Document:

Exhibit

EXHIBIT 10.1
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.  “[____]” or “[REDACTED]” INDICATES THAT INFORMATION HAS BEEN OMITTED.
    

CONSTRUCTION AND TERM LOAN AGREEMENT

This Agreement (hereinafter defined) is dated August [__], 2019, and is between [REDACTED], a [REDACTED] state chartered bank (“Lender”), having an address of [REDACTED]; SHARPS COMPLIANCE, INC. OF TEXAS, a Texas corporation d/b/a Sharps Compliance, Inc. (“Compliance”) and SHARPS ENVIRONMENTAL SERVICES, INC., a Delaware corporation d/b/a Sharps Environmental Services of Texas, Inc. (“Environmental”, and together with Compliance, “Borrower”), ALPHA BIO/MED SERVICES, LLC, a Pennsylvania limited liability company (“Alpha”), BIO-TEAM MOBILE LLC, a Pennsylvania limited liability company (“Bio-Team”), and CITIWASTE, LLC, a New York limited liability company (“Citiwaste”) (each of Alpha, Bio-Team, and CitiWaste are a “Guarantor” and collectively, the “Guarantors”).  Borrower and each Guarantor have an address of 9220 Kirby Drive, Suite 500, Houston, TX 77054.

A.    DEFINITIONS.

"Advance" shall mean each separate advance of funds under the Loan for payment of costs incurred in connection with the Project (as such term is defined herein) and financing of the Project, regardless of whether such advance is made directly to the Borrower, jointly to Borrower and any contractor or supplier, or directly to any third party for payment of costs incurred in connection with the Project, pursuant to the terms of this Agreement.

"Agreement" shall mean this Construction and Term Loan Agreement and all schedules and exhibits hereto and as the same may from time to time be amended or supplemented.

"Advance Request" shall mean the Borrower's written request for an Advance in the form of Exhibit A attached hereto and made a part hereof.

"Business Day" shall mean a day other than a Saturday, Sunday or legal holiday for commercial banks in the city where the Loan is closed.

"Capitalized Lease Obligations" means, for any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations, in accordance with GAAP, are required to be classified and accounted for as a capital lease on a balance sheet of any such Person.

“Cash Flow Leverage Ratio” means for Parent and its Subsidiaries, on a consolidated basis, as of any date (a) Net Debt, divided by (b) EBITDA for the period ended as of such date.

"Closing Date" shall mean the date on which the Note, this Agreement and Collateral Documents are executed and delivered by the Borrower to Lender.

“Collateral” shall mean all real and personal property described in the Collateral Documents as security for the Obligations.
“Collateral Documents” will mean, collectively, (i) all documents or agreements described in Section G(1) hereof, (ii) all mortgages, security agreements, assignments of leases, assignments, financing statements and other instruments creating and perfecting Liens in the assets of the Borrower or the Guarantor; and (iii) all guaranty agreements, in each case in favor of Lender to secure the Obligations.

“Completion Date” shall mean August [__], 2020.

“Compliance Certificate” shall mean a compliance certificate in the form of Exhibit G, fully completed and executed by Borrower and Parent.

"Construction Contract" shall mean, collectively, all construction contracts between Borrower and the Contractor, 

providing for the demolition of existing structures, preparation of the site, and construction of the Improvements contemplated by the Plans and Specifications, as amended, modified, supplemented or restated,  a copy of which is attached hereto as Exhibit B and is made a part hereof.

"Contractor" shall mean [REDACTED], a Texas corporation.

"Debt" means for any Person (a) all indebtedness, whether or not represented by bonds, debentures, notes, securities or other evidences of indebtedness, for the repayment of money borrowed, including, with respect to Borrower, the indebtedness evidenced by the Note and all other indebtedness of Borrower to Lender, (b) indebtedness and obligations arising in connection with Rate Management Transactions, (c) all indebtedness representing deferred payment of the purchase price of property or assets, (d) Capitalized Lease Obligations, (e) all indebtedness under guaranties, endorsements, assumptions or other contingent obligations, in respect of, or to purchase or otherwise acquire, indebtedness of others, (f) all indebtedness secured by a Lien  existing on property owned, subject to such Lien, whether or not the indebtedness secured thereby shall have been assumed by the owner thereof, and (g) any obligation to redeem or repurchase any of such Person's capital stock, partnership or membership interests or other ownership interests as applicable.

“Debt Service Coverage Ratio” means for Parent and its Subsidiaries, on a consolidated basis, as of any date (a) EBITDA for the period ended as of such date, divided by (b) the sum of (i) Principal Payments Scheduled for the period ended as of such date, plus (ii) Interest Expense for the period ended as of such date.

"Deficiency" shall mean at any time during the term of the Loan, a condition such that the costs to complete the Improvements is determined by Lender to have exceeded the costs delineated on the Development Expense Schedule such that the undisbursed portion of the Loan, if any, may be insufficient to pay (i) the remaining costs of the Improvements, (ii) all other costs and expenses necessary to make the Property operational, or (iii) to provide debt service on the Loan.

“Development Expense Schedule” will mean the overall detailed line item cost breakdown(s) of land costs, construction costs (hard costs) and all other related indirect development costs (soft  costs), including working capital, interest reserve and contingency (in a minimum of 5% of the costs of Construction) for the construction of the all of the Improvements and all related soft costs and interest on the Loan, submitted to and approved by Lender, and which cost line items may be reallocated by Lender to establish reserves or for payment of expenses, a copy of which is attached hereto as Exhibit C and made a part hereof.

     “EBITDA” means for Parent and its Subsidiaries, on a consolidated basis for any period, the sum of (a) Net Income for such period, plus (b) without duplication and to the extent deducted in determining such Net Income (i) Interest Expense for such period, plus (ii) Income Tax Expense for such period, plus (iii) depreciation and amortization for such period, plus (iv) all other non-cash and/or non-recurring expenses subject to approval of Lender, less (v) all other non-cash and/or non-recurring income. Non-cash and/or non-recurring expenses include, among other items, one-time acquisition costs, including legal fees, investment banker fees, accounting fees and recording fees. For the avoidance of doubt, EBITDA shall include all historical cash flow for such period of any acquired entity that becomes a Subsidiary during such period.

“Environmental Laws” shall mean any and all federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, rules of common law and orders of courts or any governmental authority, relating to the protection of human health or occupational safety or the environment, now or hereafter in effect and in each case as amended from time to time, including, without limitation, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Substances, including, without limitation, the following federal laws: the Resource Conservation Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act, the Hazardous Materials Transportation Act, the Clean Air Act, and the Clean Water Act.

“Environmental Liability” shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities) directly or indirectly resulting from or based upon (i) any actual or alleged violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Substances, (iii) any actual or alleged exposure to any Hazardous Substances, (iv) the release or threatened release of any Hazardous Substances or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“GAAP” shall mean Generally Accepted Accounting Principles in the United States.

“Hazardous Substances” shall mean any substances or materials (i) that are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants or toxic substances under any applicable Environmental Law, (ii) that are defined 

by any applicable Environmental Law as toxic, explosive, corrosive, ignitable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous (iii) the presence of which require investigation, removal, remediation or any other response of any kind under any applicable Environmental Law or causes or threatens to cause a nuisance upon any property constituting Collateral or to any adjacent properties or poses or threatens to pose a hazard to the health or safety of persons on or about any such property, (iv) that consist of underground or aboveground storage tanks, whether empty, filled or partially filled with any substance, or (v) that contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or wastes, crude oil, nuclear fuel, natural gas, synthetic gas, radon gas, radioactive materials, or isotopes.

"Improvements" shall mean the improvements to be constructed on the Property in accordance with the Plans and Specifications.

"Income Tax Expense" means for Parent and its Subsidiaries, on a consolidated basis for any period, all state and federal income tax expenses for such period, determined in accordance with GAAP.

"Interest Expense" means for Parent and its Subsidiaries, on a consolidated basis, for any period, the sum of all interest expense paid or required by its terms to be paid during such period, as determined in accordance with GAAP.

"Lender's Inspector" shall mean any architect for the Project or any other person designated by Lender to inspect and monitor the progress of construction of the Improvements on behalf of Lender.

"Lien" means any lien, mortgage, security interest, tax lien, financing statement, pledge, charge, hypothecation, assignment, preference, priority or other encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law or otherwise.

“Lien Waiver” shall mean the Lien Waiver executed by the Contractor or Material Subcontractor, as the case may be, in form and substance satisfactory to Lender.

“Loan” shall mean (individually, collectively and interchangeably) the Construction Loan and the Term Loan referred to in Section B below, together with any renewals, extensions, modifications or additions thereto.
“Material Subcontractor(s)” will mean any contractor, subcontractor, supplier, laborer and seller of movable property having a contract with the Contractor in connection with the construction of the Improvements on the Property in excess of $100,000.00 and any contract required to construct the Project, including those supplying or installing pilings, lumber, concrete, glazing, masonry, heating, air and ventilation, electrical, plumbing, elevators, and others as may be required by Lender.
“Net Debt” means, for Parent and its Subsidiaries for any period, the sum of (a) all outstanding Debt, minus (b) the aggregate cash held by Parent and its Subsidiaries greater than $2,000,000.00.
"Net Income" means, for Parent and its Subsidiaries for any period, the consolidated net income (or loss) of Parent and its Subsidiaries for such period, as determined in accordance with GAAP.
“No Work Affidavit” shall mean a No Work Affidavit executed by the surveyor of the Property, in form and substance satisfactory to Lender.
"Obligations" shall mean any and all amounts, liabilities and/or obligations owing from time to time by the Borrower to Lender or any transferee thereof pursuant to this Agreement, the Note and the Collateral Documents and all other obligations, indebtedness and liabilities of every kind, nature, and character of Borrower to Lender, direct or contingent, due or to become due, now existing or hereafter arising, including all future advances, together with all interest, attorneys' fees, expenses of collection and costs, including, without limitation, obligations to Lender on promissory notes and security agreements, and all renewals, extensions and modifications thereof and whether such amounts, liabilities or obligations be liquidated or unliquidated, now existing or hereafter arising, including without limitation, all agreements with respect to any swap, forward, future, or derivative transaction or option or similar agreement involving, or settled by reference to, one or more interest rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value.
“Obligor” shall mean (individually, collectively and interchangeably) the Borrower, Guarantor and each other co-maker, endorser, surety or guarantor for any of the Obligations.

“Parent” means Sharps Compliance Corp., a Delaware corporation, and its successors and assigns.

"Person" means any individual, corporation, limited liability company, partnership, joint venture, company, trust, business trust, association, governmental authority or other entity.

"Plans and Specifications" shall mean the final engineering drawings and specifications, including any revisions, amendments and addenda required to complete the construction of the Improvements, including off-site and on-site work.

“Principal Payments Scheduled” means, for Parent and its Subsidiaries, on a consolidated basis, for any period, that portion of the Debt of the Parent  and its Subsidiaries which was due to be paid during such period, including, in the case of Debt consisting of Capitalized Lease Obligations, the amount which was due to be paid during such period on such Capitalized Lease Obligations.

"Project" shall mean collectively the Property and the Improvements to be constructed thereon.

"Property" shall mean the real property located at 1544 Northeast Loop, Carthage, TX 75633 and described on Exhibit F attached hereto and made a part hereof owned by Borrower.

"Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by Borrower or any subsidiary of Borrower which 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 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.

“Retainage” shall mean “Retainage” as defined in Section C(4) of this Agreement.

"Subsidiary" means, for any Person, a Person of which or in which such Person or its other Subsidiaries own or control, directly or indirectly, fifty percent (50%) or more of (a) the combined voting power of all classes having general voting power under ordinary circumstances to elect a majority of the directors (if it is a corporation), managers or equivalent body of such Person, (b) the capital interest or profits interest of such Person, if it is a partnership, limited liability company, joint venture or similar entity, or (c) the beneficial interest of such Person, if  it is a trust, association or other unincorporated association or organization.

“Unavoidable Delay” shall mean any delay in the construction of the Property, caused by natural disaster, fire, earthquake, flood, explosion, extraordinary adverse weather conditions, general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, failure of transportation, strikes, or lockouts of which Borrower has notified Lender in writing.  Circumstances that can be remedied or mitigated through the payment of money shall not constitute Unavoidable Delay hereunder to the extent such remedy or mitigation is deemed reasonable by Lender in its sole discretion.
B.    THE LOAN.  Subject to the terms and conditions of this Agreement and provided each Obligor performs all obligations in favor of Lender contained in this Agreement and in any other agreement with Lender, whether now existing or hereafter arising, Lender will make or has made:
 
A NON-REVOLVING LINE OF CREDIT LOAN (the “Construction Loan”) to Borrower up to the total aggregate principal amount of One Million Nine Hundred Ninety-Seven Thousand Five Hundred and No/100 Dollars ($1,997,500.00), not to exceed eighty-five percent (85%) of the appraised value of the Property after completion of the Project (the “Value Limitation”).  Advances under the Construction Loan shall be made during the twelve (12) month period commencing on the Closing Date and ending on August [__], 2020 (the "Line of Credit Period").  Interest shall accrue from date of Advance at the rate or rates specified in the Note, with interest payable monthly, beginning September 1, 2019, and payable monthly on the same day thereafter, or if such date is not a Business Day, the first Business Day thereafter.  On August [__], 2020 (the "Conversion Date"), all of Lender's obligations to make any Advance on the Loan shall cease.  If, in any event, the outstanding principal balance of the Loan exceeds the Value Limitation, Borrower shall, within sixty (60) days of Lender’s request, reduce the principal balance of the Loan to an amount less than or equal to the Value Limitation. Lender may at its sole discretion obtain an updated appraisal at Borrower’s expense during the life of this loan.

On the Conversion Date, the Loan shall automatically, without the necessity of any further act on the part of 

either Lender or Borrower, convert to a TERM LOAN (the “Term Loan”) in a principal amount equal to the aggregate outstanding principal balance of all Advances made by Lender to the Borrower during the Line of Credit Period, and bear interest at the rate or rates specified in the Note from the Conversion Date until paid, and shall be payable in forty-eight (48) equal monthly installments of principal and interest, commencing on August 1, 2020, and continuing on the same day of each succeeding month, with a final installment in the amount of the remaining unpaid balance of principal and interest due and payable on August [__], 2024 (the “Maturity Date”).  The amount of each monthly installment of principal and interest shall be calculated based on a 20-year amortization of the aggregate outstanding principal balance due under the Construction Loan on the Conversion Date. 

The Loan shall be evidenced by Lender's form of promissory note (the "Note") containing additional terms and conditions. The term “Note” as used herein includes all renewals, extensions, amendments, modifications, refinancings, consolidations and substitutions therefor.

C.    BORROWING PROCEDURE.  Subject to the terms and conditions of this Agreement and provided that no Default has occurred and is continuing, Lender will fund Advances under the Loan no more than once per month in accordance with the Development Expense Schedule, as modified by any modifications approved by Lender.

(1)    Borrower shall submit a properly completed and executed Advance Request to Lender at least ten (10) Business Days prior to the proposed funding date and it shall be accompanied by following:

		
	(a)
	AIA Documents.  For hard construction costs, the Contractor's original Application and Certificate for Payment, the form of which shall be approved by Lender, and which form shall be properly completed, executed by the Contractor and notarized, and shall contain a certification signed by Borrower and a certification signed by the architect, if any.

		
	(b)
	Invoices.  For costs other than hard construction costs or interest, copies of invoices supporting the Advance Request;

		
	(c)
	Affidavits/Lien Waivers.  Owner’s and contractor’s affidavits from the Borrower and the Contractor in the form required by Lender and/or its title insurer, and, if required by Lender, conditional lien waivers and receipts for payment by all Material Subcontractors;

		
	(d)
	Title Endorsements.  If lender’s title insurance is required by Lender, date-down endorsement from the title insurance company in form and content acceptable to Lender (i) bringing forward the date of the title insurance policy and insuring that there are no intervening mortgages, liens, privileges, encumbrances or conveyances recorded against the Property; (ii) increasing the aggregate amount of insurance by an amount equal to the proposed Advance; (iii) insuring that the lien of Lender on the Property pursuant to the Collateral Documents securing the Loan is superior to all laborers, materialmen and other mechanics liens affecting the Property; (iv) describing any matters affecting the Property which appear in the public records since the date of the title policy; and (v) removing any policy exceptions (including, without limitation, survey exceptions, if appropriate) that are unacceptable to Lender;

		
	(e)
	Insurance. If required by Lender, evidence satisfactory to Lender that all insurance required by this Agreement, the Collateral Documents or as otherwise required by Lender, remains in full force and effect;

		
	(f)
	Inspector’s Report.  Prior to funding each Advance for construction costs, Lender shall obtain the report of Lender's Inspector in form and substance satisfactory to Lender; and

		
	(g)
	Foundation Survey.  Upon completion of any foundation for the Project, Borrower shall furnish to Lender a foundation survey to enable Lender to obtain a foundation endorsement.

		
	(h)
	Other Documents. Such other instruments, documents, estoppels, certificates, endorsements, invoices and opinions as Lender in its discretion may reasonably require.

(2)    In the event of a Deficiency, upon written notice by Lender to the Borrower, the Borrower shall deposit immediately the amount of such deficiency into a cash collateral account maintained by Lender and on which Lender shall have 

the sole right to draw in accordance with the terms of this Agreement.  In addition,  Borrower shall not be entitled to request or receive any Advances until such time as the Deficiency has been cured to the satisfaction of Lender.  At Lender's discretion, Lender may fund future Advances from such account prior to resumption of Advances under the Loan.  Notwithstanding the foregoing, Lender shall be authorized to fund an Advance to pay interest on the Loans when due, without the requirement of an Advance Request.

(3)    Advances for construction costs shall be made only to the extent that the work is actually completed in accordance with the Plans and Specifications and will not exceed the percentage of work completed on the Project, as certified and approved by Lender's Inspector, including materials actually incorporated in the Project or stored onsite, but excluding materials stored elsewhere and, except for the Final Advance, excluding any Retainage. Without Lender’s prior written consent, the aggregate amount of all Advances shall not exceed the lesser of: (a) budgeted amounts for each line item of hard and soft construction costs as reflected in the Development Expense Schedule; (b) actual costs incurred by the Borrower for each line item of hard and soft construction costs as reflected in the Development Expense Schedule; or (c) the principal amount of the Construction Loan.  Without Lender’s prior written consent, the maximum amount of any individual Advance shall not exceed the total of: (w) soft construction costs actually incurred or invoiced prior to the time of the Advance not in excess of the amounts budgeted therefor in the Development Expense Schedule; plus (x) the lesser of (i) actual hard construction costs incurred for completed work not in excess of the amounts budgeted therefor in the Development Expense Schedule or (ii) the budgeted amounts for hard construction costs reflected in the Development Expense Schedule multiplied by the percentage of completion of the Project determined by Lender based on the inspections and advice of the Lender’s Inspector; less (y) except in the case of the Final Advance, any Retainage; and less (z) the aggregate amount of prior Advances by Lender. 

(4)    The amount of each Advance shall be computed so that five percent (5%) of the construction costs included in the Advance Request will be retained (the "Retainage") by Lender until thirty (30) days after completion and acceptance of all work on the Project in accordance with Section D below.  If the Construction Contract requires that Retainage be funded monthly into an escrow account, such escrow account shall be at Lender and the Retainage shall not be released from such escrow account until thirty (30) days after completion and acceptance of all work on the Project in accordance with Section D below have been received and approved by Lender.

(5)    Lender's prior written consent shall be required for any (i) reallocation or change among line items in the Development Expense Schedule in excess of $25,000.00, singularly or in excess of $100,000.00 in the aggregate, or (ii) respect to any contingency line item on the Development Expense Schedule in excess of $10,000.00.

(6)    All Advances shall be deposited into a demand deposit account at Lender in the name of the Borrower, which account will be used solely to receive Advances and to pay costs incurred pursuant to the Development Expense Schedule. 

(7)    Any funds allocated in the Development Expense Schedule for developer fees and overhead (“Developer Fees”) shall not be funded more rapidly than either (a) in equal draws over the Line of Credit Period, or (b) on a percentage of completion basis, provided, however, that total Developer Fees, both funded and deferred, shall not exceed 5% of the aggregate amount in the Development Expense Schedule.

D.    FINAL ADVANCE.  In addition to the requirements for each construction Advance as set forth herein, the request for a final Advance and/or release of any Retainage shall be submitted to Lender in duplicate and shall be accompanied by the following:

(1)    Insurance. Evidence satisfactory to Lender that all insurance required by this Agreement, the Collateral Documents or as otherwise required by Lender remains in full force and effect;

(2)    Inspection.  A final report of Lender's Inspector in form and substance satisfactory to Lender stating that the Improvements have been completed in accordance with the Plans and Specifications;

(3)    Certificate of Occupancy.  A certificate of occupancy issued by the appropriate governmental authority consenting to the use and occupancy of the Improvements covered by the Construction Contract and evidence satisfactory to Lender that the Project has been approved by the local fire marshal;

(4)    Affidavits/Lien Waivers.  Final owner’s and contractor’s affidavits from the Borrower and the Contractor in the form required by Lender and/or its title insurer, and, if required by Lender, unconditional lien waivers and certification of payment in full by all Material Subcontractors shall be delivered to Lender no later than thirty (30) days after the funding of the Advance for Retainage;

(5)    Contractor Certification.  Contractor’s notarized certification that the Improvements were completed in 

accordance with the Plans and Specifications;

(6)    Architect Certification.  If required by Lender, a certification in form and substance satisfactory to Lender stating that the Improvements have been completed in accordance with the Plans and Specifications from the Project architect;

(7)    As-Built Survey.  As-Built Survey showing the Improvements, which is acceptable to Lender and certified correct to Lender, the title company and the Borrower;

(8)    Title Endorsements.  If lender’s title insurance is required by Lender, a final date-down endorsement from the title insurance company in form and substance acceptable to Lender (i) bringing forward the date of the title insurance policy and insuring that there are no intervening mortgages, liens, privileges, encumbrances or conveyances recorded against the Property that are not acceptable to Lender; (ii) increasing the aggregate amount of insurance to the total amount of all Advances; (iii) insuring that the lien of Lender on the Property pursuant to the Collateral Documents securing the Loan is  superior to all laborers, materialmen and other mechanics liens affecting the Property; (iv) describing any matters affecting the Property which appear in the public records since the date of the title policy; and (v) reflecting the as-built survey and removing any policy exceptions (including, without limitation, survey exceptions) unacceptable to Lender; and

(9)    Other Documents.  Such other instruments, documents, certificates, estoppels, endorsements, invoices and opinions as Lender in its discretion, reasonably exercised, may require

E.    MODIFIED ADVANCE PROCEDURE.  Lender reserves the right to modify the foregoing Borrowing Procedure and to disburse Advances as follows:

Upon the occurrence and during the continuance of a Default, at its sole discretion and option, Lender may make any and all advances under the Loan directly to the Contractor, subcontractors and suppliers.  For these purposes, Borrower does hereby irrevocably make, nominate, constitute and appoint Lender, in its place and stead acting through any of its officers, as Borrower's true and lawful agent and attorney-in-fact with full power of substitution, to make such construction Advances directly to the Contractor, subcontractors and suppliers.  The foregoing mandate or agency shall be an irrevocable power of attorney, that is, a power coupled with an interest which cannot be revoked, Lender having direction and authorization to so make such construction Advances, and no further direction or authorization from the Borrower shall be necessary to warrant such direct construction Advances, and all such construction Advances shall satisfy pro tanto the obligations of Lender and shall constitute construction Advances hereunder and shall be secured by the Collateral as fully as if made to Borrower, regardless of the disposition thereof by the Contractor, subcontractors or suppliers.
    
F.    USE OF PROCEEDS.  The proceeds from the Loan will be used solely for construction of Improvements in connection with the Project and to pay for all soft costs in connection therewith, as shown on the Development Expense Schedule.

G.    REPRESENTATIONS, WARRANTIES AND COVENANTS.  Borrower represents, warrants and covenants to Lender that:

(1)    Collateral Documents.  As security for the payment and performance of the Loan and any and all other Obligations, Borrower shall furnish, or cause others to furnish, all collateral documents, continuing guaranties and endorsements as may be required by Lender.  In addition to the Collateral set forth in any note evidencing a Loan, the Collateral Documents, as required by Lender, in its sole discretion, include but are not limited to the following:

		
	(a)
	A first priority Deed of Trust, Assignment of Rents, and Security Agreement (the “Mortgage”) (together with a UCC-1 Financing Statement) executed by Environmental in favor of Lender, granting a first priority mortgage and security interest in the Project, and all leases of any portion of the Property, and all other property as described therein;

		
	(b)
	Security agreement (together with a UCC-1 financing statement) executed by the Borrower in favor of Lender granting a first priority security interest in all assets of the Borrower related to the Project, including but not limited to all deposit and reserve accounts, all equipment, all general intangibles, and all documents, including without limitation, all Plans and Specifications and all other contract rights, construction contracts, architectural contracts, plans and renderings, engineering contracts and reports, design specifications, payment and performance bonds, licenses, permits, county and city approvals relating in any way to or usable in connection with the construction, use, occupancy, operations, ownership or maintenance of the Project, and all accessions to, substitutions and replacements for, rents, increases and profits, proceeds and products of each of the items listed above, including, without 

limitation, proceeds of insurance policies insuring the Collateral;

		
	(c)
	Collateral assignments of all architectural, engineering and construction management documents, the Plans and Specifications, the Construction Contract, management, operating and other agreements respecting the construction and operation of Property, as may be required by Lender, executed by the Borrower in favor of Lender, as such documents are executed by the Borrower from time to time, together with appropriate consents by the architect, engineer, construction manager, Contractor and such other parties to the above-described documents, as may be required by Lender; and

		
	(d)
	If required by Lender, Opinion of Borrower’s Counsel, in form and content satisfactory to Lender.

(2)    Guaranties.  The Loan shall be guaranteed by:

		
	(a)
	Unlimited continuing guaranty by Guarantor, guaranteeing to Lender the payment and performance of all obligations of Borrower now existing or hereafter arising; and

		
	(b)
	If required by Lender, Guarantor shall also execute in favor of Lender, a security agreement (together with a UCC-1 financing statement) granting a first priority security interest in all assets of Guarantor.

(3)    Organization and Authorization.  Each Obligor (other than an individual) is an entity which is duly organized, validly existing and, if a corporation, in good standing under applicable laws.  Each Obligor's execution, delivery and performance of this Agreement, the Collateral Documents and all other documents delivered to Lender has been duly authorized and does not violate Obligor's articles of incorporation (bylaws or other governing documents), material contracts or any applicable law or regulations.  All documents delivered to Lender are legal and binding obligations of Obligor who executed same.

(4)    Compliance with Tax and other Laws.  Each Obligor shall comply with all laws that are applicable to the Obligor's business activities, including, without limitation, all laws regarding (i) the collection, payment and deposit of employees' income, unemployment, Social Security, sales and excise taxes; (ii) the filing of returns and payment of taxes; (iii) pension liabilities including ERISA requirements; (iv) environmental protection and (v) occupational safety and health.  There is no litigation, administrative or other legal proceeding pending or threatened against any Obligor that, if adversely determined, could be expected to materially adversely affect the Project or any Obligor, its business, assets or financial condition. 

(5)    Financial Information.  From the date of this Agreement and so long as the Loans shall be outstanding, unless compliance shall have been waived in writing by Lender:

		
	(a)
	Parent shall furnish to Lender:

(i) Annual Statements; as soon as available, but in no event later than one hundred twenty (120) days after the close of Obligor’s fiscal year, a copy of the annual financial statements of Parent and its Subsidiaries, prepared in conformity with Generally Accepted Accounting Principles applied on a basis consistent with that of the preceding fiscal year, and audited by a public accountant acceptable to Lender consisting of a balance sheet, a statement of earnings and surplus, and a statement of cash flow; and

(ii)  Interim Statements: as soon as available, but in no event later than forty-five (45) days after the close of each quarter of the fiscal year of Parent and its Subsidiaries, an unaudited financial statements as of the end of such quarter, prepared in conformity with Generally Accepted Accounting Principles applied on a basis consistent with that of the preceding fiscal period, consisting of a balance sheet as of the end of such quarter, a statement of earnings and surplus for such quarter and for the year to date and a statement of cash flow for such quarter, and for the year to date all certified by an appropriate executive officer of Obligor.
 
(iii) Compliance Certificate:  Beginning September 30, 2019, as soon as available, but in no event later than forty-five (45) days after the close of each quarter of the fiscal year of Parent and Borrower, Borrower and Parent shall submit to Lender a current Compliance Certificate;

            
Each Obligor shall furnish to Lender, such additional information concerning the Obligor that Lender may reasonably require. All financial statements and financial information submitted to Lender in accordance with this Agreement shall include, among other things, detailed information regarding (i) any entities, such as 

corporations, partnerships, or limited liability companies of which the Obligor is the majority owner and (ii) any entities of which the Obligor is not the majority owner, but for which Obligor is directly or contingently liable on debts or obligations of any kind incurred by those entities.  .  All financial statements or records submitted to Lender via electronic means, including, without limitation by facsimile, open internet communications or other telephonic or electronic methods, including, without limitation, documents in Tagged Image Format Files (“TIFF”) or Portable Document Format (“PDF”) shall be treated as originals, fully binding and with full legal force and effect and the parties waive any rights they may have to object to such treatment.  The Lender may rely on all such records in good faith as complete and accurate records produced or maintained by or on behalf of the party submitting such records.

(6)    Notice of Default.  Each Obligor shall notify Lender immediately upon becoming aware of the occurrence of any event constituting, or which with the passage of time or the giving of notice, would constitute, a Default.
 
(7)    Mergers, etc.  Without the prior written consent of Lender, Borrower shall not (i) be a party to a merger or consolidation, (ii) sell or lease all or substantially all of its assets or (iii) acquire all or substantially all of the assets of another entity.  No Obligor will permit any changes to be made in the management or control of any Obligor or in the character of its business as carried on at the original date of this Agreement without the prior written consent of Lender.  No Obligor will purchase, retire or redeem any shares of its capital stock without the prior written consent of Lender. 

(8)    Indebtedness and Liens; Limitation on Loans to Stockholders and Related Entities.  Other than unsecured obligations incurred in the ordinary course of business, Borrower shall not create any additional obligations for borrowed money without the prior written consent of Lender.  Borrower shall not mortgage or encumber any of its assets (including, without limitation, the Property) or suffer any liens to exist on any of its assets (including, without limitation, the Property) without the prior written consent of Lender.  Borrower shall not loan or advance funds or assets to any stockholder, member, partner, affiliate, or related entity.

(9)    Other Liabilities.  Borrower shall not lend to or guarantee, endorse or otherwise become contingently liable in connection with the obligations, stock or dividends of any person, firm or corporation without the prior written consent of Lender.  Borrower shall not default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any indenture, agreement or other instrument to which Borrower is a party (the effect of which would materially adversely affect the business or properties of Borrower).  There is no litigation, legal or administrative proceeding, investigation or other action of any nature pending or, to the knowledge of Borrower, threatened against or affecting Borrower which involves the possibility of any judgment or liability not fully covered by insurance, and which may materially and adversely affect the Project or the business, assets or financial condition of Borrower or Borrower’s ability to carry on business as now conducted. Borrower shall observe and perform all of the terms, covenants, agreements and conditions under any leases, license agreements, servitudes, contracts, and agreements which affect the Property and the Project, and shall promptly notify the Lender within ten (10) days of receipt of any proposed modification to any of these items. Borrower further agrees that it shall not amend, modify, terminate, or revoke any of these items without the prior written consent of the Lender, which will not be unreasonably withheld.

(10)    Documentation and Additional Assurances.  The Note, Collateral Documents and all other documents or agreements executed or to be executed in connection with the Loan (collectively, the “Loan Documents”) shall be on Lender's standard forms, with such modifications as may be required by or acceptable to Lender. Upon the written request of Lender, each Obligor shall promptly and duly execute and deliver all such other instruments and documents and take such further action as Lender may deem necessary to obtain the full benefits of this Agreement and of the rights and powers granted in this Agreement.

(11)    Financial Covenants and Ratios.  Borrower and Parent on a consolidated basis shall comply with the following covenants and ratios:

		
	i.
	Cash Flow Leverage Ratio.  Borrower will at all times maintain a Cash Flow Leverage Ratio of not more than 3.00 to 1.00. The Cash Flow Leverage Ratio will be calculated and tested quarterly as of the last day of each fiscal quarter of Borrower, commencing with the fiscal quarter ending September 30, 2019 for the period of four quarters ended as of such date (a rolling or trailing four quarters basis).

		
	ii
	Minimum Debt Service Coverage Ratio.  Borrower will at all times maintain a Debt Service Coverage Ratio of not less than 1.15 to 1.00. The Debt Service Coverage Ratio will be calculated and tested quarterly as of the last day of each fiscal quarter of Borrower , commencing with the fiscal quarter ending September 30, 2019 for the period of four quarters ended as of such date (a rolling or trailing four quarters basis).

(12)    Environmental Matters. The Borrower represents and warrants to, and covenants with, Lender as follows:

		
	(a)
	Borrower (i) has not stored or disposed of, and shall not store or dispose of, any Hazardous Substances on the Property except in compliance with Environmental Laws, (ii) has not failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (iii) is not, nor has Borrower become, subject to any Environmental Liability, (iii) has not received any notice of any claim with respect to any Environmental Liability or (iv) knows of no basis for any Environmental Liability.

		
	(b)
	Borrower shall (i) at all times maintain the Property in compliance with all applicable Environmental Laws and free of any Hazardous Substances except in compliance with all applicable Environmental Laws, (ii) comply with all laws, rules, regulations and requirements of any governmental authority applicable to its business and properties, including without limitation, all Environmental Laws, ERISA, and the Occupational Safety and Health Act of 1970, as amended (“OSHA”); (iii) pay, perform or otherwise satisfy any fine, charge, penalty, fee, damage, order, judgment, decree or imposition related thereto which, if unpaid, would constitute a lien on the Property, unless (a) the validity thereof shall be contested diligently and in good faith by appropriate proceedings and with counsel reasonably satisfactory to Lender and (b) so long as Borrower shall at all times have deposited with Lender, or posted a bond satisfactory to Lender in, a sum equal to the amount necessary (in the reasonable discretion of Lender) to comply with such order or directive (including, but not limited to, the amount of any fine, penalty, interest or cost that may become due thereon by reason of or during such contest); provided, however, that Lender shall be subrogated to the rights of the payee of such amount upon payment in full with respect to such fine, charge, or any portion thereof, (iv) take all appropriate response actions, including any removal or remedial actions, in the event of a release, emission, discharge, or disposal of any Hazardous Substances in, on, under or from the Property necessary in order for the Property to be or remain in compliance with all Environmental Laws, (v) upon request of Lender, permit Lender, including its officers, agents, employees, contractors and representatives, to enter and inspect the Property for purposes of conducting an environmental assessment and (vi) upon the request of Lender, and at Borrower’s expense, cause to be prepared for the Property such site assessment reports, including, without limitation, engineering studies, historical reviews and testing, as may be reasonably requested from time to time by Lender.

		
	(c)
	Borrower agrees to furnish to Lender prompt written notice of the following: (i) any change in the nature or extent of Hazardous Substances maintained on or with respect to the Property; (ii) the occurrence of any event or any other development by which Borrower (a) fails to comply with any Environmental Law or fails to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (b) becomes subject to any Environmental Liability, (c) receives notice of any claim with respect to any Environmental Liability, or (d) becomes aware of any basis for any Environmental Liability.

		
	(d)
	In addition to any other indemnifications herein or pursuant to any other agreement with Lender, Borrower agrees to indemnify Lender, its parent, subsidiaries and its affiliates, as well as their respective shareholders, directors, officers, employees, agents, successors and assigns or (each such person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, penalties, fines, costs and expenses of any kind or nature (including the fees, charges and disbursements of any counsel for any Indemnitee and all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Obligor arising out of, in connection with, or as a result of (i) any actual or alleged presence or release of Hazardous Substances on or from, or migrating to or from, the Property, or any actual or alleged Environmental Liability related in any way to the Borrower, the Property or any other collateral, (ii) any breach of any representation, warranty or covenant contained herein, or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, all whether based on contract, tort or any other theory, whether brought by a third party or by any Obligor, and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

		
	(e)
	The provisions of this section are in addition to and supplement any other representations, warranties, covenants, indemnifications, and other provisions contained herein or in any other Loan Documents.

     (13)    Construction Covenants. In addition to the covenants of the Borrower otherwise set forth in this Agreement, the Borrower hereby agrees that, so long as any part of the Obligations is outstanding, unless compliance shall have been waived in writing by Lender, the Borrower shall at all times comply with the following covenants:

(a)    The Borrower will (i) commence construction of the Improvements not later than five (5) days following the Closing Date; (ii) cause the construction of the Improvements to be prosecuted with diligence and continuity in accordance with the Plans and Specifications; (iii) promptly correct or cause to be corrected any defect in the Improvements, any material departure in the construction of the Improvements from the Plans and Specifications, and governmental requirements or any encroachment by any part of the Improvements or any other structure located on the Property on any building line, easement, property line or restricted area; (iv) guarantee to Lender that the Improvements will be completed in good and workmanlike manner in accordance with the Plans and Specifications; (v) promptly notify Lender of any lien filed by the Contractor, any subcontractor, supplier or laborer or of Borrower's knowledge that the Contractor or any subcontractor has failed to pay amounts due following the funding of any Advance for the payment of same; and (vi) complete the construction of the Improvements in accordance with the Plans and Specifications on or before the Completion Date. Borrower may request an extension of the Completion Date equal to the number of days resulting from any Unavoidable Delay in the Construction, but under no circumstances more than thirty (30) days, and Lender will grant such extension if the following conditions have been satisfied: (a) Borrower shall have given notice of the Unavoidable Delay to Lender within ten (10) days after learning of the event resulting in such delay; and (b) after giving effect to the consequences of the Unavoidable Delay, there shall be no Deficiency, as determined by Lender in its reasonable discretion.

(b)    The Borrower will not (i) cause or permit any changes in the Plans and Specifications affecting the Improvements in excess of $25,000.00 singularly or in excess of $100,000.00 in the aggregate, except pursuant to a change order approved in writing by Lender and Lender's Inspector or (ii) make any change in the Construction Contract or any subcontract without the prior written approval of Lender and Lender's Inspector.

(c)    If requested by Lender, Borrower shall furnish to Lender within ten (10) days after Lender's request, a certificate, in form prescribed by Lender, signed by all Material Subcontractors as to the existence, amount and retainage of any such subcontracts and materials supplies agreements.

(d)    The relationship of Lender and Borrower is as creditor and debtor and Lender assumes no fiduciary obligation as a result of this Agreement.  All actions, reviews and inspections by Lender and Lender's Inspector pursuant to the terms hereof are solely for the benefit of Lender.  No actions by Lender, Lender's Inspector, or any agent, officer, employee or representative of Lender shall be or may be construed in such a manner as to impose any duty or obligation whatsoever on Lender, Lender's Inspector, or any agent, officer, employee or representative of Lender to protect or represent any owner, borrower, contractor, surety or any other person whatsoever and shall not be considered or construed as having made any warranty whatsoever, whether express or implied, as to the adequacy, quality of fitness or purpose of any physical conditions, materials, workmanship, Plans and Specifications, drawings or other requirements pertaining to the construction of the Improvements, or whether any such physical conditions, materials or workmanship comply with any Plans and Specifications, drawings, ordinances, statutes or other governmental requirements pertaining to the Property.  Lender shall have no liability, obligation or responsibility whatsoever with respect to the construction of the Improvements except to advance the Loan pursuant to this Agreement.  Lender shall not be obligated to inspect the Property or the construction of the Property, nor be liable for the performance or Default of Borrower, Contractor, any architect, subcontractor or materialmen, or any other party, or for any failure to construct, complete, protect or insure the Improvements, or for the payment of costs of labor, materials or services supplied for the Improvements, or for the performance of any obligation of Borrower whatsoever. The provisions of this Agreement relating to requirements for or limitations on Advances are solely for the benefit of the Lender, and nothing, including without limitation, any Advance or acceptance of any document or instrument, shall be construed as a representation or warranty, express or implied, to any party by Lender. (This provision survives the payment of the Obligations and the termination of this Agreement).

(e)    Without in any way releasing or modifying any liability of Lender's Inspector to Lender, the Borrower agrees to indemnify and fully protect Lender from any allegation or charge whatsoever of negligence, misfeasance, or nonfeasance, pertaining to any defect in the Improvements, and particularly, any failure of Lender or Lender's Inspector, or any agent, officer, employee or representative of Lender to note any defect in materials or workmanship or of physical conditions or failure to comply with any Plans and Specifications, drawings, ordinances, statutes or other governmental requirements, or to call to the attention of any person whatsoever, or take any action, or to demand that any action be taken, with regard to any such defect or failure or lack of compliance. (This provision survives the payment of the Obligations and the termination of this Agreement).

(f)    On the Closing Date, the Borrower shall pay Lender all the costs incurred by Lender in its initial review of the Plans and Specifications and Construction Contract; in addition, the Borrower shall reimburse Lender for all out-of-pocket expenses incurred in such inspection related thereto within 15 days after receipt of Lender's invoice and any additional monthly inspections.

(g)    Borrower shall provide Lender with a copy of all inspection reports performed by the applicable state or local inspection agencies necessary to obtain or maintain any licenses required to operate the Project.  Borrower shall provide evidence to Lender that all necessary licenses required to operate the Project have been received as soon as available but in no event later than ninety (90) days following Borrower’s receipt of the certificate of occupancy for the Project.  Borrower shall immediately provide Lender with notices of any default under any license or operating agreement in connection with the Project.

(14)    Insurance.

(a)    The Borrower shall procure and maintain for the benefit of Lender original paid-up insurance policies from companies having an A.M. Best rating of A or better or otherwise satisfactory to Lender, in amounts, in form and substance, and with expiration dates acceptable to Lender and containing a noncontributory standard mortgagee clause or its equivalent in a form satisfactory to Lender, or the statutory mortgagee clause, if any, required in the state where the Property is located, or a lender loss payable endorsement, in favor of Lender providing the following types of insurance on the Property:

		
	(1)
	Builders All-Risk and Hazard Insurance.  For the Property during the construction, and for 2 months beyond the date of substantial completion of the Improvements, builders all-risk insurance, and upon substantial completion of the Improvements, multi-peril hazard insurance, in each case affording insurance against loss or damage by fire, wind, lightning, explosion, earthquake, collapse, theft, sprinkler leakage, vandalism and malicious mischief and such other perils as are included in so-called "all-risks" or "extended coverage" and against such other insurable perils as, under good insurance practices, from time to time are insured against for properties of similar character and location; such insurance to be not less than 100% of the full replacement cost of the Improvements without deduction for depreciation and shall also include rental loss or business interruption insurance for at least a 12-month period.  The said policy shall contain replacement costs and stipulated value endorsements and shall name Lender as first mortgagee.

		
	(2)
	Flood Insurance. If the Project is located in a special flood hazard zone, immediately following the completion of the first floor slab, insurance against flood; such insurance to be not less than 100% of the full replacement cost of the Improvements or the maximum amount available, whichever is less, naming Lender as first mortgagee.

		
	(3)
	Comprehensive General Liability Insurance.  Comprehensive public liability insurance with respect to the Property and the operations related thereto, whether conducted on or off the Property, against liability for personal injury (including bodily injury and death) and property damage, of not less than $1,000,000.00 combined single limit bodily injury and property damage per occurrence and $2,000,000.00 in the aggregate.  The said comprehensive public liability insurance to be on a per occurrence basis and to specifically include but not be limited to water damage liability, products liability, motor vehicle liability for all owned and non-owned vehicles, including rented and leased vehicles, and contractual indemnification and shall name Lender as additional insured.  Motor vehicle coverage may be provided separately.

		
	(4)
	Workers' Compensation and General Liability.  To the extent required by applicable law and otherwise not covered by any other insurance of Borrower, workers' compensation and general liability insurance against loss, damage or injury to employees, agents or representatives of the Borrower, or insurance against loss, damage or injury caused by any employees, agents or representatives of the Borrower.

		
	(5)
	Other Insurance.  Such other insurance on the Property or any replacements or substitutions therefor and in such amounts as may from time to time be reasonably required by Lender against other insurable casualties which at the time are commonly insured against in the case of premises similarly situated, due regard being given to the height and type of the improvements on the Property, its construction, location, use and occupancy, or any replacements or substitutions therefor.

(b)    All of the foregoing policies shall contain an agreement by the insurer not to cancel the policies without giving Lender at least thirty (30) days' prior written notice of its intention to do so.  Borrower shall provide notification of any proposed amendments by the insurer to any policies within five (5) days after receipt of notice from such insurer.

(c)    At Closing, Borrower shall deliver original binders evidencing the insurance and within 15 days of the Closing Date the original or certified copies of the foregoing policies to Lender, and Borrower shall deliver original or certified renewal policies with satisfactory evidence of payment not less than fifteen (15) days in advance of the expiration date of the existing policy or policies. In the event Borrower should, for any reason whatsoever, fail to keep the Property or any part thereof so insured, or to keep said policies so payable, or fail to deliver to Lender the original or certified policies of insurance and the renewals thereof upon demand, then Lender, if it so elects, may itself have such insurance effected in such amounts and in such companies as it may deem proper and may pay the premiums therefor.  The Borrower shall reimburse Lender upon demand for the amount of premium paid, together with interest thereon at 15% percent per annum from date until paid.

(d)    Borrower agrees to notify Lender immediately in writing of any material fire or other casualty to or accident involving the Property, whether or not such fire, casualty or accident is covered by insurance.  Borrower further agrees to notify promptly Borrower's insurance company and to submit an appropriate claim and proof of claim to the insurance company if the Property is damaged or destroyed by fire or other casualty.

(e)    Lender is hereby authorized and empowered, at its option, to collect and receive the proceeds from any policy or policies of insurance, and each insurance company is hereby authorized and directed to make payment of all such losses directly to Lender instead of to the Borrower and Lender jointly.  Lender shall apply the net proceeds thereof, in accordance with Subsections (f) and (g) below.

(f)    If there is a fire or casualty loss which damages a portion (but not all) of the Improvements on the Property and as long as no Default has occurred and is continuing, then the proceeds of the insurance shall be deposited into a cash collateral account and such proceeds will be applied to the payment of the cost of restoration of the Improvements upon such terms and conditions as Lender may deem necessary or appropriate in its reasonable discretion; provided, however, that (i) such insurance proceeds must be adequate to cover the cost of restoration of the Improvements, or if the proceeds are insufficient, then the Borrower shall give Lender such adequate protection and assurance as Lender may, in its reasonable discretion require, that additional funds will be provided by the Borrower in order to complete the restoration of the Improvements and that Borrower has sufficient funds on hand to pay interest and principal on the Loans during the restoration period; (ii) the first priority of the Collateral Documents in the property is not impaired; (iii) the Borrower shall provide Lender on a monthly basis with a detailed cost breakdown showing by line item all costs projected for such restoration and a revised and updated cost breakdown; (iv) funds shall be disbursed from the escrow account in accordance with Lender's standard practices and procedures for construction loans; (v) there is no ongoing and continuing Default; and (vi) in the case of an ongoing and continuing Default, Lender shall have the right, in its sole discretion, to apply some or all of the insurance proceeds to the payment of the Loan.

(g)    If there is a fire or casualty loss which constitutes a total loss or a constructive total loss of the Property, or if not all of the conditions set forth in subclause (i) through (iii) of Subsection (f) above are satisfied, then the insurance proceeds shall be applied to the payment of the Obligations.  If such insurance proceeds are not sufficient to pay the Obligations in full, Lender shall have a right to accelerate the maturity of the Obligations and proceed against the Borrower and/or the remainder of the Property; and if the proceeds exceed the amount necessary to pay the Obligations in full, then such excess shall be paid to Borrower.

(15)    Taxes.

Upon demand of Lender after the occurrence of a Default, the Borrower shall pay to Lender, together with, at the same time as and in addition to the payments of principal and/or interest due on the Loans a pro rata portion of the property taxes, assessments, governmental charges, levies and insurance premiums relating to the Property next to become due, as estimated by Lender, so that Lender will have sufficient funds on hand to pay such taxes, assessments, governmental charges, levies and premiums not less than thirty (30) days prior to the due date thereof.  All such amounts shall be held by Lender (not in trust) without interest as further security for the Obligations.  Lender may apply all or a portion of the amounts so paid at such time and in such order as Lender, in its absolute discretion shall determine, to the payment of the taxes, assessments, governmental charges, levies and insurance premiums, as the case may be.

(16)    Anti-Terrorism Laws.  

(a)    Neither Borrower nor any of its affiliates is in violation of any law relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 10-56.  Neither Borrower nor any of its Affiliates is any of the following:

		
	(1)
	a person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

		
	(2)
	a person owned or controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

		
	(3)
	a person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(4)    supports “terrorism” as defined in the Executive Order; or 

		
	(5)
	a person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list.

(b)    Neither Borrower nor any of its affiliates (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in paragraph (a) above,  (ii) deals  in, or otherwise engages in any transaction relating to any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading a person that commits, threatens or conspires to commit or of avoiding, or attempt to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(17)    Additional Financial Services.  Borrower agrees that in the event Borrower is in need of additional financial services or products (including, but not limited to, deposit and loan products, cash management services, investment banking, securities brokerage services, and insurance), Borrower shall notify Lender of such need and provide Lender or Lender’s affiliates with an opportunity to provide Borrower with a price quotation for such products or services. Borrower acknowledges and agrees that Borrower is not required to purchase any product or service through Lender or Lender’s affiliates and that the choice of another provider will not affect Lender’s credit decision or credit terms.

H.    EACH EXTENSION OF CREDIT.  Each request by Borrower for an Advance shall constitute a warranty and representation by Borrower to Lender that there exists no Default or any condition, event or act which constitutes, or with notice or lapse of time (or both) would constitute a Default as defined by this Agreement.

I.    CONDITIONS PRECEDENT TO CLOSING.  The obligations of Lender hereunder shall be conditioned upon the receipt of all of, and Lender's review and approval of, the following documents and events upon terms and conditions acceptable to Lender and is subject to the accuracy of each and every representation and warranty of each Obligor contained in this Agreement:

(1)    Agreement.  A duly executed original of this Agreement;

(2)    Note. A duly executed original of the Note;

(3)    Collateral Documents.  Duly executed originals of the Collateral Documents and receipt of the Collateral;

(4)    Inspection and Inspection Fee.  Satisfactory site inspection of the Property by Lender's Inspector and payment of the construction and monitoring fee described in Section 12(f) hereof;

(5)    Architect’s, Engineer’s, Construction Manager’s and Other Contracts.  Copies of the executed architect’s, engineer’s, construction manager’s and all other contracts as may be required by Lender, together with evidence of such professionals’ insurance as may be required by Lender;

(6)    Appraisal.  Receipt of an appraisal of the Project (as built) prepared by an MAI appraiser approved by Lender and which appraisal shall be in form and content satisfactory to Lender;

(7)    Plans and Specifications.  Copy of the Plans and Specifications;

(8)    Development Expense Schedule.  Copy of the Development Expense Schedule;

(9)    Building Permits.  Receipt of copies of all building permits from applicable governmental authorities for demolition, site preparation and construction of the Improvements;

(10)    Construction Contract and Material Subcontracts.  Copy of the executed Construction Contract containing the Retainage requirements set forth herein, together with evidence of Contractor’s insurance, if required by Lender, and copies of the Material Subcontracts as may be required by Lender;

(11)    Payment and Performance Bonds.  Duly executed original of any payment and performance bonds of the Contractor and Material Subcontractors, as may be required by Lender;

(12)    No Work Affidavit. Duly executed original of a No Work Affidavit stating that no work has begun at the Property and that no materials have been delivered to the Property, which affidavit shall be dated and timed after the Mortgage has been recorded.  

(13)    Environmental Assessment Report.  Receipt of evidence which Lender deems satisfactory, including an environmental assessment questionnaire completed by Borrower indicating that all real and personal property securing the Loan is free of hazardous, toxic or dangerous waste, substances or material except in accordance with Environmental Law, as such are defined in any governmental law, regulation or ruling applicable to environmental conditions or listed as such by the Environmental Protection Agency;

(14)    Survey.  Three (3) copies of an initial survey certified correct to the title company, Lender and the Borrower;

(15)    Title Insurance Policy. A commitment for and a pro forma copy of a lender’s title insurance policy, including affirmative mechanics’ and materialman’s lien coverage and all other endorsements required by Lender, from a title insurance company approved by Lender to insure the Mortgage subject only to such permitted exceptions as may be approved by Lender; provided, however, the original lender’s policy of title insurance shall be delivered to Lender within ten (10) days of the Closing;

(16)    Insurance.  Copies of the insurance policies or certificates required by this Agreement;

(17)    Utilities Letters.  Copies of letters or other evidence in form and substance satisfactory to Lender that the Property has adequate available water, electric, gas, cable and other appropriate utility services.

(18)    Zoning Certificate.  Proof satisfactory to Lender that the Property is zoned to permit construction of the Improvements in accordance with the Plans and Specifications and use of the Improvements for their intended purpose, and has adequate parking required by applicable zoning laws;

(19)    Commitment Fee.  Payment of the commitment fee to Lender in an amount equal to the greater of (i) one-half percent (0.50%) of the maximum amount of the Loan, or (ii) $9,987.50; 

(20)    Flood Hazard Determination Form.  Duly executed original of the standard Flood Hazard Determination form; and

(21)    Other Documents and Information. Such other instruments, documents, estoppels, certificates, endorsements, invoices, opinions, and financial or other information as Lender may reasonably require; and

(22)    Fees and Expenses.  Borrower shall have paid all fees, costs and expenses in connection with the preparation, execution, delivery and performance of this Agreement, the Collateral Documents and any related documents or agreements, including without limitation attorneys’ fees and expenses and other fees, costs and expenses incurred by Lender.
    
J.    CONDITIONS OF ADVANCES.  The obligation of Lender to make any Advance is subject to the receipt of all of the items set forth in this Agreement and the satisfaction of each of the following conditions:

(1)    All representations and warranties made by each Obligor to Lender shall be true and correct as of the date of the Advance;

(2)    There shall exist no Default (or event which with the notice or lapse of time or both would constitute a Default) under this Agreement the Note, the Collateral Documents or any other agreement between any Obligor and Lender; and

(3)    Each Obligor's business must be in a condition satisfactory to Lender, the management of any Obligor must not have changed and no material adverse change (from that reflected in the last financial statements delivered to, and accepted by, Lender prior to execution of this Agreement) has occurred in the financial condition of the Borrower or any Obligor.

		
	A.
	DEFAULT.  The occurrence of any of the following shall constitute a default (“Default”) under this Agreement:  (i) failure to pay when due any sums payable under the terms of the Note, this Agreement, the Collateral Documents or otherwise in connection with the Loan, (ii) the default by any Obligor in the payment or performance when due of any obligation, covenant, or agreement or obligation under the Note, this Agreement, any of the Collateral Documents or under any other note or agreement of any Obligor with or in favor of Lender, including, but not limited to, any of the notes or documents executed in connection with the credit facilities made available to Borrower by Lender pursuant to that certain Loan Agreement between Borrower and Lender dated as of March 29, 2017 (the Defaults under clauses (i) and (ii) are each a “Monetary Default”), (iii) any statement, warranty, or representation made by any Obligor to Lender under this Agreement or under any other document or instrument contemplated by this Agreement or given by Borrower to Lender with respect to the Loan proves to be untrue in any material respect; (iv) any judgment, garnishment, seizure, tax lien or levy against any assets of any Obligor; (v) any material adverse change in the financial condition of Obligor, or any material discrepancy between the financial statements submitted by any Obligor and the actual financial condition of the Obligor; (vi) any discontinuance  or termination by Guarantor of any guaranty of all or any portion of the Loan or any attempt by Guarantor to do so; (vii) the insolvency, or the execution of an assignment for the benefit of creditors, the appointment of a receiver for any property of the Borrower or Guarantor, or the filing of a petition in bankruptcy by or against the Borrower or Guarantor, or the commencement of any proceeding in bankruptcy, or otherwise relating to the relief of debtors or the relief, postponement or adjustment of any indebtedness of the Borrower or Guarantor through reorganization, composition, extension or otherwise; (viii) death, dissolution, liquidation or insolvency of any Obligor; (ix) any default by any Obligor in the payment or performance of any material liabilities, indebtedness or obligations to any other creditor; (x) any delay in Construction (including Unavoidable Delays) that, in Lender’s reasonable judgment, makes it unlikely that Construction will be completed on or before the Completion Date, as it may be extended in accordance with this Agreement, or any other delay in the Construction or a discontinuance of Construction that continues for more than thirty (30) consecutive days without the prior written consent of Lender, subject to a thirty (30) day extension for delays resulting from Unavoidable Delay; or (xi) Parent shall fail to own one hundred percent (100%) of the outstanding voting stock of Borrower during the term of this Agreement (the Defaults under clauses (iii), (iv), (v), (ix), and (x) are each a “Non-Monetary Default”).

Upon the occurrence of a Default, Lender, at its option, shall have the right (i) to cease making advances hereunder or to comply with any other obligations with respect to this Agreement; and/or (ii) to declare the full amount of the Loan and all other Obligations of Borrower to Lender to be immediately due and payable;  and/or (iii) to exercise any and all of its rights and remedies under the Loan Documents, including, without limitation, the right to set off any funds of any Obligor in the possession of Lender, or any financial institution affiliate of Lender, against any Obligations of the Borrower to Lender; and/or (iv) to require Borrower to make monthly deposits of escrows for taxes, insurance premiums and replacement reserves to Lender.

Notwithstanding the foregoing, in the event of a Non-Monetary Default or a Monetary Default, Borrower shall have the right, but in any event (i) no more than three (3) times from the Closing Date to the date of determination, (ii) no more than two (2) times during any twelve-month period, and (iii) no more than one (1) time in any two consecutive quarters, to cure such Default (the “Cure Right”), (a) within five (5) days for a Monetary Default, and (b) within fifteen (15) days for a Non-Monetary Default. 

L.    POWER OF COMPLETION.  Subject to the time to cure as set forth in this Agreement, in the event of death, dissolution, or bankruptcy of the Borrower or the Contractor, in the event of a general assignment for the benefit of creditors by Borrower or the Contractor during the period of construction of the Improvements and  before the completion thereof, or upon any other occasion which might result in cessation of work, Lender shall have full power (but not the obligation) to take charge of and complete the construction and make disbursements under the Loan or Note in connection therewith.

M.    MISCELLANEOUS PROVISIONS.  

(1)    Costs and Expenses.  Borrower agrees to pay all of the costs, expenses and fees incurred in connection with the Loan, including without limitation inspection fees, appraisal fees and all reasonable attorney’s and paralegal’s fees and expenses, and all other costs and expenses incurred by Lender in connection with the preparation, administration, enforcement, workout, restructuring or collection of the Loan, whether or not suit is filed, including such fees at both trial and appellate court levels, together with all other costs and expenses that may be incurred by Lender in connection with the enforcement of the Note, this Agreement, the Collateral Documents or any other documents or agreements executed in connection with the Loan or the preservation or enforcement of any of Lender’s rights or interests with respect to any collateral securing the Loan.  This Agreement is not assignable by any Obligor and no party other than an Obligor is entitled to rely on this Agreement.  In no event shall any Obligor or Lender be liable to the other for indirect, special or consequential damages, including the loss of anticipated profits (provided that interest shall not be deemed to constitute profits) that may arise out of or are in any way connected with the issuance of this Agreement.  No condition or other term of this Agreement may be waived or modified except by a writing signed by the Borrower and Lender.

(2)    Survival of Agreements.  The provisions hereof, including, without limitation, all of the representations and warranties of Borrower and Guarantor herein, shall survive the execution of all instruments herein mentioned, shall continue in full force and effect until the Loan has been paid in full.  Borrower's obligations hereunder to indemnify and hold Lender harmless shall survive payment in full of the Loan and other Obligations.
(3)    GOVERNING LAW, JURISDICTION AND VENUE.  THIS AGREEMENT IS MADE AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS THEREOF WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.  BORROWER AND EACH OTHER OBLIGOR PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMIT AND CONSENT TO THE EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT IN TEXAS LOCATED IN THE SAME JUDICIAL DISTRICT AS THE OFFICE OF LENDER SPECIFIED IN THE FIRST PARAGRAPH OF THIS AGREEMENT AND AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT SHALL BE LITIGATED ONLY IN ONE OF THE FOREGOING DESCRIBED COURTS. BORROWER AND EACH OTHER OBLIGOR PARTY TO THIS AGREEMENT, FOR THEMSELVES, AND THEIR RESPECTIVE HEIRS, SUCCESSORS AND ITS ASSIGNS, AND FOR ANY PERSON CLAIMING UNDER OR THROUGH ANY OF THEM, HEREBY KNOWINGLY AND VOLUNTARILY WAIVE ANY AND ALL RIGHTS TO HAVE THE JURISDICTION AND VENUE OF ANY LITIGATION ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT IN ANY OTHER COURT, AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE ANY AND ALL RIGHTS TO REMOVE THIS ACTION TO, OR TO TRANSFER, DISMISS, OR CHANGE VENUE TO, ANY OTHER COURT. BORROWER AND EACH OTHER OBLIGOR PARTY TO THIS AGREEMENT FURTHER ACKNOWLEDGE AND AGREE THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS IN ANY WAY AGREED WITH OR REPRESENTED TO BORROWER OR SUCH OBLIGOR THAT THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN WAIVED OR WILL NOT BE FULLY ENFORCED BY LENDER.
(4)    WAIVER OF JURY TRIAL.  EACH OBLIGOR PARTY TO THIS AGREEMENT KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS SUCH OBLIGOR MAY HAVE TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BASED ON, ARISING OUT OF, OR IN ANY WAY RELATED TO: THIS AGREEMENT; THE OBLIGATIONS; ANY NOTES, COLLATERAL DOCUMENTS, LOAN AGREEMENTS, OR ANY OTHER LOAN DOCUMENTS OR AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH ANY OF THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  THIS JURY WAIVER ALSO APPLIES TO ANY CLAIM OR, COUNTERCLAIM, CAUSE OF ACTION OR DEMAND ARISING FROM OR RELATED TO (I) ANY COURSE OF CONDUCT, COURSE OF DEALING, OR RELATIONSHIP OF ANY OBLIGOR, OR ANY OTHER PERSON WITH LENDER OR ANY EMPLOYEE, OFFICER, DIRECTOR OR ASSIGNEE OF LENDER IN CONNECTION WITH THE OBLIGATIONS WITH LENDER; OR (II) ANY STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON BY OR ON BEHALF OF LENDER TO ANY OBLIGOR, OR ANY OTHER PERSON IN CONNECTION WITH THE OBLIGATIONS OR LENDER REGARDLESS OF WHETHER SUCH CAUSE OF ACTION ARISES BY CONTRACT, TORT OR OTHERWISE.  EACH OBLIGOR PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL INDUCEMENT TO THE LENDER IN EXTENDING CREDIT TO BORROWER, THAT THE LENDER WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND THAT SUCH OBLIGOR HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.  EACH OBLIGOR PARTY TO THIS AGREEMENT FURTHER CERTIFIES THAT NO PERSON HAS REPRESENTED TO IT, EXPRESSLY OR OTHERWISE, THAT LENDER OR ANY OTHER PERSON WOULD NOT, IN THE EVENT OF A LEGAL PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER.
(5)    Notices.  All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given if (i) mailed by first class United States mail, postage prepaid, registered or certified with return receipt requested, (ii) by delivering same in person to the intended addressee, or (iii) by delivery to an independent third party commercial delivery service for same day or next day delivery and providing for evidence of receipt at the office of the intended addressee.    For purposes of notice, the addresses of the parties shall be as set forth in the preamble of this Agreement; provided, however, that any party shall have the right to change its address for notice hereunder to any other location within the continental United States in the manner set forth herein.

(6)    Partial Invalidity.  Lender is relying and is entitled to rely upon each and all of the provisions of this Agreement; and accordingly, if any provision or provisions of this Agreement should be held to be invalid or ineffective, then all other provisions hereof shall continue in full force and effect notwithstanding.
(7)    Entire Agreement; No Joint Venture; No Third Party Beneficiaries.  This Agreement and all documents executed in connection with the Loan, now, or hereafter to be, executed set forth the entire agreement of Lender, the Borrower and the Guarantor with respect to the Loan and supersede all prior written or oral understandings with respect thereto; provided, that all written and oral representations, warranties and certifications made by Borrower to Lender with respect to the Obligations will survive the execution of this Agreement.  There are no intended third party beneficiaries of this Agreement. No course of dealing, course of performance, usage of trade or evidence of prior, contemporaneous or subsequent oral agreements or discussions or other extrinsic evidence of any nature shall be used to contradict, waive, vary, supplement or modify any term of this Agreement. Lender shall not be deemed to be a partner or joint venturer with any Obligor, and Borrower will indemnify and hold Lender harmless from and against any and all liabilities, damages, claims, demands, costs, expenses and attorneys’ fees resulting from such a construction of the parties and their relationship
(8)    Amendment.  Neither this Agreement nor any document executed in connection with the Loan may be changed, waived, discharged or terminated orally or in any manner other than by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.
(9)    Waivers.  No failure or delay by Lender, with respect to exercising any of its rights, powers or privileges under this Agreement or any document executed in connection with the Loan will operate as a waiver thereof.
(10)    Survival.  All covenants, agreements, representations and warranties made by the Borrower, Guarantor or any other Obligor party hereto, either in this Agreement or in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by Lender and shall survive the execution and delivery of this Agreement and the making of any Advance, regardless of any investigation made by any such party or on its behalf and notwithstanding that Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on the Loan or any other amount payable under this Agreement, the Note, any of the Collateral Documents or any other document or agreement executed in connection with the Loan is outstanding and unpaid and so long as any commitment of Lender to make Advances has not expired or terminated.  
(11)    Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower, Guarantor or any other Obligor party hereto may not assign or otherwise transfer any of their rights or obligations hereunder without the prior written consent of the Lender.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby, and Participants as provided herein any legal or equitable right, remedy or claim under or by reason of this Agreement.  Lender may at any time, without the consent of, or notice to, the Borrower, Guarantor or any other Obligor sell participations to other financial institutions (each, a “Participant”) in all or a portion of Lender’s rights and/or obligations in connections with the Loan
(12)    Headings for Convenience Only.  The Article, Section, and Subsection entitlements hereof are inserted for convenience of reference only and shall in no way alter, modify, define or be used in construing the text of such Articles, Sections or Subsections.
(13)    Severability.  Any provision of this Agreement held by a court of competent jurisdiction to invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be invalid or unenforceable. 
(14)    Cumulative Rights.  The rights and remedies of Lender under this Agreement and all documents executed in connection with the Loan will be cumulative, and the exercise or partial exercise of any such right or remedy will not preclude the exercise of any other right or remedy available to Lender under this Agreement and all documents executed in connection with the Loan or by law.
(15)    Counterparts.  To facilitate execution, this instrument may be executed in as many counterparts as may be convenient or required. All counterparts shall collectively constitute a single instrument. 
Signature Pages Follow

Lender:

[REDACTED],
a [REDACTED] state chartered bank

By:    
Name:  [REDACTED]
Title:    [REDACTED]

Borrower:

SHARPS COMPLIANCE, INC. OF TEXAS,
a Texas corporation d/b/a Sharps Compliance, Inc.

By: /s/ Diana P. Diaz    
Name:  Diana P. Diaz
Title:    Vice President and Chief Financial Officer

SHARPS ENVIRONMENTAL SERVICES, INC.,
a Delaware corporation d/b/a Sharps Environmental Services of Texas, Inc.

By: /s/ Diana P. Diaz    
Name:  Diana P. Diaz
Title:    Vice President and Chief Financial Officer

Guarantors:

ALPHA BIO/MED SERVICES, LLC,
a Pennsylvania limited liability company

By: /s/ Diana P. Diaz    
Name:  Diana P. Diaz
Title:    Vice President and Chief Financial Officer

BIO-TEAM MOBILE LLC,
a Pennsylvania limited liability company

By: /s/ Diana P. Diaz    
Name:  Diana P. Diaz
Title:    Vice President and Chief Financial Officer

CITIWASTE, LLC,
a New York limited liability company

By: /s/Diana P. Diaz    
Name:  Diana P. Diaz
Title:    Vice President and Chief Financial OfficerExhibit

EXHIBIT 10.2
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.  “[____]” or “[REDACTED]” INDICATES THAT INFORMATION HAS BEEN OMITTED.
    
MASTER EQUIPMENT FINANCE AGREEMENT

This MASTER EQUIPMENT FINANCE AGREEMENT (the "Master Agreement") is entered into as of August 21, 2019, by and among: (a) the parties of the first part, [REDACTED], LLC, a [REDACTED] limited liability company ("[REDACTED]"); and [REDACTED], a [REDACTED] limited liability company ("[REDACTED]"); and (b) the party of the second part, SHARPS COMPLIANCE, INC. OF TEXAS, a Texas corporation ("Borrower"). 
1.   Definitions and Rules of Construction.  Capitalized terms used in this Master Agreement or the other Transaction Documents without definition shall have the meanings provided in Appendix A hereto unless the context clearly requires otherwise. Unless otherwise specified, all accounting terms used in the Transaction Documents shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with GAAP.  This Master Agreement and the other Transaction Documents shall be interpreted and construed in accordance with the Rules of Construction set forth in Appendix A hereto.
2.  Master Agreement. This Master Agreement is effective as of the date specified above and provides the terms and conditions that the parties intend to apply to various secured loan transactions between Borrower and a Lender, as defined in Section 16 hereof. Each such loan transaction shall be evidenced by a Schedule (the applicable Schedule, this Master Agreement, any acceptance certificate executed in connection with or required by such Schedule, any guaranty executed by a Guarantor for the benefit of Lender or any of its Affiliates, and all other documents executed or delivered in connection with the foregoing with respect to a specific loan transaction shall hereinafter be referred to collectively as the "Transaction Documents"). One or more Schedules may expressly refer to a separate commercial note, promissory note or other similar instrument (a "Note"), in which case such Note shall also constitute a Transaction Document with respect to the specific loan transaction. Each Schedule shall incorporate by reference the terms of this Master Agreement, and such Schedule and the related Transaction Documents: (a) shall constitute a separate and enforceable agreement by and between the parties executing such Transaction Documents; and (b) shall specify the Equipment being financed thereunder, the terms pursuant to which Lender shall advance any proceeds of any loan thereunder (each, an "Advance"), and the terms of Borrower's repayment and other Obligations with respect thereto.  As used in this Master Agreement and the applicable Transaction Documents into which it is incorporated, the term "Loan" means, with respect to any Schedule, the amount of the aggregate Advances funded by Lender under the applicable Transaction Documents, together with any accrued and unpaid interest and all charges and other amounts due under the Transaction Documents with respect to the foregoing. This Master Agreement is not a legal commitment to enter into any Transaction Document or to make any Loan or Advance, and Lender will have no obligation to do so.  In addition, after entering into any Transaction Document, Lender shall have no obligation to make any Loan or Advance thereunder unless: (i) all conditions precedent to such Loan or Advance that are required by Lender have been satisfied, or waived in writing by Lender; (ii) all representations and warranties provided by Borrower, any Guarantor, and any other obligor in favor of Lender with respect to each Loan or Advance shall be true and correct on and as of the date Lender advances any proceeds thereof (or to the extent such representations and warranties expressly relate to an earlier date, such representations and warranties are true and correct as of such earlier date), it being expressly agreed that Borrower's execution and delivery of the applicable Transaction Documents shall constitute Borrower’s certification of same; and (iii) no Default or Event of Default under any Transaction Documents then exists.  
3.   PAYMENTS.  
(a)  Borrower shall pay to Lender periodic payments of principal and interest (hereinafter collectively referred to as “Periodic Payments”) on each Loan without invoice or other written demand in the amounts and at the times as more fully set forth in the applicable Transaction Documents, and each such Loan shall bear interest on the outstanding principal amount thereof in accordance with the terms of such Transaction Documents.  Whenever any payment to be made under any Transaction Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest on the Loan.  The entire outstanding principal balance and all accrued and unpaid interest of each Loan, together with any accrued and unpaid interest and all charges and other amounts due under the Transaction Documents with respect to the foregoing, will be due and payable in full on the earlier of (i) acceleration of the Loan following the occurrence of an Event of Default that has not been remedied within any stated grace or cure period, (ii) acceleration of the Loan following the occurrence of a Casualty Event to the extent provided in Section 6 hereof, or (iii) the maturity date specified for such Loan in the applicable Transaction Documents. The Loans are not revolving loans and may not be repaid and reborrowed.  All Periodic Payments and other amounts due to Lender ("Other Payments") under each Transaction Document shall be paid via wire transfer in legal tender of the United States of America in good, collected and indefeasible funds 

in the manner and to the account specified in the applicable Transaction Documents or as otherwise directed by Lender in writing.  Borrower hereby authorizes Lender to withdraw from any of Borrower's deposit accounts with Lender or any Affiliates of Lender  all Periodic Payments and Other Payments (collectively, "Payments") due under any Transaction Documents.  If any Payment is not received when due, Borrower shall pay a late charge equal to, at Lender’s election and to the extent allowed by Applicable Laws, in addition to and not in lieu of other rights of Lender, a late charge equal to the lesser of five percent (5%) of such delinquent amount or the maximum permitted by Applicable Law. Borrower acknowledges and agrees that the late charge (A) does not constitute interest, (B) is an estimate of the costs Lender will incur as a result of the late payment, and (C) is reasonable in amount. Without limiting the foregoing, following an Event of Default, Lender may at its option, in addition to the late payment fee set forth in the immediately preceding sentence, charge Borrower interest on any delinquent amounts at a rate equal to one and one-half percent per month (1.5%), or, if such rate exceeds the Maximum Rate, then at such Maximum Rate, until all amounts owing hereunder have been fully paid and satisfied or the Event of Default is otherwise cured.
(b)  Borrower's Obligations hereunder, including the Obligation to make all Payments when due, are absolute and unconditional under any and all circumstances and shall be paid and performed by Borrower without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever, including any past, present or future claims that Borrower may have against Lender or its Affiliates, any Supplier or any other person whatsoever.  To the fullest extent permissible under Applicable Laws, Borrower waives demand, diligence, presentment, protest, notice of dishonor, notice of nonpayment and notices and rights of every kind in respect of each such Payment.  
(c)  The parties hereto stipulate and agree that it is their common and overriding intent to contract in strict compliance with the Applicable Laws (including usury laws).  Notwithstanding anything herein to the contrary, if at any time the interest rate or rates applicable to any Loan or otherwise under any Transaction Documents, together with all fees, charges and other amounts which may be treated as interest on such Loan under Applicable Law (collectively, the “Charges”), shall exceed the Maximum Rate, the rate of interest payable in respect of such Loan or otherwise under any Transaction Documents, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate.  If for any reason the charges paid by Borrower, Guarantor or any other obligor exceed the Maximum Rate, Lender shall credit against the principal balance of the Loan (or, if such indebtedness shall have been paid in full, refund to the payor of such Charges) such portion of said Charges as shall be necessary to ensure that the total Charges do not exceed the Maximum Rate.
4.   Use, Maintenance, Improvements and Location. 
(a)  Borrower covenants and agrees, at its sole cost and expense, to: (i) use, operate, maintain, service and repair the Equipment: (A) in accordance with Prudent Equipment Use and Maintenance Practices (as hereinafter defined); (B) in like new condition excepting only Reasonable Wear and Tear (as hereinafter defined); and (C) only for its originally intended business purpose as described by Borrower to Lender in requesting Lender to enter into the Transaction Documents, and not for consumer, personal, family, or household purposes; (ii) maintain all records and other materials relating to Borrower's compliance with the foregoing; and (iii) keep the Equipment free from all Liens (other than the Liens created pursuant to the Transaction Documents).  Borrower further covenants and agrees not to use the Equipment to ship, store, process, create or use any Hazardous Materials (as defined below) to the extent such action should reasonably be expected to affect the value or marketability of any of the Equipment or expose Lender to any risk of civil or criminal penalty, sanction or exposure. As used herein, the term "Hazardous Materials" means  any materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled, including any and all hazardous or toxic substances, materials or waste defined or listed under the Hazardous Materials or Substances Transportation Act, 49 U.S.C. 1801 et seq; the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq; the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq, as amended by the Superfund Amendments and Reauthorization Act; or the Oil Pollution Act of 1990, 33 U.S.C. §§ 2701, et seq.
(b) As used herein, "Prudent Equipment Use and Maintenance Practices" means: (i) using, operating, maintaining, servicing and repairing the Equipment in accordance and consistent with (A) all recommendations of the Supplier or manufacturer and all maintenance and operating manuals or service agreements, whenever furnished or entered into, including any subsequent amendments or replacements thereof, issued by the Supplier, manufacturer, or service provider; (B) the requirements of all applicable insurance policies; (C) the requirements of the Equipment Documents, so as to preserve all of Borrower's and Lender's rights thereunder, including all rights to any warranties, indemnities or other rights or remedies; (D) the requirements of Applicable Law (including those relating to occupational safety and health, environmental protection or remediation and all license, permit and registration requirements), including making any alterations or modifications required to comply with Applicable Law; (E) the prudent practice of other similar Persons in the same business as Borrower, but in any event, to no lesser standard than that employed by Borrower for comparable equipment owned or leased by it;  and (F) any requirements specified in the applicable Transaction Documents related to the nature or type of the Equipment; (ii) allowing the Equipment to be operated only by employees or authorized agents of Borrower and making available to all users of the Equipment all safety and operating manuals for the 

Equipment; (iii) within a reasonable time, replacing any parts of the Equipment which become worn out, lost, destroyed, damaged beyond repair or otherwise unfit for use, with new or reconditioned replacement parts that constitute Permitted Improvements; and (iv) repairing the Equipment with replacement parts purchased from sources approved by the Supplier, according to its specifications and consistent with the recommendations and requirements of the original equipment manufacturer including operation and maintenance guidelines.
(c)  As used herein, “Reasonable Wear and Tear” means the results of normal use of the Equipment as originally intended assuming (i) use and maintenance in accordance with the Supplier’s recommendations and in accordance with the provisions of this Section 4; (ii) the complete absence of any casualty, misuse, abuse, abandonment, improper care, accident, negligence or similar occurrence with respect to the Equipment, whether or not the Equipment is in use at the time of said occurrence; and (iii) use that does not, in any way, impair the function of the Equipment or prevent the Equipment from immediately being placed into use or its continued use. 
(d)  Unless replaced in accordance with this Section 4, Borrower shall not remove, alter, or replace any parts from the Equipment that are essential to the operation of the Equipment or the removal, alteration, or replacement of which could reasonably be expected to adversely affect the value, utility and remaining useful life that the Equipment would have had without the removal, alteration, or replacement of such parts.  Provided that no Default or Event of Default has occurred and is continuing, Borrower may, at its sole cost and expense, make Permitted Improvements.  Borrower shall, upon written request from Lender, provide Lender with a detailed list of any and all removals, replacements or alterations, including Permitted Improvements, made by Borrower together with such other information related thereto as may reasonably be requested by Lender.  
(e) Borrower covenants and agrees not to move any Equipment from the location specified in the applicable Transaction Documents without Lender’s prior written consent unless such Equipment constitutes Mobile Equipment. In the case of Mobile Equipment, Borrower may move such Equipment so long as: (i) if the Mobile Equipment is subject to Certificate of Title Laws, Borrower shall not permit such Mobile Equipment to be located in a state other than the state in which such Mobile Equipment is then titled for any continuous period of time that would subject such Mobile Equipment to the Certificate of Title Laws of such other state; (ii) Borrower does not permit any Mobile Equipment to be located outside of the Continental United States; and (iii) such Mobile Equipment will be based at, and will return at regular intervals to, the location specified in the applicable Transaction Documents or such other location as Lender has agreed to in advance in writing.  Borrower shall not, in any event, permit any Equipment to be used by, or to be delivered into, the possession or control of any third party unless expressly approved in writing by Lender.  Borrower represents, warrants, covenants, and agrees that: (A) Borrower is, and will continue through the period of effectiveness hereof, to be either the owner, the lessee or the sublessee of each and every facility in which any Equipment is located at any time, and (B) all of the Equipment covered by any Transaction Documents is located in the jurisdiction specified in such Transaction Documents; provided, however, that Mobile Equipment may at times be located in other facilities or jurisdictions so long as Borrower complies with its Obligations under this Section 4(e).
5.  REPORTING; INSPECTIONS.
(a)  Financial Reporting.  So long as Borrower has any outstanding Obligations to Lender, Borrower shall comply with the following provisions:
(i)  As soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of Parent, Borrower shall submit to Lender a copy of the annual audited financial statements of Parent and its Subsidiaries for such fiscal year containing, on a consolidated basis, balance sheets, states of income, statements of stockholders' equity and statements of cash flows as at the end of such fiscal year and for the 12-month period then ended, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP, and audited and certified without qualification by independent certified public accountants of recognized standing acceptable to Lender; and
(ii)  As soon as available, and in any event within forty-five (45) days after the end of each quarter of each fiscal year of Parent , Borrower shall submit to Lender a copy of the financial statements of Parent and its Subsidiaries as of the end of such fiscal quarter and for the portion of the fiscal year then ended, containing, on a consolidated basis, balance sheets, statements of income, statements of stockholders' equity and statements of  cash flows in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified by a Financial Officer to have been prepared in accordance with GAAP and to fairly and accurately present the financial condition and results of operations of Parent and its Subsidiaries, on a consolidated basis, at the date and for the periods indicated therein.
Borrower shall be deemed to have complied with the foregoing requirements if Parent files Forms 10-K and 10-Q with the Securities and Exchange Commission that are publicly available within the time frames set forth in this Section 5(a) covering Parent and its Subsidiaries.  Borrower represents, warrants, covenants and agrees that all such financial statements (or Forms 10-Q and 10-K, 

as applicable) shall fairly present the financial condition and the results of operations of the applicable Person as of the date of and for the period covered by such statements. All financial statements and financial information submitted to Lender in accordance with this Master Agreement shall include, among other things, detailed information regarding (A) any and all Persons of which Parent is the majority owner, and (B) any and all Persons of which Parent is not the majority owner, but for which Parent is directly or contingently liable on debts or obligations of any kind incurred by those Persons.  
(b)  Notices.  Without limiting Borrower's other Obligations hereunder, Borrower expressly covenants and agrees to provide Lender with written notice promptly (and in any event within five (5) days) in the event that: (i) any Lien attaches to the Equipment (other than the Liens created pursuant to the Transaction Documents), which such notice shall include all relevant information concerning the Lien, including the name, address, and telephone number of the party asserting the Lien and the location of such Equipment on the date of the notice; (ii) Borrower or its Affiliate receives any demand, notice, summons, complaint or legal proceeding relating to any Equipment including any violation of any Applicable Laws; (iii) a Casualty Event occurs, to the extent notice is required pursuant to Section 6(a) hereof; (iv) one or more Actions described in Section 9 occurs; (v) any change of: (A) the name of Borrower or any Guarantor, (B) the identity or form of organization of Borrower or any Guarantor, or (C) Borrower's or any Guarantor's Federal Taxpayer Identification Number; and (vi) such other information regarding the results of operations, business affairs and financial condition of Borrower or any Guarantor as Lender may reasonably request. 
(c)  Inspections.  Upon forty-eight (48) hours' notice, Borrower shall afford Lender and/or its designated representatives access to the premises where the Equipment is located for the purpose of inspecting such Equipment and all applicable maintenance or other records relating thereto; provided, however, if a Default or Event of Default shall exist, no prior notice by Lender shall be required.  Borrower acknowledges that Lender’s inspection of any Equipment, Supplier or other parties, or documentation relating to any Loan will be solely for the protection of Lender’s interests in the Equipment and under such Loan and under no circumstances shall be construed to impose any responsibility or liability of any nature whatsoever on Lender.  Borrower shall, whenever reasonably requested by Lender, advise Lender of the exact location of any and all items of Equipment (or the approximate location of Mobile Equipment).
6.   Risk of Loss
(a)  Risk of Loss; Notice. No loss of, or damage to, the Equipment from any cause whatsoever, including any Casualty Event shall relieve Borrower from its Obligations except as expressly provided in this Section 6.  Borrower shall promptly (and in any event within ten (10) days) provide Lender with written notice of any Casualty Event to any Equipment for which the repairs or replacement costs are likely to exceed the lesser of: (i) twenty percent (20%) of the original cost thereof, or (ii) Fifty Thousand Dollars ($50,000).  Each such notice must be provided together with all damage reports provided to any governmental authority, insurer, or Supplier, and all documents pertaining to the repair of such Casualty Equipment, including copies of work orders, and all invoices for related charges.  Lender shall be under no duty to Borrower to pursue any claim against any Person in connection with a Total Loss or other Casualty Event.
(b)  Casualty Event Cure.  If the Casualty Event does not result in a Total Loss, Borrower shall promptly (but in any event within thirty (30) days), place the applicable Casualty Equipment in the condition and repair required by the Transaction Documents.  In the event of a Total Loss, Borrower shall promptly (but in any event within thirty (30) days): (i) replace such Casualty Equipment with Replacement Equipment, in which case such Replacement Equipment shall be, for all purposes hereof, “Equipment” as defined herein; or (ii) pay to Lender, as a mandatory prepayment of the related Loan, an amount calculated by Lender to be equal to the then outstanding principal balance thereof plus all accrued and unpaid interest, any breakage costs or prepayment premium set forth in the applicable Transaction Documents and any other amounts then due to Lender.  In the event the Casualty Equipment is less than all Equipment financed under the applicable Transaction Documents: (i) Lender may reasonably make an item by item allocation of the mandatory prepayment applicable to only the Casualty Equipment  and may, but shall not be obligated to, consider the initial cost of the applicable Equipment as well as the depreciation thereof; and (ii) Lender may require mandatory prepayment with respect to all Equipment (not solely the Casualty Equipment) if Lender determines that the Casualty Equipment is material in value when compared to the remaining Equipment, is material to the overall functionality of the remaining Equipment, or that the Casualty Event could reasonably be expected to have a Material Adverse Effect on Borrower or any Guarantor.  All payments under this Section shall be applied against the remaining installments of principal of the related Loan  in the inverse order of their maturities until repaid in full, and then against the other Obligations, as determined by Lender, in its sole discretion.  Upon Lender's receipt of the full and indefeasible payment of the amount set forth above,  Borrower’s obligation to pay future Periodic Payments shall terminate solely with respect to the Casualty Equipment so paid for, but Borrower shall remain liable for, and pay, all Taxes, indemnity payments or other Obligations related to such Casualty Equipment.    
(c)  Insurance Proceeds.  If Lender receives a payment under an insurance policy maintained by Borrower or its Affiliates in connection with any Total Loss or other Casualty Event, and such payment is both unconditional and indefeasible, then provided Borrower shall have complied with the applicable provisions of this Section 6, Lender shall either (i) if received pursuant to a Total Loss, remit such proceeds to Borrower up to an amount equal to the amount of the mandatory prepayment received by Lender from Borrower under Section 6(b) above, or credit such proceeds against any amounts owed by Borrower pursuant to subsection 

6(b) above; or (ii) if received with respect to repairs or replacements made under Section 6(b) above, remit such proceeds to the repairman of such Equipment, provided that, should such repairman have been paid in full, then to reimburse Lender for any such payments and thereafter to Borrower up to an amount equal to the out-of-pocket costs of repair or replacement actually incurred by Borrower, as established to Lender’s reasonable satisfaction.  Any insurance proceeds remaining after application in accordance with the foregoing provisions shall be (A)  remitted to Borrower promptly after written request, provided that no Default or Event of Default has occurred and is continuing; or (B) otherwise, at Lender's option if a Default or Event of Default has occurred and is continuing, be applied as a mandatory prepayment of the principal balance of the Loan.
7.   INSURANCE.  
(a)  So long as Borrower has any outstanding Obligations to Lender, Borrower shall procure and maintain: (i) all-risk first party property insurance covering the Equipment for any and all physical loss or damage to the Equipment (or any portion thereof), including loss or damage caused, in whole or in part, by fire, water, wind, earthquake, collapse, theft, vandalism, malicious mischief, collision and other risks normally included in extended all-risk property coverage in an amount not less than the greater of (A) the full replacement cost of the Equipment, and (B) the sum of the then outstanding principal balance of the Loans under such Transaction Documents plus all accrued and unpaid interest and any breakage costs or prepayment premium set forth therein; and (ii) any and all other coverage required pursuant to the terms of the respective Transaction Documents. Borrower shall be solely liable and responsible for any self-insured retention, coinsurance or deductible, each of which shall be in form and amount as is acceptable to Lender, and shall pay to Lender an amount equal to the shortfall to the extent Lender’s recovery is nullified, reduced or effected by the existence of the same.  Borrower shall be solely responsible for all premiums, including any retrospective premiums, under all required policies.  
(b)  The insurance policies required under this Section 7 (including all endorsements) shall: (i) be in a form and substance satisfactory to Lender, and written by insurers of recognized reputation, responsibility, and financial strength satisfactory to Lender; (ii) name Lender and its successors and assigns as an additional insured, and as sole loss payee under a lender's loss payable endorsement for such policy; (iii) provide that the insurance policies required hereunder are primary and noncontributory with respect to any insurance maintained separately by Lender; (iv) require the insurer to provide Lender written notice of cancellation or non-renewal of the required policy not less than thirty (30) days prior to the effectiveness of the foregoing (or such shorter period agreed upon by Lender in its sole and absolute discretion); (v) contain a waiver of subrogation in favor of Lender; (vi) contain a severability of interests provision; and (vii) shall include a lender's loss payable endorsement that states that the insurance coverage afforded Lender shall not be invalidated by any action or inaction of Borrower, including the breach of any policy warranty, declaration or condition, or that is otherwise in form and substance satisfactory to Lender.  Borrower agrees that it shall obtain and maintain such other coverages, or cause adjustments to be made to the scope, amount or other aspects of the existing coverages, promptly upon Lender’s request, as and when Lender reasonably deems such additional coverages or modifications to be appropriate in light of any changes in applicable law, prudent industry practices, Borrower’s anticipated use of the Equipment or other pertinent circumstances.  Borrower shall provide evidence reasonably acceptable to Lender of its compliance with the insurance requirements set forth herein prior to any Advance and not less than one business day prior to the renewal of each required policy. Borrower agrees to deliver to Lender evidence of compliance with this Section satisfactory to Lender, including any requested copies of policies, certificates and endorsements, with premium receipts therefor, on or before the date of execution by Borrower of the applicable Transaction Documents and thereafter within two (2) Business Days after Lender’s request.
8.   LEASE, ASSIGNMENT AND LIENS.
(a)  BORROWER SHALL NOT, WITHOUT LENDER’S PRIOR WRITTEN CONSENT, WHICH CONSENT MAY BE GRANTED OR WITHHELD IN LENDER'S SOLE AND ABSOLUTE DISCRETION, (i) SELL, ASSIGN, DELEGATE, PLEDGE, HYPOTHECATE, ENCUMBER, DISPOSE OF, OR OTHERWISE TRANSFER (including by operation of law) THE EQUIPMENT OR ANY INTEREST THEREIN; (ii) RENT, LEASE OR LEND ANY EQUIPMENT TO ANYONE; (iii) PERMIT ANY EQUIPMENT TO BE USED BY ANYONE OTHER THAN BORROWER AND ITS RESPECTIVE QUALIFIED EMPLOYEES; or (iv) assign or otherwise transfer (including by operation of law) its rights or obligations under any transaction documents. 
(b)  Lender, at any time with or without notice to Borrower, may sell, transfer, assign, grant a participation in, and/or grant a security interest in all or any part of Lender's interest in each Loan, any Payments due thereunder, the Collateral, and/or the related Transaction Documents (each, a "Lender Transfer"). Any purchaser, transferee, assignee or secured party of Lender (each a "Lender Assignee") shall have and may exercise all of Lender's rights hereunder with respect to the Loans,  Transaction Documents, the Payments due thereunder, the Lien of Lender on the Collateral, and/or the other property or rights to which any such Lender Transfer relates. In such event, Lender Assignee shall have all of the rights, but none of the obligations (unless expressly and to the extent assumed by such Lender Assignee in writing) with respect the property or rights subject to the Lender Transfer.  Lender shall be relieved of any obligations of Lender that have been assumed by Lender Assignee. Borrower acknowledges that Lender’s right to enter into a Lender Transfer is essential to Lender and, accordingly, waives any restrictions under Applicable Laws with respect to any Lender Transfer and any related remedies.  Borrower shall not assert against any Lender Assignee any 

claim that Borrower may have against Lender; provided, however, that Borrower may assert any such claim in a separate action against Lender. Upon written notice of a Lender Transfer, Borrower shall: (i) promptly execute and deliver to Lender or to such Lender Assignee an acknowledgment of such Lender Transfer in form and substance satisfactory to the requesting party, an insurance certificate adding the Lender Assignee as loss payee and/or an additional insured, and such other documents and assurances, including estoppel certificates, as are reasonably requested by Lender or such Lender Assignee; and (ii) comply with all other reasonable requirements of any such Lender Assignee in connection with any such Lender Transfer.  Following such Lender Transfer, the term “Lender” shall be deemed to include or refer to each Lender Assignee, as appropriate under the circumstances. Borrower will provide reasonable assistance to Lender to complete any transaction contemplated by this Section 8(b).
(c) Subject to the restriction on assignment contained in Section 8(a), the Transaction Documents shall inure to the benefit of, and are binding upon, the successors and assigns of the parties thereto including, without limitation, each Person who becomes bound thereto as a "new debtor" as set forth in the UCC.  Each Schedule (together with any Note to the extent the applicable Schedule expressly references a Note) constitutes "Chattel Paper" as defined by the UCC; the original counterpart of each Schedule (together with any Note to the extent applicable) designated by Lender in writing shall constitute the sole original counterpart; and no security interest can be perfected by possession of any other duplicate original or counterpart, whether or not signed by the parties.
9.   TAXES; GENERAL INDEMNITY.  Borrower shall report and pay immediately all Taxes and, on request of Lender, submit to Lender written evidence of Borrower’s payment of Taxes.  Borrower agrees to defend, indemnify and hold harmless, on a net after tax basis, each and every Indemnified Party from and against all Actions, Losses, and (without limiting the foregoing) Taxes, including any of the foregoing resulting solely or partially from the Indemnified Party's negligence. Borrower agrees to promptly (and in any event within five (5) days) notify Lender of all Actions. Borrower shall, at Lender’s election, appear and defend each Action using competent counsel acceptable to Lender and/or pay the cost of the defense of each Action brought against any Indemnified Party, either alone or in conjunction with others. Borrower shall not enter into any settlement of any Action without the approval of Lender and each applicable Indemnified Party.  Borrower shall satisfy, pay and discharge on a net after tax basis any and all Losses that may be incurred by, or recovered against, any Indemnified Party in connection with any Action. Notwithstanding the foregoing, Borrower shall not be obligated to pay any Losses resulting from an Action brought or asserted against an Indemnified Party to the extent that the damages alleged in such Actions are finally determined to have been proximately caused by the willful misconduct or gross negligence of such Indemnified Party so long as the applicable Actions are not asserted on the basis of (A) theories that the Indemnified Party is vicariously liable for the actions of Borrower or any other third party using the Equipment by or through Borrower, including theories of agency, apparent agency or employment; (B) theories that the Indemnified Party negligently entrusted the Equipment to Borrower or any other third party using the Equipment by or through Borrower; or (C) the failure of any Indemnified Party to compel Borrower to comply with the provisions of any Transaction Documents. All rights and privileges of Lender and each Indemnified Party arising from the indemnities contained in this Section 9 will survive the expiration or earlier termination of any Transaction Documents, and such indemnities are expressly made for the benefit of, and will be enforceable by, Lender, each Indemnified Party, its and their successors and assigns.
10.  Events of Default; Remedies. 
(a)  Events of Default.  A default shall be deemed to have occurred hereunder and under all Transaction Documents upon the occurrence of any of the following (each, an "Event of Default"): (i) Borrower fails to pay any Payments under any Transaction Documents when due and payable; (ii) Borrower or its designee records or attempts to record an amendment or termination statement relating to any financing statement filed for the benefit of Lender against Borrower, the Equipment or any Collateral pledged to Lender; (iii) Borrower fails to obtain, maintain or comply with all of the insurance coverages required under the Transaction Documents; (iv) Borrower breaches any representation, warranty, covenant or agreement in Sections 8(a) or 4(a)(iii) hereof; (v) any representation or warranty of Borrower or any Guarantor made in any Transaction Document or any other writing or certificate furnished by or on behalf of Borrower or Guarantor pursuant to any Transaction Document is incorrect, incomplete, false or misleading when made in any material respect; (vi) Borrower or any Guarantor fails to provide to Lender any notice required under the Transaction Documents when due; (vii) Borrower attempts to repudiate any Loan or Transaction Documents or attempts to revoke acceptance of any Equipment after any Advance has been made by Lender with respect to such Equipment; (viii) any Equipment is illegally used; (ix) Borrower or any Guarantor breaches or is in default under any other agreement by and between Lender (or any of its Affiliates) on the one hand, and Borrower or such Guarantor (or any of their respective Affiliates) on the other hand, after giving effect to any notice and cure periods set forth therein; (x) Borrower or any Guarantor: (A) defaults in any payment obligation under any agreement with any third parties (whether or not affiliated with Lender) for money borrowed, the lease of real or personal property, or any other financial accommodation (after giving effect to any applicable notice and cure provisions provided for therein) and/or (B) defaults in the observance or performance of any other covenant or condition relating to any such agreement for money borrowed, the lease of real or personal property, or any other financial accommodation if the effect of such default described in this subsection (B) is to cause, or to permit the counterparty to any such arrangement to cause, the obligations thereunder to become due prior to their stated maturity; (xi) general failure by Borrower or Guarantor to pay its 

debts as they become due or the commencement of any bankruptcy, insolvency, receivership or similar proceeding by or against Borrower or any Guarantor or any of its or their properties or business (unless, if involuntary, no Transaction Document is rejected in any such involuntary proceeding and such involuntary proceeding is dismissed within sixty (60) days of the filing thereof);  (xii) any judgment, writ, injunction, order, award or decree is entered against Borrower or any Guarantor that Lender determines could have a Material Adverse Effect on Borrower or Guarantor  unless such judgment, writ, injunction, order, award or decree is discharged or execution thereof stayed within thirty (30) days after entry or covered by applicable insurance for which the insurer has accepted liability in a manner satisfactory to Lender; (xiii) any Guarantor dies or repudiates, revokes, rescinds, withdraws, cancels or fails to perform under any guaranty executed by a Guarantor for the benefit of Lender or any of its Affiliates; (xiv) any Transaction Document or any Lien granted thereunder terminates, ceases to be effective or ceases to be the legally valid, binding and enforceable obligation of Borrower or any Guarantor, in whole or in part (except for the termination of any Lien or Transaction Document in accordance with the express terms of such Transaction Documents); (xv) Borrower, Guarantor or any other party thereto (other than Lender), directly or indirectly, contests in any manner the effectiveness, validity, binding nature or enforceability of any such Transaction Document or any Lien granted thereunder; (xvi) any Person acquires, after the date of this Master Agreement, a controlling ownership interest, directly or indirectly, in the voting power of the total outstanding stock or other ownership interests of Borrower or any Guarantor; (xvii) Borrower or any Guarantor enters into any transaction of merger or consolidation unless Borrower or Guarantor, as applicable, is the surviving entity and, prior to the consummation of such transaction, Lender determines in its sole and absolute discretion that such transaction is not likely to have a Material Adverse Effect on Borrower or Guarantor, as applicable;  (xviii) Borrower changes its legal name, state of organization or organizational structure unless Lender authorizes such change in writing; (xix) Borrower or any Guarantor (A) ceases to do business as a going concern, liquidates, dissolves or otherwise terminates its existence; or (B) sells, transfers or otherwise disposes of all or substantially all of its assets or property; (xx) Borrower or any Guarantor fails to perform or observe any other covenant, condition or agreement to be performed or observed by it under any Transaction Document that is not otherwise addressed in this Section 10(a), and such failure continues unremedied for a period of thirty (30) calendar days; or  (xxi) Lender, in good faith, deems itself insecure or determines that the prospect of payment or performance of any material obligations of Borrower or any Guarantor under the Transaction Documents is impaired for any reason. Borrower acknowledges that an Event of Default under any Transaction Document shall constitute an Event of Default under all Transaction Documents related to any and all Loans or other Obligations owing to Lender or any Affiliate of Lender.
(b)  Remedies.  Upon the occurrence of an Event of Default, Lender shall have any and all rights and remedies existing at law or in equity and shall have the right, at its sole election, at any time to exercise any or all of such remedies concurrently, successively or separately, and without notice to Borrower. Without limiting the foregoing, Lender may: (i) proceed at law or in equity to enforce specifically Borrower’s performance or to recover damages; (ii) declare each Loan and/or any or all other Obligations in default; (iii)  make such payments and do such acts as Lender considers necessary or reasonable to protect its security interest in the Equipment and any other Collateral and require Borrower to immediately assemble, make available and/or deliver the Equipment (or any portion thereof required by Lender) to Lender at a time and place designated by Lender; (iv) to the extent permitted by Applicable Laws, enter any premises where any Equipment may be located and repossess, disable or take possession of such Equipment (and/or any attached or unattached parts) by self-help, summary proceedings or otherwise without liability for rent, costs, damages or otherwise; (v) use Borrower’s premises for storage without rent or liability; (vi) sell, lease or otherwise dispose of any or all of the Equipment at private or public sale, in bulk or in parcels, with or without notice except to the extent required by Applicable Laws, and without having the Equipment present at the place of sale or in Lender’s possession; (vii) disable or keep idle all or part of the Equipment; (viii) upon application to a court of competent jurisdiction, seek the immediate appointment of a receiver for all or part of the Equipment or any other Collateral, whether such receivership is incidental to a proposed sale of such Equipment or other Collateral, pursuant to the UCC or otherwise, and Borrower consents to the appointment of such a receiver without bond, to the fullest extent permitted by Applicable Laws; (ix) accept all or a portion of the Equipment in full or partial satisfaction of Borrower’s Obligations to Lender under such Transaction Documents pursuant to the provisions of Article 9 of the UCC (provided that any such acceptance must be confirmed by Lender in writing); and (x) declare all of Borrower’s Obligations immediately due and payable including the following (the “Default Amount”): (A) the then outstanding principal balance due under the Transaction Documents; (B) all accrued and unpaid interest; (C) any breakage costs and prepayment premium set forth in the applicable Transaction Documents; and (D) all costs and expenses incurred by Lender in any repossession, transportation, recovery, storage, refurbishing, advertising, repair, sale, lease, or other disposition of the Equipment or Lender’s enforcement of its rights hereunder, including Attorneys’ Fees and any brokers’ or similar fees or any other fees, costs or expenses resulting from the Event of Default and all other amounts due hereunder, including indemnity payments.  In addition to the Default Amount, Borrower shall pay to Lender interest thereon, at a rate of eighteen percent (18%) per annum (or, if such rate exceeds the Maximum Rate, then at such Maximum Rate) from the date such amount is calculated by Lender until the date such amount is paid. Borrower expressly acknowledges that the Transaction Documents for each Loan set forth a reasonable amount and reasonable formula for calculation of liquidated damages in light of the anticipated harm caused by any Event of Default hereunder and that such harm would otherwise be difficult or impossible to calculate or ascertain. In the event Borrower pays to Lender the Default Amount and any and all other amounts due and payable to Lender hereunder (in good, collected and indefeasible funds) prior to the date Lender enters into a contract or otherwise determines that it is obligated to a third party with respect to the 

disposition of the Equipment, Lender shall release its security interest in the applicable Equipment.  In the event Lender disposes of the Equipment and any other collateral, it shall apply the Net Proceeds to Borrower’s Obligations in the order Lender determines.  Any deficiency that exists after such disposition and application of the Net Proceeds to Borrower’s Obligations will be paid immediately by Borrower.  In the event the sum of the Net Proceeds and the amounts paid by Borrower to Lender is greater than the Default Amount, fees and other amounts due under all Transaction Documents or other agreements between Lender and Borrower, such excess shall be paid without interest first to any third parties entitled to such proceeds under Applicable Laws (including secured parties granted rights therein pursuant to Article 9 of the UCC), and any remainder shall be paid to Borrower.  With respect to any exercise by Lender of its right to dispose of the Equipment, Lender shall have no obligation, subject only to any legal requirements of commercial reasonableness imposed by Article 9 of the UCC, to safeguard, clean or otherwise prepare the Equipment for disposition; Lender may comply with any state or federal law requirements that Lender deems to be applicable or prudent to follow in connection with any such disposition; and any actions taken in connection therewith shall not be deemed to have adversely affected the commercial reasonableness of any such disposition.  Lender will give Borrower reasonable notice of a public sale or the time after which any private sale or any other intended disposition of the Equipment is to be made unless the Equipment threatens to decline speedily in value or is a type customarily sold in a recognized market.  The requirements of reasonable notice shall be met if such notice is given at least five (5) days before the time of the public sale or the time after which any other disposition is to be made.  If Equipment delivered to or picked up by Lender contains goods or other property not constituting Equipment or otherwise pledged to Lender hereunder, Borrower agrees that Lender may take and dispose of such other goods or property, provided that Lender makes reasonable efforts to make such goods or property available to Borrower after repossession upon Borrower’s written request.  Forbearance as to any Default or Event of Default shall not be deemed a waiver (all waivers to be enforceable only if specifically provided in writing by Lender), and waiver of any Default or Event of Default shall not be a waiver of any other or subsequent Default or Event of Default.  To the fullest extent permitted by Applicable Laws, Borrower waives any rights now or hereafter conferred by statute or otherwise that may require marshaling, appraisement, evaluation, stay or extension by Lender or that may require Lender to permit redemption or mitigate its damages hereunder or that may otherwise limit or modify any of Lender’s rights or remedies herein.
11.   TITLE; COLLATERAL.
(a)    Equipment and Related Collateral.  Title to the Equipment shall at all times remain in the name of Borrower.  As security for all Obligations of Borrower, Borrower hereby grants to Lender a security interest in all right, title and interest of Borrower, whether now existing or hereafter acquired or arising, in and to the following (hereinafter, the "Collateral"): (i) the Equipment; (ii) all Equipment Documents (including all claims for damages arising as a result of any default by the Supplier or other parties obligated pursuant to the Equipment Documents, including claims under all warranty and indemnity provisions contained therein and any and all rights of Borrower to compel performance of the terms of such Equipment Documents); (iii) any and all leases, subleases, chattel paper, accounts, general intangibles, security deposits and proceeds relating to any Equipment; (iv) all moneys, securities and other property of Borrower now or hereafter held by Lender or its Affiliates; and (v) all other collateral as to which a security interest has been or is hereafter granted by Borrower to Lender or to any of its Affiliates in connection with any current or future mortgage, indenture, loan or credit agreement, or other contract or agreement for money borrowed or the lease of real or personal property (in all cases, wherever located, and whether now owned or hereafter acquired or arising and howsoever Borrower's right, title or interest therein may arise or appear). 
(b)  Affiliates of Lender; Lender Assignees; Cross-Collateralization.  Borrower hereby agrees that the security interest granted by Borrower in the Collateral pursuant to Section 11(a), and any other grant of a security interest in this Master Agreement or any other Transaction Documents, shall also secure all Obligations of Borrower to each Affiliate of Lender (including Borrower's obligations under or in connection with any existing and future swap agreements (as defined in 11 U.S.C. § 101, as in effect from time to time) with Lender or any of its Affiliates, other than any obligations arising under any “swap” (as such term is defined in the Commodity Exchange Act, as in effect from time to time, and the official rules and regulations promulgated thereunder (collectively, the “CEA”)) to the extent that the securing of such swap obligation by Borrower would be impermissible or illegal under the CEA).  Borrower hereby grants such a security interest to each such Affiliate.  Notwithstanding anything to the contrary herein, any security interest granted by Borrower pursuant to this Master Agreement, any Schedule or any other Transaction Document shall benefit any Lender Assignee only to the extent such assignee is also an Affiliate of Lender (it being the intention of the parties that any cross-collateralization created hereby or thereby only be effective amongst Lender and/or Affiliates of Lender).
(c)   Generally. The collateral assignment, security interest and lien granted in this Section 11 shall, unless expressly provided herein or in any Transaction Documents, survive the termination, cancellation or expiration of any Loan or Transaction Documents until such time as Borrower’s Obligations under all Loans are fully and indefeasibly discharged. Nothing herein shall be deemed to authorize any sale, lease, transfer, or other disposition of any Equipment by Borrower.
12.  REPRESENTATIONS AND WARRANTIES, OF BORROWER.  Borrower represents, warrants and agrees that, as of the effective date of this Master Agreement, the date of each Transaction Document, and the date of each Advance: 

(a) Organization.  Borrower has the form of business organization indicated, and is and will remain duly organized and existing in good standing under the laws of the state specified in the preamble of this Master Agreement and is duly qualified to do business wherever necessary to perform its obligations under the Transaction Documents, including each jurisdiction in which Equipment is or will be located.  Borrower’s exact legal name is as shown in the preamble of this Master Agreement, and Borrower does not conduct business under a trade, assumed or fictitious name other than "Sharps Compliance, Inc."  Borrower provided its correct Federal Employer Identification Number to Lender prior to execution of this Master Agreement.  Within the previous six (6) years, Borrower has not changed its name, done business under any other name, merged or been the surviving entity of any merger, except as disclosed to Lender in writing prior to execution of this Master Agreement. 
(b) Authorization; Non-Contravention; Other Agreements.  The Transaction Documents and the transactions contemplated thereunder (i) have been duly authorized by all necessary action consistent with Borrower’s form of organization; (ii) do not require the approval of, or giving notice to, any governmental authority; (iii) do not contravene or constitute a default under any Applicable Law, Borrower’s organizational documents, or any agreement, indenture, or other instrument to which Borrower is a party or by which it may be bound; and (iv) constitute legal, valid and binding obligations of Borrower enforceable against Borrower, in accordance with the terms thereof.  Borrower is not a party to any agreement or instrument, or subject to any chartering or governing document, or other corporate or business restriction, materially and adversely affecting its business, properties, assets, operations or condition (financial or otherwise) or its ability to perform its Obligations under any Transaction Documents.
(c)  No Defaults.  No Default or Event of Default has occurred and is continuing hereunder, and Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement for borrowed money or other material agreement or instrument to which it is a party or by which it may be bound in any manner.
(d) Proceedings.  There are no pending actions or proceedings to which Borrower or any Guarantor is a party, and there are no other pending or threatened actions or proceedings of which Borrower has Knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would have a Material Adverse Effect on Borrower or any Guarantor.  Further, neither Borrower nor any Guarantor is in default under any financial or other material agreement that, either individually or in the aggregate, would have the same such effect.  
(e) Financial Condition.  All financial statements furnished to Lender by or on behalf of Borrower or any Guarantor fairly present the financial condition of such Persons on the dates thereof and the results of its operations for the periods then ended, and have been prepared in accordance with GAAP.  There are no liabilities of any such Person, fixed or contingent, which are material and are not reflected in the financial statements or the notes thereto, other than liabilities arising in the ordinary course of business since the date of the last financial statement.  The financial statements do not contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading.  
(f) Supply Contract; Equipment.  The Supplier is not an Affiliate of Borrower, and the Supply Contract represents an arms’ length transaction, and the purchase price for the Equipment specified therein is the amount obtainable in an arms’ length transaction between a willing and informed buyer and a willing and informed seller under no compulsion to sell.  To the best of Borrower’s Knowledge, pursuant to general business practices, it is not unusual or extraordinary for property the same as, or similar to, the Equipment to be subjected to use similar to the use intended by Borrower.  The Equipment is to be used by Borrower solely for business purposes, and no Equipment will be used for personal, family or household purposes. Under Applicable Laws, the Equipment consists (and will continue to consist) solely of personal property and not fixtures, and all Equipment is removable from and is not essential to the premises at which it is located.  
13.  ADDITIONAL COVENANTS AND AGREEMENTS OF BORROWER.  Borrower hereby represents, warrants, covenants and agrees that at all times that Borrower has any outstanding Obligations to Lender:  (a) Borrower is and will remain duly organized and existing in good standing under the laws of the state specified in the preamble hereof and duly qualified to do business wherever necessary to perform its obligations under the Transaction Documents, including each jurisdiction in which Equipment is or will be located;  (b) Borrower and each Guarantor is and will remain in full compliance with all Applicable Laws including: (i) ensuring that no Person who owns a controlling interest in or otherwise controls Borrower or any Guarantor (A) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (B) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of Section 2, or (C) is a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order; (ii) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto; (iii) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001); and (iv) the Bank Secrecy Act ("BSA") and all laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations;  

(c)  no proceeds of any Loan under any Transaction Documents will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended; and (d) until Borrower’s Obligations under each Loan and the related Transaction Documents are satisfied in full, if requested by Lender or if required by Applicable Laws, Borrower shall, at Borrower’s sole cost and expense, permanently affix and maintain on the Equipment in a prominent place, a sign, legend, plate, plaque, tag or other identifying label disclosing Lender’s Lien on the Equipment subject to such Transaction Documents.
14.   SUPPLIER; ACCEPTANCE; DISCLAIMER; WAIVERS.
(a)  Selection, Supply and Acceptance. Borrower agrees that it has selected each item of Equipment and each Supplier and has not relied on any representation or warranty by Lender or any officer, employee, or agent of Lender in connection with such selection.  Borrower acknowledges that neither Lender nor any of its officers, employees, or agents is an agent or Affiliate of any Supplier; and neither Supplier nor any of its officers, employees, or agents is an agent of Lender or otherwise authorized to bind Lender to any representation, warranty or agreement. Lender shall have no obligation to deliver or install any item of Equipment, and Borrower shall be solely responsible for any delivery of the Equipment and any site preparation and installation. Upon delivery, Borrower shall inspect and, if conforming to the condition required by the applicable Supply Contract and any other Equipment Documents, accept the Equipment in accordance with the terms set forth in the applicable Transaction Documents.  However, if Borrower fails to accept delivery of any Equipment, or accepts such Equipment but fails to satisfy any or all of the other conditions to closing required by Lender, Lender shall have no obligation to make any Advance.  In such event, Borrower shall, upon Lender's written demand, immediately remit to Lender an amount sufficient to reimburse Lender for all Advances if any, and other charges paid or incurred by Lender with respect to such Equipment, together with interest, to the extent permitted by Applicable Laws, at a rate of one and one-half percent (1.5%) per month (or, if such rate exceeds the Maximum Rate, then at such Maximum Rate) on such amount calculated from the date such amount was paid by Lender until indefeasibly reimbursed by Borrower in full.  Any acceptance of any Equipment hereunder, or confirmation of any previous acceptance, will be only for purposes of the Advance under the applicable Transaction Documents and will be without prejudice to any rights that Lender or Borrower may have against any Supplier or other Person.
(b)   Disclaimers.  LENDER DOES NOT MAKE, HAS NOT MADE, AND EXPRESSLY DISCLAIMS ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE EQUIPMENT OR ANY OTHER MATTER, INCLUDING: THE MERCHANTABILITY OR FITNESS OF THE EQUIPMENT FOR ANY USE OR PURPOSE; TITLE; THE DESIGN OR CONDITION OF THE EQUIPMENT; ITS COMPLIANCE WITH ANY APPLICABLE LAWS OR ITS CONFORMITY TO THE PROVISIONS AND SPECIFICATIONS OF ANY EQUIPMENT DOCUMENTS OR TO THE DESCRIPTION SET FORTH THEREIN OR IN ANY TRANSACTION DOCUMENTS; THE ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT DISCOVERABLE BY BORROWER); THE LEGAL, TAX OR ACCOUNTING TREATMENT OF THE TRANSACTIONS CONTEMPLATED HEREBY; ANY INTERFERENCE OR INFRINGEMENT; OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WHATSOEVER, IT BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LENDER AND BORROWER, ARE TO BE BORNE BY BORROWER. BORROWER SHALL NOT FOR ANY REASON ASSERT THAT LENDER IS RESPONSIBLE IN ANY WAY WITH RESPECT TO: (I) ANY LIABILITY, LOSS OR DAMAGE TO BORROWER OR ANY THIRD PARTY CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY ANY EQUIPMENT, ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN, THE USE THEREOF OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION THEREWITH; OR (II) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR ANY SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES.
15.  Further Assurances; Power of Attorney; Fees. Borrower shall, upon demand of Lender and at Borrower’s sole cost and expense, do and perform any other act (including the execution, delivery, filing or recording of any and all further writings or records requested by Lender) that Lender determines to be necessary or desirable to protect Lender’s rights hereunder, including: (a) executing, delivering, filing and/or recording financing statements, termination statements, releases, applications for certificates of title and notices of liens on certificates of title, or other records under the UCC or other Applicable Laws; and (b) obtaining duly executed landlord’s or mortgagee’s waivers from any Person claiming an interest in any real property or improvements where any Equipment is located. Borrower further authorizes Lender or its designee, and irrevocably appoints Lender and any such designee as Borrower’s attorney-in-fact (coupled with an interest and irrevocable), to enter or correct any information on this Master Agreement, any other Transaction Documents, or any other writing executed in connection therewith that does not materially change the terms thereof; to execute applications for certificates of title or notice of Lien relating to any Equipment; to make claims relating to each Loan and the related Transaction Documents or the Equipment under policies of insurance maintained in accordance with the terms hereof, and to execute, endorse and deliver any documents and checks or drafts relating to or received in payment for any loss or damage under the policies of insurance required by any Loan, but only to the extent that the same relates to any Equipment; to file or record financing statements, amendments to financing statements and continuations; and/or to execute 

and deliver or otherwise authenticate and communicate any writing or record and take any other actions that Lender reasonably deems necessary or desirable to protect Lender’s interest in the Collateral and under each Loan and the related Transaction Documents. Borrower expressly authorizes, ratifies and confirms past or future filings of one or more UCC financing statements made by Lender or its designees in jurisdictions deemed necessary or desirable by Lender, which describe the Equipment and Collateral in the manner in which Lender determines best protects Lender’s interest hereunder regardless of whether such description is greater in scope than the Equipment or Collateral pledged to Lender and containing any other information deemed by Lender to be necessary or desirable. Lender and its designees are specifically authorized to file financing statements in advance of making payment to any Supplier or Borrower, and Borrower acknowledges that any such filing made prior to the date of this Loan was and is hereby authorized and ratified as of the date of such filing. Such filings may list Lender, any Affiliates of [REDACTED] and [REDACTED], and/or any Lender Assignee as a secured party (and any of the foregoing may also be listed as secured party of record on any financing statements or other documents in whole or in part as agent for the benefit of another Person without disclosing such representative capacity in such filings or other documents). Borrower further authorizes Lender and its designee to transmit and file any such statements, ministerial changes and other items by electronic means. By execution of any Transaction Documents, the applicable Executing Affiliate shall be deemed to have appointed each of [REDACTED] and [REDACTED] as such Executing Affiliate's attorney-in-fact to take all actions, on such Executing Affiliate's behalf, that are necessary or desirable with respect to the administration and performance under each Loan and the related Transaction Documents, the protection of such Executing Affiliate's rights hereunder, and the transactions contemplated thereby, including any actions necessary or desirable with respect to perfection, preservation or protection of the Liens of such Executing Affiliate in the collateral pledged by Borrower as security for Borrower's Obligations to such Executing Affiliate.  Each such Executing Affiliate retains full power and authority, in each instance, to act on its own behalf or to rely on actions of [REDACTED] and [REDACTED] as its attorney-in-fact without disclosure to, or the consent of, Borrower. If Borrower shall fail to provide any insurance, remove any Lien, pay any Taxes, provide any indemnity, or otherwise perform any Obligation hereunder that may be performed or satisfied by the payment of money, Lender may, in addition to and without waiver of any other right or remedy herein provided, pay such sum for Borrower’s account. In such event, Borrower shall reimburse Lender immediately upon demand for all such sums, together with interest from the date paid at one and one-half percent (1.5%) per month, or, if such rate exceeds the Maximum Rate, then at such Maximum Rate. Lender’s effecting performance of any Obligations hereunder shall not be a waiver of any Default or Event of Default hereunder.  Borrower agrees to pay at closing or otherwise on demand the reasonable costs and expenses incurred in connection with the preparation, execution, delivery, amendment and enforcement of, the taking of any action by Lender at the request of Borrower or in connection with the exercise by Borrower of any option under, or the granting of any waiver of forbearance in connection with, this Master Agreement, any Transaction Documents and any other documents to be delivered in connection therewith, including Attorneys’ Fees, the fees of any collection agent or other professional, the costs of any lien reports requested by Lender and the cost of obtaining and/or filing of any documents or waivers deemed necessary or desirable by Lender to protect its rights hereunder, including its interest in the Equipment. For so long as Borrower owes any Obligations hereunder, Lender is authorized to make all inquiries and obtain all such credit and other information regarding or relating to Borrower and any Guarantor, Affiliate or owner of any interest in Borrower (including obtaining consumer reports, business credit reports and such other reports) as Lender, in its sole discretion, deems necessary or advisable for such purposes as Lender may desire, including the purpose of advancing under, updating, reviewing, monitoring, administering, evaluating, collecting, renewing, extending, modifying, amending or restructuring any Loan. Lender may obtain such information without any further authorization.
16.  Lender FOR EACH LOAN. One or more Schedules or other Transaction Documents may designate, as Lender, any of [REDACTED], [REDACTED], one or more of their Affiliates (each, an "Executing Affiliate"), or a Lender Assignee who has been assigned the right by [REDACTED] or [REDACTED] to enter into the Schedule or other Transaction Documents directly as Lender. For the purposes of avoiding any doubt as to the intention of the parties, in the event an Executing Affiliate or Lender Assignee executes any Transaction Documents incorporating the terms of this Master Agreement, Borrower and such Executing Affiliate or Lender Assignee agree that the terms of this Master Agreement and any and all addenda, amendments or other modifications hereto shall apply to such Transaction Documents  as if such Executing Affiliate or Lender Assignee were a party to this Master Agreement.  As used in the Transaction Documents, the term “Lender” shall mean: (a) [REDACTED] with respect to all Loans designating [REDACTED] as Lender,  (b) [REDACTED] with respect to all Loans designating [REDACTED] as Lender, (c) any Executing Affiliate with respect to all Loans designating such Executing Affiliate as Lender, and (d) the applicable Lender Assignee with respect to all Loans designating such Lender Assignee as Lender.
17.  EQUIPMENT LOCATED IN LOUISIANA OR SUBJECT TO LOUISIANA LAW.  The terms of this Section 17 shall apply only in the event, and to the extent, that one or more Transaction Documents or the exercise of Lender's rights in the Louisiana Collateral (as hereinafter defined) or otherwise under a Transaction Document is deemed to be subject to Louisiana law (including under the Outer Continental Shelf Lands Act, 43 U.S.C. §§ 1331, et seq.), including pursuant to any foreclosure under Louisiana foreclosure process rules.  The term "Louisiana Collateral" as used herein shall refer to all portions of the Equipment, and proceeds of all portions of the Equipment, or any other collateral pledged to Lender under any Transaction Document, in each case only to the extent such Equipment, proceeds or other collateral is located in the State of Louisiana or are otherwise subject to the application 

of Louisiana law at all times during which such portions or proceeds thereof are located in the State of Louisiana or are otherwise subject to the application of Louisiana law. 
(a)   Upon the occurrence of any Event of Default, Lender shall have the following rights and remedies with respect to the Louisiana Collateral, which rights and remedies are in addition to and are not in lieu or limitation of any other rights and remedies that may be provided in the Master Agreement or any other Transaction Document, under Chapter 9 of the Louisiana Commercial Laws (La. R.S. §§10:9-101, et seq.), under the Uniform Commercial Code of any state other than Louisiana, under any other agreement, or at law or equity generally:
(i)      Lender may cause the Louisiana Collateral, or any part or parts thereof, to be immediately seized wherever found, and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, without the necessity of making additional demand, or of notifying Borrower or any guarantor, or placing Borrower or any guarantor in default.
(ii)       For purposes of foreclosure under Louisiana executory process procedures, Borrower confesses judgment and acknowledges to be indebted unto and in favor of Lender up to the full amount of the Obligations, in principal, interest, costs, expenses, attorneys' fees and other fees and charges.  To the extent permitted under applicable Louisiana law, Borrower additionally waives:  (A) the benefit of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and all other laws with regard to appraisal upon judicial sale; (B) the Notice of Seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (C) the three (3) days' delay provided under Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (D) all other benefits provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above.
(iii)     Should any of the Louisiana Collateral be seized as an incident to an action for the recognition or enforcement of the Obligations or any Transaction Documents, by executory process, sequestration, attachment, writ of fieri facias or otherwise, Borrower agrees that the court issuing any such order shall, if requested by Lender, appoint Lender or any person or entity named by Lender at the time such seizure is requested, or at any time thereafter, as keeper of the Louisiana Collateral as provided under La. R.S. §§9:5136, et seq.  Borrower agrees to pay the reasonable fees of such keeper, which compensation to the keeper shall also be a part of the Obligations under the Transaction Documents.
(iv)        Should it become necessary for Lender to foreclose against the Louisiana Collateral, all declarations of fact that are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. §9:3509.1, La. R.S. §9:3504(D)(6) and La. R.S. §10:9-629, as applicable.  
(b)   The provisions of Section 18 of the Master Agreement pertaining to the venue and jurisdiction of [REDACTED] courts shall not apply to any action with respect to any Louisiana Collateral.  References to “real” or “personal” property, as they may related to Louisiana property, shall be to immovable and movable property.  “Liens” shall include privileges under Louisiana law.
18.  Governing Law; Jurisdiction; Venue.  This Master Agreement and the Loans are made and delivered in the State of [REDACTED] and shall be governed by and construed in accordance with the laws thereof without reference to the conflicts of law principles that would cause the application of the laws of another jurisdiction, except to the extent that the UCC may require the application of the law of another state regarding the validity, perfection or enforcement of any Lien.  For purposes of any action or proceeding involving this Master Agreement or any Loan, each party hereto expressly submits to the jurisdiction and venue of all federal and state courts located in the State of [REDACTED] and consents to be served with process by registered mail or by personal service within or without said State. Borrower acknowledges that [REDACTED] and [REDACTED] are direct or indirect wholly owned subsidiaries of [REDACTED], a [REDACTED] state chartered bank, and agrees that the laws of the State of [REDACTED] have a reasonable and substantial relationship to the Loans made under the Transaction Documents. Borrower, for itself and its heirs, successors and its assigns, and for any Person claiming under or through it, hereby knowingly and voluntarily waives any and all rights to have the jurisdiction and venue of any litigation arising directly, indirectly or otherwise in connection with, out of, related to or from this Master Agreement or any Loans in any other court, and hereby knowingly and voluntarily waives any and all rights to remove this action to, or to transfer, dismiss, or change venue to, any other court. Nothing herein will affect the right to serve process in any other manner permitted by law or will limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction.  
19.    WAIVER OF JURY TRIAL.  BORROWER KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS THAT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BASED ON, ARISING OUT OF, OR IN ANY WAY RELATED TO: THIS MASTER AGREEMENT; ANY TRANSACTION DOCUMENTS; THE OBLIGATIONS; OR ANY 

OTHER TRANSACTION DOCUMENTS IN CONNECTION WITH ANY OF THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  THIS JURY WAIVER ALSO APPLIES TO ANY CLAIM OR COUNTERCLAIM, CAUSE OF ACTION OR DEMAND ARISING FROM OR RELATED TO (I) ANY COURSE OF CONDUCT, COURSE OF DEALING, OR RELATIONSHIP OF BORROWER, GUARANTOR,  THEIR AFFILIATES OR ANY OTHER PERSON WITH LENDER, ITS AFFILIATES, ANY LENDER ASSIGNEE OR ANY EMPLOYEE, OFFICER, OR DIRECTOR OF THE FOREGOING IN CONNECTION WITH THE OBLIGATIONS OR OTHERWISE RELATED TO ANY LOANS; OR (II) ANY STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON BY OR ON BEHALF OF LENDER TO BORROWER, ANY GUARANTOR OR ANY OTHER PERSON REGARDLESS OF WHETHER SUCH CAUSE OF ACTION ARISES BY CONTRACT, TORT OR OTHERWISE.  BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL INDUCEMENT TO THE LENDER'S WILLINGNESS TO ADVANCE THE PROCEEDS OF THE LOAN HEREUNDER, THAT LENDER WOULD NOT HAVE ENTERED INTO SUCH LOAN OR PERFORMED UNDER THE APPLICABLE TRANSACTION DOCUMENTS WITHOUT THIS JURY TRIAL WAIVER, AND THAT BORROWER AND GUARANTOR HAVE BEEN REPRESENTED BY AN ATTORNEY OR HAVE HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND EACH UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.  BORROWER FURTHER CERTIFIES THAT NO PERSON HAS REPRESENTED TO IT, EXPRESSLY OR OTHERWISE, THAT LENDER OR ANY OTHER PERSON WOULD NOT, IN THE EVENT OF A LEGAL PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER.
20.  NOTICES.   Notices must be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail to the address set forth below the applicable Person's signature below, or to such other address as that Person subsequently provides in writing. Any party hereto may change its address for notices and other communications hereunder by notice to the other parties hereto.  All such notices and other communications shall, when transmitted by overnight delivery or faxed, be effective when delivered; or if mailed, upon the third Business Day after the date deposited into the mail; or if personally delivered, upon delivery; provided that notices delivered to Lender shall not be effective until actually received by such Person at its address. Lender shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower or Guarantor to give such notice, and Lender shall not have any liability to Borrower, any Guarantor or any other Person on account of any action taken or not taken by Lender in reliance upon such notice.  
21.  Patriot Act.  Lender hereby notifies Borrower and any Guarantor that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies Borrower and such Guarantors, which information includes the name and address of such Person and other information that will allow Lender to identify such Person in accordance with the Patriot Act.  Borrower and each Guarantor shall provide such information and take such other actions as are reasonably requested by the Lender in order to assist the Lender in maintaining compliance with the Patriot Act.
22.   MISCELLANEOUS.  Borrower’s Obligations shall survive termination, cancellation or expiration of any Loan to the extent necessary for the full and complete performance of such Obligations.  The representations, warranties and covenants of Borrower herein shall be deemed to be continuing and to survive the execution and delivery of this Master Agreement and any other Transaction Documents. EXCEPT FOR LENDER'S AFFILIATES, THERE SHALL BE NO THIRD PARTY BENEFICIARY OF THIS MASTER AGREEMENT, INCLUDING BORROWER'S AFFILIATES AND ANY GUARANTORS. Any action by Borrower against Lender in connection with any  Loan shall be commenced within one year after such cause of action arises or Borrower shall conclusively be deemed to have waived any and all rights to commence any such cause of action. 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Master Agreement to be duly executed as of the day and year first above set forth.

SHARPS COMPLIANCE, INC. OF TEXAS 
By: /s/ Diana P. Diaz
Print Name: Diana P. Diaz
Its: Vice President and Chief Financial Officer

	
		
	Address:  9220 Kirby Drive, Ste. 500
                Houston, TX  77054
	 

	[REDACTED]
By:_________________________________
Print Name: _________________________
Its:_________________________________

Address: [REDACTED]
 
	[REDACTED]
By:__________________________________________
Print Name: __________________________________
Its:__________________________________________

Address:  [REDACTED]
 

APPENDIX A
TO MASTER AGREEMENT
1.  DEFINITIONS. Unless otherwise expressly provided, the following terms shall have the meaning set forth below:
 “Action” and "Actions" mean all claims, allegations, demands, suits, actions, and legal proceedings incident to, arising out of, or in any way connected with any Transaction Documents, Loan, Equipment, Supply Contract or other Equipment Documents, or the transactions contemplated hereby, whether civil, criminal, administrative, investigative or otherwise, including arbitration, mediation, bankruptcy and appeal and including any claims, demands, suits and legal proceedings arising out of (i) the actual or alleged manufacture, purchase, financing, ownership, delivery, acceptance, rejection, non-delivery, possession, use, lease, sublease, transportation, storage, operation, maintenance, repair, control, insurance, testing, condition, sale, return, or other disposition of the Equipment; (ii) the liability of Borrower or Lender under theories of negligence, tort and strict liability; (iii) the existence of latent or other defects (whether or not discoverable by Borrower or Lender); (iv) patent, trademark or copyright infringement; or (v) any alleged or actual Default or Event of Default.
"Advance" has the meaning ascribed thereto in Section 2 of the Master Agreement.
“Affiliate” of a Person means any other Person that directly or indirectly beneficially owns or holds any portion of any class of voting stock or other interest of such Person or directly or indirectly controls, is controlled by, or is under common control with such Person where the term “control” means the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.
“Applicable Laws” mean all laws, rules and regulations applicable to the property, Person, conduct, transaction, covenant or document in question, including all applicable common law and equitable principles; state and federal constitutions, statutes, rules, regulations; orders of governmental bodies; and judicial orders, judgments and decrees.
“Attorneys’ Fees” shall include any and all attorneys’ fees incurred by Lender (whether by its use of in-house counsel or otherwise) incident to, arising out of or in any way connected with Lender’s interests in or defense of any Actions or Lender’s enforcement of its rights and interests under each Loan and the related Transaction Documents, including attorneys’ fees incurred by Lender to collect sums due, during any work-out, with respect to settlement negotiations, or in any bankruptcy proceeding (including attorneys’ fees incurred in connection with any motion for relief from the automatic stay and any motion to assume or reject any Loan).
“Borrower” has the meaning ascribed thereto in the preamble of the Master Agreement.
"Business Day" means any day other than a Saturday, Sunday or other day on which [REDACTED] is not open for the normal conduct of business in the State of [REDACTED].
“Casualty Equipment” means any Equipment subject to any Casualty Event.
“Casualty Event” means any loss, theft, destruction, damage, unauthorized sale or trade-in, confiscation, requisition, or any other event which renders the Equipment unusable in whole or in part.
"CEA" has the meaning ascribed thereto in Section 11(b) of the Master Agreement.

"Certificate of Title Laws" means the Applicable Laws of the given State that governs the recordation of liens and ownership interest with respect to motor vehicles or other property covered by a certificate of title issued by a governmental authority in such state.
“Default” means any event which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default.
"Default Amount" has the meaning ascribed thereto in Section 10(b) of the Master Agreement.
“Equipment” means, with respect to each Loan, the property described in the applicable Schedule as the "Equipment."
“Equipment Documents” means the Supply Contract, together with all warranty agreements, extended services agreement and other instruments and documents that relate to the acquisition, installation, maintenance or warranty  of Equipment and all of Borrower's books and records relating to the Equipment, including all of the following:  operating manuals, training manuals, service guides, and maintenance and service records, in whatever form, including digital and electronic form.
“Event of Default” has the meaning ascribed thereto in Section 10(a) of the Master Agreement.
"Executing Affiliate" has the meaning ascribed thereto in Section 16 of the Master Agreement.
"Financial Officer" means the vice president of finance, chief financial officer, principal accounting officer or treasurer of Borrower or Parent, as applicable, acceptable to Lender.
"GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination. Unless waived by Lender such principles shall be consistently applied and followed in the preparation of all financial statements provided to Lender in accordance with the terms of each Loan and the related Transaction Documents.
“Guarantor” means any guarantor of Borrower’s Obligations.
"Indemnified Party" means Lender, its Affiliates and any and all employees, agents, directors, partners, shareholders, officers and members of the foregoing and any assignee, successor, or secured party of Lender or its Affiliates.
“Knowledge” means, with respect to representations and warranties or notice obligations qualified to a Person's knowledge, that no officer or manager of such Person is aware, or would be aware after reasonable inquiry, of any facts that would give such Person knowledge or notice that any such representations or warranties are false or that such events have occurred that require notice to Lender.
“Lender” has the meaning ascribed thereto in Section 16 of the Master Agreement.
"Lender Assignee" has the meaning ascribed thereto in Section 8(b) of the Master Agreement.
"Lender Transfer" has the meaning ascribed thereto in Section 8(b) of the Master Agreement.
“Lien” means any mortgage, pledge, security interest, hypothecation, assignment, encumbrance, lien (statutory or other, including tax and materialman’s liens), privilege, preference, priority, or other security agreement or preferential arrangement, charge or encumbrance of any kind or nature whatsoever.
“Loan” has the meaning ascribed thereto in Section 2 of the Master Agreement.
“Losses” means any and all penalties, losses, liabilities, damages, costs, court costs, fees, harms, judgments and any and all other expenses (including Attorneys’ Fees, judgments and amounts paid in settlement and other legal and non-legal expenses incurred investigating or defending any Action) incurred incident to, arising out of or in any way connected with any Actions, any Loan, any Equipment, any Transaction Documents, or any other instrument, document or agreement executed in connection with or contemplated by any of the foregoing.
"Material Adverse Effect" means, with respect to any Person, any change, condition, event, occurrence or circumstance which Lender determines, in its reasonable discretion, has or can be expected to have a material adverse effect on (a) the business, property, condition (financial or otherwise) or results of operations of such Person; (b) the ability of such Person to fully and timely pay all amounts due from, and perform all Obligations owed by, such Person; (c) Lender's rights under any of the Transaction Documents; or (d) the validity or enforceability of any of the Transaction Documents.
"Maximum Rate" means the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with Applicable Law.

"Mobile Equipment" mean Equipment specifically designed to be moved on a regular basis, including for purposes of illustration and not of limitation, laptop computers, motor vehicles, trailers, or any other similar equipment.
“Net Proceeds” means: (a) in the case of a purchase of the Equipment in good, collected and indefeasible funds by the purchaser, the after-tax amount received by Lender from said purchaser; or (b) in the case of a purchase of the Equipment which Lender finances pursuant to an equipment finance arrangement, equipment lease agreement or other financial arrangement (each, a “Replacement Agreement”), an amount equal to the sum of all non-cancellable periodic payments and any purchase election, purchase requirement or balloon payment set forth in the Replacement Agreement, discounted to present value at the implicit rate of the Replacement Agreement as determined by Lender.
“Obligations” means all indebtedness, liabilities and obligations of Borrower under any and all Loans or other documents, instruments, certificates and agreements made by Borrower to, with or for the benefit of Lender or any of Lender's Affiliates of any class or nature, whether now existing or hereafter incurred, direct or indirect, absolute or contingent, secured or unsecured, matured or unmatured, joint or several, whether for principal, interest, Taxes, fees, expenses, indemnities or otherwise, including future advances of any sort.
"Other Payments" has the meaning ascribed thereto in Section 3(a) of the Master Agreement.
"Parent" means Sharps Compliance Corp., a Delaware corporation, and its successors and assigns.
"Payments" has the meaning ascribed thereto in Section 3(a) of the Master Agreement.
"Periodic Payments" has the meaning ascribed thereto in Section 3(a) of the Master Agreement.
“Permitted Improvements” means any alterations, additions, modifications or attachments to the Equipment that are of a kind that customarily are made by owners of equipment similar to the Equipment, free and clear of any and all Liens (other than the Liens created pursuant to the Transaction Documents), and that do not and could not reasonably be expected to: (a) reduce the value or general usefulness of the Equipment; (b) impair the certification, performance, safety, quality, capability, function, specifications, use or character of the Equipment or alter the purpose for which such Equipment was obtained by Borrower, as described by Borrower to Lender in requesting Lender to enter into the Transaction Documents; (c) be inconsistent with Applicable Laws, manufacturer's requirements or recommendations, or any warranty, service agreement or license; (d) expose any Equipment to any Lien or other adverse interest or circumstance; (e) adversely affect insurance coverage benefiting Lender hereunder; or (f) negatively affect the resale value of the Equipment.
"Person" or "Persons" means an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government (whether national, federal, state, county, municipal or otherwise) or agency or political subdivision thereof.  
“Replacement Equipment” means new or reconditioned Equipment that: (a) is free and clear of all Liens other than the Lien of Lender; (b) has a value, utility and remaining useful life at least equal to the Equipment being replaced (assuming such Equipment was in the condition required by the subject Schedule prior to any Casualty Event); and (c) is otherwise acceptable to Lender.
"Schedule" means, with respect to each Loan, the applicable Loan Schedule or Collateral Schedule executed pursuant to this Master Agreement and incorporating by reference the terms and conditions of this Master Agreement.
"Subsidiary" means, for any Person, a Person of which or in which such Person or its other Subsidiaries own or control, directly or indirectly, fifty percent (50%) or more of (a) the combined voting power of all classes having general voting power under ordinary circumstances to elect a majority of the directors (of it is a corporation), managers or equivalent body of such Person, (b) the capital interest or profits interest of such Person, if it is a partnership, limited liability company, joint venture or similar entity, or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated association or organization.
“Supplier” means any vendor, supplier, manufacturer or other Person from whom the Equipment is purchased.
“Supply Contract” means the contract, purchase order or similar document(s) under which the Equipment was or is to be purchased from the Supplier.
“Taxes” means all license, title, recording and registration fees and any and all sales, use, personal property, excise, gross receipts, franchise, stamp or other taxes, fees and assessments now or hereafter imposed by any foreign, federal, state or local governmental body, agency, or any other taxing authority upon the Equipment or the purchase, ownership, delivery, leasing, possession, use or operation thereof or upon the Payments under the Transaction Documents, together with any penalties, fines or interest thereon; provided, however, that the term "Taxes" does not include any taxes by the United States of America or any state or political subdivision thereof that are imposed on or measured by the net income of Lender (as opposed to gross receipts).
“Total Loss” means, with respect to any Casualty Equipment, (a) the actual or constructive total loss of such Equipment; (b) the loss, disappearance, theft or destruction of such Equipment, or damage thereto that is uneconomical to repair or renders it unfit 

for normal use; or (c) the condemnation, confiscation, requisition, seizure, forfeiture or other taking of title to or use of such Equipment or the imposition of any Lien thereon by any governmental authority.
"Transaction Documents" has the meaning ascribed thereto in Section 2 of the Master Agreement.
“UCC” means the Uniform Commercial Code as enacted in the State of Mississippi, except to the extent that the validity or perfection of any Lien or provisions regarding enforcement thereof requires application of the laws of a state other than the State of Mississippi, in which case UCC shall mean for such purposes, the Uniform Commercial Code of such other state.
2. RULES OF CONSTRUCTION; INTERPRETATION; MISCELLANEOUS. The provisions of this Master Agreement and all other Transaction Documents shall be severable, and if any such provision is determined to be invalid, void or unenforceable in whole or in part for any reason, the remaining provisions shall remain in full force and effect. As used in this Master Agreement and the other Transaction Documents: (a) the terms “herein,” “hereunder,” “hereof,” “hereto” or like terms shall be deemed to refer to each Transaction Document, including this Master Agreement incorporated therein, as a whole and not to a particular section; (b) terms “include” or “including” means “include” or “including,” as the case may be, without limiting the generality of any description or word preceding such term; (c) the term "or" shall mean at least one, but not necessarily only one, of the alternatives enumerated; (d) the expression “satisfactory to Lender,” “determined by Lender,” “in Lender’s judgment,” “at Lender’s election,” or similar words which grant Lender the right to choose between alternatives or to express its opinion, means that the satisfaction, judgment, choices and opinions are to be made in Lender’s sole discretion; and (e) the term “material” as used herein shall be construed to mean significant in Lender’s judgment, taking into account all relevant facts and circumstances including the nature and amount of financial exposure to Lender. If any term of any Schedule or Note conflicts with or is inconsistent with any term of this Master Agreement, the terms of such Schedule or Note shall govern.  The captions or headings herein are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions hereof. As used herein all singular terms include the plural form thereof, and vice versa. Any use of the term “Equipment” herein shall be deemed to refer equally to all items of Equipment and each item of Equipment, it being the understanding of the parties that any reference to “Equipment” shall not be deemed to prejudice any rights or remedies of Lender, or Obligations of Borrower, hereunder with respect to any item of Equipment.  It is the intention of the parties hereto that the Equipment shall consist solely of personal property and that it shall not constitute fixtures under the laws of the states where the Equipment is located. The parties acknowledge and agree that the Equipment is and shall remain removable from, and not essential to, the premises where the Equipment is located. Borrower covenants and agrees not to affix or install any Equipment to or in any real property in such a manner that may cause it to be a fixture.  If notwithstanding the foregoing, any Equipment shall become a fixture, it shall nevertheless continue to constitute "Equipment" hereunder. This Master Agreement and the other Transaction Documents have been drafted by counsel for Lender as a convenience to the parties only and shall not, by reason of such action, be construed against Lender or any other party. Borrower acknowledges and agrees that it has had full opportunity to review the foregoing and has had access to counsel of its choice to the extent it deems necessary in order to interpret the legal effect hereof.  Each Transaction Document may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. The terms of any letter of intent or proposal are superseded hereby and declared null and void.  The parties intend and agree that, for purposes of enforcing the rights of Lender against Borrower, Guarantor or any other party obligated under any Transaction Documents, a carbon copy, photocopy, facsimile or other electronic copy (including a pdf) of each such Transaction Document or any agreement, instrument or writing executed in connection therewith with their signature thereon and all counterparts when taken together, shall be deemed to be as binding, valid, genuine, and authentic as an original-signature document for all purposes, including all matters of evidence and the “best evidence” rules. Nothing herein shall be deemed to provide or imply that Lender is a “merchant” as to any Equipment within the meaning of the UCC as currently in force or as subsequently revised or re-enacted.  Notwithstanding anything to the contrary herein, including the effective date of any Transaction Documents, any security interest granted by Borrower shall become effective between the parties with respect to any Equipment as soon as Borrower receives possession thereof and shall continue until all of Borrower’s Obligations to Lender have been paid and performed in full and are not subject to being set aside or rescinded notwithstanding termination or expiration of any Loan for any reason whatsoever. If Lender is required by the terms of any Loan to cooperate with Borrower in connection with any matter, such cooperation shall not be required if a Default or Event of Default exists. No modification of this Master Agreement or any other Transaction Document, nor any waiver, discharge, cancellation or termination of any term or condition thereof, nor any agreement to enter into any Loan will be valid unless in a writing and signed by an authorized representative of the party against whom the enforcement of such modification, waiver, discharge, cancellation, termination, or agreement is sought. Without limiting the foregoing, no manual changes, whether typed, handwritten or otherwise, unless made by Lender,  may be made to the printed form of this Master Agreement or any Transaction Document, or any term or provision hereof or thereof (and if made in any such manner by a Person other than Lender shall not be enforceable against Lender).  Changes shall be enforceable against Lender only if contained in a separate written addendum attached hereto or thereto, signed by both Lender and Borrower. The accounts or records maintained by Lender shall be conclusive evidence, absent manifest error, of the Obligations owed by Borrower hereunder, including Payments and related information.  Without in any way obligating Lender to provide any statement, invoice or billing hereunder, Borrower expressly agrees that Borrower's failure to object to any such statement, invoice or billing within a period of thirty (30) days after receipt thereof shall constitute Borrower's acquiescence with respect thereto and shall, at Lender's 

option, render such statement, invoice or billing an "account stated" between Borrower and Lender.  Time is of the essence of each Loan.  Lender’s failure at any time to require strict performance by Borrower of any provision of any Transaction Document will not waive or diminish Lender’s right at any other time to demand strict compliance with the Transaction Documents.  No Loan shall be effective unless or until execution by an authorized representative of Lender at the address, in the State of [REDACTED], as set forth below the signature of Lender.
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SHARPS COMPLIANCE, INC. OF TEXAS 
By:/s/ DIANA P. DIAZ
Print Name: Diana P. Diaz
Its:Vice President and Chief Financial Officer

	
		
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Print Name: _________________________
Its:_________________________________

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