Exhibit 10.3


    Exhibit
      10.3

    Form
      8-K

    Viking
      Systems, Inc.

    File
      No.
      000-49636

    


    EMPLOYMENT
      AGREEMENT

    


    


    Agreement
      (“Agreement”), by and between Viking Systems, Inc, a Nevada corporation
      (“Viking”), and John Kennedy (“Executive”) is executed on the 10th day of
      October 2005.

    


    RECITALS

    


    The
      Company is engaged primarily in the business of the development and supply
      of
high
      performance 3D endoscopic vision systems to hospitals for minimally invasive
      surgery (the
      “Business”).

    


    Executive
      currently serves as President Vision Systems Group of Viking and Executive
      is
      willing to continue to serve as an employee of Viking upon the terms and
      conditions herein set forth. In respect of such employment, Executive has also
      executed that certain Proprietary Information and Inventions Agreement of even
      date herewith (the “Proprietary Information and Inventions Agreement”), which is
      attached hereto as Exhibit A and incorporated herein by reference. 

    


    The
      Board
      of Directors of Viking (the “Board”) has determined that it is in the best
      interests of Viking and its stockholders to assure that Viking will have the
      continued dedication of Executive despite the possibility, threat, or occurrence
      of a Change of Control (as defined below) of Viking.

    


    The
      Board
      believes it is imperative to diminish the inevitable distraction of Executive
      by
      virtue of the personal uncertainties and risks created by a pending or
      threatened Change of Control, to encourage Executive's full attention and
      dedication to Viking currently and in the event of any threatened or pending
      Change of Control, and to provide the Executive with compensation arrangements
      upon a Change of Control that afford Executive with a requisite amount of
      individual financial security and are competitive with those of other
      corporations. In order to accomplish these, and other, objectives, the Board
      has
      caused Viking to enter into this Agreement.

    


    In
      consideration for the options granted to Executive pursuant to Section 3.3
      of
      this Agreement, Executive has agreed not to compete with the Company in
      accordance with the provisions of Section 11 of this Agreement.

    


    AGREEMENT

    


    NOW,
      THEREFORE, in consideration of the mutual promises, terms, covenants, and
      conditions set forth herein and the performance of each, it is hereby agreed
      as
      follows:


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    1. Definitions.

    


    1.1 Change
      of Control Period.
      The
“Change of Control Period” is the period commencing on the date of a Change of
      Control and ending on the first anniversary of such date. 

    


    1.2 Change
      of Control.
      For the
      purpose of this Agreement, a “Change of Control” shall mean:

    


    (a)  Change
      of Control.
      A
“Change in Control” shall mean a change in control of a nature that would be
      required to be reported in response to Item 6(e) of Schedule 14A of Regulation
      14A promulgated under the Securities Exchange Act of 1934, as amended, or if
      Item 6(e) is no longer in effect, any regulations issued by the Securities
      and
      Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
      which serve similar purposes; provided further that, without limitation, a
      Change in Control shall be deemed to have occurred if and when: 

    


    (b)
       Turnover
      of Board.
      The
      following individuals no longer constitute a majority of the members of the
      Board: (A) the individuals who, as of the date of this Agreement constitute
      the
      Board (the “Current Directors”); (B) the individuals who thereafter are elected
      to the Board and whose election, or nomination for election, to the Board was
      approved by a vote of all of the Current Directors then still in office (such
      directors becoming “Additional Directors” immediately following their election);
      and (C) the individuals who are elected to the Board and whose election, or
      nomination for election, to the Board was approved by a vote of all of the
      Current Directors and Additional Directors then still in office (such directors
      also becoming “Additional Directors” immediately following their
      election);

    


    (c)
       Tender
      Offer.
      A
      tender offer or exchange offer is made whereby the effect of such offer is
      to
      take over and control Viking, and such offer is consummated for the equity
      securities of Viking representing thirty-three percent (33%) or more of the
      combined voting power of Viking's then outstanding voting
      securities;

    


    (d)
       Merger
      or Consolidation.
      The
      stockholders of Viking shall approve a merger, consolidation, recapitalization,
      or reorganization of Viking, a reverse stock split of outstanding voting
      securities, or consummation of any such transaction if stockholder approval
      is
      not obtained, other than any such transaction that would result in at least
      75%
      of the total voting power represented by the voting securities of the surviving
      entity outstanding immediately after such transaction being beneficially owned
      by the holders of outstanding voting securities of Viking immediately prior
      to
      the transaction, with the voting power of each such continuing holder relative
      to other such continuing holders not substantially altered in the
      transaction;

    


    (e)
       Liquidation
      or Sale of Assets.
      The
      stockholders of Viking shall approve a plan of complete liquidation of Viking
      or
      an agreement for the sale or disposition by Viking of all or a substantial
      portion of Viking's assets to another person, which is not a wholly owned
      subsidiary of Viking (i.e., 50% or more of the total assets of Viking);
      or


    
      
         

      

      
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    (f)  Stockholdings.
      Any
“person” (as that term is used in Section 13(d) and 14(d) of the Securities
      Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as
      defined in Rule 13d-3 under that act), directly or indirectly of more than
      thirty-three percent (33%) of the total voting power represented by Viking's
      then outstanding voting Securities.

    


    1.3. Change
      of Control Effective Date.
      The
“Change of Control Effective Date” shall be the first date during the “Change of
      Control Period” (as defined below) on which a Change of Control
      occurs.

    


    1.4 Employment
      Period. The
      Employment Period is the period during which Viking employs the
      Executive.

    


    1.5 Good
      Cause.
      For
      purposes of this Agreement Good Cause shall mean any one or more of the
      following:

    


    (a)
       Executive's
      willful, material, and irreparable breach of this Agreement;

    


    (b)
       Executive's
      violation of Company policies and procedures, Code of Ethics, gross negligence
      in the performance or intentional nonperformance (continuing for thirty (30)
      days after receipt of written notice of need to cure) of any of Executive's
      material duties and responsibilities hereunder;

    


    (c) 
      Executive's material willful dishonesty, fraud, misrepresentation, or misconduct
      with respect to the business or affairs of Viking, which materially and
      adversely affects the operations or reputation of Viking;

    


    (d) 
      Executive's indictment for, conviction of, or guilty plea to a felony crime
      involving dishonesty or moral turpitude whether or not relating to Viking;
      or

    


    (e)
       a
      confirmed positive illegal drug test result.

    


    1.6 Good
      Reason Termination.
      Executive shall have “Good Reason” to terminate Executive's employment upon the
      occurrence of any of the following events without Executive's prior written
      approval: 

    


    (a) 
      Executive is demoted by means of a substantive reduction in authority,
      responsibilities, or duties, including but not limited to a substantive change
      in the Executive’s reporting relationship(s);

    


    (b) 
      Executive's Base Salary for a fiscal year as determined pursuant to paragraph
      3.1 is reduced; 


    
      
         

      

      
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    (c)
       Executive
      is required to render his primary employment services from a location more
      than
      30 miles from Viking's Massachusetts operations at the time Executive began
      his
      employment with Viking; 

    


    (d) Viking
      breaches a material provision of this Agreement; or 

    


    (e)
       Viking
      fails to obtain the assumption of this Agreement by any successor or assign
      of
      Viking or its principal business activities; or. 

    


    (f) There
      is
      a change in the reporting structure of Executive relative to the authority
      of
      the Executive’s immediate supervisor.

    


    1.7 Severance
      Compensation. Severance
      Compensation means those payments required by Section 6 or 7 of this
      Agreement.

    


    2. Employment
      and Duties.

    


    2.1 Employment;
      Term
      of Employment.
      The
      Company hereby agrees to continue Executive in its employ, and the Executive
      hereby agrees to remain in the employ of Viking. The term of this Agreement
      shall continue until such time as the employment of Executive is terminated
      pursuant to Section 6 below. 

    


    2.2 Duties. 
      Subject
      to the terms and provisions of this Agreement, Executive is employed by Viking
      as an executive employee of Viking. Executive’s specific position shall be as
      the President Vision Systems Group. Executive covenants to perform Executive’s
      employment duties in good faith. 

    


    2.3 Exclusive
      Services.
      Executive’s entire business time, attention, energies, skills, learning and best
      efforts shall be devoted to the business of Viking; provided, however, that
      this
      Section 2.3 shall not be construed as preventing Executive from participating
      in
      social, civic or professional associations or engaging in passive outside
      investment activities which may require a limited portion of time and effort
      to
      manage, consistent with Company’s policies and procedures and so long as such
      activities do not interfere with the performance of Executive’s duties nor
      compete, in any way, with the products or services offered by or through Viking.
      

    


    2.4 Place
      of Performance.
      Executive shall not be required by Viking or by the performance of Executive's
      duties under this Agreement either to perform Executive's principal duties
      at a
      work location more than thirty (30) miles from Viking's current
      offices.

    


    3. Compensation.
      For all
      services rendered by Executive during the Employment Period, Viking shall
      compensate Executive as follows:

    



    
      
         

      

      
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    3.1 Base
      Salary.
      Executive shall receive a monthly base salary of $16,308.33 (“Base Salary”) if
      annualized would be $195,700 per year. During the Employment Period, the Base
      Salary shall be reviewed at least annually and if increased at any time shall
      be
      substantially consistent with increases in base salary awarded in the ordinary
      course of business to other key executives of Viking and its subsidiaries.
      Any
      increase in Base Salary shall not serve to limit or reduce any other obligation
      to Executive under this Agreement. Base Salary shall not be reduced after any
      such increase.

    


    3.2 Annual
      Bonus.
      Executive
      shall be eligible for an annual performance cash bonus of up to 30% of
      Executive’s applicable annual base salary (the “Target Bonus”), less standard
      deductions and withholdings. Viking will determine the amount of the bonus,
      if
      any, based on Executive’s performance against specific measurable corporate and
      personal goals approved annually by the Compensation Committee of the Board,
      and
      payable within the first quarter of the year following the bonus
      period.

    


    3.3 Inducement
      Stock Option.
      Upon
      the execution of this Agreement, Viking shall grant to Executive a stock option
      to purchase an aggregate of 500,000 shares of the common stock of Viking, $0.001
      par value per share (the “Common Stock”). The exercise price for such stock is
      $.40 per share. Such stock option shall have a 10 year term and become
      exercisable or “vest” as described in the stock option agreement (200,000 shares
      as of October 1, 2005, 150,000 shares as of July 1, 2006 and 150,000 shares
      as
      of July 1, 2007, subject to acceleration as set forth below. The other terms
      and
      conditions of such stock options shall be set forth in the individual stock
      option agreements, which shall be Viking’s standard form of option agreement and
      consistent with its 2004 Stock Incentive Plan (the“Option
      Plan”).
      This
      stock option is in addition to options previously awarded and any future options
      that Executive would otherwise be eligible for based on annual Company or
      individual performance, or available under other Company compensation programs.
      

    


    3.4 Incentive,
      Savings, and Retirement Plans.
      In
      addition to Base Salary and Annual Bonus payable as above provided, Executive
      shall be entitled to participate during the Employment Period in all current
      incentive, savings, and retirement plans, practices, policies and programs
      applicable to other key executives of Viking (including its successors or
      assigns) and its affiliates. 

    


    3.5 Welfare
      Benefit Plans.
      Executive and/or Executive's family who are qualified to participate, as the
      case may be, shall be eligible for participation in and shall receive all
      benefits under welfare benefit plans, practices, policies, and programs provided
      by Viking and its subsidiaries, as in effect at any time thereafter with respect
      to other key executives.

    


    3.6 Expenses.
      During
      the Employment Period, Executive shall be entitled to receive prompt
      reimbursement for all reasonable expenses incurred by Executive in connection
      with the business of Viking in accordance with the policies, practices, and
      procedures of Viking and its subsidiaries in effect with respect to other key
      executives.

     

    3.7 Vacation.
      During
      the Employment Period, Executive shall be entitled to four weeks paid vacation
      per year.

    



    
      
         

      

      
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    4.  Nondisclosure
      of Confidential, Proprietary or Trade Secret
      Information.
      As a
      condition of employment, Executive agrees to execute, deliver to the Company
      and
      abide by a Proprietary Information and Inventions Agreement (the “Inventions
      Agreement”),
      the
      form of which is attached hereto as Exhibit A. The termination of employment
      shall not release Executive from Executive’s obligations under the Inventions
      Agreement or as established by applicable laws or the Company’s
      policies.

     

    5.  No
      Solicitation of Customers or Employees.
      Executive acknowledges that the Company has invested substantial time, effort
      and expense in compiling its confidential, proprietary and trade secret
      information and in assembling its present staff of personnel. In order to
      protect the business value of the Company’s confidential, proprietary and trade
      secret information, during Executive’s employment with the Company and for one
      year immediately following the termination of that employment with the
      Company:

     

    (a) 
      Executive agrees that information regarding all customers and all prospective
      customers of the Company, of which Executive learns during Executive’s
      employment with the Company, may constitute “Proprietary Information” of the
      Company as defined in the Inventions Agreement.

     

    (b) 
      Executive agrees not to, directly or indirectly, induce or solicit any of the
      Company’s employees to leave their employment with the Company.

    


    6.
       Termination;
      Rights On Termination.
      

    


    6.1 Termination.
      Executive's employment under this Agreement may be terminated in any one of
      the
      followings ways:

    


    (a)
       Death
      of Executive.
      The
      employment of Executive shall terminate immediately upon Executive's death
      provided that Viking shall, for a period of one (1) month 
      following such death, pay to the estate of Executive an amount equal to
      Executive's Base Salary and continue the welfare benefit programs contemplated
      by Section 3.5 including paying all premiums for coverage for Executive's
      dependent family members under all health, hospitalization, disability, dental,
      life, and other insurance plans that Viking maintained at the time of
      Executive's death.

    


    (b) Disability
      of Executive.
      If, as
      a result of incapacity due to physical or mental illness or injury, Executive
      shall have been absent from Executive's full-time duties hereunder for two
      (2)
      consecutive months, then fourteen (14) days after giving written notice to
      Executive (which notice may occur before or after the end of such two (2) month
      period, but which shall not be effective earlier than the last day of such
      two
      (2) month period), Viking may terminate Executive's employment provided
      Executive is unable to resume Executive's full-time duties at the conclusion
      of
      such notice period. 

    


    (c) Termination
      by Viking for Good Cause.
      Viking
      may terminate Executive's employment without notice to Executive for Good Cause.
      In the event of a termination by Viking for Good Cause, Executive shall have
      no
      right to any severance compensation except for compensation already earned.
      .


    
      
         

      

      
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    (d)
       Termination
      by Viking Without Good Cause or Termination by Executive With Good
      Reason.
      Viking
      may terminate Executive's employment without Good Cause and without notice
      during the Employment Period upon the approval of a majority of the members
      of
      the Board, excluding Executive if Executive is a member of the Board. Executive
      may terminate Executive's employment under this Agreement for Good Reason upon
      fourteen (14) days prior notice to Viking. 

    


    (e) Termination
      by Executive Without Good Reason.
      Executive may, without cause, and without Good Reason terminate Executive's
      own
      employment under this Agreement, effective fourteen (14) days after written
      notice is provided to Viking or such earlier time as any such resignation may
      be
      accepted by Viking. If Executive resigns or otherwise terminates Executive's
      employment without Good Reason, Executive shall receive no Severance
      Compensation.

    


    6.2 Severance
      Compensation Without Change in Control.
      Following termination of Executive’s employment without a Change of Control, all
      payments and benefits provided to Executive under this Agreement shall cease
      as
      of the date of such termination, except that in the event Executive’s employment
      is terminated by Viking Without Good Cause or by Executive Termination With
      Good
      Reason pursuant to Section 6.1(d), then subject to Executive’s execution and
      delivery to Viking of a Release and Waiver of claims in the form attached hereto
      as Exhibit B, Viking shall: 

    


    (a) 
      pay
      Executive severance pay in the form of continuation of Executive’s then current
      Base Salary, less standard deductions and withholdings, for a period of nine
      (9)
      months from the effective date of Executive’s termination of employment with
      Viking with such payments to be made at the same time as Executive’s base salary
      otherwise would have been payable; 

    


    (b) 
      pay
      Executive an amount equal to 50% of the Target Bonus on a prorated basis for
      the
      current year through the date of termination, less standard deductions and
      withholdings, in equal monthly installments during the period during which
      Executive is entitled to continuation of base salary under clause (i) of this
      Section 6.2; 

    


    (c) 
      if
      Executive elects continued coverage under COBRA, reimburse Executive for
      Executive’s health insurance premiums for Executive and Executive’s family for a
      period of nine (9) months from the effective date of Executive’s termination of
      employment with Viking, to the same extent Viking paid those premiums at the
      time of termination; and 

    


    (d)
       accelerate
      the vesting of all of Executive’s stock options and other equity awards issued
      by Viking by a period of nine (9) months after the effective date of Executive’s
      termination of employment with Viking.

    


    7. Termination
      of Employment Following Change of Control.
      If any
      of the events described in Section 1 hereof constituting a Change of Control
      shall have occurred, Executive shall be entitled to the benefits provided in
      Section 7.5 hereof upon the actual termination by Viking or “Constructive
      Termination” of Executive’s employment within one year after such Change of
      Control, unless such termination is by Viking for Good Cause as defined in
      Section 1.5 of this Agreement.


    
      
         

      

      
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    7.1 Constructive
      Termination.
      For
      purposes of this Agreement, “Constructive Termination” shall mean a resignation
      by Executive for Good Reason as defined in section1.6.

    


    7.2 Notice
      of Termination.
      During
      that period commencing on the Change of Control Effective Date and ending twelve
      months thereafter, any termination of Executive’s employment by Viking or by
      Executive for any reason whatsoever during the term of this Agreement shall
      be
      communicated by fourteen (14) days written notice of termination to the other
      party hereto (“Notice of Termination”). 

    


    7.3 Date
      of Termination.
      For
      purposes of this Section 7, “Date of Termination” shall mean a date which is
      within twelve (12) months after a Change of Control and is either (1) the date
      specified in the Notice of Termination, if Executive’s employment is terminated
      by Executive during the term hereof: or (2) the date on which a Notice of
      Termination is given, if Executive’s employment is terminated for any other
      reason. 

    


    7.5 Benefits
      Upon Termination Following a Change Of Control. The
      Company shall provide Executive as soon as practicable, but not more than ten
      business days following the Date of Termination subsequent to a Change of
      Control of Viking, each of the following benefits: 

    


    (a) Severance
      Benefit.
      The
      Company shall pay Executive a lump sum severance benefit, which shall equal
      the
      sum of (a) nine (9) months of Base Salary, plus (b) an
      amount
      equal to 50% of the Target Bonus on a prorated basis for the current year
      through the Date of Termination 

    


    (b) Equity
      Compensation.
      All
      unvested stock options, stock appreciation rights and restricted stock awards
      held by Executive at the time of Executive’s Date of Termination shall be deemed
      fully vested and exercisable as such Date of Termination, provided, that if
      any
      such option, right or award would, as a result of such early exercisability
      no
      longer qualify for exemption under Section 16 of the Exchange Act, then such
      option, right or award shall be fully vested but shall not become exercisable
      until the earliest date on which it could become exercisable and also qualify
      for exemption from Section 16 of the Exchange Act. All vested options held
      by
      Executive, including those deemed fully vested as of the Date of Termination
      shall become automatically exercisable for a period of one (1) year from the
      Date of Termination; provided, however, in no event shall any option remain
      exercisable beyond the maximum period allowed therefore in the stock option
      plan
      under which it was granted. This agreement shall serve as an amendment to all
      of
      Executive’s outstanding stock options, restricted stock awards and stock
      appreciation rights as of the Date of Termination. 

    


    (c) Other
      Benefits.
      Viking
      shall provide for a period of nine (9) months following the Date of Termination,
      health and welfare benefits at least comparable to those benefits in effect
      on
      Executive’s Date of Termination. At Viking's election, health benefits may be
      provided by reimbursing Executive for the cost of converting a group policy
      to
      individual coverage, or for the reimbursed cost of extended COBRA coverage.
      

    



    
      
         

      

      
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    7.6 Other
      Benefits Payable.
      The
      benefits described in subsection 7.5 above shall be payable in addition to,
      and
      not in lieu of, all other accrued or vested or earned but deferred compensation,
      rights, options or other benefits which may be owed to Executive following
      termination of Executive’s employment, irrespective of whether Executive’s
      termination was preceded by a Change of Control.

    


    7.7 Mitigation.
      Executive shall not be required to mitigate the amount of any payment provided
      for in this Agreement by seeking other employment or otherwise, nor shall the
      amount of any payment provided for in this Agreement be reduced or offset in
      any
      way whatsoever by any amount received by Executive for any reason whatsoever
      from another employer or otherwise after the Date of Termination. 

    


    8. 
      Return Of Viking Property.
      All
      records, designs, patents, business plans, financial statements, manuals,
      memoranda, lists, and other property delivered to or compiled by Executive
      by or
      on behalf of Viking (or its subsidiaries) or its representatives, vendors,
      or
      customers that pertain to the business of Viking (or its subsidiaries) shall
      be
      and remain the property of Viking and be subject at all times to its discretion
      and control. Likewise, all correspondence, reports, records, charts, advertising
      materials, and other similar data pertaining to the business, activities, or
      future plans of Viking (or its subsidiaries) that is collected by Executive
      shall be delivered promptly to Viking without request by it upon termination
      of
      Executive's employment.

    


    9. Non-disparagement
      and Neutral Reference.
      During
      the Employment Term and for the twelve (12) months thereafter, Executive will
      not knowingly disparage, criticize, or otherwise make any derogatory statements
      regarding the Company, its directors, or its officers. The foregoing
      restrictions will not apply to any statements that are made truthfully in
      response to a subpoena or other compulsory legal process. The Company will
      provide a neutral employment reference to all those requesting information
      regarding the Executive’s employment with Company and may, with the appropriate
      waivers provided by the Executive to Viking, provide additional reference
      information upon request.

    


    10. Confidentiality
      and Inventions.
      Executive recognizes that Viking has and shall continue to have and develop
      information, knowledge and rights regarding inventions, confidential
      information, products, services, future plans, business affairs, processes,
      trade secrets, technical matters, customer lists, experimental designs and
      items
      of intellectual property. Executive hereby confirms and ratifies the Proprietary
      Information and Inventions Agreement (Exhibit A, which is incorporated herein
      by
      reference) and agrees to execute and deliver to Viking any other similar
      agreement(s) presented to Executive by Viking from time to time. 

    



    
      
         

      

      
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    11.  Prohibited
      Competition.
      In
      consideration of the grant of options by the Company to Executive agreed to
      in
      this Agreement, Executive agrees to be bound by this Section 3.3. Executive
      recognizes and acknowledges the competitive and proprietary nature of the
      Company’s business operations. Accordingly, Executive agrees that, during the
      term of his employment and for a period of twelve (12) months following
      termination of his employment for any reason including, but not limited, to
      termination for cause, without cause, voluntary termination, involuntary
      termination, or as a result of change of control, Executive shall not, without
      the prior written consent of the Company, for himself or on behalf of any other
      person or entity, directly or indirectly, either as principal, agent,
      stockholder, Executive, Executive representative or in any other capacity:
      (i) own, manage, operate or control, or be concerned, connected or employed
      by, or otherwise associate in any manner with, or engage in or have a financial
      interest in, any of the following companies or in the subsidiaries of any of
      the
      following companies: Intuitive Surgical, Stryker Endoscopy, Karl Storz Imaging,
      Inc., ACMI, Olympus Medical, Medtronic Sofamor Danek, Boston Scientific
      Endoscopy, Aesculap and Linvatec.

    


    Nothing
      contained herein shall preclude Executive from purchasing or owning stock in
      any
      such competitive business if such stock is publicly traded, and provided that
      Executive’s holdings do not exceed one percent (1%) of the issued and
      outstanding capital stock of such business. If any part of this section should
      be determined by a court of competent jurisdiction to be unreasonable in
      duration, geographic area, or scope, then this section is intended to and shall
      extend only for such period of time, in such geographic area and with respect
      to
      such activity as is determined by such court to be reasonable.

    


    12. Indemnification.
      In the
      event Executive is made a party to any threatened, pending, or completed action,
      suit, or proceeding, whether civil, criminal, administrative, or investigative
      (other than an action by Viking against Executive), by reason of the fact that
      Executive is or was performing services under this Agreement, then Viking shall
      indemnify Executive against all expenses (including attorneys' fees), judgments,
      fines, and amounts paid in settlement, as actually and reasonably incurred
      by
      Executive in connection therewith to the maximum extent permitted by applicable
      law. The advancement of expenses shall be mandatory. In the event that both
      Executive and Viking are made a party to the same third-party action, complaint,
      suit, or proceeding, Viking agrees to engage competent legal representation,
      and
      Executive agrees to use the same representation, provided that if counsel
      selected by Viking shall have a conflict of interest that prevents such counsel
      from representing Executive, Executive may engage separate counsel and Viking
      shall pay all attorneys' fees of such separate counsel. Further, while Executive
      is expected at all times to use Executive's best efforts to faithfully discharge
      Executive's duties under this Agreement, Executive cannot be held liable to
      Viking for errors or omissions made in good faith if Executive has not exhibited
      gross, willful, and wanton negligence and misconduct or performed criminal
      and
      fraudulent acts that materially damage the business of Viking. Notwithstanding
      this paragraph 12, the provision of any written indemnification agreement
      applicable to the directors and officers of Viking to which Executive shall
      be a
      party shall apply rather than this paragraph 12 to the extent inconsistent
      with
      this paragraph 12. Without limiting the foregoing, Viking shall continue to
      maintain coverage for Executive under any directors' and officers' liability
      insurance policies for a period of nine (9) years following any termination
      of
      Executive's employment by Viking without Good Cause or by Executive with Good
      Reason.

    



    
      
         

      

      
        10

        
          

        

      

      
         

      

    


    13. 
      Parachute Payments.
      If any
      payment or benefit Employee would receive pursuant to a Change in Control from
      the Company or otherwise (“Payment”)
      would
      (i) constitute a “parachute payment” within the meaning of Section 280G of the
      Code, and (ii) but for this sentence, be subject to the excise tax imposed
      by
      Section 4999 of the Code (the“Excise
      Tax”),
      then
      such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be
      either (x) the largest portion of the Payment that would result in no portion
      of
      the Payment being subject to the Excise Tax or (y) the largest portion, up
      to
      and including the total, of the Payment, whichever amount, after taking into
      account all applicable federal, state and local employment taxes, income taxes,
      and the Excise Tax (all computed at the highest applicable marginal rate),
      results in Employee’s receipt, on an after-tax basis, of the greater
      amount
      of the Payment notwithstanding that all or some portion of the Payment may
      be
      subject to the Excise Tax. If a reduction in payments or benefits constituting
      “parachute payments” is necessary so that the Payment equals the Reduced Amount,
      reduction shall occur in the following order unless Employee elect in writing
      a
      different order (provided, however, that such election shall be subject to
      Company approval if made on or after the effective date of the event that
      triggers the Payment): reduction of cash payments; cancellation of accelerated
      vesting of stock options; reduction of employee benefits. In the event that
      acceleration of vesting of the stock options is to be reduced, such acceleration
      of vesting shall be cancelled in the reverse order of the date of grant of
      Employee’s stock options (i.e.,
      earliest
      granted stock option cancelled last) unless Employee elects in writing a
      different order for cancellation.

     

    14.
       No
      Prior Agreements.
      Executive hereby represents and warrants to Viking that the execution of this
      Agreement by Executive and Executive's employment by Viking and the performance
      of Executive's duties hereunder will not violate or be a breach of any agreement
      with a former employer, client, or any other person or entity. Further,
      Executive agrees to indemnify Viking for any claim, including, but not limited
      to, attorneys' fees and expenses of investigation, by any such third party
      that
      such third party may now have or may hereafter come to have against Viking
      based
      upon or arising out of any -competition, invention, or secrecy agreement between
      Executive and such third party that was in existence as of the date of this
      Agreement.

    


    15. Assignment;
      Binding Effect.
      Executive understands that Executive is being employed by Viking on the basis
      of
      Executive's personal qualifications, experience, and skills. Executive agrees,
      therefore, Executive cannot assign all or any portion of Executive's performance
      under this Agreement. Subject to the preceding two (2) sentences and the express
      provisions of Section 14 below, this Agreement shall be binding upon, inure
      to
      the benefit of and be enforceable by the parties hereto and their respective
      heirs, legal representatives, successors, and assigns.

    


    16.
       Complete
      Agreement.
      This
      Agreement is not a promise of future employment. Except as specifically provided
      herein, Executive has no oral representations, understandings, or agreements
      with Viking or any of its officers, directors, or representatives covering
      the
      same subject matter as this Agreement. This written Agreement is the final,
      complete, and exclusive statement and expression of the agreement between Viking
      and Executive and of all the terms of this Agreement, and it cannot be varied,
      contradicted, or supplemented by evidence of any prior or contemporaneous oral
      or written agreements. This written Agreement may not be later modified except
      by a further writing signed by a duly authorized officer of Viking and
      Executive, and no term of this Agreement may be waived except by writing signed
      by the party waiving the benefit of such term. This Agreement hereby supersedes
      any other employment agreements or understandings, written or oral, between
      Viking and Executive.


    
      
         

      

      
        11

        
          

        

      

      
         

      

    


    17.
       Notice.
      Whenever any notice is required hereunder, it shall be given in writing
      addressed as follows:

    


    
      	 	
              To
                Viking:

            	 	
              7514
                Girard Avenue, Suite 1509

            	 
	 	 	 	
              La
                Jolla, California 92037

            	 
	 	 	 	
              Attention:
                CEO

            	 
	 	 	 	 	 
	 	
              To
                Executive:

            	 	
              150
                Belmont Avenue

            	 
	 	 	 	
              Lowell,
                MA 01852

            	 


    

    


    Notice
      shall be deemed given and effective on the earlier of three (3) days after
      the
      deposit in the U.S. mail of a writing addressed as above and sent first class
      mail, certified, return receipt requested, or when actually received. Either
      party may change the address for notice by notifying the other party of such
      change in accordance with this paragraph 17.

    


    18. Severability;
      Headings.
      If any
      portion of this Agreement is held invalid or inoperative, the other portions
      of
      this Agreement shall be deemed valid and operative and, so far as is reasonable
      and possible, effect shall be given to the intent manifested by the portion
      held
      invalid or inoperative. The paragraph headings herein are for reference purposes
      only and are not intended in any way to describe, interpret, define or limit
      the
      extent or intent of the Agreement or of any part hereof.

    


    19.  Arbitration.
      The
      Parties agree that any and all disputes arising out of the terms of this
      Agreement, Executive’s employment by the Company, Executive’s service as an
      officer or director of the Company, or Executive’s compensation and benefits,
      their interpretation, and any of the matters herein released, will be subject
      to
      binding arbitration in Boston, MA before the Judicial Arbitration and Mediation
      Services, Inc. under the American Arbitration Association’s National Rules for
      the Resolution of Employment Disputes, supplemented by the California Rules
      of
      Civil Procedure. The Parties agree that the prevailing party in any arbitration
      will be entitled to injunctive relief in any court of competent jurisdiction
      to
      enforce the arbitration award. The
      Parties hereby agree to waive their right to have any dispute between them
      resolved in a court of law by a judge or jury. This
      paragraph will not prevent either party from seeking injunctive relief (or
      any
      other provisional remedy) from any court having jurisdiction over the Parties
      and the subject matter of their dispute relating to Executive’s obligations
      under this Agreement and the Confidential Information Agreement. Viking shall
      bear the costs of the arbitration if Executive prevails. If Viking prevails,
      Executive will pay half the cost of the arbitration. Each party shall be
      responsible for paying its own attorneys fees. 

    


    20. No
      Participation In Severance Plans.
      Except
      as contemplated by this Agreement, Executive acknowledges and agrees that the
      compensation and other benefits set forth in this Agreement are and shall be
      in
      lieu of any compensation or other benefits that may otherwise be payable to
      or
      on behalf of Executive pursuant to the terms of any severance pay arrangement
      of
      Viking or any affiliate thereof, or any other similar arrangement of Viking
      or
      any affiliates thereof providing for benefits upon involuntary termination
      of
      employment.

    


    21.
       Governing
      Law.
      This
      Agreement shall in all respects be construed according to the laws of the State
      of Massachusetts, notwithstanding the conflict of laws provisions of such
      state.


    
      
         

      

      
        12

        
          

        

      

      
         

      

    


    22.
       Counterparts;
      Facsimile.
      This
      Agreement may be executed by facsimile and in two (2) or more counterparts,
      each
      of which shall be deemed an original and all of which together shall constitute
      but one and the same instrument.

    


    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      day
      and year first above written.

    


    
      	 	
              Viking
                Systems, Inc.

            
	 	 
	 	 
	 	
              By:
                /s/ Thomas B. Marsh

            
	 	
              Thomas
                B. Marsh, CEO

            
	 	 
	 	
              EXECUTIVE:

            
	 	 
	 	 
	 	
              /s/
                John Kennedy

            
	 	
              John
                Kennedy

            


    

    



    
      
         

      

      
        13

        
          

        

      

      
         

      

    


    EXHIBIT
      A

    PROPRIETARY
      INFORMATION AND INVENTIONS AGREEMENT

    


    Viking
      Systems, Inc. 

    7514
      Girard Avenue, Suite 1509

    La
      Jolla,
      California 92037

     

    Ladies
      and Gentlemen: 

     

    I
      recognize that Viking Systems, Inc., a Nevada corporation (“Viking”),
      possesses a body of existing technology and intellectual property rights and
      is
      engaged in a continuous program of research, development and production with
      respect to its business (present and future). I understand that: 

     

    A.
       As
      part
      of my employment by Viking (with the term “employment”,
      as
      used herein, to include any consulting relationship), I am expected to make
      new
      contributions and inventions of value to Viking. 

    


    B. 
      I
      understand that my employment creates a relationship of confidence and trust
      between me and Viking and that my position places me in a unique position of
      access to the proprietary technology, trade secrets and research, development
      and business information (1)applicable to the business of Viking; or
      (2)applicable to the business of any client, partner or customer of Viking,
      which may be made known to me by Viking or by any client, partner or customer
      of
      Viking, or learned by me during the period of my employment. 

    


    C. Viking
      possesses and will continue to possess information that has been or will be
      created, discovered or developed, or has or will otherwise become known to
      Viking (including, without limitation, information created, discovered,
      developed or made known by or to me during the period of or arising out of
      my
      employment by Viking), and/or in which property rights have been or will be
      assigned or otherwise conveyed to Viking, which information has commercial
      value
      in the business in which Viking is engaged. All of the aforementioned
      information is hereinafter called “Confidential
      Information.”
      By way
      of illustration, but not limitation, Confidential Information includes all
      data,
      compilations, blueprints, plans, audio and/or video recordings and/or devices,
      information on computer disks, software, tapes, printouts and other printed,
      typewritten or handwritten documents, specifications, strategies, systems,
      schemas, methods (including delivery, storage, receipt, transmission,
      presentation and manufacture of audio, video, informational or other data or
      content), business and marketing development plans, customer lists, research
      projections, processes, techniques, designs, sequences, components, programs,
      technology, ideas, know-how, improvements, inventions (whether or not patentable
      or copyrightable), information about operations and maintenance, trade secrets,
      formulae, models, patent disclosures and any other information concerning the
      actual or anticipated business, research or development of Viking or its actual
      or potential customers or partners or which is or has been generated or received
      in confidence by or for Viking by or from any person; and all tangible and
      intangible embodiments thereof of any kind whatsoever including, where
      appropriate and without limitation, all compositions, machinery, apparatus,
      records, reports, drawings, copyright applications, patent applications,
      documents and samples, prototypes, models, products and the
      like.


    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    


     

    In
      consideration of my employment or continued employment, as the case may be,
      and
      the compensation received by me from Viking from time to time, I hereby agree
      as
      follows: 

     

    1. 
      All
      Confidential Information shall be the sole property of Viking and its assigns,
      and Viking and its assigns shall be the sole owner of all patents, copyrights
      and other rights in connection therewith. I hereby assign to Viking any rights
      I
      may have or acquire in all Confidential Information. At all times during my
      employment by Viking and at all times after termination of such employment,
      I
      will keep in confidence and trust all Confidential Information, and I will
      not
      disclose, sell, use, lecture upon or publish any Confidential Information or
      anything relating to it without the prior written consent of Viking, except
      as
      may be necessary in the ordinary course of performing my duties as an employee
      of (or consultant to) Viking. 

     

    2.
       Without
      limiting the terms of my employment with Viking, I agree that during the period
      of my employment by Viking I will not engage in any employment or activity
      in
      any business that is directly or indirectly competitive with Viking.


     

    3.
       All
      documents, data, records, apparatus, equipment, sequences, components, programs
      and other physical property, whether or not pertaining to Confidential
      Information, furnished to me by Viking or produced by myself or others in
      connection with my employment shall be and remain the sole property of Viking
      and shall be returned promptly to Viking as and when requested by Viking. Should
      Viking not so request, I shall return and deliver all such property upon
      termination of my employment by me or by Viking for any reason (“Termination”)
      and I
      will not take with me any such property, any reproduction of such property
      or
      any materials or products derived from such property. 

     

    4.
       I
      shall
      promptly disclose any outside activities or interests, including any ownership
      or participation in the development of prior inventions, that conflict or may
      conflict with the interests of Viking. I understand that I am required to make
      such disclosures promptly if the activity or interest is related, either
      directly or indirectly, to (i) an area of research, development, service,
      product or product line of Viking, (ii) a manufacturing, development or research
      methodology or process of Viking or (iii) any activity that I may be involved
      with on behalf of Viking. 

     

    5.
       I
      shall
      promptly disclose to Viking, or any persons designated by it, all improvements,
      inventions, formulae, processes, programs, techniques, know-how and data,
      whether or not patentable or copyrightable, made or conceived or reduced to
      practice or learned by me, either alone or jointly with others, during the
      period of my employment with Viking which are related to or useful in the
      business of Viking, or result from tasks assigned me by Viking, or result from
      use of premises owned, leased or contracted for by Viking (all said
      improvements, inventions, formulae, processes, techniques, know-how and data
      shall be collectively hereinafter called “Inventions”).
      Such
      disclosure shall continue for one year after Termination with respect to
      anything that would be an Invention if made, conceived, reduced to practice
      or
      learned prior to Termination. 

     


    
      
         

      

      
        A-2

        
          

        

      

      
         

      

    


    6.
       I
      agree
      that all Inventions shall be the sole property of Viking and its assigns, and
      Viking and its assigns shall be the sole owner of all patents, copyrights and
      other rights in connection therewith and all Confidential Information with
      respect thereto. I hereby assign to Viking any and all rights I may have or
      acquire in all Inventions, including all rights that may be known as or referred
      to as “moral
      rights.”
      I
      further agree as to all Inventions to assist Viking in every proper way (but
      at
      Viking’s expense) to obtain and from time to time enforce patents and copyrights
      on the Inventions in any and all countries, and to that end I will execute
      all
      documents for use in applying for and obtaining such patents and copyrights
      thereon and enforcing the same, as Viking may desire, together with any
      assignments thereof to Viking or persons designated by it. My obligation to
      assist Viking in obtaining and enforcing patents and copyrights for the
      Inventions in any and all countries shall continue beyond Termination, but
      Viking shall compensate me at a reasonable rate after Termination for time
      actually spent by me at Viking’s request on such assistance. In the event that
      Viking is unable for any reason whatsoever to secure my signature to any lawful
      and necessary document required to apply for or execute any patent or copyright
      application with respect to Inventions (including renewals, extension,
      continuations, divisions or continuations in part thereof), I hereby irrevocably
      designate and appoint Viking and its duly authorized officers and agents, as
      my
      agents and attorneys-in-fact to act for and in my behalf and instead of me,
      to
      execute and file any such application and to do all other lawfully permitted
      acts to further the prosecution and issuance of patents or copyrights thereon
      with the same legal force and effect as if executed by me. 

     

    7. 
      As a
      matter of record I have identified beneath by signature hereto a complete list
      of all inventions or improvements relevant to the subject matter of my
      employment by Viking which have been made or conceived or first reduced to
      practice by me alone or jointly with others prior to my employment by Viking
      (“Prior
      Inventions”)
      which I
      desire to remove from the operation of this Agreement; and I covenant that
      such
      list is complete. If no such list is identified, I represent that I have made
      no
      such Prior Inventions at the time of the commencement of my employment by
      Viking. Notwithstanding the foregoing, and without limiting the other provisions
      of this Agreement, I agree that (i) any improvements or new inventions to the
      item(s) so identified on such list (if any) shall be treated as Inventions
      for
      purposes of this Agreement if the provisions of Section 5 above are otherwise
      applicable and (ii) if, in the course of my employment with Viking, I
      incorporate a Prior Invention into a Viking product, process, application,
      machine or invention, the Viking is hereby granted and shall have a
      nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
      rights to sublicense through multiple tiers of sublicensees) to make, have
      made,
      modify, use and sell such Prior Invention. Notwithstanding the foregoing, I
      agree that I will not incorporate, or permit to be incorporated, Prior
      Inventions in any Viking product, process, application, machine or invention
      without Viking’s prior written consent. 

     

    8.
       I
      represent that my performance of all the terms of this Agreement and that my
      employment by Viking does not and will not breach or constitute an event of
      default under any agreement (i) obligating me to keep in confidence proprietary
      information acquired by me in confidence or in trust prior to, or at any point
      throughout, my employment by Viking, (ii) obligating me to assign to or protect
      for the benefit of any third party any proprietary information or any
      improvement, invention, formulae, process, program, technique, know-how or
      data
      or (iii) that is designed in any way to limit my employment or activity in
      any
      business in which I may compete, directly or indirectly, with any other
      business, or which might by application have such an effect. I have not entered
      into, and I agree that I will not enter into, any agreement (either written
      or
      oral) in conflict herewith. 


    
      
         

      

      
        A-3

        
          

        

      

      
         

      

    


    9.
       I
      understand, acknowledge and agree that, as part of the consideration for my
      employment or continued employment by Viking, I have not brought and will not
      bring with me to Viking or use in the performance of my responsibilities at
      or
      for Viking any equipment, supplies, facility or trade secret or other
      proprietary information of any former employer which are not generally available
      to the public, unless I have obtained (and provide herewith to Viking a copy
      of)
      written authorization for their possession and use. 

     

    10.
       I
      also
      understand that, in my employment by Viking, I am not to breach any obligation
      of confidentiality that I have to others, and I agree that I shall fulfill
      all
      such obligations during my employment by Viking. A copy of any document
      reflecting any such obligation, or a description thereof if no document is
      available is provided herewith to Viking. 

     

    11.
       I
      agree
      that during the term of my employment with Viking and for a period of twelve
      (12) months after Termination, I will not directly or indirectly: (i) induce
      or
      attempt to induce any employee or consultant of Viking to leave the employ
      of
      Viking or to otherwise end such employee’s or consultant’s relationships with
      Viking, or (ii) other than on behalf of Viking, induce or attempt to induce
      any
      other person to terminate a relationship with Viking. 

     

    12. 
      I
      acknowledge that, due to the uniqueness of my relationship with Viking, Viking
      would not have an adequate remedy at law for money damages in the event that
      this Agreement is not fully performed in accordance with its terms. I agree
      that
      in addition to any other rights and remedies available to Viking for any breach
      by me of my obligations hereunder, Viking shall be entitled to enforcement
      of my
      obligations hereunder by court injunction (without the posting of a bond or
      other security), specific performance or other appropriate equitable relief.
      

     

    13. 
      If any
      provision of this Agreement shall be declared invalid, illegal or unenforceable,
      such provision shall be severed and all remaining provisions shall continue
      in
      full force and effect. 

     

    14.
       If
      applicable, this Agreement does not apply to inventions which qualify fully
      for
      protection under Section 2870 of the California Labor Code (which, if
      applicable, could apply to ideas or inventions for which no equipment, supplies,
      facility or trade secret information of Viking were used and which were
      developed entirely on my own time, and (1) which do not relate at the time
      of
      conception or reduction to practice of the invention (a) to the actual business
      of Viking, or (b) to Viking’s actual or demonstrably anticipated research or
      development, or (2) which do not result from any work performed by me for
      Viking). Notwithstanding the foregoing, I shall disclose in confidence to Viking
      any invention in order to permit Viking to make a determination as to compliance
      by me with the terms and conditions of this Agreement. 

    


    15.
      T his
      Agreement shall be effective as of the first day of my employment by Viking.
      The
      term “employment”
      and the
      term or duration of my employment, as used herein and for purposes of this
      Agreement, shall include, without limitation, any consulting relationship
      between myself and Viking (including, if applicable, any such relationship
      which
      may follow the termination of my status as an employee of Viking or which may
      precede my status as an employee of Viking). Accordingly, notwithstanding any
      other provision of this Agreement to the contrary (and without limitation),
      a
“Termination”
      shall
      not be deemed to have occurred if a consulting relationship persists following
      the termination of my status as an employee of Viking (if applicable).


     


    
      
         

      

      
        A-4

        
          

        

      

      
         

      

    


    16.
       The
      term
      Viking, as used herein, shall include any subsidiary or affiliate of Viking.
      

    


    17.
       This
      Agreement shall be binding upon me, my heirs, executors, assigns and
      administrators and shall inure to the benefit of Viking, its successors and
      assigns. 

     

    18.
       This
      Agreement shall in all respects be construed according to the laws of the state
      of Massachusetts, notwithstanding the conflict of laws provisions of such state.
      

     

    


    


    


    
      	
              Dated:
                October 10, 2005

            	 	
              /s/
                John Kennedy

            
	
               

            	 	
              John
                Kennedy

            
	
              Prior
                Inventions:
                NONE.

            	 	 
	 	 	 
	 	 	
              Accepted
                and Agreed to

            
	 	 	
              This
                10th day of October, 2005.

            
	 	 	 
	 	 	
              Viking
                Systems, Inc.

            
	 	 	 
	 	 	 
	 	 	
              By:
                /s/ Thomas B. Marsh

            
	 	 	
              Thomas
                B. Marsh, CEO

            


    

    


    


    


    



    
      
        
          


        

         

      

      
        A-5

        
          

        

      

      
         

        
        

      

    



    EXHIBIT
      B

    RELEASE
      AND WAIVER OF CLAIMS

     

    I
      understand and agree completely to the terms set forth in the Employment
      Agreement, dated ____________, 2005 to which this form is attached (the
“Agreement”).
      I understand that this release and waiver (the “Release”),
      together with the Agreement, constitutes the complete, final and exclusive
      embodiment of the entire agreement between Viking Systems, Inc. (“Viking”) and
      me with regard to the Agreement. I am not relying on any promise or
      representation by Viking that is not expressly stated
      herein.

     

    In
      consideration of and except for the benefits I will receive under the Agreement,
      I hereby generally and completely release Viking and its directors, officers,
      employees, shareholders, members, partners, agents, attorneys, predecessors,
      successors, parent and subsidiary entities, insurers, affiliates, and assigns
      from any and all claims, liabilities and obligations, both known and unknown,
      that arise out of or are in any way related to events, acts, conduct, or
      omissions occurring prior to my signing this Release. This Release includes,
      but
      is not limited to: (1) all claims arising out of or in any way related to my
      employment with Viking or the termination of that employment; (2) all claims
      related to my compensation or benefits from Viking, including, but not limited
      to, salary, bonuses, commissions, vacation pay, expense reimbursements,
      severance pay, fringe benefits, stock, stock options, or any other ownership
      interests in Viking; (3) all claims for breach of contract, wrongful
      termination, and breach of the implied covenant of good faith and fair dealing;
      (4) all tort claims, including, but not limited to, claims for fraud,
      defamation, emotional distress, and discharge in violation of public policy;
      and
      (5) all federal, state, and local statutory claims, including, but not limited
      to, claims for discrimination, harassment, retaliation, attorneys’ fees, or
      other claims arising under the federal Civil Rights Act of 1964 (as amended),
      the federal Americans with Disabilities Act of 1990, the federal Age
      Discrimination in Employment Act of 1967 (as amended) (“ADEA”),
      and
      the California Fair Employment and Housing Act (as amended).

     

    I
      acknowledge that I am knowingly and voluntarily waiving and releasing any rights
      I may have under the ADEA. I also acknowledge that the consideration given
      under
      the Release for the waiver and release in the preceding paragraph hereof is
      in
      addition to anything of value to which I was already entitled. I further
      acknowledge that I have been advised by this writing, as required by the ADEA,
      that: (A) my waiver and release do not apply to any rights or claims that may
      arise on or after the date I execute this Release; (B) I should consult with
      an
      attorney prior to executing this Release; (C) I have twenty-one (21) days to
      consider this Release (although I may choose to voluntarily execute this Release
      earlier); (D) I have seven (7) days following my execution of this Release
      to
      revoke the Release; and (E) this Release shall not be effective until the date
      upon which the revocation period has expired, which shall be the eighth
      (8th)
      day
      after I execute this Release.

     

    I
      represent that I have not filed any claims against Viking, and agree that,
      except as such waiver may be prohibited by statute, I will not file any claim
      against Viking or seek any compensation for any claim other than the payments
      and benefits referenced herein. I agree to indemnify and hold Viking harmless
      from and against any and all loss, cost, and expense, including, but not limited
      to court costs and attorney’s fees, arising from or in connection with any
      action which may be commenced, prosecuted, or threatened by me or for my
      benefit, upon my initiative, or with my aid or approval, contrary to the
      provisions of this Release.


     


    
      
         

      

      
        B-1

        
          

        

      

      
         

      

    


    

      I
        acknowledge that I have read and understand Section 1542 of the California
        Civil
        Code which reads as follows:“A
        general release does not extend to claims which the creditor does not know
        or
        suspect to exist in his or her favor at the time of executing the release,
        which
        if known by his or her must have materially affected his or her settlement
        with
        the debtor.”
        I hereby
        expressly waive and relinquish all rights and benefits under that section
        and
        any law of any jurisdiction of similar effect with respect to my release
        of any
        claims I may have against Viking, its affiliates, and the entities and persons
        specified above.

       

      This
        release is not intended to release any continuing obligations of Viking to
        me,
        if any, under any written employment agreement that I may have with
        Viking.

    

    


    


    


    


    
      	
              Dated:
                October 10, 2005

            	 	 
	
               

            	 	
              John
                Kennedy

            
	 	 	 
	 	 	
              Accepted
                and Agreed to

            
	 	 	
              This
                10th day of October, 2005.

            
	 	 	 
	 	 	
              Viking
                Systems, Inc.

            
	 	 	 
	 	 	 
	 	 	
              By:
                

            
	 	 	
              Thomas
                B. Marsh, CEO

            


    

    
 

     

    
      
         

      

      
        B-2