SECURITIES PURCHASE AGREEMENT
EXHIBIT
99.2
This
Securities Purchase Agreement (this “Agreement”) is entered into
and made effective as of January 4, 2008 by and between Viking Systems,
Inc., a Delaware corporation (the “Company”),
and the investors
set forth on the signature pages affixed hereto (each, a “Purchaser” and collectively,
the “Purchasers”), with
respect to the following facts:
A. On
the terms
and conditions stated in this Agreement, the Company desires to issue and sell
to the Purchasers, and the Purchasers desire to purchase from the Company,
(i)
an aggregate of up to 16,800,000 shares of common stock, $0.001 par value per
share, of the Company (the “Common Stock”), and (ii)
warrants to purchase an aggregate of 16,800,000 shares of Common Stock at an
exercise price of $0.18 per share in the form attached hereto as Exhibit A (the “Warrants”);
and
B. The
transactions contemplated by this Agreement are conditioned on the completion
of
a recapitalization with respect to the Company's capital stock and certain
outstanding warrants and debentures and a 1 for 50 reverse split of the Common
Stock issued and outstanding immediately before the consummation of the
transactions contemplated by this Agreement, such that immediately following
such recapitalization and such reverse split, all debentures issued by the
Company shall be cancelled and the capitalization of the Company shall be as
set
forth in the capitalization chart attached hereto as Exhibit B
(collectively, the “Recapitalization”).
NOW,
THEREFORE, in consideration of the covenants and promises contained in this
Agreement, and intending to be legally bound, the parties hereto agree as
follows:
1. Sale
and
Issuance of Common Stock; Closing Conditions.
(a) Purchase
and
Sale. Subject to the terms and conditions of this Agreement,
on the Closing Date (as such term is defined below), each of the Purchasers
shall severally, and not jointly, purchase, and the Company shall sell and
issue
to the Purchasers, the shares of Common Stock being purchased by the Purchasers
(the “Shares”) and the
Warrants being purchased by the Purchasers, in each case, in the respective
amounts set forth opposite each of the Purchasers' respective names on the
signature pages hereto, in exchange for $0.178571 per Share (the “Purchase
Price”). The Shares and the Warrants, together, may be
referred to herein as the “Securities.”
(b) Closing. The
purchase and sale of the Securities (the “Closing”) shall occur at the
offices of Xxxxx Xxxxxx LLP, 000 X. Xxxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx,
00000 (or remotely via the exchange of documents and signatures by facsimile,
email or other means) on or before January 4, 2008 (but not before January
2,
2008), or at such other time and place as the Company and the Purchasers may
mutually agree (the “Closing
Date”). At the Closing, the Company shall deliver to each
respective Purchaser, a stock certificate representing the Shares registered
in
the name of the Purchaser and the Warrants issued in the name of the Purchaser,
against delivery of the aggregate Purchase Price therefor by wire transfer
of
immediately available funds which shall be received by January 2, 2008, in
the
account designated by the Company.
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2. Representations
and Warranties of the Company. The Company represents and
warrants to the Purchasers, effective as of the date of this Agreement and
as of
the Closing Date, as follows:
(a) Authorization. The
Company has full corporate right, power, authority and capacity to enter into
this Agreement and to consummate the transactions contemplated hereby and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. Upon the execution and delivery of
this Agreement, this Agreement shall constitute a valid and binding obligation
of the Company enforceable in accordance with its terms, subject to (i)
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally, (ii) equitable limitations on the availability of specific
remedies, (iii) principles of equity (regardless of whether such enforcement
is
considered in a proceeding in law or in equity), and (iv) to the extent rights
to indemnification and contribution may be limited by federal securities laws
or
the public policy underlying such laws.
(b) Valid
Issuance of Common
Stock. The Securities that are being purchased hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, the Shares will be duly and validly issued,
fully paid and nonassessable, and when issued pursuant to a valid exercise
of
the Warrants, the shares of Common Stock issuable upon exercise of the Warrants,
will be duly and validly issued, fully paid and nonassessable. The
Securities and the Common Stock issuable upon exercise of the Warrants will
be
free of restrictions on transfer other than restrictions on transfer under
applicable state and federal securities laws.
(c) 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:
(i)
conflict with or violate any provision of the Company's certificate 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 agreement, credit facility, debt or
other
instrument (evidencing a Company debt or otherwise) or other understanding
to
which the Company is a party or by which any property or asset of the Company
is
bound or affected, or (iii) subject to the Required Approvals (as such term
is
defined in Section 2(d)), 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; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Material Adverse
Effect. For purposes of this Agreement, “Material Adverse Effect” means
(i) a material adverse effect on the legality, validity or enforceability of
this Agreement, (ii) a material adverse effect on the results of operations,
assets, business or condition (financial or otherwise) of the Company taken
as a
whole, or (iii) a material adverse effect on the Company's ability to perform
in
any material respect on a timely basis its obligations under this
Agreement.
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(d) Filings,
Consents and
Approvals. The Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of this Agreement, other than (i)
filings required under federal securities laws, and (ii) the filing of Form
D
with the U.S. Securities and Exchange Commission (the “Commission”) and such filings
as are required to be made under applicable state securities laws (collectively,
the “Required
Approvals”).
(e) SEC
Reports; Financial
Statements. The Company’s Quarterly Report on Form 10-QSB for
the Quarter Ended September 31, 2007, as filed with the Commission on
December 19, 2007 (the “Form 10Q-SB”), complied as of
such filing date, in all material respects with the requirements of the
Securities Act and the Exchange Act, and when filed, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
Form 10-QSB comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods
then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(f) Material
Changes.
Since the date of the latest audited financial statements included within the
SEC Reports (as such term is defined below), except as specifically disclosed
in
a subsequent SEC Report filed prior to the date hereof, or pursuant to this
Agreement or the Recapitalization: (i) there has been no event, occurrence
or
development that has had or that could reasonably be expected to result in
a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or disclosed in filings made with the Commission,
(iii) the Company has not altered its method of accounting, (iv) the Company
has
not declared or made any dividend or distribution of cash or other property
to
its stockholders or purchased, redeemed or made any agreements to purchase
or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending before
the Commission any request for confidential treatment of information. For
purposes of this Agreement, “SEC Reports” means the
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act of 1934, as amended
(the “Exchange Act”),
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required
by
law or regulation to file such material), including the exhibits thereto and
documents incorporated by reference therein and amendments thereof.
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(g) Compliance
with
Laws. The Company has not received any notices of violation
with respect to, any federal, state or local statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which would not cause
a
Material Adverse Effect.
(h) Capital
Structure. As of the date hereof, the authorized capital stock
of the Company consists of 400,000,000 shares of Common Stock, of which
69,934,072 shares are issued and outstanding on such date (approximately
1,400,000 post- reverse split) and 25,000,000 shares of preferred stock, $0.001
par value, of which 7,789 shares are issued and outstanding on such
date. All such shares of the Company have been duly authorized, and
all such issued and outstanding shares have been validly issued, are fully
paid
and nonassessable and are free of any liens or encumbrances other than any
liens
or encumbrances created by or imposed upon the holders thereof, if
any. The Company has also reserved 7,500,000 shares of Common Stock
for issuance pursuant to its 2004 Stock Incentive Plan (the “Incentive Plan”), and 500,000
shares of Common Stock for issuance pursuant to its 2004 Non-Employee Director
Stock Ownership Plan (the “Director Plan” and together
with the Incentive Plan, the “Plans”), 6,216,000
(approximately 125,000 post-reverse split) of which were issuable upon exercise
of outstanding awards granted under the Plans as of the date
hereof. The Company reserved a total of 1,680,000 shares
related to the issuance of non qualified stock options or warrants to
consultants outside of the Company’s plans. The Company has also reserved
66,471,108 shares of Common Stock issuable upon conversion of debentures,
53,349,315 shares of Common Stock issuable upon conversion of preferred stock
and 55,490,359 shares of Common Stock issuable upon exercise of
warrants issued in connection with the debentures and preferred
stock. The Company has reserved an additional 9,472,222 shares of
Common Stock (189,444 post-reverse split) for the exercise of warrants issued
prior to the issuance of the debentures and preferred stock. The debentures,
preferred stock and their related warrants, will be extinguished and replaced
in
their entirety by the post- reverse split shares of Common Stock being issued
in
connection with the Recapitalization as set forth on Exhibit
B. The shares of Common stock currently reserved for issuance
upon conversion of the debentures and preferred stock and upon exercise of
the
warrants relating to the debentures and preferred stock will be considered
to be
no longer reserved upon the Recapitalization. Except as set forth in
this Section 2(g) and
except with respect to the Recapitalization as set forth on Exhibit B and as
contemplated by this Agreement, there are no other options, warrants, rights,
convertible or exchangeable securities, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating
the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
the
Company or any securities convertible into or exchangeable for capital stock
of
the Company or obligating the Company to grant, extend or enter into any such
option, warrant, right, commitment or agreement. There are no
outstanding bonds, debentures, notes or other obligations issued by the Company
which permit the holders thereof to vote with the stockholders of the Company
on
any matter.
(i) Litigation. There
are no claims, actions, suits, proceedings or investigations pending or, to
the
knowledge of the Company, threatened against the Company before any governmental
authority which (i) in any manner challenge or seek to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement,
or
(ii) could reasonably be expected to cause, individually or in the
aggregate, a Material Adverse Effect. Neither the Company nor any of
its assets or properties (whether leased or owned) is subject to any orders,
judgments, injunctions or decrees which could reasonably be expected to cause
a
Material Adverse Effect.
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(j) Disclosure.
All
disclosure furnished by or on behalf of the Company to the Purchasers regarding
the transactions contemplated hereby is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. On or
before January 15, 2008 the Company shall publicly disclose, via a Current
Report on Form 8-K, any material non-public information provided to any
Purchaser prior to the date of such public release. The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company.
3. Representations
and Warranties of Purchaser. Each of the Purchasers, severally
and not jointly, represents and warrants to the Company, effective as of the
date of this Agreement and as of the Closing, as follows, understanding that
the
Company will rely on these representations as a basis for determining the
availability of an exemption for the sale of the Securities under applicable
federal and state securities laws:
(a) Organization
and
Existence. Such Purchaser, if not a natural person, is duly
organized, validly existing and in good standing under the laws of the state
of
its organization or formation, and has all requisite power and authority to
invest in the Securities pursuant to this Agreement.
(b) Authorization. Such
Purchaser has full power and authority and has taken all requisite action on
the
part of the Purchaser necessary for (i) the authorization, execution and
delivery of this Agreement, and (ii) the authorization of the performance of
all
obligations of the Purchaser hereunder. The execution and delivery of
this Agreement by the Purchaser and the consummation by him, her or it of the
transactions contemplated hereby have been duly authorized by the Purchaser,
and
if the Purchaser is not an individual, by its board of directors or other
appropriate governing body, and no further consent or authorization of the
Purchaser is required. This Agreement constitutes the legal, valid
and binding obligations of the Purchaser, enforceable against the Purchaser
in
accordance with its terms, subject to (i) bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally, (ii) equitable limitations
on the availability of specific remedies; (iii) principles of equity (regardless
of whether such enforcement is considered in a proceeding in law or in equity),
and (iv) to the extent rights to indemnification and contribution may be limited
by federal securities laws or the public policy underlying such
laws.
(c) Purchase
Entirely for Own
Account. The Securities to be received by such Purchaser
hereunder will be acquired for such Purchaser's own account, not as nominee
or
agent, and not with a view to the resale of distribution of any part thereof
in
violation of the Securities Act, and such Purchaser has no present intention
of
selling, granting any participation in, or otherwise distributing the same
in
violation of the Securities Act without prejudice, however, to such Purchaser's
right at all times to sell or otherwise dispose of all or any party of such
Securities in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold the Securities for any period of
time. Such Purchaser is not a broker-dealer registered with the
Commission under the Exchange Act or an entity engaged in a business that would
require it to be so registered.
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(d) Investor
Experience;
Acknowledgement of Risk. Such Purchaser acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that
it
is capable of evaluating the merits and risks of the investment contemplated
hereby. Such Purchaser understands that its investment in the
Securities involves a significant degree of risk.
(e) Disclosure
of
Information. Such Purchaser has conducted its own due
diligence examination of the Company's business, financial condition, results
of
operations, and prospects, and has had an opportunity to receive all information
related to the Company and the Securities requested by it and to ask questions
of and receive answers from the Company regarding the Company, its business,
finances and operations and the terms and conditions of the offering of the
Securities. The Purchaser acknowledges that (i) all Commission
Reports have been made available to the Purchaser, and (ii) the Purchaser
has had the opportunity to ask questions, receive answers, and obtain additional
information from and concerning the Company.
(f) Restricted
Securities. Such Purchaser understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act
only
in certain limited circumstances. Such Purchaser understands that the
Securities are being offered and sold to him, her or it in reliance upon
specific exemptions from the registration requirements of federal and state
securities laws and that the Company is relying upon the truth and accuracy
of,
and the Purchaser's compliance with, the representations, warranties,
agreements, acknowledgements and understandings of the Purchasers set forth
herein to determine the availability of such exemption and the eligibility
of
the Purchasers to acquire the Securities.
(g) Legend. Such
Purchaser understands and agrees that the certificate representing the
Securities will bear a legend similar to the following:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION
OR
AN EXEMPTION THEREFROM UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT
TO
RULE 144 OF SUCH ACT.”
The
certificates evidencing the Securities may also bear any applicable legend
required by any state, local or foreign law governing such securities.
6
(h) Restriction
on Sales, Short
Sales and Hedging Transactions. Such Purchaser represents and
agrees that during the period from the execution of this Agreement through
the
Closing Date, such Purchaser shall not (i) purchase or sell, or induce
others to purchase or sell, the Common Stock as traded in the public market,
and
(ii) execute or effect, or cause to be executed or effected, any short
sale, option or equity swap transactions in or with respect to the Common Stock
or any other derivative security transaction the purpose or effect of which
is
to hedge or transfer to a third party all or any part of the risk of loss
associated with the ownership of the Securities by such Purchaser.
(i) Accredited
Investor. Such Purchaser is an accredited investor as defined
in Rule 501(a) of Regulation D, as amended, under the Securities
Act. Such Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed upon
or
made any recommendation or endorsement of the Securities.
4. Conditions
to Closing.
(a) Purchasers. The
obligation of each Purchaser to purchase the Securities at the Closing is
subject to the fulfillment to the satisfaction of the Purchasers on or before
the Closing of the following conditions:
(i) Delivery
of Agreement by
Company. The Company shall have executed and delivered this
Agreement.
(ii) Representations
and
Warranties; Performance of Obligations. The representations
and warranties made by the Company in this Agreement shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects as of the Closing, except to the extent any such
representation or warranty expressly speaks as of an earlier date, with the
same
force and effect as if they had been made at and as of such time, subject to
changes contemplated by this Agreement. The Company shall have
performed in all material respects all obligations and conditions herein
required to be performed or observed by it on or before the
Closing.
(iii) Compliance
Certificate. The chairman of the board of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in this Section 4 have been fulfilled.
(iv) Recapitalization. The
Company shall have secured the approval of the requisite number of holders
of
each of its currently outstanding classes of capital stock, and the approval
of
the requisite number of holders of the debentures issued by the Company, to
the
Recapitalization. It is understood and agreed that the Closing and
the Recapitalization shall occur simultaneously with each other.
(v) Litigation. No
judgment,
writ, order, injunction, award or decree of or by any court, or judge, justice
or magistrate, including any bankruptcy court or judge, or any order of or
by
any governmental authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority, enjoining or
preventing the consummation of the transactions contemplated by this Agreement
in the manner provided for in this Agreement.
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(b) The
Company. The Company's obligation to sell and issue the
Securities at the Closing is subject to the fulfillment to the satisfaction
of
the Company on or before the Closing Date of the following
conditions:
(i) Delivery
of Agreement by
Purchasers. Each Purchaser shall have executed and delivered
this Agreement.
(ii) Representations
and
Warranties. The representations and warranties made by the
Purchasers in this Agreement shall be true and correct in all material respects
when made, and shall be true and correct in all material respects as of the
Closing, except to the extent any such representation or warranty expressly
speaks as of an earlier date, with the same force and effect as if they had
been
made at and as of such time, subject to changes contemplated by this
Agreement. The Purchasers shall have performed in all material
respects all obligations and covenants herein required to be performed by them
on or before the Closing.
(iii) Payment
of Purchase
Price. The Purchasers shall have delivered the Purchase Price
to the Company.
(iv) Litigation. No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated by this
Agreement in the manner provided for in this Agreement.
(v) Recapitalization. The
Company shall have secured the approval of the requisite number of holders
of
each of its currently outstanding classes of capital stock, and the approval
of
the requisite number of holders of the debentures issued by the Company, to
the
Recapitalization. It is understood and agreed that the Closing and
the Recapitalization shall occur simultaneously with each other.
5. Covenants
of the Company.
(a) Transfer
Restrictions. Certificates evidencing the Shares and the
common stock which may be obtained upon exercise of the Warrants (the “Warrant Shares”) shall not
contain any legend (including the legend set forth in Section 3(g): (i) while
a
registration statement covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Securities pursuant
to
Rule 144, or (iii) if such Securities are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the Commission). The Company shall cause its counsel to
issue a legal opinion to the Transfer Agent if required by the Transfer Agent
to
effect the removal of the legend as described hereunder. If all or
any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, such Warrant
Shares shall be issued free of all legends. The Company agrees that
following the effective date of a registration statement covering the resale
of
the Shares and Warrant Shares or at such time as such legend is no longer
required under this Section 5(a), it will, no later than three trading days
following the delivery by a Purchaser to the Company or its transfer agent
of a
certificate representing the Shares or Warrant Shares issued with a restrictive
legend (such third trading day, the “Legend Removal Date”), deliver
or cause to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends. The Company may
not
make any notation on its records or give instructions to its transfer agent
that
enlarge the restrictions on transfer set forth in this
Section. Certificates for Shares and Warrant Shares subject to legend
removal hereunder shall be transmitted by the Company's transfer agent to the
Purchasers by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System.
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(b) Current
Information. Until the earliest of the time that (i) no
Purchaser owns Securities or (ii) the Warrants have expired, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange
Act.
(c) Non-Public
Information. The Company covenants and agrees that neither it
nor any other person acting on its behalf, will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall
have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser
shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.
(d) Subsequent
Equity
Issuances. From the date hereof until 180 days from the date
hereof, the Company shall not issue shares of Common Stock or securities
convertible or exchangable into Common Stock at an effective per share of Common
Stock price of less than $0.18, subject to adjustment for reverse and forward
stock splits and the like effected after the date of this Agreement; provided,
however, that issuances of stock options under the Company’s 2007 Equity
Incentive Plan or 2007 Non-Employee Directors’ Stock Option Plan exercisable at
“fair market value” (as such term in defined in such plans) are exempted from
such prohibition.
(e) Variable
Rate
Transaction. From the date hereof until the earliest of the
time that (i) no Purchaser owns Securities or (ii) the Warrants have expired,
the Company shall be prohibited from effecting or entering into an agreement
to
effect any transaction involving a Variable Rate
Transaction. “Variable Rate Transaction” means a transaction in which
the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time
after
the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock (excluding
ordinary anti-dilution adjustments) or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the Company
may
sell securities at a future determined price. Any Purchaser shall be
entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.
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6. Miscellaneous.
(a) Entire
Agreement. Each party expressly acknowledges and agrees that
this Agreement is the final, complete and exclusive statement of the agreement
of the parties with respect to its subject matter and supersedes any prior
or
contemporaneous agreements, understandings, or course of dealing. In
entering into this Agreement, neither party is relying on any representation,
warranty, or covenant that is not expressly contained in this
Agreement.
(b) Amendment. Except
as expressly otherwise provided herein, neither this Agreement nor any of the
terms, provisions, obligations or rights contained herein may be amended,
modified, supplemented, augmented, rescinded, discharged or terminated (other
than by performance), except by a written instrument or instruments signed
by
the parties to this Agreement.
(c) No
Broker
Fees. Each party represents to the other that it has not used
a broker or other placement agent in respect of the sale of the Securities
hereunder, and shall indemnify the other from any claims for any broker
purporting to act on their behalf.
(d) Applicable
Law. This Agreement and the rights and remedies of each party
arising out of or relating to this Agreement (including, without limitation,
equitable remedies) shall be solely governed by, interpreted under, and
construed and enforced in accordance with the laws (without regard to the
conflicts of law principles thereof) of the State of Delaware, as if this
Agreement were made, and as if its obligations are to be performed, wholly
within the State of Delaware. The party which does not prevail in any dispute
arising under this Agreement shall be responsible for all reasonable fees and
expenses, including attorneys’ fees, and expenses for investigation, preparation
and prosecution of such dispute incurred by the prevailing party in connection
with such dispute.
(e) Jurisdiction;
Venue; Jury
Trial. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated
by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the State
of
Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in the State of Delaware 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 suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such
proceeding. In any action, suit or proceeding in any jurisdiction
brought by any party against any other party concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents), the parties each knowingly and
intentionally, to the greatest extent permitted by applicable law, hereby
absolutely, unconditionally, irrevocably and expressly waives forever trial
by
jury.
(f) Assignment. Except
as specifically provided in this Agreement, neither the Company nor any
Purchaser may sell, license, transfer or assign (by operation of law or
otherwise) any of such party's rights or interests in this Agreement or delegate
such party's duties or obligations under this Agreement, in whole or in part,
without the prior written consent of the other party.
10
(g) Counterparts;
Facsimile
Signatures. This Agreement may be executed (i) in two or more
counterparts, each of which shall constitute an original, but all of which,
when
taken together, shall constitute but one instrument, (ii) via facsimile or
electronic transmission (e.g., PDF/email), which shall be deemed an
original.
(h) Titles
and
Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
(i) Notices. Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described: (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by facsimile, then such notice shall
be
deemed given upon receipt of confirmation of complete transmittal, (iii) if
given by mail, then such notice shall be deemed given upon the earlier of (A)
receipt of such notice by the recipient or (B)) three days after such notice
is
deposited in first class mail, postage prepaid, and (iv) if given by an
internationally recognized overnight air courier, then such notice shall be
deemed given one business day after delivery to such carrier. All
notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days'
advance written notice to the other party:
If
to the
Company
Viking
Systems, Inc.
000
Xxxxxxxx Xxxx
Xxxxxxxxxxx,
XX 00000
Attention: Chief
Financial Officer
Fax: [___________]
With
a
copy (not constituting notice) to:
Xxxxx
Xxxxxx LLP
000
Xxxx
Xxxxxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attention: P.
Xxxxx Xxxxx, Esq.
Fax
No.: (000) 000-0000
If
to the
Purchasers:
To
the
addresses set forth on the signature pages hereto.
(j) Publicity. Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby which includes the name(s) of the Purchaser(s)
(other than the Recapitalization) shall be used by the Company or the Purchasers
without the prior consent of the Company (in the case of a release or
announcement by the Purchasers) or the Purchasers (in the case of a release
or
announcement by the Company) (which consents shall not be unreasonably withheld
or delayed), except as such release or announcement may be required by
applicable federal or state securities laws or the applicable rules or
regulations of any securities exchange or securities market.
11
(k) Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties hereby waive any provision
of
law which renders any provision hereof prohibited or unenforceable in any
respect.
(l) Further
Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and
to
evidence the fulfillment of the agreements herein contained.
(m) Independent
Nature of
Investors' Obligations and Rights. The obligations of each
Purchaser under this Agreement are several and not joint with the obligations
of
any other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under this
Agreement. The decision of each Purchaser to purchase Securities
pursuant to this Agreement has been made by such Purchaser independently of
any
other Purchaser. Nothing contained herein, 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 or
as
a group with respect to such obligations or the transactions contemplated by
this Agreement. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Securities or enforcing its
rights under this Agreement. Each Purchaser shall be entitled to
independently 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. The Company acknowledges that each of the Purchasers has
been provided with the same Agreement for the purpose of closing a transaction
with multiple purchasers and not because it was required or requested to do
so
by any Purchaser.
(n) Third
Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
(o) No
Strict
Constructions. 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.
12
(p) Rights
Cumulative. Each and all of the various rights, powers and
remedies of the parties shall be considered cumulative with and in addition
to
any other rights, powers and remedies which such parties may have at law or
in
equity in the event of the breach of this Agreement. The exercise or
partial exercise of any right, power or remedy shall neither constitute the
exclusive election thereof nor the waiver of any other right, power or remedy
available to such party.
[NEXT
PAGE IS THE SIGNATURE PAGE]
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
13
[COMPANY
SIGNATURE PAGE]
IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed
as of the date first written above.
THE
COMPANY:
|
|
By:
Xxxxxx Xxxxxxx, Chief Financial Officer
|
|
PURCHASERS:
|
|
See
next page.
|
[Signature
Page to Securities Purchase Agreement - 1]
[PURCHASER SIGNATURE PAGES]
IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed
as of the date first written above.
Name
of Purchaser:
|
_____________________________________ |
Signature
of Authorized
Signatory of Purchaser:
|
_____________________________________ |
Name
of Authorized Signatory:
|
_____________________________________ |
Title
of Authorized Signatory:
|
_____________________________________ |
Fax
Number of Authorized Signatory:
|
_____________________________________ |
Address
for Notice of Purchaser:
|
_____________________________________ |
Subscription
Amount ($):
|
_____________________________________ |
Number
of Shares:
|
_____________________________________ |
Number
of Warrants:
|
_____________________________________ |
EIN
or SSN:
|
_____________________________________ |
[Signature
Page to Securities Purchase Agreement
- 2]
Exhibit
A
Form
of Warrant
[EXHIBIT
A]
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
WARRANT
to purchase
common
stock
of
Viking
systems, INC.
This
Warrant (this “Warrant”)
certifies that, for value received, [__________________________] and its
permitted assignees (the “Holder”), is entitled, upon
the terms and conditions of this Warrant, at any time and from time to time,
on
or after [INSERT ISSUANCE
DATE] (the “Initial
Exercise Date”) and on or before the Termination Date (as defined below)
but not thereafter, to subscribe for and purchase from Viking Systems, Inc.,
a
Delaware corporation (the “Company”), up to [_________]
shares (the “Warrant
Shares”) of common stock, $0.001 par value per share, of the Company (the
“Common
Stock”). The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2.
This
Warrant shall terminate (the “Termination Date”) at 5:00
p.m. Eastern Time on the earlier of (i) the five (5) year anniversary of the
Initial Exercise Date; and (ii) ten days prior to the effective date of a
transaction in which (each, a “Corporate Transaction”) (A)
the Company effects any merger or consolidation of the Company with or into
another entity (other than a merger or reorganization involving only a change
in
the state of incorporation of the Company or the acquisition by the Company
of
other businesses where the Company survives as a going concern), (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another entity) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or
property.
Stock
Purchase
Agreement. This Warrant is issued pursuant to that certain
Stock Purchase Agreement dated the date hereof (the “Stock Purchase Agreement”) by
and between the Company and the Holder.
A-1
Vesting
and
Exercise.
Vesting.
This Warrant
is exercisable as to all of the Warrant Shares on the Initial Exercise
Date.
Exercise.
Exercise of
the purchase rights for vested Warrant Shares represented by this Warrant may
be
made, in whole or in part, at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the Company of (i)
a
duly executed copy of the Notice of Exercise Form annexed hereto (or such other
office or agency of the Company as it may designate by notice in writing to
the
registered Holder at the address of the Holder appearing on the books of the
Company); specifying therein the amount of vested Warrant Shares to be
exercised, (ii) payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier's check drawn on a United States bank,
and
(iii) if this Warrant is exercised in full, surrender of this Warrant to the
Company.
Surrender
of Warrant. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to the Company
until this Warrant has been exercised in full. Partial exercises of
this Warrant resulting in purchases of a portion of the total number of Warrant
Shares shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable number of
Warrant Shares purchased. The Holder and the Company shall maintain
records showing the number of Warrant Shares purchased and the date of such
purchases. The Company shall deliver any objection to any Notice of
Exercise Form within three Trading Days (as defined below) of receipt of such
notice. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be
less
than the amount stated on the face hereof. Under no circumstances
shall this Warrant be exercised for unvested Warrant Shares.
Exercise
Price. The exercise price of the Common Stock under this
Warrant shall be $0.18, subject to adjustment hereunder (the “Exercise Price”).
Cashless
Exercise. If at any time (i) the Warrants have been held for
the then-applicable holding period (including any available “tacking” period for
such Warrants) under Rule 144 promulgated under the Securities Act of 1933,
as
amended (the “Securities
Act”), or any successor provision then in effect which would allow the
Holder to exercise the Warrants and “tack” the holding period of this Warrant
and the Warrant Shares which may be acquired thereunder, and (ii) there is
no
effective registration statement pursuant to which, the Warrant Shares may
be
resold by the Holder, then this Warrant may also be exercised at such time
by
means of a “cashless exercise” in which the Holder shall be entitled to receive
a certificate for the number of vested Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A)
= the VWAP on the Trading Day
immediately preceding the date of such election;
(B)
= the Exercise Price of this Warrant, as adjusted;
and
(X)
= the number of vested Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.
A-2
As
used
herein, “VWAP” shall
mean, for any date, the price determined by the first of the following clauses
that applies: (i) if the Common Stock is then listed or quoted on the American
Stock Exchange, the New York Stock Exchange, the Nasdaq Global Select Market,
the Nasdaq Global Market, or the Nasdaq Capital Market (each a “Trading Market”), the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time); (ii) if the Common Stock
is
not then listed or quoted on a Trading Market and if prices for the Common
Stock
are then quoted on the OTC Bulletin Board, the volume weighted average price
of
the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (iii) if the Common Stock is not then listed or quoted on the
OTC Bulletin Board and if prices for the Common Stock are then reported in
the
“Pink Sheets” published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (iv)
in
all other cases, the fair market value of a share of Common Stock as determined
by in good faith by the Company's Board of Directors or a committee
thereof.
As
used
herein “Trading Day”
shall mean a day on
which the Common Stock is traded on one of the following
markets or exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the American Stock Exchange, the New York Stock
Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq
Capital Market or the OTC Bulletin Board.
Holder’s
Restrictions. The Company shall not effect any exercise of this Warrant,
and the Holder shall not have the right to exercise any portion of this Warrant,
pursuant to 0 or otherwise, to the
extent that after giving effect to such issuance after exercise as set forth
on
the applicable Notice of Exercise, the Holder (together with the Holder’s
affiliates, and any other person or entity acting as a group together with
the
Holder or any of the Holder’s affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its affiliates shall include the number of shares of
Common Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its
affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
securities convertible into or exercisable for Common Stock ) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as
set
forth in the preceding sentence, for purposes of this 0, beneficial ownership shall be calculated
in accordance with Section 13(d) of the Exchange Act of 1934, as amended (the
“Exchange Act”) and the
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance therewith.
To
the extent that the limitation contained in this 0 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission
of
a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of
the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this 0, in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s transfer agent setting forth the number of
A-3
shares
of
Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case,
the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Warrant, by the Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Beneficial Ownership
Limitation provisions of this 0 may be
waived by the Holder, at the election of the Holder, upon not less than 61
days’
prior notice to the Company to change the Beneficial Ownership Limitation to
9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon exercise of this
Warrant, and the provisions of this 0
shall continue to apply. Following a change by a Holder of the Beneficial
Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the
Beneficial Ownership Limitation provisions of this 0 may be waived by the Holder, at the
election of the Holder, upon not less than 61 days’ prior notice to the Company
to change the Beneficial Ownership Limitation to 49.99%. Upon the
change by a Holder of the Beneficial Ownership Limitation to such 49.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
the
Holder. The provisions of this paragraph shall be construed and implemented
in a
manner otherwise than in strict conformity with the terms of this 0 to correct this paragraph (or any
portion
hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor holder of
this Warrant.
Mechanics
of
Exercise.
Authorization
of Warrant Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by
this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
Delivery
of Certificates Upon Exercise.
Certificates
for shares acquired hereunder shall be transmitted by the transfer agent of
the
Company to the Holder by crediting the account of the Holder’s prime broker with
the Depository Trust Company through its Deposit Withdrawal Agent Commission
(“DWAC”) system if the
Company is a participant in such system and (i) there is an effective
registration statement permitting the resale of the Warrant Shares by the
Holder, or (ii) the shares are eligible to be sold under Rule 144(k) as
promulgated under the Securities Act of 1933, as amended (the “Securities
Act”). Otherwise, the shares shall be transmitted by physical
delivery to the address specified by the Holder in the Notice of Exercise within
three Trading Days following the last to be received by the Company of (A)
the
Notice of Exercise Form, (B) surrender of this Warrant (if required) and (C)
payment of the aggregate Exercise Price (“Warrant Share Delivery Date”).
This Warrant shall be deemed to have been exercised on the date the Exercise
Price and the Notice of Exercise Form is received by the Company.
Compensation
for Buy-In on Failure to Timely Deliver Certificates. Upon Exercise. In addition
to any other rights available to the Holder, if the Company fails to cause
its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall (1) pay in cash to
A-4
the
Holder the amount by which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell order giving rise to
such purchase obligation was executed, and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. For
example, if the Holder purchases Common Stock having a total purchase price
of
$11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required pursuant to
the
terms hereof.
No
Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise
be entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price.
Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares shall
be made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall
be
issued in the name of the Holder or in such name or names as may be directed
by
the Holder; provided, however, that in the event certificates for Warrant Shares
are to be issued in a name other than the name of the Holder, this Warrant
when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
Closing
of Books. The Company will not close its stockholder books or records
in any manner which prevents the timely exercise of this Warrant pursuant to
the
terms hereof.
Certain
Adjustments.
Stock
Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(i) pays a stock dividend or otherwise make a distribution or distributions
on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this
Warrant), (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any)
A-5
outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re classification.
Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.
Notice
to
Holders.
Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant
to this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a
brief
statement of the facts requiring such adjustment.
Notice
to
Allow Exercise by Holder. If the Company (A) declares a dividend (or
any other distribution) on the Common Stock; (B) declares a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) authorizes the
granting to all holders of the Common Stock rights or warrants to subscribe
for
or purchase any shares of capital stock of any class or of any rights; (D)
the
Company shall authorize any Corporate Transaction; (E) authorizes the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, as applicable, the Company shall cause the following to be mailed
to the Holder at its last address as it shall appear on the books of the Company
at the time indicated: (x) at least 10 calendar days prior to the applicable
record date, a notice stating the date on which a record is to be taken for
the
purpose of such dividend, distribution, redemption, rights or warrants, or
if a
record is not to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions, redemption, rights
or
warrants are to be determined or (y) at least 20 calendar days prior to the
expected effective date, a notice stating the date on which such Corporate
Transaction is expected to become effective or close, and the date as of which
it is expected that holders of the Common Stock of record shall be entitled
to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon the effectiveness of such Corporate Transaction; provided,
that
the failure to mail any such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action required to be
specified in such notice.
Transfer
of
Warrant.
Transferability. Subject
to compliance with any applicable securities laws and the conditions set forth
in Sections 4(c), this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of this Warrant at the principal office of
the
Company, together with the Assignment Form attached hereto duly executed by
the
Holder or its duly authorized agent or attorney and funds sufficient to pay
any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute and deliver
a new warrant or warrants in the name of the assignee or assignees and in the
denomination or denominations specified in the Assignment Form, and shall issue
to the assignor a new warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. Any such
assignee must sign an investment letter in form and substance reasonably
satisfactory to the Company before a warrant is issued to such
assignee. The Company may deem and treat the registered Holder of
this Warrant as the absolute owner hereof for the purpose of any exercise hereof
or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.
A-6
New
Warrants. This Warrant may be divided or combined with other
warrants upon presentation hereof at the principal office of the Company,
together with a written notice specifying the names and denominations in which
new warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new warrant or warrants in exchange for the warrant or warrants
to
be divided or combined in accordance with such notice.
Transfer
Restrictions. If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws,
the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
“accredited investor” as defined in Rule 501 promulgated under the Securities
Act or a qualified institutional buyer as defined in Rule 144A(a) under the
Securities Act.
Legends. The
Holder understands and agrees that the certificate representing the Warrant
Shares shall bear a legend similar to the following:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION
OR
AN EXEMPTION THEREFROM UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO
VIKING SYSTEMS THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT
TO
RULE 144 OF SUCH ACT.”
The
certificates evidencing the Warrant Shares may also bear any applicable legend
required by any state, local or foreign law governing such securities.
Miscellaneous.
Title
to
Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and 0,
this Warrant and all rights hereunder are transferable, in whole or in part,
at
the office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
No
Rights as Shareholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company prior to
the
exercise hereof, and following such exercise, only to the extent this Warrant
was exercised. The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes,
as
of the close of business on the later of (i) the date this Warrant has been
exercised by delivery of a duly executed Notice of Exercise Form and payment
to
the Company of the Exercise Price and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(e)(iv) before the issuance of such shares,
have been paid or (ii) the date this Warrant is surrendered to the Company,
if
required under the terms hereof. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
or the shares purchasable hereunder until, and only to the extent that, this
Warrant shall have been exercised.
A-7
Loss,
Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating
to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity
or
security reasonably satisfactory to it (which, in the case of this Warrant,
shall not include the posting of any bond), and upon surrender and cancellation
of such warrant or stock certificate, if mutilated, the Company will make and
deliver a new warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
Saturdays,
Sundays,
Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall
be a
Saturday, Sunday or a legal holiday, then such action may be taken or such
right
may be exercised on the next succeeding day not a Saturday, Sunday or legal
holiday.
Authorized
Shares.
The
Company covenants that during the period this Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable
law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.
Except
and to the extent as waived or consented to by the Holder, the Company shall
not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this
Warrant, but will at all times in good faith assist in the carrying out of
all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company will (A) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase
in
par value, (B) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (C) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Titles
and
Subtitles. The titles and subtitles used in this Warrant are
used for convenience only and are not to be considered in construing or
interpreting this Warrant.
Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
A-8
Attorneys'
Fees. In the event that any legal proceeding with respect to
the interpretation or enforcement of this Warrant is initiated, the prevailing
party shall be awarded their costs and expenses including, but not limited
to,
reasonable attorneys' fees.
Notices. Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Stock Purchase Agreement.
Limitation
of
Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
Successors
and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit
of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.
Amendment. This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
Severability. Wherever
possible, each provision of this Warrant shall be interpreted in such manner
as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.
Force
Majeure. In no event shall a Holder have any claim or right
against the Company for any failure of performance in accordance with this
Warrant due to causes beyond its reasonable control, including, but not limited
to: such delays arising directly out of an act of God, fire, flood or other
natural catastrophe; laws, orders, rules, regulations, directions or action
of
governmental authorities having jurisdiction or any civil military authority;
or
national emergency, riot, act of terrorism or war or labor dispute.
Governing
Law;
Venue. This Warrant is to be construed in accordance with and
governed by the internal laws of the State of Delaware without giving effect
to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Delaware to the rights
and duties of the Company and the Holder. All disputes and
controversies arising out of or in connection with this Warrant shall be
resolved exclusively by the state and federal courts located in the State of
Delaware, and each of the Company and the Holder hereto agrees to submit to
the
jurisdiction of said courts and agrees that venue shall lie exclusively with
such courts.
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A-9
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: January
__, 2008
VIKING
SYSTEMS, INC.
By:
/s/ Xxxxxx
Xxxxxxx
Name: Xxxxxx
Xxxxxxx
Title: Chief
Financial Officer
|
A-10
NOTICE
OF EXERCISE
To: VIKING
SYSTEMS, INC.
(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2)
Payment shall take the form of (check applicable box):
[ ]
in lawful money of the United States; or
[
] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in Section 2(d) of the Warrant, to exercise the
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in Section 2(d).
(3)
Please issue a certificate or certificates representing said Warrant Shares
in
the name of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following address:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE
OF HOLDER]
Name
of
Holder:______________________________________________________________________________
Signature
of Authorized Signatory of
Holder:_______________________________________________________
Name
of
Authorized
Signatory:___________________________________________________________________
Title
of
Authorized
Signatory:____________________________________________________________________
Date:_______________________________________________________________________________________
A-11
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to_______________________________________________
whose address is_______________________________________________________________.
Dated: _____________,
_______
Holder's
Signature:
_____________________________
Holder's
Address:
_____________________________
_____________________________
Signature
Guaranteed: ___________________________________________
NOTE: The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
A-13
Exhibit
B
Recapitalization
Chart
B-1