Exhibit 10.5

 

Vital Images, Inc.

5850 Opus Parkway, Suite 300

Minnetonka, MN 55343-4414

 

April 27, 2011

 

Peter J. Goepfrich

4809 School Road

Edina, MN 55424

 

Dear Peter:

 

Reference is made to the employment agreement between Peter J. Goepfrich
(“Executive”) and Vital Images, Inc. (the “Company”) dated as of January 21,
2008 (the “Employment Agreement”).  Capitalized terms used herein without
definition shall have the meanings assigned to such terms under the Employment
Agreement or under the Agreement and Plan of Merger (the “Merger Agreement”),
dated as of the date hereof, by and among Toshiba Medical Systems Corporation
(the “Acquirer”), Magenta Corporation, and the Company.  Executive and the
Company hereby agree to amend certain provisions under the Employment Agreement,
effective as of the dates designated below, as follows:

 

1.                                       Limitations on Company Equity Rights. 
Effective as of the date hereof, Section 2.3 of the Employment Agreement is
hereby amended to insert the paragraph below as a new Section 2.3(c) immediately
following Section 2.3(b):

 

“Notwithstanding any other provision of this Agreement or of any option or other
stock award agreement to the contrary, Executive shall not exercise any Company
stock option (other than purchase rights under the Company’s Employee Stock
Purchase Plan with respect to the offering period that began on April 1, 2011)
during the period commencing upon the closing of the Acquirer’s tender offer as
contemplated under the Merger Agreement and ending on the earlier of (i) the
Closing Date and (ii) the termination of the Merger Agreement.”

 

2.                                       Restriction on Competition.  Effective
as of the Closing Date, Sections 3.4, 3.5, 3.6, 3.7 and 3.8 of the Employment
Agreement are hereby amended to provide that all references therein to the
“Company” shall be deemed to include the Acquirer’s healthcare imaging and
informatics solution business unit, and all references to the Company’s
“products and services” shall mean all products and services being actively sold
by the Company at the time of Employee’s termination or under development for
release within twelve (12) months of such termination.

 

3.                                       Resignation of Executive.  Effective as
of the Closing Date, Executive acknowledges and agrees that Executive shall not
have “Good Reason” to terminate his employment following the Closing Date
(i) pursuant to Section 4.1(b) of the Employment Agreement, because of a change
in Executive’s status as an executive officer of the Company that occurs solely
as a result of the consummation of the transactions contemplated by the Merger
Agreement and/or the Company ceasing to be publicly owned as a result thereof,
(ii) pursuant to Section 4.1(d) of the Employment Agreement solely as a result
of the

 

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elimination of Executive’s eligibility to receive any new equity compensation
under any of the Company’s equity based compensation plans, including without
limitation, the Company’s Employee Stock Purchase Plan, or (iii) due to any
delegation of some of the responsibilities and direct reporting relationships of
the Chief Executive Officer such that Executive will report to a new or
different executive officer.

 

4.                                       Termination by Company; Medical
Insurance Benefits.  Effective as of the Closing Date,  Executive acknowledges
and agrees that for purposes of Section 4.2 of the Employment Agreement,
Executive shall have no rights to receive severance pay unless Executive shall
have delivered (and not revoked) the release of claims described therein to the
Company within the 65-day period immediately following the date of Executive’s
termination of employment (and the Company shall deliver such release of claims
to Executive no later than two days following the date of Executive’s
termination of employment). For the avoidance of doubt, the period during which
Executive will be eligible for continuation coverage pursuant to COBRA will
commence on the date of Executive’s termination of employment. A form of such
release is attached hereto as Exhibit A.

 

5.                                       Compliance with IRC Section 409A. 
Effective as of the Closing Date, Article V of the Employment Agreement is
hereby amended to insert a new Section 5.7 immediately following Section 5.6:

 

“5.7                           Compliance with IRC Section 409A. 
Notwithstanding anything herein to the contrary, (i) if at the time of
Executive’s termination of employment with the Company Executive is a “specified
employee” as defined in Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”) and the deferral of the commencement of any payments or
benefits otherwise payable hereunder as a result of such termination of
employment is necessary in order to prevent any accelerated or additional tax
under Section 409A of the Code, then the Company will defer the commencement of
the payment of any such payments or benefits hereunder (without any reduction in
such payments or benefits ultimately paid or provided to Executive) until the
date that is six months following Executive’s termination of employment with the
Company (or the earliest date as is permitted under Section 409A of the Code
without any accelerated or additional tax) and (ii) if any other payments of
money or other benefits due to Executive hereunder could cause the application
of an accelerated or additional tax under Section 409A of the Code, such
payments or other benefits shall be deferred if deferral will make such payment
or other benefits compliant under Section 409A of the Code, or otherwise such
payment or other benefits shall be restructured, to the extent possible, in a
manner, determined by the Board, that is reasonably expected not to cause such
an accelerated or additional tax. For purposes of Section 409A of the Code, each
payment made under this Agreement shall be designated as a “separate payment”
within the meaning of the Section 409A of the Code, and, to the extent required
by Section 409A of the Code, references herein to Executive’s “termination of
employment” shall refer to Executive’s “separation from service” (within the
meaning of Section 409A) with the Company (as defined to include any affiliates
required to be taken into account for that definition of separation from
service).  To the extent any reimbursements or in-kind benefits due to Executive
under this Agreement constitute “deferred compensation” under Section 409A of
the Code, any such reimbursements or in-kind benefits shall be paid to Executive
in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).

 

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6.                                       Except as provided in Section 1 above,
this letter amendment to the Executive’s Employment Agreement will not be
effective unless and until (a) Executive and the Acquirer execute a separate
agreement setting forth a retention bonus plan; and (b) the transactions set
forth in the Merger Agreement are consummated.  Except as specifically amended
as set forth above, the Employment Agreement shall remain in full force and
effect according to its terms. Except as specifically provided herein, nothing
contained in this letter amendment is intended to affect Executive’s or the
Company’s existing or continuing rights or obligations under the Employment
Agreement, as modified hereby.

 

[Signature page follows]

 

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Very truly yours,

 

 

 

VITAL IMAGES, INC.

 

 

 

 

 

By:

/s/Michael H. Carrel

 

 

Michael H. Carrel

 

 

President and Chief Executive Officer

 

 

 

 

EXECUTIVE

 

 

 

 

 

/s/Peter J. Goepfrich

 

 

Peter J. Goepfrich

 

 

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EXHIBIT A

 

FORM OF RELEASE OF CLAIMS

 

(for Employment Agreement)

 

This Agreement and Release, dated as of                         , 20     (the
“Release”), is entered into by and between Peter J. Goepfrich (“Executive”) and
Vital Images Inc. or its successor (“Vital”) under the Agreement and Plan of
Merger dated April     , 2011, by and among Vital Images Inc., Toshiba Medical
Systems Corporation (the “Acquirer”) and Magenta Corporation (the “Merger
Agreement”).

 

WHEREAS, Executive is currently employed with Vital; and

 

WHEREAS, Executive is separated from Vital, effective as of             , 20    
(“Separation Date”).

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
in this Release and other good and valuable consideration, Executive and Vital
hereby agree as follows:

 

1.                                       If Executive is entitled to receive
severance pay and other benefits (the “Severance Benefits”) in accordance with
the terms and conditions of Section [4.1/4.2] of the employment agreement by and
between Executive and Vital, dated as of January 21, 2008, and amended
April     , 2011 in connection with the signing of the Merger Agreement (as so
amended, the “Employment Agreement”), no such Severance Benefits shall be paid
or provided unless Executive timely executes and delivers the Release to Vital
and Executive does not revoke this Release pursuant to Section 5 below.

 

2.                                       As consideration for the payments and
benefits described above, Executive releases Vital, all of its subsidiaries and
parents, equityholders, agents, representatives, administrators, trustees,
attorneys, insurers, fiduciaries, directors, officers and all employees of these
(collectively “Released Parties”), on behalf of Executive and Executive’s heirs,
successors, agents, representatives, executors and assigns, from any and all
causes of action and claims of any nature whatsoever, known or unknown, arising
from Vital’s employment of Executive, his termination of employment, any
agreement entered into between Executive and any of the Released Parties, rights
under the Released Parties’ policies and procedures, or any other matter or
event occurring prior to the date of this Release (“Claims”), including, without
limitation, claims arising under federal, state, or local laws prohibiting
wrongful termination, employment discrimination, age discrimination, including
claims under the Age Discrimination In Employment Act of 1967, as amended
(“ADEA”), the National Labor Relations Act, the Civil Rights Act of 1991, the
Americans with Disabilities Act of 1990, Title VII of the Civil Rights Act of
1964, the Employee Retirement Income Security Act of 1974, the Family Medical
Leave Act, the Equal Pay Act, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Rehabilitation Act of 1973, the Worker Adjustment and
Retraining Notification Act, the

 

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Minnesota Human Rights Act, the Minnesota Fair Labor Standards Act, the
Minnesota Payment of Wages Act and any provision of Minnesota Statutes Chapters
177, 181 or 363A, each as amended, or claims growing out of any legal
restrictions on Vital’s right to terminate its employees, any and all claims in
contract or in tort, and any claims pursuant to any federal or state wage and
hour laws; provided, that Executive does not waive or release Claims (i) with
respect to any vested right Executive may have under any employee pension or
welfare benefit plan of Vital, (ii) any rights to indemnification Executive may
have under the Employment Agreement or Vital’s charter and by-laws, (iii) with
respect to the right to enforce this Release or those provisions of the
following agreements that are applicable to Executive and expressly survive the
termination of Executive’s employment with Vital: the Employment Agreement; the
change in control agreement by and between Executive and Vital dated as of
April 29, 2004 and amended April     , 2011; and the Retention Bonus Plan letter
agreement between Executive and Vital dated as of April     , 2011, or (iv) any
rights to unemployment compensation under applicable state law. Executive
acknowledges that nothing contained in this Release is to be construed as an
admission by the Released Parties that they have acted wrongfully with respect
to the Executive or that the Executive has any right against the Released
Parties.

 

THIS MEANS THAT, BY SIGNING THIS RELEASE, EXECUTIVE WILL HAVE WAIVED ANY RIGHT
EXECUTIVE MAY HAVE HAD TO BRING A LAWSUIT OR MAKE ANY CLAIM AGAINST THE RELEASED
PARTIES BASED ON ANY ACTS OR OMISSIONS OF THE RELEASED PARTIES UP TO THE DATE OF
THE SIGNING OF THIS RELEASE.  NOTWITHSTANDING THE ABOVE, NOTHING IN THIS RELEASE
SHALL PREVENT THE EXECUTIVE FROM (I) INITIATING OR CAUSING TO BE INITIATED ON
EXECUTIVE’S BEHALF ANY COMPLAINT, CHARGE, CLAIM OR PROCEEDING AGAINST VITAL
BEFORE ANY LOCAL, STATE OR FEDERAL AGENCY, COURT OR OTHER BODY CHALLENGING THE
VALIDITY OF THE WAIVER OF EXECUTIVE’S CLAIMS UNDER ADEA CONTAINED IN THIS
RELEASE (BUT NO OTHER PORTION OF SUCH WAIVER); OR (II) INITIATING OR
PARTICIPATING IN (BUT NOT BENEFITING FROM) AN INVESTIGATION OR PROCEEDING
CONDUCTED BY THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION WITH RESPECT TO ADEA.

 

3.                                       Vital will not provide any of the
Severance Benefits unless Executive returns all of Vital’s property, including,
without limitation, credit cards, tools, keys, customer files, company
brochures, business plans or other business documents, and other items in the
possession of Executive on or before the Separation Date.  In addition,
Executive must provide Vital with passwords to all computers and programs used
by Executive while employed at Vital.

 

4.                                       Executive agrees that if Executive
breaches any promise made by Executive in this Release or in the Employment
Agreement, Vital will be entitled to recover any sum of money paid to Executive
as specified above (other than vacation and wages paid for hours worked prior to
Separation Date), in addition to recovery of all damages which Vital may suffer
as a result of such breach.  Further, all Severance Benefits provided under the
Employment Agreement are subject to termination in the event of such breach.

 

5.                                       Executive acknowledges that Executive
has been given twenty-one (21) days from the date of receipt of this Release to
consider all of the provisions of the Release and, to the extent Executive has
not used the entire 21-day period prior to executing the Release, Executive does
hereby knowingly and voluntarily waive the remainder of said 21-day period. 
EXECUTIVE

 

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FURTHER ACKNOWLEDGES THAT EXECUTIVE HAS READ THIS RELEASE CAREFULLY, HAS BEEN
ADVISED BY VITAL TO CONSULT AN ATTORNEY AND FULLY UNDERSTANDS THAT BY SIGNING
BELOW EXECUTIVE IS GIVING UP CERTAIN RIGHTS WHICH EXECUTIVE MAY HAVE TO SUE OR
ASSERT A CLAIM AGAINST ANY OF THE RELEASED PARTIES, AS DESCRIBED HEREIN AND THE
OTHER PROVISIONS HEREOF.  EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS NOT BEEN
FORCED OR PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS RELEASE AND EXECUTIVE
AGREES TO ALL OF ITS TERMS VOLUNTARILY.

 

EXECUTIVE IS ADVISED THAT EXECUTIVE HAS FIFTEEN (15) DAYS FROM THE DATE THIS
RELEASE WAS SIGNED BY EXECUTIVE TO REVOKE (RESCIND) THIS RELEASE. To be
effective, the rescission must be in writing, and must be delivered within 15
calendar days by mail or hand delivery.  If the rescission is delivered by mail,
it must be (1) postmarked within the 15-day period; (2) properly addressed to
the Director, Human Resources and Administration of Toshiba Medical Research
Institute USA, Inc. at 2441 Michelle Drive, Tustin, CA 92780, and sent by
certified mail return receipt requested.   In the event of such
revocation/rescission, Executive will return all Severance Benefits paid to
Executive.  Further, Vital will stop paying for all Severance Benefits as
specified in the Employment Agreement.

 

6.                                       Executive agrees to keep the terms of
this Release strictly confidential and, except as may be required by any
applicable law, agrees not to disclose the terms or substance of this Release to
any third party except any member of his immediate family, his attorney(s), his
tax advisor, his financial planner or any executive employee of Vital who is
asked to consider and execute a similar release; provided that Executive
notifies any such third party that the terms of this Release must be kept
strictly confidential.

 

7.                                       Executive represents and agrees that
Executive has carefully read and fully understands all of the provisions of this
Release, and that Executive is voluntarily entering into the Release.

 

EXECUTIVE IS ADVISED TO CONSULT WITH EXECUTIVE’S PRIVATE ATTORNEY BEFORE SIGNING
THIS RELEASE.

 

 

PETER J. GOEPFRICH

 

 

 

 

 

By:

 

 

Dated:

 

 

 

 

 

VITAL IMAGES INC.

 

 

 

 

 

By:

 

 

Dated:

 

 

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