CO-MARKETING AGREEMENT

CO-MARKETING AGREEMENT

        This Co-Marketing Agreement (this “Agreement”) is made effective _________, 2004 (the “Effective Date”), between Cardinal Health 103, Inc., Cardinal Health 106, Inc. and Cardinal Health 110, Inc. (individually and collectively, “Cardinal Health”), with its principal place of business at 7000 Cardinal Place, Dublin, Ohio 43017, Attn: Mas Kang, facsimile number (614) 757-5331, and Medical Technology Systems, Inc. (“MTS”), with its principal place of business at 12920 Automobile Boulevard, Clearwater, Florida 33762, Attn: Todd Siegel, facsimile number (727) 576-6311. Each of Cardinal Health 103, Inc., Cardinal Health 106, Inc. and Cardinal Health 110, Inc. shall be jointly and severally liable for the obligations of Cardinal Health under this Agreement.

Recitals

        WHEREAS, MTS manufactures, markets and sells the equipment and supplies to be used in packaging pharmaceutical products set forth on Exhibit A (collectively, the “Products”), which are the subject of this Agreement.

        WHEREAS, Cardinal Health is a pharmaceutical wholesaler with hospital/managed care, alternate care, group purchasing organization and retail customers.

        WHEREAS, MTS desires Cardinal Health to provide certain marketing and sales services with respect to the Products, and Cardinal Health desires to provide such services, all as more fully described below.

        NOW, THEREFORE, the parties hereby agree as follows:

         §1.        Exclusive Appointment; Acceptance of Appointment.

                      a.         Upon the terms and conditions set forth in this Agreement, MTS hereby appoints Cardinal Health as its exclusive marketer for the Products solely to the entities set forth on Exhibit B attached hereto (hereinafter referred to as, “Strategic Customers”). In addition, MTS shall grant to Cardinal Health a first right of refusal to market, sell and distribute under the terms of this Agreement (i.e., add to Exhibit A) any MTS product not currently covered by this Agreement or any product that MTS develops during the Term (as hereinafter defined) of this Agreement for a period of thirty (30) days after notice from MTS that such product is available for general release; provided, however, this right of first refusal shall only apply to products that are substantially similar to the Products, are intended for use by the same type of customers as the Strategic Customers and do not compete with any product manufactured or marketed by Cardinal Health or any of its affiliates.

                      b.        Cardinal Health hereby accepts such appointment and shall, at its own expense (except as otherwise set forth in this Agreement), use its best efforts to promote, market and sell the Products to the Strategic Customers.

                      c.        Notwithstanding anything to the contrary that may be contained in this Agreement, but subject to the proposal process described in Section 6, MTS may market, sell and/or distribute the Products to Strategic Customers to which Cardinal Health presents a proposal but fails, within one hundred eighty (180) days after first providing such proposal, to enter into an agreement with Cardinal Health to obtain the Products, or the Strategic Customer provides written notice of rejection of the proposal prior to the expiration of such one hundred eighty (180) day period; provided, however, the pricing offered by MTS to such Strategic Customer for the Products shall not be more favorable than the pricing offered to Cardinal Health under this Agreement. Cardinal Health shall provide to MTS immediate notice of a Strategic Customer’s rejection of a proposal.

                      d.        In the event that a Strategic Customer terminates its relationship with Cardinal Health and Cardinal Health removes the Products provided to such Strategic Customer, MTS may not, for a period of six (6) months from the date of such termination, market, sell or distribute the Products to such Strategic Customer. For a period of thirty (30) days from the date of termination of the agreement between Cardinal Health and the Strategic Customer, MTS shall have the right to purchase from Cardinal Health the Products removed from such Strategic Customer for an amount equal to (i) the fair market value of such Products (based on a five (5) year straight-line depreciation formula), or (ii) Cardinal Health’s remaining obligation on such Products, whichever is greater.

                      e.        During the Term of this Agreement, neither party shall enter into an agreement with a competitor of the other party to market, sell, provide and/or obtain the Products, or new products developed by a party during the term of this Agreement that are substantially similar to the Products. A list of each party’s competitors is set forth on Exhibit C attached hereto. Notwithstanding the foregoing, Cardinal Health retains the right to provide services similar to those provided by Cardinal Health under this Agreement to Affiliates or subsidiaries of Cardinal Health that may manufacture or supply products similar to the Products or that compete with the Products. Further notwithstanding the foregoing, MTS or its Affiliates may enter into an agreement with a competitor of Cardinal Health to sell packaging supplies and labels, and other products that are not substantially similar to the Products or are not intended for use by the same type of customers as the Strategic Customers. Except as otherwise set forth in this Agreement, during the Term of this Agreement, MTS shall not, directly or indirectly, solicit or engage in negotiations or discussions with, disclose any of the terms of this Agreement to, accept any offer from, furnish any information to, or otherwise cooperate, assist or participate with, any person or organization (other than Cardinal Health and its representatives and Affiliates) regarding the provision to MTS of the services as described herein. For the purposes of this Agreement, “Affiliate” means, with respect to any entity, any other entity Controlling, Controlled by or under common Control with such entity, and “Control” and its derivatives means the legal, beneficial or equitable ownership, directly or indirectly, of at least fifty percent (50%) of the aggregate of all voting equity interests in an entity or equity interests having the right to at least fifty percent (50%) of the profits of an entity or, in the event of dissolution, to at least fifty percent (50%) of the assets of an entity and, in the case of a partnership, also includes the holding by an entity of the position of sole general partner.

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          §2.        Term and Termination.

                      a.        This Agreement shall commence as of the Effective Date and continue for a period of five (5) years (the “Initial Term”), unless earlier terminated in accordance with the provisions hereof. Thereafter, this Agreement will automatically renew for one (1)-year periods (“Renewal Term”) unless written notice of non-renewal is provided by either party at least ninety (90) days prior to the end of the Initial Term or the applicable Renewal Term. The Initial Term and any Renewal Term(s) shall be collectively referred to as the “Term.”

                      b.        In the event either party breaches any of its representations, warranties, certifications or obligations under this Agreement, and such breach remains uncured for thirty (30) days after receipt by the non-breaching party of written notice thereof, then in addition to any and all other rights and remedies it may have, the non-breaching party may terminate this Agreement immediately upon written notice.

                      c.        Notwithstanding the foregoing, either party may terminate this Agreement at any time without cause upon providing not less than ninety (90) days prior written notice thereof to the other party, provided that in the event that Cardinal Health exercises its right to terminate the Agreement pursuant to this Section 2(c), the restrictions on MTS in Sections 1(d), (e) and (f) shall expire sixty (60) days after Cardinal Health provides such notice to MTS.

                      d.        In the event of a Change in Control (as hereinafter defined) of MTS, Cardinal Health may, in its sole discretion, terminate this Agreement immediately upon written notice to MTS. “Change in Control” shall mean: (i) a change in the record or beneficial ownership of securities of MTS representing fifty percent (50%) or more of (A) the economic interest in MTS or (B) the voting power in the election of directors of MTS; (ii) the sale or other transfer of all or substantially all of the assets of MTS (including without limitation the sale or other transfer of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of MTS) or the merger or other consolidation of MTS into any other person or entity, with the result of such merger or other consolidation being that MTS is not the survivor; (iii) a liquidation or dissolution of MTS; or (iv) a transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.

          §3.        Product Sales.

                      a.        Cardinal Health’s affiliate, Cardinal Health 111, Inc., will purchase the Products from MTS at the prices set forth on Exhibit D attached hereto (unless otherwise agreed in writing by MTS), pursuant to mutually agreed upon terms and conditions as set forth in the Product purchase agreement(s) between Cardinal Health 111, Inc. and MTS for sale or lease to the Strategic Customers (each such agreement, a “Product Purchase Agreement”). Cardinal Health retains the sole right to determine the terms and conditions, including, but not limited to, pricing, under which to sell, license and/or lease the Products to the Strategic Customers; provided, however, the terms and conditions (excluding price and payment terms) of such sale, license or lease shall at, a minimum, match the terms and conditions required of Cardinal Health 111, Inc. by MTS in the Product Purchase Agreement.

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                      b.        Except as otherwise set forth on Exhibit D or as otherwise mutually agreed between the parties, MTS represents and warrants that, as of the Effective Date of this Agreement, the Product prices set forth on Exhibit D are not greater than the prices offered to or paid by other customers of MTS (excluding the MTS National Accounts as hereinafter defined) for the Products. If at any time during the Term of this Agreement, MTS offers or enters into an agreement with any other person or entity, excluding those MTS customers (the “MTS National Accounts”) specified on Exhibit C, purchasing the Products at prices more favorable than those set forth on Exhibit D, this Agreement shall be amended to adjust the Product prices set forth on Exhibit D prospectively to match the more favorable prices. MTS and Cardinal Health shall review these MTS National Accounts and the circumstances surrounding their exclusion from this “best price” warranty to determine their continued applicability.

                      c.        Strategic Customers shall receive priority from MTS with regard to field and customer service calls and installation scheduling as, and to the extent, set forth in the Product Purchase Agreement.

                      d.        Unless otherwise specified in an applicable Product Purchase Agreement:

                                 1.        Payment terms for the OnDemand® system are 33% of the purchase price is due upon execution of the Product Purchase Agreement, 33% of the purchase price is due upon delivery, and the remaining 34% of the purchase price is due thirty (30) days after installation. Payments for all other Products are due 30 days after shipment. Cardinal Health shall be responsible for all freight charges. The Products will be shipped to Cardinal Health or the Strategic Customer, F.O.B. shipping point, unless otherwise provided in a Product Purchase Agreement.

                                 2.        If Cardinal Health fails to make any payment due under the Product Purchase Agreement on or before the due date, then (without prejudice to its other rights and remedies) MTS may charge Cardinal Health interest (both before and after judgement) on the undisputed amount unpaid, at the annual rate of 18% or the maximum rate permitted by law, whichever is less, from time to time until payment is made in full. Time for payment shall be of the essence. Cardinal Health shall provide notice of any disputed amounts to MTS within ten (10) days of receipt of the invoice, including a reasonable explanation of Cardinal Health’s good-faith basis for the dispute.

                                 3.        Cardinal Health shall be responsible for all federal, state, provincial, municipal and value added or other taxes which are now or may hereafter be required in connection with or imposed upon or are in relation to the price payable in connection with the ownership, lease, license, bailment, rental or use of the Products or any component thereof.

         § 4.       Training.

                      a.        MTS shall provide to Cardinal Health, at no charge and on mutually agreed dates and locations, on-site and/or off-site Product training sessions for Cardinal Health’s sales personnel. Cardinal Health shall assume all expenses, including travel and lodging, for Cardinal Health personnel attending such training sessions.

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                      b.        MTS shall provide, at its own expense, periodic site visits and additional “refresher” training to Strategic Customers that utilize an OnDemand or MTS Series Product as may be further set forth in the Product Purchase Agreement(s).

          §5.        Sales Materials and Other Marketing.

                      a.        Cardinal Health shall develop and print, at its own cost and expense, all sales literature, promotional materials and similar items necessary for the promotion of the Products (the “Sales Materials”) based on information provided by MTS (the “Sales Information”). Prior to each use thereof, Cardinal Health shall submit all Sales Materials to MTS for its review and approval, such approval not to be unreasonably withheld. Cardinal Health shall modify any Sales Materials that MTS notifies Cardinal Health in writing does not conform, in any material respect, to MTS marketing standards within five (5) business days of receiving notice of such non-conformity from MTS. MTS shall inform Cardinal Health if any material changes occur which warrant changes in the Sales Materials so that said Sales Materials continue to remain compliant with this Section 5.

                      b.        MTS warrants and represents that, to the best of its knowledge, the Sales Information, as originally provided by MTS, and the Sales Materials directly developed from such Sales Information without modification or combination, when approved by MTS, are true and accurate and do not infringe on any third party’s intellectual property right (including patent, trademark, service mark, copyright, trade dress, trade secret and other proprietary rights).

                      c.        Cardinal Health warrants and represents that, to the best of its knowledge, the Sales Materials, as originally provided to MTS for approval, and excluding the Sales Information as originally provided by MTS, are true and accurate and do not infringe on any third party’s intellectual property right (including patent, trademark, service mark, copyright, trade dress, trade secret and other proprietary rights).

                      d.        Except with regard to MTS Property or Proprietary Rights (as hereinafter defined), MTS shall have no proprietary right in the Sales Materials prepared by Cardinal Health. MTS shall have no right to use the Sales Materials prepared by Cardinal Health without Cardinal Health’s prior written consent. To the extent permitted by this Agreement, each party shall: (i) use all Sales Materials and Sales Information provided by the other party solely for purposes of performing their respective obligations hereunder; (ii) take all steps necessary to ensure that no person or entity has or will have unauthorized access to any of the Sales Materials and Sales Information; and (iii) not reproduce, modify or translate, or permit to be reproduced, modified or translated, any of the Sales Materials and Sales Information provided hereunder, or any portion thereof.

                      e.        Cardinal Health and MTS will each provide opportunities to the other to participate in trade shows and other industry meetings, as applicable. Each party will be responsible for its expenses incurred in attending such events, including, but not limited to, admission fees, travel and lodging.

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                      f.        Cardinal Health and MTS will co-develop additional marketing materials (i.e., testimonials, effectiveness studies) and press releases or other market communications as may be mutually agreed upon.

                      g.        Cardinal Health shall not make any promises or representations or give any warranties, guarantees or indemnities in respect of the Products except such as may be expressly authorized in writing by MTS.

          §6.        Strategic Customer Proposals.

                      a.        In order to add additional Strategic Customers to Exhibit A, each party may identify potential customers for the Products and suggest them as proposed Strategic Customers (each, a “Proposed Strategic Customer”) by entering the Proposed Strategic Customer in MTS’ lead tracking system. The proposing party will provide the other party with contact and other information and/or use commercially reasonable good faith efforts to arrange telephone conferences and meetings with the Proposed Strategic Customer to facilitate the parties’ evaluation of the Proposed Strategic Customer’s against mutually agreed qualification criteria for such Proposed Strategic Customer’s use of the Products. If the Proposed Strategic Customer meets such criteria, the Proposed Strategic Customer will be considered a “Strategic Customer” for the purposes of this Agreement. If the Proposed Strategic Customer does not meet such criteria, the Proposed Strategic Customer will be considered outside the scope of this Agreement.

                      b.        The Program Managers (as hereinafter defined) shall use commercially reasonable, good faith efforts to jointly develop selling strategies and timelines for each Strategic Customer. Cardinal Health shall have primary responsibility for developing and presenting proposals for Strategic Customers; provided, however, MTS shall provide information and support in the development and presentation of such proposals as reasonably requested by Cardinal Health. The content and structure, including, not limited to the price of the Products, shall be determined solely by Cardinal Health. In the event MTS has a proposal pending with any Strategic Customer prior to execution of this Agreement, MTS shall provide Cardinal Health with a copy of that proposal, including applicable Product pricing.

                      c.        MTS shall provide to Cardinal Health, for purposes of developing the proposals, an estimate of the fees associated with MTS’ freight, installation, facility, interface, service, supplies and other life-cycle costs associated with the Products. MTS shall not provide this information directly to the Strategic Customer, unless authorized by Cardinal Health. In addition, MTS shall, at its own expense, perform and/or provide all site inspections, sales support, customer demonstrations, and facility visits in support of Cardinal Health’s proposal.

                      d.        Only Cardinal Health’s Senior Vice President – Alternate Care Sales, Executive Vice President – Health Systems Sales and Marketing (in conjunction with local field sales management) shall be authorized to present proposals that include MTS’ OnDemand® system. Only Cardinal Health sales management (i.e., Business Development Managers, Leader® Regional Managers, Sales Managers and Regional Sales Directors) shall be authorized to present proposals that include the MTS 350, 400 and 500 systems. Only Cardinal Health Sales Directors (or their authorized designees) shall be authorized to present proposals that include the Autobond®, Gemini, Surebond and Deblistering systems.

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                      e.        Cardinal Health shall promptly notify MTS in writing and in advance of all proposals to Strategic Customers and Prospective Strategic Customers, and all related meetings with such entities, and give MTS a reasonable opportunity to attend any such proposal presentation or meeting. Cardinal Health shall also provide MTS with quarterly sales forecasts, progress reports and sales reports with respect to sales initiatives for such Strategic Customers and Prospective Strategic Customers.

          §7.        Steering Committee and Program Managers.

                      a.        A steering committee shall be formed that consists of both Cardinal Health and MTS senior-level representatives (the “Steering Committee”). The Steering Committee shall meet on a quarterly basis, or as otherwise mutually agreed, at a mutually agreed upon location to establish goals and objectives of this Agreement and monitor performance under this Agreement, including but not limited to, sales and sales pipeline reporting; sales, service and customer issues; modifications to Exhibit B (Strategic Customers), Exhibit C (Competitors) and Exhibit D (Product Pricing); review of new programs, products and services; review of any other changes that would affect this Agreement; and review of MTS product forecasts for the Products.

                      b.        Each party shall designate an employee to act as program manager (the “Program Manager”). The Program Managers shall serve as the primary point of contact under this Agreement on a day to day basis, and perform such other duties as may be mutually agreed upon.

          §8.        Reserved.

         §9.        Injunctive Relief. Each party acknowledges and agrees that the other party’s remedies at law for any violation or attempted violation by such party of any of its obligations under this Agreement would be inadequate and agrees that, in the event of any such violation or attempted violation, such other party shall be entitled to seek a temporary restraining order, temporary and permanent injunctions, and other equitable relief, without the necessity of posting any bond or proving any actual damage, in addition to all other rights and remedies which may be available to such other party from time to time.

          §10.      Alternative Dispute Resolution. The parties shall use reasonable efforts to amicably settle, as appropriate, all disputes, controversies, or differences, which may arise between them. The parties agree that any dispute, controversy or difference that arises in connection with the Agreement, excluding those relating to a breach of Section 12, Confidential Information, of this Agreement, noncompliance with applicable law, or for which either party has the right to and desires to terminate this Agreement, shall first be presented to the respective presidents of MTS and Cardinal Health, or their designees, for resolution. If no resolution is reached, then such dispute shall be settled by three (3) arbitrators; one to be selected by MTS, one to be selected by Cardinal Health and the third to be selected by the two (2) arbitrators, in a binding, non-reviewable and non-appealable alternate dispute resolution process to be conducted in accordance with the rules of the American Arbitration Association. The existence of the dispute, the dispute resolution process and the arbitrators’ award shall be maintained confidential, provided that the arbitrators’ award may be entered as a final judgment in any court having jurisdiction. The arbitration shall take place in Atlanta, Georgia or such other mutually agreeable location, and shall apply the governing law of this Agreement. This process shall be the sole mechanism and forum of such controversy or dispute, unless otherwise expressly set forth in this Agreement. The provisions of this Section 10 shall not apply to those instances in which either party is entitled to seek injunctive relief pursuant to the terms of this Agreement and desires to do so.

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          §11.      Proprietary Rights.

                      a.         Cardinal Health acknowledges that MTS and/or its licensor(s) is the owner of all rights, title, and interests in and to all proprietary materials and information (including Sales Information) that may be provided to Cardinal Health under this Agreement (collectively, the “MTS Property”), including without limitation all related patent, copyright, trademark, and other intellectual property rights (collectively, the “Proprietary Rights”). The MTS Property (in all its tangible and intangible manifestations), the Proprietary Rights, and all existing or new enhancements, developments, concepts, methods, techniques, know-how, processes, adaptations, derivative works, ideas, and expressions of ideas relating to the MTS Property are and will remain the exclusive property of MTS or its licensor(s). Except as expressly provided in this Agreement, Cardinal Health will have no right, title, or interest in the MTS Property or any Proprietary Rights. Cardinal Health will not make any claim or representation of ownership of the MTS Property or any right or interest therein (except a license, if any, granted to Cardinal Health to perform its obligations under this Agreement) , or permit or facilitate the performance of any act that is in violation of this Agreement or which might jeopardize the Proprietary Rights. Nothing in this Agreement constitutes a waiver of any rights of MTS under the U.S. or international patent, copyright or trademark laws or any other Federal, state or other law.