**EXHIBIT
      10.12**




**Personal
      Services Agreement**




This **** Agreement
      (the **“** Agreement **”** )
      is
      entered into and effective this 1 st day of
      August, 2005 (the “Effective Date”) by and between Dr. Camran Nezhat at Stanford
      School of Medicine, (hereinafter referred to as the “Consultant”), and Viking
      Systems, Inc., with offices at 7514 Girard Ave Ste 1509, La Jolla, CA 92037
      (hereinafter referred to as “Company”).




This
      Agreement will set forth the general terms of our agreement whereby Consultant
      will provide to the Company the consulting services described on Exhibit A
      hereto (the “Consulting Services”).




**1.** **Engagement** **.** Company
      hereby engages Consultant to provide the Consulting Services to the Company
      on a
      part-time basis. The parties agree that Consultant shall provide the Consulting
      Services on an “as needed” basis in an amount not to exceed ten (10) hours per
      month over the term of this Agreement. This Agreement covers all of the services
      to be furnished by Consultant to Company, and the parties acknowledge that
      there
      is not now, and during the term of this Agreement shall not be, any other
      contract or agreement between Company and Consultant unless such other contract
      or agreement shall be in writing signed by both parties. Nothing in this
      Agreement shall limit Consultant’s right to provide services to any other
      businesses or institutions except as provided in Section 5 below.




**2.** **Compensation** **.** In
      consideration for the Consulting Services, the Company will pay the Consultant
      the fees as specified in Exhibit A. Such fees shall be paid at the conclusion
      of
      each consulting month upon satisfactory evidence of the provision of such
      Consulting Services. The Company will compensate Consultant for such Consulting
      Services, but only if the Company receives full documentation regarding the
      Consulting Services provided, and all such Consulting Services are approved
      in
      writing, in advance by the Company.




**3.** **Expenses** **.** The
      Company will reimburse Consultant for all reasonable travel and other expenses
      directly related to Consultant’s performance under this Agreement provided that
      (a) such expenses in excess of $2,500 have been approved in writing, in advance
      of being incurred, by the Company and (b) such expenses are of a nature (and
      adequate documentary evidence has been provided) qualifying them as proper
      deductions on federal and state income tax returns of the Company.




**4.** **Term
      and Termination** **.** This
      Agreement shall commence on the Effective Date and shall continue for a term
      of
      three (3) years. At the conclusion of the initial term, this Agreement may
      be
      extended for subsequent one (1) -year terms by the mutual consent of both
      parties. (The initial term and any subsequent terms are collectively referred
      to
      herein as the “Term.”) Extension of this Agreement, if any, shall be made in
      writing by amending this Agreement. In the event of a material breach of the
      Agreement by either party, the other party may terminate this Agreement upon
      providing the breaching party with written notice of the breach and ten (10)
      days prior written notice of termination, provided that if the breaching party
      cures said breach within ten (10) days, this Agreement shall continue in full
      force and effect. This Agreement may be terminated by either party with or
      without cause upon sixty (60) days written notice to the other
      party.


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**5.** **Absence
      of Conflicts** **.** Consultant represents and warrants that Consultant is not under any existing
      obligation that is inconsistent with this Agreement or that would restrict
      or
      conflict with the performance of Consultant’s obligations under this Agreement.
      Consultant agrees not to enter into any agreement or arrangement during the
      term
      of this Agreement that would impose on Consultant any obligation inconsistent
      with this Agreement or that would restrict or conflict with the performance
      of
      Consultant’s obligations under this Agreement. If Consultant is required by any
      applicable guidelines or policies of Consultant’s employer to make any
      disclosure or take any action that conflicts with any obligations of Consultant
      under this Agreement or is contrary to the terms of this Agreement, Consultant
      shall promptly notify the Company of such obligation, specifying the nature
      of
      such disclosure or action and identifying the applicable guideline or policy
      under which disclosure or action is required, prior to making such disclosure
      or
      taking such action.




**6.** ****** **Inventions
      Discovered By Consultant** **.** The
      Consultant shall promptly disclose to the Company any invention, improvement,
      discovery, process, formula or method or other intellectual property, whether
      or
      not patentable or copyrightable, conceived or first reduced to practice by
      the
      Consultant, either alone or jointly with others, while performing services
      hereunder (or, if based on any Confidential Information, within one (1) year
      after the Term) (collectively, "Inventions"):




(a)  which
      pertain to any line of business activity of the Company, if then conducted
      or
      then being actively planned by the Company, with which the Consultant was or
      is
      involved, or





(b)  which
      directly relates to any of the Consultant's work for the Company.




The
      Consultant hereby assigns, transfers and conveys to the Company all of the
      Consultant's right, title and interest in and to any such Inventions. During
      and
      after the Term, the Consultant shall, at the Company’s sole expense, execute any
      documents necessary to perfect the quitclaim of such Inventions to the Company
      and to enable the Company to apply for, obtain and enforce patents, trademarks
      and copyrights in any and all countries on such Inventions, including, without
      limitation, the execution of any instruments and the giving of evidence and
      testimony, without further compensation beyond the Consultant's agreed
      compensation during the course of the Consultant's services to the Company
      under
      this Agreement; provided, however, that after the Term, the Consultant shall
      be
      compensated by the Company for the assistance required of him under this Section
      6 at the rate of $500 per hour, to be paid within thirty (30) days after receipt
      of an itemized invoice therefor.




This
      Section 6 shall survive the termination of this Agreement..




**7.** **Independent
      Contractor Status** **.** The
      parties agree that Consultant is serving as an independent contractor and is
      not
      an employee of the Company. As such, Consultant acknowledges that Consultant
      is
      not entitled to any medical benefits, paid time off, tax withholding or other
      benefits routinely provided to employees.


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**8.** **Taxes;
      Attorney’s Fees** **.**




(a)  By
      reason
      of Consultant’s status as an independent contractor and the representations made
      herein, Consultant hereby instructs the Company not to withhold any taxes from
      the fees paid to Consultant. Consultant acknowledges and agrees that Consultant
      is solely responsible for the payment of any and all domestic or foreign taxes
      and/or assessments imposed on account of the payment of fees or other
      compensation by the Company to Consultant. Consultant expressly agrees to treat
      any fees and other compensation earned under this agreement as self-employment
      income for federal and state income taxes, unemployment insurance taxes,
      disability insurance taxes or any other taxes when such amounts become due
      and
      payable.




(b)  Notwithstanding
      anything to the contrary, the Company shall pay the attorney’s fees incurred by
      the Consultant in connection with the review and negotiation of this Agreement
      by paying a flat fee of $10,000 directly to Squire, Sanders & Dempsey L.L.P.
      (“SSD”) within ten (10) days of the execution and delivery of this Agreement by
      the Consultant to the Company. SSD shall be considered a third party beneficiary
      of this Agreement specifically for purposes of this Section 8(b).




**9.** **Confidentiality** **.** The
      Consultant, during the term of this Agreement, will have access to and become
      acquainted with various business, technical, and financial information and
      compilations of information and records of the Company containing trade secrets
      of the Company not generally available to the public, all of which shall be
      deemed confidential information of the Company (hereinafter “Confidential
      Information”). Notwithstanding anything to the contrary, “Confidential
      Information” does not include information that (i) is or becomes generally
      available to the public other than as a result of a breach of this Agreement
      by
      the Consultant, (ii) was available to the Consultant on a non-confidential
      basis
      prior to its disclosure by the Company to the Consultant, (iii) becomes
      available to the Consultant on a non-confidential basis from another source,
      provided that such other source is not known by the Consultant to be bound
      by,
      and to the Consultant’s knowledge such disclosure does not breach, directly or
      indirectly, a confidentiality agreement between such other source and the
      Company, (iv) is provided by the Company to a third party on a non-confidential
      basis, or (v) is independently developed by the Consultant without access to
      the
      Confidential Information, as evidenced by written records. The Consultant shall
      not disclose any of the Confidential Information, directly or indirectly, or
      use
      it in any way, either during the term of this Agreement or at any time
      thereafter for a period of three (3) years; provided, however, that the
      Consultant may disclose Confidential Information if such disclosure is required
      by any applicable law, subpoena, court order, regulation, or judicial or
      administrative process, provided that, to the extent practicable and permitted
      by applicable law or regulation, the Consultant provides notice of such
      requirement to the Company for the purpose of enabling the Company to seek
      a
      protective order or otherwise prevent such disclosure. All Confidential
      Information summarized or described in files, documents, records, and similar
      items, whether prepared by the Consultant or otherwise coming into the
      Consultant’s possession, shall remain the Confidential Information of the
      Company. At or promptly after the termination of the Agreement, the Consultant
      shall either return to the Company, or certify to the Company the destruction
      of, all Confidential Information of the Company then in the possession of the
      Consultant.


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**10.**  **Provisions
      Necessary and Reasonable** **.** The
      Consultant agrees that the provisions of Sections 6 and 9 of this Agreement
      are
      necessary and reasonable to protect the Company's Confidential Information,
      Inventions and goodwill. In the event of any breach of any of the covenants
      set
      forth in Sections 6 and 9 herein, the Company would suffer substantial
      irreparable harm and would not have an adequate remedy at law for such breach.
      In recognition of the foregoing, the Consultant agrees that in the event of
      a
      breach or threatened breach of any of these covenants, in addition to such
      remedies as the Company may have at law, without posting any bond or security,
      the Company shall be entitled to seek and obtain equitable relief, in the form
      of specific performance, and/or temporary, preliminary or permanent injunctive
      relief, or any other equitable remedy which then may be available. The seeking
      of such injunction or order shall not affect the Company's right to seek and
      obtain damages or other equitable relief on account of any such actual or
      threatened breach.




**11.** **Limitation
      on Authority** **.** Consultant shall not have any authority to obligate or bind the Company to
      any
      agreement, purchase or obligation of any kind without the express written
      approval of an officer of the Company. The Company shall not have any authority
      to obligate or bind the Consultant to any agreement, purchase or obligation
      of
      any kind without the express written approval of the Consultant.




**12.** **Assignment
      of Rights and Duties** **.** Neither
      Consultant nor the Company may assign its rights or duties under this Agreement
      without prior written consent of the other, which consent may be withheld for
      any reason. Any attempted assignment, transfer, conveyance, or other disposition
      of any interest of either party in this Agreement shall be void.




**13.** **Notice** **.** All
      notices and other communications required or permitted under this Agreement
      shall be in writing and shall be deemed given upon personal delivery, facsimile
      transmission (with confirmation of receipt), delivery by a reputable overnight
      courier service or five (5) days following deposit in the United States mail
      (if
      sent by certified or registered mail, postage prepaid, return receipt
      requested), to the parties at the following addresses (unless the party has
      by
      written notice subsequently provided a new contact person or
      address):




For
                the**CONSULTANT**:
            Dr.
                Camran Nezhat, M.D., FACOG, FACS
              Center
                for Special Minimally Invasive Surgery
              Stanford
                University Medical Center
              900
                Welch Road, Suite 403
              Palo
                Alto, CA 94304For**COMPANY:**
            Lonna
                Williams
              Sr.
                Vice President, Commercial Operations
              Viking
                Systems Inc.
              7825
                Fay Suite 200
              La
                Jolla, CA 92037With
                a copy to:
              Thomas
                Marsh, CEO
              Viking
                Systems Inc.
              7514
                Girard Ave Ste 1509
              San
                Diego, CA 92037




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**14.** **Legal
      Fee; Arbitration** **.** With the
      exception of the Company’s right to a temporary restraining order, a preliminary
      injunction or a permanent injunction under 10 above, the parties hereto
      expressly agree that any dispute, controversy or claim arising hereunder or
      in
      any way related to this Agreement shall be resolved by arbitration in the County
      of San Diego, State of California by JAMS-Endispute. The arbitration shall
      be
      conducted by a sole arbitrator appointed by JAMS-Endispute (the “Arbitrator”) or
      any
      successor entity. If neither Arbitrator nor any successor entity exists at
      the
      time of the dispute, the dispute shall be submitted for arbitration to the
      AAA
      or any successor entity. The
      Arbitrator’s decision shall be final and binding on all parties. The parties
      intend that this arbitration provision be irrevocable and be construed as
      broadly as possible. The arbitration shall be governed by the provisions of
      the
      Arbitration Act, and judgment upon the award rendered by the Arbitrator may
      be
      entered by any court having jurisdiction thereof.




**15.** **Attorneys
      Fees** **.** If a
      legal action or other proceeding is brought by the Company or by the Consultant
      for enforcement of this Agreement or for judgment on an arbitration award under
      this Agreement, the party that prevails shall be entitled to recover reasonable
      attorney’s fees, costs and expenses incurred in addition to any other relief to
      which that party may be entitled.




**16.** **Governing
      Law** **.** This
      Agreement shall be governed by and construed under the laws of the State of
      California without reference to principles of conflicts of laws.




**17.** **Entire
      Agreement** **.** This
      Agreement, including Exhibit A hereto, sets forth the entire agreement and
      understanding among the parties as to the subject matter hereof and supersedes
      all prior agreements or understandings with respect to such subject matter,
      whether written or oral. This Agreement may not be amended or modified except
      in
      writing signed by Consultant and a duly authorized officer of the Company.
      No
      waiver of any term, provision or condition of this Agreement, whether by conduct
      or otherwise in any one or more instances shall be deemed to be or construed
      as
      a further or continuing waiver of any such term, provision or condition, or
      of
      any other term, provision or condition. The invalidity or unenforceability
      of
      any term or provision of the parties with respect to the subject matter of
      this
      Agreement shall not affect the validity or enforceability of any other term
      or
      provision of this Agreement. This Agreement may be executed in two or more
      counterparts, each of which shall be deemed an original and all of which
      together shall constitute one and the same instrument.




**18.** **Representations
      and Warranties; Covenant** **.** The
      authorized capital stock of the Company as of the Effective Date consists of
      100,000,000 shares of Common Stock, 52,132,100 shares of which are outstanding
      (fully diluted), 25,000,000 shares of Preferred Stock, none of which are
      outstanding,. The Company has reserved 7,500,000 shares of Common Stock for
      issuance to employees, consultants and advisors under its stock option plan.
      Except as set forth in this Section 18, there are no other options, warrants,
      conversion privileges or other rights presently outstanding to purchase or
      otherwise acquire any authorized but unissued shares of capital stock or other
      securities of the Company.




To
      the
      extent that, at any time during the term of this agreement, the number of shares
      subject to the Option (as defined in Exhibit A) constitute less than one percent
      (1%) of the Company’s capital stock on a fully diluted basis (which definition
      of fully diluted shall include all outstanding options to purchase common stock
      and any other securities exercisable for or convertible into to common stock),
      then the vesting of the Option shall be accelerated such that at such time
      that
      the shares subject to the Option constitute less than one percent (1.00%) of
      the
      Company’s capital stock on a fully diluted basis, one hundred percent (100%) of
      the Option shall be exercisable immediately upon such event and as of such
      time,
      and Consultant shall have the right to terminate this Agreement with no
      penalties.


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**19.** **Indemnification** **.** The
      Company agrees to indemnify, defend, and hold harmless Consultant, and any
      of
      Consultant’s affiliates from any and all damage, loss, liability, cost or
      expense, including without limitation reasonable attorneys’ fees, costs and
      expenses related to defending any claims resulting from any claim, demand,
      suit
      or proceeding arising out of or related to (i) any products liability claims
      for
      a defect in the Company’s products, and (ii) any claims brought against
      Consultant in connection with services that Consultant performs for the Company
      hereunder.




**20.** **Waiver** **.** Any
      waiver by any party hereto of any breach of any kind or character whatsoever
      by
      any other party, whether such waiver be direct or implied, shall not be
      construed as a continuing waiver or consent to any subsequent breach of this
      Agreement on the part of the other party or parties.




**21.** **Severability** **.** The
      provisions of this Agreement are severable and should any provision hereof
      be
      void, voidable or unenforceable under any applicable law, such void, voidable
      or
      unenforceable provision shall not affect or invalidate any other provision
      of
      this Agreement, which shall continue to govern the relative rights and duties
      of
      the parties as though void, voidable or unenforceable provision were not a
      part
      hereof. In addition, it is the intention and agreement of the parties that
      all
      of the terms and conditions hereof be enforced to the fullest extent permitted
      by law.




**22.** **Modification** **.** This
      Agreement may not be modified except by a written instrument signed by all
      the
      parties hereto.




**23.** **Headings** **.** The
      headings of sections and subsection used in this Agreement are for convenience
      only and are not part of its operative language. They shall not be used to
      affect the construction of any provision hereof.




[remainder
      of page intentionally left blank]


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The
      foregoing is acknowledged, understood and agreed to as evidenced by execution
      by
      the parties in the spaces below.







**CONSULTANT:**By:
                /s/ Camran Nazhat
              Name:
              Title:
              
              Social
                Security Number:**VIKING
                SYSTEMS INC.:**By:
                /s/ Thomas B. Marsh
              Name:
                Thomas B. Marsh
              Title:
                CEO


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**Exhibit
      A**




Consulting
      Services -




Clinical
      development, business value enhancement and new product advisory




**Part
      1 -** **Clinical
      development**




Assist
      the Company establish the clinical benefits of the Endosite 3Di product
      portfolio and 3-dimensional laparoscopic imagery as an enhancement to
      laparoscopic surgical procedures, and agree to provide the foregoing services.
      The Consulting Services will be directed by the Company’s Vice President of
      Clinical Development and Sr. Vice President of Commercial
      Operations.




A.
            Lead
                Viking Systems OBGYN and general Minimally Invasive Surgical Clinical
                Advisory Panel (not to exceed two meetings per year in conjunction
                with
                scheduled either SLS or other appropriate
                meetings)


B.
            Lead
                and complete clinical studies resulting in peer-reviewed journal
                publications.


C.
            Present
                abstracts and posters of clinical data and observations at major
                medical
                meetings.




**Part
      2 - Contribution to business value enhancement**




A.
            Discussions
                with investors and board of directors reflecting view of 3-dimenstional
                product portfolio, clinical utility and aid in assessing additional
                products and companies for collaboration or
                acquisitions


B.
            Assistance
                to management with the business and medical industry
                press


C.
            Act
                as an exposure center (Viking Center of Excellence) providing access,
                opportunity to view, training and information to other surgeons relative
                to the 3-dimensional vision system product portfolio including surgeon
                outreach as it relates to Viking’s placements in other academic and
                prestigious institutions




**Part
      3 - New product advisory**




A.
            Assist
                in new product planning including R&D
                programs


B.
            Suggestions
                and due diligence for business
                collaborations


C.
            Suggestions
                and due diligence for potential
                acquisitions.




**Compensation
      for Personal Services:**




Payment
      for the Consulting Services shall be in the form of a five year non-qualified
      stock option in the amount of 1,000,000 shares with an exercise price at fair
      market value on the Effective Date (the “Option”). The Option shall vest in
      quarterly installments over a thirty-six (36) month period commencing on the
      Effective Date, subject to acceleration of vesting upon completion of the
      following milestones in the amounts set forth below. In the event this Agreement
      is terminated by either party, further vesting of the option is terminated.


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1.
            15%
                of the Option at execution of this
                agreement


2.
            10%
                of the Option upon installation of the Viking 3Di System and used
                regularly for surgery and training, regardless of whether Stanford
                pays
                for the system.


3.
            15%
                of the Option upon completion of the $8 million convertible preferred
                financing round.


4.
            15%
                of the Option upon the placement of 5 systems in OBGYN academic centers
                on
                or prior to December 31, 2005


5.
            10%
                of the Option upon the placement of 15 systems in OBGYN academic
                centers
                on or prior to December 31, 2006


6.
            5%
                of the Option upon the placement of 25 systems in OBGYN academic
                centers
                on or prior to December 31, 2007


7.
            Development
                of data, submission of abstracts, presentations/poster sessions,
                and
                public presentations, interviews or articles at least 3 per year
                in each
                of the following years:


a.
            2006,
                10% of the Option


b.
            2007,
                10% of the Option


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