INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

Exhibit 10.2

Viking Systems, Inc.

Form 8-K

File No. 000-49636

 

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

 

     This Intellectual Property Security Agreement (this "IP Agreement") is made

as of September 14, 2004 by and between Viking Systems,  Inc.  ("Grantor"),  and

Silicon Valley Bank, a California banking corporation ("Bank").

 

                                    RECITALS

 

     A. Bank will make  advances to Grantor  ("Advances")  as  described  in the

Silicon Valley Bank Loan and Security  Agreement of  approximate  even date (the

"Loan  Agreement"),  but only if Grantor grants Bank a security  interest in its

Copyrights,  Trademarks,  Patents,  and Mask Works.  Defined  terms used but not

defined herein shall have the same meanings as in the Loan Agreement.

 

     B. Pursuant to the terms of the Loan Agreement, Grantor has granted to Bank

a security  interest  in all of  Grantor's  right  title and  interest,  whether

presently existing or hereafter acquired in, to and under all of the Collateral.

 

     NOW, THEREFORE,  for good and valuable  consideration,  receipt of which is

hereby  acknowledged  and intending to be legally bound, as collateral  security

for the prompt and complete payment when due of Grantor's Indebtedness under the

Loan Agreement,  Grantor hereby  represents,  warrants,  covenants and agrees as

follows:

 

     1. Grant of Security  Interest.  As collateral  security for the prompt and

complete  payment  and  performance  of  all  of  Grantor's  present  or  future

Indebtedness,  obligations  and  liabilities  to Bank,  Grantor  hereby grants a

security interest in all of Grantor's right, title and interest in, to and under

its Intellectual  Property Collateral (all of which shall collectively be called

the "Intellectual  Property  Collateral"),  including,  without limitation,  the

following:

 

          (a) Any and all copyright rights,  copyright  applications,  copyright

     registrations   and  like  protections  in  each  work  or  authorship  and

     derivative  work thereof,  whether  published or unpublished and whether or

     not the same also  constitutes a trade secret,  now or hereafter  existing,

     created,  acquired or held, including without limitation those set forth on

     Exhibit A attached hereto (collectively, the "Copyrights");

 

          (b) Any and all trade secrets,  and any and all intellectual  property

     rights in computer software and computer software products now or hereafter

     existing, created, acquired or held;

 

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          (c) Any and all design rights which may be available to Grantor now or

     hereafter existing, created, acquired or held;

 

          (d) All patents,  patent applications and like protections  including,

     without  limitation,  improvements,  divisions,  continuations,   renewals,

     reissues,  extensions  and  continuations-in-part  of the  same,  including

     without limitation the patents and patent applications set forth on Exhibit

     B attached hereto (collectively, the "Patents");

 

          (e) Any trademark and servicemark  rights,  whether registered or not,

     applications   to  register  and   registrations   of  the  same  and  like

     protections,  and the entire goodwill of the business of Grantor  connected

     with and symbolized by such trademarks,  including without limitation those

     set forth on Exhibit C attached hereto (collectively, the "Trademarks");

 

          (f) All mask works or similar  rights  available for the protection of

     semiconductor  chips, now owned or hereafter acquired,  including,  without

     limitation those set forth on Exhibit D attached hereto (collectively,  the

     "Mask Works");

 

          (g) Any and all claims for damages by way of past,  present and future

     infringements of any of the rights included above,  with the right, but not

     the  obligation,  to sue for and  collect  such  damages  for  said  use or

     infringement of the intellectual property rights identified above;

 

          (h)  All  licenses  or  other  rights  to use  any of the  Copyrights,

     Patents,  Trademarks,  or Mask  Works and all  license  fees and  royalties

     arising  from such use to the extent  permitted  by such license or rights;

     and

 

          (i) All amendments,  extensions, renewals and extensions of any of the

     Copyrights, Trademarks, Patents, or Mask Works; and

 

          (j) All  proceeds  and products of the  foregoing,  including  without

     limitation  all  payments  under  insurance  or any  indemnity  or warranty

     payable in respect of any of the foregoing.

 

     2.  Authorization  and Request.  Grantor  authorizes  and requests that the

Register of Copyrights and the  Commissioner  of Patents and  Trademarks  record

this IP Agreement.

 

     3. Covenants and Warranties.  Grantor represents,  warrants,  covenants and

agrees as follows:

 

          (a)  Grantor  is now  the  sole  owner  of the  Intellectual  Property

     Collateral,  except for  non-exclusive  licenses  granted by Grantor to its

     customers in the ordinary course of business.

 

          (b)  Performance of this IP Agreement does not conflict with or result

     in a breach of any IP  Agreement to which  Grantor is bound,  except to the

     extent  that  certain   intellectual   property   agreements  prohibit  the

     assignment of the rights thereunder to a third party without the licensor's

     or other  party's  consent  and this IP  Agreement  constitutes  a security

     interest.

 

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          (c) During the term of this IP Agreement, Grantor will not transfer or

     otherwise  encumber any interest in the Intellectual  Property  Collateral,

     except for non-exclusive licenses granted by Grantor in the ordinary course

     of business or as set forth in this IP Agreement;

 

          (d) To its  knowledge,  each of the Patents is valid and  enforceable,

     and no part of the Intellectual Property Collateral has been judged invalid

     or unenforceable,  in whole or in part, and no claim has been made that any

     part of the  Intellectual  Property  Collateral  violates the rights of any

     third party;

 

          (e) Grantor shall promptly advise Bank of any material  adverse change

     in the  composition  of the  Collateral,  including  but not limited to any

     subsequent  ownership right of the Grantor in or to any Trademark,  Patent,

     Copyright, or Mask Work specified in this IP Agreement;

 

          (f) Grantor  shall (i)  protect,  defend and maintain the validity and

     enforceability of the Trademarks, Patents, Copyrights, and Mask Works, (ii)

     use its best efforts to detect  infringements  of the Trademarks,  Patents,

     Copyrights,  and Mask Works and promptly advise Bank in writing of material

     infringements  detected  and  (iii)  not  allow  any  Trademarks,  Patents,

     Copyrights,  or Mask Works to be  abandoned,  forfeited or dedicated to the

     public without the written consent of Bank, which shall not be unreasonably

     withheld,  unless Grantor  determines  that reasonable  business  practices

     suggest that abandonment is appropriate.

 

          (g) Grantor  shall not  register  any  maskworks,  software,  computer

     programs or other works of authorship  subject to United  States  copyright

     protection with the United States  Copyright Office without first complying

     with the following: (i) providing Secured Party with at least 15 days prior

     written notice  thereof,  (ii)  providing  Secured Party with a copy of the

     application for any such  registration  and (iii) executing and filing such

     other  instruments,  and taking such further  actions as Secured  Party may

     reasonably  request from time to time to perfect or continue the perfection

     of Secured Party's interest in the Collateral, including without limitation

     the filing with the United States Copyright Office, simultaneously with the

     filing by Grantor of the application for any such  registration,  of a copy

     of this  Agreement or a  Supplement  hereto in form  acceptable  to Secured

     Party identifying the maskworks, software, computer programs or other works

     of  authorship  being  registered  and  confirming  the grant of a security

     interest therein in favor of Secured Party.

 

          (h) This IP  Agreement  creates,  and in the  case of  after  acquired

     Intellectual Property Collateral, this IP Agreement will create at the time

     Grantor  first has  rights in such  after  acquired  Intellectual  Property

     Collateral,  in favor of Bank a valid and perfected first priority security

     interest  in the  Intellectual  Property  Collateral  in the United  States

     securing the payment and  performance of the  obligations  evidenced by the

     Note and the Loan Agreement  upon making the filings  referred to in clause

     (i) below;

 

          (i) To its knowledge, except for, and upon, the filing with the United

     States  Patent  and  Trademark  office  with  respect  to the  Patents  and

     Trademarks  and the Register of Copyrights  with respect to the  Copyrights

     and  Mask  Wo