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EXHIBIT 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into as
of this 5th day of May, 2011, by and among Viking Systems, Inc., a Delaware
corporation (the “Company”), and the “Investors” named in that certain Purchase
Agreement by and among the Company and the Investors (the “Purchase Agreement”).
Capitalized terms used herein have the respective meanings ascribed thereto in
the Purchase Agreement unless otherwise defined herein.
 
The parties hereby agree as follows:
 
1.     Certain Definitions.
 
As used in this Agreement, the following terms shall have the following
meanings:
 
“Common Stock” means the Company’s common stock, $0.001 par value, and any
securities into which such shares may hereinafter be reclassified.
 
“Investors” means the Investors identified in the Purchase Agreement and any
Affiliate or permitted transferee of any Investor who is a subsequent holder of
any Warrants or Registrable Securities.
 
“Liquidated Damages Cap” means that the Company will not pay in the aggregate,
more than 3% of the amount invested by each Investor to that Investor in
liquidated damages without regard to which clause in the Transaction
Documents  requires the Company to pay such damages.
 
“Midsummer Purchase Agreement” means the letter agreements, dated as of May 4,
2011, between Clinton Magnolia Master Fund, Ltd., and Midsummer Investment, Ltd.
 
“Prospectus” means (i) the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus, and (ii) any “free writing prospectus” as defined
in Rule 405 under the 1933 Act.
 
“Register,” “registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.
 
“Registrable Securities” means (i) the shares of Common Stock purchased by the
Investors pursuant to the Purchase Agreement and the Midsummer Purchase
Agreement, (ii) the Warrant Shares relating to the Warrants purchased by the
Investors pursuant to the Purchase Agreement and the Midsummer Purchase
Agreement, and (iii) any other securities issued or issuable with respect to or
in exchange for Registrable Securities; provided, that a security shall cease to
be a Registrable Security upon (a) sale pursuant to a Registration Statement or
Rule 144 (or other available exemption) under the 1933 Act, or (b) such security
becoming eligible for sale without restriction by the holder thereof pursuant to
Rule 144 (or other available exemption) under the 1933 Act assuming, in the case
of the Warrants, cashless exercise of the Warrants.
 

 
 

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“Registration Statement” means any registration statement of the Company filed
under the 1933 Act that covers the resale of any of the Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
 
“Required Investors” means the Investors holding a majority of the Registrable
Securities.
 
“SEC” means the U.S. Securities and Exchange Commission.
 
“Transaction Documents” means this Registration Rights Agreement, the Purchase
Agreement executed between the Company and Investors on the same date and the
Warrant issued by the Company pursuant to the Purchase Agreement.
 
“Warrants” means warrants to purchase shares of the Company’s Common Stock.
 
“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the Warrants.
 
“1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
 
2.     Registration.
 
(a)  Registration Statements.
 
(i)   Each Investor acknowledges that the Company’s Common Stock currently
trades on the Over the Counter Bulletin Board and that the Company is not
currently eligible to use Form S-3  for the Registration Statement(s) required
to be filed hereunder and is not eligible to use a “free writing prospectus”.
 
(ii)  Promptly following the closing of the purchase and sale of the securities
contemplated by the Purchase Agreement (the “Closing Date”) but no later than
sixty (60) days after the Closing Date (the “Filing Deadline”), the Company
shall prepare and file with the SEC one Registration Statement on Form S-1,
covering the resale of the Registrable Securities, subject to the limitation
contained in Section 2(a)(iv).  Subject to any SEC comments, such Registration
Statement shall include the plan of distribution attached hereto as Exhibit
A.  Such Registration Statement also shall cover, to the extent allowable under
the 1933 Act and the rules promulgated thereunder (including Rule 416), but
subject to the limitation contained in Section 2(a)(iv), such indeterminate
number of additional shares of Common Stock resulting from stock splits, stock
dividends or similar transactions with respect to the Registrable
Securities.  Such Registration Statement shall not include any shares of Common
Stock or other securities for the account of any other holder without the prior
written consent of the Required Investors.  The Registration Statement (and each
pre-effective amendment thereto that responds to SEC staff comments) shall be
provided in accordance with Section 3(c) to the Investors and their counsel
prior to its filing or other submission.  If a Registration Statement covering
the Registrable Securities is not filed with the SEC on or prior to the Filing
Deadline, the Company will make pro rata payments to each Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.0% of the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the Filing Deadline for which no Registration
Statement is filed with respect to the Registrable Securities, subject to the
Liquidated Damages Cap.  Such payments shall constitute the Investors’ exclusive
monetary remedy for such events, but shall not affect the right of the Investors
to seek injunctive relief.  Such payments shall be made to each Investor in cash
or in securities no later than three (3) Business Days after the end of each
such 30-day period.
 

 
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(iii)  Subsequent Registration Statement.  If the registration statement
described in Section 2(a)(ii) (the “Initial Registration Statement”) becomes, in
the Company’s best judgment, stale, or three years after the Initial
Registration Statement is declared effective by the SEC or if the Investor
reasonably believes that the Company can register additional Registrable
Securities consistent with Section 2(a)(iv) and the Company and its Counsel
concur; then upon the written demand of any Investor who holds Registrable
Securities that are not covered by a registration statement declared effective
by the SEC and available for resale (absent an Allowable Delay, as defined
below), but subject to the limitation contained in Section 2(a)(iv), the Company
shall prepare and file with the SEC a Registration Statement on Form S-1 (or
such other available Form) (a “Subsequent Registration Statement”).  Such
written demand will include the number and type of Registrable Securities the
Investor demands to be registered.  Notwithstanding the foregoing, the Company
will not be obligated to file a Registration Statement for Registrable
Securities that have a market value of less than $250,000 and the Company will
not be required to file more than one Registration Statement every six
months.  In the event the Company has commenced an underwritten public offering
of securities, the Company may defer its obligation to file a Subsequent
Registration Statement until three months after the completion of such offering
or such offering is terminated and no penalties or damages will accrue during
such deferral.  Subject to any SEC comments, such Registration Statement shall
include the plan of distribution attached hereto as Exhibit A.  Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), but subject to
the limitation contained in Section 2(a)(iv), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.  Such
Registration Statement shall not include any shares of Common Stock or other
securities for the account of any other holder without the prior written consent
of the Required Investors.  The Registration Statement (and each amendment
thereto that responds to SEC staff comments) shall be provided in accordance
with Section 3(c) to the Investors prior to its filing or other submission.  If
a Registration Statement covering the Registrable Securities is required to be
filed under this Section 2(a)(iii) and is not filed with the SEC within sixty
(60) Calendar Days of the request of any Investor or upon the occurrence of any
of the events specified in this Section 2(a)(iii) (the “Subsequent Registration
Statement Filing Deadline”), the Company will make pro rata payments to each
Investor, subject to the Liquidated Damages Cap, as liquidated damages and not
as a penalty, in an amount equal to 1.0% of the initial investment represented
by the Registrable Securities that the Investor has requested to be included on
the Registration Statement each 30-day period or pro rata for any portion
thereof following the Additional Shares Filing Deadline for which no
Registration Statement is filed with respect to the Additional Shares.  Such
payments shall constitute the Investors’ exclusive monetary remedy for such
events, but shall not affect the right of the Investors to seek injunctive
relief.  Such payments shall be made to each Investor in, at the Company’s
option, cash or in securities no later than three (3) Business Days after the
end of each such 30-day period.   The Investors’ rights to request additional
Registration Statements pursuant to this Section will terminate seven years
following execution of this Registration Rights Agreement.
 
 
 
 
 
 
 
 

 
 
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(iv)  Registration Limitation.  Notwithstanding anything to the contrary
contained herein, the Company shall not be required to register Registrable
Securities in excess of applicable SEC staff guidelines on the maximum allowable
registration of securities for resale by the Investors (which the parties
understand currently to be an amount equal to one-third of the Company's public
float).  To the extent that this maximum amount is less than the total amount of
Registrable Securities at the time any Registration Statement is required to be
filed, the Registrable Securities to be covered by such Registration Statement
shall be the following, in order, until the maximum amount is covered:  (1)
first, all of the Common Stock issuable upon exercise of the Warrants acquired
pursuant to the Midsummer Purchase Agreement;  (2) second, the Common Stock
acquired by Clinton Group, Inc. pursuant to the Purchase Agreement; (3) third,
the Common Stock acquired by all of the Investors excluding Clinton Group, Inc.
pursuant to the Purchase Agreement; and (4) fourth, the Warrants acquired by all
of the Investors pursuant to the Purchase Agreement.  Any cut-back imposed on
the Investors pursuant to this Section 2(a)(iv) shall be allocated among the
Investors on a pro-rata basis as to (3) and to (4) above in this Section.
 
(b)  Expenses.  The Company will pay all expenses associated with each
registration, including filing and printing fees, the Company’s counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws and listing fees but
excluding discounts, commissions, fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals with respect to the
Registrable Securities being sold.  The Company will pay the actual fees and
expenses of one counsel to the Investors to a maximum of $10,000.  The Company
will pay such fees within 30 calendar days of receipt of a reasonably detailed
bill from the Investors.
 
(c)  Effectiveness.
 
(i)   The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective as soon as practicable.  The Company
shall notify the Investors by facsimile or e-mail as promptly as practicable,
and in any event, within twenty-four (24) hours, after any Registration
Statement is declared effective and shall promptly after a written request by an
Investor, provide the Investors with printed copies of any related Prospectus to
be used in connection with the sale or other disposition of the securities
covered thereby.  If (A)(x) a Registration Statement covering the Registrable
Securities is not declared effective by the SEC prior to the earlier of (i) five
(5) Business Days after the SEC shall have informed the Company that no review
of the Registration Statement will be made or that the SEC has no further
comments on the Registration Statement or (ii) the ninetieth (90th) day after
the date the Registration Statement is first filed or (y) a Subsequent
Registration Statement is not declared effective by the SEC prior to the earlier
of (i) five (5) Business Days after the SEC shall have informed the Company that
no review of the Registration Statement will be made or that the SEC has no
further comments on the Registration Statement or (ii) the ninetieth day (90th)
day after the Subsequent Registration Statement Filing Deadline, or (B) after a
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to such Registration Statement for any reason (including, without
limitation, by reason of a stop order, or the Company’s failure to update the
Registration Statement), but excluding any Allowed Delay (as defined below)
then, subject to the Liquidated Damages Cap, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.0% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof following the date by which
such Registration Statement should have been effective (the “Blackout
Period”).  Such payments shall constitute the Investors’ exclusive monetary
remedy for such events, but shall not affect the right of the Investors to seek
injunctive relief.  The amounts payable as liquidated damages pursuant to this
paragraph shall be paid monthly within three (3) Business Days of the last day
of each month following the commencement of the Blackout Period until the
termination of the Blackout Period.  Such payments shall be made to each
Investor in cash or in securities at the Company’s option.
 

 
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(ii)  For not more than twenty (20) consecutive days or for a total of not more
than forty-five (45) days in any twelve (12) month period, the Company may
suspend the use of any Prospectus included in any Registration Statement
contemplated by this Section in the event that the Company determines in good
faith that such suspension is necessary to (A) delay the disclosure of material
non-public information concerning the Company, the disclosure of which at the
time is not, in the good faith opinion of the Company, in the best interests of
the Company or (B) amend or supplement the affected Registration Statement or
the related Prospectus so that such Registration Statement or Prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the case of the Prospectus in light of the circumstances under which they
were made, not misleading (an “Allowed Delay”); provided, that the Company shall
promptly (a) notify each Investor in writing of the commencement of an Allowed
Delay, (b) advise the Investors in writing to cease all sales under the
Registration Statement until the end of the Allowed Delay and (c) use
commercially reasonable efforts to terminate the Allowed Delay as promptly as
practicable.
 
(d)  Rule 415; Cutback.  If at any time the SEC takes the position that the
offering of some or all of the Registrable Securities in a Registration
Statement is not eligible to be made on a delayed or continuous basis under the
provisions of Rule 415 under the 1933 Act or requires any Investor to be named
as an “underwriter”, the Company shall use its commercially reasonable efforts
to persuade the SEC that the offering contemplated by the Registration Statement
is a valid secondary offering and not an offering “by or on behalf of the
issuer” as defined in Rule 415 and that none of the Investors is an
“underwriter”.  The Investors shall have the right to have one counsel
participate in any meetings or discussions with the SEC regarding the SEC’s
position and to comment or have their counsel comment on any written submission
made to the SEC with respect thereto, however Company counsel will have final
determination on what communications are submitted on the Company’s behalf.  If
in the reasonable judgment of the Company (after consultation with its counsel)
continued discussion with the SEC staff of this issue would cause the Company to
incur the obligation to pay liquidated damages to the Investors, the Company may
elect to comply with the SEC staff position unless all of the Investors waive in
writing the obligation to pay such liquidated damages.  In the event that,
despite the Company’s commercially reasonable best efforts and compliance with
the terms of this Section 2(d), the SEC refuses to alter its position, the
Company shall (i) remove from the Registration Statement such portion of the
Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such
restrictions and limitations on the registration and resale of the Registrable
Securities as the SEC may require to assure the Company’s compliance with the
requirements of Rule 415 (collectively, the “SEC Restrictions”). Any cut-back
imposed on the Investors pursuant to this Section 2(d) shall be allocated among
the Investors consistent with Section 2(a)(iv).  No liquidated damages shall
accrue as to any Cut Back Shares until such date as the Company is able to
effect the registration of such Cut Back Shares in accordance with any SEC
Restrictions.  In the event of a Cut Back, Investors may demand registration
rights pursuant to Section 2(a)(iii).
 

 
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3.      Company Obligations.  The Company will use commercially reasonable
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:
 
(a)  use commercially reasonable efforts to cause such Registration Statement to
become effective and to remain continuously effective for a period of three
years (the “Effectiveness Period”);
 
(b)  prepare and file with the SEC such amendments and post-effective amendments
to the Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the Effectiveness Period and to comply with
the provisions of the 1933 Act and the 1934 Act with respect to the distribution
of all of the Registrable Securities covered thereby;
 
(c)  subject to the paragraph at the end of this Section, provide copies to and
permit one counsel designated by the Investors to review each Registration
Statement and all amendments thereto responding to SEC staff comments no fewer
than three (3) days prior to their filing with the SEC however nothing in this
paragraph obligates the Company to accept comments or disclosure to the
Company’s filings;
 
(d)  subject to the paragraph at the end of this Section, furnish (which may be
by email notice of a filing on EDGAR) to the Investors and one legal counsel
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company (but not later than two (2) Business Days after
the filing date, receipt date or sending date, as the case may be) one (1) copy
of any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment);
 

 
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(e)  use commercially reasonable efforts to (i) prevent the issuance of any stop
order or other suspension of effectiveness and, (ii) if such order is issued,
obtain the withdrawal of any such order at the earliest possible moment;
 
(f)  prior to any public offering of Registrable Securities, at the written
request of the Investor and if required by applicable law, use commercially
reasonable efforts to register or qualify such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions requested
by the Investors and do any and all other commercially reasonable acts or things
necessary or advisable to enable the distribution in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(f), (ii) subject itself
to general taxation in any jurisdiction where it would not otherwise be so
subject but for this Section 3(f), or (iii) file a general consent to service of
process in any such jurisdiction;
 
(g)  use commercially reasonable efforts to cause all Registrable Securities
covered by a Registration Statement to be listed on each securities exchange,
interdealer quotation system or other market on which similar securities issued
by the Company are then listed;
 
(h)  [intentionally omitted]; and
 
(i)  otherwise use commercially reasonable efforts to comply with all applicable
rules and regulations of the SEC under the 1933 Act and the 1934 Act, including,
without limitation, Rule 172 under the 1933 Act, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the 1933 Act, promptly inform the Investors in writing if, at any time
during the Effectiveness Period, the Company does not satisfy the conditions
specified in Rule 172 and, as a result thereof, the Investors are required to
deliver a Prospectus in connection with any disposition of Registrable
Securities and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder.
 
(j)  With a view to making available to the Investors the benefits of Rule 144
(or its successor rule) and any other rule or regulation of the SEC that may at
any time permit the Investors to sell shares of Common Stock to the public
without registration, the Company covenants and agrees to:  (i) make and keep
public information available, as those terms are understood and defined in Rule
144, until the earlier of (A) six months after such date as all of the
Registrable Securities may be sold without restriction by the holders thereof
pursuant to Rule 144 or any other rule of similar effect, (B) such date as all
of the Registrable Securities shall have been resold or (C) the seventh (7th)
anniversary of the Closing Date (the “Public Information Period”); (ii) during
the Public Information Period file with the SEC in a timely manner all reports
and other documents required of the Company under the 1934 Act; and (iii) during
the Public Information Period furnish to each Investor upon request, as long as
such Investor owns any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the 1934 and
Act, (B) such other information as may be reasonably requested in order to avail
such Investor of any rule or regulation of the SEC that permits the selling of
any such Registrable Securities without registration.
 

 
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The Investors acknowledge such information may contain material non-public
information and agree to comply with the Company’s insider trading policy then
in effect and federal and state securities laws regarding receipt of material
non-public information.  Furthermore, Investors agree they will not disseminate
such information and will maintain appropriate controls and procedures regarding
such information.  If requested by the Company, Investors agree to execute a
non-disclosure agreement with the Company regarding such information.  Investors
acknowledge the information contained in the Company’s correspondence to the SEC
may not be made public for a significant period of time and possession of such
information may impact when they can trade in the Company’s securities.  The
Company may elect to not provide any non-public information to any Investor or
their representative that will not execute a non-disclosure agreement with the
Company.
 
5.     Obligations of the Investors.
 
(a)  Each Investor shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. Furthermore, each Investor will promptly, and in any event
within three (3) business days, respond fully to any reasonable request for
information as required by the Company or the SEC or any other regulator for
inclusion in the Registration Statement or in correspondence to the SEC or such
other regulator (the “Investor Information”).  Failure to respond to such
requests will stay any obligation of the Company to register such Securities for
such Investor and will stay any liquidated damages the Company may accrue as
they relate to that Investor.  Furthermore, if such Investor does not provide
the Investor Information within three (3) business days of such request, the
Company may, in its sole discretion, exclude such Investor’s securities from the
Registration Statement.
 
(b)  Each Investor, by its acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of a Registration Statement hereunder.
 
(c)  Each Investor agrees that, upon receipt of any notice from the Company of
either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or
(ii) the happening of an event pursuant to Section 3(h) hereof, such Investor
will immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities, until the
Investor is advised by the Company that such dispositions may again be made.
 

 
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6.     Indemnification.
 
(a)  Indemnification by the Company.  The Company will indemnify and hold
harmless each Investor and its officers, directors, members, employees and
agents, successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement or omission or alleged omission of any
material fact contained in any Registration Statement, any preliminary
Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a “Blue Sky Application”); (iii) the
omission or alleged omission to state in a Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (iv) any violation by the Company or its agents of any rule or
regulation promulgated under the 1933 Act applicable to the Company or its
agents and relating to action or inaction required of the Company in connection
with such registration; or (v) any failure to register or qualify the
Registrable Securities included in any such Registration Statement in any state
where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company will undertake such registration or qualification on an
Investor’s behalf and will reimburse such Investor, and each such officer,
director or member and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Investor or any such
controlling person in writing specifically for use in such Registration
Statement or Prospectus.
 
(b)  Indemnification by the Investors.  Each Investor agrees, severally but not
jointly, to indemnify and hold harmless, to the fullest extent permitted by law,
the Company, its directors, officers, employees, shareholders and each person
who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from any untrue statement of a material fact or any omission of
a material fact required to be stated in the Registration Statement or
Prospectus or preliminary Prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent that such untrue statement or omission is contained in any
information furnished in writing by such Investor to the Company specifically
for inclusion in such Registration Statement or Prospectus or amendment or
supplement thereto.  In no event shall the liability of an Investor be greater
in amount than the dollar amount of the proceeds (net of all expenses paid by
such Investor in connection with any claim relating to this Section 6 and the
amount of any damages such Investor has otherwise been required to pay by reason
of such untrue statement or omission) received by such Investor upon the sale of
the Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.
 

 
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(c)  Conduct of Indemnification Proceedings.  Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists
between such person and the indemnifying party with respect to such claims (in
which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation.  It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys at any time for all such indemnified parties.  No indemnifying party
will, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation.  No
indemnifying party will be liable to any indemnified party under this Agreement
for any settlement by such indemnified party effected without the indemnifying
party’s prior written consent, which shall not be unreasonably withheld,
conditioned or delayed.
 
(d)  Contribution.  If for any reason the indemnification provided for in the
preceding paragraphs (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations.  No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent
misrepresentation.  In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.
 
7.     Miscellaneous.
 
(a)  Amendments and Waivers.  This Agreement may be amended only by a writing
signed by the Company and the Required Investors.  The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Required Investors.
 

 
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(b)  Notices.  All notices and other communications provided for or permitted
hereunder shall be made as set forth in Section 9.4 of the Purchase Agreement.
 
(c)  Assignments and Transfers by Investors.  The provisions of this Agreement
shall be binding upon and inure to the benefit of the Investors and their
respective successors and assigns.  An Investor may transfer or assign, in whole
or from time to time in part, to one or more persons its rights hereunder in
connection with the transfer of Registrable Securities by such Investor to such
person, provided that such Investor complies with all laws applicable thereto
and provides written notice of assignment to the Company promptly after such
assignment is effected.
 
(d)  Assignments and Transfers by the Company.  This Agreement may not be
assigned by the Company (whether by operation of law or otherwise) without the
prior written consent of the Required Investors, provided, however, that in the
event that the Company is a party to a merger, consolidation, share exchange or
similar business combination transaction in which the Common Stock is converted
into the equity securities of another Person, from and after the effective time
of such transaction, such Person shall, by virtue of such transaction, be deemed
to have assumed the obligations of the Company hereunder, the term “Company”
shall be deemed to refer to such Person and the term “Registrable Securities”
shall be deemed to include the securities received by the Investors in
connection with such transaction unless such securities are otherwise freely
tradable by the Investors after giving effect to such transaction.
 
(e)  Benefits of the Agreement.  The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
 
(f)  Counterparts; Faxes.  This Agreement 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.  This Agreement may also
be executed via facsimile, which shall be deemed an original.
 
(g)  Titles and Subtitles.  The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
 
(h)  Severability.  Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.  To the extent
permitted by applicable law, the parties hereby waive any provision of law which
renders any provisions hereof prohibited or unenforceable in any respect.
 

 
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(i)  Further Assurances.  The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be
required to carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained.
 
(j)  Entire Agreement.  This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
 
(k)  Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York applicable to agreements made and to be performed
entirely within the State of New York.  Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated
hereby.  Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.  Each
of the parties hereto irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such
court.  Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. TO THE EXTENT
ALLOWABLE UNDER APPLICABLE LAW, EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
 
[Signature page follows.]
 

 

 
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                      IN WITNESS WHEREOF, the parties have executed this
Agreement or caused their duly authorized officers to execute this Agreement as
of the date first above written.
 
 
 

The Company:  
VIKING SYSTEMS, INC.

 
By:       /s/ John “Jed” Kenned
Name: John “Jed” Kennedy
Title:    President and Chief Executive Officer
       

 
 
 

 
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The Investors: 
Clinton Group, Inc.
 
 
By:       /s/ Francis A. Ruchalski
Name:  Francis A. Ruchalski
Title:    Chief Financial Officer
 

 
 
 
 
 
 
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The Investors:  
DAFNA LifeScience Market Neutral, Ltd.
 
By:       /s/ Nathan Fischel
Name:  Nathan Fischel
Title:    Managing Member
 

 
 
 
 
 
 
 
 
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The Investors:
DAFNA LifeScience Select, Ltd.
 
 
By:       /s/ Nathan Fischel
Name:  Nathan Fischel
Title:    Managing Member

 
 

 
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The Investors:  
DAFNA LifeScience, Ltd.
 
By:       /s/ Nathan Fischel
Name:  Nathan Fischel
Title:    Managing Member
 

 
 
 
 
 
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The Investors:  
Pergament Multi-Strategy Opportunities, LP
 
By:       /s/ Steven J. Brown
Name:  Steven J. Brown
Title:    Portfolio Manager
 

 
 
 
 
 
 
 
 
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The Investors:  
Steven J. Brown
 

By:       /s/ Steven J. Brown
Name:  Steven J. Brown

 
 
 

 
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Exhibit A

Plan of Distribution
 
We are registering the shares of common stock previously issued and issuable
upon exercise of the warrants to permit the resale of the shares of common stock
by the selling shareholders.  We will not receive any of the proceeds from the
sale by the selling shareholders of the shares of common stock.  We will bear
all fees and expenses incident to our obligation to register the shares of
common Stock.
 
The selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a selling shareholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock or interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.
 
The selling shareholders may use any one or more of the following methods when
disposing of shares or interests therein:
 
 
·
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 
 
·
block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;

 
 
·
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 
 
·
an exchange distribution in accordance with the rules of the applicable
exchange;

 
 
·
privately negotiated transactions;

 
 
·
short sales effected after the date the registration statement of which this
prospectus is a part is declared effective by the SEC;

 
 
·
through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 
 
·
broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;

 
 
·
a combination of any such methods of sale; and

 
 
·
any other method permitted by applicable law.

 

 
 
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If the selling shareholders effect such transactions by selling shares of common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  The selling shareholders may,
from time to time, pledge or grant a security interest in some or all of the
shares of common stock owned by them and, if they default in the performance of
their secured obligations, the pledgees or secured parties may offer and sell
the shares of common stock, from time to time, under this prospectus, or under
an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling shareholders to
include the pledgee, transferee or other successors in interest as selling
shareholders under this prospectus.  The selling shareholders also may transfer
the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
 
In connection with the sale of our common stock or interests therein, the
selling shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume.  The selling
shareholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities.  The selling
shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
 
The aggregate proceeds to the selling shareholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any.  Each of the selling shareholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents.  We will not receive any of the proceeds from this
offering.  Upon any exercise of the warrants by payment of cash, however, we
will receive the exercise price of the warrants.
 
The selling shareholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
that they meet the criteria and conform to the requirements of that rule.
 
Any underwriters, broker-dealers or agents that participate in the sale of the
common stock or interests therein may be “underwriters” within the meaning of
Section 2(11) of the Securities Act.  Any discounts, commissions, concessions or
profit they earn on any resale of the shares may be underwriting discounts and
commissions under the Securities Act.  Selling shareholders who are
“underwriters” within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act.
 

 
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To the extent required, the shares of our common stock to be sold, the names of
the selling shareholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
 
In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers.  In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
 
We have advised the selling shareholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling shareholders and their affiliates.  In
addition, to the extent applicable we will make copies of this prospectus (as it
may be supplemented or amended from time to time) available to the selling
shareholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act.  The selling shareholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
 
We have agreed to indemnify the selling shareholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.
 
 
 
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