Contract
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.
THIS
NOTE IS REGISTERED WITH THE COMPANY PURSUANT TO SECTION 11.4(B) OF THE PURCHASE
AGREEMENT (AS DEFINED BELOW). TRANSFER OF ALL OR ANY PORTION OF THIS
NOTE IS PERMITTED SUBJECT TO THE PROVISIONS SET FORTH IN SUCH SECTION 11.4(B)
WHICH REQUIRE, AMONG OTHER THINGS, THAT NO TRANSFER IS EFFECTIVE UNTIL THE
TRANSFEREE IS REFLECTED AS SUCH ON THE REGISTRY MAINTAINED WITH THE AGENT
PURSUANT TO SUCH SECTION 11.4(B).
SECURED
CONVERTIBLE TERM NOTE
FOR
VALUE
RECEIVED, GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Nevada corporation (the
“Company”) hereby promises to pay to VALENS U.S. SPV I, LLC
(the “Holder”) or its registered assigns or successors in
interest, the sum of Six Hundred Forty-Seven Thousand Five Hundred and Eight
Dollars and Ninety Cents ($647,508.90), 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 Securities Purchase Agreement dated as of the date hereof
(as amended, restated, modified and/or supplemented from time to time, the
“Purchase Agreement”) among the Company, the Holder, each other
Purchaser and LV Administrative Services, Inc., as administrative and collateral
agent for the Purchasers (the “Agent” together with the
Purchasers, collectively, the “Creditor Parties”).
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 of one percent (3.5%) (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 eleven
percent (11%). Interest shall be (i) calculated on the basis of a 360
day year, and (ii) payable monthly, in arrears, commencing on November 1, 2007,
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.
1
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 and shall
be
subject to adjustment as set forth herein.
1.3 Principal
Payments. Amortizing payments of the Principal Amount shall be
made by the Company on March 1, 2008 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 Company shall make monthly
payments to the Holder on each Amortization Date, each such payment in the
amount of $15,757.58 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 to the Holder under this Note, the Purchase Agreement and/or any
other Related 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 Company to the Holder under this Note, the Purchase Agreement
and/or any other Related 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 Company shall pay 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
$2.78.
2
(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 115% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed twenty five percent
(25%) of the average dollar trading volume of the Common Stock for the period
of
twenty-two (22) trading days immediately preceding and including such
Amortization Date. If subsection (i) of the Conversion Criteria is
met but subsection (ii) of the Conversion 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 by the Company 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 Company shall not be permitted to pay any part of its obligations
to
the Holder hereunder in shares of Common Stock if (i) there fails to exist
an
effective current Registration Statement (as defined in the Registration Rights
Agreement) covering the resale of the shares of Common Stock to be issued in
connection with such payment and there fails to exist an exemption from
registration for resale available pursuant to Rule 144 of the Securities Act
and
in respect of the Common Stock to be issued in connection with such payment
or
(ii) an Event of Default (as hereinafter defined) exists and is continuing,
unless such Event of Default is cured within any applicable cure period or
otherwise waived in writing by the Holder.
2.3 Optional/Mandatory
Redemption in Cash. (a) The Company may prepay this Note
(“Optional Redemption”) by paying to the Holder a sum of money
equal to one hundred ten percent (110%) 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
Purchase Agreement or any other Related 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 hereinafter defined) or
for
conversions elected to be made by the Holder pursuant to Article III 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 must be paid in good 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 will be null and
void. In the event that the Redemption Amount is paid to the Holder
within six (6) months of the date of issue of this Note, upon receipt in full
of
the Redemption Amount in good funds, the Holder will rebate to Company fifty
percent (50%) of any fees it received from the Company on the date of issue
of
this Note. If any Notes issued pursuant to the Purchase Agreement, in
addition to this Note, are outstanding (collectively, the “Outstanding
Notes”) and the Company pursuant to this Section 2.3 elects to make an
Optional Redemption, then the Company shall take the same action with respect
to
all Outstanding Notes and make such payments to all holders of Outstanding
Notes
on a pro rata basis based upon the Redemption Amount of each Outstanding
Note.
3
(b) The
Company shall prepay this Note by paying to the Holder the Redemption Amount,
in
good cleared funds, if, and on the date that, the Company and/or one or more
of
its Subsidiaries prepays, or becomes obligated to prepay, pursuant to the terms
of that certain Security Agreement dated as of February 28, 2006 among the
Company, certain of its Subsidiaries and Laurus Master Fund, Ltd.
(“Laurus”), as amended, restated, modified and/or superseded
from time to time (the “Laurus Security Agreement”) or the
Notes (as defined in the Laurus Security Agreement), all of the outstanding
Obligations (as defined in the Laurus Security Agreement).
ARTICLE
III
HOLDER’S
CONVERSION RIGHTS
3.1 Optional
Conversion. Subject to the terms set forth in this Article III,
the Holder shall have the right, but not the obligation, to convert all or
any
portion of the issued and outstanding Principal Amount and/or accrued interest
and fees due and payable into fully paid and non-assessable shares of Common
Stock at 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 9.99% 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 9.99% 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 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 sentence. For any
reason at any time, upon written or oral request of the Holder, the Company
shall within two (2) business days confirm orally and in writing to the Holder
the number of shares of Common Stock outstanding as of any given
date. The limitations set forth herein (x) shall automatically become
null and void (i) following notice to the Parent 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 and (y) may be
waived by the Holder upon provision of no less than sixty-one (61) days prior
written notice to the Parent; provided, however, that, such written notice
of
waiver shall only be effective if delivered at a time when no indebtedness
(including, without limitation, principal, interest, fees and charges) of the
Parent of which the Holder or any of its Affiliates was, at any time, the owner,
directly or indirectly is outstanding.
4
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 (appropriate completed)
(“Notice of Conversion”) to the Company and such Notice of
Conversion shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and fees that are being converted. 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 Company within two (2) business days after the
Conversion Date. Each date on which a Notice of Conversion is
delivered or telecopied to the Company 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 Company will issue instructions to the transfer agent accompanied by an
opinion of counsel within two (2) business days of the date of the delivery
to
the Company 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 Company 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 Company 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 Company
written instructions to the contrary.
3.4 Late
Payments. The 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 Company shall 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 Company shall 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:
5
(a) Reclassification. If
the Company 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 Company in shares of Common Stock, the Fixed 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
Company 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 Warrant. The Company represents that
upon issuance, the Conversion Shares will be duly and validly issued, fully
paid
and non-assessable. The Company 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 Company 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
Company shall not pay any costs, fees or any other consideration to the Holder
for the production and issuance of a new Note.
3.10 Rights
of Shareholders. No Holder shall be entitled to vote or receive
dividends or be deemed the holder of the Note Shares or any other securities
of
the Company which may at any time be issuable upon conversion of this Note
for
any purpose, nor shall anything contained herein be construed to confer upon
the
Holder, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon the recapitalization, issuance of shares,
reclassification of shares, change of nominal value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise, in each case, until the Delivery
Date applicable to the respective Note Shares purchasable upon the conversion
hereof shall have occurred as provided herein.
6
ARTICLE
IV
EVENTS
OF DEFAULT
4.1 Events
of Default. The occurrence of any of the following events set
forth in this Section 4.1 shall constitute an event of default (“Event
of Default”) hereunder:
(a) Failure
to Pay. The Company fails to pay when due any installment of
principal, interest or other fees hereon in accordance herewith, or the Company
fails to pay any of the other Obligations (under and as defined in the Master
Security Agreement) when due, and, in any such case, such failure shall continue
for a period of three (3) days following the date upon which any such payment
was due;
(b) Breach
of Covenant. The Company or any of its Subsidiaries breaches any
covenant or any other term or condition of this Note in any material respect
and
such breach, if subject to cure, continues for a period of fifteen (15) days
after the occurrence thereof.
(c) Breach
of Representations and Warranties. Any representation, warranty
or statement made or furnished by the Company or any of its Subsidiaries in
this
Note, the Purchase Agreement or any other Related Agreement shall at any time
be
false or misleading in any material respect on the date as of which made or
deemed made.
(d) Default
Under Laurus Agreements. The occurrence of any Event of Default
under, and as defined in, any agreement, document or instrument executed, from
time to time, between or among the Company and/or any of its Subsidiaries and
Laurus or by the Company and/or any of its Subsidiaries in favor of Laurus,
including, without limitation, the Laurus Security Agreement or the Notes (as
defined in the Laurus Security Agreement);
(e) Default
Under Other Agreements. The occurrence of any default (or similar
term) in the observance or performance of any other agreement or condition
relating to any indebtedness or contingent obligation of the Company or any
of
its Subsidiaries (including, without limitation, the Subordinated Debt (as
defined below)) beyond the period of grace (if any), the effect of which default
is to cause, or permit the holder or holders of such indebtedness or beneficiary
or beneficiaries of such contingent obligation to cause, such indebtedness
to
become due prior to its stated maturity or such contingent obligation to become
payable;
(f) Material
Adverse Effect. Any change or the occurrence of any event which
could reasonably be expected to have a Material Adverse Effect;
(g) Bankruptcy. The
Company or any of its Subsidiaries shall (i) apply for, consent to or suffer
to
exist the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence
a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, without challenge within ten (10) days of the filing thereof,
or failure to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii) take
any
action for the purpose of effecting any of the foregoing;
7
(h) Judgments. Attachments
or levies in excess of $50,000 in the aggregate are made upon the Company or
any
of its Subsidiary’s assets or a judgment is rendered against the Company’s
property involving a liability of more than $50,000 which shall not have been
vacated, discharged, stayed or bonded within thirty (30) days from the entry
thereof;
(i) Continued
Operations. The Company or any of its Subsidiaries shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
(j) Change
of Control. A Change of Control (as defined below) shall occur
with respect to the Company, unless Holder shall have expressly consented to
such Change of Control in writing. A “Change of Control” shall mean
any event or circumstance as a result of which (i) any “Person” or “group” (as
such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as
in
effect on the date hereof), other than the Holder, is or becomes the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of 35% or more on a fully diluted basis of the then
outstanding voting equity interest of the Company (other than a “Person” or
“group” that beneficially owns 35% or more of such outstanding voting equity
interests of the Company on the date hereof), (ii) the Board of Directors of
the
Company shall cease to consist of a majority of the Company’s board of directors
on the date hereof (or directors appointed by a majority of the board of
directors in effect immediately prior to such appointment) or (iii) the Company
or any of its Subsidiaries merges or consolidates with, or sells all or
substantially all of its assets to, any other person or entity;
(k) Indictment;
Proceedings. The indictment or threatened indictment of the
Company or any of its Subsidiaries or any executive officer of the Company
or
any of its Subsidiaries under any criminal statute, or commencement or
threatened commencement of criminal or civil proceeding against the Company
or
any of its Subsidiaries or any executive officer of the Company or any of its
Subsidiaries pursuant to which statute or proceeding penalties or remedies
sought or available include forfeiture of any of the property of the Company
or
any of its Subsidiaries;
(l) The
Purchase Agreement and Related Agreements. (i) An Event of
Default shall occur under and as defined in the Purchase Agreement or any other
Related Agreement, (ii) the Company or any of its Subsidiaries shall breach
any
term or provision of the Purchase Agreement or any other Related Agreement
in
any material respect and such breach, if capable of cure, continues unremedied
for a period of fifteen (15) days after the occurrence thereof, (iii) the
Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under, the Purchase Agreement or any Related
Agreement, (iv) any proceeding shall be brought to challenge the validity,
binding effect of the Purchase Agreement or any Related Agreement or (v) the
Purchase Agreement or any Related Agreement ceases to be a valid, binding and
enforceable obligation of the Company or any of its Subsidiaries (to the extent
such persons or entities are a party thereto);
8
(m) Stop
Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive
days
or five (5) days during a period of ten (10) consecutive days, excluding in
all
cases a suspension of all trading on a Principal Market, provided that the
Company shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice;
(n) Failure
to Deliver Common Stock or Replacement Note. The Company’s
failure to deliver Common Stock to the Holder pursuant to and in the form
required by this Note and the Purchase Agreement and, if such failure to deliver
Common Stock shall not be cured within two (2) business days or the Company
is
required to issue a replacement Note to the Holder and the Company shall fail
to
deliver such replacement Note within seven (7) business days; or
(o) Subordinated
Debt. The Company or any of its Subsidiaries shall take or
participate in any action which would be prohibited under the provisions of
any
subordination agreement governing any indebtedness for borrowed money of the
Company or any of its Subsidiaries which has been subordinated in right of
payment to the obligations hereunder (“Subordinated Debt”) or
make any payment on the Subordinated Debt to a person or entity that was not
entitled to receive such payments under the provisions of any subordination
agreement governing such Subordinated Debt.
4.2 Default
Interest. Following the occurrence and during the continuance of
an Event of Default, the Company shall 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 under this Note, the Purchase
Agreement and each other Related Agreement, 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 Agent may demand repayment in full of all obligations
and liabilities owing by the Company to the Holder under this Note, the Purchase
Agreement and/or any other Related Agreement and/or may elect, in addition
to
all rights and remedies of the Agent under the Purchase Agreement and the other
Related Agreements and all obligations and liabilities of the Company under
the
Purchase Agreement and the other Related Agreements, to require the Company
to
make a Default Payment (“Default Payment”). The
Default Payment shall be one hundred twenty percent (120%) of the outstanding
principal amount of this Note, plus accrued but unpaid interest, all other
fees
then remaining unpaid, and all other amounts payable hereunder. The
Default Payment shall be due and payable immediately on the date that the Agent
has demanded payment of the Default Payment 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.
9
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
the Holder 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 given in writing in
accordance with the terms of the Purchase 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 the 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 Purchase
Agreement. The Company may not 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.
5.7 Cost
of Collection. In case of the occurrence of an Event of Default
under this Note, the Company shall pay the Holder 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.
10
(b) THE
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 THE COMPANY, ON THE ONE HAND,
AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE
OR
ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE 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
FURTHERPROVIDED, THAT, TO THE EXTENT NECESSARY TO EXERCISE ANY
RIGHTS OR REMEDIES THE HOLDER HAS WITH RESPECT TO COLLATERAL LOCATED IN ANOTHER
JURISDICTION, NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER SUCH
JURISDICTION TO COLLECT THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY
AGREEMENT), TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY
AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH
IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS. THE 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 PURCHASE 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) THE
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, THE 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 THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER RELATED 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 Company to the Holder and thus refunded
to
the Company.
5.11 Security
Interest. The Agent, for the ratable benefit of the Creditor
Parties, has been granted a security interest in certain assets of the Company
as more fully described in the Master Security Agreement and the other Related
Agreements.
11
5.12 Construction;
Counterparts. 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. This Note may be executed by the parties hereto in
one or more counterparts, each of which shall be deemed an original and all
of
which when taken together shall constitute one and the same
instrument. Any signature delivered by a party by facsimile or
electronic transmission shall be deemed to be an original signature
hereto.
5.13 Registered
Obligation. This Note shall be registered (and such registration
shall thereafter be maintained) as set forth in Section 11.4(b) of the Purchase
Agreement. 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) registration of such holder as an assignee in accordance with
Section 11.4(b) of the Purchase Agreement.
[Balance
of page intentionally left blank; signature page follows]
12
IN
WITNESS WHEREOF, the Company has caused thi Secured Convertible Term
Note to be signed in its name effective as of this 31st day of October
2007.
13
EXHIBIT
A
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)
0000
Xxxxxx Xxxxxx, Xxxxx 000
Pomona,
CA 91768
The
undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Secured Convertible Term Note dated as
of
_________, 2007 (the “Note”) issued by General Environmental
Management, Inc (the “Company”) by delivery of shares of Common
Stock of the Company (“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:
|
