· | You may send a written notice that you are revoking your proxy to our Secretary, Clyde Rhodes, at 3191 Temple Avenue, Ste 250,Suite #250, Pomona, CA 91768 and deliver such notice to us prior to the SpecialAnnual Meeting. |
· | You may attend the SpecialAnnual Meeting and vote in person. Simply attending the SpecialAnnual Meeting will not, by itself, revoke your proxy. |
When are stockholder proposals due for next year’s Annual Meeting?
Requirements for Stockholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials.
Stockholders may present proper proposals for inclusion in the Company’s proxy statement and for consideration at the Annual Meeting to be held in 2008 by submitting their proposals in writing to the Secretary of the Company in a timely manner as provided herein. In order to be included in the Company’s proxy materials for the 2008 Annual Meeting, stockholder proposals must be received by the Secretary of the Company no later than the Notice Deadline (as defined below), and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Requirements for Stockholder Proposals to be Brought Before an Annual Meeting.
Section 3.6 of our Bylaws establishes an advance notice procedure for stockholders who wish to present certain matters before an Annual Meeting of stockholders. The Bylaws provide that, to be properly brought before an Annual Meeting, nominations for the election of director or other business must be: (1) specified in the notice of meeting given by or at the direction of the board of directors, (2) properly brought before the meeting by or at the direction of the board of directors, or (3) properly brought before the meeting by a stockholder who has delivered written notice to the Secretary of the Company no later than the Notice Deadline, which notice must contain specified information concerning the matters to be brought before such meeting and concerning the stockholder proposing such matters.
The “Notice Deadline” is defined as that date which is 120 days prior to the one-year anniversary of the date on which the Company first mailed its proxy materials for the previous year’s Annual Meeting of stockholders. As a result, the Notice Deadline for the 2008 annual stockholder meeting is February 11, 2008. If a stockholder who has notified the Company of his or her intention to present a proposal at an Annual Meeting does not appear to present his or her proposal at such meeting, the Company need not present the proposal for vote at such meeting.
A copy of the full text of Section 3.6 of our Bylaws may be obtained without charge by stockholders by writing to the Secretary of the Company at the address below. All notices of proposals by stockholders, whether or not included in the Company’s proxy materials, should be sent to our Secretary, Clyde Rhodes, at 3191 Temple Avenue, Suite #250, Pomona, CA 91768.
Stockholders may also submit a recommendation (as opposed to a formal nomination) for a candidate for membership on our board of directors by following the procedures set forth in the section entitled “Director Candidates” in Proposal 1 below.
How are votes counted?
Votes will be counted by the inspector of election appointed for the SpecialAnnual 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?
| · | For Proposal 1--1, the granting toelection of directors, the Board of Directorsthree nominees receiving 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, amost “For” vote by a majority of the votes present(among votes properly cast in person or by proxy. “Withheld votes” and Broker non-votesproxy) will have no effect. |
· | 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.be elected. “Withheld votes” and Broker non-votes will have no effect. |
| · | For Proposal 3--2, the granting toratification of the Boardappointment of DirectorsWeinberg & Co. P.A. as GEM's independent certified public accountants for 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,fiscal year ending December 31, 2007, a “For” vote by a majority of the votes present in person or by proxy, voting as a separate class.will ratify the appointment. “Withheld votes” and Broker non-votes will have no effect. |
| · | For Proposal 3, the ratification of the Company’s 2007 Stock Option Plan, which provides for the issuance of options to purchase up to 5,500,000 shares of Common Stock, a “For” vote by a majority of the votes present in person or by proxy, will ratify the plan. “Withheld votes” and Broker non-votes will have no effect. |
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 SpecialAnnual Meeting is present in person or represented by proxy at the SpecialAnnual Meeting.
Your shares will be counted as present at the SpecialAnnual Meeting if you submit a valid proxy vote or vote at the SpecialAnnual 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 SpecialAnnual Meeting may adjourn the SpecialAnnual 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 SpecialAnnual Meeting?
Preliminary voting results will be announced at the SpecialAnnual Meeting. Final voting results will be published in the Company’s quarterly report on Form 10-Q for the quarter ending March 31,June 30, 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 ELECT THREE DIRECTORS TO SERVE FOR THE ENSUING YEAR AND UNTIL THEIR SUCCESSORS ARE ELECTED
GEM’s board of directors currently consists of three directors. Upon the recommendation of the nominating committee of the board of directors, which consists solely of independent directors, the board of directors has selected three nominees for director this year. Each director to be elected will hold office until the next Annual Meeting of stockholders and until his or her successor is elected, or until the director’s death, resignation or removal. Each nominee listed below is currently a director of the Company.
VOTE REQUIRED
Directors are elected by a plurality of the votes properly cast in person or by proxy. The nominees receiving the highest number of affirmative votes will be elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR 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.THREE NOMINEES LISTED BELOW.
NOMINEES
Unless otherwise instructed, the proxy holders will vote the proxies received by them for the nominees named below. The nominees have consented to be named nominees in the proxy statement and to continue to serve as directors if elected. If a nominee becomes unable or declines to serve as a director or if additional persons are nominated at the Annual Meeting, the proxy holders intend to vote all proxies received by them in such a manner as will assure the election of the nominees listed below if possible (or, if new nominees have been designated by the board of directors, in such a manner as to elect such nominees), and the specific nominees to be voted for will be determined by the proxy holders.
The BoardCompany is not aware of Directors has approved, subjectany reason that any of the nominees will be unable or will decline to shareholder approval, an amendmentserve as directors. There are no arrangements or understandings between any director or executive officer and any other person pursuant to which he is or was to be selected as a director or officer of the Company’s AmendedCompany.
The following is a brief biography of each nominee for director:
Name | Age | Position |
| Timothy J. Koziol | 53 | Chief Executive Officer, Board Chairman and Director |
| James P. Stapleton | 44 | Director |
| Clyde E. Rhodes, Jr. | 43 | Chief Compliance Officer, Board Secretary and Director |
Timothy J. Koziol. Mr. Koziol joined GEM in January 2002 and Restated Articlesnow serves as the Chairman and Chief Executive Officer of Incorporationthe Company. Mr. Koziol implemented accounting controls and systems to monitor the day-to-day financial position of GEM, changed operational policies to improve efficiencies, and implemented new sales and marketing programs to increase the numberrevenue. Prior to joining GEM, Mr. Koziol was a principal of authorized common shares from two hundred million (200,000,000)Fortress Funding, Inc., an asset based lending company, where he was responsible for business development and underwriting. Mr. Koziol was also a principal in Global Vantage, Ltd., an investment banking firm located in Newport Beach, CA. Prior to one billion (1,000,000,000). The Board of Directors has determined that this amendment is advisable andhis work in the best interestsfinancial services industry, Mr. Koziol managed a marketing consulting firm for national and regional clients. He has a Bachelor of Arts from Wheaton College in Speech Communications and a Masters of Arts (Magma Cum Laude) from 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.Wheaton Graduate School in Mass Communications.
ReasonsJames P. Stapleton is currently the Chief Financial Officer of BioNovo (OTC BB BNVI), a pharmaceutical company. Bionovo is a drug discovery and development company focusing on cancer and women’s health. He was hired as the CFO. at BioNovo in June 2005. From January 2003 to January 2005, Mr. Stapleton was the CFO for Auxilio, Inc. (NASDAQ OTC AUXO.OB). Prior to that, from 1996 through 2002, Mr. Stapleton was employed in a variety of positions for ProSoft Learning Corp. (NASDAQ OTC POSO.OB); including holding the Amendmentpositions as Corporate Secretary, Vice President - Investor Relations, Chief Financial Officer, and other positions. Moreover, Mr. Stapleton was Chief Financial Officer of BioTek Solutions, Inc. from 1995 through February 1996. Also, from 1987 to1995, Mr. Stapleton was the Chief Financial Officer for Advantage Life Products, Inc. Currently, Mr. Stapleton serves on GEM’s Board of Directors. He also served as GEM’s CFO from Nov. 2003 through April 2004. Mr. Stapleton graduated in 1995 from the University of California, Irvine (UCI) with an MBA; he also graduated in 1985 from the University of Washingon with a BA in Economics.
Currently, the Company is authorized to issue 200,000,000 common shares. Of the 200,000,000 common shares authorized,Clyde E. Rhodes, Jr. Mr. Rhodes serves as of November 30, 2006, there were 128,382,181 common shares issuedChief Compliance Officer, Secretary and outstanding and 14,515,150 common shares reserved for issuance upon the exercise of outstanding options, including, without limitation, the benefit plansa Director of the Company. Consequently,Mr. Rhodes joined GEM’s predecessor, HazPak Environmental Services, Inc. (“HES”), in 2000. Before joining HES, he was the Company has approximately 57,102,669 common shares availableHazardous Waste Program Manager for general corporate purposes.
In addition, the Company is authorized to issue 50 million sharesMetropolitan Water District of preferred stock, 3 million of whichSouthern California for more than nine years. Mr. Rhodes has been designated as “Series A Convertible Preferred” (“Series A”), 19 millionin the environmental industry for a total of which has been designated as “Series B Convertible Preferred” (“Series B”), 16 million which have been designated as Series C (“Series C”)more than 15 years developing environmental management programs, performing environmental audits and 12 millionassisting public and private entities in meeting the myriad 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,state and c) no Series C outstanding. Each share of Series Afederal environment control laws and regulations. Mr. Rhodes 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 alla founding member of the Convertible Notes into 95,065,546 sharesJoint Utilities Vendor Audit Consortium established by west coast utilities (Edison, LA Department of common stock at $.05 per share.
From September 1, 2006Water and Power, Southern California Gas, PG&E, Salt River Project, and the Arizona Public Service Utility) to November 30, 2006,audit hazardous waste facilities throughout the Company had raised $2,454,000 for working capital, throughcountry. Mr. Rhodes possesses a Bachelor of Science Degree in Chemical Engineering from Louisiana Tech University. Mr. Rhodes has the salecertificate of 2,454,000 sharesEngineer-In-Training and received registration as a Registered Environmental Assessor in the State 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 successfulCalifornia 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.1994.
INDEPENDENCE OF DIRECTORS
The BoardOur 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 Directorsdirectors has determined that James P. Stapleton, is an "independent" director for the Company shall issue to the investors un the Convertible Notes and the investors in the Series B, upon the filingpurposes of the Amendment to increase the authorized common stock, a number of shares or pre-reverse split shares of common stock, so that eachapplicable rules 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.SEC.
Also, other thanDIRECTOR CANDIDATES
Stockholder Nominations and Recommendations. Section 3.6 of our Bylaws, described above, sets forth the issuanceprocedure for the proper submission of commonstockholder nominations for membership on the board of directors. In addition, it is the policy of our nominating committee to consider properly submitted stockholder recommendations (as opposed to a formal nomination) for candidates for membership on our board of directors. A stockholder may make such a recommendation by submitting the following information: candidate’s name, home and business contact information, detailed biographical data, relevant qualifications, information regarding any relationships between the candidate and GEM within the last three years and evidence of ownership of GEM stock uponby the conversionrecommending stockholder. Information must be submitted to:
Clyde E. Rhodes, Jr., Board Secretary
3191 Temple Avenue, Suite #250
Pomona, CA 91768
Identifying and Evaluating Director Nominees. The nominating committee uses a variety of methods for identifying and evaluating candidates for nomination to the board of directors. Although candidates for nomination to the board of directors typically are suggested by existing directors or by our executive officers, candidates may come to the attention of the Series Bnominating committee through professional search firms, stockholders or other persons. The nominating committee evaluates candidates for nomination by reviewing the qualifications of the candidates, considering the performance of the board of directors as a whole and Series C, the directors eligible for re-election at the Annual Meeting of stockholders, and considering the current size, composition and needs of the board of directors and its committees. The nominating committee also takes into account other factors it considers appropriate, including issues of character, judgment, independence, age, expertise, diversity of experience, length of service, other commitments and potential conflicts of interest. Except as may be required by rules promulgated by the SEC, it is the current sense of the nominating committee that there are no specific, minimum qualifications that must be met by each nominee for the board of directors, nor are there specific qualities or skills that are necessary for one or more of the members of the board of directors to possess. Candidates properly recommended by stockholders are evaluated by the nominating committee using the same criteria as other candidates.
CODE OF ETHICS
GEM is committed to maintaining the highest standards of business conduct and ethics. Our Code of Business Conduct and Ethics (the “Code”) reflects the business practices and principles of behavior that support this commitment and covers our employees, officers and directors. The Code satisfies SEC rules for a “code of ethics” required by Section 406 of the Sarbanes-Oxley Act of 2002. The Code is available at GEM’s Corporate Website, and we will post any amendment to the Code, as well as any waivers that are required to be disclosed by the rules of the SEC, on GEM’s Corporate Website.
COMMUNICATIONS WITH THE BOARD
Stockholders may communicate with the non-management members of the board of directors by writing to:
Board of Directors has proposed
General Environmental Management, Inc.
3191 Temple Avenue Suite #250
Pomona, California 91768.
Pursuant to procedures adopted by the increase in authorized common shares to enableboard of directors, the chief financial officer of the Company asreviews all such correspondence and forwards copies of all correspondence, together with a meanssummary, to each non-management member of providing itthe board of directors. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Company’s audit committee and handled in accordance with procedures established by the additional flexibility to actaudit committee 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.such matters.
BOARD MEETINGS AND COMMITTEES
The Boardboard of Directors has no current specific plans to authorize the issuancedirectors of additional common shares, except as stated above, and in connection with possible future awards under employee benefit plans. However, the Company is considering,held a total of 2 meetings and will continueacted by written consent 15 times during the year ended December 31, 2006. No director serving during the year ended December 31, 2006 attended fewer than 75% of the aggregate of all meetings of the board of directors and the committees of the board of directors upon which such director served. Directors are encouraged, but not required, to consider, various financing alternatives, including potential capital market transactions. In connection withattend the Company’s overall financing initiatives, from time to time,Annual Meeting of stockholders.
The board of directors has three standing committees: the Board of Directors has consideredaudit committee, the compensation committee 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.nominating committee.
AbilityAudit Committee. GEM has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Board to Issues Shares; Certain Issuances Requiring Shareholder Approval
If the AmendmentExchange Act. The audit committee currently consists of one director, James Stapleton, who is approved“independent” as independence for audit committee members is defined by the stockholders, the additional common shares authorizedSEC Rules. Mr. Stapleton has been determined by the amendment may be issued from timeboard of directors to timemeet the qualifications of an “audit committee financial expert” in accordance with SEC rules, including that the person meets the relevant definition of an “independent director.” Stockholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Stapleton’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon authorization byMr. Stapleton any duties, obligations or liability that are greater than are generally imposed on him as a member of the Boardaudit committee and the board of Directors, without further approval bydirectors, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the shareholders unless required by applicable law, ruleduties, obligations or regulation. Shares may be issued for such considerationliability of any other member of the board of directors.
The audit committee oversees the Company’s financial reporting process and internal controls, as well as the Boardindependent audit of Directors may determinethe Company’s financial statements. The audit committee also selects an accounting firm to be engaged as the Company’s independent public accountants and as may be permitted by applicable law.provides oversight of legal, ethical and corporate governance matters. The audit committee held three (3) meetings during the year ended December 31, 2006. The report of the audit committee is presented later in this proxy statement.
VOTE REQUIREDDIRECTOR COMPENSATION
A “For” vote byOur directors did not receive any cash compensation for their services as directors during the year ended December 31, 2006. Our 2005 Stock Plan provides for grants of options to purchase common stock to our directors who are not employees. Our non-employee director was awarded 35,000 warrants for his services as a majoritydirector and as chairman 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.audit committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECCOMENDSRECOMMENDS A VOTE FOR“FOR” EACH OF 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 2NOMINEES LISTED ABOVE.
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.
· | 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
|
· | 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;
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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.PROPOSAL 2
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
In addition, all outstanding options, warrants, convertible preferred stock,Based on the recommendation of its Audit Committee, the Board has appointed the firm of Weinberg & Co. P.A. to be GEM’s independent certified public accountants for the year ending December 31, 2007, and other securities entitling their holdersrecommends to purchase sharesstockholders that they vote for ratification of our common stockthat appointment. Although not required to do so, the Board has determined that it would be desirable to request stockholders’ approval of this appointment. The ratification of the appointment of GEM’s independent certified public accountants will be adjusted, as requiredrequire the affirmative vote 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.outstanding Stock present in person or represented by proxy at the Meeting. If such approval is not received, the Board will reconsider the appointment.
If our stockholders approve someIn 2006 and 2005 Weinberg & Co. P.A. services included an examination of GEM’s consolidated financial statements, the financial statements of certain benefit plans, and reviews of the consolidated financial statements included in GEM Form 10-Qs filed with the SEC for each of the quarters ended March 31, June 30, and September 30.
Weinberg & Co. P.A. billed GEM for professional services rendered for the years ended December 31, 2006, and December 31, 2005, as follows:
| | | | Fiscal Year | | | Fiscal Year | |
Fees for Services Rendered | | | 2006 | | | 2005 | |
| Audit fees (1) | | $ | 175,858 | | $ | 135,304 | |
| Audit-related fees (2) | | $ | 44,824 | | $ | 111,508 | |
| Tax fees (3) | | $ | - | | $ | - | |
| All other fees | | $ | - | | $ | - | |
| Total | | $ | 220,682 | | $ | 246,812 | |
(1) Includes fees and expenses related to the fiscal year audit and to interim reviews and related accounting consultation.
(2) Includes fees and expenses for audits of the employee benefit plan and, in 2004, consultation regarding internal control reporting.
(3) Includes fees and expenses for tax advisory service.
The Audit Committee approves in advance all audit and non-audit services provided by the independent auditors prior to their engagement with respect to such services. The Audit Committee has delegated to the Chairman of the Audit Committee the authority to pre-approve additional audit-related and non-audit services not prohibited by law to be performed by GEM’s independent auditors and associated fees up to a maximum for any one non-audit service equal to the lesser of $20,000 or 20% of the audit fees for GEM’s most recent completed fiscal year, provided that the Chair shall report any decisions to pre-approve such audit-related or non-audit services and fees to the full Audit Committee at its next regular meeting. The Audit Committee approved in advance 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,audit 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 payablenon-audit services provided by the Company after the effective date until they surrender their old stock certificates for exchange. All options, warrants, convertible preferred stockindependent auditors in fiscal 2006 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 2.2005.
THE BOARD OF DIRECTORS UNANIMOUSLY RECCOMENDS ARECOMMENDS THAT STOCKHOLDERS VOTE FOR“FOR” THE PROPOSAL TO GRANTRATIFY THE BOARDAPPOINTMENT OF DIRECTORSWEINBERG & CO. P.A.TO SERVE AS GEM’S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 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.FISCAL YEAR ENDING DECEMBER 31, 2007.
PROPOSAL 3
TO GRANTADOPT THE BOARD OF DIRECTORSCOMPANY’S 2007 STOCK OPTION PLAN, WHICH PROVIDES FOR 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.ISSUANCE OF OPTIONS TO PURCHASE UP TO 5,500,000 SHARES OF COMMON STOCK
The Board of Directors has proposedapproved the increase in authorized preffered shares to enable the Company as a means of providing it with the additional flexibility to act with respect to2007 General Environmental Management, Inc. Stock Incentive Plan (the "2007 STOCK INCENTIVE PLAN"), an incentive and non-qualified stock option plan which authorizes the issuance of preferredup to 5,500,000 shares of our common stock. The 2007 Stock Incentive Plan was approved by the Board of Directors subject to stockholder approval. If the 2007 Stock Incentive Plan is approved, the shares of common stock being authorized will be used to grant Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Shares or securitiesPerformance Awards to our employees, directors, officers and consultants and Incentive and non-qualified stock options to our employees.
With respect to Incentive Stock Options, the 2007 Stock Incentive Plan provides that the exercise price of each such option must be at least equal to 100% of the fair market value of our common stock on the date of grant (110% in the case of stockholders who, at the time the option is granted, own more than 10% of the outstanding common stock), and requires that all such options have an expiration date not later than ten years from the date of the grant (or the fifth anniversary of the date of grant, in the case of 10% stockholders). Pursuant to the provisions of the 2007 Stock Incentive Plan, the aggregate fair market value, determined as of the date(s) of grant, for which incentive stock options are first exercisable for, or convertible into,by an option holder during any one calendar year cannot exceed $100,000.
With respect to non-qualified stock options, the 2007 Stock Incentive Plan requires that the exercise price of all such options be at least equal to 100% of the fair market value of our common shares in circumstances which itstock on the date such option is granted and requires that all such options have an expiration date not later than ten years from the date of the grant of the option.
The Board of Directors believes will advance the interests ofthat the Company and its stockholders withouthave benefited from the delaygrant of seekingstock options in the past and that similar benefits will result from the adoption of the 2007 Stock Incentive Plan. It is believed that stock options play an amendmentimportant role in providing eligible employees with an incentive and inducement to contribute fully to our Company's growth and development because of the Amended Articles of Incorporation at that time.opportunity to acquire a proprietary interest in the Company on an attractive basis.
During the term of the 2007 Stock Incentive Plan, our eligible employees will receive, for no consideration prior to exercise, the opportunity to profit from any rise in the market value of our common stock. This will dilute the equity interest of our other stockholders. The grant and exercise of the options also may affect our ability to obtain additional capital during the term of any options.
The 2007 Stock Incentive Plan will be administered by the Board of Directors, or by any Stock Option Committee or Compensation Committee that may be established by the Board of Directors.
The description of the proposed 2007 Stock Incentive Plan set forth above is a summary of various provisions of the 2007 Stock Incentive Plan and is not a complete description of the plan. The Plan is attached to this proxy statement as Appendix A.
VOTE REQUIREDFederal Income Tax Consequences
The affirmative votefollowing is a summary of the federal income tax treatment of the stock options which may be granted under the 2007 Stock Incentive Plan based upon the current provisions of the Internal Revenue Code. This summary does not purport to be a complete and detailed description of all possible tax consequences to the recipient of a majoritystock option. It describes the federal tax consequences in effect as of all outstandingthe date of this Proxy Statement. Each holder of a stock option is advised to consult his or her tax advisor because tax consequences may vary depending on the individual circumstances of the holder.
An option holder who exercises a non-qualified stock option will recognize taxable compensation at the date of exercise with respect to the difference between the fair market value of the option shares of common stockat exercise and the exercise price paid to purchase such shares. The Company is entitled to votea corresponding deduction for such compensation. At such time as the option stock is sold, the option holder will recognize either short-term or long-term capital gain income (depending upon the length of time such stock has been held) with respect to the excess of the stock sale price over the exercise price paid to purchase such shares.
An option holder who exercises an incentive stock option will not realize any regular taxable income. At the date of exercise, the option holder may, depending on his or her personal tax situation, be subject to Alternative Minimum tax ("AMT") because the difference between the fair market value of the shares at exercise and the meeting, as wellexercise price represents an AMT preference item.
The tax consequences of a disposition of an incentive stock option depend upon the length of time the stock has been held by the employee. If the employee holds the option stock for at least two years after the option is granted and one year after the exercise of the option, any gain realized on the sale is long-term capital gain. In order to receive long-term capital gain treatment, the employee must remain in our employ from the time the option is granted until three months before its exercise (twelve months in the event of termination due to disability of the employee). We will not be entitled to a deduction in this instance.
If the incentive option stock is not held for the requisite holding period described above, a "disqualifying disposition" will occur. A disqualifying disposition results in the employee recognizing ordinary compensation income to the extent of the lesser of: (1) the fair market value of the option stock on the date of exercise less the exercise price (the "spread") or (2) the amount realized on disposition of the option stock less the exercise price. If the amount realized on the disposition is greater than the fair market value of the stock on the date the stock option was exercised, such excess will be treated as a majority of all outstanding shares of Series B Convertible Preferred Stock and Series C Convertible Preferred Stock,capital gain, which will be a long-term capital gain if the stock was held for the appropriate holding period (currently more than one year). We will be entitled to votea deduction at this time for such ordinary compensation income. The option holder's basis in such shares will be the meeting, voting as a separate classe, is required to approve Proposal 3.fair market value on the date of exercise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS ATHAT STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE COMPANY’S 2007 STOCK OPTION PLAN, WHICH PROVIDES FOR THE PROPSALISSUANCE OF OPTIONS TO GRANT THE BOARDPURCHASE UP TO 5,500,000 SHARES OF DIRECTORS THE AUTHORITY TO AMEND THE CERTIFICATECOMMON STOCK
The Board is not aware of any matters not set forth herein that may come before the Meeting. If, however, further business properly comes before the Meeting, the persons named in the proxies will vote the shares represented thereby in accordance with their judgment.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF INCORPORATION TO INCREASE THE NUMBERAUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF AUTHORIZED PREFERRED STOCK, $.001 PAR VALUE, FROM 50,000,000 TO 100,000,000.INDEPENDENT AUDITORS
The audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Each new engagement of Weinberg & Co. P.A. was approved in advance by the audit committee, and none of those engagements made use of the de minimus exception to pre-approval contained in the SEC’s rules.
AUDIT COMMITTEE REPORT
The Audit Committee (the "Committee") is composed of James P. Stapleton, who is considered an "independent" director for the purposes of the applicable rules of the SEC. The Board and the Committee believe that the Committee members are and were at the time of the actions described in this report "independent" directors, as independence is defined by SEC Rule 401(e).
The Committee has reviewed and discussed with management GEM's audited consolidated financial statements as of and for the year ended December 31, 2006, and has discussed with GEM's independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants.
The Committee has received and reviewed the written disclosures and the letter from the independent auditors required by Independence Standard No. 1, Independence Discussions with Audit Committees, as amended, issued by the Independence Standards Board, and has discussed with the auditors the auditors' independence and considered whether the provision of non-audit services by the auditors is compatible with maintaining their independence.
Based on the foregoing reviews and discussions, the Committee recommended to the Board that the above referenced consolidated financial statements be included in GEM's Annual Report on Form 10-KSB for the year ended December 31, 2006, for filing with the SEC.
Respectfully Submitted
James P. Stapleton
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of November 30, 2006,April 16, 2007, 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 and each nominee for director to the Company, (iii) each of the executive officers named in the Summary Compensation Table appearing herein, and (iv) all current executive officers and directors of the Company as a group. Unless otherwise indicated, all personpersons named below can be reached at General Environmental Management, Inc. 3191 Temple Avenue, Ste 250,Suite #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% |
Name | No. of Shares owned (1) | % of Stock Outstanding (2) |
General Pacific Partners LLC (3) 660 Newport Center Drive, Suite 720 Newport Beach, CA 92660 | 2,862,272 (4) | 24.73% |
Revete Capital Partners, LLC (3) 660 Newport Center Drive, Suite 720 Newport Beach, CA 92660 | 400,000 (5) | 4.10% |
Billington Brown Acceptance, LLC (3) 660 Newport Center Drive, Suite 720 Newport Beach, CA 92660 | 46,442 (6) | 0.48% |
| Timothy J. Koziol | 858,469 (7) | 8.79% |
| Clyde Rhodes | 100,836 (8) | 1.03% |
| James Stapleton | 44,392 (9) | 0.45% |
| Brett M. Clark | 655,000 (10) | 6.71% |
| Directors and Officers as a Group | 1,686,730 | 16.98% |
| (1) | The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the Selling Stockholder has sole or shared voting power or investment power and also any shares which the Selling Stockholder has the right to acquire within 60 days. |
| (2) | Based upon 128,382,1819,767,147 shares outstanding. |
(2) | (3) | Kevin P. O’Connell is the managing member of General Pacific Partners LLC, Billington Brown Acceptance LLC and Revete Capital Partners LLC. |
| (4) | Includes 190,000warrants to purchase 1,051,686 common shares at an exercise price of $0.60 and warrants to purchase 19,059 common shares at an exercise price of $30. |
| (5) | Includes warrants to purchase 400,000 common shares at an exercise price of $1.19. |
| (6) | Includes warrants to purchase 2,688 common shares at an exercise price of $37.50. |
| (7) | Includes 187,500 options to purchase common stock at $1.00$1.19 per share, 6,667 options to purchase common stock at $30 per share, warrants to purchase 650,000 common shares at an exercise price of $1.19 and warrants to purchase 967 common shares at an exercise price of $30. |
| (8) | Includes 87,500 options to purchase common stock at $1.19 per share. |
| (9) | Includes warrants to purchase 35,000 common shares at and exercise price of $1.19 per share. |
| (10) | Includes 150,000 options to purchase common stock at $1.19 per share, 5,000 options to purchase common stock at $39 per share and warrants to purchase 500,000 shares of common stock at $1.19 per share. |
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation earned by or paid to our Chief Executive Officer and the other most highly compensated executive officers whose total salary and bonuses exceeded $100,000 for services rendered in all capacities during the fiscal year ended December 31, 2006. We refer to these individuals as our named executive officers.
The total compensation for the three fiscal years ended December 31, 2006 of Timothy J. Koziol, our Chief Executive Officer, Brett M. Clark, our Chief Financial Officer, and Clyde E. Rhodes, Jr., our Secretary is set forth below in the following Summary Compensation Table.
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) | Other Annual Compensation ($) (2) | All Other Compensation ($) |
| | | | | | |
Timothy J. Koziol | 2006 | 203,075 | 25,000 | -0- | -0- |
| | 2005 | 204,194 | 10,000 | -0- | -0- |
| | 2004 | 186,401 | -0- | -0- | -0- |
| | | | | | |
Brett M. Clark | 2006 | 147,950 | -0- | -0- | -0- |
| | 2005 | 81,710 | 10,000 | 71,920 | -0- |
| | 2004 | -0- | -0- | -0- | -0- |
| | | | | | |
Clyde E. Rhodes, Jr. | 2006 | 110,973 | -0- | -0- | -0- |
| | 2005 | 103,393 | 10,000 | -0- | -0- |
| | 2004 | 85,361 | -0- | -0- | -0- |
| (1) | The compensation described in this table does not include medical, group life insurance or other benefits received by the named executive officers that are available generally to all of our salaried employees, and may not include certain perquisites and other personal benefits received by the named executive officers that do not exceed the lesser of $50,000 or ten percent (10%) of any such officer's salary and bonus disclosed in the table. |
| (2) | Mr. Clark performed services for the Company during the first part of the year as an outside consultant. |
Option Grants in Last Fiscal Year
Prior to acquisition by the Company, General Environmental Management, Inc. of Delaware’s Board of Directors approved and implemented the 2005 Stock Option Plan (the plan). The plan authorized option grants to employees and other persons closely associated with the Company for the purchase of up to 88,117 shares. The Board of Directors of the Company granted a total of 66,284 options to 86 employees and to two consultants. The exercise price for the options ranged between $30.00 and $48.00, the market value of the stock at the date of the grant.
On April 1, 2006 the Company granted 3,334 options to employees. The exercise price for these options is $25.80, the market value of the stock at the date of the grant.
On July 1, 2006 the Company granted 9,253 options to employees. The exercise price for these options is $6.60, the market value of the stock at the date of the grant.
Aggregate Option Exercises in Last Fiscal Year And Fiscal Year End Option Values
There were no option exercises by our executive officers during fiscal 2006.
YEAR-END OPTION VALUES
The following table provides information for the executive officers named in the Summary Compensation Table above concerning stock options exercised during the year ended December 31, 2006, as well as the number and value of securities underlying exercisable and unexercisable options held as of December 31, 2006.
| | Number of Securities Underlying Unexercised Options at December 31, 2006(#) | | Value of Unexercised In-the-Money Options at December 31, 2006 ($) |
| | Exercisable | | Unexercisable | | Exercisable | | Unexercisable |
| Timothy J Koziol | 6,334 | | 333 | | - | | - |
| Brett M. Clark | 3,000 | | 3,667 | | - | | - |
| Clyde E. Rhodes, Jr. | - | | - | | - | | - |
The values shown for in-the-money options represent the difference between the respective exercise price of outstanding stock options, and $2.43, which is the fair market value of our common stock as of December 31, 2006.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the year ended December 31, 2006, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with. All such Forms 4 have since been filed with the Securities and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the years ended December 31, 2006 and 2005 the Company incurred $525,000 and $611,126 respectively in fees for advisory services provided by General Pacific Partners (“GPP”), a company that owns approximately 13 % of the outstanding stock of GEM at December 31, 2006 and is operated by a prior member of the Board of Directors of the Company’s wholly owned subsidiary, General Environmental Management, Inc. of Delaware. During the year ended December 31, 2006, as a part of this advisory agreement, the Company also issued 333,334 warrants, valued at $773,761, to purchase common stock at $1.20 per share. The company used the black scholes valuation model to determine the value of the warrants. For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 3.68%, expected volatility of 93.49% and an expected term for the warrants of 6 years. The Company allocated the fees and warrant values to specific tasks outlined in the advisory agreement. This included $513,165 related to a proposed acquisition
(Note 14), $319,730 related to the issuance of convertible notes and $465,871 related to general corporate matters.
As of December 31, 2006 the Company owed General Pacific Partners $270,000 for fees related to advisory services. These amounts due are unsecured, non- interest bearing and due on demand.
During the year ended December 31, 2006, General Pacific Partners made unsecured advances to the Company totaling $850,000. The proceeds were used for due diligence on a proposed capital raise and working capital until proceeds from the capital raise were received. The rate of interest on the advance is 10% per annum. The funds are due December 31, 2007. As of December 31, 2006, $300,000 of the advance had been repaid, and $550,000 remained outstanding.
During the year ended December 31, 2006, the Company converted $110,000 of amounts due to GPP for services in exchange for the issuance of 3,667 shares of the Company’s common stock. The shares issued were valued at the market price at the date of issuance, which resulted in a reduction in cost of $53,900 upon conversion that has been offset to operating expenses in the accompanying statement of operations.
On December 31, 2006 General Pacific Partners agreed to convert $851,558 in promissory notes and accrued interest into 709,632 shares of common stock in connection with this conversion. The Company issued 212,890 warrants to purchase common stock at $0.60 with an expiration date of December 31, 2008. As an inducement to convert these warrants were valued at $210,760 using the Black Scholes valuation model. For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 3.68 %, expected volatility of 161.56 % and an expected term for the warrants of 2 years.
INDEMNIFICATION AGREEMENTS
Our bylaws provide that we shall indemnify our directors and officers and may indemnify our employees and other agents to the fullest extent permitted by Nevada law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the Nevada Revised Statutes expressly permits indemnification.
We believe that these provisions are necessary to attract and retain qualified persons as directors and executive officers. It is the position of the Securities and Exchange Commission that indemnification for liabilities arising under federal or state securities laws is against public policy and not enforceable.
In March, 2007, a former employee of the company, Francis Passarelli, instituted an action against the Company, its CEO, a former director and 25 “John Does” to set aside a settlement agreement between the former employee and the Company, on the grounds of concealment and fraud. The action seeks damages of approximately $1 million. The Company and its CEO have vigorously denied any liability to the former employee and believes the action is completely without merit. In the event of an adverse result against the CEO or former director, the Company would indemnify them for any losses they may suffer.
At present, there is no other pending litigation or proceeding involving any of our directors or officers in which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification. The Company is self-insured for these and similar claims
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are GEM stockholders will be “householding” our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker or direct your written request to:
Brett Clark, Executive Vice President - Chief Financial Officer
General Environmental Management, Inc.
3191 Temple Avenue, Suite #250
Pomona, CA 91768
or call (909) 444-9500 to request an additional copy. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.
OTHER MATTERS
The Company knows of no other matters to be submitted to the SpecialAnnual 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.
A copy of the Company’s Annual Report to the Securities and Exchange Commission on Form 10-KSB for the year ended December 31, 2006 is enclosed with this Proxy Statement.
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. The SEC allows the Corporation to “incorporate by reference” information into this Proxy Statement, which means that we can disclose important information by referring you to another document filed separately with the SEC. A copy of such report is enclosed with this Proxy Statement. All documents filed by the Corporation pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the annual meeting shall also be deemed to be incorporated by reference into this Proxy Statement.
You should rely only on the information contained in this Proxy Statement or other documents to which we refer to vote at the SpecialAnnual 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 SpecialAnnual 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 __, 2006May 31, 2007
The signatory on the reverse side of this proxy card (the “Signatory”), revoking all prior proxies, hereby appoints Timothy J.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 SpecialAnnual Meeting of Stockholders of the Company to be held on January __,July 2, 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.