EXHIBIT 10.2
REVOLVING LINE OF CREDIT NOTE

 

$5,000,000.00   Houston, Texas

July 15, 2010

FOR VALUE RECEIVED, the undersigned SHARPS COMPLIANCE, INC. OF TEXAS
("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at the Houston RCBO, 1000 Louisiana Street,
3rd Floor, Houston, Texas
77002-5027, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Five Million Dollars ($5,000,000.00), or so much thereof as may
be advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

(a)     "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in Texas are authorized or required by law to close.

(b)     "Daily One Month LIBOR" means, for any day, the rate of interest equal
to LIBOR then in effect for delivery for a one (1) month period.

(c)      "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), or three (3) months, as designated by Borrower,
during which all or a portion of the outstanding principal balance of this Note
bears interest determined in relation to LIBOR; provided however, that no Fixed
Rate Term may be selected for a principal amount less than One Hundred Thousand
Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall
extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would
end on a day which is not a Business Day, then such Fixed Rate Term shall be
extended to the next succeeding Business Day.

(d)      "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:

LIBOR =
Base LIBOR
   
100% - LIBOR Reserve Percentage
 

(i)           "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank (A) for the purpose of calculating effective rates of
interest for loans making reference to LIBOR, as the Inter-Bank Market Offered
Rate, with the understanding that such rate is quoted by Bank for the purpose of
calculating effective rates of interest for loans making reference thereto, on
the first day of a Fixed Rate Term for delivery of funds on said date for a
period of time approximately equal to the number of days in such Fixed Rate Term
and in an amount approximately equal to the principal amount to which such Fixed
Rate Term applies , or (B) for the purpose of calculating effective rates of
interest for loans making reference to the Daily One Month LIBOR Rate, as the
Inter-Bank Market Offered Rate in effect from time to time

 
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for delivery of funds for one (1) month in amounts approximately equal to the
principal amount of such loans.  Borrower understands and agrees that Bank may
base its quotation of the Inter-Bank Market Offered Rate upon such offers or
other market indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S. dollar
deposits on the London Inter-Bank Market.
 
(ii)           "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable term of this Note.

INTEREST:

(a)           Interest.  The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed,
unless such calculation would result in a usurious rate, in which case interest
shall be computed on the basis of a 365/366-day year, as the case may be, actual
days elapsed) at the lesser of (i) either (A) a fluctuating rate per annum two
and one half percent (2.5%) above the Daily One Month LIBOR Rate in effect from
time to time, or (B) a fixed rate per annum determined by Bank to be two and one
half percent (2.5%) above LIBOR in effect on the first day of the applicable
Fixed Rate Term, or (ii) the Maximum Rate.  When interest is determined in
relation to the Daily One Month LIBOR Rate, each change in the interest rate
shall become effective each Business Day that the Bank determines that the Daily
One Month LIBOR Rate has changed.  Bank is hereby authorized to note the date,
principal amount and interest rate applicable thereto and any payments made
thereon on Bank's books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.

(b)           Selection of Interest Rate Options.  At any time any portion of
this Note bears interest determined in relation to LIBOR for a Fixed Rate Term,
it may be continued by Borrower at the end of the Fixed Rate Term applicable
thereto so that all or a portion thereof bears interest determined in relation
to the Daily One Month LIBOR Rate or to LIBOR for a new Fixed Rate Term
designated by Borrower.  At any time any portion of this Note bears interest
determined in relation to the Daily One Month LIBOR Rate, Borrower may at any
time convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as
Borrower requests an advance hereunder or wishes to select an interest rate
determined in relation to the Daily One Month LIBOR Rate or a Fixed Rate Term
for all or a portion of the outstanding principal balance hereof, and at the end
of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection for a Fixed Rate Term, the length of
the applicable Fixed Rate Term.  Any such notice may be given by telephone (or
such other electronic method as Bank may permit) so long as, with respect to
each LIBOR selection for a Fixed Rate Term, (A) if requested by Bank, Borrower
provides to Bank written confirmation thereof not later than three (3) Business
Days after such notice is given, and (B) such notice is given to Bank prior to
10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during
any Business Day if Bank, at its sole option but without obligation to do so,
accepts Borrower's notice and quotes a fixed rate to Borrower.  If Borrower does
not immediately accept a fixed rate when quoted by Bank, the quoted rate shall
expire and any subsequent LIBOR request from Borrower shall be subject to a
redetermination by Bank of the applicable fixed rate.  If no specific
designation of interest is made at the time

 
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any advance is requested hereunder or at the end of any Fixed Rate Term,
Borrower shall be deemed to have made a Daily One Month LIBOR Rate interest
selection for such advance or the principal amount to which such Fixed Rate Term
applied.
 
(c)           Taxes and Regulatory Costs.  Borrower shall pay to Bank
immediately upon demand, in addition to any other amounts due or to become due
hereunder, any and all (i) withholdings, interest equalization taxes, stamp
taxes or other taxes (except income and franchise taxes) imposed by any domestic
or foreign governmental authority and related in any manner to LIBOR, and (ii)
future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR.  In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.

(d)           Payment of Interest.  Interest accrued on this Note shall be
payable on the fifteenth day of each month, commencing August 15, 2010.

(e)           Default Interest.  From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Bank's option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest (computed on the basis of a 360-day year, actual
days elapsed, unless such calculation would result in a usurious rate, in which
case interest shall be computed on the basis of a 365/366-day year, as the case
may be, actual days elapsed) at an increased rate equal to the lesser of (i) a
rate per annum equal to four percent (4%) above the rate of interest from time
to time applicable to this Note, or (ii) the Maximum Rate.

BORROWING AND REPAYMENT:

(a)           Borrowing and Repayment.  Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated
above.  The unpaid principal balance of this obligation at any time shall be the
total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for Borrower, which balance may be endorsed
hereon from time to time by the holder.  The outstanding principal balance of
this Note shall be due and payable in full on July 15, 2012.

(b)           Advances.  Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or written
request of (i) David P. Tusa, any one acting alone, who are authorized to
request advances and direct the disposition of any advances until written notice
of the revocation of such authority is received by the holder at the office
designated above, or (ii) any person, with respect to advances deposited to the
credit of any deposit account of Borrower, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against

 
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such account.  The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by Borrower.
 
(c)           Application of Payments.  Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.  All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Daily One Month LIBOR Rate, if any, and second, to
the outstanding principal balance of this Note which bears interest determined
in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.

PREPAYMENT:

(a)           Daily One Month LIBOR Rate.  Borrower may prepay principal on any
portion of this Note which bears interest determined in relation to the Daily
One Month LIBOR Rate at any time, in any amount and without penalty.

(b)           LIBOR.  Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof.  In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto, Borrower shall pay to Bank immediately upon demand a fee which is the
sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:

 
(i)
 
Determine the amount of interest which would have accrued each month on the
amount prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the Fixed Rate Term applicable thereto.

 
(ii)
 
Subtract from the amount determined in (i) above the amount of interest which
would have accrued for the same month on the amount prepaid for the remaining
term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for
new loans made for such term and in a principal amount equal to the amount
prepaid.

 
(iii)
 
If the result obtained in (ii) for any month is greater than zero, discount that
difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities.  Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank.

 
 
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EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of July 15, 2010, as
amended from time to time (the "Credit Agreement").  Any default in the payment
or performance of any obligation under this Note, or any defined event of
default under the Credit Agreement, shall constitute an "Event of Default" under
this Note.

MISCELLANEOUS:

(a)           Remedies.  Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate.  Borrower shall pay to the holder immediately upon demand the full
amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

(b)           Obligations Joint and Several.  Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.

(c)           Governing Law.  This Note shall be governed by and construed in
accordance with the laws of the State of Texas.

(d)           Savings Clause.  It is the intention of the parties to comply
strictly with applicable usury laws.  Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the “Maximum Rate”).  If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this

 
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Note or any Related Document shall be obligated to pay the amount of such
interest to the extent it is in excess of the Maximum Rate; (iii) any such
excess interest which is or has been received by Bank, notwithstanding this
paragraph, shall be credited against the then unpaid principal balance hereof or
thereof, or if this Note or any Related Document has been or would be paid in
full by such credit, refunded to Borrower; and (iv) the provisions of this Note
and each Related Document, and any other communication to Borrower, shall
immediately be deemed reformed and such excess interest reduced, without the
necessity of executing any other document, to the Maximum Rate.  The right to
accelerate the maturity of this Note or any Related Document does not include
the right to accelerate, collect or charge unearned interest, but only such
interest that has otherwise accrued as of the date of acceleration.  Without
limiting the foregoing, all calculations of the rate of interest contracted for,
charged, taken, reserved or received in connection with this Note and any
Related Document which are made for the purpose of determining whether such rate
exceeds the Maximum Rate shall be made to the extent permitted by applicable
laws by amortizing, prorating, allocating and spreading during the period of the
full term of this Note or such Related Document, including all prior and
subsequent renewals and extensions hereof or thereof, all interest at any time
contracted for, charged, taken, reserved or received by Bank.  The terms of this
paragraph shall be deemed to be incorporated into each Related Document.
 
To the extent that either Chapter 303 or 306, or both, of the Texas Finance Code
apply in determining the Maximum Rate, Bank hereby elects to determine the
applicable rate ceiling by using the weekly ceiling from time to time in effect,
subject to Bank’s right subsequently to change such method in accordance with
applicable law, as the same may be amended or modified from time to time.

(e)           Right of Setoff; Deposit Accounts.  Upon and after the occurrence
of an Event of Default, (i) Borrower hereby authorizes Bank, at any time and
from time to time, without notice, which is hereby expressly waived by Borrower,
and whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect.  Borrower hereby grants to Bank a security interest in
all deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.

(f)           Business Purpose.  Borrower represents and warrants that all loans
evidenced by this Note are for a business, commercial, investment, agricultural
or other similar purpose and not primarily for a personal, family or household
use.

(g)           Certain Tri-Party Accounts.  Borrower and Bank agree that Chapter
346 of the Texas Finance Code (which regulates certain revolving credit accounts
and revolving triparty accounts) shall not apply to any revolving loan accounts
created under this Note or maintained in connection herewith.

 
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NOTICE:  THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
EVIDENCED HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.

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

SHARPS COMPLIANCE, INC. OF TEXAS

By: ___________________________
      David P. Tusa, President
 
 
 
 
 
 
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