Exhibit 10.4
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GENERAL ENVIRONMENTAL MANAGEMENT, INC., A NEVADA CORPORATION,
THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, each of GENERAL ENVIRONMENTAL MANAGEMENT,
INC., a Nevada corporation (the "Parent") and the other companies listed on
Exhibit A attached hereto (such other companies together with the Parent, each a
"Company" and collectively, the "Companies"), jointly and severally, promises to
pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box
309 GT, Xxxxxx House, South Church Street, Xxxxxx Town, Grand Cayman, Cayman
Islands, Fax: 000-000-0000 (the "Holder") or its registered assigns or
successors in interest, sum of Two Million Dollars ($2,000,000), together with
any accrued and unpaid interest hereon, on February 28, 2009 (the "Maturity
Date") if not sooner indefeasibly paid in full.
Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in that certain Security Agreement dated as
of the date hereof among the Companies and the Holder (as amended, modified
and/or supplemented from time to time, the "Security Agreement").
The following terms shall apply to this Secured Convertible
Term Note (this "Note"):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest payable on
the outstanding principal amount of this Note (the "Principal Amount") shall
accrue at a rate per annum equal to the "prime rate" published in The Wall
Street Journal from time to time (the "Prime Rate"), plus three and one half
percent (3.50%) (the "Contract Rate"). The Contract Rate shall be increased or
decreased as the case may be for each increase or decrease in the Prime Rate in
an amount equal to such increase or decrease in the Prime Rate; each change to
be effective as of the day of the change in the Prime Rate. The Contract Rate
shall not at any time be less than eight percent (8.0%). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears,
commencing on March 1, 2006, on the first business day of each consecutive
calendar month thereafter through and including the Maturity Date, and on the
Maturity Date, whether by acceleration or otherwise.
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1.2 Contract Rate Payments. The Contract Rate shall be calculated on the
last business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date (each a
"Determination Date") and shall be subject to adjustment as set forth herein.
1.3 Principal Payments. Amortizing payments of the aggregate principal
amount outstanding under this Note at any time (the "Principal Amount") shall be
made, jointly and severally, by the Companies on June 1, 2006 and on the first
business day of each succeeding month thereafter through and including the
Maturity Date (each, an "Amortization Date"). Subject to Article III below,
commencing on the first Amortization Date, the Companies shall make, jointly and
severally, monthly payments to the Holder on each Repayment Date, each such
payment in the amount of $60,606.06 together with any accrued and unpaid
interest on such portion of the Principal Amount plus any and all other unpaid
amounts which are then owing under this Note, the Security Agreement and/or any
other Ancillary Agreement (collectively, the "Monthly Amount"). Any outstanding
Principal Amount together with any accrued and unpaid interest and any and all
other unpaid amounts which are then owing by the Companies to the Holder under
this Note, the Security Agreement and/or any other Ancillary Agreement shall be
due and payable on the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1 Payment of Monthly Amount.
(a) Payment in Cash or Common Stock. If the Monthly Amount (or a
portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required
to be paid in cash pursuant to Section 2.1(b), then the Companies shall
pay, jointly and severally, the Holder an amount in cash equal to 100% of
the Monthly Amount (or such portion of such Monthly Amount to be paid in
cash) due and owing to the Holder on the Amortization Date. If the Monthly
Amount (or a portion of such Monthly Amount if not all of the Monthly
Amount may be converted into shares of Common Stock pursuant to Section
3.2) is required to be paid in shares of Common Stock pursuant to Section
2.1(b), the number of such shares to be issued by the Company to the Holder
on such Amortization Date (in respect of such portion of the Monthly Amount
converted into shares of Common Stock pursuant to Section 2.1(b)), shall be
the number determined by dividing (i) the portion of the Monthly Amount
converted into shares of Common Stock, by (ii) the then applicable Fixed
Conversion Price. For purposes hereof, subject to Section 3.6 hereof, the
initial "Fixed Conversion Price" means $0.85.
(b) Monthly Amount Conversion Conditions. Subject to Sections 2.1(a),
2.2, and 3.2 hereof, the Holder shall convert into shares of Common Stock
all or a portion of the Monthly Amount due on each Amortization Date if the
following conditions (the "Conversion Criteria") are satisfied: (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on
the Principal Market for the five (5) trading days immediately preceding
such Amortization Date shall be greater than or equal to one hundred twenty
percent (120%) of the Fixed Conversion Price and (ii) the amount of such
conversion does not exceed twenty five percent (25%) of the aggregate
dollar trading volume of the Common Stock for the period of twenty-two (22)
trading days immediately preceding such Amortization Date. If subsection
(i) of the Conversion Criteria is met but subsection (ii) of the Conversion
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Criteria is not met as to the entire Monthly Amount, the Holder shall
convert only such part of the Monthly Amount that meets subsection (ii) of
the Conversion Criteria. Any portion of the Monthly Amount due on an
Amortization Date that the Holder has not been able to convert into shares
of Common Stock due to the failure to meet the Conversion Criteria, shall
be paid in cash, jointly and severally, by the Companies at the rate of
100% of the Monthly Amount otherwise due on such Amortization Date, within
three (3) business days of such Amortization Date.]
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, the Holder shall not be required to accept shares of Common Stock as
payment following a conversion by the Holder (a) if there fails to exist an
effective current Registration Statement (as defined in the Registration Rights
Agreement) covering the shares of Common Stock to be issued and if an exemption
from registration for resale (without volume limitation) of all of the Common
Stock issued and issuable is unavailable pursuant to Rule 144 of the Securities
Act, or (b) if an Event of Default hereunder exists and is continuing, unless
such requirement is otherwise waived in writing by the Holder in whole or in
part at the Holder's option.
2.3 Optional Redemption in Cash. The Companies will have the option of
prepaying this Note ("Optional Redemption") by paying to the Holder a sum of
money equal to one hundred twenty percent (120%) of the Principal Amount
outstanding at such time together with accrued but unpaid interest thereon and
any and all other sums due, accrued or payable to the Holder arising under this
Note, the Security Agreement or any other Ancillary Agreement (the "Redemption
Amount") outstanding on the Redemption Payment Date (as defined below). The
Company shall deliver to the Holder a written notice of redemption (the "Notice
of Redemption") specifying the date for such Optional Redemption (the
"Redemption Payment Date"), which date shall be ten (10) business days after the
date of the Notice of Redemption (the "Redemption Period"). A Notice of
Redemption shall not be effective with respect to any portion of this Note for
which the Holder has previously delivered a Notice of Conversion (as defined
below) pursuant to Section 3.1 or for conversions elected to be made by the
Holder pursuant to Section 3.3 during the Redemption Period. The Redemption
Amount shall be determined as if the Holder's conversion elections had been
completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount (plus any additional interest and
fees accruing on the Notes during th Redemption Period) must be irrevocably paid
in full in immediately available funds to the Holder. In the event the Company
fails to pay the Redemption Amount on the Redemption Payment Date as set forth
herein, then such Redemption Notice shall be null and void.
ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms of this Article III, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or during an Event of Default (as defined in Article IV), and,
subject to the limitations set forth in Section 3.2 hereof, to convert all or
any portion of the outstanding Principal Amount and/or accrued interest and fees
due and payable into fully paid and nonassessable shares of the Common Stock at
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the Fixed Conversion Price. The shares of Common Stock to be issued upon such
conversion are herein referred to as, the "Conversion Shares."
3.2 Conversion Limitation. Notwithstanding anything herein to the contrary,
in no event shall the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon exercise of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of this Note or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein) and
(2) the number of shares of Common Stock issuable upon the conversion of the
portion of this Note with respect to which the determination of this proviso is
being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 4.99% of the then outstanding shares of
Common Stock (whether or not, at the time of such conversion, the Holder and its
Affiliates beneficially own more than 4.99% of the then outstanding shares of
Common Stock). As used herein, the term "Affiliate" means any person or entity
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a person or entity, as such terms
are used in and construed under Rule 144 under the Securities Act. For purposes
of the proviso to the second preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso. The limitations set forth herein (x) may be
waived by the Holder upon provision of no less than sixty-one (61) days prior
notice to the Company and (y) shall automatically become null and void (i)
following notice to the Company upon the occurrence and during the continuance
of an Event of Default (as defined in the Security Agreement), or (ii) upon
receipt by the Holder of a Notice of Redemption.
3.3 Mechanics of Xxxxxx's Conversion. In the event that the Holder elects
to convert this Note into Common Stock, the Holder shall give notice of such
election by delivering an executed and completed notice of conversion in
substantially the form of Exhibit B hereto (appropriately completed) ("Notice of
Conversion") to the Parent and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted. During the period commencing on the date hereof
and continuing through and including the twelve (12) month anniversary of the
date hereof (but not thereafter) (the "Call Period"), the Parent shall have two
(2) hours from the time that such Notice of Conversion is delivered to the
Parent to provide the Holder with written notice (delivered to Holder via
facsimile or email) of the Parent's decision to purchase the number of shares of
Common Stock otherwise deliverable to the Holder pursuant to the Notice of
Conversion (the "Designated Shares") for a purchase price equal to $1.50 per
Designated Share (the "Disposition Price"). The Disposition Price shall be paid
by the Parent to the Holder by wire transfer of immediately available funds
within two (2) business days of the date of the Notice of Conversion. On each
Conversion Date (as hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and shall provide
written notice thereof to the Parent within two (2) business days after the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Parent in accordance with the provisions hereof shall be
deemed a Conversion Date (the "Conversion Date"). Pursuant to the terms of the
Notice of Conversion, the Parent will issue instructions to the transfer agent
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accompanied by an opinion of counsel within one (1) business day of the date of
the delivery to the Parent of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates representing the Conversion Shares
to the Holder by crediting the account of the Holder's designated broker with
the Depository Trust Corporation ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days after receipt by the
Parent of the Notice of Conversion (the "Delivery Date"). In the case of the
exercise of the conversion rights set forth herein the conversion privilege
shall be deemed to have been exercised and the Conversion Shares issuable upon
such conversion shall be deemed to have been issued upon the date of receipt by
the Parent of the Notice of Conversion. The Holder shall be treated for all
purposes as the record holder of the Conversion Shares, unless the Holder
provides the Parent written instructions to the contrary.
3.4 Late Payments. Each Company understands that a delay in the delivery of
the Conversion Shares in the form required pursuant to this Article beyond the
Delivery Date could result in economic loss to the Holder. As compensation to
the Holder for such loss, in addition to all other rights and remedies which the
Holder may have under this Note, applicable law or otherwise, the Companies
shall, jointly and severally, pay late payments to the Holder for any late
issuance of Conversion Shares in the form required pursuant to this Article III
upon conversion of this Note, in the amount equal to $500 per business day after
the Delivery Date. The Companies shall, jointly and severally, make any payments
incurred under this Section in immediately available funds upon demand.
3.5 Conversion Mechanics. The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing that portion
of the principal and interest and fees to be converted, if any, by the then
applicable Fixed Conversion Price. In the event of any conversions of a portion
of the outstanding Principal Amount pursuant to this Article III, such
conversions shall be deemed to constitute conversions of the outstanding
Principal Amount applying to Monthly Amounts for the remaining Amortization
Dates in chronological order.
3.6 Adjustment Provisions. The Fixed Conversion Price and number and kind
of shares or other securities to be issued upon conversion determined pursuant
to this Note shall be subject to adjustment from time to time upon the
occurrence of certain events during the period that this conversion right
remains outstanding, as follows:
(a) Reclassification. If the Parent at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to
the unpaid Principal Amount and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase an adjusted number of such
securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock (i) immediately prior to or
(ii) immediately after, such reclassification or other change at the sole
election of the Holder.
(b) Stock Splits, Combinations and Dividends. If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares
of Common Stock, or if a dividend is paid on the Common Stock or any
preferred stock issued by the Parent in shares of Common Stock, the Fixed
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Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of
combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.
3.7 Reservation of Shares. During the period the conversion right exists,
the Parent will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Conversion Shares
upon the full conversion of this Note and the Warrants. The Parent represents
that upon issuance, the Conversion Shares will be duly and validly issued, fully
paid and non-assessable. The Parent agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for the Conversion Shares upon the conversion
of this Note.
3.8 Registration Rights. The Holder has been granted registration rights
with respect to the Conversion Shares as set forth in the Registration Rights
Agreement.
3.9 Issuance of New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Parent to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. Subject
to the provisions of Article IV of this Note, the Parent shall not pay any
costs, fees or any other consideration to the Holder for the production and
issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. The occurrence of an Event of Default under the
Security Agreement shall constitute an event of default ("Event of Default")
hereunder.
4.2 Default Interest. Following the occurrence and during the continuance
of an Event of Default, the Companies shall, jointly and severally, pay
additional interest on the outstanding principal balance of this Note in an
amount equal to two percent (2%) per month, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest at such additional
interest rate from the date of such Event of Default until the date such Event
of Default is cured or waived.
4.3 Default Payment. Following the occurrence and during the continuance of
an Event of Default, the Holder, at its option, may elect, in addition to all
rights and remedies of the Holder under the Security Agreement and the other
Ancillary Agreements and all obligations and liabilities of each Company under
the Security Agreement and the other Ancillary Agreements, to require the
Companies, jointly and severally, to make a Default Payment ("Default Payment").
The Default Payment shall be one hundred twenty percent (120%) of the
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outstanding principal amount of the Note, plus accrued but unpaid interest, all
other fees then remaining unpaid, and all other amounts payable hereunder. The
Default Payment shall be applied first to any fees due and payable to the Holder
pursuant to the Notes and/or the Ancillary Agreements, then to accrued and
unpaid interest due on the Notes, the Security Agreement and then to the
outstanding principal balance of the Notes. The Default Payment shall be due and
payable immediately on the date that the Holder has exercised its rights
pursuant to this Section 4.3.
ARTICLE V
MISCELLANEOUS
5.1 Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof until
the date this Note is indefeasibly paid in full and irrevocably terminated.
5.2 Cumulative Remedies. The remedies under this Note shall be cumulative.
5.3 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.4 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effective: (a) upon personal delivery to the
party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
respective Company at the address provided for such Company in the Security
Agreement executed in connection herewith, and to the Holder at the address
provided in the Security Agreement for such Holder, with a copy to Xxxx X.
Xxxxxx, Esq., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, xxxxxxxxx
number (000) 000-0000, or at such other address as the respective Company or the
Holder may designate by ten days advance written notice to the other parties
hereto. A Notice of Conversion shall be deemed given when made to the Parent
pursuant to the Security Agreement.
5.5 Amendment Provision. The term "Note" and all references thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
5.6 Assignability. This Note shall be binding upon each Company and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Security Agreement. No Company may assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.
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5.7 Cost of Collection. In case of any Event of Default under this Note,
the Companies shall, jointly and severally, pay the Holder's reasonable costs of
collection, including reasonable attorneys' fees.
5.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
ANY COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING
TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE
SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS; PROVIDED, THAT
EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW
YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. EACH COMPANY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES
ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. EACH COMPANY HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE
SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID
(c) EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY
HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE HOLDER, AND/OR ANY COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
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BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT, ANY
OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.
5.9 Severability. In the event that any provision of this Note is invalid
or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.
5.10 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Companies to the Holder and thus refunded
to the Companies.
5.11 Security Interest. The Holder has been granted a security interest (i)
in certain assets of the Companies as more fully described in the Security
Agreement dated as of the date hereof and (ii) in the equity interests of the
Company's Subsidiaries pursuant to the Stock Pledge Agreement dated as of the
date hereof.
5.12 Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Company (or its agent) shall register this Note (and thereafter shall
maintain such registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Company of this Note to the new holder or
the issuance by the Company of a new instrument to the new holder, or (ii)
transfer through a book entry system maintained by the Company (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).
5.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, each Company has caused this Secured
Convertible Term Note to be signed in its name effective as of this 28th day of
February 2006.
GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Nevada Corporation
By:__________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
WITNESS:
----------------------------------
GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Delaware Corporation
By:__________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
WITNESS:
----------------------------------
GENERAL ENVIRONMENTAL MANAGEMENT OF RANCHO XXXXXXX, LLC, a
California limited liability company
By:__________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Manager
WITNESS:
----------------------------------
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EXHIBIT A
OTHER COMPANIES
General Environmental Management, Inc., a Delaware corporation
General Environmental Management of Rancho Xxxxxxx, LLC, a California limited
liability company
EXHIBIT B
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all
or part of the Secured Convertible Term Note into
Common Stock)
General Environmental Management, Inc.
0000 Xxxxxx Xxx.
Suite 250
Pomona, CA 91768
The undersigned hereby converts $_________ of the principal due on
[specify applicable Amortization Date] under the Secured Convertible Term Note
dated as of February __, 2006 (the "Note") issued by General Environmental
Management, Inc. (the "Parent") by delivery of shares of Common Stock of the
Parent ("Shares") on and subject to the conditions set forth in the Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
[HOLDER]
By:_______________________________
Name:_____________________________
Title:______________________________
