On January 28, 2014, Sharps Compliance Corp. entered into a Credit Agreement with a commercial bank. The Credit agreement, which replaces the Prior credit agreement executed effective April 30, 2013 with another commercial bank, provides for a two-year, $3.0 million line of credit facility, the proceeds of which may be utilized for working capital, letters of credit (up to $500,000) and general corporate purposes.

Indebtedness under the credit agreement is secured by the company's accounts receivable and inventory with advances outstanding at any time limited to a borrowing base equal to 80% of eligible accounts receivable plus 50% of eligible inventory. Borrowings bear interest at WSJ Prime. The company will pay a fee of 0.25% per annum on the unused amount of the line of credit.

The Credit Agreement contains affirmative and negative covenants that, among other things, require the company to maintain a minimum level of tangible net worth and a minimum liquidity. The credit agreement, which expires on January 28, 2016, also contains customary events of default which, if uncured, may terminate the Credit agreement and require immediate repayment of all indebtedness to the lenders.