EXHIBIT 10.4
WAIVER AND CONSENT AGREEMENT
This Waiver and Consent Agreement (this "Waiver") is dated as of September
12, 2005 between Knockout Holdings, Inc., a Delaware corporation (the "Company")
and CAMOFI Master LDC, formerly known as DCOFI Master LDC (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into the Securities
Purchase Agreement, dated as of May 2, 2005 (the "Purchase Agreement"), pursuant
to which the Company has issued to the Purchaser the Company's 11% Senior
Secured Note due May 2, 2008 in the original aggregate principal amount of
$3,000,000 (the "Note"). Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Purchase Agreement.
WHEREAS, the Company is contemplating a transaction (the "Contemplated
Transaction") whereby it proposes to issue its convertible promissory notes in
the aggregate principal amount of $2,800,000 (the "Additional Notes") pursuant
to a Purchase Agreement, among the Company and the Purchasers of the Additional
Notes, in the form attached hereto as Exhibit A;
WHEREAS, the Note provides that so long as any portion of the Note is
outstanding, the Company will not enter into, create, incur, assume or suffer to
exist any indebtedness of any kind other than indebtedness in the ordinary
course of business in an amount less than $25,000 or indebtedness which is used
to prepay the Note in full;
WHEREAS, the Company has requested that Purchaser consent to the issuance
of the Additional Notes, and the Purchaser is willing to agree to provide such
consent, subject to the terms and conditions contained in this Waiver.
In consideration of the foregoing and the agreements and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Consent. Subject to the terms and conditions contained herein and
notwithstanding anything to the contrary contained in the Purchase Agreement,
Note or Warrant, including Section 7(a) of the Note, the Purchaser hereby: (i)
consents to the Contemplated Transaction, including the incurrence of the
indebtedness pursuant to the Additional Notes, and (ii) waives its rights
pursuant to Section 4.16 of the Purchase Agreement to exchange all or a portion
of its Notes for the Additional Notes.
2. Amendment to the Note. The Note is hereby amended and restated in the
form attached hereto as Exhibit B.
3. Amendment to Warrant. The Common Stock Purchase Warrants ("Warrants")
to purchase in the aggregate 364,720 shares of the Company's Common Stock, which
Warrants were issued to the Purchaser pursuant to the Securities Purchase
Agreement, dated as of January 17, 2005, among the Company and the purchasers
identified therein, is hereby amended by amending the term "Exercise Price" to
mean "$0.30" and by inserting anti-dilution provisions substantially in the form
attached hereto as Exhibit C.
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4. Release of Escrow Funds.
(a) Notwithstanding anything to the contrary in the Purchase
Agreement, the Note or the Escrow Agreement, the remaining Escrowed Funds in the
amount of $364,453 shall be released and paid to the Purchaser as prepayment of
$364,453 of the outstanding principal under the Note.
(b) The prepayment of principal in the amount of $364,453 pursuant
to this Section 5 shall not be subject to Section 2(e) of the Note.
(c) The Company and the Purchaser covenant and agree that they will
promptly deliver a joint notice to Continental Stock Transfer & Trust Company,
as Escrow Agent under the Escrow Agreement, instructing the Escrow Agent to
release $364,453 of the Escrowed Funds to the Purchaser in accordance with this
Section 5.
5. Amendment to Registration Rights Agreement. The Registration Rights
Agreement, dated May 2, 2005, by and between the Company and the Purchaser, is
hereby amended by adding the following new clause (vi) and (vii) to the end of
the definition of the term "Registrable Securities":
(vi) without duplication, all Conversion Shares (as such term is
defined in the Notes) and (vii) 3,000,000 shares of Common Stock
issuable upon conversion of the 18,750 shares of the Company's
Series A Convertible Stock, par value $.001, acquired by the
Purchasers pursuant to that certain Agreement, dated September 12,
2005, between the Purchaser and Xxxxx Xxxxxxx;
6. Release of Security Interest. The Purchaser and the Company hereby
agree to terminate the Security Agreement, dated May 2, 2005 (the "Security
Agreement"), between the Company and the Purchaser, as Secured Party, effective
as of the date hereof. The Purchaser (a) hereby releases as of the date hereof
all liens and security interest in all of the Collateral (as such term is
defined in the Security Agreement); (b) consents to the Company filing a Uniform
Commercial Code Financing Statement Amendment terminating the Purchaser's
security interest in the Collateral and such other instruments and other
documents necessary to release the Purchaser's security interest in the
Collateral; and (c) agrees to return to the Company all Collateral within the
possession of the Purchaser.
7. Representations, Warranties and Covenants. The Company represents,
warrants and covenants with and to Purchaser as follows:
(a) this Waiver has been duly authorized, executed and delivered by
the Company, and the agreements and obligations of the Company contained herein
constitute legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms; and
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(b) neither the execution and delivery of this Waiver, nor the
consummation of the transactions herein contemplated, nor compliance with the
provisions hereof or thereof are in contravention of any law or regulation or
any order or decree of any court or governmental authority applicable to the
Company in any respect, or conflicts with or result in the breach of, or
constitutes a default in any respect under any mortgage, deed of trust, security
agreement, agreement or instrument to which the Company is a party or may be
bound, or violates any provision of the Certificate of Incorporation or By-Laws
(or similar organizational document) of the Company.
8. General.
(a) Effect of this Waiver. Except as expressly provided herein, no
other changes or modifications to the Transaction Documents are intended or
implied, and in all other respects the Transaction Documents are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
date hereof. To the extent any conflict exists between the terms of this Waiver
and the Transaction Documents, the terms of this Waiver shall control. Except as
set forth herein, the execution of this Waiver shall not be deemed to be a
waiver of any term or provision of any Transaction Documents.
(b) Governing Law. The validity, interpretation and enforcement of
this Waiver and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of New York but excluding any principles of conflicts
of law or other rule of law that would cause the application of the law of any
jurisdiction other than the laws of the State of New York.
(c) Binding Effect. This Waiver is binding upon and shall inure to
the benefit of the Company, the Purchaser and their respective successors and
assigns. Any acknowledgment or consent contained herein shall not be construed
to constitute a consent to any other or further action by the Company or to
entitle the Company to any other consent.
(d) Counterparts, etc. This Waiver may be executed in any number of
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same agreement. In making proof of this Waiver, it
shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto. Delivery of an executed
counterpart of this Waiver by fax shall have the same force and effect as
delivery of an original executed counterpart of this Waiver.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Consent
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
COMPANY:
KNOCKOUT HOLDINGS, INC.
By: /s/ Xxxxxxx Xxx
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Title: CFO
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PURCHASER:
CAMOFI MASTER LDC, formerly known as
DCOFI MASTER LDC
By: /s/ Xxxxxxx X. Xxxx
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Title: Authorized Signatory
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