor may be removed as a member
of any Issuer which is a limited liability company and replaced with the
assignee designated in such request. If the Lender so requests after an Event of
Default has occurred and is continuing, each Pledgor covenants and agrees to
execute an amendment to the operating agreement of the relevant Issuer to
reflect any such assignee's substitution in place of such Pledgor as a member of
such Issuer, provided that such assignee shall adopt such operating agreement,
and agrees to be bound by the terms and provisions thereof. In the event that
any such assignee is admitted as a member of any Issuer in substitution of a
Pledgor, each Pledgor agrees that such assignee shall not be liable for the

                                      11
<PAGE>

obligations of such Pledgor with respect to such Issuer arising before such
assignee's admission to such Issuer, except to the extent required by law. Each
Pledgor agrees that neither the execution and delivery of this Pledge Agreement,
the enforcement by the Lender of any of its rights thereunder, or the transfer
(or agreement to transfer) by the Lender of any of its rights in any Issuer
shall constitute a default under any operating agreement of any Issuer, and each
Pledgor expressly waives any rights it may have under any operating agreement of
any Issuer as a result of the foregoing. Each Pledgor hereby waives any and all
rights under any operating agreement of any Issuer which, whether exercised by
such Pledgor or not, would prevent, inhibit or interfere with the granting of a
security interest in the Collateral to the Lender, the foreclosure of such
security interest in the Collateral by the Lender or the full realization by the
Lender of any of its other rights under this Pledge Agreement or the other Loan
Documents.

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

      18. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 12.6 of the Financing
Agreement.

      19. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.

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

      21. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Venue. THIS PLEDGE 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 NORTH CAROLINA. THE PROVISIONS OF THE FINANCING
AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, WAIVER OF JURY TRIAL AND VENUE
ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS.

      22. Severability. If any provision of this Pledge 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.

                                      12
<PAGE>

      23. Entirety. This Pledge Agreement and the other Loan 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 commitment
letters or correspondence relating to this Pledge Agreement or the other Loan
Documents or the transactions contemplated herein and therein.

      24. Survival. All representations and warranties of the Pledgors hereunder
shall survive the execution and delivery of this Pledge Agreement and the other
Loan Documents, the making of the Revolving Credit Loans and the issuance of the
Letters of Credit under the Financing Agreement.

      25. Other Security. To the extent that any of the Pledgor Obligations are
now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Lender shall have the right to proceed against such other property,
guarantee or endorsement upon the occurrence and during the continuance of any
Event of Default, and the Lender have the right, in its sole discretion, to
determine which rights, security, liens, security interests or remedies the
Lender shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of the Lender's
rights or the Pledgor Obligations under this Pledge Agreement or under any other
of the Loan Documents.

      26. Joint and Several Obligations of Pledgors.

            (a) Each of the Pledgors is accepting joint and several liability
      hereunder in consideration of the financial accommodation to be provided
      by the Lender under the Financing Agreement, for the mutual benefit,
      directly and indirectly, of each of the Pledgors and in consideration of
      the undertakings of each of the Pledgors to accept joint and several
      liability for the obligations of each of them.

            (b) Each of the Pledgors jointly and severally hereby irrevocably
      and unconditionally accepts, not merely as a surety but also as a
      co-debtor, joint and several liability with the other Pledgors with
      respect to the payment and performance of all of the Pledgor Obligations
      arising under this Pledge Agreement and the other Loan Documents, it being
      the intention of the parties hereto that all the Pledgor Obligations shall
      be the joint and several obligations of each of the Pledgors without
      preferences or distinction among them.

            (c) Notwithstanding any provision to the contrary contained herein
      or in any other of the Loan Documents, to the extent the obligations of a
      Pledgor shall be adjudicated to be invalid or unenforceable for any reason
      (including, without limitation, because of any applicable state or federal
      law relating to fraudulent conveyances or transfers) then the obligations
      of each Pledgor hereunder shall be limited to the maximum amount that is
      permissible under applicable law (whether federal or state and including,
      without limitation, the Bankruptcy Code).

                  [remainder of page intentionally left blank]

                                      13
<PAGE>

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

                                          PLEDGORS:

                                          CROWN CRAFTS, INC.

                                          By: /s/ E. Randall Chestnut
                                              ---------------------------------
                                              E. Randall Chestnut
                                              President and CEO

                                          CROWN CRAFTS INFANT PRODUCTS, INC.

                                          By: /s/ E. Randall Chestnut
                                              ---------------------------------
                                              E. Randall Chestnut
                                              Vice President

                                          CHURCHILL WEAVERS, INC.

                                          By: /s/ E. Randall Chestnut
                                              ---------------------------------
                                              E. Randall Chestnut
                                              Vice President

                                          HAMCO, INC.

                                          By: /s/ E. Randall Chestnut
                                              ----------------------------------
                                              E. Randall Chestnut
                                              President and CEO

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

                                          LENDER:

                                          THE CIT GROUP/COMMERCIAL
                                          SERVICES, INC.

                                          By: /s/ William Johanessen
                                              ----------------------------------
                                              William Johanessen
                                              Senior Vice President

                                      14<PAGE>

                                                                    Exhibit 10.3

STATE OF KENTUCKY
COUNTY OF MADISON

                    MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
                      FIXTURE FILING AND SECURITY AGREEMENT

                    THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, FIXTURE
FILING AND SECURITY AGREEMENT ("Mortgage"), made and executed this 11th day of
July, 2006, by and among CHURCHILL WEAVERS, INC., a Kentucky corporation, whose
address is 916 South Burnside Avenue, Gonzalez, Louisiana 70707, as Party of the
First Part, being hereinafter called "Mortgagor"; and THE CIT GROUP/COMMERCIAL
SERVICES, INC., a New York corporation, whose address is 301 South Tryon Street,
Charlotte, Mecklenberg County, North Carolina 28202, as Party of the Second
Part, being hereinafter called "Lender";

                                   WITNESSETH:

     That for and in consideration of the sum of Ten Dollars ($10.00) and other
valuable consideration, the receipt and sufficiency whereof are hereby
acknowledged, and in order to secure the indebtedness and other obligations of
Mortgagor and its affiliates as hereinafter set forth, Mortgagor does hereby
grant, bargain, mortgage, sell and convey unto Lender and its successors and
assigns the following:

     (A) THE LAND. The land (the "Land") situated in Madison County, Kentucky,
which is described in detail in Schedule A attached hereto and incorporated
herein and made a part of this document for all purposes.

     (B) THE IMPROVEMENTS: TOGETHER WITH (1) all the buildings, structures and
improvements of every nature whatsoever now or hereafter situated on the Land,
and (2) all fixtures, machinery, appliances, equipment, furniture and personal
property of every nature whatsoever now or hereafter owned by Mortgagor and
located in or on, attached to, and used or intended to be used in connection
with or with the operation of, the Land, buildings, structures or other
improvements, or in connection with any construction being conducted or which
may be conducted thereon, and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to any of the foregoing,
and all of the right, title and interest of Mortgagor in and to any such
personal property or fixtures, which, to the fullest extent permitted by law,
shall be conclusively deemed fixtures and a part of the real property encumbered
hereby (hereinafter called the "Improvements").

     (C) EASEMENTS AND OTHER PROPERTY INTERESTS: TOGETHER WITH all easements,
rights-of-way, gores of land, streets, ways, alleys, passages, sewer rights,
water courses, water rights and powers, other real property and interests
therein, and all appurtenances whatsoever, in any way belonging, relating or
appertaining to any of the property described in

<PAGE>

paragraphs (A) and (B) hereof, or which hereafter shall in any way belong,
relate or be appurtenant thereto, whether now owned or hereafter acquired by
Mortgagor by adverse possession or in any other manner.

     (D) TOGETHER WITH (i) all of the estate, right, title and interest of
Mortgagor of, in and to all judgments, insurance proceeds, awards of damages and
settlements hereafter made resulting from condemnation proceedings or the taking
of the property described in paragraphs (A), (B) and (C) hereof or any part
thereof under the power of eminent domain, or for any damage (whether caused by
such taking or otherwise) to the property described in paragraphs (A), (B) and
(C) hereof or any part thereof, or to any rights appurtenant thereto, and all
proceeds of any sales or other disposition of the property described in
paragraphs (A), (B) and (C) hereof or any part thereof; and Lender is hereby
authorized to collect and receive said awards and proceeds in accordance with
this Mortgage and to give proper receipts and acquittances therefor, and (if it
so elects) to apply the same in accordance with this Mortgage toward the payment
of the indebtedness and other sums secured hereby, notwithstanding the fact that
the amount owing thereon may not then be due and payable; and (ii) all contract
rights, general intangibles, actions and rights in action, including without
limitation all rights to insurance proceeds and unearned premiums arising from
or relating to the property described in paragraphs (A), (B) and (C) above; and
(iii) all proceeds, products, replacements, additions, substitutions, renewals
and accessions of and to the property described in paragraphs (A), (B) and (C).

     (E) TOGETHER WITH all rents, income, accounts receivable and other benefits
to which Mortgagor may now or hereafter be entitled from the property described
in paragraphs (A), (B) and (C) hereof to be applied against the indebtedness and
other sums secured hereby; provided, however, that permission is hereby given to
Mortgagor, so long as no Event of Default (as defined in Section 2.01) has
occurred hereunder, to collect and use such rents, income and other benefits as
they become due and payable, but not in advance thereof. Upon the occurrence of
any such Event of Default, the permission hereby given to Mortgagor to collect
such rents, accounts receivable, income and other benefits from the property
described in paragraphs (A), (B) and (C) hereof shall terminate and such
permission shall not be reinstated upon a cure of such Event of Default without
Lender's specific written consent.

     The foregoing provisions hereof shall constitute an absolute and present
assignment of the rents, income and other benefits from the property described
in (A), (B) and (C) above, subject, however, to the conditional permission given
to Mortgagor to collect and use such rents, income and other benefits as
hereinabove provided; and the existence or exercise of such right of Mortgagor
shall not operate to subordinate this assignment to any subsequent assignment,
in whole or in part, by Mortgagor, and any such subsequent assignment by
Mortgagor shall be subject to the rights of Lender hereunder.

     (F) TOGETHER WITH all right, title and interest of Mortgagor in and to any
and all leases now or hereafter on or affecting the property described in
paragraphs (A), (B) and (C) hereof, and all books and records which contain
payments made under the leases and all security therefor.

                                       2

<PAGE>

     (G) TOGETHER WITH (i) the Mortgagor's rights further to encumber the
property described in paragraphs (A), (B), (C) and (F) above for debt; and (ii)
all of the Mortgagor's rights to enter into any lease or lease agreement.

     All of the property described in paragraphs (A), (B), (C), (D), (E), (F)
and (G) above, and each item of property therein described, is hereinafter
referred to as the "Property".

     TO HAVE AND TO HOLD the Property and all parts thereof unto Lender and its
successors and assigns, forever upon the trust, terms and conditions contained
herein.

     This Mortgage is executed and delivered by Mortgagor to secure the
following described obligations, liabilities and indebtedness of Mortgagor and
its affiliates to Lender (hereinafter collectively referred as the
"Obligations"):

          (a) All loans, advances, indebtedness, obligations and liabilities now
or from time to time hereafter owing by Mortgagor, Crown Crafts, Inc., a
Delaware corporation ("CCI"), Crown Crafts Infant Products, Inc., a Delaware
corporation ("CCIP") and Hamco, Inc., a Louisiana corporation ("Hamco"; together
with Mortgagor, CCI and CCIP, the "Borrowers" and each a "Borrower"), to Lender
under that certain Financing Agreement, dated of even date herewith (such
Financing Agreement, as it may hereafter be amended from time to time, being
hereinafter called the "Financing Agreement," capitalized terms used but not
otherwise defined herein having the same meaning given therein), or under any
agreement, instrument or document executed or delivered to Lender in respect of
the Financing Agreement or the transactions contemplated thereby, pursuant to
which Lender has agreed to make a revolving line of credit available to the
Borrowers pursuant to which revolving loans may be made, repaid and re-advanced
in accordance with and evidenced by the Financing Agreement up to a maximum
aggregate principal amount of such revolving loans outstanding at any one time
in the sum of $22,000,000, which revolving loans have a maturity date of July
11, 2009.

          (b) All indebtedness, obligations and liabilities of Mortgagor arising
under this Mortgage;

          (c) All advances made by Lender to protect or preserve the Property or
the lien hereof on the Property, or for taxes, assessments, insurance premiums,
or other advances authorized under the terms of this Mortgage (whether or not
Mortgagor remains the owner of the Property at the time of such advance);

          (d) Any and all renewals, extensions, modifications, substitutions,
replacements or consolidations of the Note or any other indebtedness,
liabilities and obligations described in paragraphs (a), (b) or (c) above; and

          (e) All other obligations, liabilities and indebtedness of every kind
and character now or hereafter owing by Mortgagor or any other Borrower to
Lender, however created, incurred or evidenced, direct or indirect, absolute or
contingent, and whether owing under the Financing Agreement, this Mortgage or
the other Loan Documents (as hereinafter

                                       3

<PAGE>

defined), including without limitation, all "Obligations" of Mortgagor and each
other Borrower to Lender, as such term is defined in the Financing Agreement.

     The Financing Agreement, this Mortgage, and all other instruments,
agreements, documents and guaranty agreements executed in connection with the
Financing Agreement or the transactions contemplated thereby are hereinafter
collectively called the "Loan Documents".

     PROVIDED, HOWEVER, that if Mortgagor shall promptly pay or cause to be paid
the Obligations secured hereby in accordance with the terms thereof when the
same shall become due and payable and shall keep, perform and observe, or cause
to be kept, performed and observed, all the terms, conditions and requirements
of the Loan Documents and of this Mortgage, then, upon complete payment and
satisfaction thereof, this Mortgage shall be null and void and of no further
force and effect and shall be released by Lender upon the written request and at
the expense of Mortgagor.

                                   ARTICLE ONE

                             COVENANTS OF MORTGAGOR

     Mortgagor covenants and agrees with Lender, or any successor in title as
holder of the Obligations secured hereby, as follows:

     1.01 Performance of Loan Documents. Mortgagor shall perform, observe and
comply with, or cause to be performed, observed and complied with, all
provisions of the Loan Documents and will promptly pay or cause to be paid to
Lender the principal with interest thereon of all Obligations when payment shall
become due.

     1.02 General Representations, Covenants and Warranties. Mortgagor
represents, warrants and covenants that (a) subject only to the rights of others
provided in the instruments described in Schedule B attached hereto and
incorporated herein, Mortgagor is seized of an indefeasible estate in fee simple
in, and has good and absolute title to, the Property, and has good right, full
power and lawful authority to encumber the same as provided herein and Lender
may at all times peaceably and quietly enter upon, hold, occupy and enjoy the
Property in accordance with applicable law and with the terms hereof; (b) the
Property is free and clear of all liens, security interests, charges and
encumbrances whatsoever except those described in Schedule B; (c) Mortgagor will
maintain and preserve the lien of this Mortgage until the Obligations secured
hereby have been paid in full; (d) the Property is improved with those
improvements described in Schedule C attached hereto and incorporated herein and
made a part hereof and has frontage on, and direct access of ingress, egress,
and regress to, the street(s) described therein; (e) electric, gas, sewer, water
facilities and any other necessary utilities are, and at all times hereafter
shall be, available in sufficient capacity to service the Property
satisfactorily, and any easements necessary to the furnishing of such utility
service to Mortgagor have been obtained; and (f) the representations, warranties
and covenants made by Mortgagor in the Loan Documents are incorporated herein by
reference and made a part hereof.

                                       4

<PAGE>

     1.03 Compliance with Laws. Mortgagor covenants and warrants that the
Property presently complies with and will continue to comply with all applicable
restrictive covenants, applicable zoning and subdivision ordinances and building
codes, all applicable health and environmental laws and regulations and other
applicable laws, rules and regulations which affect the Property and the
operations of Mortgagor on the Property. If Mortgagor receives notice from any
federal, state or other governmental body that it is not in compliance with any
such covenant, ordinance, code, law or regulation, Mortgagor will provide Lender
with a copy of such notice and comply with the provisions of such notice
promptly.

     1.04 Taxes and Other Charges.

     1.04.1 Taxes and Assessments. Mortgagor shall pay promptly when due all
taxes, assessments, rates, dues, charges, fees, levies, fines, impositions,
liabilities, obligations and encumbrances of every kind whatsoever now or
hereafter imposed, levied or assessed upon or against the Property or any part
thereof, or upon or against this Mortgage or the Obligations secured hereby, or
upon or against the interest of Lender in the Property, as well as all income
taxes, assessments and other governmental charges levied and imposed by the
United States of America or any state, county, municipality or other taxing
authority upon or against Mortgagor or in respect of the Property or any part
thereof.

     1.04.2 Mechanic's and Other Liens. Mortgagor shall not permit or suffer any
mechanic's, laborer's, materialman's, statutory or other lien (other than any
lien for taxes not yet due) to be created upon or filed against the Property. If
Mortgagor shall desire to contest the validity of a lien claimed by any
mechanic, laborer or materialman, Mortgagor shall cause the lien to be bonded
off in accordance with applicable law, without expense to Lender, or shall
furnish such other security with respect thereto as is acceptable to Lender.

     1.04.3 Taxes Affecting Lender's Interest. If any state, federal, municipal
or other governmental law, order, rule or regulation, passed subsequent to the
date hereof, in any manner changes or modifies existing laws governing the
taxation of deeds of trust, mortgages or debts secured by deeds of trust,
mortgages, or the manner of collecting taxes so as to materially, adversely
affect Lender's security in the Property, the entire balance of the Obligations
secured by this Mortgage and all interest accrued thereon shall upon
commercially reasonable notice to Mortgagor become due and payable forthwith at
the option of Lender.

     1.04.4 Tax Escrow. In order to secure the performance and discharge of
Mortgagor's obligations under this paragraph 1.04, but not in lieu of such
obligations, Mortgagor, upon Lender's request, will pay over to Lender an amount
equal to one-twelfth (1/12th) of the next maturing annual ad valorem taxes,
assessments and charges (which taxes, assessments and charges, for purposes of
this paragraph, shall include without limitation water and sewer rents, and
shall hereinafter be collectively called "Taxes") of the nature described in
paragraph 1.04 for each month that has elapsed since the last date to which the
Taxes were paid; and Mortgagor will, in addition, during the continuance of an
Event of Default and upon Lender's request, pay over to Lender together with
each installment of the Obligations sufficient funds (as estimated

                                       5

<PAGE>

from time to time by Lender in its sole discretion) to permit Lender to pay when
due the Taxes. During the continuance of an Event of Default and upon Lender's
request, Mortgagor shall also deliver to Lender such additional monies as are
required to make up any deficiencies in the amounts necessary to enable Lender
to pay the Taxes. Such deposits shall not be, nor be deemed to be, trust funds
but may be commingled with the general funds of Lender, and no interest shall be
payable in respect thereof. Lender may apply to the reduction of the Obligations
secured hereby (without prepayment penalty), in such manner as Lender shall
determine, any amount under this paragraph 1.04.4 remaining to Mortgagor's
credit.

     1.04.5 No Credit Against the Obligations Secured Hereby. Mortgagor shall
not claim, demand or be entitled to receive any credit, against the principal or
interest payable on the Obligations for so much of the Taxes assessed against
the Property or any part thereof or that are applicable to the Obligations
secured hereby or to Lender's interest in the Property. No deduction shall be
claimed from the taxable value of the Property or any part thereof by reason of
the Obligations, this Mortgage or any other instrument securing the Obligations.

     1.04.6 Insurance.

          (a) Mortgagor shall, at its sole expense, keep the Property insured in
such amounts and against such risks and damages as is required by the Financing
Agreement. All policies of insurance shall contain an endorsement, in form and
substance acceptable to Lender, showing loss payable to Lender as its interests
appear. Such endorsement, or an independent instrument delivered to Lender,
shall provide that the insurance companies will give Lender at least thirty (30)
days prior written notice before any such policy or policies of insurance shall
be altered or cancelled and that no act or default of Mortgagor or any other
person shall affect the right of Lender to recover under such policy or policies
of insurance in case of loss or damage.

          (b) In order to secure the performance and discharge of Mortgagor's
obligations under this paragraph 1.04.6, but not in lieu of such obligations,
Mortgagor, during the continuance of an Event of Default, upon Lender's request,
will pay over to Lender an amount equal to one-twelfth (1/12th) of the next
maturing annual insurance premiums for each month that has elapsed since the
last date to which such premiums were paid; and Mortgagor will, in addition,
during the continuance of an Event of Default, upon Lender's request, pay over
to Lender together with each installment on the Obligations sufficient funds (as
estimated from time to time by Lender in its sole discretion) to permit Lender
to pay said premiums when due. Such deposits shall not be, nor be deemed to be,
trust funds but may be commingled with the general funds of Lender, and no
interest shall be payable in respect thereof. During the continuance of an Event
of Default, upon Lender's request, Mortgagor shall also deliver to Lender such
additional monies as are necessary to make up any deficiencies in the amounts
necessary to enable Lender to pay such premiums when due.

          (c) Pursuant to its rights granted hereunder in all proceeds from any
insurance policies, Lender is hereby authorized and empowered at its option to
adjust or compromise any loss under any insurance policies on the Property and
to collect and receive the proceeds from

                                       6

<PAGE>

any such policy or policies. Each insurance company is hereby authorized and
directed to make payment for all such losses directly to Lender alone and not to
Mortgagor and Lender jointly. After deducting from such insurance proceeds any
expenses incurred by Lender in the collection or handling of such funds, the net
proceeds received by Lender shall be applied as follows: (i) if a Default (as
such term is defined in the Financing Agreement) or Event of Default shall have
occurred and is continuing, the entire net proceeds of any insurance claim
received by Lender shall, at Lender's option, be applied to the Obligations
secured hereby; and (ii) if a Default or Event of Default shall not have
occurred and be continuing, then the net proceeds of any claim of less than
$50,000 shall be released to Mortgagor to be used solely by Mortgagor for
repairing and restoring the Property, and the net proceeds of any claim of more
than $50,000 shall be held by Lender for Mortgagor's benefit (subject to the
lien of Lender therein as security for the Obligations) and advanced to
Mortgagor from time to time, but not more often than monthly, against such
requisition or other evidence of restoration or repair of the Property,
including architect's or engineer's certificates and copies of bills and
invoices for work and materials used in connection therewith, as Lender may
reasonably require, without affecting the lien of this Mortgage for the full
amount of the Obligations secured hereby. In no event, however, shall any
advance be made which will result in the funds remaining with Lender being less
than the cost of completion of restoration of the Property as estimated by an
architect or engineer reasonably satisfactory to Lender. If, upon completion of
restoration of the Property there remain funds with Lender, Lender shall apply
the remaining funds to the Obligations secured hereby (without any prepayment
penalty). Any funds applied against the Obligations secured hereby shall be
applied to particular Obligations, whether then matured or to mature in the
future, in such order and in such manner as Lender in its discretion determines.
Although Lender intends to use its best efforts to collect such payments in a
timely fashion, Lender shall not be responsible for any failure to collect any
insurance proceeds due under the terms of any policy regardless of the cause of
such failure.

     1.04.7 Non-Impairment of Lender's Rights. Nothing contained in either of
paragraphs 1.04.4 and 1.04.6(b) shall be deemed to affect any right or remedy of
Lender under any provision of this Mortgage or of any statute or rule of law to
pay any amount required to be paid by paragraphs 1.04.1 and 1.04.6 and to add
the amount so paid to the Obligations hereby secured. Although Lender intends to
use its best efforts to make such payments in a timely fashion, the arrangements
provided for in paragraph 1.04.4 and 1.04.6 are solely for the added protection
of Lender and entail no responsibility on Lender's part beyond the allowing of
due credit, without interest, for sums actually received by it. Upon assignment
of this Mortgage, any funds on hand shall be turned over to the assignee and any
responsibility of Lender with respect thereto shall terminate.

     1.05 Condemnation. Lender shall be entitled to all compensation awards,
damages, claims, rights of action and proceeds of, or on account of, any damage
or taking through condemnation and is hereby authorized, at its option, to
commence, appear in and prosecute in its own or Mortgagor's name any action or
proceeding relating to any condemnation and to settle or compromise any claim in
connection therewith. All such compensation awards, damages, claims, rights of
action and proceeds, and any other payments or relief, and the right thereto,
are

                                       7

<PAGE>

included in the Property and Lender, after deducting therefrom all of its
expenses including reasonable attorneys' fees incurred in the collection or
handling of such funds, shall apply the net proceeds thereof as follows: (i) if
a Default or Event of Default shall have occurred and is continuing, the entire
net proceeds of any condemnation award received by Lender shall, at Lender's
option, be applied to the Obligations secured hereby, and (ii) if a Default or
Event of Default shall not have occurred and be continuing, then the net
proceeds of any condemnation award of less than $50,000 shall be released to
Mortgagor to be used solely by Mortgagor for repairing and restoring the
Property, and the net proceeds of any condemnation award of more than $50,000
shall be held by Lender for Mortgagor's benefit (subject to the lien of Lender
therein as security for the Obligations) and advanced to Mortgagor from time to
time, but not more often than monthly, against such requisition or other
evidence of restoration or repair of the Property, including architect's or
engineer's certificates and copies of bills and invoices for work and materials
used in connection therewith, as Lender may reasonably require, without
affecting the lien of this Mortgage for the full amount of the Obligations
secured hereby. In no event, however, shall any advance be made which will
result in the funds remaining with Lender being less than the cost of completion
of restoration of the Property as estimated by an architect or engineer
reasonably satisfactory to Lender. If, upon completion of restoration of the
Property there remain funds with Lender, Lender shall apply the remaining funds
to the Obligations secured hereby (without any prepayment penalty). Any funds
applied against the Obligations secured hereby shall be applied to particular
Obligations, whether then matured or to mature in the future, in such order and
in such manner as Lender in its discretion determines. Mortgagor agrees to
execute such further assignments of any compensation awards, damages, claims,
rights of action and proceeds as Lender may reasonably require. Notwithstanding
any such condemnation, Mortgagor shall continue to pay interest, computed at the
rate provided in the Loan Documents, on the entire unpaid principal amount
thereof.

     1.06 Care of Property.

          (a) Mortgagor shall preserve and maintain the Property in good
condition and repair, ordinary wear and tear excepted. Mortgagor shall not
permit, commit or suffer any waste, impairment or deterioration of the Property
or of any part thereof, and will not take any action which will increase the
risk of fire or other hazard to the Property or to any part thereof.

          (b) No part of the Property shall be removed, demolished or altered
without the prior written consent of Lender, except in the ordinary course of
business.

          (c) Lender may enter upon and inspect the Property at any reasonable
time during the life of this Mortgage.

          (d) If any part of the Property shall be lost, damaged or destroyed by
fire or any other cause, Mortgagor will give immediate written notice thereof to
Lender and shall promptly restore the Property to the equivalent of its original
condition regardless of whether or not there shall be any insurance proceeds
therefor (subject to Lender's obligations set forth in paragraph 1.04(6)(c) and
1.05 hereof). If a part of the Property shall be lost, physically

                                       8

<PAGE>

damaged, or destroyed through condemnation, Mortgagor will promptly restore,
repair or alter the remaining property in a manner satisfactory to Lender.

          (e) No work required to be performed under paragraphs 1.04.6(c), 1.05
or 1.06(d) shall be undertaken until plans and specifications therefor have been
submitted to and approved in writing by Lender.

     1.07 Further Assurances. At any time and from time to time, upon Lender's
request, Mortgagor shall make, execute and deliver, or cause to be made,
executed and delivered, to Lender and where appropriate shall cause to be
recorded or filed, and from time to time thereafter to be re-recorded and
refiled at such time and in such offices and places as shall be deemed desirable
by Lender, any and all such further deeds of trust, instruments or further
assurance, certificates and other documents as Lender may consider necessary or
desirable in order to effectuate, complete, or perfect, or to continue and
preserve the obligations of Mortgagor under the Loan Documents and this
Mortgage, and the lien of this Mortgage as a lien upon all of the Property,
whether now owned or hereafter acquired by Mortgagor. Upon any failure by
Mortgagor to do so, Lender may make, execute, record, file, re-record or refile
any and all such deeds of trust, instruments, certificates and documents for and
in the name of Mortgagor, and Mortgagor hereby irrevocably appoints Lender the
agent and attorney-in-fact of Mortgagor to do so.

     1.08 Security Agreements and Financing Statements. Mortgagor (as Debtor)
hereby grants to Lender (as Creditor and Secured Party) a security interest in
all fixtures, machinery, appliances, equipment, furniture and personal property
of every nature whatsoever constituting part of the Property.

     Mortgagor shall execute any and all such documents, including without
limitation, financing statements pursuant to the applicable Uniform Commercial
Code, as Lender may reasonably request, to preserve and maintain the priority of
the lien created hereby on property which may be deemed personal property or
fixtures, and shall pay to Lender on demand any expenses incurred by Lender in
connection with the preparation, execution and filing of any such documents.
Mortgagor hereby authorizes and empowers Lender to execute and file, on
Mortgagor's behalf, all financing statements and refilings and continuations
thereof as Lender reasonably deems necessary or advisable to create, preserve
and protect said lien. When and if Mortgagor and Lender shall respectively
become the Debtor and Secured Party in any Uniform Commercial Code financing
statement affecting the Property, this Mortgage shall be deemed a security
agreement as defined in said Uniform Commercial Code and the remedies for any
violation of the covenants, terms and conditions of the agreements herein
contained shall be (i) as prescribed herein, (ii) by general law, or (iii) as to
such part of the security which is also reflected in said financing statement by
the specific statutory consequences now or hereafter enacted and specified in
the Uniform Commercial Code, all at Lender's sole election.

     Mortgagor and Lender agree that the filing of a financing statement in the
records normally having to do with personal property shall never be construed as
in any way derogating

                                       9

<PAGE>

from or impairing the express declaration and intention of the parties hereto,
hereinabove stated, that everything used in connection with the production of
income from the Property and/or adapted for use therein and/or which is
described or reflected in this Mortgage is, and at all times and for all
purposes and in all proceedings both legal or equitable, shall be regarded as
part of the real estate encumbered by this Mortgage irrespective of whether (i)
any such item is physically attached to the Improvements, (ii) serial numbers
are used for the better identification of certain equipment items capable of
being thus identified in a recital contained herein or in any list filed with
Lender, or (iii) any such item is referred to or reflected in any such financing
statement so filed at any time. Similarly, the mention in any such financing
statement of (1) rights in or to the proceeds of any fire and/or hazard
insurance policy, or (2) any award in eminent domain proceedings for a taking or
for loss of value, or (3) Mortgagor's interest as lessor in any present or
future lease or rights to income growing out of the use and/or occupancy of the
Property, whether pursuant to lease or otherwise, shall never be construed as in
any way altering any of the rights of Lender as determined by this instrument or
impugning the priority of Lender's lien granted hereby or by any other recorded
document, but such mention in the financing statement is declared to be for the
protection of Lender in the event any court or judge shall at any time hold with
respect to (1), (2) and (3) that notice of Lender's priority of interest to be
effective against a particular class of persons, including but not limited to
the federal government and any subdivisions or entity of the federal government,
must be filed in the Uniform Commercial Code records.

     1.09 Assignment of Rents. The assignment contained in paragraph (E) of this
Mortgage shall be fully operative without any further action on the part of
either party and specifically Lender shall be entitled, at its option, upon the
occurrence of an Event of Default hereunder, to all rents, income and other
benefits from the property described in paragraphs (A), (B), (C) and (D) hereof
whether or not Lender takes possession of such property. To the extent permitted
under applicable law, Mortgagor hereby further grants to Lender the right (i) to
enter upon and take possession of the Property for the purpose of collecting the
said rents, income and other benefits, (ii) to dispossess by the usual summary
ejectment proceedings any tenant defaulting in the payment thereof to Lender,
(iii) to let the Property or any part thereof, and (iv) to apply said rents,
income and other benefits, after payment of all necessary charges and expenses,
on account of the Obligations secured hereby. Such assignment and grant shall
continue in effect until the Obligations secured hereby are paid, the execution
of this Mortgage constituting and evidencing the irrevocable consent of
Mortgagor to the entry upon and taking possession of the Property by Lender
pursuant to such grant to the extent permitted under applicable law, whether or
not enforcement of this Mortgage has been instituted. Neither the exercise of
any rights under this paragraph by Lender nor the application of any such rents,
income or other benefits to the Obligations secured hereby, shall cure or waive
any default or notice of default hereunder or invalidate any act done pursuant
hereto or to any such notice, but shall be cumulative of all other rights and
remedies.

     1.10 After-Acquired Property. To the extent permitted by and subject to
applicable law, the lien of this Mortgage will automatically attach, without
further act, to all after-acquired property located in or on, or attached to the
Property or any part thereof.

                                       10

<PAGE>

     1.11 Leases Affecting Encumbered Property. Mortgagor represents that the
schedule of leases set forth in Schedule C is true and correct; that all such
leases are presently in effect and that no default by Mortgagor exists in such
leases. As any such lease shall expire or terminate or as any new lease shall be
made, Mortgagor shall so notify Lender in order that at all times Lender shall
have a current list of all leases affecting the property described in paragraphs
(A), (B) and (C) hereof. The assignment contained in paragraph (F) of this
Mortgage shall not be deemed to impose upon Lender any of the obligations or
duties of Mortgagor provided in any such lease (including, without limitation,
any liability under the covenant of quiet enjoyment contained in any lease in
the event that any tenant shall have been joined as a party defendant in any
action to enforce this Mortgage and shall have been barred and foreclosed
thereby of all right, title and interest and equity of redemption in the
Property or any part thereof), and Mortgagor shall comply with and observe its
obligations in all material respects as landlord under all leases affecting the
Property or any part thereof. Mortgagor, if required by Lender, shall furnish
promptly to Lender original or certified copies of all such leases now existing
or hereafter created. Mortgagor shall not, without the express prior written
consent of Lender, enter into any lease affecting the Property, or materially
amend, modify, extend, terminate or cancel, accept the surrender of,
subordinate, accelerate the payment of rent as to, or change the terms of any
renewal option of any such lease now existing or hereafter created, or permit or
suffer an assignment or sublease. Mortgagor shall not accept payment of rent
more than one (1) month in advance without the prior written consent of Lender.

     With respect to the assignment contained in paragraph (F) of this Mortgage,
Mortgagor shall, from time to time upon request of Lender, specifically assign
to Lender as additional security hereunder, by an instrument in writing in such
form as may be approved by Lender, all right, title and interest of Mortgagor in
and to any and all leases now or hereafter on or affecting the Property,
together with all security therefor and all monies payable thereunder, subject
to the conditional permission hereinabove given to Mortgagor to collect the
rentals under any such lease. Mortgagor shall also execute and deliver to Lender
any notification, financing statement or other document required by Lender to
perfect the foregoing assignment as to any such lease. The provisions of this
paragraph 1.11 shall be subject to the provisions of said paragraph (F).

     1.12 Lender's Performance of Defaults. If Mortgagor defaults in the payment
of any tax, assessment, encumbrance or other imposition, in its obligation to
furnish insurance hereunder, or in the performance or observance of any other
covenant, condition or term in this Mortgage or the Loan Documents, Lender may,
to preserve its interest in the Property, perform or observe the same, and all
payments made (whether such payments are regular or accelerated payments) and
costs and expenses incurred or paid by Lender in connection therewith shall
become due and payable immediately. The amounts so incurred or paid by Lender
together with interest thereon at the Default Rate (as such term is defined in
the Financing Agreement) from the date incurred until paid by Mortgagor, shall
be added to the Obligations and secured by the lien of this Mortgage. Lender is
hereby empowered to enter and authorize others to enter upon the Property or any
part thereof for the purpose of performing or observing any such defaulted
covenant, condition or term, without thereby becoming liable to Mortgagor or any
person in possession holding under Mortgagor.

                                       11

<PAGE>

     1.13 Use of Property. Mortgagor covenants that the Property will be used,
if at all, for the purposes set forth in Schedule C.

     1.14 Required Notices. Mortgagor shall notify Lender promptly of the
occurrence of any of the following: (i) receipt of notice from any governmental
authority relating to the Property; (ii) receipt of a notice from any tenant
leasing all or any portion of the Property; (iii) any change in the occupancy of
the Property; (iv) receipt of any notice from the holder of any other lien or
security interest in the Property; or (v) commencement of any judicial or
administrative proceedings by or against or otherwise affecting Mortgagor, the
Property or any Borrower or entity controlled by or under common control with
Mortgagor, or any other action by any creditor thereof as a result of any
default under the terms of any loan.

     1.15 Future Indebtedness of Mortgagor. The lien of this Mortgage secures,
as of the date hereof, without further act, all Obligations, and any additional
indebtedness, whether direct, indirect, existing, future, contingent or
otherwise, made by Lender to or for the benefit of Mortgagor and the other
Borrowers from time to time hereafter; provided, however, that the total
additional indebtedness secured hereby shall in no event exceed the principal
sum of Twenty-Two Million Dollars ($22,000,000), plus interest, costs and
advances made by Lender to protect or preserve the Property or the lien hereof
on the Property, or for taxes, assessments, or insurance premiums as herein
provided.

                                   ARTICLE TWO

                                    DEFAULTS

     2.01 Event of Default. The term "Event of Default", wherever used in this
Mortgage, shall have the meaning ascribed to such term in the Financing
Agreement.

                                  ARTICLE THREE

                                    REMEDIES

     3.01 Acceleration of Maturity. If an Event of Default shall have occurred,
then all of the Obligations secured hereby shall, at Lender's option,
immediately become due and payable without notice or demand, time being of the
essence hereof; and no omission on the part of Lender to exercise such option
when entitled to do so shall be construed as a waiver of such right.

     3.02 Lender's Power of Enforcement. If an Event of Default shall have
occurred, Lender may, either with or without entry or taking possession as
hereinabove provided or otherwise, and without regard to whether or not the
Obligations shall be due and without prejudice to the right of Lender thereafter
to bring any action for any default existing at the time such earlier action was
commenced, proceed by any appropriate action or proceeding: (a) to enforce
payment of the Obligations or the performance of any term hereof or any other
right; (b) to enforce this Mortgage and to sell, as an entirety or in separate
lots or parcels, the Property

                                       12

<PAGE>

under the judgment or decree of a court or courts of competent jurisdiction; and
(c) to pursue any other remedy available to it. Lender shall take action either
by such proceedings or by the exercise of its powers with respect to entry or
taking possession, or both, as Lender may determine.

                                       13

<PAGE>

     3.03 Lender's Right to Enter and Take Possession, Operate and Apply Income.

          (a) If an Event of Default shall have occurred, (i) Mortgagor upon
demand of Lender shall forthwith surrender to Lender the actual possession and
if and to the extent permitted by law, Lender itself, or by such officers or
agents as it may appoint, may enter upon and take possession of the Property and
may exclude Mortgagor and its agents and employees wholly therefrom and may have
joint access with Mortgagor to the books, papers and accounts of Mortgagor; and
(ii) Mortgagor will pay monthly in advance to Lender on Lender's entry into
possession, or to any receiver appointed to collect the rents, income and other
benefits of the Property, the fair and reasonable rental value for the use and
occupation of such part of the Property as may be in possession of Mortgagor,
and upon default in any such payment will vacate and surrender possession of
such part of the Property to Lender or to such receiver and, in default thereof,
Mortgagor may be evicted by summary proceedings or otherwise.

          (b) If Mortgagor shall for any reason fail to surrender or deliver the
Property or any part thereof after Lender's demand, Lender may obtain a judgment
or decree conferring on Lender the right to immediate possession or requiring
Mortgagor to deliver immediate possession of all or part of the Property to
Lender, to the entry of which judgment or decree Mortgagor hereby specifically
consents. Mortgagor shall pay to Lender, upon demand, all reasonable costs and
expenses of obtaining such judgment or decree and compensation to Lender, its
attorneys and agents, and all such costs, expenses and compensation shall, until
paid, be secured by the lien of this Mortgage.

          (c) Upon every such entering upon or taking of possession, Lender may
hold, store, use, operate, manage and control the Property and conduct the
business thereof, and, from time to time:

               (i) Make all necessary and proper maintenance, repairs, renewals,
     replacements, additions, betterments and improvements thereto and thereon
     and purchase or otherwise acquire additional fixtures, personalty and other
     property;

               (ii) Insure or keep the Property insured;

               (iii) Manage and operate the Property and exercise all the rights
     and powers of Mortgagor in its name or otherwise with respect to the same;

               (iv) Enter into agreements with others to exercise the powers
     herein granted Lender, all as Lender from time to time may determine; and
     Lender may collect and receive all the rents, income and other benefits
     thereof, including those past due as well as those accruing thereafter; and
     shall apply the monies so received by Lender in such priority as Lender may
     determine to (1) the payment of the Obligations; (2) the deposits for taxes
     and assessments and insurance premiums due; (3) the cost of insurance,
     taxes, assessments and proper charges upon the Property or any part
     thereof; (4) the expenses of operating, maintaining, repairing and
     improving the Property, including without limitation renting commissions
     and rental collection commissions paid to an

                                       14

<PAGE>

     agent of Lender or of the receiver; and (5) the compensation, expenses and
     disbursements of the agents, attorneys and other representatives of Lender.
     All costs, expenses and liabilities of every character incurred by Lender
     in managing, operating and maintaining the Property, not paid out of rent
     as hereinabove provided, shall constitute additional Obligations secured
     hereby. While in possession of the Property, Lender or the receiver shall
     be liable to account only for the rents, issues and profits actually
     received.

     Lender shall surrender possession of the Property to Mortgagor only when
all Obligations secured hereby and all amounts under any of the terms of this
Mortgage shall have been paid and all defaults cured or waived. The same right
of taking possession, however, shall exist if any subsequent Event of Default
shall occur and be continuing.

     3.04 Reserved.

     3.05 Leases. Lender is authorized to enforce this Mortgage subject to the
rights of any tenants of the Property, and the failure to make any such tenants
parties defendant to any such enforcement proceedings and to foreclose their
rights will not be, nor be asserted by Mortgagor to be, a defense to any
proceedings instituted by Lender to collect the sums secured hereby or to
collect any deficiency remaining unpaid after the sale of the Property.

     3.06 Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws. Mortgagor agrees to the full extent permitted by law that in case of a
default in its part hereunder, neither Mortgagor nor anyone claiming through or
under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, extension or redemption laws now or hereafter in force,
in order to prevent or hinder the enforcement of this Mortgage or the absolute
sale of the Property or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereat, and Mortgagor, for
itself and all who may at any time claim through or under it, hereby waives, to
the full extent that it may lawfully so do, the benefit of all such laws, and
any and all right to have the assets comprising the Property marshalled upon any
enforcement of the lien hereof and agrees that any court having jurisdiction to
enforce such lien may sell the Property in part or as an entirety.

     3.07 Receiver. If an Event of Default shall have occurred, Lender, to the
extent permitted by law and without regard to the value or adequacy of the
security for the Obligations secured hereby, shall be entitled as a matter of
right if it so elects to the appointment of a receiver to enter upon and take
possession of the Property and to collect all rents, income and other benefits
thereof and apply the same as the court may direct, and any such receiver shall
be entitled to hold, store, use, operate, manage and control the Property and
conduct the business thereof as would Lender pursuant to Paragraph 3.03(c)
above. The expenses, including receiver's fees, attorney's fees, costs and
agent's compensation, incurred pursuant to the powers herein contained shall be
secured by this Mortgage. The right to enter and take possession of and to
manage and operate the Property and to collect all rents, income and other
benefits thereof, whether by a receiver or otherwise, shall be cumulative to any
other right or remedy hereunder or afforded by law and may be exercised
concurrently therewith or independently thereof. Lender

                                       15

<PAGE>

shall be liable to account only for such rents, income and other benefits
actually received by Lender, whether received pursuant to this paragraph or
paragraph 3.03. Notwithstanding the appointment of any receiver or other
custodian, Lender shall be entitled as pledgee to the possession and control of
any cash, deposits, or instruments at the time held by, or payable or
deliverable under the terms of this Mortgage to, Lender.

     3.08 Suits to Protect the Property. Lender shall have the power and
authority to institute and maintain any suits and proceedings as Lender may deem
advisable (a) to prevent any impairment of the Property by any acts which may be
unlawful or any violation of this Mortgage, (b) to preserve or protect its
interest in the Property, and (c) to restrain the enforcement of or compliance
with any legislation or other government enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement or compliance with
such enactment, rule or order might impair the security hereunder or be
prejudicial to Lender's interest.

     3.09 Proofs of Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting Mortgagor or any guarantor, co-maker or endorser
of any of Mortgagor's obligations, its creditors or its property, Lender, to the
extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have its claims
allowed in such proceedings for the entire amount due and payable by Mortgagor
under this Mortgage, the Financing Agreement and any other instrument securing
the Obligations, at the date of the institution of such proceedings, and for any
additional amounts which may become due and payable by Mortgagor after such
date.

     3.10 Application of Monies by Lender.

          (a) Upon the occurrence of an Event of Default, Lender shall be
entitled to sue for and to recover judgment against Mortgagor for the whole
amount of the Obligations due and unpaid together with costs and expenses,
including without limitation, the reasonable compensation, expenses and
disbursements of Lender's agents, attorneys and other representatives, either
before, after or during the pendency of any proceedings for the enforcement of
this Mortgage, and the right of Lender to recover such judgment shall not be
affected by any taking possession hereunder, or by the exercise of any other
right, power or remedy for the enforcement of the terms of this Mortgage.

          (b) In case of a sale of all or any part of the Property and the
application of the proceeds of sale to the payment of the Obligations secured
hereby, Lender shall be entitled to enforce payment from Mortgagor of all
Obligations then remaining due and unpaid and to recover judgment against
Mortgagor for any portion thereof remaining unpaid, with interest.

          (c) Mortgagor hereby agrees, to the extent permitted by law, that no
recovery of any such judgment by Lender and no attachment or levy of any
execution upon any of the Property or any other property shall in any way affect
the lien of this Mortgage upon the

                                       16

<PAGE>

Property or any part thereof or any lien, rights, powers or remedies of Lender
hereunder, but such lien, rights, powers and remedies shall continue unimpaired
as before.

          (d) Any monies collected or received by Lender under this paragraph
3.10 shall be applied to the payment of reasonable compensation, expenses and
disbursements of the agents, attorneys and other representatives of Lender, and
the balance remaining shall be applied to the payment of the Obligations secured
hereby.

          (e) The provisions of this paragraph shall not be deemed to limit or
otherwise modify the provisions of any guaranty of the Obligations of Mortgagor
to Lender.

     3.11 Delay or Omission; No Waiver. No delay or omission of Lender to
exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to waive
any such Event of Default or to constitute acquiescence therein. Every right,
power and remedy given to Lender may be exercised from time to time and as often
as may be deemed expedient by Lender.

     3.12 No Waiver of One Default to Affect Another. No waiver of any Event of
Default hereunder shall extend to or affect any subsequent or any other Event of
Default then existing, or impair any rights, powers or remedies consequent
thereon. If Lender (a) grants forbearance or an extension of time for the
payment of any Obligations secured hereby; (b) takes other or additional
security for the payment thereof; (c) waives or does not exercise any right
granted in the Financing Agreement; (d) releases any part of the Property from
the lien of this Mortgage; (e) consents to the filing of any map, plat or replat
of the Land; (f) consents to the granting of any easement on the Land; or (g)
makes or consents to any agreement changing the terms of this Mortgage or
subordinating the lien or any charge hereof, no such act or omission shall
release, discharge, modify, change or affect the Obligations of Mortgagor. No
such act or omission shall preclude Lender from exercising any right, power or
privilege herein granted or intended to be granted in case of any Event of
Default then existing or of any subsequent Event of Default nor shall the lien
of this Mortgage be altered hereby, except to the extent of releases as
described in subparagraph (d) above of this paragraph 3.12.

     3.13 Discontinuance of Proceedings; Position of Parties Restored. If Lender
shall have proceeded to enforce any right or remedy under this Mortgage and such
proceedings shall have been discontinued or abandoned for any reason, or such
proceedings shall have resulted in a final determination adverse to Lender, then
and in every such case Mortgagor and Lender shall be restored to their former
positions and rights hereunder, and all rights, powers and remedies of Lender
shall continue as if no such proceedings had occurred or had been taken.

     3.14 Remedies Cumulative. No right, power or remedy conferred upon or
reserved to Lender by this Mortgage or the Loan Documents is exclusive of any
other right, power or remedy, but each and every such right, power and remedy
shall be cumulative and concurrent and shall be in addition to any other right,
power and remedy given under the Loan Documents, or now or hereafter existing at
law, in equity or by statute.

                                       17

<PAGE>

                                  ARTICLE FOUR

                 TRANSFER OR FURTHER ENCUMBRANCE OF THE PROPERTY

     4.01 Transfer or Further Encumbrance of the Property. In the event of any
sale, conveyance, transfer, lease, pledge or further encumbrance of the Property
or any interest in or any part of the Property, or any further assignment of
rents from the Property without the prior written consent of Lender then, at
Lender's option, Lender may declare all Obligations to be due and payable
immediately without demand or notice. Lender's consent shall be within its sole
and absolute discretion, and Lender specifically reserves the right to condition
its consent upon (by way of illustration but not of limitation) its approval of
the financial management ability of the purchaser, transferee, lessee, pledgee
or assignee, upon an agreement to escalate the interest rate on the Obligations
to Lender's then current interest rate for similarly situated properties, upon
the assumption of the Obligations and this Mortgage by the purchaser,
transferee, lessee, pledgee or assignee, upon the receipt of guaranties of the
indebtedness satisfactory to Lender or upon payment to Lender of a reasonable
assumption fee. Any purchaser, transferee, lessee, pledgee or assignee shall be
deemed to have assumed and agreed to pay the Obligations secured by this
Mortgage and to have assumed and agreed to be bound by the terms and conditions
of this Mortgage, including the terms of this paragraph, unless Lender
specifically agrees in writing to the contrary. Mortgagor agrees that in the
event the ownership of the Property or any part thereof becomes vested in a
person other than Mortgagor, Lender may, without notice to Mortgagor (except as
required by applicable law), deal in any way with such successor or successors
in interest with reference to this Mortgage and the Obligations hereby secured
without in any way vitiating or discharging Mortgagor's liability hereunder or
under the Loan Documents. No transfer or encumbrance of the Property or any
interest therein and no forbearance or assumption by any person with respect to
this Mortgage and no extension to any person of the time for payment of the
Obligations hereby secured given by Lender shall operate to release, discharge,
modify, change or affect the liability of Mortgagor either in whole or in part,
unless Lender specifically agrees in writing to the contrary.

                                  ARTICLE FIVE

                            MISCELLANEOUS PROVISIONS

     5.01 Successors and Assigns Included in Parties. Whenever one of the
parties hereto is named or referred to herein, the heirs, personal
representatives, successors and assigns of such party shall be included and all
covenants and agreements contained in this Mortgage, by or on behalf of
Mortgagor or Lender shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed or not.

                                       18

<PAGE>

     5.02 Addresses for Notices, Etc.

          (a) Except as may be otherwise provided herein, any notice, report,
demand or other instrument authorized or required to be given or furnished under
this Mortgage to Mortgagor or Lender shall be in writing, shall be sent by
certified or registered mail, return receipt requested, personal delivery
against receipt, or by telegraph or facsimile and, unless otherwise expressly
permitted herein, shall be deemed to have been validly served, given or
delivered when delivered against receipt or one (1) business day after deposit
in the United States mail, postage prepaid, or, in the case of telegraphic
notice, when delivered to the telegraph company, or, in the case of facsimile
notice, when sent, answer back, addressed as follows:

     If to Lender, at: The CIT Group/Commercial Services, Inc.
                       301 South Tryon Street
                       Charlotte, North Carolina 28202
                       Attention: Account Executive - Crown Crafts et al.
                       Facsimile No.: 704-339-2894

     with a copy to:   Hunton & Williams LLP
                       Bank of America Plaza, Suite 3500
                       101 South Tryon Street
                       Charlotte, North Carolina 28280
                       Attention: Haywood A. Barnes
                       Facsimile No.: 704-378-4790

     If to Mortgagor:  Churchill Weavers, Inc.
                       c/o Crown Crafts, Inc.
                       916 South Burnside Avenue
                       Gonzalez, Louisiana 70707
                       Attention: Randall Chestnut
                       Facsimile No.: 225-647-9112

     With a copy to:   Rogers & Hardin
                       229 Peachtree Street NE
                       2700 International Tower
                       Atlanta, Georgia 30303
                       Attention: Steven E. Fox
                       Facsimile No.: 404-525-2224

          (b) Either party may change the address to which any such notice,
report, demand or other instrument is to be delivered or mailed, by furnishing
written notice of such change to the other party, but no such notice of change
shall be effective unless and until received by such other party.

                                       19

<PAGE>

     5.03 Headings. The headings of the articles, sections, paragraphs and
subdivisions of this Mortgage are for convenience of reference only, are not to
be considered a part hereof, and shall not limit or expand or otherwise affect
any of the terms hereof.

     5.04 Invalid Provisions to Affect No Others. In the event that any of the
covenants, agreements, terms or provisions contained in the Loan Documents shall
be deemed invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained in the Loan
Documents shall be in no way affected, prejudiced or disturbed thereby; and if
any application of any term, restriction or covenant to any person or
circumstances is deemed illegal or unenforceable, the application of such term,
restriction or covenant to other persons and circumstances shall remain
unaffected to the extent permitted by law.

     5.05 Changes, Etc. Neither this Mortgage nor any term hereof may be
changed, waived, discharged or terminated orally, or by any action or inaction,
but only by an instrument in writing signed by Lender or Mortgagor, as the case
may be, against which enforcement of the change, waiver, discharge or
termination is sought. The modification hereof or of any of the Loan Documents
or the release of any part of the Property from the lien hereof shall not impair
the priority of the lien of this Mortgage.

     5.06 Governing Law. This Mortgage shall be construed, interpreted, enforced
and governed by and in accordance with the laws of the State of Kentucky.

                                       20

<PAGE>

     IN WITNESS WHEREOF, Mortgagor has caused this Mortgage and Security
Agreement to be duly executed under seal in its corporate name by its duly
authorized corporate officers on the day and year first above written.

                                        CHURCHILL WEAVERS, INC.

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

STATE OF Louisiana

Parish OF Ascension

     I, the undersigned authority, a Notary Public in and for said County, in
said state, hereby certify that E. Randall Chestnut, the Vice President of
Churchill Weavers, Inc., who is personally known to me to be the same person
whose name is signed to the foregoing instrument, acknowledged before me on this
day that, being informed of the contents of the instrument, he, in his capacity
as such Vice President and with full authority, executed the same voluntarily
for and as the act of said corporation on the day the same bears date.

     Given under my hand this the 7th day of July, 2006.

                                        /s/ Doretta Trichel
                                        ----------------------------------------
                                        Notary Public Doretta Trichel ID # 50325
                                        My Commission Expires: is for life
                                        Resident of Ascension Parish

                                       21

<PAGE>

This document was prepared by:

Haywood A. Barnes, Esq.

Hunton & Williams LLP

Bank of America Plaza,

Suite 3500, 101 South Tryon Street

Charlotte, North Carolina 28280

/s/ Haywood A. Barnes
-------------------------------------
Haywood A. Barnes, Esq.

                                       22

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