(b)           On June 30, 2008, Vital Images, Inc. (the “Company”) and Philip I. Smith, its Executive Vice President for Corporate Development and Strategic Planning, agreed that Mr. Smith would resign from his position, effective July 31, 2008.  Mr. Smith’s resignation is not the result of any disagreement with the Company, known to an executive officer of the Company, on any matter relating to the Company’s operations, policies or practices.

In connection with Mr. Smith’s resignation, the Company entered into a Separation Agreement (the “Agreement”) with Mr. Smith providing for the following:

Continuing Services.  Mr. Smith will remain on the Company’s payroll through July 31, 2008 (the “Separation Date”) to provide transition services as reasonably requested by Michael H. Carrel, the Company’s President and Chief Executive Officer.

Severance Pay.  Mr. Smith is entitled to a severance payment in the amount of $190,000.00, less applicable taxes and withholdings, payable in a lump sum on the Company’s first regular payroll date after the expiration of any applicable rescission periods following the Separation Date.

Non Compete Clause.  Mr. Smith has agreed, for 18 months after the Separation Date, not to become employed by or connected with any person or entity which manufactures, sells, solicits, offers or provides  products and services similar to or the same as those offered by the 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 two, three and four dimensions.  Mr. Smith also has agreed not to, directly or indirectly, solicit customers of the Company or solicit employees of the Company for 18 months following the Separation Date.

The foregoing is a summary description of the terms of the Agreement, which the Company expects to file as an exhibit to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.