Document:

ex10-38.htm

    
      

      

    

    Exhibit
10.38

     

     

    
      AMENDED
AND RESTATED

      REVOLVING CREDIT AND TERM
LOAN AGREEMENT

       

      AGREEMENT (this “Agreement”) is made
and entered into as of the 4th day of September, 2009, by and between CVC CALIFORNIA, LLC, a
Delaware limited liability company (the “Lender”), and GENERAL ENVIRONMENTAL MANAGEMENT,
INC., a Nevada corporation (the “Borrower”);

       

      W I T N E S S E T H
:

       

      WHEREAS, the Borrower and its
Subsidiaries are engaged in the business of providing field services, technical
services, transportation, off-site treatment, on-site treatment services, and
environmental health and safety compliance services (collectively, the “Business
Operations”); and

       

      WHEREAS, the Lender and
Borrower are parties to a Revolving Credit and Term Loan Agreement dated as of
August 31, 2008 (the “Original Agreement”),
pursuant to which the Lender has made available to the Borrower a revolving
credit facility and a term loan; and

       

      WHEREAS, in order to assist
the Borrower to better manage its anticipated cash flow needs and conform its
credit facilities with the needs of the Business Operations after giving effect
to the sale by the Borrower of its Wholly-Owned Subsidiary, GEM Mobile Treatment
Services, Inc., consummated on August 17, 2009, the Borrower has requested the
Lender to restructure the credit facilities under the Original Agreement on the
terms and conditions of this Agreement; and

       

      WHEREAS, the Lender is willing
and able to effect such restructuring on the terms and conditions of this
Agreement;

       

      NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein contained, the
parties hereby agree as follows:

       

      I.             
DEFINITIONS

       

      Section
1.01.  Defined Terms.  In addition to the other terms
defined elsewhere in this Agreement, as used herein, the following terms shall
have the following meanings:

       

      “Accounts” shall mean
“accounts” (as defined in the UCC) of the Borrower and its Domestic Subsidiaries
from time to time.

       

      “Account Debtor” shall
mean any Person who is obligated on an Account.

       

      “Acquisition
Agreement” shall mean the Stock Purchase Agreement dated as of August 31,
2008 by and between Island, the Seller, the Trust and GEM-DE.

       

      “Act” shall mean the
Securities Act of 1933, as amended, and the rules and regulations
thereunder.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      “Advances” shall mean
the principal amounts loaned to the Borrower from time to time pursuant to
Section 2.01 below.

       

      “Affiliate” shall
mean, with respect to any Person, any other Person in Control of, Controlled by,
or under common Control with the first Person, and any other Person who has a
substantial interest, direct or indirect, in the first Person or any of its
Affiliates, including, without limitation, any officer or director of the first
Person or any of its Affiliates; provided, however, that neither
the Lender nor any of its Affiliates shall be deemed an “Affiliate” of the
Borrower for any purposes of this Agreement.  For the purpose of this
definition, a “substantial interest” shall mean the direct or indirect legal or
beneficial ownership of more than ten (10%) percent of any class of stock or
similar interest.

       

      “Agreement” shall mean
this Amended and Restated Revolving Credit and Term Loan Agreement as it may
from time to time be amended, modified, supplemented and/or
restated.

       

      “Applicable Law” shall
mean all applicable provisions of all (a) constitutions, statutes, ordinances,
rules, regulations and orders of all governmental and/or quasi-governmental
bodies, (b) Government Approvals, and (c) order, judgments and decrees of all
courts and arbitrators.

       

      “Assignee Lender” has
the meaning set forth in Section 8.02 below.

       

      “Availability” shall
mean the amount (if any) by which, at the time of determination, (a) the
Revolving Credit Commitment exceeds (b) the outstanding principal amount of
Advances.

       

      “Board Observer
Agreement” shall mean the letter agreement dated January 8, 2009 by and
between the Borrower and the Lender, pursuant to which the Borrower has granted
to the Lender certain observer rights with respect to the Board of Directors of
the Borrower.

       

      “Borrowing Base” shall
mean an amount, determined in accordance with the most recent borrowing base
report provided to the Lender under Section 5.04(d) below, equal to (a) 85% of
Eligible Accounts, plus (b) 75% of the
value of unbilled goods and/or services theretofore provided by the Borrower or
any Domestic Subsidiary (such value to be calculated, except to the extent
otherwise provided in the applicable Contract with the customer, on an
arithmetic basis based on the portion of the subject project for which goods
and/or services have actually been rendered but not yet billed) and which, if
billed at such time, would constitute an Eligible Account, minus (c) such
reserves as the Lender may establish from time to time in its Permitted
Discretion (including, without limitation, to account for dilution and other
contingencies and risks of collection).  In the event that the
Borrower has not timely delivered a current Borrowing Base report in accordance
with Section 5.04(d) below, then the applicable Borrowing Base shall be such
amount as is established by the Lender in its Permitted Discretion, until such
time as the Borrower has delivered a current Borrowing Base report.

       

      “Borrowing Date” means
the Business Day on which the Lender makes a Loan hereunder.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      “Business Day” shall
mean a day other than (a) a Saturday, (b) a Sunday, or (c)  a day on
which banking institutions in the State of California or the State of Florida
are authorized or required by law or executive order to close.

       

      “Capital Expenditures”
shall mean with respect to any Person, all expenditures of such Person for
tangible assets which are capitalized, and the fair value of any tangible assets
leased by such Person under any lease which would be a Capitalized Lease,
determined in accordance with GAAP, including all amounts paid or accrued by
such Person in connection with the purchase (whether on a cash or deferred
payment basis) or lease (including Capitalized Lease Obligations) of any
machinery, equipment, real property, improvements to real property (including
leasehold improvements), or any other tangible asset of such Person which is
required, in accordance with GAAP, to be treated as a fixed asset on the
consolidated balance sheet of such Person.

       

      “Capitalized Lease”
shall mean any lease which is or should be capitalized on the balance sheet of
the lessee thereunder in accordance with GAAP.

       

      “Capitalized Lease
Obligation” shall mean with respect to any Person, the amount of the
liability which reflects the amount of future payments under all Capitalized
Leases of such Person as at any date, determined in accordance with
GAAP.

       

      “Cash Equivalents”
shall mean (a) marketable securities issued, or directly and fully guaranteed or
insured, by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof) having maturities of not more than twelve (12)
months from the date of acquisition; (b) time deposits, demand deposits,
certificates of deposit, acceptances or prime commercial paper issued by, or
repurchase obligations for underlying securities of the types described in
clause (a) entered into with any commercial bank having a short-term deposit
rating of at least A-2 or the equivalent thereof by Standard & Poor’s
Corporation or at least P-2 or the equivalent thereof by Moody’s Investors
Service, Inc.; (c) commercial paper with a rating of A-I or A-2 or the
equivalent thereof by Standard & Poor’s Corporation or P-1 or P-2 or the
equivalent thereof by Moody’s Investors Service, Inc. and in each case maturing
within twelve (12) months after the date of acquisition; (d) marketable direct
obligations issued by any state in the United States or any agency or
instrumentality thereof maturing within twelve (12) months from the date of
acquisition thereof and, at the time of acquisition, have one of the two highest
ratings generally obtainable from either Standard & Poor’s Corporation or
Moody’s Investors Services, Inc.; (e) tax-exempt commercial paper of United
States municipal, state or local governments rated at least A-2 or the
equivalent thereof by Standard & Poor’s Corporation or at least P-2 or the
equivalent thereof by Moody’s Investors Services, Inc. and maturing within
twelve (12) months after the date of acquisition thereof; (f) any other items
selected by the Borrower and approved by the Lender (which approval shall not be
unreasonably withheld or delayed); or (g) any mutual fund or other pooled
investment vehicle which invests principally in the foregoing
obligations.

       

      “Closing Date” shall
mean the date on which the conditions precedent set forth in part A of Article
IV below are satisfied or have been waived by the Lender in its sole
discretion.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      “Code” shall mean the
Internal Revenue Code of 1986, and the rules and regulations promulgated
thereunder, as in effect from time to time.

       

      “Collateral” shall
mean all collateral pledged by the Borrower and/or any Subsidiary as security
for the payment and performance of the Obligations, whether pursuant to the
Collateral Agreement or any other Security Document.

       

      “Collateral Agreement”
shall mean the Collateral Agreement, dated as of the Original Closing Date, by
and between the Borrower, its Subsidiaries and the Lender, as same may be
amended, modified, supplemented and/or restated from time to time.

       

      “Common Stock” shall
mean the authorized common stock of the Company, $.001 par value per
share.

       

      “Confidential
Information” shall mean information that the Borrower furnishes to the
Lender which is not generally available to the public or available to the Lender
from a source other than the Borrower which is not, to the Lender’s knowledge,
bound by any confidentiality agreement in respect thereof.

       

      “Contract” shall mean
any indenture, agreement (other than this Agreement), other contractual
restriction, lease in which the Borrower or any Subsidiary is a lessor or
lessee, license or instrument.

       

      “Control” shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms “Controlling” and
“Controlled”
shall have meanings correlative thereto.

       

      “Control Agreement”
shall mean, with respect to each bank account and/or securities account
maintained by or in the name of the Borrower or any Domestic Subsidiary, an
agreement executed and delivered by the Borrower (or the subject Domestic
Subsidiary, as applicable) and the account intermediary, whereby the account
intermediary acknowledges the Lender’s Lien on such account and all funds or
property therein, and “control” (within the meaning of the UCC) over such
account is established in favor of the Lender.

       

      “Convertible Term
Loan” shall mean the convertible term loan in the face amount of
$6,314,699.59 described in Section
2.02(a)(ii) below.

       

      “Convertible Term
Note” shall mean the promissory note of the Borrower issued to the Lender
as described in Section 2.02(d)(ii) below.

       

      “Deed of Trust” shall
mean the outstanding deed of trust pursuant to which the Lender has received a
first priority Lien on the Owned Real Property as Collateral for the
Obligations.

       

      “Default” shall mean
any of the events specified in Article VII hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      “Disclosure Schedule”
shall mean the disclosure schedule, dated as of the Closing Date, executed and
delivered by the Borrower to the Lender, the section numbers of which correspond
to the Section numbers of this Agreement.

       

      “Dollars” or “$” shall mean United
States Dollars, lawful currency for the payment of public and private
debts.

       

      “Domestic Subsidiary”
shall mean any Subsidiary which is incorporated or formed under the laws of the
United States, any State or Commonwealth in the United States, or the District
of Columbia.

       

      “EBITDA” shall mean,
for the subject period, for the Borrower and its Subsidiaries on a consolidated
basis, the sum of (a) Net Income, plus (b) Interest
Expense deducted in the calculation of such Net Income, plus (c) all income
taxes deducted in the calculation of such Net Income, plus (d) depreciation
and amortization expense deducted in the calculation of such Net Income, plus (e) other
non-cash charges and expenses deducted in the calculation of such Net Income,
excluding accruals for operating expenses made in the ordinary course of
business.

       

      “Eligible Account”
shall mean the face amount of each trade Account of the Borrower or a Domestic
Subsidiary (if same has executed a Guaranty Agreement and become a party to the
Collateral Agreement) for services rendered or goods and products sold in the
ordinary course of the Business Operations which the Lender, in its Permitted
Discretion, deems to be an Eligible Account; provided, however, that an
Account shall not be deemed an Eligible Account unless it meets all of the
following conditions:

       

      (a)           the
subject services or products and goods have been rendered, shipped or delivered
on an absolute sale basis (subject to normal course inspection and acceptance by
customers) to an Account Debtor which is not an Affiliate, vendor or supplier of
the Borrower or a Subsidiary, with an invoice date contemporaneous with or
within twenty (20) calendar days after the date of shipment or service, and
which does not constitute a consignment sale, bill-and-hold sale,
sale-and-return or other such arrangement and is not subject to any other
repurchase, return or offset agreement binding upon the Borrower or a Domestic
Subsidiary; the subject services or products and goods have been fully provided,
rendered, shipped and/or delivered (or shipped f.o.b.) to such Account Debtor on
an open account basis (or with payment guaranteed by a domestic letter of
credit, drawn on or by a domestic financial institution, acceptable to the
Lender in all respects), and no part of the subject services, products or goods
has been returned, rejected, lost or damaged; the Account is not evidenced by
chattel paper or an instrument of any kind; and such Account Debtor is not
insolvent or the subject of any bankruptcy or insolvency proceeding of any kind
in any jurisdiction;

       

      (b)           if
the Account Debtor is located outside the continental United States, payment for
the subject services or goods shall be secured by an irrevocable letter of
credit, which letter of credit shall have been confirmed by a financial
institutional reasonably acceptable to the Lender payable in the full amount of
the face value of the Account in lawful currency of the United
States;

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      (c)           it
is a valid, legally enforceable obligation of the Account Debtor thereunder
payable in Dollars and is not subject to any recoupment, offset or other defense
or any discount or chargeback on the part of such Account Debtor (provided that
prompt payment discounts or other discounts granted in the ordinary course of
business shall not cause an Account to be disqualified hereunder, so long as
only the discounted amount of such Account, if not otherwise disqualified, is
included in the calculation of the Borrowing Base) or to any claim on the part
of such Account Debtor denying liability thereunder (provided that the
undisputed portion may be considered to be an Eligible Account);

       

      (d)           it
is subject to no Lien whatsoever, except for the Lien of the
Lender;

       

      (e)           it
has not remained unpaid in whole or in part for a period exceeding ninety (90)
days after the original invoice date;

       

      (f)           it
does not arise out of a transaction (whether direct or indirect) with an
employee, officer, agent, director or Affiliate of the Borrower or any
Subsidiary or with any entity controlled by any employee, officer, or director
of the Borrower or any Subsidiary;

       

      (g)           it
is not subject to any contract retainage or other withholding of any portion of
payments on amounts invoiced, whether to secure the Borrower’s or any
Subsidiary’s performance or otherwise;

       

      (h)           it
does not represent the unpaid portion of an Account any portion of which was
previously paid or agreed to be paid through the issuance or delivery of equity
securities or other non-cash consideration;

       

      (i)           
if the Account Debtor is the United States, any State or Commonwealth therein,
or any department, agency or instrumentality thereof, the Borrower or the
applicable Domestic Subsidiary has duly assigned its rights to payment of such
Account to the Lender pursuant to the federal Assignment of Claims Act and any
comparable State statutes;

       

      (j)          
 the Lender has a perfected first priority Lien in such
Account;

       

      (k)           such
Account is not payable by any person other than the Account Debtor (such as a
beneficiary, recipient or subscriber individually), provided that the portion
thereof which is payable by the Account Debtor may be considered to be an
Eligible Account;

       

      (l)           
at least sixty (60%) percent in dollar amount of the total Accounts owed by such
Account Debtor and/or its Affiliates constitute Eligible Accounts;

       

      (m)          the
total Accounts owed by the subject Account Debtor (other than Jacobs Engineering
Group, Inc.) and/or its Affiliates constitute less than twenty-five (25%)
percent of all Eligible Accounts (provided that only the excess over twenty-five
(25%) percent shall be disqualified under this clause (m), unless the Lender has
otherwise consented in writing to the inclusion of all or any portion of such
excess);

       

      (n)          such
Account is payable solely to the Borrower or a Domestic Subsidiary which has
executed a Guaranty Agreement and become a party to Collateral Agreement, and
the Borrower or such Domestic Subsidiary is not aware of any dispute by the
Account Debtor with respect to such Account; and

       

      
        
           

        

        
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      (o)           it
is not otherwise determined by the Lender, in the Lender’s Permitted Discretion,
to be difficult to collect, uncollectible or otherwise unacceptable for any
reason.

       

      “Environmental Indemnity
Agreement” shall mean the environmental indemnity agreement, dated as of
the Closing Date, pursuant to which the Borrower and its Subsidiaries have
agreed to indemnify and hold harmless the Lender and its Affiliates from and in
respect of any and all environmental claims and liabilities relating to the
Owned Real Property and all operations (past, present and future) conducted on
or about the Owned Real Property.

       

      “Environmental Report”
shall mean the Phase I Environmental Site Assessment of the Owned Real Property
dated July 23, 2008, prepared by IVI Due Diligence Services, Inc. for US Capital
Corporation.

       

      “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as in effect from time to
time.

       

      “ERISA Affiliate”
shall mean, with respect to any Person, any other Person which is under common
control with the first Person within the meaning of Section 414(b) or 414(c) of
the Code; provided, however, that with
respect to the Borrower, no Person which is an Affiliate of the Lender (other
than the Borrower and its Subsidiaries) shall be deemed an ERISA Affiliate for
purposes of this Agreement

       

      “Event of Default” has
the meaning set forth in Article VII below.

       

      “Excess Cash Proceeds”
has the meaning set forth in Section 6.18 below.

       

      “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.

       

      “Financial Statements”
has the meaning set forth in Section 3.01(a) below.

       

      “Fiscal Year” shall
mean the fiscal year of the Company which ends on December 31 of each
year.

       

      “Fixed Charges” shall
mean, for the period in question, the sum of (a) all principal payments
scheduled or required to be made during or with respect to such period in
respect of Indebtedness of the Borrower and its Subsidiaries, plus (b) all cash
Interest Expense of the Borrower and its Subsidiaries for such period, plus (c) all cash
income taxes paid or accrued for the Borrower and its Subsidiaries for such
period.

       

      “Foreign Subsidiary”
shall mean any Subsidiary which is not a Domestic Subsidiary.

       

      “GAAP” shall mean
generally accepted accounting principles in the United States of America,
consistently applied, unless the context otherwise requires, with respect to any
financial terms contained herein, as then in effect with respect to the
preparation of financial statements.

       

      
        
           

        

        
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      “GEM-DE” shall mean
General Environmental Management, Inc., a Delaware corporation, which is a
Wholly-Owned Subsidiary of the Borrower.

       

      “Government Approval”
shall mean an authorization, consent, non-action, approval, license or exemption
of, registration or filing with, or report to, any governmental or
quasi-governmental department, agency, body or other unit.

       

      “GPP” shall mean
General Pacific Partners LLC, a California limited liability
company.

       

      “Guaranty”, “Guaranteed” or to
“Guarantee”, as
applied to any Indebtedness, liability or other obligation, shall mean (a) a
guaranty, directly or indirectly, in any manner, including by way of endorsement
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), of any part or all of such obligation, and (b) an
agreement, contingent or otherwise, and whether or not constituting a guaranty,
assuring, or intended to assure, the payment or performance (or payment of
damages in the event of non-performance) of any part or all of such obligation
by any means (including, without limitation, the purchase of securities or
obligations, the purchase or sale of property or services, or the supplying of
funds).

       

      “Guaranty Agreement”
shall mean the guaranty agreement, dated as of the Original Closing Date,
executed by each Domestic Subsidiary in favor of the Lender, pursuant to which
the Domestic Subsidiaries have jointly and severally guaranteed the full and
timely payment and performance of all of the Obligations.

       

      “Indebtedness” shall
mean (without duplication), with respect to any Person, (a) all obligations or
liabilities, contingent or otherwise, for borrowed money, (b) any and all
obligations represented by promissory notes, bonds, debentures or the like, or
on which interest charges are customarily paid, (c) any liability secured by any
mortgage, pledge, lien or security interest on property owned or acquired,
whether or not such liability shall have been assumed, (d) obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade payables and accrued obligations incurred in the ordinary
course of business), (f) any obligations (contingent or otherwise) of such
Person as an account party or applicant in respect of letters of credit and/or
bankers’ acceptances, or in respect of financial or other hedging obligations,
and (g) Guarantees, endorsements (other than for collection in the ordinary
course of business) and other contingent obligations in respect of the
obligations of others.

       

      “Intellectual
Property” shall have the meaning ascribed thereto in the Collateral
Agreement.

       

      “Interest Expense”
shall mean, for the relevant period, interest expense (including, without
limitation, interest attributable to Capitalized Leases in accordance with GAAP)
and fees with respect to Indebtedness.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      “Investment”, as
applied to the Borrower or any Subsidiary, shall mean: (a) any shares of capital
stock, evidence of Indebtedness or other security issued by any other Person to
the Borrower or any Subsidiary, (b) any loan, advance or extension of credit to,
or contribution to the capital of, any other Person, other than credit terms
extended to customers in the ordinary course of business, (c) any other
investment by the Borrower or any Subsidiary in any assets or securities of any
other Person, and (d) any commitment to make any Investment.

       

      “Island” shall mean
Island Environmental Services, Inc., a California corporation, which is a
Wholly-Owned Subsidiary.

       

      “Knowledge” or “Known”
or words of similar import shall mean, with respect to the Borrower and/or any
Subsidiary, the actual knowledge of Timothy J. Koziol and Brett M. Clark (and/or
their respective successors as officers of the Borrower) after reasonable
inquiry of the appropriate employees of the Borrower and the
Subsidiaries.

       

      “Landlord Waiver”
shall mean a landlord waiver, subordination and/or access agreement, in form and
substance reasonably satisfactory to the Lender, executed in favor of the Lender
by the Landlord of Real Property leased or occupied by the Borrower or any
Subsidiary.

       

      “Liabilities and
Contingencies” has the meaning set forth in Section 3.01(c)
below.

       

      “Lien”, as applied to
the property or assets (or the income or profits therefrom) of the Borrower or
any Subsidiary, shall mean (in each case, whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise): (a) any mortgage, lien, pledge, hypothecation, attachment,
assignment, deposit arrangement, encumbrance, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind in respect of
any property (including, without limitation, stock of any Subsidiary) of the
Borrower or any Subsidiary, or upon the income or profits therefrom; (b) any
arrangement under which any property of the Borrower or any Subsidiary is
transferred, sequestered or otherwise identified for the purpose of subjecting
or making available the same for the payment of Indebtedness or the performance
of any other liability in priority to the payment of the general, unsecured
creditors of the Borrower or any Subsidiary; (c) any Indebtedness or liability
which remains unpaid after the same shall become due and payable and which, if
unpaid, by law or otherwise is given any priority whatsoever over the general
unsecured creditors of the Borrower or any Subsidiary; and (d) any agreement
(other than this Agreement) or other arrangement which, directly or indirectly,
prohibits the Borrower or any Subsidiary from creating or incurring any lien on
any of its properties or assets or which conditions the ability to do so on the
security, on a pro rata or other basis,
of Indebtedness other than Indebtedness outstanding under this
Agreement.

       

      “Loan Documents” shall
mean the collective reference to this Agreement, the Notes, the Security
Documents, the Environmental Indemnity Agreement, the Validity Guaranties, the
Subordination Agreement, the Board Observer Agreement, the Warrant, the
Registration Rights Agreement, and any and all other agreements, instruments,
certificates and other documents as may be executed and delivered by the
Borrower and/or any of the Subsidiaries pursuant hereto or thereto.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      “Loans” shall mean,
collectively, the Advances, the Term Loan and the Convertible Term
Loan.

       

      “Material Adverse
Effect” shall mean any event, act, omission, condition or circumstance
which has or would reasonably be expected to have a material adverse effect on
(a) the business, operations, properties, assets or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) the
ability of the Borrower or any Subsidiary to perform its obligations under any
of the Loan Documents, or (c) the validity or enforceability of, or the Lender’s
rights and remedies under, any of the Loan Documents, other than due to the acts
or omissions of the Lender or any of its Affiliates.

       

      “Maximum Revolver
Amount” shall mean $1,700,000.

       

      “Monitoring Fee” shall
mean the fees payable to the Lender pursuant to Section 2.03(b)
below.

       

      “Net Income” shall
mean the consolidated net income (or loss) of the Borrower and its Subsidiaries
for the period in question, after giving effect to deduction of or provision for
all operating expenses, all taxes and reserves (including reserves for deferred
taxes) and all other proper deductions, all determined in accordance with GAAP;
provided, however, that for
purposes of calculating Net Income, there shall be excluded and no effect shall
be given to (a) the restoration of any contingency reserve except to the extent
that such reserve was established during the subject period, and (b) any Net
Income attributable to any Subsidiary to the extent that the Borrower (or any
Subsidiary through which the Borrower owns the subject Subsidiary) is prohibited
(by law, Contract, minority ownership rights or otherwise) from receiving a
distribution of such Net Income from such Subsidiary.

       

      “Notes” shall mean,
collectively, the Revolving Credit Note, the Term Note and the Convertible Term
Note.

       

      “Obligations” shall
mean the collective reference to all Indebtedness and other liabilities and
obligations of every kind and description owed by the Borrower to the Lender
from time to time under or pursuant to this Agreement, the Notes, the Security
Documents and the other Loan Documents (excluding the Warrant and Registration
Rights Agreement, other than amounts payable (a) under Section 1.4 of the
Warrant based upon exercise of the Put Option thereunder prior to or at the time
of the repayment in full of all other Obligations, and (b) from time to time
pursuant to Section 2(c) of the Registration Rights Agreement), and/or otherwise
in respect of the Loans, however evidenced, created or incurred, fixed or
contingent, now or hereafter existing, due or to become due.

       

      “Organic Documents”
shall mean, with respect to any Person, the certificate of incorporation,
articles of incorporation, certificate of formation, certificate of limited
partnership, by-laws, operating agreement, limited partnership agreement or
other such document of such Person.

       

      “Original Agreement”
shall have the meaning ascribed thereto in the second “WHEREAS” paragraph
above.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      “Original Closing
Date” shall mean August 31, 2008, which was the “Closing Date” under, as
defined in and for purposes of the Original Agreement.

       

      “Owned Real Property”
shall mean the Real Property, consisting of approximately 4.5 acres of improved
land and buildings, owned by General Environmental Management of Rancho Cordova,
LLC (a Wholly-Owned Subsidiary of the Borrower) located at 11855 White Rock
Road, Rancho Cordova, California 95742.

       

      “Participant” has the
meaning set forth in Section 8.01 below.

       

      “Permitted Discretion”
shall mean a determination or judgment made by the Lender in good faith in the
exercise of reasonable business judgment from the perspective of a secured
lender.

       

      “Permitted
Indebtedness” shall mean any and all Indebtedness expressly permitted
pursuant to Section 6.01 below.

       

      “Permitted Liens”
shall mean those Liens expressly permitted pursuant to Section 6.02
below.

       

      “Person” shall mean
any individual, partnership, corporation, limited liability company, banking
association, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

       

      “Purchase Money Note”
shall mean the Purchase Money Note dated August 17, 2009 in the principal amount
of $5,600,000 issued by MTS Acquisition Company, Inc. to GEM-DE, as same may be
amended, modified, supplemented and/or restated from time to time (subject to
any required consent under this Agreement).

       

      “Real Properties”
shall mean, collectively, any real properties (land, buildings and/or
improvements) now owned or leased or occupied by the Borrower or any of the
Subsidiaries, and, during the period of the Borrower’s and/or Subsidiary’s
occupancy thereof, any other real properties heretofore owned or leased by the
Borrower or any Subsidiary (provided that, with respect to leased properties,
the “Real Property” shall refer only to the portion of the subject property
(excluding common areas) leased by the Borrower or a Subsidiary).

       

      “Register” has the
meaning set forth in Section 8.03(a) below.

       

      “Registration Rights
Agreement” shall mean the Registration Rights Agreement, dated as of the
Original Closing Date, made by the Company for the benefit of the Lender and any
subsequent Holders (as such term is defined in the Registration Rights
Agreement), as same may be amended, modified, supplemented and/or restated from
time to time.

       

      “Revolving Credit
Commitment” shall mean the Lender’s agreement to make Advances to the
Borrower within the limitations set forth in Section 2.01 below.

       

      
        
           

        

        
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      “Revolving Credit Maturity
Date” shall mean August 31, 2011; provided, however, that in the
event that the Advances are prepaid or required to be prepaid pursuant to
Section 2.01(e) or Section 2.07 below, then the Revolving Credit Maturity Date
shall be deemed to have occurred simultaneously with such prepayment or required
prepayment.

       

      “Revolving Credit
Note” shall mean the amended and restated promissory note of the Borrower
issued to the Lender to represent the Advances and interest thereon, as
described in Section 2.01(f) below.

       

      “Royalty Provisions”
shall mean Section 2.2 of the Stock Purchase Agreement, as same may be amended,
modified, supplemented and/or restated from time to time (subject to any
required consent under this Agreement).

       

      “Sale” shall mean any
transaction or series of related transactions (a) whereby a majority of the
outstanding capital stock of or equity interests in the Borrower which
ordinarily has voting power for the election of directors (including preferred
stock counted on an “as converted” basis into common stock and common stock
counted on a fully diluted basis) is sold, assigned or transferred, (b) whereby
the Borrower issues shares of its capital stock or equity interests which, after
giving effect to such transaction or transactions, constitute a majority of the
outstanding capital stock of the Borrower which ordinarily has voting power for
the election of a majority of the Borrower’s directors (including, if
applicable, preferred stock counted on an “as converted” basis into common stock
and common stock counted on a fully diluted basis), (c) whereby Control of
the Borrower is held by a Person (or group of Persons acting in concert) who
does not hold such Control on the date of this Agreement, (d) in which the
Borrower is a constituent party to any merger or consolidation and as a result
thereof (i) the holders of the outstanding capital stock of the Borrower which
ordinarily has voting power for the election of a majority of the Borrower’s
directors (including, if applicable, preferred stock counted on an “as
converted” basis into common stock) immediately prior to such merger or
consolidation cease to own a majority of the outstanding capital stock of the
Borrower which ordinarily has voting power for the election of a majority of the
Borrower’s directors (including, if applicable, preferred stock counted on an
“as converted” basis into common stock), or (ii) the Borrower is not the
surviving entity, or (e) whereby all or any material portion of the assets of
the Borrower and the Subsidiaries (taken as a whole) are sold, assigned or
transferred.

       

      “SEC” shall mean the
United States Securities and Exchange Commission, and any successor agency
performing the functions thereof.

       

      “SEC Reports” shall
mean all periodic and current reports, registration statements, proxy statements
and other reports filed or required to be filed by the Borrower with the SEC
pursuant to the Act and/or the Exchange Act, and any amendments or supplements
thereto filed with the SEC.

       

      “Security Documents”
shall mean the Guaranty Agreement, the Collateral Agreement, the Deed of Trust,
collateral assignments, Landlord Waivers, Control Agreements, financing
statements or other such agreements or documents pursuant thereto, and any other
agreements or instruments securing or creating or evidencing Liens securing the
Obligations.

       

      
        
           

        

        
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      “Seller” shall mean
Randy Costales and Gloria Costales.

       

      “Seller Notes” shall
mean (a) the subordinated promissory note of GEM-DE in the principal amount of
$1,062,500, issued by GEM-DE to the Seller on the Original Closing Date pursuant
to the Acquisition Agreement, (b) the subordinated promissory note of GEM-DE in
the principal amount of $187,500, issued by GEM-DE to the Trust on the Original
Closing Date pursuant to the Acquisition Agreement, and (c) any Contingent Note
(as defined in the Acquisition Agreement) which may be issued at any
time.

       

      “Stock Purchase
Agreement” shall mean the Stock Purchase Agreement dated as of August 17,
2009 by and among the Borrower, GEM-DE, GEM Mobile Treatment Services, Inc., and
MTS Acquisition Company, Inc., as same may be amended, modified, supplemented
and/or restated from time to time (subject to any required consent under this
Agreement).

       

      “Subordinated Debt”
shall mean the Seller Notes and all other Indebtedness for money borrowed and
other liabilities of the Borrower, whether or not evidenced by promissory notes,
which is contractually subordinated in right of payment, in a manner
satisfactory to the Lender (as evidenced by the Lender’s prior written approval
thereof), to all Obligations of the Borrower to the Lender.

       

      “Subordination
Agreement” shall mean the Subordination Agreement, dated as of the
Original Closing Date (as same may thereafter be amended, modified, supplemented
and/or restated from time to time), by and between the Lender, the Seller, the
Trust and GEM-DE, pursuant to which the Seller and the Trust have subordinated
their rights under the Seller Notes to the Obligations.

       

      “Subsidiary” or “Subsidiaries” shall
mean the individual or collective reference to any corporation, limited
liability company or other entity of which 50% or more of the outstanding shares
of stock or other equity interests of each class having ordinary voting power
and/or rights to profits (other than stock having such power only by reason of
the happening of a contingency) is at the time owned by the Borrower, directly
or indirectly through one or more Subsidiaries of the Borrower.

       

      “Term Loan” shall mean
the term loan in the face amount of $5,600,000 described in Section 2.02(a)(i)
below.

       

      “Term Note” shall mean
the promissory note of the Borrower issued to the Lender as described in Section
2.02(d)(i) below.

       

      “Third Party Payment”
shall have the meaning ascribed thereto in Section 2.08(a) below.

       

      “Trust” shall mean NCF
Charitable Trust, a Florida wholly charitable trust and tax-exempt organization
classified as a public charity.

       

      “UCC” means the
Uniform Commercial Code as in effect in the State of New York on the date hereof
and hereafter from time to time.

       

      
        
           

        

        
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      “Validity Guaranties”
shall mean, collectively, (a) the Validity Guaranty, dated as of the Original
Closing Date, by and among the Lender, the Borrower and Timothy J. Koziol, and
(b) the Validity Guaranty, dated as of the Original Closing Date, by and among
the Lender, the Borrower and Brett M. Clark.

       

      “Warrant” shall mean
the amended and restated warrant to purchase an aggregate of 2,700,000 shares of
Common Stock (subject to adjustment), such warrant to be issued by the Borrower
to the Lender on the Closing Date.

       

      “Wholly-Owned
Subsidiary” shall mean each Domestic Subsidiary of which all of the
outstanding equity securities (other than directors’ qualifying shares) are
owned by the Borrower or another such Wholly-Owned Subsidiary.

       

      Section 1.02.  Use
of Defined Terms.  All terms defined in this Agreement shall
have their defined meanings when used in the Notes, the Security Documents, the
other Loan Documents, and all certificates, reports or other documents made or
delivered pursuant to this Agreement, unless otherwise defined therein or unless
the specific context shall otherwise require.

       

      Section
1.03.  Accounting Terms.  All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP.

       

      Section
1.04.  Other Definitional Provisions.  The words
“hereof,” “herein”, “hereto” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this
Agreement unless otherwise specified.  The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.  The word “including” and words of similar import when
used in this Agreement shall mean “including, without limitation,” unless
otherwise specified.

       

      II.            GENERAL
TERMS

       

      Section 2.01. Revolving Credit
Loans.

       

      (a)           Subject
at all times to all of the terms and conditions of this Agreement, the Lender
hereby agrees to extend to the Borrower a secured revolving credit facility,
from the Closing Date to the Revolving Credit Maturity Date, in an aggregate
principal amount not to exceed, at any time outstanding, the lesser of (i) the
Borrowing Base at the subject time, or (ii) the Maximum Revolver Amount (the
"Revolving Credit
Commitment").

       

      (b)           Such
revolving credit loans are herein sometimes referred to individually as an
"Advance" and
collectively as the "Advances."  Subject
at all times to all of the terms and conditions of this Agreement, from the
Closing Date to the Revolving Credit Maturity Date and within the limits of the
Revolving Credit Commitment, the Lender shall lend, and the Borrower may borrow,
prepay (without premium or penalty) and reborrow under this Section
2.01.  Each request for an Advance (i) shall be irrevocable, (ii)
shall be deemed to constitute an express affirmation that all conditions
precedent set forth in part B of Article IV hereof are satisfied on the date of
such request and will be satisfied on the requested Borrowing Date, and (iii)
shall be made to the Lender in writing, not later than three (3) Business Days
prior to the requested Borrowing Date, by an authorized officer of the Borrower
or by telephonic communication by such authorized officer to the Lender, which
shall be confirmed by written notice to the Lender to be delivered to the Lender
by the Business Day next following the subject request.  In no event
shall the Borrower request, or shall the Lender be required to honor, (A) any
request for an Advance in an amount greater than the Availability at such time,
(B) any request for an Advance in an amount less than $100,000, or (C) more than
one request (or more frequently if reasonably required by the Borrower) for the
borrowing of Advances in any seven (7) calendar day period.

       

      
        
           

        

        
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      (c)           The
Borrower shall pay the Lender interest on all Advances at the rate(s) per annum
as in effect from time to time in accordance with the Revolving Credit
Note.  Such interest shall be payable monthly in arrears on the first
day of each calendar month and on the Revolving Credit Maturity Date, and shall
be computed on the daily unpaid balance of all Advances made under the
Borrower's revolving credit loan accounts with the Lender, based on a three
hundred sixty (360) day year, counting the actual number of days
elapsed.  The Borrower hereby authorizes the Lender to charge the
Borrower's revolving credit loan accounts for all such interest; provided, however, that the
Lender shall be under no obligation to make any such charge to the Borrower’s
revolving credit loan accounts (including, without limitation, if there is
insufficient Availability at the time such interest is due and
payable).

       

      (d)           In
the event and to the extent that, at any time, the outstanding principal amount
of Advances exceeds the Revolving Credit Commitment then in effect, then the
Borrower shall immediately, without notice or demand, make a payment to the
Lender in respect of the Advances in an amount sufficient to cause the
outstanding principal amount of Advances to be equal to or less than the
Revolving Credit Commitment then in effect.

       

      (e)           Unless
sooner due and payable by reason of the Lender’s demand for payment or an Event
of Default or Sale having occurred, the Borrower shall pay in full all of the
Obligations to the Lender in respect of all Advances on or prior to the
Revolving Credit Maturity Date.  Anything elsewhere contained in this
Agreement to the contrary notwithstanding, in the event that and at such time as
the Convertible Term Loan shall be repaid or be required to be repaid in full,
the Revolving Credit Commitment shall thereupon terminate and all outstanding
Advances, all accrued interest thereon and all other outstanding Obligations
(including, without limitation, accrued Monitoring Fees) shall be immediately
due and payable, without requirement of any notice or demand.

       

      (f)           All
Advances shall be evidenced by a secured Amended and Restated Revolving Credit
Note of the Company payable to the Lender or registered assigns.

       

      (g)           The
Borrower may, at its option, terminate the Revolving Credit Commitment at any
time by giving twenty (20) days’ prior written notice thereof to the Lender, and
paying to the Lender, on the date fixed for termination, an amount equal to the
sum of (i) all outstanding principal and accrued interest of the Advances, and
(ii) all accrued Monitoring Fees.

       

      (h)           The
Lender and the Borrower hereby agree that, after giving effect to the
restructuring of the credit facilities pursuant to this Agreement, the
outstanding principal amount of Advances on September 4, 2009 is
$1,700,000.

       

      
        
           

        

        
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      Section
2.02.  Term Loans.

       

      (a)           Subject
at all times to all of the terms and conditions of this Agreement, the Lender
hereby agrees (i) to convert a portion of the outstanding Advances and a portion
of the outstanding term loan under the Original Agreement into a Term Loan in
the principal amount of $5,600,000, and (ii) to convert a portion of the
outstanding Advances and outstanding term loan under the Original Agreement into
a convertible term loan in the principal amount of
$6,314,699.59.  Such conversion shall become effective on the Closing
Date, and any amounts repaid in respect of the Term Loan and the Convertible
Term Loan may not be reborrowed.

       

      (b)           The
Term Loan shall be repayable in installments in accordance with the schedule of
payments set forth in the Term Note, and the Convertible Term Loan shall be
repayable on demand or, in the absence of demand, in installments in accordance
with the schedule of payments set forth in the Convertible Term
Note.  The Borrower shall be required to prepay the Term Loan and the
Convertible Term Loan in full simultaneously with the consummation of any Sale
or any termination of the Revolving Credit Commitment.

       

      (c)           The
Borrower shall pay the Lender interest on the principal balances of the Term
Loan and the Convertible Term Loan at the rate(s) per annum as in effect from
time to time in accordance with the Term Note and the Convertible Term Note,
respectively.  Such interest shall be payable in accordance with the
Term Note and the Convertible Term Note, respectively, and shall be computed on
the daily unpaid balance of the Term Loan and the Convertible Term Loan, based
on a three hundred sixty (360) day year, counting the actual number of days
elapsed.  The Borrower hereby authorizes the Lender to charge the
Borrower’s revolving credit loan accounts for all such interest and/or for any
or all principal amounts due and payable in respect of the Term Loan and/or the
Convertible Term Loan; provided, however, that the
Lender shall be under no obligation to make any such charge to the Borrower’s
revolving credit loan accounts (including, without limitation, if there is
insufficient Availability at the time such interest and/or principal is due and
payable).

       

      (d)           (i)
The Term Loan shall be evidenced by a secured Term Note of the Borrower payable
to the Lender or registered assigns, and (ii) the Convertible Term Loan shall be
evidenced by a secured Convertible Term Note of the Borrower payable to the
Lender or registered assigns.

       

      (e)           In
the event and to the extent that, at any time and from time to time, (i) the
Borrower, GEM-DE and/or any other Person (including, without limitation, the
Lender as collateral assignee) shall receive any prepayment under or in respect
of the Purchase Money Note, an equal prepayment shall immediately be made under
and pursuant to the Term Note, (ii) any payment is received by the Borrower,
GEM-DE and/or any other Person (including, without limitation, the Lender as
collateral assignee) under the Royalty Provisions, then an equal prepayment
shall immediately be made under and pursuant to the Convertible Term Note, and
(iii) the Borrower shall receive payment (other than by offset) in respect of
any indemnification claim under the Acquisition Agreement, (A) the Borrower
shall immediately give written notice to the Lender upon receipt of such
indemnification payment, stating the date and amount of such payment, and (B)
the Borrower shall, upon demand by the Lender, make a prepayment on the
Convertible Term Note in an amount equal to the net after-tax amount of the
indemnification payment received by the Borrower.  Any prepayment
under this Section 2.02(e) shall not require payment of any prepayment
premium.  In the event and to the extent that, at any time and from
time to time, the Lender (as collateral assignee) shall receive (A) any
scheduled payment under or in respect of the Purchase Money Note, the Lender
shall apply same to the corresponding payment under the Term Note, (B) any
prepayment under or in respect of the Purchase Money Note, the Lender shall
apply same as a prepayment under the Term Note, and (C) any payment under the
Royalty Provisions, the Lender shall apply same as a prepayment under the
Convertible Term Note; and any such application of payments by the Lender shall
be deemed to constitute a payment by the Borrower of the corresponding
obligations under the subject Note.

       

      
        
           

        

        
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      Section
2.03.  Fees and Premiums.

       

      (a)           [Reserved].

       

      (b)           The
Borrower shall further pay to the Lender, on the first (1st) day of
each calendar month prior to the Revolving Credit Maturity Date or the earlier
termination of the Revolving Credit Commitment and payment of the Obligations in
accordance with Section 2.01(g) above or Section 2.07 below, and upon the
termination of the Revolving Credit Commitment and payment of the Obligations
thereon, a collateral monitoring, availability and administrative fee in an
amount equal to 0.083% of the average daily outstanding principal amount of
Advances during the immediately preceding calendar month (which shall be
appropriately prorated, based on a 30-day month, for any partial calendar
month).

       

      (c)           In
the event of any prepayment of all or any portion of the Term Loan or the
Convertible Term Loan (other than a prepayment (i) pursuant to Section 2.02(e)
above, or (ii) made with the proceeds received from the sale of any business
unit or units, promptly upon receipt of such proceeds), in addition to the
payment of the subject principal amount and all unpaid accrued interest thereon,
the Borrower shall be required to pay to the Lender a prepayment premium in an
amount equal to (A) two (2%) percent of the principal amount being prepaid if
the prepayment is made on or prior to February 28, 2010, and (B) one (1%)
percent of the principal amount being prepaid if such prepayment is made
subsequent to February 28, 2010 and prior to August 1, 2011.

       

      (d)           Payments
received in respect of the Obligations after 12:00 Noon on any day shall be
deemed to be received on the next succeeding Business Day, and if any payment is
received other than by wire transfer of immediately available funds, such
payment shall be subject to three (3) Business Days’ clearance prior to being
credited to the Obligations for interest calculation purposes.

       

      Section 2.04.  Use
of Proceeds.  The Borrower shall utilize the proceeds of the
Loans solely for working capital and other general corporate purposes of the
Borrower, and for the payment of fees and expenses associated with the
consummation of the transactions contemplated by this Agreement.

       

      Section
2.05.  Further Obligations.  With respect to all
Obligations for which the interest rate is not otherwise specified herein
(whether such Obligations arise hereunder, pursuant to the Notes or Security
Documents, or otherwise), such Obligations shall bear interest at the rate(s) in
effect from time to time pursuant to the Revolving Credit Note.

       

      
        
           

        

        
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      Section
2.06.  Application of Payments.  All amounts paid to
or received by the Lender in respect of the Loans from whatever source (whether
from the Borrower, any Subsidiary pursuant to a Guaranty Agreement, any
realization upon any Collateral, or otherwise) shall, except as otherwise
provided in Section 2.02(e) above, unless otherwise directed by the Borrower
with respect to any particular payment (unless an Event of Default shall then be
continuing, in which event the Lender may disregard Section 2.02(e) and/or
disregard the Borrower’s direction), be applied (a) first, to reimburse the
Lender for all out-of-pocket costs and expenses incurred by the Lender which are
reimbursable to the Lender in accordance with this Agreement, the Notes and/or
any of the other Loan Documents, (e) next, to any accrued but unpaid fees or
prepayment premiums, and amounts payable under Section 2(c) of the Registration
Rights Agreement, (c) next, to unpaid accrued interest on the Convertible Term
Loan, (d) next, to unpaid accrued interest on the Term Loan, (e) next, to unpaid
accrued interest on the Advances, (f) next, to the outstanding principal of the
Convertible Term Loan, to the extent then due and payable, (g) next, to the
outstanding principal of the Advances, (h) next, to the payment of any unpaid
Option Purchase Price under the Warrant, (i) next, to the outstanding principal
of the Term Loan, to the extent then due and payable, and (j) finally, to the
payment of any other outstanding Obligations; and after payment in full of the
Obligations, any further amounts paid to or received by the Lender in respect of
the Loans shall be paid over to the Borrower or such other Person(s) as may be
legally entitled thereto.

       

      Section
2.07.  Sale; Term Loan Payment.  Anything elsewhere
contained in this Agreement and/or the Notes to the contrary notwithstanding,
the Revolving Credit Commitment shall terminate and all Obligations shall become
immediately due and payable, without requirement of any notice or demand, (a)
upon the consummation of any Sale, and (b) upon the prepayment or required
payment or prepayment in full of the Term Loan or the Convertible Term
Loan.  In addition, the Term Loan, the Convertible Term Loan and all
Obligations shall become immediately due and payable, without requirement of any
notice or demand, (i) upon the consummation of any Sale, and (ii) upon any
termination of the Revolving Credit Commitment.

       

      Section
2.08.  Obligations Unconditional.

       

      (a)           The
payment and performance of all Obligations shall constitute the absolute and
unconditional obligations of the Borrower, and shall be independent of any
defense or rights of set-off, recoupment or counterclaim which the Borrower
might otherwise have against the Lender.  All payments required by
this Agreement and/or the Notes shall be paid free of any deductions or
withholdings for any taxes or other amounts and without abatement, diminution or
set-off.  If the Borrower is required by law to make such a deduction
or withholding from a payment hereunder (except for net income taxes, or
franchise taxes imposed in lieu of net income taxes, imposed generally by
federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax on
the overall net income of the Lender or its members), the Borrower shall pay to
the Lender such additional amount as is necessary to ensure that, after the
making of such deduction or withholding, the Lender receives (free from any
liability in respect of any such deduction or withholding) a net sum equal to
the sum which it would have received and so retained had no such deduction or
withholding been made or required to be made.  The Borrower shall (i)
pay the full amount of any deduction or withholding, which it is required to
make by-law, to the relevant authority within the payment period set by the
relevant law, and (ii) promptly after any such payment, deliver to the Lender an
original (or certified copy) official receipt issued by the relevant authority
in respect of the amount withheld or deducted or, if the relevant authority does
not issue such official receipts, such other evidence of payment of the amount
withheld or deducted as is reasonably acceptable to the
Lender.  Notwithstanding anything to the contrary contained in this
Section 2.08(a), in the event that the Borrower is compelled by legal process to
make payment to a third party (“Third Party
Payment”), including any taxing authority, of any amount that is
unrelated to this Agreement or the transactions hereunder and that is owed by
the Lender to such third party, then, upon the Borrower making such payment and
presenting to the Lender satisfactory evidence of such payment, such Third Party
Payment shall be entered on the Lender’s books and records as a credit to the
Borrower’s account.  The Borrower shall give the Lender at least
fifteen (15) days’ written notice prior to making any such Third Party
Payment.

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      (b)           If,
at any time and from time to time after the Closing Date, (i) any change in any
existing law, regulation, treaty or directive or in the interpretation or
application thereof, (ii) any new law, regulation, treaty or directive enacted
or application thereof, or (iii) compliance by the Lender with any request or
directive (whether or not having the force of law) from any governmental
authority (A) subjects the Lender to any tax, levy, impost, deduction,
assessment, charge or withholding of any kind whatsoever with respect to any
Loan Document, or changes the basis of taxation of payments to the Lender of any
amount payable thereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment fees or other
fees payable hereunder or changes in the rate of tax on the overall net income
of the Lender or its members), or (B) imposes on the Lender any other condition
or increased cost in connection with the transactions contemplated thereby or
participations therein, and the result of any of the foregoing is to increase
the cost to the Lender of making or continuing any Loan or to reduce any amount
receivable hereunder, then, in any such case, the Borrower shall promptly pay to
the Lender any additional amounts necessary to compensate the Lender, on an
after-tax basis, for such additional cost or reduced amount as determined by the
Lender.  If the Lender becomes entitled to claim any additional
amounts pursuant to this Section 2.08(b), the Lender shall promptly notify the
Borrower of the event by reason of which the Lender has become so entitled, and
each such notice of additional amounts payable pursuant to this Section 2.08(b)
submitted by the Lender to the Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.

       

      Section
2.09.  Reversal of Payments.  To the extent that any
payment or payments made to or received by the Lender pursuant to this Agreement
or any other Loan Document are subsequently invalidated, declared to be
fraudulent or preferential, set aside, or required to be repaid to any trustee,
receiver or other person under any state or federal bankruptcy or other such
law, then, to the extent thereof, such amounts shall be revived as Obligations
and continue in full force and effect hereunder as if such payment or payments
had not been received by the Lender.

       

      
        
           

        

        
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      III.           REPRESENTATIONS AND
WARRANTIES

       

      As of the
Closing Date and on each Borrowing Date (unless the representation and warranty
refers to a specific date, in which case such representation and warranty shall
continue in effect with respect to such specific date), the Borrower hereby
makes the following representations and warranties to the Lender, all of which
representations and warranties shall survive the Closing Date, the delivery of
the Notes and the making of the Loans, shall be continuing in nature so long as
any Obligations are outstanding or the Revolving Credit Commitment remains in
effect, and are as follows:

       

      Section
3.01.  Financial Matters.

       

      (a)           The
Borrower has heretofore furnished to the Lender (i) the audited consolidated
financial statements (including balance sheets, statements of income, statements
of cash flows and statements of stockholders’ equity) of the Borrower and its
Subsidiaries as at December 31, 2006, 2007 and 2008, and for the Fiscal Years
then ended, and (ii) the unaudited consolidated financial statements of the
Borrower and its Subsidiaries as of June 30, 2009 and for the six (6) months
then ended (collectively, the “Financial
Statements”).

       

      (b)           The
Financial Statements (i) have been prepared in accordance with GAAP on a
consistent basis for all periods (subject, in the case of the unaudited
Financial Statements, to the absence of full footnote disclosures, and to normal
non-material audit adjustments), (ii) are complete and correct in all material
respects, (iii) fairly present the consolidated financial condition of the
Borrower and its Subsidiaries as of said dates, and the results of their
operations for the periods stated, (iv) contain and reflect all necessary
adjustments and accruals for a fair presentation of the Borrower’s and its
Subsidiaries’ consolidated financial condition and results of operations as of
the dates of and for the periods covered by such Financial Statements, and (v)
make full and adequate provision, subject to and in accordance with GAAP, for
the various assets and liabilities (including, without limitation, deferred
revenues) of the Borrower and its Subsidiaries, fixed or contingent, and the
results of their operations and transactions in their accounts, as of the dates
and for the periods referred to therein.

       

      (c)           Except
as set forth in Schedule 3.01(c) of
the Disclosure Schedule, neither the Borrower nor any Subsidiary has any
liabilities, obligations or commitments of any kind or nature whatsoever,
whether absolute, accrued, contingent or otherwise (collectively “Liabilities and
Contingencies”), including, without limitation, Liabilities and
Contingencies under employment agreements and with respect to any “earn-outs”,
stock appreciation rights, or related compensation obligations, except: (i)
Liabilities and Contingencies disclosed in the Financial Statements or footnotes
thereto, (ii) Liabilities and Contingencies incurred in the ordinary course of
business and consistent with past practice since the date of the most recent
Financial Statements, or (iii) those Liabilities  and Contingencies
which are not required to be disclosed under GAAP.  The reserves, if
any, reflected on the balance sheet included in the most recent Financial
Statements are appropriate and reasonable.  Neither the Borrower nor
any Subsidiary has any Indebtedness for money borrowed, outstanding obligations
for the purchase price of property, contingent obligations or liabilities for
taxes, or any unusual forward or long-term commitments, except as specifically
set forth in Schedule
3.01 of the Disclosure Schedule.

       

      
        
           

        

        
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      (d)           Since
the date of the most recent Financial Statements, except as set forth in Schedule 3.01(d) of
the Disclosure Schedule, there has been no material adverse change in the
working capital, condition (financial or otherwise), assets, liabilities,
reserves, business, management, operations or prospects of the Borrower and its
Subsidiaries (taken as a whole), including, without limitation, the
following:

       

      (i)           there
has been no material change in any assumptions underlying, or in any methods of
calculating, any bad debt, contingency or other reserve relating to the Borrower
or any Subsidiary;

       

      (ii)           there
have been (A) no material write-downs in the value of any inventory of, and
there have been no write-offs as uncollectible of any notes, accounts receivable
or other receivables of, the Borrower or any Subsidiary other than write-offs of
accounts receivable reserved in full as of the date of the most recent financial
statements delivered to the Lender, and (B) no reserves established for the
uncollectibility of any notes, Accounts or other receivables of the Borrower or
any Subsidiary, except to the extent that same have been disclosed to the Lender
in writing and would not, individually or in the aggregate, cause the
outstanding Advances to exceed the Revolving Credit Commitment;

       

      (iii)          no
debts have been cancelled, no claims or rights of substantial value have been
waived, and no properties or assets (real, personal or mixed, tangible or
intangible) have been sold, transferred, or otherwise disposed of by the
Borrower or any Subsidiary except in the ordinary course of business and
consistent with past practice;

       

      (iv)          there
has been no change in any method of accounting or accounting practice utilized
by the Borrower or any Subsidiary;

       

      (v)           no
material casualty, loss or damage has been suffered by the Borrower or any
Subsidiary, regardless of whether such casualty, loss or damage is or was
covered by insurance;

       

      (vi)          Any
announced changes in the policies or practices of any customer, supplier or
referral source which would reasonably be expected to have a Material Adverse
Effect;

       

      (vii)         Any
incurrence of (A) any liability or obligation outside of the ordinary course of
business, or (B) any Indebtedness other than Permitted
Indebtedness;

       

      (viii)        Any
declaration, setting aside or payment of any dividend or distribution or any
other payment of any kind by the Company to or in respect of any equity
securities of the Company; and

       

      (ix)           No
action described in this Section 3.01(d) has been agreed to be taken by the
Borrower or any Subsidiary.

       

      (e)           The
Borrower has in place adequate systems of internal controls and disclosure
controls and procedures sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, and
(v) the Borrower and its management are able to obtain timely and accurate
information regarding the Business Operations and all material transactions
relating to the Borrower and its Subsidiaries; and no material deficiency exists
with respect to the Borrower’s systems of internal controls.

       

      
        
           

        

        
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      (f)           Schedule 3.01(f) of
the Disclosure Schedule sets forth a true and complete list of all undisputed
and all disputed accounts payable (itemized by creditor, dollar amount and
original due date) of the Borrower and its Subsidiaries that are more than
ninety (90) days past due as of the date of this Agreement.

       

      Section
3.02.  Organization; Corporate Existence.

       

      (a)           The
Borrower (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, (ii) has all requisite corporate
power and authority to own its properties and to carry on its business as now
conducted and as proposed hereafter to be conducted, (iii) is qualified to do
business as a foreign corporation in the State of California and in each other
jurisdiction in which the failure of the Borrower to be so qualified would have
a Material Adverse Effect, and (iv) has all requisite corporate power and
authority to execute and deliver, and perform all of its obligations under, the
Loan Documents to which it is a party.  True and complete copies of
the Organic Documents of the Borrower, together with all amendments thereto,
have been furnished to the Lender.

       

      (b)           Each
of the Subsidiaries (i) is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, (ii) has all
requisite corporate or company power and authority to own its properties and to
carry on its business as now conducted and as proposed hereafter to be
conducted, (iii) is qualified to do business as a foreign corporation or limited
liability company in each jurisdiction in which the failure of such Subsidiary
to be so qualified would have a Material Adverse Effect, and (iv) has all
requisite corporate or company power and authority to execute and deliver, and
perform all of its obligations under, the Loan Documents to which it is a
party.  True and complete copies of the Organic Documents of each
Subsidiary, together with all amendments thereto, have been furnished to the
Lender.

       

      Section
3.03.  Authorization.

       

      (a)           The
execution, delivery and performance by the Borrower and its Subsidiaries of
their respective obligations under the Loan Documents have been duly authorized
by all requisite company, corporate and other action and will not, either prior
to or as a result of the consummation of the transactions contemplated by this
Agreement: (i) violate any provision of Applicable Law, any order of any court
or other agency of government, any provision of the Organic Documents of the
Borrower or any Subsidiary, or any Contract, indenture, agreement or other
instrument to which the Borrower or any Subsidiary is a party, or by which the
Borrower or any Subsidiary or any of their respective assets or properties are
bound which would have a Material Adverse Effect, or (ii) be in conflict with,
result in a breach of, or constitute (after the giving of notice or lapse of
time or both) a default under, or, except as may be provided in the Loan
Documents, result in the creation or imposition of any Lien of any nature
whatsoever upon any of the property or assets of the Borrower or any Subsidiary
pursuant to, any such Contract, indenture, agreement or other
instrument.

       

      
        
           

        

        
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      (b)           This
Agreement and other Loan Documents have been duly executed and delivered by the
Borrower and each Subsidiary (in each case to the extent it is a party thereto),
and constitute the valid and binding obligations of the Borrower and each
Subsidiary (in each case to the extent it is a party thereto), enforceable
against the Borrower and each Subsidiary in accordance with their respective
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization, moretorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to creditors’ rights generally, and by
general principles of equity.

       

      (c)           Neither
the Borrower nor any Subsidiary is required to obtain any Government Approval,
consent or authorization from, or to file any declaration or statement with, any
governmental instrumentality or agency in connection with or as a condition to
the execution, delivery or performance of any of the Loan
Documents.

       

      (d)           The
Borrower has reserved for issuance a sufficient number of shares of Common Stock
to satisfy its obligations upon conversion in full of the Convertible Term Note
and the exercise in full of the Warrant.  Upon conversion of the
Convertible Term Note in accordance with the terms thereof, the shares of Common
Stock issuable upon such conversion will be validly issued, fully paid and
nonassessable.  Upon exercise of the Warrant in accordance with the
terms thereof, the Warrant Shares (as such term is defined in the Warrant) will
be validly issued, fully paid and nonassessable.

       

      Section
3.04.  Litigation.  Except as disclosed in Schedule 3.04 of the
Disclosure Schedule, there is no action, suit or proceeding at law or in equity
or by or before any governmental instrumentality or other agency now pending or,
to the knowledge of the Borrower, threatened against or affecting the Borrower
or any Subsidiaries or any of their respective assets, which, if adversely
determined, would have a Material Adverse Effect.  The Borrower has no
Knowledge of any state of facts, events, conditions or circumstances which are
reasonably likely to give rise to, or would properly constitute grounds for or
the basis of, any suit, action, arbitration, proceeding or investigation
(including, without limitation, any unfair labor practice charges, interference
with union organizing activities, or other labor or employment claims) against
or with respect to the Borrower or any Subsidiary which, if adversely
determined, would have a Material Adverse Effect.

       

      Section
3.05.  Material Contracts.  Except as disclosed on
Schedule 3.05
of the Disclosure Schedule, neither the Borrower nor any Subsidiary is (a) a
party to any Contract, agreement or instrument or subject to any charter or
other corporate or organizational restriction which has had or if breached by
the Borrower or any Subsidiary would reasonably be expected to have a Material
Adverse Effect, (b) subject to any liability or obligation under or relating to
any collective bargaining agreement, or (c) in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contract, agreement or instrument to which it is a party or by
which any of its assets or properties is bound, which default, individually or
in the aggregate, would have or could reasonably be expected to have a Material
Adverse Effect.

       

      
        
           

        

        
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      Section
3.06.  Title to Properties.  The Borrower and each
Subsidiary has good title to all of its owned properties and assets, free and
clear of all mortgages, security interests, restrictions, encumbrances or other
Liens of any kind, except for restrictions on the nature of use thereof imposed
by Applicable Law, and except for Permitted Liens, none of which materially
interfere with the use and enjoyment of such properties and assets in the normal
course of the Business Operations as presently conducted, or materially impair
the value of such properties and assets for the purpose of such
business.

       

      Section
3.07.  Real Property.  Schedule 3.07 of the
Disclosure Schedule sets forth a correct and complete list of all Real
Properties leased or occupied by the Borrower and/or any of the Subsidiaries on
the date of this Agreement.  Except for the Owned Real Property,
neither the Borrower nor any Subsidiary owns any Real Property.  The
Borrower or the subject Subsidiary has a valid lessee’s interest in each Real
Property currently leased or occupied by the Borrower or any
Subsidiary.  Neither the Borrower, any Subsidiary nor, to the
Borrower’s Knowledge, any other party thereto, is in material breach or
violation of any requirements of any such lease; and such Real Properties are in
good condition (reasonable wear and tear excepted) and are adequate for the
current and proposed businesses of the Borrower and its
Subsidiaries.  To the Borrower’s Knowledge, the Borrower’s and its
Subsidiaries’ use of the Real Properties in the normal conduct of the Business
Operations does not violate any applicable building, zoning or other law,
ordinance or regulation affecting such Real Properties, and no covenants,
easements, rights-of-way or other such conditions of record materially impair
the Borrower’s and its Subsidiaries’ use of the Real Properties in the normal
conduct of the Business Operations.

       

      Section
3.08.  Machinery and Equipment.  The machinery and
equipment owned and/or used by the Borrower and the Subsidiaries is, as to each
individual material item of machinery and equipment, and in the aggregate as to
all such equipment, in good and usable condition and in a state of good
maintenance and repair (reasonable wear and tear excepted), and adequate for its
use in the Business Operations.  All of such machinery and equipment
has been inspected and maintained at all times and from time to time in
accordance with all Applicable Law and applicable manufacturers’ warranties,
specifications and recommendations

       

      Section
3.09.  Capitalization.  Except as disclosed in Schedule 3.09 of the
Disclosure Schedule and new Subsidiaries which may hereafter be formed or
acquired in compliance with this Agreement, the Borrower does not, directly or
indirectly, own any capital stock of or any form of equity interest in any other
Person.

       

      Section 3.10.  No
Bankruptcy Filing.  The Borrower is not contemplating either
the filing of a petition under any state or federal bankruptcy or insolvency
law, or the liquidation of all or any substantial portion of its assets or
property (except for the sale of one or more business units as contemplated by
Section 5.16 below); and the Borrower has no Knowledge of any Person
contemplating the filing of any such petition against the Borrower.

       

      
        
           

        

        
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      Section 3.11.  No
Investment Company.  The Borrower is not an “investment
company” or a company “controlled” by an “investment company” as such terms are
defined in the Investment Company Act of 1940, as amended.

       

      Section
3.12.  Margin Securities.  Neither the Borrower nor
any Subsidiary owns or has any present intention of acquiring any “margin
security” or any “margin stock” within the meaning of Regulations T, U or X of
the Board of Governors of the Federal Reserve System (herein called “margin
security” and “margin stock”).  None of the proceeds of the Loans will
be used, directly or indirectly, for the purpose of purchasing or carrying, or
for the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry, any margin security or margin stock or for any
other purpose which might constitute the transactions contemplated hereby a
“purpose credit” within the meaning of said Regulations T, U or X, or cause this
Agreement to violate any other regulation of the Board of Governors of the
Federal Reserve System or the Exchange Act, or any rules or regulations
promulgated under such statutes.

       

      Section
3.13.  Taxes.

       

      (a)           All
federal, state and local tax returns and tax reports required to be filed by the
Borrower and/or any Subsidiary have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, and all of such tax returns, tax reports and other filings
are correct and complete in all material respects.  All federal, state
and local income, franchise, sales, use, property, excise, ad valorem,
value-added, payroll and other taxes (including interest, penalties and
additions to tax and including estimated tax installments where required to be
filed and paid) due from or with respect to the Borrower and the Subsidiaries
have been fully paid (except for taxes the validity of which are being contested
in good faith by appropriate proceedings and as to which the Borrower or
Subsidiary has set aside on its books adequate reserves), and appropriate
accruals have been made on the Borrower’s books for taxes not yet due and
payable.  All taxes and other assessments and levies which the
Borrower and/or any Subsidiary is required by law to withhold or to collect have
been duly withheld and collected, and have been paid over to the proper
governmental authorities to the extent due and payable.  Except as set
forth in Schedule
3.13 of the Disclosure Schedule, there are no outstanding or pending
claims, deficiencies or assessments for taxes, interest or penalties with
respect to any taxable period of the Borrower or any Subsidiary, and no
outstanding tax Liens.

       

      (b)           Except
as disclosed in Schedule 3.13 of the
Disclosure Schedule, the Borrower has no Knowledge and has not received notice
of any pending audit with respect to any federal, state or local tax returns of
the Borrower or any Subsidiary, and no waivers of statutes of limitations have
been given or requested with respect to any tax years or tax filings of the
Borrower or any Subsidiary.

       

      
        
           

        

        
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      Section
3.14.  ERISA.  Except as set forth in Schedule 3.14 of the
Disclosure Schedule, neither the Borrower nor any ERISA Affiliate of the
Borrower maintains or has any obligation to make any contributions to any
pension, profit sharing or other similar plan providing for deferred
compensation to any employee.  With respect to any such plan(s) as may
now exist or may hereafter be established by the Borrower or any ERISA Affiliate
of the Borrower, and which constitutes an “employee pension benefit plan” within
the meaning of Section 3(2) of ERISA, except as set forth on Schedule 3.14 of the
Disclosure Schedule:  (a) the Borrower or the subject ERISA Affiliate
has paid and shall cause to be paid when due all amounts necessary to fund such
plan(s) in accordance with its terms, (b) except for normal premiums payable by
the Borrower to the Pension Benefit Guaranty Corporation (“PBGC”), the Borrower
or the subject ERISA Affiliate has not taken and shall not take any action which
could result in any liability to the PBGC, or any of its successors or assigns,
(c) the present value of all accrued benefits thereunder shall not at any time
exceed the value of the assets of such plan(s) allocable to such accrued
benefits, (d) there have not been and there shall not be any transactions such
as would cause the imposition of any tax or penalty under Section 4975 of the
Code or under Section 502 of ERISA, which would adversely affect the funded
benefits attributable to the Borrower or the subject ERISA Affiliate, (e) there
has not been and there shall not be any termination or partial termination
thereof (other than a partial termination resulting solely from a reduction in
the number of employees of the Borrower or an ERISA Affiliate of the Borrower,
which reduction is not anticipated by the Borrower), and there has not been and
there shall not be any “reportable event” (as such term is defined in Section
4043(b) of ERISA) on or after the effective date of Section 4043(b) of ERISA
with respect to any such plan(s) subject to Title IV of ERISA, (f) no
“accumulated funding deficiency” (as defined in Section 412 of the Code) has
been or shall be incurred on or after the effective date of Section 412 of the
Code, (g) such plan(s) have been and shall be determined to be “qualified”
within the meaning of Section 401(a) of the Code, and have been and shall be
duly administered in compliance with ERISA and the Code, and (h) the Borrower is
not aware of any fact, event, condition or cause which might adversely affect
the qualified status thereof.  As respects any “multi-employer plan”
(as such term is defined in Section 3(37) of ERISA) to which the Borrower or any
ERISA Affiliate thereof has heretofore been, is now, or may hereafter be
required to make contributions, the Borrower or such ERISA Affiliate has made
and shall make all required contributions thereto, and there has not been and
shall not be any “complete withdrawal” or “partial withdrawal” (as such terms
are respectively defined in Sections 4203 and 4205 of ERISA) therefrom on the
part of the Borrower or such ERISA Affiliate.

       

      Section
3.15.  Intellectual Property.  Except as set forth in
Schedule 3.15 of
the Disclosure Schedule, the Borrower and the Subsidiaries own or have the valid
right to use all patents, trademarks, copyrights, software, computer programs,
equipment designs, network designs, equipment configurations, technology and
other intellectual property used, marketed and/or sold in the Business
Operations, and the Borrower and the Subsidiaries are in compliance in all
material respects with all licenses, user agreements and other such agreements
regarding the use of intellectual property used in the Business Operations; and
the Borrower has no Knowledge that and has received no notice claiming that any
of such intellectual property infringes upon or violates the valid rights of any
other Person.

       

      Section
3.16.  Compliance with Laws.  The Borrower and the
Subsidiaries are in compliance with all occupational safety, health, wage and
hour, employment discrimination, environmental, flammability, labeling and other
Applicable Law which are material to the Business Operations, except where such
non-compliance would not, individually or in the aggregate, have a Material
Adverse Effect.  Neither the Borrower nor any Subsidiary is aware of
any existing state or facts, events, conditions or occurrences which may now or
hereafter constitute or result in a violation of any Applicable Law, or which
may be reasonably expected to give rise to the assertion of any such violation,
which individually or in the aggregate could have a Material Adverse
Effect.  Neither the Borrower nor any Subsidiary has received written
notice of default or violation, nor is the Borrower or any Subsidiary in default
or violation, with respect to any judgment, order, writ, injunction, decree,
demand or assessment issued by any court or any federal, state, local, municipal
or other governmental agency, board, commission, bureau, instrumentality or
department, domestic or foreign, relating to any aspect of the Borrower’s or any
Subsidiaries’ business, affairs, properties or assets.  Except as
disclosed in Schedule
3.16 of the Disclosure Schedule, neither the Borrower nor any Subsidiary
has received written notice of or been charged with, or is, to the Borrower’s
Knowledge, under investigation with respect to, any violation of any provision
of any Applicable Law, which violation would, individually or in the aggregate
with all other such violations, have a Material Adverse Effect.

       

      
        
           

        

        
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      Section
3.17.  Licenses and Permits.  The Borrower and each
Subsidiary has all federal, state and local licenses and permits required to be
maintained in respect of the ownership and operation of the Owned Real Property
and otherwise in connection with and material to the Business Operations, and,
to Borrower’s Knowledge, all such licenses and permits are valid and in full
force and effect.   The Borrower and each Subsidiary has complied
with the requirements of such licenses and permits in all material respects, and
has received no written notice of any pending or threatened proceedings for the
suspension, termination, revocation or limitation thereof. There is no existing
circumstance or condition Known to the Borrower that would be reasonably
expected to cause or permit any of such licenses or permits to be voided,
revoked or withdrawn.

       

      Section
3.18.  Insurance.  Schedule 3.18 of the
Disclosure Schedule lists all insurance coverages maintained by the Borrower and
its Subsidiaries on the date of this Agreement, including the names of insurers,
policy limits and deductibles.  The Borrower has not received written
notice of cancellation or intent not to renew any of such policies, and there
has not occurred, and to the Borrower’s Knowledge there does not exist, any
condition (other than general industry-wide conditions) such as would cause any
of such insurers to cancel any of such insurance coverages, or would be
reasonably likely to materially increase the premiums charged to the Borrower or
any Subsidiary for coverages consistent with the scope and amounts of coverages
as in effect on the date hereof.

       

      Section
3.19.  Environmental Laws.

       

      (a)           Except
to the extent disclosed in the Environmental Report, the Borrower and each
Subsidiary has complied in all material respects with all Environmental Laws
relating to its business and properties, and to the Knowledge of the Borrower
there exist no Hazardous Substances in amounts in violation of applicable
Environmental Laws or underground storage tanks on any of the Real Properties
the existence of which would, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect, except those that are stored and
used in material compliance with Applicable Laws.

       

      (b)           Except
to the extent disclosed in the Environmental Report, neither the Borrower nor
any Subsidiary has received written notice of any pending or threatened
litigation or administrative proceeding which in any instance (i) asserts or
alleges any violation of applicable Environmental Laws on the part of the
Borrower or any Subsidiary, (ii) asserts or alleges that the Borrower or any
Subsidiary is required to clean up, remove or otherwise take remedial or other
response action due to the disposal, depositing, discharge, leaking or other
release of any Hazardous Substances or materials, or (iii) asserts or alleges
that the Borrower or any Subsidiary is required to pay all or any portion of the
costs of any past, present or future cleanup, removal or remedial or other
response action which arises out of or is related to the disposal, depositing,
discharge, leaking or other release of any hazardous substances or materials by
the Borrower or any Subsidiary.  To the Borrower’s Knowledge, neither
the Borrower nor any Subsidiary is subject to any judgment, decree, order or
citation related to or arising out of any Environmental Laws.  To the
Borrower’s Knowledge, neither the Borrower nor any Subsidiary has been named or
listed as a potentially responsible party by any governmental body or agency in
any matter arising under any Environmental Laws.  Neither the Borrower
nor any Subsidiary is a participant in, nor does the Borrower have Knowledge of,
any governmental investigation involving environmental condition at any of the
Real Properties.

       

      
        
           

        

        
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      (c)           Except
to the extent disclosed in the Environmental Report, neither the Borrower or any
Subsidiary nor, to the Borrower’s Knowledge, any other person, firm, corporation
or governmental entity has caused or permitted any Hazardous Substances or other
materials to be stored, deposited, treated, recycled or disposed of on, under or
at any of the Real Properties which materials, if known to be present, would
reasonably be expected to require or authorize cleanup, removal or other
remedial action by the Borrower or any Subsidiary under any applicable
Environmental Laws.

       

      (d)           To
the Borrower’s Knowledge, all owners and/or tenants of  properties
adjacent to the Owned Real Property and which may affect the environmental
condition of the Owned Real Property have implemented and are in compliance with
all mandated remediation programs in respect of Hazardous Substances and other
environmental contamination caused by or emanating from such owners’ or tenants’
properties or operations.

       

      (e)           As
used in this Section 3.19 and in Sections 5.03 and 5.08 below, the following
terms have the following meanings:

       

      “Environmental Laws”
include all federal, state, and local laws, rules, regulations, ordinances,
permits, orders, and consent decrees agreed to by the Borrower or any
Subsidiary, relating to health, safety, and environmental matters applicable to
the business and property of the Borrower or any Subsidiary.  Such
laws and regulations include but are not limited to the Resource Conservation
and Recovery Act (“RCRA”), 42 U.S.C.
§6901 et seq., as amended; the Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”), 42 U.S.C.
§9601 et seq., as amended; the Toxic Substances Control Act (“TSCA”), 15 U.S.C.
§2601 et seq., as amended; and the Clean Water Act, 33 U.S.C. §1331 et seq., as
amended.

       

      “Hazardous
Substances”, “Release”, “Respond” and “Response” shall have
the meanings assigned to them in CERCLA, 42 U.S.C. §9601, as
amended.

       

      “Notice” means any
actual summons, citation, directive, information request, notice of potential
responsibility, notice of violation or deficiency, order, claim, complaint,
investigation, proceeding, judgment, letter, or other written communication from
the United States Environmental Protection Agency or other federal, state, or
local agency or authority, or any other entity or individual, public or private,
concerning any intentional or unintentional act or omission which involves
management of Hazardous Substances in amounts in violation of Environmental Laws
on or off any Real Properties; the imposition of any lien on any Real
Properties, including but not limited to liens asserted by government entities
in connection with any Borrower’s or Subsidiary’s response to the presence or
Release of Hazardous Substances in amounts in violation of Environmental Laws;
and any alleged violation of or responsibility under any Environmental
Laws.

       

      
        
           

        

        
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      Section
3.20.  Sensitive Payments.  Neither the Borrower nor
any Subsidiary has (a) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made, (b) established
or maintained any unrecorded fund or asset for any purpose or made any false or
artificial entries on its books, (c) made any payments to any person with the
intention that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment, or (d) done
business with or proposes to do business with any country, or any Person in any
country, which is prohibited or restricted under any Applicable Law of the
United States, or engaged in or proposes to engage in any “trading with the
enemy” or other transactions violating any rules or regulations of the Office of
Foreign Assets Control or any similar laws, rules or regulations of any federal,
state, local or foreign government or governmental agency.

       

      Section
3.21.  Full Disclosure.  No statement of fact made by
the Borrower in this Agreement or any other Loan Document or in any information
memorandum, business summary, agreement, certificate, schedule or other written
statement furnished by the Borrower or any Subsidiary to the Lender pursuant
hereto, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make any statements
contained herein or therein not misleading.  Except for matters of a
general economic or political nature which do not affect the Borrower or any
Subsidiary uniquely, there is no fact presently known to the Borrower which has
not been disclosed to the Lender, which has had or would reasonably be expected
to have a Material Adverse Effect.  All of the SEC reports filed by
the Borrower have been prepared in accordance with the applicable rules and
regulations of the SEC, are true and accurate in all material respects (subject
to any filed amendments), and do not contain any material misstatement of fact
or any omission which, in light of the circumstances, would be materially
misleading.

       

      Section
3.22.  Reaffirmation.  Each and every request by the
Borrower for an Advance shall constitute a reaffirmation of the truth and
accuracy in all material respects of the Borrowers’ and each Subsidiary’s
representations and warranties made in this Agreement and the Security Documents
on and as of the date of such request.

       

      IV.           CONDITIONS OF MAKING THE
LOANS

       

      A.           The
obligation of the Lender to effect the restructuring hereunder and to consummate
the other transactions contemplated hereby are subject to the following
conditions precedent:

       

      
        
           

        

        
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      Section
4.01.  Representations and Warranties.  The
representations and warranties set forth in Article III hereof and in the other
Loan Documents shall be true and correct on and as of the Closing
Date.

       

      Section
4.02.  Loan Documents.  The Borrower and its
Subsidiaries (as applicable) shall have duly executed and/or delivered to the
Lender all of the following:

       

      (a)           The
Notes;

       

      (b)           The
Warrant;

       

      (c)           A
reaffirmation by the Subsidiaries of their obligations under the Guaranty
Agreement; and a reaffirmation by the individuals party to the Validity
Guaranties, reaffirming their respective obligations under their respective
Validity Guaranties;

       

      (d)           A
certificate of the Secretary or an Assistant Secretary of the Borrower,
certifying the vote of the Board of Directors or other governing body of the
Borrower, authorizing and directing the execution and delivery of this
Agreement, the Notes, the Warrant and all further agreements, instruments,
certificates and other documents pursuant hereto and thereto, and the
consummation of the transactions contemplated hereby and thereby;

       

      (e)           A
certificate of the Secretary or an Assistant Secretary of the Borrower,
certifying the names of the officers of the Borrower who are authorized to
execute and deliver the Loan Documents and all other agreements, instruments,
certificates and other documents to be delivered pursuant hereto and thereto,
together with the true signatures of such officers.  The Lender may
conclusively rely on such certificate until the Lender shall receive any further
such certificate canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate;

       

      (f)           Certified
copies of the Organic Documents of the Borrower, and a certificate of the
Secretary of State of the State of Nevada certifying that the Borrower is in
good standing in such State as of a date reasonably prior to the Closing Date;
and

       

      (g)           Such
other agreements, instruments, documents and certificates (including, without
limitation, satisfactory lien and judgment searches respecting the Borrower) as
the Lender or its counsel may reasonably request.

       

      Section
4.03.  Seller Notes Modification.  The Lender shall
have received true and complete copies of written modification agreements,
executed by GEM-DE and the holders of the Seller Notes, pursuant to which the
payment provisions of the Seller Notes (including, without limitation,
installment due dates and final maturity dates) shall have been modified to the
satisfaction of the Lender in its sole discretion; provided, however, that with
respect to the Trust, such modification agreement may be executed and delivered
subsequent to the Closing but on or before September 14, 2009.

       

      Section
4.04.  Fees and Reimbursements.  The Borrower shall
have paid or reimbursed the Lender for its reasonable out-of-pocket costs,
charges and expenses incurred to the Closing Date in respect of the transactions
contemplated by this Agreement and the other Loan Documents; and in connection
herewith, the Borrower hereby irrevocably authorizes the Lender to charge such
amounts as Advances to the Borrower’s revolving credit loan
account.  Failure of the Lender to effect any such charge shall not
excuse the Borrower from its obligation to pay such amounts.

       

      
        
           

        

        
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      Section
4.05.  Further Matters.  All legal matters, and the
form and substance of all documents, incident to the transactions contemplated
hereby shall be satisfactory to counsel for the Lender.

       

      Section 4.06.  No
Default.  No Default or Event of Default shall have occurred
and be continuing.

       

      B.           The
obligation of the Lender to make any Advances subsequent to the Closing Date is
subject to (a) the representations and warranties set forth in Article III and
in the other Loan Documents being true and correct in all material respects
(except that, to the extent that any representation or warranty is already
qualified by concepts of materiality and/or Material Adverse Effect, then such
representations and warranties shall be true and correct in all respects) on and
as of the subject Borrowing Date, (b) the Lender’s receipt of a current
Borrowing Base report in conformity with Section 5.04(d) below, (c) the
execution and delivery of such further Security Documents as the Lender may have
reasonably requested pursuant to the Security Documents theretofore executed and
delivered, and (d) there being no continuing Default or Event of
Default.

       

      V.           AFFIRMATIVE
COVENANTS

       

      The
Borrower hereby covenants and agrees that, from the date hereof and until all
Obligations (whether now existing or hereafter arising) have been paid in full
and the Revolving Credit Commitment has been terminated, unless the Lender shall
otherwise consent in writing, the Borrower shall, and shall cause each of its
Subsidiaries to:

       

      Section
5.01.  Corporate and Insurance.  Do or cause to be
done all things necessary to at all times (a) preserve, renew and keep in full
force and effect its corporate or other legal existence, rights, licenses,
permits and franchises, (b) comply with the Loan Documents and any other
agreements and instruments executed and delivered hereunder and thereunder (to
the extent a party thereto), (c) maintain, preserve and protect all of its
franchises and material trade names, and preserve all of its material property
used or useful in the conduct of its business and keep the same in good repair,
working order and condition (reasonable wear and tear excepted), and from time
to time make, or cause to be made, all needed and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the Business
Operations carried on in connection therewith may be properly and advantageously
conducted at all times, (d) maintain insurance in amounts, on such terms
and against such risks (including fire and other hazards insured against by
extended coverage, and public liability insurance covering claims for personal
injury, death or property damage) as are customary for companies of similar size
revenues in the same or similar businesses and operating in the same or similar
locations, as well as all such other insurance as is required by the Collateral
Agreement, each of which policies (other than workers compensation) shall be
issued by a financially sound and reputable insurer reasonably satisfactory to
the Lender and shall name the Lender as loss payee and additional insured as its
interest appears and provide for the Lender to receive written notice thereof at
least thirty (30) days prior to any cancellation of the subject policy, and (e)
comply with all material Contracts and material obligations to which it is a
party or by which it is bound, all benefit plans which it maintains or is
required to contribute to, and all Applicable Law (including, without
limitation, Environmental Laws) material to its Business Operations, and all
requirements of its insurers, whether now in effect or hereafter enacted,
promulgated or issued.  The Borrower will provide to the Lender a
certificate of the foregoing insurance, promptly upon request.

       

      
        
           

        

        
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      Section
5.02.  Payment of Taxes.  File, pay and discharge, or
cause to be paid and discharged, all taxes, assessments and governmental charges
or levies imposed upon the Borrower and/or any Subsidiary or upon its income and
profits or upon any of its property (real, personal or mixed) or upon any part
thereof, before the same shall become in default, as well as all lawful claims
for labor, materials, supplies and otherwise, which, if unpaid when due, might
become a Lien or charge upon such property or any part thereof; provided, however, that neither
the Borrower nor any Subsidiary shall be required to pay and discharge or cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as (a) the validity thereof shall be contested in good faith by appropriate
proceedings and the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect to any such tax, assessment, charge, levy
or claim so contested, and (b) payment with respect to any such tax, assessment,
charge, levy or claim shall be made before any of the Borrower’s or such
Subsidiary’s property shall be seized or sold in satisfaction
thereof.

       

      Section
5.03.  Notices.  Give prompt written notice to the
Lender of (a) the filing by the Borrower of any SEC Reports, (b) the receipt by
the Borrower or any Subsidiary of any Notice in respect of Hazardous Substances
or otherwise in respect of or under any Environmental Laws or any claimed
violation thereof by the Borrower, any Subsidiary or any Real Property, (c) any
proceedings instituted against the Borrower or any Subsidiary in any federal or
state court or before any commission or other regulatory body, whether federal,
state or local, which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect (d) occupancy of any new or additional Real
Property, and (e) the occurrence of any material casualty to any Collateral, any
Material Adverse Effect, or any Default or Event of Default, and the action that
the Borrower has taken, is taking, or proposes to take with respect
thereto.

       

      Section
5.04.  Periodic Reports.  Furnish to the
Lender:

       

      (a)           Within
ninety (90) calendar days after the end of each Fiscal Year consolidated and
consolidating balance sheets, statements of income, statements of stockholders’
equity, and statements of cash flows of the Borrower and its Subsidiaries,
together with footnotes and supporting schedules thereto, certified (as to the
consolidated statements) by independent certified public accountants selected by
the Borrower and reasonably satisfactory to the Lender, showing the financial
condition of the Borrower and its Subsidiaries at the close of such Fiscal Year
and the results of operations of the Borrower and its Subsidiaries during such
Fiscal Year;

       

      (b)           Within
(i) thirty (30) calendar days after the end of each fiscal month (forty-five
(45) calendar days in the case of the end of a fiscal quarter), consolidated
(and, if specifically requested by the Lender reasonably in advance,
consolidating) unaudited balance sheets, statements of income, statements of
stockholders’ equity and statements of cash flows of the Borrower and its
Subsidiaries, in each case with supporting schedules thereto, prepared by the
Borrower and certified by the Borrower’s Chairman, President, Chief Executive
Officer, Chief Financial Officer or Chief Accounting Officer, such balance
sheets to be as of the close of such fiscal month and such statements of income,
statements of stockholders’ equity and statements of cash flows to be for the
period from the beginning of the then-current Fiscal Year to the end of such
fiscal month or fiscal quarter (as the case may be), together with comparative
statements of income and cash flows for the corresponding period in the
immediately preceding Fiscal Year, in each case subject to normal audit and
year-end adjustments;

       

      
        
           

        

        
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      (c)           Concurrently
with the delivery of each of the financial statements required by Sections
5.04(a) and 5.04(b) above, a certificate on behalf of the Borrower (signed by
the Chairman, President, Chief Executive Officer, Chief Financial Officer or
Chief Accounting Officer of the Borrower), certifying (i) that he has examined
the provisions of this Agreement and that no Default or Event of Default has
occurred and/or is continuing, and (ii) with respect to any financial statements
as of or ending on a date as of which compliance with Sections 6.18 and/or 6.19
below is required, a calculation of the applicable EBITDA and/or EBITDA to Fixed
Charges ratio for the subject measuring period;

       

      (d)           On
or prior to the fifteenth (15th)
calendar day of each calendar month, a detailed calculation of the Borrowing
Base as of the close of the immediately preceding calendar month, in form and
substance, and with supporting documentation (including, without limitation,
receivables and payables agings as of the close of the immediately preceding
calendar month), as may reasonably be required by the Lender;

       

      (e)           Within
fifteen (15) calendar days after the end of each calendar month, an accounts
receivable aging report and an accounts payable aging report for the Borrower
and the Subsidiaries (each on a consolidated and consolidating
basis);

       

      (f)           As
soon as approved by the Borrower’s Board of Directors (but in any event not
later than the beginning of each Fiscal Year), a budget and operating plan (on a
quarter-by-quarter basis) for such Fiscal Year, in such detail as may reasonably
be required by the Lender;

       

      (g)           As
and when distributed to the Borrower’s shareholders, copies of all proxy
materials, reports and other information which the Borrower provides to its
shareholders; and as and when distributed to any other holders of Indebtedness
of the Borrower or the Subsidiaries, copies of all reports, statements and other
information provided to such lenders; and

       

      (h)           Promptly,
from time to time, such other information (including, without limitation,
receivables and payables agings, and sales reports) regarding the Borrower’s or
any Subsidiary’s operations, assets, business, affairs and financial condition,
as the Lender may reasonably request.

       

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

       

      To the
extent that the financial statements required by Sections 5.04(a) and 5.04(b)
are contained in any SEC Reports filed by the Borrower within the required time
period hereunder for the delivery of such financial statements, then the
Borrower shall be deemed to have complied with the subject financial statement
delivery by notifying the Lender of the filing of the subject SEC
Report.

       

      To the
extent that any report or other delivery required under this Section 5.04 or
elsewhere in this Agreement will, at the time of anticipated delivery to the
Lender, contain any material non-public information, the Borrower will notify
the Lender thereof as promptly as practicable prior to the delivery of such
report (but without disclosing the specific items of material non-public
information or the nature thereof), and if so requested by the Lender prior to
the required date of the information delivery hereunder, the Borrower shall (x)
if reasonably practicable, redact such material non-public information from the
subject report prior to the delivery thereof to the Lender, or (y) defer
delivery of such report until such time as the Borrower has made public
disclosure of the subject material information or the Lender has affirmatively
requested delivery of such report.  Absent timely request by the
Lender as aforesaid, the Borrower shall make the required delivery to the Lender
on a timely basis.

       

      Section
5.05.  Books and Records; Inspection.  Maintain
centralized books and records regarding all of the Business Operations at the
Borrower’s principal place of business, and permit agents or representatives of
the Lender to inspect, at any time during normal business hours, upon reasonable
notice, and without undue material disruption of the Business Operations, all of
the Borrower’s and its Subsidiaries’ various books and records, to make copies,
abstracts and/or reproductions thereof, and to discuss the business and affairs
of the Borrower and the Subsidiaries with the management of the
Borrower.

       

      Section
5.06.  Accounting.  Maintain a standard system of
accounting in order to permit the preparation of financial statements in
accordance with GAAP and Regulation S-X promulgated under the Act.

       

      Section
5.07.  Reimbursements.  Pay or reimburse the Lender
or other appropriate Persons on demand for all reasonable costs, expenses and
other charges incurred or payable from time to time in connection with the
transactions contemplated by this Agreement, any waivers or amendments in
respect of any Loan Documents (whether or not completed or executed), any
“workout” or enforcement action (whether or not consummated or completed, and
regardless of the outcome thereof), and the Lender’s initial SEC filing
subsequent to the Closing Date reporting its and its Affiliates’ beneficial
ownership of securities of the Borrower, including but not limited to any and
all search fees, recording fees, costs of inspections, and legal and accounting
fees.

       

      Section
5.08.  Environmental Response.  In the event that
Borrower obtains knowledge during the term of this Agreement of any material
discharge, spill, injection, escape, emission, disposal, leak or other Release
of Hazardous Substances in amounts in violation of applicable Environmental Laws
by the Borrower or any Subsidiary on any Real Property owned or leased by the
Borrower or any Subsidiary, which is not authorized by a permit or other
approval issued by the appropriate governmental agencies and which requires
notification to or the filing of any report with any federal or state
governmental agency by the Borrower or any Subsidiary, the Borrower shall
promptly: (a) notify the Lender; and (b) to the extent required of Borrower or
any  Subsidiary by applicable Environmental Laws, comply with the
notice requirements of the Environmental Protection Agency and applicable state
agencies, and take all steps necessary to promptly clean up such discharge,
spill, injection, escape, emission, disposal, leak or other Release in
accordance with all applicable Environmental Laws and the Federal National
Contingency Plan, and, if required, by applicable Environmental Laws, receive a
certification from all applicable state agencies or the Environmental Protection
Agency, that such Real Property has been cleaned up to the satisfaction of such
agency(ies).

       

      
        
           

        

        
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      Section
5.09.  Management.  Cause Timothy J. Koziol to
continue to be employed or to function as the Chief Executive Officer of the
Borrower, Brett M. Clark to continue to be employed or to function as the Chief
Financial Officer of the Borrower, and William Mitzell to continue to be
employed or to function as the Chief Operating Officer of the Borrower, unless a
successor is appointed within sixty (60) days after the termination of any such
individual’s employment and such successor is reasonably satisfactory to the
Lender.

       

      Section 5.10.  Use
of Proceeds.  Cause all proceeds of the Loans to be utilized
solely in the manner and for the purposes set forth in Section 2.04
above.

       

      Section
5.11.  Future Subsidiaries.  At any time and from
time to time when the Borrower or any of its Domestic Subsidiaries proposes to
form or acquire any Domestic Subsidiary subsequent to the Closing Date, the
Borrower shall give written notice thereof to the Lender reasonably in advance
of (and in no event less than fifteen (15) days prior to) the formation or
acquisition of such Domestic Subsidiary, accompanied by true and complete copies
of the Organic Documents of such Domestic Subsidiary and stating, with respect
to such Domestic Subsidiary, (a) its proper legal name, (b) its jurisdiction of
incorporation or formation, (c) the jurisdictions (if any) in which it is
qualified or is required to be qualified to do business as a foreign entity, (d)
the number of shares of capital stock, equity securities or ownership interests
outstanding, and (e) the record owners of such outstanding capital stock, equity
securities or other ownership interests; and contemporaneously with the
formation or acquisition of such new Domestic Subsidiary, such new Domestic
Subsidiary shall be deemed to have made and joined in all of the representations
and warranties made by the Borrower in this Agreement and the other Loan
Documents (all of which shall be applicable to such new Domestic Subsidiary as
if named therein), and the Borrower shall cause such new Domestic Subsidiary to
execute and deliver to the Lender (i) a Guaranty Agreement in form and substance
reasonably satisfactory to the Lender (or a joinder agreement with respect to
the existing Guaranty Agreement in form and substance reasonably satisfactory to
the Lender), and (ii) a Collateral Agreement (with completed perfection
certificate and other appropriate Security Documents) in substantially the form
of the Collateral Agreement as then in effect (or a joinder agreement with
respect to the existing Collateral Agreement in form and substance reasonably
satisfactory to the Lender) and other Security Documents as reasonably requested
by the Lender.

       

      Section
5.12.  Landlord Waivers.  To the extent requested by
the Lender from time to time subsequent to the Closing Date, use commercially
reasonable efforts to obtain, in form and substance reasonably satisfactory to
the Lender, any and all bailee waivers, warehousemen’s waivers, Landlord Waivers
and/or access agreements requested by the Lender in respect of locations where
there is stored or held Collateral having an aggregate fair market value in
excess of $25,000 and this Section 5.12 shall be applicable to any material
leased premises for which a Landlord Waiver has not been obtained as of the
Closing Date.

       

      
        
           

        

        
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      Section
5.13.  Deposit Accounts.  Notify the Lender upon
opening any new bank account or securities account, and cause the subject bank
or securities intermediary promptly to execute and deliver to the Lender a
Control Agreement in respect of such bank account or securities account; and
this Section 5.13 shall also be applicable to any and all bank accounts for
which Control Agreements have not been entered into on the Closing Date if (a)
the funds in such bank account exceed $10,000, or (ii) the funds held in the
Bank Accounts for which Control Agreements are not in place exceed $25,000 in
the aggregate; and to the extent that a required Control Agreement is not
entered into within thirty (30) days after the Closing Date, then the subject
bank account(s) shall be promptly closed and the funds held therein shall be
transferred to one or more accounts at another banking institution which has
executed and delivered a Control Agreement in respect of such account(s) in form
and substance satisfactory to the Lender; provided that the requirements of this
section shall not apply to any bank account used by the Borrower or its
Subsidiaries to make payroll payments so long as no amounts are held in such
accounts for more than two (2) Business Days.

       

      Section
5.14.  Seller Notes Certification.  Not less than ten
(10) Business Days prior to making any payment on or in respect of either of the
Seller Notes, provide to the Lender (a) a pro forma calculation of
the coverage test under Section 6.19 below as of the date of the most recent
financial statements of the Borrower then available and giving pro forma effect to the
proposed payment on the Seller Notes, and (b) certifying that, both before and
after giving effect to such proposed payment on the Seller Notes, no Event of
Default exists or shall exist; and to the extent that any such calculation or
certification shall indicate that an Event of Default exists or would exist
immediately after giving effect to the proposed payment, the Borrower shall not
make such proposed payment.

       

      Section
5.15.  Rights of First Refusal.  At any time when any
Obligations are outstanding or the Revolving Credit Commitment remains in
effect, provide written notice to Lender not less than thirty (30) days prior to
accepting any bona fide offer or
proposal with respect to any equity or debt financing to be undertaken by the
Borrower or any of its Subsidiaries (which notice shall set forth in reasonable
detail all of the material terms and conditions on which such equity or debt
financing is to be effected), and if the Lender or any Affiliate of the Lender
agrees in writing, within twenty (20) days after receipt of such notice, to
provide such equity or debt financing on substantially similar material terms as
those set forth in the Borrower’s notice, the Borrower or such Subsidiary shall
undertake such financing with the Lender or its Affiliate promptly thereafter
(subject to the Borrower’s or the Subsidiary’s right to abandon the proposed
financing altogether); and this Section 5.15 shall (a) again be applicable in
the event that any proposed equity or debt financing terms offered to the Lender
are modified in a manner which is materially more advantageous to the
investor(s), taken as a whole, and (b) be applicable successively to each and
every proposed equity or debt financing until the Obligations have been paid in
full and the Revolving Credit Commitment has been terminated or has
expired.

       

      Section
5.16.  Sales of Business Units.  Continue to pursue
with reasonable diligence the Borrower’s plan to restructure its operations by
offering for sale the Borrower’s revenue-generating business units at prices and
on terms and conditions reasonably acceptable to the Borrower and the Lender;
and, upon request of the Lender if the Lender deems same to be appropriate to
assist in the sale of such revenue-generating business units, retain an
investment banker or other qualified Person(s) reasonably acceptable to the
Lender.

       

      
        
           

        

        
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      VI.           NEGATIVE
COVENANTS

       

      The
Borrower hereby covenants and agrees that, until all Obligations (whether now
existing or hereafter arising) have been paid in full and the Revolving Credit
Commitment has been terminated, unless the Lender shall otherwise consent in
writing, the Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly:

       

      Section
6.01.  Indebtedness.  Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any
Indebtedness, other than:

       

      (a)           Indebtedness
to the Lender pursuant to the Loan Documents;

       

      (b)           liabilities
with respect to trade obligations, accounts payable, advances, royalty or other
similar payments, operating leases and other normal accruals incurred in the
ordinary course of business, or with respect to which the Borrower or the
subject Subsidiary is contesting in good faith the amount or validity thereof by
appropriate proceedings, and then only to the extent that the Borrower or the
subject Subsidiary has set aside on its books adequate reserves
therefor;

       

      (c)           Indebtedness
existing on the date of this Agreement owed to those Persons, in those amounts
and having those maturities as set forth in Schedule 3.01 of the
Disclosure Schedule, including any extensions, renewals or refinancings of such
Indebtedness provided that (i) there is no increase in the principal amount
thereof at the time of such extension, renewal or refinancing, and (ii) there is
no other material change in the terms of such Indebtedness which is materially
adverse to the Borrower or to the Lender;

       

      (d)           Capitalized
Leases reflected in the Financial Statements, and Capitalized Leases hereafter
entered into by the Borrower or its Subsidiaries in the ordinary course of the
Business Operations and within the limitations provided in Section 6.17
below;

       

      (e)           purchase
money Indebtedness incurred in connection with the Borrower’s or its
Subsidiaries’ acquisition of capital assets in the ordinary course of the
Business Operations and within the limitations provided in Section 6.17
below;

       

      (f)           Subordinated
Debt in such amounts and upon such terms and conditions as shall be acceptable
to the Lender in its sole and absolute discretion;

       

      (g)           intercompany
Indebtedness between the Borrower and any Wholly-Owned Subsidiary or between
Wholly-Owned Subsidiaries;

       

      (h)           Guarantees
to the extent permitted pursuant to Section 6.03 below; and

       

      (i)           
The Seller Notes.

       

      Section
6.02.  Liens.  Create, incur, assume or suffer to
exist any Lien or other encumbrance of any nature whatsoever on any of its
assets, now or hereafter owned, other than:

       

      
        
           

        

        
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      (a)           subject
to Section 5.02 above, Liens securing the payment of taxes which are either not
yet due or the validity of which is being contested in good faith by appropriate
proceedings, and as to which the Borrower or the subject Subsidiary shall have
set aside on its books adequate reserves;

       

      (b)           deposits
under workers’ compensation, unemployment insurance and social security laws, or
to secure the performance of bids, tenders, contracts (other than for the
repayment of money borrowed) or leases, or to secure statutory obligations or
surety or appeal bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;

       

      (c)           statutory
Liens of landlords; Liens imposed by law, such as, carriers’, warehousemen’s,
materialmen’s or mechanics’ liens, incurred by the Borrower or any Subsidiary in
good faith in the ordinary course of business and discharged promptly after same
are incurred and prior to delinquency thereof; fully bonded Liens arising out of
a judgment or award against the Borrower or any Subsidiary with respect to which
the Borrower or such Subsidiary shall currently be prosecuting an appeal, a stay
of execution pending such appeal having been secured; and Liens arising out of a
judgment or award against the Borrower or any Subsidiary which are fully covered
by insurance (subject to applicable deductibles) and for which the relevant
insurer has not denied or disclaimed coverage;

       

      (d)           other
Liens incurred in connection with Indebtedness expressly permitted pursuant to
Section 6.01(d) and/or Section 6.01(e) above, or existing on the subject assets
at the time of acquisition thereof, provided that such Liens do not extend to
any assets or property other than the specific assets or properties acquired
pursuant to such permitted Indebtedness;

       

      (e)           encumbrances
consisting of easements, rights-of-way, survey exceptions and other similar
restrictions on the use of Real Property, or minor irregularities in title
thereto which do not materially impair the use of such property in the operation
of the business of the Borrower and its Subsidiaries;

       

      (f)         
  Liens in existence on the date of this Agreement, as set forth on
Schedule 6.02
of the Disclosure Schedule;

       

      (g)           Liens
arising out of judgments or awards (i) which are fully covered by insurance
(subject to applicable deductibles) and for which the relevant insurer has not
denied or disclaimed coverage, (ii) with respect to which the Borrower or the
subject Subsidiary shall be prosecuting an appeal in good faith and in respect
of which a stay of execution shall have been issued, or (iii) which do not
cause an Event of Default under Section 7.01(i) below;

       

      (h)           Liens
in favor of the Lender; and

       

      (i)          
 extensions, renewals or replacements of any Lien referred to in clauses
(a) through (f) above, provided that same shall not effect any increase in any
principal amount secured thereby.

       

      Section
6.03.  Guarantees.  Guarantee, endorse or otherwise
in any manner become or be responsible for obligations of any other Person,
except (a) endorsements of negotiable instruments for collection in the ordinary
course of business, and (b) Guarantees by the Borrower of obligations of
Wholly-Owned Subsidiaries in the ordinary course of business.

       

      
        
           

        

        
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      Section
6.04.  Sales of Assets and Management.  (a) Sell,
lease, transfer, encumber or otherwise dispose of any of the Borrower’s or any
Subsidiary’s properties, assets, rights, licenses or franchises other than (i)
sales of inventory in the ordinary course of business, (ii) licenses, joint
ventures and related transactions entered into, modified or terminated in the
ordinary course of business, or (iii) the disposition of surplus, obsolete or
worn-out equipment in the ordinary course of business, or (b) permit any
Affiliate of the Borrower (other than a Subsidiary which is a party to the
Collateral Agreement) to own or obtain any patent, patent application,
copyright, copyright application, trademark, trademark application, license, or
other intangible asset relating to the Business Operations except in the normal
course of business on terms and conditions no less favorable to the Borrower or
any Subsidiary than those which could be obtained in an arms’ length transaction
with an unaffiliated third party.

       

      Section
6.05.  Sale-Leaseback. Enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or
transfer any property (real, personal or mixed) used or useful in the Business
Operations, whether now owned or hereafter acquired, and thereafter rent or
lease such property.

       

      Section
6.06.  Investments; Acquisitions.  Make any
Investment in, or otherwise acquire or hold securities (including, without
limitation, capital stock and evidences of Indebtedness) of, or make loans or
advances to, or enter into any arrangement for the purpose of providing funds or
credit to, any other Person (including any Affiliate), except:

       

      (a)           Investments
in Wholly-Owned Subsidiaries which have complied with the requirements of
Section 5.11 above;

       

      (b)           advances
(to the extent permitted by Applicable Law, including federal securities laws)
to employees of the Borrower or any Wholly-Owned Subsidiaries for normal
business expenses not to exceed at any time $25,000 in the
aggregate;

       

      (c)           equity
interests in Account Debtors received in connection with the settlement of
amounts due to the Borrower or any Subsidiary in the ordinary course of business
or upon the insolvency of the subject Account Debtors;

       

      (d)           Investments
of excess cash generated in the Business Operations in Cash Equivalents;
and

       

      (e)           Investments
of cash in overnight deposits or other customary cash management Investments
with commercial banks or in commercial paper satisfying the criteria for such
banks or commercial paper as set forth in the definition of Cash
Equivalents.

       

      Section
6.07.  Real Property; Corporate Form;
Acquisitions.  Purchase or acquire any Real Property or any
ownership interest in any Real Property; or dissolve or liquidate, or
consolidate or merge with or into, sell all or substantially all of the assets
of the Borrower or any Subsidiary to, or acquire all or substantially all of the
securities, assets or properties of, any other Person, except for (a)
consolidations of Wholly-Owned Subsidiaries (provided that the owner of the
Owned Real Property shall not be consolidated with any other Subsidiary); (c)
mergers of a Wholly-Owned Subsidiary (other than the owner of the Owned Real
Property) into the Borrower or into a Wholly-Owned Subsidiary; or (d) sales
(other than a sale of the Owned Real Property) to the Borrower or another
Subsidiary for fair value.

       

      
        
           

        

        
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      Section
6.08.  Dividends and Redemptions.  Directly or
indirectly declare or pay any dividends, or make any distribution of cash or
property, or both, to any Person in respect of any of the shares of the capital
stock or other equity securities of the Borrower or any other Person, or
directly or indirectly redeem, purchase or otherwise acquire for consideration
any securities or shares of the capital stock or other equity securities of the
Borrower or any other Person, or establish or make payment into any sinking fund
for any such purpose; provided, that this
Section 6.08 shall not be deemed to prohibit the payment of dividends or
distributions by any Subsidiary to the Borrower or to any other direct or
indirect Wholly-Owned Subsidiary.

       

      Section
6.09.  Compensation.  Directly or indirectly pay any
cash compensation to any executive officers of the Borrower except in accordance
with the compensation levels disclosed in Schedule 6.09 of the
Disclosure Schedule or as otherwise approved by the disinterested members of the
Board of Directors of the Borrower but in no case in any amount or amounts which
would cause or reasonably be expected to cause a Material Adverse
Effect.

       

      Section
6.10.  Change of Business.  Directly or indirectly:
(a) engage in a business materially different from the general nature of the
Business Operations (i) as now being conducted, or (ii) as the same may
hereafter be reasonably expanded from time to time in like areas of business;
(b) wind up the Business Operations or cease substantially all of its normal
Business Operations for a period in excess of ten (10) consecutive days; or (c)
suffer any material disruption, interruption or discontinuance of a material
portion of its normal Business Operations for a period in excess of thirty (30)
consecutive days (provided that no Material Adverse Effect shall exist or arise
during such thirty (30) day period).

       

      Section
6.11.  Receivables.  Sell or assign in any way any
accounts receivable, promissory notes or trade acceptances held by the Borrower
or any Subsidiary with or without recourse, except for collections (including
endorsements) in the ordinary course of business.

       

      Section
6.12.  Certain Amendments.  Agree, consent, permit or
otherwise undertake to amend any of the terms or provisions of (a) the
Borrower’s or any Subsidiary’s Organic Documents or the Seller Notes in a manner
which may impair or adversely affect in any respect any of the Lender’s rights
under any of the Loan Documents, or (b) the Purchase Money Note or the Royalty
Provisions, or any other provisions of the Stock Purchase Agreement, in any
manner such as would reduce or delay payments to GEM-DE (or the Lender, as
collateral assignee) thereunder or otherwise restrict or limit rights to receive
or collect payments thereunder; or purport to release any of the collateral
securing the Purchase Money Note.

       

      Section
6.13.  Affiliate Transactions.  Enter into any
Contract, agreement or transaction with any Affiliate of the Borrower except (a)
as disclosed in Schedule 6.13 of the
Disclosure Schedule, (b) for intercompany Indebtedness between the Borrower and
any Wholly-Owned Subsidiary or between any Wholly-Owned Subsidiaries, or (c) in
the normal course of business on terms and conditions no less favorable to the
Borrower or any Subsidiary than those which could be obtained in an arms’ length
transaction with an unaffiliated third party.

       

      
        
           

        

        
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      Section
6.14.  Fiscal Year.  Amend its Fiscal
Year.

       

      Section
6.15.  Subordinated Debt.  Prepay, redeem or purchase
any Subordinated Debt, or make any payment on any Subordinated Debt, except as
permitted in accordance with the applicable subordination
agreement.

       

      Section
6.16.  ERISA.  Suffer or permit any condition or
circumstance contrary to or in violation of Section 3.14 above, if same has or
would reasonably be expected to have a Material Adverse Effect.

       

      Section
6.17.  Capital Expenditures.  Make aggregate Capital
Expenditures (whether through cash purchase, principal payments under
Capitalized Leases, or otherwise) in any Fiscal Year, in the aggregate for the
Borrower and all Subsidiaries, in excess of $600,000.

       

      Section
6.18.  EBITDA.  Permit EBITDA to be less than (a)
$1.00 for any fiscal quarter ending on or after December 31,
2009.  For purposes of assessing interest at the default rates
provided in the Notes, any failure to comply with this Section 6.18 shall be
deemed to be an Event of Default at the end of the subject fiscal quarter (and
not deferred until such non-compliance is reported), but for all other purposes,
such non-compliance shall not be deemed an Event of Default (i) unless (A)the
Borrower fails, within thirty (30) days after the conclusion of the subject
fiscal quarter, to reach written agreement with the Lender on a plan to cure
such non-compliance, or (B) if such a curative plan is agreed upon, the Borrower
fails to complete the cure within sixty (60) days after the conclusion of the
subject fiscal quarter, or (ii) if (A) the Borrower shall have received, during
or within sixty (60) days after the conclusion of the subject fiscal quarter,
net cash proceeds from the issuance of Common Stock in a dollar amount at least
equal to the amount by which the Borrower failed to achieve the required minimum
EBITDA), which net cash proceeds amount (or requisite portion thereof) are, for
purposes hereof, added to EBITDA to the extent necessary (on a dollar-for-dollar
basis) to eliminate the EBITDA shortfall in such fiscal quarter, and/or (B) to
the extent that such net cash proceeds are not applied to cure an EBITDA
shortfall as aforesaid (“Excess Cash
Proceeds”), and provided that the Borrower has made or simultaneously
makes a prepayment of principal under the Convertible Term Note out of such net
cash proceeds (which prepayment shall be applied to the principal installments
thereunder in direct order of maturity, and shall be without requirement of any
premium or penalty) in an amount equal to one-half of the Excess Cash Proceeds,
an amount equal to one-half of the Excess Cash Proceeds are, for purposes
hereof, added to EBITDA in the first fiscal quarter immediately following the
fiscal quarter in which the Excess Cash Proceeds were received by the
Borrower.

       

      Section
6.19.  Coverage Test.  Permit the ratio of (a)
EBITDA, plus
any permitted additions to EBITDA effected in accordance with Section 6.18
above, minus
any and all dividends, distributions and/or redemption payments made by the
Borrower to its shareholders or other holders of equity interests, to (b) Fixed
Charges, to be less than 1.0 to 1.0 for any four (4) consecutive fiscal quarters
ending on or after December 31, 2009.

       

      
        
           

        

        
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      Section 6.20.  GPP
Payments.  Make any payments of any kind (whether in cash, in
kind or otherwise) to or on behalf of GPP or any of its Affiliates, provided that the
foregoing limitation shall not be applicable to scheduled payments which are
made as and when due under the outstanding Equipment Lease Agreement between
GEM-DE and P-1 Leasing (an affiliate of GPP), at the rate of $4,000 per
month.

       

      VII.         DEFAULTS

       

      Section
7.01.  Events of Default.  Each of the following
events is herein, and in the Notes, sometimes referred to as an Event of
Default:

       

      (a)           if
any representation or warranty made herein or in any other Loan Document, or in
any certificate, financial statement, Borrowing Base report, instrument or other
written statement furnished by the Borrower or any Subsidiary in connection with
this Agreement, any other Loan Document or any of the borrowings hereunder shall
be false, inaccurate or misleading in any material respect when made or when
deemed made hereunder;

       

      (b)           any
default in the payment of any principal or interest under either of the Notes or
any other Obligations when the same shall be due and payable, whether at the due
date thereof or at a date required for prepayment or by acceleration or
otherwise, and the continuance of any such non-payment (in whole or in part) for
a period of three (3) Business Days;

       

      (c)           any
default in the due observance or performance of any covenant, condition or
agreement contained in any Section of Article VI hereof or in the Board Observer
Agreement, which, if capable of being cured, is not fully cured within thirty
(30) days after the occurrence thereof;

       

      (d)           any
default in the due observance or performance of any covenant, condition or
agreement to be observed or performed under Article V hereof, or otherwise
pursuant to the terms hereof or any other Loan Document and not addressed in
Sections 7.01(a), (b) or (c), and the continuance of such default unremedied for
a period of thirty (30) days (five (5) Business Days in the case of Sections
2.04(b) and 5.01(d) above) after written notice thereof to the Borrower, or such
other cure period as may be provided in the applicable Loan
Document;

       

      (e)           any
default with respect to any Indebtedness of the Borrower or any of the
Subsidiaries (other than to the Lender) in an aggregate amount in excess of
$50,000, if the effect of such default is to permit the holder, with or without
notice or lapse of time or both, to accelerate the maturity of any such
Indebtedness for money borrowed or to cause such Indebtedness for money borrowed
to become due prior to the stated maturity thereof;

       

      (f)           if
the Borrower or any Subsidiary shall: (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
properties, (ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title 11 of the United States Code, or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage or any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against him or
it in any proceeding under any such law, or (vi) take or permit to be taken any
action in furtherance of or for the purpose of effecting any of the
foregoing;

       

      
        
           

        

        
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      (g)           if
any order, judgment or decree shall be entered, without the application,
approval or consent of the Borrower or any Subsidiary, by any court of competent
jurisdiction, approving a petition seeking reorganization of the Borrower or any
Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the
Borrower or any Subsidiary, or of all or any substantial part of its assets, and
such order, judgment or decree shall continue unstayed and in effect for any
period of sixty (60) days;

       

      (h)           if
final judgment(s) or administrative order for the payment of money in an
uninsured amount in excess of $50,000 individually or in the aggregate shall be
rendered against the Borrower and/or any Subsidiary, and the same shall remain
undischarged or unbonded for a period of thirty (30) consecutive days, during
which execution shall not be effectively stayed;

       

      (i)          
 the occurrence of any levy upon or seizure or attachment of, or any
uninsured loss of or damage to, any property of the Borrower or any Subsidiary
having an aggregate fair value or repair cost (as the case may be) in excess of
$50,000 individually or in the aggregate, and any such levy, seizure or
attachment shall not be set aside, bonded or discharged within thirty (30) days
after the date thereof;

       

      (j)        
   if any Lien purported to be created by any Security Document
shall cease to be a valid perfected first priority Lien (subject only to any
priority accorded by Applicable Law to Permitted Liens) on the assets or
properties covered thereby, or the Borrower or any Subsidiary or Affiliate
thereof shall assert in writing that any Lien purported to be created by any
Security Document is not a valid perfected first priority lien (subject only to
any priority accorded by Applicable Law to Permitted Liens) on the assets or
properties purported to be covered thereby;

       

      (k)           if
(i) any of the Loan Documents shall, other than by reason of the Lender’s
default, bankruptcy or insolvency, cease to be in full force and effect (other
than as a result of the discharge thereof in accordance with the terms thereof
or by written agreement of all parties thereto), or (ii) the Borrower or any
Subsidiary or Affiliate thereof shall disclaim or deny the validity of any Loan
Document or its obligations thereunder;

       

      (l)       
    if the Borrower or any Subsidiary or any executive
officer of the Borrower or any Subsidiary shall be indicted for, convicted of or
plead nolo
contendere to
any felony offense;

       

      (m)          if
the Common Stock shall not be traded or listed on any national securities
exchange, the Nasdaq Global Market, the Nasdaq Select Market (or any other
Nasdaq market) or the OTC Bulletin Board for any period of thirty (30)
consecutive days; or

       

      (n)          the
shall occur any Material Adverse Effect.

       

      
        
           

        

        
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      Section
7.02.  Remedies.  Upon the occurrence of any Event of
Default, and at all times thereafter during the continuance thereof: (a) the
Notes, and any and all other Obligations, shall, at the Lender’s option (except
in the case of Sections 7.01(f) and 7.01(g) hereof, the occurrence of which
shall automatically effect acceleration, regardless of any action or forbearance
in respect of any prior or ongoing Default or Event of Default which may be
inconsistent with such automatic acceleration), become immediately due and
payable, both as to principal, interest and other charges, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Notes or other evidence of such Obligations
to the contrary notwithstanding, (b) all outstanding Obligations under the
Notes, and all other outstanding Obligations, shall bear interest at the default
rates of interest provided in the Notes, (c) the Lender may file suit against
the Borrower on the Notes and against the Borrower and the Subsidiaries under
the other Loan Documents and/or seek specific performance or injunctive relief
thereunder (whether or not a remedy exists at law or is adequate), (d) the
Lender shall have the right, in accordance with the Security Documents, to
exercise any and all remedies in respect of such or all of the Collateral as the
Lender may determine in its discretion (without any requirement of marshalling
of assets or other such requirement, all of which are hereby waived by the
Borrower), and (e) the Revolving Credit Commitment shall, at the Lender’s option
(except in the case of Sections 7.01(f) and 7/01(g) hereof, the occurrence of
which shall automatically effect termination, regardless of any action or
forbearance in respect of any prior or ongoing Default or Event of Default which
may be inconsistent with such automatic termination), be immediately terminated
or reduced, and the Lender shall be under no further obligation to consider
making any further Advances.

       

      VIII.        PARTICIPATING LENDERS;
ASSIGNMENT

       

      Section
8.01.  Participations.  Anything in this Agreement to
the contrary notwithstanding, the Lender may, at any time and from time to time,
without in any manner affecting or impairing the validity of any Obligations,
transfer, assign or grant participating interests in the Loans as the Lender
shall in its sole discretion determine, to such other Persons (the “Participants”) as the
Lender may determine.  Upon any such transfer, assignment or granting
of participating interests, the Participants shall be deemed to be included
within the term “Lender” for all purposes of this Agreement, subject to such
agreements and arrangements as the Lender and the Participants may agree upon.
Notwithstanding the granting of any such participating interests: (a) the
Borrower shall look solely to the Lender for all purposes of this Agreement and
the transactions contemplated hereby, (b) the Borrower shall at all times have
the right to rely upon any waivers or consents signed by the Lender as being
binding upon all of the Participants, and (c) all communications in respect of
this Agreement and such transactions shall remain solely between the Borrower
and the Lender (exclusive of Participants) hereunder.

       

      Section
8.02.  Transfer and Assignment.  Anything in this
Agreement to the contrary notwithstanding, the Lender may, at any time and from
time to time, without in any manner affecting or impairing the validity of any
Obligations, transfer and assign all or any portion of its interest in this
Agreement, the Notes and the other Loan Documents to any Person (an “Assignee Lender”) as
the Lender may determine; provided, however, that unless
an Event of Default exists at the time of the assignment, the Assignee Lender
(a) shall be a financial institution, investment fund or other financial entity
which has a net worth of $75,000,000 or more (as represented and warranted to
the Lender by such prospective Assignee Lender) and which regularly engages, as
part of its normal business operations, in the making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit, and
(b) shall not be a business which, to the Lender’s knowledge, derives any
material revenues (directly or through any parent or subsidiary) from
environmental health and safety compliance services (including transportation or
treatment of Hazardous Substances.  Upon any such transfer or
assignment, the Assignee Lender shall be deemed to succeed (to the extent of the
interest assigned) to the rights and obligations of the Lender for all purposes
of this Agreement.  In the event of any transfer and assignment of the
Lender’s entire interest in this Agreement, the Notes and the Security
Documents, the Lender shall be replaced by the Assignee Lender as “Secured
Party” under the Collateral Agreement and all other Security
Documents.

       

      
        
           

        

        
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      Section
8.03.  Recordation of Assignment.  In respect of any
negotiation, transfer or assignment of all or any portion of any Lender’s
interest in this Agreement, any Note and/or any other Loan Documents at any time
and from time to time, the following provisions shall be
applicable:

       

      (a)           The
Borrower, or any agent appointed by the Borrower, shall maintain a register (the
“Register”) in
which there shall be recorded the name and address of each Person holding any
Note(s) hereunder or any commitment to lend hereunder, and the principal amount
payable to such Person under such Person’s Note(s) or committed by such Person
under such Person’s lending commitment.  The Borrower hereby
irrevocably appoints the Lender (and/or any subsequent Lender appointed by the
Lender then maintaining the Register) as the Borrower’s agent for the purpose of
maintaining the Register.

       

      (b)           In
connection with any negotiation, transfer or assignment as aforesaid, the
transferor/assignor shall deliver to the Lender then maintaining the Register an
assignment and assumption agreement executed by the transferor/assignor and the
transferee/assignee, setting forth the specifics of the subject transaction,
including but not limited to the amount and nature of Obligations and/or lending
commitments being transferred or assigned (and being assumed, as applicable),
and the proposed effective date of such transfer or assignment and the related
assumption (if applicable).

       

      (c)           Subject
to receipt of completed tax forms (indicating withholding status, or exemption
from withholding, as applicable, of the transferee/assignee) reasonably required
by the Person then maintaining the Register, and (if required by such Person)
surrender of the negotiated, transferred or assigned Note(s) for reissuance by
the Borrower, such Person shall record the subject transfer, assignment and
assumption in the Register.  Anything contained in any Note or other
Loan Document to the contrary notwithstanding, no negotiation, transfer or
assignment shall be effective until it is recorded in the Register pursuant to
this Section 8.03(c).  The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error; and the Borrower and each
Lender shall treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement.  The Register
shall be available for inspection by the Borrower and each Lender at any
reasonable time and from time to time upon reasonable prior notice.

       

      IX.           MISCELLANEOUS

       

      Section
9.01.  Survival.  This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto, shall survive the making by the Lender of the Loans
and the execution and delivery to the Lender of the Notes, and shall continue in
full force and effect for so long as the Notes or any other Obligations are
outstanding and unpaid or the Revolving Credit Commitment remains
outstanding.  Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party; and all covenants, promises and agreements in
this Agreement contained, by or on behalf of the Borrower shall inure to the
benefit of the successors and assigns of the Lender.

       

      
        
           

        

        
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      Section
9.02.  Indemnification.  The Borrower shall indemnify
the Lender and its directors, managers, officers, employees, attorneys and
agents against, and shall hold the Lender and such Persons harmless from, any
and all losses, claims, damages and liabilities and related expenses, including
reasonable counsel fees and expenses, incurred by the Lender or any such Person
arising out of, in any way connected with, or as a result of: (a) the use of any
of the proceeds of the Loans made by the Lender to the Borrower; (b) this
Agreement, the ownership and operation of the Borrower’s and any Subsidiary’s
assets, including all Real Properties and improvements or any Contract, the
performance by the Borrower or any other Person of their respective obligations
thereunder, and the consummation of the transactions contemplated by this
Agreement; (c) any finder’s fee, brokerage commission of other such obligation
payable or alleged to be payable in respect of the transactions contemplated by
this Agreement which arises or is alleged to arise from any agreement, action or
conduct of the Borrower or any of its Affiliates, and/or (d) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not the Lender or its directors, officers, managers, employees,
attorneys or agents are a party thereto; provided that such
indemnity shall not apply to any such losses, claims, damages, liabilities or
related expenses arising from (i) any unexcused breach by the Lender of any of
its obligations under this Agreement, (ii) the willful misconduct or gross
negligence of the Lender as determined by a final, non-appealable judgment of a
court of competent jurisdiction, or (iii) the breach of any commitment or legal
obligation of the Lender to any Person other than the Borrower or its
Affiliates, provided that such
breach is determined pursuant to a final and nonappealable decision of a court
of competent jurisdiction.  The foregoing indemnity shall remain
operative and in full force and effect regardless of the expiration or any
termination of this Agreement, the consummation of the transactions contemplated
by this Agreement, the repayment of the Loans, the invalidity or
unenforceability of any term or provision of any Loan Document, any
investigation made by or on behalf of the Lender, and the content or accuracy of
any representation or warranty made by the Borrower or any Subsidiary in any
Loan Document.  All amounts due under this Section 9.02 shall be
payable on written demand therefor.

       

      Section
9.03.  Governing Law.  This Agreement and the other
Loan Documents shall (irrespective of where same are executed and delivered) be
governed by and construed in accordance with the laws of the State of New York
(without giving effect to principles of conflicts of laws other than Sections
5-1401 and 5-1402 of the New York General Obligations Law).

       

      Section
9.04.  Waiver and Amendment.  Neither any
modification or waiver of any provision of this Agreement, the Notes, or any
other Loan Document, nor any consent to any departure by the Borrower or any
Subsidiary therefrom, shall in any event be effective unless the same shall be
set forth in writing duly signed or acknowledged by the Lender and all parties
to such Loan Document, and then such waiver or consent shall be effective only
in the specific instance, and for the specific purpose, for which
given.  No notice to or demand on the Borrower in any instance shall
entitle the Borrower to any other or future notice or demand in the same,
similar or other circumstances.

       

      
        
           

        

        
          46

          
            

          

        

        
           

        

      

       

      Section
9.05.  Reservation of Remedies.  Neither any failure
nor any delay on the part of the Lender in exercising any right, power or
privilege hereunder or under the Notes or any other Loan Document shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or future exercise, or the exercise of any other right, power or
privilege.

       

      Section
9.06.  Notices.  All notices, requests, demands and
other communications under or in respect of this Agreement or any transactions
hereunder shall be in writing (which may include telegraphic or telecopied
communication) and shall be personally delivered or mailed (by prepaid
registered or certified mail, return receipt requested), sent by prepaid
recognized overnight courier service, or telegraphed or telecopied by facsimile
transmission to the applicable party at its address or telecopier number
indicated below.

       

      If to the
Lender:

       

      CVC
California, LLC

      CityPlace
Tower

      525
Okeechobee Blvd., Suite 1050

      West Palm
Beach, FL 33401

      Attention:
Chief Financial Officer

      Telecopier:
(561) 727-2100

       

      with a
copy to:

       

      Greenberg
Traurig, LLP

      200 Park
Avenue

      New York,
New York  10166

      Attention:  Shahe
Sinanian, Esq.

      Telecopier:
(212) 801-6400

       

      If to the
Borrower:

       

      General
Environmental Management, Inc.

      3191
Temple Avenue, Suite 250

      Pomona,
California  91768

      Attention:
Timothy J. Koziol

      Telecopier:  (909)
444-8356

       

      with a
copy to:

       

      deCastro,
PC

      309
Laurel Street

      San
Diego, California  92101

      Attention:
Stanley M. Moskowitz, Esq.

      Telecopier:
(619) 702-9401

       

      
        
           

        

        
          47

          
            

          

        

        
           

        

      

       

      or, as to
each party, at such other address or telecopier number as shall be designated by
such party in a written notice to the other party delivered as
aforesaid.  All such notices, requests, demands and other
communications shall be deemed given (a) when personally delivered, (b) three
(3) Business Days after being deposited in the mails with postage prepaid (by
registered or certified mail, return receipt requested), (c) one (1) Business
Day after being delivered to the telegraph company or overnight courier service,
if prepaid and sent overnight delivery, addressed as aforesaid and with all
charges prepaid or billed to the account of the sender, or (d) when sent by
facsimile transmission to a telecopier number designated by such
addressee.

       

      Section
9.07.  Binding Effect.  This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns, except that the Borrower shall not assign any
of its rights or obligations hereunder without the prior written consent of the
Lender.

       

      Section
9.08.  Consent to Jurisdiction; Waiver of Jury
Trial.  The Borrower hereby consents to the jurisdiction of all
courts of the State of New York and the United States District Court for the
Southern District of New York, as well as to the jurisdiction of all courts from
which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to this Agreement, any
other Loan Document, any other agreements, instruments, certificates or other
documents executed in connection herewith or therewith, or any of the
transactions contemplated hereby or thereby, or any of the Borrower’s or any
Subsidiary’s obligations hereunder or thereunder.  The Borrower hereby
waives the right to interpose any counterclaims (other than compulsory
counterclaims) in any action brought by the Lender hereunder or in respect of
any other Loan Document, provided that this waiver shall not preclude the
Borrower from pursuing any such claims by means of separate
proceedings.  THE BORROWER HEREBY EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS WHICH IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS, AND ALSO WAIVES
TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.  The Lender may
file a copy of this Agreement as evidence of the foregoing waiver of right to
jury trial.

       

      Section
9.09.  Certain Waivers.  The Borrower hereby waives
any claims for special, consequential or punitive damages in any way arising out
of or relating to this Agreement, any of the other Loan Documents, or any breach
hereof or thereof.

       

      Section
9.10.  Severability.  If any provision of this
Agreement is held invalid or unenforceable, either in its entirety or by virtue
of its scope or application to given circumstances, such provision shall
thereupon be deemed modified only to the extent necessary to render same valid,
or not applicable to given circumstances, or excised from this Agreement, as the
situation may require, and this Agreement shall be construed and enforced as if
such provision had been included herein as so modified in scope or application,
or had not been included herein, as the case may be.

       

      Section
9.11.  Captions.  The Article and Section headings in
this Agreement are included herein for convenience of reference only, and shall
not affect the construction or interpretation of any provision of this
Agreement.

       

      
        
           

        

        
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      Section
9.12.  Sole and Entire Agreement.  This Agreement,
the Notes, the other Loan Documents, and the other agreements, instruments,
certificates and documents referred to or described herein and therein
constitute the sole and entire agreement and understanding between the parties
hereto as to the subject matter hereof, and supersede all prior discussions,
agreements and understandings of every kind and nature between the parties as to
such subject matter.

       

      Section
9.13.  Confidentiality.  The Lender shall not
disclose any Confidential Information to any Person without the prior written
consent of the Borrower; provided, however, that nothing
herein contained shall limit any disclosure of the tax structure of the
transactions contemplated hereby, or the disclosure of any information (a) to
the extent required by statute, rule, regulation or judicial process, (b) to
counsel for the Lender, (c) to bank examiners, auditors, accountants or, if
required by law, any regulatory authority, (d) to the officers, partners,
managers, directors, employees, agents and advisors (including independent
auditors and counsel) of the Lender, provided that such Persons shall be bound
by this Section 9.13, (e) in connection with any litigation which relates to
this Agreement to which the Lender is a party, (f) to a subsidiary or Affiliate
of the Lender, or (g) to any assignee or participant (or prospective assignee or
participant) which agrees to be bound by this Section 9.13, and further provided, that in no
event shall the Lender be obligated or required to return any materials
furnished by the Borrower.  The obligations of the Lender under this
Section 9.13 shall supersede and replace the obligations of the Lender under any
confidentiality letter in respect of this financing previously signed and
delivered by the Lender to the Borrower.

       

      Section
9.14.  Counterparts; Fax Signatures.  This Agreement
may be executed in any number of counterparts, all of which shall constitute one
and the same agreement.  This Agreement may be executed by fax and
electronic signatures, each of which shall be fully binding on the signing
party.

       

      Section
9.15.  Effect on Other Loan Documents.  From and
after the Closing Date, (a) this Agreement shall amend, modify and supersede the
Original Agreement in its entirety, provided that this Agreement shall not
revoke any transactions effected under the Original Agreement or effect a
novation of any Obligations outstanding under the Original Agreement, (b) all
references to the “Loan Agreement” in the various Loan Documents shall be deemed
to refer to this Agreement, (c) all references to the “Notes” (or any individual
Note) contained in the various Loan Documents shall mean and refer to the Notes
(or the corresponding Note(s)) issued pursuant to this Agreement, and (d) all
references to the “Warrants” (or any individual Warrant) contained in the
various Loan Documents shall mean and refer to the Warrant issued pursuant to
this Agreement.  Promptly following the Closing Date, the Lender shall
return to the Borrower the Notes and the Warrants issued pursuant to the
Original Agreement, each marked “canceled”.

       

      [The
remainder of this page is intentionally blank]

       

      
        
           

        

        
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      IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed by their duly
authorized officer as of the day and year first written above.

       

       

      
        
          
            
              
                	 	 	 	CVC
      CALIFORNIA, LLC	 
	 	 	 	 	 
	
                         

                      	 	By:	
                        /s/
      

                      	 
	
                         

                      	 	 	
                              
                          Name:
      Gary E. Jaggard

                          Title:
      Managing Director

                        

                      	 

              

            

          

        

      

      
         

        
          
            
              
                
                  	 	 	 	      
                          GENERAL
      ENVIRONMENTAL

                          MANAGEMENT,
      INC.

                        	 
	 	 	 	 	 
	
                           

                        	 	By:	
                          /s/
      

                        	 
	
                           

                        	 	 	
                                
                                  
                              Name:

                              Title:

                            

                          

                        	 

                

              

            

          

        

      

    

     

     

    50ex10-39.htm

    
      

      

    

    Exhibit
10.39

     

    
    

     

    
      	$6,314,699.59	
              September 4,
      2009

            

    

     

    
      AMENDED
AND RESTATED

      CONVERTIBLE TERM
NOTE

       

      This Note and the Common Stock
issuable upon conversion hereof (until such time, if any, as such Common Stock
is registered with the Securities and Exchange Commission pursuant to an
effective registration statement) have not been registered under the Securities
Act of 1933, as amended (the “Act”), or any state securities laws, and may not
be sold, offered for sale of otherwise transferred unless registered or
qualified under the Act and applicable state securities laws or unless the Maker
receives an opinion, in form and from counsel reasonably acceptable to the
Maker, that registration, qualification or other such actions are not required
under any such laws.

       

      FOR VALUE
RECEIVED, GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Nevada corporation (the
“Maker”), hereby
promises to pay to CVC California, LLC, a Delaware limited liability company
(“CVC”), or registered
assigns (collectively with CVC, the “Payee”), the sum of Six
Million Three Hundred Fourteen Thousand Six Hundred Ninety-Nine and 59/100
($6,314,699.59 Dollars (the “Principal”), with interest
thereon, on the terms and conditions set forth herein and in the Amended and
Restated Revolving Credit and Term Loan Agreement of even date herewith by and
between CVC and the Maker (as same may be amended, modified, supplemented and/or
restated from time to time, the “Loan
Agreement”).  Terms defined in the Loan Agreement and not
otherwise defined herein shall have the meanings assigned thereto in the Loan
Agreement.

       

      Payments
of principal of, interest on and any other amounts with respect to this
Convertible Promissory Note (this “Note”) are to be made in
lawful money of the United States of America.

       

      Principal
and accrued interest of this Note may or shall be convertible into common stock
of the Maker as provided in Section 3 below.

       

      1.           Payments.

       

      (a)           Interest. This Note
shall bear interest (“Interest”) on Principal
amounts outstanding from time to time from the date hereof at the rate of
fourteen (14%) percent per annum; provided, however, that during
the continuance of any Event of Default, the Interest rate hereunder shall be
increased to nineteen (19%) percent per annum.  All Interest shall be
computed on the daily unpaid Principal balance of this Note based on a three
hundred sixty (360) day year, and shall be payable ON DEMAND or, in the
absence of demand, monthly in arrears on the first day of each calendar month
commencing November 1, 2009 and on the maturity hereof.

       

      (b)           Principal.  The
Principal of this Note shall be payable ON DEMAND or, in the
absence of demand, (i) in seven (7) equal monthly installments of $138,000 each,
due and payable on the first day of each calendar month commencing December 1,
2009 and continuing through and including June 1, 2010, and (ii) a final
installment due and payable on June 30, 2010 in an amount equal to the entire
remaining Principal balance of this Note.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      (c)           Non-Business
Day.  If any scheduled payment date as aforesaid is not a
business day in the State of California or the State of Florida, then the
payment to be made on such scheduled payment date shall be due and payable on
the next succeeding business day, with additional interest on any Principal
amount so delayed for the period of such delay.

       

      2.           Prepayment.

       

      (a)           Optional Prepayment of
Principal. The unpaid Principal balance of this Note may, at the Maker’s
option, be prepaid in whole or in part, at any time or from time to time upon
twenty (20) days’ prior written notice to the Payee, provided that the Payee
shall retain the right to convert all or any portion of such Principal amount
called for prepayment, together with any or all Interest accrued thereon, at any
time prior to the date fixed for prepayment, and thereafter until such
prepayment is actually made.  Any optional prepayment of Principal
hereunder (other than a prepayment (i) required pursuant to Section 2.02(e) of
the Loan Agreement, or (ii) made with the proceeds received from the sale of any
business unit or units, promptly upon receipt of such proceeds) shall require
the simultaneous payment of a prepayment premium as provided in Section 2.03(c)
of the Loan Agreement.

       

      (b)           Mandatory Prepayment of
Principal.  The Principal of this Note may be required to be
prepaid in accordance with Section 2.07 of the Loan Agreement, and such
prepayment shall, unless made with the proceeds received from the sale of any
business unit or units, be subject to the payment of a prepayment premium as
provided in Section 2.03(c) of the Loan Agreement.  In addition,
Principal and accrued interest of this Note shall be required to be prepaid in
the event and to the extent that and at the same time as there shall be paid any
amounts pursuant to Section 2.2 of that certain Stock Purchase Agreement dated
as of August 17, 2009 by and among MTS Acquisition Company, Inc., the Maker,
General Environmental Management, Inc. (a Delaware corporation), and GEM Mobile
Treatment Services, Inc. (as same may be amended, modified, supplemented and/or
restated from time to time, the “Stock Purchase Agreement”),
and no prepayment premium shall be required in respect thereof.

       

      (c)           Interest. Except to
the extent that such Interest is converted as herein provided, each prepayment
of Principal shall be accompanied by all accrued Interest on the Principal
amount prepaid or converted accrued to the date of prepayment or
conversion.

       

      (d)           Application of
Payments.  Any and all prepayments hereunder shall be applied
first to any prepayment premium required under Section 2(a) or 2(b) above, then
to unpaid accrued Interest on the Principal amount being prepaid, and finally to
the remaining Principal installments in inverse order of maturity.

       

      3.           Conversion.

       

      (a)           Optional and Mandatory
Conversion.  The
Payee may, at its option, upon written notice to the Maker given at any time and
from time to time, convert all or any portion of the unpaid Principal balance of
this Note, and/or any accrued Interest thereon, into shares of common stock of
the Maker (“Common
Stock”), at a price of $0.60 per share of Common Stock (as same may be
adjusted from time to time in accordance herewith, the “Conversion
Price”).

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (b)           Mechanics of
Conversion.  Upon
notice to the Maker of the Payee’s conversion election as provided in Section
3(a), the Maker shall, in accordance with Section 3(c), issue to the Payee (or
to the Payee’s designee(s) set forth in the Payee’s conversion election) the
number of shares of Common Stock to which the Payee shall be entitled upon such
conversion, and shall deliver or cause to be delivered to the Payee or such
designee(s) the certificates representing such shares of Common
Stock.  All shares of Common Stock issued or delivered upon any
conversion hereunder shall, when issued or delivered, be duly authorized,
validly issued, fully paid and nonassessable.  In lieu of any
fractional shares to which the Payee would otherwise be entitled, the Maker
shall pay cash equal to such fraction multiplied by the per share Conversion
Price.

       

      (c)           Issuance of Common Stock
Upon Conversion.  Within
a reasonable time, not exceeding five (5) Business Days after the Conversion
Date, the Maker shall deliver or cause to be delivered, to or upon the written
order of the Payee, certificates representing the number of fully paid and
nonassessable shares of Common Stock into which this Note has been converted in
accordance with the provisions of this Section 3.  If so requested by
the Maker, the Payee shall, within a reasonable time (not exceeding five (5)
Business Days after receipt by the Payee of such certificates), surrender this
Note to the Maker for cancellation, against delivery of a replacement Note
representing the remaining balance (if any) of this Note which has not been
converted.  Subject to the following provisions of this Section 3,
such conversion shall be deemed to have occurred on the Conversion Date, so that
the Payee of this Note or such Payee’s designee(s) shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time.

       

      (d)           Taxes on
Conversion.  The
issuance of certificates for shares for Common Stock upon the conversion of this
Note shall be made without charge by the Maker to the converting Payee for any
tax in respect of the issuance of such certificates and such certificates shall
be issued in the name of, or in such names as may be directed by, the Payee;
provided, however, that the
Maker shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance or delivery of any such certificate in a
name other than that of the Payee, and the Maker shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Maker the amount of any such tax or
shall have established to the satisfaction of the Maker that any such tax has
been paid; and
further provided, that the
Maker shall not be required to pay any income tax to which the Payee may be
subject in respect of the issuance of this Note or the shares issued upon
conversion hereof.

       

      (e)           Adjustment of
Shares.

       

      (i)         
  Stock
Dividends, Distributions or Subdivisions.  In the event that,
at any time and from time to time from and after the date of this Note, the
Maker shall issue additional shares of Common Stock (or securities convertible
into Common Stock) in a stock dividend, stock distribution or subdivision paid
with respect to Common Stock, or declare any dividend or other distribution
payable in additional shares of Common Stock (or securities convertible into
Common Stock) or effect a split or subdivision of the outstanding shares of
Common Stock, then, concurrently with the effectiveness of such stock dividend,
stock distribution or subdivision, the then-effective Conversion Price shall be
proportionately decreased, and the number of shares of Common Stock issuable
upon conversion of this Note shall thus be proportionately
increased.  The Maker shall not, at any time, take any action which
would cause the Conversion Price to be reduced to an amount less than the par
value per share of the class of stock into which this Note is
convertible.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      (ii)          
Combinations or
Consolidations.  In the event that, at any time and from time
to time from and after the date of this Note, the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then, concurrently with the
effectiveness of such combination or consolidation, the then-effective
Conversion Price shall be proportionately increased, and the number of shares of
Common Stock issuable upon conversion of this Note shall thus be proportionately
decreased.

       

      (iii)           Other Dividends or
Distributions.  If the Maker, at any time or from time to time
after the issuance of this Note, makes a distribution to the holders of Common
Stock which is payable in securities of the Maker other than Common Stock, then,
in each such event, provision shall be made so that the Payee shall receive upon
conversion of this Note, in addition to the number of shares of Common Stock,
the amount of such securities of the Maker which would have been received if the
portion of this Note so converted had been exercised for Common Stock on the
date of such event, subject to adjustments subsequent to the date of such event
with respect to such distributed securities which shall be on terms as nearly
equivalent as practicable to the adjustments provided in this
Section 3(e)(iii) and all other adjustments under this
Section 3(e).  Nothing contained in this Section 3(e)(iii) shall
be deemed to permit the payment of any distribution in violation of the Loan
Agreement.

       

      (iv)           Merger, Consolidation or
Exchange.  If, at any time or from time to time after the date
of this Note, there occurs any merger, consolidation, arrangement or statutory
share exchange of the Maker with or into any other person or entity, then, in
each such event, provision shall be made so that the Payee shall receive upon
conversion of this Note the kind and amount of shares and other securities and
property (including cash) which would have been received upon such merger,
consolidation, arrangement or statutory share exchange by the Payee if the
portion of this Note so converted had been exercised for shares of Common Stock
immediately prior to such merger, consolidation, arrangement or statutory share
exchange, subject to adjustments for events subsequent to the effective date of
such merger, consolidation, arrangement or statutory share exchange with respect
to such shares and other securities which shall be on terms as nearly equivalent
as practicable to the adjustments provided in this Section 3(e)(iv) and all
other adjustments under this Section 3(e).  Nothing contained in
this Section 3(e)(iv) shall be deemed to permit any such transaction in
violation of the Loan Agreement.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      (v)           Recapitalization or
Reclassification.  If, at any time or from time to time after
the date of this Note, the shares of Common Stock issuable upon conversion of
this Note are changed into the same or a different number of securities of any
class of the Maker, whether by recapitalization, reclassification or otherwise
(other than a merger, consolidation, arrangement or statutory share exchange
provided for elsewhere in this Section 3(e)), then, in each such event,
provision shall be made so that the Payee shall receive upon conversion of this
Note the kind and amount of securities or other property which would have been
received in connection with such recapitalization, reclassification or other
change by the Payee if the portion of this Note so converted had been converted
immediately prior to such recapitalization, reclassification or change, subject
to adjustments for events subsequent to the effective date of such
recapitalization, reclassification or other change with respect to such
securities which shall be on terms as nearly equivalent as practicable to the
adjustments provided in this Section 3(e)(v) and all other adjustments
under this Section 3(e).

       

      (vi)           Extraordinary Dividends or
Distributions.  If, at any time or from time to time after the
date of this Note, the Maker shall declare a dividend or any other distribution
upon the Common Stock payable otherwise than out of current earnings, retained
earnings or earned surplus and otherwise than in shares of Common Stock, then
the Conversion Price in effect immediately prior to such declaration shall be
reduced by an amount equal, in the case of a dividend or distribution in cash,
to the amount thereof payable per share of Common Stock or, in the case of any
other dividend or distribution, to the value thereof per share of Common Stock
at the time such dividend or distribution was declared, as determined by the
Board of Directors of the Maker in good faith.  Such reductions shall
take effect as of the date on which a record is taken for the purposes of the
subject dividend or distribution, or, if a record is not taken, the date as of
which the holders of record of Common Stock entitled to such dividend or
distribution are to be determined.  Nothing contained in this Section
3(e)(vi) shall be deemed to permit the payment of any dividend in violation of
the Loan Agreement.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      (vii)         Dilutive
Issuances.  (A)  If the Maker, at any time or from
time to time, issues or sells any Additional Shares of Common Stock (as defined
below), other than as provided in the foregoing subsections of this
Section 3(e), for a price per share (which, in the case of options,
warrants, convertible securities or other rights, includes the amounts paid
therefor plus the exercise price, conversion price or other such amounts payable
thereunder) that is less than the Conversion Price then in
effect, then and in each such case, the then applicable Conversion Price shall
automatically be reduced as of the opening of business on the date of such issue
or sale, to a price determined by multiplying the Conversion Price then in
effect by a fraction (i) the numerator of which shall be (A) the
number of share of Common Stock deemed outstanding (as determined below)
immediately prior to such issue or sale, plus (B) the number of shares of
Common Stock which the aggregate consideration received by the Maker for the
total number of Additional Shares of Common Stock so issued would purchase at
the Conversion Price then in effect, and (ii) the denominator of which
shall be the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued; provided, however, that upon
the expiration or other termination of options, warrants or other rights to
purchase or acquire Common Stock which triggered any adjustment under this
Section 3(e)(vii), and upon the expiration or termination of the right to
convert or exchange convertible or exchangeable securities (whether by reason of
redemption or otherwise) which triggered any adjustment under this Section
3(e)(vii), if any thereof shall not have been exercised, converted or exchanged,
as applicable, the number of shares of Common Stock deemed to be outstanding
pursuant to this Section 3(e)(vii) shall be reduced by the number of shares
as to which options, warrants and rights to purchase or acquire Common Stock
shall have expired or terminated unexercised, and as to which conversion or
exchange rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be outstanding; and the Conversion Price
then in effect shall forthwith be readjusted and thereafter be the price that it
would have been had adjustment been made on the basis of the issuance only of
the shares of Common Stock actually issued.  For purposes of the
preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date shall be the sum of (x) the number of shares
of Common Stock actually outstanding, (y) the number of shares of Common
Stock into which this Note could be converted on the day immediately preceding
the given date, and (z) the number of shares of Common Stock which could be
obtained through the exercise or conversion of all other rights, options and
convertible securities outstanding on the day immediately preceding the given
date.  For purposes hereof, “Additional Shares of Common
Stock” shall mean all shares of Common Stock, and all options, warrants,
convertible securities or other rights to purchase or acquire Common Stock,
issued by the Maker other than (i) shares
of Common Stock issued pursuant to the exercise of options, warrants or
convertible securities outstanding on September 1, 2009 (including, without
limitation, all of the Warrants issued pursuant to the Loan Agreement), or
hereafter issued from time to time pursuant to and in accordance with stock
purchase or stock option plans as in effect on September 1, 2009, and (ii)
shares of Common Stock and/or options, warrants or other Common Stock purchase
rights for up to an aggregate of 2,000,000 shares of Common Stock (such number
to be subject to adjustment in accordance with Sections 3(e)(i) and 3(e)(ii)
above), provided that, in each case, such options, warrants or other rights (A)
have an exercise price per share of Common Stock equal to or greater than the
then-current fair market value of a share of Common Stock, as determined in good
faith by the Board of Directors of the Maker or the Compensation Committee
thereof, and (B) are issued to employees, officers or directors of, or
consultants to, the Maker or any Subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Maker’s Board of
Directors or the Compensation Committee thereof, and by the Maker’s
stockholders.

       

      (B)           In
the event that the exercise price, conversion price, purchase price or other
price at which shares of Common Stock are purchasable pursuant to any options,
warrants, convertible securities or other rights to purchase or acquire Common
Stock is reduced at any time or from time to time (other than under or by reason
of provisions designed to protect against dilution), then, upon such reduction
becoming effective, the Conversion Price then in effect hereunder shall
forthwith be decreased to such Conversion Price as would have been obtained had
the adjustments made and required under this Section 3(e)(vii) upon the issuance
of such options, warrants, convertible securities or other rights been made upon
the basis of (and the total consideration received therefor) (i) the issuance of
the number of shares of Common Stock theretofore actually delivered upon the
exercise, conversion or exchange of such options, warrants, convertible
securities or other rights, (ii) the issuance of all of the Common Stock and all
other options, warrants, convertible securities and other rights to purchase or
acquire Common Stock issued after the issuance of the modified options,
warrants, convertible securities or other rights, and (iii) the original
issuance at the time of the reduction of any such options, warrants, convertible
securities or other rights then still outstanding.

       

      
        
           

        

        
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      (C)           In
no event shall an adjustment under this Section 3(e)(vii) be made if it
would result in an increase in the then applicable Conversion
Price.

       

      (viii)        Certificate of
Adjustment.  Whenever the Conversion Price and/or the number of
share of Common Stock receivable upon conversion of this Note is adjusted, the
Maker shall promptly deliver to the Payee a certificate of adjustment, setting
forth the Conversion Price and/or shares of Common Stock issuable after
adjustment, a brief statement of the facts requiring the adjustment and the
computation by which the adjustment was made.  The certificate of
adjustment shall be prima facie evidence of the correctness of the
adjustment.

       

      (ix)           Successive
Application.  The provisions of this Section 3(e) shall be
applicable successively to each event described herein which may occur
subsequent to the date of this Note and prior to the conversion in full of this
Note.

       

      (x)          
 Fractional
Shares.  No fractional shares of Common Stock shall be issuable
by reason of any adjustments made pursuant to this Section 3(e); and in lieu of
any such fractional shares, the Maker shall pay cash therefor in accordance with
Section 3(b) above.

       

      (f)           No
Impairment. The
Maker will not, by amendment of its incorporation documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder but will at all times in good faith assist in the carrying out of all
the provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the Payee
of this Note against impairment.  In the event of any merger or
consolidation in which the Maker is not the surviving entity, the Maker shall
make appropriate arrangements in order that, upon any subsequent conversion of
this Note, the Payee shall become entitled to receive the same securities or
other consideration that such Payee would have received had such conversion been
made immediately prior to the consummation of such merger or consolidation,
subject to further adjustments, of the type provided in this Note, with respect
to any events relating to any such securities occurring subsequent to the
consummation of such merger or consolidation.

       

      (g)           Common Stock
Reserved.  The
Maker shall at all times reserve and keep available out of its authorized but
unissued Common Stock such number of shares of Common Stock as shall from time
to time be sufficient to effect the full conversion of this Note into Common
Stock.

       

      (h)           Restricted
Securities.  The
shares of Common Stock issuable to the Payee hereunder (the “Shares”) may not, at the time
of issuance, have been registered under any federal or state securities laws,
and may constitute “restricted securities” within the meaning of federal and
state securities laws.  By its receipt of Shares, if the Shares are
not then the subject of an effective registration statement under the Securities
Act, the Payee will be deemed to acknowledge and confirm that it is receiving
such Shares for its own account for investment, and not with a view to the
resale or distribution thereof in violation of any federal or state securities
laws.

       

      
        
           

        

        
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      4.           Loan
Documents.  This
Note is the Convertible Term Note issued pursuant to the terms of the Loan
Agreement and is secured pursuant to the provisions of certain “Security
Documents” referred to in the Loan Agreement.  This Note is entitled
to all of the benefits of the Loan Agreement and in said Security Documents,
including provisions governing the payment and the acceleration of maturity
hereof, which agreements and instruments are hereby incorporated by reference
herein and made a part hereof.  The occurrence and continuance of an
Event of Default under the Loan Agreement shall constitute a default under this
Note and shall entitle the Payee to accelerate the entire indebtedness hereunder
and take such other action as may be provided for in the Loan Agreement and/or
in any and all other instruments evidencing and/or securing the indebtedness
under this Note, or as may be provided under the law.

       

      5.           Communications and
Notices.  Except
as otherwise specifically provided herein, all communications and notices
provided for in this Note shall be sent by reputable overnight courier or
facsimile to the Payee at the Payee’s address as provided to the Secretary of
the Maker from time to time and, if to the Maker, at 3191 Temple Avenue, Suite
250, Pomona, California 91768, Attention: Timothy J. Koziol, Fax # (909)
444-8356.  Any notice sent by overnight courier shall be deemed given
on the third (3rd)
Business Day after being deposited with the courier with all charges prepaid or
billed to the account of the sender. Any notice sent by facsimile shall be
deemed received on the date on which such notice is sent if such notice is sent
during normal business hours at the point of receipt (or otherwise on the next
succeeding Business Day).  The Maker and the Payee may from time to
time change their respective addresses or fax numbers, for purposes of this
Section 5, by written notice to the other parties; provided, however, that
notice of such change shall be effective only upon receipt.

       

      6.           Governing
Law.  This
Note shall be construed in accordance with and governed by the laws of the State of
New York, except to the extent superseded by Federal enactments.

       

      7.           Assignment.  This
Note shall be binding upon and shall inure to the benefit of the respective
successors and permitted assigns of the parties hereto, provided that the Maker
may not assign any of its rights or obligations hereunder without the prior
written consent of the Payee.

       

      8.           Waiver and
Amendment.  No
waiver of a right in any instance shall constitute a continuing waiver of
successive rights, and any one waiver shall govern only the particular matters
waived.  Neither any provision of this Note nor any performance
hereunder may be amended or waived except pursuant to an agreement in writing
signed by the party against whom enforcement thereof is
sought.  Except as otherwise expressly provided in this Note, the
Maker hereby waives diligence, demand, presentment for payment, protest,
dishonor, nonpayment, default, notice of any and all of the foregoing, and any
other notice or action otherwise required to be given or taken under the law in
connection with the delivery, acceptance, performance, default, enforcement or
collection of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended, modified or subordinated (by forbearance or
otherwise) from time to time, without in any way affecting the liability of the
Maker.  The Maker further waives the benefit of any exemption under
the homestead exemption laws, if any, or any other exemption, appraisal or
insolvency laws, and consents that the Payee may release or surrender, exchange
or substitute any personal property or other collateral security now held or
which may hereafter be held as security for the payment of this
Note.

       

      
        
           

        

        
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      9.           Usury Savings
Clause.  All
agreements between the Maker and the Payee are hereby expressly limited to
provide that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Payee for the use, forbearance
or detention of the indebtedness evidenced hereby exceed the maximum amount
which the Payee is permitted to receive under applicable law.  If,
from any circumstances whatsoever, fulfillment of any provision hereof or of the
Loan Agreement or any Loan Document thereunder, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, ipso facto, the obligation
to be fulfilled shall automatically be reduced to the limit of such validity,
and if from any circumstance the Payee shall ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance of any of
the Maker’s Obligations (as such term is defined in the Loan Agreement) to the
Payee, and not to the payment of interest hereunder.  To the extent
permitted by applicable law, all sums paid or agreed to be paid for the use,
forbearance or detention of the indebtedness evidenced by this Note shall be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full, to the end that the rate or amount of
interest on account of such indebtedness does not exceed any applicable usury
ceiling.  As used herein, the term “applicable law” shall mean the law
in effect as of the date hereof, provided, however, that in the event there is a
change in the law which results in a higher permissible rate of interest, then
this Note shall be governed by such new law as of its effective
date.  This provision shall control every other provision of all
agreements between the Maker and the Payee.

       

      10.         Collection
Costs.  In
the event that the Payee shall place this Note in the hands of an attorney for
collection during the continuance of any Event of Default, the Maker shall
further be liable to the Payee for all costs and expenses (including reasonable
attorneys’ fees) which may be incurred by the Payee in enforcing this Note, all
of which costs and expenses shall be obligations under and part of this Note;
and the Payee may take judgment for all such amounts in addition to all other
sums due hereunder.

       

      11.         Effect on Prior
Note.  This Note, together with the Term Note of even date
herewith in the principal amount of $5,600,000 issued by the Maker to CVC,
amends, restates and supersedes in its entirety the Convertible Term Note dated
August 31, 2008 in the principal amount of $6,900,000 issued by the Maker to
CVC, provided that this Note does not effect a novation of the outstanding
obligations under such prior Convertible Term Note (all of which obligations
continue and shall henceforth be evidenced by this Note and the Term Note
referred to in this paragraph).

       

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      IN
WITNESS WHEREOF, the Maker has executed this Note on the date first above
written.

       

      
        
          
            
              	 	 	 	
                      GENERAL
      ENVIRONMENTAL MANAGEMENT, INC.,

                      a
      Nevada corporation

                    	 
	 	 	 	 	 
	
                       

                    	 	By: 
      	
                      /s/
      

                    	 
	
                       

                    	 	 	
                            
                        Name:

                        Title:

                      

                    	 

            

          

        

      

    

     

     

     

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