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Exhibit 10.3
 
 
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 OFFSHORE SPV II, CORP. (the
“Holder”) or its registered assigns or successors in interest, the sum of Five
Hundred Ninety-Seven Thousand Seven Hundred Dollars and Fifty-Two Cents
($597,700.52), 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.
 
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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 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 $14,545.45 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.
 
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(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.
 
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(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.
 
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3.3  Mechanics of Holder’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:
 
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(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.
 
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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;
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(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);
 
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(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.
 
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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.
 
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(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.
 
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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]
 
 
 
 
 
 
 
 
 
 
 
 
 
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IN WITNESS WHEREOF, the Company has caused this Secured Convertible Term Note to
be signed in its name effective as of this 31st day of October, 2007.
 

   
GENERAL ENVIRONMENTAL MANAGEMENT, INC.,
a Nevada corporation
           
 
 
By: 
/s/
 
 
   
Name:
 
 
   
Title:
 

 
WITNESS:
 
 
   
 
 

 
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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)
 
General Environmental Management, Inc.
3191 Temple Avenue, Suite 250
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: