Document:

EXECUTIVE
      INCENTIVE COMPENSATION PLAN 

    

    SHARPS
      COMPLIANCE CORP.

    

     

    The
      Compensation Committee of the Board of Directors (“Committee”) of Sharps
      Compliance Corp. (the “Company”) has adopted its Executive Incentive
      Compensation Plan effective for the fiscal years ended June 30, 2008 and
      2009.  The Executive Incentive Compensation Plan (the “Plan”) is designed
      to allow eligible executive full-time employees to share in achievements based
      on attainment of pre-established Company financial performance as well as
      achievement of individual goals.  The Plan is designed to motivate and
      reward eligible participants whose performance is considered by the Committee
      to
      be critical and integral to the overall success of the Company.

    

    Eligibility
      and Plan Year

    

    Plan
      eligibility is determined by the Committee. For the fiscal years ending June
      30,
      2008 and 2009 participation in the Plan is limited to the Company’s Chief
      Executive Officer and Chief Financial Officer.  The Committee may, at its
      sole discretion, add other Company executives as participants to the
      Plan.

    

    Elements
      of the Plan

    

    Each
      eligible participant has a target bonus, calculated as a specified percentage
      of
      that executive’s then current annual salary. For the fiscal years ending
      June 30, 2008 and 2009 the specified percentage of participant’s annual salary
      is 40% for both the Chief Executive Officer and Chief Financial Officer. The
      bonus amount will be computed based upon achievement of goals in three
      categories:  (1) positioning the Company for future growth, (2) the
      achievement of fiscal year budgeted earnings and (3) achievement of fiscal
      year
      budgeted revenues. 

    

    Individual
      Performance Element (determines 25% of target bonus)

    

    The
      computation of this portion of the target bonus will be based upon
      accomplishments of the Company and the executive participants designed to
      position the Company for future growth. The Committee will review
      accomplishments prepared by executive participants and determine achievement
      of
      the goal in their sole discretion.

    

    Earnings
      Performance Element (determines 25% of target bonus)

     

    Achievement
      of this element will be based upon the Company meeting the budgeted net earnings
      (from ongoing operations) goal for the respective fiscal year.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Revenue
      Performance Element (determines 50% of target bonus)

     

    Achievement
      of this element will be based upon the Company meeting the budgeted revenue
      (from ongoing operations) goal for the respective fiscal year.

     

    In
      addition to the above executive participants will recommend to the Committee
      a
      fiscal year bonus pool for non-executive employees.

    

    Eligibility
      and Payments to Participants

    

    The
      participant must be an active, full-time employee of the Company on the last
      day
      of the fiscal year for which the incentive award is earned to be entitled to
      the
      bonus.  

    

    Awards
      shall be paid in cash less applicable taxes, within five (5) days of the public
      release of the Company’s annual fiscal year end financial results.

    

    The
      Plan,
      as set forth in this document, represents the general guidelines the Committee
      presently intends to utilize to determine executive incentive
      compensation.  If, however, at the sole discretion of the Committee, the
      Company’s best interest is served by applying different guidelines in special or
      for unusual circumstances, it reserves the right to do so. The Committee
      reserves the right to amend or discontinue this Plan at any time in the best
      interests of the Company and its shareholders.  Without in anyway limiting
      the foregoing rights of the Company, should a material business event,
      significant customer contract, acquisition, disposition or change in control
      occur during the Plan period, the Committee reserves the right to amend or
      supplement the Plan following such event in such manner as the Committee, in
      its
      sole discretion, deems appropriate.

    

    The
      Committee shall have full power and authority to interpret and administer the
      Plan and shall be the sole arbiter of all manners of interpretation and
      application of the Plan and the Committee’s determination shall be final. 
Any inconsistencies that may occur between the Plan provisions and the
      calculation of the incentive results will be interpreted and resolved on an
      individual basis by the Committee.SHARPS
      COMPLIANCE CORP.

    RESTRICTED
      STOCK AWARD AGREEMENT

     

    THIS
      AGREEMENT is made as of this 9th day of June 2008, by and between Sharps
      Compliance Corp., a Delaware corporation (the “Company”), and ______________
      (“Director”).

     

    The
      Company, pursuant to the Sharps Compliance Corp. 1993 Stock Plan (the “Plan”)
      and the Non-Employee Director Compensation Policy, hereby grants the following
      stock award to Director, which award shall have the terms and conditions set
      forth in this Agreement:

     

    1.       
      Award

    The
      Company, effective as of the date of this Agreement, hereby grants to Director
      a
      restricted stock award of ___________ shares (the “Shares”) of common stock, par
      value $.01 per share, of the Company (the “Common Stock”), subject to the terms
      and conditions set forth herein.

     

    2.       
      Vesting

    Subject
      to the terms and condition of this Agreement, the Shares shall vest as
      follows:  one-third (1/3) of the Shares shall vest on each of June 9, 2009,
      2010 and 2011, if, and only if, Director remains as a member of the Board of
      Directors of the Company from the date hereof until each respective vesting
      date.  Vesting of the Shares shall be accelerated to an earlier date in the
      event of a Change in Control of Company (as defined in the attached Exhibit
      A),
      and provided that Director remains as a member of the Board of Directors of
      the
      Company until the effective date of such Change in Control, all unvested Shares
      granted under this Agreement shall become immediately vested on the effective
      date of the Change in Control;

     

    3.       
      Restriction
      on Transfer

    Until
      the
      Shares vest pursuant to Section 2 hereof, none of the Shares may be sold,
      assigned, transferred, pledged, hypothecated or otherwise disposed of or
      encumbered, and no attempt to transfer the Shares, whether voluntary or
      involuntary, by operation of law or otherwise, shall vest the transferee with
      any interest or right in or with respect to the Shares.

     

    4.       
      Forfeiture
      

    If
      Director ceases to be a member of the Board of Directors the Company for any
      reason prior to the vesting of the Shares pursuant to Section 2 hereof,
      Director’s rights to the unvested portion of the Shares shall be immediately and
      irrevocably forfeited.

     

    5.       
      Issuance
      and Custody of Certificate

     

    After
      any
      Shares vest pursuant to Section 2 hereof, the Company shall promptly cause
      to be
      issued a certificate or certificates evidencing such vested Shares, free of
      the
      legend or restrictions and shall cause such certificate or certificates to
      be
      delivered to Director or Director’s legal representatives, beneficiaries or
      heirs.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6.       
      Distributions
      and Adjustments

    (a) 
      If all or any portion of the Shares vest subsequent to any change in the number
      or character of Shares of Common Stock (through stock dividend,
      recapitalization, stock split, reverse stock split, reorganization, merger,
      consolidation, split-up, spin-off, combination, repurchase or exchange of Shares
      of Common Stock or other securities of the Company, issuance of warrants or
      other rights to purchase Shares of Common Stock or other securities of the
      Company or other similar corporate transaction or event affecting the Shares
      such that an adjustment is determined by the Compensation Committee of the
      Board
      of Directors (the “Committee”) to be appropriate in order to prevent dilution or
      enlargement of the interest represented by the Share, Director shall then
      receive upon such vesting the number and type of securities or other
      consideration which he would have received if the Shares had vested prior to
      the
      event changing the number or character of outstanding Shares of Common
      Stock.

     

    (b) 
      Any additional Shares of Common Stock, any other securities of the Company
      and
      any other property (except for cash dividends) distributed with respect to
      the
      Shares prior to the date the Shares vest shall be subject to the same
      restrictions, terms and conditions as the Shares.  Any cash dividends
      payable with respect to the Shares shall be distributed to Director at the
      same
      time cash dividends are distributed to shareholders of the Company
      generally.

     

    (c) 
      Any additional Shares of Common Stock, any securities and any other property
      (except for cash dividends) distributed with respect to the Shares prior to
      the
      date such Shares vest shall be promptly deposited with the Secretary or the
      custodian designated by the Secretary to be held in custody in accordance with
      Section 5(c) hereof.

     

    7.       
      Taxes

    (a) 
      In order to provide the Company with the opportunity to claim the benefit of
      any
      income tax deduction which may be available to it in connection with this
      restricted stock award, and in order to comply with all applicable federal
      or
      state tax laws or regulations, the Company may take such action as it deems
      appropriate to insure that, if necessary, all applicable federal or state income
      and social security taxes are withheld or collected from Director.

      

    (b) 
      Should Director elect, in accordance with Section 83(b) of the Internal
      Revenue Code of 1986, as amended, to recognize ordinary income in the year
      of
      acquisition of the Shares, the Company may require at the time of such election
      an additional payment for withholding tax purposes based on the fair market
      value of such Shares as of the date of the acquisition of such Shares by
      Director.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    8.       
      Miscellaneous

    (a) 
      This Agreement is issued pursuant to the Plan and is subject to its terms. 

     

    (b)
      This
      Agreement shall be governed by and construed under the internal laws of the
      State of Delaware, without regard for conflicts of laws principles
      thereof.

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      on
      the day and year first above written.

     

     

    
      	 	 	 
	 	
              Sharps
                Compliance Corp.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              David
                P. Tusa

            

      	 	Its:  
              	Executive
              Vice
              President and Chief Financial Officer
	 
 	 
 	
              

 
	 	DIRECTOR
	 	
            
	 	 

      

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    Exhibit
      A

    
 

     

    (i)         
      For purposes of this Agreement and this Exhibit A, a Change in Control” of the
      Company shall mean:

     

    (a)         
      a change in control of the Company of a nature that would be required to be
      reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
      under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      whether or not the Company is then subject to such reporting
      requirement;

     

    (b)        
      the public announcement (which, for purposes of this definition, shall include,
      without limitation, a report filed pursuant to Section 13(d) of the Exchange
      Act) by the Company or any “person” (as such term is used in Sections 13(d) and
      14(d) of the Exchange Act) that such person has become the “beneficial owner”
(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
      indirectly, of securities of the Company representing 30% or more of the
      combined voting power of the Company’s then outstanding securities, determined
      in accordance with Rule 13d-3, excluding, however, any securities acquired
      directly from the Company (other than an acquisition by virtue of the exercise
      of a conversion privilege unless the security being so converted was itself
      acquired directly from the Company); however, that for purposes of this clause
      the term “person” shall not include the Company, any subsidiary of the Company
      or any employee benefit plan of the Company or of any subsidiary of the Company
      or any entity holding shares of Common Stock organized, appointed or established
      for, or pursuant to the terms of, any such plan;

     

    (c)         
      the Continuing Board of Directors cease to constitute a majority of the
      Company’s Board of Directors;

     

    (d)        
      consummation of a reorganization, merger or consolidation of, or a sale or
      other
      disposition of all or substantially all of the assets of, the Company (a
“Business Combination”), in each case, unless, following such Business
      Combination, (A) all or substantially all of the persons who were the beneficial
      owners of the Company’s outstanding voting securities immediately prior to such
      Business Combination beneficially own voting securities of the corporation
      resulting from such Business Combination having more than 50% of the combined
      voting power of the outstanding voting securities of such resulting Corporation
      and (B) at least a majority of the members of the Board of Directors of the
      corporation resulting from such Business Combination were Continuing Directors
      at the time of the action of the Board of Directors of the Company approving
      such Business Combination; or

     

    (e)         
      approval by the shareholders of the Company of a complete liquidation or
      dissolution of the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii)         
      “Continuing Director” shall mean any person who is a member of the Board of
      Directors of the Company, while such person is a member of the Board of
      Directors, who is not an Acquiring Person (as defined below) or an Affiliate
      or
      Associate (as defined below) of an Acquiring Person, or a representative of
      an
      Acquiring Person or of any such Affiliate or Associate, and who (x) was a member
      of the Board of Directors on the date of this Agreement as first written above
      or (y) subsequently becomes a member of the Board of Directors, if
      such  person’s initial nomination for election or initial election to the
      Board of Directors is recommended or approved by a majority of the Continuing
      Directors.  For purposes of this subparagraph (ii), “Acquiring Person”
shall mean any “person” (as such term is used in Sections 13(d) and 14(d) of the
      Exchange Act) who or which, together with all Affiliates and Associates of
      such
      person, is the “beneficial owner” (as defined in Rule 13d-3 promulgated under
      the Exchange Act), directly or indirectly, of securities of the Company
      representing 20% or more of the combined voting power of the Company’s then
      outstanding securities, but shall not include the Company, any subsidiary of
      the
      Company or any employee benefit plan of the Company or of any subsidiary of
      the
      Company or any entity holding shares of Common Stock organized, appointed or
      established for, or pursuant to the terms of, any such plan; and “Affiliate” and
“Associate” shall have the respective meanings ascribed to such terms in Rule
      12b-2 promulgated under the Exchange Act.

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