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.
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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.
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<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,
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<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,
