Form 8K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of
report (Date of earliest event reported):
November
29 , 2006
General
Environmental Management, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Nevada
(State
of
Other Jurisdiction of Incorporation)
|
33-55254-38
|
87-0485313
|
|
(Commission
File Number)
|
(IRS
Employer Identification
No.)
|
3191
Temple Avenue, Suite 250 Pomona, California
91768
(Address
of Principal Executive Offices) (Zip Code)
(909)
444-9500
(Registrant's
Telephone Number, Including Zip Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
]
Written communications pursuant to Rule 425 under the Securities Act
(17CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under theExchange
Act (17 CFR 240.14d-2(b))
[
]
Pre-commencement communication pursuant to Rule 13e-4(c) under the
Item
1.01 Termination of a Material Definitive Agreement
a.
On
August 10, 2006, we entered into a series of agreements (“Agreements”) with
Laurus Master Fund, Ltd. ("Laurus") whereby we agreed to issue to Laurus (i)
a
secured three (3) year term note ("Note") in the face amount of $25 million;
and
(ii) seven (7) year warrants ("Warrants") to purchase 13,636,362 shares (the
“Warrant Shares”) of our common stock at an exercise price of $.24 per share.
The total Note proceeds is $25 million. We also agreed to pay, out of the Loan
proceeds, an Investment Fee of $1,155,000 to Laurus Capital Management, LLC,
the
manager of Laurus, and the sum of approximately $51,000 to Laurus as
reimbursement for Laurus' structuring and due diligence fees, legal fees, and
expenses incurred in connection with the transaction. Approximately $70,000
in
additional fees were paid to counsel and other parties in the transaction.
In
addition, in September we paid $1 million into the Restricted Account. A summary
of the terms of the Agreements is contained in our 8K Report filed on August
14,
2006
The
Note
proceeds, less the fees, are being held in an restricted account (the
“Restricted Account”) and were to be released upon certain conditions to be
satisfied by certain dates, among which were:
1.
We
raise a minimum of $16 million through the sale of our equity securities on
or
before a closing with best efforts to raise up to $19 million.
2.
We
provide Laurus with evidence that we have entered into a definitive agreement
to
acquire PCI (as defined in Paragraph “b” below) by a certain date, and we
complete the acquisition of PCI.
We
entered into a definitive agreement to acquire PCI on August 15, 2006. We were
not able to raise the minimum of $16 million through the sale of our securities
nor have we been able to complete the acquisition of PCI.
In
accordance with the terms of the Agreements, the net Note proceeds were returned
to Laurus. Laurus is not be obligated to return any fees or expenses that we
paid. The Warrants have been cancelled. The balance due to Laurus on the Note
was $289,776.11. On Decmber 5, 2006
On
December 5, 2006, we executed a Second Amended and Restated Secured Term Note
(“Second Note”) in the principal sum of $289,776.11, with a maturity date of
June 7, 2007. The Second Note bears interest at prime plus 3 ½ % with monthly
amortization payments of $48,296.02 per month, commencing on January 1,
2007.
b.
On
August 15, 2006, we entered into an exclusive agreement (the “PCI Agreement”) to
acquire of all of the shares of Pollution Control Industries, Inc., a Delaware
corporation (“PCI DE”) (such shares being referred to herein as the
“Stock”);
and
all of the membership interests of Thunderbird LLC, an Illinois limited
liability company (“Thunderbird”) (The PCI Agreement and the intended
acquisition of PCI is sometimes referred to below as the “Transaction”.) PCI DE
is an Indiana-based provider of hazardous and non-hazardous waste management
services, and Thunderbird, and its subsidiaries, operate several businesses
that
are affiliated with PCI DE. PCI DE and Thunderbird are hereafter referred to
as
“PCI.” The purchase price was $35 million, subject to certain adjustments. The
acquisition was subject to regulatory approval, and standard closing
conditions.
The
PCI
Agreement provided that we place a $500,000 as “Break-up” fee in escrow, to be
paid to the sellers of PCI (the “Sellers”), in the event that we were not able
to close the Transaction by September 30, 2006 because of our inability to
fund
the purchase price.
On
September 22, 2006, we advised PCI that we would not be able to complete the
Transaction by September 30, 2006. On September 22, 2006, we entered into a
First Amendment to the PCI Agreement, pursuant to which we agreed to: (i)
increase the purchase price to $35.875 million by agreeing to allow the $500,000
Break-up fee to be paid to the Sellers, and deposit an additional $875,000
as a
further Break-up fee, to be paid to the Sellers if the Transaction did not
close
by October 13, 2006.
On
October 12, 2006 we entered into a Second Amendment to the PCI Agreement
pursuant to which we agreed allow the $875,000 Break-up fee to be paid to the
Sellers, and deposit an additional $1,000,000 as a further Break-up fee to
be
paid to the Sellers if the Transaction did not close by November 29,
2006.
We
attempted to raise the $16 million through the sale of our equity securities
in
a “PIPE” (Private Investment of Public Equity) transaction. We engaged several
investment bankers to assist us in finding investors to participate in the
PIPE
transaction. We believe that due to a re-interpretation of Rule 415 by the
Staff
of the Securities & Exchange Commission, professional investors, i.e.
Private Equity and Hedge Funds, have become reluctant to invest in the
securities of companies that are traded on the OTC Bulletin Board. The
re-interpretation of Rule 415, of which there has not been any official
guidance, makes it difficult to determine when securities sold in a PIPE
transaction can be registered under the 1933 Act. We therefore believe that
this
uncertainty has prevented us from raising the $16 million through the sale
of
our equity securities, which would have enabled us to complete the acquisition
of PCI.
Notwithstanding
the expiration of the exclusive period to purchase PCI, if we are successful
in
obtaining the requisite financing, we intend to renew our offer to complete
the
purchase of PCI. We estimate that we will have to raise approximately $47.5
million to provide us with sufficient funds to pay for PCI and to fund the
then
combined businesses. There can be no assurance that we will obtain such
financing, or even if obtained, that PCI will accept a renewed offer.
In
the
event that we do not acquire PCI, we will have incurred expenses of $4.4 million
that will be written off to expense.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
General
Environmental Management, Inc
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|
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| By:
/s/ Timothy
Koziol |
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|
Timothy
Koziol, Chief Executive Officer |
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Date:
December 8, 2006
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