Document:

Exhibit 10.5 Form of Security Agreement

    Exhibit
      10.5

    Form
      8-K

    Viking
      Systems, Inc.

    File
      No.
      000-49636

    

    EXHIBIT
      E

    

    SECURITY
      AGREEMENT

    

      This
        SECURITY AGREEMENT, dated as of February 23, 2006 (this “Agreement”),
        is
        among Viking Systems, Inc., a Delaware corporation
        (the
        “Company”),
        all
        of the Subsidiaries of the Company
        (such
        subsidiaries,
        the
“Guarantors”
        and
        together with the Company,
        the
“Debtors”)
        and
        the holders of the Company’s 8% Secured Convertible Debentures due February 23,
        2009 and issued on February 23, 2007 in the original aggregate principal
        amount
        of $5,576,533 (collectively, the “Debentures”)
        signatory hereto, their endorsees, transferees and assigns (collectively,
        the
“Secured
        Parties”).

    

    W
      I T N E S S E T H:

    

    WHEREAS,
      pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
      Parties have severally agreed to extend the loans to the Company evidenced
      by
      the Debentures; 

    

      WHEREAS,
        pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
        “Guarantee”),
        the
        Guarantors
        have
        jointly and severally agreed to guarantee and act as surety for payment of
        such
        Debentures; and

    

    WHEREAS,
      in order to induce the Secured Parties to extend the loans evidenced by the
      Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
      this Agreement and to grant the Secured Parties, pari passu
      with
      each other Secured Party and through the Agent, a security interest in certain
      property of such Debtor to secure the prompt payment, performance and discharge
      in full of all of the Company’s obligations under the Debentures and the
      Guarantors’ obligations under the Guarantee.

    

    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

    

    1. Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
      tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
      intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
      the respective meanings given such terms in Article 9 of the
      UCC.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

      (a) “Collateral”
means
        the collateral in which the Secured Parties are granted a security interest
        by
        this Agreement and which shall include the following personal property of
        the
        Debtors, whether presently owned or existing or hereafter acquired or coming
        into existence, wherever situated, and all additions and accessions thereto
        and
        all substitutions and replacements thereof, and all proceeds, products and
        accounts thereof, including, without limitation, all proceeds from the sale
        or
        transfer of the Collateral and of insurance covering the same and of any
        tort
        claims in connection therewith,
        and all
        dividends, interest, cash, notes, securities, equity interest or other property
        at any time and from time to time acquired, receivable or otherwise distributed
        in respect of, or in exchange for, any or all of the Pledged Securities (as
        defined below):

    

    (i) All
      goods, including, without limitation, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory;

    

      (ii) All
        contract rights and other general intangibles, including, without limitation,
        all partnership interests, membership interests, stock or other securities,
        rights
        under any of the Organizational Documents, agreements related to the Pledged
        Securities, licenses,
        distribution and other agreements, computer software (whether “off-the-shelf”,
        licensed from any third party or developed by any Debtor), computer software
        development rights, leases, franchises, customer lists, quality control
        procedures, grants and rights, goodwill, trademarks, service marks, trade
        styles, trade names, patents, patent applications, copyrights, and income
        tax
        refunds; 

    

    (iii) All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit; 

    

    (iv)
       All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v) All
      commercial tort claims;

    

    (vi) All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii) All
      investment property;

    
      
         

      

      
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     (viii) All
      supporting obligations; and

    

    (ix) All
      files, records, books of account, business papers, and computer programs;
      and

    

    (x) the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

    

      Without
        limiting the generality of the foregoing, the “Collateral”
shall
        include all investment property and general intangibles respecting ownership
        and/or other equity interests in each Guarantor, including, without limitation,
        the shares of capital stock and the other equity interests listed on
Schedule
        H
        hereto
        (as the same may be modified from time to time pursuant to the terms hereof),
        and any other shares of capital stock and/or other equity interests of any
        other
        direct or indirect subsidiary of any Debtor obtained in the future, and,
        in each
        case, all certificates representing such shares and/or equity interests and,
        in
        each case, all rights, options, warrants, stock, other securities and/or
        equity
        interests that may hereafter be received, receivable or distributed in respect
        of, or exchanged for, any of the foregoing and all rights arising under or
        in
        connection with the Pledged Securities, including, but not limited to, all
        dividends, interest and cash.

    

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided, however, that to the extent permitted by applicable law, this
      Agreement shall create a valid security interest in such asset and, to the
      extent permitted by applicable law, this Agreement shall create a valid security
      interest in the proceeds of such asset.

    

    (b) “Intellectual
      Property”
means
      the collective reference to all rights, priorities and privileges relating
      to
      intellectual property, whether arising under United States, multinational or
      foreign laws or otherwise, including, without limitation, (i) all copyrights
      arising under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, all registrations and recordings thereof, and all applications
      in
      connection therewith, including, without limitation, all registrations,
      recordings and applications in the United States Copyright Office, (ii) all
      letters patent of the United States, any other country or any political
      subdivision thereof, all reissues and extensions thereof, and all applications
      for letters patent of the United States or any other country and all divisions,
      continuations and continuations-in-part thereof, 

    
      
         

      

      
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    (iii)
      all
      trademarks, trade names, corporate names, company names, business names,
      fictitious business names, trade dress, service marks, logos, domain names
      and
      other source or business identifiers, and all goodwill associated therewith,
      now
      existing or hereafter adopted or acquired, all registrations and recordings
      thereof, and all applications in connection therewith, whether in the United
      States Patent and Trademark Office or in any similar office or agency of the
      United States, any State thereof or any other country or any political
      subdivision thereof, or otherwise, and all common law rights related thereto,
      (iv) all trade secrets arising under the laws of the United States, any other
      country or any political subdivision thereof, (v) all rights to obtain any
      reissues, renewals or extensions of the foregoing, (vi) all licenses for any
      of
      the foregoing, and (vii) all causes of action for infringement of the
      foregoing.

    

      (c) “Majority
        in Interest”
means,
        at any time of determination, the majority in interest (based on
        then-outstanding principal amounts of Debentures at the time of such
        determination) of the Secured Parties.

    

      (d) “Necessary
        Endorsement”
means
        undated stock powers endorsed in blank or other proper instruments of assignment
        duly executed and such other instruments or documents as the Agent (as that
        term
        is defined below) may reasonably request.

    

      (e) “Obligations”
means
        all of the liabilities
        and obligations (primary, secondary, direct, contingent, sole, joint or several)
        due or to become due, or that are now or may be hereafter contracted or
        acquired, or owing to, of any Debtor to the Secured Parties, including, without
        limitation, all
        obligations under this Agreement, the Debentures, the Guarantee and any other
        instruments, agreements or other documents executed and/or delivered in
        connection herewith or therewith, in each case, whether now or hereafter
        existing, voluntary or involuntary, direct or indirect, absolute or contingent,
        liquidated or unliquidated, whether or not jointly owed with others, and
        whether
        or not from time to time decreased or extinguished and later increased, created
        or incurred, and all or any portion of such obligations or liabilities that
        are
        paid, to the extent all or any part of such payment is avoided or recovered
        directly or indirectly from any of the Secured Parties as a preference,
        fraudulent transfer or otherwise as such obligations may be amended,
        supplemented, converted, extended or modified from time to time. Without
        limiting the generality of the foregoing, the term “Obligations” shall include,
        without limitation: (i) principal of, and interest on the Debentures and
        the
        loans extended pursuant thereto; (ii) any and all other fees, indemnities,
        costs, obligations and liabilities of the Debtors from time to time under
        or in
        connection with this Agreement, the Debentures, the Guarantee and any other
        instruments, agreements or other documents executed and/or delivered in
        connection herewith or therewith; and (iii) all amounts (including but not
        limited to post-petition interest) in respect of the foregoing that would
        be
        payable but for the fact that the obligations to pay such amounts are
        unenforceable or not allowable due to the existence of a bankruptcy,
        reorganization or similar proceeding involving any Debtor.

    

    
      
         

      

      
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      (f) “Organizational
        Documents”
means
        with respect to any Debtor, the documents by which such Debtor was organized
        (such as a certificate of incorporation, certificate of limited partnership
        or
        articles of organization, and including, without limitation, any certificates
        of
        designation for preferred stock or other forms of preferred equity) and which
        relate to the internal governance of such Debtor (such as bylaws, a partnership
        agreement or an operating, limited liability or members
        agreement).

    

      (g) “Pledged
        Securities”
shall
        have the meaning ascribed to such term in Section 4(i).

    

    (h) “UCC”
means
      the Uniform Commercial Code of the State of New York and or any other applicable
      law of any state or states which has jurisdiction with respect to all, or any
      portion of, the Collateral or this Agreement, from time to time. It is the
      intent of the parties that defined terms in the UCC should be construed in
      their
      broadest sense so that the term “Collateral” will be construed in its broadest
      sense. Accordingly if there are, from time to time, changes to defined terms
      in
      the UCC that broaden the definitions, they are incorporated herein and if
      existing definitions in the UCC are broader than the amended definitions, the
      existing ones shall be controlling. 

    

    2. Grant
      of Security Interest in Collateral.
      As an
      inducement for the Secured Parties to extend the loans as evidenced by the
      Debentures and to secure the complete and timely payment, performance and
      discharge in full, as the case may be, of all of the Obligations, each Debtor
      hereby unconditionally and irrevocably pledges, grants and hypothecates to
      the
      Secured Parties a security interest in and to, a lien upon and a right of
      set-off against all of their respective right, title and interest of whatsoever
      kind and nature in and to, the Collateral (a “Security
      Interest”
and
      collectively, the “Security
      Interests”).

    

      3. Delivery
        of Certain Collateral.
        Contemporaneously or prior to the execution of this Agreement, each Debtor
        shall
        deliver or cause to be delivered to the Agent (a) any and all certificates
        and
        other instruments representing or evidencing the Pledged Securities, and
        (b) any
        and all certificates and other instruments or documents representing any
        of the
        other Collateral, in each case, together with all Necessary Endorsements.
        The
        Debtors are, contemporaneously with the execution hereof, delivering to Agent,
        or have previously delivered to Agent, a true and correct copy of each
        Organizational Document governing any of the Pledged
        Securities.

    

      4 Representations,
        Warranties, Covenants and Agreements of the Debtors.
        Except
        as set forth under the corresponding section of the disclosure schedules
        delivered to the Secured Parties concurrently herewith (the “Disclosure
        Schedules”),
        which
        Disclosure Schedules shall be deemed a part hereof, each Debtor represents
        and
        warrants to, and covenants and agrees with, the Secured Parties as
        follows:

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (a) Each
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by each
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of such Debtor and no further
      action is required by such Debtor. This Agreement has been duly executed by
      each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of
      each Debtor, enforceable against each Debtor in accordance with its terms except
      as such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors and by general principles of
      equity.

    

    (b) The
      Debtors have no place of business or offices where their respective books of
      account and records are kept (other than temporarily at the offices of its
      attorneys or accountants) or places where Collateral is stored or located,
      except as set forth on Schedule
      A
      attached
      hereto. Except as specifically set forth on Schedule
      A,
      each
      Debtor is the record owner of the real property where such Collateral is
      located, and there exist no mortgages or other liens on any such real property
      except for Permitted Liens (as defined in the Debentures). Except as disclosed
      on Schedule
      A,
      none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    

    (c) Except
      for Permitted Liens (as defined in the Debentures) and except as set forth
      on
Schedule
      B
      attached
      hereto, the Debtors are the sole owner of the Collateral (except for
      non-exclusive licenses granted by any Debtor in the ordinary course of
      business), free and clear of any liens, security interests, encumbrances, rights
      or claims, and are fully authorized to grant the Security Interests. Except
      as
      set forth on Schedule
      B
      attached
      hereto, there is not on file in any governmental or regulatory authority, agency
      or recording office an effective financing statement, security agreement,
      license or transfer or any notice of any of the foregoing (other than those
      that
      will be filed in favor of the Secured Parties pursuant to this Agreement)
      covering or affecting any of the Collateral. Except as set forth on Schedule
      B
      attached hereto and except pursuant to this Agreement, as long as this Agreement
      shall be in effect, the Debtors shall not execute and shall not knowingly permit
      to be on file in any such office or agency any other financing statement or
      other document or instrument (except to the extent filed or recorded in favor
      of
      the Secured Parties pursuant to the terms of this Agreement).

    

    (d) No
      written claim has been received that any Collateral or Debtor's use of any
      Collateral violates the rights of any third party. There has been no adverse
      decision to any Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of any Debtor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (e) Each
      Debtor shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Parties at least 30 days prior
      to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements under the UCC and other necessary documents
      have been filed and recorded and other steps have been taken to perfect the
      Security Interests to create in favor of the Secured Parties a valid, perfected
      and continuing perfected first priority lien in the Collateral.

    

      (f) This
        Agreement creates in favor of the Secured Parties a valid, security interest
        in
        the Collateral, subject only to Permitted Liens (as defined in the Debentures)
        securing the payment and performance of the Obligations. Upon making the
        filings
        described in the immediately following paragraph, all security interests
        created
        hereunder in any Collateral which may be perfected by filing Uniform Commercial
        Code financing statements shall have been duly perfected. Except for the
        filing
        of the Uniform Commercial Code financing statements referred to in the
        immediately following paragraph, the recordation of the Intellectual Property
        Security Agreement (as defined below) with respect to copyrights and copyright
        applications in the United States Copyright Office referred to in paragraph
        (m),
the
        execution and delivery of deposit account control agreements satisfying the
        requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
        account of the Debtors,
        and the
        delivery of the certificates and other instruments provided in Section
        3,
        no
        action is necessary to create, perfect or protect the security interests
        created
        hereunder. Without limiting the generality of the foregoing, except for the
        filing of said financing statements, the recordation of said Intellectual
        Property Security Agreement, and the execution and delivery of said deposit
        account control agreements, no consent of any third parties and no
        authorization, approval or other action by, and no notice to or filing with,
        any
        governmental authority or regulatory body is required for (i) the execution,
        delivery and performance of this Agreement, (ii) the creation or perfection
        of
        the Security Interests created hereunder in the Collateral or (iii) the
        enforcement of the rights of the Agent and the Secured Parties
        hereunder.

    

    (g) Each
      Debtor hereby authorizes the Agent to file one or more financing statements
      under the UCC, with respect to the Security Interests with the proper filing
      and
      recording agencies in any jurisdiction deemed proper by it.

    

    
      
         

      

      
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    (h) The
      execution, delivery and performance of this Agreement by the Debtors does not
      (i) violate any of the provisions of any Organizational Documents of any Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor's debt or otherwise) or other understanding
      to
      which any Debtor is a party or by which any property or asset of any Debtor
      is
      bound or affected. If any, all required consents (including, without limitation,
      from stockholders or creditors of any Debtor) necessary for any Debtor to enter
      into and perform its obligations hereunder have been obtained.

    

      (i) The
        capital stock and other equity interests listed on Schedule
        H
        hereto
        (the “Pledged
        Securities”)
        represent all of the capital stock and other equity interests of the Guarantors,
        and represent all capital stock and other equity interests owned, directly
        or
        indirectly, by the Company. All of the Pledged Securities are validly issued,
        fully paid and nonassessable, and the Company is the legal and beneficial
        owner
        of the Pledged Securities, free and clear of any lien, security interest
        or
        other encumbrance except for the security interests created by this Agreement
        and other Permitted Liens (as defined in the Debentures). 

    

      (j) The
        ownership and other equity interests in partnerships and limited liability
        companies (if any)
        included
        in the Collateral
        (the
“Pledged
        Interests”)
        by
        their express terms do not provide that they are securities governed by Article
        8 of the UCC and are not held in a securities account or by any financial
        intermediary.

    

      (k) Except
        for Permitted Liens (as defined in the Debentures), each Debtor shall at
        all
        times maintain the liens and Security Interests provided for hereunder as
        valid
        and perfected first priority liens and security interests in the Collateral
        in
        favor of the Secured Parties until this Agreement and the Security Interest
        hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor
        hereby
        agrees to defend the same against the claims of any and all persons and
        entities. Each Debtor shall safeguard and protect all Collateral for the
        account
        of the Secured Parties. At the request of the Agent, each Debtor will sign
        and
        deliver to the Agent on behalf of the Secured Parties at any time or from
        time
        to time one or more financing statements pursuant to the UCC in form reasonably
        satisfactory to the Agent and will pay the cost of filing the same in all
        public
        offices wherever filing is, or is deemed by the Agent to be, necessary or
        desirable to effect the rights and obligations provided for herein. Without
        limiting the generality of the foregoing, each Debtor shall pay all fees,
        taxes
        and other amounts necessary to maintain the Collateral and the Security
        Interests hereunder, and each Debtor shall obtain and furnish to the Agent
        from
        time to time, upon demand, such releases and/or subordinations of claims
        and
        liens which may be required to maintain the priority of the Security Interests
        hereunder.

    

    
      
         

      

      
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      (l) No
        Debtor
        will transfer, pledge, hypothecate, encumber, license, sell or otherwise
        dispose
        of any of the Collateral (except for non-exclusive licenses granted by a
        Debtor
        in its ordinary course of business and sales of inventory by a Debtor in
        its
        ordinary course of business) without the prior written consent of a Majority
        in Interest.

    

      (m) Each
        Debtor shall keep and preserve its equipment, inventory and other tangible
        Collateral in good condition, repair and order and shall not operate or locate
        any such Collateral (or cause to be operated or located) in any area excluded
        from insurance coverage.

    

      (n) Each
        Debtor shall maintain with financially sound and reputable insurers, insurance
        with respect to the Collateral, including Collateral hereafter acquired,
        against
        loss or damage of the kinds and in the amounts customarily insured against
        by
        entities of established reputation having similar properties similarly situated
        and in such amounts as are customarily carried under similar circumstances
        by
        other such entities and otherwise as is prudent for entities engaged in similar
        businesses but in any event sufficient to cover the full replacement cost
        thereof. Each Debtor shall cause each insurance policy issued in connection
        herewith to provide, and the insurer issuing such policy to certify to the
        Agent
        that (a) the Agent will be named as lender loss payee and additional insured
        under each such insurance policy; (b) if such insurance be proposed to be
        cancelled or materially changed for any reason whatsoever, such insurer will
        promptly notify the Agent and such cancellation or change shall not be effective
        as to the Agent for at least thirty (30) days after receipt by the Agent
        of such
        notice, unless the effect of such change is to extend or increase coverage
        under
        the policy; and (c) the Agent will have the right (but no obligation) at
        its
        election to remedy any default in the payment of premiums within thirty (30)
        days of notice from the insurer of such default. If no Event of Default (as
        defined in the Debentures) exists and if the proceeds arising out of any
        claim
        or series of related claims do not exceed $100,000, loss payments in each
        instance will be applied by the applicable Debtor to the repair and/or
        replacement of property with respect to which the loss was incurred to the
        extent reasonably feasible, and any loss payments or the balance thereof
        remaining, to the extent not so applied, shall be payable to the applicable
        Debtor, provided, however, that payments received by any Debtor after an
        Event
        of Default occurs and is continuing or in excess of $100,000 for any occurrence
        or series of related occurrences shall be paid to the Agent on behalf of
        the
        Secured Parties and, if received by such Debtor, shall be held in trust for
        the
        Secured Parties and immediately paid over to the Agent unless otherwise directed
        in writing by the Agent. Copies of such policies or the related certificates,
        in
        each case, naming the Agent as lender loss payee and additional insured shall
        be
        delivered to the Agent at least annually and at the time any new policy of
        insurance is issued.

    

      (o)
         Each
        Debtor shall, within ten (10) days of obtaining knowledge thereof, advise
        the
        Secured Parties promptly, in sufficient detail, of any material adverse change
        in the Collateral, and of the occurrence of any event which would have a
        material adverse effect on the value of the Collateral or on the Secured
        Parties’ security interest, through the Agent, therein.

    

    
      
         

      

      
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      (p) Each
        Debtor shall promptly execute and deliver to the Agent such further deeds,
        mortgages, assignments, security agreements, financing statements or other
        instruments, documents, certificates and assurances and take such further
        action
        as the Agent may from time to time request and may in its sole discretion
        deem
        necessary to perfect, protect or enforce the Secured Parties’ security interest
        in the Collateral including, without limitation, if applicable, the execution
        and delivery of a separate security agreement with respect to each Debtor’s
        Intellectual Property (“Intellectual
        Property Security Agreement”)
        in
        which the Secured Parties have been granted a security interest hereunder,
        substantially in a form reasonably acceptable to the Agent, which Intellectual
        Property Security Agreement, other than as stated therein, shall be subject
        to
        all of the terms and conditions hereof.

    

      (q) Each
        Debtor shall permit the Agent and its representatives and agents to inspect
        the
        Collateral during normal business hours and upon reasonable prior notice,
        and to
        make copies of records pertaining to the Collateral as may be reasonably
        requested by the Agent from time to time.

    

      (r) Each
        Debtor shall take all steps reasonably necessary to diligently pursue and
        seek
        to preserve, enforce and collect any rights, claims, causes of action and
        accounts receivable in respect of the Collateral.

    

      (s) Each
        Debtor shall promptly notify the Secured Parties in sufficient detail upon
        becoming aware of any attachment, garnishment, execution or other legal process
        levied against any Collateral and of any other information received by such
        Debtor that may materially affect the value of the Collateral, the Security
        Interest or the rights and remedies of the Secured Parties
        hereunder.

    

      (t) All
        information heretofore, herein or hereafter supplied to the Secured Parties
        by
        or on behalf of any Debtor with respect to the Collateral is accurate and
        complete in all material respects as of the date furnished.

    

      (u) The
        Debtors shall at all times preserve and keep in full force and effect their
        respective valid existence and good standing and any rights and franchises
        material to its business.

    

      (v) No
        Debtor
        will change its name, type of organization, jurisdiction of organization,
        organizational identification number (if it has one), legal or corporate
        structure, or identity, or add any new fictitious name unless it provides
        at
        least 30 days prior written notice to the Secured Parties of such change
        and, at
        the time of such written notification, such Debtor provides any financing
        statements or fixture filings necessary to perfect and continue the perfection
        of the Security Interests granted and evidenced by this
        Agreement.

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

      (w) Except
        in
        the ordinary course of business, no Debtor may consign any of its Inventory
        or
        sell any of its Inventory on bill and hold, sale or return, sale on approval,
        or
        other conditional terms of sale without the consent of the
        Agent
        which shall not be unreasonably withheld.

    

      (x) No
        Debtor
        may relocate its chief executive office to a new location without providing
        30
        days prior written notification thereof to the Secured Parties and so long
        as,
        at the time of such written notification, such Debtor provides any financing
        statements or fixture filings necessary to perfect and continue the perfection
        of the Security Interests granted and evidenced by this
        Agreement.

    

      (y) Each
        Debtor was organized and remains organized solely under the laws of the state
        set forth next to such Debtor’s name in Schedule
        D
        attached
        hereto, which Schedule
        D
        sets
        forth each Debtor’s organizational identification number or, if any Debtor does
        not have one, states that one does not exist.

    

      (z) 
        (i) The
        actual name of each Debtor is the name set forth in Schedule
        D
        attached
        hereto; (ii) no Debtor has any trade names except as set forth on Schedule
        E
        attached
        hereto; (iii) no Debtor has used any name other than that stated in the preamble
        hereto or as set forth on Schedule
        E
        for the
        preceding five years; and (iv) no entity has merged into any Debtor or been
        acquired by any Debtor within the past five years except as set forth on
        Schedule
        E.

    

      (aa) At
        any
        time and from time to time that any Collateral consists of instruments,
        certificated securities or other items that require or permit possession
        by the
        secured party to perfect the security interest created hereby, the applicable
        Debtor shall deliver such Collateral to the Agent.

    

      (bb)
         Each
        Debtor, in its capacity as issuer, hereby agrees to comply with any and all
        orders and instructions of Agent regarding the Pledged Interests consistent
        with
        the terms of this Agreement without the further consent of any Debtor as
        contemplated by Section 8-106 (or any successor section) of the UCC. Further,
        each Debtor agrees that it shall not enter into a similar agreement (or one
        that
        would confer “control” within the meaning of Article 8 of the UCC) with any
        other person or entity.

    

      (cc) Each
        Debtor shall cause all tangible chattel paper constituting Collateral to
        be
        delivered to the Agent, or, if such delivery is not possible, then to cause
        such
        tangible chattel paper to contain a legend noting that it is subject to the
        security interest created by this Agreement. To the extent that any Collateral
        consists of electronic chattel paper, the applicable Debtor shall cause the
        underlying chattel paper to be “marked” within the meaning of Section 9-105 of
        the UCC (or successor section thereto).

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

      (dd) If
        there
        is any investment property or deposit account included as Collateral that
        can be
        perfected by “control” through an account control agreement, the applicable
        Debtor shall cause such an account control agreement, in form and substance
        in
        each case satisfactory to the Agent, to be entered into and delivered to
        the
        Agent for the benefit of the Secured Parties.

    

      (ee)
         To
        the
        extent that any Collateral consists of letter-of-credit rights, the applicable
        Debtor shall cause the issuer of each underlying letter of credit to consent
        to
        an assignment of the proceeds thereof to the Secured Parties.

    

      (ff)
         To
        the
        extent that any Collateral is in the possession of any third party, the
        applicable Debtor shall join with the Agent in notifying such third party
        of the
        Secured Parties’ security interest in such Collateral and shall use its best
        efforts to obtain an acknowledgement and agreement from such third party
        with
        respect to the Collateral, in form and substance reasonably satisfactory
        to the
        Agent.

    

      (gg) If
        any
        Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
        shall promptly notify the Secured Parties in a writing signed by such Debtor
        of
        the particulars thereof and grant to the Secured Parties in such writing
        a
        security interest therein and in the proceeds thereof, all upon the terms
        of
        this Agreement, with such writing to be in form and substance satisfactory
        to
        the Agent.

    

      (hh) Each
        Debtor shall immediately provide written notice to the Secured Parties of
        any
        and all accounts which arise out of contracts with any governmental authority
        and, to the extent necessary to perfect or continue the perfected status
        of the
        Security Interests in such accounts and proceeds thereof, shall execute and
        deliver to the Agent an assignment of claims for such accounts and cooperate
        with the Agent in taking any other steps required, in its judgment, under
        the
        Federal Assignment of Claims Act or any similar federal, state or local statute
        or rule to perfect or continue the perfected status of the Security Interests
        in
        such accounts and proceeds thereof.

    

      (ii) Each
        Debtor shall cause each subsidiary
        of such
        Debtor to immediately become a party hereto (an “Additional
        Debtor”),
        by
        executing and delivering an Additional Debtor Joinder in substantially the
        form
        of Annex A attached hereto and comply with the provisions hereof applicable
        to
        the Debtors. Concurrent therewith, the Additional Debtor shall deliver
        replacement schedules for, or supplements to all other Schedules to (or referred
        to in) this Agreement, as applicable, which replacement schedules shall
        supersede, or supplements shall modify, the Schedules then in effect. The
        Additional Debtor shall also deliver such opinions of counsel, authorizing
        resolutions, good standing certificates, incumbency certificates, organizational
        documents, financing statements and other information and documentation as
        the
        Agent may reasonably request. 

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    Upon
      delivery of the foregoing to the Agent, the Additional Debtor shall be and
      become a party to this Agreement with the same rights and obligations as the
      Debtors, for all purposes hereof as fully and to the same extent as if it were
      an original signatory hereto and shall be deemed to have made the
      representations, warranties and covenants set forth herein as of the date of
      execution and delivery of such Additional Debtor Joinder, and all references
      herein to the “Debtors” shall be deemed to include each Additional
      Debtor.

    

      (jj)
         Each
        Debtor shall vote the Pledged Securities to comply with the covenants and
        agreements set forth herein and in the Debentures.

    

      (kk) Each
        Debtor shall register the pledge of the applicable Pledged Securities on
        the
        books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
        to register the pledge of the applicable Pledged Securities in the name of
        the
        Secured Parties on the books of such issuer. Further, except with respect
        to
        certificated securities delivered to the Agent, the applicable Debtor shall
        deliver to Agent an acknowledgement of pledge (which, where appropriate,
        shall
        comply with the requirements of the relevant UCC with respect to perfection
        by
        registration) signed by the issuer of the applicable Pledged Securities,
        which
        acknowledgement shall confirm that: (a) it has registered the pledge on its
        books and records; and (b) at any time directed by Agent during the continuation
        of an Event of Default, such issuer will transfer the record ownership of
        such
        Pledged Securities into the name of any designee of Agent, will take such
        steps
        as may be necessary to effect the transfer, and will comply with all other
        instructions of Agent regarding such Pledged Securities without the further
        consent of the applicable Debtor.

    

      (ll)
        In
        the
        event that, upon an occurrence of an Event of Default, Agent shall sell all
        or
        any of the Pledged Securities to another party or parties (herein called
        the
“Transferee”)
        or
        shall purchase or retain all or any of the Pledged Securities, each Debtor
        shall, to the extent applicable: (i) deliver to Agent or the Transferee,
        as the
        case may be, the articles of incorporation, bylaws, minute books, stock
        certificate books, corporate seals, deeds, leases, indentures, agreements,
        evidences of indebtedness, books of account, financial records and all other
        Organizational Documents and records of the Debtors and their direct and
        indirect subsidiaries; (ii) use its best efforts to obtain resignations of
        the
        persons then serving as officers and directors of the Debtors and their direct
        and indirect subsidiaries, if so requested; and (iii) use its best efforts
        to
        obtain any approvals that are required by any governmental or regulatory
        body in
        order to permit the sale of the Pledged Securities to the Transferee or the
        purchase or retention of the Pledged Securities by Agent and allow the
        Transferee or Agent to continue the business of the Debtors and their direct
        and
        indirect subsidiaries.

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (mm) Without
      limiting the generality of the other obligations of the Debtors hereunder,
      each
      Debtor shall promptly (i) cause to be registered at the United States Copyright
      Office all of its material copyrights, (ii) cause the security interest
      contemplated hereby with respect to all Intellectual Property registered at
      the
      United States Copyright Office or United States Patent and Trademark Office
      to
      be duly recorded at the applicable office, and (iii) give the Agent notice
      whenever it acquires (whether absolutely or by license) or creates any
      additional material Intellectual Property.

    

      (nn) Each
        Debtor will from time to time, at the joint and several expense of the Debtors,
        promptly execute and deliver all such further instruments and documents,
        and
        take all such further action as may be necessary or desirable, or as the
        Agent
        may reasonably request, in order to perfect and protect any security interest
        granted or purported to be granted hereby or to enable the Secured Parties
        to
        exercise and enforce their rights and remedies hereunder and with respect
        to any
        Collateral or to otherwise carry out the purposes of this
        Agreement.

    

      (oo) Schedule
        F
        attached
        hereto lists all of the patents, patent applications, trademarks, trademark
        applications, registered copyrights, and domain names owned by any of the
        Debtors as of the date hereof. Schedule
        F
        lists
        all material licenses in favor of any Debtor for the use of any patents,
        trademarks, copyrights and domain names as of the date hereof. All material
        patents and trademarks of the Debtors have been duly recorded at the United
        States Patent and Trademark Office and all material copyrights of the Debtors
        have been duly recorded at the United States Copyright
        Office.

    

      (pp) Except
        as
        set forth on Schedule
        G
        attached
        hereto, none of the account debtors or other persons or entities obligated
        on
        any of the Collateral is a governmental authority covered by the Federal
        Assignment of Claims Act or any similar federal, state or local statute or
        rule
        in respect of such Collateral.

    

      5. Effect
        of Pledge on Certain Rights. If
        any of
        the Collateral subject to this Agreement consists of nonvoting equity or
        ownership interests (regardless of class, designation, preference or rights)
        that may be converted into voting equity or ownership interests upon the
        occurrence of certain events (including, without limitation, upon the transfer
        of all or any of the other stock or assets of the issuer), it is agreed that
        the
        pledge of such equity or ownership interests pursuant to this Agreement or
        the
        enforcement of any of Agent’s rights hereunder shall not be deemed to be the
        type of event which would trigger such conversion rights notwithstanding
        any
        provisions in the Organizational Documents or agreements to which any Debtor
        is
        subject or to which any Debtor is party.

    

      6.
         Defaults.
        The
        following events shall be “Events
        of Default”:

    

    (a) The
      occurrence of an Event of Default (as defined in the Debentures) under the
      Debentures;

    

    (b) Any
      representation or warranty of any Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (c) The
      failure by any Debtor to observe or perform any of its obligations hereunder
      for
      five (5) days after delivery to such Debtor of notice of such failure by or
      on
      behalf of a Secured Party unless such default is capable of cure but cannot
      be
      cured within such time frame and such Debtor is using best efforts to cure
      same
      in a timely fashion; or

    

    (d)
      If
      any provision of this Agreement shall at any time for any reason be declared
      to
      be null and void, or the validity or enforceability thereof shall be contested
      by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
      governmental authority having jurisdiction over any Debtor, seeking to establish
      the invalidity or unenforceability thereof, or any Debtor shall deny that any
      Debtor has any liability or obligation purported to be created under this
      Agreement.

    

      7. Duty
        To Hold In Trust.
        

    

      (a) Upon
        the
        occurrence of any Event of Default and at any time thereafter, each Debtor
        shall, upon receipt of any revenue, income,
        dividend, interest
        or other
        sums subject to the Security Interests, whether payable pursuant to the
        Debentures or otherwise, or of any check, draft, note, trade acceptance or
        other
        instrument evidencing an obligation to pay any such sum, hold the same in
        trust
        for the Secured Parties and shall forthwith endorse and transfer any such
        sums
        or instruments, or both, to the Secured Parties, pro-rata in proportion to
        their
        respective then-currently outstanding principal amount of Debentures for
        application to the satisfaction of the Obligations (and if any Debenture
        is not
        outstanding, pro-rata in proportion to the initial purchases of the remaining
        Debentures). 

    

      (b) If
        any
        Debtor shall become entitled to receive or shall receive any securities or
        other
        property (including, without limitation, shares of Pledged Securities or
        instruments representing Pledged Securities acquired after the date hereof,
        or
        any options, warrants, rights or other similar property or certificates
        representing a dividend, or any distribution in connection with any
        recapitalization, reclassification or increase or reduction of capital, or
        issued in connection with any reorganization of such Debtor or any of its
        direct
        or indirect subsidiaries) in respect of the Pledged Securities (whether as
        an
        addition to, in substitution of, or in exchange for, such Pledged Securities
        or
        otherwise), such Debtor agrees to (i) accept the same as the agent of the
        Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
        of
        the Secured Parties; and (iii) to deliver any and all certificates or
        instruments evidencing the same to Agent on or before the close of business
        on
        the fifth business day following the receipt thereof by such Debtor, in the
        exact form received together with the Necessary Endorsements, to be held
        by
        Agent subject to the terms of this Agreement as Collateral.

    

      8.  Rights
        and Remedies Upon Default.
        

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Secured
      Parties, acting through the Agent, shall have the right to exercise all of
      the
      remedies conferred hereunder and under the Debentures, and the Secured Parties
      shall have all the rights and remedies of a secured party under the UCC. Without
      limitation, the Agent, for the benefit of the Secured Parties, shall have the
      following rights and powers:

    

      (i) The
        Agent
        shall have the right to take possession of the Collateral and, for that purpose,
        enter, with the aid and assistance of any person, any premises where the
        Collateral, or any part thereof, is or may be placed and remove the same,
        and
        each Debtor shall assemble the Collateral and make it available to the Agent
        at
        places which the Agent shall reasonably select, whether at such Debtor's
        premises or elsewhere, and make available to the Agent, without rent, all
        of
        such Debtor’s respective premises and facilities for the purpose of the Agent
        taking possession of, removing or putting the Collateral in saleable or
        disposable form.

    

      (ii) Upon
        notice to the Debtors by Agent, all rights of each Debtor to exercise the
        voting
        and other consensual rights which it would otherwise be entitled to exercise
        and
        all rights of each Debtor to receive the dividends and interest which it
        would
        otherwise be authorized to receive and retain, shall cease. Upon such notice,
        Agent shall have the right to receive, for the benefit of the Secured Parties,
        any interest, cash dividends or other payments on the Collateral and, at
        the
        option of Agent, to exercise in such Agent’s discretion all voting rights
        pertaining thereto. Without limiting the generality of the foregoing, Agent
        shall have the right (but not the obligation) to exercise all rights with
        respect to the Collateral as it were the sole and absolute owner thereof,
        including, without limitation, to vote and/or to exchange, at its sole
        discretion, any or all of the Collateral in connection with a merger,
        reorganization, consolidation, recapitalization or other readjustment concerning
        or involving the Collateral or any Debtor or any of its direct or indirect
        subsidiaries.

    

      (iii) The
        Agent
        shall have the right to operate the business of each Debtor using the Collateral
        and shall have the right to assign, sell, lease or otherwise dispose of and
        deliver all or any part of the Collateral, at public or private sale or
        otherwise, either with or without special conditions or stipulations, for
        cash
        or on credit or for future delivery, in such parcel or parcels and at such
        time
        or times and at such place or places, and upon such terms and conditions
        as the
        Agent may deem commercially reasonable, all without (except as shall be required
        by applicable statute and cannot be waived) advertisement or demand upon
        or
        notice to any Debtor or right of redemption of a Debtor, which are hereby
        expressly waived. Upon each such sale, lease, assignment or other transfer
        of
        Collateral, the Agent, for the benefit of the Secured Parties, may, unless
        prohibited by applicable law which cannot be waived, purchase all or any
        part of
        the Collateral being sold, free from and discharged of all trusts, claims,
        right
        of redemption and equities of any Debtor, which are hereby waived and
        released.

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

      (iv) The
        Agent
        shall have the right (but not the obligation) to notify any account debtors
        and
        any obligors under instruments or accounts to make payments directly to the
        Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights
        against such account debtors and obligors.

    

      (v) The
        Agent, for the benefit of the Secured Parties, may (but is not obligated
        to)
        direct any financial intermediary or any other person or entity holding any
        investment property to transfer the same to the Agent, on behalf of the Secured
        Parties, or its designee.

    

      (vi) The
        Agent
        may (but is not obligated to) transfer any or all Intellectual Property
        registered in the name of any Debtor at the United States Patent and Trademark
        Office and/or Copyright Office into the name of the Secured Parties or any
        designee or any purchaser of any Collateral.

    

      (b) The
        Agent
        shall comply with any applicable law in connection with a disposition of
        Collateral and such compliance will not be considered adversely to affect
        the
        commercial reasonableness of any sale of the Collateral. The Agent may sell
        the
        Collateral without giving any warranties and may specifically disclaim such
        warranties. If the Agent sells any of the Collateral on credit, the Debtors
        will
        only be credited with payments actually made by the purchaser. In addition,
        each
        Debtor waives any and all rights that it may have to a judicial hearing in
        advance of the enforcement of any of the Agent’s rights and remedies hereunder,
        including, without limitation, its right following an Event of Default to
        take
        immediate possession of the Collateral and to exercise its rights and remedies
        with respect thereto.

    

      (c) For
        the
        purpose of enabling the Agent to further exercise rights and remedies under
        this
        Section 8 or elsewhere provided by agreement or applicable law, each Debtor
        hereby grants to the Agent, for the benefit of the Agent and the Secured
        Parties, an irrevocable, nonexclusive license (exercisable without payment
        of
        royalty or other compensation to such Debtor) to use, license or sublicense
        following an Event of Default, any Intellectual Property now owned or hereafter
        acquired by such Debtor, and wherever the same may be located, and including
        in
        such license access to all media in which any of the licensed items may be
        recorded or stored and to all computer software and programs used for the
        compilation or printout thereof.

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    9. Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder or from payments made on account of any insurance policy insuring
      any
      portion of the Collateral shall be applied first, to the expenses of retaking,
      holding, storing, processing and preparing for sale, selling, and the like
      (including, without limitation, any taxes, fees and other costs incurred in
      connection therewith) of the Collateral, to the reasonable attorneys’ fees and
      expenses incurred by the Agent in enforcing the Secured Parties’ rights
      hereunder and in connection with collecting, storing and disposing of the
      Collateral, and then to satisfaction of the Obligations pro rata among the
      Secured Parties (based on then-outstanding principal amounts of Debentures
      at
      the time of any such determination), and to the payment of any other amounts
      required by applicable law, after which the Secured Parties shall pay to the
      applicable Debtor any surplus proceeds. If, upon the sale, license or other
      disposition of the Collateral, the proceeds thereof are insufficient to pay
      all
      amounts to which the Secured Parties are legally entitled, the Debtors will
      be
      liable for the deficiency, together with interest thereon, at the rate of 18%
      per annum or the lesser amount permitted by applicable law (the “Default Rate”),
      and the reasonable fees of any attorneys employed by the Secured Parties to
      collect such deficiency. To the extent permitted by applicable law, each Debtor
      waives all claims, damages and demands against the Secured Parties arising
      out
      of the repossession, removal, retention or sale of the Collateral, unless due
      solely to the gross negligence or willful misconduct of the Secured Parties
      as
      determined by a final judgment (not subject to further appeal) of a court of
      competent jurisdiction.

    

      10. Securities
        Law Provision.
        Each
        Debtor recognizes that Agent may be limited in its ability to effect a sale
        to
        the public of all or part of the Pledged Securities by reason of certain
        prohibitions in the Securities Act of 1933, as amended, or other federal
        or
        state securities laws (collectively, the “Securities
        Laws”),
        and
        may be compelled to resort to one or more sales to a restricted group of
        purchasers who may be required to agree to acquire the Pledged Securities
        for
        their own account, for investment and not with a view to the distribution
        or
        resale thereof. Each Debtor agrees that sales so made may be at prices and
        on
        terms less favorable than if the Pledged Securities were sold to the public,
        and
        that Agent has no obligation to delay the sale of any Pledged Securities
        for the
        period of time necessary to register the Pledged Securities for sale to the
        public under the Securities Laws. Each Debtor shall cooperate with Agent
        in its
        attempt to satisfy any requirements under the Securities Laws (including,
        without limitation, registration thereunder if requested by Agent) applicable
        to
        the sale of the Pledged Securities by Agent.

    

      11. Costs
        and Expenses.
        Each
        Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
        incurred in connection with any filing required hereunder, including without
        limitation, any financing statements pursuant to the UCC, continuation
        statements, partial releases and/or termination statements related thereto
        or
        any expenses of any searches reasonably required by the Agent. The Debtors
        shall
        also pay all other claims and charges which in the reasonable opinion of
        the
        Agent is reasonably likely to prejudice, imperil or otherwise affect the
        Collateral or the Security Interests therein. The Debtors will also, upon
        demand, pay to the Agent the amount of any and all reasonable expenses,
        including the reasonable fees and expenses of its counsel and of any experts
        and
        agents, which the Agent, for the benefit of the Secured Parties, may incur
        in
        connection with (i) the enforcement of this Agreement, (ii) the custody or
        preservation of, or the sale of, collection from, or other realization upon,
        any
        of the Collateral, or 

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    (iii)
      the
      exercise or enforcement of any of the rights of the Secured Parties under the
      Debentures. Until so paid, any fees payable hereunder shall be added to the
      principal amount of the Debentures and shall bear interest at the Default
      Rate.

    

      12. Responsibility
        for Collateral.
        The
        Debtors assume all liabilities and responsibility in connection with all
        Collateral, and the Obligations shall in no way be affected or diminished
        by
        reason of the loss, destruction, damage or theft of any of the Collateral
        or its
        unavailability for any reason. Without limiting the generality of the foregoing,
        (a) neither the Agent nor any Secured Party (i) has any duty (either before
        or
        after an Event of Default) to collect any amounts in respect of the Collateral
        or to preserve any rights relating to the Collateral, or (ii) has any obligation
        to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
        shall remain obligated and liable under each contract or agreement included
        in
        the Collateral to be observed or performed by such Debtor thereunder. Neither
        the Agent nor any Secured Party shall have any obligation or liability under
        any
        such contract or agreement by reason of or arising out of this Agreement
        or the
        receipt by the Agent or any Secured Party of any payment relating to any
        of the
        Collateral, nor shall the Agent or any Secured Party be obligated in any
        manner
        to perform any of the obligations of any Debtor under or pursuant to any
        such
        contract or agreement, to make inquiry as to the nature or sufficiency of
        any
        payment received by the Agent or any Secured Party in respect of the Collateral
        or as to the sufficiency of any performance by any party under any such contract
        or agreement, to present or file any claim, to take any action to enforce
        any
        performance or to collect the payment of any amounts which may have been
        assigned to the Agent or to which the Agent or any Secured Party may be entitled
        at any time or times.

    

      13. Security
        Interests Absolute.
        All
        rights of the Secured Parties and all obligations of the Debtors hereunder,
        shall be absolute and unconditional, irrespective of: (a) any lack of validity
        or enforceability of this Agreement, the Debentures or any agreement entered
        into in connection with the foregoing, or any portion hereof or thereof;
        (b) any
        change in the time, manner or place of payment or performance of, or in any
        other term of, all or any of the Obligations, or any other amendment or waiver
        of or any consent to any departure from the Debentures or any other agreement
        entered into in connection with the foregoing; (c) any exchange, release
        or
        nonperfection of any of the Collateral, or any release or amendment or waiver
        of
        or consent to departure from any other collateral for, or any guarantee,
        or any
        other security, for all or any of the Obligations; (d) any action by the
        Secured
        Parties to obtain, adjust, settle and cancel in its sole discretion any
        insurance claims or matters made or arising in connection with the Collateral;
        or (e) any other circumstance which might otherwise constitute any legal
        or
        equitable defense available to a Debtor, or a discharge of all or any part
        of
        the Security Interests granted hereby. Until the Obligations shall have been
        paid and performed in full, the rights of the Secured Parties shall continue
        even if the Obligations are barred for any reason, including, without
        limitation, the running of the statute of limitations or bankruptcy. Each
        Debtor
        expressly waives presentment, protest, notice of protest, demand, notice
        of
        nonpayment and demand for performance. 

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

      In
        the
        event that at any time any transfer of any Collateral or any payment received
        by
        the Secured Parties hereunder shall be deemed by final order of a court of
        competent jurisdiction to have been a voidable preference or fraudulent
        conveyance under the bankruptcy or insolvency laws of the United States,
        or
        shall be deemed to be otherwise due to any party other than the Secured Parties,
        then, in any such event, each Debtor’s obligations hereunder shall survive
        cancellation of this Agreement, and shall not be discharged or satisfied
        by any
        prior payment thereof and/or cancellation of this Agreement, but shall remain
        a
        valid and binding obligation enforceable in accordance with the terms and
        provisions hereof. Each Debtor waives all right to require the Secured Parties
        to proceed against any other person or entity
        or
to
        apply
        any Collateral which the Secured Parties may hold at any time, or to marshal
        assets, or to pursue any other remedy. Each Debtor waives any defense arising
        by
        reason of the application of the statute of limitations to any obligation
        secured hereby.

    

      14. Term
        of Agreement.
        This
        Agreement and the Security Interests shall terminate on the date on which
        all
        payments under the Debentures have been indefeasibly paid in full and all
        other
        Obligations have been paid or discharged; provided, however, that all
        indemnities of the Debtors contained in this Agreement (including, without
        limitation, Annex B hereto) shall survive and remain operative and in full
        force
        and effect regardless of the termination of this Agreement.

    

      15.
         Power
        of Attorney; Further Assurances.

    

      (a)
         Each
        Debtor authorizes the Agent, and does hereby make, constitute and appoint
        the
        Agent and its officers, agents, successors or assigns with full power of
        substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
        the name of the Agent or such Debtor, to, after the occurrence and during
        the
        continuance of an Event of Default, (i) endorse any note, checks, drafts,
        money
        orders or other instruments of payment (including payments payable under
        or in
        respect of any policy of insurance) in respect of the Collateral that may
        come
        into possession of the Agent; (ii) to sign and endorse any financing statement
        pursuant to the UCC or any invoice, freight or express bill, bill of lading,
        storage or warehouse receipts, drafts against debtors, assignments,
        verifications and notices in connection with accounts, and other documents
        relating to the Collateral; (iii) to pay or discharge taxes, liens, security
        interests or other encumbrances at any time levied or placed on or threatened
        against the Collateral; (iv) to demand, collect, receipt for, compromise,
        settle
        and sue for monies due in respect of the Collateral; (v) to transfer any
        Intellectual Property or provide licenses respecting any Intellectual Property;
        and (vi) generally, at the option of the Agent, and at the expense of the
        Debtors, at any time, or from time to time, to execute and deliver any and
        all
        documents and instruments and to do all acts and things which the Agent deems
        necessary to protect, preserve and realize upon the Collateral and the Security
        Interests granted therein in order to effect the intent of this Agreement
        and
        the Debentures all as fully and effectually as the Debtors might or could
        do;
        and each Debtor hereby ratifies all that said attorney shall lawfully do
        or
        cause to be done by virtue hereof. This power of attorney is coupled with
        an
        interest and shall be irrevocable for the term of this Agreement and thereafter
        as long as any of the Obligations shall be outstanding. 

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which any Debtor is subject or to which any Debtor is a party.
      Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, each Secured Party is specifically
      authorized to execute and file any applications for or instruments of transfer
      and assignment of any patents, trademarks, copyrights or other Intellectual
      Property with the United States Patent and Trademark Office and the United
      States Copyright Office.

    

    (b)
       On
      a
      continuing basis, each Debtor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, with the proper filing and recording agencies in
      any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C
      attached
      hereto, all such instruments, and take all such action as may reasonably be
      deemed necessary or advisable, or as reasonably requested by the Agent, to
      perfect the Security Interests granted hereunder and otherwise to carry out
      the
      intent and purposes of this Agreement, or for assuring and confirming to the
      Agent the grant or perfection of a perfected security interest in all the
      Collateral under the UCC.

    

    (c)
       Each
      Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
      with full authority in the place and instead of such Debtor and in the name
      of
      such Debtor, from time to time in the Agent’s discretion, to take any action and
      to execute any instrument which the Agent may deem necessary or advisable to
      accomplish the purposes of this Agreement, including the filing, in its sole
      discretion, of one or more financing or continuation statements and amendments
      thereto, relative to any of the Collateral without the signature of such Debtor
      where permitted by law, which financing statements may (but need not) describe
      the Collateral as “all assets” or “all personal property” or words of like
      import, and ratifies all such actions taken by the Agent. This power of attorney
      is coupled with an interest and shall be irrevocable for the term of this
      Agreement and thereafter as long as any of the Obligations shall be
      outstanding.

    

      16. Notices.
        All
        notices, requests, demands and other communications hereunder shall be subject
        to the notice provision of the Purchase Agreement (as such term is defined
        in
        the Debentures).

    

      17. Other
        Security.
        To the
        extent that the Obligations are now or hereafter secured by property other
        than
        the Collateral or by the guarantee, endorsement or property of any other
        person,
        firm, corporation or other entity, then the Agent shall have the right, in
        its
        sole discretion, to pursue, relinquish, subordinate, modify or take any other
        action with respect thereto, without in any way modifying or affecting any
        of
        the Secured Parties’ rights and remedies hereunder.

    

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

      18. Appointment
        of Agent.
        The
        Secured Parties hereby appoint CAMOFI Master, LDC to act as their agent
        (“CAMOFI”
or
        “Agent”)
        for
        purposes of exercising any and all rights and remedies of the Secured Parties
        hereunder. Such appointment shall continue until revoked in writing by a
        Majority
        in Interest, at which time a Majority in Interest
        shall
        appoint a new Agent, provided that CAMOFI may not be removed as Agent unless
        CAMOFI shall then hold less than $625,000 in principal amount of
        Debentures;
        provided,
        further,
        that
        such removal may occur only if each of the other Secured Parties shall then
        hold
        not less than an aggregate of $625,000 in principal amount of Debentures.
        The
        Agent
        shall have the rights, responsibilities and immunities set forth in Annex
        B
        hereto.

     

      19. Miscellaneous.

    

    (a) No
      course
      of dealing between the Debtors and the Secured Parties, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Parties,
      any
      right, power or privilege hereunder or under the Debentures shall operate as
      a
      waiver thereof; nor shall any single or partial exercise of any right, power
      or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

    

    (b) All
      of
      the rights and remedies of the Secured Parties with respect to the Collateral,
      whether established hereby or by the Debentures or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

    

    (c) This
      Agreement,
      together with the exhibits and schedules hereto, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings, oral or written, with respect
      to such matters, which the parties acknowledge have been merged into this
      Agreement and the exhibits and schedules hereto.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed, in the case of an amendment, by the
      Debtors and the Secured Parties or, in the case of a waiver, by the party
      against whom enforcement of any such waived provision is sought. 

    

    (d) If
      any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (e) No
      waiver
      of any default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

    

      (f)
         This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and permitted assigns. The Company and the Guarantors may
        not
        assign this Agreement or any rights or obligations hereunder without the
        prior
        written consent of each Secured Party (other than by merger). Any Secured
        Party
        may assign any or all of its rights under this Agreement to any Person to
        whom
        such Secured Party assigns or transfers any Securities, provided such transferee
        agrees in writing to be bound, with respect to the transferred Securities,
        by
        the provisions of this Agreement that apply to the “Secured
        Parties.”

    

    (g) Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

    

    (h) All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each Debtor agrees that all proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and the Debentures (whether brought against
      a
      party hereto or its respective affiliates, directors, officers, shareholders,
      partners, members, employees or agents) shall be commenced exclusively in the
      state and federal courts sitting in the City of New York, Borough of Manhattan.
      Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in the City of New York, Borough of Manhattan
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court, that such proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such proceeding by mailing
      a
      copy thereof via registered or certified mail or overnight delivery (with
      evidence of delivery) to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If any party shall commence a proceeding to enforce any
      provisions of this Agreement, then the prevailing party in such proceeding
      shall
      be reimbursed by the other party for its reasonable attorney’s fees and other
      costs and expenses incurred with the investigation, preparation and prosecution
      of such proceeding.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    (i) This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    

    (j) All
      Debtors shall jointly and severally be liable for the obligations of each Debtor
      to the Secured Parties hereunder.

    

    (k) Each
      Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
      Parties and their respective partners, members, shareholders, officers,
      directors, employees and agents (and any other persons with other titles that
      have similar functions) (collectively, “Indemnitees”)
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final, nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in the Debentures, the Purchase Agreement (as such
      term is defined in the Debentures) or any other agreement, instrument or other
      document executed or delivered in connection herewith or therewith.

    

      (l) Nothing
        in this Agreement shall be construed to subject Agent or any Secured Party
        to
        liability as a partner in any Debtor or any if its direct or indirect
        subsidiaries that is a partnership or as a member in any Debtor or any of
        its
        direct or indirect subsidiaries that is a limited liability company, nor
        shall
        Agent or any Secured Party be deemed to have assumed any obligations under
        any
        partnership agreement or limited liability company agreement, as applicable,
        of
        any such Debtor or any if its direct or indirect subsidiaries or otherwise,
        unless and until any such Secured Party exercises its right to be substituted
        for such Debtor as a partner or member, as applicable, pursuant
        hereto.

    

      (m)
         To
        the
        extent that the grant of the security interest in the Collateral and the
        enforcement of the terms hereof require the consent, approval or action of
        any
        partner or member, as applicable, of any Debtor or any direct or indirect
        subsidiary of any Debtor or compliance with any provisions of any of the
        Organizational Documents, the Debtors hereby grant such consent and approval
        and
        waive any such noncompliance with the terms of said
        documents.

    

    [SIGNATURE
      PAGES FOLLOW]

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security
      Agreement to be duly executed on the day and year first above
      written.

    

    

    
      	
              VIKING
                SYSTEMS, INC.

            
	
              By:__________________________________________

              Name:

              Title:

            
	 
	
              [INSERT
                NAMES OF SUBSIDIARIES]

               

            
	
              By:__________________________________________

              Name:

              Title:

            

    

    

     

    

    

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VKSY SA]

     

    Name
      of
      Investing Entity: __________________________

    Signature
      of Authorized Signatory of Investing entity:
      _________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

     

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    

    

    

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    

    

    SCHEDULE
      A

    

    

    Principal
      Place of Business of Debtors:

    

    Locations
      Where Collateral is Located or Stored:

    

    SCHEDULE
      B

    

    

    

    

    SCHEDULE
      C

    

    

    

    

    SCHEDULE
      D

    Legal
      Names and Organizational Identification Numbers

    

    

    

    

    SCHEDULE
      E

    Names;
      Mergers and Acquisitions

    

    

    

    SCHEDULE
      F

    Intellectual
      Property

    

    

    

    SCHEDULE
      G

    Account
      Debtors

    

    

    

    SCHEDULE
      H

    Pledged
      Securities

    

     

    

    
      
        
        

         

      

      
        27

        
          

        

      

      
         

        
        

      

    

    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    

    FORM
      OF ADDITIONAL DEBTOR JOINDER

    

    Security
      Agreement dated as of February 23, 2007 made by
      Viking
      Systems, Inc. and its subsidiaries party thereto from time to time, as
      Debtors
      to and
      in favor of
      the
      Secured Parties identified therein (the “Security
      Agreement”)
      

    

    Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    

    The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Parties referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtors under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
      THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
      SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
      IN
      THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
      PROVISIONS SET FORTH THEREIN.

    

    Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    

    An
      executed copy of this Joinder shall be delivered to the Secured Parties, and
      the
      Secured Parties may rely on the matters set forth herein on or after the date
      hereof. This Joinder shall not be modified, amended or terminated without the
      prior written consent of the Secured Parties.

    

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    

    [Name
      of
      Additional Debtor]

    

    By:
      ________________________________

    Name:
      _____________________________

    Title:
      ______________________________

    

    Address:
      ___________________________

    

    

    

    

    

    Dated:
      ______________________________

    

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    ANNEX
      B

    to

    SECURITY

    AGREEMENT

    

    THE
      AGENT

    

    1.
       Appointment. The
      Secured Parties (all capitalized terms used herein and not otherwise defined
      shall have the respective meanings provided in the Security Agreement to which
      this Annex B is attached (the "Agreement")),
      by
      their acceptance of the benefits of the Agreement, hereby designate CAMOFI
      Master, LDC (“CAMOFI” or “Agent”)
      as the
      Agent to act as specified herein and in the Agreement. Each Secured Party shall
      be deemed irrevocably to authorize the Agent to take such action on its behalf
      under the provisions of the Agreement and any other Transaction Document (as
      such term is defined in the Debentures) and to exercise such powers and to
      perform such duties hereunder and thereunder as are specifically delegated
      to or
      required of the Agent by the terms hereof and thereof and such other powers
      as
      are reasonably incidental thereto. The Agent may perform any of its duties
      hereunder by or through its agents or employees.

    

    2.
       Nature
      of Duties.
      The
      Agent shall have no duties or responsibilities except those expressly set forth
      in the Agreement. Neither the Agent nor any of its partners, members,
      shareholders, officers, directors, employees or agents shall be liable for
      any
      action taken or omitted by it as such under the Agreement or hereunder or in
      connection herewith or therewith, be responsible for the consequence of any
      oversight or error of judgment or answerable for any loss, unless caused solely
      by its or their gross negligence or willful misconduct as determined by a final
      judgment (not subject to further appeal) of a court of competent jurisdiction.
      The duties of the Agent shall be mechanical and administrative in nature; the
      Agent shall not have by reason of the Agreement or any other Transaction
      Document a fiduciary relationship in respect of any Debtor or any Secured Party;
      and nothing in the Agreement or any other Transaction Document, expressed or
      implied, is intended to or shall be so construed as to impose upon the Agent
      any
      obligations in respect of the Agreement or any other Transaction Document except
      as expressly set forth herein and therein.

    

    3.
       Lack
      of Reliance on the Agent.
      Independently and without reliance upon the Agent, each Secured Party, to the
      extent it deems appropriate, has made and shall continue to make (i) its own
      independent investigation of the financial condition and affairs of the Company
      and its subsidiaries in connection with such Secured Party’s investment in the
      Debtors, the creation and continuance of the Obligations, the transactions
      contemplated by the Transaction Documents, and the taking or not taking of
      any
      action in connection therewith, and (ii) its own appraisal of the
      creditworthiness of the Company and its subsidiaries, and of the value of the
      Collateral from time to time, and the Agent shall have no duty or
      responsibility, either initially or on a continuing basis, to provide any
      Secured Party with any credit, market or other information with respect thereto,
      whether coming into its possession before any Obligations are incurred or at
      any
      time or times thereafter. 

    The
      Agent
      shall not be responsible to the Debtors or any Secured Party for any recitals,
      statements, information, representations or warranties herein or in any
      document, certificate or other writing delivered in connection herewith, or
      for
      the execution, effectiveness, genuineness, validity, enforceability, perfection,
      collectibility, priority or sufficiency of the Agreement or any other
      Transaction Document, or for the financial condition of the Debtors or the
      value
      of any of the Collateral, or be required to make any inquiry concerning either
      the performance or observance of any of the terms, provisions or conditions
      of
      the Agreement or any other Transaction Document, or the financial condition
      of
      the Debtors, or the value of any of the Collateral, or the existence or possible
      existence of any default or Event of Default under the Agreement, the Debentures
      or any of the other Transaction Documents.

    

    4.
       Certain
      Rights of the Agent.
      The
      Agent shall have the right to take any action with respect to the Collateral,
      on
      behalf of all of the Secured Parties. To the extent practical, the Agent shall
      request instructions from the Secured Parties with respect to any material
      act
      or action (including failure to act) in connection with the Agreement or any
      other Transaction Document, and shall be entitled to act or refrain from acting
      in accordance with the instructions of Secured Parties holding a majority in
      principal amount of Debentures (based on then-outstanding principal amounts
      of
      Debentures at the time of any such determination); if such instructions are
      not
      provided despite the Agent’s request therefor, the Agent shall be entitled to
      refrain from such act or taking such action, and if such action is taken, shall
      be entitled to appropriate indemnification from the Secured Parties in respect
      of actions to be taken by the Agent; and the Agent shall not incur liability
      to
      any person or entity by reason of so refraining. Without limiting the foregoing,
      (a) no Secured Party shall have any right of action whatsoever against the
      Agent
      as a result of the Agent acting or refraining from acting hereunder in
      accordance with the terms of the Agreement or any other Transaction Document,
      and the Debtors shall have no right to question or challenge the authority
      of,
      or the instructions given to, the Agent pursuant to the foregoing and (b) the
      Agent shall not be required to take any action which the Agent believes (i)
      could reasonably be expected to expose it to personal liability or (ii) is
      contrary to this Agreement, the Transaction Documents or applicable
      law.

    

    5.
       Reliance.
      The
      Agent shall be entitled to rely, and shall be fully protected in relying, upon
      any writing, resolution, notice, statement, certificate, telex, teletype or
      telecopier message, cablegram, radiogram, order or other document or telephone
      message signed, sent or made by the proper person or entity, and, with respect
      to all legal matters pertaining to the Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of counsel selected by it
      and
      upon all other matters pertaining to this Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of other experts selected
      by
      it. Anything to the contrary notwithstanding, the Agent shall have no obligation
      whatsoever to any Secured Party to assure that the Collateral exists or is
      owned
      by the Debtors or is cared for, protected or insured or that the liens granted
      pursuant to the Agreement have been properly or sufficiently or lawfully
      created, perfected, or enforced or are entitled to any particular
      priority.

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    6.
       Indemnification.
      To the
      extent that the Agent is not reimbursed and indemnified by the Debtors, the
      Secured Parties will jointly and severally reimburse and indemnify the Agent,
      in
      proportion to their initially purchased respective principal amounts of
      Debentures, from and against any and all liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses or disbursements
      of any kind or nature whatsoever which may be imposed on, incurred by or
      asserted against the Agent in performing its duties hereunder or under the
      Agreement or any other Transaction Document, or in any way relating to or
      arising out of the Agreement or any other Transaction Document except for those
      determined by a final judgment (not subject to further appeal) of a court of
      competent jurisdiction to have resulted solely from the Agent's own gross
      negligence or willful misconduct. Prior to taking any action hereunder as Agent,
      the Agent may require each Secured Party to deposit with it sufficient sums
      as
      it determines in good faith is necessary to protect the Agent for costs and
      expenses associated with taking such action.

    

    7.
       Resignation
      by the Agent. 

    (a)
       The
      Agent
      may resign from the performance of all its functions and duties under the
      Agreement and the other Transaction Documents at any time by giving 30 days'
      prior written notice (as provided in the Agreement) to the Debtors and the
      Secured Parties. Such resignation shall take effect upon the appointment of
      a
      successor Agent pursuant to clauses (b) and (c) below.

    

      (b)
         Upon
        any
        such notice of resignation, the Secured Parties, acting by a Majority
        in Interest,
        shall
        appoint a successor Agent hereunder.

    

    (c)
       If
      a
      successor Agent shall not have been so appointed within said 30-day period,
      the
      Agent shall then appoint a successor Agent who shall serve as Agent until such
      time, if any, as the Secured Parties appoint a successor Agent as provided
      above. If a successor Agent has not been appointed within such 30-day period,
      the Agent may petition any court of competent jurisdiction or may interplead
      the
      Debtors and the Secured Parties in a proceeding for the appointment of a
      successor Agent, and all fees, including, but not limited to, extraordinary
      fees
      associated with the filing of interpleader and expenses associated therewith,
      shall be payable by the Debtors on demand.

    

    8.
       Rights
      with respect to Collateral.
      Each
      Secured Party agrees with all other Secured Parties and the Agent (i) that
      it
      shall not, and shall not attempt to, exercise any rights with respect to its
      security interest in the Collateral, whether pursuant to any other agreement
      or
      otherwise (other than pursuant to this Agreement), or take or institute any
      action against the Agent or any of the other Secured Parties in respect of
      the
      Collateral or its rights hereunder (other than any such action arising from
      the
      breach of this Agreement) and (ii) that such Secured Party has no other rights
      with respect to the Collateral other than as set forth in this Agreement and
      the
      other Transaction Documents. 

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    Upon
      the
      acceptance of any appointment as Agent hereunder by a successor Agent, such
      successor Agent shall thereupon succeed to and become vested with all the
      rights, powers, privileges and duties of the retiring Agent and the retiring
      Agent shall be discharged from its duties and obligations under the
      Agreement.  After any retiring Agent’s resignation or removal hereunder as
      Agent, the provisions of the Agreement including this Annex B shall inure to
      its
      benefit as to any actions taken or omitted to be taken by it while it was
      Agent.

    

     

    
      
         

      

      
        32Exhibit 10.6 Consent, Waiver and Amendment Agreement

    

      Exhibit
        10.6

      Form
        8-K

      Viking
        Systems, Inc.

      File
        No.
        000-49636

      

      CONSENT,
        WAIVER AND AMENDMENT AGREEMENT

      

      This
        Consent, Waiver and Amendment Agreement (this “Agreement”)
        is
        entered into as of February 23, 2007, by and between each of the undersigned
        purchasers, acting individually (individually a “Purchaser”
and
        collectively the “Purchasers”),
        and
        Viking Systems, Inc., a Delaware corporation (the “Company”).

      

      WHEREAS,
        pursuant to a securities purchase agreement dated May 22, 2006 among the
        Company
        and the Purchasers (the “Purchase
        Agreement”),
        the
        Purchasers were issued convertible preferred stock (the “Preferred
        Stock”)
        and
        warrants (the “Existing
        Warrants”)
        to
        purchase shares of Common Stock, par value $.001 per share (the “Common
        Stock”)
        and in
        the individual amounts set forth below such Purchaser’s name on the signature
        pages to the Purchase Agreement;

      

      WHEREAS,
        the Company and Purchasers desire to amend certain terms of the Transaction
        Documents and waive certain provisions and other matters contained in the
        Transaction Document.

      

      NOW,
        THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
        and for good and valuable consideration the receipt and adequacy of which
        are
        hereby acknowledged, the Purchasers and the Company agree as
        follows:

      

      ARTICLE
        I

      DEFINITIONS

      

      Section
        1.  Definitions.
        Capitalized terms not defined in this Agreement shall have the meanings ascribed
        to such terms in the Purchase Agreement.

      

      ARTICLE
        II

      AMENDMENTS
        AND OTHER AGREEMENTS

      

      Section
        2.1  Consent
        to Subsequent Financing.
        Each
        Purchaser, severally and not jointly with the other Purchasers, hereby consents
        to the Company consummating the issuance of up to $6,000,000 principal amount
        of
        8% Secured Convertible Debentures and Warrants on the terms and conditions
        set
        forth in a term sheet provided so the Purchasers which financing shall close
        concurrently with the effectiveness of this Agreement (“Subsequent
        Financing”).
        Each
        Purchaser acknowledges that the terms and conditions of the Subsequent Financing
        may conflict with terms and conditions of the Purchase Agreement and other
        Transaction Documents and the Company’s obligations under the Purchase Agreement
        and other Transaction documents. 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Each
        Purchaser hereby waives any breach of the Purchase Agreement and other
        Transaction Documents that may occur by reason of the terms, conditions,
        rights,
        restrictions and covenants of the Subsequent Financing and the documents
        related
        to the Subsequent Financing (“Subsequent
        Financing Documents”)
        as of
        the date hereof.

      

      Section
        2.2 Subordination
        of Rights to Participating in Future Financings.
        The
        Transaction Documents grant the Purchaser the right to participate in future
        equity or debt financings (“Future Financings”) of the Company. As a condition
        to the Subsequent Financing, the investors therein require that the Company
        grant such investors the exclusive right to participate in Future Financings.
        Each Purchaser subordinates to the investors in the Subsequent Financing,
        any
        and all rights such Purchaser was granted in the Transaction Documents to
        participate in Future Financings of the Company. If, in connection with any
        Future Financing, the investors in the Subsequent Financing do not acquire
        all
        securities offered in such Future Financing that they are entitled to acquire
        pursuant to the Subsequent Financing Documents, the securities remaining
        for
        sale shall be offered to the Purchasers on a pro rata basis.

      

      Section
        2.3 Adjustment
        to Exercise Price of the Existing Warrants.
        Each
        Purchaser, severally and not jointly with the other Purchasers, hereby agrees
        with the Company that, on account of the Subsequent Financing, the Exercise
        Price of the Existing Warrants shall be reduced from $0.35 to $0.18, each
        subject to further adjustment therein, but that the number of Warrant Shares
        issuable thereunder shall not be increased solely on account of such reduction
        pursuant to Section 3(b) provided that any further issuances of Common Stock
        or
        Common Stock Equivalents shall be subject to the full provisions of Section
        3(b)
        as to both a decrease in the Exercise Price and increase in the number of
        Warrant Shares issuable thereunder, including but not limited to pursuant
        to
        Section 5(i) of the Convertible Debentures issued pursuant to the Subsequent
        Financing.

      

      Section
        2.4 Amendment
        to Termination Date of the Existing Warrants.
        The
        definition of “Termination Date” in the first paragraph of the Existing Warrants
        is hereby amended and restated in its entirety as follows:

      

      “...and
        on
        or prior to the close of business on seven year anniversary of the Initial
        Exercise Date (the “Termination
        Date”)...”

      

      Section
        2.5 Amendment
        to Section 3(b) of the Existing Warrants.
        Section
        3(b) of the Existing Warrants is hereby amended and restated in its entirety
        as
        follows:

      

      “Subsequent
        Equity Sales.
        If the
        Company or any Subsidiary thereof, as applicable, at any time while this
        Warrant
        is outstanding, shall sell or grant any option to purchase, or sell or grant
        any
        right to reprice its securities, or otherwise dispose of or issue (or announce
        any offer, sale, grant or any option to purchase or other disposition) any
        Common Stock or Common Stock Equivalents entitling any Person to acquire
        shares
        of Common Stock, at an effective price per share less than the then Exercise
        Price (such lower price, the “Base
        Share Price”
and
        such issuances collectively, a “Dilutive
        Issuance”)
        

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (if
        the
        holder of the Common Stock or Common Stock Equivalents so issued shall at
        any
        time, whether by operation of purchase price adjustments, reset provisions,
        floating conversion, exercise or exchange prices or otherwise, or due to
        warrants, options or rights per share which are issued in connection with
        such
        issuance, be entitled to receive shares of Common Stock at an effective price
        per share which is less than the Exercise Price, such issuance shall be deemed
        to have occurred for less than the Exercise Price on such date of the Dilutive
        Issuance), then the Exercise Price shall be reduced and only reduced to equal
        the Base Share Price and the number of Warrant Shares issuable hereunder
        shall
        be increased such that the aggregate Exercise Price payable hereunder, after
        taking into account the decrease in the Exercise Price, shall be equal to
        the
        aggregate Exercise Price prior to such adjustment. Such adjustment shall
        be made
        whenever such Common Stock or Common Stock Equivalents are issued.
        Notwithstanding the foregoing, no adjustments shall be made, paid or issued
        under this Section 3(b) in respect of an Exempt Issuance. The Company shall
        notify the Holder in writing, no later than the Trading Day following the
        issuance of any Common Stock or Common Stock Equivalents subject to this
        Section
        3(b), indicating therein the applicable issuance price, or applicable reset
        price, exchange price, conversion price and other pricing terms (such notice
        the
“Dilutive
        Issuance Notice”).
        For
        purposes of clarification, whether or not the Company provides a Dilutive
        Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
        Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
        entitled to receive a number of Warrant Shares based upon the Base Share
        Price
        regardless of whether the Holder accurately refers to the Base Share Price
        in
        the Notice of Exercise.”

      

      Section
        2.6 Consent,
        Waivers and other Agreements.

      

      a) As
        to all
        shares underlying preferred and warrants(the “Unregistered
        Shares”)
        issued
        pursuant to the Transaction Documents that are not subject to the currently
        effective registration statement on file with the SEC (the “Existing
        Registration Statement”)],
        the
        Purchasers hereby agree to waive the requirements of Section 3(c) of the
        Registration Rights Agreement, and agree that the Company shall not be required
        to file a Registration Statement with the Commission seeking to register
        such
        Unregistered Shares for resale by the Purchasers unless and until it receives
        a
        written request (a “Demand
        Notice”,
        and
        the registration statement to be filed in connection therewith, a “Demand
        Registration”)
        by the
        Purchasers holding a majority or more of the Registrable Securities (as defined
        in the Registration Rights Agreement) that are not subject to the Existing
        Registration Statement. For clarity, in connection with any Demand Registration,
        the “Filing Date” for purposes of the Registration Rights Agreement shall be the
        30th
        calendar
        day following the date of the Demand Notice and the “Effectiveness Date” shall
        be the 90th
        calendar
        day following the Demand Notice.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      b) Each
        Purchaser, severally, and not jointly with the other Purchasers, hereby agrees
        that in lieu of the payment of accrued but unpaid cash liquidated damages
        under
        Section 2(b) of the Registration Rights Agreement as to the Unregistered
        Shares
        in the amounts set forth on Schedule
        A
        hereto
        and for the other consideration given to the Purchasers hereunder, each
        Purchaser agrees to accept, and the Company agrees to issue to the Purchasers,
        an aggregate of 4,000,000 shares of Common Stock (“Liquidated
        Damage Shares”),
        subject to adjustment for reverse and forward stock splits and the like).
        Each
        Purchaser shall receive a number of Liquidated Damage Shares calculated as
        follows: such Purchaser’s initial Subscription Amount at the closing of the
        Purchase Agreement divided by the aggregate Subscription Amounts under the
        Purchase Agreement multiplied by 4,000,000. By way of example, Midsummer
        Investment Ltd had a Subscription Amount equal to $2,500,000 and the aggregate
        of all Subscription Amounts was $8,000,000. Accordingly, Midsummer would
        receive
        1.25 million of the Liquidated Damage Shares.

      

      Section
        2.7 Effect
        on Transaction Documents. The
        foregoing consents and waivers are given solely in respect of the transactions
        described herein. Except
        as
        expressly set forth herein, all of the terms and conditions of the Transaction
        Documents shall continue in full force and effect after the execution of
        this
        Agreement, and shall not be in any way changed, modified or superseded by
        the
        terms set forth herein. This
        Agreement shall not constitute a novation or satisfaction and accord of any
        Transaction Document.

      

      Section
        2.8. Filing
        of Form 8-K.
        Within
        2 Trading Days of the date hereof, the Company shall issue a Current Report
        on
        Form 8-K, reasonably acceptable to each Purchaser disclosing the material
        terms
        of the transactions contemplated hereby, which shall include this Agreement
        as
        an attachment thereto.

      

      Section
        2.9. Waiver
        of Certain Breaches.
        The
        Transaction Documents contain numerous provisions which require the Company
        to
        take certain actions or refrain from taking certain actions (“Requirements”).
        Some of the Requirements require that Company take certain actions within
        prescribed time periods. The Company is aware that it has not complied in
        all
        respects with the Requirements. Each Purchaser hereby waives any breach of
        the
        Transaction Documents with respect to the Requirements set forth on Exhibit
        A
        attached hereto and by this reference made a part hereof.

      

      Section
        2.10. Conditions
        to Purchasers Obligations.
        The
        respective obligations of the Purchasers hereunder and the effectiveness
        of the
        consents, waivers and amendments set forth herein are subject to the following
        conditions being met:

      

      (a) the
        accuracy in all material respects of the representations and warranties of
        the
        Company contained herein;

      

      (b) all
        obligations, covenants and agreements of the Company required to be performed
        at
        or prior to the date hereof shall have been performed;

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (c) all
        Purchasers parties to the Purchase Agreement shall have agreed to the terms
        and
        conditions of this Agreement; and

      

      (d) there
        shall have been no Material Adverse Effect with respect to the Company since
        the
        date hereof; 

      

      ARTICLE
        III

      REPRESENTATIONS
        AND WARRANTIES

      

      Section
        3.1. Representations
        and Warranties of the Company.
        The
        Company hereby make the representations and warranties set forth below to
        the
        Purchasers that as of the date of its execution of this Agreement:

      

      (a) Authorization;
        Enforcement.
        The
        Company has the requisite corporate power and authority to enter into and
        to
        consummate the transactions contemplated by this Agreement and otherwise
        to
        carry out its obligations hereunder and thereunder. The execution and delivery
        of this Agreement by the Company and the consummation by it of the transactions
        contemplated hereby have been duly authorized by all necessary action on
        the
        part of such Company and no further action is required by such Company, its
        board of directors or its stockholders in connection therewith. This Agreement
        has been duly executed by the Company and, when delivered in accordance with
        the
        terms hereof will constitute the valid and binding obligation of the Company
        enforceable against the Company in accordance with its terms except (i) as
        limited by general equitable principles and applicable bankruptcy, insolvency,
        reorganization, moratorium and other laws of general application affecting
        enforcement of creditors’ rights generally, (ii) as limited by laws relating to
        the availability of specific performance, injunctive relief or other equitable
        remedies and (iii) insofar as indemnification and contribution provisions
        may be
        limited by applicable law.

      

      (b) No
        Conflicts.
        The
        execution, delivery and performance of this Agreement by the Company and
        the
        consummation by the Company of the transactions contemplated hereby do not
        and
        will not: (i) conflict with or violate any provision of the Company’s
        certificate or articles of incorporation, bylaws or other organizational
        or
        charter documents, or (ii) conflict with, or constitute a default (or an
        event
        that with notice or lapse of time or both would become a default) under,
        result
        in the creation of any lien upon any of the properties or assets of the Company,
        or give to others any rights of termination, amendment, acceleration or
        cancellation (with or without notice, lapse of time or both) of, any material
        agreement, credit facility, debt or other material instrument (evidencing
        Company debt or otherwise) or other material understanding to which the Company
        is a party or by which any property or asset of the Company is bound or
        affected, or (iii) conflict with or result in a violation of any law, rule,
        regulation, order, judgment, injunction, decree or other restriction of any
        court or governmental authority to which the Company is subject (including
        federal and state securities laws and regulations), or by which any property
        or
        asset of the Company is bound or affected.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      (c) Other
        Representations, Warranties and Covenants.
        Except
        as set forth on Schedule
        A
        attached
        hereto, the Company hereby makes such representations, warranties and covenants
        set forth in the Purchase Agreement as though fully set forth herein as of
        the
        date hereof, and all such representations, warranties and obligations are
        incorporated herein by reference.

       

      ARTICLE
        IV

      MISCELLANEOUS

      

      Section
        4.1 Notices.
        Any and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be made in accordance with the provisions of the
        Purchase Agreement.

      

      Section
        4.2 Survival.
        All
        warranties and representations (as of the date such warranties and
        representations were made) made herein or in any certificate or other instrument
        delivered by it or on its behalf under this Agreement shall be considered
        to
        have been relied upon by the parties hereto and shall survive the issuance
        of
        the Existing Warrants. This Agreement shall inure to the benefit of and be
        binding upon the successors and permitted assigns of each of the parties;
        provided however that no party may assign this Agreement or the obligations
        and
        rights of such party hereunder without the prior written consent of the other
        parties hereto.

      

      Section
        4.3 Execution.
        This
        Agreement may be executed in two or more counterparts, all of which when
        taken
        together shall be considered one and the same agreement and shall become
        effective when counterparts have been signed by each party and delivered
        to the
        other party, it being understood that both parties need not sign the same
        counterpart. In the event that any signature is delivered by facsimile
        transmission, such signature shall create a valid and binding obligation
        of the
        party executing (or on whose behalf such signature is executed) with the
        same
        force and effect as if such facsimile signature page were an original
        thereof.

      

      Section
        4.4 Severability.
        If any
        provision of this Agreement is held to be invalid or unenforceable in any
        respect, the validity and enforceability of the remaining terms and provisions
        of this Agreement shall not in any way be affected or impaired thereby and
        the
        parties will attempt to agree upon a valid and enforceable provision that
        is a
        reasonable substitute therefor, and upon so agreeing, shall incorporate such
        substitute provision in this Agreement.

      

      Section
        4.5 Governing
        Law.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Agreement shall be determined pursuant to the Governing Law provision
        of
        the Purchase Agreement.

      

      Section
        4.6 Entire
        Agreement.
        The
        Agreement, together with the exhibits and schedules thereto, contain the
        entire
        understanding of the parties with respect to the subject matter hereof and
        supersede all prior agreements and understandings, oral or written, with
        respect
        to such matters, which the parties acknowledge have been merged into such
        documents, exhibits and schedules.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      Section
        4.7 Construction.
        The
        headings herein are for convenience only, do not constitute a part of this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof. The language used in this Agreement will be deemed to be the language
        chosen by the parties to express their mutual intent, and no rules of strict
        construction will be applied against any party.

      

      Section
        4.8 Independent
        Nature of Purchasers’ Obligations and Rights.
        The
        obligations of each Purchaser hereunder are several and not joint with the
        obligations of any other Purchasers hereunder, and no Purchaser shall be
        responsible in any way for the performance of the obligations of any other
        Purchaser hereunder. Nothing contained herein or in any other agreement or
        document delivered at any closing, and no action taken by any Purchaser pursuant
        hereto, shall be deemed to constitute the Purchasers as a partnership, an
        association, a joint venture or any other kind of entity, or create a
        presumption that the Purchasers are in any way acting in concert with respect
        to
        such obligations or the transactions contemplated by this Agreement. Each
        Purchaser shall be entitled to protect and enforce its rights, including
        without
        limitation the rights arising out of this Agreement, and it shall not be
        necessary for any other Purchaser to be joined as an additional party in
        any
        proceeding for such purpose.

      

      Section
        4.9 Termination. 
        This Agreement may be terminated by any Purchaser, as to such Purchaser’s
        obligations hereunder, by written notice to the other parties, if the
        transactions contemplated hereunder are not effective on or before February
        23,
        2007.

      

      Section
        4.10 Independent
        Nature of Purchasers’ Obligations and Rights.
        The
        obligations of each Purchaser hereunder are several and not joint with the
        obligations of any other Purchasers hereunder, and no Purchaser shall be
        responsible in any way for the performance of the obligations of any other
        Purchaser hereunder. Nothing contained herein or in any other agreement or
        document delivered at any closing, and no action taken by any Purchaser pursuant
        hereto, shall be deemed to constitute the Purchasers as a partnership, an
        association, a joint venture or any other kind of entity, or create a
        presumption that the Purchasers are in any way acting in concert with respect
        to
        such obligations or the transactions contemplated by this Agreement. Each
        Purchaser shall be entitled to protect and enforce its rights, including
        without
        limitation the rights arising out of this Agreement, and it shall not be
        necessary for any other Purchaser to be joined as an additional party in
        any
        proceeding for such purpose.

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
        executed by their respective authorized signatories as of the date first
        indicated above.

      
        

        
          	 	
                  VIKING
                    SYSTEMS, INC.

                   

                
	 	
                  By:
                    /s/
                    Donald Tucker 

                  Name:
                    Donald Tucker

                  Title:
                    Chief Executive Officer

                

        

        

      

      

      

      

      

      

      

      

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      [PURCHASER
        SIGNATURE PAGES TO VKSY 

      AMENDMENT
        AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed
        by their respective authorized signatories as of the date first indicated
        above.

      Name
        of
        Purchaser: ________________________________________________________

      Signature
        of Authorized Signatory of Purchaser:
        __________________________________

      Name
        of
        Authorized Signatory:
        ____________________________________________________

      Title
        of
        Authorized Signatory:
        _____________________________________________________

      Email
        Address of
        Purchaser:________________________________________________

      

      

      

      

      

      

      

      This
        document was executed by the following:

      

      
        	
                Name

              	
                Shares

              
	 	 
	
                Crestview
                  Capital Master, LLC

              	
                500,00

              
	
                Vision
                  Opportunity Master fund, Ltd.

              	
                125,000

              
	
                Bushido
                  Capital Master Fund, LP

              	
                750,000

              
	
                Gamma
                  Opportunity Capital Partners, LP Class A

              	
                125,000

              
	
                Pierce
                  Diversified Strategy Master Fund, LLC

              	
                250,000

              
	
                GSSF
                  Master Fund, LP

              	
                212,500

              
	
                Gryphon
                  Master Fund, LP

              	
                412,500

              
	
                Midsummer
                  Investment LTD

              	
                1,250,000

              
	
                Rockmore
                  Investment Master Fund, LTD

              	
                375,000

              
	 	 
	
                TOTAL

              	
                4,000,000

              

      

      

      

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      EXHIBIT
        “A”

      CONSENT,
        WAIVER AND AMENDMENT AGREEMENT

      

      1. The
        Company was required by the Transaction document to file a Form 8-K within
        one
        trading day after the Transaction Documents were executed to disclose the
        transaction. The SEC requires Form 8-K to be filed within four business days
        of
        the event described. The date of the Transaction Documents was May 22, 2006.
        Pursuant to SEC rules, a Form 8-K was required to be filed by May 22, 2006.
        Pursuant to the Transaction Documents, the Form 8-K was required to be filed
        by
        May 23, 2006. The Form 8-K was actually filed May 25, 2006 which was within
        the
        SEC filing period but not within the Transaction Documents filing
        period.

      

      2. The
        Transaction Document includes the following provision:

      

      The
        Company and each Purchaser shall consult with each other in issuing any other
        press releases with respect to the transactions contemplated hereby, and
        neither
        the Company nor any Purchaser shall issue any such press release or otherwise
        make any such public statement without the prior consent of the Company,
        with
        respect to any press release of any Purchaser, or without the prior consent
        of
        each Purchaser, with respect to any press release of the Company, which consent
        shall not unreasonably be withheld or delayed, except if such disclosure
        is
        required by law, in which case the disclosing party shall promptly provide
        the
        other party with prior notice of such public statement or
        communication.

      

      The
        Company believes it did not obtain approval from each Purchaser relative
        to the
        press release it sent relating to the Transaction.

      

      3. The
        Transaction Document includes the following provision:

      

      Not
        less
        than 5 Trading Days prior to the filing of each Registration Statement and
        not
        less than 1 Trading Day prior to the filing of any related Prospectus or
        any
        amendment or supplement thereto (including any document that would be
        incorporated or deemed to be incorporated therein by reference), the Company
        shall, (i) furnish to each Holder copies of all such documents proposed to
        be
        filed, which documents (other than those incorporated or deemed to be
        incorporated by reference) will be subject to the review of such
        Holders.

      

      The
        Company is uncertain as to whether it furnished each Purchaser with a copy
        of
        each amendment to the registration statements filed pursuant to the Transaction
        documents.

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      4. The
        Company may not amend its Certificate of Incorporation in any matter that
        adversely affects the rights of the Purchasers. The Company is required to
        amend
        its Certificate of Incorporation to increase its authorized shares of common
        stock from 200,000,000 to 400,000,000. Although the Company does not believe
        that such amendment will adversely affect the rights of the Purchasers, there
        may be a potential adverse effect based upon potential future
        dilution.

      

      5. The
        Company has made certain covenants in the Certificate of Designation regarding
        the declaration of dividends, payment of dividends and other matters relating
        to
        dividends. Some of such covenants have not been met.

      

      6. As
        long
        as the Series B Preferred Stock is outstanding, the Company may not incur
        debt.
        In December 2006, the Company borrowed $350,000 from one of the Purchasers.
        In
        January, 2007, the Company borrowed $300,000 from Donald E. Tucker.

      

      7. Viking
        has declared a “delay fee penalty” payable to former convertible note-holders at
        a rate of 1% per month of the notes’ principal balance until such time as the
        shares into which these convertible notes were converted are
        registered.

      

      

      
        
           

        

        
          10

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