Document:

Exhibit 10.21

 

Frank
W. Smith

Employment
Agreement

 

[see
following page]

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”)
is executed this         
day of
                    
2007, but is to be effective as of the 5th day of February, 2007 (the “Effective Date”), by and between
WORLDWATER & POWER CORP., a Delaware corporation (the “Company”), and FRANK W. SMITH, residing at
540 TORI CT. NEW HOPE, PA 18938 (the “Executive”).

 

Background

 

The Company desires to obtain the services of the Executive as
Executive Vice President and Chief Operating Officer, and the Executive is
willing to render such services, in accordance with the terms hereinafter set
forth.

 

The Company, by appropriate action, has authorized the employment of
the Executive as provided for in this Agreement.

 

NOW THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:

 

1.             Term. The initial term (the “Initial Term”) of this Agreement shall
commence as of the date hereof and shall terminate on Feb. 4, 2010. Unless terminated as
hereinafter provided, this Agreement shall continue from month to month (each
such period, a “Renewal Term”) on
the same terms and conditions as in the Initial Term, subject to adjustments as
herein provided (the “Employment Term”).

 

2.             Employment.

 

(a)           The Executive will be employed as Executive
Vice President and Chief Operating Officer of the Company and will perform the
duties, undertake the responsibilities and exercise the authority customarily
performed, undertaken and exercised by persons situated in a similar executive
capacity, and as directed by the Company.

 

(b)           Excluding periods of a vacation and sick
leave to which the Executive is entitled, the Executive agrees during the
Employment Term to devote substantially all of his business time to the
business and affairs of the Company and to the duties and responsibilities
assigned to the Executive hereunder by the Company. The Executive may (i) serve
on civic or charitable boards or committees; and (ii) manage personal
investments and non-competing family businesses; so long as any such activities
do not interfere with the performance of the Executive’s responsibilities
hereunder. Executive shall use his best efforts to discharge the
responsibilities of his office and position as set forth herein.

 

 

3.             Compensation.

 

(a)           The Company agrees to pay or cause to be paid
to the Executive during the Employment Term a base salary at the initial rate
of Sixteen Thousand Six Hundred Sixty-Six and 67/100 ($16,666.67) per month
(i.e., $200,000.00 per annum) (hereinafter referred to as the “Base
Salary”). Such Base Salary shall be payable in accordance with the
Company’s standard payroll schedule. Such rate of salary, or increased rate of
salary, as the case may be, shall be reviewed at least annually by the Company.

 

(b)           The Company hereby grants to Executive,
subject to the terms of this Section 3(b) and the terms of the
Company’s 1999 Incentive Stock Option Plan (the “Plan”), options to purchase 600,000 shares of the Company’s
common stock under the terms of the Plan (the “Options”)
based on the closing bid price of the Company’s common stock on the
date such Options were approved by the Company’s Board of Directors. The
Options will become fully vested as follows: (i) Options to purchase
100,000 shares of the Company’s common stock will vest on _August 5, 2007; and (ii) the balance of
the Options will vest in 30 equal monthly installments commencing _September,
2007 and continuing on the 5th day of the immediately following 29
months; provided, however, that the vesting of the Options to Executive
hereunder is conditioned upon the continuous employment of Executive by the
Company through the date on which an installment of Options vests. Upon
termination of Executive’s employment other than for Cause (as defined in Section 8
below), Executive may exercise the Options during the 90 day period following
termination of employment; all unexercised Options will be terminated after
such 90 day period. All unexercised Options will immediately terminate upon the
termination of Executive’s employment for Cause.

 

(c)           Notwithstanding the provisions of Section 3(b) above,
the issuance of Options to Executive hereunder will be accelerated and payable
to Executive in full upon a Change of Control.  
For the purposes of this Agreement, the term “Change of Control” will mean:

 

(i)            The acquisition by any individual, entity or
group, [other than EMCORE Corporation or any of its affiliates,] (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended, the “Exchange Act”) (each referred to as a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either (a) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common
Stock”) or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of
this subsection (i), the following acquisitions shall not constitute a Change
of Control: (w) any acquisition directly from the Company, (x) any
acquisition by the Company, (y) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (z) any acquisition by any

 

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corporation
pursuant to a transaction which complies with clauses (a), (b) and (c) of
subsection (iii) of this Section 3(c); or

 

(ii)           Individuals who, as of the date hereof,
constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board; or

 

(iii)          Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation (a “Business Combination”), in each case,
unless, following such Business Combination, (a) all or substantially all
of the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (b) no person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 50% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and (c) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, for such Business Combination; or

 

(iv)          Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.

 

4.             Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, practices and programs maintained by
the Company and made available to employees generally including, without limitation,
all pension, retirement,

 

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profit
sharing, savings, medical, hospitalization, disability, dental, life or travel
accident insurance benefit plans. The Executive’s participation in such plans,
practices and programs shall be on the same basis and terms as are applicable
to employees of the Company generally. Executive will be entitled to three
weeks vacation per year, no more than two of which may be taken consecutively
without the consent of the Company’s Chief Executive Officer. In addition,
Executive shall receive a monthly car allowance of $750.00, to cover the
Executive’s operation and insurance of an automobile for business purposes.

 

5.             Executive Benefits. The Executive shall be entitled to
participate in all executive benefit 
or  incentive  compensation plans  now 
maintained   or hereafter
established by the Company for the purpose of providing compensation and/or
benefits to executives of the Company and any supplemental retirement, salary
continuation, stock option, deferred compensation, supplemental medical or life
insurance or other bonus or incentive compensation plans. Unless otherwise
provided herein, the Executive’s participation in such plans shall be on the
same basis and terms as other similarly situated executives of the Company. No
additional compensation provided under any of such plans shall be deemed to
modify or otherwise affect the terms of this Agreement or any of the Executive’s
entitlements hereunder.

 

6.             Reimbursement of Expenses.  The
Executive is authorized to incur expenses reasonably necessary (consistent with
a policy to be established by the Company) to carry out his duties under this
Agreement including, without limitation, the cost of continuing professional
education courses. The Company will reimburse the Executive for all such
expenses upon receipt of an itemized account of such expenditures, which shall
be in accordance with the usual practices of the Company and in accordance with
the annual budget prepared from time to time by the Company.

 

7.             Termination of Employment.  In
the event the Company terminates Executive’s employment without Cause (as
defined below), or in the event of the death of the Executive or if the
Executive is permanently disabled or incapacitated and as a result thereof is
and continues to be for a period of ninety (90) days unable to perform his
duties hereunder as determined by mutual agreement of the Executive and the
Company but if no such agreement is reached, as determined; (a) by a
mutually selected Person who is an expert in the type of disability claimed
whose determination shall be final and binding; or (b) if no such Person
is selected, by an arbitrator selected pursuant to the commercial arbitration rules of
the American Arbitration Association, the Executive or, in the event of the
Executive’s death, the Executive’s estate, shall be entitled to receive the
following amounts earned or accrued hereunder through the date of termination
(the “Termination Date”), but not
paid as of the Termination Date (collectively, “Accrued Compensation”):

 

(i)            (a) Base Salary (reduced by the amount
of payments received by Executive pursuant to the Company’s disability
insurance program, if any), and (b) an additional amount equal to Base
Salary for six months following the Termination Date;

 

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(ii)           reimbursement for any and all monies advanced or expenses incurred in
connection with the Executive’s employment for reasonable and necessary
expenses incurred by the Executive on behalf of the Company for the period
ending on the Termination Date;

 

(iii)          accrued and unpaid vacation pay;

 

(iv)          any bonuses or incentive compensation earned through the Termination
Date, or to which Executive is entitled in connection with his employment
through the Termination Date;

 

(v)           any previous compensation which the Executive has previously deferred
(including any interest earned or credited thereon, and any bonus or incentive
payments earned under the terms of Sections 4 and 5 of this Agreement which
amounts will be payable upon the payment to other participants in the bonus or
incentive plan).

 

8.             Termination for Cause or Voluntary
Termination.

 

(a)           If Executive’s employment is terminated by
the Company for Cause (as  herein  defined), 
the  Executive  shall 
be  entitled  to 
receive  Accrued Compensation,
other than the amounts described in Sections 7(i)(b) and 7(iii), and all
other obligations of the Company under this Agreement shall cease.

 

(b)           If Executive voluntarily terminates his
employment with the Company, the Executive shall be entitled to receive Accrued
Compensation, other than the amounts described in Sections 7(i)(b), and all
other obligations of the Company under this Agreement shall cease.

 

(c)           For purposes of this Agreement, the term “Cause” shall mean that the Executive shall have: (i) committed
any act of fraud, embezzlement or theft in connection with his duties
hereunder, (ii) committed any intentional act that has a material adverse
impact on the Company or its affiliates, (iii) engaged in any gross
misconduct, or (iv) breached in any material respect the material
provisions of paragraph 9 or 10 of this Agreement.

 

9.             Non-Competition; Confidentiality.

 

(a)           In the event Executive is terminated for
Cause or Executive voluntarily terminates this Agreement, for a period expiring
two (2) years after the termination of this Agreement, Executive shall not
engage in any of the following activities:

 

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(i)            Engage in Competitive Activities, Own, manage, operate, engage in, serve as
an advisor or consultant for, control, or otherwise participate in any business
that is or shall be competitive with any of those business activities that have
constituted part of the Company’s business at any time during the 12 months
preceding the Termination Date, nor shall Executive assist any Person that
shall be engaged in any such business activities, including making available
any information or funding to any such Person, or be involved as a stockholder,
partner, member, guarantor, or other holder of an interest in any Person
engaging in any such activities;

 

(ii)           Solicit Employees. Solicit to employ any employee of the
Company or any affiliate thereof while such Person is employed by any of them;

 

(iii)          Interfere with Contracts. Either on its own account or for any other
Person, solicit, induce, attempt to induce with, or endeavor to cause any
Person (including without limitation any broker, customer, governmental
authority, subcontractor, or supplier) to modify, amend, terminate, or
otherwise alter any contract or arrangement that such Person has with the
Company or any affiliate thereof with respect to the business of the Company;
and

 

(iv)          Assist Competitors. Make any statement or perform any act
intended to advance an interest of any existing or prospective competitor of
the Company, any affiliate thereof with respect to the business of the Company,
or encourage any other Person to make any such statement or to perform any such
act.

 

(b)           For a period expiring two (2) years
after the termination of Executive’s employment with the Company, for any
reason, Executive agrees to keep confidential any and all confidential and
non-public Company documents, trade secrets and other information including,
but not limited to, patent work, engineering drawings, product designs,
research and development results, client lists, pricing strategy, product cost
data, proprietary technical information, corporate policies and procedures, and
corporate marketing and financial plans and strategies. In the event of the
termination of Executive’s employment for any reason, Executive shall promptly
return all documents and all other Company property in Executive’s possession
related to any of the items described in this paragraph.

 

(c)           If a court of competent jurisdiction
determines that the provisions of this Section 9 are partially or wholly
inoperative, invalid or unenforceable in a particular case because of their
duration, geographical scope, restricted activity, or other parameter, such
court may reform such duration, geographical scope, restricted activity or
other parameter with respect to such case to permit enforcement of such
reformed provision to the greatest extent allowable.

 

10.           Company Property. 
Executive agrees that any and all 
development techniques or other products or processes relating to the
Company’s business which the

 

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Executive
may create, make, discover, introduce or invent while retained by the Company
hereunder, shall belong to and be the sole property of the Company. Executive
agrees promptly and fully to disclose the same to the Company and to assign all
rights thereto to the Company immediately.

 

11.           Injunctive Relief.  The
Executive agrees that the remedy at law for any breach of the provisions of
Sections 9 and 10 hereof will be inadequate and that the Company shall be
entitled to injunctive relief in addition to any other remedy it may have.

 

12.           Survival. The parties hereby agree that the provisions of Sections 6, 7, 8, 9,
10 and 11 hereof and of this Section 12 shall survive the termination of
this Agreement. Any compensation, bonuses and benefits that have been earned
prior to the termination date of this Agreement in accordance with the
provision of this Agreement or any compensation or benefit plan shall be
payable or provided thereafter in accordance with the original terms for
payment of such compensation or bonus or provision of such benefits in
accordance with the provision of this Agreement or any such compensation or
benefit plan.

 

13.           Successors and Assigns.

 

(a)           This Agreement shall be binding upon and
shall inure to the benefit of the Company, its successors and assigns and the
Company shall require any successor or assign to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. The term “Company” as
used herein shall include such successors and assigns. The term “successors and assigns” as used herein
shall mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company (including this Agreement) whether by
operation of law or otherwise.

 

(b)           Neither this Agreement nor any right or
interest hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the laws of
descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s legal personal representative.

 

14.           Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other, provided that all notices to the
Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company. All notices and communications shall be deemed to
have been received on the date of delivery thereof or on the third business day
after the mailing thereof, except that notice of change of address shall be
effective only upon receipt.

 

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15.           Non-exclusivity
of Rights. Nothing in this
Agreement shall prevent or limit the Executive’s continuing or future participation
in any benefit, bonus, incentive or other plan or program provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company or any of its subsidiaries. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Company or any of its subsidiaries
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.

 

16.           Miscellaneous.  No
provision of this Agreement may be modified, waived or discharged unless such
wavier, modification or discharge is agreed to in writing and signed by the
Executive and the Company after authorization of the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreement or representation, oral or otherwise, express or implied, with
respect to the subject matter hereof has been made by either party which is not
expressly set forth in this Agreement.

 

17.           Person.  For purposes of this
Agreement, “Person” shall mean any individual, partnership, limited liability
company, corporation, joint venture, trust, business trust, cooperative or
association or any foreign trust or foreign business organization, and the
heirs, executors, administrators, legal representatives, successors, and
assigns of such Person where the context so permits or requires.

 

18.           Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of New Jersey
without giving effect to the conflict of law principles thereof.

 

19.           Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.

 

20.           Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof, including, without
limitation, any agreement between the Company and Executive, verbal or written,
which is hereby terminated in its entirety.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.

 

 

	
   

  	
  /s/ Frank
  W. Smith

  
	
   

  	
  Frank
  W. Smith

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WORLDWATER &
  POWER CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Quentin T. Kelly

  
	
   

  	
  Name:

  
	
   

  	
  Title:   CEO

  

 

9Exhibit 10.1

 

SEPARATION
AGREEMENT

 

THIS SEPARATION AGREEMENT (the “Agreement”), is made
as of this 30th day of June, 2008 (the “Effective Date”) by and between Vital
Images, Inc., a Minnesota corporation (the “Company”) and Philip I. Smith
(the “Executive”).

 

BACKGROUND

 

1.             Executive is
currently the Executive Vice President of Corporate Development and Strategic
Planning for the Company.

 

2.             The Company and
Executive have entered into an Employment Agreement dated September 8,
2005 (the “Employment Agreement”), and a Change in Control Agreement dated April 29,
2004 (the “Change in Control Agreement”).

 

3.             The Company and
Executive have entered into various agreements regarding stock options and
restricted stock.  These agreements are
the following: Incentive Stock Option Agreement dated February 28, 2003;
Non-Statutory Stock Option Agreement dated February 28, 2003; Incentive
Stock Option Agreement dated August 7, 2003; Non-Statutory Stock Option
Agreement dated August 7, 2003; Incentive Stock Option Agreement dated February 5,
2004; Non-Statutory Stock Option Agreement dated February 5, 2004;
Non-Statutory Stock Option Agreement dated February 15, 2005; Restricted
Stock Award Agreement dated February 15, 2005; Non-Statutory Stock Option
Agreement dated September 8, 2005; Restricted Stock Award Agreement dated September 8,
2005; Non-Statutory Stock Option Agreement dated March 9, 2006;
Non-Statutory Stock Option Agreement dated February 2, 2007; and
Restricted Stock Award Agreement dated February 28, 2007.

 

All shares underlying
options exercisable by Executive as of the Termination Date pursuant to the
option agreements shall be referred to as Executive’s “Options” and all shares
of restricted stock that have been granted to Executive pursuant to the restricted
stock agreements and have vested as of the Termination Date shall be referred
to as Executive’s “Restricted Stock.” 
The agreements regarding Options shall collectively be referred to as
the “Option Agreements,” and the agreements regarding Restricted Stock shall
collectively be referred to as the “Restricted Stock Agreements.”  All Option Agreements and Restricted Stock
Agreements were entered into pursuant to and are governed by the Company’s 1997
Stock Option and Incentive Plan (the “1997 Plan”).

 

4.             The Company and
Executive have decided to terminate Executive’s employment with the Company as
of July 31, 2008 (the “Termination Date”).

 

5.             The Company and
Executive desire to resolve all present and potential issues between them
relating to Executive’s employment and termination of Executive’s employment,
and have agreed to a full resolution of any such issues as set forth in this
Agreement.

 

NOW THEREFORE, in consideration of the mutual promises
and provisions contained in this Agreement and in the Release referred to
below, the parties, intending to be legally bound, agree as follows:

 

1

 

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:

 

2

 

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,

 

3

 

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 subject matter covered thereby, Executive
agrees that the court making such determination shall have the power to reduce
or modify the scope, duration, subject matter or area of that promise to the
extent that allows the maximum scope, duration, subject matter or area
permitted by applicable law.  Executive
further agrees that the remedies provided for herein are in addition to, and
are not to be construed as replacements for, or a limitation of, rights and
remedies otherwise available to Company.

 

6.             Non-Compete Restrictions.  In
exchange for the Company’s agreements, covenants and promises set forth in this
Agreement, which Executive acknowledges are adequate consideration for his
obligations in this Paragraph 6, Executive agrees that Executive shall not,
directly or indirectly, on behalf of himself or a third party, for a period of
eighteen (18) months following the Termination Date (“Restricted Period”), do
any of the following:

 

1.     Own, manage, operate, join, control, consult with,
participate in the ownership, operation or control of, be employed by, or be
connected in any manner with any person or entity which manufactures, sells,
solicits, offers, offers to provide, or provides any Competitive Products and Services,
unless such employment is by a large diversified entity and on a basis such
that Executive will have no involvement whatsoever with the provision of
Competitive Products and Services during the Restricted Period.  For purposes of this Agreement, Competitive
Products and Services shall include all products and services similar to or the
same as those offered by Company to its customers involving advanced medical
visualization and analysis software technologies beyond MIP (Minimum Intensity
Projection) and MPR (Multi Planar Reformation) that allow for analysis,
manipulation, and distribution of images, such as radiological studies, in 2D,
3D and 4D.  This restriction applies
worldwide, and Executive agrees and acknowledges a worldwide restriction is reasonable
in scope given the Company’s worldwide territory;

 

4

 

2.     Solicit customers or the business of any
person, firm, corporation or other entity who is or who was a customer or
account of Company or any of Company’s affiliates and subsidiaries while
Employee was employed by Company, including but not limited to resellers or
distributors of Company products or services, or accept business from any
person, firm, corporation or other entity who is or who was a customer or
account of Company or any of Company’s affiliates and subsidiaries while
Executive was employed by Company, for the purpose of selling to such customer
or account any Competitive Product or Service; and

 

3.        Induce or seek to induce any person employed
with Company or its affiliates as of the Separation Date to discontinue that
person’s employment with Company and/or solicit, recruit, hire or participate
in any other person’s or entity’s effort to hire an employee of Company.

 

7.             Executive’s Understandings.
Executive acknowledges and represents that:

 

A.    Executive understands that he
has the right to consult with an attorney regarding the meaning and effect of
this Agreement.

 

B.    Executive also understands
that he has twenty-one (21) calendar days from the date on which he receives an
unsigned copy of this Agreement in which to consider whether or not to sign
this Agreement. Executive further understands that he need not use the full
twenty-one (21) calendar days, and that if he signs this Agreement before the
expiration of the twenty-one (21) day period he does so voluntarily and of his
own free will.  Executive agrees that the
date on which he received this Agreement is accurately reflected in Paragraph 15
of this Agreement.

 

C.    Executive understands that he
may rescind (that is, cancel) within seven (7) calendar days of signing
the Agreement and the Bring-Down Release with respect to claims arising under
the Age Discrimination in Employment Act (“ADEA Rescission Period”) and that he
may rescind within fifteen (15) calendar days of signing the Agreement or the
Bring-Down Release, as applicable, with respect to claims arising under the
Minnesota Human Rights Act (“MHRA Rescission Period”) (collectively, “Rescission
Periods”).  To be effective, the
rescission must be in writing, delivered to Company at 5850 Opus Parkway, Suite 300,
Minnetonka, MN 55343-4414 ATTN: Cindy Edwards, within the applicable rescission
period, or sent to Company, at such address, by certified mail, return receipt
requested, postmarked within the applicable rescission period.

 

8.             Cancellation of
Agreement By Company.  If Executive
exercises his right of rescission under Paragraph 7.C. of this Agreement,
Company will have the right, exercisable by written notice delivered to Executive,
to terminate this Agreement in its entirety, in which event Company will have
no obligation whatsoever to Executive hereunder.  If Executive exercises his right of
rescission under Paragraph 7.C. of this Agreement, and Company does not
exercise its right to terminate this Agreement hereunder, the remaining
provisions of this Agreement (including specifically the remaining provisions
of Paragraph 5 or Paragraph 6 of this Agreement) shall remain valid and
continue in full force and effect.

 

9.             Performance By
Executive.  Nothing contained herein
shall operate as a waiver or an election of remedies by Company should
Executive fail to perform any duty or obligation imposed upon him
hereunder.  Notwithstanding anything
contained herein to the contrary, this Agreement and the duties and obligations
of Executive hereunder shall continue in full force and effect irrespective of
any violation of any term or provision of this Agreement by Executive.

 

10.           No Admission Of
Liability.  The parties agree that
this Agreement shall not be considered an admission of liability by
Company.  Company expressly denies that
it is in any way liable to Executive or that it has engaged in any wrongdoing
with respect to Executive.

 

11.           Executive’s
Acknowledgments.  Executive acknowledges
and represents that:  (a) he has
read this Agreement and understands its consequences; (b) he has received
adequate opportunity to read and consider this Agreement; (c) he has
received adequate opportunity to consult an attorney regarding this Agreement,
and either has consulted an attorney or decided of his own free will not to
consult an attorney; (d) he has determined to execute this Agreement of
his own free will and acknowledges that he has not relied upon any statements
or explanations made

 

5

 

by
Company regarding this Agreement; (e) the promises of Company made in this
Agreement constitute fair and adequate consideration for the promises, releases
and agreements made by Executive in this Agreement and Schedule A, (f) he
is the legal party in interest in this Agreement, with legal title to all
rights and claims asserted and hereby released; and (g) he has not filed
for bankruptcy or assigned or transferred any rights against Employer to any
other person or entity.

 

12.           Entire Agreement.  Except with regard to the Option Agreements
and the Restricted Stock Agreements, as such as governed by the 1997 Plan and
as modified herein, and Paragraphs 3.4, 3.5, 3.6, 3.8, 4.5 and 4.6 of the
Employment Agreement, this Agreement contains the entire agreement between
Company and Executive and supersedes and cancels any and all other agreements,
including the Change in Control Agreement and any other agreement, whether oral
or in writing, between Company and Executive with respect to Executive’s
employment with the Company, the termination of Executive’s employment and the
subject matter referred to herein.

 

13.           Governing Law.  This Agreement shall be construed and
enforced in accordance with the laws of the State of Minnesota. All actions
regarding this Agreement shall be brought in a state or federal court in the
State of Minnesota.

 

14.           Notices. All
notices required or permitted to be given under this Agreement shall be given
by certified mail, return receipt requested, to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:

 

	
  If to Company:

  	
   

  	
  Vital Images, Inc.

  
	
   

  	
   

  	
  5850 Opus Parkway

  
	
   

  	
   

  	
  Suite 300

  
	
   

  	
   

  	
  Minnetonka, MN 55343-4414

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  
	
  If to Executive:

  	
   

  	
  Philip I. Smith

  
	
   

  	
   

  	
  4503 Browndale Ave.

  
	
   

  	
   

  	
  Edina, MN 55424

  

 

15.           Effective Date.  This Agreement was provided to Executive on June 11,
2008.  If Executive desires to accept
this Agreement, Executive shall execute the Agreement and return the same to
Company at the address set forth in Paragraph 14.

 

16.           Counterparts.  This Agreement may be executed in
counterparts with an executed counterpart to be delivered to the other
party.  Each such executed counterpart
shall be deemed an original but shall constitute one and the same instrument.

 

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

 

	
   

  	
   

  	
  VITAL IMAGES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  6/30/08

  	
   

  	
  By

  	
  /s/ Michael H. Carrel

  
	
  Dated:

  	
   

  	
  Michael H. Carrel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  6/30/08

  	
   

  	
  /s/ Philip I. Smith

  
	
  Dated:

  	
   

  	
  Philip I. Smith

  
					

 

6

 

Schedule A

 

Executive’s “Bring-down”
Release

 

This Bring-down Release Agreement is entered into as of July 31,
2008 by Philip I. Smith, a resident of the State of Minnesota (“Executive”).

 

1.             Definitions.  We intend all words used in this Bring-down
Release to have their plain meanings in ordinary English.  Specific terms we use in this Bring-down Release
have the following meanings:

 

A.            Executive, as
used herein, shall include the undersigned Executive and anyone who has
obtained any legal rights or claims through the undersigned Executive.

 

B.            Company, as
used herein, shall at all times mean Vital Images, Inc., its parent
company, its 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,
Executives, representatives and agents (including, without limitation, their
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.

 

C.            Executive’s Claims,
as used herein, means all of the rights Executive, has on or prior to the date
hereof, to any relief of any kind from Company, whether or not Executive now
knows about those rights, arising out of or relating to Executive’s employment
with Company and the termination of Executive’s employment; all claims arising
out of or relating to statements, actions, or alleged omissions of Company; 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; state and local human rights acts; 
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; battery; false imprisonment; invasion of privacy; interference with
contractual or business relationships; any other wrongful employment practices
or violation of any common law; all claims for compensation of any kind,
including without limitation, bonuses, commissions, vacation pay, and expense
reimbursements; all claims for back pay, front pay, reinstatement, other
equitable relief, compensatory damages, damages for alleged personal injury,
liquidated damages, and punitive damages; and all claims for attorney’s fees,
costs and interest; and any other claims for unlawful employment practices
arising on or prior to the date hereof; provided, however, that the term “Executive’s
Claims” shall in no event include Executive’s rights to receive the payments,
benefits and continuing protections provided under the June 30, 2008
Separation Agreement between Executive and Company.

 

2.             Executive’s
Obligations.  As material inducement
to Company in entering into the Separation Agreement, and specifically in
consideration for the payments and benefits, as set forth in more detail in the
Separation Agreement, Executive hereby agrees as follows:

 

A.            Release.  Executive agrees to release all Executive’s
Claims.  However, by signing this
Bring-down Release Executive does not waive any claims that may arise after the
date on which Executive signs this Bring-down Release, the right to take legal
action to enforce the terms of this Bring-down Release, 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

 

7

 

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.

 

B.            Covenant Not To Sue.  Executive agrees that he will not initiate
any litigation to pursue claims which Executive released in Section 2.A.  This covenant does not apply to any
litigation challenging the validity of this Section 2.  Further, Executive agrees to pay Company’s
attorneys’ fees if Executive breaches the covenant not to sue contained in this
Section 2.B.

 

3.             Executive’s
Understandings.  Executive
acknowledges and represents that:

 

A.    Executive has the right to consult with an
attorney regarding the meaning and effect of this Bring-down Release.

 

B.    Executive acknowledges that he was offered a
period of twenty-one (21) calendar days from the date on which he received an
unsigned copy of this Bring-down Release in which to consider whether or not to
sign this Bring-down Release and that, having been advised of that entitlement,
such period has expired.

 

C.    Executive may rescind (that is, cancel)
within seven (7) calendar days of signing the Bring-down Release, the
provisions of Section 2.A. of this Bring-down Release with respect to claims
arising under the Age Discrimination in Employment Act (“ADEA Rescission Period”)
and that he may rescind within fifteen (15) calendar days of signing the
Bring-down Release the provisions of Section 2.A. of this Bring-down
Release with respect to claims arising under the Minnesota Human Rights Act (“MHRA
Rescission Period”) (collectively, “Rescission Periods”).  To be effective, rescission must be in
writing, delivered to Company at 5850 Opus Parkway, Suite 300, Minnetonka,
MN  55343, ATTN:  Vice President, Human Resources, within the
applicable Rescission Period, or sent to Company, at such address, by certified
mail, return receipt requested, postmarked within the applicable Rescission
Period.

 

4.             Executive’s
Acknowledgements.  Executive
acknowledges and represents that:  (a) he
has read this Agreement and understands its consequences; (b) he has
received adequate opportunity to read and consider this Agreement; (c) he
has received adequate opportunity to consult an attorney regarding this
Agreement, and either has consulted an attorney or decided of his own free will
not to consult an attorney; (d) he has determined to execute this
Agreement of his own free will and acknowledges that he has not relied upon any
statements or explanations made by Company regarding this Agreement;  (e) the promises of Company made in this
Bring-down Release constitute fair and adequate consideration for the promises,
releases and agreements made by Executive in this Bring-down Release and the
(date signed) Agreement between Executive and Company, (f) he is the legal
party in interest in this Agreement, with legal title to all rights and claims
asserted and hereby released; and (g) he has not filed for bankruptcy or
assigned or transferred any rights against Employer to any other person or
entity.

 

5.             Governing
Law.  This Bring-down Release shall
be construed and enforced in accordance with the laws of the State of
Minnesota.  All actions regarding this
Bring-down Release shall be brought in a state or federal court within the
State of Minnesota.

 

6.             Effective
Date.  This Bring-down Release shall
be effective upon the date set forth below.

 

 

	
  Dated: 

  	
  July 31, 2008

  	
   

  	
  /s/ Philip I. Smith

  
	
   

  	
   

  	
  Philip I. Smith

  

 

8

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