EXECUTIVE CHANGE OF CONTROL
AGREEMENT
AGREEMENT by
and between Viking Systems, Inc., a Delaware corporation (the
“Corporation”), and Robert Mathews (the
“Executive”), dated as of the 6th day of August,
2008.
WHEREAS, the
Corporation, on behalf of itself and its shareholders, wishes to
assure that the Corporation will have the continued dedication of
the Executive, notwithstanding the possibility, threat, or
occurrence of a Change of Control (as defined below) of the
Corporation, and
WHEREAS, the
Board of Directors of the Corporation (the “Board”)
believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control or other risk
of termination, to encourage his attention and dedication to his
assigned duties currently and in the event of any threatened or
pending Change of Control, and to provide the Executive with
competitive compensation arrangements;
THEREFORE, the
Board has caused the Corporation to enter into this Agreement (i)
to ensure the Executive of individual financial security, and (ii)
to provide such protection in a manner which is competitive with
that of other corporations.
NOW, THEREFORE,
IT IS HEREBY AGREED AS FOLLOWS:
|
|
|
Certain Definitions.
(a) The “Effective Date” shall
be the first date during the “Change of Control Period”
(as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive’s employment with the
Corporation is terminated involuntarily prior to the date on which
a Change of Control (if any) occurs, then for all purposes of this
Agreement the “Effective Date” shall mean the date
immediately prior to the date of such termination.
|
(b) The
“Change of Control Period” is the period commencing on
the date hereof and ending on the third anniversary of such date,
provided , however , that commencing on the date one
year after the date hereof (such date and each annual anniversary
thereof is hereinafter referred to as the “Renewal
Date”), the Change of Control Period shall be automatically
extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Corporation
shall give notice that the Change of Control Period shall not be so
extended.
|
|
|
Change of Control
. (a) For purposes of this Agreement, a
“Change of Control” shall be deemed to have occurred if
a change of control of the nature that would be required to be
reported in response to Item 5.01 of the Current Report on Form 8-K
as in effect on the date hereof pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the “Exchange
Act”) occurs, provided that, without limitation, a
“Change of Control” shall be deemed to have occurred if
(i) the beneficial ownership at any time hereafter by any person,
as defined herein, of capital stock of the Corporation, constitutes
20 percent or more of the general voting power of all of the
Corporation’s outstanding capital, except that the amount of
capital acquired by such person as a result of the recapitalization
of the Corporation on January 4, 2008 and/or the amount
subsequently acquired by such person through a sale by the
Corporation through underwriters or private placement of its
capital stock by the Corporation shall not be included in this
calculation, or (ii) individuals who, as of the date hereof,
constitute the Board (as of the date hereof, the “Incumbent
Board”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a Director
subsequent to the date hereof whose election, or nomination for
election by the Corporation’s shareholders, was approved by a
vote of at least three-quarters of the Directors comprising the
Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election
of the Directors of the Corporation, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall
be, for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board. No sale to
underwriters or private placement of its capital stock by the
Corporation, nor any acquisition initiated by the Corporation,
through merger, purchase of assets or otherwise, effected in whole
or in part by issuance or reissuance of shares of its capital
stock, shall constitute a Change of Control.
|
(b) For purposes of the definition of
“Change of Control”, the following definitions shall be
applicable:
(i) The term
“person” shall mean any individual, corporation or
other entity and any group as such term is used in Section 13(d)
(3) or 14(d) (2) of the Exchange Act.
(ii) Any
person shall be deemed to be the beneficial owner of any shares of
capital stock of the Corporation:
|
|
|
which that person owns directly whether or not
of record, or
|
|
|
|
which that person has the right to acquire
pursuant to any agreement or understanding or upon exercise of
conversion rights, warrants, or options, or otherwise, or
|
|
|
|
which are beneficially owned, directly or
indirectly (including shares deemed owned through application of
clause (B) above, by an “affiliate” or
“associate” (as defined in the rules of the Securities
and Exchange Commission under the Securities Act of 1933, as
amended) of that person, or
|
|
|
|
which are beneficially owned, directly or
indirectly (including shares deemed owned through application of
clause (B) above), by any other person with which that person or
his “affiliate” or “associate” (defined as
aforesaid) has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting or disposing of capital stock
of the Corporation.
|
(iii) The
outstanding shares of capital stock of the Corporation shall
include shares deemed owned through application of clause (ii) (B),
(C) and (D), above, but shall not include any other shares which
may be issuable pursuant to any agreement or upon exercise of
conversion rights, warrants or options, or otherwise, but which are
not actually outstanding.
|
|
|
Employment Period . The
Corporation hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the
Corporation, for the period commencing on the Effective Date and
ending on the first anniversary of such date. If on the
first anniversary of the Effective Date the Executive remains
employed by the Corporation, the Corporation hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Corporation, for the period
commencing on the first anniversary of the Effective Date and
ending on the second anniversary of such date. For the
first year following the Effective Date, the “Employment
Period” shall be the first year following the Effective
Date. For the second year following the Effective Date
(if on the first anniversary of the Effective Date the Executive
remains employed by the Corporation) the “Employment
Period” shall be the first two years following the Effective
Date. To be clear, termination of the Executive’s employment
by the Corporation on the first anniversary of the Effective Date
shall be a termination by the Corporation other that for Cause or
Disability.
|
|
|
|
Terms of Employment
. (a) Position and Duties
. (i) During the Employment Period, (A)
Executive’s position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at any time
during the 90-day period immediately preceding the Effective Date
and (B) the Executive’s services shall be performed at the
location where the Executive was employed immediately preceding the
Effective Date or any office or location less that thirty-five (35)
miles from such location.
|
|
|
(ii) During the
Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Corporation and,
to the extent necessary to discharge the responsibilities assigned
to the Executive hereunder, to use the Executive’s reasonable
best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve
on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive’s responsibilities as an employee of the
Corporation in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executives responsibilities
to the Corporation.
|
|
|
(b)
Compensation . (i) Base Salary
. During the Employment Period, the Executive shall
receive an annual base salary (“Base Salary”) at a
bi-weekly rate at least equal to the highest bi-weekly salary paid
to the Executive by the Corporation during the twelve month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Base Salary
shall be reviewed at least annually and shall be increased at any
time and from time to time as shall be consistent with increases in
base salary awarded in the ordinary course of business to other key
executives of the Corporation. Any increase in Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Base Salary shall
not be reduced after any such increase.
|
|
|
(ii) Annual
Bonus . Should an annual bonus (an “Annual Bonus”)
program be implemented in addition to base pay, the Executive shall
be awarded, for each fiscal year during the Employment Period for
which the program is in effect, an Annual Bonus in cash or kind
commensurate with the program for the Executive’s position
with the Corporation.
|
|
|
(iii) Incentive,
Savings and Retirement Plans . In addition to Base
Salary and Annual Bonus (if any) payable as hereinabove provided,
the Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement plans
and programs then applicable to other key executives of the
Corporation.
|
|
|
(iv) Welfare
Benefit Plans . During the Employment Period, the
Executive and/or the Executive’s family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans provided by the Corporation
(including, without limitation, medical, prescription, dental,
disability, and life insurance plans and programs) at least
comparable to those in effect at any time during the 90-day period
immediately preceding the Effective Date which would be most
favorable to the Executive or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other key
executives.
|
|
|
(v) Expenses
. During the Employment Period, the Executive shall
|
|
