Exhibit 10.1 - Securities Purchase Agreement


    

      Exhibit
        10.1

      Form
        8-K

      Viking
        Systems, Inc.

      File
        No.
        000-49636

      


      SECURITIES
        PURCHASE AGREEMENT

      


      


      SECURITIES
        PURCHASE AGREEMENT (this “Agreement”), dated as of August 12, 2005, among
        (i) Viking Systems, Inc., a Nevada corporation (“Viking”), (ii) St. Cloud
        Capital Partners, L.P., a Delaware limited partnership (“St. Cloud”), as “Lead
        Lender” and “Collateral Agent” and (iii) St. Cloud, Donald Tucker, and any other
        Person signing the signature page of this Agreement as an Investor or that
        becomes an Investor after the date hereof in accordance with this Agreement
        (collectively, the “Investors”).

      


      Recitals

      


      The
        capitalized terms used in these Recitals shall have the respective meanings
        set
        forth for such terms in Section 1 hereof.

      


      Viking
        desires to borrow up to $4,000,000 from Investors on the terms and conditions
        of
        this Agreement and each of the Investors hereby agrees to make a Loan to
        Viking
        on the terms and conditions of this Agreement. 

      


      Viking
        has agreed to secure the Obligations by granting to the Investors a Third
        Priority Lien on the Collateral. Such Third Priority Lien is junior to and
        subordinate to a first priority Lien of Silicon Valley Bank and a second
        priority lien in favor of St. Cloud as Collateral Agent for a loan transaction
        effected March 22, 2005 (the “March 22, 2005 Transaction”).

      


      As
        additional consideration for each of the Investors making a Loan to Viking,
        each
        Investor will be given the right to convert his, her or its Loan into shares
        of
        Viking’s Common Stock and each Investor will be given a Warrant to purchase
        additional shares of Viking Common Stock. The exact terms and conditions
        of the
        conversion and the Warrant are set forth below.

      


      All
        or
        some of the Investors hereunder are also investors (the “March 22nd
        Investors”) in the March 22, 2005 Transaction. The March 22, 2005 Transaction
        included certain agreements between Viking and the March 22nd
        Investors relating to a conversion of the March 22nd
        Loan
        into Viking Common Stock, the issuance of warrants to the March 22nd
        Investors, the registration of the loan conversion shares and warrant shares
        and
        other matters. Under certain circumstances and pursuant to the terms and
        conditions of this Agreement, the terms, rights, conditions and agreements
        of
        the March 22, 2005 Transaction documents shall be incorporated into this
        Agreement as agreed to herein.

      



      
        
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      Viking
        proposes to offer and sell shares of its capital stock in either (i) a private
        equity offering (“PEO”) to be completed within 120 days from the date of this
        Agreement, or (ii) a registered public offering with gross offering proceeds
        of
        not less than $4,000,000 (“Public Offering”) the registration statement for
        which will be filed within 45 days from the date of this Agreement. If the
        PEO
        occurs, the Investors herein shall convert their Loans into the securities
        offered in the PEO pursuant to the terms and conditions of this Agreement.
        If in
        lieu of a PEO, Viking files a registration statement for the Public Offering
        and
        the Public Offering Requirements are met, the Investors shall convert their
        Loans into shares of Viking’s common stock pursuant to the terms and conditions
        of this Agreement. If either the PEO has not to be completed within 120 days
        from the date hereof or the registration statement for the Public Offering
        has
        not been filed within 45 days and declared effective by the Securities and
        Exchange Commission within 120 days after filing, the Loans made pursuant
        to
        this Agreement shall have the same conversion rights, registration rights,
        warrant rights and other rights, terms and conditions that the March 22nd
        Investors were granted or are subject to pursuant to the March 22, 2005
        Transaction Documents.

      


      Each
        of
        the Investors hereby appoints St. Cloud as the “Collateral Agent” to act
        hereunder on behalf of all of the Investors under the Security Agreement.
        

      


      Simultaneously
        with the execution and delivery of this Agreement by each of the Investors
        (or
        an Addendum Agreement to this Agreement, as applicable), (a) each Investor
        shall
        lend Viking the amount set forth opposite such Investor’s name on Annex
        A
        of this
        Agreement, which maximum Loan to be made by all Investors as a group is an
        aggregate of $4,000,000, and (b) Viking shall issue to each of the Investors
        a
        Promissory Note in the principal amount of such Investor’s Loan substantially in
        the form of Exhibit
        A.
        In
        addition, as of the date hereof, each of the Collateral Agent and Viking
        shall
        execute and deliver a Security Agreement substantially in the form of
Exhibit
        B.
        

      


      NOW,
        THEREFORE, in consideration of the premises and the agreements, provisions
        and
        covenants herein contained, the parties hereto agree as follows:

      


      Agreement

      


      1. Definitions.
        For
        purposes of this Agreement, the following terms shall have the meaning set
        forth
        below:

      


      (a) “Agent-Related
        Persons”
is
        defined in Section 13.3.

      


      (b) “Agent’s
        Liens”
is
        defined in Section 13.10.

      


      (c) “Business”
is
        defined in Section 8.18.

      


      (d) “CERCLA”
is
        defined in Section 8.15.

      


      (e) “Closings”
is
        defined in Section 3.


      
        
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      (f) “Closing
        Fee”
is
        defined in Section 2.3.

      


      (g) “Closing
        Date”
is
        defined in Section 3.

      


      (h) “Code”
is
        defined in Section 8.16.

      


      (i) “Collateral”
means
        Viking’s right, title and interest in, to and under all tangible and intangible
        personal property of Viking, in each case whether now owned or existing or
        hereafter acquired or arising and wherever located.

      


      (j) “Collateral
        Agent”
is
        defined in the preamble of this Agreement.

      


      (k) “Collateral
        Agent Fee”
is
        defined in Section 13.2 of this Agreement.

      


      (l) “Common
        Stock”
means
        the $.001 par value common stock of Viking.

      


      (m) “Conversion
        Price”
is
        defined in Section 4.1, 4.2 and 4.3.

      


      (n) “Conversion
        Rights”
means
        each Investor’s right under the Promissory Note, to convert all or part of the
        outstanding balance of the Promissory Note into Common Stock at the Conversion
        Price.

      


      (o) “Convertible
        Securities”
means
        any securities of Viking convertible into or exercisable or exchangeable
        for
        Common Stock.

      


      (p) “Current
        Balance Sheet”
is
        defined in Section 8.6.

      


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

      


      (r) “Environment”
means
        soil, land surface or subsurface strata, surface waters (including navigable
        waters, ocean waters, streams, ponds, drainage basins and wetlands),
        groundwater, drinking water supply, stream sediments, ambient air (including
        indoor air), plant and animal life and any other environmental medium or
        natural
        resource.

      


      (s) “Environmental
        and Safety Requirements”
shall
        mean all federal, state, local and foreign statutes, regulations, rules,
        ordinances, and similar provisions having the force or effect of law, all
        judicial and administrative orders, judgments, directives, and determinations,
        all contractual obligations, permits, licenses and all common law, in each
        case
        concerning public health and safety, worker health and safety and pollution
        or
        protection of the environment (including, without limitation, all those relating
        to the presence, use, production, generation, handling, transportation,
        treatment, storage, disposal, distribution, labeling, testing, processing,
        discharge, release, threatened release, control or cleanup of any hazardous
        or
        otherwise regulated materials, substances or wastes, chemical substances
        or
        mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
        products or byproducts, asbestos, polychlorinated biphenyls, noise or
        radiation), each as amended and as now or hereafter in effect.


      
        
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      (t) “Event
        of Default”
means
        the occurrence of any of the conditions or events set forth in Section 6
        of the
        Promissory Notes.

      


      (u) “Exchange
        Act”
is
        defined in Section 8.5

      


      (v) “Financial
        Statements”
is
        defined in Section 8.5.

      


      (w) “First
        Closing Date” means
        August 12, 2005, or such other date as Viking and St. Cloud mutually agree
        upon.

      


      (x) “GAAP”
is
        defined in Section 8.5.

      


      (y) “Governmental
        Agency”
means
        any government or any agency, bureau, commission, court, department, official,
        political subdivision, tribunal or other instrumentality of any government,
        whether federal, state or local, domestic or foreign.

      


      (z) “Indemnified
        Liabilities”
is
        defined in Section 15.

      


      (aa) “Indemnified
        Person”
is
        defined in Section 15.

      


      (bb) “Investor”
is
        defined in the preamble of this Agreement. 

      


      (cc) “Lead
        Lender/Collateral Agent”
is
        defined in the preamble of this Agreement.

      


      (dd) “Lien”
means
        any lien, mortgage, pledge, assignment, security interest, charge or encumbrance
        of any kind (including any agreement to give any of the foregoing, any
        conditional sale or other title retention agreement, and any lease in the
        nature
        thereof) and any option, trust or other preferential arrangement having the
        practical effect of any of the foregoing.

      


      (ee) “Loan”
means
        the loan to be made by each of the Investors to Viking pursuant to the terms
        of
        this Agreement as evidenced by the Promissory Notes in the amount set forth
        opposite such Investors’ names on Annex
        A
        of this
        Agreement.

      


      (ff) “Loan
        Documents”
means,
        collectively, the Promissory Note, Security Instruments, Registration Rights
        Agreement, the Warrant and this Agreement, as each may be amended, supplemented
        or restated from time to time.

      


      (gg) “March
        22, 2005 Transaction”
is
        defined in the Recitals.

      


      (hh) “March
        22nd
        Investors”
is
        defined in the Recitals.

      


      (ii) “March
        22nd
        Loan”
is
        the
        loan made by the March 22nd
        Investors in the March 22, 2005 Transaction.

      


      (jj) “Material
        Adverse Change”
is
        defined in Section 8.6.


      
        
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      (kk) “Material
        Adverse Effect”
is
        defined in Section 8.6.

      


      (ll) “Maturity
        Date”
is
        defined in Section 2. 

      (mm) “Multiemployer
        Plan”
is
        defined in Section 8.16.

      


      (nn) “Obligations”
means
        obligations of Viking from time to time arising under or in respect of (i)
        the
        Loans, (ii) this Agreement and/or (iii) the other Loan Documents owing to
        Investors.

      


      (oo) “Parties”
means
        Viking, the Lead Lender/Collateral Agent and the Investors.

      


      (pp) “Pension
        Plan”
is
        defined in Section 8.16.

      


      (qq) “PEO”
is
        defined in the Recitals.

      


      (rr) “Person”
shall
        mean any corporation, limited liability company, trust, partnership, individual,
        association or other entity.

      


      (ss) “Promissory
        Note”
shall
        mean and refer to each of the Secured Convertible Promissory Notes substantially
        in the form of Exhibit “A,” dated as of the applicable Closing Date, and issued
        by Viking to evidence the Loans by each of the Secured Parties, as the same
        may
        be amended, restated or supplemented from time to time.

      


      (tt) “Proprietary
        Information”
is
        defined in Section 8.10.

      


      (uu) “Public
        Offering”
is
        defined in the Recitals.

      


      (vv) “Public
        Offering Requirements”
means
        Viking complying with the following requirements (i) filing within forty-five
        (45) days from the date hereof a registration statement with the Securities
        and
        Exchange Commission for the Public Offering, (ii) such registration statement
        is
        declared effective within 120 days after it was initially filed by Viking,
        and
        (iii) a minimum of $4,000,000 in gross proceeds is raised in the Public
        Offering.

      


      (ww) “Regulatory
        Problem”
shall
        mean any transaction, circumstance or situation whereby (i) a Person and
        such
        Person’s affiliates would own, control or have power over a quantity of
        securities of any kind issued by Viking or any other entity greater than
        is
        permitted under any requirement of any applicable governmental authority,
        or
        (ii) it has been asserted by any governmental regulatory agency, or such
        Person
        believes, that such Person or its affiliates are not entitled to hold, or
        exercise any significant right under or with respect to, the
        Securities.

      



      
        
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      (xx) “Regulatory
        Violation”
shall
        mean, with respect to Lead Lender, (i) a diversion of the proceeds of the
        issuance by Viking of the Securities from the use reported thereof on the
        SBA
        form No. 1031 delivered at Closing, if such diversion was effected without
        obtaining the prior written consent of Lead Lender (which may be withheld
        in its
        sole discretion) or (ii) a change in the principal business activity of Viking
        to an ineligible business activity (within the meaning of the SBIC Regulations)
        if such change occurs within one year after the date of the
        Closing.

      


      (yy) “Required
        Investors”
means
        Investors holding a majority in interest of the outstanding principal amount
        of
        the Promissory Notes, including the affirmative vote, consent or approval
        (as
        applicable) of St. Cloud.

      


      (zz) “St.
        Cloud”
is
        defined in the preamble of this Agreement.

      


      (aaa) “SBA”
is
        defined in Section 3.1.

      


      (bbb) “SBIC”
means
        a
        small business investment company licensed under the SBIC Act.

      


      (ccc) “SBIC
        Act”
means
        the Small Business Investment Act of 1958, as amended.

      


      (ddd) “SBIC
        Regulations”
means
        the Small Business Investment Company Act of 1958, as amended, and the
        regulations issued by the SBA thereunder, codified at Title 13 of the Code
        of
        Federal Regulations (“13
        C.F.R.”),
        107
        and 121, as amended.

      


      (eee) “SEC
        Filings”
is
        defined in Section 8.11.

      


      (fff) “SEC
        Reports”
is
        defined in Section 8.11.

      


      (ggg) “Third
        Priority”
means,
        with respect to any Lien purported to be created in any Collateral pursuant
        to
        the Security Instruments, that such Lien is the only Lien to which such
        Collateral is subject, other than the first priority Lien of Silicon Valley
        Bank
        granted to Silicon Valley Bank pursuant to that certain Silicon
        Valley Bank Loan and Security Agreement, dated as of September 14, 2004,
        between
        Silicon Valley Bank and Viking (the “SVB Loan Agreement”) and a second priority
        lien in favor of St. Cloud as Collateral Agent in connection with the March
        22,
        2005 Transaction.

      


      (hhh) “Secured
        Parties”
means
        each of the Investors.

      


      (iii) “Securities”
means
        the Promissory Notes, the Warrants and the Common Stock issuable upon conversion
        or exercise of the Promissory Notes and the Warrants.

      


      (jjj) “Securities
        Act”
is
        defined in Section 2.4.

      



      
        
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      (kkk) “Security
        Agreement”
means
        a
        security agreement substantially in the form of Exhibit “D” attached hereto, as
        the same may be amended, restated or supplemented from time to
        time.

      


      (lll) “Security
        Instruments”
means
        the Security Agreement, and UCC-1 Financing Statement and such other documents
        as may be reasonably required by the Investors to establish, preserve and
        perfect the Second Priority Lien on the Collateral and secure the Promissory
        Note.

      


      (mmm) “Shareholders”
is
        defined in Section 13.5.

      


      (nnn) “Transaction
        Expenses”
shall
        mean and include (i) all out-of-pocket fees and expenses incurred by Lead
        Lender
        and Collateral Agent in connection with its due diligence review of Viking,
        the
        preparation, negotiation, execution, interpretation and enforcement of this
        Agreement, the Securities and the other Loan Documents and the agreements
        contemplated hereby and thereby, and the consummation of all of the transactions
        contemplated hereby and thereby (including, without limitation, all travel
        expenses incurred by representatives or agents of Lead Lender and Collateral
        Agent and all reasonable fees and expenses of legal counsel, accountants
        and
        other third parties), (ii) all reasonable fees and expenses incurred with
        respect to any amendments or waivers (whether or not the same become effective)
        under or in respect of each of the Loan Documents and the other agreements
        and
        instruments contemplated hereby and thereby, (iii) all recording and filing
        fees, stamp and other taxes which may be payable in respect of the execution
        and
        delivery of the Loan Documents or the issuance, delivery or acquisition of
        the
        Securities, and (iv) the fees and expenses incurred by Lead Lender and
        Collateral Agent in any filing with any governmental agency with respect
        to its
        investment in Viking or in any other filing with any governmental agency
        with
        respect to Viking which mentions Lead Lender and Collateral Agent.

      


      (ooo) “Viking”
is
        defined in the preamble of this Agreement. 

      


      (ppp) “Viking
        Benefit Plan”
is
        defined in Section 8.16.

      


      (qqq) “Warrant”
means
        the Warrant issued to each investor pursuant to this Agreement.

      



      
        
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      2. The
        Loan.
        Viking
        agrees to borrow from the Investors, and each Investor, severally and not
        jointly, agrees to lend to Viking, subject to the terms and conditions set
        forth
        herein, the amount set forth opposite such Investor’s name on Annex
        A,
        which
        Loan by such Investors in the aggregate shall be (a) in the minimum aggregate
        principal amount of $400,000 as of the First Closing Date and (b) in the
        maximum
        aggregate principal amount of $4,000,000 (the “Maximum Aggregate Principal
        Amount”). Each Loan shall be due on the date that is twelve months from the date
        hereof (“Maturity Date”). If on the First Closing Date, the Company shall not
        have issued to the Investors Promissory Notes in the maximum aggregate principal
        amount of $4,000,000, Viking shall have the right, at any time on or prior
        to
        the date that is ninety (90) days after the First Closing Date, to issue
        Promissory Notes to one or more Investors in an amount not to exceed the
        Maximum
        Aggregate Principal Amount, provided that any such additional Investor shall
        be
        required to execute an Addendum Agreement to this Agreement substantially
        in the
        form of Exhibit
        C.
        Any
        such additional Person so making a Loan to Viking pursuant to the terms of
        this
        Agreement shall be considered an “Investor” for purposes of this
        Agreement.

      


      2.1 Use
        of Loan Proceeds.
        The
        Loan proceeds shall be used by Viking pursuant to the use of proceeds as
        set
        forth on the certificate delivered pursuant to Section 3.1.10.

      


      2.2 Promissory
        Note and Grant of Security Interest.
        Each
        Loan shall be evidenced by a Promissory Note and secured by a Third Priority
        Lien against all of the Collateral as set forth in the Security Instruments.
        On
        the First Closing Date, Viking shall execute a Security Agreement which shall
        grant to each Investor and Collateral Agent a security interest in the
        Collateral in order to secure prompt repayment of any and all Obligations
        owed
        by Viking to each Investor and in order to secure prompt performance by Viking
        of its covenants and obligations under the Loan Documents. The Investors
        agree
        to enter into a customary subordination agreement as may reasonably be requested
        by Silicon Valley Bank relating to the subordination of Investor’s loan to the
        rights and preferences of Silicon Valley Bank pursuant to the SVB Loan
        Agreement.

      


      2.3 Loan
        Closing Fee. On
        the
        applicable Closing Date for each such Investor, a total of two percent (2%)
        of
        the Loan from an Investor shall be deducted from the Loan proceeds from such
        Investor and shall be retained by such Investor as a closing fee (the “Closing
        Fee”). Accordingly, on such Closing Date, Viking shall receive ninety-eight
        percent (98%) of the total Loan proceeds and each of the Investors shall
        retain
        two percent (2%) of such Investor’s Loan as a Closing Fee.

      


      2.4 Accredited
        Investors Only.
        The
        Promissory Notes will be offered and sold to only a limited number of selected
        sophisticated Investors, each of whom Viking has reasonable grounds to believe
        and does believe, immediately before making an offer, qualifies as an
“accredited investor,” as that term is defined in Rule 501 of Regulation D
        promulgated under the Securities Act of 1933, as amended (the “Securities Act”),
        and has such knowledge and experience of financial and business matters that
        such prospective purchaser is capable of evaluating the merits and risks
        of
        investing in the Promissory Notes. 

      


      



      
        
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      3. Deliveries
        at Closing.
        Subject
        to the terms and conditions set forth herein, the closings of the transactions
        contemplated herein (each, a “Closing”) shall take place at offices of Viking,
        La Jolla, California, (i) on the First Closing Date, with respect to St.
        Cloud,
        and (ii) on such other dates as Viking and such other Investor mutually agree
        upon, with respect to the other Investor, provided that such date shall be
        on or
        prior to ninety (90) days from the First Closing Date (as applicable to each
        such Investor, a “Closing Date”). 

      


      3.1 Deliveries
        by Viking at Closing. The
        obligations of each Investor under this Agreement are subject to the
        fulfillment, on or before the Closing of each of the following conditions,
        unless otherwise waived. At the Closing, Viking will have delivered to each
        Investor or its counsel all of the following documents:

      


      3.1.1 This
        Agreement, signed by a duly authorized officer of Viking;

      


      3.1.2 A
        Promissory Note, in the aggregate principal amount of the Loan, signed by
        a duly
        authorized officer of Viking;

      


      3.1.3 The
        Security Agreement, signed by a duly authorized officer of Viking;

      


      3.1.4 A
        certificate, dated as of the Closing Date, signed by the Chief Executive
        Officer
        and President of Viking, in the form reasonably acceptable to Lead Lender’s
        counsel, certifying (i) that the representations and warranties of Viking
        contained in Section 11 are true and correct in all respects on and as of
        the
        Closing with the same effect as though such representations and warranties
        had
        been made on and as of the Closing Date (except, with respect to Closings
        subsequent to the First Closing Date, for changes resulting from the
        transactions contemplated by this Agreement); (ii) that Viking has performed
        and
        complied with all covenants, agreements, obligations and conditions contained
        in
        the Agreement that are required to be performed or complied with by it on
        or
        before the Closing; (iii) a true and complete copy of the Articles of
        Incorporation and Bylaws of Viking, as amended or supplemented to the Closing
        Date, and (iv) resolutions of the Board of Directors of Viking (and, if
        required, the stockholders of Viking) authorizing the execution, delivery
        and
        performance of this Agreement, the other Loan Documents and the consummation
        of
        the transactions contemplated thereby.

      


      3.1.5 A
        closing
        statement (substantially in the form provided by Lead Lender), signed by
        a duly
        authorized officer of Viking;

      



      
        
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      3.1.6 With
        respect to each Investor, the Closing Fees and, with respect to the Lead
        Lender,
        the Transaction Expenses, an estimate of which shall be provided by Lead
        Lender
        to Viking and which Transaction Expenses may be deducted or withheld from
        the
        amount paid by Lead Lender to Viking in connection with the Lead Lender’s Loan
        at the First Closing; provided, however, that Lead Lender shall provide Viking
        with the aggregate amount of Transaction Expenses as of the First Closing
        Date
        within thirty (30) days after the First Closing Date and to the extent such
        amount is less than the estimated amount deducted at the Closing on the First
        Closing Date, such difference shall be promptly paid by Lead Lender to Viking,
        and to the extent such amount is greater than the estimated amount deducted
        at
        the Closing on the First Closing Date, such difference shall be promptly
        paid by
        Viking to Lead Lender;

      


      3.1.7 Completed
        Small Business Administration (“SBA”) forms No. 480 (Size Status Declaration),
        No. 652 (Assurance of Compliance) and No. 1031 (Portfolio Financing Report,
        Parts A and B);

      


      3.1.8 A
        certificate, dated as of the Closing Date, signed by the Chief Executive
        Officer
        and President of Viking, certifying as to the use of proceeds from the issuance
        of the Promissory Note.

      


      3.1.9 Such
        other documents relating to the transactions contemplated by this Agreement
        as
        Lead Lender or its counsel may reasonably request.

      


      3.2 Deliveries
        by Investor at Closing.
        The
        obligations of Viking under this Agreement are subject to the fulfillment,
        on or
        before the Closing of each of the following conditions, unless otherwise
        waived.
        At the Closing, each Investor will have delivered to Viking or its
        counsel:

      


      3.2.1 A
        wire
        transfer to the account listed in Schedule
        3.2.1
        hereto in
        an
        amount equal to such Investor’s Loan less the Closing Fees (and in the case of
        Lead Lender, less the Transaction Expenses); and

      


      3.2.2 This
        Agreement, signed by a duly authorized officer of each Investor, or if Investor
        is an individual, by such Investor (or, if after the First Closing Date,
        an
        Addendum Agreement to this Agreement); and

      


      3.2.3 The
        Security Agreement, signed by a duly authorized officer of each Investor,
        or if
        Investor is an individual, by such Investor.

      


      3.3 Warrant
        Agreement and Registration Rights Agreement.
        The
        Warrant to be issued hereunder shall be delivered by Viking to the Investors
        as
        soon as practical after the terms and conditions of the Warrant are determined
        in accordance with Section 5 of this Agreement. The Registration Rights
        Agreement to be entered by Viking and the Lenders shall be executed by Viking
        and delivered to the Investors as soon as practical after the terms and
        conditions of the registration rights have been determined.

      



      
        
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      4. Loan
        Conversion Terms. Viking
        and each of the Lenders acknowledge that Viking intends to attempt to raise
        additional capital in either a PEO or a Public Offering. The parties anticipate
        that the decision as to whether Viking will effect a PEO or a Public Offering
        will be finalized within 45 days from the date of this Agreement. The conversion
        terms and Conversion Price of the Loans will depend upon whether a PEO or
        a
        Public Offering is effected by Viking. The Loan conversion terms are as
        follows:

      


      4.1
        Loan
        Conversion Upon PEO.
        In the
        event Viking elects to offer its securities in a PEO, Viking shall have the
        right to require an Investor to convert all or any portion of such Investor’s
        Loan into the securities offered by Viking in such PEO subject to the following:
        (i) the conversion price for each Loan converted into the PEO shall be at
        a
        price which is a 20% discount to PEO offering price; and (ii) Viking shall
        have
        no right to require an Investor to convert such Investor’s Loan into the PEO
        securities unless such PEO is completed within 120 days from the date hereof
        and
        a minimum gross proceeds of $4,000,000 is raised in the PEO from investors
        who
        are not Investors under this Agreement. Except as set forth in this Section
        4.1,
        all terms and conditions of the PEO, including registration rights and warrants
        agreements, shall be applicable to the Investors whose Loans are converted
        into
        PEO securities pursuant to this Section 4.1. If the PEO does not have
        Registration Rights, the Equity Securities and Convertible Securities issued
        to
        the Lenders shall be substantially similar to the Registration Rights provided
        to the March 22nd
        Investors.

      


      4.2
        Loan
        Conversion Upon Public Offering.
        In the
        event Viking elects to offer its securities in a Public Offering, Viking
        shall
        have the right to require an Investor to convert all or any portion of such
        Investor's Loan into shares of Viking Common Stock subject to the following:
        (i)
        the conversion price for each Loan converted pursuant to this Section 4.2
        shall
        be at a price which is a 20% discount to the per share Public Offering price;
        and (ii) Viking shall have no right to require an Investor to convert such
        Investor's Loan under this section 4.2 unless Viking files a registration
        statement with the Securities and Exchange Commission within forty-five (45)
        days from the date hereof, the Public Offering is for a minimum of $4,000,000
        in
        gross offering proceeds and such registration statement is declared effective
        by
        the Securities and Exchange Commission within 120 days from that date of
        the
        original filing (the "Public Offering Requirements"). 

      


      Notwithstanding
        anything else contained in this Agreement to the contrary, in the event Viking
        completes a Public Offering in which the net offering proceeds exceed
        $6,000,000, an Investor may at its sole option require repayment of up to
        fifty
        percent (50%) of such Investor's Loan with that portion of the net Public
        Offering Proceeds which exceed $6,000,000. Any repayment here under shall
        be
        made on a prorata basis among all of the Investors requiring repayment.


      For
        example, if (i) net Public Offering Proceeds are $6,500,000, (ii) the total
        Loan
        is $4,000,000 and (iii) all Investors require repayment, then Viking shall
        use
        $500,000 of the net Public Offering Proceeds to repay each 12.5% of each
        Investor's Loan. If the net Public Offering Proceeds are $7,000,000, then
        Viking
        shall use $1,000,000 of the net Public Offering Proceeds to repay each 25%
        of
        each Investor's Loan.

       

      Any
        amount of the Loan not repaid with Public Offering Proceeds shall be converted
        into Viking Common Stock pursuant to this Section 4.2.

      



      
        
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      4.3
        Terms
        Applicable if PEO or Public Offering Does Not Occur.
        In the
        event that Viking fails, either (i) within 120 days from the date hereof,
        to
        complete a PEO, or (ii) to meet the Public Offering Requirements, then in
        such
        event, the terms and conditions of the Loans shall be identical to the terms,
        conditions and procedures of the loans made in the March 22, 2005 Transaction
        except the security interest securing the Loans shall be a Third Priority
        Lien
        and not a second priority lien. Accordingly, if Viking does not complete
        a PEO
        within 120 days from the date of this Agreement or fails to meet the Public
        Offering Requirements, (i) the Lender’s shall be granted Warrants on the same
        terms and conditions as the March 22nd
        Investors were granted warrants in the March 22, 2005 Transaction, (ii) the
        optional and mandatory conversion rights applicable to the March 22nd
        Investors shall be applicable to each of the Investors in connection with
        their
        Loans, and (iii) each of the Investors shall be granted registration rights
        which are equivalent to the registration rights granted to March 22nd
        Investors in the March 22, 2005 Transaction.

      


      5. Warrants.
        As
        additional consideration for an Investor making a Loan to Viking pursuant
        to
        this Agreement, Viking shall issue each Investor a Warrant to purchase shares
        of
        Viking’s Common Stock. The exact terms and conditions of the Warrant shall be
        depend upon whether Viking (i) completes a PEO with warrants, (ii) a PEO
        without
        warrants, (iii) a Public Offering or neither a PEO or a Public Offering.
        Depending upon the circumstances, the Warrant terms are as follows:

      


      5.1 PEO
        with Warrants.
        If
        Viking elects to offer its securities in a PEO and such PEO has Warrants,
        the
        Loans shall be converted into the PEO securities pursuant to Section 4.1
        of this
        Agreement and the Investors herein shall be issued Warrants on the same terms
        and conditions as all other investors in the PEO, provided however, in no
        event
        shall the exercise price of the Warrants granted to the Investors under this
        Section 5.1 exceed $.60 per share. Accordingly, if the Warrant component
        of such
        PEO securities is less than $.60 per share, the Investors Warrant exercise
        price
        under this section 5.1 shall be such lesser price. If the Warrant component
        of
        such PEO securities is more than $.60 per share, the Investors Warrant exercise
        price under this section 5.1 shall be $.60. Furthermore, in the event Investors
        are issued Warrants under this Section 5.1, the total number of Warrants
        issued
        shall be the greater of (i) a Warrant to purchase one (1) share of Common
        Stock
        for each four (4) shares issuable to Investors under this Section 5.1 or
        the
        number of Warrant shares issuable under the terms of the PEO. 

      


      5.2 PEO
        without Warrants.
        If
        Viking elects to offer its securities in a PEO and such PEO does not include
        Warrants as part of the securities issued to the PEO Investors, the Loans
        shall
        be converted in the PEO securities pursuant to Section 4.1 of this Agreement
        and
        the Investors herein shall be issued Warrants exercisable at $.60 per share,
        subject to adjustment pursuant to the terms of such Warrant, and each Warrant
        shall be for a term of forty-two (42) months from the date hereof. An Investor
        shall be issued a Warrant to purchase one (1) share of Common Stock for each
        four (4) shares issuable to investors in the PEO. For example, if an investor
        in
        the PEO is entitled to be issued, either directly, or upon conversion of
        convertible securities, shares of Viking Common Stock, the Investor under
        this
        Agreement shall be issued a Warrant to purchase one share of Common Stock
        for
        each four shares of Common Stock issued or issuable in connection with
        Convertible Securities offered in the PEO. The form of the Warrant issued
        pursuant to this Section 5.2 shall be substantially similar to the Form of
        Warrant issued in the March 22nd
        Transaction except as other wise provided herein.


      
        
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      5.3 Public
        Offering.
        If
        Viking elects to offer its securities in a Public Offering and the Loan is
        converted into Common Stock pursuant to Section 4.2 of this Agreement, an
        Investor shall be issued a Warrant to purchase one (1) share of Common Stock
        for
        each four (4) shares issuable to Investors in connection with the conversion,
        agreed to in Section 4.2 of this Agreement. The number of shares will be
        calculated prior to the payoff of a portion of the Loan, if any, at the time
        of
        the offering. Warrants granted pursuant to this Section 5.3 shall be exercisable
        at lesser of $.60 per share or 20% above the price at which the shares are
        converted, subject to adjustment pursuant to the terms of such Warrant, and
        each
        Warrant shall be for a term of forty-two (42) months from the date hereof.
        The
        form of the Warrant issued pursuant to this Section 5.3 shall be substantially
        similar to the Form of Warrant issued in the March 22nd
        Transaction except as other wise provided herein. 

       

      5.4 Warrant
        Terms Applicable if PEO or Public Offering Does Not Occur. In the event neither
        a PEO or Public Offering occurs and the Loans are converted in accordance
        with
        Section 4.3 of this Agreement, the Investors shall be granted Warrants on
        the
        same terms and conditions as the March 22nd Investors were granted
        Warrants.

      


      6. Adjustments
        to Conversion Prices.
        The
        Conversion Prices shall be adjusted pursuant to the provisions of the PEO
        or the
        March 22 Transaction. If Viking effects a Public Offering, the Conversion
        Price
        shall be adjusted if Viking:

      


      (i) makes
        a
        distribution on its Common Stock in shares of its Common Stock; 

      


      (ii) subdivides
        or reclassifies its outstanding shares of Common Stock into a greater number
        of
        shares;

      


      (iii) combines
        or reclassifies its outstanding shares of Common Stock into a smaller number
        of
        shares;

      


      (iv) makes
        a
        distribution on its Common Stock in shares of its capital stock other than
        Common Stock; and/or

      


      (v) issues,
        by reclassification of its Common Stock, any shares of its capital
        stock;

      



      
        
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      Then
        the
        Conversion Price in effect immediately prior to such action (and the number
        and
        kind of capital stock purchasable upon conversion of the Promissory Note,
        upon
        the occurrence of any of the events described in (iv) and (v) above), shall
        be
        adjusted so that the holder of a Promissory Note upon conversion thereof
        shall
        be entitled to receive the number of shares of Common Stock (and such other
        securities) that the holder of the Promissory Note would have owned or have
        been
        entitled to receive after the happening of any of the events described above
        had
        the Promissory Note been converted immediately prior to the happening of
        such
        event or any record date with respect thereto, and the Default Conversion
        Price
        immediately prior to such action shall be adjusted proportionately to the
        adjustment of the Conversion Price. An adjustment made pursuant to this Section
        5 shall become effective immediately after the record date in the case of
        a
        dividend or distribution and shall become effective immediately after the
        effective date in the case of a subdivision, combination or issuance. If,
        as a
        result of an adjustment made pursuant to this Section 5, the holder of the
        Promissory Note thereafter surrendered for conversion shall become entitled
        to
        receive shares of two (2) or more classes of capital stock or shares of Common
        Stock and any other class of capital stock of Viking, the Board of Directors
        in
        good faith shall determine the allocation of the adjusted Conversion Price
        and
        Default Conversion Price between or among shares of such classes of capital
        stock or shares of Common Stock and such other class of capital
        stock.

      


      Upon
        any
        adjustment of the Conversion Price, then and in each such case Viking, at
        its
        sole expense, shall give written notice thereof (i) by certified or registered
        mail, postage prepaid, (ii) by a nationally known overnight delivery service,
        or
        (iii) delivered by hand, addressed to the holder of the Promissory Note at
        his
        address as shown on the books of Viking, which notice shall state the conversion
        price resulting from such adjustment and adjusted number of shares of Common
        Stock or other capital stock, as applicable, issuable upon exercise of the
        Promissory Note, setting forth in reasonable detail the method upon which
        such
        calculation is based. 

      


      7. Remedies.
        Upon
        the occurrence of an Event of Default and the expiration of any notice and
        cure
        period provided for under the Loan Documents (if any), the entire indebtedness
        owed to the Investor shall, at the option of the Investor, immediately become
        due and payable without presentment, demand, protest, or other notice of
        any
        kind, all of which are expressly waived by Viking; provided that the occurrence
        of an Event of Default as set forth in Section 6(iv) and Section 6(v) of
        the
        Promissory Note shall make all sums of principal and interest then remaining
        unpaid and all other amounts payable under the Loan Documents due and payable,
        all without demand, presentment, notice or protest, all of which hereby are
        expressly waived, and will permit Investor to exercise any other right available
        to it at law or in equity, all which rights and powers may be exercised
        cumulatively. The Investor may proceed with every remedy available at law
        or in
        equity or provided for in this Agreement or in any of the Loan Documents,
        and
        all expenses incurred by the Investor in connection with any remedy shall
        be
        deemed indebtedness of Viking to the Investor. The Collateral Agent, on behalf
        of the Investor, may apply the proceeds from any Collateral or from any other
        source against any part of the Loans as and in any order the Collateral Agent
        sees fit but on a pro rata basis to each Investor. 

      



      
        
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      No
        delay
        or failure of an Investor in the exercise of any right or remedy provided
        for
        under this Agreement or under any of the Loan Documents shall be deemed a
        waiver
        of such right by the Investor. No exercise or partial exercise or waiver
        of any
        right or remedy shall be deemed a waiver of any further exercise of such
        right
        or remedy or of any other right or remedy that the Investor may have under
        this
        Agreement or under any of the Loan Documents. Enforcement of any of the
        Investor’s rights as to any security for the Loan shall not affect the
        Investor’s right to enforce payment of the Loan and to recover judgment for any
        portion thereof remaining unpaid. The rights and remedies set forth in this
        Agreement and in any of the Loan Documents are cumulative and not exclusive
        of
        any other right or remedy that an Investor may have.

      


      8. Lead
        Lender.
        Viking
        shall furnish to Lead Lender such financial information as may be reasonably
        requested by Lead Lender. Such financial information shall include, but not
        be
        limited to: (i) audited financial statements within one hundred twenty (120)
        days of Viking’s fiscal year end; (ii) internally prepared financial statements
        within thirty (30) days of each calendar month end; and (iii) an
        annual
        budget for the upcoming fiscal year by month within thirty (30) days of fiscal
        year end. All financial reports should include a balance sheet, income statement
        and statement of cash flows prepared in accordance with GAAP, accompanied
        by a
        management discussion and analysis of the appropriate reporting
        period.

      


      9. Representations
        and Warranties of Viking.
        Viking
        makes the following representa-tions and warran-ties to each Investor, which
        representations and warranties shall be true and correct as of the date hereof
        and for so long as any portion of any Promissory Note remains
        outstanding:

      


      9.1 Existence;
        Qualification;
        No Subsidiary.  Viking
        is
        a corporation duly incorporated, validly existing and in good standing under
        the
        laws of the State of Nevada, and has full corporate power and authority to
        conduct its business and own and operate its business as now conducted and
        operated and as proposed to be conducted. Viking is licensed or qualified
        as a
        foreign corporation and is in good standing in each jurisdiction where it
        is
        required to be so licensed or qualified, except where the failure to be so
        licensed or qualified would not materially and adversely affect Viking. Viking
        has no subsidiaries.

      


      9.2 Authorization
        and Enforceability; Issuance of Common Shares.

      



      
        
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      (a) Viking
        has the full power and authority and has taken all required corporate and
        other
        action necessary to permit Viking to execute, deliver, and perform this
        Agreement, the Promissory Note, the Security Instruments to issue the
        Securities, and none of such actions do or will violate any provision of
        Viking’s certificate of incorporation or by-laws, or conflict with, result in
        the breach of, constitute a default (or an event that, with notice or lapse
        of
        time or both, would constitute a default) under, result in the creation of
        a
        Lien upon Viking’s capital stock or the assets of Viking pursuant to, give any
        third party the right to accelerate any material obligation under, require
        any
        authorization, consent or approval or other action by or notice to under,
        any
        agreement, instrument, or understanding to which Viking is a party or by
        which
        it is bound or any applicable law, regulation, order, or judgment. Each of
        these
        Loan Agreements constitutes a legal, valid, and binding obligation of Viking,
        enforceable against Viking in accordance with its terms, except to the extent
        limited by applicable bankruptcy, insolvency, reorganization, moratorium,
        and
        similar laws of general application related to the enforcement of creditor’s
        rights generally and general principles of equity.

      


      (b) The
        Common Stock to be issued upon the conversion of the Promissory Notes and
        the
        exercise of warrants, if warrants are issued to the Lenders, will be duly
        authorized and, when issued and delivered in accordance with the Promissory
        Notes and warrants, respectively, will be validly issued and outstanding
        and
        will be fully paid and nonassessable. The copies of the Articles of
        Incorporation and Bylaws of Viking furnished to Lead Lender’s counsel reflect
        all amendments made thereto at any time prior to the Closing and are correct
        and
        complete in all respects. 

      


      9.3 Capitalization.
        .As
        of the
        date of this Agreement, the authorized capital stock of Viking is comprised
        of
        100,000,000 shares of Common Stock and 25,000,000 shares of preferred stock.
        As
        of the date of this Agreement, there are 31,919,050 shares of Common Stock
        outstanding and no shares of preferred stock outstanding. All of Viking’s
        outstanding shares of Common Stock are duly and validly issued, fully paid,
        and
        nonassessable and have been issued in compliance with all applicable laws.
        Except as set forth on Schedule
        9.3
        or as
        contemplated by this Agreement, (i) there are no outstanding options,
        convertible securities, warrants, debentures, phantom stock, stock appreciation
        rights, preemptive rights, rights of first offer, rights of first refusal,
        antidilution rights, registration rights, or commitments of any kind relating
        to
        any issued or unissued shares of capital stock (or other equity interests)
        of
        Viking; (ii) Viking is not subject to any obligation (contingent or otherwise)
        to repurchase or otherwise acquire or retire any Common Stock; and (iii)
        there
        are no proxies, voting trust agreements or similar agreements or options
        granted
        by the holders of Common Stock.

      


      9.4 Private
        Sale.
        Subject
        to the accuracy of an Investor’s representations and warranties in this
        Agreement, neither the offer, sale, and issuance of the Securities as
        contemplated by this Agreement nor the issuance and delivery of any Common
        Stock
        upon exercise of the Warrant or pursuant to the conversion of the Promissory
        Notes requires or will require registration or qualification under the
        Securities Act or any state securities laws. Neither Viking, nor any agent
        acting on Viking’s behalf, has offered or solicited or will offer or solicit any
        offers to buy any securities from, any Person or Persons so as to require
        the
        issuance or sale of the Securities to be registered pursuant to the provisions
        of Section 5 of the Securities Act or prevent Viking from utilizing the
        provisions of Section 25102(f) of the California Corporate Securities Law
        of
        1968 or any other applicable state securities law exemption from
        qualification.


      
        
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      9.5 Disclosure. Viking’s
        Annual Report on Form 10-KSB or the fiscal year ended December 31, 2004 its
        Quarterly Reports on Form 10-QSB for the fiscal quarter ended March 31, 2005,
        and its Current Reports filed with the Securities and Exchange Commission
        (collectively, the “SEC Filings”) comply with the requirements of the Securities
        Exchange Act of 1934, as amended (“Exchange Act”), in all material respects, do
        not contain any untrue statement of a material fact, and do not omit to state
        a
        material fact necessary in order to make the statements therein, in the light
        of
        the circumstances under which they were made, not misleading. The financial
        statements (together with the notes to the financial statements) included
        in the
        SEC Filings (the “Financial Statements”) are in accordance with the books and
        records of Viking and the Financial Statements fairly and accurately present
        the
        financial condition and results of operations, the shareholders’ equity and cash
        flows of Viking, as of the dates and for the periods indicated, in accordance
        with generally accepted accounting principles (“GAAP”) consistently applied.
        Viking has no material liabilities or obligations, absolute, contingent or
        otherwise, other than (a) liabilities set forth in the Financial Statements,
        (b)
        liabilities incurred in the ordinary course of business subsequent to March
        31,
        2005, and (c) obligations under contracts and commitments incurred in the
        ordinary course of business and not required under GAAP to be reflected in
        such
        financial statements, which, in both cases, individually or in the aggregate,
        are not material to the financial condition, operations or prospects of
        Viking.

      


      9.6. Absence
        of Certain Changes. 

      


      (a) Except
        as
        set forth in Schedule
        9.6,
        since
        March 31, 2005, Viking has not:

      


      (i) incurred
        any liabilities, other than current liabilities incurred, or obligations
        under
        contracts entered into, in the ordinary course of business and consistent
        with
        past practice;

      


      (ii) paid,
        discharged, or satisfied any claim, lien, or liability, other than any claim,
        lien, or liability (A) reflected or reserved against on the consolidated
        balance
        sheet as of Mach 31, 2005 included in the Financial Statements (the “Current
        Balance Sheet”) and paid, discharged, or satisfied in the ordinary course of
        business and consistent with past practice since the date of the Current
        Balance
        Sheet, or (B) incurred and paid, discharged, or satisfied since the date
        of the
        Current Balance Sheet in the ordinary course of business and consistent with
        past practice;

      


      (iii) sold,
        leased, assigned, or otherwise transferred any of its assets or services,
        tangible or intangible (other than sales in the ordinary course of business
        and
        consistent with past practice);

      


      (iv) permitted
        any of its assets, tangible or intangible, to become subject to any lien,
        security interest, or other charge or encumbrance (other than any Permitted
        Lien);

      


      (v) written
        off as uncollectible any accounts receivable, except for accounts receivable
        aggregating not more than $25,000;


      
        
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      (vi) terminated
        or amended, or suffered the termination or amendment of, other than in the
        ordinary course of business and consistent with past practice, or failed
        to
        perform in all material respects, all its obligations, or suffered or permitted
        any material default to exist under, any material agreement, license, or
        permit;

      


      (vii) suffered
        any damage, destruction, or loss of tangible property (whether or not covered
        by
        insurance) that, in the aggregate, exceeds $25,000;

      


      (viii) made
        any
        loan to any person or entity (other than advances to employees in the ordinary
        course of business and consistent with past practice that do not exceed $25,000
        in the aggregate);

      


      (ix) cancelled,
        waived, or released any debt, claim, or right in an amount or having a value
        exceeding $25,000;

      


      (x) paid
        any
        amount to, or entered into any agreement, arrangement, or transaction with,
        any
        affiliate (including its officers, directors, and employees), other than
        payments of salary and benefits to employees in the ordinary course of business
        and consistent with past practice;

      


      (xi) declared,
        set aside, or paid any dividend or distribution with respect to its capital
        stock, or redeemed, purchased, or otherwise acquired any of its capital
        stock;

      


      (xii) other
        than in the ordinary course of business and consistent with past practice,
        granted any increase in the compensation of any officer or employee or made
        any
        other change in employment terms of any officer or employee;

      


      (xiii) issued
        or
        agreed to issue any securities of any kind, whether or not pursuant to
        agreements or rights existing on or before Mach 31, 2005, except pursuant
        to
        agreements listed in Schedule
        9.3;

      


      (xiv) made
        any
        change in accounting or cash management practices;

      


      (xv) suffered
        or caused any other occurrence, event, or transaction outside the ordinary
        course of business; or

      


      (xvi) agreed,
        in writing or otherwise, to any of the foregoing.

      


      (b) Since
        the
        March 31, 2005 Balance Sheet, there has not been any material adverse change
        (a
“Material Adverse Change” or a “Material Adverse Effect”) in the business,
        operations, properties, prospects, assets or condition of Viking, excluding
        operating losses in the ordinary course of business, an no event has occurred
        or
        circumstance exists that may result in such a Material Adverse
        Change.


      
        
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      9.7 Litigation.
        As of
        the date of this Agreement, no claim, suit, proceeding, or investigation
        is
        pending or, to the knowledge of Viking, threatened against or affecting Viking
        or its officers or directors in their capacities as such.

      


      9.8 Licenses,
        Compliance with Law, Other Agreements.
        Viking
        has
        all material franchises, permits, licenses, and other rights to allow it
        to
        conduct its business and is not in violation, in any material respect, of
        any
        order or decree of any court, or of any law, order, or regulation of any
        governmental agency, or of the provisions of any material contract or agreement
        to which it is a party or by it is bound, and neither the Loan Documents,
        nor
        the transactions contemplated therein will result in any such violation.
        Viking
        has conducted its business in compliance with all applicable laws, rules,
        and
        regulations, except to the extent non-compliance could not reasonably be
        expected to have a Material Adverse Effect on Viking.

      


      9.9 Third-Party
        Approvals. Except
        as
        set forth in Schedule
        9.9,
        Viking
        is not required to obtain any order, consent, approval, or authorization
        of, or
        to make any declaration or filing with, any Governmental Agency or other
        third
        party (including under any state securities or “blue sky” laws) in connection
        with the execution, delivery and performance of the Loan Documents and related
        documents. 

      


      9.10 Assets.

      


      (a) Viking
        has good and marketable title to, or a valid leasehold interest in, all of
        its
        properties of any kind other than Proprietary Information (as defined below)
        and
        interests in such properties, which constitute all the properties and interests
        in property other than Proprietary Information that are used in the business
        of
        Viking as conducted or as currently proposed to be conducted, free and clear
        of
        restrictions or conditions on transfer or assignment and free and clear of
        Lines. 

      


      (b) Except
        as
        set forth on Schedule
        9.10(b),
        Viking
        has good title to and exclusive ownership of all patents, patent applications,
        trademarks, service marks and domain names, together with the goodwill of
        the
        business associated therewith, copyrights, trade names, mask works, proprietary
        information, know-how, processes, models, designs, trade secrets, customer
        and
        supplier lists, market surveys, plans, procedures and other intellectual
        property rights (collectively the “Proprietary Information”), which are used or
        held for use in the operation or conduct of the business of Viking as presently
        conducted and currently proposed to be conducted, free and clear of restrictions
        or conditions on transfer or assignment and free and clear of payments and
        fees
        and Liens. The business of Viking as presently conducted and as currently
        proposed to be conducted does not and to the knowledge of Viking, will not
        conflict or infringe with the Proprietary Information of others. No affiliate,
        officer, consultant or employee of Viking has any right in any of the
        Proprietary Information.


      
        
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      (c) Viking
        has taken commercially reasonable measures to protect the secrecy, value
        and
        confidentiality of the Proprietary Information. Viking has not disclosed
        the
        contents of any Proprietary Information to Persons other than its officers
        and
        employees or to other Persons who have executed appropriate confidentiality
        agreements. To the knowledge of Viking, no officer, consultant or employee
        of
        Viking is under any restriction, whether contractual, or by virtue of previous
        employment or otherwise, that would prevent such Person from performing his
        or
        her duties for Viking or prevent Viking from using the Proprietary Information.
        Viking is not a party to any nondisclosure or confidentiality agreements
        not
        entered into in the ordinary course of business.

      


      (d) Viking
        owns, or has a valid leasehold interest in, all of the equipment and other
        fixed
        assets of Viking which are necessary and sufficient for the efficient operation
        of the business of Viking as currently conducted and currently proposed to
        be
        conducted and all of such assets are in good operating condition, normal
        wear
        and tear excepted.

      


      9.11 Employee
        Compensation.
        All
        forms, reports and documents filed by Viking with the SEC on or after January
        28, 2004 (“SEC Reports”) list all executive officers of Viking and a description
        of all forms of compensation and employee benefits payable to them required
        to
        be disclosed therein. Except as set forth in the SEC Reports or on Schedule
        9.11,
        Viking
        is not a party to or bound by any employment agreement not terminable at
        will or
        having more than one month’s severance pay or which requires, or which could
        require, compensation and benefits of more than Six Thousand Dollars ($6,000)
        per month, collective employment contracts, deferred compensation agreements,
        bonus plans, profit sharing plans, pension plans or any other plans or programs
        subject to ERISA or health, disability, sick pay or other employee benefits.
        Viking believes that relations with its employees are satisfactory

      


      9.12 Material
        Agreements.
        Except
        as attached as exhibits to the SEC Reports or on Schedule
        9.12,
        Viking
        is not a party to, nor is any of its property bound by, (a) any agreement
        requiring the performance by Viking
        of any
        obligation for a period of time extending beyond one year from the date hereof,
        calling for or which could result in the payment or receipt of consideration
        of
        more than Fifty Thousand Dollars ($50,000), or licensing any material
        Proprietary Information of Viking or any third party; (b) any agreement or
        understanding between Viking and any officer, employee or consultant of Viking,
        other than employee compensation and benefits entered into in the ordinary
        course of business; (c) any loan or credit agreements providing for the
        extension of credit in excess of Fifty Thousand Dollars ($50,000) to or from
        Viking; (d) any agreements or commitments containing a provision limiting
        the
        ability of Viking to compete with any Person or engage in any line of business;
        (e) any agreement requiring Viking to guaranty the obligations of any Person;
        (f) any agreement requiring Viking to provide indemnification to any officer
        or
        director of Viking; or (g) any agreements providing for the payment of any
        royalties based on revenues (or a specific revenue stream) of Viking. There
        is
        no default or event that with notice or lapse of time, or both, would constitute
        a default by any party to any of the foregoing agreements. Viking has not
        received notice nor does it have knowledge that any party to any of these
        agreements intends to cancel or terminate any of these agreements or to exercise
        or not exercise any options under any of these agreements or to seek a
        renegotiation or adjustment of any material provisions. 

      



      
        
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      9.13 Insurance.
        The
        insurance coverage of Viking with respect to its properties, assets and business
        is reasonable and customary for corporations engaged in similar lines of
        business, including business interruption insurance, and is in full force
        and
        effect. Viking shall use commercially reasonable efforts to ensure that the
        insurance policies with respect to such coverage include an additional insured
        endorsement payable in favor of Investor, and Viking shall not cancel such
        insurance policies without the consent of Collateral Agent.

      


      9.14 Finder’s
        or Broker’s Fees. There
        are
        no claims for brokerage commissions, finders’ fees or similar compensation in
        connection with the transactions contemplated by this Agreement based on
        any
        arrangement or agreement binding upon Viking.

      


      9.15 Environmental
        and Safety Matters.
        

      


      (a) Viking
        is
        now and has always been in compliance in all material respects with all
        Environmental and Safety Requirements.

      


      (b) Without
        limiting the generality of the foregoing, Viking has obtained and complied
        with,
        and is in compliance with, in all material respects, all permits, licenses
        and
        other authorizations that may be required pursuant to Environmental and Safety
        Requirements for the occupation of its facilities and the operation of its
        business.

      


      (c) Viking
        has not received any written or oral notice regarding any actual or alleged
        material violation of Environmental and Safety Requirements, or any material
        liabilities, obligations or responsibilities or potential material liabilities,
        obligations or responsibilities (whether accrued, absolute, contingent,
        unliquidated or otherwise), including any investigatory, remedial or corrective
        obligations, relating to Viking or its facilities arising under Environmental
        and Safety Requirements, nor is Viking aware of any information which might
        form
        the basis of any such notice.

      


      (d) None
        of
        the following exists or, or to the knowledge of Viking, formerly existed
        at any
        property or facility owned or operated by Viking: (i) underground storage
        tanks;
        (ii) asbestos-containing material in any form or condition; (iii) materials
        or
        equipment containing polychlorinated biphenyls; (iv) landfills, surface
        impoundments, or disposal areas, or (v) maintenance area or vehicle or equipment
        wash area.

      


      (e) Viking
        has not treated, stored, disposed of, arranged for or permitted the disposal
        of,
        transported, handled, or released any substance, including any hazardous
        substance, or owned or operated any property or facility (and no such property
        or facility is contaminated by any such substance) in a manner that has given
        or
        could give rise to material liabilities, obligations or responsibilities
        of
        Viking, including any liability for response costs, corrective action costs,
        personal injury, property damage, natural resources damages or attorney fees,
        pursuant to the Comprehensive Environmental Response, Compensation and Liability
        Act of 1980, as amended (“CERCLA”) or the Solid Waste Disposal Act, as amended,
        or any other Environmental and Safety Requirements, nor has Viking released
        or
        waived any third party, either expressly or by operation of law, from any
        liability, obligation or responsibility relating to any Environmental and
        Safety
        Requirements.

      



      
        
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      (f) To
        the
        knowledge of Viking, no facts, events or conditions relating to the past
        or
        present facilities, properties or operations of Viking will prevent, hinder
        or
        limit continued compliance in all material respects with Environmental and
        Safety Requirements, give rise to any investigatory, remedial or corrective
        obligations pursuant to Environmental and Safety Requirements, or give rise
        to
        any other material liabilities (whether accrued, absolute, contingent,
        unliquidated or otherwise) pursuant to Environmental and Safety Requirements,
        including any relating to onsite or offsite releases or threatened releases
        of
        hazardous materials, substances or wastes, personal injury, property damage
        or
        natural resources damage.

      


      (g) Neither
        this Agreement nor the consummation of the transaction that is the subject
        of
        this Agreement will result in any obligations for site investigation or cleanup,
        or notification to or consent of government agencies or third parties, pursuant
        to any of the so-called “transaction-triggered” or “responsible property
        transfer” Environmental and Safety Requirements.

      


      (h) Viking
        has, neither expressly nor by operation of law, assumed nor undertaken any
        liability, including any obligation for corrective or remedial action, of
        any
        other Person relating to Environmental and Safety Requirements.

      


      (i) Viking
        has provided each Investor with true, correct and complete copies of all
        environmental reports, assessments or investigations and all parts thereof
        (including any drafts of such items) regarding any property currently or
        formerly owned, leased or operated by such Viking.

      


      9.16 Employee
        Benefits and Plans.

      


      (a) Schedule
        9.16(a)
        sets
        forth a true and complete list of each “employee benefit plan” as defined
        in Section 3(3) of ERISA, and any other plan, policy, program practice,
        agreement, understanding or arrangement (whether written or oral) providing
        compensation or other benefits to any current or former director, officer,
        employee or consultant (or to any dependent or beneficiary thereof) of Viking
        or
        any ERISA Affiliates (as defined below), which are now, or were within the
        past
        six years, maintained, sponsored or contributed to by Viking or any ERISA
        Affiliate, or under which Viking or any ERISA Affiliate has any obligation
        or
        liability, whether actual or contingent, including, without limitation, all
        incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical,
        disability, stock purchase, stock option, stock appreciation, phantom stock,
        restricted stock or other stock-based compensation plans, policies, programs,
        practices or arrangements (each a “Viking Benefit Plan”). For purposes of this
        Agreement, “ERISA Affiliate” shall mean any entity (whether or not incorporated)
        other than Viking that is considered under common control and treated as
        one
        employer under Section 414(b), (c), (m) or (o) of the Internal Revenue Code
        of
        1986, as amended (the “Code”). Viking does not have, and to the knowledge of
        Viking, no other Person, has any express or implied commitment, whether legally
        enforceable or not, to modify, change or terminate any Viking Benefit Plan,
        other than with respect to a modification, change or termination required
        by
        ERISA, the Code or any other applicable law or governmental rule or
        regulation.

      



      
        
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      (b) Each
        Viking Benefit Plan has been administered in all material respects in accordance
        with its terms and all applicable laws, including ERISA and the Code, and
        contributions required to be made under the terms of any of the Viking Benefit
        Plans as of the date of this Agreement have been timely made or, if not yet
        due,
        have been properly reflected on the most recent consolidated balance sheet
        filed
        or incorporated by reference in Parent’s audited consolidated financial
        statements prior to the date of this Agreement. With respect to the Viking
        Benefit Plans, no event has occurred and, to the knowledge of Viking, there
        exists no condition or set of circumstances in connection with which Viking
        could be subject to any material liability (other than for routine benefit
        liabilities) under the terms of, or with respect to, such Viking Benefit
        Plans,
        ERISA, the Code or any other applicable law or governmental rule or
        regulation.

      


      (c) Except
        as
        disclosed on Schedule
        9.16(c):
        (i)
        each Viking Benefit Plan which is intended to qualify under Section 401(a),
        Section 401(k), Section 401(m) or Section 4975(e)(6) of the Code has received
        a
        favorable determination letter from the IRS as to its qualified status, and
        each
        trust established in connection with any Viking Benefit Plan which is intended
        to be exempt from federal income taxation under Section 501(a) of the Code
        is so
        exempt, and to Viking’s knowledge no fact or event has occurred that could
        reasonably be expected to adversely affect the qualified status of any such
        Viking Benefit Plan or the exempt status of any such trust; (ii) to Viking’s
        knowledge there has been no prohibited transaction (within the meaning of
        Section 406 of ERISA or Section 4975 of the Code and other than a transaction
        that is exempt under a statutory or administrative exemption) with respect
        to
        any Viking Benefit Plan that could result in material liability to Viking
        or any
        ERISA Affiliate; (iii) no suit, administrative proceeding, action or other
        litigation has been brought, or to the knowledge of Viking is threatened,
        against or with respect to any such Viking Benefit Plan, including any audit
        or
        inquiry by the IRS or United States Department of Labor (other than routine
        benefits claims); (iv) none of the assets of Viking or any ERISA Affiliate
        is,
        or may reasonably be expected to become, the subject of any lien arising
        under
        ERISA or Section 412(n) of the Code; (v) neither Viking nor any ERISA Affiliate
        has any material liability under ERISA Section 502; (vi) all tax, annual
        reporting and other governmental filings required by ERISA and the Code have
        been timely filed with the appropriate governmental entity with respect to
        each
        Viking Benefit Plan; (vii) all contributions and payments to or under each
        Viking Benefit Plan which can appropriately be deducted under either Code
        Section 162 or 404 are, to the knowledge of Viking, deductible; and (viii)
        no excise tax could be imposed upon any Viking under Chapter 43 of the
        Code.

      


      (d) No
        Viking
        Benefit Plan is a “multiemployer plan” (as defined in Section 3(37) or
        4001(a)(3) of ERISA) (a “Multiemployer Plan”) or is subject to Title IV of ERISA
        or Section 412 of the Code, and neither Viking nor any ERISA Affiliate has
        sponsored or contributed to or been required to contribute to a Multiemployer
        Plan or other pension plan subject to Title IV of ERISA or Section 412 of
        the
        Code (a “Pension Plan”).

      



      
        
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      (e) Except
        as
        set forth on Schedule
        9.16(e)
        or as
        required by applicable law, no Viking Benefit Plan provides any of the following
        retiree or post-employment benefits to any person: medical, disability or
        life
        insurance benefits. No Viking Benefit Plan is a voluntary employee benefit
        association under Section 501(a)(9) of the Code. Viking and each of its ERISA
        Affiliates are in compliance in all material respects with (i) the requirements
        of the applicable health care continuation and notice provisions of the
        Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
        regulations (including proposed regulations) thereunder and any similar state
        law and (ii) the applicable requirements of the Health Insurance Portability
        and
        Accountability Act of 1996, as amended, and the regulations
        thereunder.

      


      (f) 
        Viking
        does not maintain, sponsor, contribute to or has any liability with respect
        to
        any employee benefit plan program or arrangement that provides benefits to
        non-resident aliens with no United States source income outside of the United
        States.

      


      9.17 Taxes.
        Viking
        has filed all tax returns it was required to file, and has paid all taxes
        shown
        on those tax returns as owing. Viking has withheld and paid all taxes required
        to have been withheld and paid in connection with amounts paid or owing to
        any
        employee, independent contractor, creditor, stockholder, or other third party.
        There is no dispute or claim concerning any tax liability of Viking, either
        (i)
        claimed or raised by any authority in writing or (ii) to the knowledge of
        Viking, claimed or raised by any agent of such authority.

      


      9.18 Small
        Business Matters.

      


      9.18.1 Viking
        acknowledges that Lead Lender is a federally licensed SBIC under the SBIC
        Act.
        Viking, together with its “affiliates” (as that term is defined in 13 C.F.R.
        Section 121.103), is a “small business concern” within the meaning of the SBIC
        Regulations, including 13 C.F.R. Section 121.103. After giving effect to
        the
        transactions contemplated by the Loan Documents, Viking will have 500 or
        fewer
        full-time equivalent employees. The information regarding Viking and its
        affiliates set forth in the SBA forms Nos. 480, 652 and 1031 delivered at
        the
        Closing is accurate and complete. Copies of such forms have been completed
        and
        executed by Viking and delivered to Lead Lender at the Closing together with
        a
        written statement of Viking regarding its planned use of the proceeds from
        the
        transactions contemplated by the Loan Documents. Viking does not presently
        engage in, and it shall not hereafter engage in, any activities, nor shall
        it
        use directly or indirectly the proceeds of the transactions contemplated
        by the
        Loan Documents for any purpose, for which an SBIC is prohibited from providing
        funds by the SBIC Regulations (including 13 C.F.R. Section
        107.720).

      


      9.18.2 The
        primary business activity of Viking does not involve, directly or indirectly,
        providing funds to others, purchasing or discounting debt obligations, factoring
        or long-term leasing of equipment with no provision for maintenance or repair,
        and Viking is not classified under Section 53 (Real Estate) of the NAICS
        manual.
        The assets of the business of Viking (the “Business”) will not be reduced or
        consumed, generally without replacement, as the life of the Business progresses,
        and the nature of the Business does not require that a stream of cash payments
        be made to the Business’s financing sources, on a basis associated with the
        continuing sale of assets.


      
        
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      9.19 Solvency.
        Viking
        is
        solvent as of the date of this Agreement and will not become insolvent as
        a
        result of the consummation of the transactions contemplated by this Agreement
        or
        the other Loan Documents. Viking is, and after giving effect to the transactions
        contemplated by this Agreement shall be, able to pay its debts as they become
        due, and Viking’s property now has, and after giving effect to the transactions
        contemplated hereby shall have, a fair salable value greater than the amounts
        required to pay its debts (including a reasonable estimate of the amount
        of all
        contingent liabilities). Viking has adequate capital to carry on its business,
        and after giving effect to the transactions contemplated by this Agreement,
        Viking shall have adequate capital to conduct its business. No transfer of
        property is being made and no obligation is being incurred in connection
        with
        the transactions contemplated by this Agreement with the intent to hinder,
        delay
        or defraud either present or future creditors of Viking.

      


      9.20 Disclosure.
        Neither
        this Agreement, nor any of the other Loan Documents, nor any of the schedules,
        attachments, or certificates attached to this Agreement or any of the other
        Loan
        Documents, delivered by Viking at the Closing, contains any untrue statements
        of
        a material fact or omits a material fact necessary to make the statements
        contained herein or therein not misleading. To Viking’s knowledge, there is no
        fact which Viking has not disclosed to Investors, in writing, which could
        reasonably be anticipated to have a Material Adverse Effect.

      


      10. Representations
        and Warranties of Investors.
        Each
        Investor represents and warrants to Viking as follows:

      


      (a) The
        Investor is an “accredited investor” as such term is defined in Rule 501 of
        Regulation D promulgated by the SEC.

      


      (b) Investor
        has had the opportunity to ask questions of and to receive answers from Viking
        and its executive officers concerning the affairs and prospects of Viking
        in
        general, has received and read the SEC filings of Viking, and desires no
        further
        information pertaining to Viking. Investor will rely solely upon (i) such
        information and not any other material heretofore received, and (ii)
        investigations made by Investor or Investor’s representatives in making
        Investor’s investment decision.

      


      (c) In
        Investor’s opinion, Investor’s overall commitment to investments that are not
        readily marketable is not disproportionate to Investor’s net worth, and in
        Investor’s opinion, Investor’s investment in the Promissory Notes will not cause
        such overall commitment to such investments to become excessive.

      


      (d) Investor
        has, either alone or together with Investor’s purchaser representative, if any,
        such knowledge and experience in financial, real estate, and business matters
        that Investor is capable of evaluating the merits and risks of this
        investment.

      


      (e) Investor
        has adequate means of providing for Investor’s current needs and personal
        contingencies, and Investor has no need for liquidity in Investor’s investment
        in the Promissory Notes. Investor is, able to meet Investor’s obligations
        hereunder, and acknowledges that this investment is long-term and speculative
        in
        nature.

      



      
        
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      (f) Investor’s
        personal financial circumstances, investment portfolio, and tax bracket are
        such
        that Investor and Investor’s purchaser representative, if any, believe the
        purchase contemplated herein to be a suitable investment. Investor is able
        to
        bear the economic risk of this investment.

      


      (g) The
        address set forth opposite such Investor’s name on Annex
        A,
        if
        Investor is an individual, Investor’s true and correct residence and, if
        Investor is an entity, Investor’s principal place of business.

      


      (h) Investor
        acknowledges that if a purchaser representative has been utilized by Investor
        in
        evaluating the investment contemplated hereby, that Investor’s purchaser
        representative has advised Investor of the merits and risks of an investment
        in
        Viking and the suitability of the investment.

      


      (i) Investor
        confirms that Investor is financially prepared to hold the Promissory Note
        for a
        substantial period of time and to withstand the possibility of a loss of
        the
        investment.

      


      (j) Investor
        understands that none of the Promissory Notes have been registered under
        the
        Securities Act or under any state securities act in reliance on an exemption
        for
        non-public offerings.

      


      (k) The
        Promissory Note which the Investor is purchasing are being acquired solely
        for
        Investor’s own account, for investment purposes, and are not being purchased
        with a view to or for resale, distribution, subdivision, or fractionalization,
        and Investor has no plans to enter into any such contract, undertaking,
        agreement, or arrangement. Investor agrees that the Promissory Note to be
        received will bear a restrictive legend limiting transfer. 

      


      (l) If
        Investor is a corporation, partnership, or trust, the undersigned is authorized
        and otherwise duly qualified to purchase and hold the Promissory Note, and
        Investor has its principal place of business as set forth below and was not
        formed for the specific purpose of acquiring the Securities, unless otherwise
        specifically set forth on the signature page hereof.

      


      (m) Investor
        has the full power and authority to execute and deliver this Agreement, and
        Investor’s execution and delivery of this Agreement and will not conflict or
        result in a material breach of any other agreement or obligation to which
        Investor is a Party.

      


      11. Affirmative
        Covenants of Viking.
        Until
        the Promissory Notes are paid in full, Viking shall:

      


      11.1 Pay
        the Loans.
        Duly
        and punctually pay or cause to be paid all principal, interest, and other
        amounts due on the Promissory Notes on the date, in the place, and in the
        manner
        set forth in the Loan Documents and perform and observe all other obligations
        of
        Viking under this Agreement and the other Loan Documents.

      



      
        
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      11.2 Tax
        Returns.
        File
        all federal, state, and local tax returns or requests for extensions that
        are
        required to be filed and pay and discharge, when payable, all taxes, assessments
        and governmental charges imposed upon its properties or upon the income or
        profits therefrom received by Viking before delinquent.

      


      11.3 Compliance
        With Laws.
        Comply
        promptly with all laws, rules, regulations, resolutions, ordinances, and
        codes
        applicable to Viking or the Collateral.

      


      11.4 Compliance
        with Agreements.
        Comply
        with all other material obligations which it incurs pursuant to any contract
        or
        agreement as such obligations become due, unless and to the extent the same
        are
        being contested in good faith and by appropriate proceedings and adequate
        reserves have been set aside on its books with respect thereto.

      


      11.5
         Reporting
        Requirements.
        Viking
        shall file with the SEC in a timely manner all reports and other documents
        required of Viking under the Securities Act and the Exchange Act. Viking
        will
        furnish to the Investors:

      


      (a) as
        soon
        as possible, and in any event within ten (10) days after obtaining knowledge,
        notice of the occurrence of (A) an Event of Default, (B) an event which,
        with
        the giving of notice or the lapse of time or both, would constitute an Event
        of
        Default, or (C) a Material Adverse Change, the written statement of the Chief
        Executive Officer or the Chief Financial Officer of Viking, setting forth
        the
        details of such Event of Default, event or Material Adverse Change and the
        action which Viking proposes to take with respect thereto;

      


      (b)
         promptly
        after the sending or filing thereof, copies of all financial statements,
        reports, certificates of its Chief Executive Officer, Chief Financial Officer
        or
        accountants and other information which Viking sends to any holders (other
        than
        the Promissory Notes) of its securities and, without duplication, the
        following:

      


      (i)  Within
        thirty (30) days after the end of each monthly accounting period in each
        fiscal
        year (or when furnished to any lender or other third party, if earlier),
        (A)
        unaudited statements of Viking (prepared in form reasonably satisfactory
        to Lead
        Lender), certified by Viking’s principal financial officer and principal
        executive officer, of income, retained earnings and changes in financial
        position for such monthly period and for the period from the beginning of
        such
        fiscal year to the end of such monthly period and a balance sheet as of the
        end
        of such monthly period, setting forth in each case comparisons to figures
        for
        the corresponding periods in the preceding fiscal year and comparisons to
        budgets prepared by Viking, and (B) a copy of any borrowing base certificate
        or
        similar document submitted to any lender or other third party.  

       

      (ii) Promptly
        upon receipt thereof, any additional reports, management letters or other
        detailed information concerning significant aspects of Viking’s operations and
        financial affairs or in conjunction with any annual or interim audit given
        to
        Viking by its independent accountants (and not otherwise contained in other
        materials provided pursuant to this Section).

      



      
        
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      (iii) Thirty
        (30) days prior to the commencement of each fiscal year, a comprehensive
        annual
        budget or forecast which shall include annual consolidated and consolidating
        budgets prepared on a monthly basis for Viking for such fiscal year (displaying
        anticipated statements of income, retained earnings, changes in financial
        position and balance sheets and containing such internal narrative as
        appropriate). In addition, said plan will include a capital expenditure plan
        which shall be presented to the Board for its approval within thirty (30)
        days
        after the commencement of each fiscal year.

      


      (iv) Promptly,
        but in any event within three (3) days after Viking’s receipt of notice of the
        intention of any customer that has accounted for over ten percent (10%) of
        the
        Viking’s aggregate revenues for the immediately preceding 12-month period to
        cease doing business with Viking or to materially reduce the volume purchased
        from Viking.

      


      (v) Within
        three (3) business days after transmission thereof, copies of all such financial
        statements, proxy statements and reports as Viking sends to its shareholders
        (“Shareholders”), and copies of all registration statements and all regular,
        special or periodic reports which Viking files with any state securities
        regulatory agency, the SEC or with any securities exchange on which any of
        its
        securities are then listed, and copies of all press releases and other
        statements made available generally by Viking to the public concerning material
        developments in Viking’s business.

      


      (c)
         At
        any
        time Viking is not subject to the reporting requirements of the Securities
        Act
        and the Exchange Act:

      


        
(i) Within
        forty-five (45) days after the end of each quarterly accounting period in
        each
        fiscal year (or furnished to any lender or other third party, if earlier),
        unaudited statements of Viking (prepared in form satisfactory to Lead Lender),
        certified by Viking’s principal financial officer and principal executive
        officer, of income, retained earnings and changes in financial position or
        such
        quarterly period and for the period from the beginning of such fiscal year
        to
        the end of such quarterly period and a balance sheet as of the end of such
        quarterly period, setting forth in each case comparisons to figures for the
        corresponding periods in the preceding fiscal year and comparisons to budgets
        prepared by Viking.

      


      (ii) Within
        ninety (90) days after the end of each fiscal year (or furnished to any lender
        or other third party, if earlier), statements of income, retained earnings
        and
        changes in financial position of Viking for such fiscal year, and a balance
        sheet of Viking as of the end of such fiscal year, setting forth in each
        case in
        comparative form corresponding figures for the preceding fiscal
        year.

      



      
        
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      (iii) All
        financial statements required to be delivered hereby shall be (A) prepared
        in accordance with GAAP, consistently applied, except in the case of unaudited
        financial statements, which may not contain all footnotes required by GAAP;
        (B)
        prepared on a consolidated and consolidating basis, as applicable; (C)
        accompanied by a management discussion and analysis of Viking’s financial
        condition, changes in financial condition and results of operations, as compared
        to the comparable period in the preceding fiscal year; (D) in the case of
        annual statements, be audited by an independent accounting firm approved
        by the
        Board; and (E) in the case of quarterly statements, shall be accompanied by
        a compliance certificate from Viking’s principal financial officer and principal
        executive officer certifying as to Viking’s compliance with each covenant set
        forth in the Loan Documents and that no default has occurred with respect
        to
        this Agreement, or any of the other Loan Documents or with respect to any
        indebtedness in favor of banks or other financial institutions.

      


      (d) promptly
        after the commencement thereof, notice of each action, suit or proceeding
        before
        any court or other governmental authority or other regulatory body or any
        arbitrator as to which there is a reasonable possibility of a determination
        that
        would (A) materially impact the ability of Viking to conduct its business,
        (B)
        materially and adversely affect the business, operations or financial condition
        of Viking taken as a whole, or (C) impair the validity or enforceability
        of the
        Promissory Notes or the ability of Viking to perform its obligations under
        the
        Loan Documents;

      


      (e) promptly
        upon request, such other information concerning the condition or operations,
        financial or otherwise, of Viking as the holder from time to time may reasonably
        request.

      


      11.6 Inspection
        of Property.
        Viking
        will permit any representative designated by Lead Lender upon reasonable
        notice,
        during normal business hours, to (i) visit and inspect any of the properties
        of
        Viking, (ii) examine the financial records of Viking and make copies thereof
        or
        extracts therefrom, and (iii) discuss the affairs, finances and accounts
        of
        Viking with the officers, key employees and independent accountants of Viking.
        If Lead Lender has reasonable grounds for conducting an inspection, Viking
        shall
        reimburse the Lead Lender for all commercially reasonable costs and expenses
        incurred by Lead Lender in connection with any such inspection.

      


      11.7 Keeping
        of Records and Books of Account.
        Viking
        will keep adequate records and books of account, with complete entries made
        in
        accordance with generally accepted accounting principles, reflecting all
        of its
        financial and other business transactions.

      


      12. Negative
        Covenants of Viking.
        

      



      
        
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      12.1 Until
        payment and performance in full of all obligations of Viking to the Investors
        pursuant to the terms of this Agreement and the Loan Documents, Viking shall
        not
        incur any liability or tax under Section 4971 of the Code in respect of an
        accumulated funding deficiency (or obtain any waiver under Section 412(d)
        of the
        Code or Section 303 of ERISA) or incur any material liability to the Pension
        Benefit Guaranty Corporation in connection with any employee benefit plan.
        No
        Reportable Event, as defined in Title IV of ERISA, will occur or continue
        with
        respect to any such plan.

      


      12.2 Until
        payment and performance in full of all obligations of Viking to the Investors
        pursuant to the terms of this Agreement and the Loan Documents, Viking shall
        not, without the prior written consent of the Required Investors, take any
        of
        the following actions:

      


      (a) Incur
        any
        indebtedness (other than in the ordinary course of its business or as
        contemplated by this Agreement and the Loan Documents) or grant any liens
        with
        respect to any of its assets;

      


      (b) Guaranty
        or otherwise in any way become or be responsible for indebtedness for borrowed
        money, or for obligations, in either case of any of its officers, directors
        or
        principal stockholders or any of their affiliates, contingently or
        otherwise;

      


      (c) Declare
        or pay dividends or make or authorize any distribution or payment upon any
        of
        its equity securities, or effect a reverse stock split or subdivision of
        any
        shares of capital stock of Viking;

      


      (d) Sell,
        transfer or dispose of, any of its assets other than in the ordinary course
        of
        its business and for fair value;

      


      (e) Purchase,
        redeem, retire or otherwise acquire for value any of its capital stock or
        securities convertible into, or any option, warrant or other right to acquire
        its capital stock now or hereafter outstanding other than pursuant to the
        terms
        of the Loan Documents;

      


      (f) Repay
        out
        of the proceeds of the Promissory Notes any indebtedness for borrowed funds
        or
        any related party obligations except for Promissory Notes heretofore issued
        to
        the Investors;

      


      (g) Issue
        equity below $0.20 per share;

      


      (h) Merge
        or
        consolidate with any Person, or sell, lease, license or otherwise dispose
        of any
        of its assets (other than in the ordinary course of business) or liquidate,
        dissolve, recapitalize or reorganize in any form of transaction;

      


      (i) Purchase,
        lease or otherwise acquire any assets pursuant to a contract requiring
        expenditures in excess of One Hundred Thousand Dollars ($100,000);

      


      (j) Enter
        into the active management or operation of any business other than the business
        as currently conducted by Viking;


      
        
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      (k) Amend
        the
        articles of incorporation or by-laws of Viking;

      


      (l) Increase
        the total number of Directors to more than seven (7) Directors;

      


      (m) Execute,
        renew or modify any contract not in the ordinary course of business involving
        obligations of Viking in excess of One Hundred Thousand Dollars
        ($100,000);

      


      (o) Increase
        compensation or other benefits to any Person, other than in the ordinary
        course
        of business consistent with past practice with respect to non-officer employees
        and except as may be approved by the compensation committee of the Board
        of
        Directors with respect to executives and officers;

      


      (p) Enter
        into any transaction with any affiliate, director, officer, or employee of
        Viking involving, in the aggregate, more than Ten Thousand Dollars ($10,000),
        except that Borrower may enter into employment arrangements approved by the
        compensation committee of the Board of Directors;

      


      (q) Create
        or
        form a Subsidiary whether by acquisition, new capitalization, merger or
        otherwise; provided,
        that
        in the
        event that the Required Investors shall consent to the formation or acquisition
        by Viking of any new Subsidiary, or participation in any partnership or joint
        venture, whether or not wholly owned, Viking shall promptly and diligently
        take
        all actions necessary or required by Collateral Agent to cause such corporation,
        partnership, or other entity or venture to become a credit party for all
        purposes of this Agreement and a “Grantor” under a security agreement in favor
        of Collateral Agent, as agent for Investors (or any successor agent), in
        form
        and substance similar to the Security Agreement;

      


      (r) Enter
        or
        consummate any off-balance sheet transactions (as defined in Item 303(a)(4)(ii)
        of Regulation S-K promulgated under the Securities Act);

      


      (s) Register
        any securities under the Securities Act in connection with an underwritten
        public offering unless Lead Lender reasonably consents to such registration
        (it
        being understood that it would not be unreasonable for Lead Lender to withhold
        its consent in any such registration in which Investors would not have
        registration rights that are pari
        passu
        with
        each other holder of securities of Viking having registration rights);
        or

      


      (t) Take
        any
        action, or fail to take any action, which would result in the invalidity,
        abandonment, misuse or unenforceability of any Proprietary Information or
        which
        would, to the knowledge of Viking, infringe upon or misappropriate any rights
        of
        other Persons.

      


      13. SBIC
        Regulatory Provisions.

      


      13.1 Use
        of Proceeds.

      



      
        
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      13.1.1 At
        such
        times as Lead Lender reasonably requests, Viking shall deliver to Lead Lender
        a
        written statement certified by Viking’s Chief Financial Officer describing in
        reasonable detail the use of the proceeds from the transactions contemplated
        by
        the Loan Documents by Viking. In addition to any other rights granted hereunder,
        Viking shall grant Lead Lender and the SBA access to Viking’s books and records
        for the purpose of verifying the use of such proceeds and verifying the
        certifications made by Viking in SBA forms Nos. 480, 652 and 1031, delivered
        pursuant to Section 3.1.10 and
        for
        the purpose of determining whether the principal business activity of Viking
        continues to constitute an eligible business activity (within the meaning
        of the
        SBIC Regulations).

      


      13.1.2 Viking
        shall not use any proceeds from the transactions contemplated by the Loan
        Documents substantially for a foreign operation, and no more than forty-nine
        percent (49%) of the employees or tangible assets of Viking will be outside
        the
        United States (unless Viking can show to the SBA’s satisfaction, that proceeds
        from the transactions contemplated by the Loan Documents will be used for
        a
        specific domestic purpose). 

      


      13.1.3 Viking
        shall not use any proceeds from the transactions contemplated by the Loan
        Documents for any purpose contrary to public interest (including, but not
        limited to, activities which are in violation of law) or inconsistent with
        free
        enterprise, in each case, within the meaning of 13 C.F.R. Section
        107.720.

      


      13.2 Regulatory
        Violation.
        Upon the
        occurrence of a Regulatory Violation or in the event that Lead Lender determines
        in its good faith judgment that a Regulatory Violation has occurred, in addition
        to any other rights and remedies to which it may be entitled as a holder
        of the
        Securities under any of the Loan Documents, Lead Lender shall have the right
        to
        the extent required under the SBIC Regulations to demand the immediate repayment
        of the principal balance of the Promissory Notes, plus all accrued interest
        on
        the Promissory Notes, by delivering written notice of such demand to Viking.
        Viking shall make such payment by a cashier’s or certified check or by wire
        transfer of immediately available funds to Lead Lender within thirty (30)
        days
        after Viking’s receipt of the demand notice. 

      


      13.3 Regulatory
        Compliance Cooperation.
        In the
        event that Lead Lender believes that it has a Regulatory Problem, Lead Lender
        shall have the right to transfer its Securities without regard to any
        restrictions on transfer set forth in this Agreement or any of the Loan
        Documents other than the restrictions under applicable securities law, and
        Viking shall take all such actions as are reasonably requested by Lead Lender
        in
        order to effectuate and facilitate any transfer by Lead Lender of the Securities
        then held by Lead Lender to any Person designated by Lead Lender. 

      


      13.4 Economic
        Impact Information.
        Promptly after the end of each calendar year (but in any event prior to
        February 28 of each year), Viking shall deliver to Lead Lender a written
        assessment of the economic impact of Lead Lender’s investment in Viking,
        specifying the full-time equivalent jobs created or retained in connection
        with
        the investment, the impact of the investment on the businesses of Viking
        and on
        Taxes paid by Viking and its employees.

      



      
        
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      13.5 Business
        Activity.
        For a
        period of one (1) year following the date hereof, Viking will not change
        its
        business activity if such change would render Viking ineligible to receive
        financial assistance from Lead Lender (within the meanings of 13 C.F.R. Sections
        107.720 and 107.760(b)).

      


      13.6 Number
        of Members.
        Viking
        will notify Lead Lender from time to time when the number of its shareholders
        increases to or above or decreases below fifty (50).

      


      13.7 Compliance
        With Non-Discrimination Requirements.
        Viking
        shall comply at all times with the non-discrimination requirements of 13
        C.F.R.
        Parts 112, 113 and 117.

      


      14. Lead
        Lender and Collateral Agent.

      


      14.1 Appointment
        and Authorization. Each
        Investor hereby designates and appoints St. Cloud as Lead Lender and Collateral
        Agent under this Agreement and the other Loan Documents and each Lender Investor
        irrevocably authorizes the Lead Lender and Collateral Agent to take such
        action
        on its behalf under the provisions of this Agreement and each other Loan
        Document and to exercise such powers and perform such duties as are expressly
        delegated to it by the terms of this Agreement or any other Loan Document,
        together with such powers as are reasonably incidental thereto. Notwithstanding
        any provision to the contrary contained elsewhere in this Agreement or in
        any
        other Loan Document, the Lead Lender and Collateral Agent shall not have
        any
        duties or responsibilities, except those expressly set forth herein or in
        the
        Security Agreement, nor shall the Lead Lender and Collateral Agent have or
        be
        deemed to have any fiduciary relationship with any Investor, and no implied
        covenants, functions, responsibilities, duties, obligations or liabilities
        shall
        be read into this Agreement or any other Loan Document or otherwise exist
        against the Lead Lender and Collateral Agent. Without limiting the generality
        of
        the foregoing sentence, the use of the term “agent” in this Agreement with
        reference to the Collateral Agent is not intended to connote any fiduciary
        or
        other implied (or express) obligations arising under agency doctrine of any
        applicable law. Except as expressly otherwise provided in this Agreement,
        the
        Agent shall have and may use its sole discretion with respect to exercising
        or
        refraining from exercising any discretionary rights or taking
        or
        refraining from taking any actions which the Collateral Agent is expressly
        entitled to take or assert under this Agreement and the other Loan Documents,
        including the exercise of remedies, and any action so taken or not taken
        shall
        be deemed consented to by the Investors.

      


      14.2 Collateral
        Agent Fee.
        As
        payment in full for its services as Collateral Agent, Viking will pay Collateral
        Agent a fee (the “Collateral Agent Fee”) of 1.125% of the total Loan made by the
        investors (a maximum of $45,000). The Collateral Agent Fee attributed to
        each
        Loan will be paid on each Closing Date.

      


      14.3 Delegation
        of Duties.
        The
        Lead Lender and Collateral Agent may execute any of its duties under this
        Agreement or any other Loan Document by or through agents, employees or
        attorneys-in-fact and shall be entitled to advice of counsel concerning all
        matters pertaining to such duties. The Lead Lender and Collateral Agent shall
        not be responsible for the negligence or misconduct of any agent or
        attorney-in-fact that it selects as long as such selection was made without
        gross negligence or willful misconduct.


      
        
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      14.4 Liability
        of Lead Lender and Collateral Agent.
        Neither
        the Lead Lender nor the Collateral Agent (together with its affiliates, and
        the
        officers, directors, employees, counsel, representatives, agents and
        attorneys-in-fact of the Agent and such affiliates, the “Agent-Related Persons”)
        shall (i) be liable for any action taken or omitted to be taken by any of
        them
        under or in connection with this Agreement or any other Loan Document or
        the
        transactions contemplated hereby (except for its own gross negligence or
        willful
        misconduct), or (ii) be responsible in any manner to any of the Investors
        for
        any recital, statement, representation or warranty made by Viking contained
        in
        this Agreement or in any other Loan Document, or in any certificate, report,
        statement or other document referred to or provided for in, or received by
        the
        Collateral Agent under or in connection with, this Agreement or any other
        Loan
        Document, or the validity, effectiveness, genuineness, enforceability or
        sufficiency of this Agreement or any other Loan Document, or for any failure
        of
        Viking or any other party to any Loan Document to perform its obligations
        hereunder or thereunder. No Agent-Related Person shall be under any obligation
        to any Investor to ascertain or to inquire as to the observance or performance
        of any of the agreements contained in, or conditions of, this Agreement or
        any
        other Loan Document, or to inspect the properties, books or records of
        Viking.

      


      14.5 Reliance
        by Agent.
        The Lead
        Lender and Collateral Agent shall be entitled to rely, and shall be fully
        protected in relying, upon any writing, resolution, notice, consent,
        certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
        statement or other document or conversation believed by it to be genuine
        and
        correct and to have been signed, sent or made by the proper Person or Persons,
        and upon advice and statements of legal counsel (including counsel to Viking),
        independent accountants and other experts selected by the Lead Lender and
        Collateral Agent. 

      


      14.6 Notice
        of Default. The
        Lead
        Lender and Collateral Agent shall not be deemed to have knowledge or notice
        of
        the occurrence of any Default or Event of Default, unless the Lead Lender
        and
        Collateral Agent shall have received written notice from an Investor or Viking
        referring to this Agreement, describing such Default or Event of Default
        and
        stating that such notice is a “notice of default.” The Lead Lender and
        Collateral Agent will notify the Investors of its receipt of any such notice.
        The Lead Lender and Collateral Agent shall take such action with respect
        to such
        Default or Event of Default as may be requested by the Required Investors
        in
        accordance with the Security Agreement; provided,
        however,
        that
        unless and until the Lead Lender and Collateral Agent has received any such
        request, the Lead Lender and Collateral Agent may (but shall not be obligated
        to) take such action, or refrain from taking such action, with respect to
        such
        Default or Event of Default as it shall deem advisable.

      



      
        
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      14.7 Credit
        Decision.
        Each
        Investor acknowledges that none of the Agent-Related Persons has made any
        representation or warranty to it, and that no act by the Lead Lender and
        Collateral Agent hereinafter taken, including any review of the affairs of
        Viking, shall be deemed to constitute any representation or warranty by any
        Agent-Related Person to any Investor. Each Investor represents to the Lead
        Lender and Collateral Agent that it has, independently and without reliance
        upon
        any Agent-Related Person and based on such documents and information as it
        has
        deemed appropriate, made its own appraisal of and investigation into the
        business, prospects, operations, property, financial and other condition
        and
        creditworthiness of Viking, and all applicable bank regulatory laws relating
        to
        the transactions contemplated hereby, and made its own decision to enter
        into
        this Agreement and to extend credit to the Viking. Each Investor also represents
        that it will, independently and without reliance upon any Agent-Related Person
        and based on such documents and information as it shall deem appropriate
        at the
        time, continue to make its own credit analysis, appraisals and decisions
        in
        taking or not taking action under this Agreement and the other Loan Documents,
        and to make such investigations as it deems necessary to inform itself as
        to the
        business, prospects, operations, property, financial and other condition
        and
        creditworthiness of Viking. Except for notices, reports and other documents
        expressly required to be furnished to the Investors by the Lead Lender and
        Collateral Agent herein or under the Security Agreement, the Lead Lender
        and
        Collateral Agent shall not have any duty or responsibility to provide any
        Investor with any credit or other information concerning the business,
        prospects, operations, property, financial and other condition or
        creditworthiness of Viking which may come into the possession of any of the
        Agent-Related Persons.

      


      14.8 Indemnification.
        Whether
        or not the transactions contemplated hereby are consummated, the Investors
        shall
        indemnify upon demand the Agent-Related Persons (to the extent not reimbursed
        by
        or on behalf of Viking and without limiting the obligation of Viking to do
        so),
        in accordance with their pro rata interest in the aggregate principal amount
        of
        the Loans, from and against any and all Indemnified Liabilities as such term
        is
        defined in Section 15; provided,
        however,
        that no
        Investor shall be liable for the payment to the Agent-Related Persons of
        any
        portion of such Indemnified Liabilities resulting solely from such Person’s
        gross negligence or willful misconduct. Without limitation of the foregoing,
        each Investor shall reimburse the Lead Lender and Collateral Agent upon demand
        for its pro rata interest in the aggregate principal amount of the Loans
        of any
        costs or out-of-pocket expenses (including legal fees and expenses) incurred
        by
        the Lead Lender and Collateral Agent in connection with the preparation,
        execution, delivery, administration, modification, amendment or enforcement
        (whether through negotiations, legal proceedings or otherwise) of, or legal
        advice in respect of rights or responsibilities
        under, this Agreement, any other Loan Document, or any document contemplated
        by
        or referred to herein, to the extent that the Lead Lender and Collateral
        Agent
        is not reimbursed for such expenses by or on behalf of Viking. The undertaking
        in this Section shall survive the payment of all Obligations hereunder and
        the
        resignation or replacement of the Lead Lender and Collateral Agent.

      



      
        
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      14.9 Agent
        in Individual Capacity.
        The
        Lead Lender and its affiliates may make loans to, issue letters of credit
        for
        the account of, accept deposits from, acquire equity interests in and generally
        engage in any kind of banking, trust, financial advisory, underwriting or
        other
        business with Viking
        and affiliates as though the Lead Lender were not the Collateral Agent hereunder
        and without notice to or consent of the Investors. The Lead Lender or its
        affiliates may receive information regarding Viking (including information
        that
        may be subject to confidentiality obligations in favor of Viking) and the
        Investors acknowledge that the Collateral Agent and the Lead Lender shall
        be
        under no obligation to provide such information to them. With respect to
        its
        Loans, the Lead Lender shall have the same rights and powers under this
        Agreement as any other Investor and may exercise the same as though it were
        not
        the Collateral Agent, and the terms “Investor” and “Investors” include the Lead
        Lender in its individual capacity.

      


      14.10 Successor
        Agent.
        The
        Collateral Agent may resign as Collateral Agent upon at least ten (10) days’
prior notice to the Investors and Viking. Subject to the foregoing, if the
        Collateral Agent resigns under this Agreement, the Required Investors shall
        appoint from among the Investors a successor agent for the Investors. If
        no
        successor agent is appointed prior to the effective date of the resignation
        of
        the Collateral Agent, the Collateral Agent may appoint, after consulting
        with
        the Investors and Viking, a successor agent from among the Investors. Upon
        the
        acceptance of its appointment as successor agent hereunder, such successor
        agent
        shall succeed to all the rights, powers and duties of the retiring Collateral
        Agent and the term “Collateral Agent” shall mean such successor agent and the
        retiring Collateral Agent’s appointment, powers and duties as Collateral Agent
        shall be terminated. After any retiring Collateral Agent’s resignation hereunder
        as Collateral Agent, the provisions of this Article 13
        shall
        continue to inure to its benefit as to any actions taken or omitted to be
        taken
        by it while it was Collateral Agent under this Agreement.

      


      14.11 Collateral
        Matters.

       

          (a)
        The
        Investors hereby irrevocably authorize the Collateral Agent, at its option
        and
        in its sole discretion, to release any Liens in the Collateral granted to
        the
        Investors, for the benefit of the Investors pursuant to this Agreement and
        the
        other Loan Documents (“Agent’s Liens”) (i) upon payment and satisfaction in full
        by Viking of all Loans and all other Obligations; (ii) constituting
        property being sold or disposed of if Viking certifies to the Collateral
        Agent
        that the sale or disposition is made in compliance with the Security Agreement
        (and the Collateral Agent may rely conclusively on any such certificate,
        without
        further inquiry); (iii) constituting property in which Viking owned no
        interest at the time the Lien was granted or at any time thereafter; or (iv)
        constituting property leased to Viking under a lease which has expired or
        been
        terminated in a transaction permitted under this Agreement. Except as provided
        above, the Collateral Agent will not release any of the Collateral Agent’s Liens
        without the prior written authorization of the Investors; provided
        that the
        Collateral Agent may, in its discretion, release the Collateral Agent’s Liens on
        Collateral valued in the aggregate not in excess of $250,000 during each
        fiscal
        year without the prior written authorization of the Investors and the Collateral
        Agent may release the Collateral Agent’s Liens on Collateral valued in the
        aggregate not in excess of $500,000 during each fiscal year with the prior
        written authorization of Required Investors. Upon request by the Collateral
        Agent or Viking at any time, the Investors will confirm in writing the
        Collateral Agent’s authority to release any Agent’s Liens upon particular types
        or items of Collateral pursuant to this Section
        13.11.


      
        
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      (b) Upon
        receipt by the Collateral Agent of any authorization required pursuant to
        Section
        14.11(a)
        from the
        Investors of the Collateral Agent’s authority to release Agent’s Liens upon
        particular types or items of Collateral, and upon at least five (5) Business
        Days prior written request by Viking, the Collateral Agent shall (and is
        hereby
        irrevocably authorized by the Investors to) execute such documents as may
        be
        necessary to evidence the release of the Collateral Agent’s Liens upon such
        Collateral; provided,
        however,
        that
        (i) the Collateral Agent shall not be required to execute any such document
        on
        terms which, in the Collateral Agent’s opinion, would expose the Collateral
        Agent to liability or create any obligation or entail any consequence other
        than
        the release of such Liens without recourse or warranty, and (ii) such release
        shall not in any manner discharge, affect or impair the Obligations or any
        Liens
        (other than those expressly being released) upon (or obligations of Viking
        in
        respect of) all interests retained by Viking, including the proceeds of any
        sale, all of which shall continue to constitute part of the
        Collateral.

      


      (c)The
        Collateral Agent shall have no obligation whatsoever to any of the Investors
        to
        assure that the Collateral exists or is owned by Viking or is cared for,
        protected or insured or has been encumbered, or that the Collateral Agent’s
        Liens have been properly or sufficiently or lawfully created, perfected,
        protected or enforced or are entitled to any particular priority, or to exercise
        at all or in any particular manner or under any duty of care, disclosure
        or
        fidelity, or to continue exercising, any of the rights, authorities and powers
        granted or available to the Collateral Agent pursuant to any of the Loan
        Documents, it being understood and agreed that in respect of the Collateral,
        or
        any act, omission or event related thereto, the Collateral Agent may act
        in any
        manner it may deem appropriate, in its sole discretion given the Collateral
        Agent’s own interest in the Collateral in its capacity as one of the Investors
        and that the Collateral Agent shall have no other duty or liability whatsoever
        to any Investor as to any of the foregoing.

      


      14.12 Restrictions
        on Actions by Investors; Sharing of Payments. 

       

          (a) Each
        of
        the Investors agrees that it shall not, without the express consent of all
        Investors, and that it shall, to the extent it is lawfully entitled to do
        so,
        upon the request of all Investors, set off against the Obligations, any amounts
        owing by such Investor to Viking or any accounts of Viking now or hereafter
        maintained with such Investor. Each of the Investors further agrees that
        it
        shall not, unless specifically requested to do so by the Lead Lender and
        Collateral Agent, take or cause to be taken any action to enforce its rights
        under this Agreement or against Viking, including the commencement of any
        legal
        or equitable proceedings, to foreclose any Lien on, or otherwise enforce
        any
        security interest in, any of the Collateral.

      



      
        
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          37

          
            

          

        

        
           

        

      


      (b) If
        at any
        time or times any Investor shall receive (i) by payment, foreclosure, setoff
        or
        otherwise, any proceeds of Collateral or any payments with respect to the
        Obligations of Viking to such Investor arising under, or relating to, this
        Agreement or the other Loan Documents, except for any such proceeds or payments
        received by such Investor from the Lead Lender and Collateral Agent pursuant
        to
        the terms of this Agreement, or (ii) payments from the Lead Lender and
        Collateral Agent in excess of such Investor’s ratable portion of all such
        distributions by the Agent, such Investor shall promptly (1) turn the same
        over
        to the Lead Lender and Collateral Agent, in kind, and with such endorsements
        as
        may be required to negotiate the same to the Lead Lender and Collateral Agent,
        or in same day funds, as applicable, for the account of all of the Investors
        and
        for application to the Obligations in accordance with the applicable provisions
        of this Agreement, or (2) purchase, without recourse or warranty, an undivided
        interest and participation in the Obligations owed to the other Investors
        so
        that such excess payment received shall be applied ratably as among the
        Investors in accordance with their pro rata interest in the aggregate principal
        amount of the Loans; provided,
        however,
        that if
        all or part of such excess payment received by the purchasing party is
        thereafter recovered from it, those purchases of participations shall be
        rescinded in whole or in part, as applicable, and the applicable portion
        of the
        purchase price paid therefor shall be returned to such purchasing party,
        but
        without interest except to the extent that such purchasing party is required
        to
        pay interest in connection with the recovery of the excess payment.

      


      14.13 Agency
        for Perfection.
        Each
        Investor hereby appoints each other Investor as agent for the purpose of
        perfecting the Investors’ security interest in assets which, in accordance with
        Article 9 of the UCC can be perfected only by possession. Should any Investor
        (other than the Collateral Agent) obtain possession of any such Collateral,
        such
        Investor shall notify the Collateral Agent thereof, and, promptly upon the
        Collateral Agent’s request therefor shall deliver such Collateral to the
        Collateral Agent or in accordance with the Collateral Agent’s
        instructions.

       

      14.14 Concerning
        the Collateral and the Related Loan Documents.
        Each
        Investor authorizes and directs the Collateral Agent to enter into the other
        Loan Documents, for the ratable benefit and obligation of the Collateral
        Agent
        and the Investors. Each Investor agrees that any action taken by the Collateral
        Agent or Required Investors, as applicable, in accordance with the terms
        of this
        Agreement or the other Loan Documents, and the exercise by the Collateral
        Agent
        or the Required Investors, as applicable, of their respective powers set
        forth
        therein or herein, together with such other powers that are reasonably
        incidental thereto, shall be binding upon all of the Investors.
        The
        Investors acknowledge that the Loans and all interest, fees and expenses
        hereunder constitute one debt of Viking, secured pari passu
        by all
        of the Collateral.

      


      14.15 Relation
        Among Investors.
        The
        Investors are not partners or co-venturers, and no Investor shall be liable
        for
        the acts or omissions of, or (except as otherwise set forth herein in case
        of
        the Collateral Agent) authorized to act for, any other Investor.

      



      
        
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      15. Indemnity
        of the Agent and the Investors by Viking. Except
        as
        set forth in the Registration Rights Agreement, Viking agrees to defend,
        indemnify and hold the Agent-Related Persons, and each Investor and each
        of its
        respective officers, directors, employees, counsel, representatives, agents
        and
        attorneys-in-fact (each, an “Indemnified Person”) harmless from and against any
        and all liabilities, obligations, losses, damages, penalties, actions,
        judgments, suits, costs, charges, expenses and disbursements (including attorney
        fees) of any kind or nature whatsoever which may at any time (including at
        any
        time following repayment of the Loans and the termination, resignation or
        replacement of the Collateral Agent) be imposed on, incurred by or asserted
        against any such Person in any way relating to or arising out of this Agreement
        or any document contemplated by or referred to herein, or the transactions
        contemplated hereby, or any action taken or omitted by any such Person under
        or
        in connection with any of the foregoing, including with respect to any
        investigation, litigation or proceeding (including any insolvency proceeding
        or
        appellate proceeding) related to or arising out of this Agreement, any other
        Loan Document, or the Loans or the use of the proceeds thereof, whether or
        not
        any Indemnified Person is a party thereto (all the foregoing, collectively,
        the
“Indemnified Liabilities”); provided, that Viking shall have no obligation
        hereunder to any Indemnified Person with respect to Indemnified Liabilities
        resulting solely from the willful misconduct of such Indemnified Person.
        The
        agreements in this Section shall survive payment of all
        Obligations.

      


      16. Representation
        by Counsel.
        Each
        party hereto represents and agrees with each other that it has been represented
        by or had the opportunity to be represented by, independent counsel of its
        own
        choosing, and that it has had the full right and opportunity to consult with
        its
        respective attorney(s), that to the extent, if any, that it desired, it availed
        itself of this right and opportunity, that it or its authorized officers
        (as the
        case may be) have carefully read and fully understand this Agreement in its
        entirety and have had it fully explained to them by such party’s respective
        counsel, that each is fully aware of the contents thereof and its meaning,
        intent and legal effect, and that it or its authorized officer (as the case
        may
        be) is competent to execute this Agreement free from coercion, duress or
        undue
        influence. The parties to this Agreement participated jointly in the negotiation
        and drafting of this Agreement. If an ambiguity or question of intent or
        interpretation arises, then this Agreement will be construed as if drafted
        jointly by the parties to this Agreement, and no presumption or burden of
        proof
        will arise favoring or disfavoring any party to this Agreement by virtue
        of the
        authorship of any of the provisions of this Agreement.

      


      17. General
        Provisions.

      


      17.1 Expenses.
        Viking
        agrees to pay and save Lead Lender harmless against liability for the payment
        of
        the Transaction Expenses.

      



      
        
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      17.2 Notice.
        Any
        notice required or desired to be given by the parties hereto shall be in
        writing
        and may be personally delivered; mailed by regular mail or certified mail,
        return receipt requested; sent by telephone facsimile with a hard copy sent
        by
        regular mail; or sent by a nationally recognized receipted overnight delivery
        service, including, by example and not limita-tion, United Parcel Service,
        Federal Express, or Airborne Express. Any such notice shall be deemed given
        when
        personally delivered; if mailed by regular mail, three (3) days after deposit
        in
        the United States mail, postage prepaid; if mailed by certified mail, return
        receipt requested, three (3) days after deposit in the United States mail,
        postage prepaid, or on the day of receipt by the recipient, whichever is
        sooner;
        if sent by telephone facsimile, on the day sent if sent on a business day
        during
        normal business hours of the recipient or on the next business day if sent
        at
        any other time; or if sent by overnight delivery service, one (1) business
        day
        after deposit in the custody of the delivery service. The addresses and
        telephone numbers for the mailing, transmitting, or delivering of notices
        shall
        be as follows:

      


      
        	 	 
	 	 
	
                If
                  to Lead Lender and Collateral Agent, to:

              	
                St.
                  Cloud Capital Partners, LP

              
	 	
                10866
                  Wilshire Boulevard, Suite 1450

              
	 	
                Los
                  Angeles, CA 90024

              
	 	
                Facsimile:
                  (310) 475-0550

              
	 	
                Attn:
                  Cary S. Fitchey

              
	 	 
	
                If
                  to Viking, to:

              	
                Viking
                  Systems, Inc.

              
	 	
                7514
                  Girard Avenue, Suite 1509

              
	 	
                La
                  Jolla, CA 92037

              
	 	
                Facsimile:
                  858-225-0467

              
	 	
                Attn:
                  Tom Marsh

              
	 	 
	
                With
                  copies to:

              	
                Cohne,
                  Rappaport & Segal

              
	 	
                257
                  East 200 South, Suite 700

              
	 	
                Salt
                  Lake City, UT 84111

              
	 	
                Facsimile:
                  801-355-1813

              
	 	
                Attn:
                  A. O. Headman, Jr.

              
	 	 
	
                If
                  to the Investors:

              	
                (see
                  signature page or Annex A)

              


      

      


      Notices
        of a change of address of a party shall be given in the same manner as all
        other
        notices as hereinabove provided.

      


      17.3 Terms
        Survive.
        All
        agreements, representations, warranties, and covenants made by Viking shall
        survive the execution and delivery of this Agreement and the Loan Documents
        and
        shall continue in full force and effect so long as any obligation to the
        Investor contemplated by this Agreement is outstanding and unpaid and thereafter
        as herein provided.

      


      17.4 No
        Assignment.
        The
        parties agree that neither this Agreement nor any of the Loan Documents may
        be
        assigned by Viking.


      
        
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          40

          
            

          

        

        
           

        

      

       

      17.5 Governing
        Law.
        This
        Agreement and the Loan Documents shall be governed by and construed in
        accordance with the laws of the State of California.

      


      17.6 Jurisdiction.
        The
        Parties agree and consent that the courts of the State of California shall
        have
        jurisdiction with respect to enforcement of this Agreement or any Loan Documents
        executed in connection herewith and shall have jurisdic-tion with respect
        to any
        disputes or with respect to any legal proceedings involving claims arising
        out
        of this Agreement or the Loan Documents. 

      


      17.7 Amendments.
        No
        provision or term of this Agreement may be amended, modified, revoked,
        supplemented, waived, or otherwise changed, except by a written instrument
        duly
        executed by Viking and the Investors (including St. Cloud) and designated
        as an
        amendment, supplement, or waiver. Viking agrees to pay any fees incurred
        by
        Investors in connection with any consent, waiver or amendment of any Loan
        Document. 

      


      17.8 Counting
        of Days.
        Unless
        otherwise indicated, the term “days” when used herein shall mean calendar days.
        If any time period ends on a Saturday, Sunday, or holiday officially recognized
        by the State of California, the period shall be deemed to end on the next
        succeeding business day.

      


      17.9 Headings.
        The
        article and section headings herein are for convenience only and shall not
        affect the construction hereof.

      


      17.10 Entire
        Agreement.
        This
        Agreement and the other Loan Documents constitute the final expression of
        the
        agreement and understanding of the parties with respect to the general subject
        matter hereof and supersede any previous understanding, negotia-tions, or
        discussions, whether written or oral. This Agreement and the Loan Documents
        may
        not be contradicted by evidence of any alleged oral agreement.

      


      17.11 Conflict.
        If the
        term of any other Loan Document, except the Promissory Note, shall be in
        conflict with this Agreement, this Agreement shall govern to the extent of
        the
        conflict. If the terms of this Agreement shall be in conflict with the
        Promissory Note, the Promissory Note will govern to the extent of the
        conflict.

      


      17.12 Use
        of Terms.
        As used
        herein, words in any gender shall be deemed to include the other genders,
        and
        the singular shall be deemed to include the plural, and vice versa.

      


      17.13 Agency.
        Nothing
        in this Agreement shall be construed to constitute the creation of a partnership
        or joint venture between the Investors and Viking. No Investor is an agent
        or
        representative of Viking. 

      


      17.14 Authority
        to File Notices.
        Viking
        hereby appoints and designates the Collateral Agent as its attorney-in-fact
        to
        file, for record any notice that the Collateral Agent deems necessary to
        protect
        the Secured Parties’ interests under the Security Agreement. This power shall be
        deemed coupled with an interest and shall be irrevocable while any sum or
        performance remains due and owing under any of the Loan
        Documents.


      
        
          | 

           

        

        
          41

          
            

          

        

        
           

        

      


      17.15 Waiver.
        An
        Investor shall not be deemed to have waived any rights hereunder unless such
        waiver is given in writing and signed by such Investor. No delay or admission
        on
        the part of an Investor in exercising any right shall operate as a waiver
        of
        such right or any other right. A written waiver by an Investor of a provision
        of
        this Agreement shall not prejudice or constitute a waiver of the Investor’s
        rights otherwise to demand strict compliance with that provision or any other
        provision of this Agreement. No prior written waiver by the Investor, nor
        any
        course of dealing between the Investor and Viking, shall constitute a waiver
        of
        any of the Investor’s rights or obligations. Whenever the consent of the
        Investor is required under this Agreement, the granting of such consent by
        the
        Investor in any instance shall not constitute continuing consent in subsequent
        instances where such consent is required, and in all cases, such consent
        may be
        granted or withheld in the sole discretion of the Investor.

      


      17.16 Severability.
        If a
        court of competent jurisdiction finds any provision of this Agreement or
        any of
        the Loan Documents to be invalid or unenforceable as to any person or
        circumstance, such finding shall not render that provision invalid or
        unenforce-able as to any other persons or circumstances. If feasible, any
        such
        offending provision shall be deemed to be modified to be within the limits
        of
        enforceability or validity. However, if the offending provision cannot be
        so
        modified, it shall be stricken, and all other provisions of this Agreement
        in
        all other respects shall remain valid and enforceable.

      



      
        
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      IN
        WITNESS WHEREOF, each of the parties to this Agreement has executed this
        Agreement on the day and year above written.

      


      
        	 	
                VIKING:

              
	 	 
	 	
                Viking
                  Systems, Inc.,

              
	 	
                a
                  Nevada corporation

              
	 	 
	 	 
	 	 
	 	
                By:

              
	 	
                Thomas
                  B. Marsh, President

              
	 	 
	 	
                LEAD
                  LENDER and COLLATERAL AGENT:

              
	 	 
	 	
                St.
                  Cloud Capital Partners, L.P.

              
	 	
                By: SCGP,
                  LLC

              
	 	
                Its: General
                  Partner

              
	 	 
	 	
                By:

              
	 	
                Name: Cary
                  S. Fitchey

              
	 	
                Title: Senior
                  Managing Member

              
	 	 
	 	
                Address:

              
	 	
                10866
                  Wilshire Boulevard, Suite 1450

              
	 	
                Los
                  Angeles, CA 90024

              
	 	
                Facsimile:
                  (310)475-0550

              
	 	 
	 	
                With
                  a copy to:

              
	 	
                Latham
                  & Watkins LLP

              
	 	
                633
                  West Fifth Street, Suite 4000

              
	 	
                Los
                  Angeles, California 90071

              
	 	
                Facsimile:
                  (213)891-8763

              
	 	
                Attention:
                  W. Alex Voxman, Esq.

              


      


      
        
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          43

          
            

          

        

        
           

        

      


      SIGNATURE
        PAGE TO

      


      SECURITIES
        PURCHASE AGREEMENT

      


      DATED
        AS OF August 12, 2005

      


      BY
        AND
        AMONG

      


      VIKING
        SYSTEMS, INC., 

      


      ST.
        CLOUD CAPITAL PARTNERS, L.P., 

      AS
        “LEAD LENDER” AND “COLLATERAL AGENT”

      


      AND
        EACH INVESTOR NAMED THEREIN

      


      The
        undersigned hereby executes and delivers the Securities Purchase Agreement
        (the
“Securities Purchase Agreement”) to which this Signature Page is attached
        effective as of the date of the Agreement, which Securities Purchase Agreement
        and Signature Page, together with all counterparts of such Agreement and
        signature pages of the other Investors named in such Securities Purchase
        Agreement, shall constitute one and the same document in accordance with
        the
        terms of such Securities Purchase Agreement.

      


      
        	 	
                INVESTORS:

              
	 	
                 

                 

                 

                By:

              
	 	
                 

                 

                 

                Name: Donald
                  Tucker

              
	 	
                (Print)

                 

                 

                Address     1626
                  Clemson Circle

              
	 	
                La
                  Jolla, California 92037

              
	 	
                Facsimile

              


      

      


      



      
        
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          44

          
            

          

        

        
           

        

      


      SIGNATURE
        PAGE TO

      


      SECURITIES
        PURCHASE AGREEMENT

      DATED
        AS OF AUGUST 12, 2005

      BY
        AND
        AMONG

      VIKING
        SYSTEMS, INC., 

      ST.
        CLOUD CAPITAL PARTNERS, L.P., 

      AS
        “LEAD LENDER” AND “COLLATERAL AGENT”

      AND
        EACH INVESTOR NAMED THEREIN

      


       

      The
        undersigned hereby executes and delivers the Securities Purchase Agreement
        (the
“Securities Purchase Agreement”) to which this Signature Page is attached
        effective as of the date of the Agreement, which Securities Purchase Agreement
        and Signature Page, together with all counterparts of such Agreement and
        signature pages of the other Investors named in such Securities Purchase
        Agreement, shall constitute one and the same document in accordance with
        the
        terms of such Securities Purchase Agreement.

      


      
        	 	
                INVESTORS:

              
	 	
                 

                 

                 

                By:

              
	 	
                 

                 

                 

                Name: Brian
                  M. & Jacquelyn L. Miller,

              
	 	
                Trustees
                  udt 11/27/90, community property

              
	 	
                (Print)

                 

                 

                Address 60
                  Summit Avenue

              
	 	
                Mill
                  Valley CA 94941

              
	 	
                Facsimile (415)
                  281-2201

              


      

      



      
        
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          45

          
            

          

        

        
           

        

      


      


      ANNEX
        A

      


      
        	
                SCHEDULE
                  OF INVESTORS

              
	
                 

                Investor

              	
                 

                Address

              	
                 

                Loan

              
	
                St.
                  Cloud Capital Partners, L.P.

              	
                10866
                  Wilshire Boulevard

                Suite
                  1450

                Los
                  Angeles, CA 90024

                Facsimile:
                  (310)475-0550

                Attn:
                  Cary Fitchey

              	
                $300,000

              
	
                Donald
                  Tucker

              	
                1626
                  Clemson Circle

                La
                  Jolla, CA 92037 

                Facsimile:
                  ________

              	
                $200,000

              
	
                Brian
                  M. & Jacquelyn L. Miller, Trustees udt 11/27/90, community
                  property

                 

                 

                 

                 

              	
                60
                  Summit Ave

                Mill
                  Valley, CA 94941

                Facsimile:
                  (415) 281-2201

              	
                $100,000

              
	 	 	 
	 	 	 
	 	 	 


      

      


      


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      EXHIBIT
        A

      


      


      PROMISSORY
        NOTE

       

       


      
        
          


          | 

           

        

        
           

          
            

          

        

        
           

        

      


      EXHIBIT
        B

      


      


      SECURITY
        AGREEMENT

       

       


      
        
          
            


            | 

          

           

        

        
           

          
            

          

        

        
           

          
          

        

      



      EXHIBIT
        C

       

      
 

      FORM
        OF ADDENDUM AGREEMENT

      ADDENDUM
        TO SECURITIES PURCHASE AGREEMENT

      


      This
        Addendum to the Securities Purchase Agreement (the “Addendum”)
        is
        made as of August ___, 2005, by and among Viking Systems, Inc., a Nevada
        corporation (“Viking”),
        and
        the individuals and entities listed on the signature page attached hereto
        (the “Additional
        Investors”).
         On
        August
        ___, 2005, Viking entered into a Securities Purchase Agreement (the
“Securities
        Purchase Agreement”)
        with
        St. Cloud Capital Partners, L.P., a Delaware limited partnership (“St. Cloud”),
        as “Lead Lender” and “Collateral Agent,” and St. Cloud, and Donald Tucker as
        Investors. The Securities Purchase Agreement provides in Section 2 thereof
        that
        additional Investors may, under the terms and pursuant to the conditions
        set
        forth therein, become parties to the Securities Purchase Agreement.

      


      AGREEMENT

      


      In
        consideration of the mutual promises, covenants and conditions hereinafter
        set
        forth, the parties hereto mutually agree as follows:

      


      1. Loan.
        Subject
        to the terms and conditions hereof, at the Closing (as defined in Section
        2
        hereof), Viking agrees to borrow from each Additional Investor, and each
        Additional Investor, severally and not jointly, agrees to lend to Viking,
        the
        amount set forth opposite such Additional Investor’s name on Exhibit
        A hereto.
        Each of the Additional Investors, by their signatures hereto, shall hereby
        (i) become parties to the Securities Purchase Agreement, (ii) be
        considered an “Investor”
for
        all
        purposes under the Securities Purchase Agreement and (iii) have all the
        rights and obligations of an Investor thereunder.

      


      2. Closing.
        The
        closing of the transactions contemplated hereunder and under the Securities
        Purchase Agreement (the “Closing”)
        shall
        be held at the offices of _______________________________________________,
        California, at _____ __.m., on __________, 2005, or at such other time and
        place
        as Viking and the Additional Investors may agree.

      


      3. Delivery.
        At the
        Closing, (i) Viking shall deliver to each Additional Investor or its counsel,
        the instruments and documents set forth in Section 3.1 of the Securities
        Purchase Agreement; and (ii) each Additional Investor shall deliver to Viking
        the instruments and documents set forth in Section 3.2 of the Securities
        Purchase Agreement.

      


      4. Representations
        and Warranties.

      


      4.1 Representations
        and Warranties of Viking.
        Each
        Additional Investor hereby acknowledges receipt of the Securities Purchase
        Agreement and the exhibits thereto. Viking affirms to each Additional Investor
        that:

      


      (i) The
        representations and warranties of Viking set forth in Section 11 of the
        Securities Purchase Agreement were true and correct in all respects when
        made;


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      (ii) Such
        representations and warranties, which are incorporated herein by this reference
        and made a part hereof, remain true and accurate in all respects as of the
        date
        hereof, except for changes resulting from the transactions contemplated in
        the
        Securities Purchase Agreement.

      


      4.2 Representations
        and Warranties of Additional Investors.
        Each
        Additional Investor acknowledges that such Additional Investor has reviewed
        the
        representations and warranties set forth in Section 12 of the Securities
        Purchase Agreement and agrees with Viking that such representations and
        warranties, which are incorporated herein by this reference and made a part
        hereof, are true and correct as of the date hereof as they relate to such
        Additional Investor.

      


      5. Miscellaneous.

      


      5.1 Incorporation
        by Reference.
        The
        provisions set forth in Section 21 of the Purchase Agreement are incorporated
        herein by this reference and made a part hereof.

      


      5.2 Counterparts.
        This
        Addendum may be executed in any number of counterparts, each of which may
        be
        executed by less than all of the Additional Investors, each of which shall
        be
        enforceable against the parties actually executing such counterparts, and
        all of
        which together shall constitute one instrument.

      


      The
        parties hereto have executed this Addendum as of the date first set forth
        above.

      


      
        	 	 
	 	
                VIKING:

              
	 	 
	 	
                Viking
                  Systems, Inc.,

              
	 	
                a
                  Nevada corporation

              
	 	 
	 	
                By:

              
	 	
                Thomas
                  B. Marsh, President

              
	 	 
	 	
                ADDITIONAL
                  INVESTORS:

              
	 	 
	 	
                By:

              
	 	 
	 	
                Name:

              
	 	
                (Print)

              
	 	
                Title:

              
	 	
                (If
                  applicable)

              
	 	
                Address

              
	 	 
	 	
                Facsimile