Document:

Exhibit 10.2

CHASE                                                        Line of Credit Note

                                                                   $1,500,000.00
                                                            Date: March 27, 2006

Promise to Pay. On or before March 27, 2008, for value received, SHARPS
COMPLIANCE CORP. (the "Borrower") promises to pay to JPMorgan Chase Bank, N.A.,
whose address is 707 Travis, 9th Floor, Houston, TX 77002 (the "Bank") or order,
in lawful money of the United States of America, the sum of One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00) or such lesser sum as is
indicated on Bank records, plus interest as provided below.

Definitions. As used in this Note, the following terms have the following
respective meanings:

"Adjusted LIBOR Rate" means, with respect to a LIBOR Rate Advance for the
relevant Interest Period, the sum of (i) the Applicable Margin plus (ii) the
quotient of (a) the LIBOR Rate applicable to such Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Interest Period.

"Advance" means a LIBOR Rate Advance or a Prime Rate Advance and "Advances"
means all LIBOR Rate Advances and all Prime Rate Advances under this Note.

"Applicable Margin" means with respect to any Prime Rate Advance, 0.00% per
annum and with respect to any LIBOR Rate Advance, 2.75% per annum.

"Business Day" means (i) with respect to any borrowing, payment or rate
selection of LIBOR Rate Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Texas and/or New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day other than a Saturday, Sunday or any other day on
which national banking associations are authorized to be closed.

"Interest Period" means, with respect to a LIBOR Rate Advance, a period of one
(1), three (3) or six (6) month(s) commencing on a Business Day selected by the
Borrower pursuant to this Note. Such Interest Period shall end on the day which
corresponds numerically to such date one (1), three (3) or six (6) month(s)
thereafter, as applicable, provided, however, that if there is no such
numerically corresponding day in such first, third or sixth succeeding month(s),
as applicable, such Interest Period shall end on the last Business Day of such
first, third or sixth succeeding month(s), as applicable. If an Interest Period
would otherwise end on a day which is not a Business Day, such Interest Period
shall end on the next succeeding Business Day, provided, however, that if said
next succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.

"LIBOR Rate" means with respect to any LIBOR Rate Advance for any Interest
Period, the interest rate determined by the Bank by reference to Page 3750 of
the Moneyline Telerate Service ("MTS") (or on any successor or substitute page
of the MTS, or any successor to or substitute for the MTS, providing rate
quotations comparable to those currently provided on Page 3750 of the MTS, as
determined by the Bank from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) to
be the rate at approximately 11:00 a.m. London time, two Business Days prior to
the commencement of the Interest Period for the offering by the Bank's London
office, of dollar deposits in an amount comparable to such LIBOR Rate Advance
with a maturity equal to such Interest Period. If no LIBOR Rate is available to
the Bank, the applicable LIBOR Rate for the relevant Interest Period shall
instead be the rate determined by the Bank to be the rate at which the Bank
offers to place deposits in U.S. dollars with first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, in the approximate amount of the
principal amount outstanding on such date and having a maturity equal to such
Interest Period.

"LIBOR Rate Advance" means any borrowing under this Note when and to the extent
that its interest rate is determined by reference to the Adjusted LIBOR Rate.

"Prime Rate" means the rate of interest per annum announced from time to time by
the Bank as its prime rate. The Prime Rate is a variable rate and each change in
the Prime Rate is effective from and including the date the change is announced
as being effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE THE BANK'S
LOWEST RATE.

"Prime Rate Advance" means any Advance under this Note when and to the extent
that its interest rate is determined by reference to the Prime Rate.

"Principal Payment Date" is defined in the paragraph entitled "Principal
Payments" below.

<PAGE>

"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.

"Reserve Requirement" means, with respect to an Interest Period, the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves) which is imposed under Regulation D.

Interest Rates. The Advance(s) evidenced by this Note may be drawn down and
remain outstanding as up to five (5) LIBOR Rate Advances and/or a Prime Rate
Advance. The Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of each Prime Rate Advance at the Prime Rate plus the
Applicable Margin and each LIBOR Rate Advance at the Adjusted LIBOR Rate.
Interest shall be calculated on the basis of the actual number of days elapsed
in a year of 360 days. In no event shall the interest rate applicable to any
Advance exceed the maximum rate allowed by law. Any interest payment which would
for any reason be deemed unlawful under applicable law shall be applied to
principal.

Bank Records. The Bank shall, in the ordinary course of business, make notations
in its records of the date, amount, interest rate and Interest Period of each
Advance hereunder, the amount of each payment on the Advances, and other
information. Such records shall, in the absence of manifest error, be conclusive
as to the outstanding principal balance of and interest rate or rates applicable
to this Note.

Notice and Manner of Electing Interest Rates on Advances. The Borrower shall
give the Bank written notice (effective upon receipt) of the Borrower's intent
to draw down an Advance under this Note no later than 2:00 p.m. Central time, on
the date of disbursement, if the full amount of the drawn Advance is to be
disbursed as a Prime Rate Advance and no later than 11:00 a.m. Central time
three (3) Business Days before disbursement, if any part of such Advance is to
be disbursed as a LIBOR Rate Advance. The Borrower's notice must specify: (a)
the disbursement date, (b) the amount of each Advance, (c) the type of each
Advance (Prime Rate Advance or LIBOR Rate Advance), and (d) for each LIBOR Rate
Advance, the duration of the applicable Interest Period; provided, however, that
the Borrower may not elect an Interest Period ending after the maturity date of
this Note. Each LIBOR Rate Advance shall be in a minimum amount of One Hundred
Thousand and 00/100 Dollars ($100,000.00). All notices under this paragraph are
irrevocable. By the Bank's close of business on the disbursement date and upon
fulfillment of the conditions set forth herein and in any other of the Related
Documents, the Bank shall disburse the requested Advances in immediately
available funds by crediting the amount of such Advances to the Borrower's
account with the Bank.

Conversion and Renewals. The Borrower may elect from time to time to convert one
type of Advance into another or to renew any Advance by giving the Bank written
notice no later than 2:00 p.m. Central time, on the date of the conversion into
or renewal of a Prime Rate Advance and 11:00 a.m. Central time three (3)
Business Days before conversion into or renewal of a LIBOR Rate Advance,
specifying: (a) the renewal or conversion date, (b) the amount of the Advance to
be converted or renewed, (c) in the case of conversion, the type of Advance to
be converted into (Prime Rate Advance or LIBOR Rate Advance), and (d) in the
case of renewals of or conversion into a LIBOR Rate Advance, the applicable
Interest Period, provided that (i) the minimum principal amount of each LIBOR
Rate Advance outstanding after a renewal or conversion shall be One Hundred
Thousand and 00/100 Dollars ($100,000.00); (ii) a LIBOR Rate Advance can only be
converted on the last day of the Interest Period for the Advance; and (iii) the
Borrower may not elect an Interest Period ending after the maturity date of this
Note. All notices given under this paragraph are irrevocable. If the Borrower
fails to give the Bank the notice specified above for the renewal or conversion
of a LIBOR Rate Advance by 11:00 a.m. Central time three (3) Business Days
before the end of the Interest Period for that Advance, the Advance shall
automatically be converted to a Prime Rate Advance on the last day of the
Interest Period for the Advance.

Interest Payments. Interest on the Advances shall be paid on the seventeenth day
of each month, beginning with the first month following disbursement of the
Advance, whether the Advance is a Prime Rate Advance or LIBOR Rate Advance.

Principal Payments. All outstanding principal and interest is due and payable in
full on March 27, 2008, which is defined herein as the "Principal Payment Date".

Default Rate of Interest. After a default has occurred under this Note, whether
or not the Bank elects to accelerate the maturity of this Note because of such
default, all Advances outstanding under this Note, including all LIBOR Rate
Advances, shall bear interest at a per annum rate equal to the Prime Rate, plus
the Applicable Margin for a Prime Rate Advance, plus three percent (3.00%) from
the date the Bank elects to impose such rate. Imposition of this rate shall not
affect any limitations contained in this Note on the Borrower's right to repay
principal on any LIBOR Rate Advance before the expiration of the Interest Period
for that Advance.

Prepayment. The Borrower may prepay all or any part of any Prime Rate Advance at
any time without premium or penalty. The Borrower may prepay any LIBOR Rate
Advance only at the end of an Interest Period.

                                       2
<PAGE>

Funding Loss Indemnification. Upon the Bank's request, the Borrower shall pay
the Bank amounts sufficient (in the Bank's reasonable opinion) to compensate it
for any loss, cost, or expense incurred as a result of:

A. Any payment of a LIBOR Rate Advance on a date other than the last day of the
Interest Period for the Advance, including, without limitation, acceleration of
the Advances by the Bank pursuant to this Note or the Related Documents; or

B. Any failure by the Borrower to borrow or renew a LIBOR Rate Advance on the
date specified in the relevant notice from the Borrower to the Bank.

Additional Costs. If any applicable domestic or foreign law, treaty, government
rule or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall (a) affect the basis of taxation of
payments to the Bank of any amounts payable by the Borrower under this Note or
the Related Documents (other than taxes imposed on the overall net income of the
Bank by the jurisdiction or by any political subdivision or taxing authority of
the jurisdiction in which the Bank has its principal office), or (b) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (c) impose any other condition with respect to this Note or the
Related Documents and the result of any of the foregoing is to increase the cost
to the Bank of maintaining any LIBOR Rate Advance or to reduce the amount of any
sum receivable by the Bank on such an Advance, or (d) affect the amount of
capital required or expected to be maintained by the Bank (or any corporation
controlling the Bank) and the Bank determines that the amount of such capital is
increased by or based upon the existence of the Bank's obligations under this
Note or the Related Documents and the increase has the effect of reducing the
rate of return on the Bank's (or its controlling corporation's) capital as a
consequence of the obligations under this Note or the Related Documents to a
level below that which the Bank (or its controlling corporation) could have
achieved but for such circumstances (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by the Bank to be material,
then the Borrower shall pay to the Bank, from time to time, upon request by the
Bank, additional amounts sufficient to compensate the Bank for the increased
cost or reduced sum receivable. Whenever the Bank shall learn of circumstances
described in this section which are likely to result in additional costs to the
Borrower, the Bank shall give prompt written notice to the Borrower of the basis
for and the estimated amount of any such anticipated additional costs. A
statement as to the amount of the increased cost or reduced sum receivable,
prepared in good faith and in reasonable detail by the Bank and submitted by the
Bank to the Borrower, shall be conclusive and binding for all purposes absent
manifest error in computation.

Illegality. If any applicable domestic or foreign law, treaty, rule or
regulation now or later in effect (whether or not it now applies to the Bank) or
the interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the Bank with any
guideline, request or directive of such an authority (whether or not having the
force of law), shall make it unlawful or impossible for the Bank to maintain or
fund the LIBOR Rate Advances, then, upon notice to the Borrower by the Bank, the
outstanding principal amount of the LIBOR Rate Advances, together with accrued
interest and any other amounts payable to the Bank under this Note or the
Related Documents on account of the LIBOR Rate Advances shall be repaid (a)
immediately upon the Bank's demand if such change or compliance with such
requests, in the Bank's judgment, requires immediate repayment, or (b) at the
expiration of the last Interest Period to expire before the effective date of
any such change or request provided, however, that subject to the terms and
conditions of this Note and the Related Documents the Borrower shall be entitled
to simultaneously replace the entire outstanding balance of any LIBOR Rate
Advance repaid in accordance with this section with a Prime Rate Advance in the
same amount.

Inability to Determine Interest Rate. If the Bank determines that (a) quotations
of interest rates for the relevant deposits referred to in the definition of
Adjusted LIBOR Rate are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the interest rate on a LIBOR
Rate Advance as provided in this Note, or (b) the relevant interest rates
referred to in the definition of Adjusted LIBOR Rate do not accurately cover the
cost to the Bank of making or maintaining LIBOR Rate Advances, then the Bank
shall forthwith give notice of such circumstances to the Borrower, whereupon (i)
the obligation of the Bank to make LIBOR Rate Advances shall be suspended until
the Bank notifies the Borrower that the circumstances giving rise to the
suspension no longer exists, and (ii) the Borrower shall repay in full the then
outstanding principal amount of each LIBOR Rate Advance, together with accrued
interest, on the last day of the then current Interest Period applicable to the
Advance, provided, however, that, subject to the terms and conditions of this
Note and the Related Documents, the Borrower shall be entitled to simultaneously
replace the entire outstanding balance of any LIBOR Rate Advance repaid in
accordance with this section with a Prime Rate Advance in the same amount.

Obligations Due on Non-Business Day. Whenever any payment under this Note
becomes due and payable on a day that is not a Business Day, if no default then
exists under this Note, the maturity of the payment shall be extended to the
next succeeding Business Day, except, in the case of a LIBOR Rate Advance, if
the result of the extension would be to extend the payment into another calendar
month, the payment must be made on the immediately preceding Business Day.

                                       3

<PAGE>

Matters Regarding Payment. The Borrower will pay the Bank at the Bank's address
shown above or at such other place as the Bank may designate. Payments shall be
allocated among principal, interest and fees at the discretion of the Bank
unless otherwise agreed or required by applicable law. Acceptance by the Bank of
any payment which is less than the payment due at the time shall not constitute
a waiver of the Bank's right to receive payment in full at that time or any
other time.

Authorization for Direct Payments (ACH Debits). To effectuate any payment due
under this Note, the Borrower hereby authorizes the Bank to initiate debit
entries to Account Number ______________________________ at the Bank and to
debit the same to such account. This authorization to initiate debit entries
shall remain in full force and effect until the Bank has received written
notification of its termination in such time and in such manner as to afford the
Bank a reasonable opportunity to act on it. The Borrower represents that the
Borrower is and will be the owner of all funds in such account. The Borrower
acknowledges (1) that such debit entries may cause an overdraft of such account
which may result in the Bank's refusal to honor items drawn on such account
until adequate deposits are made to such account; (2) that the Bank is under no
duty or obligation to initiate any debit entry for any purpose; and (3) that if
a debit is not made because the above-referenced account does not have a
sufficient available balance, or otherwise, the payment may be late or past due.

Business Loan. The Borrower acknowledges and agrees that this Note evidences a
loan for a business, commercial, agricultural or similar commercial enterprise
purpose, and that all advances made under this Note shall not be used for any
personal, family or household purpose.

Credit Facility. The Bank has approved a credit facility to the Borrower in a
principal amount not to exceed the face amount of this Note. The credit facility
is in the form of advances made from time to time by the Bank to the Borrower.
This Note evidences the Borrower's obligation to repay those advances. The
aggregate principal amount of debt evidenced by this Note is the amount
reflected from time to time in the records of the Bank. Until the earliest of
maturity, the occurrence of any default, or the occurrence of any event that
would constitute a default but for the giving of notice or the lapse of time or
both until the end of any grace or cure period, the Borrower may borrow, pay
down and reborrow under this Note subject to the terms of the Related Documents.

Liabilities. The term "Liabilities" in this Note means all debts, obligations,
and liabilities of every kind and character of the Borrower, whether individual,
joint and several, contingent or otherwise, now or hereafter existing in favor
of the Bank, including without limitation, all liabilities, interest, costs and
fees, arising under or from any note, open account, overdraft, credit card,
lease, letter of credit application, endorsement, surety agreement, guaranty,
Rate Management Transaction, acceptance, foreign exchange contract or depository
service contract, whether payable to the Bank or to a third party and
subsequently acquired by the Bank, any monetary obligations (including interest)
incurred or accrued during the pendency of any bankruptcy, insolvency,
receivership or other similar proceedings, regardless of whether allowed or
allowable in such proceeding, and all renewals, extensions, modifications,
consolidations, rearrangements, restatements, replacements or substitutions of
any of the foregoing. The term "Rate Management Transaction" in this Note means
any transaction (including an agreement with respect thereto) that is a rate
swap, basis swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option, derivative transaction or
any other similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or more interest
rates, foreign currencies, commodity prices, equity prices or other financial
measures.

Related Documents. The term "Related Documents" in this Note means this Note,
all loan agreements, credit agreements, reimbursement agreements, security
agreements, mortgages, deeds of trust, pledge agreements, assignments,
guaranties, and any other instrument or document executed in connection with
this Note or in connection with any of the Liabilities.

Security. The term "Collateral" in this Note means all real or personal property
described in all security agreements, pledge agreements, mortgages, deeds of
trust, assignments, or other instruments now or hereafter executed in connection
with this Note or in connection with any of the Liabilities. If applicable, the
Collateral secures the payment of this Note and the Liabilities.

Bank's Right of Setoff. In addition to the Collateral, if any, the Borrower
grants to the Bank a security interest in the Accounts, and the Bank is
authorized to setoff and apply, all Accounts, Securities and Other Property, and
Bank Debt against any and all Liabilities of the Borrower. This right of setoff
may be exercised at any time and from time to time, and without prior notice to
the Borrower. This security interest in the Accounts and right of setoff may be
enforced or exercised by the Bank regardless of whether or not the Bank has made
any demand under this paragraph or whether the Liabilities are contingent,
matured, or unmatured. Any delay, neglect or conduct by the Bank in exercising
its rights under this paragraph will not be a waiver of the right to exercise
this right of setoff or enforce this security interest in the Accounts. The
rights of the Bank under this paragraph are in addition to other rights the Bank
may have in the Related Documents or by law. In this paragraph: (a) the term
"Accounts" means any and all accounts and deposits of the Borrower (whether
general, special, time, demand, provisional or final) at any time held by the
Bank (including all Accounts held jointly with another, but excluding any IRA or
Keogh Account, or any trust Account in which a security interest would be
prohibited by law); (b) the term "Securities and Other Property" means any and
all financial assets, securities entitlements, securities accounts, investment
property and other personal property of the Borrower in the custody, possession
or control of the Bank, JPMorgan Chase & Co. and their respective subsidiaries
and affiliates (other than property held by the Bank in a fiduciary capacity);
and (c) the term "Bank Debt" means all indebtedness at any time owing by the
Bank, to or for the credit or account of the Borrower and any claim of the
Borrower (whether individual, joint and several or otherwise) against the Bank
now or hereafter existing.

                                       4
<PAGE>

Representations by Borrower. Each Borrower represents and warrants that each of
the following is and will remain true and correct until the later of maturity or
the date on which all Liabilities evidenced by this Note are paid in full: (a)
the execution and delivery of this Note and the performance of the obligations
it imposes do not violate any law, conflict with any agreement by which it is
bound, or require the consent or approval of any governmental authority or other
third party; (b) this Note is a valid and binding agreement of the Borrower,
enforceable according to its terms; (c) all balance sheets, profit and loss
statements, other financial statements and applications for credit furnished to
the Bank in connection with the Liabilities are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not materially and adversely changed since those dates;
and, if the Borrower is not a natural person (i) it is duly organized, and
validly existing under the laws of the state where it is organized and is in
good standing in each state where it is doing business; and (ii) the execution
and delivery of this Note and the performance of the obligations it imposes (A)
are within its powers and have been duly authorized by all necessary action of
its governing body, and (B) do not contravene the terms of its articles of
incorporation or organization, its by-laws, regulations or any partnership,
operating or other agreement governing its organization and affairs.

Events of Default/Acceleration. If any of the following events occurs this Note
shall become due immediately, without notice, at the Bank's option, and the
Borrower hereby waives notice of intent to accelerate maturity of this Note and
notice of acceleration of this Note upon any of the following events:

1.   The Borrower, or any guarantor of any of the Liabilities (the "Guarantor"),
     fails to pay when due any amount payable under this Note, under any of the
     Liabilities, or under any agreement or instrument evidencing debt to any
     creditor.
2.   The Borrower or any Guarantor (a) fails to observe or perform or otherwise
     violates any other term, covenant, condition, or agreement of any of the
     Related Documents; (b) makes any materially incorrect or misleading
     representation, warranty, or certificate to the Bank; (c) makes any
     materially incorrect or misleading representation in any financial
     statement or other information delivered to the Bank; or (d) defaults under
     the terms of any agreement or instrument relating to any debt for borrowed
     money (other than the debt evidenced by this Note) and the effect of such
     default will allow the creditor to declare the debt due before its
     maturity.
3.   In the event (a) there is a default under the terms of any Related
     Document, (b) any guaranty of the loan evidenced by this Note is terminated
     or becomes unenforceable in whole or in part, (c) any Guarantor fails to
     promptly perform under its guaranty, or (d) the Borrower fails to comply
     with, or pay, or perform under any agreement, now or hereafter in effect,
     between the Borrower and JPMorgan Chase & Co., or any of its subsidiaries
     or affiliates or their successors.
4.   There is any loss, theft, damage, or destruction of any Collateral not
     covered by insurance.
5.   A "reportable event" (as defined in the Employee Retirement Income Security
     Act of 1974 as amended) occurs that would permit the Pension Benefit
     Guaranty Corporation to terminate any employee benefit plan of the Borrower
     or any Guarantor or any affiliate of the Borrower or any Guarantor.
6.   The Borrower or any Guarantor becomes insolvent or unable to pay its debts
     as they become due.
7.   The Borrower or any Guarantor (a) makes an assignment for the benefit of
     creditors; (b) consents to the appointment of a custodian, receiver, or
     trustee for itself or for a substantial part of its assets; or (c)
     commences any proceeding under any bankruptcy, reorganization, liquidation,
     insolvency or similar laws of any jurisdiction.
8.   A custodian, receiver, or trustee is appointed for the Borrower or any
     Guarantor or for a substantial part of its assets. 9. Proceedings are
     commenced against the Borrower or any Guarantor under any bankruptcy,
     reorganization, liquidation, or
     similar laws of any jurisdiction, and they remain undismissed for thirty
     (30) days after commencement; or the Borrower or the Guarantor consents to
     the commencement of those proceedings.
10.  Any judgment is entered against the Borrower or any Guarantor, or any
     attachment, levy, or garnishment is issued against any property of the
     Borrower or any Guarantor.
11.  The Borrower or any Guarantor dies, or a guardian or conservator is
     appointed for the Borrower or any Guarantor or all or any portion of the
     Borrower's assets, any Guarantor's assets, or the Collateral.
12.  The Borrower or any Guarantor, without the Bank's written consent (a) is
     dissolved, (b) merges or consolidates with any third party, (c) leases,
     sells or otherwise conveys a material part of its assets or business
     outside the ordinary course of its business, (d) leases, purchases, or
     otherwise acquires a material part of the assets of any other business
     entity, except in the ordinary course of its business, or (e) agrees to do
     any of the foregoing (notwithstanding the foregoing, any subsidiary may
     merge or consolidate with any other subsidiary, or with the Borrower, so
     long as the Borrower is the survivor).
13.  Any material adverse change occurs in the business, assets, affairs,
     prospects or financial condition of the Borrower or any Guarantor or any
     subsidiary of the Borrower.

Remedies. If this Note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other person or business entity, with or without designating the capacity of
that nominee. Without limiting any other available remedy, the Borrower is
liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred (or charged by internal allocation) in connection with the
negotiation, preparation, execution, filing, recording, modification,
supplementing and waiver of this Note or the Related Documents and the making,
servicing and collection of this Note or the Related Documents and any other
amounts owed under this Note or the Related Documents, including without
limitation reasonable attorneys' fees and court costs. These costs and expenses
include without limitation any costs or expenses incurred by the Bank in any
bankruptcy, reorganization, insolvency or other similar proceeding.

                                       5
<PAGE>

Waivers. Any party liable on this Note waives (a) to the extent permitted by
law, all rights and benefits under any laws or statutes regarding sureties, as
may be amended; (b) any right to receive notice of the following matters before
the Bank enforces any of its rights: (i) the Bank's acceptance of this Note,
(ii) any credit that the Bank extends to the Borrower, (iii) the Borrower's
default, (iv) any demand, diligence, presentment, dishonor and protest, or (v)
any action that the Bank takes regarding the Borrower, anyone else, any
Collateral, or any of the Liabilities, that it might be entitled to by law or
under any other agreement; (c) any right to require the Bank to proceed against
the Borrower, any other obligor or guarantor of the Liabilities, or any
Collateral, or pursue any remedy in the Bank's power to pursue; (d) any defense
based on any claim that any endorser or other parties' obligations exceed or are
more burdensome than those of the Borrower; (e) the benefit of any statute of
limitations affecting liability of any endorser or other party liable hereunder
or the enforcement hereof; (f) any defense arising by reason of any disability
or other defense of the Borrower or by reason of the cessation from any cause
whatsoever (other than payment in full) of the obligation of the Borrower for
the Liabilities; and (g) any defense based on or arising out of any defense that
the Borrower may have to the payment or performance of the Liabilities or any
portion thereof. Any party liable on this Note consents to any extension or
postponement of time of its payment without limit as to the number or period, to
any substitution, exchange or release of all or any part of the Collateral, to
the addition of any other party, and to the release or discharge of, or
suspension of any rights and remedies against, any person who may be liable for
the payment of this Note. The Bank may waive or delay enforcing any of its
rights without losing them. Any waiver affects only the specific terms and time
period stated in the waiver. No modification or waiver of any provision of this
Note is effective unless it is in writing and signed by the party against whom
it is being enforced.

Cooperation. The Borrower agrees to fully cooperate with the Bank and not to
delay, impede or otherwise interfere with the efforts of the Bank to secure
payment from the assets which secure the Liabilities including actions,
proceedings, motions, orders, agreements or other matters relating to relief
from automatic stay, abandonment of property, use of cash collateral and sale of
the Bank's collateral free and clear of all liens.

Additional Waivers. To the extent not prohibited by applicable law, the Borrower
waives (a) to the extent the Borrower is subject to the Texas Revised
Partnership Act ("TRPA") or Section 152.306 of the Texas Business Organizations
Code ("BOC"), compliance by the Bank with Section 3.05(d) of TRPA and Section
152.306(b) of BOC; and (b) if the Liabilities are secured by an interest in real
property, all rights of the Borrower under Sections 51.003, 51.004, and 51.005
of the Texas Property Code (as amended from time to time).

Rights of Subrogation. Any party liable on this Note waives and agrees not to
enforce any rights of subrogation, contribution or indemnification that it may
have against the Borrower, any person liable on the Liabilities, or the
Collateral, until the Borrower and such party liable on this Note have fully
performed all their obligations to the Bank, even if those obligations are not
covered by this Note.

Reinstatement. The Borrower agrees that to the extent any payment or transfer is
received by the Bank in connection with the Liabilities evidenced by this Note,
and all or any part of the payment or transfer is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be
transferred or repaid by the Bank or transferred or paid over to a trustee,
receiver or any other entity, whether under any bankruptcy act or otherwise (any
of those payments or transfers is hereinafter referred to as a "Preferential
Payment"), then this Note shall continue to be effective or shall be reinstated,
as the case may be, even if all those Liabilities have been paid in full and
whether or not the Bank is in possession of this Note, or whether the Note has
been marked paid, released or canceled, or returned to the Borrower and, to the
extent of the payment, repayment or other transfer by the Bank, the Liabilities
or part intended to be satisfied by the Preferential Payment shall be revived
and continued in full force and effect as if the Preferential Payment had not
been made.

Governing Law and Venue. This Note shall be governed by and construed in
accordance with the laws of the State of Texas (without giving effect to its
laws of conflicts). The Borrower agrees that any legal action or proceeding with
respect to any of its obligations under this Note may be brought by the Bank in
any state or federal court located in the State of Texas, as the Bank in its
sole discretion may elect. By the execution and delivery of this Note, the
Borrower submits to and accepts, for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of those courts.
The Borrower waives any claim that the State of Texas is not a convenient forum
or the proper venue for any such suit, action or proceeding.

Usury. The Bank does not intend to charge, collect or receive any interest that
would exceed the maximum rate allowed by law. If the effect of any applicable
law is to render usurious any amount called for under this Note or the other
Related Documents, or if any amount is charged or received with respect to this

                                       6

<PAGE>

Note, or if any prepayment by the Borrower results in the Borrower having paid
any interest in excess of that permitted by law, then all excess amounts
collected by the Bank shall be credited on the principal balance of this Note
(or, if this Note and all other indebtedness arising under or pursuant to the
other Related Documents have been paid in full, refunded to the Borrower), and
the provisions of this Note and the other Related Documents immediately shall be
deemed reformed and the amounts thereafter collectable reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law. All sums paid, or agreed to be paid, by the Borrower for the
use, forbearance, or detention of money under this Note or the other Related
Documents shall, to the maximum extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling from time to time
in effect and applicable to such indebtedness for so long as such indebtedness
is outstanding. To the extent federal law permits the Bank to contract for,
charge or receive a greater amount of interest, the Bank will rely on federal
law instead of the Texas Finance Code. In no event shall Chapter 346 of the
Texas Finance Code apply to this Note. To the extent that Chapter 303 of the
Texas Finance Code is applicable to this Note, the "weekly ceiling" specified in
Chapter 303 is the applicable ceiling.

Miscellaneous. Each Borrower is liable jointly and severally for the obligations
represented by this Note, the term "Borrower" means any one or more of them, and
the receipt of value by any one of them constitutes the receipt of value by the
others. This Note binds the Borrower and its successors, and benefits the Bank,
its successors and assigns. Any reference to the Bank includes any holder of
this Note. This Note is issued pursuant and entitled to the benefits of that
certain Credit Agreement by and between the Borrower and the Bank, dated March
27, 2006, and all replacements thereof (the "Credit Agreement") to which
reference is hereby made for a more complete statement of the terms and
conditions under which the loan evidenced hereby is made and is to be repaid.
The terms and provisions of the Credit Agreement are hereby incorporated and
made a part hereof by this reference thereto with the same force and effect as
if set forth at length herein. No reference to the Credit Agreement and no
provisions of this Note or the Credit Agreement shall alter or impair the
absolute and unconditional obligation of the Borrower to pay the principal and
interest on this Note as herein prescribed. Capitalized terms not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. Section headings are for convenience of reference only and do not
affect the interpretation of this Note. Any notices and demands under or related
to this document shall be in writing and delivered to the intended party at its
address stated herein, and if to the Bank, at its main office if no other
address of the Bank is specified herein, by one of the following means: (a) by
hand, (b) by a nationally recognized overnight courier service, or (c) by
certified mail, postage prepaid, with return receipt requested. Notice shall be
deemed given: (a) upon receipt if delivered by hand, (b) on the Delivery Day
after the day of deposit with a nationally recognized courier service, or (c) on
the third Delivery Day after the notice is deposited in the mail. "Delivery Day"
means a day other than a Saturday, a Sunday, or any other day on which national
banking associations are authorized to be closed. Any party may change its
address for purposes of the receipt of notices and demands by giving notice of
such change in the manner provided in this provision. This Note and any Related
Documents embody the entire agreement between the Borrower and the Bank
regarding the terms of the loan evidenced by this Note and supercede all oral
statements and prior writings relating to that loan. If any provision of this
Note cannot be enforced, the remaining portions of this Note shall continue in
effect. The Borrower agrees that the Bank may provide any information or
knowledge the Bank may have about the Borrower or about any matter relating to
this Note or the Related Documents to JPMorgan Chase & Co., or any of its
subsidiaries or affiliates or their successors, or to any one or more purchasers
or potential purchasers of this Note or the Related Documents. The Borrower
agrees that the Bank may at any time sell, assign or transfer one or more
interests or participations in all or any part of its rights and obligations in
this Note to one or more purchasers whether or not related to the Bank.

Government Regulation. Borrower shall not (a) be or become subject at any time
to any law, regulation, or list of any government agency (including, without
limitation, the U.S. Office of Foreign Asset Control list) that prohibits or
limits Bank from making any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower, or (b) fail to provide documentary
and other evidence of Borrower's identity as may be requested by Bank at any
time to enable Bank to verify Borrower's identity or to comply with any
applicable law or regulation, including, without limitation, Section 326 of the
USA Patriot Act of 2001, 31 U.S.C. Section 5318.

USA PATRIOT ACT NOTIFICATION. The following notification is provided to Borrower
pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product. What this means for
Borrower: When Borrower opens an account, if Borrower is an individual Bank will
ask for Borrower's name, taxpayer identification number, residential address,
date of birth, and other information that will allow Bank to identify Borrower,
and if Borrower is not an individual Bank will ask for Borrower's name, taxpayer
identification number, business address, and other information that will allow
Bank to identify Borrower. Bank may also ask, if Borrower is an individual to
see Borrower's driver's license or other identifying documents, and if Borrower
is not an individual to see Borrower's legal organizational documents or other
identifying documents.

WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

                                       7
<PAGE>

JURY WAIVER. THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS NOTE OR THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.

THIS NOTE AND THE OTHER RELATED DOCUMENTS REPRESENT 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.

<TABLE>
<S><C>                                            <C>
                                                   Borrower:

  Address:  9350 Kirby Drive, Suite 300
            Houston, TX 77054                      SHARPS COMPLIANCE CORP.

                                                   By:
                                                        ---------------------------------------------------------

                                                        ---------------------------------------------------------
                                                        Printed Name                                      Title

                                                   Date Signed:
                                                                -------------------------------------------------
</TABLE>

The Bank is executing this Note for the purpose of acknowledging and agreeing to
the Jury Waiver, the notice given under ss.26.02 of the Texas Business and
Commerce Code and to comply with the waiver requirements of TRPA and BOC, and
the Bank's failure to execute or authenticate this Note will not invalidate this
Note.

 Bank:

 JPMorgan Chase Bank, N.A.

 By:
      ---------------------------------------------------------

      ---------------------------------------------------------
      Printed Name                                      Title

                                       8Exhibit 10.3

CHASE                                              Continuing Security Agreement

Name of Debtor:            SHARPS COMPLIANCE CORP.
Taxpayer I.D. No.:         74-2657168
State Organization No.:    2316242
Debtor's Address:          9350 Kirby Drive, Suite 300, Houston, TX 77054

Dated as of March 27, 2006

Grant of Security Interest. SHARPS COMPLIANCE CORP. (whether one or more, the
"Debtor", individually and collectively if more than one) grants to JPMorgan
Chase Bank, N.A., whose address is 707 Travis, 9th Floor, Houston, TX 77002
(together with its successors and assigns, the "Bank") a continuing security
interest in, pledges and assigns to Bank all of the "Collateral" (as hereinafter
defined) in which the Debtor has rights or power to transfer rights and all
Collateral in which the Debtor later acquires ownership, other rights or rights
or power to transfer rights to secure the payment and performance of the
Liabilities.

Borrower. "Borrower" means each and all of SHARPS COMPLIANCE CORP.

Liabilities. "Liabilities" means all obligations, indebtedness and liabilities
of the Borrower whether individual, joint and several, absolute or contingent,
direct or indirect, liquidated or unliquidated, now or hereafter existing in
favor of the Bank, including without limitation, all liabilities, all interest,
costs and fees arising under or from any note, open account, overdraft, letter
of credit application, endorsement, surety agreement, guaranty, credit card,
lease, Rate Management Transaction, acceptance, foreign exchange contract or
depository service contract, whether payable to the Bank or to a third party and
subsequently acquired by the Bank, any monetary obligations (including interest)
incurred or accrued during the pendency of any bankruptcy, insolvency,
receivership or other similar proceedings, regardless of whether allowed or
allowable in such proceeding, and all renewals, extensions, modifications,
consolidations, rearrangements, restatements, replacements or substitutions of
any of the foregoing. "Rate Management Transaction" means any transaction
(including an agreement with respect thereto) that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option, derivative transaction or any other similar
transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures. The
Debtor and the Bank specifically contemplate that Liabilities include
indebtedness hereafter incurred by the Borrower to the Bank.

Collateral. Accounts; Chattel Paper; Equipment; General Intangibles;
Instruments; and Inventory.

Description of Collateral. As used in this agreement, the term "Collateral"
means all of the Debtor's property whether owned individually or jointly with
others of the types indicated above and defined below, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located, including but not limited to any items listed on any schedule or list
attached hereto. In addition, the term "Collateral" includes all "proceeds,"
"products" and "supporting obligations" (as such terms are defined in the "UCC,"
meaning the Uniform Commercial Code of Texas, as in effect from time to time) of
the Collateral indicated above, including but not limited to all stock rights,
subscription rights, dividends, stock dividends, stock splits, or liquidating
dividends, and all cash, accounts, chattel paper, "instruments," "investment
property," "financial assets," and "general intangibles" (as such terms are
defined in the UCC) arising from the sale, rent, lease, casualty loss or other
disposition of the Collateral, and any Collateral returned to, repossessed by or
stopped in transit by the Debtor, and all insurance claims relating to any of
the Collateral (defined above). The term "Collateral" further includes all of
the Debtor's right, title and interest in and to all books, records and data
relating to the Collateral identified above, regardless of the form of media
containing such information or data, and all software necessary or desirable to
use any of the Collateral identified above or to access, retrieve, or process
any of such information or data. Where the Collateral is in the possession of
the Bank or the Bank's agent, the Debtor agrees to deliver to the Bank any
property that represents an increase in the Collateral or profits or proceeds of
the Collateral.

1.   "Accounts" means all of the Debtor's "accounts" as defined in Article 9 of
     the UCC.

2.   "Chattel Paper" means all of the Debtor's "chattel paper" as defined in
     Article 9 of the UCC.

<PAGE>

3.   "Equipment" means all of the Debtor's "equipment" as defined in Article 9
     of the UCC. In addition, "Equipment" includes any "documents" (as defined
     in Article 9 of the UCC) issued with respect to any of the Debtor's
     "equipment" (as defined in Article 9 of the UCC) and certificates of title
     relating to the foregoing. Without limiting the security interest granted,
     the Debtor represents and warrants that the Debtor's Equipment is presently
     located at 9350 Kirby Drive, Suite 300, Houston, TX 77054.

4.   "General Intangibles" means all of the Debtor's "general intangibles" as
     defined in Article 9 of the UCC. In addition, "General Intangibles" further
     includes any right to a refund of taxes paid at any time to any
     governmental entity.

5.   "Instruments" means all of the Debtor's "instruments" as defined in Article
     9 of the UCC.

6.   "Inventory" means all of the Debtor's "inventory" as defined in Article 9
     of the UCC. In addition, "Inventory" includes any "documents" and
     certificates of title issued with respect to any of the Debtor's
     "inventory" (as defined in Article 9 of the UCC). Without limiting the
     security interest granted, the Debtor represents and warrants that the
     Debtor's Inventory is presently located at 9350 Kirby Drive, Suite 300,
     Houston, TX 77054.

Representations, Warranties and Covenants. The Debtor represents and warrants
to, and covenants and agrees with the Bank that each of the following is true
and will remain true until termination of this agreement and full and final
payment of all Liabilities:

1.   Its principal residence or chief executive office is at the address shown
     above;
2.   The Debtor's name as it appears in this agreement is its exact name as it
     appears in the Debtor's organizational documents, as amended, including any
     trust documents;
3.   It is or will become the owner of the Collateral free from any liens,
     encumbrances or security interests, except for this security interest and
     existing liens disclosed to and accepted by the Bank in writing, and it
     will defend the Collateral against all claims and demands of all persons at
     any time claiming any interest in the Collateral;
4.   It will keep the Collateral free of liens, encumbrances and other security
     interests, except for this security interest, maintain the Collateral in
     good repair, not use it illegally and exhibit the Collateral to the Bank on
     demand;
5.   At its own expense, the Debtor will maintain comprehensive casualty
     insurance on the Collateral against such risks, in such amounts, with such
     deductibles and with such companies as may be satisfactory to the Bank.
     Each insurance policy shall contain a lender's loss payable endorsement in
     form and substance satisfactory to the Bank and a prohibition against
     cancellation or amendment of the policy or removal of the Bank as loss
     payee without at least thirty (30) days prior written notice to the Bank.
     In all events, the amounts of such insurance coverages shall conform to
     prudent business practices and shall be in such minimum amounts that the
     Debtor will not be deemed a co-insurer. The policies and certificates
     evidencing them, shall, if the Bank so requests, be deposited with the
     Bank. The Debtor authorizes the Bank to endorse on the Debtor's behalf and
     to negotiate drafts reflecting proceeds of insurance of the Collateral,
     provided that the Bank shall remit to the Debtor such surplus, if any, as
     remains after the proceeds have been applied, at the Bank's option, to the
     satisfaction of all of the Liabilities (in such order of application as the
     Bank may elect) or to the establishment of a cash collateral account for
     the Liabilities;
6.   It will not sell, lease, license or offer to sell, lease, license or
     otherwise transfer the Collateral or any rights in or to the Collateral,
     without the written consent of the Bank, except in the ordinary course of
     business;
7.   It will not change the location of the Collateral from the locations of the
     Collateral described in this agreement, without providing at least ten (10)
     days prior written notice to the Bank;
8.   It will pay promptly when due all taxes and assessments upon the
     Collateral, or for the use or operation of the Collateral;
9.   No financing statement covering all or any part of the Collateral or any
     proceeds is on file in any public office, unless the Bank has approved that
     filing. From time to time at the Bank's request, the Debtor will execute
     one or more financing statements or similar record and a control agreement
     with respect to the proceeds in form satisfactory to the Bank and will pay
     the cost of filing them in all public offices where filing is deemed by the
     Bank to be necessary or desirable. In addition, the Debtor shall execute
     and deliver, or cause to be executed and delivered, such other documents as
     the Bank may from time to time request to perfect or to further evidence
     the security interest created in the Collateral by this agreement
     including, without limitation: (a) any certificate or certificates of title
     to the Collateral with the security interest of the Bank noted thereon or
     executed applications for such certificates of title in form satisfactory
     to the Bank; (b) any assignments of claims under government contracts which
     are included as part of the Collateral, together with any notices and
     related documents as the Bank may from time to time request; (c) any
     assignment of any specific account receivable as the Bank may from time to
     time request; (d) a notice of and acknowledgment of the Bank's security
     interest and a control agreement with respect to any Collateral, all in
     form and substance satisfactory to the Bank; (e) a notice to and
     acknowledgment from any person holding or in possession of any Collateral
     that such persons holds the Collateral as a bailee for the Bank's benefit,
     all in form and substance satisfactory to the Bank; and (f) any consent to
     the assignment of proceeds of any letter of credit, all in form and
     substance satisfactory to the Bank;
10.  It will not, without the Bank's prior written consent, change the Debtor's
     name, the Debtor's business organization, the jurisdiction under which the
     Debtor's business organization is formed or organized, or the Debtor's
     chief executive office, or of any additional places of the Debtor's
     business;

                                       2

<PAGE>

11.  It will provide any information that the Bank may reasonably request and
     will permit the Bank or the Bank's agents to inspect and copy its books,
     records, data and the Collateral at any time during normal business hours;
12.  The Bank shall have the right now, and at any time in the future in its
     sole and absolute discretion, without notice to the Debtor, to (a) prepare,
     file and sign the Debtor's name on any proof of claim in bankruptcy or
     similar document against any owner of the Collateral and (b) prepare, file
     and sign the Debtor's name on any financing statement, notice of lien,
     assignment or satisfaction of lien or similar document in connection with
     the Collateral. The Debtor hereby authorizes the Bank to file financing
     statements covering Collateral or such lesser amount of assets as the Bank
     may determine, or the Bank may, at its option, file financing statements or
     similar records containing any collateral description which reasonably
     describes the Collateral in which a security interest is granted under this
     agreement;
13.  Immediately upon the Debtor's receipt of any Collateral evidenced by an
     agreement, "instrument," "chattel paper," certificated "security" or
     "document" (as such terms are defined in the UCC) (collectively, "Special
     Collateral"), the Debtor shall mark the Special Collateral to show that it
     is subject to the Bank's security interest and shall deliver the original
     to the Bank together with appropriate endorsements and other specific
     evidence of assignment or transfer in form and substance satisfactory to
     the Bank;
14.  The Debtor shall keep all tangible Collateral in good order and repair and
     shall not waste or destroy any of the Collateral, nor use any of the
     Collateral in violation of any applicable law or any policy of insurance
     thereon. To the extent that the Collateral consists of "farm products" (as
     defined in the UCC), the Debtor shall attend to and care for the crops and
     livestock in accordance with the best practices of good husbandry, and do,
     or cause to be done, any and all acts that may at any time be appropriate
     or necessary to grow, raise, harvest, care for, preserve and protect the
     farm products;
15.  Except as may be otherwise disclosed in writing by the Debtor to the Bank,
     none of the Collateral is attached to real estate so as to constitute a
     "fixture" (as defined in the UCC) and none of the Collateral shall at any
     time hereafter be attached to real estate so as to constitute a fixture. If
     any of the Collateral is now or at any time hereafter becomes so attached
     to real estate so as to constitute a fixture, the Debtor shall, at any time
     upon the Bank's request, furnish the Bank with a disclaimer of interest in
     the Collateral executed by each person or entity having an interest in such
     real estate.

Accounts; Chattel Paper; General Intangibles and Instruments. If the Collateral
includes the Debtor's "Accounts, Chattel Paper, General Intangibles and
Instruments" and until the Bank gives notice to the Debtor to the contrary, the
Debtor will, in the usual course of its business and at its own expense, on the
Bank's behalf but not as the Bank's agent, demand and receive and use its best
efforts to collect all moneys due or to become due with respect to the
Collateral. Until the Bank gives notice to the Debtor to the contrary or until
the Debtor is in default, it may use the funds collected in its business. Upon
notice from the Bank or upon default, the Debtor agrees that all sums of money
it receives on account of or in payment or settlement of the Accounts, Chattel
Paper, General Intangibles and Instruments shall be held by it as trustee for
the Bank without commingling with any of the Debtor's other funds, and shall
immediately be delivered to the Bank with endorsement to the Bank's order of any
check or similar instrument. It is agreed that, at any time the Bank so elects,
the Bank shall be entitled, in its own name or in the name of the Debtor or
otherwise, but at the expense and cost of the Debtor, to collect, demand,
receive, sue for or compromise any and all Accounts, Chattel Paper, General
Intangibles, and Instruments, and to give good and sufficient releases, to
endorse any checks, drafts or other orders for the payment of money payable to
the Debtor and, in the Bank's discretion, to file any claims or take any action
or proceeding which the Bank may deem necessary or advisable. It is expressly
understood and agreed, however, that the Bank shall not be required or obligated
in any manner to make any demand or to make any inquiry as to the nature or
sufficiency of any payment received by it or to present or file any claim or
take any other action to collect or enforce the payment of any amounts which may
have been assigned to the Bank or to which the Bank may be entitled at any time
or times. All notices required in this paragraph will be immediately effective
when sent. Such notices need not be given prior to the Bank's taking action. The
Debtor appoints the Bank or the Bank's designee as the Debtor's attorney-in-fact
to do all things with reference to the Collateral as provided for in this
section including without limitation (1) to notify the post office authorities
to change the Debtor's mailing address to one designated by the Bank, (2) to
receive, open and dispose of mail addressed to the Debtor, (3) to sign the
Debtor's name on any invoice or bill of lading relating to any Collateral, on
assignments and verifications of account and on notices to the Debtor's
customers, and (4) to do all things necessary to carry out this agreement or to
perform any of the obligations of the Debtor under this agreement. The Debtor
ratifies and approves all acts of the Bank as attorney-in-fact. The Bank shall
not be liable for any act or omission, nor any error of judgment or mistake of
fact or law, but only for its gross negligence or willful misconduct. This power
being coupled with an interest is irrevocable until all of the Liabilities have
been fully satisfied and shall survive the death or disability of the Debtor.

Pledge. If the Debtor is not liable for all or any part of the Liabilities, then
the Debtor agrees that:

1.   If any moneys become available from any source other than the Collateral
     that the Bank can apply to the Liabilities, the Bank may apply them in any
     manner it chooses, including but not limited to applying them against
     obligations, indebtedness or liabilities which are not secured by this
     agreement.
2.   The Bank may take any action against the Borrower, the Collateral or any
     other collateral for the Liabilities, or any other person or entity liable
     for any of the Liabilities.

                                       3
<PAGE>

3.   The Bank may release the Borrower or anyone else from the Liabilities,
     either in whole or in part, or release the Collateral in whole or in part
     or any other collateral for the Liabilities, and need not perfect a
     security interest in the Collateral or any other collateral for the
     Liabilities.
4.   The Bank does not have to exercise any rights that it has against the
     Borrower or anyone else, or make any effort to realize on the Collateral or
     any other collateral for the Liabilities, or exercise any right of setoff.
5.   Without notice or demand and without affecting the Debtor's obligations
     hereunder, from time to time, the Bank is authorized to: (a) renew, modify,
     compromise, rearrange, restate, consolidate, extend, accelerate or
     otherwise change the time for payment of, or otherwise change the terms of
     the Liabilities or any part thereof, including increasing or decreasing the
     rate of interest thereon; (b) release, substitute or add any one or more
     sureties, endorsers, or guarantors; (c) take and hold other collateral for
     the payment of the Liabilities, and enforce, exchange, substitute,
     subordinate, impair, waive or release any such collateral; (d) proceed
     against the Collateral or any other collateral for the Liabilities and
     direct the order or manner of sale as the Bank in its discretion may
     determine; and (e) apply any and all payments received by the Bank in
     connection with the Liabilities, or recoveries from the Collateral or any
     other collateral for the Liabilities, in such order or manner as the Bank
     in its discretion may determine.
6.   The Debtor's obligations hereunder shall not be released, diminished or
     affected by (a) any act or omission of the Bank, (b) the voluntary or
     involuntary liquidation, sale or other disposition of all or substantially
     all of the assets of the Borrower, or any receivership, insolvency,
     bankruptcy, reorganization, or other similar proceedings affecting the
     Borrower or any of its assets or any other obligor on the Liabilities or
     that obligor's assets, (c) any change in the composition or structure of
     the Borrower or any other obligor on the Liabilities, including a merger or
     consolidation with any other person or entity, or (d) any payments made
     upon the Liabilities.
7.   The Debtor expressly consents to any impairment of any other collateral for
     the Liabilities, including, but not limited to, failure to perfect a
     security interest and release of any other collateral for the Liabilities
     and any such impairment or release shall not affect the Debtor's
     obligations hereunder.
8.   The Debtor waives and agrees not to enforce any rights of subrogation,
     contribution or indemnification that it may have against the Borrower, any
     person or entity liable on the Liabilities, or the Collateral, until the
     Borrower and the Debtor have fully performed all their obligations to the
     Bank, even if those obligations are not covered by this agreement.
9.   The Debtor waives (a) to the extent not prohibited by applicable law, all
     rights and benefits under any laws or statutes regarding sureties, as may
     be amended, (b) any right the Debtor may have to receive notice of the
     following matters before the Bank enforces any of its rights: (i) the
     Bank's acceptance of this agreement, (ii) incurrence or acquisition of any
     Liabilities, any credit that the Bank extends to the Borrower, (iii) the
     Borrower's default, (iv) any demand, intent to accelerate, diligence,
     presentment, dishonor and protest, or (v) any action that the Bank takes
     regarding the Borrower, anyone else, any other collateral for the
     Liabilities, or any of the Liabilities, which it might be entitled to by
     law or under any other agreement, (c) any right it may have to require the
     Bank to proceed against the Borrower, any guarantor or other obligor on the
     Liabilities, the Collateral or any other collateral for the Liabilities, or
     pursue any remedy in the Bank's power to pursue, (d) any defense based on
     any claim that the Debtor's obligations exceed or are more burdensome than
     those of the Borrower, (e) the benefit of any statute of limitations
     affecting the Debtor's obligations hereunder or the enforcement hereof, (f)
     any defense arising by reason of any disability or other defense of the
     Borrower or by reason of the cessation from any cause whatsoever (other
     than payment in full) of the obligation of the Borrower for the
     Liabilities, and (g) any defense based on or arising out of any defense
     that the Borrower may have to the payment or performance of the Liabilities
     or any portion thereof. The Bank may waive or delay enforcing any of its
     rights without losing them. Any waiver affects only the specific terms and
     time period stated in the waiver.
10.  The Debtor agrees that to the extent any payment or transfer is received by
     the Bank in connection with the Liabilities, and all or any part of such
     payment or transfer is subsequently invalidated, declared to be fraudulent
     or preferential, set aside or required to be transferred or repaid by the
     Bank or paid over to a trustee, receiver or any other person or entity,
     whether under any bankruptcy act or otherwise (any of those payments or
     transfers is hereinafter referred to as a "Preferential Payment"), then
     this agreement shall continue to be effective or shall be reinstated, as
     the case may be, even if all Liabilities have been paid in full, and
     whether or not the Bank is in possession of this agreement or whether this
     agreement has been marked paid, cancelled, released or returned to Debtor,
     and, to the extent of the payment or repayment or other transfer by the
     Bank, the Liabilities or part intended to be satisfied by the Preferential
     Payment shall be revived and continued in full force and effect as if the
     Preferential Payment had not been made. If this agreement must be
     reinstated, the Debtor agrees to execute and deliver to the Bank any new
     security agreements and financing statements, if necessary or if requested
     by the Bank, in form and substance acceptable to the Bank, covering the
     Collateral.
11.  The Debtor agrees to fully cooperate with the Bank and not to delay, impede
     or otherwise interfere with the efforts of the Bank to secure payment from
     the assets which secure the Liabilities including actions, proceedings,
     motions, orders, agreements or other matters relating to relief from
     automatic stay, abandonment of property, use of cash collateral and sale of
     the Bank's collateral free and clear of all liens.

                                       4
<PAGE>

12.  The Debtor has (a) without reliance on the Bank or any information received
     from the Debtor and based upon the records and information the Debtor deems
     appropriate, made an independent investigation of the Borrower, the
     Borrower's business, assets, operations, prospects and condition, financial
     or otherwise, and any circumstances that may bear upon those transactions,
     the Borrower or the obligations, liabilities and risks undertaken pursuant
     to this agreement; (b) adequate means to obtain from the Borrower on a
     continuing basis information concerning the Borrower and the Debtor has no
     duty to provide any information concerning the Borrower or other obligor on
     the Liabilities to the Debtor; (c) full and complete access to the Borrower
     and any and all records relating to any Liabilities now or in the future
     owing by the Borrower; (d) not relied and will not rely upon any
     representations or warranties of the Debtor not embodied in this agreement
     or any acts taken by the Debtor prior to or after the execution or other
     authentication and delivery of this agreement (including but not limited to
     any review by the Debtor of the business, assets, operations, prospects and
     condition, financial or otherwise, of the Borrower); and (e) determined
     that the Debtor will receive benefit, directly or indirectly, and has or
     will receive fair and reasonably equivalent value, for the execution and
     delivery of this agreement and the rights provided to the Bank. By entering
     into this agreement, the Debtor does not intend: (i) to incur or believe
     that the Debtor will incur debts that would be beyond the Debtor's ability
     to pay as those debts mature; or (ii) to hinder, delay or defraud any
     creditor of the Debtor. The Debtor is neither engaged in nor about to
     engage in any business or transaction for which the remaining assets of the
     Debtor are unreasonably small in relation to the business or transaction,
     and any property remaining with the Debtor after the execution or other
     authentication of this agreement is not unreasonably small capital.
13.  Without limiting any foregoing waiver, consent or agreement, the Debtor
     further waives all rights, if any, of the Debtor under Rule 31, Texas Rules
     of Civil Procedure, or Chapter 34 of the Texas Business and Commerce Code,
     or Section 17.001 of the Texas Civil Practice and Remedies Code; and (i) to
     the extent the Debtor is subject to the Texas Revised Partnership Act
     ("TRPA") or Section 152.306 of the Texas Business Organizations Code
     ("BOC"), compliance by the Debtor with Section 3.05(d) of TRPA and Section
     152.306(b) of BOC.

Default; Remedies. If any of the Liabilities are not paid at maturity, whether
by acceleration or otherwise, or if a default by anyone occurs under the terms
of any agreement related to any of the Liabilities, then the Bank shall have the
rights and remedies provided by law or this agreement, including but not limited
to the right to require the Debtor to assemble the Collateral and make it
available to the Bank at a place to be designated by the Bank which is
reasonably convenient to both parties, the right to take possession of the
Collateral with or without demand and with or without process of law, and the
right to sell and dispose of it and distribute the proceeds according to law.
Should a default occur, the Debtor will pay to the Bank all costs reasonably
incurred by the Bank for the purpose of enforcing its rights hereunder, to the
extent not prohibited by law, including, without limitation: costs of
foreclosure; costs of obtaining money damages; and a reasonable fee for the
services of internal and outside attorneys employed or engaged by the Bank or
its affiliates for any purpose related to this agreement, including, without
limitation, consultation, drafting documents, sending notices or instituting,
prosecuting or defending litigation or any proceeding. The Debtor agrees that
upon default the Bank may dispose of any of the Collateral in its then present
condition, that the Bank has no duty to repair or clean the Collateral prior to
sale, and that the disposal of the Collateral in its present condition or
without repair or clean-up shall not affect the commercial reasonableness of
such sale or disposition. The Bank's compliance with any applicable state or
federal law requirements in connection with the disposition of the Collateral
will not adversely affect the commercial reasonableness of any sale of the
Collateral. The Bank may disclaim warranties of title, possession, quiet
enjoyment, and the like, and the Debtor agrees that any such action shall not
affect the commercial reasonableness of the sale. In connection with the right
of the Bank to take possession of the Collateral, the Bank may take possession
of any other items of property in or on the Collateral at the time of taking
possession, and hold them for the Debtor without liability on the part of the
Bank. The Debtor expressly agrees that the Bank may enter upon the premises
where the Collateral is believed to be located without any obligation of payment
to the Debtor, and that the Bank may, without cost, use any and all of the
Debtor's "equipment" (as defined in the UCC) in the manufacturing or processing
of any "inventory" (as defined in the UCC) or in growing, raising, cultivating,
caring for, harvesting, loading and transporting of any of the Collateral that
constitutes "farm products" (as defined in the UCC). If there is any statutory
requirement for notice, that requirement shall be met if the Bank sends notice
to the Debtor at least ten (10) days prior to the date of sale, disposition or
other event giving rise to the required notice, and such notice shall be deemed
commercially reasonable. The Debtor is liable for any deficiency remaining after
disposition of the Collateral.

Miscellaneous.
1.   Where the Collateral is located at, used in or attached to a facility
     leased by the Debtor, the Debtor will obtain from the lessor a consent to
     the granting of this security interest and a release or subordination of
     the lessor's interest in any of the Collateral, in form and substance
     satisfactory to the Bank.
2.   At its option the Bank may, but shall be under no duty or obligation to,
     discharge taxes, liens, security interests or other encumbrances at any
     time levied or placed on the Collateral, pay for insurance on the
     Collateral, and pay for the maintenance and preservation of the Collateral,
     and the Debtor agrees to reimburse the Bank on demand for any payment made
     or expense incurred by the Bank, with interest at the highest rate at which
     interest may accrue under any of the instruments or documents evidencing
     the Liabilities.
3.   No delay on the part of the Bank in the exercise of any right or remedy
     waives that right or remedy, no single or partial exercise by the Bank of
     any right or remedy precludes any other exercise of it or the exercise of
     any other right or remedy, and no waiver or indulgence by the Bank of any
     default is effective unless it is in writing and signed by the Bank, nor
     does a waiver on one occasion waive that right on any future occasion.

                                       5
<PAGE>

4.   If any provision of this agreement is invalid, it shall be ineffective only
     to the extent of its invalidity, and the remaining provisions shall be
     valid and effective.
5.   Except as provided in the Accounts; Chattel Paper; General Intangibles; and
     Instruments paragraph above, any notices and demands under or related to
     this document shall be in writing and delivered to the intended party at
     its address stated herein, and if to the Bank, at its main office if no
     other address of the Bank is specified herein, by one of the following
     means: (a) by hand, (b) by a nationally recognized overnight courier
     service, or (c) by certified mail, postage prepaid, with return receipt
     requested. Notice shall be deemed given: (a) upon receipt if delivered by
     hand, (b) on the Delivery Day after the day of deposit with a nationally
     recognized courier service, or (c) on the third Delivery Day after the
     notice is deposited in the mail. "Delivery Day" means a day other than a
     Saturday, a Sunday, or any other day on which national banking associations
     are authorized to be closed. Any party may change its address for purposes
     of the receipt of notices and demands by giving notice of such change in
     the manner provided in this provision.
6.   All rights of the Bank benefit the Bank's successors and assigns; and all
     obligations of the Debtor bind the Debtor's heirs, executors,
     administrators, successors and assigns. If more than one person or entity
     signs as the Debtor, their obligations are joint and several and each
     agreement, representation, warranty and covenant shall be individual, joint
     and several and the "Collateral" includes any property that is owned by any
     Debtor individually or jointly with any other.
7.   A carbon, photographic or other reproduction of this agreement is
     sufficient as, and can be filed as, a financing statement. The Bank is
     irrevocably appointed the Debtor's attorney-in-fact to execute any
     financing statement on the Debtor's behalf covering the Collateral. The
     Debtor authorizes the Bank to file one or more financing statements or
     similar records related to the security interests created by this
     agreement, and further authorizes the Bank, as secured party herein,
     instead of the Debtor, to sign such financing statements and other similar
     records.

Indemnification. The Debtor agrees to indemnify, defend and hold the Bank, its
parent companies, subsidiaries, affiliates, their respective successors and
assigns and each of their respective shareholders, directors, officers,
employees and agents (collectively the "Indemnified Persons") harmless from and
against any and all loss, liability, obligation, damage, penalty, judgment,
claim, deficiency, expense, interest, penalties, attorneys' fees (including the
fees and expenses of attorneys engaged by the Indemnified Person at the
Indemnified Person's reasonable discretion) and amounts paid in settlement
("Claims") to which any Indemnified Person may become subject arising out of or
relating to this agreement or the Collateral, including any Claims resulting
from any Indemnified Person's own negligence, except to the limited extent that
the Claims are proximately caused by the Indemnified Person's gross negligence
or willful misconduct. The indemnification provided for in this paragraph shall
survive the termination of this agreement and shall not be affected by the
presence, absence or amount of or the payment or nonpayment of any claim under,
any insurance.

Governing Law and Venue. This agreement shall be governed by and construed in
accordance with the laws of the State of Texas (without giving effect to its
laws of conflicts), and to the extent applicable, federal law, except to the
extent that the laws regarding the perfection and priority of security interests
of the state(s) in which either the Debtor or any property securing the
Liabilities is located, are applicable. The Debtor agrees that any legal action
or proceeding with respect to any of its obligations under this agreement may be
brought by the Bank in any state or federal court located in the State of Texas,
as the Bank in its sole discretion may elect. By the execution and delivery of
this agreement, the Debtor submits to and accepts, for itself and in respect of
its property, generally and unconditionally, the non-exclusive jurisdiction of
those courts. The Debtor waives any claim that the State of Texas is not a
convenient forum or the proper venue for any such suit, action or proceeding.

Additional Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants to the Bank that each of the following is true and will
remain true until termination of this agreement and payment in full of all
Liabilities: (a) the execution and delivery of this agreement and the
performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, and do not require the consent
or approval of any governmental authority or any third party; (b) this agreement
is a valid and binding agreement, enforceable according to its terms; and (c)
all balance sheets, profit and loss statements, and other financial statements
furnished to the Bank in connection with the Liabilities are accurate and fairly
reflect the financial condition of the organizations and persons to which they
apply on their effective dates, including contingent liabilities of every type,
which financial condition has not changed materially and adversely since those
dates. The Debtor, other than a natural person, further represents that: (a) it
is duly organized and validly existing under the laws of the state where it is
organized and is in good standing in each state where it is doing business; and
(b) the execution and delivery of this agreement and the performance of the
obligations it imposes (i) are within its powers and have been duly authorized
by all necessary action of its governing body; and (ii) do not contravene the
terms of its articles of incorporation or organization, its by-laws, or any
agreement or document governing its affairs.

WAIVER OF SPECIAL DAMAGES. THE DEBTOR WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

                                       6
<PAGE>

JURY WAIVER. THE DEBTOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN OR AMONG THE DEBTOR AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
PROVIDE THE FINANCING DESCRIBED HEREIN.

THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT OF 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.

                  Debtor:

                  SHARPS COMPLIANCE CORP.

                  By:
                       ---------------------------------------------------------

                       ---------------------------------------------------------
                       Printed Name                                      Title

                  Date Signed:
                                ------------------------------------------------

The Bank is executing this agreement for the purpose of acknowledging and
agreeing to the foregoing Jury Waiver, the notice given under ss.26.02 of the
Texas Business and Commerce Code and to comply with the waiver requirements of
TRPA and BOC, and the Bank's failure to execute or authenticate this agreement
will not invalidate this agreement.

 Bank:

 JPMorgan Chase Bank, N.A.

 By:
      ---------------------------------------------------------

      ---------------------------------------------------------
      Printed Name                                      Title

                                       7

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