**Exhibit 10.39**

 

**EMPLOYMENT AGREEMENT**

 

THIS AGREEMENT, made and entered into as of the 9th day ofFebruary, 2002, by and between Vital Images, Inc. (“Company”) and Jay D. Miller(“Executive”).

 

**W I T N E S S E T H :**

 

WHEREAS, Company desires to retain the services of Executive for and onbehalf of Company on the terms and subject to the conditions set forth herein.

 

WHEREAS, each of the parties acknowledge that they are receiving goodand valuable consideration for entering into this Employment Agreement and Executiveacknowledges that this Employment Agreement, including the non-disclosureagreement set forth hereinbelow, was negotiated between the parties hereto andthat Executive received bargained for consideration in the form of benefitsresulting to Executive from the terms and conditions of such employment, inexchange for entering into this Employment Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants containedherein, the sufficiency of which is hereby acknowledged, the parties heretoagree as follows:

 

**ARTICLE I.**

 

**EMPLOYMENT AND TERM**

 

**1.1****                               EMPLOYMENT.**  Upon the terms and subject to the conditionsherein contained, Company hereby employs Executive as President and ChiefExecutive Officer, and Executive hereby accepts such employment, subject to thesupervision of the Board of Directors of Company.

 

**1.2.****                            TERM.**  This Agreement shall take effect upon thedate first above written, and shall remain in effect until terminated inaccordance with Article IV.  Upontermination of this Agreement, except as otherwise provided herein, neither theCompany nor Executive shall have any further rights, duties, privileges orobligations hereunder.

 

**ARTICLE II.**

 

**COMPENSATION**

 

**2.1****                               BASESALARY. **In exchange for theprovision of services, Company agrees that it will pay Executive commencingFebruary 9, 2002 at the rate of $180,000 per year, payable in accordance withstandard pay practices of Company, less any applicable withholdings ordeductions.

 

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**2.2****                               BENEFITS.**  In addition to the compensation set forthunder Section 2.1, Executive shall be entitled to participate in any ofCompany’s standard benefit policies or plans, including its Employee StockPurchase Plan, according to their terms. Subject to the provisions of Section 4.1(d) of this Agreement, thesepolicies may be modified or terminated from time to time by Company, but notretroactively.  The written terms of thepolicies shall govern any questions of eligibility, coverage, or duration ofcoverage.

 

**2.3****                               INCENTIVECOMPENSATION.**  As an incentiveto performance, Executive shall be eligible to receive incentive compensationand/or benefits as follows:

 

a.                                       Executiveshall be eligible to participate in Company’s Management Incentive Plan (the“Plan”) as it is established annually by the Board of Directors.  Pursuant to the Plan, Executive’s incentivetarget for calendar year 2002 shall be fifty percent (50%) of Executive’s basesalary for calendar year 2002. Executive’s incentive compensation for calendar year 2002 under thePlan, if any, will be determined as soon as practical after December 31, 2002,and will be paid to Executive in a lump sum, less any withholdings ordeductions, on or before March 15, 2003.

 

b.                                      Uponapproval by Company’s Board of Directors, Executive shall be entitled to enterinto Stock Option Agreements, attached hereto as Exhibit A and Exhibit B,with Company.

 

**2.4****                               VACATION. **Executive shall initially receive twenty(20) days of vacation per year.

 

**2.5.****                            BOARDOF DIRECTORS.**  As soon aspracticable after the date of this Agreement, Executive shall be elected toCompany’s Board of Directors.

 

**2.6.****                            BUSINESSEXPENSES.**  The Company willreimburse Executive for all reasonable, ordinary and necessary expensesincurred by him in the performance of his duties hereunder, provided thatExecutive accounts to Company for such expenses in a manner normally prescribedby Company for reimbursement of expenses. Such reimbursement requests must be accompanied by the appropriatedocumentation and shall be subject to review by Company’s Chief Financial Officer.

 

**ARTICLE III.**

 

# **DUTIESOF EXECUTIVE**

 

**3.1****                               SERVICES.**  Executive shall perform all duties andobligations charged to Executive by the Board of Directors of Company, as thesame may be determined from time to time. The Board shall assure adequate time, resources and authority forExecutive to achieve goals mutually agreed upon by Company and Executive.

 

**3.2****                               TIMEAND EFFORT.**  Executive shalldevote his full time and effort to the business of Company.  Executive shall perform the duties andobligations required of Executive hereunder in a

 

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competent, efficient and satisfactory manner at such hours and undersuch conditions as the performance of such duties and obligations may require.

 

**3.3****                               ARTICLESAND BY-LAWS.**  Executiveshall act in accordance with so as to abide by the Articles of Incorporation ofCompany, the Bylaws of Company and all decisions of the Board of Directors ofCompany.

 

**3.4****                               CONFIDENTIALITYAND LOYALTY. **Executiveacknowledges that during the course of his employment he has produced and mayproduce and have access to material, records, data and information notgenerally available to the public (“Confidential Information”) regardingCompany, its customers and affiliates. Accordingly, during and subsequent to the termination of this Agreement,Executive shall hold in confidence and not directly or indirectly disclose,use, copy or make lists of any such confidential information, except to theextent authorized in writing by Company, or as required by law or any competentadministrative agency or as otherwise is reasonably necessary or appropriate inconnection with the performance by Executive of his duties pursuant to thisAgreement.  Upon termination of hisemployment under this Agreement, Executive shall promptly deliver to Company(i) all records, manuals, books, documents, letters, reports, data, tables,calculations and all copies of any of the foregoing which are the property ofCompany or which relate in any way to the customers, business, practices ortechniques of Company and (ii) all other property of Company and ConfidentialInformation which in any of these cases are in his possession or under hiscontrol.  Executive agrees to abide byCompany’s reasonable policies as in effect from time to time, respectingavoidance of interests conflicting with those of Company.

 

**3.5****                               WORKSMADE FOR HIRE.**  Executiveacknowledges and agrees that any and all works of authorship by Executive madepursuant to this Agreement or any prior agreements are within the scope ofservices to be provided to Company and shall constitute “works made for hire”as defined by the Copyright Act of 1976, Title 17 of the United States Code, asnow enacted or hereinafter amended. Accordingly, Executive acknowledges and agrees that Company shall be thesole and exclusive owner of any and all copyright(s) with respect to such worksof authorship and that Executive shall not be entitled to any additionalcompensation over and above the compensation set forth herein or otherwisealready received by Executive unless otherwise agreed in writing byCompany.  If any work of authorshipcreated hereunder or prior hereto is not deemed to be a “work made for hire,”Executive hereby assigns all right, title and interest therein to Company.

 

**3.6****                               COMPANYTO HOLD PROPRIETARY RIGHTS.** Furthermore, and without limiting the foregoing, Executive acknowledgesand agrees that all proprietary rights including, without limitation, allpatent, trademark, trade secret, copyright and other rights, which may exist inconnection with any and all inventions, ideas, and works created or conceivedby Executive for Company, either before or after the date hereof, shall be thesole and exclusive property of Company and Executive shall have no further rightstherein and, to the extent necessary, assigns all such rights to Company.  All patent, copyright and other rights insuch inventions, ideas and works shall be the property of Company, who shallhave the sole right to seek patent, copyright, registered design or otherprotection in connection therewith. Executive shall at Company’s reasonable expense do all things andexecute all such documents as Company may reasonably require to vest in Companythe rights and protection herein described.

 

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**3.7****                               REMEDIES.**  Executive agrees and understands that anybreach of any of the covenants or agreements set forth in this ARTICLE III ofthis Agreement will cause Company irreparable harm for which there is noadequate remedy at law, and, without limiting whatever other rights andremedies Company may have under this paragraph, Executive consents to theissuance of an injunction in favor of Company enjoining the breach of any ofthe aforesaid covenants or agreements by any court of competentjurisdiction.  If any or all of theaforesaid covenants or agreements are held to be unenforceable because of thescope or duration of such covenant or agreement or the area covered thereby,the parties agree that the court making such determination shall have the powerto reduce or modify the scope, duration and/or area of such covenant to theextent that allows the maximum scope, duration and/or area permitted byapplicable law.

 

**ARTICLE IV.**

 

**TERMINATION**

 

**4.1****                               RESIGNATIONOF EXECUTIVE.**  Executive mayresign his employment at any time for any reason upon fifteen (15) days advancewritten notice to the Board of Directors. If Executive resigns his employment without Good Reason (as that term isdefined below), he shall not be entitled to severance pay.  If Executive resigns his employment for GoodReason, the Company shall pay Executive the severance pay set forth in Section4.2 below provided Executive agrees to release any claims he may have againstthe Company in exchange for the receipt of severance pay.  For purposes of this Agreement, Good Reasonshall mean the occurrence of any of the following events, which the Company hasnot cured within thirty (30) days of notice thereof:

 

a.                                       Amaterial breach of this Agreement by the Company;

 

b.                                      Amaterial adverse change in Executive’s status or position as an executiveofficer of the Company as a result of a material diminution in Executive’sduties, responsibilities or authority as of the date of this Agreement (exceptin connection with the termination of Executive’s employment in accordance withSection 4.3 hereof);

 

c.                                       Areduction by the Company of Executive’s Base Salary as the same may beincreased from time to time;

 

d.                                      Without replacement by a plan providingbenefits to Executive equal to or greater than those discontinued or by paymentof cash in lieu of such benefits, the failure by the Company to continue ineffect, within its maximum stated term, any employee benefit plan in whichExecutive is participating immediately prior to the date of this Agreement orthe taking of any action by the Company that would adversely affect Executive’sparticipation or materially reduce Executive’s benefits under all such plans;provided, however, that Good Reason shall not include changes, modificationsand terminations of the Company’s standard benefit policies and plans which aregenerally applicable to the Company’s officers and employees; or

 

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e.                                       The Company’s requiring Executive to bebased anywhere other than the Minneapolis/St. Paul, Minnesota metropolitanstatistical area, except for required travel on the Company’s business.

 

**4.2****                               TERMINATIONBY COMPANY.**  Company shall havethe right to terminate Executive’s employment without notice and with orwithout Cause, as that term is defined below. If Company terminates Executive’s employment without Cause, Companyshall pay Executive twelve (12) months of severance pay based on Executive’sbase salary at the time of termination provided Executive agrees to release anyclaims he may have against the Company in exchange for the receipt of severancepay.  Executive’s severance pay, if any,shall be payable in one lump sum, less any applicable withholdings or deductions,within ten (10) days after the expiration of any applicable rescissionperiods.  If Company terminatesExecutive’s employment with Cause, Executive shall not receive severance pay.

 

**4.3****                               TERMINATIONFOR CAUSE.**  Notwithstandinganything contained in this Agreement to the contrary, Company shall have theright to terminate the employment of Executive for Cause.  Cause means:

 

a.                                       Executive’s gross misconduct;

 

b.                                      Executiveshall inexcusably violate or willfully refuse to obey the lawful and reasonableinstructions of the Board of Directors of Company; or

 

c.                                       Executive’s conviction (including a plea of nolocontendere) of willfully engaging in illegal conduct constituting a felony orgross misdemeanor under federal or state law which is materially anddemonstrably injurious to the Company or which impairs Executive’s ability toperform substantially his duties for the Company.

 

An act or failure to act will beconsidered “gross” or “willful” for this purpose only if done, or omitted to bedone, by Executive in bad faith and without reasonable belief that it was in,or not opposed to, the best interests of the Company.  Any act, or failure to act, based upon authority given pursuantto a resolution duly adopted by the Company’s board of directors (or a committeethereof) or based upon the advice of counsel for the Company will beconclusively presumed to be done, or omitted to be done, by Executive in goodfaith and in the best interests of the Company.  It is also expressly understood that Executive’s attention tomatters not directly related to the business of the Company will not provide abasis for termination for Cause so long as the Board did not expresslydisapprove in writing of Executive’s engagement in such activities eitherbefore or within a reasonable period of time after the Board knew or couldreasonably have known that Executive engaged in those activities.  Notwithstanding the foregoing, Executive maynot be terminated for Cause unless and until there has been delivered to him acopy of a resolution duly adopted by the affirmative vote of not less than amajority of the entire membership of the Board at a meeting of the Board calledand held for the purpose (after reasonable notice to Executive and anopportunity for him, together with his counsel, to be heard before the Board),finding that in the good faith opinion of the Board Executive was guilty of theconduct set forth above in clauses a., b. or c. of this definition andspecifying the particulars thereof in detail.

 

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Where the employment of Executive is terminated pursuant to thisArticle IV, Section 4.3 of this Agreement, such termination shall be effectiveupon the delivery of notice thereof to Executive.

 

**4.4****                               SURVIVINGRIGHTS.**  Notwithstanding thetermination of Executive’s employment, the parties shall be required to carryout any provisions hereof which contemplate performance subsequent to suchtermination; and such termination shall not affect any liability or otherobligation which shall have accrued prior to such termination, including, butnot limited to, any liability for loss or damage on account of a prior default.

 

**4.5****                               CHANGEIN CONTROL BENEFITS.**  The Company and Executive shall enter intoan Amended and Restated Change of Control Agreement effective February 9, 2002which shall set forth the terms and conditions of change of control benefitspayable to Executive.

 

**ARTICLE V.**

 

**GENERAL PROVISIONS**

 

**5.1****                               NOTICES.**  All notices, requests, and othercommunications shall be in writing and except as otherwise provided herein,shall be considered to have been delivered if personally delivered or whendeposited in the United States Mail, first class, certified or registered,postage prepaid, return receipt requested, addressed to the proper party at itsaddress as set forth below, or to such other address as such party mayhereafter designate by written notice to the other party:

 
| a.     | If to Company, to:   | Vital Images, Inc.            |
|--------|----------------------|-------------------------------|
|   |                 | 3300 Fernbrook Lane N.        |
|   |                 | Suite 200                     |
|   |                 | Plymouth, MN   55447     |
|   |                 |                          |
|   |                 | Attn. Chief Financial Officer |
|   |                 |                          |
| b.     | If to Executive, to: | Jay D. Miller                 |
|   |                 |                          |
|   |                 |                          |
|   |                 |                          |

 

**5.2****                               WAIVER,MODIFICATION OR AMENDMENT.**  Nowaiver, modification or amendment of any term, condition or provision of thisAgreement shall be valid or of any effect unless made in writing, signed by theparty to be bound or its duly authorized representative and specifying withparticularity the nature and extent of such waiver, modification oramendment.  Any waiver by any party ofany default of the other shall not effect, or impair any right arising from,any subsequent default.  Nothing hereinshall limit the rights and remedies of the parties hereto under and pursuant tothis Agreement, except as hereinbefore set forth.

 

**5.3****                               ENTIREAGREEMENT.**  This Agreementcontains the entire understanding of the parties hereto in respect oftransactions contemplated hereby and supersedes all prior agreements andunderstandings between the parties with respect to such subject matter.

 

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**5.4****                               INTERPRETATIONAND SEVERANCE.**  The provisionsof this Agreement shall be applied and interpreted in a manner consistent witheach other so as to carry out the purposes and intent of the parties hereto,but if for any reason any provision hereof is determined to be unenforceable orinvalid, such provision or such part thereof as may be unenforceable or invalidshall be deemed severed from this Agreement and the remaining provisions shallbe carried out with the same force and effect as if the severed provision orpart thereof had not been a part of this Agreement.

 

**5.5****                               GOVERNINGLAW.**  This Agreement shall beconstrued and enforced in accordance with the laws of the State of Minnesota.

 

**5.6****                               ASSIGNMENT.**  Executive acknowledges that Executive’sservices are unique and personal. Accordingly, Executive may not assign Executive’s rights or delegateExecutive’s duties or obligations under this Agreement.  Company’s rights and obligations under thisAgreement shall inure to the benefit of and shall be binding on Company’ssuccessors and assigns.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement asof the day and year first above written.

 
|   |   | VITAL IMAGES, INC. |
|--------|--------|--------------------|
|   |   |               |
|   |   |               |
|   |   | By                 | /s/ Douglas M. Pihl |   |
|   |   |               | Douglas M. Pihl |
|   |   |               | Chairman |
|   |   |               |
|   |   |               |
|   |   | EXECUTIVE:         |
|   |   |               |
|   |   |               |
|   |   | /s/ Jay D. Miller  |   |
|   |   | Jay D. Miller      |   |

 

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