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
<PAGE>
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.
2
<PAGE>
(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.
3
<PAGE>
(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.
4
<PAGE>
(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.
5
<PAGE>
(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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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,
12
<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.
14
<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
