Exhibit 10.2
Form 8-K
Viking Systems, Inc.
File No. 000-49636
THIS NOTE AND THE COMMON STOCK REFERENCED
HEREIN HAVE NOT BEEN
REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR UNDER THE PROVISIONS
OF ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE
REGISTERED HOLDER HEREOF FOR PURPOSES OF
INVESTMENT AND IN RELIANCE ON STATUTORY
EXEMPTIONS UNDER THE 1933 ACT, AND UNDER ANY
APPLICABLE STATE
SECURITIES LAWS.
NEITHER THE NOTE NOR THE COMMON STOCK MAY BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION
WHICH IS EXEMPT UNDER
PROVISIONS OF THE
1933
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT; AND IN THE CASE OF
AN EXEMPTION, ONLY IF THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSACTION
DOES NOT REQUIRE REGISTRATION OF THIS NOTE AND THE COMMON STOCK REFERENCED
HEREIN.
This note is one of a series issued in the
aggregate principal
amount of up to
Two Million Seven Hundred Fifty Thousand
Dollars ($2,750,000).
VIKING SYSTEMS, INC.
March 22, 2005
$750,000.00
10% SECURED CONVERTIBLE PROMISSORY NOTE
Viking Systems,
Inc. (the "Company"),
for value received,
hereby promises
to pay to ST. CLOUD CAPITAL PARTNERS,
L.P. or registered
assigns (the "Holder")
on March 22, 2006, or such earlier date as this Note
may become due and payable
pursuant to Section 6 hereof (the "Maturity
Date"), the principal sum of Seven
Hundred and Fifty Thousand Dollars ($750,000.00), and to pay interest on the
outstanding principal sum hereof at the rate of ten
percent (10%) per annum.
This 10% Secured Convertible Promissory Note (this "Note") is issued to the
Holder pursuant to the terms and conditions
of that certain Securities Purchase
Agreement, dated as of the date hereof, and any amendments thereto (the
"Securities Purchase Agreement") entered into by the
Company, the Lead
Lender
and Collateral Agent, and those persons and
entities described in the Securities
Purchase Agreement as an "Investor." All
capitalized terms used
herein without
definitions shall have the respective meanings provided therefore in the
Securities Purchase Agreement.
1. Repayment. Monthly payments of interest only shall be paid by the
Company to Holder commencing on March 31, 2005, and
on the last business day of
each succeeding month through and including February 28, 2006. The unpaid
principal amount of this Note and accrued
but unpaid interest
thereon, if any,
shall be paid on the Maturity Date by the
Company to the Holder.
<PAGE>
Both
principal hereof and interest thereon are payable at the address
of
the Holder designated in the Securities Purchase Agreement or at such other
place as the Holder may from time to time
designate in writing. Any payment
otherwise due on a Saturday, Sunday or legal bank holiday may be paid on the
following business day. Payments shall be made in lawful money of
the United
States of America. Interest hereunder shall be computed on the
basis of a year
of three hundred sixty (360) days for the
actual number of days elapsed.
2. Security. This Note is secured as provided for in the Securities
Purchase Agreement and the Security
Agreement referred to therein.
3. Transfers of Note to Comply with
the 1933 Act. The
Holder agrees that
this Note may not be sold, transferred, pledged, hypothecated or otherwise
disposed of except as follows: (1) to a Person whom the Note may legally be
transferred without registration and without delivery
of a current
prospectus
under the 1933 Act with respect thereto and then only against receipt of an
agreement of such Person to comply with the
provisions
of this Section 3
with
respect to any resale or other disposition of the Note; or (2) to any Person
upon delivery of a prospectus then meeting the requirements of the 1933 Act
relating to such securities and the offering thereof for such sale or
disposition, and thereafter to all
successive assignees.
4. Prepayment;
Repayment Upon Consolidation or Merger. The principal amount
of this Note may be prepaid by the Company,
in whole or in part
without premium
or penalty, at any time in installments not less than the lesser of (i)
twenty-five percent (25%) of the original
principal amount of the Note and (ii)
the remaining outstanding principal balance of this Note; provided that the
Company gives not less than thirty (30)
days' prior written
notice to Holder of
the Company's election to prepay this Note.
Upon any prepayment of the entire
principal amount of this Note, all accrued,
but unpaid,
interest shall be
paid
to the Holder on the date of
prepayment.
This Note shall
be paid in full, without premium, in the event the Company
(i) sells, leases or transfers all or a
substantial portion of the assets of the
Company or (ii) reorganizes, consolidates
or merges with or into another Person,
unless (A) the Company shall be the
surviving corporation
and the
shareholders
of the Company immediately prior to such
reorganization, consolidation or merger
own more than fifty (50%) of the voting
securities
of the Company
immediately
after such transaction or (B) the other
corporation
controls, is under common
control with or is controlled by the Company immediately prior to the
consolidation or merger whether or not the Company shall be the surviving
corporation in such consolidation or merger, in which event this Note shall
remain outstanding as an obligation of the consolidated or surviving
corporation.
5. Conversion of Note. The Holder shall have the right
from time to time,
and at any time on or prior to the Maturity
Date, to convert all
or any part of
the entirety of the debt then outstanding under this Note into fully-paid and
non-assessable shares of Common Stock,
or any shares of
capital stock or other
securities of the Company into which such Common Stock shall hereafter be
changed or reclassified, in accordance with the terms of Section 4 of the
Securities Purchase Agreement.
2
<PAGE>
Notwithstanding
the foregoing, in the event that any sums due
under this
Note are not repaid on the Maturity Date,
in lieu of accepting
repayment of the
Note from the Company, the Holder will have
the option at any time and from time
to time to convert the entirety of the debt
then outstanding,
plus any accrued
but unpaid interest thereon, under this Note into fully paid
and non-assessable
shares of Common Stock, or any shares of capital
stock or other
securities of
the Company into which such Common Stock shall hereafter be changed or
reclassified, pursuant to the terms of Section 4 of the Securities Purchase
Agreement.
The Company may require the Holder to convert this Note into shares of
Common Stock pursuant to the terms and
conditions of the
Securities
Purchase
Agreement.
As long as this
Note is outstanding,
the Company
shall reserve and keep
available, free from preemptive rights, out of its authorized and unissued
Common Stock a sufficient number of shares
to provide for the issuance of Common
Stock upon the conversion in full of this Note and,
from time to time,
shall
take all steps necessary to amend its certificate
of incorporation
to provide
sufficient reserves of shares of Common Stock
issuable upon conversion in whole
of this Note. The Company covenants that
all shares of Common Stock which may be
issued upon conversion of this Note will, upon issue, be fully paid,
nonassessable, free of preemptive rights
and free from all taxes, liens, charges
and security interests with respect to the
issue thereof.
6. Events of
Default and Remedies.
(a) Any one or more of the following events which shall have
occurred
and be continuing shall constitute an event of default ("Event of
Default"):
(i) Failure to make
any payment hereunder
when due or
interest
thereon within five days of the date when due; or
(ii) Any
representation or
warranty made by the
Company or any
officer of the Company
in the Securities
Purchase Agreement, this
Note, the Security Instruments, or in any agreement, report,
certificate or other document delivered to the Holder pursuant
to the
Loan Documents shall have been incorrect in any material
respect when
made which shall not have been remedied ten (10) days after written
notice thereof shall have been given to the Company; or
(iii) The Company
shall fail to perform or observe any covenant
contained in the
Securities
Purchase Agreement or any other Loan
Document and such
default, if capable of
being remedied,
shall not
have been remedied ten
(10) days after written notice thereof shall
have been given to the Company; or
(iv) The Company (A) shall institute any proceeding or
voluntary
case seeking to
adjudicate
it bankrupt or insolvent, or seeking
dissolution,
liquidation, winding
up, reorganization,
arrangement,
adjustment, protection, relief or composition of it or its debts
under
any law relating to bankruptcy, insolvency or reorganization or
relief
of debtors,
or seeking the entry of any order for relief or the
appointment of
a receiver, trustee, custodian or other similar
official for the Company or for any substantial part of its property,
3
<PAGE>
or shall consent to the commencement against it of such a
proceeding
or case, or shall
file an answer in any such case or proceeding
commenced against it
consenting to or acquiescing in the commencement
of such case or
proceeding, or shall
consent to or
acquiesce in the
appointment of
such a receiver, trustee, custodian or similar
official; (B) shall be
unable to pay its debts as such debts become
due, or shall
admit in writing its inability to apply its debts
generally; (C) shall
make a general
assignment
for the benefit of
creditors; or (D)
shall take any action to authorize or effect any of
the actions set fort above in this subsection; or
(v) Any proceeding
shall be instituted against the Company
seeking to
adjudicate
it bankrupt or insolvent, or seeking
dissolution,
liquidation, winding
up,
reorganization,
