EXHIBIT 10.6
PREFERRED STOCK CONVERSION AGREEMENT
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THIS CONVERSION AGREEMENT (this "Agreement") is entered into this __
day of March, 2005, by and among CONTINENTAL BEVERAGE AND NUTRITION, INC., a
Delaware corporation (the "Company"), and CES CONSULTING CORP. ("CES").
WITNESSETH:
WHEREAS, the Company previously entered into a consulting agreement
with CES whereby CES converted $200,223 of debt owed it by the Company (the
"Original Debt") into 20,000 shares of the Company's Series A Preferred Stock
(the "Preferred Stock"); and
WHEREAS, the Company is contemplating a private placement of at least
Four Hundred Thousand Dollars ($400,000) (the "New Placement") through the
issuance of the Company's 8% Senior Secured Convertible Promissory Note(s) (the
"New Note"), to one or more investors (the "New Investors"); and
WHEREAS, it is a condition precedent to the New Placement that CES
agree to convert all of the issued and outstanding shares of Preferred Stock
held by it into shares of the Company's Common Stock (the "Common Stock") and
take such other actions as more fully set forth herein; and
WHEREAS, the parties hereto are entering into this Agreement to convert
the Preferred Stock into Common Stock on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants contained herein and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, and in order to induce the New Investors to consummate the New
Placement, the parties do hereby agree as follows:
1. Conversion of Preferred Stock.
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1.1. Automatic Conversion. Concurrent with the closing of
the New Placement, all of the shares of Preferred Stock held by CES shall
automatically convert into an aggregate of 2,002,230 shares of Common Stock
(such shares, hereinafter the "Conversion Shares"). The number of Conversion
Shares having been determined by dividing the Original Debt by $0.10.
1.2. Issuance of New Certificates. Concurrent with the
execution of this Agreement, CES shall deliver its original stock certificates
representing all of its Preferred Stock that is being converted to Conversion
Shares. Promptly following the Company's receipt of the original stock
certificates from CES and the consummation of the New Placement, the Company, at
its expense, shall deliver to CES, in CES's name, a certificate representing the
number of fully paid and non-assessable Conversion Shares into which the
Preferred Stock has been converted in accordance with the provisions of Section
1.1 above.
1.3. Acknowledgement, Waiver of Rights. CES acknowledges
that upon the conversion of the Preferred Stock, as provided herein, CES shall
have no claims against the Company arising from its ownership of the Preferred
Stock.
2.1 General Piggyback Rights. If the Company, at any time during
the two (2) year period commencing after the issuance of the Conversion Shares
or options to purchase Conversion Shares, proposes to register any of its
securities under the Securities Act of 1933, as amended for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms X-0, X-0 and any
successor forms thereto as well as registrations that do not permit resales) (a
"Piggyback Registration"), each such time it will give written notice to such
effect to CES, at least ten (10) days prior to such filing. Upon the written
request of CES received by the Company within ten (10) days after the giving of
any such notice by the Company to register any of its Conversion Shares, the
Company will cause the Conversion Shares as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition by the holder of such
Conversion Shares so registered. Notwithstanding the foregoing, the Company may
withdraw or abandon any such registration statements in its sole discretion.
2.2 Underwritten Offerings. If the registration for which the
Company gives notice pursuant to Section 2.1 is a registered public offering
involving an underwriting, the Company shall so advise CES as a part of the
written notice given pursuant to Section 2.1. In such event, (i) the right of
CES to include its Conversion Shares in such registration pursuant to this
Section 2 shall be conditioned upon CES's participation in such underwriting on
the terms set forth therein and herein and (ii) CES shall enter into an
underwriting agreement with the underwriter or underwriters selected for the
underwriting by the Company. If CES disapproves of the terms of the
underwriting, CES may elect, by written notice to the Company, to withdraw its
shares from such registration statement and underwriting. If the managing
underwriter advises the Company in writing that in its good faith determination
marketing factors require a limitation on the number of shares to be
underwritten, the shares to be included in the underwriting shall be allocated,
first to the Company, second, to each of the holders of demand or automatic
registration rights and third, to each of the holders of piggyback or similar
registration rights who request registration including CES in proportion, as
nearly as practicable, to the respective number of shares of Common Stock (on an
as-converted basis) held by them on the date the Company gives notice to such
holders of its intent to file a registration statement. If any such holder
entitled to be included in such registration statement would thus be entitled to
include more shares than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata in the manner
described in the preceding sentence.
2.3 Expenses. All expenses (other than underwriting discounts and
commissions, brokerage fees and applicable transfer taxes) incurred in
connection with registrations, filings or qualifications pursuant to this
Section 2, including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees and fees and disbursements of
counsel for the Company, shall be borne by the Company. Any other fees and
expenses including those of Holder's counsel shall be borne by CES.
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2.4 Indemnification. Each of the Company and CES shall indemnify
the other party hereto and their respective officers, directors, employees and
agents against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) by the indemnifying party of a material fact contained in any
prospectus or other document (including any related registration statement,
notification or the like) incident to any registration of the type described in
this Section 2, or any omission (or alleged omission) by the indemnifying party
to state in any such document a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
such indemnified party for any legal and any other expenses reasonably incurred
in connection with investigating and defending any such claim, loss, damage,
liability or action; provided that no party will be eligible for indemnification
hereunder to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished by such party for use in connection with such
registration.
2.5 Information. CES shall cooperate as reasonably requested by
the Company in connection with the preparation of the registration statement
with respect to such registration, and for so long as the Company is obligated
to file and keep effective such registration statement, shall provide to the
Company, in writing, for use in the registration statement, all such information
regarding CES and its plan of distribution of the Conversion Shares included in
such registration as may be reasonably necessary to enable the Company to
prepare such registration statement, to maintain the currency and effectiveness
thereof and otherwise to comply with all applicable requirements of law in
connection therewith.
3. Miscellaneous.
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3.1. Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes any prior oral or written agreements between the parties hereto, and
this Agreement may not be modified, amended or terminated except by a written
agreement specifically referring to this Agreement signed by each party hereto.
3.2. Successors and Assigns; Third Party Beneficiaries.
This Agreement shall be binding upon and shall inure to the benefit of each
party hereto and their respective successors, assigns, heirs and administrators.
Neither party hereto may assign its rights or obligations hereunder without the
express written consent of the other party hereto. The New Investors shall be
express third-party beneficiaries of this Agreement and shall have the right to
enforce this Agreement against the Company and CES in their own right.
3.3. Additional Documents. Each party hereto shall
cooperate, shall take such further action and shall execute and deliver such
further documents as may be reasonably requested by the other party in order to
carry out the provisions and purposes of this Agreement.
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3.4. Specific Performance. Each party hereto hereby
acknowledges that the obligations created herein are unique and that the other
parties hereto and the New Investors would suffer irreparable harm in the event
of any breach of this Agreement by any party hereto for which money damages
would not be an adequate remedy. Accordingly, each party hereto and the New
Investors shall have the right to specific performance of this Agreement and to
obtain injunctive relief in the event of any breach or threatened breach of the
terms hereof by any party hereto in addition to any other remedies available at
law or in equity. No one shall be obligated to post any bond or other security
in connection with any action seeking specific performance of this Agreement or
any other equitable remedy.
3.5. Governing Law. This Agreement and all amendments
thereof shall be governed by and construed in accordance with the laws of the
State of New York, without reference to its conflicts of laws principles.
3.6 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
COMPANY:
CONTINENTAL BEVERAGE AND
NUTRITIION, INC.
By:
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Name:
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Title:
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CES:
CES CONSULTING CORP.
By: /s/ XXXXX XXXXXXX
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Xxxxx Xxxxxxx, President
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