LOAN EXTENSION AND MODIFICATION AGREEMENT

 

This LOAN EXTENSION AND MODIFICATION AGREEMENT (this "Agreement") is dated as of February 14, 2011, by and among (i) Genesis Group Holdings, Inc., a Delaware corporation, trading on the OTC Bulletin Board under the symbol "GGHO" (the "Parent"), Digital Comm, Inc., a Florida corporation and the Parent's wholly-owned and sole subsidiary (the "Borrower"), and (ii) UTA Capital LLC, a Delaware limited liability company (the "Purchaser").

 

Terms not otherwise defined herein shall have the meaning ascribed to such terms in any of the following agreements, as applicable: (i) the Note and Warrant Purchase Agreement, among the Parent, the Borrower and the Purchaser, dated as of August 6, 2010 (the "Purchase Agreement"); (ii) the form of Senior Secured Bridge Note, attached hereto as Exhibit A, which form was executed by the Borrower on even date with the Purchase Agreement, and payable to the order of the Purchaser in the stated Principal Amount, as defined therein (the "Original Note"); or (iii) the form of the Common Stock Purchase Warrant, attached hereto as Exhibit B, which form was executed by Parent on even date with the Purchase Agreement, entitling the Purchaser to purchase Warrant Shares at Exercise Price as defined therein and subject to terms and conditions specified therein (the "Original Warrant").

 

 

WHEREAS, pursuant to the Purchase Agreement the Borrower obtained a loan from the Purchaser in the aggregate principal amount of $1,000,000, which principal balance has been reduced to $775,000 (the "Loan");

 

WHEREAS, the Loan is evidenced by the Purchase Agreement and the Original Note;

 

WHEREAS, the obligations of Parent and Borrower under the Purchase Agreement are secured by: (i) the pledges of all of the shares of capital stock of the Borrower held by the Parent, representing 100% of the outstanding shares of capital stock of the Borrower; (ii) a first priority perfected security interest in and lien on any and all accounts receivable, contracts, chattel paper, equipment and all other assets of the Parent, and (iii) a first priority perfected security interest in and lien on any and all accounts receivable, contracts, chattel paper, equipment and all other assets of the Borrower, including a first priority perfected security interest in and lien on all of the accounts receivable, contracts and chattel paper of the Borrower, and proceeds thereof, including (x) the funds and other assets held in the AR Proceeds Security Account under the Lockbox Account Agreement, and (y) the remaining proceeds of the initial loan initially deposited and held in a segregated cash collateral account. The foregoing pledges and guarantees described in this recital, together with the Purchase Agreement, the Original Note and the Original Warrant, hereinafter referred to as the "Loan Documents"), and all of the foregoing pledges and guarantees are intended to and shall remain on full force and effect;

 

WHEREAS, certain conditions precedent set forth under Section 8 of the Purchase Agreement and certain covenants set forth under Sections 6 and 7 therein have not been satisfied and performed by the Parent and the Company, and therefore, pursuant to the Purchase Agreement the Purchaser has not paid for, and the Borrower has not issued to the benefit of the Purchaser, a second Note in the principal amount of $1,000,000.00.

 

 

WHEREAS, pursuant to the Original Note: (i) the Maturity Date is August 6, 2011(the "Original Maturity Date"), and (ii) on the Original Maturity Date, unless such date shall be otherwise extended in writing by the Purchaser in its sole discretion, all outstanding principal and any accrued and unpaid interest due and owing under the Original Note shall be immediately paid by Borrower.

 

WHEREAS, the Parent and the Borrower seek the Purchaser's consent to modify and extend the Original Maturity Date of the Original Note to September 30, 2011 (the "Amended Maturity Date"), and the Purchaser, upon and subject to all covenants, terms and conditions provided herein and in the Amended and Restated Note (each as defined below), and on the basis of the facts and statements contained in the foregoing recitals, is willing to consent to the Amended Maturity Date; and

 

WHEREAS, in addition to the Amended Maturity Date, the Parent and the Borrower seek the Purchaser's consent to modify other terms and conditions of the Original Note as more fully set forth herein, and the Purchaser, upon and subject to all covenants, terms and conditions provided herein and in the Amended and Restated Note, and on the basis of the facts and statements contained in the foregoing recitals, is willing to consent to such modifications as set forth herein;

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser, the Parent and the Borrower agree as follows:

 

1.         Extension. All references to the Original Maturity Date in the Loan Documents are hereby changed to refer to the Amended Maturity Date.

 

2.         Interest Rate; Principal Amortization.

 

a.	The Interest Rate for the remainder of the term of the Loan shall be 10% per annum on the outstanding principal balance.

 

b.	For the period commencing on January 1, 2011 through March 31, 2011, the Loan shall bear only interest at the Interest Rate, as defined in the Original Note.

 

c.

For the period commencing on April 1, 2011 through September 30, 2011, the Loan shall bear interest at the Interest Rate, and the Borrower shall additionally repay to the Purchaser $375,000 in five equal monthly principal payments of $75,000 each, payable at the end of each of the first five full calendar months within such period.

 

d.	Any remaining principal balance of the Loan shall be due and payable on the Amended Maturity Date.

 

 

 

 

3.     Proceeds of Future Equity Financing.

 

a.

If either the Borrower or the Parent obtains any equity financing, (x) 30% of the cumulative net proceeds of any such financing or financings (reduced only by direct transactional expenses) in excess of $500,000, and (y) 100% of any cumulative net proceeds of any such financing or financings in excess of $1,500,000 shall be applied toward repayment of the remaining principal amount of the Loan.

 

b.	The Parent and Borrower shall continue to be obligated to apply 100% of any debt financing to repay the remaining principal amount of the Loan.

 

4.     Issuance of Additional Parent Common Stock.

 

a.

Upon execution of this Agreement, the Parent shall issue to the Purchaser, as additional consideration for Purchaser's agreements herein, a number of shares of the Parent's Common Stock, initially in the amount of 1,282,084 shares, representing 1% of the sum of (x) all issued and outstanding shares of the Parent's Common Stock, and (y) all shares of Parent Common Stock issuable pursuant to all outstanding options, warrants (including the Original Warrant), convertible securities and other rights to purchase or otherwise acquire Parent Common Stock, including the shares being issued pursuant to this Section 4a of the Agreement ("Purchaser's Additional Equity"). Until the Loan is repaid in full, the Purchaser's Additional Equity shall hereafter be increased by a number of shares equal to 1% of any new issuance of additional shares of Parent Common Stock, whether by (x) sale or issuance of equity to third parties (up to the first $500,000) or to related parties, (y) grant of options, warrants or convertible securities to third parties or related parties, or (z) payment in exchange for or in lieu of compensation.

 

b.

The Parent hereby represents and warrants to the Purchaser, as an inducement to accept the foregoing Purchaser's Additional Equity, that as of the date hereof, there are (x) 105,973,976 shares of the Parent's Common Stock issued and outstanding, (y) 20,952,381 shares of the Parent's Common Sock issuable upon exercise of the Original Warrant, and (z) no other shares of the Parent's Common Stock issuable upon exercise or conversion of options, warrants, convertible securities or other securities of the Parent (whether or not presently or contingently convertible into or exercisable or exchangeable for shares of the Parent's Common Stock) or contingently issuable in exchange for or in lieu of compensation.

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

 

	THE PARENT:
	GENESIS CROUP HOLDINGS, INC.
	By:	/s/ Laurence M Sands
	Name:	Laurence M Sands
	Title:	S.U.P Corporate Secretary

	Address:
	Facsimile:

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

 

	THE PARENT:
	GENESIS CROUP HOLDINGS, INC.
	By:
	Name:
	Title:

	Address:
	Facsimile:

 

 

	THE PURCHASER:
	UTA CAPITAL LLC
	By YZT Management LLC, its Managing Member
	By:	/s/ Udi Toledano
	Name:	Udi Toledano
	Title:	Managing Member

 

 

 

 

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