Exhibit 10.1

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.

 

VIKING SYSTEMS, INC.

SECURED PROMISSORY NOTE

 

US$1,000,000 August 13, 2012

FOR VALUE RECEIVED, the undersigned, Viking Systems, Inc., a Delaware
corporation (the “Company”), hereby promises to pay, without setoff or
counterclaim (except as expressly provided herein), on the terms and conditions
of this Promissory Note (as it may be amended from time to time, this “Note”),
to the order of CONMED Corporation, a New York corporation (together with its
permitted successors, assigns and tranferees, the “Holder”), the lesser of (a)
the principal amount of one million United States Dollars (US$1,000,000) and (b)
the aggregate unpaid principal amount of all advances (each a “draw”) made by
the Holder to the Company from time to time hereunder (such lesser amount, the
“Principal Amount”), with simple interest thereon as set forth herein, on the
earlier to occur of (i) the Maturity Date and (ii) when declared due and payable
by the Holder in writing upon the occurrence of an Event of Default.

Subject to the terms and conditions of this Note, the Company shall have the
right to draw upon this Note (a) on the date hereof, an amount equal to five
hundred thousand United States Dollars (US$500,000), and (b) on or after the
date that is thirty (30) days after the date hereof, an amount equal to five
hundred thousand United States Dollars (US$500,000). The aggregate principal
amount of all draws under this Note shall not exceed one million United States
Dollars (US$1,000,000). The Holder shall deliver the amount of any draw to the
Company on the requested date of the draw by wire transfer or such other means
as is mutually agreed by the Holder and the Company; provided that the Company
shall provide the Holder with written notice of the second draw hereunder at
least ten (10) days prior to the requested date of such second draw. The date
and amount of each draw made by the Holder to the Company, and each payment made
on account of the Principal Amount, shall be recorded by the Holder on its books
and, prior to any transfer of this Note, endorsed by the Holder on a schedule
attached hereto or any continuation thereof; provided that the failure of the
Holder to make any such recordation or endorsement shall not affect the
obligations of the Company to make a payment when due of any amount owing under
this Note in respect of the draws made hereunder.

All capitalized terms used and not otherwise defined in this Note shall have the
respective meanings set forth in the Merger Agreement (as defined below).

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Section 1
DEFINITIONS

 

1.1Definitions. In this Note, unless the context otherwise requires, the
following words and expressions have the following meanings:

 

 “Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Collateral” has the meaning given such term in Section 4.1.

 

“Company” has the meaning given such term in the first introductory paragraph
hereof.

 

“Default” means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default.

 

“Default Rate” means the rate equal to the Interest Rate plus 2.0% per annum.

 

“draw” has the meaning given such term in the first introductory paragraph
hereof.

 

“Event of Default” has the meaning given such term in Section 8.1.

 

“Holder” has the meaning given such term in the introductory paragraph hereof.

 

“Indebtedness” means, with respect to a specified Person, (a) all indebtedness
of such Person for borrowed money; (b) all obligations of such Person for the
deferred purchase price of property or services (other than trade payables
incurred in the ordinary course of business irrespective of when paid); (c) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments; (d) all obligations and liabilities of such Person created
or arising under any conditional sales or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights
and remedies of the lessor, seller and/or lender thereunder are limited to
repossession or sale of such property; (e) all capitalized lease obligations of
such Person; (f) all aggregate mark-to-market exposure of such Person under
hedging agreements; (g) all obligations referred to in clauses (a) through (f)
of this definition of another Person guaranteed by the specified Person or
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien upon property owned by the
specified Person, whether or not the specified Person has assumed or become
liable for the payment of such Indebtedness.

 

“Indemnitees” has the meaning given such term in Section 11.4.

 

“Indemnified Matters” has the meaning given such term in Section 11.4.

 

“Interest Rate” means for any day a fluctuating rate per annum equal to the Wall
Street Journal Rate (as defined below) plus two percent (2%) per annum.

 

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“Maturity Date” means the date that is ninety (90) calendar days following the
earlier to occur of (x) the termination of the Merger Agreement for any reason
and (y) the Closing Date (as defined in the Merger Agreement); provided,
however, that, if (i) the Company terminates the Merger Agreement pursuant to
Section 8.3(b) thereof and/or (ii) the Company enters into an Alternative
Acquisition Agreement, then the “Maturity Date” means the date that is two (2)
Business Days after the earlier to occur of the events described in clauses (i)
and (ii).

“Merger Agreement” means that certain Agreement and Plan of Merger, dated as of
the date hereof, by and among the Company, the Holder, and Arrow Merger
Corporation.

“Note” has the meaning given such term in the first introductory paragraph
hereof.

“Permitted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges that are not yet due and payable or are being contested in good faith by
appropriate proceedings and as to which the Company has set aside adequate
reserves; (b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens, in each case, incurred in the
ordinary course of business for sums not yet due and payable; (c) Liens to
secure (or to obtain letters of credit that secure) the performance of tenders,
statutory obligations, surety bonds, appeal bonds, bids, leases (other than
capitalized leases), performance bonds, purchase, construction or sales
contracts and other similar obligations, in each case not incurred or made in
connection with the borrowing of money, the obtaining of advances or credit or
the payment of the deferred purchase price of property; (d) any attachment or
judgment Lien (provided that such Lien does not result in an Event of Default
hereunder); and (e) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances, in each
case incidental to, and not interfering with, the ordinary conduct of the
business of the Company (provided that such Liens do not, in the aggregate,
materially detract from the value of such property).

“Principal Amount” has the meaning given such term in the first introductory
paragraph hereof.

“Secured Obligations” has the meaning given such term in Section 4.1.

“UCC” has the meaning given such term in Section 4.1.

“Wall Street Journal Rate” means a rate of interest per annum equal to the
“prime rate” as published from time to time in the “Money Rates” section of the
Wall Street Journal as the average prime lending rate in effect for large U.S.
banks (whether or not such rate has actually been charged by any such bank), or
if the Wall Street Journal ceases publication or ceases publishing the “prime
rate” on a regular basis, such other regularly published average prime rate
applicable to such commercial banks as is acceptable to the Holder in its
reasonable discretion.

1.2Headings. Section headings in this Note are included herein for convenience
of reference only and shall not constitute a part of this Note for any other
purpose.

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SECTION 2
INTEREST

2.1Interest

 

(a)This Note shall bear interest at the Interest Rate on the outstanding
Principal Amount commencing on the date hereof through payment in full of this
Note. Interest shall accrue on a daily basis, and accrued interest shall be due
and payable in cash at the time of payment of all or any portion of the
Principal Amount. Interest shall be calculated on the basis of a 360 day year
and the actual number of days elapsed during which it accrues. Interest shall
compound annually on the anniversary of the issuance of this Note.    

(b)Upon written notice by the Holder to the Company of the occurrence of any
Event of Default and after any applicable cure period as described in Section
8.1, the outstanding balance of the Principal Amount shall bear interest at the
Default Rate commencing on the date of notice to the Company of such Event of
Default. Such default interest shall be payable on demand, and shall accrue on
the outstanding Principal Amount until the earlier of (i) waiver or cure (to the
reasonable satisfaction of the Holder) of the applicable Event of Default and
(ii) agreement of the Holder to rescind the charging of interest at the Default
Rate.

SECTION 3
PAYMENT

3.1Repayment. A single and final payment of the entire outstanding Principal
Amount, accrued interest and other amounts payable hereunder shall be due and
payable in full on the Maturity Date.

 

3.2Optional Prepayment. The Company shall be permitted to prepay this Note, in
whole or in part at any time prior to the Maturity Date. Amounts repaid or
prepaid may not be reborrowed. All partial prepayments hereunder shall be
applied first to accrued and unpaid interest and thereafter to the outstanding
Principal Amount, and shall reduce the total amount owed by the Company on the
Maturity Date accordingly.

 

3.3Certain Mandatory Prepayments.

 

(a)Promptly but in any event within thirty (30) Business Days after the receipt
by the Company or any of its Subsidiaries of any net cash proceeds from any
transaction, or series of related transactions, pursuant to which the Company or
its Subsidiaries conveys, sells, leases or subleases, assigns, transfers or
otherwise disposes of any part of its or their respective businesses, properties
or assets (whether now owned or hereafter acquired) to any other Person in
excess of twenty-five thousand United States Dollars (US$25,000) in the
aggregate during any fiscal year, the Company shall cause one hundred percent
(100%) of such net cash proceeds received during such fiscal year to be applied
to prepay the amounts outstanding under this Note.

 

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(b)All prepayments under this Section 3.3 shall be accompanied by all accrued
and unpaid interest on the amounts being prepaid. Notwithstanding anything to
the contrary contained in this Section 3.3, any conveyance, sale, lease or
sublease, assignment, transfer or other disposition of assets of the Company in
the ordinary course of business shall not require the Company to prepay any
amounts outstanding under this Note.

3.4Manner of Payment. Each payment in cash by the Company on account of all or
any portion of the Principal Amount or accrued interest hereunder and any other
amount owed to the Holder under this Note shall be made not later than 1:00 p.m.
(New York time) on the date specified for payment under this Note to the Holder
at its office located at the address for notices as provided in Section 11.1
below, by wire transfer to an account designated by the Holder in writing or as
otherwise directed by the Holder, in lawful money of the United States of
America in immediately available funds. Any payment received by the Holder after
1:00 p.m. (New York time) shall be deemed received on the next Business Day.
Receipt by the Holder at or prior to 1:00 p.m. (New York time) on any Business
Day shall be deemed to constitute receipt by the Holder on such Business Day.

Section 4
GRANT OF SECURITY

4.1Grant of Security. The Company hereby grants to the Holder a security
interest, as that term is defined in the Uniform Commercial Code of Delaware
(the “UCC”), in the Collateral (as hereinafter defined), as security for the
payment and performance of all the obligations of the Company under and in
connection with this Note now or hereafter existing, whether for the Principal
Amount, interest, fees, expenses or otherwise (all such obligations of the
Company, the “Secured Obligations”). The Company, as security for the Secured
Obligations, hereby assigns, pledges, transfers and sets over unto the Holder
and its successors and assigns, and hereby grants to the Holder a continuing
security interest in, all of the Company’s right, title and interest in and to
all of the Company’s now existing or hereafter acquired tangible and intangible
properties, including, without limitation, a first lien on all present and
future assets of the Company and its subsidiaries (such properties and assets,
the “Collateral”).    

4.2UCC Filings. This Note secures the payment and performance of all of the
Secured Obligations, and by its execution hereof, the Company authorizes the
Holder to file any and all documents necessary or advisable to properly perfect
a security interest in the Collateral, including, but not limited to, the filing
of such UCC-1 Financing Statements with the Secretaries of State in any and all
jurisdictions deemed advisable by the Holder. Upon the payment in full of the
Secured Obligations to the satisfaction of the Holder in its sole discretion,
the security interest granted hereby shall terminate, all rights in and to the
Collateral shall revert to the Company and the Holder shall duly file, at the
expense of the Company, such UCC-3 Amendments necessary to terminate the
Holder’s security interest hereunder.

 

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4.3Preservation of Security Interest. The Company hereby represents and warrants
to the Holder that no other security interests have been granted (other than
those that have fully terminated) and no other Liens exist on the Collateral
other than the security interest granted hereby to the Holder, and upon the
filing of a financing statement with the Secretary of State of Delaware that
describes the Collateral, the Holder will have a first priority security
interest in all such Collateral that may be perfected by filing a financing
statement under the Delaware UCC. The Company hereby agrees: (a) it shall
diligently preserve and protect the Holder’s security interest in the
Collateral; (b) the Holder’s security interest shall remain a first priority
lien on the Collateral for so long as any Secured Obligations shall remain
outstanding; and (c) the Company shall not grant any security interest in the
Collateral to any other person prior to the repayment in full in cash of this
Note.    

4.4Remedies on Default. If any Event of Default shall occur and be continuing,
the Holder may, in its sole discretion, (i) to the full extent permitted by Law
take possession and control of all or any part of the Collateral and any
proceeds thereof and the books and records pertaining thereto, with or without
judicial process, and (ii) without demand or notice (and if notice is required
by Law, after five (5) Business Days’ prior written notice), proceed to exercise
one or more of the rights and remedies accorded to a secured party by the UCC
and otherwise by Law or by the terms hereof. The Holder’s rights and remedies
shall include, without limitation, the power to sell all or any portion of the
Collateral at public or private sale at such place and time and on such terms as
Holder may see fit (subject to the requirements of applicable Law). Without
precluding any other methods of sale, the sale of Collateral shall be deemed to
have been made in a commercially reasonable manner if conducted in conformity
with reasonable commercial practices of secured parties disposing of similar
property, but in any event, the Holder may sell the Collateral on such terms as
the Holder may choose without assuming any credit risk and without any
obligation to advertise or give notice of any kind not expressly required under
this Note, by the UCC or otherwise. All of the rights and remedies of the Holder
under this Note shall be cumulative and not exclusive of other rights and
remedies which it otherwise would have, whether under the UCC or otherwise. The
Holder shall not be under any obligation to marshal any assets in favor of
Company or any other person or against or in payment of this Note.

Section 5
CONDITIONS PRECEDENT TO DRAWS

The obligation of the Holder to honor any request for a draw is subject to the
following conditions precedent:

5.1Representations and Warranties of the Company. The representations and
warranties of the Company set forth in Section 6 shall be true and correct in
all respects on and as of the date of such draw (except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall be true and correct as of such
earlier date);

 

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5.2Tender Offer Conditions. Each of the Tender Offer Conditions shall be
satisfied as of the date of such draw, other than (a) the Minimum Tender
Condition, and (b) delivery of the certificate contemplated by clause (iv) of
Annex B of the Merger Agreement;    

5.3Performance of Obligations of the Company. The Company shall have performed
in all material respects all obligations required to be performed by it under
this Note on or prior to the date of such draw;    

5.4Event of Default. No Event of Default or default that with the passage of
time would constitute an Event of Default shall exist, or would result from such
proposed draw or from the application of the proceeds therefrom; and    

 5.5Certificate. The Holder shall have received a certificate signed by an
officer of the Company in the form attached hereto as Annex A.

Section 6
REPRESENTATIONS AND WARRANTIES

In order to induce the Holder to enter into this Note, the Company hereby
represents and warrants to the Holder that:

6.1Organization, Qualifications. The Company is a Delaware corporation, duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and has all requisite corporate or similar power and authority to own,
lease and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a
foreign corporation or other legal entity in each jurisdiction where the
ownership, leasing or operation of its assets or properties or conduct of its
business requires such qualification, except where the failure to be so
organized, qualified or in good standing, or to have such power or authority
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

 

6.2Corporate Authority; Approval; Validity. The Company has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Note. This Note
has been duly executed and delivered by the Company and constitutes a valid and
binding agreements of the Company enforceable against the Company in accordance
with their respective terms, subject to the Bankruptcy and Equity Exception.    
 6.3Governmental Filings; No Violations. No notices, reports or other filings
are required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Company from, any Governmental Entity, in connection with the execution,
delivery and performance of this Note by the Company and the consummation of the
transactions contemplated hereby other than filings made with the U.S.
Securities and Exchange Commission. The execution, delivery and performance of
this Note by the Company does not, and the consummation of the transactions
contemplated hereby will not, constitute or result in (a) a breach or violation
of, or a default under, the certificate of incorporation or by-laws of the
Company, (b) with or without notice, lapse of time or both, a breach or
violation of, a termination (or right of termination) or a default under, the
creation or acceleration of any obligations under or the creation of a Lien on
any of the assets of the Company pursuant to any Contract binding on the Company
or under any Law to which the Company is subject, (c) the loss or impairment of,
payment of any additional amounts with respect to, or the consent of any other
Person being required in respect of, the Company’s right to own or use any
Intellectual Property, or (d) any change in the rights or obligations of any
party under any Contract binding on the Company.

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Section 7
Covenants

7.1Affirmative Covenants. The Company covenants to the Holder that, from the
date hereof until all amounts owing hereunder have been paid in full, the
Company shall (and shall, except in the cases of clause (a) and (b), cause its
Subsidiaries to):    

(a)punctually pay the Principal Amount and/or any interest payable on this Note,
and any other amount due and payable under this Note in the manner specified in
this Note;    

(b)give written notice promptly to the Holder of: (i)  any condition or event
that constitutes an Event of Default, (ii)  any written notice from any Person
to the Company or any of its Subsidiaries with respect to any claimed default or
event of default under any Contract, (iii)  any material litigation filed or
threatened against the Company or any of its Subsidiaries, (iv)  any notice of
material default given by any counterparty to the Company or any of its
Subsidiaries under any contract such counterparty has with the Company or any of
its Subsidiaries, or (v)  the occurrence of any event that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, in each case which notice includes a certificate specifying the
nature and period of existence of such condition or event, or specifying the
notice given or action taken by any such Person and the nature of such claimed
default or event of default, event or condition, and what action the Company or
its applicable Subsidiary has taken, is taking and proposes to take with respect
thereto;    

(c)preserve and maintain its and its Subsidiaries’ legal status, rights,
franchises and privileges in the jurisdiction of its and their respective
organization and qualify and remain qualified as a foreign corporation or other
entity, as applicable, in each jurisdiction in which such qualification is
necessary or desirable in view of its and their respective businesses and
operations or the ownership or lease of its and their respective properties,
except in each case where the failure to maintain such existence, rights,
franchises, privilege or qualification would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;    

(d)comply in all material respects with the requirements of all (i) applicable
Laws and (ii) contractual obligations of the Company and its Subsidiaries,
except where the failure to comply would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;

 

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(e)execute and deliver, or cause to be executed and delivered, upon the request
of the Holder and at the Company’s expense, such additional documents,
instruments and agreements as the Holder may determine to be reasonably
necessary to carry out the provisions of this Note and the transactions and
actions contemplated hereunder;    

(f)maintain proper books of record and account, in which entries that are full,
true and correct in all respects and are in conformity with applicable
accounting principles consistently applied shall be made of all material
financial transactions and matters involving the assets and business of the
Company and its Subsidiaries; and    

(g)use the proceeds of each draw solely for general corporate purposes.    

7.2Negative Covenants. Without limiting any other provision of this Note, the
Company shall not, and shall not permit any of its Subsidiaries to, do or take
any action on or following the date hereof with respect to any of the following:

(a)issue notes or otherwise incur any Indebtedness for borrowed money after the
date hereof without the prior written consent of the Holder other than any
Indebtedness the proceeds of which are used to prepay this Note in whole or in
part;    

(b)create, incur, assume or permit to exist, directly or indirectly, any (i)
Lien securing Indebtedness for borrowed money except Permitted Liens and (ii)
Liens securing obligations other than Indebtedness for borrowed money;    

(c)cease to conduct or carry on the business of the Company or its Subsidiaries
substantially as conducted on the date hereof or as proposed to be conducted or
materially change any part of its business activities or take any action that
would result in a Material Adverse Effect;    

(d)effect the sale, transfer or license, in a single transaction or a series of
transactions, of any material assets;    

(e)avoid or seek to avoid the observance or performance of any of the terms of
this Note through any reorganization, recapitalization, transfer of assets or
other voluntary action;    

(f)(i) liquidate or dissolve, consolidate with, or merge into or with, any other
corporation (provided that this clause (i) shall not prohibit a merger or
consolidation involving only the Company and one or more of its Subsidiaries
pursuant to which the Company is the surviving party); or (ii) purchase or
otherwise acquire all or substantially all of the capital stock or assets of any
Person (or of any division or business unit thereof); or

 

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(g)declare or make, directly or indirectly, any dividend or other distribution
(whether in cash, securities or other property) with respect to any equity
interest in the Company or any of its Subsidiaries, or any payment (whether in
cash, securities, or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of such equity interest, or on account
of any return of capital to the holders of equity interests of the Company or
its Subsidiaries, in each case without the prior written consent of the Holder.

Section 8
events of default

8.1 Events of Default. The occurrence of any one or more of the following events
shall constitute an “Event of Default”:    

(a)the Company shall fail to pay any of the Principal Amount of or accrued
interest under this Note when due in accordance with the terms hereof;    

(b)the Company shall fail to pay any amount (other than the Principal Amount or
accrued interest) that is payable hereunder, when due in accordance with the
terms hereof and such failure of payment has continued for thirty (30) days
after being notified of such failure by the Holder;    

(c)any representation, warranty, certification or statement made by or on behalf
of the Company in this Note shall have been incorrect, misleading or false when
made and such inaccuracy has continued for five (5) Business Days after the
earlier of (i) the date on which the Company becomes aware of such inaccuracy
and (ii) the date on which the Company has been notified of such inaccuracy in
writing by the Holder;    

(d)the Company shall default in the due observance or performance of any
covenant, condition, agreement or provision contained in this Note and (other
than with respect to the covenants made in Section 7.2 for which no cure period
shall apply) such breach has continued for five (5) Business Days after the
earlier of (i) the date on which the Company becomes aware of such inaccuracy
and (ii) the date on which the Company has been notified of such inaccuracy in
writing by the Holder;    

(e)any Person or group of Persons other than the Holder or its Subsidiaries
shall have acquired a majority of the issued and outstanding Shares or otherwise
shall have acquired a majority of the voting power of the Company;

 

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(f)(1) the Company or any of its Subsidiaries shall commence any case,
proceeding or other action (a) under any Law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (b)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets; or (2)
there shall be commenced against the Company or any of its Subsidiaries any
case, proceeding, petition or other action of a nature referred to in clause (1)
above that (a) results in the entry of an order for relief or any such
adjudication or appointment or (b) remains undismissed or unstayed for a period
of seven (7) days; or (3) there shall be commenced against the Company or any of
its Subsidiaries any case, proceeding, petition or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets, or seeking appointment of a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any substantial part of its assets, in each case that results
in the entry of an order for any such relief or appointment that shall not have
been vacated, discharged or stayed within sixty (60) days after the entry
thereof; (4) the Company or any of its Subsidiaries shall (a) make a general
assignment for the benefit of its creditors, or (b) shall admit its inability to
pay its debts when they become due; (5) there shall be any order, judgment or
decree entered against the Company or any of its Subsidiaries decreeing the
dissolution or split up of the Company or any of its Subsidiaries and such order
shall remain undismissed or unstayed for a period in excess of sixty (60) days;
or (6) the Company or any of its Subsidiaries shall cease to carry on all or any
substantial part of its business in the ordinary course;    

(g)the Company or any of its Subsidiaries forfeits or is otherwise deprived of
any permits, easements, consents or licenses required to carry on any material
portion of its business, or the Company or any of its Subsidiaries files for, or
an event occurs, which can reasonably be expected to result in the Company’s or
any of its Subsidiaries’ dissolution or termination;    

(h)there is entered against the Company or its Subsidiaries a final judgment or
order for the payment of money in an aggregate amount exceeding $1,000,000 and
such judgment or order shall remain unsatisfied or without a stay in respect
thereof for a period of sixty (60) days;    

(i)the Company or any of its Subsidiaries shall fail to pay when due any
obligation, whether direct or contingent, for Indebtedness, or shall breach or
default with respect to any term of any loan agreement, mortgage, indenture or
other agreement pursuant to which such obligation was created or securing such
obligation if the effect of such breach or default is to cause, or to permit the
holder or holders of that Indebtedness (or a trustee on behalf of such holder or
holders), to cause that Indebtedness to become or be declared due and payable
(or redeemable) prior to its stated maturing or the stated maturity of any
underlying obligation, as the case may be; or    

(j)any other event occurs that has had or would reasonably be expected to have a
Material Adverse Effect.

 

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8.2Notice by the Company. Upon the occurrence of an Event of Default, the
Company shall give the Holder prompt notice in writing of the occurrence of such
Event of Default.     8.3Consequence of Event of Default. Upon the occurrence
and during the continuance of an Event of Default, (i) upon notice pursuant to
Section 2.1(a), the outstanding balance of the Principal Amount shall bear
interest at the Default Rate from the date of such Event of Default and (ii) the
Holder may, by notice in writing to the Company, declare the then outstanding
Principal Amount of this Note, together with any accrued and unpaid interest due
hereunder, to be forthwith due and payable and all such amounts shall be
immediately due and payable.

SECTION 9
REGISTRATION AND TRANSFER OF NOTE

9.1 Register.  The Company shall keep at its principal office a register in
which the Company shall provide for the registration of this Note and record the
name and address of the Holder.  The Holder shall notify the Company of any
change of name or address and promptly after receiving such notification the
Company shall record such information in such register.     9.2 Transfer. This
Note and all rights hereunder may not be assigned, pledged, encumbered or
otherwise transferred by the Holder under any circumstances unless the Company
has consented in writing to such assignment, pledge, encumbrance or transfer.

SECTION 10
GOVERNING LAW; JURISDICTION

10.1GOVERNING LAW AND JURISDICTION.

 

(a)Governing Law. This Note (including any claim or controversy arising out of
or relating to this Note) shall be construed and governed by and in accordance
with the Laws of the State of Delaware without regard to conflict of Law
principles thereof to the extent that such principles would direct a matter to
another jurisdiction.    

(b)Consent to Jurisdiction and Service. Each of the Company and the Holder
hereby irrevocably submits to the personal jurisdiction of the courts of the
State of Delaware and the Federal courts of the United States of America located
in the State of Delaware solely in respect of the interpretation and enforcement
of the provisions of this Note, and in respect of the transactions contemplated
hereby, and hereby waives, and agrees not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in said courts or that the venue
thereof may not be appropriate or that this Note may not be enforced in or by
such courts, and each of the Company and the Holder irrevocably agrees that all
claims relating to such action, proceeding, or transactions shall be heard and
determined in such a Delaware State or Federal court. Each of the Company and
the Holder hereby consents to and grants any such court jurisdiction over the
person of such parties and, to the extent permitted by applicable Law, over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 11.1 or in such other manner as may be permitted by Law shall be valid
and sufficient service thereof.

 

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Section 11
Miscellaneous

11.1Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, by
facsimile or overnight courier:

  (a) if to the Company, to:             Viking Systems, Inc.       134 Flanders
Road       Westborough, MA  01581       Attention: Robert Mathews, Chief
Financial Officer       Fax: (508) 366-8858               with a copy (which
shall not constitute notice) to:               Trombly Business Law, PC      
1320 Centre Street, Suite 202       Newton, MA  02459       Attention: Amy
Trombly, Esq.       Fax: (617) 663-6164           (b) if to the Holder, to:    
        CONMED Corporation       525 French Road       Utica, New York 13502    
  Attention: General Counsel     Fax: (315) 793-8929               with a copy
(which shall not constitute notice) to:               Sullivan & Cromwell LLP,  
    125 Broad Street       New York, NY  10004

      Attention: Bob Downes         Melissa Sawyer       Fax:  (212) 558-3588

or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above. Any notice, request, instruction
or other document given as provided above shall be deemed given to the receiving
party upon actual receipt, if delivered personally; three (3) Business Days
after deposit in the mail, if sent by registered or certified mail; upon
confirmation of successful transmission if sent by facsimile (provided that if
given by facsimile such notice, request, instruction or other document shall be
followed up within one (1) Business Day by dispatch pursuant to one of the other
methods described herein); or on the next Business Day after deposit with an
overnight courier, if sent by an overnight courier.

 

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11.2Amendments;Waivers. This Note may not be amended or modified, and no
provisions hereof may be waived, without the written consent of the Company and
the Holder. Except as expressly agreed in writing by the Holder, no extension of
time for payment of this Note, or any installment hereof, and no alternation,
amendment or waiver of any provision of this Note shall release, discharge,
modify, change or affect the liability of the Company under this Note.

11.3Expenses. All of the Holder’s costs of enforcing its rights hereunder,
including any costs of collection, administering the Note, addressing any
requests for amendments or waivers and any reasonable attorney’s fees in
connection therewith, shall be paid by the Company.

11.4Indemnification. The Company agrees to defend, protect, indemnify and hold
harmless the Holder and its Subsidiaries and their officers, directors,
trustees, employees, agents and advisors (collectively called the “Indemnitees”)
from and against any and all claims, losses, demands, settlements, damages,
liabilities, obligations, penalties, fines, fees, reasonable costs and expenses
(including, without limitation, reasonable attorneys’ fees, costs and expenses,
but excluding income, franchise and similar Taxes of an Indemnitee) incurred by
such Indemnitees, whether prior to or from and after the date hereof, as a
result of or arising from or relating to or in connection with any of the
following: (a) the Holder’s furnishing of funds to the Company under this Note,
(b) any matter relating to the financing transactions contemplated by this Note,
(c) any claim, litigation, investigation or administrative or judicial
proceeding in connection with any transaction contemplated in, or consummated
under, the Note or (d) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party
thereto (collectively, the “Indemnified Matters”); provided, however, that the
Company shall not have any obligation to any Indemnitee under this Section 11.4
for any Indemnified Matter to the extent resulting from the bad faith, gross
negligence or willful misconduct of such Indemnitee. Such indemnification for
all of the foregoing losses, damages, fees, costs and expenses of the
Indemnitees shall be due and payable promptly after demand therefor. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section 11.4 may be unenforceable because it is violative of any Law or
public policy, the Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable Law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. This
Indemnity shall survive the repayment of this Note.

11.5Waiver. The Company hereby waives diligence, presentment, protest and
demand, notice of protest, notice of dishonor, notice of nonpayment and any and
all other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note. The Company further waives, to
the full extent permitted by Law, the right to plead any and all statutes of
limitations as a defense to any demand on this Note.

 

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11.6Entire Agreement. This Note and the Merger Agreement constitute the entire
agreement of the Company and the Holder with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both oral and
written, between the Company and the Holder with respect to the subject matter
hereof.

11.7Counterparts. This Note may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

11.8Severability. If any provision of this Note shall be declared void or
unenforceable by any judicial or administrative authority, the validity of any
other provision and of the entire Note shall not be affected thereby.

[Signature page follows]

 

 

IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by its
officer or director thereunto duly authorized, on the date first above written.

 

  Viking Systems, Inc.           By: /s/ John Kennedy     Name: John “Jed”
Kennedy     Title: President and Chief Executive Officer

AGREED AND ACCEPTED:

CONMED Corporation

By: /s/ Daniel S. Jonas     Name: Daniel S. Jonas     Title: Vice
President-Legal Affairs, General Counsel

 

[Signature Page to Promissory Note]

 

 

Annex A

 

Form of Officer’s Certificate

 

Certificate of VIKING SYSTEMS, INC.

 

This Certificate is delivered in connection with that certain Promissory Note,
dated August 13, 2012 (as amended, the “Note”), delivered by Viking Systems,
Inc., a Delaware corporation, to CONMED Corporation, a New York corporation. All
capitalized terms used herein and not otherwise expressly defined herein shall
have the respective meanings given such terms in the Note.

 

The undersigned, [insert name of officer], on behalf of the Company, in his
capacity as an officer of the Company and not in his personal capacity, does
hereby certify that:

 

(a) the representations and warranties of the Company set forth in Section 6 of
the Note are true and correct in all respects on and as of the date hereof
(except to the extent such representations and warranties specifically relate to
an earlier date, in which case such representations and warranties shall be true
and correct as of such earlier date);

 

(b) as of the date hereof, each of the Tender Offer Conditions is satisfied,
other than (x) the Minimum Tender Condition, and (y) delivery of the certificate
contemplated by clause (iv) of Annex B of the Merger Agreement;

 

(c) the Company has performed in all material respects all obligations required
to be performed by it under the Note on or prior to the date hereof; and

 

(f) no Event of Default or default that with the passage of time would
constitute an Event of Default exists, or would result from the proposed draw or
from the application of the proceeds therefrom.

 

IN WITNESS WHEREOF, I have hereunto set my hand as of the _____ day of [insert
date of proposed draw].

 

By:                                           
Name:
Title: