July 13, 2004
Viking Systems, Inc.
Mr. Tom Marsh
CEO & President
7514 Girard Ave., Ste 1509
La Jolla, CA 92037
VIA EMAIL: tmarsh@vikingsystems.com
Re: Consulting Agreement
Dear Tom:
This letter sets forth our agreement of the engagement of Hyacinth
Resources, Inc. ("Hyacinth"), "Consultant" by Viking Systems, Inc. ("Client").
The Consultant has contacts with web design and e-marketing firms, manufacturer
representatives, public relationship firms, lenders, brokers, sellers, buyers,
financiers, investors, venture capital firms, strategic partners, and other
contacts. For purposes of this Letter Agreement, all of such contacts of
Consultant are referred to as "Contacts".
Services. Client hereby retains Consultant, and Consultant hereby agrees to
provide the following services to Client, on an as requested basis:
o to act as a consultant, business facilitator, and finder for
Client in connection with various matters including but not
limited to, customer research and development, product
distribution, marketing efforts, business plan development,
commercial or private loan and other debt financing efforts, and
other business matters;
o to provide corporate structure, business and financial advice to
Client;
o to refer Client to Contacts that are lending institutions
and private lenders;
o to refer Client to Contacts who are providers of product
marketing services,
o to refer Client to Contacts who are potential merger
partners, strategic alliance participants, and to potential
joint venture partners;
o to refer Client to Contacts who are potential buyers of
assets or securities from Client;
o to refer Client to Contacts who are underwriters, placement
agents and investment bankers.
Term. The term of this engagement ends on December 31st, 2004.
Compensation. The parties acknowledge that it is their mutual expectation,
that the services to be provided by Consultant to Client hereunder, will result
in increased revenues of Client, increased shareholders equity of Client and/or
increased gross assets. As compensation in full for the services rendered to
Client hereunder, Client shall grant consultants options (the "Options") to
purchase an aggregate of 1,000,000 shares of Corporate Client at a price of $.50
per share. The Options shall vest in one or more blocks upon the increase in
Client's Net Tangible Book Value as described in the paragraph below.
Vesting Based Upon Net Tangible Book Value Increases. Vesting based upon
Net Tangible Book Value increases shall be based upon a starting Net Tangible
Book Value amount represented by Client's unaudited monthly balance sheet
financial statement ending July 31st, 2004. During the term of this Agreement,
for each increase of $3.00 over the Net Tangible Book Value number as of July
31st, 2004, an Option for one share shall vest, to the maximum of $3,000,000 or
1,000,000 shares. Any Client net operating losses will not be included in the
calculation of "Net Tangible Book Value Increases" during the term of this
agreement for purposes of calculating the vesting of Consultant's options.
Vesting shall be calculated and effective at the end of each fiscal quarter
during the Term of the Agreement. The Net Tangible Book Value number ending on
July 31st, 2004 will be provided to Consultant by Client in writing not later
than September 30th, 2004. The number will be expressly made a part of this
Agreement.
Exercise Period. Any of the Options granted hereunder shall be exercisable
for a period of three years from the date such Option(s) vest.
Registration Rights. The Options shall carry piggy-back registration rights
on terms and conditions which are typical in financing transactions. However;
the piggy back rights granted hereby will not be in effect until after twelve
(12) months from the execution date of this Definitive Agreement.
Confidential Information. Except as permitted by Client, Consultant
covenant and agrees not to disclose, directly or indirectly, at any time either
during the term of this Agreement or within twenty four (24) months subsequent
to the termination of this Agreement to anyone not an employee of Client, and
not to use at any time either during the term of this Letter Agreement or within
two (2) years thereafter, except as permitted by Client, any proprietary or
confidential information of Client unless it shall involuntarily be required to
do so by a court having competent jurisdiction after notice to Client. Client
and Consultant hereby acknowledge that: (a) the duration limitation imposed with
respect to said secret and confidential information are reasonable; and (b) the
restrictions stated hereinabove are reasonably necessary for the protection of
Client's legitimate proprietary interests.
Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
and judgment on the award rendered may be entered in any court having
jurisdiction thereof. Such arbitration shall be held in San Diego County, State
of California, and the cost thereof, including reasonable attorneys' fees, shall
be borne by the losing party or in such proportions as the arbitrator may
decide.
Indemnification. Client agrees to indemnify and hold harmless Consultant
and each person, who control Consultant against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject, and to reimburse Consultant and each such controlling person, if
any, for any legal or other expenses reasonably incurred by it or them in
connection with defending any actions, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any information
provided by Client to Consultant to give to a Contact or provided directly to a
Contact by Client, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
Consultant agrees to indemnify and hold harmless Client and each person,
who controls Consultant against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject,
and to reimburse Client and each such controlling person, if any, for any legal
or other expenses reasonably incurred by it or them in connection with defending
any actions, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon (1) any action of Consultant and (2) the claim by
any person, including but not limited to, Troika Capital, for compensation
related directly or indirectly to this agreement.
Compliance with Law. Consultant shall comply with all applicable laws and
regulations during the term of this agreement. Consultant is aware that he may
obtain material, undisclosed information about the company and while in
possession of such information, and prior to the time such information is
disclosed to the public, Consultant shall not purchase or sale securities of the
Company.
Entire Agreement. This Letter Agreement constitutes the entire agreement
between the parties with regard to the matters discussed herein. It also
supersedes any and all other agreements or contracts, either oral or written,
between the parties with respect to the subject matter hereof.
Amendment. The terms and conditions of this Agreement may be amended at any
time by mutual written agreement of the parties.
Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect its other provisions, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision had been omitted.
Waiver. No waiver by either party of a breach of any provision of this
Agreement shall operate as or be construed to be a waiver of any other breach of
that provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of this Agreement
on one or more occasions shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
No Assignments. This Agreement is personal to each of the parties hereto,
and neither party may assign nor delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party. Once
vested, the options may not be assigned by Consultant to any person except,
Consultant may assign one or more options, or an interest in one or more
options, to Troika Capital subject to troika Capital agreeing not to further
assign such options or such interest in such options.
Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the conflict of laws.
Corporate Authority. Both parties to this agreement hereto, represent that
they have binding authority from their respective Board of Directors to enter
into this agreement, and by signing below represent this authority to bind the
respective Consultant and Client to this Agreement.
Please confirm our mutual understanding of this engagement by signing and
returning to us the enclosed duplicate copy of this Letter Agreement.
Best regards,
By /s/ Douglas P. Morris
Douglas P. Morris
President, Hyacinth Resources, Inc.
Agreed to and accepted as of the above date by:
Viking Systems, Inc.
By /s/ Thomas B. Marsh Dated: July 19, 2004
Tom Marsh, CEO & President