FIRST AMENDMENT TO SETTLEMENT AGREEMENT
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) XXXXX XXXXXXXX, an individual
resident of Nevada (“Xxxxxxxx”), (iv) LANJK, LLC, a Kentucky limited
liability company (“LANJK”), (v) RICE REALTY COMPANY, LLC, a
Kentucky limited liability company (“RRC”), (vi) XXXXXX X. XXXX, III, an
individual resident of California (“Xxxx”), (vii) CTS EQUITIES LIMITED
PARTNERSHIP, a Nevada limited partnership (“CTS”), and (viii) XXX XXXXXXXX, an individual
resident of Kentucky (“Xxxxxxxx,” collectively with LANJK, RRC, Xxxx, and CTS,
the “Letter Agreement Holders”).
RECITALS:
A. LYH,
LNS, Xxxxxxxx, 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 Xxxxxxxx Note from Xxxxxxxx in
exchange for the Settlement Payment, (2) LYH became indebted to LNS pursuant to
and in the amount of the Xxxxxxxx Note, and (3) the Letter Agreement Holders (a)
granted LNS security interests in the Letter Agreements to secure payment by LYH
of the Xxxxxxxx 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 Xxxxxxxx, LYH, and LNS concerning past due and
future commitment fees pursuant to Section 5 of the Xxxxxxxx Note and account
for accrued and unpaid interest due to Xxxxxxxx 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 Xxxxxxxx Note Section
5. By mutual mistake of Xxxxxxxx, LYH, and LNS, the Settlement
Agreement did not account for the intent of Xxxxxxxx, LYH, and LNS to cause the
right to receive past due and future commitment fees under Section 5 of the
Xxxxxxxx Note to remain with Xxxxxxxx. Thus, Xxxxxxxx, LYH, and LNS
agree that LNS did not purchase and shall not receive any commitment fee
pursuant to Section 5 of the Xxxxxxxx Note, whether due and owing to Xxxxxxxx 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:
Purchase and Assumption of
Xxxxxxxx Note. LNS hereby purchases and assumes any and all of
Xxxxxxxx’x rights and obligations under and in connection with the Xxxxxxxx
Note; provided, however, that LNS is not purchasing and shall not assume
Xxxxxxxx’x right to receive any Commitment Fee (as defined in the Xxxxxxxx Note)
pursuant to the Xxxxxxxx Note, whether past due as of the Effective Date or to
be incurred from and after the Effective Date.
Additionally,
Section 5 of the Xxxxxxxx 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 Xxxxxxxx pursuant to the Xxxxxxxx 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 Xxxxxxxx Note, LNS shall pay to Xxxxxxxx the
sum of Seven Million Seven Hundred Fifty Thousand and No/100 Dollars
($7,750,000) plus the accrued and unpaid interest due to Xxxxxxxx pursuant to
the Xxxxxxxx Note for the period beginning April 1, 2010, and ending on the
Effective Date (the “Settlement Payment”). Xxxxxxxx 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 Xxxxxxxx
(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.
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
Xxxxxxxx avoids the Agreement pursuant to this Section 2(c), the payments
Xxxxxxxx received from LNS hereunder shall be credited against the Xxxxxxxx
Note, the Xxxxxxxx Note shall revert to Xxxxxxxx, LNS will have no further
obligation to make any payments to Xxxxxxxx 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 Xxxxxxxx received from LNS
hereunder prior to the date the Xxxxxxxx Note reverts to Xxxxxxxx, which
promissory note shall include the same interest and payment terms as the
Xxxxxxxx Note.
4. Acknowledgement;
Waiver. Pursuant to the Settlement Agreement, LYH, LNS, and
the Letter Agreement Holders bargained for a settlement of Xxxxxxxx’x claims
arising from the Xxxxxxxx Note, and specifically from the payments LYH paid
after becoming past due. Xxxxxxxx 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 Xxxxxxxx
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 Xxxxxxxx Note or the Settlement Agreement that occurs
on or after the Effective Date.
5. Amendment of Xxxxxxxx Note
Section 2. Section 2 of the Xxxxxxxx Note is amended and
modified as follows:
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The
principal of, and all interest on, this Note shall be due and payable
without setoff, offset, credit, counterclaim or
defense.
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6. Amendment of Xxxxxxxx Note
Section 3. Section 3 of the Xxxxxxxx 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 Xxxxxxxx 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
Xxxxxxxx Note until it is paid in full.
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 Xxxxxxxx. 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 Xxxxxxxx under
the Xxxxxxxx Note. LYH, LNS, and Xxxxxxxx hereby agree that Xxxxxxxx
shall remain as the beneficiary of the Policy; provided, however, that (a)
Xxxxxxxx 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,
Xxxxxxxx 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.
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]
IN WITNESS WHEREOF, the
parties have executed this Amendment as of the day and date first above
written.
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LY
HOLDINGS, LLC
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By:
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/s/ J. Xxxxxxx Xxxxxxxxx
III
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Its:
Chief Executive Officer
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LIGHTYEAR
NETWORK SOLUTIONS, LLC
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By:
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/s/ J. Xxxxxxx Xxxxxxxxx
III
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Its:
Chief Executive Officer
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/s/ Xxxxx Xxxxxxxx
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XXXXX
XXXXXXXX
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LANJK,
LLC
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By:
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/s/ J. Xxxxxxx Xxxxxxxxx
III
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Its:
Manager
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RICE
REALTY COMPANY, LLC
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By:
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/s/ W. Xxxxx Xxxx
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Its:
Manager
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/s/ Xxxxxx X. Xxxx, III
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XXXXXX
X. XXXX, III
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CTS
EQUITIES LIMITED PARTNERSHIP
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By:
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/s/ Xxxxx Xxxxxxxx
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Its:
General Partner
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/s/ Xxxxxx X.
Xxxxxxxx
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XXX
XXXXXXXX
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