Document:

Intercompany Obligations Settlement Agreement

This Intercompany Obligations Settlement Agreement (“Agreement”) is made and entered into this the 4th day of November, 2011 by and among (i) LY Holdings, LLC (“LYH”); (ii) Lightyear Network Solutions, Inc. formerly known as Libra Alliance Corporation (“LYNS”) and (iii) Lightyear Network Solutions, LLC (“LNSLLC”); and (iv) Chris Sullivan (“Sullivan”).

Recitals:

A.           On or around February 12, 2010, as part of the exchange transaction contemplated by the Master Transaction Agreement dated as of February 12, 2010 by and between LYH and LYNS (the “Master Transaction Agreement”) and pursuant to that certain Securities Exchange Agreement (the “Securities Exchange Agreement”), LYH contributed the assets of its wholly-owned subsidiary LNSLLC to LYNS in exchange for 10,000,000 shares of LYNS common stock (the “Common Stock”) and 9,500,000 shares of LYNS preferred stock (the “Preferred Stock”).  The transaction consummated pursuant to the Master Transaction Agreement and related agreements shall be referred to herein as the “Exchange Transaction.”

B.           As a part of the Exchange Transaction, certain lenders to LYH contributed to LYNS term notes from LYH in the aggregate principal amount of $5,149,980 in exchange for 3,242,533 shares of Common Stock in LYNS.

C.           After this contribution, LYH was obligated to LYNS, and the resulting obligation of LYH to LYNS was evidenced by that certain Term Note dated February 12, 2010 (the “Term Note”).

D.           On or around February 11, 2010, LYH made, issued and delivered to Sullivan that certain Fifth Amended and Restated Commercial Note dated February 11, 2010 in the face principal amount of $8,000,000 (the “Sullivan Note”).

E.           Subsequently, pursuant to that certain Settlement Agreement dated as of April 29, 2010 by and among LYH, LNSLLC, Sullivan, LANJK, LLC, Rice Realty Company, LLC, Rigdon O. Dees, III, CTS Equities Limited Partnership and Ron Carmicle (the “Settlement Agreement”), LNSLLC purchased from Sullivan the Sullivan Note on an installment payment basis. As a result of this purchase, LYH was obligated to LNSLLC pursuant to the terms of the Sullivan Note. In addition, pursuant to Section 2 of the Settlement Agreement, Sullivan has the right, under certain circumstances, to declare the Settlement Agreement void and to unwind the transactions effected by the Settlement Agreement, which would reinstate Sullivan as the payee and the secured party under the Sullivan Note and related security agreements and pledges.

F.           The current aggregate principal balance of the Term Note and the Sullivan Note is $12,899,980 (the “LYH Principal Indebtedness”) and the current aggregate interest balance of the Term Note and the Sullivan Note is $1,223,203.02 (the “LYH Interest Indebtedness”).

G.           Subsequent to the date of the Settlement Agreement, LYNS or LNSLLC made installment payments to Sullivan pursuant to the Settlement Agreement and currently owes Sullivan $6,250,000 in principal under the Settlement Agreement (the “LYNS Principal Indebtedness”). As of October 31, 2011, the accrued but unpaid interest due to Sullivan under the Settlement Agreement is $ 98,458.90 (the “LYNS Interest Indebtedness to Sullivan” and together with the LYNS Principal Indebtedness to Sullivan, the “LYNS Indebtedness to Sullivan”).

 

  

  

 

 

H.           As of the date hereof, LYNS currently owes LYH $2,232,110 in accrued but undeclared dividends on the Preferred Stock (the “LYNS Preferred Stock Dividend”).

I.           The parties desire to settle and/or restructure the above-described intercompany obligations as more fully set forth herein.

J.           LANJK, LLC, Rice Realty Company, LLC, Rigdon O. Dees, III, CTS Equities Limited Partnership and Ron Carmicle (the “Letter Agreement Holders”) as parties to the Settlement Agreement also desire to restructure the above-described intercompany obligations and have agreed to execute an Acknowledgement to this Agreement consenting to the terms of the Agreement and the resulting modifications to the Settlement Agreement.

Agreement:

Now, therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:

1.           LYH Principal Indebtedness. The parties hereto agree that the LYH Principal Indebtedness is $12,899,980. The parties acknowledge and agree that if the amount of the LYH Principal Indebtedness is incorrect for whatever reason, the LYH Principal Indebtedness shall be deemed to be $12,899,980 and all other amounts are hereby waived or discharged.

2.           LYNS Indebtedness to Sullivan. The parties hereto agree that the LYNS Principal Indebtedness to Sullivan is $6,250,000. The parties acknowledge and agree that if the amount of the LYNS Principal Indebtedness to Sullivan is incorrect for whatever reason, the LYNS Principal Indebtedness to Sullivan shall be deemed to be $6,250,000 and all other amounts are hereby waived or discharged.

3.           Exchange for LYH Principal Indebtedness.  In complete satisfaction of the LYH Principal Indebtedness, on November 4, 2011 (the “Effective Date”) LYH shall (a) surrender and waive its right to payment of the LYNS Preferred Stock Dividend; and (b) surrender to LYNS all 9,500,000 shares of Preferred Stock, and LYNS shall cancel and retire all such shares of Preferred Stock. After giving effect to such cancellation, Common Stock is the only authorized and issuable class of LYNS capital stock.  Upon LYH’s surrender of its right to the LYNS Preferred Stock Dividend and the Preferred Stock and LYNS’s cancellation of the Preferred Stock on the Effective Date, LYH’s obligations to LYNS for the LYH Principal Indebtedness shall be discharged and satisfied in full.

4.           Note for LYH Interest Indebtedness.  Contemporaneous with the execution of this Agreement, to document the LYH Interest Indebtedness LYH shall issue to LYNS a term note  in the form attached hereto as Exhibit A (the “LYH Term Note”) in the face principal amount of $1,223,203.02. The LYH Term Note shall accrue interest at one-year LIBOR rate plus 2% per annum and shall require payment of all principal and interest at its maturity five years from the Effective Date. The LYH Term Note shall be secured by a Security Agreement and Stock Pledge Agreement  in the form attached hereto as part of Exhibit A, whereby LYH grants to LYNS a security interest in and to all right, title and interest of LYH in and to two million (2,000,000)  shares of common stock of LYNS held by LYH.

 

  

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5.           LYNS Indebtedness to Sullivan. Sullivan hereby consents to the transactions contemplated by Sections 3 and 4 of this Agreement, which include the discharge and satisfaction of the Sullivan Note. In addition, contemporaneous with the execution of this Agreement, Sullivan waives and surrenders his right to rescind and declare void the transactions contemplated by the Settlement Agreement. In consideration for such consent, waiver and surrender and in order to amend and restate the obligations to Sullivan set forth in the Settlement Agreement, contemporaneously with the execution of this Agreement, LNSLLC and LYNS shall issue to Sullivan a term note and related security agreement in the forms attached hereto as Exhibit B (collectively, the “New Sullivan Note”) which shall amend and restate the obligations to Sullivan for the LYNS  Principal Indebtedness to Sullivan. The parties acknowledge and agree that the LYNS Interest Indebtedness to Sullivan shall be paid by LNSLLC and/or LYNS on November 10, 2011 and that such payment obligation shall be unchanged by this Agreement. All subsequent principal and interest payments shall be made pursuant to the terms of the New Sullivan Note. The New Sullivan Note shall be secured by the following (a form of which is attached hereto as a part of Exhibit B): (i) Guaranty Agreement executed by Sherman Henderson in favor of Sullivan; (ii) Security Agreement whereby Rice-LY Ventures, LLC (“Rice-LY”) grants Sullivan a security interest in Rice-LY’s membership interest in LYH; and (iii) Security Agreement whereby LANJK, LLC (“LANJK”) grants Sullivan a security interest in LANJK’s membership interest in LYH.

6.           First Savings Bank.  LYNS has a line of credit with First Savings Bank, F.S.B. (“FSB”) in the approximate amount of $2.0 million for which LYH has pledged 2.0 million shares of Preferred Stock (represented by Stock Certificate 102) pursuant to that certain Stock Pledge Agreement dated January 21, 2011.  FSB has agreed to release this Preferred Stock as collateral provided that LYH pledge 2.0 million shares of Common Stock as replacement collateral.  Upon the execution of this Agreement, LYH shall grant a pledge of 2.0 million shares of Common Stock pursuant to a Stock Pledge Agreement in the form attached hereto as Exhibit C.

7.           Letter Agreement Holders. Letter Agreement Holders hereby consent to the transactions contemplated by this Agreement.  In connection with the amendment and restatement of the obligations to Sullivan set forth in the Settlement Agreement, each letter Agreement holder hereby acknowledges and agrees to the termination of (a) the security interest in the Letter Agreements granted by the Letter Agreement Holders to LNSLLC pursuant to Section 5 of the Settlement Agreement and (b) LNSLLC option to purchase the Letter Agreements pursuant to Section 6 of the Settlement Agreement.

8.           Representation with respect to the Common Stock and Preferred Stock. Except for the security interest in the Preferred Stock held by FSB, which is to be released by FSB pursuant to the terms of this Agreement and a Collateral Release Agreement in the form attached hereto as Exhibit D, LYH represents and warrants that it has valid title to and is the owner of the Common Stock and Preferred Stock, free and clear of any liens, security interests, encumbrances or claims. There are no outstanding subscription rights, warrants, options, conversion rights, or other rights or agreements of any kind whatsoever related to the Common Stock and Preferred Stock.

 

  

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9.           Representations and Warranties. Each of the parties to this Agreement represents, warrants and covenants as of the date hereof, as follows:

a.      Each party hereto has the requisite power, capacity and authority to enter into this Agreement. 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 Agreement is a valid and binding obligation of each party hereto; and

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 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.

10.           Singular and Plural Terms.  Wherever the context requires, the singular number shall include the plural, the plural the singular, and the use of any gender shall include all genders.

11.           Binding Effect.  This Agreement shall bind and inure to the benefit of the parties and their respective successors and permitted assigns.

12.           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. If any provision of this Agreement 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.

13.           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.

14.           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.

15.           Miscellaneous. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements in regard thereto. This Agreement cannot be amended except by an agreement in writing signed by the authorized representatives of all the parties and specifically referring to this Agreement. The paragraph headings set forth herein are for convenience purposes only and do not constitute a substantive part of this Agreement.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

  

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In Witness Whereof, the parties hereto have executed this Agreement on the date first written above.

	
LY Holdings, LLC

	  	  
	
By:

	
/s/ W. Brent Rice

	  	
W. Brent Rice

	  	
Authorized Party

	  	  
	
Lightyear Network Solutions, LLC

	  	  
	
By: 

	
/s/ Stephen M. Lochmueller

	  	
Stephen M. Lochmueller

	  	
Chief Executive Officer

	  	  
	
Lightyear Network Solutions, Inc.

	  	  
	
By:

	
/s/ Stephen M. Lochmueller

	  	
Stephen M. Lochmueller

	  	
Chief Executive Officer

	  	  
	  	
/s/ Chris Sullivan

	
Chris Sullivan

 

  

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Acknowledgement

Each of the following parties (each a Letter Agreement Holder as defined in the Settlement Agreement): (i) acknowledges that this Agreement modifies the terms of the Settlement Agreement (and any amendments thereto) related to the Letter Agreements (as defined in the Settlement Agreement) including, but not limited to, termination of (a) the security interest in the Letter Agreements granted by the Letter Agreement Holders to LNSLLC pursuant to Section 5 of the Settlement Agreement and (b) LNSLLC option to purchase the Letter Agreements pursuant to Section 6 of the Settlement Agreement; (ii) agrees to the terms of this Agreement and the transactions contemplated hereby; and (iii) acknowledges that this Agreement amends and restates, among other things, the financial obligations to Sullivan for the LYNS Indebtedness to Sullivan under the Settlement Agreement.

Dated: November 4, 2011

	  	
/s/ Ridgon O. Dees, III

	
Ridgon O. Dees, III

	  	  
	  	
/s/ Ron Carmicle

	
Ron Carmicle

	  	  
	
Rice Realty Company, LLC

	  	  
	
By: 

	
/s/ W. Brent Rice

	  	
W. Brent Rice

	  	
Authorized Party

	  	  
	
LANJK, LLC

	  	  
	
By:

	
/s/ J. Sherman Henderson III

	  	
J. Sherman Henderson III

	  	
Authorized Party

	  	  
	
CTS Equities Limited Partnership

	  	  
	
By:

	
/s/ Chris Sullivan

	  	
Chris Sullivan

	  	
Authorized Party

 

  

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EXHIBIT A

 

LYH Term Note and Related Security Documents

 

  

  

 

 

EXHIBIT B

 

New Sullivan Note and Related Security Documents

 

  

  

 

 

EXHIBIT C

 

Stock Pledge Agreement

 

  

  

 

 

EXHIBIT D

 

Collateral Release AgreementTERM NOTE

 

	
$ 1,223,203.02

	
Louisville, Kentucky

	  	
November 4, 2011

For Value Received, the undersigned, LY Holdings, LLC, a Kentucky limited liability company, with its main office located at 1901 Eastpoint Parkway, Louisville, Kentucky 40223 (the “Maker”), hereby promises and agrees to pay to the order of Lightyear Network Solutions, Inc., with its main office located at 1901 Eastpoint Parkway, Louisville, Kentucky 40223 (hereinafter the “Payee”), the principal sum equal to One Million Two Hundred Twenty Three Thousand Two Hundred Three Dollars ($1,223,203.02), together with all accrued interest thereon computed and payable in the manner set forth below.  The unpaid principal balance of, and all accrued interest on, this Note, unless sooner paid, shall be due and payable in full on November 4, 2016 (the “Maturity Date”).

 

From the date of this Note, the outstanding principal balance of this Note, as the same shall exist from time to time, shall bear interest at a rate equal to the one year LIBOR rate plus two percent (2%) per annum.

The obligations under this Note are secured by a security interest in certain assets of the Maker, specifically including the shares of common stock of the Payee.

On the Maturity Date, the Maker shall pay to the Payee (i) the entire outstanding principal balance of this Note plus (ii) all accrued but unpaid interest on this Note.

This Note may be prepaid in whole or in part at any time, without premium or penalty.  Any partial prepayment shall be applied first to accrued interest due and owing on this Note, with the balance being applied to principal; provided, however, no partial prepayment shall postpone the due date of any installment of interest or principal due on this Note unless and until this Note is paid and performed in full.

 

The occurrence of any of the following shall constitute an “Event of Default” under this Note:

 

(i)           Maker fails in the timely performance of any term, covenant or condition required to be kept, observed or performed under this Note;

 

(ii)          the commencement by the Maker of any bankruptcy, insolvency, arrangement, reorganization, receivership, assignment of the benefit of creditors or similar proceedings under any federal or state law; or (ii) the commencement against Maker of any bankruptcy, insolvency, arrangement, reorganization, receivership, assignment for the benefit of creditors or similar proceedings under any federal or state law by creditors of any of Maker, but only if such proceeding is not contested by Maker within ten (10) days and not dismissed or vacated within thirty (30) days of commencement, or any of the actions or relief sought in any such proceeding shall occur or be authorized by the Maker;

 

(iii)         a Change of Control shall occur with respect to the Maker;

 

  

  

 

 

(iv)          Maker shall cease to own at least 50% of the common stock of the Payee currently owned by the Maker as of the date of this Note; and

 

For purposes of this Note a “Change of Control” shall mean Maker:  (i) is dissolved or ceases to exist; (ii) sells all or substantially all of Maker’s assets; (iii) is a party to a merger or consolidation with another entity; (iv) changes its capital structures; (v) sells or transfers more than 50% of the outstanding membership interests in the Maker; and (vi) changes its corporate name or trade name without prior written notice to Payee.

Upon the occurrence of any Event of Default under this Note, the Payee or any subsequent holder(s) of this Note may, upon written notice or demand, declare all sums of principal and interest evidenced hereby to be accelerated and immediately due and payable in full, and the payee may thereupon exercise all rights and remedies granted and available to it in law or equity.

 

Upon any Event of Default under this Note, the Maker agrees to pay all costs of collection, and/or costs relating to modifying or further securing the Note, when incurred by the Payee, including, but not limited to, reasonable attorneys’ fees.  If any suit or action is instituted to enforce this Note, the Maker agrees to pay to the Payee, in addition to the costs and disbursements otherwise allowed by law, such sums as may be adjudged reasonable attorneys’ fees, court costs, and all other expenses in collecting or attempting to collect this Note.

 

This Note shall be governed and construed in accordance with the laws of the Commonwealth of Kentucky.

 

All installments of principal and/or interest on this Note shall be paid to the Payee in immediately available funds at the address above or to such other person or at such other place as may be designated in writing by Payee from time to time.

 

The invalidity or unenforceability of any provision of this Note in general or in any particular circumstance shall not affect the validity or enforceability of any one or more of the other provisions of this Note or the validity of such provision as applied to any other circumstance.  The Maker agrees that this Note and all provisions hereof shall be interpreted so as to give effect and validity to all the provisions hereof to the fullest extent permitted by law.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

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In Witness Whereof, the Maker has made and delivered this Note to the Payee as of the day, month, and year first above written.

 

	
LY Holdings, LLC

	  	  
	
By:

	
/s/ W. Brent Rice

	  	
W. Brent Rice

	  	
Authorized Party

	  	  
	  	
(“Maker”)

 

  

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