CONSENT, WAIVER AND AMENDMENT AGREEMENT
Exhibit
10.6
Form
8-K
Viking
Systems, Inc.
File
No.
000-49636
This
Consent, Waiver and Amendment Agreement (this “Agreement”)
is
entered into as of February 23, 2007, by and between each of the undersigned
purchasers, acting individually (individually a “Purchaser”
and
collectively the “Purchasers”),
and
Viking Systems, Inc., a Delaware corporation (the “Company”).
WHEREAS,
pursuant to a securities purchase agreement dated May 22, 2006 among the
Company
and the Purchasers (the “Purchase
Agreement”),
the
Purchasers were issued convertible preferred stock (the “Preferred
Stock”)
and
warrants (the “Existing
Warrants”)
to
purchase shares of Common Stock, par value $.001 per share (the “Common
Stock”)
and in
the individual amounts set forth below such Purchaser’s name on the signature
pages to the Purchase Agreement;
WHEREAS,
the Company and Purchasers desire to amend certain terms of the Transaction
Documents and waive certain provisions and other matters contained in the
Transaction Document.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for good and valuable consideration the receipt and adequacy of which
are
hereby acknowledged, the Purchasers and the Company agree as
follows:
ARTICLE
I
DEFINITIONS
Section
1. Definitions.
Capitalized terms not defined in this Agreement shall have the meanings ascribed
to such terms in the Purchase Agreement.
ARTICLE
II
AMENDMENTS
AND OTHER AGREEMENTS
Section
2.1 Consent
to Subsequent Financing.
Each
Purchaser, severally and not jointly with the other Purchasers, hereby consents
to the Company consummating the issuance of up to $6,000,000 principal amount
of
8% Secured Convertible Debentures and Warrants on the terms and conditions
set
forth in a term sheet provided so the Purchasers which financing shall close
concurrently with the effectiveness of this Agreement (“Subsequent
Financing”).
Each
Purchaser acknowledges that the terms and conditions of the Subsequent Financing
may conflict with terms and conditions of the Purchase Agreement and other
Transaction Documents and the Company’s obligations under the Purchase Agreement
and other Transaction documents.
Each
Purchaser hereby waives any breach of the Purchase Agreement and other
Transaction Documents that may occur by reason of the terms, conditions,
rights,
restrictions and covenants of the Subsequent Financing and the documents
related
to the Subsequent Financing (“Subsequent
Financing Documents”)
as of
the date hereof.
Section
2.2 Subordination
of Rights to Participating in Future Financings.
The
Transaction Documents grant the Purchaser the right to participate in future
equity or debt financings (“Future Financings”) of the Company. As a condition
to the Subsequent Financing, the investors therein require that the Company
grant such investors the exclusive right to participate in Future Financings.
Each Purchaser subordinates to the investors in the Subsequent Financing,
any
and all rights such Purchaser was granted in the Transaction Documents to
participate in Future Financings of the Company. If, in connection with any
Future Financing, the investors in the Subsequent Financing do not acquire
all
securities offered in such Future Financing that they are entitled to acquire
pursuant to the Subsequent Financing Documents, the securities remaining
for
sale shall be offered to the Purchasers on a pro rata basis.
Section
2.3 Adjustment
to Exercise Price of the Existing Warrants.
Each
Purchaser, severally and not jointly with the other Purchasers, hereby agrees
with the Company that, on account of the Subsequent Financing, the Exercise
Price of the Existing Warrants shall be reduced from $0.35 to $0.18, each
subject to further adjustment therein, but that the number of Warrant Shares
issuable thereunder shall not be increased solely on account of such reduction
pursuant to Section 3(b) provided that any further issuances of Common Stock
or
Common Stock Equivalents shall be subject to the full provisions of Section
3(b)
as to both a decrease in the Exercise Price and increase in the number of
Warrant Shares issuable thereunder, including but not limited to pursuant
to
Section 5(i) of the Convertible Debentures issued pursuant to the Subsequent
Financing.
Section
2.4 Amendment
to Termination Date of the Existing Warrants.
The
definition of “Termination Date” in the first paragraph of the Existing Warrants
is hereby amended and restated in its entirety as follows:
“…and
on
or prior to the close of business on seven year anniversary of the Initial
Exercise Date (the “Termination
Date”)…”
Section
2.5 Amendment
to Section 3(b) of the Existing Warrants.
Section
3(b) of the Existing Warrants is hereby amended and restated in its entirety
as
follows:
“Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time while this
Warrant
is outstanding, shall sell or grant any option to purchase, or sell or grant
any
right to reprice its securities, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any
Common Stock or Common Stock Equivalents entitling any Person to acquire
shares
of Common Stock, at an effective price per share less than the then Exercise
Price (such lower price, the “Base
Share Price”
and
such issuances collectively, a “Dilutive
Issuance”)
2
(if
the
holder of the Common Stock or Common Stock Equivalents so issued shall at
any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with
such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Exercise Price, such issuance shall be deemed
to have occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced to equal
the Base Share Price and the number of Warrant Shares issuable hereunder
shall
be increased such that the aggregate Exercise Price payable hereunder, after
taking into account the decrease in the Exercise Price, shall be equal to
the
aggregate Exercise Price prior to such adjustment. Such adjustment shall
be made
whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustments shall be made, paid or issued
under this Section 3(b) in respect of an Exempt Issuance. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this
Section
3(b), indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms (such notice
the
“Dilutive
Issuance Notice”).
For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share
Price
regardless of whether the Holder accurately refers to the Base Share Price
in
the Notice of Exercise.”
Section
2.6 Consent,
Waivers and other Agreements.
a) As
to all
shares underlying preferred and warrants(the “Unregistered
Shares”)
issued
pursuant to the Transaction Documents that are not subject to the currently
effective registration statement on file with the SEC (the “Existing
Registration Statement”)],
the
Purchasers hereby agree to waive the requirements of Section 3(c) of the
Registration Rights Agreement, and agree that the Company shall not be required
to file a Registration Statement with the Commission seeking to register
such
Unregistered Shares for resale by the Purchasers unless and until it receives
a
written request (a “Demand
Notice”,
and
the registration statement to be filed in connection therewith, a “Demand
Registration”)
by the
Purchasers holding a majority or more of the Registrable Securities (as defined
in the Registration Rights Agreement) that are not subject to the Existing
Registration Statement. For clarity, in connection with any Demand Registration,
the “Filing Date” for purposes of the Registration Rights Agreement shall be the
30th
calendar
day following the date of the Demand Notice and the “Effectiveness Date” shall
be the 90th
calendar
day following the Demand Notice.
3
b) Each
Purchaser, severally, and not jointly with the other Purchasers, hereby agrees
that in lieu of the payment of accrued but unpaid cash liquidated damages
under
Section 2(b) of the Registration Rights Agreement as to the Unregistered
Shares
in the amounts set forth on Schedule
A
hereto
and for the other consideration given to the Purchasers hereunder, each
Purchaser agrees to accept, and the Company agrees to issue to the Purchasers,
an aggregate of 4,000,000 shares of Common Stock (“Liquidated
Damage Shares”),
subject to adjustment for reverse and forward stock splits and the like).
Each
Purchaser shall receive a number of Liquidated Damage Shares calculated as
follows: such Purchaser’s initial Subscription Amount at the closing of the
Purchase Agreement divided by the aggregate Subscription Amounts under the
Purchase Agreement multiplied by 4,000,000. By way of example, Midsummer
Investment Ltd had a Subscription Amount equal to $2,500,000 and the aggregate
of all Subscription Amounts was $8,000,000. Accordingly, Midsummer would
receive
1.25 million of the Liquidated Damage Shares.
Section
2.7 Effect
on Transaction Documents. The
foregoing consents and waivers are given solely in respect of the transactions
described herein. Except
as
expressly set forth herein, all of the terms and conditions of the Transaction
Documents shall continue in full force and effect after the execution of
this
Agreement, and shall not be in any way changed, modified or superseded by
the
terms set forth herein. This
Agreement shall not constitute a novation or satisfaction and accord of any
Transaction Document.
Section
2.8. Filing
of Form 8-K.
Within
2 Trading Days of the date hereof, the Company shall issue a Current Report
on
Form 8-K, reasonably acceptable to each Purchaser disclosing the material
terms
of the transactions contemplated hereby, which shall include this Agreement
as
an attachment thereto.
Section
2.9. Waiver
of Certain Breaches.
The
Transaction Documents contain numerous provisions which require the Company
to
take certain actions or refrain from taking certain actions (“Requirements”).
Some of the Requirements require that Company take certain actions within
prescribed time periods. The Company is aware that it has not complied in
all
respects with the Requirements. Each Purchaser hereby waives any breach of
the
Transaction Documents with respect to the Requirements set forth on Exhibit
A
attached hereto and by this reference made a part hereof.
Section
2.10. Conditions
to Purchasers Obligations.
The
respective obligations of the Purchasers hereunder and the effectiveness
of the
consents, waivers and amendments set forth herein are subject to the following
conditions being met:
(a) the
accuracy in all material respects of the representations and warranties of
the
Company contained herein;
(b) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the date hereof shall have been performed;
4
(c) all
Purchasers parties to the Purchase Agreement shall have agreed to the terms
and
conditions of this Agreement; and
(d) there
shall have been no Material Adverse Effect with respect to the Company since
the
date hereof;
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
Section
3.1. Representations
and Warranties of the Company.
The
Company hereby make the representations and warranties set forth below to
the
Purchasers that as of the date of its execution of this Agreement:
(a) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by this Agreement and otherwise
to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on
the
part of such Company and no further action is required by such Company, its
board of directors or its stockholders in connection therewith. This Agreement
has been duly executed by the Company and, when delivered in accordance with
the
terms hereof will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be
limited by applicable law.
(b) No
Conflicts.
The
execution, delivery and performance of this Agreement by the Company and
the
consummation by the Company of the transactions contemplated hereby do not
and
will not: (i) conflict with or violate any provision of the Company’s
certificate or articles of incorporation, bylaws or other organizational
or
charter documents, or (ii) conflict with, or constitute a default (or an
event
that with notice or lapse of time or both would become a default) under,
result
in the creation of any lien upon any of the properties or assets of the Company,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any material
agreement, credit facility, debt or other material instrument (evidencing
Company debt or otherwise) or other material understanding to which the Company
is a party or by which any property or asset of the Company is bound or
affected, or (iii) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any property
or
asset of the Company is bound or affected.
5
(c) Other
Representations, Warranties and Covenants.
Except
as set forth on Schedule
A
attached
hereto, the Company hereby makes such representations, warranties and covenants
set forth in the Purchase Agreement as though fully set forth herein as of
the
date hereof, and all such representations, warranties and obligations are
incorporated herein by reference.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be made in accordance with the provisions of the
Purchase Agreement.
Section
4.2 Survival.
All
warranties and representations (as of the date such warranties and
representations were made) made herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered
to
have been relied upon by the parties hereto and shall survive the issuance
of
the Existing Warrants. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties;
provided however that no party may assign this Agreement or the obligations
and
rights of such party hereunder without the prior written consent of the other
parties hereto.
Section
4.3 Execution.
This
Agreement may be executed in two or more counterparts, all of which when
taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered
to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation
of the
party executing (or on whose behalf such signature is executed) with the
same
force and effect as if such facsimile signature page were an original
thereof.
Section
4.4 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that
is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section
4.5 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be determined pursuant to the Governing Law provision
of
the Purchase Agreement.
Section
4.6 Entire
Agreement.
The
Agreement, together with the exhibits and schedules thereto, contain the
entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6
Section
4.7 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
Section
4.8 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect
to
such obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights, including
without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in
any
proceeding for such purpose.
Section
4.9 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder, by written notice to the other parties, if the
transactions contemplated hereunder are not effective on or before February
23,
2007.
Section
4.10 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect
to
such obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights, including
without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in
any
proceeding for such purpose.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
|
VIKING
SYSTEMS, INC.
|
|
|
By:
/s/
Xxxxxx Xxxxxx
Name:
Xxxxxx Xxxxxx
Title:
Chief Executive Officer
|
7
[PURCHASER
SIGNATURE PAGES TO VKSY
AMENDMENT
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed
by their respective authorized signatories as of the date first indicated
above.
Name
of
Purchaser: ________________________________________________________
Signature
of Authorized Signatory of Purchaser:
__________________________________
Name
of
Authorized Signatory:
____________________________________________________
Title
of
Authorized Signatory:
_____________________________________________________
Email
Address of
Purchaser:________________________________________________
This
document was executed by the following:
|
Name
|
Shares
|
|
Crestview
Capital Master, LLC
|
500,00
|
|
Vision
Opportunity Master fund, Ltd.
|
125,000
|
|
Bushido
Capital Master Fund, LP
|
750,000
|
|
Gamma
Opportunity Capital Partners, LP Class A
|
125,000
|
|
Xxxxxx
Diversified Strategy Master Fund, LLC
|
250,000
|
|
GSSF
Master Fund, LP
|
212,500
|
|
Gryphon
Master Fund, LP
|
412,500
|
|
Midsummer
Investment LTD
|
1,250,000
|
|
Xxxxxxxx
Investment Master Fund, LTD
|
375,000
|
|
TOTAL
|
4,000,000
|
8
EXHIBIT
“A”
1. The
Company was required by the Transaction document to file a Form 8-K within
one
trading day after the Transaction Documents were executed to disclose the
transaction. The SEC requires Form 8-K to be filed within four business days
of
the event described. The date of the Transaction Documents was May 22, 2006.
Pursuant to SEC rules, a Form 8-K was required to be filed by May 22, 2006.
Pursuant to the Transaction Documents, the Form 8-K was required to be filed
by
May 23, 2006. The Form 8-K was actually filed May 25, 2006 which was within
the
SEC filing period but not within the Transaction Documents filing
period.
2. The
Transaction Document includes the following provision:
The
Company and each Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and
neither
the Company nor any Purchaser shall issue any such press release or otherwise
make any such public statement without the prior consent of the Company,
with
respect to any press release of any Purchaser, or without the prior consent
of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure
is
required by law, in which case the disclosing party shall promptly provide
the
other party with prior notice of such public statement or
communication.
The
Company believes it did not obtain approval from each Purchaser relative
to the
press release it sent relating to the Transaction.
3. The
Transaction Document includes the following provision:
Not
less
than 5 Trading Days prior to the filing of each Registration Statement and
not
less than 1 Trading Day prior to the filing of any related Prospectus or
any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to each Holder copies of all such documents proposed to
be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders.
The
Company is uncertain as to whether it furnished each Purchaser with a copy
of
each amendment to the registration statements filed pursuant to the Transaction
documents.
9
4. The
Company may not amend its Certificate of Incorporation in any matter that
adversely affects the rights of the Purchasers. The Company is required to
amend
its Certificate of Incorporation to increase its authorized shares of common
stock from 200,000,000 to 400,000,000. Although the Company does not believe
that such amendment will adversely affect the rights of the Purchasers, there
may be a potential adverse effect based upon potential future
dilution.
5. The
Company has made certain covenants in the Certificate of Designation regarding
the declaration of dividends, payment of dividends and other matters relating
to
dividends. Some of such covenants have not been met.
6. As
long
as the Series B Preferred Stock is outstanding, the Company may not incur
debt.
In December 2006, the Company borrowed $350,000 from one of the Purchasers.
In
January, 2007, the Company borrowed $300,000 from Xxxxxx X. Xxxxxx.
7. Viking
has declared a “delay fee penalty” payable to former convertible note-holders at
a rate of 1% per month of the notes’ principal balance until such time as the
shares into which these convertible notes were converted are
registered.
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