EXHIBIT 10.7

FIRST AMENDMENT TO SETTLEMENT AGREEMENT

THIS FIRST AMENDMENT TO SETTLEMENT AGREEMENT (“Amendment”) is made and entered
into as of the 12th day of August, 2010, and is made effective as of April 29,
2010 (the “Effective Date”), by and among (i) LY HOLDINGS, LLC, a Kentucky
limited liability company (“LYH”), (ii) LIGHTYEAR NETWORK SOLUTIONS, LLC, a
Kentucky limited liability company (“LNS”), (iii) CHRIS SULLIVAN, an individual
resident of Nevada (“Sullivan”), (iv) LANJK, LLC, a Kentucky limited liability
company (“LANJK”), (v) RICE REALTY COMPANY, LLC, a Kentucky limited liability
company (“RRC”), (vi) RIGDON O. DEES, III, an individual resident of California
(“Dees”), (vii) CTS EQUITIES LIMITED PARTNERSHIP, a Nevada limited partnership
(“CTS”), and (viii) RON CARMICLE, an individual resident of Kentucky
(“Carmicle,” collectively with LANJK, RRC, Dees, and CTS, the “Letter Agreement
Holders”).

RECITALS:

A.           LYH, LNS, Sullivan, and the Letter Agreement Holders entered into
that certain Settlement Agreement dated April 29, 2010 (the “Settlement
Agreement”), pursuant to which (1) LNS purchased and assumed the Sullivan Note
from Sullivan in exchange for the Settlement Payment, (2) LYH became indebted to
LNS pursuant to and in the amount of the Sullivan Note, and (3) the Letter
Agreement Holders (a) granted LNS security interests in the Letter Agreements to
secure payment by LYH of the Sullivan Note to LNS, and (b) gave LNS an option
pursuant to which LNS may purchase the Letter Agreements.
 
 B.           The parties now desire to amend the Settlement Agreement to, inter
alia, recognize and rectify a mutual mistake of Sullivan, LYH, and LNS
concerning past due and future commitment fees pursuant to Section 5 of the
Sullivan Note and account for accrued and unpaid interest due to Sullivan from
April 1, 2010, to the Effective Date.  All capitalized terms not defined in this
Amendment shall have the definitions set forth in the Settlement Agreement.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of all of which is hereby acknowledged, the parties do hereby agree
as follows:
 
1.           Amendment of Settlement Agreement Section 2(a); Amendment of
Sullivan Note Section 5.  By mutual mistake of Sullivan, LYH, and LNS, the
Settlement Agreement did not account for the intent of Sullivan, LYH, and LNS to
cause the right to receive past due and future commitment fees under Section 5
of the Sullivan Note to remain with Sullivan.  Thus, Sullivan, LYH, and LNS
agree that LNS did not purchase and shall not receive any commitment fee
pursuant to Section 5 of the Sullivan Note, whether due and owing to Sullivan as
of the Effective Date or to become due from and after the Effective Date.  As a
consequence of the foregoing, Section 2(a) of the Settlement Agreement is
amended and modified as follows:

 

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Purchase and Assumption of Sullivan Note.  LNS hereby purchases and assumes any
and all of Sullivan’s rights and obligations under and in connection with the
Sullivan Note; provided, however, that LNS is not purchasing and shall not
assume Sullivan’s right to receive any Commitment Fee (as defined in the
Sullivan Note) pursuant to the Sullivan Note, whether past due as of the
Effective Date or to be incurred from and after the Effective Date.
 
Additionally, Section 5 of the Sullivan Note is deleted in its entirety.
 
2.           Amendment of Settlement Agreement Section 2(b).  The Settlement
Payment reflected in the Settlement Agreement failed to account for the accrued
and unpaid interest due to Sullivan pursuant to the Sullivan Note for the period
beginning April 1, 2010, and ending on the Effective Date.  Therefore, effective
as of the Effective Date, the first paragraph of Section 2(b) of the Settlement
Agreement is amended and modified as follows:
 
In exchange for the purchase of the Sullivan Note, LNS shall pay to Sullivan the
sum of Seven Million Seven Hundred Fifty Thousand and No/100 Dollars
($7,750,000) plus the accrued and unpaid interest due to Sullivan pursuant to
the Sullivan Note for the period beginning April 1, 2010, and ending on the
Effective Date (the “Settlement Payment”).  Sullivan acknowledges that LNS paid
$250,000 contemporaneous with the Closing of the Settlement Agreement.  The
remainder of the Settlement Payment shall be paid as follows: (a) on October 1,
2010, and on the first day of each quarter year thereafter until and including
the Maturity Date (as defined below), $250,000 plus accrued and unpaid interest
payable to Fifth Third as directed by Sullivan (the “Quarterly Payments”), and
(b) on the Maturity Date, the then-outstanding principal amount plus accrued and
unpaid interest (the “Final Payment,” collectively with the Quarterly Payments,
the “Deferred Payment”).  If all such sums are not paid and satisfied in full by
the Maturity Date, any sums remaining due shall thereafter bear interest at the
Default Rate (as defined below).  For purposes of this Agreement, “Maturity
Date” shall mean the sooner of (i) July 1, 2011, or (ii) the maturity date of
the Fifth Third Note.  The parties hereto acknowledge that the Fifth Third Note
has not matured as of the date of this Amendment and Fifth Third agreed to
extend the maturity date of the Fifth Third Note six months to January 10, 2011.

The second and third paragraphs of Section 2(b) shall remain as set forth in the
Settlement Agreement and shall not be amended or modified.

 

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3.           Amendment of Settlement Agreement Section 2(c).  The last sentence
of the third paragraph of Section 2(c) of the Settlement Agreement is amended
and modified as follows:
 
If Sullivan avoids the Agreement pursuant to this Section 2(c), the payments
Sullivan received from LNS hereunder shall be credited against the Sullivan
Note, the Sullivan Note shall revert to Sullivan, LNS will have no further
obligation to make any payments to Sullivan whether for amounts withheld or to
become due, and LYH shall execute a new promissory note in favor of LNS in a
principal amount equal to the amount of the payments Sullivan received from LNS
hereunder prior to the date the Sullivan Note reverts to Sullivan, which
promissory note shall include the same interest and payment terms as the
Sullivan Note.
 
4.           Acknowledgement; Waiver.  Pursuant to the Settlement Agreement,
LYH, LNS, and the Letter Agreement Holders bargained for a settlement of
Sullivan’s claims arising from the Sullivan Note, and specifically from the
payments LYH paid after becoming past due.  Sullivan acknowledges and agrees
that he waived pursuant to the Settlement Agreement, and hereby expressly
waives, any right to charge a default rate of interest or receive a late payment
penalty for or as a result of any failure of LYH to make timely payments under
the Sullivan Note prior to the Effective Date.  This waiver applies only to the
past due payments made prior to the Effective Date and shall not apply to any
Event of Default under the Sullivan Note or the Settlement Agreement that occurs
on or after the Effective Date.
 
5.           Amendment of Sullivan Note Section 2.  Section 2 of the Sullivan
Note is amended and modified as follows:
 
 
The principal of, and all interest on, this Note shall be due and payable
without setoff, offset, credit, counterclaim or defense.

 
6.           Amendment of Sullivan Note Section 3.  Section 3 of the Sullivan
Note is amended and modified as follows:

Maturity Date.  All outstanding principal of this Note, all accrued but unpaid
interest thereon and all other charges, fees or expenses hereunder shall be due
and payable upon demand to LNS.  The date upon which demand is made to Borrower
is referred to herein as the “Maturity Date”.
 
7.           Letter Agreement Holders.  Each of the Letter Agreement Holders
joins in this Amendment for the purpose of, among other things, acknowledging
that the term of the Sullivan Note has been modified and amended such that the
maturity date has been extended to the date upon which LNS demands payment,
subject to the terms of the Settlement Agreement and this Amendment, and
acknowledging and agreeing that the security interests granted in the Settlement
Agreement shall secure the Sullivan Note until it is paid in full.

 

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8.           Life Insurance Policy.  Pursuant to that certain Assignment of Life
Insurance Policy as Collateral Agreement dated December 30, 2004, LYH assigned
life insurance policy number 75 173 549 (the “Policy”) to Sullivan.  In the
event of the death of the named insured, the proceeds of the Policy would be
credited against some or all of the then-current amount due to Sullivan under
the Sullivan Note.  LYH, LNS, and Sullivan hereby agree that Sullivan shall
remain as the beneficiary of the Policy; provided, however, that (a) Sullivan
shall credit any proceeds of the Policy against the then-current amount of the
Settlement Payment and deliver all excess proceeds to LNS, and (b) if the
Settlement Payment if fully paid prior to the death of the named insured,
Sullivan shall assign the Policy to LNS immediately upon the full payment of the
Settlement Payment and LNS shall be the sole beneficiary of the Policy
thereafter.
 
9.           Representations, Warranties and Covenants.  Each party to
this Amendment represents, warrants and covenants, as of the date hereof, as
follows:
 
(a).          Each party hereto has the requisite power and authority to enter
into this Amendment.  The execution and delivery hereof and the performance by
each party hereto of his or its obligations hereunder will not violate or
constitute an event of default under the terms and provisions of any agreement,
document or instrument to which any such party is a party or by which any such
party is bound;
 
(b).          This Amendment is a valid and binding obligation of each party
hereto;
 
(c).           To the best of each party’s knowledge as of the date hereof, each
party is in full compliance with all applicable laws and any other local,
municipal, regional, state or federal requirements and no party hereto has
received actual notice from any governmental authority that he or it is not in
full compliance with all applicable laws and any other local, municipal,
regional, state or federal requirements;
 
(d).          The Letter Agreement Holders have not granted any option or any
other rights to acquire  the Letter Agreements, other than as set forth in the
Settlement Agreement;
 
(e).           So long as the Option remains in effect, each Letter Agreement
Holder reaffirms that he or it will take no action, or fail to take any required
action, that would prohibit him or it from complying with the obligations
hereunder or that would cause any of the representations or warranties hereunder
to be untrue as of the date hereof or at any future date;
 
(f).           So long as the Option remains in effect, each Letter Agreement
Holder reaffirms that he or it will not grant any liens on any Letter Agreement,
or sell or otherwise transfer any Letter Agreement.
 
10.           Miscellaneous.  The Settlement Agreement, as amended and modified
by this Amendment, constitutes the entire understanding between the parties with
respect to the subject matter hereof and supersedes all prior or contemporaneous
agreements in regard thereto.  The Settlement Agreement, as modified, cannot be
amended except by an agreement in writing signed by authorized representatives
of all parties and specifically referring to the Settlement Agreement.  The
paragraph headings set forth herein are for convenience only and do not
constitute a substantive part of this Amendment.  This Amendment shall be
governed by and construed under the laws of the Commonwealth of Kentucky,
without regard to conflicts of law principles.  If any provision of this
Amendment shall be determined to be illegal or unenforceable by any Court of law
or any competent governmental or other authority, the remaining provisions shall
be severable and enforceable in accordance with their terms.

 

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11.           Binding Effect.  The Settlement Agreement, as amended and modified
by this Amendment, is binding upon, and shall inure to the benefit of, the
parties hereto and their heirs, personal representatives, successors and
assigns.
 
12.           Counterparts.  This Amendment may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument.
 
13.           Continuing Obligation.  As amended hereby, the Settlement
Agreement shall remain in full force and effect.  From and after the date of
this Amendment, all references to the Settlement Agreement in any document
executed in conjunction with this transaction shall include the terms of this
Amendment.

[SPACE INTENTIONALLY BLANK; SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and
date first above written.

LY HOLDINGS, LLC
 
By:
/s/  J. Sherman Henderson III
 
Its: Chief Executive Officer
 
LIGHTYEAR NETWORK SOLUTIONS, LLC
 
By:
/s/  J. Sherman Henderson III
 
Its: Chief Executive Officer
 
/s/ Chris Sullivan
CHRIS SULLIVAN
 
LANJK, LLC
 
By:  
/s/  J. Sherman Henderson III
 
Its: Manager
 
RICE REALTY COMPANY, LLC
 
By:
/s/ W. Brent Rice
 
Its: Manager

 

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/s/ Rigdon O. Dees, III
RIGDON O. DEES, III
 
CTS EQUITIES LIMITED PARTNERSHIP
 
By:  
/s/ Chris Sullivan
 
Its: General Partner
 
/s/    Ronald L. Carmicle
RON CARMICLE

 

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