WARRANT AGREEMENT (this  "Agreement")  dated June 26, 2002, between MEDICAL
TECHNOLOGY SYSTEMS, INC., a Delaware corporation (the "Company"),  and EUREKA I,
L.P., a Delaware limited partnership (the "Purchaser").

     The parties to this  Agreement  are also parties to a  Securities  Purchase
Agreement  dated the date hereof (the  "Purchase  Agreement").  Section 6 of the
Purchase Agreement provides that as a condition of the Purchaser's obligation to
purchase  and pay for the  Series A  Preferred  Stock,  Notes and  Warrants  (as
defined therein),  the Company will execute and deliver this Agreement and issue
to the Purchaser one or more Warrant Certificates evidencing the Warrants (these
and  certain  other terms being  defined in Section 14) to be  purchased  by the
Purchaser on the Closing Date (as defined in the Purchase Agreement).

     NOW,  THEREFORE,  the  parties  agree as follows,  intending  to be legally
bound:

     Section 1. Issuance of the Warrants.

     On the date hereof, the Company hereby issues to the Purchaser and, subject
to the terms and  conditions  hereof,  the  Purchaser  hereby  acquires from the
Company, Warrants to purchase 566,517 shares of Common Stock. The exercise price
for the  Warrants  shall be $0.01  per  share,  as  adjusted  from  time to time
pursuant to Sections 11, 12 and 13 (the "Exercise Price"). Each Warrant entitles
the holder thereof to purchase one Warrant Share.

     Section 2. Warrant Certificates.

     The certificates evidencing the Warrants (the "Warrant Certificates") to be
delivered  pursuant to this Agreement shall be in registered form only and shall
be substantially in the form of Exhibit A.

     Section 3. Execution of Warrant Certificates.

     Warrant  Certificates  shall be  signed on  behalf  of the  Company  by its
Chairman of the Board, Chief Executive Officer,  President,  any Vice President,
Chief Financial Officer or Treasurer.  The Company's corporate seal may but need
not be affixed to any Warrant Certificate.

     Section 4. Registration.

     The Company  will keep at its  principal  office a register or registers in
which the Company shall record the  registrations  of the Warrants and the names
and  addresses  of the  holders  thereof  from  time to time  and all  transfers
thereof.  The Company shall number and register the Warrant Certificates in such
register as they are issued by the  Company.  The Company may deem and treat the
registered  holders of the Warrant  Certificates as the absolute owners thereof,
for all  purposes,  and the  Company  shall not be affected by any notice to the
contrary.

<PAGE>
                                       2

     Section 5. Registration of Transfers, Exchanges or Assignment of Warrants.

     Subject to the  limitations of this Section,  the Warrant  holders shall be
entitled to assign their Warrants in whole or in part to any Person,  so long as
such  transferee  or  assignee  executes  a  counterpart  to  the  Intercreditor
Agreement or a joinder  thereto,  agreeing to be bound by its terms. The Company
shall,  from time to time,  register  the  transfer of any  outstanding  Warrant
Certificates  upon the register  maintained  by it for that purpose  pursuant to
Section  4,  upon  surrender  thereof  accompanied  by a written  instrument  or
instruments  of  transfer  in the form of the  Assignment  Form  attached to the
Warrant Certificate duly executed by the registered holder or holders thereof or
by the duly  appointed  legal  representative  thereof or by his  attorney  duly
authorized  in writing.  In the event of any  assignment  in part,  the Exercise
Price shall be apportioned  between the Warrants to be issued to the holder with
respect to that  portion not  transferred  and the  Warrants to be issued to the
transferee, based on their respective number of Warrants.

     If a transfer is made otherwise than pursuant to an effective  registration
statement  under the  Securities  Act, the Company may require the transferor to
deliver,  prior to such transfer, an opinion of counsel, which may be counsel to
such  transferor,  reasonably  satisfactory to the Company,  that the Warrant or
Warrant  Shares may be sold without  registration  under the  Securities Act and
state  securities  or blue sky laws.  In such event,  regardless  of whether the
Company requires delivery of an opinion of counsel, the Company may also require
that the transferee provide, prior to such transfer:

          (1) a written representation,  signed by the proposed transferee, that
     such transferee is purchasing the Warrants or Warrant Shares for investment
     and not with a view toward distribution;

          (2)  an  agreement  by  such  transferee  to  the  impression  of  the
     restrictive investment legend set forth below on the Warrant or the Warrant
     Shares;

          (3) an  agreement  by such  transferee  that the  Company  may place a
     notation  in the stock  books and the  Warrant  register  of the Company in
     respect of the  restrictions on transfer  described in the legend set forth
     below; and

          (4) an agreement by such  transferee to be bound by the  provisions of
     this Section  relating to the  restrictions  on transfer of such Warrant or
     Warrant Shares.

     Each Warrant Certificate and each certificate  representing  Warrant Shares
shall,  until the Warrants or Warrant Shares  represented  by such  certificates
have been distributed to the public pursuant to an offering registered under the
Securities  Act,  or until the  Warrants  or  Warrant  Shares may be sold by the
holder  pursuant to Rule 144(k) under the  Securities  Act, or until the Company
has  received an opinion of counsel,  which may be counsel to the holder of such
certificate,  reasonably  satisfactory  to the Company,  that such legend is not
required under the Securities Act, bear a legend in substantially  the following
form:

<PAGE>
                                       3

                    THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED
                    UNDER THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE "1933
                    ACT"),  OR THE  SECURITIES  LAW OF ANY  STATE AND MAY NOT BE
                    OFFERED,  SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS SUCH
                    OFFER, SALE, PLEDGE OR TRANSFER IS REGISTERED UNDER THE 1933
                    ACT OR APPLICABLE  STATE SECURITIES LAWS OR EXEMPT FROM SUCH
                    REGISTRATION.  TRANSFER OF THESE  SECURITIES IS ALSO SUBJECT
                    TO CERTAIN  RESTRICTIONS  UNDER THE WARRANT  AGREEMENT DATED
                    JUNE 26, 2002, BETWEEN THE COMPANY AND EUREKA I, L.P.

     Warrant  Certificates  may be  exchanged  or  combined at the option of the
holder thereof for another Warrant Certificate or other Warrant  Certificates of
like tenor and  representing  in the  aggregate a like  number of Warrants  upon
presentation  thereof to the Company at its  principal  office,  together with a
written notice signed by the holder  specifying the names and  denominations  in
which the new Warrants are to be issued.

     Upon  surrender of a Warrant  Certificate  to the Company at its  principal
office for transfer or exchange in  accordance  with this  Section,  the Company
shall,  without  charge,  execute and deliver a new Warrant  Certificate of like
tenor, and in the amount of the Warrants being  transferred,  in the name of the
assignee  named in the  instrument  of  assignment  and, if the holder's  entire
interest is not being  assigned,  in the name of the holder with respect to that
portion  not  transferred,  and the Warrant  Certificate  so  surrendered  shall
promptly be canceled.

     Any new Warrant  Certificate  issued as a result of  transfer,  exchange or
combining shall bear the legend required by the Intercreditor Agreement.

     Section 6. Terms of Warrants; Exercise of Warrants.

     Subject to the terms of this Agreement,  each Warrant holder shall have the
right, which may be exercised at any time during the period from (and including)
the date of this Agreement until 5:00 p.m., Eastern time, on June 26, 2012 (such
period being herein referred to as the "Exercise  Period"),  to receive from the
Company  the  number  of  Warrant  Shares  which the  holder  may at the time be
entitled  to receive on exercise of such  Warrants  and payment of the  Exercise
Price then in effect for such Warrant  Shares.  The Warrant  Shares  issued to a
Warrant holder upon exercise of its Warrants shall be fully paid,  nonassessable
and subject to no preemptive  rights.  Each Warrant not  exercised  prior to the
expiration of the Exercise  Period shall become void, and all rights  thereunder
and all rights in respect  thereof under this  Agreement  shall cease as of such
time.

     During the Exercise Period,  each Warrant holder may exercise,  at any time
or from time to time,  some or all of the  Warrants  represented  by its Warrant
Certificates  by (1)  surrendering  to the Company at its principal  office such
Warrant Certificates with the Form of Election to Purchase attached thereto duly
filled in and signed,  with  signatures  guaranteed  by a bank or trust  company
having an office or  correspondent  in the  United  States or a broker or dealer

<PAGE>
                                       4

which  is  a  member  of  a  registered  securities  exchange  or  the  National
Association  of  Securities  Dealers,  Inc.,  and (2) paying to the  Company the
Exercise  Price  for the  number of  Warrant  Shares in  respect  of which  such
Warrants are then being  exercised.  Warrants  shall be deemed  exercised on the
date Warrant  Certificates  representing  such Warrants are  surrendered  to the
Company,  accompanied by the Form of Election to Purchase as provided above, and
payment of the Exercise Price for such Warrants is received by the Company,  and
the  Warrant  Shares in respect of which the  Warrants  are  exercised  shall be
deemed  issued  on that  date,  and the  Person  in whose  name the  certificate
representing  the Warrant  Shares is to be issued  shall be deemed the holder of
such Warrant  Shares as of that date for all purposes.  Payment of the aggregate
Exercise Price by the Warrant holder shall be made by check payable to the order
of the Company or by wire transfer of immediately available funds, as the holder
shall elect.

     In addition to the rights of the holders under the preceding  provisions of
this Section,  each holder shall have the right,  in lieu of paying the Exercise
Price in cash,  to instruct the Company to reduce the number of shares of Common
Stock  thereafter  eligible to be purchased by such holder  pursuant to Warrants
held by it in accordance with the following formula:

                                  P
                      N =   -------------
                              ( M - E )
where:

       N  =  the number of shares of Common Stock to be subtracted from
             remaining number of Warrant Shares purchasable upon exercise
             of such holder's Warrants; and

       P  =  the aggregate Exercise Price otherwise payable for the shares
             issuable upon exercise of the Warrants; and

       M  =  the Market Price determined as of the date of such exercise; and

       E  =  the Exercise Price on the date of such exercise.

     Subject to the  provisions of Section 7, upon the exercise of any Warrants,
the Company shall issue and cause to be delivered with all  reasonable  dispatch
(but in any event within ten Business  Days) to or upon the written order of the
holder  and in such  name or  names  as the  Warrant  holder  may  designate,  a
certificate or certificates  for the number of full Warrant Shares issuable upon
the exercise of such  Warrants,  together  with such other  property,  including
cash, which shall be deliverable upon such exercise.

     Notwithstanding any other provision of this Agreement or the Warrants,  but
subject to the terms of the Intercreditor  Agreement, the Company shall have the
option in lieu of  delivering  shares of Common Stock upon exercise of Warrants,
to  deliver  cash in an amount  equal to the  number  of shares of Common  Stock
otherwise  deliverable  times the Market  Price per share of the Common Stock on
the date of exercise.

<PAGE>
                                       5

     The Warrants  shall be  exercisable at any time or from time to time during
the Exercise Period,  at the election of the holders thereof,  either in full or
from time to time in part, and if fewer than all of the Warrants  represented by
a Warrant Certificate are exercised,  a new certificate  evidencing the Warrants
not  exercised  will be issued by the Company at the Company's  expense,  to the
holder of such  Warrants with all  reasonable  dispatch (but in any event within
ten  Business  Days).  All Warrant  Certificates  surrendered  upon  exercise of
Warrants shall be canceled by the Company.

     Section 7. Payment of Taxes.

     The  Company  will pay all  documentary  stamp  taxes  attributable  to the
initial  issuance of the Warrants or the initial  issuance of the Warrant Shares
upon the exercise of Warrants;  but the Company shall not be required to pay any
transfer  tax which may be payable in respect of any  transfer  involved  in the
issuance of any Warrant Certificates or any certificates for Warrant Shares in a
name  other  than  that of the  registered  holder  of the  Warrant  Certificate
surrendered for exercise or transfer of a Warrant,  and the Company shall not be
required  to  issue  or  deliver  such  Warrant   Certificate  or   certificates
representing  such  Warrant  Shares  unless  or  until  the  Person  or  Persons
requesting  the  issuance  thereof  shall have paid to the Company the amount of
such tax or shall have  established to the satisfaction of the Company that such
tax has been paid.

     Section 8. Mutilated or Missing Warrant Certificates.

     In case  any  Warrant  Certificate  shall be  mutilated,  lost,  stolen  or
destroyed,  the Company  shall  issue in exchange  and  substitution  for,  upon
surrender of the mutilated Warrant  Certificate,  or in lieu of and substitution
for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate
of like tenor and representing an equivalent  number of Warrants,  but only upon
receipt  of  evidence  satisfactory  to the  Company  of  such  loss,  theft  or
destruction of such Warrant  Certificate.  The new Warrant  Certificate shall be
dated the date of issuance of the lost, stolen or destroyed Warrant  Certificate
and shall bear the legends required by Section 5. Applicants for such substitute
Warrant Certificates shall also comply with any other reasonable requests of the
Company,  including,  without limitation, in the case of any such loss, theft or
destruction,  a request  to provide an  indemnity  bond,  the form and issuer of
which shall be satisfactory  to the Company,  except that neither the Purchaser,
any of its Affiliates nor any other institutional  investor shall be required to
furnish an indemnity bond if it furnishes to the Company an unsecured  indemnity
agreement in customary form.

     Section 9. Reservation of Warrant Shares.

     The  Company  will at all  times  reserve  and keep  available,  free  from
preemptive rights and liens, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any  obligation  to issue  Warrant  Shares
upon  exercise of Warrants,  the maximum  number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.

<PAGE>
                                       6

     Section 10. Certain Other Agreements of the Company.

          (a) The  Company  hereby  covenants  and agrees  that (1) all  Warrant
     Shares will upon issuance be validly issued,  fully paid and nonassessable,
     and free from all  taxes,  liens and  charges,  and will upon  issuance  be
     listed, on each national  securities exchange or trading market, if any, on
     which other shares of the same class are then listed;  (2) the Company will
     not increase the par value of the shares of Common  Stock  receivable  upon
     the exercise of the Warrants above the Exercise  Price then in effect;  (3)
     during  the  Exercise  Period,  without  the  consent  of the  holders of a
     majority in interest of the Warrants and Warrant  Shares,  the Company will
     not authorize any new class of Common Stock (as defined in Section 12) that
     differs  from  the  Common  Stock  (as  constituted  on the  date  of  this
     Agreement)  in any respect other than voting  rights;  (4) the Company will
     not  authorize  any  Preferred  Stock  without the  written  consent of the
     holders of a majority of the  Warrants  and Warrant  Shares;  (5) before or
     within a  reasonable  time after  taking any action  which  would  cause an
     adjustment  reducing  the  Exercise  Price  below the then par value of the
     shares of Common  Stock (but in any case not later than the next  annual or
     special  meeting  of  stockholders),  the  Company  will  use  commercially
     reasonable efforts to take all such corporate action as may be necessary or
     appropriate  in order that the Company may validly and legally  issue fully
     paid and  nonassessable  shares of Common Stock at such  adjusted  Exercise
     Price upon the exercise of the Warrants (it being  understood  that failure
     to obtain the appropriate  action despite the Company's use of commercially
     reasonable efforts will not constitute a violation of this Agreement);  and
     (6) the Company will not take any action which results in any adjustment of
     the Exercise Price if the total number of Warrant Shares issuable after the
     action upon the exercise of the Warrants (including any additional Warrants
     issued  pursuant to Section 11) would  exceed the total number of shares of
     Common Stock then authorized by the Company's  certificate of incorporation
     and available for the purpose of issue upon such exercise.

          (b) The holders of a majority  of the  outstanding  Warrants  have the
     right (so long as the outstanding  Warrants represent the unexercised right
     to purchase  during the  Exercise  Period at least  one-half of the Warrant
     Shares  originally  covered by the Warrants  initially issued hereunder) to
     appoint one observer who shall have the right to attend all meetings of the
     board of directors of the Company and all committee meetings of such board;
     provided,  however,  that, so long as the holders of the Series A Preferred
     Stock,  the Notes or the  Warrants  shall have the right to appoint such an
     observer,  all shall appoint the same observer,  the identity of which will
     be determined (i) by the requisite holders of the Notes until the principal
     and  interest  of the Notes are  repaid in full,  (ii)  thereafter,  by the
     holders of a majority of the outstanding Warrants, and (iii) thereafter, by
     the  holders  of the  majority  of the  issued  and  outstanding  Series  A
     Preferred  Stock.  Notwithstanding  anything to the  contrary,  the Company
     shall be entitled to exclude such observer from any board  discussions (and
     withhold any related  materials)  materially  affecting the relationship of
     the Company or any of its  Subsidiaries to any holder of Series A Preferred
     Stock, the Warrants or the Notes.

          (c)  During  the  Exercise   Period,   the  Company  will  permit  any
     representatives  designated  by the holders of a majority of the  Warrants,
     during normal  business hours and upon  reasonable  notice to (1) visit and
     inspect any of the  properties  of the Company  and its  Subsidiaries,  (2)
     examine  the  corporate  and  financial  records  of the  Company  and  its

<PAGE>
                                       7

     Subsidiaries and make copies thereof or extracts  therefrom and (3) discuss
     the  affairs,  finances  and  accounts  of  any  such  companies  with  the
     directors,  officers,  key employees  and  independent  accountants  of the
     Company  and its  Subsidiaries;  provided,  that  in no  event  shall  such
     inspection  impede or  interrupt  the  normal  business  operations  of the
     Company.  The Company will  reimburse the holders of the Warrants for their
     reasonable   expenses  (including  travel)  incurred  under  the  preceding
     sentence for not more than one such  examination per year. The presentation
     of an executed  copy of this  Agreement by the holders of a majority of the
     Warrants to the  Company's  independent  accountants  will  constitute  the
     Company's  permission to its  independent  accountants  to  participate  in
     discussions  with such  persons.  The  holders  of the  Warrants  and their
     designated   representative  shall  maintain  the  confidentiality  of  any
     confidential  and  Proprietary  Information so obtained by them or obtained
     from any board observer which is not otherwise available from other sources
     that  are free  from  similar  restrictions;  provided,  however,  that the
     foregoing  shall in no way limit or  otherwise  restrict the ability of the
     holders of the Warrants or such authorized  representatives to disclose any
     such  information  concerning  the  Company  which they may be  required to
     disclose  (i) to their  partners to the extent  required  to satisfy  their
     fiduciary obligations to such persons (so long as such partners agree to be
     bound by the  confidentiality  provisions  hereof),  or (ii)  otherwise  as
     required  by law.  The  holders  of the  Warrants  and  Warrant  Shares (i)
     acknowledge  that  they  may,  from  time  to  time,  be in  possession  of
     non-public information regarding the Company as a result of the information
     rights  granted  to them  hereunder,  and  (ii)  agree  not to trade in the
     securities of the Company  while in possession of any material,  non-public
     information in violation of applicable law.

          (d) During the Exercise  Period,  the Company will furnish each holder
     of Warrants with the following:

               (i) As soon as  practicable,  and in any case within  thirty (30)
          days after the end of each  calendar  month,  the  monthly  management
          reporting package in the form customarily prepared by the Company from
          time to time, but minimally  including (A) an unaudited  balance sheet
          as of the last day of such month, (B) an unaudited statement of income
          for such month,  together  with a cumulative  statement of income from
          the first day of the then current  fiscal year to the last day of such
          month,  and (C) a  statement  of  cash  flows  for  such  month  and a
          comparison   between  the  actual  figures  for  such  month  and  the
          comparable  figures (with respect to clauses (A) and (B) only) for the
          prior year period,  along with  management  commentary.  The foregoing
          financial statements shall be accompanied by an Officers'  Certificate
          to the effect  that such  statements  fairly  present in all  material
          respects the financial  position and financial  results of the Company
          for the fiscal period covered,  qualified by the fact that the Company
          may need to make adjustments to the foregoing figures as determined by
          the  Company's   auditors  in  accordance   with  generally   accepted
          accounting procedures.

               (ii) As soon as practicable and in any event within 90 days after
          the end of each  fiscal  year  commencing  with the fiscal year ending
          March 31, 2002,  an annual  independent  certified  audit  prepared by
          nationally recognized certified public accountants.

<PAGE>
                                       8

               (iii) Not later than the beginning of each fiscal year, an annual
          operating  plan with budget for the Company,  including  the Company's
          capital budget, for the coming fiscal year.

               (iv)  Promptly  upon receipt  thereof,  any  additional  reports,
          management   letters   or  other   detailed   information   concerning
          significant aspects of the Company's  operations and financial affairs
          given to the Company by its independent accountants (and not otherwise
          contained in other materials provided pursuant to this Section 7.2).

               (v) Within fifteen days after transmission thereof, copies of all
          financial statements, proxy statements,  reports and any other general
          written  communications  which the Company  sends to its  shareholders
          and/or  lenders  and  copies of all  registration  statements  and all
          regular,  special  or  periodic  reports  which  it  files,  with  the
          Securities and Exchange  Commission or with any securities exchange on
          which any of its securities  are then listed,  and copies of all press
          releases and other statements made available  generally by the Company
          to the  public  concerning  material  developments  in  the  Company's
          business.

               (vi) From time to time upon  request of any  holder of  Warrants,
          such other information as the Company is required by law to furnish to
          as any stockholder on request.

          (e) If for any  period  the  Company  shall  have  any  Subsidiary  or
     Subsidiaries,  then in respect  of such  period  the  financial  statements
     delivered  pursuant  to  subsections  (i) and (ii) of Section  10(d)  shall
     include consolidating  (unaudited) and consolidated financial statements of
     the Company and its Subsidiaries.

          Section 11. Adjustment on Liquidity Event.

          (a)  Adjustment.  If a Liquidity  Event  occurs,  at the option of any
     holder of Warrants the number of Warrant  Shares  issuable upon exercise of
     the Warrants shall be increased, if necessary (but not decreased),  so that
     each of the investment thresholds set forth in the following table opposite
     the period in which the Liquidity  Event occurs is met,  determined in each
     case (1) with reference to the value implicit in the Liquidity Event of the
     Warrant Shares issuable (after such adjustment) upon exercise of all of the
     Warrants,  and  (2) on the  assumption  that  all  outstanding  Convertible
     Securities  (including  Convertible  Securities  issuable  upon exercise of
     outstanding options), warrants and other rights are exercised, converted or
     exchanged,  and all shares of Common  Stock  issuable  upon such  exercise,
     converted or exchanged are issued:

<PAGE>
                                        9


         Period (dates               Internal Rate        Investment
          Inclusive)                   of Return           Multiple
--------------------------------    ---------------     --------------
  June 27, 2002, through                  32%                2.50
  June 26, 2005
  June 27, 2005, through                  32%                2.75
  June 26, 2006
  June 27, 2006 and thereafter            32%                3.00

     (b) Definitions. For purposes of this Section:

               (1)  "Liquidity  Event" means (A) the sale,  lease,  abandonment,
          transfer or other disposition of all or substantially all the stock or
          assets  of  the  Company,   including  by  merger,   consolidation  or
          otherwise,  (B) the  dissolution,  liquidation  or  winding  up of the
          Company, (C) the occurrence of a Change of Control, or (D) a Qualified
          Public Offering.

               (2) A "Change  of  Control"  occurs  when,  as the  result of the
          issuance  of  securities  by  the  Company  or  the   disposition   of
          outstanding  securities  of the  Company by the  holders  thereof,  by
          merger, or by any other transaction,  (i) members of the Siegel Family
          collectively  own less than 22.5% of the combined  voting power of all
          classes of Voting Securities, or (ii) any "person" or group of persons
          (within the meaning of section 13(d) of the Securities Exchange Act of
          1934 or Rule 13d-5 thereunder)  (other than one or more members of the
          Siegel Family or holders of the Series A Preferred Stock,  Warrants or
          shares of Common Stock issued as a result of  conversion of the Series
          A  Preferred   Stock  or  exercise  of  the  Warrants),   becomes  the
          "beneficial  owner"  (within  the  meaning  of Rule  13d-3  under  the
          Securities  Exchange Act of 1934, except that a person shall be deemed
          to be the beneficial  owner of all securities that such person has the
          right to acquire  before or after the expiration of any period of time
          specified  in such rule) of Voting  Securities  with  combined  voting
          power  equal to or greater  than 35% of combined  voting  power of all
          outstanding Voting Securities. In determining the percentage of voting
          power of all Voting  Securities held by any Person (or "person"),  all
          Voting Securities  issuable upon the exercise,  conversion or exchange
          of  outstanding  options,  warrants,  convertible  securities or other
          rights to purchase or subscribe for Voting  Securities shall be deemed
          to be outstanding.

               (3) "Voting  Securities"  means  securities  entitled in ordinary
          circumstances  to vote  generally  in the election of directors of the
          Company.

               (4) "Siegel Family" means (1) Todd E. Siegel,  his siblings,  the
          descendants of Todd E. Siegel and his siblings, and the spouses of any
          of the foregoing persons;  and (2) any general or limited  partnership
          (including Jade Partners),  trust  (including the Siegel Family Trust)
          or other entity all of whose partners,  beneficiaries  or other owners
          are Persons described in clause (1).

<PAGE>
                                       10

               (5) "Qualified Public Offering" means the first issuance and sale
          after  the  date of  this  Agreement  by the  Company,  pursuant  to a
          registration  statement  that becomes  effective  under the Securities
          Act, of securities (other than senior debt securities that are neither
          Convertible Securities nor issued as part of an offering that includes
          equity  securities or Convertible  Securities) for net proceeds to the
          Company of $15,000,000 or more.

               (6) "Internal  Rate of Return" means the per annum  discount rate
          (calculated on the basis of daily  compounding)  that, when applied to
          each payment in cash of principal of,  interest on, and prepayment fee
          in connection with, the Notes and to the proceeds  received (or deemed
          received pursuant to paragraph (B)) by the Warrant holders pursuant to
          a Liquidity  Event,  results in an aggregate  present  value as of the
          Weighted Average Issue Date equal to the aggregate purchase price paid
          by the Purchaser for the Notes and the Warrants. For this purpose:

                    (A) "Weighted  Average Issue Date" means the date determined
               by (i)  multiplying  the  aggregate  issue price of each separate
               issuance of Notes and  Warrants by the number of days between the
               date of such issuance and the date of the Liquidity  Event;  (ii)
               adding  together the amounts  determined  under clause (A); (iii)
               dividing the result  obtained  under clause (ii) by the aggregate
               issue price of all Notes and Warrants  issued  before the date of
               the Liquidity Event; and (iv) counting  backward from the date of
               the Liquidity Event the number of days so determined; and

                    (B) if the Liquidity Event is a Qualified  Public  Offering,
               the Internal Rate of Return will be calculated on the  assumption
               that all Warrants are exercised  and all Warrant  Shares are sold
               at the public offering price,  whether or not any Warrants are in
               fact exercised or any Warrant Shares are in fact sold.

               (7)  "Investment  Multiple" means the result obtained by dividing
          (A) the sum of (i) the aggregate amount paid in cash on account of the
          principal of,  interest on and prepayment  fee in connection  with the
          Notes; plus (ii) the proceeds received (or deemed received pursuant to
          the next  sentence)  by the  Warrant  holders  pursuant to a Liquidity
          Event,  by (B) the aggregate  purchase price paid by the Purchaser for
          the Notes and the Warrants.  For this purpose,  if the Liquidity Event
          is a  Qualified  Public  Offering,  the  Investment  Multiple  will be
          calculated on the  assumption  that all Warrants are exercised and all
          Warrant Shares are sold at the public offering  price,  whether or not
          any of the Warrants are in fact exercised or any of the Warrant Shares
          are in fact sold.

          (c) Ratable Treatment. All additional Warrants issued pursuant to this
     Section will be apportioned  among the Warrant holders in proportion to the
     number of Warrants held by each immediately before the Liquidity Event that
     causes the adjustment.

          (d) Issuance of Additional Warrant Certificates.  Promptly (and in any
     event  within ten Business  Days) after the  occurrence  of any  adjustment
     under this  Section,  the Company  will execute and deliver to each Warrant
     Holder  one or more  additional  Warrant  Certificates  for the  additional
     Warrants  to be issued on account  of such  adjustment,  except  that if it

<PAGE>
                                       11

     shall be necessary for the Warrant  Holders to possess or deliver  Warrants
     or certificates  representing Warrant Shares in order to participate in the
     related  Liquidity  Event,  the Company  will  execute and deliver  Warrant
     Certificates  in  sufficient  time for the Warrant  Holders to exercise the
     Warrants evidenced thereby and obtain all share certificates  necessary for
     them to participate in the Liquidity Event.

          (e)  Limitation.  The number of  Warrants  that the  Company  shall be
     required to issue  pursuant to this  Section  shall not exceed  12,500,000,
     less the number of shares of Common Stock issued by the Company pursuant to
     Section  11 of the  Registration  Rights  Agreement  dated the date  hereof
     between the Company and the Purchaser.

     Section 12. Dilution Adjustments and Related Provisions.

     The number of shares of Common Stock  purchasable upon the exercise of each
Warrant and the Exercise Price shall be subject to adjustment  from time to time
upon the  occurrence  of  certain  events,  as  provided  in this  Section.  Any
reduction in the Exercise  Price is subject to  subsection  (k). For purposes of
this Section,  "Common  Stock" means the Common Stock (as defined in Section 14)
and any other stock of the Company,  however  designated,  that has the right to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.

          (a) Adjustment  for Change in Capital Stock.  If at any time after the
     date hereof, the Company:

               (1) pays a dividend or makes a  distribution  on its Common Stock
          in shares of its Common Stock;

               (2)  subdivides  its  outstanding  shares of Common  Stock into a
          greater number of shares;

               (3)  combines  its  outstanding  shares  of Common  Stock  into a
          smaller number of shares;

               (4) makes a  distribution  on its  Common  Stock in shares of its
          capital stock other than Common Stock; or

               (5) issues by  reclassification of its Common Stock any shares of
          its capital stock;

then the  number of shares of Common  Stock  purchasable  upon  exercise  of the
Warrants and the Exercise Price, as in effect  immediately prior to such action,
shall be adjusted so that the holders may receive upon  exercise of the Warrants
and payment of the same aggregate  consideration the number of shares of capital
stock of the Company  which the holders would have owned  immediately  following
such action if the holders had exercised the Warrants  immediately prior to such
action. The adjustment shall become effective  immediately after the record date
in the case of a dividend or distribution  and  immediately  after the effective
date in the case of a subdivision, combination or reclassification.  If after an

<PAGE>
                                       12

adjustment a holder of a Warrant upon exercise may receive shares of two or more
classes or series of capital stock of the Company,  the Company shall  determine
the  allocation of the adjusted  Exercise Price between the classes or series of
capital stock.  After such allocation,  the exercise  privilege and the Exercise
Price of each class or series of capital  stock shall  thereafter  be subject to
adjustment  on terms  comparable  to those  applicable  to Common  Stock in this
Section.  Such adjustment shall be made  successively  whenever any event listed
above shall occur.

          (b)  Adjustment for Common Stock  Issuances.  If at any time after the
     date of this Agreement the Company issues (other than in an Exempt Issuance
     or in a transaction  described in  subsection  (a) or (e)) shares of Common
     Stock for a consideration per share less than the Market Price,  determined
     as of the date of  issuance of such  shares,  the  Exercise  Price shall be
     reduced in accordance with the following formula:

                                    P
                            O +  -------
                                    M
                    EP9 = EP x -----------
                                   O9

where:  EP9  =  the adjusted Exercise Price;

        EP   =  the then current Exercise Price;

        O    =  the number of shares of Common Stock outstanding immediately
                prior to the issuance of such additional shares;

        P    =  the aggregate consideration received for the issuance of such
                additional shares;

        M    =  the Market Price, determined as of the date of issuance of such
                shares; and

        O9   =  the number of shares of Common Stock outstanding immediately
                after the issuance of such additional shares.

The adjustment shall be made successively whenever any such issuance occurs, and
shall become effective immediately after such issuance.

     (c) Adjustment for Convertible  Securities  Issuance.  If at any time after
the date hereof the  Company  issues  (other than in an Exempt  Issuance or in a
transaction  described in  subsection  (a)) any  Convertible  Securities  for an
aggregate consideration which, when added to the aggregate consideration payable
for the number of shares of Common Stock initially  deliverable upon conversion,
exchange or exercise of such Convertible Securities, is less than the product of
such number of shares of Common Stock and the Market Price, determined as of the
date of issuance of such  Convertible  Securities,  the Exercise  Price shall be
reduced in accordance with the following formula:

<PAGE>

                                       13


                                    P
                            O +  -------
                                    M
                    EP9 = EP x -----------
                                  O + C


where:  EP9  =  the adjusted Exercise Price.

        EP   =  the then current Exercise Price;

        O    =  the number of shares of Common Stock outstanding immediately
                prior to the issuance of such Convertible Securities;

        P    =  the sum of the aggregate consideration received for the
                issuance of such Convertible Securities plus the additional
                consideration, if any, payable upon conversion, exchange or
                exercise of such Convertible Securities at the initial
                conversion, exchange or exercise rate;

        M    =  the Market Price, determined as of the date of issuance of
                such Convertible Securities; and

        C    =  the maximum number of shares deliverable upon conversion,
                exchange or exercise of such Convertible Securities at the
                initial conversion, exchange or exercise rate.

The adjustment shall be made successively whenever any such issuance occurs, and
shall become  effective  immediately  after such issuance.  If all of the Common
Stock  deliverable  upon  conversion,  exchange or exercise of such  Convertible
Securities  has not been issued when such  Convertible  Securities are no longer
outstanding,  then the  Exercise  Price  shall  promptly  be  readjusted  to the
Exercise  Price  which  would  then be in  effect  had the  adjustment  upon the
issuance  of such  securities  been  made on the basis of the  actual  number of
shares of Common  Stock  issued  upon  conversion,  exchange or exercise of such
Convertible Securities.

          (d) Adjustment for Rights Issue.  If at any time after the date hereof
     the Company  distributes any rights,  options or warrants to all holders of
     its Common Stock  entitling them for a period expiring within 60 days after
     the record  date  mentioned  below to  purchase  shares of Common  Stock or
     Convertible Securities at a price per share (or with an initial conversion,
     exchange or exercise  price per share) less than the Market Price per share
     on that record date, the Exercise Price shall be reduced in accordance with
     the following formula:

<PAGE>
                                       14


                                        M
                       EP9  =  EP x  -------
                                      O + N


 where:   EP9  =  the adjusted Exercise Price;

          EP   =  the then current Exercise Price;

          O    =  the number of shares of Common Stock outstanding on the
                  record date;

          N    =  the number of additional shares of Common Stock covered
                  by the rights, options, warrants or Convertible Securities;

          P    =  the offering price per share (including the initial
                  conversion, exchange or exercise price, in the case of
                  Convertible Securities) of the additional shares; and

          M    =  the Market Price determined as of the record date.

The adjustment  pursuant to this subsection shall be made successively  whenever
any such  rights,  options or  warrants  are issued and shall  become  effective
immediately after the record date for the determination of stockholders entitled
to receive the rights,  options or warrants.  If at the end of the period during
which such rights, options or warrants are exercisable,  not all rights, options
or warrants shall have been  exercised,  the Exercise Price shall be immediately
readjusted  to what it would have been if "N" in the above  formula had been the
number of shares actually issued.

          (e) Adjustment for Distribution on or Purchase or Redemption of Common
     Stock.  If at any time after the date hereof the Company or any  Subsidiary
     of the Company (1)  distributes  to the holders of Common  Stock any of the
     assets  (including  cash),  debt securities,  preferred stock, or rights to
     purchase debt securities, preferred stock or common stock of the Company or
     any of its Subsidiaries,  or (2) redeems,  purchases or otherwise  acquires
     for value any shares of Common Stock,  the Exercise  Price shall be reduced
     in accordance with the following formula:


                              (M x O) - F
               EP9  =  EP x  -------------
                               M x (O - N)

where:    EP9  =   the adjusted Exercise Price;

          EP   =   the then current Exercise Price;

          M    =   the Market Price determined as of the date on which
                   the distribution, redemption, purchase or acquisition
                   occurs;

<PAGE>
                                       15

          O    =   the number of shares of Common Stock outstanding immediately
                   before the distribution, redemption, purchase or acquisition;

          F    =  the aggregate amount of cash plus the Fair Market Value of
                  the aggregate non-cash consideration or securities distributed
                  to holders of Common Stock or paid for all shares of Common
                  Stock so redeemed, purchased or acquired; and

          N    =  the number of shares of Common Stock so redeemed, purchased or
                  acquired.

No adjustment  shall be required  under this  subsection on account of the first
$50,000 paid by the Company after the date hereof to acquire odd lots (less than
100 shares) of Common Stock.

          (f) No Increase in Exercise  Price.  In no event shall any  adjustment
     made  pursuant to  subsection  (b),  (c),  (d) or (e) increase the Exercise
     Price.

          (g) Adjustment in Number of Warrant  Shares.  Upon each  adjustment in
     the Exercise Price pursuant to any provision of this Section, the number of
     shares of Common Stock  purchasable  hereunder  shall be  adjusted,  to the
     nearest  one  hundredth  of a  whole  share,  to the  product  obtained  by
     multiplying  the  number of shares  purchasable  immediately  prior to such
     adjustment  in the  Exercise  Price by a fraction,  the  numerator of which
     shall be the Exercise Price  immediately  prior to such  adjustment and the
     denominator  of which  shall be the  Exercise  Price in effect  immediately
     thereafter,   determined   without   reference  to   subsection   (k).  All
     calculations under this Section shall be made to the nearest ten-thousandth
     of a cent and to the nearest hundredth of a share.

          (h) Deferral of De Minimis Adjustments.  No adjustment in the Exercise
     Price need be made  unless the  adjustment  would  require an  increase  or
     decrease of at least one percent in the  Exercise  Price.  Any  adjustments
     that are not made shall be carried  forward  and taken into  account in any
     later adjustment.

          (i)  Consideration  Received.  In  any  calculation  of  consideration
     received for purposes of this Section, the following shall apply:

               (1) in the case of the  issuance  of shares  of  Common  Stock or
          Convertible Securities for cash, the consideration shall be the amount
          of such cash,  before deduction for  commissions,  discounts and other
          expenses of the issuance; and

               (2) in the case of the  issuance  of shares  of  Common  Stock or
          Convertible  Securities for a consideration  in whole or in part other
          than cash, the consideration other than cash shall be deemed to be the
          Fair Market Value thereof.

          (j) When No  Adjustment  Required.  No  adjustment  need be made for a
     change in the par value,  or from par value to no par value, or from no par
     value to par value,  of the Common Stock.  To the extent the holders become
     entitled to receive cash upon exercise of the Warrants,  no adjustment need
     be made thereafter as to the cash. Interest will not accrue on the cash.

<PAGE>
                                       16

          (k) Par Value. Notwithstanding any other provision of this Section, no
     adjustment to the Exercise  Price shall reduce the Exercise Price below the
     then par  value  per  share of the  Common  Stock,  and any such  purported
     adjustment  shall  instead  reduce  the  Exercise  Price to such par value.
     However,  in  applying  subsection  (g),  the  "Exercise  Price  in  effect
     immediately   thereafter"  shall  be  determined  without  regard  to  this
     subsection.

               (l) Notice of Certain Transactions. If:

                    (1) the  Company  takes any  action  that  would  require an
               adjustment in the Exercise Price pursuant to this Section,

                    (2) the  Company  takes  any  action  that  would  require a
               supplemental Warrant Agreement pursuant to subsection (m),

                    (3) there is a liquidation or dissolution of the Company, or

                    (4) a Liquidity Event occurs,

     the Company shall mail to Warrant holders a notice describing the event and
     stating  applicable  record  date  or,  if  there is no  record  date,  the
     effective  date.  The Company shall mail the notice at least 30 days before
     such date if  practicable,  but in any event not less than ten days  before
     the time the Warrant  holders would be required to exercise  their warrants
     in order to participate in the  transaction on the same basis as holders of
     Common  Stock.  Failure  to mail the  notice or any  defect in it shall not
     affect the validity of the transaction.

          Whenever  the  Exercise  Price or the number of shares of Common Stock
     purchasable  under the terms of the Warrants shall be adjusted  pursuant to
     this  Section,   the  Company  shall  as  soon  as  practicable  prepare  a
     certificate  signed by its President or a Vice  President  setting forth in
     reasonable  detail the event  requiring the  adjustment,  the amount of the
     adjustment,  the method by which the adjustment was calculated,  the Market
     Price (if applicable), and the number of shares of Common Stock purchasable
     after giving effect to such  adjustment,  and shall as soon as  practicable
     cause  copies of such  certificate  to be mailed (by first  class,  postage
     prepaid) to the registered holders of the Warrants.

     (m) Reorganization of the Company.

          If the Company  consolidates  or merges with or into,  or transfers or
     leases all or  substantially  all its assets to, any person  (other than to
     one  of  its  Wholly-Owned   Subsidiaries),   upon   consummation  of  such
     transaction  the Warrants shall  automatically  become  exercisable for the
     kind and amount of  securities,  cash or other assets which the holder of a
     Warrant  would  have owned  immediately  after the  consolidation,  merger,
     transfer  or lease if the  holder had  exercised  the  Warrant  immediately
     before  the  record  date  (or,  if  none,  the  effective   date)  of  the
     transaction.  Concurrently  with and as a condition of the  consummation of

<PAGE>
                                       17

     such  transaction,   the  corporation  formed  by  or  surviving  any  such
     consolidation  or merger if other than the Company,  or the person to which
     such  sale or  conveyance  shall  have been  made  (any  such  person,  the
     "Successor  Guarantor"),  shall enter into a supplemental Warrant Agreement
     so providing and further providing for adjustments which shall be as nearly
     equivalent  as may be  practical  to the  adjustments  provided for in this
     Section.  The Successor  Guarantor  shall mail to Warrant holders a copy of
     the supplemental Warrant Agreement. If the issuer of securities deliverable
     upon exercise of Warrants under the  supplemental  Warrant  Agreement is an
     affiliate of the surviving  transferee or lessee  corporation,  that issuer
     shall join in the supplemental Warrant Agreement.

          Notwithstanding  the preceding  paragraph,  in the case of any merger,
     reverse stock split,  or other  transaction in which the Common Stock shall
     be converted into the right to receive a consideration consisting solely of
     cash,  then each  holder of a  Warrant,  without  having to take any action
     other than the  surrendering of such Warrant to the Company,  shall receive
     an amount equal to the amount (if any) by which the price per share payable
     to, or which would be received by, any holder of Common Stock in connection
     with such transaction exceeds the Exercise Price effective at that time.

          If this subsection applies,  subsections (a), (b), (c), (d) and (e) do
     not apply.

          (n) Form of Warrants.  Irrespective of any adjustments in the Exercise
     Price or the number or kind of shares  purchasable upon the exercise of the
     Warrants, Warrants theretofore or thereafter issued may continue to express
     the same price and number and kind of shares as are stated in the  Warrants
     initially issuable pursuant to this Agreement.

          (o) Violation of Purchase Agreement.  Nothing in this Section shall be
     deemed to waive any  restriction  on the Company set forth in the  Purchase
     Agreement or elsewhere in this Agreement.

     Section 13. No Impairment.

     The Company will not, by amendment of its certificate of  incorporation  or
through  any  consolidation,   merger,   reorganization,   transfer  of  assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of the  Warrants  against  dilution or other
impairment.  Without  limiting the generality of the foregoing,  the Company (1)
will take all such action as may be necessary or  appropriate  in order that the
Company may validly and  legally  issue fully paid and  nonassessable  shares of
Common Stock on the exercise of the Warrants from time to time  outstanding  and
(2) will not take any action  which  results in any  adjustment  of the Exercise
Price if the total number of Warrant  Shares  issuable after the action upon the
exercise  of all of the  Warrants  would  exceed  the total  number of shares of
Common Stock then authorized by the Company's  certificate of incorporation  and
available for the purposes of issue upon such exercise.

<PAGE>
                                       18

     Section 14. Definitions.

     The following terms shall have the following meanings:

     "Affiliate"  of any  Person  means  any  other  Person  that  controls,  is
controlled by or is under common control with such Person.

     "Business  Day" means any day on which the New York Stock  Exchange is open
for trading.

     "Change of Control" is defined in Section 11(b).

     "Common  Stock" means the Common Stock,  par value $0.01 per share,  of the
Company  as  constituted  on the date of this  Agreement,  except  as  otherwise
provided in  Sections  10(a)(3)  and 12 and in the  definition  of  "Convertible
Securities."

     "Convertible   Securities"   means   securities  or  obligations  that  are
exercisable for, convertible into or exchangeable for shares of Common Stock (as
defined in Section 12). The term includes  options,  warrants or other rights to
subscribe  for or purchase  Common Stock or to subscribe  for or purchase  other
Convertible Securities.

     "Exempt Issuance" means (a) the issuance of Common Stock upon the exercise,
conversion  or exchange of  Convertible  Securities,  (b) the issuance of Common
Stock or Convertible  Securities in a bona fide  underwritten  public  offering,
registered  under the Securities  Act, (c) the issuance of Common Stock pursuant
to any plan of the Company for the  reinvestment  of dividends on the same class
of capital  stock,  (d) the  issuance  after the date  hereof  for  compensation
purposes  of  options  to  purchase  up to  155,500  shares of  Common  Stock to
officers,  employees, or directors of, or bona fide consultants to, the Company,
(e) the issuance of Common Stock pursuant to Section 2.C of the Executive  Stock
Appreciation  Rights  and Non  Qualified  Stock  Option  Agreement,  dated as of
February 6, 1995, between the Company and Todd E. Siegel, as amended October 28,
2000,  and (f) the  issuance  of Common  Stock  pursuant  to Section 3.c of, and
Exhibit A to, the Employment  Agreement,  effective as of March 2, 2001, between
the Company and Michael P. Conroy.

     "Exercise Period" is defined in Section 6.

     "Exercise Price" is defined in Section 1.

     "Fair  Market  Value" of property  other than cash means (1) in the case of
any security traded in the Nasdaq Stock Market,  listed on a securities exchange
or reported on the NASD OTC bulletin  board,  its Market  Price,  and (2) in all
other cases,  the fair market value of the property as  determined in good faith
by the Board of  Directors of the Company,  subject to the  appraisal  procedure
described  below.  In  connection  with any  transaction  described  herein that
requires the  determination  of the Fair Market  Value of property,  the Company
will  notify  the  holders  of the  Warrants  in  writing  of the  terms  of the

<PAGE>
                                       19

transaction  and of the amount  determined  by the Board of  Directors to be the
Fair Market Value of the  property,  including a  description  of the  valuation
method.  If the holders of a majority of the Warrants believe that the Company's
notice incorrectly states the Fair Market Value of the property,  the holders of
a majority of the Warrants may engage an independent  appraisal firm selected by
them (the "First Appraiser") to determine the Fair Market Value of the property.
The report of the First  Appraiser  shall be  conclusive  on the question of the
Fair Market  Value of the  property  unless,  within 15 Business  Days after its
receipt  of  the  report  of  the  First  Appraiser,  the  Company  appoints  an
independent  appraisal firm (the "Second Appraiser") and notifies the holders of
all  Warrants  of the  identity of the Second  Appraiser.  If the reports of the
First  Appraiser and the Second  Appraiser are within 10 percent of the lower of
the two,  report of the First Appraiser  shall  conclusively  establish the Fair
Market Value of the  property.  Otherwise,  the First  Appraiser  and the Second
Appraiser will jointly appoint a third appraiser reasonably  satisfactory to the
Company and the holders of a majority of the Warrants  (the "Third  Appraiser").
The report of the Third Appraiser shall be averaged with the report of the First
Appraiser  or the  Second  Appraiser,  whichever  shall be closer to that of the
Third Appraiser,  and the average shall  conclusively  establish the Fair Market
Value of the  property.  Each  appraiser  will be  instructed  to  complete  its
appraisal  within 30 days after its  appointment.  The  Company  will permit all
appraisers  appointed  hereunder  to have  reasonable  access  to its  books and
records, to its officers and employees, and to its accountants. The Company will
pay the cost of the First Appraiser.  If the adjustment based on the Fair Market
Value as finally  determined  exceeds  the  adjustment  based on the Fair Market
Value stated in the Company's  notice by more than 10 percent,  the Company will
pay the cost of the Second  Appraiser;  otherwise,  the Warrant Holders will pay
the cost of the Second  Appraiser (in  proportion to the number of Warrants held
by each).  The cost of the Third  Appraiser will be paid half by the Company and
half by the Warrant  holders (in  proportion  to the number of Warrants  held by
each).

     "Holder" or "holder"  means a  registered  holder of Warrants or of Warrant
Shares.

     "Intercreditor  Agreement" means the Subordination Agreement dated the date
hereof among LaSalle Business Credit,  Inc., the Purchaser,  the Company and MTS
Packaging, Inc., as in effect from time to time.

     "Internal Rate of Return" is defined in Section 11(b).

     "Investment Multiple" is defined in Section 11(b).

     "Liquidity Event" is defined in Section 11(b).

     "Market  Price" of a security  on (or  determined  as of) any day means the
average of the last  reported  sale  prices of such  security as reported by the
Nasdaq Stock Market or, if such security is listed on a securities exchange, the
average of the last  reported  sale prices of such  security  on such  exchange,
which shall be for consolidated  trading if applicable to such exchange,  or, if
not so reported,  or if no sale shall have occurred on a particular trading day,
the last reported bid price of such security,  in each case for the five trading
days immediately  before such day. If a security is publicly traded,  but not in
the Nasdaq  Stock Market or on a  securities  exchange,  its Market Price is the

<PAGE>
                                       20

average  of the  last  reported  bid  prices  of such  security  on the NASD OTC
bulletin  board for the five trading days  immediately  preceding such day. If a
security is not reported on the NASD OTC bulletin board, its Market Price is its
Fair Market Value irrespective of any accounting treatment.

     "Notes" means the Company's 14% Senior  Subordinated  Notes issued pursuant
to the Purchase Agreement.

     "Person" means an individual,  corporation,  partnership, limited liability
company, trust or any other entity.

     "Purchase Agreement" is defined in the preamble.

     "Qualified Public Offering" is defined in Section 11(b).

     "Securities  Act" means the  Securities  Act of 1933,  as amended,  and the
rules and regulations of the Commission promulgated thereunder,  all as the same
shall be in effect from time to time.

     "Series  A  Preferred  Stock"  means  the  Company's  Series A  Convertible
Participating Preferred Stock, par value $0.0001 per share.

     "Siegel Family" is defined in Section 11(b).

     "Subsidiary"  means  (1)  any  partnership  in  which  the  Company  or any
Subsidiary  of the  Company  is a general  partner,  (2) any Person in which the
Company  and  its  Subsidiaries  collectively  own  a  majority  of  the  equity
interests,  and (3) any  Person of which  securities  having a  majority  of the
ordinary voting power in electing the board of directors or comparable body are,
at the time as of which any  determination  is being made,  owned by the Company
either directly or through one or more Subsidiaries.

     "Warrant Certificate" is defined in Section 2.

     "Warrant  Shares" means shares of Common Stock (and any other securities or
property) issued or issuable upon exercise of the Warrants.

     "Warrants"  means the Warrants to purchase shares of Common Stock issued or
to be issued by the Company  pursuant to Section 1 or pursuant to an  adjustment
under Section 11 or 12.

     "Wholly-Owned   Subsidiary"  means  any  Subsidiary,   all  of  the  equity
securities of which are owned by the Company or another Wholly-Owned Subsidiary.

<PAGE>
                                       21

     Section 15. Fractional Shares.

     The Company shall not be required to issue fractional Warrant Shares on the
exercise  of  Warrants,  but it may elect to do so,  and if  fractional  Warrant
Shares are issued,  the Company  need not carry the  fraction to more than three
decimal places. In lieu of issuing fractions,  or smaller fractions, of a share,
the Company may, subject to the terms of the  Intercreditor  Agreement,  pay the
holder  cash  equal  to the  product  of (1) any  fraction  of a  Warrant  Share
otherwise  issuable  and (2) the excess of the Market Price of a share of Common
Stock (determined as of the date of exercise) over the Exercise Price.

     Section 16. No Rights as Stockholders.

     Nothing  contained in this Agreement  shall be construed as conferring upon
the holder or any  transferee  of any Warrant  prior to the time of the exercise
thereof,  the right to vote,  to receive  dividends  or to consent to or receive
notice as a  stockholder  in respect  of any  meeting  of  stockholders  for the
election of  directors  of the  Company,  or  otherwise to enjoy the rights of a
stockholder of the Company.

     Section 17. Right of First Offer.

          (a) Except as provided in subsection (b), the Company shall,  prior to
     any  proposed  issuance by the Company of any of its  securities,  offer to
     each  Holder by  written  notice  the  right,  for a period of 30 days,  to
     purchase all or any part of such  securities for cash at an amount equal to
     the price or other  consideration for which such securities are proposed to
     be issued.

          (b)  Subsection  (a) shall not apply (1) to debt  securities  that are
     neither  Convertible  Securities  nor issued as part of a transaction  that
     includes equity securities or Convertible Securities;  or (2) to securities
     issued (A) pursuant to an Exempt  Issuance,  (B) as  consideration  for the
     acquisition  from an  unaffiliated  third  party of all or part of  another
     business (whether by purchase of stock or assets or otherwise), or (C) in a
     transaction described in Section 12(a).

          (c) The Company's  written  notice to the Holders  shall  describe the
     securities  proposed  to be issued by the  Company  and specify the number,
     price and payment terms.  Each Holder may accept the Company's  offer as to
     the full  number of  securities  offered or any lesser  number,  by written
     notice thereof given by it to the Company and to the other Holders prior to
     the expiration of the aforesaid  30-day period,  in which event the Company
     shall  promptly sell and each Holder shall buy,  upon the terms  specified,
     the number of securities agreed to be purchased by such Holder. The Company
     shall be free at any time  prior to 90 days after the date of its notice of
     offer to the  Holders,  to offer and sell to any third party or parties the
     securities  not agreed by the Holders to be purchased  by them,  at a price
     and on payment terms no less favorable to the Company than those  specified
     in such notice of offer to the Holders.  However,  if such third party sale
     or sales are not consummated  within such 90-day period,  the Company shall
     not sell  such  securities  as shall not have been  purchased  within  such
     period without again complying with this Section.

<PAGE>
                                       22


          (d) If the Holders in the aggregate  elect to purchase more securities
     than the  Company  proposes  to issue,  each  Holder  shall  purchase  such
     securities  (1) in the  proportion  that all electing  Holders  shall agree
     among  themselves in writing,  notice of which shall be given in writing to
     the Company not later than one business day before the  issuance,  sale and
     purchase is scheduled to be completed, or (2) failing such agreement in the
     proportion  that the  amount  of  securities  that  such  Holder  elects to
     purchase  bears to the amount of securities  elected to be purchased by all
     Holders.

     Section  18.   Notices.   All   notices,   requests,   consents  and  other
communications  hereunder  to any  party  shall be deemed  to be  sufficient  if
contained in a written instrument  delivered in person or duly sent by overnight
courier,  facsimile transmission or registered or certified mail, return receipt
requested,  postage  prepaid,  addressed  to such party at the address set forth
below or such other  address as may  hereafter be  designated  in writing by the
addressee to the other parties:

                  If to the Company:

                  Medical Technology Systems, Inc.
                  12920 Automobile Boulevard
                  Clearwater, Florida  33729
                  Fax:  727-540-0547
                  Attention:   Todd E. Siegel,
                               President and Chief Executive Officer

and if to a  Warrant  holder,  to its  address  shown  from  time to time on the
register maintained by the Company pursuant to Section 4.

All such notices and communications shall be deemed to have been received in the
case of (a) facsimile transmission,  on the date sent, (b) personal delivery, on
the date of such  delivery,  (c) overnight  courier,  on the first  business day
following  delivery to such courier and (d) mailing,  on the fifth day after the
posting thereof.

     Section 19. Supplements and Amendments.

     Any  amendment or supplement  to this  Agreement  shall require the written
consent of the Company and the registered  holders of a majority of the Warrants
then  outstanding,  except that the consent of each holder of a Warrant affected
shall be required for any amendment to this  Agreement  that would  increase the
Exercise  Price or decrease the number of shares of Common Stock  purchasable at
the time of such  amendment  upon  exercise of Warrants,  other than pursuant to
adjustments provided in this Agreement.

     Section 20. Successors.

     All the covenants and provisions of this Agreement by or for the benefit of
the  Company  or the  Purchaser  shall  bind and inure to the  benefit  of their
respective successors and permitted assigns hereunder.

<PAGE>
                                       23

     Section 21. Benefits of this Agreement.

     Nothing in this  Agreement  shall be  construed to give to any Person other
than the Company,  the Purchaser and the registered  holders of the Warrants any
legal or  equitable  right,  remedy  or claim  under  this  Agreement;  but this
Agreement  shall be for the sole  and  exclusive  benefit  of the  Company,  the
Purchaser and the registered holders of the Warrants.

     Section 22. Counterparts; Effectiveness.

     This Agreement may be executed in any number of counterparts, and each such
counterpart  hereof shall be deemed to be an original  instrument,  but all such
counterparts  together  shall  constitute  but one  agreement.  A signature page
delivered  by  facsimile  transmission  shall be the  equivalent  of an original
signed copy of this  Agreement for all  purposes.  This  Agreement  shall become
effective  on  the  date  on  which  each  party  hereto  shall  have   received
counterparts hereof executed by each of the parties hereto.

     Section 23. Entire Agreement.

     This Agreement, the Purchase Agreement and the Transaction Documents embody
the entire  agreement  and  understanding  among the parties with respect to the
subject  matter  hereof and supersede all prior  agreements  and  understandings
relating to the subject matter hereof.

     Section 24. Severability.

     If any provision of this Agreement  shall be held or deemed to be, or shall
in fact be, invalid,  inoperative,  illegal or  unenforceable  as applied to any
particular  case in any  jurisdiction  because of the conflict of such provision
with any  constitution  or  statute  or rule of  public  policy or for any other
reason,  such circumstance  shall not have the effect of rendering the provision
or provisions in question invalid, inoperative,  illegal or unenforceable in any
other  jurisdiction  or in any other case or  circumstance  or of rendering  any
other provision or provisions herein contained invalid, inoperative,  illegal or
unenforceable  to the  extent  that such  other  provisions  are not  themselves
actually in conflict with such  constitution,  statute or rule of public policy,
but this Agreement  shall be reformed and construed in any such  jurisdiction or
case as if such invalid,  inoperative,  illegal or  unenforceable  provision had
never been  contained  herein and such  provision  reformed  so that it would be
valid,  operative  and  enforceable  to the  maximum  extent  permitted  in such
jurisdiction or in such case.

     Section 25. Governing Law.

     All  issues  and   questions   concerning   the   construction,   validity,
interpretation  and  enforcement of this Warrant  Agreement shall be governed by
the laws of the State of Delaware. The parties hereby waive any and all right to
trial  by  jury in any  legal  proceeding  arising  out of or  relating  to this
Agreement.


<PAGE>
                                       S-1

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed under seal, as of the day and year first above written.

                                MEDICAL TECHNOLOGY SYSTEMS, INC.

                                By___________________________
                                  Name:
                                  Title:


                                EUREKA I, L.P.

                                By: EUREKA MANAGEMENT, L.P.,
                                    its sole general partner

                                By: BERWIND CAPITAL PARTNERS, LLC,
                                    its sole general partner


                                By:________________________________
                                   Christine C. Jones,
                                   President


<PAGE>


                                    EXHIBIT A
                              to Warrant Agreement

THE SECURITIES  REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED,  SOLD,  PLEDGED OR OTHERWISE  TRANSFERRED UNLESS SUCH OFFER,
SALE,  PLEDGE OR TRANSFER IS REGISTERED  UNDER THE 1933 ACT OR APPLICABLE  STATE
SECURITIES LAWS OR EXEMPT FROM SUCH  REGISTRATION.  TRANSFER OF THESE SECURITIES
IS ALSO SUBJECT TO CERTAIN  RESTRICTIONS  UNDER THE WARRANT AGREEMENT DATED JUNE
26, 2002, BETWEEN THE COMPANY AND EUREKA I, L.P.

No._____                                                        _______Warrants

                               Warrant Certificate

                        MEDICAL TECHNOLOGY SYSTEMS, INC.

     This  Warrant  Certificate  certifies  that  __________  or  its  permitted
assigns,  is the holder of _______  Warrants (the  "Warrants")  expiring at 5:00
p.m., Eastern time on June 26, 2012 (the "Expiration  Time"), to purchase shares
of the Common Stock, par value $0.01 per share (the "Common Stock"),  of Medical
Technology Systems,  Inc., a Delaware corporation (the "Company").  Each Warrant
entitles the holder, upon exercise, to receive from the Company, if exercised at
or before the Expiration Time, one fully paid and nonassessable  share of Common
Stock (a "Warrant Share") at the exercise price (the "Exercise  Price") of $0.01
per share,  payable as provided in the Warrant Agreement  (defined below),  upon
surrender of this Warrant  Certificate  and payment of the Exercise Price at the
principal office of the Company,  subject to the conditions set forth herein and
in the  Warrant  Agreement.  The  Exercise  Price and number of  Warrant  Shares
issuable  upon  exercise  of the  Warrants  are subject to  adjustment  upon the
occurrence of certain events, as provided in the Warrant Agreement.

     The  Warrants  evidenced  by this  Warrant  Certificate  are part of a duly
authorized  issue of  Warrants  of the  Company  and are  issued or to be issued
pursuant to a Warrant  Agreement dated June 26, 2002 (the "Warrant  Agreement"),
between the Company and Eureka I, L.P.,  the initial  purchaser of the Warrants.
The Warrant Agreement is hereby  incorporated by reference in and made a part of
this  instrument  and is hereby  referred  to for a  description  of the rights,
limitations  or rights,  obligations,  duties and  immunities  thereunder of the
Company and the holders (the words "holders" or "holder"  meaning the registered
holders  or holder of the  Warrants).  A copy of the  Warrant  Agreement  may be
obtained by the holder hereof upon written request to the Company.

<PAGE>
                                       2

        All issues and questions concerning the construction, validity,
interpretation and enforcement of this Warrant Certificate shall be governed by
the laws of the State of Delaware without regard to principles of conflicts of
laws.

<PAGE>
                                       3

     IN WITNESS WHEREOF,  the Company has caused this Warrant  Certificate to be
duly executed.

                                             MEDICAL TECHNOLOGY SYSTEMS, INC.


Dated    ________________                   By_____________________________
                                              Name:
                                              Title:


<PAGE>

                          FORM OF ELECTION TO PURCHASE

                                                      Dated _________________


     The  undersigned,  being  duly  authorized,  hereby  irrevocably  elects to
exercise  the within  Warrant to the  extent of  purchasing  ___________________
shares of Common Stock and hereby:

                                   (check one)

        [  ]1    makes payment of $_________ in payment of the
                 Exercise Price thereof.

        [  ]2    instructs the Company pursuant to the third
                 paragraph of Section 6 of the Warrant Agreement to reduce the
                 number of shares of Common Stock eligible to be purchased by
                 the undersigned by _______ shares.


                                    * * * * *


                     INSTRUCTIONS FOR REGISTRATION OF STOCK

Name  __________________________________________________________
             (please typewrite or print in block letters)

Address  _______________________________________________________

                           Signature/Title ________________________________

               Note:  The signature  must conform in all respects to the name of
               the holder as specified on the face of this Warrant Certificate.


Taxpayer Identification Number of holder  _________________________


Signature Guarantee _______________________________


<PAGE>

                                 ASSIGNMENT FORM


     FOR VALUE  RECEIVED,  the undersigned  hereby sells,  assigns and transfers
unto

      Name  ______________________________________________
             (please typewrite or print in block letters)

     Address _____________________________________________

     Taxpayer Identification No.__________________________


               its right  represented  by this Warrant  Certificate  to purchase
               ____________  shares of Common Stock and does hereby  irrevocably
               constitute and appoint  attorney-in-fact  to transfer the same on
               the books of the Company with full power of  substitution  in the
               premises.

Date:  ____________________

Signature/Title  __________________________________________

                    Note:  The signature must conform in all respects to name of
                    the  holder  as  specified  on  the  face  of  this  Warrant
                    Certificate.

Taxpayer Identification number of transferor __________________________


Signature Guarantee _________________________