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:
June 4,
2009
General
Environmental Management, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Nevada
(State of
Other Jurisdiction of Incorporation)
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33-55254-38
(Commission
File Number)
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87-0485313
(IRS
Employer Identification No.)
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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 (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c)
Item
1.01 Entry into a Material Definitive Agreement
On
September 4, 2008 General Environmental Management, Inc. (the “Company”) entered
into a series of agreements with CVC California, LLC, a Delaware limited
liability company (“CVC”), including a Revolving Credit and Term Loan Agreement
(the "Agreement"), a Convertible Term Note (the "Note"), Warrants to purchase
shares of the Company's common stock and a Registration Rights Agreement. (See
Report on Form 8-K dated September 24, 2008)
Section
6.18 of the Agreement requires that EBITDA of the Company not be less than (a)
$1,000,000 for the fiscal quarter ending September 30, 2008, (b) $2,000,000 for
the two (2) consecutive fiscal quarters ending December 31, 2008, (c) $3,000,000
for the three (3) consecutive fiscal quarters ending March 31, 2009, or (d)
$4,000,000 in any four (4) consecutive fiscal quarters ending on or after June
30, 2009; provided, however, that it shall not be an Event of Default if actual
EBITDA in any measuring period is within 10% of the required minimum EBITDA for
such measuring period as set forth in this Section 6.18, so long as actual
EBITDA for the next succeeding measuring period hereunder is equal to or greater
than the required EBITDA for such.
For the
fiscal quarter ending September 30, 2008, the Company had EBITDA that was within
10% of the required minimum EBITDA for such measuring period but was not able to
achieve the EBITDA required in the next succeeding measuring
period.
The Company
has had discussions with CVC to obtain a waiver of the Default and continued to
operate in the normal course of business and receive advances under the
Revolving Credit Commitment facility.
On June
1, 2009, the Company and CVC entered into an Amendment to the Agreement which
provides:
1. That
Sections 6.18 and Sections 6.19 be amended to read as follows:
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Section
6.18. EBITDA. Permit EBITDA to be less than (a)
$670,000 for the fiscal quarter ending September 30, 2009, (b) $660,000
for the fiscal quarter ending December 31, 2009, or (c) in any succeeding
fiscal quarter, an amount which is more than $10,000 less than the
required minimum EBITDA in the immediately preceding fiscal quarter (i.e.,
$650,000 for the fiscal quarter ending March 31, 2010, $640,000 for the
fiscal quarter ending June 30, 2010, etc.). 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 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.
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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 September 30,
2009.
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2. That a
new Section 6.20 be added as follows:
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Section
6.20. GPP Payments. (Shall not) Make any payments of
any kind (whether in cash, in kind or otherwise) to or on behalf of GPP
(General Pacific Partners, LLC) 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 (the “P-1
Lease”).
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3. That
the Convertible Term Note be amended as follows:
(a) The
monthly principal payment that was due under the Term Note on May 1, 2009, and
the monthly principal payment becoming due under the Term Note on June 1, 2009,
shall instead be due and payable on August 31, 2011 (which payments shall be in
addition to the payments otherwise scheduled to be due and payable on such date
in accordance with the Term Note).
(b) The
Conversion Price (as such term is defined in the Term Note) currently in effect
under the Term Note is hereby reduced to $.75 per share of Common Stock, subject
to further adjustment from time to time in accordance herewith and in accordance
with the Term Note. In addition to any and all other adjustments, the
Conversion Price shall be adjusted, effective December 1, 2009, to be an amount
equal to the weighted average Trading Price (as such term is defined in the Term
Note) of the Common Stock during the period from May 1, 2009 through November
30, 2009 (the “Measuring Period”),
but in no event less than $.60 per share of Common Stock; provided, however, that if, at
any time and from time to time during such Measuring Period, there shall occur
any stock split, stock dividend, combination of shares, recapitalization or
other such event relating to the Common Stock, then appropriate adjustment shall
be made to the Trading Prices used in such calculation, and the minimum $.60
Conversion Price, to fairly reflect the effects of each such stock split, stock
dividend, combination of shares, recapitalization or other such
event. The Borrower shall, as promptly as practicable after November
30, 2009, provide to the Lender a detailed written calculation of the adjusted
Conversion Price in accordance with this paragraph
(c) In
the event that the Borrower shall hereafter receive, at any time and from time
to time, any Excess Cash Proceeds (as such term is defined in the modified
Section 6.18 of the Loan Agreement as set forth above), the Borrower shall be
required to make a prepayment of principal under the Term Note (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 such Excess Cash Proceeds. If such Excess
Cash Proceeds are received during the sixty (60) day period following the close
of a fiscal quarter in which there was an EBITDA shortfall under Section 6.18 of
the Loan Agreement, such prepayment shall be due and payable within one (1)
Business Day after the receipt of such Excess Cash Proceeds, and otherwise shall
be due and payable on the first (1st)
Business Day after the conclusion of the fiscal quarter in which such Excess
Cash Proceeds are received.
4. That
the Warrants be amended or cancelled, as the case may be, as
follows:
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(a) Warrant
No. CV-2 issued by the Borrower to the Lender pursuant to the Loan
Agreement is hereby amended so as to change the current Exercise Price
thereunder to $.70 per share of Common Stock, subject to further
adjustment hereafter from time to time in accordance with such
Warrant.
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(b) Warrant
No. CV-3 issued by the Borrower to the Lender pursuant to the Loan Agreement is
hereby cancelled, and shall be destroyed by the Lender promptly following the
effectiveness of this Amendment No. 1.
(c) In
the event that, at any time from and after the date of this Amendment No. 1,
there shall occur any Event of Default under Section 7.01(b) of the Loan
Agreement, then the exercise price applicable under each of the remaining
outstanding Warrants shall thereupon automatically (and without requirement of
any further writing) be reduced to $.01 per share of Common Stock (provided
that, if the Exercise Price under any such Warrant is then already less than
$.01 per share, then there shall be no increase in such Exercise Price by reason
of this paragraph 4(c)).
5. That
the Registration Rights Agreement be amended as follows:
(a)
Sections 2(a) and 2(b) of the Registration Rights Agreement are hereby amended
so as to require the filing of the required Registration Statement (as such term
is defined in the Registration Rights Agreement), or, if applicable, the initial
Registration Statement, by not later than July 31, 2010, and to require such
Registration Statement (or, if applicable, the initial Registration Statement)
to be declared effective by the SEC by not later than October 31,
2009. Any additional Registration Statement required under the
circumstances described in the proviso to Section
2(a) of the Registration Rights Agreement shall be required to be filed as soon
after the required filing of the initial Registration Statement as is permitted
by the SEC, and the Company shall cause each such additional Registration
Statement to be declared effective as promptly as possible after the required
filing thereof. Such registration(s) shall include, in addition to
the shares described in the Registration Rights Agreement, the shares of Common
Stock being issued to the Lender pursuant to paragraph 7(a) below.
(b)
Anything contained in the Registration Rights Agreement to the contrary
notwithstanding, the Lender hereby consents to the inclusion, in each
registration statement filed under the Registration Rights Agreement, of the
shares received by GPP pursuant to the debt conversion contemplated by paragraph
8(c) below, subject to proportionate cutback (based on the relative number of
shares requested to be registered by the Lender and GPP) in the event that less
than all of the Lender’s shares and GPP’s shares can be included in any such
registration statement. The Lender hereby confirms that GPP is an
intended third party beneficiary of this paragraph 5(b).
6. That
CVC waived the Events of Default consisting of the non-payment by the
Company of the principal installments due under the Term Note on May 1, 2009 and
June 1, 2009, and further waived the Events of Default consisting of
the failure of the Company to comply with Section 6.18 of the Loan Agreement for
the periods ended December 31, 2008 and March 31, 2009, and waived all rights to
collect the increased interest chargeable under the Notes by reason of the
foregoing Events of Default.
7. That
the Company pay a fee in consideration of the waivers and amendments, the
Company shall (a) within five (5) Business Days issue to and in the name of the
Lender, or its securities intermediary, by such means as is directed by the
Lender, at a price of $.01 per share (which shall be paid by crediting such
amount to the outstanding Advances) but having an agreed value of $.74 per
share, 600,000 shares of Common Stock, and (b) issue to the Lender the Company's
promissory note in the principal amount of $164,000, bearing interest at the
rate of 7% per annum (which interest shall be payable monthly in arrears on the
first day of each calendar month commencing June 1, 2009) and maturing in full
on August 31, 2011.
Item
3.02 Unregistered Sales of Equity Securities
On June
1, 2009, the Company issued 600,000 shares of its common stock having an agreed
value of $.74 per share pursuant to an Amendment to certain agreements between
the Company and its Senior Lender CVC (see Item 1.01 above)
On June
1, 2009 the Company issued a total of 274,593 shares of its common stock to
General Pacific Partners, LLC, ("GPP") in consideration of a conversion of
certain of the Company's indebtedness to
GPP of
$164,756 ($.60 per share).
Item
9.01 Financial Statements and Exhibits.
(d) Exhibits
The
following exhibits are filed with this Current Report on Form 8-K:
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Exhibit
Number
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Description
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10.29
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Amendment
to Revolving Credit and Term Loan Agreement dated as at June 1, 2009
between General Environmental Management, Inc. and CVC California
LLC.
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| 10.30 |
Fee
Note dated as at June 1, 2009 between General Environmental Management,
Inc. and CVC California LLC.
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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.
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General
Environmental Management, Inc
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Date:
June 4, 2009
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By:
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/s/
Timothy Koziol
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Timothy
Koziol
Chief
Executive Officer
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