Document:

ex_10-3.htm

    
      

      

    

    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);

       

      
        
          
          

        

        
          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 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:

       

      
        	
                 

              	 	 	
                 

              	 

      

       

      
        
          
          

        

        
          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)

       

      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:ex_10-4.htm

    
      

      

    

    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 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:

     

    
      
        
        

      

      
        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.

    
       

      
        	 	 	
                GENERAL
                  ENVIRONMENTAL MANAGEMENT, INC.,

                a
                  Nevada corporation

              	 
	 	 	 	 	 
	
                 

              	 	
                By: 
                  

              	
                /s/
                  

              	 
	
                 

              	 	 	
                Name:

              	 
	
                 

              	 	 	
                Title:

              	 

      

       

      WITNESS:

       

      
        	
                 

              	 	 	
                 

              	 

      

       

    

    
      
        
        

      

      
        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)

     

    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:

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