Preliminary Proxy Statement
PRELIMINARY
PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
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the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting Material under Rule 14a-12
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GENERAL
ENVIRONMENTAL MANAGEMENT, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing.
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GENERAL
ENVIRONMENTAL MANAGEMENT, INC
3191
Temple Avenue, Ste 250,
Pomona,
CA 91768
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On January __, 2007
Dear
Stockholders:
You
are
cordially invited to attend a Special Meeting of Stockholders of General
Environmental Management, Inc., a Nevada corporation (the “Company”). The
meeting will be held on January __, 2007 at 10:00 a.m., local time, at the
office 3191 Temple Avenue, Ste 250, Pomona, CA 91768, for the following
purposes:
1. To
grant the Board of Directors the authority to amend the Certificate of
Incorporation to increase the number of authorized common shares $.001 par
value, from 200,000,000 to one billion.
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO GRANT THE BOARD
OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED COMMON SHARES, $.001 PAR VALUE, FROM 200,000,000 TO
ONE
BILLION.
2. To
grant the Board of Directors the authority to amend the Certificate of
Incorporation to combine shares of the Company’s common stock to effect a one
for 30 reverse stock split of the common stock:
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO GRANT THE BOARD
OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF INCORPORATION TO EFFECT
A
REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK OF THE COMPANY, PAR VALUE $.001
PER SHARE, BY A RATIO OF 1-FOR-30.
3.
To
grant the Board of Directors the authority to amend the Certificate of
Incorporation to increase the number of authorized preferred shares, $.001
par
value, from 50,000,000 to 100,000,000.
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO GRANT THE BOARD
OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SERIES B CONVERTIBLE PREFERRED STOCK $.001 PAR VALUE,
FROM 50,000,000 TO 100,000,000.
No
other
business may be transacted.
These
items of business are more fully described in the Proxy Statement accompanying
this Notice. The record date for the Special Meeting is December 27, 2006.
On
November 30, 2006 there were 128,382,181 shares of common stock outstanding
and
entitled to vote. Each such share is entitled to one vote. In addition, there
were 2,479,000 shares of Series “B” Convertible Preferred Stock (“Series B
Preferred Stock”) outstanding. Each share of Series B Preferred Stock is
entitled to 20 votes. Only stockholders of record at the close of business
on
December 27, 2006 may vote at the Special Meeting or any adjournment or
postponement thereof. This Notice of Special Meeting of Stockholders and Proxy
Statement and form of proxy are being distributed on or about January 8, 2007
by
Order of the Board of Directors.
Timothy
J. Koziol
President
and Chief Executive Officer
Pomona,
California
December
__, 2006
You
are cordially invited to attend the Special Meeting in person. Whether or not
you expect to attend the Special Meeting, please complete, date, sign and return
the enclosed proxy card, as promptly as possible in order to ensure your
representation at the Special Meeting. A return envelope (which is postage
prepaid if mailed in the United States) is enclosed for your convenience. Even
if you have voted by proxy card, you may still vote in person if you attend
the
Special Meeting. Please note, however, that if your shares are held of record
by
a broker, bank or other nominee and you wish to vote at the Special Meeting,
you
must obtain a legal proxy issued in your name from that record holder.
GENERAL
ENVIRONMENTAL MANAGEMENT, INC.
3191
Temple Avenue, Ste 250,
Pomona,
CA 91768
PROXY
STATEMENT
FOR
THE 2007 SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On January __, 2007
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why
am I receiving these materials?
We
sent
you this proxy statement and the enclosed proxy card because the board of
directors of General Environmental Management, Inc. (referred to as the
“Company” or “GEM”) is soliciting your proxy to vote at the Company’s 2007
Special Meeting. You are invited to attend the Special Meeting and we request
that you vote on the proposals described in this proxy statement. However,
you
do not need to attend the Special Meeting to vote your shares. Instead, you
may
simply complete, sign and return the enclosed proxy card. The Company intends
to
mail this proxy statement and accompanying proxy card on or about January 8,
2007 to all stockholders of record entitled to vote at the Special Meeting.
Who
can vote at the Special Meeting?
Only
stockholders of record at the close of business on the record date, December
27,
2006, will be entitled to vote at the Special Meeting. As of the record date,
there were 128,382,181 shares of GEM’s common stock and 2,479,000 shares of
GEM’s preferred stock outstanding and entitled to vote. For information
regarding security ownership by management and by the beneficial owners of
more
than 5% of GEM’s common stock, see the section entitled “Security Ownership of
Certain Beneficial Owners and Management” below.
Stockholders
of Record: Shares Registered in Your Name
If
on
December 27, 2006 your shares were registered directly in your name with GEM’s
transfer agent, Colonial Stock Transfer Co., then you are a stockholder of
record. As a stockholder of record, you may vote in person at the Special
Meeting or vote by proxy. Whether or not you plan to attend the Special Meeting,
we urge you to fill out and return the enclosed proxy card as instructed below
to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If
on
December 27, 2006 your shares were held in an account at a brokerage firm,
bank,
dealer or other similar organization, then you are the beneficial owner of
shares held in “street name” and these proxy materials are being forwarded to
you by that organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the Special Meeting.
As a
beneficial owner, you have the right to direct your broker or other agent
on how
to vote the shares in your account. You are also invited to attend the Special
Meeting. However, since you are not the stockholder of record, you may not
vote
your shares in person at the Special Meeting unless you request and obtain
a
legal proxy from your broker or other agent. If you fail to instruct your
organization how you would like to have your shares voted, they will not
be
voted.
May
I attend the Special Meeting?
All
stockholders of record as of the close of business on December 27, 2006 may
attend the Special Meeting. You must have a proxy card or other evidence of
your
ownership of shares eligible to be voted as of the record date (such as a copy
of your brokerage or bank account statement) to attend the Special Meeting.
Also, stockholders will be asked to present valid government-issued photo
identification, such as a driver’s license or passport, before being admitted to
the meeting. Cameras, recording devices and other electronic devices will not
be
permitted at the Special Meeting. No items will be allowed into the Special
Meeting that might pose a concern for the safety of those attending.
If
you
are a registered stockholder, you will receive a proxy card in the mail. Please
bring the proxy card, or other evidence of your ownership of shares eligible
to
be voted as of the record date, to the Special Meeting.
If
a
broker, bank, trustee, nominee or other third party holds your shares, please
inform that party that you plan to attend the Special Meeting and ask for a
legal proxy. Bring the legal proxy to the stockholder registration area when
you
arrive at the Special Meeting and we will admit you to the Special Meeting.
If
you cannot obtain a legal proxy in time, we will admit you to the Special
Meeting if you bring a copy of your brokerage or bank account statement showing
that you owned GEM stock as of December 27, 2006.
On
what proposals am I voting?
The
following three matters are scheduled for a vote:
| o |
To
grant the Board of Directors the authority to amend the Certificate
of
Incorporation to increase the
number of authorized common shares $.001 par value, from 200,000,000
to
one billion.
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To
grant the Board of Directors the discretion and authority to amend
the
Certificate of Incorporation to effect a reverse split of the outstanding
common stock of the Company, par value $.001 per share, by a ratio
of
1-for-30.
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To
grant the Board of Directors the authority to amend the Certificate
of
Incorporation to increase the number of authorized preferred shares
$.001
par value, from 50,000,000 to
100,000,000.
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How
do I vote?
You
may
either vote “For” or “Against” or abstain from voting on each of the matters to
be voted on. The procedures for voting are as follows:
Stockholder
of Record: Shares Registered in Your Name
If
you
are a stockholder of record, you may vote in person at the Special Meeting,
vote
by proxy using the enclosed proxy card. Whether or not you plan to attend the
Special Meeting, we urge you to vote by proxy to ensure your vote is counted.
You may still attend the Special Meeting and vote in person if you have already
voted by proxy.
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To
vote in person: come to the Special Meeting and we will give you
a ballot
when you arrive.
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To
vote using the proxy card: simply complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If you
return
your signed proxy card to us before the Special Meeting, the designated
proxy holders will vote your shares as you direct, except with respect
to
all other matters that may properly come before the meeting or any
postponement, continuation or adjournment thereof, the designated
proxy
holders have discretionary authority to vote your shares.
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Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If
you
are a beneficial owner of shares registered in the name of your broker, bank
or
other agent, you should have received a proxy card and voting instructions
with
these proxy materials from that organization rather than from GEM. Simply
complete and mail the proxy card to ensure that your vote is counted. To vote
in
person at the Special Meeting, you must obtain a valid legal proxy from your
broker, bank or other agent. Follow the instructions from your broker or bank
included with these proxy materials, or contact your broker or bank to request
a
legal proxy form.
How
many votes do I have?
On
each
matter to be voted upon, holders of common stock have one vote for each share
of
common stock you own as of December 27, 2006 and holders of Series B Preferred
Stock have 20 votes for each share of Series B Preferred Stock you own as of
December 27, 2006.
What
if I return a proxy card but do not make specific choices?
If
you
return a signed and dated proxy card without marking any voting selections,
your
shares will be voted
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“For”
granting the Board of Directors the authority to amend the Certificate
of
Incorporation to increase the
number of authorized common shares $.001 par value, from 200,000,000
to
one billion.
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“For”
granting the Board of Directors the discretion and authority to amend
the
Certificate of Incorporation to effect a reverse split of the outstanding
common stock of the Company, par value $.001 per share, by a ratio
of
1-for-30.
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“For”
granting the Board of Directors the authority to amend the Certificate
of
Incorporation to increase the number of authorized preferred shares
$.001
par value, from 50,000,000 to
100,000,000.
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As
set
forth on the proxy card, if any other matter is properly presented at the
meeting, your proxy (one of the individuals named on your proxy card) will
vote
your shares at his or her discretion.
Who
is paying for this proxy solicitation?
GEM
will
bear the entire cost of solicitation of proxies, including preparation,
assembly, printing and mailing of this proxy statement. In addition to these
mailed proxy materials, our directors and employees may also solicit proxies
in
person, by telephone, by electronic mail or by other means of communication.
Directors and employees will not be paid any additional compensation for
soliciting proxies. We may also reimburse brokerage firms, banks and other
agents for the cost of forwarding proxy materials to beneficial owners. We
may
engage the services of a professional proxy solicitation firm to aid in the
solicitation of proxies from certain brokers, bank nominees and other
institutional owners. Our costs for such services, if retained, will not be
material.
What
does it mean if I receive more than one proxy card?
If
you
receive more than one proxy card, your shares are registered in more than one
name or are registered in different accounts. Please complete, sign and return
each proxy card to ensure that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Yes.
You
may revoke your proxy at any time before the closing of the polls at the Special
Meeting. You may revoke your proxy in any one of three ways:
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You
may complete, sign, date and mail another proxy card bearing a later
date
and deliver such proxy
card to us prior to the Special Meeting;
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You
may send a written notice that you are revoking your proxy to our
Secretary at 3191 Temple Avenue,
Ste 250, Pomona, CA 91768 and deliver such notice to us prior to
the
Special Meeting.
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You
may attend the Special Meeting and vote in person. Simply
attending the
Special Meeting will not,
by itself, revoke your proxy.
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How
are votes counted?
Votes
will be counted by the inspector of election appointed for the Special Meeting,
who will separately count “For” and (with respect to proposals other than the
election of directors) “Against” votes, abstentions and broker non-votes. A
“broker non-vote” occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions with respect to that proposal from the beneficial owner. Broker
non-votes will have the effect on each Proposal as indicated below. Abstentions
will be counted towards the vote total for each proposal and will have the
same
effect as “Against” votes.
How
many votes are needed to approve each proposal?
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Proposal 1--
the granting to the Board of Directors the authority to amend the
Certificate of Incorporation to increase the number of authorized
common
shares $.001 par value, from 200,000,000 to one billion, a “For” vote by a
majority of the votes present in person or by proxy. “Withheld votes” and
Broker non-votes will have no effect.
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Proposal
2-- the granting to the Board of Directors the discretion and authority
to
amend the Certificate of Incorporation to effect a reverse split
of the
outstanding common stock of the Company, par value $.001 per share,
by a
ratio of 1-for-30, a “For” vote by a majority of the votes present in
person or by proxy. “Withheld votes” and Broker non-votes will have no
effect.
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Proposal
3-- the granting to the Board of Directors the authority to
amend the
Certificate of Incorporation to increase the number of authorized
preferred shares, $.001 par value, from 50,000,000 to 100,000,000,
a “For”
vote by a majority of the votes present in person or by proxy
voting as a
separate class. “Withheld votes” and Broker non-votes will have no effect.
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What
is the quorum requirement?
A
quorum
of stockholders is necessary to hold a valid stockholder meeting. A quorum
will
be present if at least a majority of the stock issued and outstanding and
entitled to vote at the Special Meeting is present in person or represented
by
proxy at the Special Meeting.
Your
shares will be counted as present at the Special Meeting if you submit a valid
proxy vote or vote at the Special Meeting. Abstentions and broker non-votes
are
counted as present and entitled to vote and are, therefore, included for
purposes of determining the quorum requirement. If there is no quorum, a
majority of the votes present at the Special Meeting may adjourn the Special
Meeting to another date.
Dissenter’s
or Appraisal Rights
The
Company’s shareholders are not entitled to dissenter’s or appraisal rights under
Nevada law in connection with the amendments.
How
can I find out the results of the voting at the Special Meeting?
Preliminary
voting results will be announced at the Special Meeting. Final voting results
will be published in the Company’s quarterly report on Form 10-Q for the
quarter ending March 31, 2007.
OVERALL
REASON FOR THE MEETING
The
Board
of Directors has determined that it is in the best interests of the Company
and
the stockholders to adjust the capital structure of the Company so that the
Company, as a result of the adjustments, has under 15 million shares of common
stock issued and outstanding. In order to fulfill the Company’s commitments to
certain purchasers of its Series B Convertible Preferred stock, the Company
must
first amend its Articles of Incorporation to increase the number of common
shares authorized to allow for the issuance of common stock. After conversion
of
the Series B, and giving effect to the number of shares that are reserved
for
issuance upon the exercise of options and warrants, the Company would have
approximately 248,895,622 common shares outstanding (323,895,622 if 3,000,000
shares of Series C are sold prior to the filing of the Amendment to increase
the
authorized common stock). The Board of Directors believes that the Company’s
best interest would be served if a “reverse split’ of the shares would occur
after the issuance of the common shares upon the conversion of the Series
B,
reducing the issued and outstanding common stock to under 15 million shares.
The
Board of Directors believes that the reduction in common shares outstanding
will
increase investor interest in the Company. Further, by increasing the authorized
common stock and increasing the authorized preferred stock, the Board of
Directors will have more flexibility to enter into financing or acquisition
transactions without having to wait for the stockholder approval of the issuance
of additional shares of common or preferred stock.
The
plan
is therefore, assuming stock holder approval at the meeting: First-- file an
amendment to the Articles of Incorporation increasing the authorized common
stock from 200 million to one billion and increasing the authorized preferred
stock from 50 million to 100 million; Second-- convert all Series B into common
stock; Third-- file another amendment to the Articles of Incorporation
implementing a reverse split of the common stock at a ratio of
1-for-30.
PROPOSAL
1
TO
GRANT THE BOARD OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES $.001 PAR
VALUE, FROM 200,000,000 TO ONE BILLION.
The
Board
of Directors has approved, subject to shareholder approval, an amendment to
the
Company’s Amended and Restated Articles of Incorporation to increase the number
of authorized common shares from two hundred million (200,000,000) to one
billion (1,000,000,000). The Board of Directors has determined that this
amendment is advisable and in the best interests of the Company and its
shareholders.
At
the
Special Meeting, shareholders will be asked to consider and vote upon this
amendment. The Board of Directors recommends that shareholders vote FOR the
amendment.
Reasons
for the Amendment
Currently,
the Company is authorized to issue 200,000,000 common shares. Of the 200,000,000
common shares authorized, as of November 30, 2006, there were
128,382,181 common shares issued and outstanding and 14,515,150 common
shares reserved for issuance upon the exercise of outstanding options,
including, without limitation, the benefit plans of the Company. Consequently,
the Company has approximately 57,102,669 common shares available for general
corporate purposes.
In
addition, the Company is authorized to issue 50 million shares of preferred
stock, 3 million of which has been designated as “Series A Convertible
Preferred” (“Series A”), 19 million of which has been designated as “Series B
Convertible Preferred” (“Series B”), 16 million which have been designated as
Series C (“Series C”) and 12 million of which have no terms designated by the
Board of Directors. As of November 30, 2006, there were: a) no Series A
Convertible Preferred outstanding, b) 2,479,000 shares of Series B outstanding,
and c) no Series C outstanding. Each share of Series A is convertible into
one
share of common stock has no votes to cast at any meeting of common
stockholders. Each share of Series B will be automatically converted into 20
shares of common stock at the time the Company effectuates an amendment (the
“Amendment”) to its Articles of Incorporation in accordance with Nevada General
Corporation Law to increase the authorized number of shares of common stock
in
an amount sufficient to allow for the full conversion of all outstanding and
issued shares of Series B into shares of common stock. Each share of Series
B
has 20 votes to cast at any meeting of common stockholders. Each share of Series
C will be automatically converted into 25 shares of common stock at the time
the
Company effectuates an amendment (the “Amendment”) to it’s Articles of
Incorporation in accordance with Nevada General Corporation Law to increase
the
authorized number of shares of common stock in an amount sufficient to allow
for
the full conversion of all outstanding and issued shares of Series C into shares
of common stock. Each share of Series C has 20 votes to cast at any meeting
of
common shareholders.
From
May
22, 2006 to August 31, 2006, the Company had raised $4,753,277 for working
capital, through the sale of Convertible Notes. On August 31, 2006, the Company
converted all of the Convertible Notes into 95,065,546 shares of common stock
at
$.05 per share.
From
September 1, 2006 to November 30, 2006, the Company had raised $2,454,000
for
working capital, through the sale of 2,454,000 shares of Series B at $1.00
per
share. The Company is currently attempting to sell an additional 3 million
shares of Series C at $1.00 per share through a private placement to “accredited
investors.” If the Company is successful in selling the additional $3 million of
Series C, it would have 3,000,000 of Series C outstanding. Series C is
convertible into 75,000,000 shares of common stock. The Company does not
have
sufficient shares of common stock authorized to convert the Series C into
common
stock.
The
Board
of Directors had designated Series B and Series C to allow the Company to raise
the working capital it needs through the sale of equity at the equivalent of
$.05 and $.04 per share of common stock respectively. The Board of Directors
has
committed to the purchasers of the Series B and Series C, that it would call
a
meeting of stockholders to approve the Amendment to increase the authorized
common stock, so that the Series B and Series C can be automatically converted
into common stock. The Board of Directors has determined that the Company shall
issue to the investors un the Convertible Notes and the investors in the Series
B, upon the filing of the Amendment to increase the authorized common stock,
a
number of shares or pre-reverse split shares of common stock, so that each
of
the investors in the Convertible Notes and the Series B will receive the
equivalent amount of pre-reverse split common shares as if the Convertible
Notes
and Series B were converted at $.04 per share. Accordingly, the Company: a)
will
issue to the investors in the Convertible Notes, an additional 23,766,379 shares
of common stock (pre-reverse split) upon the filing of the Amendment to increase
the authorized common stock; and b) issue to the Series B a total of 61,975,000
shares of common stock (pre-reverse split) upon the approval of the Amendment
to
increase the authorized common stock.
Also,
other than the issuance of common stock upon the conversion of the Series B
and
Series C, the Board of Directors has proposed the increase in authorized common
shares to enable the Company as a means of providing it with the additional
flexibility to act with respect to the issuance of common shares or securities
exercisable for, or convertible into, common shares in circumstances which
it
believes will advance the interests of the Company and its stockholders without
the delay of seeking an amendment to the Amended Articles of Incorporation
at
that time.
The
Board
of Directors has no current specific plans to authorize the issuance of
additional common shares, except as stated above, and in connection with
possible future awards under employee benefit plans. However, the Company is
considering, and will continue to consider, various financing alternatives,
including potential capital market transactions. In connection with the
Company’s overall financing initiatives, from time to time, the Board of
Directors has considered and will continue to consider the issuance of common
shares or securities convertible into common shares. If stockholders approve
the
amendment to the Amended and Restated Articles of Incorporation, then the Board
of Directors would have more flexibility to pursue opportunities to engage
in
possible future capital market transactions involving common shares or
securities convertible into common shares, including, without limitation, public
offerings or private placements of such common shares or securities convertible
into common shares.
Ability
of the Board to Issues Shares; Certain Issuances Requiring Shareholder
Approval
If
the
Amendment is approved by the stockholders, the additional common shares
authorized by the amendment may be issued from time to time upon authorization
by the Board of Directors, without further approval by the shareholders unless
required by applicable law, rule or regulation. Shares may be issued for such
consideration as the Board of Directors may determine and as may be permitted
by
applicable law.
VOTE
REQUIRED
A
“For”
vote by a majority of the votes of the shares of common stock and Series B
Preferred Stock present in person or by proxy at the meeting, voting together,
is required to approve Proposal 1.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECCOMENDS A VOTE FOR THE PROPOSAL TO GRANT
THE
BOARD OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF INCORPORATION
TO
INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES, $.001 PAR VALUE, FROM
200,000,000 TO ONE BILLION.
PROPOSAL
2
TO
GRANT THE BOARD OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF
INCORPORATION TO COMBINE SHARES OF THE COMPANY’S COMMON STOCK TO EFFECT A ONE
FOR THIRTY REVERSE STOCK SPLIT.
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the
trading price per share of common stock after the reverse stock
split
would rise in proportion to the reduction in the number of
pre-split
shares of common stock outstanding before the reverse stock
split;
and
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the
reverse stock split would result in a per share price that
would attract
brokers and investors who do not trade in lower priced stocks;
|
The
market price of the Common Stock would also be based on the Company’s
performance and other factors, some of which are unrelated to the number of
shares outstanding. If the reverse stock split is consummated and the trading
price of the common stock declines, the percentage decline as an absolute number
and as a percentage of the Company’s overall market capitalization may be
greater than would occur in the absence of the reverse stock split. Furthermore,
the liquidity of the common stock could be adversely affected by the reduced
number of shares that would be outstanding after the reverse stock split.
The
following table reflects the number of shares of common stock that would be
outstanding as a result of the proposed reverse stock split, and the approximate
percentage reduction in the number of outstanding shares, based on 128,382,181
shares of common stock outstanding as of the record date, as well as the number
of shares of common stock that would be available for issuance after the
proposed reverse stock split:
| |
Common
Shares
|
Exchange
Ratio
|
Common
Shares
-
Post Split
|
|
Current
Outstanding
|
128,382,181
|
30
|
4,279,406
|
|
Additional
Shares - May Convertible Notes
|
23,766,387
|
30
|
792,213
|
|
Additional
Shares - Series A Convertible Preferred
|
1,250,000
|
30
|
41,667
|
|
Conversion
of Series B Convertible Preferred
|
61,975,000
|
30
|
2,065,833
|
|
Series
C Convertible Preferred
|
75,000,000
|
30
|
2,500,000
|
|
Current
Options and Warrants
|
33,522,054
|
30
|
1,117,402
|
If
a
reverse split is implemented, the number of shares of common stock held by
each
stockholder would be reduced by multiplying the number of shares held
immediately before the reverse split by the exchange ratio, and then rounding
up
to the nearest whole share. No fractional shares will be issued as a result
of
the reverse split. In lieu of any fractional interest in a share to which each
stockholder otherwise would be entitled as a result of the reverse split, the
Company will issue to such stockholder one whole share of common stock, as
described in further detail below. The reverse stock split would affect our
common stock uniformly and would not affect any stockholder’s percentage
ownership interests in the Company or proportionate voting power, except to
the
extent that interests in fractional shares would be rounded up to the nearest
whole share.
Effect
on Options, Warrants and Other Securities.
In
addition, all outstanding options, warrants, convertible preferred stock, and
other securities entitling their holders to purchase shares of our common stock
will be adjusted, as required by the terms of these securities, for the reverse
stock split. In particular, the conversion ratio for each instrument would
be
reduced, and the exercise price, if applicable, would be increased, in
accordance with the terms of each instrument and based on the exchange ratio
of
the reverse stock split. Also, the number of shares reserved for issuance under
our existing stock incentive and employee stock purchase plans would be reduced
proportionally based on the exchange ratio of the reverse stock split. None
of
the rights currently accruing to holders of our common stock, options, warrants,
convertible preferred stock or other securities convertible into common stock,
will be affected by the reverse stock split.
Other
Effects on Outstanding Shares.
If
a
reverse stock split is implemented, the rights and preferences of the
outstanding shares of common stock will remain the same after the reverse split.
Each share of common stock issued pursuant to the reverse stock split would
be
fully paid and nonassessable.
The
reverse stock split would result in some stockholders owning “odd-lots” of less
than 100 shares of common stock. Brokerage commissions and other costs of
transactions in odd-lots are generally higher than the costs of transactions
in
“round-lots” of even multiples of 100 shares.
Our
common stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended. As a result, we are subject to
the
periodic reporting and other requirements of the Exchange Act. The proposed
reverse stock split would not affect the registration of the common stock under
the Exchange Act.
Effect
on Authorized Shares of common stock.
The
reverse stock split, if implemented, would not change the number of authorized
shares of common stock as designated by our amended Articles of Incorporation
(1
billion authorized.) Therefore, because the number of issued and outstanding
shares of common stock would decrease, the number of shares remaining available
for issuance under our authorized pool of common stock would increase.
Possible
Anti-Takeover Effects.
Under
the
proposed reverse stock split, the number of authorized shares of common stock
will not be reduced. This will increase significantly the ability of our board
of directors to issue authorized and unissued shares without further stockholder
action. The effective increase in the number of authorized but unissued shares
of common stock may be construed as having an anti-takeover effect by
permitting, for example, the issuance of shares to purchasers who might oppose
a
hostile takeover bid or oppose any efforts to amend or repeal certain provisions
of the Company’s certificate of incorporation or bylaws. As a result, management
and the board might use the additional shares to resist or frustrate a
third-party transaction providing an above-market premium that is favored by
a
majority of the independent stockholders.
If
our
stockholders approve some or all of the proposed amendments to our certificate
of incorporation, the board of directors may elect whether or not to declare
a
reverse stock split, as well as the exchange ratio, at any time before the
first
anniversary of this Special Meeting of Stockholders. The reverse stock split
would be implemented by filing the appropriate amendment to our Articles of
Incorporation with the Nevada Secretary of State, and the reverse stock split
would become effective on the date of the filing. As of the effective date
of
the reverse stock split, each certificate representing shares of our common
stock before the reverse stock split will be deemed, for all corporate purposes,
to evidence ownership of the reduced number of shares of common stock resulting
from the reverse stock split, except that holders of unexchanged shares would
not be entitled to receive any dividends or other distributions payable by
the
Company after the effective date until they surrender their old stock
certificates for exchange. All options, warrants, convertible preferred stock
and other securities would also be automatically adjusted on the effective
date.
Our transfer agent would act as the exchange agent for purposes of implementing
the exchange of stock certificates. As soon as practicable after the effective
date, stockholders and holders of securities convertible into our common stock
will be notified of the effectiveness of the reverse split. Stockholders of
record would receive a letter of transmittal requesting them to surrender their
stock certificates for stock certificates reflecting the adjusted number of
shares as a result of the reverse stock split. Persons who hold their shares
in
brokerage accounts or “street name” would not be required to take any further
actions to effect the exchange of their certificates. No new certificates would
be issued to a stockholder until the stockholder has surrendered the
stockholder’s outstanding certificate(s) together with the properly
completed and executed letter of transmittal to the exchange agent. Until
surrender, each certificate representing shares before the reverse stock split
would continue to be valid and would represent the adjusted number of shares
based on the exchange ratio of the reverse stock split, rounded up to the
nearest whole share. Stockholders should not destroy any stock certificate
and
should not submit any certificates until they receive a letter of transmittal.
Federal
Income Tax Consequences--The following is a summary of material federal income
tax consequences of the reverse stock split and does not purport to be complete.
It does not discuss any state, local, foreign or minimum income or other tax
consequences. Also, it does not address the tax consequences to holders that
are
subject to special tax rules, including banks, insurance companies, regulated
investment companies, personal holding companies, foreign entities, nonresident
alien individuals, broker-dealers and tax-exempt entities. The discussion is
based on the provisions of the United States federal income tax law as of the
date hereof, which is subject to change retroactively as well as prospectively.
This summary also assumes that the shares are held as a “capital asset,” as
defined in the Internal Revenue Code of 1986, as amended (generally, property
held for investment). The tax treatment of a stockholder may vary depending
upon
the particular facts and circumstances of the stockholder. Each stockholder
is
urged to consult with the stockholder’s own tax advisor with respect to the
consequences of the reverse stock split.
No
gain
or loss should be recognized by a stockholder upon his or her exchange of shares
pursuant to the reverse stock split (except in the case of the portion of whole
shares attributable to the rounding up of fractional shares, as discussed
herein). A stockholder’s tax basis in the shares received as a result of the
reverse split will be equal, in the aggregate, to his or her basis in the shares
exchanged, increased by the income or gain attributable to the rounding up
of
fractional shares, as described herein. New shares attributable to the rounding
up of fractional shares to the nearest whole number of shares will be treated
for tax purposes as if the fractional shares constitute a disproportionate
dividend distribution. Such stockholders generally should recognize ordinary
income to the extent of earnings and profits of the company allocated to the
portion of each whole share attributable to the rounding up process, and the
remainder of the gain, if any, shall be treated as received from the exchange
of
property. The stockholder’s holding period for the shares will include the
period during which he or she held the pre-split shares surrendered in the
reverse split. The portion of the shares received by a stockholder that are
attributable to rounding up for fractional shares will have a holding period
commencing on the effective date of the reverse split. The reverse split would
constitute a reorganization within the meaning of Section 368(1)(E) of
the Internal Revenue Code of 1986, as amended, and the Company will not
recognize any gain or loss as a result of the reverse split.
Our
beliefs regarding the tax consequence of the reverse stock split are not binding
upon the Internal Revenue Service or the courts, and there can be no assurance
that the Internal Revenue Service or the courts will accept the positions
expressed above. The state and local tax consequences of the reverse stock
split
may vary significantly as to each stockholder, depending upon the state in
which
he or she resides.
The
affirmative vote of a majority of all outstanding shares of common stock and
Series B Convertible Preferred Stock, voting together, is entitled to vote
at
the meeting is required to approve Proposal 2.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECCOMENDS A VOTE FOR THE PROPOSAL TO GRANT
THE
BOARD OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF INCORPORATION
TO
EFFECT A REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK OF THE COMPANY, PAR
VALUE
$.001 PER SHARE, BY A RATIO OF 1-FOR 30.
PROPOSAL
3
TO
GRANT THE BOARD OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED PREFERRED SHARES $.001 PAR
VALUE, FROM 50,000,000 TO 100,000,000.
The
Company is authorized to issue 50 million shares of preferred stock, 3 million
of which has been designated as “Series A Convertible Preferred” (“Series A”),
19 million of which has been designated as “Series B Convertible Preferred”
(“Series B”), and 16 million which have been designated as Series C (“Series C”)
and 12 million of which have no terms designated by the Board of Directors.
As
of November 30, 2006, there were: a) no Series A Convertible Preferred
outstanding, b) 2,479,000 shares of Series B outstanding, and c) no Series
C
outstanding. In accordance with the Articles of Incorporation, the Board of
Directors has the authority,
by
resolution or resolutions from time to time adopted, to provide for the issuance
of preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of
the
shares of each such series, and the qualifications, limitation or restrictions
thereof, including, but not limited to determination of any of the following:
(1)
the
distinctive serial designation and the number of shares constituting such
series;
(2)
the
rights in respect of dividends, if any, to be paid on the shares of such series,
whether dividends shall be cumulative and, if so, from which date or dates,
the
payment or date or dates for dividends, and the participating or other special
rights, if any, with respect to dividends;
(3)
the
voting powers, full or limited, if any, of the shares of such series;
(4)
whether the shares of such series shall be redeemable and, if so, the price
or
prices at which, and the terms and conditions upon which such shares may be
redeemed:
(5)
the
amount or amounts payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation;
(6)
whether the shares of such series shall be entitled to the benefits of a sinking
or retirement fund to be applied to the purchase or redemption of such shares,
and, if so entitled, the amount of such fund and the manner of its application,
including the price or prices at which such shares may be redeemed or purchased
through the application of such funds;
(7)
whether the shares of such series shall be convertible into, or exchangeable
for, shares of any other class or classes or any other series of the same or
any
other class or classes of stock of the corporation and, if so convertible or
exchangeable, the conversion price or prices, or the rate or rates of exchange,
and the adjustments thereof, if any, at which such conversion or exchange may
be
made, and any other terms and conditions of such conversion or exchange;
(8)
the
subscription or purchase price and form of consideration for which the shares
of
such series shall be issued; and
(9)
whether the shares of such series which are redeemed or converted shall have
the
status of authorized but unissued shares of preferred stock and whether such
shares may be reissued as shares of the same or any other series of preferred
stock.
The
Board
of Directors has proposed the increase in authorized preffered shares to enable
the Company as a means of providing it with the additional flexibility to act
with respect to the issuance of preferred shares or securities exercisable
for,
or convertible into, common shares in circumstances which it believes will
advance the interests of the Company and its stockholders without the delay
of
seeking an amendment to the Amended Articles of Incorporation at that
time.
VOTE
REQUIRED
The
affirmative vote of a majority of all outstanding shares of common stock
entitled to vote at the meeting, as well as a majority of all outstanding shares
of Series B Convertible Preferred Stock and Series C Convertible Preferred
Stock, entitled to vote at the meeting, voting as a separate classe, is required
to approve Proposal 3.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPSAL TO GRANT THE
BOARD OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATE OF INCORPORATION
TO
INCREASE THE NUMBER OF AUTHORIZED PREFERRED STOCK, $.001 PAR VALUE, FROM
50,000,000 TO 100,000,000.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth as of November 30, 2006, certain information as
known
to the Company with respect to the beneficial ownership of our common stock
by
(i) any person (including any group as that term is used in
Section 13(d)(3) of the Exchange Act), known by the Company to be the
beneficial owner of more than 5% of the Company’s voting securities,
(ii) each director, (iii) each of the executive officers, and
(iv) all current executive officers and directors of the Company as a
group. Unless otherwise indicated, all person named below can be reached at
General Environmental Management, Inc. 3191 Temple Avenue, Ste 250, Pomona,
CA
91768.
|
Name
|
No.
of
Shares
owned
|
%
of Stock
Outstanding
(1)
|
|
Timothy
J. Koziol
|
|
0.4%
|
|
Clyde
Rhodes
|
400,030
|
0.3%
|
|
James
Stapleton
|
31,717
|
0.02%
|
|
Brett
M. Clark
|
90,000
|
0.07%
|
|
Directors
and Officers as a Group
|
1,111,777
|
0.8%
|
|
(1)
|
Based
upon 128,382,181 shares outstanding.
|
|
(2)
|
Includes
190,000 options to purchase common stock at $1.00 per
share.
|
OTHER
MATTERS
The
Company knows of no other matters to be submitted to the Special Meeting. If
any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form proxy to vote the shares they represent
as
the board of directors may recommend.
WHERE
YOU CAN FIND MORE INFORMATION
The
Corporation files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
or
other information we file at the SEC’s Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the SEC’s regional offices located at 233
Broadway, New York, New York 10279; 801 Brickell Ave., Suite 1800, Miami,
Florida 33131; 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois
60604; 1801 California Street, Suite 4800, Denver, Colorado 80202-2648 or
5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036-3648.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the website maintained by the
SEC
at http://www.sec.gov.
You
should rely only on the information contained in this Proxy Statement or other
documents to which we refer to vote at the Special Meeting. We have not
authorized anyone to provide you with information that is different from what
is
contained in this Proxy Statement. You should not assume that the information
contained in this Proxy Statement is accurate as of any date other than the
date
of the Special Meeting, and the mailing of the Proxy Statement to stockholders
shall not create any implication to the contrary.
Please
sign and promptly return your proxy in the enclosed envelope. Your vote is
important.
By
Order
of the Board of Directors
Clyde
E.
Rhodes Jr., Secretary
Dated:
December __, 2006
Appendix
A
GENERAL
ENVIRONMENTAL MANAGEMENT, INC.
3191
Temple Avenue, Ste 250
Pomona,
CA 91768
PROXY
FOR THE 2007 SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On January __, 2007
TO
THE
STOCKHOLDERS:
NOTICE
IS
HEREBY GIVEN that the Special Meeting of Stockholders of GENERAL
ENVIRONMENTAL MANAGEMENT, INC
(the
“Company”), a Nevada corporation, will be held on January __, 2007 at 10:00
a.m., local time, at the office of the Company, 3191
Temple Avenue, Ste 250, Pomona, CA 91768 for
the
purposes stated on the reverse side of this proxy card.
The
signatory on the reverse side of this proxy card (the “Signatory”), revoking all
prior proxies, hereby appoints Timothy J. Koziol and Brett M. Clark, and each
of
them, as proxies and attorneys-in-fact, with full power of substitution, to
represent and vote on the matters set forth in this proxy any and all shares
of
the Common Stock of the Company held or owned by or standing in the name of
the
Signatory on the Company’s books that the Signatory would be entitled to vote at
the Special Meeting of Stockholders of the Company to be held on January __,
2007, at 10:00 a.m., local time, and any continuation or adjournment
thereof, with all powers the Signatory would possess if personally present
at
the meeting.
The
Signatory hereby directs and authorizes the above named Proxies and each of
them, or their substitute or substitutes, to vote as specified with respect
to
the proposals listed on the reverse side of this proxy card. The shares
represented by this proxy will be voted as specified, or, if no specification
is
made, in favor of each proposal. The Signatory hereby further confers upon
said
Proxies, and each of them, or their substitutes, discretionary authority to
vote
with respect to all other matters that may properly come before the meeting
or
any postponement, continuation or adjournment thereof.
The
Signatory hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders, Proxy Statement and Special Report.
17