Exhibit 10.1
Form 8-K
Viking Systems, Inc.
File No. 000-49636
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE
AGREEMENT (this
"Agreement"),
dated as of March
22,
2005, among (i) Viking Systems, Inc., a Nevada corporation
("Viking"), (ii)
St.
Cloud Capital Partners, L.P., a Delaware limited
partnership ("St.
Cloud"), as
"Lead Lender" and "Collateral Agent" and (iii) St. Cloud,
Donald Tucker,
Brian
Miller, and any other
Person signing the signature page of this Agreement as an
Investor or that becomes an Investor after the date hereof in
accordance
with
this Agreement (collectively, the "Investors").
Recitals
The
capitalized
terms used in these
Recitals shall have the respective
meanings set forth for such terms in Section 1 hereof.
Viking desires to
borrow up to $2,750,000 from Investors on the terms
and
conditions of this
Agreement and each of the Investors hereby agrees to make a
Loan to Viking on the terms and conditions of this Agreement.
Viking has agreed to secure the Obligations by granting to the
Investors a
Second Priority Lien on the Collateral. Such Second Priority Lien is
junior to
and subordinate to a first priority Lien of Silicon Valley
Bank.
As
additional
consideration
for each of the
Investors making a Loan to
Viking, each
Investor will be given the right to convert
his, her or its Loan
into shares of Viking's Common Stock and each Investor will be given a
Warrant
to purchase additional shares of Viking Common Stock.
Each
of the Investors
hereby appoints St. Cloud as the "Collateral Agent"
to act hereunder on behalf of all of the Investors under the
Security Agreement.
Simultaneously with the execution and delivery of this Agreement by
each of
the Investors (or an Addendum Agreement to this Agreement,
as applicable),
(a)
each Investor shall
lend Viking the amount set forth opposite such Investor's
name on Annex A of this Agreement, which maximum Loan to be made by all
Investors as a group is an aggregate of $2,750,000, (b) Viking shall issue to
each of the
Investors a Promissory Note in the principal amount of such
Investor's Loan
substantially in the
form of Exhibit A, (c) Viking shall grant
each of the Investors
a Warrant to purchase
shares of Viking's
Common Stock
substantially in the form of Exhibit B, and (d) each of the
Investors and Viking
shall execute and deliver a Registration Rights Agreement substantially in the
form of Exhibit C (or
a Joinder to such Registration Rights Agreement, as
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applicable). In
addition, as of the
date hereof, each of
the Collateral Agent
and Viking shall execute and deliver a Security Agreement substantially in the
form of Exhibit D.
NOW,
THEREFORE,
in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree
as follows:
Agreement
1.
Definitions. For
purposes of this Agreement, the following terms shall
have the meaning set forth below:
(a) "Acceptance Period" is defined in Section 15.1.
(b) "Agent-Related Persons" is defined in Section 18.2.
(c) "Agent's Liens" is defined in Section 18.8.
(d) "Business" is defined in Section 11.18.
(e) "CERCLA" is defined in Section 11.15.
(f) "Closings" is defined in Section 3.
(g) "Closing Fee" is defined in Section 2.3.
(h) "Closing Date" is defined in Section 3.
(i) "Code" is defined in Section 11.16.
(j) "Collateral" means
Viking's right, title
and interest in, to and
under all tangible and intangible personal property of Viking, in
each case
whether now owned or
existing or hereafter acquired or arising and wherever
located.
(k) "Collateral Agent" is defined in the preamble of this
Agreement.
(l) "Common Stock" means the $.001 par value common stock of
Viking.
(m) "Conversion Notice" is defined in Section 4.1.
(n) "Conversion
Price" is $0.20 per
share, subject to
adjustment as
set
forth in Section 7 of this Agreement.
(o) "Conversion
Rights"
means each Investor's right under the
Promissory Note, to
convert all or part of the outstanding balance of the
Promissory Note into Common Stock at the Conversion Price.
(p) "Convertible
Securities"
means
any securities of Viking
convertible into or exercisable or exchangeable for Common
Stock.
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(q) "Co-Sale Right" is defined in Section 15.2.
(r) "Current Balance Sheet" is defined in Section 11.6.
(s) "Default" means a
condition or event that, after notice or lapse
of
time, or both, would constitute an Event of Default.
(t) "Default
Conversion
Price" is $0.05 per share, subject to
adjustment as set forth in Section 7 of this Agreement.
(u) "Eligible Preemptive Shares" is defined in Section 15.1.
(v) "Environment"
means soil,
land surface or subsurface strata,
surface waters (including navigable waters, ocean waters,
streams, ponds,
drainage basins and wetlands), groundwater, drinking water supply, stream
sediments, ambient air
(including indoor
air), plant and animal
life and
any
other environmental medium or natural resource.
(w) "Environmental and
Safety Requirements"
shall mean all
federal,
state, local and
foreign statutes,
regulations, rules,
ordinances,
and
similar provisions
having the force or
effect of law, all
judicial and
administrative orders,
judgments,
directives,
and determinations, all
contractual obligations, permits, licenses and all common law, in
each case
concerning public health and safety, worker health and safety and
pollution
or
protection of the environment (including, without limitation, all those
relating to
the presence, use, production, generation, handling,
transportation,
treatment, storage,
disposal, distribution, labeling,
testing, processing,
discharge,
release, threatened release, control or
cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical
substances
or mixtures, pesticides, pollutants,
contaminants, toxic
chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation), each as amended and as now
or
hereafter in effect.
(x) "Event of Default"
means the occurrence
of any of the conditions
or
events set forth in Section 6 of the Promissory Notes.
(y) "Exchange Act" is defined in Section 11.5
(z) "Financial Statements" is defined in Section 11.5.
(aa) "First Closing
Date" means March 22, 2005, or such other date as
Viking and St. Cloud mutually agree upon.
(bb) "GAAP" is defined in Section 11.5.
(cc) "Governmental Agency" means any government or any agency,
bureau,
commission, court, department, official, political subdivision,
tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
(dd) "Indemnified Liabilities" is defined in Section 19.
(ee) "Indemnified Person" is defined in Section 19.
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(ff) "Investor" is defined in the preamble of this Agreement.
(gg) "Lead Lender/Collateral Agent" is defined in the preamble of
this
Agreement.
(hh) "Lead Lender Director" is defined in Section 10.1.
(ii) "Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or
encumbrance
of any kind
(including any
agreement to
give
any of the foregoing,
any conditional
sale or other title
retention
agreement, and any
lease in the nature
thereof) and any option, trust or
other preferential
arrangement
having the practical
effect of any of the
foregoing.
(jj) "Loan"
means the loan to be made by each of the
Investors to
Viking pursuant
to the terms of this Agreement as evidenced by the
Promissory Notes in
the amount set forth opposite such Investors' names on
Annex A of this Agreement.
(kk) "Loan
Documents"
means, collectively, the Promissory Note,
Security Instruments,
Registration Rights Agreement, the Warrant and this
Agreement, as each may
be amended,
supplemented or
restated from time to
time.
(ll) "Major Shareholder" is defined in Section 15.2.
(mm) "Major Shareholder Notice" is defined in Section 15.2.
(nn) "Mandatory Conversion Notice" is defined in Section 4.3.
(oo) "Mandatory
Conversion Right" means Viking's right to require all
or
part of the Loan of each Investor to be converted into Common Stock
pursuant to Section 4.2 of this Agreement.
(pp) "Material Adverse Change" is defined in Section 11.6.
(qq) "Material Adverse Effect" is defined in Section 11.6.
(rr) "Maturity Date" is defined in Section 2.
(ss) "Multiemployer Plan" is defined in Section 11.16.
(tt) "New Issuance" is defined in Section 7.
(uu) "Obligations"
means obligations of Viking from time to time
arising under or in respect of (i) the Loans, (ii) this Agreement and/or
(iii) the other Loan Documents owing to Investors.
(vv) "Observer" is defined in Section 10.1.
(ww) "Parties" means Viking, the Lead Lender/Collateral
Agent and the
Investors.
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(xx) "Pension Plan" is defined in Section 11.16.
(yy) "Permitted Transferee" is defined in Section 15.2.
(zz) "Person" shall mean any corporation, limited liability company,
trust, partnership, individual, association or other entity.
(aaa) "Preemptive Right" is defined in Section 15.1.
(bbb) "Preemptive Right Notice" is defined in Section 15.1.
(ccc) "Promissory
Note" shall mean and refer to each of
the Secured
Convertible Promissory
Notes substantially in the form of Exhibit
"A,"
dated as of the
applicable Closing
Date, and issued by Viking to evidence
the
Loans by each of the
Secured Parties, as the same may be amended,
restated or supplemented from time to time.
(ddd) "Proprietary Information" is defined in Section 11.10.
(eee) "Registration
Rights Agreement" means a registration rights
agreement
substantially in the form of Exhibit "C" attached hereto, as
the
same
may be amended, restated or supplemented from time to time.
(fff) "Regulatory Problem" shall mean any transaction, circumstance
or
situation whereby
(i) a Person and such
Person's affiliates would own,
control or have power over a quantity of securities of any kind issued by
Viking or any other entity greater than is permitted under any requirement
of
any applicable
governmental
authority, or (ii) it has been asserted by
any
governmental
regulatory agency,
or such Person
believes, that such
Person or its
affiliates
are not entitled to hold, or exercise any
significant right under or with respect to, the Securities.
(ggg) "Regulatory
Violation" shall mean, with respect to Lead Lender,
(i)
a diversion of the proceeds of the issuance by Viking of the
Securities
from
the use reported thereof on the SBA form No. 1031 delivered at
Closing, if such diversion was effected without obtaining the prior
written
consent of Lead Lender
(which may be withheld in its sole discretion) or
(ii)
a change in the principal business activity of Viking to an
ineligible
business activity
(within the meaning of the SBIC
Regulations)
if such
change occurs within one year after the date of the Closing.
(hhh) "Required
Investors"
means Investors holding a majority in
interest of the
outstanding
principal amount of the Promissory Notes,
including the affirmative vote, consent or approval (as
applicable) of St.
Cloud.
(iii) "St. Cloud" is defined in the preamble of this Agreement.
(jjj) "SBA" is defined in Section 3.1.
(kkk) "SBIC" means a small business investment company licensed
under
the
SBIC Act.
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(lll) "SBIC Act" means the Small Business Investment Act of 1958, as
amended.
(mmm) "SBIC Regulations" means the Small Business
Investment Company
Act
of 1958, as amended,
and the regulations issued by the SBA thereunder,
codified at Title 13 of the Code of Federal Regulations ("13
C.F.R."), 107
and
121, as amended.
(nnn) "SEC Filings" is defined in Section 11.
(ooo) "SEC
Reports" is defined in Section 11.11.
(ppp) "Second
Priority" means, with
respect to any Lien purported to
be
created in any
Collateral pursuant to
the Security
Instruments, that
such
Lien is the only Lien to which such Collateral is subject,
other than
the
first priority Lien of
Silicon Valley Bank
granted to Silicon
Valley
Bank
pursuant to that certain Silicon Valley Bank Loan and Security
Agreement, dated as of
September 14, 2004, between Silicon Valley Bank and
Viking (the "SVB Loan Agreement").
(qqq) "Secured Parties" means each of the Investors.
(rrr) "Securities"
means the Promissory
Notes, the Warrants
and the
Common Stock issuable upon conversion or exercise of the
Promissory Notes
and
the Warrants.
(sss) "Securities Act" is defined in Section 2.4.
(ttt) "Security Agreement" means a security agreement substantially
in
the
form of Exhibit
"D" attached hereto, as the same may be amended,
restated or supplemented from time to time.
(uuu) "Security
Instruments" means the Security Agreement, and UCC-1
Financing Statement
and such other documents as may be reasonably required
by
the Investors to
establish,
preserve and perfect
the Second
Priority
Lien
on the Collateral and secure the Promissory Note.
(vvv) "Shareholders" is defined in Section 13.5.
(www)
"Transaction
Expenses" shall
mean and include (i) all
out-of-pocket fees and
expenses incurred by Lead Lender and Collateral
Agent in connection with its due diligence review of Viking, the
preparation, negotiation, execution, interpretation and enforcement
of this
Agreement,
the Securities and the other Loan
Documents and the agreements
contemplated hereby
and thereby, and the consummation of all of the
transactions
contemplated
hereby and
thereby
(including,
without
limitation, all travel
expenses incurred by
representatives or
agents of
Lead
Lender and Collateral
Agent and all
reasonable fees and
expenses of
legal counsel,
accountants and other third parties), (ii) all reasonable
fees
and expenses
incurred with respect to any amendments or waivers
(whether or not the same become effective) under or in respect of each of
the
Loan Documents and the other agreements and instruments contemplated
hereby and thereby,
(iii) all recording
and filing fees, stamp
and other
taxes which may be payable in respect of the execution and delivery of the
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Loan
Documents or the issuance, delivery or acquisition of the
Securities,
and (iv) the fees and
expenses incurred by Lead Lender and Collateral Agent
in
any filing with any
governmental agency
with respect to its investment
in
Viking or in any other filing with any governmental agency with respect
to
Viking which mentions Lead Lender and Collateral Agent.
(xxx) "Viking" is defined in the preamble of this Agreement.
(yyy) "Viking Benefit Plan" is defined in Section 11.16.
(zzz) "Warrant"
means the Warrant issued to each Investor as
additional
consideration for an Investor's Loan substantially in the form
attached hereto as
Exhibit B, as the same may be amended, restated or
supplemented from time to time.
2.
The Loan. Viking agrees to borrow from the Investors, and each
Investor,
severally and not
jointly, agrees to
lend to Viking,
subject to the terms and
conditions set forth herein, the amount set forth opposite such
Investor's name
on Annex A, which Loan by such Investors in the aggregate shall be (a) in the
minimum aggregate
principal amount of $1,300,000 as of the
First Closing Date
and (b) in the maximum
aggregate principal
amount of $2,750,000
(the "Maximum
Aggregate Principal Amount"). Each Loan shall be due on the date
that is twelve
months from the date hereof ("Maturity Date"). If on the First
Closing Date, the
Company shall not have issued to the Investors Promissory Notes in the maximum
aggregate principal
amount of $2,750,000,
Viking shall have the
right, at any
time on or prior to the date that is two (2) weeks after the First
Closing Date,
to issue Promissory
Notes to one or more
Investors in an amount
not to exceed
the Maximum
Aggregate Principal Amount, provided that any such additional
Investor shall be
required to execute an Addendum Agreement to this Agreement
substantially in the
form of Exhibit E. Any such additional Person so making a
Loan to Viking
pursuant to the terms of this Agreement shall be considered an
"Investor" for purposes of this Agreement.
2.1. Use of Loan
Proceeds. The Loan
proceeds shall be used by Viking
pursuant to the use of proceeds as set forth on the certificate delivered
pursuant to Section 3.1.10.
2.2. Promissory Note
and Grant of Security Interest. Each Loan shall
be
evidenced by a
Promissory Note and
secured by a Second
Priority Lien
against all of the Collateral as set forth in the Security
Instruments. On
the
First Closing Date,
Viking shall execute a
Security Agreement
which
shall grant to each Investor and Collateral Agent a security interest in
the
Collateral
in order to secure prompt repayment of any and all
Obligations owed by
Viking to each
Investor and in order to secure prompt
performance by
Viking of its
covenants and obligations under the Loan
Documents. The
Investors agree to enter into a customary subordination
agreement as may reasonably be requested by Silicon Valley Bank
relating to
the
subordination
of Investor's loan to the rights and
preferences
of
Silicon Valley Bank pursuant to the SVB Loan Agreement.
2.3 Loan Closing
Fee. On the
applicable
Closing Date for each
such
Investor, a total of two percent (2%) of the Loan from an Investor
shall be
deducted from the Loan proceeds from such Investor and shall be
retained by
such
Investor as a closing fee (the "Closing Fee"). Accordingly, on such
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Closing Date, Viking shall receive ninety-eight percent (98%) of the
total
Loan
proceeds and each of
the Investors
shall retain two
percent (2%) of
such
Investor's Loan as a Closing Fee.
2.4 Accredited
Investors Only. The
Promissory Notes will
be offered
and
sold to only a limited number of selected sophisticated Investors,
each
of
whom Viking
has reasonable grounds to believe and does believe,
immediately before making an offer, qualifies as an "accredited
investor,"
as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act of
1933, as amended (the
"Securities Act"),
and has such
knowledge and
experience
of financial and business matters that such
prospective purchaser
is capable of evaluating the merits and risks of
investing in the Promissory Notes.
3.
Deliveries at Closing.
Subject to the terms
and conditions
set forth
herein, the closings of the transactions contemplated herein (each,
a "Closing")
shall take place at the offices of Latham & Watkins LLP, 633
West Fifth Street,
Los Angeles,
California, (i) on the
First Closing
Date, with respect to St.
Cloud, and (ii) on
such other dates as Viking and such other Investor mutually
agree upon, with respect to the other Investor, provided that such
date shall be
on or prior to two (2) weeks from the First Closing Date (as
applicable to each
such Investor, a "Closing Date").
3.1 Deliveries by Viking at Closing. The obligations of each
Investor
under this
Agreement are subject to the fulfillment, on or before the
Closing of each of the following conditions, unless otherwise waived. At
the
Closing, Viking will have delivered to each Investor or its counsel
all
of
the following documents:
3.1.1 This
Agreement,
signed by a duly
authorized
officer of
Viking;
3.1.2 A Promissory Note, in the aggregate principal amount of
the
Loan, signed by a duly authorized officer of Viking;
3.1.3 A Warrant to purchase the number of shares of Common
Stock
("Warrant Shares") set forth opposite such Investor's name on Annex
A,
signed by a duly authorized officer of Viking;
3.1.4 The Security Agreement, signed by a duly authorized
officer
of Viking;
3.1.5 The Registration Rights Agreement, signed by a duly
authorized officer of Viking;
3.1.6 A certificate,
dated as of the Closing Date, signed by the
Chief Executive
Officer
and President of Viking, in the form
reasonably acceptable
to Lead Lender's
counsel, certifying
(i) that
the representations
and warranties of
Viking contained in Section 11
are true and correct in all respects on and as of the Closing with
the
same effect as though such representations and warranties had been
made on and as of the Closing Date (except, with respect to Closings
subsequent to the First Closing Date, for changes resulting from the
transactions
contemplated by this
Agreement);
(ii) that Viking
has
performed and complied with all covenants, agreements, obligations
and
conditions contained
in the Agreement that are required to be
performed or complied
with by it on or
before the Closing;
(iii) a
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true and
complete copy of the Articles of Incorporation and Bylaws of
Viking, as
amended or supplemented to the Closing Date, (iv)
resolutions of the Board of Directors of Viking (and, if required,
the
stockholders of
Viking) authorizing the execution, delivery and
performance of this
Agreement,
the other Loan Documents and the
consummation of
the transactions contemplated thereby, and (v)
resolutions of the
Board electing Cary Fitchey as director and
designee of Lead Lender to serve on the Board, and Larry Haimovitch
as
Observer (as defined below), effective as of the Closing Date.
3.1.7 A closing statement (substantially in the form
provided by
Lead Lender), signed by a duly authorized officer of Viking;
3.1.8 With respect to each Investor, the Closing Fees and, with
respect to the Lead Lender, the Transaction Expenses, an estimate of
which shall be provided by Lead Lender to Viking and which
Transaction
Expenses may be
deducted or withheld from the amount paid by Lead
Lender to Viking in
connection
with the Lead
Lender's Loan at the
First
Closing; provided, however, that Lead Lender shall provide
Viking with the
aggregate amount of
Transaction
Expenses as of the
First Closing
Date within
thirty (30) days after
the First Closing
Date and to the extent such amount is less than the estimated amount
deducted at the Closing on the First Closing Date, such difference
shall be promptly
paid by Lead
Lender to Viking,
and to the extent
such amount is greater
than the estimated amount deducted at the
Closing on the First Closing Date, such difference shall be promptly
paid by Viking to Lead Lender;
3.1.9 Completed Small Business Administration ("SBA") forms No.
480 (Size
Status Declaration),
No. 652 (Assurance of
Compliance) and
No. 1031 (Portfolio Financing Report, Parts A and B);
3.1.10 A certificate, dated as of the Closing Date, signed by
the
Chief Executive Officer and President of Viking, certifying as to the
use of proceeds from the issuance of the Promissory Note.
3.1.11 An opinion
from Cohne, Rappaport & Segal, counsel to
Viking, dated as of
the Closing Date and addressed to Lead Lender, in
the form acceptable to Lead Lender.
3.1.12 Such
other documents relating to the transactions
contemplated by this
Agreement as Lead Lender or its counsel may
reasonably request.
3.2 Deliveries by Investor at Closing. The obligations of Viking
under
this
Agreement are subject to the fulfillment, on or before the Closing of
each
of the following conditions, unless otherwise waived. At the
Closing,
each
Investor will have delivered to Viking or its counsel:
3.2.1. A wire transfer
to the account listed
in Schedule 3.2.1
hereto in an amount
equal to such
Investor's Loan less
the Closing
Fees (and in the case of Lead Lender, less the Transaction
Expenses);
and
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3.2.2 This Agreement, signed by a duly authorized officer of
each
Investor, or if
Investor is an
individual, by such
Investor (or, if
after the First Closing Date, an Addendum Agreement to this
Agreement);
3.2.3 The Registration Rights Agreement, signed by a duly
authorized officer of each Investor, or if Investor is an
individual,
by such Investor
(or, if after the Closing Date, a Joinder to the
Registration Rights Agreement); and
3.2.4 The Security Agreement, signed by a duly authorized
officer
of each Investor, or if Investor is an individual, by such
Investor.
4.
Note Conversion Rights. Each Investor shall have the right
from time to
time, and at any
time on or
prior to the Maturity Date of such Investor's
Promissory Note, to convert all or any part of the amount then
outstanding under
such Investor's
Promissory Note into
fully paid and
non-assessable shares
of
Common Stock, at the Conversion Price. Notwithstanding the foregoing, in the
event that any sums due under a Promissory Note are not repaid on the
Maturity
Date, in lieu of accepting repayment of the Promissory Note from Viking, the
Investor 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 such Promissory Note into fully paid and
non-assessable shares of
Common Stock, at the Default Conversion Price.
4.1. Conversion
Procedure.
To convert a
Promissory Note into Common
Stock, the holder
thereof shall
surrender to Viking the Promissory Note,
and
give written notice
("Conversion
Notice") to Viking
that such holder
elects to convert all
or a portion of such
Promissory
Note into Common
Stock. The Conversion Notice shall specify (i) the amount of the
Promissory
Note
to be converted and
the name or names in which such holder wishes the
certificate or
certificates
for Common Stock and any portion of the
Promissory Note not to be so converted to be issued and (ii) the
address to
which such holder wishes delivery to be made of such new
certificates (and,
if
applicable, a replacement Promissory Note reflecting the portion of
such
Promissory Note that
shall not have been converted) to be issued upon such
conversion. As
promptly as practicable on or after the conversion date,
Viking shall issue and shall deliver a certificate or certificates
for the
number of full shares of Common Stock issuable upon conversion, together
with
payment in lieu of any fractional share, as hereinafter
provided, to
the
person or persons entitled to receive the same. In the event that
there
shall have been
surrendered a Promissory Note only part of which is to
be
converted, Viking
shall issue and deliver to such holder or such holder's
designee a new Promissory Note representing that portion of the
Promissory
Note
which shall not have been converted.
4.2. Mandatory
Conversion
Rights. Viking shall have the right to
require an Investor to convert all or a portion of such
Investor's Loan at
the
Conversion Price in the event that:
(i) no Event of Default exists or is continuing at the time of
such mandatory conversion; and
(ii) Viking has raised a minimum of $3,000,000 in public and/or
private equity offerings on or prior to the one-year anniversary date
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of the Closing at an average price equal to or greater than
$0.30 per
share of Common Stock.
For purposes of this Section 4.2, equity
attributed to the issuance or conversion of the Promissory Notes or
the Warrants shall not be included in the calculation of such average
price.
4.3. Procedure
for Mandatory Conversion. In the event that Viking
elects to cause the mandatory conversion of Promissory Notes into Common
Stock pursuant to Section 4.2 of this Agreement, Viking shall give written
notice of mandatory
conversion
("Mandatory
Conversion
Notice") to each
Investor instructing
the Investor to
surrender to Viking
the Promissory
Note, and give written
notice to each of the
Investors that Viking elects
to
convert all or a portion of a holder's Promissory Note into Common
Stock
pursuant to Section 4.2 of this Agreement. Such Mandatory
Conversion Notice
shall specify the amount of the Promissory Note to be converted. If less
than
all of the entire unpaid balance of all of the Promissory Notes are
converted in full, then in such event, the mandatory conversion shall be
effected on a pro rata basis for all Investors. Immediately upon Viking's
mailing of a Mandatory
Conversion Notice,
the Promissory Notes
shall, to
the
extent of the
amount to be
converted as set forth in the Mandatory
Conversion Notice,
be deemed to be
converted into Common Stock and no
interest shall
thereafter accrue on the amount to be converted as set forth
in
the Mandatory
Conversion
Notice. As promptly as practicable after
Viking's receipt of an Investor's Promissory Note, Viking shall issue and
shall deliver a certificate or certificates for the number of full shares
of
Common Stock issuable upon such conversion, together with a new
Promissory Note for
the remaining
outstanding principal
balance of each
Promissory Note
if less than the entire original Promissory Note is
converted.
5.
Warrants. As
additional
consideration for an Investor making a Loan to
Viking pursuant to this Agreement, Viking shall issue each Investor
a Warrant to
purchase shares of
Viking's Common Stock.
Each Warrant is
exercisable at $.40
per share, subject to adjustment pursuant to the terms of such
Warrant, and each
Warrant shall be for a
term of forty-two (42)
months from the date hereof. An
Investor shall be issued a Warrant to purchase one (1) share of
Common Stock for
each four (4) shares
issuable upon
conversion of the
Promissory
Note at the
Conversion Price,
subject to adjustment
pursuant to the terms
of the Warrant.
For example, if an
Investor loans $500,000 to Viking hereunder, such Investor
shall be issued Warrants to purchase 625,000 shares of Common
Stock.
6.
Registration
Rights. The Common Stock issuable upon the
conversion of
the Promissory Notes and the Common Stock issuable upon exercise of
the Warrants
shall be subject to a Registration Rights Agreement substantially in the form
attached hereto as Exhibit "C."
7.
Adjustments
to Conversion Price and Warrant Exercise Price. The
Conversion Price and the Default Conversion Price in effect at any
time and from
time to time shall be subject to adjustment from time to time upon
the happening
of certain events as follows:
7.1 New Issuances.
If at any time after
the issuance of a Promissory
Note
and prior to the repayment in full or conversion in full of such
Promissory Note,
Viking issues or sells
(a "New Issuance") any
shares of
common stock for a consideration per share less than the Conversion
Price
or
Default Conversion Price in effect immediately prior to such New
11
<PAGE>
Issuance, then,
immediately upon such
New Issuance, the
Conversion Price
and
the Default Conversion
Price, as applicable,
of the unpaid portion of
the
Promissory
Note shall be reduced
to an amount equal to
the price per
share of common stock
issued in the New Issuance. If the New Issuance
involves the issuance of Convertible Securities, the Conversion Price and
Default Conversion Price, as applicable, shall be reduced to the
effective
price of the common stock issuable under such Convertible Securities if
such
effective price is less than the Conversion Price or Default
Conversion Price, as applicable.
7.2 Reorganization,
Reclassification,
Consolidation, Merger or Sale.
If
any capital
reorganization,
reclassification
or any other
change of
capital stock of
Viking, or any
consolidation
or merger of Viking
with
another Person, or the
sale or transfer of all or substantially all of its
assets to another
Person shall be
effected in such a way that holders of
shares of Common Stock shall be entitled to receive stock, securities or
assets with respect to
or in exchange for
their shares of Common
Stock,
then
provision shall be made by Viking,
in accordance
with this Section
7.2,
whereby each holder of
the Promissory Note shall thereafter have the
right to receive, upon the basis and upon the terms and conditions
specified herein and in addition to or in exchange for, as
applicable, the
shares of Common Stock subject to the Promissory Note immediately
theretofore receivable
upon conversion of such Promissory Note at the
Conversion Price
or Default Conversion Price (depending on which is
applicable at the time of the actual conversion of the Promissory Note),
such
securities or assets as would have been issued or payable with
respect
to
or in exchange for the
aggregate shares of Common Stock immediately
theretofore receivable upon conversion of the Promissory Note if
conversion
of
the Promissory Note had occurred immediately prior to such
reorganization,
reclassification,
consolidation, merger
or sale. Viking
will
not effect any such
consolidation, merger,
sale, transfer or lease
unless prior to the
consummation thereof
the successor
entity (if other
than
Viking) resulting from such consolidation or merger or the entity
purchasing such
assets shall assume by written instrument (i) the
obligation to deliver to the holder of the Promissory Note such securities
or
assets as, in accordance with the foregoing provisions, the holder of
the
Promissory
Note may be entitled
to receive
upon conversion of the
Promissory Note,
and (ii) all
other obligations of Viking under the
Promissory Note. The
provisions of this Section 7.2 shall similarly apply
to
successive
consolidations,
mergers, exchanges, sales, transfers or
leases. In
the event that in connection with any such capital
reorganization or
reclassification,
consolidation,
merger,
sale or
transfer, additional
shares of Common
Stock shall be issued
in exchange,
conversion, substitution or payment, in whole or in part, for a
security of
Viking other than Common Stock, any such issue shall be treated as
an issue
of
Common Stock covered by the provisions of Section 7.2 hereof.
7.3 Stock Dividends and Securities Distributions. If, at any time or
from
time to time after the date hereof, Viking shall distribute to the
holders of shares
of Common Stock (i) securities (including rights,
warrants, options or
another form of
convertible
securities) other
than
securities of Viking,
(ii) property, other than cash, or (iii) cash,
without fair payment
therefor, then, and in
each such case, the holder of
the
Promissory
Note, upon conversion of the Promissory Note at the
Conversion Price
or Default Conversion Price (depending on which is
applicable at the time of the actual conversion of the Promissory Note),
shall be entitled to receive such securities, property and cash which the
holder of the Promissory Note would hold on the date of such
conversion if,
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<PAGE>
on
the date of the distribution, the holder of the Promissory Note had
been
the
holder of record of the shares of Common Stock issued upon such
conversion and, during the period from the date hereof to and
including the
date
of such conversion,
had retained such
shares of Common Stock and the
securities, property
and cash receivable by
the holder of the
Promissory
Note
during such period, subject, however, to the holder of the
Promissory
Note
agreeing to any
conditions to such
distribution as were
required of
all
other holders of shares of Common Stock in connection with such
distribution.
7.4 Other Adjustments.
In addition to those
adjustments set forth in
Section 7.2 and Section 7.3, but without duplication of the adjustments
to
be
made under such Sections, if Viking:
(i) makes a
distribution on its
Common Stock in shares of its
Common Stock;
(ii) subdivides or reclassifies its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares;
(iv) makes a
distribution on its
Common Stock in shares
of its
capital stock other than Common Stock; and/or
(v) issues, by
reclassification of
its Common Stock, any shares
of its capital stock;
then the Conversion Price in effect immediately prior to such action
(and
the number and kind of capital stock purchasable upon conversion of
the
Promissory Note, upon
the occurrence of any of the events described in
(iv)
and (v) above), shall
be adjusted so that the holder of a Promissory
Note
upon conversion
thereof shall be entitled to receive the number
of
shares of Common Stock (and such other securities) that the holder of the
Promissory Note would have owned or have been entitled to receive
after the
happening of any of the events described above had the Promissory
Note been
converted immediately
prior to the
happening of such
event or any record
date
with respect thereto,
and the Default
Conversion Price
immediately
prior to such action shall be adjusted proportionately to the
adjustment of
the
Conversion Price. An adjustment made pursuant to this Section 7.4
shall
become effective
immediately
after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or issuance.
If,
as a
result of an adjustment made pursuant to this Section 7.4,
the holder
of
the Promissory Note thereafter surrendered for conversion
shall become
entitled to receive
shares of two (2) or more classes of capital stock or
shares of Common Stock and any other class of capital stock of
Viking, the
Board of Directors in
good faith shall
determine the
allocation
of the
adjusted Conversion
Price and Default
Conversion
Price between or
among
shares of such classes of capital stock or shares of Common Stock
and such
other class of capital stock.
The adjustment to the Conversion Price and Default Conversion Price
(and
number and kind of capital stock purchasable upon conversion of the
13
<PAGE>
Promissory Note)
described in this Section 7.4 shall be made each time any
event listed in paragraphs (i) through (v) of this Section 7.4
occurs.
(vi) In the event that at any time, as a result of an adjustment
made pursuant to this Section 7.4, the holder of the Promissory Note
thereafter shall
become entitled to receive any shares of Viking,
other than Common Stock, thereafter the Conversion
Price and Default
Conversion Price shall be subject to adjustment from time to time
in a
manner and on
terms as nearly equivalent as practicable to the
provisions with
respect to the Common Stock contained in this Section
7.4.
7.5 Notice of Adjustment. Upon any adjustment of the
Conversion Price
or
Default Conversion Price, then and in each such case Viking, at its
sole
expense, shall give
written notice thereof
(i) by certified or registered
mail, postage
prepaid, (ii) by a nationally known overnight delivery
service, or (iii) delivered by hand, addressed to the holder of the
Promissory Note at his
address as shown on the books of Viking, which
notice shall state the conversion price resulting from such
adjustment and
adjusted number
of shares of Common Stock or other capital stock, as
applicable, issuable upon exercise of the Promissory Note, setting
forth in
reasonable detail the method upon which such calculation is
based.
7.6 Warrant
Adjustments. The
Warrant attached
hereto as Exhibit "B"
contains a provision
providing for the
reduction of the Warrant exercise
price upon a New Issuance at less than the Conversion Price and for other
adjustments to the number of Warrant shares and the warrant
exercise price.
8.
[Reserved.]
9.
Remedies. Upon the
occurrence of an Event of Default and the expiration
of any notice and cure period provided for under the Loan
Documents (if any),
the entire
indebtedness
owed to the
Investor shall, at the option of the
Investor, immediately
become due and payable without presentment, demand,
protest, or other
notice of any kind,
all of which
are expressly waived by
Viking; provided
that the occurrence of an Event of Default as set forth in
Section 6(iv) and
Section 6(v) of the
Promissory
Note shall make all
sums of
principal and interest then remaining unpaid and all other amounts
payable under
the Loan Documents due and payable, all without demand,
presentment,
notice or
protest, all of which
hereby are expressly waived, and will permit Investor to
exercise any other right available to it at law or in
equity, all which
rights
and powers may be
exercised
cumulatively. The
Investor may proceed with every
remedy available at law or in equity or provided for in this
Agreement or in any
of the Loan Documents,
and all expenses
incurred by the Investor in connection
with any remedy shall
be deemed indebtedness
of Viking to the
Investor. The
Collateral Agent,
on behalf of the
Investor, may apply the proceeds from
any
Collateral or from any other source against any part of the Loans as
and in any
order the Collateral Agent sees fit but on a pro rata basis to each
Investor.
No
delay or failure of an Investor in the exercise of any right or
remedy
provided for under this Agreement or under any of the Loan
Documents shall be
deemed a waiver of such right by the Investor. No exercise or partial
exercise
or waiver of any right or remedy shall be deemed a waiver of any further
exercise of such
right or remedy or of any other right or remedy that the
Investor may have
under this Agreement or under any of the Loan
Documents.
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<PAGE>
Enforcement of any of
the Investor's
rights as to any
security for the Loan
shall not affect the
Investor's
right to enforce payment of the Loan and to
recover judgment
for any portion thereof remaining unpaid. The rights and
remedies set
forth in this Agreement and in any of the Loan
Documents are
cumulative and not
exclusive of any other
right or remedy that an Investor may
have.
10.
Lead Lender.
10.1. Board of Directors Matters. Until the Loans are repaid in
full,
Lead
Lender shall have the option of designating one person to serve on
the
Board of Directors of Viking ("Lead Lender Director") and/or one observer
(the
"Observer")
to attend meetings of the Board of Directors
of Viking.
Viking shall reimburse
the reasonable travel costs and expenses of
such
Lead
Lender Director and Observer incurred in attending any Viking Board
of
Directors meetings or
committee meetings.
In addition, any Lead Lender
Director shall be entitled to such other compensation or benefits,
Viking
makes available to its other outside directors. If Lead Lender designates
an
Observer to Viking's Board of Directors, then:
(i) such Observer shall have the right to attend, as an
observer,
all meetings
of Viking's Board of Directors and all meetings of
committees of Viking Board of Directors;
(ii) receive
copies
of all written documents and other
information (including copies of meeting minutes) provided to
Viking's
Board members in connection with Board Meetings and Board committee
meetings at the same time such materials and information are provided
to Viking's Board members;
(iii) if Viking
proposes to take any action through the written
consent of its Board of Directors, then Viking shall provide such
Observer with a written notice of such proposed Board actions prior
to
the effective date
thereof, describing in reasonable detail the nature
and substance of such action.
10.2. Financial Information. Viking shall furnish to Lead
Lender such
financial information
as may be reasonably
requested by Lead Lender. Such
financial information shall include, but not be limited to:
(i) audited financial
statements within one hundred twenty (120)
days of Viking's fiscal year end;
(ii) internally prepared financial statements within thirty (30)
days of each calendar month end; and
(iii) an annual budget
for the upcoming fiscal year by month
within thirty (30)
days of fiscal year
end. All financial reports
should include a balance sheet, income statement and statement of
cash
flows prepared in
accordance with GAAP,
accompanied by a
management
discussion and analysis of the appropriate reporting period.
15
<PAGE>
11.
Representations
and Warranties of
Viking. Viking makes
the following
representations and
warranties to each
Investor, which representations and
warranties shall be
true and correct as of
the date hereof and
for so long as
any portion of any Promissory Note remains outstanding:
11.1. Existence; Qualification; No Subsidiary. Viking is a
corporation
duly
incorporated, validly
existing and in good standing under the laws of
the
State of Nevada, and
has full corporate power and authority to conduct
its
business and own and operate its business as now conducted and
operated
and
as proposed to be
conducted. Viking is
licensed or qualified as a
foreign corporation
and is in good standing in each jurisdiction where it
is
required to be so licensed or qualified, except where the failure to be
so
licensed or qualified would not materially and adversely
affect Viking.
Viking has no subsidiaries.
11.2. Authorization and Enforceability; Issuance of Common
Shares.
(a) Viking has the
full power and
authority and has taken all
required corporate
and other action
necessary to permit Viking to
execute, deliver, and perform this Agreement, the Promissory Note,
the
Warrant, the
Security Instruments and the Registration Rights
Agreement and to issue the Securities, and none of such actions do or
will violate any provision of Viking's certificate of incorporation
or
by-laws, or
conflict with, result in the breach of,
constitute
a
default (or an event that, with notice or lapse of time or both,
would
constitute a default)
under, result in the creation of a Lien upon
Viking's capital stock
or the assets of Viking pursuant to, give any
third party the right to accelerate any material obligation under,
require any
authorization, consent
or approval or other action by or
notice to under, any agreement, instrument, or understanding to
which
Viking is a party or
by which it is
bound or any applicable law,
regulation,
order, or judgment. Each of these Loan Agreements
constitutes a
legal, valid, and binding obligation of Viking,
enforceable against Viking in accordance with its terms, except to
the
extent limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and
similar laws of
general application
related to the
enforcement of creditor's rights generally and general
principles of
equity. (b) The Common
Stock to be issued upon the conversion of the
Promissory Notes
and the exercise of the Warrants will be duly
authorized and,
when issued and
delivered in accordance with the
Promissory Notes and
Warrants,
respectively, will be
validly issued
and outstanding and will be fully paid and nonassessable. The copies
of the Articles of
Incorporation
and Bylaws of Viking
furnished to
Lead Lender's counsel
reflect all amendments made thereto at any time
prior to the Closing and are correct and complete in all
respects.
11.3. Capitalization. As of the date of this Agreement, the
authorized
capital stock of Viking is comprised of 100,000,000 shares of Common Stock
and
25,000,000 shares of preferred stock. As of the date of this
Agreement,
there are 30,608,650 shares of Common Stock outstanding, and no shares of
preferred stock outstanding. All of Viking's outstanding shares of Common
Stock are duly and validly issued, fully paid, and nonassessable and have
been
issued in compliance with all applicable laws. Except as set forth on
Schedule 11.3 or as
contemplated
by this Agreement, (i) there are no
outstanding options, convertible securities, warrants, debentures, phantom
stock, stock appreciation rights, preemptive rights, rights of
first offer,
16
<PAGE>
rights of first
refusal, antidilution
rights, registration rights, or
commitments of any
kind relating
to any issued or unissued shares of
capital stock (or
other equity
interests) of Viking;
(ii) Viking is not
subject to any
obligation (contingent
or otherwise) to repurchase or
otherwise acquire
or retire any Common Stock; and (iii) there are no
proxies, voting trust
agreements or similar
agreements or options granted
by
the holders of Common Stock.
11.4. Private
Sale. Subject to the accuracy of an Investor's
representations and warranties in this Agreement, neither the offer, sale,
and
issuance of the
Securities as
contemplated by this
Agreement nor the
issuance and delivery
of any Common Stock upon exercise of the Warrant or
pursuant to the conversion of the Promissory Notes requires or will
require
registration or
qualification
under the Securities Act or any state
securities laws.
Neither Viking, nor
any agent acting on Viking's behalf,
has
offered or
solicited or will offer or solicit
any offers to buy
any
securities from,
any Person or Persons
so as to require the
issuance or
sale
of the Securities
to be registered pursuant to the provisions of
Section 5 of the
Securities Act or
prevent Viking from utilizing the
provisions of Section 25102(f) of the California Corporate Securities Law
of
1968 or any
other applicable state securities law exemption from
qualification.
11.5. Disclosure.
Viking's Annual Report
on Form 10-K for the fiscal
year ended December 31, 2003, its Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 2004, June 30, 2004 and September
30, 2004,
and
its Current Reports
filed with the Securities and Exchange Commission
(collectively, the
"SEC Filings")
comply with the requirements of the
Securities Exchange
Act of 1934,
as amended ("Exchange Act"), in all
material respects, do
not contain any untrue statement of a material fact,
and
do not omit to state a
material fact
necessary in order to make the
statements therein, in the light of the circumstances under which
they were
made, not misleading.
The financial statements (together with the notes to
the
financial statements) included in the SEC Filings (the "Financial
Statements") are in accordance with the books and records of Viking
and the
Financial Statements
fairly and accurately present the financial condition
and
results of operations, the shareholders' equity and cash flows of
Viking, as of the dates and for the periods indicated, in accordance with
generally accepted
accounting principles
("GAAP") consistently
applied.
Viking has no material liabilities or obligations, absolute, contingent or
otherwise, other
than (a) liabilities set forth in the Financial
Statements, (b)
liabilities
incurred in the
ordinary course of
business
subsequent to September 30, 2004, and (c) obligations under contracts and
commitments incurred
in the ordinary
course of business and
not required
under GAAP to be reflected in such financial statements, which, in both
cases, individually or
in the aggregate, are not material to the financial
condition, operations or prospects of Viking.
11.6. Absence of Certain Changes.
(a) Except as set forth in Schedule 11.6, since September 30,
2004, Viking has not:
(i) incurred any liabilities, other than current liabilities
incurred, or
obligations under
contracts entered into, in the
ordinary course of business and consistent with past practice;
(ii) paid, discharged,
or satisfied
any claim,
lien, or
liability, other than any claim, lien, or liability (A)
reflected
17
<PAGE>
or reserved
against on the consolidated balance sheet as of
September 30, 2004
included in the
Financial Statements (the
"Current Balance
Sheet") and paid,
discharged, or
satisfied in
the ordinary course of business and consistent with past
practice
since the date of the Current Balance Sheet, or (B) incurred
and
paid, discharged,
or satisfied since the date of the Current
Balance Sheet in the ordinary course of business and
consistent
with past practice;
(iii) sold, leased,
assigned, or otherwise
transferred any
of its assets or
services, tangible or
intangible
(other than
sales in the ordinary course of business and consistent with
past
practice);
(iv) permitted any of its assets, tangible or intangible, to
become subject to any lien, security interest, or other charge
or
encumbrance (other than any Permitted Lien);
(v) written off as
uncollectible any
accounts
receivable,
except for accounts receivable aggregating not more than
$25,000;
(vi) terminated or
amended, or suffered
the termination or
amendment of, other
than in the ordinary
course of business and
consistent with
past practice, or failed to perform in all
material respects, all its obligations, or suffered or permitted
any material
default to exist
under, any
material agreement,
license, or permit;
(vii) suffered any damage, destruction, or loss of
tangible
property (whether
or not covered by insurance) that, in the
aggregate, exceeds $25,000;
(viii) made any loan
to any person or
entity (other
than
advances to employees
in the ordinary course of business and
consistent with past
practice that do not exceed $25,000 in the
aggregate);
(ix) cancelled,
waived, or released any debt, claim, or
right in an amount or having a value exceeding $25,000;
(x) paid any amount
to, or entered into any agreement,
arrangement, or
transaction with, any
affiliate (including
its
officers, directors,
and employees), other than payments of
salary and
benefits to employees in the ordinary course of
business and consistent with past practice;
(xi) declared,
set aside, or paid any dividend or
distribution with
respect to its capital
stock, or redeemed,
purchased, or otherwise acquired any of its capital stock;
(xii) other than in
the ordinary
course of business and
consistent with
past practice, granted any increase in the
compensation of any
officer or employee or made any other change
in employment terms of any officer or employee;
(xiii) issued or agreed to issue any securities of any kind,
whether or not pursuant to agreements or rights existing on or
before September 30, 2004, except pursuant to agreements
listed
in Schedule 11.3;
18
<PAGE>
(xiv) made any
change in accounting or cash management
practices;
(xv) suffered
or caused any other
occurrence,
event, or
transaction outside the ordinary course of business; or
(xvi) agreed,
in writing or otherwise, to any of the
foregoing.
(b) Since the
September 30, 2004
Balance Sheet,
there has not
been any material
adverse change (a
"Material Adverse
Change" or a
"Material Adverse
Effect") in the business, operations, properties,
prospects, assets or
condition of Viking,
excluding operating losses
in the ordinary
course of business, an no event has occurred or
circumstance exists that may result in such a Material Adverse
Change.
11.7. Litigation.
As of the date of this
Agreement, no claim,
suit,
proceeding, or
investigation
is pending or, to the
knowledge of
Viking,
threatened against or
affecting Viking or its officers or directors in
their capacities as such.
11.8. Licenses,
Compliance with Law, Other Agreements. Viking has all
material franchises,
permits, licenses, and other rights to allow it
to
conduct its business and is not in violation, in any material respect,
of
any
order or decree of any court, or of any law, order, or regulation of
any
governmental agency,
or of the provisions
of any material contract or
agreement to which it
is a party or by it is bound, and neither the Loan
Documents, nor the
transactions
contemplated
therein will result in
any
such
violation.
Viking has conducted
its business in compliance with all
applicable laws,
rules,
and regulations, except to the extent
non-compliance could
not reasonably be expected to have a Material Adverse
Effect on Viking.
11.9. Third-Party
Approvals.
Except as set forth in
Schedule 11.9,
Viking is not required to obtain any order, consent, approval, or
authorization
of, or to make any declaration or filing with, any
Governmental Agency
or other third party (including under any state
securities or "blue sky" laws) in connection with the execution, delivery
and
performance of the Loan Documents and related documents.
11.10 Assets.
(a) Viking has good and marketable title to, or a valid
leasehold
interest in, all of its properties of any kind other than
Proprietary
Information (as defined below) and interests in such properties,
which
constitute all the
properties
and interests in
property other
than
Proprietary
Information that are
used in the business
of Viking as
conducted or as currently proposed to be conducted, free and clear of
restrictions or
conditions
on transfer or
assignment
and free and
clear of Lines.
(b) Except as set
forth on Schedule
11.10(b), Viking has good
title to and exclusive ownership of all patents, patent applications,
trademarks, service marks and domain names, together with the
goodwill
of the business associated therewith, copyrights, trade names, mask
works, proprietary information, know-how, processes, models,
designs,
trade secrets,
customer and supplier lists, market surveys, plans,
procedures and other
intellectual property
rights (collectively
the
19
<PAGE>
"Proprietary
Information"), which
are used or held for use in the
operation or conduct of the business of Viking as presently
conducted
and currently proposed to be conducted, free and clear of
restrictions
or conditions on transfer or assignment and free and clear of
payments
and fees and Liens. The business of Viking as presently
conducted and
as currently proposed to be conducted does not and to the knowledge
of
Viking, will not conflict or infringe with the Proprietary
Information
of others. No affiliate, officer, consultant or employee of Viking
has
any right in any of the Proprietary Information.
(c) Viking has taken commercially reasonable measures to protect
the secrecy, value and confidentiality of the Proprietary
Information.
Viking has not disclosed the contents of any Proprietary Information
to Persons other than
its officers and
employees or to other Persons
who have executed appropriate confidentiality agreements. To the
knowledge of Viking,
no officer, consultant
or employee of Viking is
under any restriction,
whether contractual,
or by virtue of previous
employment or
otherwise, that would prevent such Person from
performing his or her
duties for Viking or prevent Viking from using
the Proprietary
Information.
Viking
is not a party to any
nondisclosure or
confidentiality
agreements not entered
into in the
ordinary course of business.
(d) Viking owns, or has a valid leasehold interest in, all of
the
equipment and other
fixed assets of Viking
which are necessary
and
sufficient for the
efficient operation of the business of
Viking as
currently conducted
and currently proposed to be conducted and all of
such assets are in
good operating
condition,
normal wear and tear
excepted.
11.11 Employee Compensation. All forms, reports and documents filed
by
Viking with the SEC on or after January 28, 2004 ("SEC Reports") list all
executive officers of Viking and a description of all forms of
compensation
and
employee benefits
payable to them
required to be
disclosed therein.
Except as set forth in the SEC Reports or on Schedule 11.11,
Viking is not
a
party to or bound by any employment agreement not terminable at will
or
having more than one
month's severance
pay or which
requires, or which
could require,
compensation and benefits of more than Six Thousand Dollars
($6,000) per month, collective employment contracts, deferred compensation
agreements, bonus
plans, profit sharing plans, pension plans or any other
plans or programs subject to ERISA or health, disability, sick pay
or other
employee benefits.
Viking believes that relations with its
employees are
satisfactory
11.12 Material
Agreements. Except as
attached as exhibits to the SEC
Reports or on Schedule
11.12, Viking is not a
party to, nor is any of its
property bound by, (a) any agreement requiring the performance by
Viking of
any
obligation for a period of time extending beyond one year from the
date
hereof, calling
for or which
could result in the payment or receipt of
c
