10% SECURED CONVERTIBLE PROMISSORY NOTE

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 Three Million Dollars ($3,000.000).

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 August 12, 2005 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. THIS NOTE SUPERCEDES NOTES IN THE AMOUNT OF $300,000, $200,000, AND $250,000 DATED AUGUST 12, 2005, SEPTEMBER 11, 2005 AND DECEMBER 1, 2005.

1.   Repayment . Monthly payments of interest only shall be paid by the Company to Holder commencing on January 1, 2006, and on the last business day of each succeeding month through and including March 22, 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.

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.

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, 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 bankr