Revolving Line of Credit Promissory Note dated January 28, 2014, by and between Sharps Compliance, Inc. and a commercial bank

FOR VALUE RECEIVED, the undersigned, SHARPS COMPLIANCE, INC. OF TEXAS, a Texas corporation (the "Maker", whether one or more, and if more than one, jointly and severally) promises to pay to the order of [REDACTED], a [REDACTED] state chartered bank (the "Payee", together with any and all subsequent owners and holders of this Note), at its offices at [REDACTED], or such other place as Payee, in Payee's sole discretion, shall designate in writing to Maker, which at the time of payment is legal tender of the United States of America for payment of public and private debts, without offset, the principal sum of $3,000,000.00, or so much thereof as may be advanced and outstanding hereunder, together with interest thereon from and after the date hereof until maturity at a rate per annum which shall from day to day be equal to the lesser of (a) a fluctuating rate per annum (the "Contract Rate") which is equal to the Index Rate (as hereinafter defined) in effect from day to day, each such change in the Contract Rate to become effective, without notice to Maker, on the effective date of each change in the Index Rate, or (b) the Maximum Rate (as hereinafter defined); provided, however, if at any time the Contract Rate shall exceed the Maximum Rate, thereby causing the Contract Rate to be limited to the Maximum Rate, then notwithstanding any subsequent change in either the Contract Rate or the Maximum Rate that would otherwise reduce the Contract Rate to less than the Maximum Rate, the Contract Rate shall remain equal to the Maximum Rate until the total amount of interest accrued equals the amount of interest which would have accrued if the Contract Rate had at all times been in effect.  As used herein, the term "Index Rate" shall mean at any time the prime rate of interest per annum then most recently published in The Wall Street Journal's "Money Rates" table.  If more than one prime rate is quoted in the table, then the highest prime rate will be the Index Rate.  Interest on this Note shall be computed on the basis of a year of 360 days, and for the actual number of days elapsed, unless such calculation would result in a usurious rate, in which case interest shall be calculated on the per annum basis of 365 or 366 days, as the case may be.

It is expressly understood, notwithstanding any provision herein to the contrary, that this Note is a revolving line of credit Note established pursuant to the terms of a Letter Loan Agreement (the "Loan Agreement") of even date herewith, by and between Maker and Payee.  Subsequent and periodic advances in various increments will be made to Maker pursuant to the Loan Agreement up to, but in no event to exceed, the maximum of the face value hereof.  The unpaid principal balance of this Note at any time shall be the total amounts loaned or advanced hereunder by Payee, less the amount of payments or prepayments of principal made hereon by or for the account of Maker.  It is contemplated that by reason of prepayments hereon, there may be times when no indebtedness is owing hereunder; provided, notwithstanding such occurrence, this Note shall remain valid and shall be in full force and effect as to the advances made pursuant to and under the terms of this Note subsequent to such occurrence.  Each advance and each payment on account of principal or interest shall be reflected by a notation made by Payee in its records kept in the ordinary course of its business with regard to this Note.  The aggregate unpaid amount of advances reflect­ed by the notations in such records shall be deemed rebuttable presumptive evidence of the principal amount owing under this Note, which amount Maker unconditionally promises to pay to the order of Payee under the terms hereof.  In the event that the unpaid principal amount hereof at any time, for any reason, exceeds the maximum amount specified in the Loan Agreement, Maker covenants and agrees to pay the excess principal amount immedi­ately upon demand and such excess principal amount shall in all respects be deemed to be included among the advances made pursuant to the terms of this Note and shall bear interest at the rate specified above.  Interest on this Note shall accrue only on the principal advanced from the time it is so advanced, at the Contract Rate.

Interest only, accruing and to accrue on this Note, shall be due and payable monthly as it accrues, beginning 1 month from the date hereof, and continuing regularly on the same day of each succeeding calendar month thereafter until 2 years from the date hereof, when the entire amount, principal and interest then remaining unpaid, shall be due and payable.

If a payment is 10 or more days late, Maker will pay a delinquency charge in an amount equal to the greater of (i) 5.0% of the amount of the delinquent payment up to the maximum amount of $1,500.00, or (ii) $25.00.  This amount is stipulated by Maker to be reasonable in order to compensate Payee for its additional costs incurred as a result of having to attend to such delinquency.  This late charge should be paid only once, but promptly, as to each respective late payment.  It is further agreed that the imposition of any such late payment fee shall in no way prejudice or limit Payee's right or remedies against Maker under this Note or the Security Instruments (as defined below).  All payments due under this Note shall be made by Maker without offset or other reduction.  Upon an Event of Default (as defined below) and the expiration of any notice and/or cure period provided in the Loan Agreement, regardless of whether or not there has been an acceleration of the indebtedness evidenced by this Note, and at all times after the maturity of the indebtedness evidenced by this Note (whether by acceleration or otherwise), Payee, at its option, may also, if permitted under Applicable Law (as defined below), do one or both of the following: (a) increase the Contract Rate to the Maximum Rate, and (b) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note (including any increased Contract Rate).

If any payment of principal or interest on this Note shall become due on a day which is not a Business Day (as defined below), such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computing of interest in connection with such payment.  In the event an installment, or the maturity date as set forth herein, is due on the 29th, 30th, or 31st day of the month, for each month which does not have a 29th, 30th, or 31st day, such installment, or the final payment, as applicable, shall be due on the last day of such month.  Payments received after Payee's cut-off times established from time to time or on weekends or bank holidays will be credited as of the next Business Day.  Any check, draft, money order or other instrument given in payment of all or any portion of this Note may be accepted by Payee and handled in collection in the customary manner, but the same shall not constitute payment or diminish any rights of Payee except to the extent that actual cash proceeds of such instrument are unconditionally received by Payee.

In the event any check, draft, money order, or other instrument or other form of remittance  used to make a payment to Payee is returned or dishonored for any reason, Maker shall pay to Payee, in addition to any other amounts to which Payee may be entitled hereunder, a reasonable processing fee of $30.00 (or the maximum amount provided from time to time in Section 3.506(b) of the Texas Business and Commerce Code, as it may be amended).  This processing fee should be paid once with respect to each return or dishonor.  It is further agreed that the imposition of any such processing fee shall in no way prejudice or limit Payee's rights or remedies against Maker under this Note or any of the Security Instruments or any other instrument.

Unless otherwise agreed in writing, or otherwise required by Applicable Law, interest on this Note will be cal­culated on the unpaid principal balance to the date each install­ment is paid and payments received will be applied in the following order of priority: (i) the payment or reimbursement of any expenses, costs, or obligations (other than the outstanding principal balance hereof and interest hereon) for which either Maker shall be obligated or Payee shall be entitled pursuant to the provisions of this Note or the other Security Instruments, (ii) the payment of accrued but unpaid interest hereon, and (iii) the payment of principal; provided, however, upon delinquency or other Event of Default, Payee reserves the right to apply installment payments among principal, interest, delinquency charges, collection costs, and other charges, at its discretion.

Maker shall have the privilege to prepay at any time, and from time to time, all or any part of the princi­pal amount of this Note, without notice, penalty or fee.  Except as expressly provided herein to the contrary, all prepayments on this Note shall be applied in the following order of priority: (i) the payment or reimbursement of any expenses, costs, or obligations (other than the outstanding principal balance hereof and interest hereon) for which either Maker shall be obligated or Payee shall be entitled pursuant to the provisions of this Note or the other Security Instruments, (ii) the payment of accrued but unpaid interest hereon, and (iii) the payment of all or any portion of the principal balance hereof then outstanding hereunder, in the inverse order of maturity.

In the event the Index Rate becomes unavailable or ceases to exist for any reason, Payee, in its sole discretion, shall designate a substi­tute Index Rate which is based upon comparable information to the prior index.  Payee shall notify Maker of the change of the index, but the failure of Payee to notify Maker shall in no way affect the calculation of the interest to accrue hereun­der or the effec­tive date of such change.

Maker agrees that upon the occurrence of any one or more of the following events of default ("Event of Default"):

(1)            failure of Maker to pay any installment of principal of or interest on this Note or on any other indebtedness of Maker to Payee when due; or

(2)            the occurrence of any event of default specified in any of the other documents evidencing, securing, governing, guaranteeing and/or pertaining to this Note including, but not limited to, the Loan Agreement and the Security Instruments;

the holder of this Note may, at its option, after the expiration of the notice and right to cure period provided in the Loan Agreement, (i) declare the outstanding principal balance of and accrued but unpaid interest on this Note at once due and payable, (ii) foreclose all liens securing payment hereof, (iii) pursue any and all other rights, remedies, and recourses available to the holder hereof, including but not limited to any such rights, remedies, or recourses under the Loan Agreement, any of the Security Instruments, or other loan documents, at law or in equity, or (iv) pursue any combination of the foregoing; PROVIDED, HOWEVER, IMMEDIATELY UPON THE OCCURRENCE OF ANY OF SUCH EVENT OF DEFAULT, PAYEE, AT ITS OPTION, MAY CEASE ALL ADVANCES ON THIS NOTE.

All makers, endorsers, sureties and guarantors hereof, as well as all other parties to become liable on this Note, hereby sever­ally: (i) except as specifically provided in the Loan Agreement,  waive notice of default, demand, notice of intent of demand, presentment for payment, notice of non‑payment, protest, notice of pro­test, grace, notice of intent to accelerate maturity, notice of accel­eration of maturity, filing of suit, diligence in collection or enforcing any of the security for this Note; (ii) except as specifically provided otherwise in the Security Instruments, agree that they are and shall be jointly, severally, directly, and primarily liable for the repayment of all sums due and owing under this Note; (iii) consent to any and all renewals, ex­tensions, and modification in the time of payment and to any other indulgence with respect to this Note; (iv) agree that Payee shall not be required first to institute suit or exhaust its remedies against Maker or others liable or to become liable on this Note, or to enforce its rights against them or any security for this Note; (v) agree to any substitution, subor­dination, exchange, or release of any security for this Note, or the release of any party primarily or secondarily liable on this Note; and (vi) acknowledge that Payee has no duty of good faith to Maker and that no fiduciary, trust, or other special relationship exists between Maker and Payee.  Maker acknowledges and agrees that it may be required to pay this Note in full without assistance from any other party, or any collateral or security for this Note.  Payee shall not be required to mitigate damages, file suit, or take any action to foreclose, proceed against, or exhaust any collateral or security in order to enforce the payment of this Note.

Upon the occurrence of an Event of Default, and if any action is taken by Payee to enforce the terms and provisions of this Note, including, but not limited to, this Note is placed in the hands of an attorney for collection, or suit is brought on same, or this Note is collected through any Probate, Bankruptcy Court, or any judicial proceeding whatsoever, then Maker agrees and promises to pay Payee's reasonable expenses and costs, including, but not limited to, attorney's fees.

This Note, and its validity, enforcement, and interpretation, shall be governed by and construed in accordance with Applicable Law, without regard to any conflict of law rules and principles.  It is expressly provided and stipulated that notwith­standing any provision of this Note or any other instrument evidencing or securing the loan evidenced hereby, in no event shall the aggregate of all interest paid by Maker to Payee under this Note ever exceed the Maximum Rate on the principal balance of this Note from time to time advanced and remaining unpaid.  In this connection, it is expressly stip­ulated and agreed that it is the intent of Payee and Maker in the execution and delivery of this Note to contract in strict compliance with Applicable Law as defined below.  In further­ance thereof, none of the terms of this Note or any other instrument evidencing or securing the loan evidenced hereby, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, at a rate in excess of the Maximum Rate permitted to be charged of Maker under Applicable Law.  Maker or any guarantors, endorsers, or other parties now or hereafter becoming liable for payment of this Note shall never be liable for interest in excess of the Maximum Rate, and the provision of this paragraph and the immediately succeeding paragraph shall govern over all other provisions of this Note and any instru­ments evidencing or securing the loan evidenced hereby, should such provisions be in apparent conflict here­with.

Specifically and without limiting the generality of the foregoing paragraph, it is expressly provided that:

(i)              In the event of prepayment of the principal of this Note (if permitted hereunder) or the payment of the principal of this Note prior to the stated maturity date hereof resulting from acceleration of maturity of this Note, if the aggregate amounts of interest accru­ing hereon prior to such payment plus the amount of any interest accruing after maturity and plus any other amounts paid or accrued in connection with the loan evi­denced hereby which by Applicable Law are deemed interest on the loan evi­denced by this Note and which aggregate amount paid or accrued (if calculated in accordance with the provisions of this Note other than this paragraph) would exceed the Maximum Rate, then in such event the amount of such excess shall be credited, as of the date paid, toward the payment of principal of this Note so as to reduce the amount of the final payment of principal due on this Note;

(ii)            If under any circumstance the aggregate amounts paid on the loan evidenced by this Note prior to and incident to the final payment hereof include amounts which by Applicable Law are deemed interest and which would exceed the Maximum Rate, Maker stipulates that such payment and collection will have been and will be deemed to have been the result of a mathematical error on the part of both Maker and Payee, and any excess shall be credited on the Note by Payee.  If this Note shall have been paid in full, Payee shall promptly refund the amount of such excess (to the extent only of the excess of such interest pay­ments above the Maximum Rate) upon the discovery of such error or notice thereof; and

(iii)           All amounts paid or agreed to be paid in connection with the indebtedness evidenced by this Note which would under Applicable Law be deemed interest shall, to the extent provided by Applicable Law, be amortized, prorated, allocated and spread throughout the full term of this Note.

As security for this Note and all indebtedness which may at any time be owing by any Maker under this Note to Payee, upon the occurrence of an Event of Default and the expiration of any right to cure period in the Loan Agreement, each Maker grants Payee a right of setoff on any property of any Maker in Payee's possession, including, without limitation, that which Payee may hold for collection or safekeep­ing, and on any money or accounts on deposit with Payee, and Payee may retain and apply the property, money, secu­rities, or ac­counts to the payment of this Note or such other indebtedness with or without notice to any Maker.  This right of Payee is in addition to any other right of setoff which Payee may have under Applicable Law.

As used herein, the term "Applicable Law" means the laws of the State of Texas and laws of the United States of America in effect from time to time and applicable to this Note.

As used herein, the term "Business Day" shall mean any day other than a Saturday, Sunday or federal banking holiday upon which Payee is closed.

As used herein, the term "Maximum Rate" means the maximum lawful non-usurious rate of interest (if any) which, under Applicable Law, Payee is permitted to charge Maker on this Note from time to time.  It is intended that Chapter 303 of the Texas Finance Code shall be included in the laws of the State of Texas in determining Applicable Law, and including, to the extent permitted by Applicable Law, any future amendments or any new laws coming into effect in the future to the extent a higher rate of interest is permitted by any such amendment or new law.  If Applicable Law does not provide for a maximum non-usurious rate of interest, the Maximum Rate shall be 24% per annum.

Except as otherwise provided herein or required by Applicable Law, any notice or communication required or permitted hereunder to be given to either Maker or Payee pursuant to the terms hereof shall be given in writing, sent by (i) personal delivery, or (ii) expedited delivery service with proof of delivery, or (iii) United States mail, postage prepaid, registered or certified mail, return receipt requested, or (iv) facsimile (provided that such facsimile is confirmed by expedited delivery service or by United States mail in the manner previously described), addressed to Maker or Payee at the address as contained herein or to such other address as either party shall have designated by written notice, sent in accordance with this paragraph at least 30 days prior to the date of the giving of such notice.  Except as provided otherwise, any such notice or communication shall be deemed to have been given and received either at the time of personal delivery, or in the case of mail, as of the date 3 Business Days after deposit in an official depository of the United States mail, or in the case of either delivery service or facsimile, upon receipt.  To the extent actual receipt is required, rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was received shall be deemed to be receipt of the notice, demand, request or other communication sent.

This Note is secured by all security agreements, guaranty agreements, loan agreements, collateral assignments, mortgages, deeds of trust and any other lien instruments executed by Maker, or any other party as pledgor, surety, or guarantor for Maker, in favor of Payee, includ­ing those executed simultaneously herewith, those previously executed and those hereafter executed (the "Security Instruments"), including, but not limited to, that certain Security Agreement of even date herewith, executed by Maker to Payee, covering accounts and inventory.

Where appropriate, any pertinent noun, verb or pronoun shall be construed and interpreted to include both the proper number and gender.  This Note shall not be renewed, extended, or modified except by a written instrument evidencing the same.