SEPARATION AGREEMENT

AGREEMENT

1.             Termination of Employment. Executive’s employment with the Company shall terminate as of the Termination Date. On the Termination Date, Executive shall cease to be an employee of the Company without further action by either party.  For purposes of this Agreement “Executive” shall mean the undersigned Executive and anyone who has obtained any legal rights or claims through him, and “Company” shall mean Vital Images, Inc., its parent company, their subsidiaries, successors and assigns, their affiliated and predecessor companies, their successors and assigns, their affiliated and predecessor companies and the present or former directors, officers, officers, employees, representatives and agents (including, without limitation, its accountants and attorneys) of any of them, whether in their individual or official capacities, and the current and former trustees or administrators of any pension or other benefit plan applicable to employees or former employees of Company, in their official or individual capacities.

2.             Earned Compensation. The Company shall pay Executive all earned base salary through the Termination Date, as well as the amount accrued for Executive’s vacation time through the Termination Date.  Executive will continue to participate in all Executive benefit plans in which he is currently a participant, in accordance with the terms of such plans, through the Termination Date.

3.             Executive’s Options and Restricted Stock. All vesting or exercise rights, limitations, restrictions or other terms or conditions related to Executive’s Options and Restricted Stock shall remain subject to and governed by the respective agreements and the 1997 Plan, except that Article 9 of the Option Agreements and Article 3(d) of the Restricted Stock Agreements shall be deleted and of no effect as of the Termination Date.

4.             Company’s Obligations and Separation Agreements.  In consideration for Executive’s promises contained herein, specifically including, but not limited to, Executive’s Obligations as set forth in Paragraph 5, Company agrees to provide Executive with the following benefits:

A.    The Company will pay Executive severance pay in the amount of One Hundred Ninety Thousand Dollars ($190,000.00).  The severance pay will be paid on the Company’s first regular payroll date after the expiration of any applicable rescission periods, as set forth in Paragraph 7.  All payments shall be subject to applicable taxes and withholding.

B.    Executive, pursuant to federal and state law, may, for a period of eighteen (18) months following the Termination Date (“COBRA Period”), continue the group medical and dental insurance coverage previously provided to Executive by Company.  Executive will be required to pay the entire premium for such benefits for any portion of the COBRA Period that Executive elects to continue COBRA coverage.  The benefit described in this paragraph B is provided in exchange for the release of Executive’s claims under the Age Discrimination in Employment Act (“ADEA) and is the only consideration provided for this purpose.

C.    Company shall allow Executive to retain the laptop computer, cell phone and cell phone number issued by or through the Company to Executive; however, Executive shall remove or destroy any Company property or information identified by the Company contained on the laptop computer and cell phone no later than the date of this Agreement, to the satisfaction of the Company.  For such purpose, on the date this Agreement is signed by Executive, Executive shall give access to Company to the laptop computer and cell phone.  Cell phone expenses after the Termination Date will be the full responsibility of Executive.

5.             Executive’s Obligations.  As material inducement to Company in entering into this Agreement and providing the consideration described in Paragraph 4, Executive hereby agrees as follows:

A.    General Release of Claims. Executive knowingly and voluntarily releases and forever discharges Company, to the full extent permitted by law, of and from any and all claims, known and unknown, asserted and unasserted, Executive have or may have against Company as of the date the Executive signs this Agreement, including, but not limited to:

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i.    All claims arising out of or relating to Executive’s employment with Company and the termination of Executive’s employment; and

ii.   All claims arising out of or relating to statements, actions, or alleged omissions of Company; and

iii.  All claims for any alleged unlawful discrimination, harassment, retaliation or reprisal or any other alleged unlawful practices arising under any federal, state, or local statute, ordinance, or regulation, including without limitation claims under Title VII of the Civil Rights Act of 1964, as amended; the Americans with Disabilities Act, 42 U.S.C. sec. 1981; the Sarbanes-Oxley Act of 2002; the Employee Retirement Income Security Act of 1974; the Equal Pay Act; the Immigration Reform and Control Act; the Worker Adjustment and Retraining Notification Act; the O.C.G.A. and its counterparts; the Fair Credit Reporting Act; and state and local human rights acts;

iv.  All claims for alleged wrongful discharge; breach of contract; breach of implied contract; breach of a covenant of good faith and fair dealing; breach of fiduciary duty; estoppel; Executive’s activities, if any, as a “whistleblower;” defamation; infliction of emotional distress; fraud; misrepresentation; negligence; harassment; retaliation or reprisal; constructive discharge; assault; batter; false imprisonment; invasions of privacy; interference with contractual or business relationships; any other wrongful employment practices or violation of any common law; and

v.   All claims for compensation of any kind, including without limitation, bonuses, commissions, vacation pay, and expense reimbursements; and

vi.  All claims for back pay, front pay, reinstatement, other equitable relief, compensatory damages, damages for alleged personal injury, liquidated damages, and punitive damages; and

vii. All claims for attorney’s fees, costs and interest.

However, by signing this Agreement Executive does not waive any claims that may arise after the date on which Executive signs this Agreement, the right to take legal action to enforce the terms of this Agreement, or any claims that the law does not allow Executive to waive in a private agreement such as this, including, without limitation, the right to file a charge with or participate in any investigation conducted by the Equal Employment Opportunity Commission (“EEOC”) or any state or local human rights agency.  Executive agrees to waive, however, his right to any monetary recovery should the EEOC or any state or local human rights agency pursue any claims on Executive’s behalf in a private agreement such as this.

Should Executive bring any claims against Company, Executive agrees to immediately return all payments made to Executive under Paragraph 4 of this Agreement, other than the payments provided in exchange for the release of claims under the ADEA.  Executive further agrees that if Executive fails to do so, the payments made in Paragraph 4 of this Agreement, other than those provided in exchange for the release of claims under the ADEA, may be offset against any payments that Company is ordered by a court or administrative agency to make to Executive.

B.      Covenant Not To Sue.  Executive agrees that he will not initiate any litigation to pursue claims which Executive released in this Paragraph 5.  This covenant does not apply to litigation challenging the validity of this Paragraph 5.  Further, Executive agrees to pay Company’s attorney’s fees if Executive breaches the covenant not to sue contained in this Section 5.B.

C.      Company Property.  Subject to Section 4.C. of this Agreement, Executive will return all property belonging to Company no later than two weeks after the Termination Date, whether such property is currently on or off the premises of Company, including, without limitation, any and all computer hardware or computer software.  The company will turn off access to the Company network on the Termination Date.

D.      Confidentiality and Loyalty.  Executive acknowledges and reaffirms his continuing obligations to Company regarding confidentiality and loyalty pursuant to the Employment Agreement and as exist by operation of law.  Executive also agrees not to disclose the terms and conditions of this Agreement,

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other than to Executive’s spouse or significant other, attorneys, tax preparer, and other individuals or entities that need to know the terms and conditions to provide services on Executive’s behalf or as required by law.

E.       Non-Disparagement.  Executive agrees that he shall not disparage or defame Company in any respect.

F.       Expense Reimbursement.  Executive shall have sixty (60) days from the Termination Date to submit Executive’s last expense report.  Company reserves its right to review and deny payment on any expenses submitted by Executive that do not comply with Company policies and procedures regarding expense reimbursement.

G.      Bring-down Release.  Executive agrees to provide a “bring down” release in the form attached hereto as Schedule A and incorporated herein by this reference.  This bring-down release will be signed by Executive on the Termination Date, except in the event of his death or disability prior to the Termination Date.  Executive acknowledges that the money and benefits received and to be received by Executive by entering into this Agreement are beyond what Executive would receive if he did not enter into the Agreement and that they are provided by Company in exchange for the releases and agreements provided by Executive herein and in Schedule A.

H.      Transition Services. Between the date of this Agreement and the Termination Date, Executive agrees to provide transition services to the reasonable satisfaction of the Company’s President and Chief Executive Officer.  Executive acknowledges that (i) the transition services must be performed on a regular basis until the Termination Date; and (ii) Executive’s agreement to perform the transition services is a material inducement for the Company to enter into this Agreement and provide the benefits set forth herein.

I.        Remedies.  Executive acknowledges that any breach of any of the promises set forth in this Paragraph 5 will cause Company irreparable harm for which there is no adequate remedy at law and Executive therefore consents to the issuance by any court of competent jurisdiction of any injunction in favor of Company enjoining the breach of any of those promises.  If any promise made by Executive in this Paragraph 5 or Paragraph 6 should be held to be unenforceable because of its scope or duration, or the area or subje