EXHIBIT 10.1

EMPLOYMENT AGREEMENT TERMINATION AND RETIREMENT AGREEMENT

        This agreement (the “Agreement”) is made this 29th day of December, 2004, between Michael P. Conroy (the “Executive”) and MTS Medication Technologies, Inc. (the “Company”). For purposes of this Agreement, the term “Company” refers jointly and severally to MTS Medication Technologies, Inc. and its existing or former officers, directors, shareholders, Executives, and agents (in their individual and representative capacities), including, without limitation, any parent, affiliates, predecessor, successor, subsidiary, or other related company.

BACKGROUND.

        The Executive was employed by the Company pursuant to the terms of an Employment Agreement effective July 1, 2003 (the “Employment Agreement”) until the Executive’s retirement effective January 7, 2005. The Executive has also resigned as CFO and Director of the Company as of September 1, 2004. The Executive and the Company desire to terminate the Employment Agreement in an amicable manner.

        The Executive acknowledges that the Company has advised the Executive to consult an attorney prior to executing this Agreement.

        THEREFORE, the parties agree as follows:

         1.      The Company’s Benefits to the Executive .

                  (a)     The Company acknowledges that the Executive will retire effective January 6, 2005 and has resigned as an Officer and Director of the Company.

                  (b)    In consideration of the Executive’s agreement to assist with the transition of his duties, the Company will continue to employ the Executive until his retirement on January 6, 2005. The Executive will continue to receive the salary and benefits as described in the Employment Agreement through January 7, 2005.

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                  (c)     At the Executive’s request, the Company will assign any key man life insurance policies insuring Executive to the Executive. The Executive will be responsible for the payment of any premiums or costs related to the assigned insurance effective January 7, 2005.

                  (d)     Stock Options. The Executive may exercise any vested Stock Options previously granted to the Executive consistent with the provisions of the Company’s Stock Option Plan.

                  (e)     Grant of Shares . The Company has issued the Executive 50,000 shares of the restricted common stock of the Company pursuant to the Company Stock Option Plan. The grant of these shares replaces the Common Stock Bonus described in Exhibit D of the Executive’s July 1, 2003 Employment Agreement. The value of these shares, for tax purposes, shall be determined based upon the average closing price of the shares as quoted on the American Stock Exchange for the five (5) days preceding the Executive’s retirement date.

                  (f)     The Executive will receive continuous access to all health care benefits available to retired Executives of the Company. The Executive will be responsible for the payment of any premiums related to the health care benefits.

                  (g)     The Company will withhold from all salary or bonus payments all necessary federal, state, or local taxes or other standard withholdings.

                  (h)     The Executive understands that the benefits described in Paragraph (1) shall constitute the sole financial obligation of the Company to the Executive under this Agreement.

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                  (i)     The Company (for itself and any and all subsidiaries, other affiliates and any other person who may be entitled to make a claim on behalf of, or through the company) freely releases and discharges the Executive and his heirs and personal representatives from any further obligations under the Employment Agreement Executive once had or now have. The Company agrees not bring charges, claims or actions against the Executive (or his heirs or personal representatives) in the future for any claims related to the obligations of the Executive pursuant to the Employment Agreement or his employment with the Company or his actions as an officer and director of the Company.

         2.      The Executive’s Agreements for the Benefit of the Company.

                  (a)     Release

                          (i)     The Executive (on his own behalf and on behalf of his heirs, personal representatives, and any other person who may be entitled to make a claim on his behalf or through him) freely releases and discharges the Company and its officers, directors, Executives, agents, and representatives, and their successors in interest, from any further obligations under the Employment Agreement that Executive once had or now has. The Executive agrees not to bring any charges, claims, or actions against the Company and its officers, directors, Executives, agents, and representatives, and their successors in interest, in the future, for any claims related to the obligations of the Company pursuant to the Employment Agreement. Notwithstanding the foregoing, the Company shall not be relieved of and shall maintain any and all obligations to the Executive for indemnification of the Executive under the Company’s officers and directors liability insurance with respect to any acts or omissions of the executive while an officer, director and employee of the Company.

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