CERTAIN RIGHTS AND INTERESTS OF SECURED PARTY (AS DEFINED BELOW), TOGETHER WITH
ITS SUCCESSORS AND ASSIGNS, ARISING UNDER THIS AGREEMENT ARE SUBORDINATED TO
CERTAIN RIGHTS AND INTERESTS OF THE EXISTING SECURED LENDERS (AS SUCH TERM IS
USED AND DEFINED BELOW.
 
SECURITY AGREEMENT
 
This Security Agreement (this “Agreement”) is made and effective this 4th day of
November, 2011, by and among LIGHTYEAR NETWORK SOLUTIONS, INC., a Nevada
corporation, LIGHTYEAR NETWORK SOLUTIONS, LLC, a Kentucky limited liability
company, each having an address of 1901 Eastpoint Parkway, Louisville,
Kentucky  40223 (collectively, “Grantors” and individually, a “Grantor”), and
CHRIS T. SULLIVAN, an individual resident of Florida, having an address of 3717
W. North B Street, Tampa, Florida 33609, and his successors and assigns
(“Secured Party”).
 
RECITALS:
 
A.       Grantors are the Co-Makers of a Term Note, dated November 4, 2011, in
the principal amount of $6,250,000 payable to the order of Secured Party
maturing on January 10, 2013 (the “Note”).
 
B.       Grantors have agreed to grant to Secured Party a security interest in
certain assets of Grantors as security for repayment of the Note and any
extensions, renewals, modifications and replacements of the foregoing, without
limit as to number or frequency (hereinafter referred to as the “Indebtedness”).
 
C.       For purposes of this Agreement, the term “Collateral” means and
includes the following: all personal property, goods, inventory, equipment,
instruments, investment property, documents, documents of title, letter of
credit rights, policies and certificates of insurance, general intangibles
(including without limitation choses in action, tax refunds and insurance
proceeds), chattel paper, accounts, deposits, money, cash, commercial tort
claims or other property of Grantor now owned or hereafter acquired; including,
but not limited to all trade names, trademarks, trade secrets, goodwill,
patents, patent applications, copyrights, deposit accounts, licenses and
franchises, and all cash and non-cash proceeds of all the foregoing, all
products of the foregoing, and all substitutions.  Unless otherwise defined in
this Agreement, terms that are defined in the Uniform Commercial Code, as in
effect from time to time in the Commonwealth of Kentucky (the “U.C.C.”) are used
herein as so defined.
 
D.       The Indebtedness may from time to time be further secured by certain
other security instruments which may be executed in connection with, or as
security for, the Indebtedness (together with this Agreement, collectively, the
“Security Documents”).  In addition to the Indebtedness, this Agreement shall
further secure (i) the performance of all of the covenants of Grantors and the
payment of all sums payable by Grantors, under the terms of the Indebtedness,
this Agreement and the other Security Documents; (ii) the repayment of all sums
advanced by Secured Party to protect its interest in the Collateral or to
perform any covenants of Grantor hereunder which Grantor shall have failed to
perform and interest at the Default Rate (as defined in the Note) on such sums
advanced by Secured Party; (iii) any and all now existing and future obligations
of Grantors to Secured Party, however created, evidenced or acquired, whether
direct or indirect, absolute or contingent, matured or unmatured, primary or
secondary, or with joint, several, or joint and several liability (it being
understood that Secured Party is not under any obligation to make any future
advances); (iv) any and all modifications, extensions, renewals, substitutions
and replacements of any Indebtedness or obligation hereinabove described; and
(v) costs of collection of all such sums, including, but not limited to,
attorney fees and court costs.  All of the foregoing are sometimes hereinafter
called the “Liabilities”.
 
 
 

--------------------------------------------------------------------------------

 
 
GRANT
 
NOW, THEREFORE, for and in consideration of Secured Party amending and restating
the loan described in the Indebtedness to or for the benefit of Grantors and
surrendering certain other rights pursuant to the Intercompany Obligations
Settlement Agreement, and for the purpose of securing the Indebtedness and the
Liabilities and the performance by Grantors of their obligations hereunder, and
in consideration of the various agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Grantors, EACH GRANTOR HEREBY WARRANTS, CONVEYS, GRANTS, AND
ASSIGNS TO SECURED PARTY AND ITS SUCCESSORS AND ASSIGNS FOREVER A CONTINUING
SECURITY INTEREST IN AND TO ALL OF THE COLLATERAL.  Notwithstanding anything to
the contrary contained in this Agreement, upon payment in full of the
Indebtedness and performance of all obligations under the Note, this Agreement
and the other Security Documents, the same shall terminate and be of no further
force and effect and the Secured Party shall thereupon terminate its security
interest in the Collateral.
 
COVENANTS AND AGREEMENTS OF GRANTORS
 
To further secure the payment of the Indebtedness and the performance and
satisfaction of the Liabilities, each Grantor hereby represents, warrants,
covenants, and agrees as follows:
 
1.        Title.  Grantor has or will acquire, and will maintain full and
absolute title in Grantor to the Collateral, except for the lien created hereby,
the lien created by that certain Security Agreement executed by Lightyear
Network Solutions, LLC in favor of First Savings Bank, F.S.B. dated January 21,
2011, and  the lien created by that certain Security Agreement – Limited
Liability Membership dated October 1, 2010 executed by Lightyear Network
Solutions, Inc. in favor of Community Trust Bank, Inc., (“CTB”) whereby Grantor
granted CTB a security interest in all of its membership interests in SE
Acquisitions, LLC (collectively, the “Existing Secured Lenders”), and Grantor
has good right to subject the Collateral to the security interest granted by
this Security Agreement.  Except for Collateral in the possession of the Secured
Party or in possession of a third party per agreement of Grantor and any
Existing Secured Lender or Secured Party, Grantor has and will maintain full
possession of the Collateral and will defend it against all adverse claims.
 
2.        Perfection and Priority.  Upon the execution and delivery of this
Agreement by Grantor, and upon Secured Party’s filing of appropriate financing
statements with the appropriate governmental agencies and payment of the
appropriate recording fees, Secured Party will have a perfected security
interest in and to the Collateral (excluding real property), which may be
perfected by such filing, having the first priority in such Collateral after and
subordinate only to the Existing Lenders.
 
 
2

--------------------------------------------------------------------------------

 
 
3.        Protection and Use of Collateral.  Grantor shall not, without the
prior written consent of Secured Party, sell, assign, transfer, or otherwise
dispose of any of the Collateral or any of Grantor’s right, title or interest
therein, and shall not otherwise do or permit anything to be done or occur that
may impair the Collateral as security hereunder; provided that, Grantor may
maintain, handle, and otherwise deal with the Collateral consistent with past
practice and otherwise in the ordinary course of business.
 
4.        Financing Statements, Certificates, Etc.  Grantor will do such acts as
Secured Party may deem necessary or appropriate to establish and maintain in
Secured Party a valid perfected lien and security interest in the Collateral to
secure full and prompt performance and payment of the obligations.  Grantor
authorizes Secured Party, at the expense of Grantor, to sign and file, without
Grantor’s signature, such financing and continuation statements, amendments, and
supplements thereto, notices to third parties and other documents which Secured
Party may from time to time deem necessary to perfect, preserve and protect its
security interest in the Collateral, including, without limitation, such
financing statements as may be necessary or appropriate, in the reasonable
opinion of Secured Party, to perfect and protect Secured Party’s security
interest in such of the Collateral as may be or be deemed to be or constitute
fixtures under Kentucky law.  Grantor agrees to execute and deliver to Secured
Party any such financing statements and documents (including, without
limitation, intellectual property security agreements) and to furnish and
endorse such other instruments, certificates, certificates of title with Secured
Party’s security interest noted thereon or executed applications for said
certificates as Secured Party may from time to time request in order to
evidence, perfect, preserve and protect its security interest in the
Collateral.  Grantor agrees to prepare and execute such notices to third parties
regarding the security interest in the Collateral created by this Agreement as
Secured Party deems advisable to perfect, preserve, and protect the security
interest.  Grantor, at any time upon request by Secured Party, will deliver to
Secured Party certified schedules, in such form as may be specified by Secured
Party, identifying the Collateral, or such part thereof as may be specified by
Secured Party, together with such supporting documents and information as
Secured Party reasonably may request.
 
5.        Taxes and Assessments.  Grantor agrees to pay promptly when due all
taxes, assessments, and governmental charges upon or against Grantor for the
Collateral, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings and for which Grantor has established
adequate reserves.
 
6.        Other Obligations and Costs.  In the event Grantor fails to pay any
taxes, assessments, charges, or other costs or expenses which Grantor is
required to pay in order to comply with the terms hereof, Secured Party may, but
shall have not duty to, make expenditures for any and all such purposes on
Grantor’s behalf.  Secured Party may also, but shall have no duty to, perform on
behalf of Grantor any agreement or obligation of Grantor hereunder which Grantor
shall have failed to perform.  Grantor will forthwith reimburse Secured Party
for all costs and expenses of Secured Party in connection with or relating to
any such payment or performance, including reasonable attorney’s fees, which
amounts shall constitute part of the Liabilities due to Secured Party from
Grantors, shall be secured hereby and shall bear interest at the Default Rate.
 
 
3

--------------------------------------------------------------------------------

 
 
7.        Events of Default/Acceleration.  Upon the occurrence of any of the
following or any event of default specified in the Note (hereinafter referred to
as “Events of Default”), Secured Party shall be entitled to exercise its
remedies under this Agreement or as otherwise provided by law:  (1) Grantor
fails to pay when due any amount payable under the notes comprising the
Indebtedness, the Security Documents, or any agreement evidencing the
Indebtedness; (2) Grantor (a) fails to observe or perform any other agreement
evidencing or securing the Indebtedness, including, but not limited to the Note
comprising the Indebtedness, the Security Documents or (b) make any materially
incorrect or misleading representation in any financial statement or other
information delivered to the Secured Party; (3) Grantor defaults under the terms
of the Note comprising the Indebtedness, Security Documents, or any other note,
loan agreement, mortgage, security agreement, or document executed as part of
the Indebtedness transaction or any guaranty of the Indebtedness becomes
unenforceable in whole or in part, or any guarantor fails to promptly perform
under such a guaranty; (4) Grantor fails to pay when due any amount payable
under any note or agreement evidencing debt to Secured Party or any Existing
Secured Lender or defaults under the terms of any agreement or instrument
relating to or securing any debt for borrowed money owing to Secured Party or
any Existing Secured Lender; (5) Grantor becomes insolvent or unable to pay its
debts as they become due; (6) Grantor (a) makes an assignment for the benefit of
creditors, (b) consents to the appointment of a custodian, receiver, or trustee
for itself or for a substantial part of its assets, or (c) commences any
proceeding under any bankruptcy, reorganization, liquidation, insolvency, or
similar laws of any jurisdiction; (7) a custodian, receiver, or trustee is
appointed for Grantor or for a substantial part of his assets without the
consent of the party against which the appointment is made and is not removed
within sixty (60) days after such appointment; or Grantor consents to such
appointment; (8) proceedings are commenced against Grantor under any bankruptcy,
reorganization, liquidation, or similar laws of any jurisdiction, and such
proceedings remain undismissed for sixty (60) days after commencement; or
Grantor consents to the commencement of such proceedings; (9) any judgment
having a material affect on Grantor’s assets is entered against Grantor, or any
attachment, levy, or garnishment is issued against any property of Grantor; (10)
any proceedings are instituted for the foreclosure or collection of any
mortgage, judgment, or lien affecting the Collateral; (11) Grantor sells,
transfers, or hypothecates or attempts to sell, transfer, or hypothecate all or
any part of the Collateral except as provided in this Security Agreement without
the prior written consent of Secured Party; (12) Grantor, as applicable, without
Secured Party’s written consent, (a) is dissolved or its existence is
terminated, (b) merges or consolidates with any third party, (c) sells a
material part of its assets or business outside the ordinary course of its
business, or (d) agrees to do any of the foregoing; (13) there is a substantial
change in the existing or prospective financial condition of Grantor which
Secured Party in good faith determines to be materially adverse; or (14) if at
any time or for any reason Secured Party reasonably and in good faith deems
itself insecure.
 
8.        Remedies Upon Default.  Time is of the essence under this Security
Agreement.  Upon the occurrence of any Event of Default and the expiration of
any applicable grace period provided in the Note or notes comprising the
Indebtedness and/or Security Documents and at any time thereafter, the Secured
Party shall be entitled, without notice to Grantor, to declare all of the
Indebtedness to be immediately due and payable, whereupon the same shall become
immediately due and payable, without presentation, demand, protest, notice of
protest, or other notice of dishonor of any kind, all of which are hereby
expressly waived.  In addition, upon the occurrence of any Event of Default
under this Security Agreement and the expiration of any applicable grace period
provided in the Note or notes comprising the Indebtedness, and at any time
thereafter, Secured Party shall have all the remedies of a secured party under
the U.C.C and as otherwise provided by applicable law, including but not limited
to the following:
 
 
4

--------------------------------------------------------------------------------

 
 
(a)       Secured Party may take possession of the Collateral and may use it
after having done so.  For purposes of taking possession, Secured Party may
enter upon any premises on which the Collateral may be situated without legal
process and remove the Collateral.  Grantor hereby releases Secured Party from
any claims arising from such removal and shall hold Secured Party harmless from
any liability resulting therefrom, except for liability arising or resulting
from Secured Party’s gross negligence or willful intent.
 
(b)       Secured Party may notify any person indebted to Grantor to pay Secured
Party directly any amounts due Grantor under an account receivable, general
intangible, investment account, instrument or chattel paper, and Secured Party
may enforce payment of the same through legal proceedings, or otherwise, in its
own name or in the name of Grantor.
 
(c)       Secured Party may require Grantor to assemble the Collateral and make
it available at a place to be designated by Secured Party.
 
(d)       Unless the Collateral threatens to decline speedily in value or is of
a type customarily sold on a recognized market, Secured Party shall give Grantor
at least ten (10) days prior written notice of the time and place of any public
sale thereof or of the time after which any private sale or any other intended
disposition thereof is to be made.  Grantor stipulates and agrees that a
disposition complying with this subparagraph shall be deemed a commercially
reasonable disposition of the Collateral by Secured Party.  The expenses of
retaking, holding, preparing for sale, selling, and the like, and reasonable
attorney’s fees and expenses incurred by Secured Party, may be paid from the
proceeds of the disposition.
 
(e)       Grantor agrees that Secured Party may obtain the appointment of a
receiver respecting the Collateral upon such notice as may be required by
applicable law and without notice if permitted by such law, and may obtain
immediate possession thereof in replevin.
 
All remedies of Secured Party shall be cumulative to the full extent provided by
law.  Pursuit by Secured Party of certain judicial or other remedies shall not
abate nor bar resort to other remedies with respect to the Collateral, and
pursuit of certain remedies with respect to all or some of the Collateral shall
not bar other remedies with respect to the Indebtedness or the Liabilities or to
other portions of the Collateral.  Secured Party may exercise its rights to the
Collateral without resorting or regard to other collateral or sources of
security or reimbursement for the Indebtedness or the Liabilities.
 
 
5

--------------------------------------------------------------------------------

 
 
9.        Nonwaiver, Expenses, Proceeds of Collateral.  No waiver by Secured
Party of any of its rights or of any Event of Default shall be effective unless
in writing, and in no event shall it operate as a waiver of any other of its
rights or any other Event of Default nor of the same rights or Event of Default
on any future occasion.  Grantor shall pay to Secured Party on demand any and
all expenses, including reasonable attorney’s fees, incurred or paid by Secured
Party in perfecting, protecting, or enforcing its rights and interests with
respect to the Collateral.  After deducting all of said expenses the residue of
any proceeds of collection or sale of the Collateral shall be applied to the
payment of the Indebtedness and the Liabilities and Grantors shall remain fully
and jointly and severally liable for any deficiency.
 
10.        Subordination. Grantors and Secured Party acknowledge and agree for
the benefit of Existing Secured Lenders that any and all obligations of Grantors
to Secured Party under the Indebtedness and any rights or interests arising
under the Note, this Agreement and the other Security Documents are subordinated
in right of payment and in priority to the prior irrevocable payment in full in
cash and performance of the indebtedness secured by the security agreements
referred to in Section 1 hereof, to the extent outstanding as of the date
hereof, and all interest and other charges thereon.  Without limiting the
generality of the foregoing, Secured Party acknowledges and agrees that the
security interest granted hereby in the membership interests owned by Lightyear
Network Solutions, Inc. in SE Acquisitions, LLC (the “SE Membership Interests”)
is subordinate to the first and prior security interest in and to the SE
Membership Interests previously granted to CTB.  Secured Party agrees that CTB
may rely on, and shall be a beneficiary of, this acknowledgement and agreement
by Secured Party.
 
11.        Notices.  Any notice required to be given by any party to the other
under the provisions of this Security Agreement or under applicable law shall be
given to Grantors and shall be given to Secured Party, at the address set forth
in the initial paragraph of this Agreement.
 
12.        Successors in Interest.  This Security Agreement shall be binding
upon and inure to the benefit of Grantors and Secured Party and their respective
successors, assigns, and legal representatives.
 
13.        Authority Relative to this Agreement.  Each party hereto represents
and warrants (i) that each has the full legal power, capacity and authority to
execute, deliver, and perform this Agreement and to consummate the transactions
contemplated hereby, and (ii) that this Agreement has been duly and validly
executed by the parties hereto and constitutes the valid and binding obligations
of each party, enforceable against each in accordance with its terms.
 
14.        Governing Law.  This Agreement has been delivered and accepted at and
will be deemed to have been made at Louisville, Kentucky and will be interpreted
and the rights and liabilities of the parties hereto determined in accordance
with the laws of the Commonwealth of Kentucky, without regard to conflicts of
law principles.
 
15.        Jurisdiction.  The parties hereby irrevocably agree and submit to the
exclusive jurisdiction of any state or federal court located within Jefferson
County, Kentucky, and waive any objection based on forum non conveniens and any
objection to venue of any such action or proceeding.
 
 
6

--------------------------------------------------------------------------------

 
 
16.        Waiver of Jury Trial.  THE PARTIES HERETO EACH WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR ANY
ACTUAL OR PROPOSED TRANSACTION OR OTHER MATTER CONTEMPLATED IN OR RELATING TO
ANY OF THE FOREGOING.
 
[SPACE INTENTIONALLY BLANK; SIGNATURES ON FOLLOWING PAGE]
 
 
7

--------------------------------------------------------------------------------

 

In Witness Whereof, Grantors have executed and delivered this Security Agreement
the day and date first written above.
 

 
GRANTORS:
         
Lightyear Network Solutions, Inc.
           
By:
/s/ Stephen M. Lochmueller
     
Stephen M. Lochmueller
     
Chief Executive Officer
           
Lightyear Network Solutions, LLC
           
By:
/s/ Stephen M. Lochmueller
     
Stephen M. Lochmueller
     
Chief Executive Officer
         
SECURED PARTY:
           
Chris T. Sullivan
           
By:
/s/ Chris T. Sullivan

 
 

--------------------------------------------------------------------------------