Document:

Exhibit 10.1 Loan Agreement

    Exhibit
      10.1

    Form
      8-K

    Viking
      Systems, Inc.

    File
      No.
      000-49636

    

    LOAN
      AGREEMENT

    

    Viking
      Systems, Inc. (“Viking”) and Vision Opportunity Master Fund Ltd. (“VOMF”) have
      entered into this Agreement on April 7, 2006, pursuant to which VOMF has agreed
      to loan (the Loan”) the principal sum of Two Hundred Fifty Thousand Dollars
      ($250,000.00) (the “Principal Amount”) to Viking.

     

    RECITALS

    

    Viking
      intends to offer and sell shares of its Preferred Stock (the “Preferred Stock”)
      in a private financing (the “Subsequent Financing”) in which $5,000,000 or more
      will be raised from the sale of the Preferred Stock.

    

    Viking
      has requested that VOMF provide it with interim financing to fund operations
      prior to the completion of the Subsequent Financing.

    

    VOMF
      has
      agreed to make the Loan to Viking pursuant to the terms and conditions of this
      Agreement.

    

    As
      additional consideration for VOMF making the Loan to Viking, VOMF will be issued
      Warrants to purchase shares of Viking Common Stock. 

    

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

    

    1. Loan.
      Viking
      agrees to borrow from VOMF, and VOMF agrees to lend to Viking, subject to the
      terms and conditions set forth herein, the sum of Two Hundred Fifty Thousand
      Dollars ($250,000) (the “Principal Amount”). The principal amount shall be
      delivered by VOMF to Viking upon the execution of this Loan Agreement and the
      attached Promissory Agreement.. 

    

    2. Repayment.
      Subject
      to Section 3 of this Agreement, the unpaid Principal Amount, a premium in the
      amount of $12,500 (“Loan Premium”), and accrued interest on the Principal
      Amount, shall be paid by Viking to VOMF not later than May 31, 2006 (the
“Maturity Date”).

    

    3. Acceleration
      of Maturity Date.
      Notwithstanding anything else contained herein to the contrary, in the event
      Viking completes the Subsequent Financing prior to May 31, 2006, the Maturity
      Date shall be the date of the initial closing of the Subsequent
      Financing.

    

    4. Conversion
      Rights.
      At the
      sole option of VOMF, any or all of the amounts due to VOMF by Viking pursuant
      to
      this Agreement, may be converted into either of the following:

    
      
        

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    (i)
      shares of Viking’s common stock at the lower of $.20 per share or the effective
      price per share of common stock provided for in the Subsequent Financing;
      or

    

    (ii)
      the
      Preferred Stock and other securities offered in the Subsequent
      Financing.

    

    5. Use
      of Loan Proceeds.
      The
      Loan proceeds shall be used by Viking as working capital.

    

    6. Promissory
      Note. The
      Loan
      shall be evidenced by a Promissory Note in the form attached
      hereto.

    

      7. Warrants.
        As
        additional consideration for VOMF making the Loan to Viking pursuant to this
        Agreement, Viking shall issue VOMF the following Warrants:

      

      (i) a
        Warrant
        to purchase the greater of (i) 1,250,000 shares of Viking’s Common Stock and
        (ii) the Principal Amount of the Loan ($250,000) divided by the effective
        price
        per share of common stock provided for in the Subsequent Financing exercisable
        at $.50 per share, subject to adjustment pursuant to the terms of such Warrant.
        Such Warrant shall be for a term of five (5) years from the date hereof.
        

      

      (ii) a
        Warrant
        to purchase the greater of (i) 1,250,000 shares of Viking’s Common Stock and
        (ii) the Principal Amount of the Loan ($250,000) divided by the effective
        price
        per share of common stock provided for in the Subsequent Financing exercisable
        at $.75 per share, subject to adjustment pursuant to the terms of such Warrant.
        Such Warrant shall be for a term of five (5) years from the date
        hereof.

      

      The
        form
        of Warrants is attached hereto. 

    8. Registration
      Rights. The
      common stock of Viking issuable upon the conversion of the Promissory Note
      and
      the common stock issuable upon exercise of the Warrants shall have registration
      rights that are substantially equivalent to the registration rights granted
      to
      investors in the Subsequent Financing. 

    

    9. Anti-Dilution
      Rights.
      The
      common stock of Viking issuable upon the conversion of the Promissory Note
      and
      the common stock issuable upon exercise of the Warrants shall have anti-dilution
      rights that are substantially equivalent to the anti-dilution rights granted
      to
      investors in the Subsequent Financing but in no event will shares of common
      stock be issued at less than $.05 per share.

    

    10. Representations
      and Warranties of VOMF.
      VOMF
      represents and warrants to Viking as follows:

    

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

    
      
        

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        2

        
          

        

      

      
         

      

    

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

    

    11. Right
      of First Refusal.
      Subject
      to the closing of the Loan VOMF will have the right to purchase its pro rata
      portion of any subsequent offering of debt or equity securities by Viking for
      a
      period of one
      year
      from the effective date of the registration statement filed pursuant to Section
      8 above.

    

    12. Execution
      of Waiver and Consent. VOMF
      and/or its affiliates acquired a promissory note from Viking in December 2005
      pursuant to a Securities Purchase Agreement. A total of $3,000,000 was raised
      by
      Viking from the sale of promissory notes to several investors pursuant to such
      Securities Purchase Agreement. Viking has requested, and in the future will
      request that the holders of the promissory notes sold pursuant to such
      Securities Purchase Agreement waive certain payment dates, default dates and
      other provisions in order to provide Viking with sufficient additional time
      to
      complete the Subsequent Financing. In consideration of Viking’s agreements under
      this Loan Agreement, VOMF and/or its affiliates agrees to execute such waivers
      and consents relating to the promissory note and Securities Purchase Agreement.
      

    

    13. General
      Provisions.

     

    13.1. Expenses.
      Viking
      agrees to pay VOMF’s expenses incurred in connection with the Loan up to a
      maximum amount of $5,000.

    

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

    

    
      	
              If
                to Lead Lender and Collateral Agent, to:

            	
              Vision
                Opportunity Master Fund Ltd

            
	 	
              317
                Madison Avenue, Suite 1220

            
	 	
              New
                York, NY

            
	 	
              Facsimile:
                (212) 849-8225

            
	 	
              Attn:
                Adam Benowtiz

            

    

    
      
        

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        3

        
          

        

      

      
         

      

    

    

    
      	
              If
                to Viking, to:

            	
              Viking
                Systems, Inc.

            
	 	
              4350
                La Jolla Village Drive, Suite 900

            
	 	
              La
                Jolla, CA 92122

            
	 	
              Facsimile:
                858-225-0467

            
	 	
              Attn:
                Thomas Marsh or Nathan Harrison

            
	 	 
	
              With
                copies to:

            	
              Cohne,
                Rappaport & Segal

            
	 	
              257
                East 200 South, Suite 700

            
	 	
              Salt
                Lake City, UT 84111

            
	 	
              Facsimile:
                801-355-1813

            
	 	
              Attn:
                A. O. Headman, Jr.

            

    

    

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

    

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

    

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

    

    13.5. Amendments.
      No
      provision or term of this Agreement may be amended, modified, revoked,
      supplemented, waived, or otherwise changed, except by a written instrument
      duly
      executed by Viking and VOMF. 

    

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

    

    13.7. Entire
      Agreement.
      This
      Agreement, the Promissory Note and the Warrants constitute the final expression
      of the agreement and understanding of the parties with respect to the general
      subject matter hereof and supersede any previous understanding, negotia-tions,
      or discussions, whether written or oral. This Agreement, the Promissory Notes
      and the Warrant may not be contradicted by evidence of any alleged oral
      agreement.

    

    
      
        

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

    

    
      	 	
              VIKING:

            
	 	 
	 	
              Viking
                Systems, Inc.,

            
	 	
              a
                Nevada corporation

            
	 	 
	 	
              By: /s/
                Thomas B. Marsh

            
	 	
              Thomas
                B. Marsh, President

            
	 	 
	 	
              VOMF
                

            
	 	 
	 	
              Vision
                Opportunity Master Fund Ltd

            
	 	 
	 	
              By:
                 /s/

            
	 	
              Name:

            
	 	
              Title:

            

    

    

    

     

    
      
         

      

      
        5Exhibit 10.2 Convertible Promissory Note

    Exhibit
      10.2

    Form
      8-K

    Viking
      Systems, Inc.

    File
      No.
      000-49636

    

    THIS
      NOTE
      AND THE COMMON STOCK REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR UNDER THE PROVISIONS OF
      ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED
      HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS
      UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. NEITHER
      THE
      NOTE NOR THE COMMON STOCK MAY BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT
      IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE 1933 ACT AND ANY
      APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED
      AN
      OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT
      REQUIRE REGISTRATION OF THIS NOTE AND THE COMMON STOCK REFERENCED HEREIN.

    

    VIKING
      SYSTEMS, INC.

    

    
      	
              April
                7, 2006

            	
              $250,000.00

            

    

    

    10%
      UNSECURED CONVERTIBLE PROMISSORY NOTE

    

    Viking
      Systems, Inc. (the “Company”), for value received, hereby promises to pay to
      VISION OPPORTUNITY MASTER FUND, LTD. or registered assigns (the “Holder”) on May
      31, 2006, or such earlier date as this Note may become due and payable pursuant
      to Section 2 hereof (the “Maturity Date”), (i) the Principal Amount of Two
      Hundred Fifty Thousand Dollars ($250,000.00); (ii) a Loan Premium of Twelve
      Thousand Five Hundred Dollars ($12,500); and (iii) interest on the outstanding
      Principal Amount at the rate of ten percent (10%) per annum. 

    

    This
      10%
      Unsecured Convertible Promissory Note (this “Note”) is issued to the Holder
      pursuant to the terms and conditions of that certain Loan Agreement, dated
      as of
      the date hereof, and any amendments thereto (the “Loan Agreement”) entered into
      by the Company and Vision Opportunity Master Fund Ltd. All capitalized terms
      used herein without definitions shall have the respective meanings provided
      therefore in the Loan Agreement. 

    

    1. Repayment.
      Subject
      to Section 2 of this Note, the unpaid Principal Amount, the Loan Premium in
      the
      amount of $12,500, and accrued interest on the Principal Amount, shall be paid
      by Viking to Holder not later than May 31, 2006 (the “Maturity
      Date”).

    

    2. Acceleration
      of Maturity Date.
      Not
      withstanding anything else contained herein to the contrary, in the event Viking
      completes the Subsequent Financing prior to May 31, 2006, the Maturity Date
      shall be the date of the initial closing of the Subsequent
      Financing.

    

    3. Conversion
      Rights.
      At the
      sole option of Holder any or all of the amounts due to Holder by Viking pursuant
      to this Agreement, may be converted into either of the following:

    

    (i) shares
      of
      Viking’s common stock at the lower of $.20 per share or the effective per share
      of common stock price provided for in the Subsequent Financing;
      or

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii) the
      Preferred Stock and other securities offered in the Subsequent
      Financing.

    

    Both
      principal hereof and interest thereon are payable at the address of the Holder
      designated in the Loan Agreement or at such other place as the Holder may from
      time to time designate in writing. Any payment otherwise due on a Saturday,
      Sunday or legal bank holiday may be paid on the following business day. Payments
      shall be made in lawful money of the United States of America. Interest
      hereunder shall be computed on the basis of a year of three hundred sixty (360)
      days for the actual number of days elapsed.

    

    4. Transfers
      of Note to Comply with the 1933 Act.
      The
      Holder agrees that this Note may not be sold, transferred, pledged, hypothecated
      or otherwise disposed of except as follows: (1) to a Person whom the Note may
      legally be transferred without registration and without delivery of a current
      prospectus under the 1933 Act with respect thereto and then only against receipt
      of an agreement of such Person to comply with the provisions of this Section
      4
      with respect to any resale or other disposition of the Note; or (2) to any
      Person upon delivery of a prospectus then meeting the requirements of the 1933
      Act relating to such securities and the offering thereof for such sale or
      disposition, and thereafter to all successive assignees.

    

    5. Events
      of Default and Remedies. 

    

    (a) Any
      one
      or more of the following events which shall have occurred and be continuing
      shall constitute an event of default (“Event of Default”):

    

    (i) Failure
      to make any payment hereunder when due or interest thereon within five days
      of
      the date when due; or

    

    (ii) Any
      representation or warranty made by the Company or any officer of the Company
      in
      the Loan Agreement or this Note shall have been incorrect in any material
      respect when made which shall not have been remedied ten (10) days after written
      notice thereof shall have been given to the Company; or

    

    (iii) The
      Company shall fail to perform or observe any covenant contained in the Loan
      Agreement or this Note and such default, if capable of being remedied, shall
      not
      have been remedied ten (10) days after written notice thereof shall have been
      given to the Company; or 

    

    
      
        
        

      

      
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    (iv) The
      Company (A) shall institute any proceeding or voluntary case seeking to
      adjudicate it bankrupt or insolvent, or seeking dissolution, liquidation,
      winding up, reorganization, arrangement, adjustment, protection, relief or
      composition of it or its debts under any law relating to bankruptcy, insolvency
      or reorganization or relief of debtors, or seeking the entry of any order for
      relief or the appointment of a receiver, trustee, custodian or other similar
      official for the Company or for any substantial part of its property, or shall
      consent to the commencement against it of such a proceeding or case, or shall
      file an answer in any such case or proceeding commenced against it consenting
      to
      or acquiescing in the commencement of such case or proceeding, or shall consent
      to or acquiesce in the appointment of such a receiver, trustee, custodian or
      similar official; (B) shall be unable to pay its debts as such debts become
      due,
      or shall admit in writing its inability to apply its debts generally; (C) shall
      make a general assignment for the benefit of creditors; or (D) shall take any
      action to authorize or effect any of the actions set fort above in this
      subsection; or

    

    (v) Any
      proceeding shall be instituted against the Company seeking to adjudicate it
      bankrupt or insolvent, or seeking dissolution, liquidation, winding up,
      reorganization, arrangement, adjustment, protection, relief of debtors, or
      seeking the entry of an order for relief or the appointment of a receiver,
      trustee, custodian or other similar official for the Company or for any
      substantial part of its property, and either such proceeding shall not have
      been
      dismissed or shall not have been stayed for a period of sixty (60) days or
      any
      of the actions sought in such proceeding (including, without limitation, the
      entry of any order for relief against it or the appointment of a receiver,
      trustee, custodian or other similar official for it or for any substantial
      part
      of its property) shall occur; or

    

    (vi) The
      making or filing of any money judgment, writ or similar process in excess of
      One
      Hundred Thousand Dollars ($100,000) against the Company or any of the property
      or other assets of the Company which shall remain unsatisfied, unvacated,
      unhanded or unstayed until the date that is the earlier to occur of thirty
      (30)
      days after such judgment, writ or similar process is entered and five (5) days
      prior to the date of any proposed sale thereunder; or

    

    (vii) The
      suspension of the usual business activities of the Company or the winding up
      or
      the complete or partial liquidation of the Company’s business.

    

    (b) In
      the
      event of and immediately upon the occurrence of an Event of Default, the Note
      shall become immediately due and payable without any action by the Holder and
      the Note shall bear interest until paid at the rate of 15% per annum (the
“Default Interest Rate”). If an Event of Default occurs and is continuing,
      Holder may pursue any remedy available at law or in equity or provided for
      in
      any Loan Document to collect the payment of all amounts due under the Note
      or to
      enforce the performance of any provision of the Note, and all expenses incurred
      by Holder in connection with any remedy shall be deemed indebtedness of the
      Company. 

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (c) No
      delay
      or failure of Holder in the exercise of any right or remedy provided for under
      this Note or under the Loan Agreement shall be deemed a waiver of such right
      by
      Holder. No exercise or partial exercise or waiver of any right or remedy shall
      be deemed a waiver of any further exercise of such right or remedy or of any
      other right or remedy that Holder may have under this Note or under the Loan
      Agreement. The rights and remedies set forth in this Note and in the Loan
      Documents are cumulative and not exclusive of any other right or remedy that
      Holder may have.

    

    6. Unconditional
      Obligation; Fees, Waivers, Other.

    

    (a) The
      obligations to make the payments provided for in this Note are absolute and
      unconditional and not subject to any defense, set-off, counterclaim, rescission,
      recoupment or adjustment whatsoever.

    

    (b) The
      Company promises to pay all costs and expenses, including reasonable attorneys’
fees incurred in the collection and enforcement of this Note and to indemnify
      Holder against any losses, claims, damages and liabilities and related expenses,
      including counsel fees and expenses, incurred by Holder in connection with
      the
      collection and enforcement of this Note (including, without limitation, in
      connection with any bankruptcy, insolvency, reorganization or workout).

    

    (c) No
      forbearance, indulgence, delay or failure to exercise any right or remedy with
      respect to this Note shall operate as a waiver or as an acquiescence in any
      default, nor shall any single or partial exercise of any right or remedy
      preclude any other or further exercise thereof or the exercise of any other
      right or remedy.

    

    (d) This
      Note
      may not be modified or discharged (other than by payment or conversion) except
      in a writing duly executed by the Company and Holder.

    

    (e) Holder
      hereby expressly waives demand and presentment for payment, notice of
      nonpayment, notice of dishonor, protest, notice of protest, bringing of suit,
      and diligence in taking any action to collect amounts called for hereunder,
      and
      shall be directly and primarily liable for the payment of all sums owing and
      to
      be owing hereon, regardless of and without any notice, diligence, act or
      omission with respect to the collection of any amount called for hereunder
      or in
      connection with any right, lien, interest or property at any and all times which
      the Company had or is existing as security for any amount called for
      hereunder.

    

    7. Miscellaneous.

    

    (a) The
      headings of the various paragraphs of this Note are for convenience of reference
      only and shall in no way modify any of the terms or provisions of this
      Note.

    

    (b) Any
      notice required or desired to be given by the parties hereto shall be in writing
      and made pursuant to the Loan Agreement.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (d) Upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss,
      theft, destruction or mutilation of this Note, and (in the case of loss, theft
      or destruction) of reasonably satisfactory indemnification, and upon surrender
      and cancellation of this Note, if mutilated, the Company shall execute and
      deliver a new Note of like tenor and date.

    

    (e) At
      any
      time or from time to time upon the request of Holder, the Company will execute
      and deliver such further documents and do such other acts and things as Holder
      may reasonably request in order fully to effectuate the purposes of this Note,
      and to provide for the payment of the principal and interest due hereunder.
      

    

    (f) This
      Note
      shall be construed and enforced in accordance with the laws of the State of
      New
      York, without giving effect to the conflicts of law principles thereof or the
      actual domiciles of the parties. The Company and the Holder hereby consent
      to
      the jurisdiction of the Courts of the State of New York and the United States
      District Courts situated therein in connection with any action concerning the
      provisions of this Note instituted by the Holder against the
      Company.

    

    (g)
       No
      recourse shall be had for the payment of the principal or interest of this
      Note
      against any incorporator or any past, present or future stockholder officer,
      director, agent or attorney of the Company, or of any successor corporation,
      either directly or through the Company or any successor corporation, otherwise
      all such liability of the incorporators, stockholders, officers, directors,
      attorneys and agents being waived, released and surrendered by the Holder hereof
      by the acceptance of this Note.

    

    (h)
       This
      Note
      shall bind the Company and its successors and assigns.

    

    IN
      WITNESS WHEREOF, the undersigned has duly executed and delivered this Note
      as of
      the day and year first above written.

    

    

    
      	 	
              VIKING
                SYSTEMS, INC.

            
	 	 
	 	 
	 	
              By:
                /s/ Thomas B. Marsh

            
	 	
              Name:
                Thomas B. Marsh

            
	 	
              Title:
                President
                and Chief Executive Officer

            

    

    

    

    

    

    

    

    
      
        
        

      

      
        5

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