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$6,500,000
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August 31, 2008
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CONVERTIBLE TERM
NOTE
This Note and the Common Stock issuable upon
conversion hereof (until such time, if any, as such Common Stock is
registered with the Securities and Exchange Commission pursuant to
an effective registration statement) have not been registered under
the Securities Act of 1933, as amended (the “Act”), or
any state securities laws, and may not be sold, offered for sale of
otherwise transferred unless registered or qualified under the Act
and applicable state securities laws or unless the Maker receives
an opinion, in form and from counsel reasonably acceptable to the
Maker, that registration, qualification or other such actions are
not required under any such laws .
FOR VALUE RECEIVED, GENERAL ENVIRONMENTAL
MANAGEMENT, INC., a Nevada corporation (the “ Maker
”), hereby promises to pay to CVC California, LLC, a Delaware
limited liability company (“ CVC ”), or
registered assigns (collectively with CVC, the “ Payee
”), the sum of Six Million Five Hundred Thousand ($6,500,000)
Dollars (the “ Principal ”), with interest
thereon, on the terms and conditions set forth herein and in the
Revolving Credit and Term Loan Agreement of even date herewith by
and between CVC and the Maker (as same may be amended, modified,
supplemented and/or restated from time to time, the “ Loan
Agreement ”). Terms defined in the Loan
Agreement and not otherwise defined herein shall have the meanings
assigned thereto in the Loan Agreement.
Payments of principal of, interest on and any
other amounts with respect to this Convertible Promissory Note
(this “ Note ”) are to be made in lawful money
of the United States of America.
Principal and accrued interest of this Note may
or shall be convertible into common stock of the Maker as provided
in Section 3 below.
(a)
Interest . This Note shall bear interest (“
Interest ”) on Principal amounts outstanding from time
to time from the date hereof at the rate of nine and one-half
(9.5%) percent per annum; provided , however , that
during the continuance of any Event of Default, the Interest rate
hereunder shall be increased to fourteen and one-half (14.5%)
percent per annum. All Interest shall be computed on the
daily unpaid Principal balance of this Note based on a three
hundred sixty (360) day year, and shall be payable monthly in
arrears on the first day of each calendar month commencing October
1, 2008 and on the maturity hereof.
(b)
Principal . The Principal of this Note shall be
payable (i) in twenty-nine (29) equal monthly installments of
$135,416.66 each, due and payable on the first day of each calendar
month commencing April 1, 2009 and continuing through and including
August 1, 2011, and (ii) a final installment due and payable
on August 31, 2011 in an amount equal to the entire remaining
Principal balance of this Note.
(c)
Non-Business Day . If any scheduled payment date
as aforesaid is not a business day in the State of California or
the State of Florida, then the payment to be made on such scheduled
payment date shall be due and payable on the next succeeding
business day, with additional interest on any Principal amount so
delayed for the period of such delay.
(a)
Optional Prepayment of Principal . The unpaid Principal
balance of this Note may, at the Maker’s option, be prepaid
in whole or in part, at any time or from time to time upon twenty
(20) days’ prior written notice to the Payee, provided that
the Payee shall retain the right to convert all or any portion of
such Principal amount called for prepayment, together with any or
all Interest accrued thereon, at any time prior to the date fixed
for prepayment, and thereafter until such prepayment is actually
made. Any optional prepayment of Principal hereunder
made prior to August 1, 2011 (other than a prepayment required
pursuant to Section 2.02(e) of the Loan Agreement) shall require
the simultaneous payment of a prepayment premium as provided in
Section 2.03(c) of the Loan Agreement.
(b)
Mandatory Prepayment of Principal . The Principal
of this Note may be required to be prepaid in accordance with
Section 2.07 of the Loan Agreement, and such prepayment shall, if
made or required to be made prior to August 1, 2011, be subject to
the payment of a prepayment premium as provided in Section 2.03(c)
of the Loan Agreement.
(c)
Interest . Except to the extent that such Interest is
converted as herein provided, each prepayment of Principal shall be
accompanied by all accrued Interest on the Principal amount prepaid
or converted accrued to the date of prepayment or
conversion.
(d)
Application of Payments . Any and all prepayments
hereunder shall be applied first to any prepayment premium required
under Section 2(a) or 2(b) above, then to unpaid accrued Interest
on the Principal amount being prepaid, and finally to the remaining
Principal installments in inverse order of maturity.
(a)
Optional and Mandatory Conversion The Payee may,
at its option, upon written notice to the Maker given at any time
and from time to time, convert all or any portion of the unpaid
Principal balance of this Note, and/or any accrued Interest
thereon, into shares of common stock of the Maker (“
Common Stock ”), at a price of $3.00 per share of
Common Stock (as same may be adjusted from time to time in
accordance herewith, the “ Conversion Price
”). In addition, if (i) there is not then
continuing any Default or Event of Default under and as defined in
the Loan Agreement, (ii) the Common Stock is then traded or
listed for trading on any national securities exchange, the Nasdaq
Global Market, the Nasdaq Select Market or any other Nasdaq market,
or the OTC Bulletin Board, (iii) there is then in effect a
valid registration statement under the Securities Act of 1933, as
amended (the “ Act ”), in respect of the Common
Stock issued and issuable upon conversion of this Note and upon
exercise of the Warrants issued pursuant to the Loan Agreement, or
such Common Stock (assuming cashless exercise of the Warrants) is
otherwise freely tradable without volume limitation under Rule 144
or another general registration exemption under the Act, such that
all such shares of Common Stock will be freely tradable immediately
upon issuance at such time, (iv) the Maker is current in all of its
required filings with the Securities and Exchange Commission and
all other regulatory filings, (v) the reported Trading Price (as
hereinafter defined) of the Common Stock for each of the twenty
(20) consecutive trading days immediately prior thereto has been
equal to or greater than 150% of the Conversion Price in effect on
each such trading day, and (vi) the average daily trading volume of
the Common Stock as reported by the principal exchange or trading
medium on which the Common Stock is listed or quoted has been equal
to or greater than 100,000 shares (such number to be
subject to adjustment on a proportionate basis
in the event of each and every stock split, stock dividend,
combination of shares, recapitalization or other such event
respecting the Common Stock which may occur subsequent to the date
hereof) during the three (3) months immediately prior thereto,
then the Maker may, upon five (5) business days’ prior
written notice to the Payee, require the Payee to convert all or
any portion of the Principal of this Note into shares of Common
Stock at the Conversion Price then in effect; and in the event of
any such conversion at the option of the Maker, the Maker shall
give written notice thereof to the Payee certifying as to the
satisfaction of the foregoing conditions (including a detailed
schedule of Trading Prices and volumes for purposes of the
foregoing clauses (v) and (vi)), and shall pay to the Payee,
simultaneously with the delivery of stock certificates in
accordance with Section 3(c), all unpaid accrued Interest on the
Principal amount so converted. As used herein, the term
“ Trading Price ” on any relevant date means the
closing sale price (or, if no closing sale price is reported, the
last reported sale price) of the Common Stock (regular
way). The effective date of any conversion hereunder is
herein referred to as the “ Conversion Date.
” To the extent that this Note is converted only
in part, then such conversion shall be treated as a prepayment of
the Principal amount converted in accordance with Section 2(d)
above, provided that no prepayment premium shall be required in
respect of any conversion.
(b)
Mechanics of Conversion . Upon notice to the
Maker of the Payee’s conversion election as provided in
Section 3(a), or upon notice to the Payee of the Maker’s
conversion election as provided in Section 3(a), the Maker shall,
in accordance with Section 3(c), issue to the Payee (or to the
Payee’s designee(s) set forth in the Payee’s conversion
election, or in any direction given to the Maker in response to the
Maker’s conversion election) the number of shares of Common
Stock to which the Payee shall be entitled upon such conversion,
and shall deliver or cause to be delivered to the Payee or such
designee(s) the certificates representing such shares of Common
Stock. All shares of Common Stock issued or delivered
upon any conversion hereunder shall, when issued or delivered, be
duly authorized, validly issued, fully paid and
nonassessable. In lieu of any fractional shares to which
the Payee would otherwise be entitled, the Maker shall pay cash
equal to such fraction multiplied by the per share Conversion
Price.
(c)
Issuance of Common Stock Upon Conversion . Within
a reasonable time, not exceeding five (5) Business Days after the
Conversion Date, the Maker shall deliver or cause to be delivered,
to or upon the written order of the Payee, certificates
representing the number of fully paid and nonassessable shares of
Common Stock into which this Note has been converted in accordance
with the provisions of this Section 3. If so requested
by the Maker, the Payee shall, within a reasonable time (not
exceeding five (5) Business Days after receipt by the Payee of such
certificates), surrender this Note to the Maker for cancellation,
against delivery of a replacement Note representing the remaining
balance (if any) of this Note which has not been
converted. Subject to the following provisions of this
Section 3, such conversion shall be deemed to have occurred on the
Conversion Date, so that the Payee of this Note or such
Payee’s designee(s) shall be treated for all purposes as
having become the record holder of such shares of Common Stock at
such time.
(d)
Taxes on Conversion . The issuance of
certificates for shares for Common Stock upon the conversion of
this Note shall be made without charge by the Maker to the
converting Payee for any tax in respect of the issuance of such
certificates and such certificates shall be issued in the name of,
or in such names as may be directed by, the Payee; provided
, however , that the Maker shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance or delivery of any such certificate in a name other than
that of the Payee, and the Maker shall not be required to issue or
deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Maker the
amount of any such tax or shall have established to the
satisfaction of the Maker that any such tax has been paid;
and further provided , that the Maker shall
not be required to pay any income tax to which the Payee may be
subject in respect of the issuance of this Note or the shares
issued upon conversion hereof.
(e)
Adjustment of Shares .
(i)
Stock Dividends, Distributions or Subdivisions
. In the event that, at any time and from time to time
from and after the date of this Note, the Maker shall issue
additional shares of Common Stock (or securities convertible into
Common Stock) in a stock dividend, stock distribution or
subdivision paid with respect to Common Stock, or declare any
dividend or other distribution payable in additional shares of
Common Stock (or securities convertible into Common Stock) or
effect a split or subdivision of the outstanding shares of Common
Stock, then, concurrently with the effectiveness of such stock
dividend, stock distribution or subdivision, the then-effective
Conversion Price shall be proportionately decreased, and the number
of shares of Common Stock issuable upon conversion of this Note
shall thus be proportionately increased. The Maker shall
not, at any time, take any action which would cause the Conversion
Price to be reduced to an amount less than the par value per share
of the class of stock into which this Note is
convertible.
(ii)
Combinations or Consolidations . In the event
that, at any time and from time to time from and after the date of
this Note, the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then, concurrently with the
effectiveness of such combination or consolidation, the
then-effective Conversion Price shall be proportionately increased,
and the number of shares of Common Stock issuable upon conversion
of this Note shall thus be proportionately decreased.
(iii)
Other Dividends or Distributions . If the Maker,
at any time or f
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