Exhibit 10.1

ASSIGNMENT AND AMENDMENT AGREEMENT dated as of June 27, 2006 (this “Assignment
and Amendment Agreement”), among LEVEL 3 FINANCING, INC., a Delaware corporation
(the “Borrower”); LEVEL 3 COMMUNICATIONS, INC., a Delaware corporation of which
the Borrower is a wholly owned subsidiary (“Level 3”); the financial
institutions and other entities that have delivered Existing Lender signature
pages hereto, in their respective capacities as parties to the Existing Credit
Agreement referred to below (the “Existing Lenders”); the Continuing Lenders (as
defined below) that have delivered Continuing Lender signature pages hereto; and
MERRILL LYNCH CAPITAL CORPORATION (“MLCC”), as administrative agent (in such
capacity, the “Administrative Agent”) and as collateral agent (in such capacity,
the “Collateral Agent”) under the Credit Agreement dated as of December 1, 2004,
among the Borrower, Level 3, the lenders referred to therein and the
Administrative Agent and Collateral Agent (the “Existing Credit Agreement”).

WHEREAS, the Borrower has requested, and the undersigned Lenders and the
Administrative Agent have agreed, upon the terms and subject to the conditions
set forth herein, that the Existing Credit Agreement be amended and restated as
provided herein effective upon satisfaction of the conditions set forth in
Section 10;

NOW, THEREFORE, the Borrower, Level 3, each of the undersigned Lenders and the
Administrative Agent hereby agree as follows:

SECTION 1. Defined Terms. Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Restated Credit Agreement
referred to below, except that references to “Loans” under the Existing Credit
Agreement shall have the meanings assigned to such terms in the Existing Credit
Agreement. As used in this Assignment and Amendment Agreement, the following
terms shall have the meanings assigned to them below:

“Additional Lenders” shall mean the Continuing Lenders that are not Existing
Lenders.

“Assigned Loans” has the meaning given in Section 6(c) of this Agreement.

“Assigning Lenders” shall mean the Departing Lenders and each Continuing Lender
whose outstanding Loans immediately following the effectiveness of the
assignments provided for in Section 7 will be less than the aggregate
outstanding amount of its Loans under the Existing Credit Agreement immediately
prior to such effectiveness as a result of this Assignment and Amendment
Agreement and the transactions provided for herein.

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“Consent Fee” shall mean an amount per $1,000 principal amount of Loans equal to
the excess of (i) the present value at such time of (A) $1,030 plus (B) all
interest that would have accrued on such principal amount from the date of such
prepayment through December 1, 2006, computed using a discount rate equal to the
Treasury Rate (as defined in the Existing Credit Agreement and determined as of
the Business Day prior to prepayment) plus 50 basis points, over (ii) $1,000.
For purposes of computing the interest that would have accrued on any amount
prepaid pursuant to this paragraph through December 1, 2006, it shall be assumed
that such amount would have accrued interest at all times from the date of such
prepayment through December 1, 2006 at a rate equal to the LIBO Rate (as defined
in the Existing Credit Agreement) for a notional Interest Period (as defined in
the Existing Credit Agreement) of three months commencing on the date of such
prepayment plus the Applicable Margin (as defined in the Existing Credit
Agreement) at the time in effect.

“Continuing Lenders” means (i) the Existing Lenders that are assigning less than
100% of their respective Loans under the Existing Credit Agreement and (ii) the
Additional Lenders.

“Departing Lenders” shall mean the Existing Lenders that are not Continuing
Lenders.

“Increasing Lenders” shall mean the Additional Lenders and each Continuing
Lender whose outstanding Loans immediately following the effectiveness of the
assignments provided for in Section 7 will be greater than the aggregate
outstanding amount of its Loans under the Existing Credit Agreement immediately
prior to such effectiveness as a result of this Assignment and Amendment
Agreement and the transactions provided for herein.

“Lenders” means the Existing Lenders and the Continuing Lenders.

“Retained Loans” has the meaning given in Section 6(c) of this Agreement.

SECTION 2. Amendment Effectiveness Date. (a) The transactions provided for in
Sections 3 through 9 shall be consummated at a closing (the “Closing”) to be
held on the Amendment Effectiveness Date at the offices of Cravath, Swaine &
Moore LLP, or at such other time and place as the parties hereto shall agree
upon.

(b) The “Amendment Effectiveness Date” shall be specified by the Company, and
shall be a date not later than July 11, 2006, as of which all the conditions set
forth or referred to in Section 10 shall have been satisfied. The Company shall
give not less than three Business Days’ written notice proposing the Amendment
Effectiveness Date to the Administrative Agent, which shall send copies of such
notice to the Lenders. This Assignment and Amendment Agreement shall terminate
at 5:00 p.m., New York City time, on July 11, 2006, if the Amendment
Effectiveness Date shall not have occurred at or prior to such time.

SECTION 3. Amendment and Restatement of the Existing Credit Agreement. (a) The
Existing Credit Agreement (including all Exhibits and Schedules thereto) is

 

2

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hereby amended and restated, effective as of the Amendment Effectiveness Date
and immediately following the effectiveness of the assignments provided for in
Section 7, into a credit agreement (including all exhibits and schedules
thereto) reading, subject to the next succeeding sentence, in its entirety as
set forth in Exhibit A hereto (the “Restated Credit Agreement”), and the
Administrative Agent and the Collateral Agent are hereby directed to enter into
such Loan Documents and to take such other actions as may be required to give
effect to the transactions contemplated hereby. Schedule 2.01 to the Restated
Credit Agreement, setting forth the respective commitments of the Continuing
Lenders, shall be prepared by the Administrative Agent on or prior to the
Amendment Effectiveness Date based on the Funding Memorandum described in
Section 6(c) of this Assignment and Amendment Agreement and, upon effectiveness
of the assignments, shall be deemed a part of the Restated Credit Agreement as
though included in Exhibit A hereto. From and after the effectiveness of such
amendment and restatement, the terms “Agreement”, “this Agreement”, “herein”,
“hereinafter”, “hereto”, “hereof” and words of similar import, as used in the
Restated Credit Agreement, shall, unless the context otherwise requires, refer
to the Existing Credit Agreement as amended and restated in the form of the
Restated Credit Agreement, and the term “Credit Agreement”, as used in the other
Loan Documents, shall mean the Restated Credit Agreement.

(b) On the Amendment Effectiveness Date, the Loans outstanding under the
Existing Credit Agreement will continue outstanding as Loans under the Restated
Credit Agreement. Notwithstanding anything to the contrary in the Existing
Credit Agreement, the Interest Period in effect for Assigned Loans will
terminate on the Amendment Effectiveness Date, and each such Loan will be
converted on such date into a Eurodollar Loan having an initial Interest Period
equal to the balance of the Interest Period in effect for the Retained Loans on
the Amendment Effectiveness Date and bearing interest at the LIBO Rate for
dollar deposits with a two-month maturity in effect two Business Days’ prior to
the Amendment Effectiveness Date.

SECTION 4. Delivery of Promissory Notes. On or prior to the Amendment
Effectiveness Date, each Lender holding one or more promissory notes issued
pursuant to the Existing Credit Agreement shall deliver such promissory notes to
the Administrative Agent. Each Lender that fails so to deliver any such
promissory note held by it hereby agrees to indemnify the Borrower for any loss,
cost or expense resulting from such failure. Upon the effectiveness of the
Restated Credit Agreement, the Administrative Agent shall release and deliver
such promissory notes to the Borrower for cancellation.1

SECTION 5. Fees and Expenses. On the Amendment Effectiveness Date, at or before
the effectiveness of the Restated Credit Agreement, the Company shall pay to the
Administrative Agent (a) for its own account, all fees and other amounts owed to
it under any agreement or instrument between it and the Borrower as of the
Amendment Effectiveness Date and (b) for the account of each applicable payee,
all expenses due and

 

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1 Continuing Lenders that wish to obtain new Notes may request them under
Section 2.03(e) of the Restated Credit Agreement.

 

3

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payable on or before the Amendment Effectiveness Date under the Loan Documents.
Notwithstanding anything to the contrary in the Existing Credit Agreement, the
Administrative Agent shall be responsible for paying its own expenses (including
counsel fees) associated with the amendment and restatement of the Existing
Credit Agreement.

SECTION 6. Representations and Warranties of Lenders; Funding Memorandum.
(a) Each Existing Lender that is a Departing Lender hereby represents and
warrants, severally and not jointly, as of the date set forth on its Existing
Lender signature page hereto, that (i) it is the owner of the principal amount
of Loans under the Existing Credit Agreement set forth on its Existing Lender
signature page in the box entitled “Principal Amount of Loans Owned”, (ii) it
has full power and authority to assign and transfer such Loans, (iii) it will
not transfer such Loans other than pursuant to this Assignment and Amendment
Agreement prior to the earlier of (x) the Amendment Effectiveness Date and
(y) the date of termination of this Assignment and Amendment Agreement in
accordance with Section 2(b) and (iv) when such Loans are assigned on the
Amendment Effectiveness Date, each assignee will acquire such Loans free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right, in each case created by or arising through such
Existing Lender.

(b) Each Existing Lender that is a Continuing Lender hereby represents and
warrants, severally and not jointly, that (i) it is the owner of the principal
amount of Loans under the Existing Credit Agreement set forth on its Existing
Lender signature page hereto in the box entitled “Principal Amount of Loans
Owned”, (ii) it will not transfer such Loans other than pursuant to this
Assignment and Amendment Agreement prior to the earlier of (x) the Amendment
Effectiveness Date and (y) the date of termination of this Assignment and
Amendment Agreement in accordance with Section 2(b), (iii) it has full power and
authority to assign and transfer the amount of such Loans, if any, that exceeds
the amount set forth on its Continuing Lender signature page in the box entitled
“Loan Commitment” and (iv) when such Loans, if any, are assigned on the
Amendment Effectiveness Date, each assignee will acquire good title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim or right, in each case created by or arising
through such Existing Lender.

(c) On or prior to the Amendment Effectiveness Date, the Administrative Agent
and the Borrower will prepare and agree upon a funding memorandum (the “Funding
Memorandum”) setting forth (i) the respective amounts of the Loans under the
Existing Credit Agreement that are held on the Amendment Effectiveness Date by
the Continuing Lenders and that will continue to be held by such Continuing
Lenders (such Loans being called “Retained Loans”), (ii) the respective amounts
of the Loans under the Existing Credit Agreement that will be assigned on the
Amendment Effectiveness Date pursuant to Section 7(a) by the Assigning Lenders
(such Loans being called the “Assigned Loans”), (iii) the respective amounts of
the Assigned Loans that will be purchased on the Amendment Effectiveness Date
pursuant to Section 7(a) by the Increasing Lenders and (iv) the respective
amounts to be paid and received by the parties hereto on the Amendment
Effectiveness Date pursuant to Section 9. The amounts of the Assigned Loans
under the Existing Credit Agreement that are to be

 

4

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assigned by each Assigning Lender and purchased by each Increasing Lender, as
set forth in the Funding Memorandum, will be such that, after giving effect to
such assignments and purchases, the Loans to be outstanding under the Restated
Credit Agreement will be held by the Continuing Lenders in the respective
amounts set forth in the Funding Memorandum.

SECTION 7. Assignment and Purchase. (a) Subject to the conditions set forth in
Section 10, effective on the Amendment Effectiveness Date, (i) each Assigning
Lender hereby sells, assigns and transfers to the Increasing Lenders, without
recourse, representation or warranty (other than as expressly set forth below in
this paragraph), at face amount, all its Assigned Loans, all interest accrued
thereon to the Amendment Effectiveness Date and not yet paid by the Borrower and
all its related rights and interests under the Existing Credit Agreement, and
(ii) each Increasing Lender hereby purchases and accepts from the Assigning
Lenders the Assigned Loans to be purchased by it, all interest accrued thereon
to the Amendment Effectiveness Date and not yet paid by the Borrower and all
such related rights and interests. The parties hereto acknowledge that each
Increasing Lender is purchasing its Assigned Loans and the interest accrued
thereon ratably from each Assigning Lender assigning Loans in accordance with
the amounts of Loans being sold by such Assigning Lenders and that each
Assigning Lender is assigning its Assigned Loans and the interest accrued
thereon ratably to each Increasing Lender in accordance with the amounts of
Loans being purchased by such Increasing Lenders. Notwithstanding the foregoing,
(A) the Existing Lenders shall retain the exclusive right under the Existing
Credit Agreement to receive and retain the payments referred to in clauses (a)
and (b) of Section 9, and (B) the Departing Lenders shall retain all their
rights arising out of the period prior to the Amendment Effectiveness Date under
the Existing Credit Agreement in respect of indemnification and expense
reimbursement obligations (including under Sections 2.08, 2.10 and 9.03 of the
Existing Credit Agreement, each as in effect immediately prior to the Amendment
Effectiveness Date), which shall survive the amendment of the Existing Credit
Agreement without prejudice to the rights of the Continuing Lenders under the
Restated Credit Agreement (including under such Sections). Each Assigning Lender
represents to each Increasing Lender that it owns the Loans and related
interests being assigned by it hereunder free and clear of any Liens and that it
has the power and all requisite authority to effect the assignments provided for
herein.

SECTION 8. Consents and Releases. The Borrower hereby consents and agrees to the
transactions contemplated by Section 7 and hereby releases, effective on the
Amendment Effectiveness Date, the Departing Lenders from all their obligations
under the Existing Credit Agreement. The Continuing Lenders and the Borrower
agree that, upon the effectiveness of the amendment and restatement provided for
in Section 3, the obligations of the Borrowers, the Administrative Agent and the
Continuing Lenders shall, except as expressly set forth herein, be limited to
those set forth in the Restated Credit Agreement.

 

5

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SECTION 9. Payments. (a) Subject to the conditions set forth in Section 10
hereof, on the Amendment Effectiveness Date:

(i) the Company shall pay to the Administrative Agent, in the manner required
under the Existing Credit Agreement, for the account of each Existing Lender, an
amount equal to the Consent Fee on the Loans held by such Existing Lender
immediately prior to the effectiveness of the assignments provided for in
Section 7;

(ii) each Increasing Lender shall pay to the Administrative Agent, in accordance
with Section 2.02 of the Restated Credit Agreement, amounts equal to the
principal amounts of the Assigned Loans to be purchased by such Increasing
Lender and all interest accrued thereon to the Amendment Effectiveness Date and
not yet paid by the Borrower, as set forth in the Funding Memorandum (the
obligations of the Increasing Lenders under this paragraph (ii) being several
and not joint); and

(iii) the Administrative Agent shall pay (A) to the Existing Lenders, (1) from
the funds received by it pursuant to clause (i) above, the Consent Fee in
respect of the Loans of such Existing Lenders immediately prior to the
effectiveness of the assignments provided for in Section 7; (B) to the Assigning
Lenders, from the funds received by it pursuant to clause (ii) above, the
aggregate principal amounts of the Assigned Loans of such Assigning Lenders
outstanding on the Amendment Effectiveness Date and all interest accrued thereon
to the Amendment Effectiveness Date and not yet paid by the Borrower.

(b) The Company agrees to pay to each Assigning Lender any breakage costs that
may result from the assignments provided for herein as provided, and within the
time period specified, in Section 2.09 of Existing Credit Agreement, and agrees
that solely for purposes of computing amounts due under such Section, such Loans
will be deemed to have been prepaid on the Amendment Effectiveness Date.

(c) In the event the Company shall specify a date as the Amendment Effectiveness
Date and the Amendment Effectiveness Date shall not occur on such date, the
Company shall indemnify each Lender for any loss or expense incurred by such
Lender as a result of the transactions to have been consummated by such Lender
on such proposed Amendment Effectiveness Date, in each case determined as set
forth in Section 2.09 of the Restated Credit Agreement in respect of any failure
to borrow or prepay any Loan.

SECTION 10. Conditions. The consummation of the transactions set forth in
Sections 3 through 9 of this Assignment and Amendment Agreement shall be subject
to the satisfaction (or waiver pursuant to Section 9.02 of the Restated Credit
Agreement) of the following conditions precedent:

(a) The Administrative Agent (or its counsel) shall have received from Level 3,
the Borrower, the Administrative Agent and each Continuing Lender either
(i) counterparts of the Amended and Restated Credit Agreement signed on behalf
of each such party or (ii) written evidence satisfactory to the Administrative
Agent (which may include a telecopy transmission of a signed signature page of
this Agreement) that each such party has signed a counterpart of the Amended and
Restated Credit Agreement.

 

6

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(b) The Administrative Agent shall have received favorable written opinions
(addressed to the Administrative Agent and the Lenders and dated the Amendment
Effectiveness Date) of (i) Willkie Farr & Gallagher LLP, counsel for the
Borrower, substantially in the form of Exhibit B-1, (ii) the Chief Legal Officer
or an Assistant General Counsel of Level 3, substantially in the form of
Exhibit B-2, and (iii) Bingham McCutchen LLP, regulatory counsel for the
Borrower, substantially in the form of Exhibit B-3, and covering such other
matters relating to the Loan Parties, the Loan Documents or the transactions
contemplated hereby as the Administrative Agent shall reasonably request.

(c) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of each Loan Party, the
authorization by the Loan Parties of the transactions contemplated hereby and
any other legal matters relating to the Loan Parties, the Loan Documents or the
transactions contemplated hereby, all in form and substance reasonably
satisfactory to the Administrative Agent and its counsel.

(d) The representations and warranties set forth in Article III of the Amended
and Restated Credit Agreement shall be true and correct in all material respects
on and as of the Amendment Effectiveness Date.

(e) The Borrower and the other Loan Parties shall be in compliance with all the
terms and provisions set forth herein and in the other Loan Documents on their
part to be observed or performed, and on the Amendment Effectiveness Date, no
Default shall have occurred and be continuing.

(f) The Administrative Agent shall have received a certificate, dated the
Amendment Effectiveness Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in paragraphs
(d) and (e) and the second sentence of paragraph (h) of this Section 10.

(g) The Administrative Agent shall have received all fees and other amounts due
and payable from the Borrower on or prior to the Amendment Effectiveness Date
under the Existing Credit Agreement or this Assignment and Amendment Agreement.

(h) Each of the Security Documents and Guarantee Agreements shall have been
amended to the extent (if any) necessary or advisable in the judgment of the
Collateral Agent in view of the transactions contemplated by this Assignment and
Amendment Agreement. The Guarantee and Collateral Requirement shall be
satisfied. The Administrative Agent shall have received an updated Effective
Date Perfection Certificate dated the Amendment Effectiveness Date and signed by
a Financial Officer, together with all attachments contemplated thereby.

 

7

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(i) Each Rating Agency shall have in effect a rating on the Loan, which may
include a rating on the Existing Credit Agreement.

(j) All the Existing Lenders under the Existing Credit Agreement shall have
become parties to this Assignment and Amendment Agreement.

Notwithstanding the foregoing, the transactions set forth in Sections 3 through
9 of this Assignment and Amendment Agreement shall not become effective unless
each of the foregoing conditions shall be satisfied (or waived pursuant to
Section 9.02 of the Restated Credit Agreement) at or prior to 5:00 p.m.,
New York City time, on July 11, 2006 (and, in the event such conditions are not
so satisfied or waived, the obligations of the Lenders to complete the
transactions provided for herein shall terminate at such time).

The Administrative Agent shall notify the Company and the Lenders of the
Amendment Effectiveness Date, and such notice shall be conclusive and binding.

SECTION 11. Effectiveness; Counterparts. This Assignment and Amendment Agreement
shall become effective when copies hereof which, when taken together, bear the
signatures of each of the Borrower, Level 3, MLCC and each of the Lenders shall
have been received by the Administrative Agent. This Assignment and Amendment
Agreement may not be amended nor may any provision hereof be waived except
pursuant to a writing signed by the Borrower, the Administrative Agent and the
Continuing Lenders. This Assignment and Amendment Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract. Delivery of an
executed counterpart of a signature page of this Assignment and Amendment
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Assignment and Amendment Agreement.

SECTION 12. No Novation. This Assignment and Amendment Agreement shall not
extinguish the Loans outstanding under the Existing Credit Agreement. Nothing
herein contained shall be construed as a substitution or novation of the Loans
outstanding under the Existing Credit Agreement, which shall remain outstanding
as modified hereby. Notwithstanding any provision of this Assignment and
Amendment Agreement, the provisions of Sections 2.08, 2.09, 2.10 and 9.03 of the
Existing Credit Agreement, as in effect immediately prior to the Amendment
Effectiveness Date, will continue to be effective as to all matters arising out
of or in any way related to facts or events existing or occurring prior to the
Amendment Effectiveness Date.

SECTION 13. Notices. All notices hereunder shall be given in accordance with the
provisions of Section 9.01 of the Restated Credit Agreement or, in the case of a
notice to any Departing Lender, in accordance with Section 9.01 of the Existing
Credit Agreement.

 

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SECTION 14. Applicable Law; Waiver of Jury Trial. (A) THIS ASSIGNMENT AND
AMENDMENT AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.

(B) EACH PARTY HERETO HEREBY AGREES AS SET FORTH IN SECTIONS 9.03, 9.09 and 9.10
OF THE RESTATED CREDIT AGREEMENT AS IF SUCH SECTIONS WERE SET FORTH IN FULL
HEREIN AND APPLIED, MUTATIS MUTANDIS, TO THE TRANSACTIONS PROVIDED FOR HEREIN.

[Signature Pages to Follow]

 

9

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LEVEL 3 FINANCING, INC., By  

/s/ Neil J. Eckstein

Name:   Neil J. Eckstein Title:   Senior Vice President LEVEL 3 COMMUNICATIONS,
INC., By  

/s/ Thomas C. Stortz

Name:   Thomas C. Stortz Title:   Secretary

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MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent and Collateral Agent,
by  

/s/ Stephen Paras

Name:   Stephen Paras Title:   Vice President

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[FORM OF EXISTING LENDER SIGNATURE PAGE]

 

              Principal

Amount of Loans Owned

$            

Dated:                     

 

[EXISTING LENDER] by  

 

Name:   Title:  

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

[FORM OF CONTINUING LENDER SIGNATURE PAGE]

 

Loan Commitment

$            

Dated:                     

 

[CONTINUING LENDER] by  

 

Name:   Title:  

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EXHIBITS

 

Exhibits     Exhibit A   Amended and Restated Credit Agreement Exhibit B-1  
Form of Opinion of Willkie Farr & Gallagher LLP, counsel for the Borrower
Exhibit B-2   Form of Opinion of Chief Legal Officer or an Assistant General
Counsel of Level 3 Exhibit B-3   Form of Opinion of Bingham McCutchen LLP,
regulatory counsel for the Borrower

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EXECUTION VERSION

AMENDED AND RESTATED

CREDIT AGREEMENT

dated as of

June 27, 2006

among

LEVEL 3 COMMUNICATIONS, INC.

LEVEL 3 FINANCING, INC.

The Lenders Party hereto

and

MERRILL LYNCH CAPITAL CORPORATION,

as Administrative Agent and Collateral Agent

 

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MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Lead Arranger and Bookrunner

MORGAN STANLEY & CO. INCORPORATED

and

CREDIT SUISSE SECURITIES (USA) LLC

as Co-Arrangers and Co-Syndication Agents

and

J.P. MORGAN SECURITIES INC.

and

WACHOVIA CAPITAL MARKETS, LLC

as Co- Documentation Agents

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TABLE OF CONTENTS

 

          Page   

ARTICLE I

 

Definitions

  

SECTION 1.01.

  

Defined Terms

  

SECTION 1.02.

  

Terms Generally

   39

SECTION 1.03.

  

Accounting Terms; GAAP

   40   

ARTICLE II

 

The Credits

  

SECTION 2.01.

  

Commitments; Loans and Borrowings

   40

SECTION 2.02.

  

Interest Elections

   40

SECTION 2.03.

  

Repayment of Loans; Evidence of Debt

   42

SECTION 2.04.

  

Prepayments and Offers to Prepay

   42

SECTION 2.05.

  

Fees

   44

SECTION 2.06.

  

Interest

   44

SECTION 2.07.

  

Alternate Rate of Interest

   45

SECTION 2.08.

  

Increased Costs

   45

SECTION 2.09.

  

Break Funding Payments

   46

SECTION 2.10.

  

Taxes

   47

 

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SECTION 2.11.

  

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

   48

SECTION 2.12.

  

Mitigation Obligations; Replacement of Lenders

   49   

ARTICLE III

 

Representations and Warranties

  

SECTION 3.01.

  

Organization; Powers

   50

SECTION 3.02.

  

Authorization; Enforceability

   50

SECTION 3.03.

  

Governmental Approvals; No Conflicts

   51

SECTION 3.04.

  

Financial Condition; No Material Adverse Change

   51

SECTION 3.05.

  

Properties

   52

SECTION 3.06.

  

Litigation and Environmental Matters

   52

SECTION 3.07.

  

Compliance with Laws and Agreements

   52

SECTION 3.08.

  

Investment and Holding Company Status

   52

SECTION 3.09.

  

Taxes

   53

SECTION 3.10.

  

ERISA

   53

SECTION 3.11.

  

Disclosure

   53

SECTION 3.12.

  

Subsidiaries

   53

SECTION 3.13.

  

Insurance

   53

SECTION 3.14.

  

Labor Matters

   53

 

ii

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SECTION 3.15.

  

Intellectual Property

   54

SECTION 3.16.

  

Security Interests

   54

SECTION 3.17.

  

FCC Compliance

   55

SECTION 3.18.

  

Qualified Credit Facility; Senior Indebtedness

   55

SECTION 3.19.

  

Solvency

   55   

ARTICLE IV

 

Conditions

     

ARTICLE V

 

Affirmative Covenants

  

SECTION 5.01.

  

Financial Statements and Other Information

   56

SECTION 5.02.

  

Notices of Material Events

   57

SECTION 5.03.

  

Information Regarding Collateral

   57

SECTION 5.04.

  

Existence; Conduct of Business

   58

SECTION 5.05.

  

Payment of Taxes

   58

SECTION 5.06.

  

Maintenance of Properties

   58

SECTION 5.07.

  

Insurance

   58

SECTION 5.08.

  

Casualty and Condemnation

   59

SECTION 5.09.

  

Annual Information Meeting

   59

 

iii

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SECTION 5.10.

  

Compliance with Laws

   59

SECTION 5.11.

  

Use of Proceeds

   59

SECTION 5.12.

  

Guarantee and Collateral Requirement; Further Assurances

   59

SECTION 5.13.

  

Guarantee Permit Condition and Collateral Permit Condition

   60   

ARTICLE VI

 

Negative Covenants

  

SECTION 6.01.

  

Limitation on Consolidated Debt

   60

SECTION 6.02.

  

Limitation on Indebtedness of the Borrower and Borrower Restricted Subsidiaries

   66

SECTION 6.03.

  

Limitation on Restricted Payments

   70

SECTION 6.04.

  

Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries

   74

SECTION 6.05.

  

Limitation on Liens

   76

SECTION 6.06.

  

Limitation on Sale and Leaseback Transactions

   78

SECTION 6.07.

  

Limitation on Asset Dispositions

   78

SECTION 6.08.

  

Limitation on Issuance and Sales of Capital Stock of Restricted Subsidiaries

   82

SECTION 6.09.

  

Transactions with Affiliates

   83

SECTION 6.10.

  

Limitation on Designations of Unrestricted Subsidiaries

   84

 

vi

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SECTION 6.11.

  

Limitation on Actions with respect to Existing Intercompany Obligations

   85

SECTION 6.12.

  

Covenant Suspension

   87

SECTION 6.13.

  

Consolidation, Merger, Conveyance, Transfer or Lease

   88   

ARTICLE VII

 

Events of Default

     

ARTICLE VIII

 

The Agent

     

ARTICLE IX

 

Miscellaneous

  

SECTION 9.01.

  

Notices

   98

SECTION 9.02.

  

Waivers; Amendments; Addition of Term or Revolving Tranches

   99

SECTION 9.03.

  

Expenses; Indemnity; Damage Waiver

   101

SECTION 9.04.

  

Successors and Assigns

   103

SECTION 9.05.

  

Survival

   106

SECTION 9.06.

  

Counterparts; Integration; Effectiveness

   106

SECTION 9.07.

  

Severability

   107

SECTION 9.08.

  

Right of Setoff

   107

SECTION 9.09.

  

Governing Law; Jurisdiction; Consent to Service of Process

   107

SECTION 9.10.

  

WAIVER OF JURY TRIAL

   108

 

v

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SECTION 9.11.

  

Headings

   108

SECTION 9.12.

  

Confidentiality

   108

SECTION 9.13.

  

Interest Rate Limitation

   109

SECTION 9.14.

  

Release of Subsidiary Loan Parties and Collateral

   109

SECTION 9.15.

  

Senior Debt Status

   110

SECTION 9.16.

  

No Fiduciary Relationship

   111

SECTION 9.17.

  

Amendment and Restatement; No Novation

   111

 

SCHEDULES:

    

Schedule 2.01

   — Amendment Effectiveness Date Loans

Schedule 3.12

   — Subsidiaries

Schedule 3.13

   — Insurance

EXHIBITS:

    

Exhibit A

  

— Form of Assignment and Assumption

Exhibit B

  

— Form of Effective Date Perfection Certificate

Exhibit C-1

  

— Guarantee Agreement

Exhibit C-2

  

— Collateral Agreement

Exhibit C-3

  

— Indemnity, Subrogation and Contribution Agreement

Exhibit D

  

— Form of Promissory Note

Exhibit E

  

— Intentionally Omitted

Exhibit F-1

  

— Floating Rate Proceeds Note Subordination Agreement

Exhibit F-2

  

— 10.75% Proceeds Note Subordination Agreement

Exhibit F-3

  

— 12.25% Proceeds Note Subordination Agreement

Exhibit G

  

— Loan Proceeds Note Collateral Agreement

Exhibit H

  

— Loan Proceeds Note

 

vi

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AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 27, 2006 among LEVEL 3
COMMUNICATIONS, INC., LEVEL 3 COMMUNICATIONS FINANCING INC., the LENDERS party
hereto, and MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent and
Collateral Agent.

WHEREAS the Borrower, Level 3, certain of the Lenders and Merrill Lynch Capital
Corporation, as Administrative Agent and Collateral Agent, are parties to the
Existing Credit Agreement, under which term loans in an aggregate principal
amount of $730,000,000 are outstanding.

WHEREAS the Borrower and Level 3 have requested that the Lenders and the Agent
amend and restate the Existing Credit Agreement in the form of this Agreement
and the Lenders continue to provide credit hereunder in the form of $730,000,000
of Loans.

WHEREAS the Agent and the Lenders are willing to amend and restate the Existing
Credit Agreement and the Lenders are willing to continue to provide such credit
to the Borrower, in each case on the terms and subject to the conditions set
forth herein.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Accreted Value” of any Indebtedness issued at a price less than the principal
amount at stated maturity, means, as of any date of determination, an amount
equal to the sum of (a) the issue price of such Indebtedness as determined in
accordance with Section 1273 of the Code or any successor provisions plus
(b) the aggregate of the portions of the original issue discount (the excess of
the amounts considered as part of the “stated redemption price at maturity” of
such Indebtedness within the meaning of Section 1273(a)(2) of the Code or any
successor provisions, whether denominated as principal or interest, over the
issue price of such Indebtedness) that shall theretofore have accrued pursuant
to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code)
from the date of issue of such Indebtedness to the date of determination, minus

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all amounts theretofore paid in respect of such Indebtedness, which amounts are
considered as part of the “stated redemption price at maturity” of such
Indebtedness within the meaning of Section 1273(a)(2) of the Code or any
successor provisions (whether such amounts paid were denominated principal or
interest).

“Acquired Debt” means, with respect to any specified Person, (i) Indebtedness of
any other Person existing at the time such Person merges with or into or
consolidates with or becomes a Subsidiary of such specified Person and
(ii) Indebtedness secured by a Lien encumbering any Property acquired by such
specified Person, which Indebtedness was not incurred in anticipation of, and
was outstanding prior to, such merger, consolidation or acquisition.

“Additional Tranche” means any tranche of commitments established or loans made
under this Agreement pursuant to Section 9.02(d).

“Administrative Agent” means Merrill Lynch Capital Corporation, in its capacity
as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affiliate” of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, “control” when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing. For purposes of
Sections 6.07 and 6.09 and the definition of “Telecommunications/IS Assets”
only, “Affiliate” shall also mean any beneficial owner of shares representing
10% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of Level 3 or of rights or warrants to purchase such Voting Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.

“Affiliate Transaction” has the meaning assigned to such term in Section 6.09.

“Agent” means Merrill Lynch Capital Corporation, in its capacities as
Administrative Agent and Collateral Agent.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus  1/2 of 1%. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective from and including the effective date of such change in the Prime
Rate or the Federal Funds Effective Rate, respectively.

 

2

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“Amendment Effectiveness Date” has the meaning assigned to such term in the
Assignment and Amendment Agreement. The Amendment Effectiveness Date occurred on
June 27, 2006.

“Annual Perfection Certificate” has the meaning assigned to such term in the
Collateral Agreement.

“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, as the case may be, the applicable rate per annum set forth
below under the caption “ABR Spread” or “Eurodollar Spread”, as the case may be,
based upon the Corporate Family Ratings assigned by the Rating Agencies to Level
3.

 

Rating

   ABR Spread    Eurodollar Spread

Category 1

B3/B- or higher

   1.75% per annum    2.75% per annum

Category 2

lower than B3/B-

   2.00% per annum    3.00% per annum

For purposes of the foregoing, (i) if either Rating Agency shall not have in
effect Corporate Family Rating for Level 3 (other than by reason of the
circumstances referred to in the last sentence of this definition), then such
Rating Agency shall be deemed to have established a rating in Category 2;
(ii) if the Corporate Family Ratings established or deemed to have been
established by the Rating Agencies for Level 3 shall fall within different
Categories, the Applicable Margin shall be based on the lower of the two
ratings; and (iii) if the Corporate Family Ratings established or deemed to be
established by the Rating Agencies for Level 3 shall be changed (other than as a
result of a change in the rating system of Moody’s or S&P), such change shall be
effective as of the date on which it is first announced by the applicable Rating
Agency. Each change in the Applicable Margin shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of Moody’s or S&P shall change, or if either such Rating Agency shall
cease to be in the business of providing corporate ratings, Level 3, the
Borrower, the Agent and the Lenders shall negotiate in good faith to amend this
definition to reflect such changed rating system or the unavailability of
ratings from such Rating Agency and, pending the effectiveness of any such
amendment, the Applicable Margin shall be determined by reference to the rating
most recently in effect prior to such change or cessation.

“Approved Fund” means (a) with respect to any Lender, a CLO managed by such
Lender or by an Affiliate of such Lender and (b) with respect to any Lender that
is a fund which invests in bank loans and similar extensions of credit, any
other fund that invests in bank loans and similar extensions of credit and is
managed by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.

 

3

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“Asset Disposition” means any transfer, conveyance, sale, lease, issuance or
other disposition by Level 3 or any Restricted Subsidiary in one or more related
transactions (including a consolidation or merger or other sale of any such
Restricted Subsidiary with, into or to another Person in a transaction in which
such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a
disposition by a Restricted Subsidiary to Level 3 or a Restricted Subsidiary or
by Level 3 to a Restricted Subsidiary) of (i) shares of Capital Stock or other
ownership interests of a Restricted Subsidiary (other than as permitted by
clause (v), (vi), (vii) or (ix) of Section 6.08), (ii) substantially all of the
assets of Level 3 or any Restricted Subsidiary representing a division or line
of business or (iii) other Property of Level 3 or any Restricted Subsidiary
outside of the ordinary course of business (excluding any transfer, conveyance,
sale, lease or other disposition of equipment that is obsolete or no longer used
by or useful to Level 3; provided, however, that Level 3 has delivered to the
Administrative Agent an Officers’ Certificate stating that such criteria are
satisfied); provided in each case that the aggregate consideration for such
transfer, conveyance, sale, lease or other disposition is equal to $5,000,000 or
more in any 12-month period. The following shall not be Asset Dispositions:
(i) Permitted Telecommunications Capital Asset Dispositions that comply with
clause (i) of the first paragraph of Section 6.07, (ii) when used with respect
to Level 3, any Asset Disposition permitted pursuant to Section 6.13 which
constitutes a disposition of all or substantially all of the assets of Level 3
and the Restricted Subsidiaries taken as a whole, (iii) Receivables sales
constituting Indebtedness under Qualified Receivables Facilities permitted to be
Incurred pursuant to Section 6.01 or Section 6.02 and (iv) any disposition that
constitutes a Permitted Investment or a Restricted Payment permitted by
Section 6.03.

“Assigned Loans” has the meaning assigned to such term in the Assignment and
Amendment Agreement.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee in the form of Exhibit A or any other form approved by
the Administrative Agent.

“Assignment and Amendment Agreement” shall mean the Assignment and Amendment
Agreement dated as of the date hereof among the Borrower, Level 3, the Lenders
(as defined therein) and the Agent.

“Attributable Value” means, as to any particular lease under which any Person is
at the time liable other than a Capital Lease Obligation, and at any date as of
which the amount thereof is to be determined, the total net amount of rent
required to be paid by such Person under such lease during the remaining term
thereof (including any period for which such lease has been extended) as
determined in accordance with GAAP, discounted from the last date of such
remaining term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation with like
term in accordance with GAAP. The net amount of rent required to be paid under
any such lease for any such period shall be the aggregate amount of rent payable
by the lessee with respect to such period after excluding amounts required to be
paid on account of insurance, taxes, assessments, utility, operating and labor
costs and

 

4

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similar charges. In the case of any lease which is terminable by the lessee upon
the payment of penalty, such net amount shall also include the lesser of the
amount of such penalty (in which case no rent shall be considered as required to
be paid under such lease subsequent to the first date upon which it may be so
terminated) or the rent which would otherwise be required to be paid if such
lease is not so terminated. “Attributable Value” means, as to a Capital Lease
Obligation, the principal amount thereof.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Board of Directors” of any Person means the board of directors of such Person
or the executive committee or similar body of such Person.

“Board Resolution” of any Person means a copy of a resolution certified by the
Secretary or an Assistant Secretary of such Person to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Administrative Agent.

“Borrower” means Level 3 Financing, Inc., a Delaware corporation.

“Borrower Debt Ratio” means the ratio of (a) the aggregate consolidated
principal amount (or, in the case of Indebtedness issued at a discount, the
then-Accreted Value) of Indebtedness of the Borrower and the Borrower Restricted
Subsidiaries (other than Indebtedness owed to Level 3 or a Sister Restricted
Subsidiary that is subordinated to the Loan Proceeds Note (if Level 3 LLC is the
obligor of such Indebtedness) or the Loan Proceeds Note Guarantee or the
Guarantee of the Obligations by the obligor on such Indebtedness), on a
consolidated basis, outstanding as of the most recent available quarterly or
annual balance sheet, after giving pro forma effect to the proposed Incurrence
of Indebtedness giving rise to such calculation and any other Indebtedness
Incurred or repaid since such balance sheet date and the receipt and application
of the net proceeds thereof, to (b) the sum of, without duplication,
(x) Consolidated Cash Flow Available for Fixed Charges of the Borrower and the
Borrower Restricted Subsidiaries for the four full fiscal quarters next
preceding such proposed Incurrence of Indebtedness for which consolidated
financial statements are available and (y) Consolidated Cash Flow Available for
Fixed Charges of Level 3 and the Sister Restricted Subsidiaries to the extent
attributable to Sister Restricted Subsidiaries that are Guarantors for such four
full fiscal quarters; provided, however, that if (A) since the beginning of such
four full fiscal quarter period the Borrower, any Borrower Restricted
Subsidiary, Level 3 or any Sister Restricted Subsidiary shall have made one or
more Asset Dispositions or an Investment (by merger or otherwise) in any
Borrower Restricted Subsidiary or Sister Restricted Subsidiary (or any Person
which becomes a Borrower Restricted Subsidiary or a Sister Restricted
Subsidiary) or an acquisition, merger or consolidation of Property which
constitutes all or substantially all of an operating unit of a business or a
line of business, or (B) since the beginning of such period any Person (that
subsequently became a Borrower Restricted Subsidiary or a Sister Restricted
Subsidiary or was merged with or into the Borrower, any Borrower Restricted
Subsidiary or any Sister Restricted Subsidiary since the beginning of such
period) shall have made such an Asset

 

5

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Disposition, Investment, acquisition, merger or consolidation, then Consolidated
Cash Flow Available for Fixed Charges for such four full fiscal quarter period
shall be calculated after giving pro forma effect to such Asset Dispositions,
Investments, acquisitions, mergers or consolidations as if such Asset
Dispositions, Investments, acquisitions, mergers or consolidations occurred on
the first day of such period. For purposes of this definition, whenever “pro
forma” effect is to be given to any Asset Disposition, Investment, acquisition,
merger or consolidation, the calculations shall be performed in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act, as
interpreted in good faith by the chief financial officer of Level 3, except that
any such pro forma calculation may include operating expense reductions for such
period attributable to the transaction to which pro forma effect is being given
(including, without limitation, operating expense reductions attributable to
execution or termination of any contract, reduction of costs related to
administrative functions, the termination of any employees or the closing (or
the approval by the Board of Directors of Level 3 of the closing) of any
facility) that have been realized or for which all steps necessary for the
realization of which have been taken or are reasonably expected to be taken
within twelve months following such transaction, provided, that such adjustments
are set forth in an Officer’s Certificate which states (i) the amount of such
adjustment or adjustments and (ii) that such adjustment or adjustments are based
on the reasonable good faith beliefs of the Officers executing such Officers’
Certificate.

“Borrower Restricted Subsidiary Supplemental Indenture” means any supplemental
indenture to the 10.75% Notes Indenture, the Floating Rate Notes Indenture or
the 12.25% Notes Indenture in substantially the form of the Level 3 LLC 10.75%
Notes Supplemental Indenture, the Level 3 LLC Floating Rate Notes Supplemental
Indenture or the Level 3 LLC 12.25% Notes Supplemental Indenture, as the case
may be, among the Borrower, Level 3, any Borrower Restricted Subsidiary (other
than Level 3 LLC) and the Trustee under the 10.75% Notes Indenture, the Floating
Rate Notes Indenture or the 12.25% Notes Indenture, as the case may be.

“Borrower Restricted Subsidiaries” means the Subsidiaries of the Borrower that
are Restricted Subsidiaries.

“Borrowing” means Loans made, converted or continued on the same date and, in
the case of Eurodollar Loans, as to which a single Interest Period is in effect.
The Retained Loans and the Assigned Loans outstanding on the Amendment
Effectiveness Date shall for all purposes hereof be considered to be a single
Borrowing; provided, that interest on the Retained Loans and the Assigned Loans
shall initially accrue and be payable as provided herein based on the LIBO Rates
for the respective initial Interest Periods applicable to the Retained Loans and
the Assigned Loans.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

 

6

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“Capital Lease Obligations” of any Person means the obligation of such Person to
pay rent or other payment amount under any lease of (or other Indebtedness
arrangement conveying the right to use) Property of such Person which obligation
is required to be classified and accounted for as a capital lease or a liability
on a balance sheet of such Person under GAAP (a “Capital Lease”). The stated
maturity of such obligation shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. The principal
amount of such obligation shall be the capitalized amount thereof that would
appear on the face of a balance sheet of such Person in accordance with GAAP.

“Capital Stock” of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person and any rights (other than debt securities convertible
or exchangeable into an equity interest), warrants or options to acquire an
equity interest in such Person.

“Cash Equivalents” means (i) Government Securities maturing, or subject to
tender at the option of the holder thereof, within two years after the date of
acquisition thereof, (ii) time deposits and certificates of deposit of any
commercial bank organized in the United States having capital and surplus in
excess of $500,000,000 or a commercial bank organized under the law of any other
country that is a member of the OECD having total assets in excess of
$500,000,000 (or its foreign currency equivalent at the time) with a maturity
date not more than one year from the date of acquisition, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with (x) any bank meeting
the qualifications specified in clause (ii) above or (y) any primary government
securities dealer reporting to the Market Reports Division of the Federal
Reserve Bank of New York, (iv) direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof maturing, or subject to tender at the option of
the holder thereof, within 180 days after the date of acquisition thereof;
provided, however, that at the time of acquisition, the long-term debt of such
state, political subdivision or public instrumentality has a rating of A- (or
higher) from S&P or A-3 (or higher) from Moody’s (or, if at any time neither S&P
nor Moody’s shall be rating such obligations, then an equivalent rating from
such other nationally recognized rating service acceptable to the Administrative
Agent), (v) commercial paper issued by the parent corporation of any commercial
bank organized in the United States having capital and surplus in excess of
$500,000,000 or a commercial bank organized under the laws of any other country
that is a member of the OECD having total assets in excess of $500,000,000 (or
its foreign currency equivalent at the time), and commercial paper issued by
others having one of the two highest ratings obtainable from either S&P or
Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such
obligations, then from such other nationally recognized rating service
acceptable to the Administrative Agent) and in each case maturing within one
year after the date of acquisition, (vi) overnight bank deposits and bankers’
acceptances at any commercial bank organized in the United States having capital
and surplus in excess of $500,000,000 or a commercial bank organized under the
laws of any other country that is a member of

 

7

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the OECD having total assets in excess of $500,000,000 (or its foreign currency
equivalent at the time), (vii) deposits available for withdrawal on demand with
a commercial bank organized in the United States having capital and surplus in
excess of $500,000,000 or a commercial bank organized under the laws of any
other country that is a member of the OECD having total assets in excess of
$500,000,000 (or its foreign currency equivalent at the time), (viii) debt
obligations issued by any Person; provided, however, that at the time of
acquisition, any such debt obligation has a rating of A (or higher) from S&P or
A-2 (or higher) from Moody’s (or, if at any time neither S&P nor Moody’s shall
be rating such debt organizations, then an equivalent rating from such other
nationally recognized rating service acceptable to the Administrative Agent) and
in each case maturing within one year after the date of acquisition, and
(ix) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (i) through (viii).

“Change of Control” means the occurrence of any of the following events:

(a) if any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act or any successor provisions to either of the
foregoing), including any group acting for the purpose of acquiring, holding,
voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under
the Exchange Act, other than any one or more of the Permitted Holders, becomes
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, except
that a person will be deemed to have “beneficial ownership” of all shares that
any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of 35%
or more of the total voting power of the Voting Stock of Level 3; provided,
however, that the Permitted Holders are the “beneficial owners” (as defined in
Rule 13d-3 under the Exchange Act, except that a person will be deemed to have
“beneficial ownership” of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, in the aggregate of a lesser percentage of the
total voting power of the Voting Stock of Level 3 than such other person or
group (for purposes of this clause (a), such person or group shall be deemed to
beneficially own any Voting Stock of a corporation (the “specified corporation”)
held by any other corporation (the “parent corporation”) so long as such person
or group beneficially owns, directly or indirectly, in the aggregate a majority
of the total voting power of the Voting Stock of such parent corporation); or

(b) the sale, transfer, assignment, lease, conveyance or other disposition,
directly or indirectly, of all or substantially all the assets of (i) Level 3
and the Restricted Subsidiaries or (ii) the Borrower and the Borrower Restricted
Subsidiaries, in each case considered as a whole (other than a disposition of
such assets as an entirety or virtually as an entirety to a Wholly Owned
Restricted Subsidiary or Level 3 or the Borrower, respectively, or one or more
Permitted Holders) shall have occurred; or

 

8

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(c) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of Level 3 (together with any
new directors whose election or appointment by such board or whose nomination
for election by the shareholders of Level 3 was approved by a vote of a majority
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Level 3 then in office; or

(d) the shareholders of Level 3 or the Borrower shall have approved any plan of
liquidation or dissolution of Level 3 or the Borrower, respectively.

“Change of Control Triggering Event” means the occurrence of both a Change of
Control and a Rating Decline with respect to the Loans within 30 days of each
other.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
Effective Date, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
Effective Date or (c) compliance by any Lender (or, for purposes of
Section 2.08(c), by any lending office of such Lender or by such Lender’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the Effective Date.

“CLO” means any entity (whether a corporation, partnership, trust or otherwise)
that is engaged in making, purchasing, holding or otherwise investing in bank
loans and similar extensions of credit in the ordinary course of its business
and is administered or managed by a Lender or an Affiliate of such Lender.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all “Collateral”, as defined in any applicable
Security Document. It is understood that the Collateral shall not include
Excluded Collateral (as defined in the Collateral Agreement).

“Collateral Agent” means Merrill Lynch Capital Corporation in its capacity as
collateral agent for the Secured Parties hereunder.

“Collateral Agreement” means the Collateral Agreement dated the Effective Date
among Level 3, the Borrower, the Subsidiary Loan Parties identified therein and
the Collateral Agent, a copy of which is attached as Exhibit C-2 to this
Agreement, as amended, restated, supplemented or otherwise modified from time to
time.

“Collateral Permit Condition” means, with respect to Level 3 LLC or any Material
LLC Subsidiary, that Level 3 LLC or such Material LLC Subsidiary, as the case
may be, has obtained all material (as determined in good faith by the General
Counsel of Level 3) authorizations and consents of Federal and State
Governmental Authorities

 

9

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required in order for it to become a Grantor under the Collateral Agreement and
to satisfy the Guarantee and Collateral Requirement insofar as the
authorizations and consents so permit.

“Commitment” means, with respect to each Lender, the commitment pursuant to
which such Lender or an assignor to such Lender made Loans on the Effective
Date. The aggregate amount of the Lenders’ Commitments on the Effective Date was
$730,000,000, subject to any increase under Section 9.02.

“Common Stock” of any Person means Capital Stock of such Person that does not
rank prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.

“Communications Act” means the Communications Act of 1934 and any similar or
successor Federal statute and the rules, regulations and published policies of
the FCC thereunder, all as amended and as the same may be in effect from time to
time.

“Consolidated Capital Ratio” means as of the date of determination the ratio of
(i) the aggregate amount of Indebtedness of Level 3 and its Restricted
Subsidiaries on a consolidated basis as at the date of determination to (ii) the
sum of (a) $2,024,000,000, (b) the aggregate net proceeds to Level 3 from the
issuance or sale of any Capital Stock (including Preferred Stock) of Level 3
other than Disqualified Stock subsequent to the Measurement Date, (c) the
aggregate net proceeds from the issuance or sale of Indebtedness of Level 3 or
any Restricted Subsidiary subsequent to the Measurement Date convertible or
exchangeable into Capital Stock of Level 3 other than Disqualified Stock, in
each case upon conversion or exchange thereof into Capital Stock of Level 3
subsequent to the Measurement Date and (d) the after-tax gain on the sale,
subsequent to the Measurement Date, of Special Assets to the extent such Special
Assets have been sold for cash, Cash Equivalents, Telecommunications/IS Assets
or the assumption of Indebtedness of Level 3 or any Restricted Subsidiary (other
than Indebtedness that is subordinated to the Loans or any applicable Loan
Proceeds Note Guarantee or any Guarantee of the Obligations) and release of
Level 3 and all Restricted Subsidiaries from all liability on the Indebtedness
assumed; provided, however, that, for purposes of calculation of the
Consolidated Capital Ratio, the net proceeds from the issuance or sale of
Capital Stock or Indebtedness described in clause (b) or (c) above shall not be
included to the extent (x) such proceeds have been utilized to make a Permitted
Investment under clause (i) of the definition thereof or a Restricted Payment or
(y) such Capital Stock or Indebtedness shall have been issued or sold to
Level 3, a Subsidiary of Level 3 or an employee stock ownership plan or trust
established by Level 3 or any such Subsidiary for the benefit of their
employees.

“Consolidated Cash Flow Available for Fixed Charges” for Level 3 and its
Restricted Subsidiaries or for the Borrower and the Borrower Restricted
Subsidiaries for any period means the Consolidated Net Income of Level 3 and its
Restricted Subsidiaries or the Borrower and the Borrower Restricted
Subsidiaries, as applicable, for such period increased by the sum of, to the
extent reducing such Consolidated Net Income for such

 

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period, (i) Consolidated Interest Expense of Level 3 and its Restricted
Subsidiaries or the Borrower and the Borrower Restricted Subsidiaries, as
applicable, for such period, plus (ii) Consolidated Income Tax Expense of
Level 3 and its Restricted Subsidiaries or the Borrower and the Borrower
Restricted Subsidiaries, as applicable, for such period, plus (iii) consolidated
depreciation and amortization expense and any other non-cash items (other than
any such non-cash item to the extent that it represents an accrual of or reserve
for cash expenditures in any future period) for Level 3 and its Restricted
Subsidiaries or for the Borrower and the Borrower Restricted Subsidiaries, as
applicable; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow Available for Fixed Charges (if positive) of any
Restricted Subsidiary or Borrower Restricted Subsidiary, as applicable
(calculated separately for such Restricted Subsidiary or Borrower Restricted
Subsidiary in the same manner as provided above for Level 3 or the Borrower, as
applicable) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to Level 3 or another Restricted
Subsidiary or to the Borrower or another Borrower Restricted Subsidiary, as
applicable, to the extent of such restrictions.

“Consolidated Income Tax Expense” for Level 3 and its Restricted Subsidiaries or
for the Borrower and the Borrower Restricted Subsidiaries for any period means
the aggregate amounts of the provisions for income taxes of Level 3 and its
Restricted Subsidiaries or the Borrower and the Borrower Restricted
Subsidiaries, as applicable, for such period calculated on a consolidated basis
in accordance with GAAP.

“Consolidated Interest Expense” for Level 3 and its Restricted Subsidiaries or
the Borrower and the Borrower Restricted Subsidiaries for any period means the
interest expense included in a consolidated income statement (excluding interest
income) of Level 3 and its Restricted Subsidiaries or the Borrower and the
Borrower Restricted Subsidiaries, as applicable, for such period in accordance
with GAAP, including without limitation or duplication (or, to the extent not so
included, with the addition of), (i) the amortization of Indebtedness discounts
and issuance costs, including commitment fees; (ii) any payments or fees with
respect to letters of credit, bankers’ acceptances or similar facilities;
(iii) net costs with respect to interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements (including fees);
(iv) Preferred Stock Dividends (other than dividends paid in shares of Preferred
Stock that is not Disqualified Stock) declared and paid or payable; (v) accrued
Disqualified Stock Dividends, whether or not declared or paid; (vi) interest on
Indebtedness guaranteed by Level 3 and its Restricted Subsidiaries or the
Borrower and the Borrower Restricted Subsidiaries, as applicable; (vii) the
portion of any Capital Lease Obligation or Sale and Leaseback Transaction paid
during such period that is allocable to interest expense; (viii) interest
Incurred in connection with investments in discontinued operations; and (ix) the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than Level 3 or a Restricted Subsidiary or the Borrower or
a Borrower Restricted Subsidiary, as applicable) in connection with Indebtedness
Incurred by such plan or trust.

 

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“Consolidated Net Income” for Level 3 and its Restricted Subsidiaries or the
Borrower and the Borrower Restricted Subsidiaries for any period means the net
income (or loss) of Level 3 and its Restricted Subsidiaries or the Borrower and
the Borrower Restricted Subsidiaries, as applicable, for such period determined
on a consolidated basis in accordance with GAAP; provided, however, that there
shall be excluded therefrom (a) for purposes of Section 6.03 only, the net
income (or loss) of any Person acquired by Level 3 or a Restricted Subsidiary or
the Borrower or a Borrower Restricted Subsidiary, as applicable, in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (b) the net income (or loss) of any Person that is not a Restricted
Subsidiary or a Borrower Restricted Subsidiary, as applicable, except to the
extent of the amount of dividends or other distributions actually paid to
Level 3 or a Restricted Subsidiary or to the Borrower or a Borrower Restricted
Subsidiary, as applicable, by such Person during such period (except, for
purposes of Section 6.03 only, to the extent such dividends or distributions
have been subtracted from the calculation of the amount of Investments to
support the actual making of Investments), (c) gains or losses realized upon the
sale or other disposition of any Property of Level 3 or its Restricted
Subsidiaries or the Borrower or the Borrower Restricted Subsidiaries, as
applicable, that is not sold or disposed of in the ordinary course of business
(it being understood that Permitted Telecommunications Capital Asset
Dispositions shall be considered to be in the ordinary course of business),
(d) gains or losses realized upon the sale or other disposition of any Special
Assets, (e) all extraordinary gains and extraordinary losses, determined in
accordance with GAAP, (f) the cumulative effect of changes in accounting
principles, (g) non-cash gains or losses resulting from fluctuations in currency
exchange rates, (h) any non-cash expense related to the issuance to employees or
directors of Level 3 or any Restricted Subsidiary or the Borrower or any
Borrower Restricted Subsidiary, as applicable, of (1) options to purchase
Capital Stock of Level 3 or such Restricted Subsidiary or the Borrower or such
Borrower Restricted Subsidiary, as applicable, or (2) other compensatory rights;
provided, in either case, that such options or rights, by their terms can be
redeemed at the option of the holder of such option or right only for Capital
Stock and (i) with respect to a Restricted Subsidiary or a Borrower Restricted
Subsidiary, as applicable, that is not a Wholly Owned Subsidiary any aggregate
net income (or loss) in excess of Level 3’s or any Restricted Subsidiary’s or
the Borrower’s or any Borrower Restricted Subsidiary’s, as applicable, pro rata
share of the net income (or loss) of such Restricted Subsidiary or Borrower
Restricted Subsidiary, as applicable, that is not a Wholly Owned Subsidiary;
provided further that there shall further be excluded therefrom the net income
(but not net loss) of any Restricted Subsidiary or any Borrower Restricted
Subsidiary, as applicable, that is subject to a restriction which prevents the
payment of dividends or the making of distributions to Level 3 or another
Restricted Subsidiary or to the Borrower or another Borrower Restricted
Subsidiary, as applicable, to the extent of such restriction.

“Consolidated Net Worth” of any Person means the stockholders’ equity of such
Person, determined on a consolidated basis in accordance with GAAP, less amounts
attributable to Disqualified Stock of such Person.

“Consolidated Tangible Assets” of any Person means the total amount of assets
(less applicable reserves and other properly deductible items) which under GAAP

 

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would be included on a consolidated balance sheet of such Person and its
Subsidiaries after deducting therefrom all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangibles, which
in each case under GAAP would be included on such consolidated balance sheet.

“Continuing Lenders” has the meaning assigned to such term in the Assignment and
Amendment Agreement.

“Corporate Family Rating” means, as of any date of determination, Level 3’s
(a) issuer credit rating as determined by S&P and (b) corporate family rating as
determined by Moody’s, in each case, in effect as of such date.

“Credit Facilities” means one or more credit agreements, loan agreements or
similar facilities (including any Additional Tranche), secured or unsecured,
providing for revolving credit loans, term loans and/or letters of credit,
including any Qualified Receivable Facility, entered into from time to time by
Level 3 and its Restricted Subsidiaries, or Purchase Money Debt, or Indebtedness
Incurred pursuant to Capital Lease Obligations, Sale and Leaseback Transactions,
or senior secured note issuances, and including any related notes, Guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as the same may be amended, supplemented, modified, restated or
replaced from time to time.

“Debt Tender Offer” means the tender offer for Existing Notes maturing in 2008
pursuant to the Offer to Purchase of Level 3 dated October 29, 2004.

“Default” means any event, act or condition which constitutes an Event of
Default or which upon the notice specified in Article VII, the lapse of time
specified in Article VII or both would, unless cured or waived, become an Event
of Default.

“Designated Grantor Subsidiary” means (a) BTE Equipment, LLC, (b) Level 3
Enhanced Services, LLC, (c) Level 3 International, Inc., (d) Level 3 LLC,
(e) [Intentionally omitted], (f) each other Material Subsidiary (other than the
Borrower or any Material LLC Subsidiary), (g) each Subsidiary of Level 3 that
directly or indirectly owns any Equity Interest in any Designated Grantor
Subsidiary and (h) at such time as it shall have satisfied the Collateral Permit
Condition, WilTel Communications Group, LLC and each Material LLC Subsidiary. No
Foreign Subsidiary shall at any time constitute a Designated Grantor Subsidiary.

“Designated Guarantor Subsidiary” means (a) BTE Equipment, LLC, (b) Level 3
Enhanced Services, LLC, (c) Level 3 International, Inc., (d) Level 3 LLC,
(e) [Intentionally omitted], (f) each other Material Subsidiary (other than the
Borrower or any Material LLC Subsidiary), (g) each Subsidiary of Level 3 that
directly or indirectly owns any Equity Interest in any Designated Guarantor
Subsidiary, (h) at such time as it shall have satisfied the Guarantee Permit
Condition, each Material LLC Subsidiary and (i) Wiltel Communications Group,
LLC. No Foreign Subsidiary shall at any time constitute a Designated Guarantor
Subsidiary.

 

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“Designation” and “Designation Amount” have the respective meanings specified in
Section 6.10.

“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Level 3’s reports and filings under the
Exchange Act filed since January 1, 2006 and prior to June 27, 2006 and
available on the Securities and Exchange Commission’s website on the internet at
www.sec.gov prior to June 27, 2006.

“Disqualified Stock” of any Person means any Capital Stock of such Person which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date; provided, however, that any Preferred Stock which
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require Level 3 or the Borrower, respectively, to
repurchase or redeem such Preferred Stock upon the occurrence of a change of
control occurring prior to the Maturity Date shall not constitute Disqualified
Stock if the change of control provisions applicable to such Preferred Stock are
no more favorable to the holders of such Preferred Stock than the provisions
applicable to the Loans as provided for in the definition of “Change of Control
Triggering Event”) and such Preferred Stock specifically provides that Level 3
or the Borrower, respectively, will not repurchase or redeem any such stock
pursuant to such provisions prior to the Borrower’s repayment of the Loans as
required by Section 2.04(f).

“Disqualified Stock Dividends” means all dividends with respect to Disqualified
Stock of Level 3 held by Persons other than a Wholly Owned Restricted
Subsidiary. The amount of any such dividend shall be equal to the quotient of
such dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and
0) applicable to Level 3 for the period during which such dividends were paid.

“dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign
Subsidiary.

“Domestic Restricted Subsidiary” means any Restricted Subsidiary other than
(a) a Foreign Restricted Subsidiary or (b) a Subsidiary of a Foreign Restricted
Subsidiary.

“Effective Date” means December 1, 2004.

“Effective Date Perfection Certificate” means a certificate in the form of
Exhibit B or any other form approved by the Administrative Agent.

“Effective Date Purchase Money Debt” means Purchase Money Debt outstanding on
the Effective Date; provided, however, that the amount of such Purchase Money
Debt when Incurred did not exceed 100% of the cost of the construction,

 

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installation, acquisition, lease, development or improvement of the applicable
Telecommunications/IS Assets.

“Effective Date Rating” means B3 in the case of Moody’s and CCC in the case of
S&P, which were the respective ratings assigned to the Loans by the Rating
Agencies on the Effective Date.

“Eligible Transferee” shall mean and include (i) a commercial bank, (ii) an
insurance company, a finance company, a financial institution or any fund that
invests in loans in the ordinary course of business and has total assets in
excess of $5,000,000 and (iii) any other financial institution reasonably
satisfactory to Level 3 and the Administrative Agent.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Level 3 or any Subsidiary of Level 3 directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
together with Level 3 is treated as a single employer under Section 414(b) or
(c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Level 3 or

 

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any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by Level 3 or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by Level 3 or any of its ERISA Affiliates of any
Withdrawal Liability; or (g) the receipt by Level 3 or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from Level 3 or any ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.

“Eurocurrency Reserve Requirements” means the aggregate of the maximum reserve
percentages (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Board and any other banking
authority to which United States commercial banks are subject and applicable to
“Eurocurrency Liabilities”, as such term is defined in Regulation D of the
Board, or any similar category of assets or liabilities relating to eurocurrency
fundings. Eurocurrency Reserve Requirements shall be adjusted automatically on
and as of the effective date of any change in any reserve percentage.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Exchange Act” means the Securities Exchange Act of 1934, as amended (or any
successor act), and the rules and regulations thereunder (or respective
successors thereto).

“Excess Proceeds” has the meaning specified in Section 6.07(c).

“Excluded Taxes” means, with respect to the Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) income or franchise taxes imposed on (or measured by)
its net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction described in clause (a) above
and (c) in the case of a Foreign Lender (other than an assignee pursuant to a
request by Level 3 under Section 2.12(b)), any withholding tax that (i) is in
effect and would apply to amounts payable to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or designates a new
lending office), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 2.10(a) or (ii) is attributable to such
Foreign Lender’s failure to comply with Section 2.10(e).

 

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“Executive Officer” means the chief executive officer, the president, the chief
financial officer, the secretary or the treasurer of Level 3.

“Existing Credit Agreement” means the Credit Agreement dated as of December 1,
2004 among the Borrower, Level 3, the lenders from time to time party thereto
and the Administrative Agent and Collateral Agent.

“Existing Notes” means Level 3’s 2 7/8% Convertible Senior Notes due 2010 in an
aggregate principal amount not to exceed $374,000,000, 11% Senior Notes due 2008
in an aggregate principal amount not to exceed $78,000,000, 11 1/4% Senior Notes
due 2010 in an aggregate principal amount not to exceed $96,000,000, 12 7/8%
Senior Discount Notes due 2010 in an aggregate principal amount at maturity not
to exceed $488,000,000, 10 3/4% Senior Notes due 2008 in an aggregate principal
amount not to exceed €59,000,000, 11 1/4% Senior Notes due 2010 in an aggregate
principal amount not to exceed €123,000,000, 9 1/8% Senior Notes due 2008 in an
aggregate principal amount not to exceed $398,000,000, 10 1/2% Senior Discount
Notes due 2008 in an aggregate principal amount at maturity not to exceed
$62,000,000, 6% Convertible Subordinated Notes due 2009 in an aggregate
principal amount not to exceed $362,000,000, 6% Convertible Subordinated Notes
due 2010 in an aggregate principal amount not to exceed $514,000,000, 9%
Convertible Senior Discount Notes due 2013 in an aggregate principal amount not
to exceed $254,000,000, 5 1/4% Convertible Senior Notes due 2011 in an aggregate
principal amount not to exceed $345,000,000, 10% Convertible Senior Notes due
2011 in an aggregate principal amount not to exceed $880,000,000, 11 1/2% Senior
Notes due 2010 in an aggregate principal amount not to exceed $692,000,000 and
3.5% Convertible Senior Notes due 2012 in an aggregate principal amount not to
exceed $345,000,000 and the Borrower’s 10.75% Senior Notes due 2011 in an
aggregate principal amount not to exceed $500,000,000, Floating Rate Senior
Notes due 2011 in an aggregate principal amount not to exceed $150,000,000 and
12.25% Senior Notes due 2013 in an aggregate principal amount not to exceed
$550,000,000.

“Fair Market Value” means, with respect to any Property, the price that could be
negotiated in an arm’s-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under pressure or
compulsion to complete the transaction. Unless otherwise specified herein, Fair
Market Value shall be determined by the Board of Directors of Level 3 acting in
good faith and shall be evidenced by a Board Resolution of Level 3 (except in
the case of the last paragraph under Section 6.07 delivered to the
Administrative Agent).

“FCC” means the United States Federal Communications Commission.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of

 

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the quotations for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.

“Financial Officer” means the chief financial officer, principal accounting
officer, vice president-finance, assistant treasurer, treasurer or controller of
Level 3 or other specified Person.

“Financing Inc. Indentures” means the 10.75% Notes Indenture, the Floating Rate
Notes Indenture and the 12.25% Notes Indenture.

“Financing Inc. Notes” means the 10.75% Notes, the Floating Rate Notes and the
12.25% Notes.

“Financing Inc. Notes Supplemental Indentures” means the Borrower Restricted
Subsidiary Supplemental Indentures and the Level 3 LLC Notes Supplemental
Indentures.

“Floating Rate Notes Indenture” means the Indenture dated as of March 14, 2006
among Level 3, the Borrower and The Bank of New York, as trustee, governing the
Floating Rate Notes.

“Floating Rate Notes” means the Borrower’s Floating Rate Notes due 2011 in an
aggregate principal amount outstanding on the date hereof of $150,000,000.

“Floating Rate Notes Supplemental Indentures” means the Borrower Restricted
Subsidiary Supplemental Indentures and the Level 3 LLC Floating Rate Notes
Supplemental Indenture.

“Floating Rate Proceeds Note” means the intercompany demand note dated March 14,
2006, in an initial principal amount equal to $150,000,000, issued by Level 3
LLC to the Borrower.

“Floating Rate Proceeds Note Subordination Agreement” means the Floating Rate
Proceeds Note Subordination Agreement dated March 14, 2006, a copy of which is
attached as Exhibit F-1 to this Agreement, among the Borrower, Level 3, Level 3
LLC and the Administrative Agent, as amended, restated, supplemented or
otherwise modified from time to time.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America. For purposes of this
definition, the United States of America, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Restricted Subsidiary” means any Restricted Subsidiary that is not
organized under the laws of the United States of America or any State thereof or
the District of Columbia.

 

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“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or the
District of Columbia.

“GAAP” has the meaning ascribed to such term in Section 1.03.

“Government Securities” means direct obligations of, or obligations fully and
unconditionally guaranteed or insured by, the United States of America or any
agency or instrumentality thereof for the payment of which obligations or
guarantee the full faith and credit of the United States is pledged and which
are not callable or redeemable at the issuer’s option (unless, for purposes of
the definition of “Cash Equivalents” only, the obligations are redeemable or
callable at a price not less than the purchase price paid by Level 3 or the
applicable Restricted Subsidiary, together with all accrued and unpaid interest
(if any) on such Government Securities).

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

“Grantor” means (1) Level 3 and (2) any other Person that becomes a Grantor
pursuant to the terms of the Collateral Agreement.

“Guarantee” by any Person means any obligation, direct or indirect, contingent
or otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Indebtedness of any other Person (the “primary obligor”) in
any manner, whether directly or indirectly, and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, including any such obligations arising by
virtue of partnership arrangements or by agreements to keep-well, (ii) to
purchase Property or services or to take-or-pay for the purpose of assuring the
holder of such Indebtedness of the payment of such Indebtedness, (iii) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
such Indebtedness or (iv) entered into for the purpose of assuring in any other
manner the obligee against loss in respect thereof, in whole or in part (and
“Guaranteed”, “Guaranteeing” and “Guarantor” shall have meanings correlative to
the foregoing); provided, however, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.

“Guarantee Agreement” means the Guarantee Agreement dated the Effective Date
among Level 3, the Subsidiary Loan Parties identified therein and the Agent, a
copy of which is attached as Exhibit C-1 to this Agreement, as amended,
restated, supplemented or otherwise modified from time to time.

 

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“Guarantee and Collateral Requirement” means, at any time, the requirement that:

(a) the Administrative Agent shall have received from Level 3 and each
Designated Guarantor Subsidiary either (i) a counterpart of the Guarantee
Agreement duly executed and delivered on behalf of such Person or (ii) in the
case of any Person that became or becomes a Designated Guarantor Subsidiary
after the Effective Date, a supplement to the Guarantee Agreement in the form
specified therein or other form acceptable to the Administrative Agent, duly
executed and delivered on behalf of such Designated Guarantor Subsidiary;

(b) the Administrative Agent shall have received from Level 3, the Borrower and
each Designated Grantor Subsidiary either (i) a counterpart of the Collateral
Agreement duly executed and delivered on behalf of such Person or (ii) in the
case of any Person that became or becomes a Designated Grantor Subsidiary after
the Effective Date, a supplement to the Collateral Agreement in the form
specified therein or other form acceptable to the Administrative Agent, duly
executed and delivered on behalf of such Designated Grantor Subsidiary;

(c) the Administrative Agent shall have received from Level 3, the Borrower,
each Designated Guarantor Subsidiary and each Designated Grantor Subsidiary
either (i) a counterpart of the Indemnity, Subrogation and Contribution
Agreement duly executed and delivered on behalf of such Person or (ii) in the
case of any Person that became or becomes a Designated Grantor Subsidiary or a
Designated Guarantor Subsidiary after the Effective Date, a supplement to the
Indemnity, Subrogation and Contribution Agreement in the form specified therein
or other form acceptable to the Administrative Agent, duly executed and
delivered on behalf of such Designated Guarantor Subsidiary or such Designated
Grantor Subsidiary, as applicable, unless such Person has previously duly
executed and delivered such supplement to the Collateral Agent;

(d) all Equity Interests of Material Subsidiaries directly owned by or on behalf
of Level 3, the Borrower or any Designated Grantor Subsidiary (other than Equity
Interests released from the Lien of the Collateral Agreement as provided in
Section 6.07, 6.08, 6.10 or 9.14) shall have been pledged pursuant to the
Collateral Agreement and, if such pledged Equity Interests are in certificated
form, the Collateral Agent shall have received the certificates representing
such pledged Equity Interests, together with undated stock powers or other
instruments of transfer with respect thereto endorsed in blank (provided that
none of the outstanding Equity Interests of any Foreign Subsidiary will be
required to be pledged other than 65% of the outstanding voting Equity Interests
of Level 3 Communications Canada Co.);

(e) the Loan Proceeds Note, each Offering Proceeds Note and the Parent
Intercompany Note shall have been pledged by the Borrower and Level 3, as
applicable, pursuant to the Collateral Agreement, and the Collateral Agent shall

 

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have received such promissory notes together with undated instruments of
transfer with respect thereto endorsed in blank; and

(f) all documents and instruments, including Uniform Commercial Code financing
statements, required by law or reasonably requested by the Collateral Agent to
be filed, registered or recorded to create the Liens intended to be created by
the Collateral Agreement or to perfect such Liens to the extent and with the
priority required by the Collateral Agreement shall have been filed, registered
or recorded or delivered to the Collateral Agent for filing, registration or
recording or arrangements therefor satisfactory to the Administrative Agent
shall have been made; provided, however, that it is understood that no Grantor
shall have any obligation to (i) provide a real property description for central
fixture filings or local fixture filings and (ii) other than upon request by the
Collateral Agent, file central or local fixture filings in the state of
Tennessee or any other state that implements a substantial recordation tax for
such filings.

The foregoing provisions shall not require the creation or perfection of pledges
of or security interests in particular assets if and for so long as, in the good
faith judgment of the Collateral Agent, the cost of creating or perfecting such
pledges or security interests in such assets shall be excessive in view of the
benefits to be obtained by the Lenders therefrom. The Collateral Agent may grant
extensions of time for the perfection of security interests in particular assets
(including extensions beyond the Effective Date for the perfection of security
interests in the assets of the Loan Parties on such date) where it determines
that perfection cannot be accomplished without undue effort or expense by the
time or times at which it would otherwise be required by this Agreement or the
Security Documents. The Guarantee and Collateral Requirement shall be satisfied
with respect to any Designated Guarantor Subsidiary or Designated Grantor
Subsidiary that is referred to in clause (f) or (h) of the definition of either
such term and that is not a Designated Guarantor Subsidiary or Designated
Grantor Subsidiary on the date hereof within 45 days after the date on which it
becomes a Designated Guarantor Subsidiary or Designated Grantor Subsidiary (or
in the case of a Material Subsidiary, 45 days from the date on which financial
statements are available that enable Level 3 to make the determination that such
Person has become a Material Subsidiary), but will not be required to be
satisfied prior to such time. Notwithstanding any provision of this definition,
(i) no Foreign Subsidiary shall be required to become a party to the Guarantee
Agreement, the Collateral Agreement or any other Security Document or to
Guarantee or create Liens on its assets to secure the Obligations, and (ii) no
Designated Guarantor Subsidiary or Designated Grantor Subsidiary that is
referred to in clause (f) or (h) of the definition of either such term and that
was not a Designated Guarantor Subsidiary or Designated Grantor Subsidiary on
the Effective Date shall be required to become a party to the Collateral
Agreement or any other Security Document or to Guarantee or create Liens on its
assets to secure the Obligations if Level 3 shall deliver to the Administrative
Agent a certificate of a legal officer of Level 3 stating that such actions
would in the good faith belief of such officer violate any applicable law or
regulation; provided, that the Borrower covenants and agrees that if it shall
deliver a certificate pursuant to the foregoing clause (ii) with respect to any
Designated Guarantor Subsidiary or Designated Grantor Subsidiary, it will
promptly notify the Collateral Agent in the event that at any

 

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time thereafter the circumstances preventing such Designated Guarantor
Subsidiary or Designated Grantor Subsidiary from becoming a party to the
Collateral Agreement or any other Security Document or Guaranteeing or creating
Liens on its assets to secure the Obligations shall no longer exist, and
following the delivery of such notice the provisions of this definition will at
all times apply as if no such certificate had been delivered with respect to
such Designated Guarantor Subsidiary or Designated Grantor Subsidiary. No Loan
Party shall be obligated to provide a lien on real property or interests in real
property, other than fixtures.

“Guarantee Permit Condition” means, with respect to any Material LLC Subsidiary,
that such Material LLC Subsidiary, as the case may be, has obtained all material
(as determined in good faith by the General Counsel of Level 3) authorizations
and consents of Federal and State Governmental Authorities required in order for
it to become a Guarantor under the Guarantee Agreement and to satisfy the
Guarantee and Collateral Requirement insofar as the authorizations and consents
so permit.

“Guarantor” means (1) Level 3 and (2) any other Person that becomes a Guarantor
pursuant to Section 6.01, Section 6.02, Section 6.13 or any other provisions of
this Agreement.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Agreement” means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.

“Incur” means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Indebtedness or other
obligation including the recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such Person
(and “Incurrence”, “Incurred” and “Incurring” shall have meanings correlative to
the foregoing); provided, however, that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an Incurrence of such Indebtedness and that neither the accrual of
interest nor the accretion of original issue discount shall be deemed an
Incurrence of Indebtedness. Indebtedness otherwise incurred by a Person before
it becomes a Subsidiary of Level 3 shall be deemed to have been Incurred at the
time at which it becomes a Subsidiary.

“Indebtedness” means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments,

 

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including obligations incurred in connection with the acquisition of Property,
(iii) every reimbursement obligation of such Person with respect to letters of
credit, bankers’ acceptances or similar facilities issued for the account of
such Person, (iv) every obligation of such Person issued or assumed as the
deferred purchase price of Property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (v) every Capital Lease Obligation of such
Person and all Attributable Value in respect of Sale and Leaseback Transactions
entered into by such Person, (vi) all obligations to redeem or repurchase
Disqualified Stock issued by such Person, (vii) the liquidation preference of
any Preferred Stock (other than Disqualified Stock, which is covered by the
preceding clause (vi)) issued by any Restricted Subsidiary of such Person,
(viii) every obligation under Hedging Agreements of such Person, and (ix) every
obligation of the type referred to in clauses (i) through (viii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed. The “amount” or “principal amount” of Indebtedness
at any time of determination as used herein represented by (a) any Indebtedness
issued at a price that is less than the principal amount at maturity thereof,
shall be, except as otherwise set forth herein, the Accreted Value of such
Indebtedness at such time or (b) in the case of any Receivables sale
constituting Indebtedness, the amount of the unrecovered purchase price (that
is, the amount paid for Receivables that has not been actually recovered from
the collection of such Receivables) paid by the purchaser (other than Level 3 or
a Wholly Owned Restricted Subsidiary of Level 3) thereof. The amount of
Indebtedness represented by an obligation under a Hedging Agreement shall be
equal to (x) zero if such obligation has been Incurred pursuant to clause (x) of
paragraph (b) of Section 6.01 or clause (viii) of paragraph (b) of Section 6.02
or (y) the notional amount of such obligation if not Incurred pursuant to such
clause. A Qualified Receivable Facility in the form of a Receivables purchase
facility will be deemed to constitute Indebtedness.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnity, Subrogation and Contribution Agreement” means the Indemnity,
Subrogation and Contribution Agreement among Level 3, the Borrower, the
Subsidiary Loan Parties and the Collateral Agent, a copy of which is attached as
Exhibit C-3 to this Agreement, as amended, restated, supplemented or otherwise
modified from time to time.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.02.

“Interest Payment Date” means (a) with respect to any Eurodollar Loan, the last
day of each Interest Period applicable to such Eurodollar Loan and, in the case
of a Eurodollar Loan with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period
and (b) in the case of any ABR Loan, March 31, June 30, September 30 and
December 31 in each year.

 

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“Interest Period” means, with respect to any Eurodollar Borrowing,
(a) initially, (i) with respect to any Retained Loans, the period commencing on
the date of the Borrowing of which such Loans are a part and ending on the
numerically corresponding day in the calendar month that is three months
thereafter, and (ii) with respect to Assigned Loans, the period commencing on
the Amendment Effectiveness Date and ending on the last day as the Interest
Period applicable to the Retained Loan as set forth in the preceding clause (i),
and (b) thereafter, each period commencing on the last day of the immediately
preceding Interest Period and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months thereafter, as the Borrower
may elect; provided, that (a) if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (b) any Interest Period that commences on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Borrowing shall be the
effective date of the most recent conversion or continuation of such Borrowing.

“Invested Capital” means the sum of (a) $500,000,000, (b) the aggregate net
proceeds received by Level 3 from the issuance or sale of any Capital Stock,
including Preferred Stock, of Level 3 but excluding Disqualified Stock,
subsequent to the Measurement Date, and (c) the aggregate net proceeds from the
issuance or sale of Indebtedness of Level 3 or any Restricted Subsidiary
subsequent to the Measurement Date convertible or exchangeable into Capital
Stock of Level 3 other than Disqualified Stock, in each case upon conversion or
exchange thereof into Capital Stock of Level 3 subsequent to the Measurement
Date; provided, however, that the net proceeds from the issuance or sale of
Capital Stock or Indebtedness described in clause (b) or (c) shall be excluded
from any computation of Invested Capital to the extent (i) utilized to make a
Restricted Payment or (ii) such Capital Stock or Indebtedness shall have been
issued or sold to Level 3, a Subsidiary of Level 3 or an employee stock
ownership plan or trust established by Level 3 or any such Subsidiary for the
benefit of their employees.

“Investment” by any Person means any direct or indirect loan, advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, purchase, redemption, retirement or acquisition
of Capital Stock, bonds, notes, debentures or other securities or evidence of
Indebtedness issued by, or Incurrence of, or payment on, a Guarantee of any
obligation of, any other Person; provided, however, that Investments shall
exclude commercially reasonable extensions of trade credit. The amount, as of
any date of determination, of any Investment shall be the original cost of such
Investment, plus the cost of all additions, as of such date, thereto and minus
the amount, as of such date, of any portion of such Investment repaid to such
Person in cash as a repayment of principal or a return of capital, as the case
may be (except to the extent such repaid amount has been included in
Consolidated Net Income of Level 3 and its Restricted Subsidiaries to support
the actual making of Restricted Payments), but without any other adjustments for
increases or decreases in value, or

 

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write-ups, write-downs or write-offs with respect to such Investment. In
determining the amount of any Investment involving a transfer of any Property
other than cash, such Property shall be valued at its Fair Market Value at the
time of such transfer.

“Investment Grade Rating” means a rating equal to or higher that Baa3 (or the
equivalent) by Moody’s and BBB- (or the equivalent) by S&P.

“Joint Venture” means a Person in which Level 3 or a Restricted Subsidiary holds
not more than 50% of the shares of Voting Stock.

“knowledge” means, when used in reference to Level 3 or any of its Subsidiaries,
the actual knowledge of any Executive Officer or any Financial Officer.

“Lenders” means the Continuing Lenders and any other Person that shall have
become a party hereto pursuant to an Assignment and Assumption or
Section 9.02(d), other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Assumption.

“Level 3” means Level 3 Communications, Inc., a Delaware corporation.

“Level 3 LLC” means Level 3 Communications, LLC, a Delaware limited liability
company.

“Level 3 LLC Floating Rate Notes Supplemental Indenture” means a supplemental
indenture substantially in the form of Exhibit G to the Floating Rate Notes
Indenture among the Borrower, Level 3, Level 3 LLC and the Trustee under the
Floating Rate Notes Indenture.

“Level 3 LLC Notes Supplemental Indentures” means the Level 3 LLC 10.75% Notes
Supplemental Indenture, the Level 3 LLC Floating Rate Notes Supplemental
Indenture and the Level 3 LLC 12.25% Notes Supplemental Indenture.

“Level 3 LLC 10.75% Notes Supplemental Indenture” means the Supplemental
Indenture dated as of December 1, 2004 among the Borrower, Level 3, Level 3 LLC
and the Trustee under the 10.75% Notes Indenture.

“Level 3 LLC 12.25% Notes Supplemental Indenture” means a supplemental indenture
substantially in the form of Exhibit G to the 12.25% Notes Indenture among the
Borrower, Level 3, Level 3 LLC and the Trustee under the 12.25% Notes Indenture.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Bloomberg’s British Banker’s Association rate page
(or on any successor or substitute page) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, as
the rate for dollar deposits with a maturity comparable to such Interest Period.
In the event that such rate is not available on such page at such time for any
reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such
Interest Period shall be determined by

 

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reference to any analogous page of another quotation service providing
quotations comparable to those currently provided on such page for interest
rates applicable to dollar deposits in the London interbank market, as
determined by the Administrative Agent.

“License” means any license granted by the FCC or any foreign telecommunications
regulatory body.

“Lien” means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien,
charge, easement (other than any easement not materially impairing usefulness),
encumbrance, preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such Property
(including any Capital Lease Obligation, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing and any Sale and Leaseback Transaction). For purposes of this
definition the sale, lease, conveyance or other transfer by Level 3 or any of
its Subsidiaries of, including the grant of indefeasible rights of use or
equivalent arrangements with respect to, dark or lit communications fiber
capacity or communications conduit shall not constitute a Lien. For the sake of
clarity, subordination and setoff rights do not constitute Liens.

“Loan Documents” means this Agreement, the Assignment and Amendment Agreement,
any promissory notes issued hereunder and the Security Documents.

“Loan Parties” means Level 3, the Borrower and the Subsidiary Loan Parties.

“Loan Proceeds Note” means the demand note dated the Effective Date in an
initial principal amount of $730,000,000 issued by Level 3 LLC to the Borrower
to evidence the loan in such amount made by the Borrower to Level 3 LLC on the
Effective Date.

“Loan Proceeds Note Collateral Agreement” means the Loan Proceeds Note
Collateral Agreement dated as of December 1, 2004 among the Borrower, Level 3
LLC and the Collateral Agent.

“Loan Proceeds Note Guarantee” means an unconditional Guarantee of the due and
punctual payment of the principal of and premium, if any, and interest on the
Loan Proceeds Note, when and as due, whether on demand, at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, and all
other monetary obligations of Level 3 LLC under the Loan Proceeds Note, in
substantially the form set forth in Exhibit G hereto.

“Loan Proceeds Note Guarantor” means any Restricted Subsidiary that provides a
Loan Proceeds Note Guarantee pursuant to Section 6.01, Section 6.02 or any other
provision of this Agreement.

 

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“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

“Material Adverse Effect” means (a) a material adverse effect on the business,
assets, operations or condition, financial or otherwise, of Level 3 and the
Restricted Subsidiaries taken as a whole that materially increases the
likelihood of a default in the payment of the Obligations when due or (b) a
material adverse effect on the rights of or benefits available to the Lenders
under any Loan Document.

“Material Indebtedness” means Indebtedness of any one or more of Level 3, the
Borrower or any other Restricted Subsidiary having an outstanding principal
amount of no less than $25,000,000 or its foreign currency equivalency at the
time individually or in the aggregate.

“Material LLC Subsidiary” means a Material Subsidiary that is a subsidiary of
Level 3 LLC.

“Material Subsidiary” means, at any time, any Restricted Subsidiary engaged in
the Telecommunications/IS Business (other than a Subsidiary (including, on the
Effective Date, Eldorado Marketing, Inc. (now known as Technology Spectrum,
Inc.) and Software Spectrum, Inc.) engaged primarily in the business of
(i) constructing, creating, developing or marketing software or (ii) computer
outsourcing, data center management, computer systems integration, or
reengineering of software for any purpose, as determined in good faith by the
Board of Directors of Level 3) accounting, or holding assets that accounted, for
more than 5% of Pro Forma Consolidated Cash Flow Available for Fixed Charges for
Level 3 and its Restricted Subsidiaries for the period of four fiscal quarters
most recently ended or more than 5% of Consolidated Tangible Assets at the end
of such period; provided that if at any time all Restricted Subsidiaries that
are not Material Subsidiaries shall account for more than 10% of Pro Forma
Consolidated Cash Flow Available for Fixed Charges for Level 3 and its
Restricted Subsidiaries for the period of four fiscal quarters most recently
ended or more than 10% of Consolidated Tangible Assets at the end of such
period, Level 3 shall designate sufficient Restricted Subsidiaries as “Material
Subsidiaries” to eliminate such excess (or, if Level 3 shall have failed to
designate such Restricted Subsidiaries within 10 Business Days, Restricted
Subsidiaries shall automatically be deemed designated as Material Subsidiaries
in descending order based on the amounts of their contributions to Consolidated
Tangible Assets until such excess shall have been eliminated), and the
Restricted Subsidiaries so designated or deemed designated shall for all
purposes of this Agreement constitute Material Subsidiaries. Notwithstanding the
foregoing, Level 3 Holdings, Inc. and its Subsidiaries shall not constitute
Material Subsidiaries unless they would otherwise satisfy the foregoing test and
they are engaged to any material extent in the Telecommunications/IS Business,
as determined in good faith by the Board of Directors of Level 3.

“Maturity Date” means December 1, 2011.

“Measurement Date” means April 28, 1998.

 

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“Moody’s” means Moody’s Investors Service, Inc. or, if Moody’s Investors
Service, Inc. shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Moody’s Investors Service Inc. ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business with
respect thereto shall not have been transferred to any successor Person, then
“Moody’s” shall mean any other nationally recognized rating agency (other than
S&P) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Administrative Agent
by a written notice given to the Borrower.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“Net Available Proceeds” from any Asset Disposition by any Person means cash or
cash equivalents received (including amounts received by way of sale or
discounting of any note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquirer of Indebtedness or other obligations relating to such Property)
therefrom by such Person, net of (i) all legal, title and recording taxes,
expenses and commissions and other fees and expenses (including appraisals,
brokerage commissions and investment banking fees) Incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a liability
as a consequence of such Asset Disposition, (ii) all payments made by such
Person or its Subsidiaries on any Indebtedness which is secured by such Property
in accordance with the terms of any Lien upon or with respect to such Property
or which must by the terms of such Lien, or in order to obtain a necessary
consent to such Asset Disposition or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or Joint
Ventures of such Person as a result of such Asset Disposition and
(iv) appropriate amounts to be provided by such Person or any Subsidiary
thereof, as the case may be, as a reserve in accordance with GAAP against any
liabilities associated with such Property and retained by such Person or any
Subsidiary thereof, as the case may be, after such Asset Disposition, including
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Disposition, in each case
as determined by the Board of Directors of such Person, in its reasonable good
faith judgment evidenced by a Board Resolution delivered to the Administrative
Agent; provided, however, that any reduction in such reserve within
twelve months following the consummation of such Asset Disposition will be, for
all purposes of this Agreement, treated as a new Asset Disposition at the time
of such reduction with Net Available Proceeds equal to the amount of such
reduction; provided further, however, that, in the event that any consideration
for a transaction (which would otherwise constitute Net Available Proceeds) is
required to be held in escrow pending determination of whether a purchase price
adjustment will be made, at such time as such portion of the consideration is
released to such Person or its Restricted Subsidiary from escrow, such portion
shall be treated for all purposes of this Agreement as a new Asset Disposition
at the time of such release from escrow with Net Available Proceeds equal to the
amount of such portion of consideration released from escrow.

 

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“Non-Telecommunications Subsidiary” means any Borrower Restricted Subsidiary not
engaged in any material respect in the Telecommunications/IS Business.

“Obligations” has the meaning assigned to such term in the Guarantee Agreement.

“OECD” means the Organization for Economic Cooperation and Development.

“Offering Proceeds Notes” means the 10.75% Proceeds Note, the Floating Rate
Proceeds Note and the 12.25% Proceeds Note.

“Offering Proceeds Note Guarantee” means an unconditional Guarantee of the due
and punctual payment of the principal of and premium, if any, and interest on
any Offering Proceeds Note, when and as due, whether on demand, at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, and all
other monetary obligations of Level 3 LLC under any Offering Proceeds Note.

“Offering Proceeds Note Subordination Agreements” means the Floating Rate
Proceeds Note Subordination Agreement, the 10.75% Proceeds Note Subordination
Agreement and the 12.25% Proceeds Note Subordination Agreement].

“Officers’ Certificate” of any Person means a certificate signed by the Chairman
of the Board of Directors of such Person, a Vice Chairman of the Board of
Directors of such Person, the President or a Vice President, and by the Chief
Financial Officer, the Chief Accounting Officer, the Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of such
Person and delivered to the Administrative Agent, which shall comply with this
Agreement.

“Opinion of Counsel” means an opinion of counsel reasonably acceptable to the
Administrative Agent (who may be counsel to Level 3 or the Borrower, including
an employee of Level 3 or the Borrower).

“Other Taxes” means any and all present or future recording, stamp, documentary,
excise, transfer, sales, property or similar taxes, charges or levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

“Parent Intercompany Note” means the intercompany demand note dated December 8,
1999, as amended and restated on October 1, 2003, in an initial principal amount
equal to $11,900,000,000, issued by Level 3 LLC to Level 3.

“Parent’s Indentures” means (a) the indenture dated as of April 28, 1998 between
Level 3 and IBJ Schroder Bank & Trust Company, as trustee, as amended or
supplemented from time to time in accordance therewith relating to the Level 3’s
9 1/8% Senior Notes due 2008, (b) the indenture dated as of February 29, 2000
between Level 3 and The Bank of New York, as trustee, as amended or supplemented
from time to time in accordance therewith relating to the Level 3’s 11% Senior
Notes due 2008, (c) the Euro

 

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Securities indenture dated as of February 29, 2000 between Level 3 and The Bank
of New York, as trustee, as amended or supplemented from time to time in
accordance therewith relating to the Level 3’s 10 3/4% Senior Euro Notes due
2008, (d) the indenture dated as of December 2, 1998 between Level 3 and IBJ
Schroder Bank & Trust Company, as trustee, as amended or supplemented from time
to time in accordance therewith relating to the Level 3’s 10 1/2% Senior
Discount Notes due 2008, (e) the indenture dated as of February 29, 2000 between
Level 3 and The Bank of New York, as trustee, as amended or supplemented from
time to time in accordance therewith relating to the Level 3’s 12 7/8% Senior
Discount Notes due 2010, (f) the indenture dated as of February 29, 2000 between
Level 3 and The Bank of New York, as trustee, as amended or supplemented from
time to time in accordance therewith relating to the Level 3’s 11 1/4% Senior
Notes due 2010, (g) the Euro Securities indenture dated as of February 29, 2000
between Level 3 and The Bank of New York, as trustee, as amended or supplemented
from time to time in accordance therewith relating to the Level 3’s 11 1/4%
Senior Euro Notes due 2010, (h) the indenture dated as of October 24, 2003
between Level 3 and The Bank of New York, as trustee, as amended or supplemented
from time to time in accordance therewith relating to the Level 3’s 9% Senior
Notes due 2013 and (i) the amended and restated indenture (Senior Debt
Securities) dated as of July 8, 2003 between Level 3 and The Bank of New York,
as trustee, as amended or supplemented from time to time in accordance
therewith, relating to Level 3’s 3.5% Convertible Senior Notes due 2012.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permitted Holders” means the members of Level 3’s board of directors on the
Measurement Date and their respective estates, spouses, ancestors, and lineal
descendants, the legal representatives of any of the foregoing and the trustees
of any bona fide trusts of which the foregoing are the sole beneficiaries or the
grantors, or any Person of which the foregoing “beneficially owns” (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934) at least 66 2/3% of the
total voting power of the Voting Stock of such Person.

“Permitted Hedging Agreement” of any Person means any Hedging Agreement entered
into with one or more financial institutions in the ordinary course of business
that is designed to protect such Person against fluctuations in interest rates
or currency exchange rates with respect to Indebtedness Incurred and not for
purposes of speculation and which, in the case of an interest rate agreement,
shall have a notional amount no greater than the principal amount at maturity
due with respect to the Indebtedness being hedged thereby.

“Permitted Investments” means (a) Cash Equivalents; (b) investments in prepaid
expenses; (c) negotiable instruments held for collection and lease, utility and
workers’ compensation, performance and other similar deposits; (d) loans,
advances or extensions of credit to employees and directors made in the ordinary
course of business and consistent with past practice; (e) obligations under
Permitted Hedging Agreements; (f) bonds, notes, debentures and other securities
received as a result of Asset Dispositions

 

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pursuant to and in compliance with Section 6.07; (g) Investments in any Person
as a result of which such Person becomes a Restricted Subsidiary;
(h) Investments made prior to the Measurement Date; (i) Investments made after
the Measurement Date in Persons engaged in the Telecommunications/IS Business in
an aggregate amount not to exceed Invested Capital; and (j) additional
Investments made after the Effective Date in an aggregate amount not to exceed
$200,000,000.

“Permitted Liens” means (a) Liens for taxes, assessments, governmental charges,
levies or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (b) other Liens incidental to the conduct of Level 3’s and its
Restricted Subsidiaries’ businesses or the ownership of its Property not
securing any Indebtedness of Level 3 or a Subsidiary of Level 3, and which do
not in the aggregate materially detract from the value of Level 3’s and its
Restricted Subsidiaries’ Property when taken as a whole, or materially impair
the use thereof in the operation of its business; (c) Liens, pledges and
deposits made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of statutory obligations;
(d) Liens, pledges or deposits made to secure the performance of tenders, bids,
leases, public or statutory obligations, sureties, stays, appeals, indemnities,
performance or other similar bonds and other obligations of like nature incurred
in the ordinary course of business (exclusive of obligations for the payment of
borrowed money, the obtaining of advances or credit or the payment of the
deferred purchase price of Property and which do not in the aggregate materially
impair the use of Property in the operation of the business of Level 3 and the
Restricted Subsidiaries taken as a whole); (e) zoning restrictions, servitudes,
easements, rights-of-way, restrictions and other similar charges or encumbrances
incurred in the ordinary course of business which, in the aggregate, do not
materially detract from the value of the Property subject thereto or materially
interfere with the ordinary conduct of the business of Level 3 or its Restricted
Subsidiaries; and (f) any interest or title of a lessor in the Property subject
to any lease other than a Capital Lease.

“Permitted Telecommunications Capital Asset Disposition” means the transfer,
conveyance, sale, lease or other disposition of optical fiber and/or conduit and
any related equipment used in a Segment (as defined) of Level 3’s communications
network that (i) constitute capital assets in accordance with GAAP and
(ii) after giving effect to such disposition, would result in Level 3 retaining
at least either (A) 24 optical fibers per route mile on such Segment as deployed
at the time of such disposition or (B) 12 optical fibers and one empty conduit
per route mile on such Segment as deployed at such time. “Segment” means
(x) with respect to Level 3’s intercity network, the through-portion of such
network between two local networks (i.e., Omaha to Denver) and (y) with respect
to a local network of Level 3 (i.e., Dallas), the entire through-portion of such
network, excluding the spurs which branch off the through-portion.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

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“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which Level 3 or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069 of ERISA be deemed
to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledged Equity Interests” has the meaning assigned to such term in the
Collateral Agreement.

“Preferred Stock” of any Person means Capital Stock of such Person of any class
or classes (however designated) that ranks prior, as to the payment of dividends
or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding-up of such Person, to shares of Capital
Stock of any other class of such Person.

“Preferred Stock Dividends” means all dividends with respect to Preferred Stock
of Restricted Subsidiaries held by Persons other than Level 3 or the Borrower or
a Wholly Owned Restricted Subsidiary or the Borrower, respectively. The amount
of any such dividend shall be equal to the quotient of such dividend divided by
the difference between one and the maximum statutory federal income rate
(expressed as a decimal number between 1 and 0) applicable to the borrower of
such Preferred Stock for the period during which such dividends were paid.

“Prime Rate” means the rate of interest quoted in The Wall Street Journal, Money
Rates Section as the Prime Rate (currently defined as the base rate on corporate
loans posted by at least 75% of the nation’s thirty (30) largest banks), as in
effect from time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
The Administrative Agent or any other Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.

“Pro Forma Consolidated Cash Flow Available for Fixed Charges” for Level 3 and
its Restricted Subsidiaries for any period means Consolidated Cash Flow
Available for Fixed Charges of Level 3 and its Restricted Subsidiaries for such
period, calculated in accordance with the definition thereof; provided, however,
that if (A) since the beginning of the applicable period Level 3 or one of its
Restricted Subsidiaries shall have made one or more Asset Dispositions or an
Investment (by merger or otherwise) in any Restricted Subsidiary (or any Person
which becomes a Restricted Subsidiary) or an acquisition, merger or
consolidation of Property which constitutes all or substantially all of an
operating unit of a business or a line of business, or (B) since the beginning
of such period any Person (that subsequently became a Restricted Subsidiary or
was merged with or into Level 3 or any Restricted Subsidiary since the beginning
of such period) shall have made such an Asset Disposition, Investment,
acquisition, merger or consolidation, then Consolidated Cash Flow Available for
Fixed Charges for such four full fiscal quarter period shall be calculated after
giving pro forma effect to such Asset Dispositions, Investments, acquisitions,
mergers or consolidations as if such Asset Dispositions, Investments,
acquisitions, mergers or consolidations occurred on the first day of such

 

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period. For purposes of this definition, whenever “pro forma” effect is to be
given to any Asset Disposition, Investment, acquisition, merger or
consolidation, the calculations shall be performed in accordance with Article 11
of Regulation S-X promulgated under the Securities Act, as interpreted in good
faith by the chief financial officer of Level 3, except that any such pro forma
calculation may include operating expense reductions for such period
attributable to the transaction to which pro forma effect is being given
(including, without limitation, operating expense reductions attributable to
execution or termination of any contract, reduction of costs related to
administrative functions, the termination of any employees or the closing (or
the approval by the Board of Directors of Level 3 of the closing) of any
facility) that have been realized or for which all steps necessary for the
realization of which have been taken or are reasonably expected to be taken
within twelve months following such transaction, provided that such adjustments
are set forth in an Officers’ Certificate which states (i) the amount of such
adjustment or adjustments and (ii) that such adjustment or adjustments are based
on the reasonable good faith beliefs of the Officers executing such Officers’
Certificate.

“Property” means, with respect to any Person, any interest of such Person in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including Capital Stock in, and other securities of, any other
Person. For purposes of any calculation required pursuant to this Agreement, the
value of any Property shall be its Fair Market Value.

“Proportionate Interest” in any issuance of Capital Stock of a Restricted
Subsidiary means a ratio (i) the numerator of which is the aggregate amount of
all Capital Stock of such Restricted Subsidiary beneficially owned by Level 3
and the Restricted Subsidiaries and (ii) the denominator of which is the
aggregate amount of Capital Stock of such Restricted Subsidiary beneficially
owned by all Persons (excluding, in the case of this clause (ii), any Investment
made in connection with such issuance).

“Purchase Money Debt” means Indebtedness (including Acquired Debt and Capital
Lease Obligations, mortgage financings and purchase money obligations) incurred
for the purpose of financing all or any part of the cost of construction,
installation, acquisition, lease, development or improvement by Level 3 or any
Restricted Subsidiary of any Telecommunications/IS Assets of Level 3 or any
Restricted Subsidiary and including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection therewith, as the
same may be amended, supplemented, modified or restated from time to time (it
being understood that Indebtedness meeting the foregoing requirements and
Incurred within 90 days after the construction, installation, acquisition,
lease, development or improvement of such Telecommunications/IS Assets by
Level 3 or such Restricted Subsidiary shall constitute Purchase Money Debt).

“Qualified Credit Facility” means one or more credit agreements, loan
agreements, or similar facilities, secured or unsecured, providing for revolving
credit loans, term loans and/or letters of credit, including any Qualified
Receivable Facility, entered into from time to time by Level 3 and its
Restricted Subsidiaries, and including any related notes, Guarantees, collateral
documents, instruments and agreements

 

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executed in connection therewith, as the same may be amended, supplemented,
modified, restated or replaced from time to time.

“Qualified Receivable Facility” means Indebtedness of Level 3 or any Subsidiary
of Level 3 Incurred from time to time on customary terms (as determined by
Level 3 in good faith) pursuant to either (x) credit facilities secured only by
Receivables, collections thereof and accounts established solely for the
collection of such Receivables or (y) Receivables purchase facilities, and
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, as the same may be amended,
supplemented, modified or restated from time to time.

“Rating Agencies” mean Moody’s and S&P.

“Rating Date” means the earlier of the date of public notice of the occurrence
of a Change of Control or of the intention of Level 3 to effect a Change of
Control.

“Rating Decline” shall be deemed to have occurred if, no later than 90 days
after the Rating Date (which period shall be extended so long as the rating of
the Loans is under publicly announced consideration for possible downgrade by
any of the Rating Agencies), either of the Rating Agencies assigns or reaffirms
a rating to the Loans that is lower than the applicable Effective Date Rating
(or the equivalent thereof). If, prior to the Rating Date, either of the ratings
assigned to the Loans by the Rating Agencies is lower than the applicable
Effective Date Rating, then a Rating Decline will be deemed to have occurred if
such rating is not changed by the 90th day following the Rating Date. A
downgrade within rating categories, as well as between rating categories, will
be considered a Rating Decline. A “Rating Decline” also shall be deemed to have
occurred if a Rating Decline (as defined in any indenture governing any of the
Existing Notes) shall have occurred in respect of any of the Existing Notes.

“Receivables” means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money and proceeds
and products thereof in each case generated in the ordinary course of business.

“refinancing” has the meaning assigned to such term in Sections 6.01(b)(viii)
and 6.02(b)(vi).

“Register” has the meaning assigned to such term in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the directors, officers, employees, agents, trustees, partners,
members and advisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Loans representing at
least a majority in aggregate principal amount of the total Loans outstanding
(or if the Loans have not yet been made, Lenders having commitments representing
at least a majority in aggregate principal amount of the total Commitments).

 

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“Restricted Payment” has the meaning specified in Section 6.03.

“Restricted Subsidiary” means (a) a Subsidiary of Level 3 or a Restricted
Subsidiary, including the Borrower, that has not been designated or classified
as an Unrestricted Subsidiary pursuant to and in compliance with Section 6.10
and (b) an Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary pursuant to such Section. Notwithstanding any other provision of this
Agreement, the Restricted Subsidiaries shall at all times include the Borrower
and Level 3 LLC.

“Retained Loans” has the meaning assigned to such term in the Assignment and
Amendment Agreement.

“Revocation” has the meaning specified in Section 6.10.

“S&P” means Standard & Poor’s Ratings Service or, if Standard & Poor’s Rating
Service shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Standard & Poor’s Ratings Service ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business with
respect thereto shall not have been transferred to any successor Person, then
“S&P” shall mean any other nationally recognized rating agency (other than
Moody’s) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Administrative Agent
by a written notice given to the Borrower.

“Sale and Leaseback Transaction” of any Person means any direct or indirect
arrangement pursuant to which any Property is sold or transferred by such Person
or a Restricted Subsidiary of such person and is thereafter leased back from the
purchaser or transferee thereof by such Person or one of its Restricted
Subsidiaries. The stated maturity of such arrangement shall be the date of the
last payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.

“Security Documents” means the Guarantee Agreement, the Collateral Agreement,
the Indemnity, Subrogation and Contribution Agreement, the Loan Proceeds Note
Collateral Agreement and each other security agreement or other instrument or
document executed and delivered pursuant to Section 5.12 to secure any of the
Obligations.

“Security Interest” has the meaning assigned to such term in the Collateral
Agreement.

“Sister Restricted Subsidiary” means a Restricted Subsidiary that is not the
Borrower or a Borrower Restricted Subsidiary.

“Significant Subsidiary” means any Subsidiary that would be a “Significant
Subsidiary” of Level 3 within the meaning of Rule 1-02 under Regulation S-X
promulgated by the Securities and Exchange Commission.

 

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“Special Assets” means (a) the Capital Stock or assets of RCN Corporation (and
any intermediate holding companies or other entities formed solely for the
purpose of owning such Capital Stock or assets) owned, directly or indirectly,
by Level 3 or any Restricted Subsidiary on the Measurement Date, and (b) any
Property, other than cash, Cash Equivalents and Telecommunications/IS Assets,
received as consideration for the disposition after the Measurement Date of
Special Assets (as contemplated by the first proviso in Section 6.07).

“Subordinated Debt” means Indebtedness of Level 3 (a) that is not secured by any
Lien on or with respect to any Property now owned or acquired after the
Measurement Date and (b) as to which the payment of principal of (and premium,
if any) and interest and other payment obligations in respect of such
Indebtedness shall be subordinate to the prior payment in full in cash of the
Guarantee of the Obligations by Level 3 to at least the following extent: (i) no
payments of principal of (or premium, if any) or interest on or otherwise due
(including by acceleration or for additional amounts) in respect of, or
repurchases, redemptions or other retirements of, such Indebtedness
(collectively, “payments of such Indebtedness”) may be permitted for so long as
any default (after giving effect to any applicable grace periods) in the payment
of principal (or premium, if any) or interest on the Loans exists, including as
a result of acceleration; (ii) in the event that any other Default exists with
respect to the Loans, upon notice by Lenders holding 25% or more in aggregate
outstanding principal amount of the Loans to the Administrative Agent, the
Administrative Agent shall have the right to give notice to Level 3 and the
holders of such Indebtedness (or trustees or agents therefor) of a payment
blockage, and thereafter no payments of such Indebtedness may be made for a
period of 179 days from the date of such notice; provided, however, that not
more than one such payment blockage notice may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to the Loans
during such period; (iii) if payment of such Indebtedness is accelerated when
any principal amount of the Loans is outstanding, no payments of such
Indebtedness may be made until three Business Days after the Administrative
Agent receives notice of such acceleration and, thereafter, such payments may
only be made to the extent the terms of such Indebtedness permit payment at that
time; and (iv) such Indebtedness may not (x) provide for payments of principal
of such Indebtedness at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance, retirement
or repurchase thereof by Level 3 (including any redemption, retirement or
repurchase which is contingent upon events or circumstances but excluding any
retirement required by virtue of acceleration of such Indebtedness upon an event
of default thereunder), in each case prior to the Maturity Date or (y) permit
redemption or other retirement (including pursuant to an offer to purchase made
by Level 3) of such Indebtedness at the option of the holder thereof prior to
the Maturity Date, other than, in the case of clause (x) or (y), any such
payment, redemption or other retirement (including pursuant to an offer to
purchase made by Level 3) which is conditioned upon (A) a change of control of
Level 3 pursuant to provisions substantially similar to those described in the
definition of “Change of Control Triggering Event” (and which shall provide that
such Indebtedness will not be repurchased pursuant to such provisions prior to
the Borrower’s repayment of the Loans required to be repaid by the Borrower
pursuant to the provisions described in the definition of “Change of Control
Triggering Event”) or (B) a sale or other disposition of

 

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assets pursuant to provisions substantially similar to those described in
Section 6.07 (and which shall provide that such Indebtedness will not be
repurchased pursuant to such provisions prior to the Borrower’s repayment of the
Loans required to be repaid by the Borrower pursuant to Section 6.07).

“Subordinated Indentures” means (a) the indenture dated as of September 20, 1999
between Level 3 and IBJ Whitehall Bank & Trust Company, as trustee, as
supplemented by the Supplement dated September 20, 1999 and as amended or
supplemented from time to time in accordance therewith relating to Level 3’s
6.0% Convertible Subordinated Notes due 2009 and (b) the indenture dated as of
September 20, 1999 between Level 3 and IBJ Whitehall Bank & Trust Company, as
trustee, as supplemented by the Second Supplement dated February 29, 1999 and as
amended or supplemented from time to time in accordance therewith relating to
Level 3’s 6.0% Convertible Subordinated Notes due 2010.

“Subsidiary” of any Person means (i) a corporation more than 50% of the combined
voting power of the outstanding Voting Stock of which is owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person
or by such Person and one or more Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof.

“Subsidiary Loan Party” means, as applicable, any Subsidiary of Level 3 that has
guaranteed the Obligations or has assigned and pledged any of its assets to
secure the Obligations pursuant to any Security Document.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Telecommunications/IS Assets” means (a) any Property (other than cash, cash
equivalents and securities) to be owned by Level 3 or any Restricted Subsidiary
and used in the Telecommunications/IS Business; (b) for purposes of
Sections 6.01, 6.02 and 6.05 only, Capital Stock of any Person; or (c) for all
other purposes of this Agreement, Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
Level 3 or another Restricted Subsidiary from any Person other than an Affiliate
of Level 3; provided, however, that, in the case of clause (b) or (c), such
Person is primarily engaged in the Telecommunications/IS Business.

“Telecommunications/IS Business” means the business of (i) transmitting, or
providing (or arranging for the providing of) services relating to the
transmission of, voice, video or data through owned or leased transmission
facilities, (ii) constructing, creating, developing or marketing communications
networks, related network transmission equipment, software and other devices for
use in a communications business, (iii) computer outsourcing, data center
management, computer systems integration, reengineering of computer software for
any purpose (including, without

 

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limitation, for the purposes of porting computer software from one operating
environment or computer platform to another or to address issues commonly
referred to as “Year 2000 issues”) or (iv) evaluating, participating or pursuing
any other activity or opportunity that is primarily related to those identified
in (i), (ii) or (iii) above; provided, that the determination of what
constitutes a Telecommunications/IS Business shall be made in good faith by the
Board of Directors of Level 3.

“10.75% Notes Indenture” means the Indenture dated as of October 1, 2003 among
Level 3, the Borrower and The Bank of New York, as trustee, governing the 10.75%
Notes.

“10.75% Notes” means the Borrower’s 10.75% Senior Notes due 2011 in an aggregate
principal amount outstanding on the date hereof of $500,000,000.

“10.75% Notes Supplemental Indentures” means the Borrower Restricted Subsidiary
Supplemental Indentures and the Level 3 LLC 10.75% Notes Supplemental Indenture.

“10.75% Offering Proceeds Note” means the intercompany demand note dated
October 1, 2003, in an initial principal amount equal to $500,000,000, issued by
Level 3 LLC to the Borrower.

“10.75% Proceeds Note Subordination Agreement” means the 10.75% Proceeds Note
Subordination Agreement dated the Effective Date among the Borrower, Level 3,
Level 3 LLC and the Administrative Agent, a copy of which is attached as Exhibit
F-3 to this Agreement, as amended, restated, supplemented, or otherwise modified
from time to time.

“Transactions” means the execution, delivery and performance by each Loan Party
of the Loan Documents to which it is to be a party, the borrowing of the Loans
and the use of the proceeds thereof.

“12.25% Notes Indenture” means the Indenture dated as of March 14, 2006 among
Level 3, the Borrower and The Bank of New York, as trustee, governing the 12.25%
Notes.

“12.25% Notes” means the Borrower’s 12.25% Senior Notes due 2013 in an aggregate
principal amount outstanding on the date hereof of $550,000,000.

“12.25% Notes Supplemental Indentures” means the Borrower Restricted Subsidiary
Supplemental Indentures and the Level 3 LLC 12.25% Notes Supplemental Indenture.

“12.25% Offering Proceeds Note” means the intercompany demand note dated
April 6, 2006, in an initial principal amount equal to $550,000,000, issued by
Level 3 LLC to the Borrower.

 

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“12.25% Proceeds Note Subordination Agreement” means the 12.25% Proceeds Note
Subordination Agreement dated as of March 14, 2006 among the Borrower, Level 3,
Level 3 LLC and the Administrative Agent, a copy of which is attached as Exhibit
F-3 to this Agreement, as amended, restated, supplemented or otherwise modified
from time to time.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by LIBO Rate or ABR.

“Unrestricted Subsidiary” means (a) 91 Holding Corp., SR 91 Holding LLC, SR91
Corp., SR LP, Express Lanes, Inc., California Private Transportation Company LP,
CPTC LLC and 85 Tenth Avenue LLC; (b) any Subsidiary of an Unrestricted
Subsidiary; and (c) any Subsidiary designated as such pursuant to and in
compliance with Section 6.10 and not thereafter redesignated as a Restricted
Subsidiary as permitted pursuant thereto. For the sake of clarity, actions taken
by an Unrestricted Subsidiary will not be deemed to have been taken, directly or
indirectly, by Level 3 or any Restricted Subsidiary. No Unrestricted Subsidiary
may own any Capital Stock of a Restricted Subsidiary.

“Vice President”, when used with respect to any Person, means any vice
president, whether or not designated by a number or a word or words added before
or after the title “vice president”.

“Voting Stock” of any Person means Capital Stock of such Person which ordinarily
has voting power for the election of directors (or persons performing similar
functions) of such Person, whether at all times or only for so long as no senior
class of securities has such voting power by reason of any contingency.

“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person all of
the outstanding Voting Stock or other ownership interests (other than directors’
qualifying shares) of which shall at the time be owned by such Person or by one
or more Wholly Owned Subsidiaries of such Person or by such Person and one or
more Wholly Owned Subsidiaries such Person.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other

 

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document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person’s successors and assigns, (c) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words “asset” and “property” shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.

SECTION 1.03. Accounting Terms; GAAP. All accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly provided, the
term “GAAP” with respect to any computation required or permitted hereunder
shall mean United States generally accepted accounting principles as in effect
on September 30, 2004. Notwithstanding the foregoing, all financial statements
provided for hereunder shall be prepared in accordance with United States
generally accepted accounting principles as in effect from time to time.

ARTICLE II

The Credits

SECTION 2.01. Commitments; Loans and Borrowings. (a) On the Effective Date,
Eurodollar Loans were made to the Borrower pursuant to the Commitments. On the
Amendment Effectiveness Date, the Lenders hold the respective amounts of those
Loans set forth on Schedule 2.01 to this Agreement. Amounts paid or prepaid in
respect of Loans may not be reborrowed. The Commitments expired at 5:00 p.m. New
York City time on the Effective Date.

(b) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 and not less than $1,000,000. At the time of the conversion of a
Borrowing to an ABR Borrowing, such Borrowing shall be in an aggregate amount
that is an integral multiple of $500,000 and not less than $1,000,000.
Borrowings of more than one Type may be outstanding at one time; provided that
there shall not at any time be more than a total of 10 Eurodollar Borrowings
outstanding at any one time.

(c) Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to elect to convert or continue any Borrowing if the Interest
Period requested with respect thereto would end after the Maturity Date.

SECTION 2.02. Interest Elections. (a) The Borrowings shall initially be
Eurodollar Borrowings with the Interest Periods specified in clause (a) of the
definition of “Interest Period”. Thereafter, the Borrower may elect to convert a
Borrowing to a

 

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different Type or to continue a Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this Section.
The Borrower may elect different options with respect to different portions of
the affected Borrowing, in which case each such portion shall be allocated
ratably among the Lenders holding the Loans comprising such Borrowing, and the
Loans comprising each such portion shall be considered a separate Borrowing.

(b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone (a) in the case of a request
to convert or continue a Borrowing as a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before the date of the
proposed conversion or continuation or (b) in the case of a request to convert
or continue a Borrowing as an ABR Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of the proposed conversion or
continuation. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form approved
by the Administrative Agent and signed by the Borrower.

(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.01:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable

 

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thereto, then at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing.

SECTION 2.03. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Loan on the Maturity Date.

(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the Indebtedness of the Borrower to such Lender resulting
from the Loans made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or
(c) of this Section shall be prima facie evidence of the existence and amounts
of the obligations recorded therein; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein
(including any failure to record the making or repayment of any Loan) shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

(e) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Borrower shall prepare, execute and deliver to such
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) in substantially the
form set forth in Exhibit D hereto. Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.04. Prepayments and Offers to Prepay. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part without premium (but subject to Section 2.09).

(b) [Intentionally Omitted]

(c) [Intentionally Omitted]

(d) When the aggregate amount of Excess Proceeds exceeds $10,000,000, the
Borrower shall within 15 days notify the Administrative Agent thereof and prepay
the

 

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Loans in the amount of such Excess Proceeds without premium (but subject to
Section 2.09) (as reduced by any portion thereof which has been rejected by
Declining Lenders pursuant to clause (g) below). To the extent there are any
remaining Excess Proceeds following the completion of the prepayment required
hereunder as a result of Lender elections not to accept such prepayment, the
Borrower shall apply such Excess Proceeds to the repayment of other Indebtedness
of the Borrower or any Restricted Subsidiary that is a Subsidiary of the
Borrower, to the extent permitted or required under the terms thereof. Any other
remaining Excess Proceeds may be applied to any use as determined by Level 3
which is not otherwise prohibited by this Agreement, and the amount of Excess
Proceeds shall be reset to zero.

(e) Not fewer than 30 days prior to any payment or prepayment of any principal
amount of the Loan Proceeds Note, the Borrower shall notify the Administrative
Agent thereof and shall, on the date of such payment or prepayment, subject to
paragraph (g) below, prepay the Loans at a price equal to the principal amount
of the Loan without premium (but subject to Section 2.09); provided, however
that (i) at the expiration of such thirty Business Day period, the
Administrative Agent shall notify the Borrower of the required amount of such
prepayment (as reduced by any portion thereof which has been rejected by
Declining Lenders pursuant to clause (g) below) and (ii) the Borrower shall
immediately prepay the Loans in such amount in accordance with clause (g) below.

(f) Upon the occurrence of a Change of Control Triggering Event, the Borrower
shall within 30 days of such occurrence notify the Administrative Agent thereof
and prepay the Loans not later than 30 Business Days following such
notification; provided, however that (i) at the expiration of such 30 Business
Day period, the Administrative Agent shall notify the Borrower of the required
amount of such prepayment (as reduced by any portion thereof which has been
rejected by Declining Lenders pursuant to clause (g) below) and the Borrower
shall immediately prepay the Loans in such amount in accordance with clause
(g) below and (ii) the Borrower shall also pay, on the date of such prepayment,
to each Lender receiving such prepayment a fee equal to 1.00% of the principal
amount of the Loans prepaid to such Lender.

(g) With respect to any proposed mandatory prepayment of the Loan pursuant to
clauses (d), (e) or (f) above, any Lender may, at its option, elect not to
accept such prepayment (any Lender making such election being a “Declining
Lender”) as follows: each Declining Lender shall give written notice thereof to
the Administrative Agent not later than 10:00 a.m. New York City time on the
date which is two Business Days prior to the date on which the Administrative
Agent is required to notify the Borrower of the amount of the applicable
prepayment pursuant to clause (d), (e) or (f) above. On the date of prepayment,
an amount equal to that portion of the Loan then to be prepaid (less the amount
thereof that would otherwise be payable to Declining Lenders) shall be paid to
the Lenders that are not Declining Lenders in accordance with subsection (h)
below. In the event that the Administrative Agent has not, with respect to any
mandatory prepayment, received a notice from a Lender in accordance with this
clause (g), such Lender shall be deemed to have waived its rights under this
clause (g) to decline receipt thereof.

 

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(h) The Borrower (or Level 3 on its behalf) shall notify the Administrative
Agent by telephone (confirmed by telecopy) of any prepayment hereunder not later
than 1:00 p.m., New York City time, two Business Days before the date of
prepayment or such lesser period as may be acceptable to the Administrative
Agent. Each such notice shall be irrevocable and shall specify the prepayment
date, the principal amount to be prepaid and, in the case of a mandatory
prepayment, a reasonably detailed calculation of the amount of such prepayment.
Promptly following receipt of any such notice, the Administrative Agent shall
advise the Lenders of the contents thereof. Prepayments shall be accompanied by
accrued interest to the extent required by Section 2.06. If any prepayment
pursuant to this Section is made by the Borrower other than on the last day of
the Interest Period applicable to any prepaid Eurodollar Loans, the Borrower
shall also pay to each Lender (other than any Declining Lender) on the date of
such prepayment any amount owing to such Lender pursuant to Section 2.09.

SECTION 2.05. Fees. (a) Level 3 and the Borrower agree to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon by the Borrower and the Administrative Agent.

SECTION 2.06. Interest. (a) The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin. The Loans
comprising each Eurodollar Borrowing shall bear interest at the LIBO Rate for
the Interest Period (or Interest Periods, while the initial Interest Periods
applicable to the Retained Loans and the Assigned Loans continue in effect) for
such Borrowing plus the Applicable Margin.

(b) Notwithstanding the foregoing, if any principal of or interest on any Loan
or any fee or other amount payable by the Borrower hereunder is not paid when
due, whether at stated maturity, upon acceleration or otherwise, such overdue
amount shall bear interest, after as well as before judgment, at a rate per
annum equal to (i) in the case of overdue principal of any Loan, 2.00% per annum
plus the rate otherwise applicable to such Loan as provided in paragraph (a) of
this Section or (ii) in the case of any other amount, 2.00% per annum plus the
rate that would at the time be applicable to an ABR Loan as provided in
paragraph (a) of this Section.

(c) Accrued interest on the Loans shall be payable in arrears on each Interest
Payment Date; provided that (i) interest accrued pursuant to paragraph (b) of
this Section shall be payable on demand and (ii) in the event of any repayment
or prepayment of the Loans, accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment. Accrued
interest payable on the initial Interest Payment Date shall include all interest
accrued on the Assigned Loans prior to the Amendment Effectiveness Date and not
yet paid. Such interest on the Assigned Loans will be paid to the holders of
such Loans on the initial Interest Payment Date.

(d) All interest hereunder shall be computed on the basis of the actual number
of days elapsed in a year of 365 days (or 366 days in a leap year), and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable LIBO Rate or Alternate Base Rate
shall be

 

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determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.

SECTION 2.07. Alternate Rate of Interest. If, prior to the commencement of any
Interest Period for a Eurodollar Borrowing, the Administrative Agent determines
(which determination shall be conclusive absent manifest error) that adequate
and reasonable means do not exist for ascertaining the LIBO Rate for such
Interest Period, then the Administrative Agent shall give notice thereof to
Level 3 and the Lenders by telephone or telecopy as promptly as practicable
thereafter, whereupon each Eurodollar Loan shall automatically, on the last day
of the current Interest Period for such Eurodollar Loan, convert into an ABR
Loan and the obligations of the Lenders to make Eurodollar Loans shall be
suspended until the Administrative Agent notifies Level 3 and the Lenders that
the circumstances giving rise to such notice no longer exist.

SECTION 2.08. Increased Costs. (a) If any Lender shall notify the Administrative
Agent and Level 3 at any time that Eurocurrency Reserve Requirements are, or are
scheduled to become, effective and that such Lender is or will be generally
subject to such Eurocurrency Reserve Requirements and will, as a result, incur
additional costs, then such Lender shall, for each day from the later of the
date of such notice and the date on which such Eurocurrency Reserve Requirements
become effective, be entitled to additional interest on each Eurodollar Loan
made by it at a rate per annum determined for such day (rounded upward to the
nearest 100th of 1%) equal to the remainder obtained by subtracting (i) the LIBO
Rate for such Eurodollar Loan from (ii) the rate obtained by dividing such LIBO
Rate by a percentage equal to 100% minus the Eurocurrency Reserve Requirements
then-applicable to such Lender. Such additional interest will be payable in
arrears to the Administrative Agent, for the account of such Lender, on each
Interest Payment Date relating to such Eurodollar Loan and on any other date
when interest is required to be paid hereunder with respect to such Loan. Any
Lender giving a notice under this paragraph (a) shall promptly withdraw such
notice (by written notice of withdrawal given to the Administrative Agent and
Level 3) in the event Eurocurrency Reserve Requirements cease to apply to it or
the circumstances giving rise to such notice otherwise cease to exist.

(b) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of or credit
extended by any Lender (except any Eurocurrency Reserve Requirement); or

(ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans of such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan or to reduce the amount of
any sum received by such Lender, then Level 3 and the Borrower will pay to such
Lender such additional amount or amounts as will compensate such Lender for such
additional costs incurred or

 

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reduction suffered. This Section shall not apply to any additional costs or
reductions relating to Taxes, which are governed by Section 2.10.

(c) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender to a level
below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time Level 3 and the Borrower will pay to
such Lender such additional amount or amounts as will compensate such Lender or
such Lender’s holding company for any such reduction suffered.

(d) A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in paragraph (b) or (c) of this Section shall be delivered to Level 3 and shall
be conclusive absent manifest error. Level 3 and the Borrower, as the case may
be, shall pay such Lender the amount shown as due on any such certificate within
10 days after receipt thereof.

(e) Failure or delay on the part of any Lender to demand compensation pursuant
to this Section shall not constitute a waiver of such Lender’s right to demand
such compensation; provided that Level 3 and the Borrower shall not be required
to compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender
notifies Level 3 of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

(f) The provisions of Section 2.08(a) and (c) shall only be available to Lenders
regulated by Federal banking authorities.

SECTION 2.09. Break Funding Payments. In the event of (a) any payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the failure to borrow or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, or (c) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by Level 3 pursuant to Section 2.12, then, in any such
event, Level 3 and the Borrower, as applicable, shall compensate each Lender for
the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed not to
include any lost profit (including loss of Applicable Margin) and shall be
deemed to include an amount determined by such Lender to be the excess, if any,
of (i) the amount of interest that would have accrued on the principal amount of
such Loan had such event not occurred at the LIBO Rate that is or would have
been applicable to such Loan, for the

 

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period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest Period for such Loan), over
(ii) the amount of interest which would accrue on such principal amount for such
period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to Level 3 and shall be conclusive
absent manifest error. Level 3 or the Borrower, as applicable, shall pay such
Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

SECTION 2.10. Taxes. (a) Any and all payments by or on account of the
obligations of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent or Lender (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

(c) Level 3 and the Borrower shall indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower hereunder or under any other Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to Level 3 or the Borrower by a Lender,
or by the Administrative Agent on its own behalf or on behalf of a Lender, shall
be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent reasonably satisfactory evidence of such payment and the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment; provided however in no case shall the Borrower be
required to deliver documentation not normally issued by such Governmental
Authority.

 

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(e) Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower and Level 3 (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower and Level 3 as will permit such
payments to be made without withholding or at a reduced rate.

SECTION 2.11. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) The Borrower shall make each payment required to be made by it hereunder or
under any other Loan Document (whether of principal, interest or fees, or of
amounts payable under Section 2.08, 2.09 or 2.10, or otherwise) prior to
1:00 p.m., New York City time, on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Administrative Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
its offices at Merrill Lynch World Headquarters, North Tower, World Financial
Center, New York, New York 10281-1201, except that payments pursuant to
Sections 2.08, 2.09, 2.10 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the Persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made in
dollars.

(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties entitled thereto
in accordance with the amounts of interest and fees then due to such parties,
and (ii) second, towards payment of principal then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal then
due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans resulting in such Lender receiving payment of a greater proportion of
the aggregate amount of its Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
of the other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Loans; provided
that (i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the

 

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purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to Level 3 or any Subsidiary or Affiliate thereof (as
to which the provisions of this paragraph shall apply). The Borrower consents to
the foregoing and agrees, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation in an obligation owed
by it pursuant to the foregoing arrangements may exercise against the Borrower
rights of set-off and counterclaim with respect to such participation as fully
as if such Lender were a direct creditor of the Borrower in the amount of such
participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the Lenders that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders the amount due. In such event, if the Borrower has not
in fact made such payment, then each of the Lenders severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it
hereunder, then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations until all such unsatisfied obligations are fully paid.

SECTION 2.12. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.08, or if the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.10, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.08 or 2.10, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. Level 3 and the Borrower hereby
agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

(b) If any Lender requests compensation under Section 2.08 (other than paragraph
(a) of such Section), or if the Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender

 

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pursuant to Section 2.10, if any Lender defaults in its obligation to fund Loans
hereunder or under the circumstances contemplated by Section 9.02(d), Level 3
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) Level 3 shall
have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder,
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or Level 3 or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.08 or payments required to be made pursuant to
Section 2.10, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling Level 3 to require such assignment and
delegation cease to apply.

ARTICLE III

Representations and Warranties

On and as of the Amendment Effectiveness Date, each of Level 3 and the Borrower
represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers. Each of Level 3, the Borrower and each
Material Subsidiary of Level 3 is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, would not
constitute or result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every jurisdiction where such qualification is
required.

SECTION 3.02. Authorization; Enforceability. The Transactions entered into by
each Loan Party on the Effective Date were within such Loan Party’s powers and
were duly authorized by all necessary corporate or other action and, if
required, stockholder or member action. The Transactions to be entered into by
each Loan Party on the Amendment Effectiveness Date are within such Loan Party’s
powers and have been duly authorized by all necessary corporate or other action
and, if required, stockholder or member action. The Assignment and Amendment
Agreement has been duly executed and delivered by Level 3 and the Borrower and
constitutes a legal, valid and binding obligation of Level 3 and the Borrower,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity,

 

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regardless of whether considered in a proceeding in equity or at law. Each other
Loan Document to which any Loan Party became a party prior to the Amendment
Effectiveness Date was duly executed and delivered by such Loan Party and
constitutes a legal, valid and binding obligation of such Loan Party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law. Each other Loan Document to
which any Loan Party is to become a party on the Amendment Effectiveness Date,
when executed by and delivered by such Loan Party, will constitute a legal,
valid and binding obligation of such Loan Party, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) did not
and do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as are contemplated
to be taken to satisfy the Guarantee Permit Condition and the Collateral Permit
Condition and such as have been obtained or made and are in full force and
effect, (b) did not and will not violate the charter, by-laws or other
organizational documents of Level 3 or any of the Loan Parties and did not and
will not violate, except for any violation which would not constitute or result
in a Material Adverse Effect, (i) any applicable law or regulation of a type
typically applicable to transactions of the type contemplated by the
Transactions, (ii) any material order of any Governmental Authority, (c) did not
and will not violate the Parent’s Indentures, the Subordinated Indentures or the
Financing Inc. Indentures and (d) did not and will not result in the creation or
imposition of any Lien on any material assets of Level 3, the Borrower or any
Subsidiary of Level 3, except Liens created under the Loan Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Lenders
have been given access to Level 3’s (i) consolidated balance sheet and
statements of income, stockholders equity and cash flows as of and for the
fiscal year ended December 31, 2005, reported on by KPMG LLP, an independent
public accounting firm, and (ii) its unaudited consolidated balance sheet and
statements of income and cash flows as of and for the fiscal quarter and the
portion of the fiscal year ended March 31, 2006. Such financial statements
present fairly in all material respects the financial position and results of
operations and cash flows of Level 3 and its consolidated Subsidiaries as of
such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.

(b) Except for the Disclosed Matters, after giving effect to the Transactions,
none of Level 3 or its Subsidiaries will have, as of the Amendment Effectiveness
Date, any contingent liabilities, unusual long-term commitments or unrealized
losses which would constitute or result in a Material Adverse Effect.

 

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(c) Except as may be disclosed in Level 3’s reports and filings under the
Exchange Act filed since January 1, 2006 and prior to June 27, 2006 and
available on the Securities and Exchange Commission’s website on the internet at
www.sec.gov prior to June 27, 2006, since December 31, 2005, there has been no
material adverse change in the business, assets, operations or condition,
financial or otherwise, of Level 3 and its Subsidiaries, taken as a whole which
would constitute or result in a Material Adverse Effect.

SECTION 3.05. Properties. Each of Level 3, the Borrower and each Subsidiary of
Level 3 has good title to, or valid leasehold interests in, all its real and
personal property material to its business, except for minor defects in title
that do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties for their intended purposes and such
defects as would not constitute or result in a Material Adverse Effect.

SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of Level 3 or the Borrower, threatened
against or affecting Level 3, the Borrower or any Material Subsidiary of Level 3
(i) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, would, individually or in the aggregate,
constitute or result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.

(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, would not constitute or result
in a Material Adverse Effect, none of Level 3, the Borrower or any of the
Subsidiaries of Level 3 (i) has failed to comply with any Environmental Law or
to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

SECTION 3.07. Compliance with Laws and Agreements. Level 3, the Borrower and
each of the Subsidiaries of Level 3 is in compliance with all laws, regulations
and orders of any Governmental Authority applicable to it or its property and
all indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
would not constitute or result in a Material Adverse Effect. No Default has
occurred and is continuing.

SECTION 3.08. Investment and Holding Company Status. Neither Level 3 nor any of
the Loan Parties is (a) an “investment company” or is controlled by an entity
that is an “investment company” as defined in, or subject to regulation under,
the Investment Company Act of 1940 or (b) a “holding company” or is controlled
by an entity that is a “holding company” as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.

 

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SECTION 3.09. Taxes. Level 3, the Borrower and each of the Material Subsidiaries
of Level 3 has timely filed or caused to be filed all tax returns and reports
required to have been filed and has paid or caused to be paid all taxes required
to have been paid by it, except (a) taxes that are being contested in good faith
by appropriate proceedings and for which Level 3, the Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so would not constitute or result in a
Material Adverse Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, would constitute or result in a
Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan by an amount that would constitute or
result in a Material Adverse Effect, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts, exceed
the fair market value of the assets of all such underfunded Plans by an amount
that would constitute or result in a Material Adverse Effect.

SECTION 3.11. Disclosure. None of the reports, financial statements,
certificates or information furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or thereunder (as
modified or supplemented by other information so furnished), contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and the
ownership interest of Level 3 in, each domestic Material Subsidiary.

SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance
maintained by or on behalf of Level 3, the Borrower and the Material
Subsidiaries of Level 3 as of the Amendment Effectiveness Date. To the knowledge
of Level 3, such insurance complies with the requirements of Section 5.07.

SECTION 3.14. Labor Matters. As of the Amendment Effectiveness Date, there are
no material strikes, lockouts or slowdowns against Level 3, the Borrower or any
Subsidiary of Level 3 pending or, to the knowledge of Level 3 or the Borrower,
threatened which would constitute or result in a Material Adverse Effect. The
consummation of the Transactions did not and will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which Level 3, the Borrower or any Subsidiary
of Level 3 is bound other than any right which would not constitute or result in
a Material Adverse Effect.

 

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SECTION 3.15. Intellectual Property. Each of Level 3, the Borrower and the
Material Subsidiaries of Level 3 owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by Level 3, the Borrower and each Material
Subsidiary of Level 3, to the knowledge of Level 3 or the Borrower, does not
infringe upon the rights of any other Person except for any such infringements
that, individually or in the aggregate, would not constitute or result in a
Material Adverse Effect.

SECTION 3.16. Security Interests. (a) The Collateral Agreement creates in favor
of the Collateral Agent for the benefit of the Secured Parties a valid and
enforceable security interest in the Collateral (as defined in the Collateral
Agreement) and (i) together, with respect to the portion of the Collateral
constituting certificated securities (as defined in the Uniform Commercial
Code), with the delivery of such certificated securities to the Collateral Agent
together with instruments of transfer duly endorsed in blank, the Collateral
Agreement constitutes a fully perfected first priority Lien on, and security
interest in, under applicable Federal and State law, all right, title and
interest of the pledgors thereunder in such Collateral, prior and superior in
right to any other Person and (ii) together with the financing statements filed
in the offices specified in the Effective Date Perfection Certificate, as
supplemented and delivered on the Amendment Effectiveness Date, the Collateral
Agreement constitutes a fully perfected Lien on, and security interest in, under
applicable Federal and State law, all right, title and interest of the grantors
thereunder in such Collateral, to the extent perfection can be obtained by
filing Uniform Commercial Code financing statements, other than the Intellectual
Property (as defined in the Security Agreements) in which a security interest
may be perfected by filing, recording or registering a security agreement,
financing statement or analogous document in the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, in each
case prior and superior in right to any other Person to the extent perfection
can be obtained by filing Uniform Commercial Code financing statements, other
than with respect to the rights of Persons pursuant to Liens expressly permitted
by Section 6.05.

(b) The filing of the Collateral Agreement in the United States Patent and
Trademark Office and the United States Copyright Office has taken place and the
security interest created thereunder constitutes a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Intellectual Property (as defined in the Collateral Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other Person, other
than with respect to the rights of Persons pursuant to Liens expressly permitted
by Section 6.05 (it being understood that subsequent recordings in the United
States Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on registered trademarks, trademark applications and
copyrights acquired by the Loan Parties after the date hereof).

 

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SECTION 3.17. FCC Compliance. (a) Level 3, the Borrower and each Subsidiary of
Level 3 are in compliance with the Communications Act except where the failure
to be in compliance would not constitute or result in a Material Adverse Effect.

(b) To the knowledge of Level 3, there is no investigation, notice of apparent
liability, violation, forfeiture or other order or complaint issued by or before
the FCC, or any other proceedings of or before the FCC, affecting it, the
Borrower or any Subsidiary of Level 3 which would constitute or result in a
Material Adverse Effect.

(c) No event has occurred which (i) results in, or after notice or lapse of time
or both would result in, revocation, suspension, adverse modifications,
non-renewal, impairment, restriction or termination of, or order of forfeiture
with respect to, any License in any respect which would constitute or result in
a Material Adverse Effect or (ii) affects or would reasonably be expected in the
future to affect any of the rights of Level 3, the Borrower or any Subsidiary of
Level 3 under any License held by Level 3, the Borrower or such Subsidiary in
any respect which would constitute or result in a Material Adverse Effect.

(d) Level 3, the Borrower and each Subsidiary of Level 3 have duly filed in a
timely manner all material filings, reports, applications, documents,
instruments and information required to be filed by it under the Communications
Act, and all such filings were when made true, correct and complete in all
respects except where the failure to do so would not constitute or result in a
Material Adverse Effect.

SECTION 3.18. Qualified Credit Facility; Senior Indebtedness. The Loans and the
other Obligations constitute a “Qualified Credit Facility” as defined in the
Financing Inc. Indentures. The Loans and the other Obligations constitute a
“Credit Facility” as defined in the Parent’s Indentures. The Loans and the other
Obligations constitute “Senior Indebtedness” of the Parent, the Borrower and
each other Loan Party for purposes of any Indebtedness of the Parent, the
Borrower or such other Loan Party that by its terms is subordinated to any other
Indebtedness of such Person.

SECTION 3.19. Solvency. Immediately following the making of the Loans on the
Effective Date and after giving effect to the application of the proceeds of the
Loans, (a) the fair value of the assets of Level 3 and its Subsidiaries on a
consolidated basis, at a fair valuation, exceeded their debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of Level 3 and its Subsidiaries, on a consolidated basis, was
greater than the amount that was required to pay the probable liability of their
debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities were to become absolute and mature; (c) Level 3 and
its Subsidiaries on a consolidated basis, will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) Level 3 and its Subsidiaries,
on a consolidated basis, did not have unreasonably small capital with which to
conduct the business in which they were engaged as such business was then
conducted and was then proposed to be conducted following the Effective Date.

 

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ARTICLE IV

Conditions

[Intentionally Omitted]

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full, each of Level 3 and the Borrower covenants and agrees with the Lenders
that:

SECTION 5.01. Financial Statements and Other Information. Level 3 will furnish
to the Administrative Agent on behalf of the Lenders:

(a) within 120 days after the end of each fiscal year of Level 3, an audited
consolidated balance sheet of Level 3 and its Subsidiaries and related
statements of operations and cash flows of Level 3 and its Subsidiaries as of
the end of and for such year, setting forth in each case commencing December 31,
2006, in comparative form the figures for the previous fiscal year, all reported
on by KPMG LLP or another independent public accounting firm of recognized
national standing (without a “going concern” or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of Level 3
and its Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;

(b) within 60 days after the end of each fiscal quarter of Level 3, an unaudited
consolidated balance sheet of Level 3 and its Subsidiaries and related
statements of operations and cash flows of Level 3 and its Subsidiaries as of
the end of and for such quarter, setting forth in each case commencing June 30,
2006, in comparative form the figures for the corresponding quarter of the
previous fiscal year, all certified by a Financial Officer to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of Level 3 and its
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied; and

(c) within 120 days after the end of each fiscal year of Level 3, a certificate
of a Financial Officer stating that a review of the activities of Level 3 and
its Subsidiaries during the preceding fiscal year has been made under the
supervision of such Financial Officer with a view to determining whether the
Borrower and the other Loan Parties have kept, observed, performed and fulfilled
their obligations under this Agreement and the other Loan Documents, and further
stating, as to the knowledge of the Officer signing such certificate, Level 3,
the Borrower and each other Loan Party has kept, observed, performed and
fulfilled

 

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each and every covenant contained in this Agreement and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Agreement and the other Loan Documents (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action the Borrower or such Loan Party is
taking or proposes to take with respect thereto).

Whether or not required by the rules and regulations of the Securities and
Exchange Commission, the Borrower shall file with the Securities and Exchange
Commission, if permitted, all the periodic and other reports, proxy statements
and other materials it would be required to file with the Securities and
Exchange Commission by Section 13(a) or 15(d) under the Securities Exchange Act
of 1934, as amended, or any successor provision thereto if it were subject
thereto. The financial statements required to be delivered by Level 3 pursuant
to paragraphs (a) and (b) of this Section and the reports and statements
required to be delivered by the Borrower pursuant to paragraph (c) of this
Section shall be deemed to have been delivered (i) when reports containing such
financial statements, or such other materials, are posted on Level 3’s website
on the internet at www.level3.com (or any successor page identified in a notice
given to the Administrative Agent and the Lenders) or on the Securities and
Exchange Commission’s website on the internet at www.sec.gov or (ii) when such
financial statements, reports or statements are delivered in accordance with
Section 9.01(a).

SECTION 5.02. Notices of Material Events. Level 3 and the Borrower will furnish
to the Administrative Agent, within 30 days, written notice of the following:

(a) the occurrence of any Default; and

(b) if the trustee for or the holder of any Material Indebtedness of Level 3 or
any Restricted Subsidiary gives any notice or takes any other action with
respect to a claimed default.

Each notice delivered under this Section shall be accompanied by a statement of
an authorized officer of Level 3 setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

SECTION 5.03. Information Regarding Collateral. (a) Level 3 and the Borrower
will furnish to the Collateral Agent prompt written notice of any change (i) in
any Loan Party’s corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in any Loan
Party’s identity or corporate structure or (iii) in any Loan Party’s Federal
Taxpayer Identification Number. Each of Level 3 and the Borrower agrees not to
effect or permit any change referred to in the preceding sentence unless all
filings (or arrangements therefor satisfactory to the Collateral Agent) have
been made under the Uniform Commercial Code or otherwise that are required in
order for the Collateral Agent to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral. Each
of Level 3 and the Borrower also agrees promptly to notify the Collateral Agent
if any material portion of the Collateral is damaged or destroyed.

 

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(b) Each year, at the time of delivery of the certificate pursuant to paragraph
(c) of Section 5.01, Level 3 shall deliver to the Collateral Agent a certificate
of an authorized officer of Level 3 (i) setting forth the information required
pursuant to the Annual Perfection Certificate or confirming that there has been
no change in such information since the Amendment Effectiveness Date or the date
of the most recent certificate delivered pursuant to this Section and
(ii) certifying that all Uniform Commercial Code financing statements (excluding
fixture filings) or other appropriate filings, recordings or registrations,
including all refilings, rerecordings and reregistrations, containing a
description of the Collateral required to be set forth therein have been filed
of record in each United States governmental, municipal or other appropriate
office in each jurisdiction identified pursuant to clause (i) above to the
extent necessary to perfect and continue the perfection of the security
interests under the applicable Security Documents for a period of not less than
18 months after the date of such certificate (except as noted therein with
respect to any continuation statements to be filed within such period).

SECTION 5.04. Existence; Conduct of Business. Each of Level 3 and the Borrower
will, and will cause each Material Subsidiary of Level 3 to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and its rights, charter and statutory, except where the
failure to do so would not constitute or result in a Material Adverse Effect;
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.13.

SECTION 5.05. Payment of Taxes. Each of Level 3 and the Borrower will, and will
cause each Subsidiary of Level 3 to, pay its material Tax obligations, before
the same shall become delinquent or in default, except where the failure to pay
such tax would not constitute or result in a Material Adverse Effect.

SECTION 5.06. Maintenance of Properties. Each of Level 3 and the Borrower shall
cause all properties owned by Level 3, the Borrower or any Restricted Subsidiary
or used or held for use in the conduct of its business or the business of any
Restricted Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of Level 3 may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent
Level 3 from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of Level 3, desirable in the conduct of its
business or the business of any Subsidiary of Level 3 and not disadvantageous in
any material respect to the Lenders.

SECTION 5.07. Insurance. Each of Level 3 and the Borrower will, and will cause
each of the Restricted Subsidiaries to, keep all of their respective properties
which are of an insurable nature insured with insurers, believed by the Borrower
to be responsible, against loss or damage to the extent that property of a
similar character is usually insured by companies similarly situated and owning
like properties. Level 3 will

 

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furnish to the Lenders, upon the reasonable request of the Administrative Agent,
but not more than once during any calendar year unless a Default or an Event of
Default has occurred and is continuing, information in reasonable detail as to
the insurance so maintained.

SECTION 5.08. Casualty and Condemnation. Level 3 (a) will furnish to the
Administrative Agent prompt written notice of any casualty or other insured
damage to any portion of any Collateral or the commencement of any action or
proceeding for the taking of any Collateral or any part thereof or interest
therein under power of eminent domain or by condemnation or similar proceeding
in each case only where Level 3 estimates in good faith that the expected
proceeds from insurance, condemnation awards or otherwise will exceed
$25,000,000 and (b) will ensure that the Net Available Proceeds of any such
event (whether in the form of insurance proceeds, condemnation awards or
otherwise) are collected and applied in accordance with the applicable
provisions of this Agreement and the Security Documents. Level 3 will act in
good faith to collect or compromise all such amounts.

SECTION 5.09. Annual Information Meeting. The Borrower shall, at the request of
the Required Lenders, hold an annual meeting (telephonic or otherwise) at which
the Borrower will address any questions from the Lenders relating to its
affairs, finances, condition or otherwise to the extent that the relevant
information is public.

SECTION 5.10. Compliance with Laws. Each of Level 3 and the Borrower will, and
will cause each of the Restricted Subsidiaries of Level 3 to, comply with all
laws (including the Communications Act), rules, regulations and orders of any
Governmental Authority applicable to it or its property (including obligations
under Licenses), except where the failure to do so, individually or in the
aggregate, would not constitute or result in a Material Adverse Effect.

SECTION 5.11. Use of Proceeds. The proceeds of the Loans were advanced by the
Borrower to Level 3 LLC against delivery of the Loan Proceeds Note and were used
by Level 3 LLC to repay a portion of the Indebtedness owed by it to Level 3
under the Parent Intercompany Note. Level 3 has used or will use the amounts
received as a result of such repayment (i) to repurchase a portion of the
Existing Notes maturing in 2008 pursuant to the Debt Tender Offer, (ii) to pay
fees and expenses in connection with the Loans and the Debt Tender Offer and
(iii) for general corporate purposes. No part of the proceeds of the Loans was
or will be used, whether directly or indirectly, for any purpose that entailed a
violation of any of the Regulations of the Board, including Regulations T, U and
X.

SECTION 5.12. Guarantee and Collateral Requirement; Further Assurances. Level 3
and the Borrower will cause the Guarantee and Collateral Requirement to be and
remain satisfied at all times. Without limiting the foregoing, Level 3 and the
Borrower will, and will cause each Subsidiary of Level 3 to, execute any and all
documents, financing statements, agreements and instruments, and take all other
actions (including the filing of financing statements and other documents),
which shall be required under any applicable United States law, or which the
Collateral Agent may

 

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reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Loan Documents or the validity or priority of any
such Lien, all at the expense of the Loan Parties. Level 3 and the Borrower also
agree to provide to the Collateral Agent, from time to time upon request,
evidence reasonably satisfactory to the Collateral Agent as to the perfection of
the Liens created or intended to be created by the Loan Documents.

SECTION 5.13. Guarantee Permit Condition and Collateral Permit Condition.
(a) Each of Level 3 and the Borrower will endeavor, and cause WilTel
Communications Group, LLC and the Material LLC Subsidiaries to endeavor, in good
faith using commercially reasonable efforts to (i) (A) cause the Collateral
Permit Condition to be satisfied with respect to WilTel Communications Group,
LLC and (B) cause the Guarantee Permit Condition and the Collateral Permit
Condition to be satisfied with respect to any Material LLC Subsidiary, in each
case at the earliest practicable date and (ii) to obtain the material (as
determined in good faith by the General Counsel of Level 3) authorizations and
consents of Federal and State Authorities required to cause any Restricted
Subsidiary to become a Guarantor as required by Sections 6.01(d) and 6.02(d).
For purposes of this Section, the requirement that Level 3, the Borrower or any
Subsidiary of Level 3 use “commercially reasonable efforts” shall not be deemed
to require it to make material payments in excess of normal fees and costs to or
at the direction of Governmental Authorities or to change the manner in which it
conducts its business in any respect that the management of Level 3 shall
determine in good faith to be adverse or materially burdensome. Upon the
reasonable request of Level 3 or the Borrower, the Administrative Agent and the
Lenders will cooperate with Level 3 and the Borrower as necessary to enable them
to comply with their obligations under this Section.

(b) [Intentionally omitted]

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on the Loan and all fees payable hereunder have been paid in full, each
of Level 3, the Borrower and each Guarantor covenants and agrees with the
Lenders that:

SECTION 6.01. Limitation on Consolidated Debt. (a) Level 3 shall not, and shall
not permit any Restricted Subsidiary (other than to the extent permitted by
paragraph (b) of Section 6.02) to, directly or indirectly, Incur any
Indebtedness; provided, however, that Level 3 or any Restricted Subsidiary
(subject, in the case of the Borrower and any Borrower Restricted Subsidiary, to
Section 6.02) may Incur any Indebtedness if, after giving pro forma effect to
such Incurrence and the receipt and application of the net proceeds thereof, no
Default or Event of Default would occur as a consequence of such Incurrence or
be continuing following such Incurrence and either (i) the ratio of (A) the

 

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aggregate consolidated principal amount (or, in the case of Indebtedness issued
at a discount, the then-Accreted Value) of Indebtedness of Level 3 and its
Restricted Subsidiaries outstanding as of the most recent available quarterly or
annual balance sheet, after giving pro forma effect to the Incurrence of such
Indebtedness and any other Indebtedness Incurred or repaid since such balance
sheet date and the receipt and application of the net proceeds thereof, to
(B) Pro Forma Consolidated Cash Flow Available for Fixed Charges for Level 3 and
its Restricted Subsidiaries for the four full fiscal quarters next preceding the
Incurrence of such Indebtedness for which consolidated financial statements are
available, would be less than 5.0 to 1.0, or (ii) Level 3’s Consolidated Capital
Ratio as of the most recent available quarterly or annual balance sheet, after
giving pro forma effect to (x) the Incurrence of such Indebtedness and any other
Indebtedness Incurred or repaid since such balance sheet date, (y) the issuance
of any Capital Stock (other than Disqualified Stock) of Level 3 since such
balance sheet date, including the issuance of any Capital Stock to be issued
concurrently with the Incurrence of such Indebtedness, and (z) the receipt and
application of the net proceeds of such Indebtedness or Capital Stock, as the
case may be, is less than 2.25 to 1.0.

(b) Notwithstanding the foregoing limitation, Level 3 or any Restricted
Subsidiary (other than the Borrower or any Borrower Restricted Subsidiary,
except to the extent permitted by Section 6.02) may Incur any and all of the
following (each of which shall be given independent effect):

(i) Indebtedness created under the Loan Documents (other than Indebtedness
Incurred pursuant to an Additional Tranche);

(ii) (A) Indebtedness under Qualified Credit Facilities (other than Qualified
Receivables Facilities), Purchase Money Debt and Indebtedness in respect of
letters of credit, in an aggregate principal amount outstanding or available
that, when taken together with the sum of (A) the amount of any Indebtedness
outstanding or available under the Loan Documents, plus (B) the amount of any
outstanding Indebtedness Incurred pursuant to clause (ii)(A) of paragraph (b) of
Section 6.02, plus (C) the amount of all refinancing Indebtedness outstanding or
available pursuant to clause (vi) of paragraph (b) of Section 6.02 in respect of
Indebtedness previously Incurred pursuant to clause (ii)(A) of paragraph (b) of
Section 6.02, plus (D) the amount of all refinancing Indebtedness outstanding or
available pursuant to clause (viii) below in respect of Indebtedness previously
Incurred pursuant to this clause (ii)(A)) at any one time not to exceed
$1,000,000,000, which amount shall be reduced by the amount of Net Available
Proceeds used after the Effective Date to repay Indebtedness under any Credit
Facilities (including the Loan Documents) or any refinancing Indebtedness in
respect of any Credit Facilities (including the Loan Documents) Incurred
pursuant to clause (vi) of paragraph (b) of Section 6.02 or clause (viii)
below), and not reinvested in Telecommunications/IS Assets or used to repay
Indebtedness created under the Loan Documents or repay other Indebtedness,
pursuant to and as permitted by Section 6.07; and

 

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(B) Indebtedness under Credit Facilities in an aggregate principal amount
outstanding or available that, when taken together with the sum of (A) the
amount of any outstanding Indebtedness Incurred pursuant to clause (ii)(B) of
paragraph (b) of Section 6.02, plus (B) the amount of all refinancing
Indebtedness outstanding or available pursuant to clause (vi) of paragraph (b)
of Section 6.02 in respect of Indebtedness previously Incurred pursuant to
clause (ii)(B) of paragraph (b) of Section 6.02, plus (C) the amount of all
refinancing Indebtedness outstanding or available pursuant to
clause (viii) below in respect of Indebtedness previously Incurred pursuant to
this clause (ii)(A)) at any one time not to exceed $100,000,000;

provided, however, that at any one time, the aggregate amount of
(x) Indebtedness Incurred or permitted to be Incurred pursuant to clauses
(A) and (B) above (including any refinancing Indebtedness Incurred pursuant to
clause (viii) below) and (y) the Indebtedness Incurred or permitted to be
Incurred pursuant to clause (ii) of paragraph (b) of Section 6.02 (including any
refinancing Indebtedness Incurred pursuant to clause (vi) of paragraph (b) of
Section 6.02) shall not exceed 1.5 times Pro Forma Consolidated Cash Flow
Available for Fixed Charges of Level 3 and its Restricted Subsidiaries for the
four full fiscal quarters next preceding the Incurrence of such Indebtedness for
which consolidated financial statements are available.

(iii) Purchase Money Debt; provided, however, that the amount of such Purchase
Money Debt does not exceed 100% of the cost of construction, installation,
acquisition, lease, development or improvement of the applicable
Telecommunications/IS Assets;

(iv) Subordinated Debt of Level 3; provided, however, that the aggregate
principal amount (or, in the case of Indebtedness issued at a discount, the
Accreted Value) of such Indebtedness, together with any other outstanding
Indebtedness Incurred pursuant to this clause (iv), shall not exceed
$500,000,000 at any one time (which amount shall be permanently reduced by the
amount of Net Available Proceeds used to repay Subordinated Debt of Level 3, and
not reinvested in Telecommunications/IS Assets or used to repay the Loan or
repay other Indebtedness, pursuant to and as permitted by Section 6.07), except
to the extent such Indebtedness in excess of $500,000,000 (A) is subordinated to
all other Indebtedness of Level 3 other than Indebtedness Incurred pursuant to
this clause (iv) in excess of such $500,000,000 limitation, (B) does not provide
for the payment of cash interest on such Indebtedness prior to the Maturity Date
and (C) (1) does not provide for payments of principal of such Indebtedness at
stated maturity or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by Level 3
(including any redemption, retirement or repurchase which is contingent upon
events or circumstances, but excluding any retirement required by virtue of the
acceleration of any payment with respect to such Indebtedness upon any event of
default thereunder), in each case on or prior to the Maturity Date, and (2) does
not permit redemption or other retirement (including pursuant to an offer to
purchase

 

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made by Level 3 but excluding through conversion into capital stock of Level 3,
other than Disqualified Stock, without any payment by Level 3 or its Restricted
Subsidiaries to the holders thereof) of such Indebtedness at the option of the
holder thereof on or prior to the Maturity Date or the stated maturity of any
Additional Tranche then outstanding;

(v) Indebtedness outstanding on the Measurement Date;

(vi) Indebtedness owed by Level 3 to any Restricted Subsidiary or Indebtedness
owed by a Restricted Subsidiary to Level 3 or a Restricted Subsidiary; provided,
however, that (A) any Person that Incurs Indebtedness owed to Level 3 or a
Sister Restricted Subsidiary pursuant to this clause (vi) is a Guarantor and a
Loan Proceeds Note Guarantor, (B) (x) upon the transfer, conveyance or other
disposition by such Restricted Subsidiary or Level 3 of any Indebtedness so
permitted to a Person other than Level 3 or another Restricted Subsidiary or
(y) if for any reason such Restricted Subsidiary ceases to be a Restricted
Subsidiary, the provisions of this clause (vi) shall no longer be applicable to
such Indebtedness and such Indebtedness shall be deemed to have been Incurred by
the issuer thereof at the time of such transfer, conveyance or other disposition
or when such Restricted Subsidiary ceases to be a Restricted Subsidiary; and
(C) the payment obligation of (i) such Indebtedness (if clause (A) above
applies) and (ii) all obligations (if clause (A) above applies) with respect to
any Offering Proceeds Note Guarantee of such obligor is expressly subordinated
in any bankruptcy, liquidation or winding up proceeding of the obligor to the
prior payment in full in cash of all obligations with respect to the Loan
Proceeds Note Guarantee of such Loan Proceeds Note Guarantor; and provided
further, however, that a Foreign Restricted Subsidiary need not become a
Guarantor or a Loan Proceeds Note Guarantor pursuant to clause (A) above until
such time and only so long as such Foreign Restricted Subsidiary Guarantees any
other Indebtedness of Level 3 or any Domestic Restricted Subsidiary;

(vii) Indebtedness Incurred by a Person prior to the time (A) such Person became
a Restricted Subsidiary, (B) such Person merges into or consolidates with a
Restricted Subsidiary or (C) another Restricted Subsidiary merges into or
consolidates with such Person (in a transaction in which such Person becomes a
Restricted Subsidiary), which Indebtedness was not Incurred in anticipation of
such transaction and was outstanding prior to such transaction;

(viii) Indebtedness Incurred to renew, extend, refinance, defease, repay,
prepay, repurchase, redeem, retire, exchange or refund (each, a “refinancing”)
Indebtedness Incurred pursuant to paragraph (a) above or clause (i), (ii),
(iii), (v), (vii) or (xii) of this paragraph (b) or this clause (viii), in an
aggregate principal amount (or if issued at a discount, the then-Accreted Value)
not to exceed the aggregate principal amount (or if issued at a discount, the
then-Accreted Value) of and accrued interest on the Indebtedness so refinanced
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness so refinanced or the
amount of any premium reasonably

 

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determined by the Board of Directors of Level 3 as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated repurchase, plus
the expenses of Level 3 Incurred in connection with such refinancing; provided,
however, that (A) if the Person that originally Incurred the Indebtedness to be
refinanced became, or would have been required to become if not already, a
Guarantor or a Loan Proceeds Note Guarantor as a result of the Incurrence of the
Indebtedness being refinanced in accordance with this covenant, (1) the Person
that Incurs the refinancing Indebtedness pursuant to this clause (viii) shall be
a Guarantor and a Loan Proceeds Note Guarantor and (2) if the Indebtedness to be
refinanced is subordinated to the Loan Proceeds Note Guarantee of such Loan
Proceeds Note Guarantor or the Guarantee of the Obligations of such Guarantor,
the refinancing Indebtedness shall be subordinated to the same extent to the
Loan Proceeds Note Guarantee of the Loan Proceeds Note Guarantor or the
Guarantee of the Obligations of such Guarantor, as the case may be, Incurring
such refinancing Indebtedness, (B) the refinancing Indebtedness shall not be
senior in right of payment to the Indebtedness that is being refinanced and
(C) in the case of any refinancing of Indebtedness Incurred pursuant to
paragraph (a) above or clause (i), (v), (vii) or (xii) or, if such Indebtedness
previously refinanced Indebtedness Incurred pursuant to any such clause, this
clause (viii), the refinancing Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, (x) does
not provide for payments of principal of such Indebtedness at stated maturity or
by way of a sinking fund applicable thereto or by way of any mandatory
redemption, defeasance, retirement or repurchase thereof by Level 3 or any
Restricted Subsidiary (including any redemption, retirement or repurchase which
is contingent upon events or circumstances, but excluding any retirement
required by virtue of the acceleration of any payment with respect to such
Indebtedness upon any event of default thereunder), in each case prior to the
time the same are required by the terms of the Indebtedness being refinanced and
(y) does not permit redemption or other retirement (including pursuant to an
offer to purchase made by Level 3 or any Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the time the same are
required by the terms of the Indebtedness being refinanced, other than, in the
case of clause (x) or (y), any such payment, redemption or other retirement
(including pursuant to an offer to purchase made by Level 3) which is
conditioned upon a change of control pursuant to provisions substantially
similar to those described under Section 2.04(f);

(ix) Indebtedness (A) in respect of performance, surety or appeal bonds,
Guarantees, letters of credit or reimbursement obligations Incurred or provided
in the ordinary course of business securing the performance of contractual,
franchise, lease, self-insurance or license obligations and not in connection
with the Incurrence of Indebtedness or (B) in respect of customary agreements
providing for indemnification, adjustment of purchase price after closing, or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any such obligations of Level 3 or any of its
Restricted Subsidiaries pursuant to such agreements, Incurred in connection with

 

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the disposition of any business, assets or Restricted Subsidiary (other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition) and in an aggregate principal amount not to exceed the gross
proceeds actually received by Level 3 or any Restricted Subsidiary in connection
with such disposition;

(x) Indebtedness consisting of Permitted Hedging Agreements;

(xi) Indebtedness not otherwise permitted to be Incurred pursuant to clauses
(i) through (x) above or clause (xii) below, which, together with any other
outstanding Indebtedness Incurred pursuant to this clause (xi), has an aggregate
principal amount not in excess of $50,000,000 at any time outstanding; and

(xii) (A) Effective Date Purchase Money Debt and (B) Indebtedness outstanding on
the Amendment Effectiveness Date under the Existing Notes and the related
indentures, any Restricted Subsidiary Guarantees or Level 3 Guarantees issued
prior to the Amendment Effectiveness Date in accordance with such related
indentures and any Guarantee of the Financing Inc. Notes issued after the
Amendment Effectiveness Date; provided, however, that in the case of any such
Guarantee of the Financing Inc. Notes entered into after the Amendment
Effectiveness Date, such Guarantee is Incurred in accordance with (i) the last
sentence of paragraph (d) of this Section 6.01 and (ii) Section 6.02.

(c) Notwithstanding any other provision of this Section 6.01, the maximum amount
of Indebtedness that Level 3 or any Restricted Subsidiary may Incur pursuant to
this Section 6.01 shall not be deemed to be exceeded due solely to the result of
fluctuations in the exchange rates of currencies.

(d) For purposes of determining any particular amount of Indebtedness under this
Section 6.01, Guarantees, Liens or obligations with respect to letters of credit
supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included and shall not be treated as
Indebtedness. For purposes of determining compliance with this Section 6.01, in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the above clauses, Level 3, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses. To the
extent permitted under applicable laws and regulations, in the event that any
Restricted Subsidiary of Level 3 Guarantees any of the Financing Inc. Notes,
then Level 3 shall cause such Restricted Subsidiary to (i) become a Guarantor
and a Loan Proceeds Note Guarantor, (ii) if such Restricted Subsidiary is a
Borrower Restricted Subsidiary, subordinate, in any bankruptcy, liquidation or
winding up proceeding of such Borrower Restricted Subsidiary, such Borrower
Restricted Subsidiary’s Guarantee of such Financing Inc. Notes to the Guarantee
of the Obligations and the Loan Proceeds Note Guarantee of such Borrower
Restricted Subsidiary and (iii) in the case of a Level 3 LLC Guarantee of the
Floating Rate Notes or the 12.25% Notes, cause Level 3 LLC to

 

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enter into the Level 3 LLC Floating Rate Notes Supplemental Indenture or the
Level 3 LLC 12.25% Notes Supplemental Indenture, as the case may be.

SECTION 6.02. Limitation on Indebtedness of the Borrower and Borrower Restricted
Subsidiaries. (a) The Borrower shall not, and shall not permit any Borrower
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness;
provided, however, that (i) the Borrower or (ii) any Borrower Restricted
Subsidiary may incur any Indebtedness if, after giving pro forma effect to such
Incurrence and the receipt and application of the net proceeds thereof, no
Default or Event of Default would occur as a consequence of such Incurrence or
be continuing following such Incurrence and the Borrower Debt Ratio would be
less than (1) 4.0 to 1.0 if such Debt is Incurred on or prior to March 15, 2008
and (2) 3.75 to 1.0 if such Debt is Incurred after March 15, 2008; provided,
however, that any Borrower Restricted Subsidiary that Incurs Indebtedness
pursuant to this paragraph (a) is a Guarantor and a Loan Proceeds Note
Guarantor.

(b) Notwithstanding the foregoing limitation, the Borrower or any Borrower
Restricted Subsidiary may Incur any and all of the following (each of which
shall be given independent effect):

(i) Indebtedness created under the Loan Documents (other than Indebtedness
Incurred pursuant to an Additional Tranche);

(ii) (A) Qualified Credit Facilities (other than Qualified Receivables
Facilities), Purchase Money Debt and Indebtedness in respect of letters of
credit, in an aggregate principal amount outstanding or available that, when
taken together with the sum of (A) the amount of any Indebtedness outstanding or
available under the Loan Documents, plus (B) the amount of any outstanding
Indebtedness Incurred pursuant to clause (ii)(A) of paragraph (b) of
Section 6.01, plus (C) the amount of all refinancing Indebtedness outstanding or
available pursuant to clause (viii) of paragraph (b) of Section 6.01 in respect
of Indebtedness previously Incurred pursuant to clause (ii)(A) of paragraph (b)
of Section 6.01, plus (D) the amount of all refinancing Indebtedness outstanding
or available pursuant to clause (vi) below in respect of Indebtedness previously
Incurred pursuant to this clause (ii)(A)) at any one time not to exceed
$1,000,000,000, which amount shall be reduced by the amount of Net Available
Proceeds used after the Effective Date to repay Indebtedness under any Credit
Facilities (including the Loan Documents) or any refinancing Indebtedness in
respect of any Credit Facilities (including the Loan Documents) Incurred
pursuant to clause (viii) of paragraph (b) of Section 6.01 or clause (vi)
below), and not reinvested in Telecommunications/IS Assets or used to repay
Indebtedness created under the Loan Documents or repay other Indebtedness,
pursuant to and as permitted by Section 6.07; and

(B) Indebtedness under Credit Facilities in an aggregate principal amount
outstanding or available that, when taken together with the sum of (A) the
amount of any outstanding Indebtedness Incurred pursuant to clause (ii)(B) of
paragraph (b) of Section 6.01, plus (B) the amount of all refinancing
Indebtedness

 

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outstanding or available pursuant to clause (viii) of paragraph (b) of
Section 6.01 in respect of Indebtedness previously Incurred pursuant to
clause (ii)(B) of paragraph (b) of Section 6.01, plus (C) the amount of all
refinancing Indebtedness outstanding or available pursuant to clause (vi) below
in respect of Indebtedness previously Incurred pursuant to this clause (ii)(A))
at any one time not to exceed $100,000,000;

provided, however, that at any one time, the aggregate amount of
(x) Indebtedness Incurred or permitted to be Incurred pursuant to clauses
(A) and (B) above (including any refinancing Indebtedness Incurred pursuant to
clause (vi) below) and (y) the Indebtedness Incurred or permitted to be Incurred
pursuant to clause (ii) of paragraph (b) of Section 6.01 (including any
refinancing Indebtedness Incurred pursuant to clause (viii) of paragraph (b) of
Section 6.01) shall not exceed 1.5 times Pro Forma Consolidated Cash Flow
Available for Fixed Charges of Level 3 and its Restricted Subsidiaries for the
four full fiscal quarters next preceding the Incurrence of such Indebtedness for
which consolidated financial statements are available.

(iii) Indebtedness of the Borrower or any Borrower Restricted Subsidiary
outstanding on the Measurement Date;

(iv) Indebtedness owed by the Borrower to a Restricted Subsidiary, Indebtedness
owed by a Borrower Restricted Subsidiary to Level 3 or a Restricted Subsidiary
(including Indebtedness owed by a Borrower Restricted Subsidiary to another
Borrower Restricted Subsidiary), and Indebtedness with an aggregate principal
amount not in excess of $10,000,000 at any time outstanding owed by the Borrower
to Level 3 or any Sister Restricted Subsidiary; provided, however, that (A) any
Borrower Restricted Subsidiary that Incurs Indebtedness owed to Level 3 or a
Sister Restricted Subsidiary pursuant to this clause (iv) is a Guarantor and a
Loan Proceeds Note Guarantor, (B)(x) upon the transfer, conveyance or other
disposition by such Borrower Restricted Subsidiary or the Borrower of any
Indebtedness so permitted to a Person other than the Borrower or another
Borrower Restricted Subsidiary or (y) if for any reason such Borrower Restricted
Subsidiary ceases to be a Borrower Restricted Subsidiary, the provisions of this
clause (iv) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed to have been Incurred by the borrower thereof at
the time of such transfer, conveyance or other disposition or when such Borrower
Restricted Subsidiary ceases to be a Borrower Restricted Subsidiary and (C) the
payment obligation of (i) such Indebtedness (if clause (A) above applies) and
(ii) all obligations (if clause (A) above applies) with respect to any Offering
Proceeds Note Guarantee of such obligor is expressly subordinated in any
bankruptcy, liquidation or winding up proceeding of the obligor to the prior
payment in full in cash of all obligations of such Guarantor with respect to the
Loan Proceeds Note Guarantee of such Loan Proceeds Note Guarantor; and provided
further, however, that a Foreign Restricted Subsidiary need not become a
Guarantor or a Loan Proceeds Note Guarantor pursuant to clause (A) above

 

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until such time and only so long as such Foreign Restricted Subsidiary
Guarantees any other Indebtedness of Level 3 or any Domestic Restricted
Subsidiary;

(v) Indebtedness Incurred by a Person (other than Level 3 or any Sister
Restricted Subsidiary) prior to the time (A) such Person became a Borrower
Restricted Subsidiary, (B) such Person merges into or consolidates with a
Borrower Restricted Subsidiary or (C) a Borrower Restricted Subsidiary merges
into or consolidates with such Person (in a transaction in which such Person
becomes a Borrower Restricted Subsidiary), which Indebtedness was not Incurred
in anticipation of such transaction and was outstanding prior to such
transaction; provided, however, that after giving effect to the Incurrence of
any Indebtedness pursuant to this clause (v), the Borrower could Incur at least
$1.00 of additional Indebtedness pursuant to paragraph (a) above computed using
“5.0 to 1.0” rather than “4.0 to 1.0” or “3.75 to 1.0,” as the case may be, as
it appears therein and such Person or the Borrower Restricted Subsidiary into
which such Person merges or consolidates is a Guarantor and a Loan Proceeds Note
Guarantor;

(vi) Indebtedness of the Borrower or any Borrower Restricted Subsidiary Incurred
to renew, extend, refinance, defease, repay, prepay, repurchase, redeem, retire,
exchange or refund (each, a “refinancing”) Indebtedness of the Borrower or any
Borrower Restricted Subsidiary Incurred pursuant to paragraph (a) above or
clause (i), (ii), (iii), (v) or (x) of this paragraph (b) or this clause (vi),
in an aggregate principal amount (or if issued at a discount, the then-Accreted
Value) not to exceed the aggregate principal amount (or if issued at a discount,
the then-Accreted Value) of and accrued interest on the Indebtedness so
refinanced plus the amount of any premium required to be paid in connection with
such refinancing pursuant to the terms of the Indebtedness so refinanced or the
amount of any premium reasonably determined by the Board of Directors of Level 3
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated repurchase, plus the expenses of the Borrower Incurred in
connection with such refinancing; provided, however, that (A) if the Person that
originally Incurred the Indebtedness to be refinanced became, or would have been
required to become if not already, a Guarantor or a Loan Proceeds Note Guarantor
as a result of the Incurrence of the Indebtedness being refinanced in accordance
with this covenant, (1) the Person that Incurs the refinancing Indebtedness
pursuant to this clause (vi) (if not the Borrower) shall be a Guarantor and a
Loan Proceeds Note Guarantor and (2) if the Indebtedness to be refinanced is
subordinated to the Loan Proceeds Note Guarantee of such Loan Proceeds Note
Guarantor or the Guarantee of the Obligations of such Guarantor, the refinancing
Indebtedness shall be subordinated to the same extent to the Loan Proceeds Note
Guarantee of such Loan Proceeds Note Guarantor or the Guarantee of the
Obligations of such Guarantor, as the case may be, Incurring such refinancing
Indebtedness, (B) the refinancing Indebtedness shall not be senior in right of
payment to the Indebtedness that is being refinanced and (C) in the case of any
refinancing of Indebtedness Incurred pursuant to paragraph (a) above or
clause (i), (v) or (x) or, if such Indebtedness previously refinanced
Indebtedness Incurred pursuant to any such clause, this clause (vi), the
refinancing Indebtedness by its terms, or by the

 

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terms of any agreement or instrument pursuant to which such Indebtedness is
issued, (x) does not provide for payments of principal of such Indebtedness at
stated maturity or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by the
Borrower or any Borrower Restricted Subsidiary (including any redemption,
retirement or repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of the acceleration of any payment
with respect to such Indebtedness upon any event of default thereunder), in each
case prior to the time the same are required by the terms of the Indebtedness
being refinanced and (y) does not permit redemption or other retirement
(including pursuant to an offer to purchase made by the Borrower or a Borrower
Restricted Subsidiary) of such Indebtedness at the option of the holder thereof
prior to the time the same are required by the terms of the Indebtedness being
refinanced, other than, in the case of clause (x) or (y), any such payment,
redemption or other retirement (including pursuant to an offer to purchase made
by the Borrower) which is conditioned upon a change of control pursuant to
provisions substantially similar to those described under Section 2.04(f);

(vii) Indebtedness of the Borrower or any Borrower Restricted Subsidiary (A) in
respect of performance, surety or appeal bonds, Guarantees, letters of credit or
reimbursement obligations Incurred or provided in the ordinary course of
business securing the performance of contractual, franchise, lease,
self-insurance or license obligations and not in connection with the Incurrence
of Indebtedness or (B) in respect of customary agreements providing for
indemnification, adjustment of purchase price after closing, or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any such obligations of the Borrower or any Borrower
Restricted Subsidiary pursuant to such agreements, Incurred in connection with
the disposition of any business, assets or Borrower Restricted Subsidiary (other
than Guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or Borrower Restricted Subsidiary for the
purpose of financing such acquisition) and in an aggregate principal amount not
to exceed the gross proceeds actually received by the Borrower or any Borrower
Restricted Subsidiary in connection with such disposition;

(viii) Indebtedness of the Borrower or any Borrower Restricted Subsidiary
consisting of Permitted Hedging Agreements;

(ix) Indebtedness of any Foreign Restricted Subsidiary of the Borrower not
otherwise permitted to be Incurred pursuant to clause (i) through (viii) above
or clause (x) below, which, together with any other outstanding Indebtedness
Incurred pursuant to this clause (ix) has an aggregate principal amount not in
excess of $100,000,000 at any time outstanding;

(x) (A) Effective Date Purchase Money Debt initially Incurred by the Borrower or
any Borrower Restricted Subsidiary or another Person that became a Borrower
Restricted Subsidiary on or before the Effective Date and (B)

 

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Indebtedness under the Financing Inc. Notes and the related Financing Inc.
Indentures, any Guarantees of the Financing Inc. Notes issued prior to the
Amendment Effectiveness Date in accordance with such related Financing Inc.
Indentures and any Guarantee of the Financing Inc. Notes issued after the
Amendment Effectiveness Date; provided, however, that in the case of any such
Guarantee of the Financing Inc. Notes entered into after the Amendment
Effectiveness Date, such Guarantee is Incurred in accordance with the last
sentence of paragraph (d) of this Section 6.02; and

(c) Notwithstanding any other provision of this Section 6.02, the maximum amount
of Indebtedness the Borrower or any Borrower Restricted Subsidiary may Incur
pursuant to this Section 6.02 shall not be deemed to be exceeded due solely to
the result of fluctuations in the exchange rates of currencies.

(d) For purposes of determining any particular amount of Indebtedness under this
Section 6.02, Guarantees (other than Guarantees of Indebtedness of Level 3 or
any Sister Restricted Subsidiary that are not Guarantees of Indebtedness
Incurred by Level 3 or any Sister Restricted Subsidiary pursuant to clause (ii)
of paragraph (b) of Section 6.01), Liens or obligations with respect to letters
of credit supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included and shall not be treated as
Indebtedness. For purposes of determining compliance with this Section 6.02, in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the above clauses, the Borrower, in its
sole discretion, shall classify such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of such clauses. To
the extent permitted under applicable laws and regulations, in the event that
any Borrower Restricted Subsidiary Guarantees any of the Financing Inc. Notes,
then the Borrower shall cause such Borrower Restricted Subsidiary to (i) become
a Guarantor and a Loan Proceeds Note Guarantor, (ii) to subordinate, in any
bankruptcy, liquidation or winding up proceeding of such Borrower Restricted
Subsidiary, such Borrower Restricted Subsidiary’s Guarantee of such Financing
Inc. Notes to the Guarantee of the Obligations and the Loan Proceeds Note
Guarantee of such Borrower Restricted Subsidiary and (iii) in the case of a
Level 3 LLC Guarantee of the Floating Rate Notes or the 12.25% Notes, cause
Level 3 LLC to enter into the Level 3 LLC Floating Rate Notes Supplemental
Indenture or the Level 3 LLC 12.25% Notes Supplemental Indenture, as the case
may be.

SECTION 6.03. Limitation on Restricted Payments. (a) Level 3:

(i) shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, declare or pay any dividend, or make any distribution, in respect of
its Capital Stock or to the holders thereof, excluding any dividends or
distributions which are made solely to Level 3 or a Restricted Subsidiary (and,
if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to the other
stockholders of such Restricted Subsidiary on a pro rata basis or on a basis
that results in the receipt by Level 3 or a Restricted Subsidiary of dividends
or distributions of greater value than it would receive on a pro rata basis) or
any dividends or

 

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distributions payable solely in shares of Capital Stock of Level 3 (other than
Disqualified Stock) or in options, warrants or other rights to acquire Capital
Stock of Level 3 (other than Disqualified Stock);

(ii) shall not, and shall not permit any Restricted Subsidiary to, purchase,
redeem, or otherwise retire or acquire for value (x) any Capital Stock of
Level 3 or any Restricted Subsidiary or (y) any options, warrants or rights to
purchase or acquire shares of Capital Stock of Level 3 or any Restricted
Subsidiary or any securities convertible or exchangeable into shares of Capital
Stock of Level 3 or any Restricted Subsidiary, except, in any such case, any
such purchase, redemption or retirement or acquisition for value (A) paid to
Level 3 or a Restricted Subsidiary (or, in the case of any such purchase,
redemption or other retirement or acquisition for value with respect to a
Restricted Subsidiary that is not a Wholly Owned Subsidiary, to the other
stockholders of such Restricted Subsidiary on a pro rata basis or on a basis
that results in the receipt by Level 3 or a Restricted Subsidiary of payments of
greater value than it would receive on a pro rata basis) or (B) paid solely in
shares of Capital Stock (other than Disqualified Stock) of Level 3;

(iii) shall not make, or permit any Restricted Subsidiary to make, any
Investment (other than an Investment in Level 3 or a Restricted Subsidiary or a
Permitted Investment) in any Person, including the Designation of any Restricted
Subsidiary as an Unrestricted Subsidiary, or the Revocation of any such
Designation, according to Section 6.10;

(iv) shall not, and shall not permit any Restricted Subsidiary to, redeem,
defease, repurchase, retire or otherwise acquire or retire for value, prior to
any scheduled maturity, repayment or sinking fund payment, Indebtedness of
Level 3 which is subordinate in right of payment to the Guarantee by Level 3 of
the Obligations or Indebtedness of any Restricted Subsidiary which is
subordinate in right of payment to the Loans (in the case of the Borrower) or
the Guarantee of the Obligations (in the case of Restricted Subsidiaries other
than the Borrower) by such Restricted Subsidiary (other than any redemption,
defeasance, repurchase, retirement or other acquisition or retirement for value
made in anticipation of satisfying a scheduled maturity, repayment or sinking
fund obligation due within one year thereof); and

(v) shall not, and shall not permit any Restricted Subsidiary to, issue,
transfer, convey, sell or otherwise dispose of Capital Stock of any Restricted
Subsidiary to a Person other than Level 3 or another Restricted Subsidiary if
the result thereof is that such Restricted Subsidiary shall cease to be a
Restricted Subsidiary, in which event the amount of such “Restricted Payment”
shall be the Fair Market Value of the remaining interest, if any, in such former
Restricted Subsidiary held by Level 3 and the other Restricted Subsidiaries
(each of clauses (i) through (v) being a “Restricted Payment”)

 

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if:

(1) an Event of Default, or an event that with the passing of time or the giving
of notice, or both, would constitute an Event of Default, shall have occurred
and be continuing, or

(2) upon giving effect to such Restricted Payment, Level 3 could not Incur at
least $1.00 of additional Indebtedness pursuant to paragraph (a) of
Section 6.01, or

(3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments made on or after Measurement Date, including Restricted
Payments made pursuant to clause (A) or (B) of the proviso at the end of this
sentence, and Permitted Investments made on or after the Measurement Date
pursuant to clause (i) or (j) of the definition thereof (the amount of any such
Restricted Payment or Permitted Investment, if made other than in cash, to be
based upon Fair Market Value) exceeds the sum of:

(A) 50% of cumulative Consolidated Net Income of Level 3 and its Restricted
Subsidiaries (or, in the case that Consolidated Net Income of Level 3 and its
Restricted Subsidiaries shall be negative, 100% of such negative amount) since
the end of the last full fiscal quarter prior to the Measurement Date through
the last day of the last full fiscal quarter ending at least 45 days prior to
the date of such Restricted Payment and

(B) plus, in the case of any Revocation made after the Measurement Date, an
amount equal to the lesser of the portion (proportionate to Level 3’s equity
interest in the Subsidiary to which such Revocation relates) of the Fair Market
Value of the net assets of such Subsidiary at the time of Revocation and the
amount of Investments previously made (and treated as a Restricted Payment) by
Level 3 or any Restricted Subsidiary in such Subsidiary;

provided, however, that Level 3 or a Restricted Subsidiary may, without regard
to the limitations in clause (3) but subject to clauses (1) and (2), make
(A) Restricted Payments in an aggregate amount not to exceed the sum of
$50,000,000 and the aggregate net cash proceeds received after the Measurement
Date (i) as capital contributions to Level 3, from the issuance (other than to a
Subsidiary or an employee stock ownership plan or trust established by Level 3
or any such Subsidiary for the benefit of their employees) of Capital Stock
(other than Disqualified Stock) of Level 3, and (ii) from the issuance or sale
of Indebtedness of Level 3 or any Restricted Subsidiary (other than to a
Subsidiary, Level 3 or an employee stock ownership plan or trust established by
Level 3 or any such Subsidiary for the benefit of their employees) that after
the Measurement Date has been converted into or exchanged for Capital Stock
(other than

 

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Disqualified Stock) of Level 3 and (B) Investments in Persons engaged in the
Telecommunications/IS Business in an aggregate amount not to exceed the
after-tax gain on the sale, after the Measurement Date, of Special Assets to the
extent sold for cash, Cash Equivalents, Telecommunications/IS Assets or the
assumption of Indebtedness of Level 3 or any Restricted Subsidiary (other than
Indebtedness that is subordinated to the Loans, the Loan Proceeds Note or any
applicable Guarantee of the Obligations or Loan Proceeds Note Guarantee) and
release of Level 3 and all Restricted Subsidiaries from all liability on the
Indebtedness assumed. The aggregate net cash proceeds referred to in the
immediately preceding clauses (A)(i) and (A)(ii) shall not be utilized to make
Restricted Payments pursuant to such clauses to the extent such proceeds have
been utilized to make Permitted Investments under clause (i) of the definition
of “Permitted Investments.”

(b) Notwithstanding the foregoing limitation,

(i) Level 3 may pay any dividend on Capital Stock of any class of Level 3 within
60 days after the declaration thereof if, on the date when the dividend was
declared, Level 3 could have paid such dividend in accordance with the foregoing
provisions; provided, however, that at the time of such payment of such
dividend, no other Event of Default shall have occurred and be continuing (or
result therefrom);

(ii) Level 3 may repurchase any shares of its Common Stock or options to acquire
its Common Stock from Persons who were formerly directors, officers or employees
of Level 3 or any of its Subsidiaries or other Affiliates in an amount not to
exceed $3,000,000 in any 12-month period;

(iii) Level 3 and any Restricted Subsidiary may refinance any Indebtedness
otherwise permitted by clause (viii) of paragraph (b) of Section 6.01 or
clause (vi) of paragraph (b) of Section 6.02;

(iv) Level 3 and any Restricted Subsidiary may retire or repurchase any Capital
Stock of Level 3 or of any Restricted Subsidiary or any Subordinated Debt of
Level 3 in exchange for, or out of the proceeds of substantially concurrent sale
(other than to a Subsidiary or an employee stock ownership plan or trust
established by Level 3 or any such Subsidiary for the benefit of their
employees) of, Capital Stock (other than Disqualified Stock) of Level 3;
provided, however, that the proceeds from any such exchange or sale of Capital
Stock shall be excluded from any calculation pursuant to clause (A)(i) in the
proviso at the end of paragraph (a) above or pursuant to clause (b) of the
definition of “Invested Capital”; and

(v) Level 3 may pay cash dividends in any amount not in excess of $50,000,000 in
any 12-month period in respect of Preferred Stock of Level 3 (other than
Disqualified Stock).

 

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The Restricted Payments described in the foregoing clauses (i), (ii) and
(v) shall be included in the calculation of Restricted Payments; the Restricted
Payments described in clauses (iii) and (iv) shall be excluded in the
calculation of Restricted Payments.

(c) The Borrower may not, and may not permit any Borrower Restricted Subsidiary
to, pay any dividend or make any distribution in respect of shares of its
Capital Stock held by Level 3 or a Sister Restricted Subsidiary (whether in
cash, securities or other Property) or any payment (whether in cash, securities
or other Property) on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of Capital Stock
(all such dividends, distributions and payments being referred to herein as
“Level 3 Transfers”), other than (i) Level 3 Transfers at such times and in such
amounts as shall be necessary to permit Level 3 to pay administrative expenses
attributable to the operations of its Restricted Subsidiaries, (ii) Level 3
Transfers at such times and in such amounts as are sufficient for Level 3 to
make the timely payment of interest, premium (if any) and principal (whether at
stated maturity, by way of a sinking fund applicable thereto, by way of any
mandatory redemption, defeasance, retirement or repurchase thereof, including
upon the occurrence of designated events or circumstances or by virtue of
acceleration upon an event of default, or by way of redemption or retirement at
the option of the holder of the Indebtedness of Level 3, including pursuant to
offers to purchase) according to the terms of any Indebtedness of Level 3,
(iii) Level 3 Transfers (A) to permit Level 3 to satisfy its obligations in
respect of stock option plans or other benefit plans for management or employees
of Level 3 and its Subsidiaries, (B) to permit Level 3 to pay dividends on
Preferred Stock of Level 3 in an amount not to exceed the aggregate net cash
proceeds received by Level 3 (1) after September 30, 1999, from the issuance of
Capital Stock, and (2) from the issuance or sale of Indebtedness of Level 3 or
any Restricted Subsidiary that after September 30, 1999, has been converted into
or exchanged for Capital Stock of Level 3, (C) in an annual amount not to exceed
50% of Level 3’s Consolidated Net Income for the prior fiscal year and
(D) Level 3 Transfers in amounts not to exceed the amount required by Level 3 to
pay accrued and unpaid interest on any Indebtedness of Level 3 due upon the
conversion, exchange or purchase of such Indebtedness into, for or with Capital
Stock of Level 3 and (iv) additional Level 3 Transfers after October 1, 2003 in
an aggregate amount not to exceed $50,000,000 in the aggregate.

SECTION 6.04. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries. (a) Level 3 shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
(other than pursuant to law or regulation) on the ability of any Restricted
Subsidiary (i) to pay dividends (in cash or otherwise) or make any other
distributions in respect of its Capital Stock owned by Level 3 or any other
Restricted Subsidiary or pay any Indebtedness or other obligation owed to
Level 3 or any other Restricted Subsidiary, (ii) to make loans or advances to
Level 3 or any other Restricted Subsidiary or (iii) to transfer any of its
Property to Level 3 or any other Restricted Subsidiary.

(b) Notwithstanding the foregoing limitation, Level 3 may, and may permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist

(i) any encumbrance or restriction in effect on the Measurement Date,

 

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(ii) any encumbrance or restriction under the Loan Documents, and any customary
(as conclusively determined in good faith by the Chief Financial Officer of
Level 3) encumbrance or restriction applicable to a Restricted Subsidiary that
is contained in an agreement or instrument governing or relating to Indebtedness
contained in any Qualified Receivable Facility or Purchase Money Debt Incurred
pursuant to clause (ii) of paragraph (b) under Section 6.01 or clause (ii) of
paragraph (b) under Section 6.02 (or refinancing Indebtedness thereof Incurred
pursuant to clause (viii) of paragraph (b) under Section 6.01 or clause (vi) of
paragraph (b) under Section 6.02); provided, however, that such encumbrances and
restrictions do not limit the ability of such Restricted Subsidiary, directly or
indirectly (including through another Subsidiary of the Borrower) (i) to pay
dividends (in cash or otherwise) or make any other distributions in respect of
its Capital Stock owned by the Borrower or any other Borrower Restricted
Subsidiary or pay any Indebtedness or other obligation owed to the Borrower,
(ii) to make loans or advances to the Borrower or (iii) to transfer any of its
Property (other than in the case of Purchase Money Debt, the
Telecommunications/IS Assets installed, constructed, acquired, leased, developed
or improved with the proceeds of such Purchase Money Debt and any improvements
or accessions thereto) to the Borrower,

(iii) any encumbrance or restriction pursuant to an agreement relating to any
Acquired Debt, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person so acquired,

(iv) any encumbrance or restriction pursuant to an agreement effecting a
refinancing of Indebtedness Incurred pursuant to an agreement referred to in
clause (i), (ii) or (iii) of this paragraph (b); provided, however, that the
provisions contained in such agreement relating to such encumbrance or
restriction are no more restrictive (as so determined) in any material respect
than the provisions contained in the agreement the subject thereof,

(v) in the case of clause (iii) of paragraph (a) above, any encumbrance or
restriction contained in any security agreement (including a Capital Lease
Obligation) securing Indebtedness of Level 3 or a Restricted Subsidiary
otherwise permitted under this Agreement, but only to the extent such
restrictions restrict the transfer of the Property subject to such security
agreement,

(vi) in the case of clause (iii) of paragraph (a) above, customary provisions
(A) that restrict the subletting, assignment or transfer of any Property that is
a lease, license, conveyance or similar contract, (B) contained in asset sale or
other asset disposition agreements limiting the transfer of the Property being
sold or disposed of pending the closing of such sale or disposition or
(C) arising or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of Property of Level 3

 

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or any Restricted Subsidiary in any manner material to Level 3 or any Restricted
Subsidiary,

(vii) any encumbrance or restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or Property of such
Restricted Subsidiary; provided, however, that the consummation of such
transaction would not result in a Default or an Event of Default, that such
restriction terminates if such transaction is abandoned and that the
consummation or abandonment of such transaction occurs within one year of the
date such agreement was entered into, and

(viii) any encumbrance or restriction pursuant to this Agreement.

SECTION 6.05. Limitation on Liens. Level 3 shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist any
Lien on or with respect to any Property now owned or acquired after the date
hereof to secure any Indebtedness other than:

(i) Liens existing on the Effective Date and securing Indebtedness outstanding
on the Effective Date, which in any event shall not include Liens securing the
Parent Intercompany Note or the Existing Notes;

(ii) Liens Incurred on or after the Effective Date:

(1) pursuant to the Loan Documents to secure Indebtedness permitted to be
Incurred pursuant to clause (ii)(A) of paragraph (b) under Section 6.01 or
clause (ii)(A) of paragraph (b) under Section 6.02 (or refinancing Indebtedness
in respect thereof Incurred pursuant to clause (viii) of paragraph (b) under
Section 6.01 or clause (vi) of paragraph (b) under Section 6.02);

(2) on Receivables, collections thereof and accounts established solely for the
collection of such Receivables to secure Indebtedness under Qualified
Receivables Facilities permitted to be Incurred pursuant to clause (ii)(B) of
paragraph (b) under Section 6.01 or clause (ii)(B) of paragraph (b) under
Section 6.02 (or refinancing Indebtedness thereof Incurred pursuant to
clause (viii) of paragraph (b) under Section 6.01 or clause (vi) of paragraph
(b) under Section 6.02);

(3) on cash to secure reimbursement obligations in respect of letters of credit
permitted to be Incurred pursuant to clause (ii)(A) or (B) of
paragraph (b) under Section 6.01 or clause (ii)(A) or (B) of paragraph (b) under
Section 6.02 (or refinancing Indebtedness thereof Incurred pursuant to
clause (vi) of paragraph (b) under Section 6.02 or clause (viii) of paragraph
(b) under Section 6.01), provided that the amount of such cash does not exceed
110% of the face amount of such letters of credit; and

 

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(4) on Property acquired after the Effective Date with the proceeds of Purchase
Money Debt Incurred pursuant to clause (ii)(A) or (B) of paragraph (b) under
Section 6.01 or clause (ii)(A) or (B) of paragraph (b) under Section 6.02 (or
refinancing Indebtedness thereof Incurred pursuant to clause (vi) of paragraph
(b) under Section 6.02 or clause (viii) of paragraph (b) under Section 6.01) to
secure such Purchase Money Debt, provided that any such Lien may not extend to
any Property other than the Telecommunications/IS Assets installed, constructed,
acquired, leased, developed or improved with the proceeds of such Purchase Money
Debt and any improvements or accessions thereto (it being understood that all
Indebtedness to any single lender or group of related lenders or outstanding
under any single credit facility, and in any case relating to the same group or
collection of Telecommunications/IS Assets financed thereby, shall be considered
a single Purchase Money Debt, whether drawn at one time or from time to time);

(iii) Liens in favor of Level 3 or any Restricted Subsidiary; provided, however,
that any subsequent issue or transfer of Capital Stock or other event that
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any subsequent transfer of the Indebtedness secured by any such Lien (except
to Level 3 or a Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Lien by the borrower thereof;

(iv) Liens outstanding on the Effective Date securing Purchase Money Debt and
Liens on Property acquired after the Effective Date with the proceeds of
Purchase Money Debt Incurred pursuant to clause (iii) of paragraph (b) under
Section 6.01 to secure such Purchase Money Debt, provided that any such Lien may
not extend to any Property other than the Telecommunications/IS Assets
installed, constructed, acquired, leased, developed or improved with the
proceeds of such Purchase Money Debt and any improvements or accessions thereto
(it being understood that all Indebtedness to any single lender or group of
related lenders or outstanding under any single credit facility, and in any case
relating to the same group or collection of Telecommunications/IS Assets
financed thereby, shall be considered a single Purchase Money Debt, whether
drawn at one time or from time to time);

(v) Liens to secure Acquired Debt, provided that (a) such Lien attaches to the
acquired Property prior to the time of the acquisition of such Property and
(b) such Lien does not extend to or cover any other Property;

(vi) Liens to secure Indebtedness Incurred to refinance, in whole or in part,
Indebtedness secured by any Lien referred to in the foregoing clauses (i),
(iv) and (v) or this clause (vi) so long as such Lien does not extend to any
other Property (other than improvements and accessions to the original Property)
and the principal amount of Indebtedness so secured is not increased except as
otherwise permitted under clause (viii) of paragraph (b) of Section 6.01 or
clause (vi) of paragraph (b) of Section 6.02;

 

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(vii) Liens on Property (A) not constituting Collateral and (B) not required to
become Collateral following the satisfaction of the Guarantee Permit Condition
and the Collateral Permit Condition, Incurred on or after the Measurement Date
not otherwise permitted by the foregoing clauses (i) through (v) (but including
in the computations of Liens permitted under this clause (vii) Liens existing on
the Effective Date which remain existing at the time of computation which are
otherwise permitted under clause (i)) securing Indebtedness of Level 3 or any
Restricted Subsidiary (other than the Borrower or any Borrower Restricted
Subsidiary) in an aggregate amount not to exceed 5% of Level 3’s Consolidated
Tangible Assets.

(viii) Liens on Property of any Non-Telecommunications Subsidiary; provided,
however, that the Incurrence of such Lien does not require the Person Incurring
such Lien to secure any Indebtedness of any Person other than a
Non-Telecommunications Subsidiary;

(ix) Liens to secure Indebtedness Incurred pursuant to clause (viii) of
paragraph (b) of Section 6.02; and

(x) Permitted Liens.

SECTION 6.06. Limitation on Sale and Leaseback Transactions. Level 3 shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, enter
into, assume, Guarantee or otherwise become liable with respect to any Sale and
Leaseback Transaction, unless (i) Level 3 or such Restricted Subsidiary would be
entitled to Incur (a) Indebtedness in an amount equal to the Attributable Value
of the Sale and Leaseback Transaction pursuant to Section 6.01 or Section 6.02
and (b) a Lien pursuant to Section 6.05, equal in amount to the Attributable
Value of the Sale and Leaseback Transaction, and (ii) the Sale and Leaseback
Transaction is treated as an Asset Disposition and all of the conditions of
Section 6.07 (including the provisions concerning the application of Net
Available Proceeds) are satisfied with respect to such Sale and Leaseback
Transaction, treating all of the consideration received in such Sale and
Leaseback Transaction as Net Available Proceeds for purposes of such
Section 6.07.

SECTION 6.07. Limitation on Asset Dispositions. (a) Level 3 shall not, and shall
not permit any Restricted Subsidiary to, make any Asset Disposition unless:
(i) Level 3 or the Restricted Subsidiary, as the case may be, receives
consideration for such disposition at least equal to the Fair Market Value for
the Property sold or disposed of as determined by the Board of Directors of
Level 3 in good faith and evidenced by a Board Resolution of Level 3; and
(ii) at least 75% of the consideration for such disposition consists of cash or
Cash Equivalents or the assumption of Indebtedness of the Borrower or any
Borrower Restricted Subsidiary (other than Indebtedness of the Borrower that is
subordinated to the Obligations or Indebtedness of any Borrower Restricted
Subsidiary that is subordinated to the Obligations of such Borrower Restricted
Subsidiary) and release of the Borrower and all Borrower Restricted Subsidiaries
from all liability on the Indebtedness assumed (or if less than 75%, the
remainder of such consideration consists of Telecommunications/IS Assets);
provided, however, that, to the

 

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extent such disposition involves Special Assets, all or any portion of the
consideration may, at Level 3’s election, consist of Property other than cash,
Cash Equivalents or the assumption of Indebtedness or Telecommunications/IS
Assets.

(b) If the Net Available Proceeds from any Asset Disposition (or any series of
related Asset Dispositions) consisting of Property that is Collateral or
Property that would be required to become Collateral following the satisfaction
of the Guarantee Permit Condition and the Collateral Permit Condition exceed
$10.0 million, the Borrower shall deposit an amount in cash or cash equivalents
equal to such Net Available Proceeds (which such amount shall thereafter
constitute the Net Available Proceeds of such Asset Disposition or related Asset
Dispositions) into a deposit account in which the Collateral Agent has a
perfected security interest in favor of the Lenders. Prior to such time a Notice
of Default shall have been delivered to the Borrower pursuant to Article VII,
the Borrower may withdraw such Net Available Proceeds, and the Collateral Agent,
at the Request of the Borrower, shall take all actions necessary, at the expense
of the Borrower, to promptly release the security interest in such Net Available
Proceeds (i) to permit Level 3 or a Restricted Subsidiary to reinvest such Net
Available Proceeds in Telecommunications/IS Assets, (ii) to permit the Borrower
to repay the Loan in accordance with Section 2.04(d) or (iii) following
consummation of any offer to prepay the Loan pursuant to Section 2.04(d), to
Level 3 or any Restricted Subsidiary for any purpose.

(c) The Net Available Proceeds (or any portion thereof) from Asset Dispositions
may be applied by Level 3 or a Restricted Subsidiary, to the extent Level 3 or
such Restricted Subsidiary elects: (1) to permanently prepay Borrowings in
accordance with Section 2.04(b) or (c) or (2) to reinvest in
Telecommunications/IS Assets (including by means of an Investment in
Telecommunications/IS Assets by a Restricted Subsidiary with Net Available
Proceeds received by Level 3 or another Restricted Subsidiary). Level 3 shall
not, and shall not permit any Restricted Subsidiary, to acquire any
Telecommunications/IS Assets with the Net Available Proceeds of any Asset
Disposition consisting of Collateral or Property that would be required to
become Collateral following the satisfaction of the Guarantee Permit Condition
and the Collateral Permit Condition unless such Telecommunications/IS Assets are
Collateral or Property that would be required to become Collateral following the
satisfaction of the Guarantee Permit Condition and the Collateral Permit
Condition. Any Net Available Proceeds from an Asset Disposition not applied in
accordance with paragraph (b) within 330 days (or, in the case of a disposition
of Special Assets identified in clause (a) of the definition thereof in which
the Net Available Proceeds exceed $500,000,000, 510 days) from the date of the
receipt of such Net Available Proceeds shall constitute “Excess Proceeds.” The
Borrower shall apply such Excess Proceeds to the extent required by
Section 2.04.

(d) (1) The Borrower shall not, and shall not permit any Borrower Restricted
Subsidiary, to sell, transfer, lease or otherwise dispose of any Property that
is Collateral or that would be required to become Collateral following the
satisfaction of the Collateral Permit Condition to a Subsidiary of Level 3
(other than a Subsidiary that is a Guarantor and a Grantor or that will become a
Guarantor and a Grantor following satisfaction of the Guarantee Permit Condition
and the Collateral Permit Condition), and

 

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(2) Level 3 shall not designate as an Unrestricted Subsidiary any Borrower
Restricted Subsidiary that owns, directly or indirectly, any Property that is
Collateral or that would be required to become Collateral following the
satisfaction of the Collateral Permit Condition unless either:

(A) (1) in the case of a sale, transfer, lease or other disposition, the
Borrower or such Borrower Restricted Subsidiary receives consideration for such
sale, transfer, lease or other disposition at least equal to the Fair Market
Value of such Property (which, in the case of the Offering Proceeds Notes, any
other intercompany Indebtedness or the Loan Proceeds Note, is the principal
amount of such Offering Proceeds Note, such Indebtedness or the Loan Proceeds
Note, as applicable, and any accrued and unpaid interest thereon), and

(2) in the case of a sale, transfer, lease or other disposition, the
consideration consists of 100% in cash or Cash Equivalents; or

(B) such transaction:

(1) [Intentionally Omitted]

(2) is desirable in the conduct of the business of Level 3 and its Subsidiaries
taken as a whole (as conclusively determined by the Board of Directors of
Level 3), and

(3) (i) in the case of a sale, transfer, lease or other disposition in which the
consideration does not consist of 100% cash or Cash Equivalents, the Fair Market
Value of the Property that is Collateral so sold, transferred, leased or
disposed of (net of any cash or Cash Equivalents received by the Borrower or
such Borrower Restricted Subsidiary in respect of such Collateral), or (ii) in
the case of a designation of a Borrower Restricted Subsidiary as an Unrestricted
Subsidiary, the Fair Market Value of all Property that is Collateral owned,
directly or indirectly, by such Borrower Restricted Subsidiary at the time it is
designated an Unrestricted Subsidiary, when taken together with the Collateral
Release Amount (determined prior to such sale, lease, transfer or other
disposition or designation as an Unrestricted Subsidiary), does not exceed 5.0%
of Consolidated Tangible Assets as determined at the time of such sale, lease,
transfer or other disposition or designation as an Unrestricted Subsidiary, on
the basis of the most recent consolidated balance sheet available to Level 3 (as
conclusively determined in good faith by the Chief Financial Officer of
Level 3).

For purposes of this Section 6.07(d), “Collateral Release Amount” means an
amount equal to:

(1) the sum of (x) the Fair Market Value of any Property that constituted
Collateral previously sold, transferred, leased or otherwise disposed of
pursuant to this Section 6.07(d) for consideration not

 

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consisting of 100% cash or Cash Equivalents (net of any cash or Cash Equivalents
received by the transferor in consideration for such sale, transfer, lease or
other disposition) plus (y) the Fair Market Value of all Property that
constituted Collateral held directly or indirectly by each Borrower Restricted
Subsidiary previously designated as an Unrestricted Subsidiary pursuant to this
Section 6.07(d), minus

(2) the sum of, without duplication, (x) the amount of any cash or Cash
Equivalents received by the Borrower or a Borrower Restricted Subsidiary in
repayment of principal or as a return of capital from an Investment made
pursuant to clause (B) of this Section 6.07(d) plus (y) the amount of any cash
or Cash Equivalents received by the Borrower or a Borrower Restricted Subsidiary
from a Borrower Restricted Subsidiary designated as an Unrestricted Subsidiary
pursuant to this Section 6.07(d) representing a return of capital, in the case
of clauses (x) and (y), to the extent such cash or Cash Equivalents were treated
as Net Available Proceeds from an Asset Disposition, plus (z) the Fair Market
Value (determined at the time that such Property again becomes Collateral in
accordance with the Security Documents) of any Property which had ceased to be
Collateral pursuant to this Section 6.07(d) and thereafter became Collateral in
accordance with the terms of the Security Documents.

In the event of (a) a transfer of Property that constitutes Collateral made in
accordance with this Section 6.07(d), such Property shall be released from any
Lien to which it is subject pursuant to the Security Documents in accordance
with the procedures in Section 9.14 or (b) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary in compliance with this
Section 6.07(d), such Restricted Subsidiary shall, by delivery of documentation
providing for such release in form satisfactory to the Administrative Agent, be
released from any Guarantee (in the case of a Guarantor) and its obligations
under the Collateral Agreement (in the case of a Grantor) previously made by
such Subsidiary.

(e) The Borrower shall not, and shall not permit any Borrower Restricted
Subsidiary to, sell, transfer, lease or otherwise dispose of any Property that
does not constitute Collateral to Level 3 or any Sister Restricted Subsidiary
unless (i) the Borrower or such Borrower Restricted Subsidiary receives
consideration for such sale, transfer, lease or other disposition at least equal
to the Fair Market Value of such Property and (ii) the consideration consists of
either (A) 100% in cash or Cash Equivalents or (B) Debt of Level 3 or the
Restricted Subsidiary to which Property was transferred that is secured by a
Lien on such transferred Property. Level 3 or the Restricted Subsidiary to which
Property was transferred for consideration consisting of Debt that is secured by
a Lien on such Property in accordance with clause (ii)(B) of the prior sentence
may substitute the Lien on such Property with a Lien on other Property
(including any Property owned by the Borrower or an Borrower Restricted
Subsidiary) that, as determined by the Board of Directors of Level 3 in good
faith and evidenced by a Board Resolution of Level 3 filed with the Trustee upon
request of the Trustee, has a Fair

 

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Market Value of no less than the Fair Market Value of the Property for which the
substitution is made at the time of the substitution. The provisions of this
paragraph do not apply to (a) dividends and distributions, (b) loans or advances
and (c) purchases of services or goods.

SECTION 6.08. Limitation on Issuance and Sales of Capital Stock of Restricted
Subsidiaries. Level 3 shall at all times own all the issued and outstanding
Capital Stock of the Borrower. The Borrower shall at all times own all the
issued and outstanding Capital Stock of Level 3 LLC. Level 3 shall not, and
shall not permit any Restricted Subsidiary to, issue, transfer, convey, sell or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary or
securities convertible or exchangeable into, or options, warrants, rights or any
other interest with respect to, Capital Stock of a Restricted Subsidiary to any
Person other than Level 3 or a Restricted Subsidiary except (i) a sale of all of
the Capital Stock of such Restricted Subsidiary owned by Level 3 and any
Restricted Subsidiary that complies with the provisions of Section 6.07 to the
extent such provisions apply, (ii) in a transaction that results in such
Restricted Subsidiary becoming a Joint Venture, provided (x) such transaction
complies with the provisions of Section 6.07 to the extent such provisions apply
and (y) the remaining interest of Level 3 or any other Restricted Subsidiary in
such Joint Venture would have been permitted as a new Restricted Payment or
Permitted Investment under the provisions of Section 6.03, (iii) the issuance,
transfer, conveyance, sale or other disposition of shares of such Restricted
Subsidiary so long as after giving effect to such transaction such Restricted
Subsidiary remains a Restricted Subsidiary and such transaction complies with
the provisions of Section 6.07 to the extent such provisions apply, (iv) the
transfer, conveyance, sale or other disposition of shares required by applicable
law or regulation, (v) if required, the issuance, transfer, conveyance, sale or
other disposition of directors’ qualifying shares, (vi) Disqualified Stock
issued in exchange for, or upon conversion of, or the proceeds of the issuance
of which are used to refinance, shares of Disqualified Stock of such Restricted
Subsidiary, provided that the amounts of the redemption obligations of such
Disqualified Stock shall not exceed the amounts of the redemption obligations
of, and such Disqualified Stock shall have redemption obligations no earlier
than those required by, the Disqualified Stock being exchanged, converted or
refinanced, (vii) in a transaction where Level 3 or a Restricted Subsidiary
acquires at the same time not less than its Proportionate Interest in such
issuance of Capital Stock, (viii) Capital Stock issued and outstanding on the
Measurement Date, (ix) Capital Stock of a Restricted Subsidiary issued and
outstanding prior to the time that such Person becomes a Restricted Subsidiary
so long as such Capital Stock was not issued in contemplation of such Person’s
becoming a Restricted Subsidiary or otherwise being acquired by Level 3 and
(x) an issuance of Preferred Stock of a Restricted Subsidiary (other than
Preferred Stock convertible or exchangeable into Common Stock of any Restricted
Subsidiary) otherwise permitted by this Agreement. In the event of (a) the
consummation of a transaction referred to in any of the foregoing clauses that
results in a Restricted Subsidiary that is a Guarantor or a Grantor (or both) no
longer being a Restricted Subsidiary and (b) the execution and delivery of
documentation providing for such release in form satisfactory to the
Administrative Agent, any such Guarantor or Grantor (or Guarantor and Grantor)
shall be released from all its obligations under its Guarantee (in the case of a
Guarantor) and its obligations under the Collateral Agreement (in the case of a
Grantor).

 

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SECTION 6.09. Transactions with Affiliates. Level 3 shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, sell,
lease, transfer, or otherwise dispose of any of its Property to, or purchase any
Property from, or enter into any contract, agreement, understanding, loan,
advance, Guarantee or transaction (including the rendering of services) with or
for the benefit of, any Affiliate (each of the foregoing, an “Affiliate
Transaction”), unless (a) such Affiliate Transaction or series of Affiliate
Transactions is (i) in the best interest of Level 3 or such Restricted
Subsidiary and (ii) on terms that are no less favorable to Level 3 or such
Restricted Subsidiary than those that would have been obtained in a comparable
arm’s-length transaction by Level 3 or such Restricted Subsidiary with a Person
that is not an Affiliate (or, in the event that there are no comparable
transactions involving Persons who are not Affiliates of Level 3 or the relevant
Restricted Subsidiary to apply for comparative purposes, is otherwise on terms
that, taken as a whole, Level 3 has determined to be fair to Level 3 or the
relevant Restricted Subsidiary) and (b) Level 3 delivers to the Administrative
Agent (i) with respect to any Affiliate Transaction or series of Affiliate
Transactions involving aggregate payments in excess of $10,000,000 but less than
$15,000,000, a certificate of the chief executive, operating or financial
officer of Level 3 evidencing such officer’s determination that such Affiliate
Transaction or series of Affiliate Transactions complies with clause (a) above
and (ii) with respect to any Affiliate Transaction or series of Affiliate
Transactions involving aggregate payments equal to or in excess of $15,000,000,
a Board Resolution of Level 3 certifying that such Affiliate Transaction or
series of Affiliate Transactions complies with clause (a) above and that such
Affiliate Transaction or series of Affiliate Transactions has been approved by
the Board of Directors of Level 3, including a majority of the disinterested
members of the Board of Directors of Level 3; provided, however, that, in the
event that there shall not be at least two disinterested members of the Board of
Directors of Level 3 with respect to the Affiliate Transaction, Level 3 shall,
at the request of the Administrative Agent, in addition to such Board
Resolution, deliver to the Administrative Agent a written opinion from an
investment banking firm of national standing in the United States which, in the
good faith judgment of the Board of Directors of Level 3, is independent with
respect to Level 3 and its Affiliates and qualified to perform such task, which
opinion shall be to the effect that the consideration to be paid or received in
connection with such Affiliate Transaction is fair, from a financial point of
view, to Level 3 or such Restricted Subsidiary.

Notwithstanding the foregoing, the following shall not be deemed Affiliate
Transactions: (i) any employment agreement entered into by Level 3 or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
industry practice; (ii) any agreement or arrangement with respect to the
compensation of a director or officer of Level 3 or any Restricted Subsidiary
approved by a majority of the disinterested members of the Board of Directors of
Level 3 and consistent with industry practice; (iii) transactions between or
among Level 3 and its Restricted Subsidiaries; provided, however, that no more
than 5% of the Voting Stock (on a fully diluted basis) of any such Restricted
Subsidiary is owned by an Affiliate of Level 3 (other than a Restricted
Subsidiary); (iv) Restricted Payments and Permitted Investments permitted by
Section 6.03 (other than Investments in Affiliates that are not Level 3 or
Restricted Subsidiaries); (v) transactions pursuant to the terms of any
agreement or arrangement as

 

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in effect on the Measurement Date; and (vi) transactions with respect to
wireline or wireless transmission capacity, the lease or sharing or other use of
cable or fiber optic lines, equipment, rights-of-way or other access rights,
between Level 3 (or any Restricted Subsidiary) and any other Person; provided,
however, that, in the case of this clause (vi), such transaction complies with
clause (a) in the immediately preceding paragraph.

SECTION 6.10. Limitation on Designations of Unrestricted Subsidiaries. Level 3
shall not designate (1) the Borrower or Level 3 LLC as an Unrestricted
Subsidiary or (2) any other Subsidiary (other than a newly created Subsidiary in
which no Investment has previously been made) as an “Unrestricted Subsidiary”
under this Agreement (a “Designation”) unless in the case of this clause (2):

(a) no Default or Event of Default shall have occurred and be continuing at the
time of or after giving effect to such Designation;

(b) immediately after giving effect to such Designation, Level 3 would be able
to Incur $1.00 of Indebtedness under paragraph (a) of Section 6.01; and

(c) Level 3 would not be prohibited under any provision of this Agreement from
making an Investment at the time of Designation (assuming the effectiveness of
such Designation) in an amount (the “Designation Amount”) equal to the portion
(proportionate to Level 3’s equity interest in such Restricted Subsidiary) of
the Fair Market Value of the net assets of such Restricted Subsidiary on such
date.

In the event of any such Designation, Level 3 shall be deemed to have made an
Investment constituting a Restricted Payment pursuant to Section 6.03 for all
purposes of this Agreement in the Designation Amount; provided, however, that,
upon a Revocation of any such Designation of a Subsidiary, Level 3 shall be
deemed to continue to have a permanent “Investment” in an Unrestricted
Subsidiary of an amount (if positive) equal to (i) Level 3’s “Investment” in
such Subsidiary at the time of such Revocation less (ii) the portion
(proportionate to Level 3’s equity interest in such Subsidiary) of the Fair
Market Value of the net assets of such Subsidiary at the time of such
Revocation. At the time of any Designation of any Subsidiary as an Unrestricted
Subsidiary, such Subsidiary shall not own any Capital Stock of Level 3 or any
Restricted Subsidiary. In addition, neither Level 3 nor any Restricted
Subsidiary shall at any time (x) provide credit support for, or a Guarantee of,
any Indebtedness of any Unrestricted Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness); provided, however, that
Level 3 or a Restricted Subsidiary may pledge Capital Stock or Indebtedness of
any Unrestricted Subsidiary on a nonrecourse basis such that the pledgee has no
claim whatsoever against Level 3 other than to obtain such pledged Capital Stock
or Indebtedness, (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness, Lien or other obligation of any
Unrestricted Subsidiary (including any right to take enforcement action

 

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against such Unrestricted Subsidiary), except in the case of clause (x) or
(y) to the extent permitted under Sections 6.03 and 6.09.

Unless Designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of Level 3 will be classified as a Restricted Subsidiary; provided,
however, that such Subsidiary shall not be designated as a Restricted Subsidiary
and shall be automatically classified as an Unrestricted Subsidiary if either of
the requirements set forth in clauses (a) and (b) of the immediately following
paragraph will not be satisfied immediately following such classification.
Except as provided in the first sentence of this Section 6.10, no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.

A Designation may be revoked (a “Revocation”) by a Board Resolution of Level 3
delivered to the Administrative Agent, provided that Level 3 will not make any
Revocation unless:

(a) no Default or Event of Default shall have occurred and be continuing at the
time of and after giving effect to such Revocation; and

(b) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if Incurred at such time, have been
permitted to be Incurred at such time for all purposes of this Agreement.

All Designations and Revocations must be evidenced by Board Resolutions of
Level 3 delivered to the Administrative Agent (i) certifying compliance with the
foregoing provisions and (ii) giving the effective date of such Designation or
Revocation, such delivery to the Administrative Agent to occur within 45 days
after the end of the fiscal quarter of Level 3 in which such Designation or
Revocation is made (or, in the case of a Designation or Revocation made during
the last fiscal quarter of Level 3’s fiscal year, within 90 days after the end
of such fiscal year). Upon Designation of a Restricted Subsidiary as an
Unrestricted Subsidiary in compliance with this Section 6.10, such Restricted
Subsidiary shall, by delivery of documentation providing for such release in
form satisfactory to the Administrative Agent, be released from any Guarantee
(in the case of a Guarantor) and its obligations under the Collateral Agreement
(in the case of a Grantor) previously made by such Subsidiary.

SECTION 6.11. Limitation on Actions with respect to Existing Intercompany
Obligations. Without the consent of the holders of at least two-thirds of the
outstanding principal amount of the Loans:

(a) the Borrower shall not forgive or waive or fail to enforce any of its rights
under any Offering Proceeds Note, the Loan Proceeds Note, any Financing Inc.
Notes Supplemental Indenture, any Offering Proceeds Note Subordination Agreement
or any other agreement with Level 3 or any Restricted Subsidiary to subordinate
a payment obligation on any Indebtedness to the prior payment in full in cash of
all obligations with respect to the Loan Proceeds Note, a Loan Proceeds Note
Guarantee, any Offering Proceeds Note or any Offering Proceeds Note

 

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Guarantee, and the Borrower and Level 3 LLC may not amend the Loan Proceeds
Note, a Loan Proceeds Note Guarantee, any Offering Proceeds Note or any Offering
Proceeds Note Guarantee, in a manner adverse to the Lenders; provided, however,
that that in the event of an Event of Default of Level 3 LLC as described in
clause (i) or (j) or Article 7, the principal then outstanding together with
accrued interest thereon on the Loan Proceeds Note, each Offering Proceeds Note,
the Loan Proceeds Note Guarantee and each Offering Proceeds Note Guarantee shall
automatically become due and payable without presentment, demand, protest or
other notice of any kind;

(b) in the event Level 3 LLC (or any successor obligor under the Loan Proceeds
Note) repays all or a portion of the Loan Proceeds Note, the Borrower must
prepay the Loan in a principal amount equal to the principal amount of the Loan
Proceeds Note then repaid in accordance with, and if at such time permitted by,
this Agreement; provided, however, that if at any time the principal amount of
the Loan Proceeds Note is greater than the principal amount of the Loan that
remains outstanding, Level 3 LLC (or any successor obligor under the Loans
Proceeds Note) may repay or forgive or waive an amount of the Loan Proceeds Note
equal to such excess without complying with this paragraph (b);

(c) Level 3 shall not, and shall not permit any Restricted Subsidiary to,
provide any Lien on its Property for the benefit of, or any Guarantee (other
than a similarly subordinated Guarantee) or other form of credit enhancement in
respect of, (i) the Parent Intercompany Note or (ii) any other intercompany note
required by clause (vi) of paragraph (b) of Section 6.01 or clause (iv) of
paragraph (b) of Section 6.02 to be subordinated to the prior payment in full in
cash of all obligations with respect to the Loan Proceeds Note or a Loan
Proceeds Note Guarantee, or take any other action with the purpose or effect of
making the Parent Intercompany Note senior to or equal in right of payment with
any Offering Proceeds Note or the Loan Proceeds Note;

(d) Level 3 shall not, and shall not permit any Restricted Subsidiary to,
provide any Lien on its Property for the benefit of, or any Guarantee (other
than a similarly subordinated Guarantee) or other form of credit enhancement in
respect of, (i) any Offering Proceeds Note or (ii) any other intercompany note
required by clause (vi) of paragraph (b) of Section 6.01 or clause (iv) of
paragraph (b) of Section 6.02 to be subordinated to the prior payment in full in
cash of all obligations with respect to the Loan Proceeds Note or a Loan
Proceeds Note Guarantee, or take any other action with the purpose or effect of
making any Offering Proceeds Note senior to or equal in right of payment with
the Loan Proceeds Note;

(e) Level 3 and Level 3 LLC shall not amend the terms of the Parent Intercompany
Note or any Offering Proceeds Note in a manner adverse to the Lenders, the
determination of which shall be made by the Board of Directors of Level 3 acting
in good faith and shall be evidenced by a Board Resolution of Level 3;

 

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(f) Level 3, the Borrower and Level 3 LLC shall not amend any of the Financing
Inc. Notes Supplemental Indentures or any Offering Proceeds Note Subordination
Agreement in a manner adverse to the Lenders and Level 3 or any Restricted
Subsidiary and the Borrower shall not amend any other agreement between Level 3
or any Restricted Subsidiary and the Borrower to subordinate a payment
obligation on any Indebtedness of Level 3 or any Restricted Subsidiary to the
prior payment in full in cash of all obligations with respect to the Loan
Proceeds Note, in each case, the determination of which shall be made by the
Board of Directors of Level 3 acting in good faith and shall be evidenced by a
Board Resolution of Level 3;

(g) unless an Event of Default has occurred and is continuing, Level 3 shall
neither cause nor permit the Borrower to demand repayment of the Offering
Proceeds Note prior to the satisfaction of the Guarantee Permit Condition and
the Collateral Permit Condition; and

(h) Level 3 and the Borrower shall cause any Indebtedness of Level 3 LLC to
Level 3 to be evidenced by either the Parent Intercompany Note or another duly
executed promissory note that is pledged and delivered to the Collateral Agent
within 3 Business Days of the Incurrence of such Indebtedness.

SECTION 6.12. Covenant Suspension. During any period of time (a “Suspension
Period”) that (i) the ratings assigned to the Term Loan by both of the Rating
Agencies are Investment Grade Ratings and (ii) no Default or Event of Default
has occurred and is continuing, Level 3 and the Restricted Subsidiaries will not
be subject to the covenants set forth in Sections 6.01, 6.02, 6.03, 6.04,
6.06(i)(a), 6.07, 6.08 (other than the first two sentences thereof), 6.09,
6.13(a)(3) and (4), 6.13(c)(3) and (4) and clause (b) of the first sentence of
Section 6.10 (collectively, the “Suspended Covenants”). In the event that
Level 3 and the Restricted Subsidiaries are not subject to the Suspended
Covenants for any period of time as a result of the preceding sentence and, on
any subsequent date (the “Reversion Date”), one or both of the Rating Agencies
withdraws its ratings or downgrades the ratings assigned to the Loan below the
required Investment Grade Ratings or a Default or Event of Default occurs and is
continuing, then Level 3 and the Restricted Subsidiaries will thereafter again
be subject to the Suspended Covenants and calculations of the amount available
to be made as Restricted Payments under Section 6.03 will be made as though
Section 6.03 had been in effect during the entire period of time from the
Measurement Date. On the Reversion Date, all Indebtedness Incurred during the
Suspension Period will be classified to have been Incurred pursuant to
paragraph (a) of Section 6.01 or one of the clauses set forth in
paragraph (b) of Section 6.01 or paragraph (a) of Section 6.02 or one of the
clauses set forth in paragraph (b) of Section 6.02 (in each case to the extent
such Indebtedness would be permitted to be Incurred thereunder as of the
Reversion Date and after giving effect to Indebtedness Incurred prior to the
Suspension Period and outstanding on the Reversion Date). To the extent such
Indebtedness would not be permitted to be Incurred pursuant to paragraph (a) of
Section 6.01 or one of the clauses set forth in paragraph (b) of Section 6.01 or
paragraph (a) of Section 6.02 or one of the clauses set forth in
paragraph (b) of Section 6.02, such Indebtedness will be deemed to have been

 

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outstanding on the Measurement Date, so that it is classified as permitted under
Section 6.01(b)(v) or Section 6.02(b)(iii). If the Incurrence of any
Indebtedness by a Restricted Subsidiary during the Suspension Period would have
been prohibited or conditioned upon such Restricted Subsidiary entering into a
Guarantee of the Obligations and a Loan Proceeds Note Guarantee had Section 6.01
and Section 6.02 been in effect at the time of such Incurrence, such Restricted
Subsidiary shall enter into a Guarantee of the Obligations and a Loan Proceeds
Note Guarantee that are senior to or pari passu with such Indebtedness within
ten days after the Reversion Date. For purposes of determining compliance with
Section 6.07 on the Reversion Date, the Net Available Proceeds from all Asset
Dispositions not applied in accordance with the covenant will be deemed to be
reset to zero. Notwithstanding the foregoing, neither (a) the continued
existence, after the date of such withdrawal or downgrade, of facts and
circumstances or obligations that were Incurred or otherwise came into existence
during a Suspension Period nor (b) the performance of any such obligations,
shall constitute a breach of any covenant set forth in the Agreement or cause a
Default or Event of Default thereunder; provided, however, that (1) Level 3 and
its Restricted Subsidiaries did not Incur or otherwise cause such facts and
circumstances or obligations to exist in anticipation of a withdrawal or
downgrade below investment grade, (2) Level 3 reasonably believed that such
Incurrence or actions would not result in such a withdrawal or downgrade and
(3) if so required each Restricted Subsidiary shall have entered into a
Guarantee of the Obligations and a Loan Proceeds Note Guarantee within the
specified time period. For purposes of clauses (1) and (2) in the preceding
sentence, anticipation and reasonable belief may be determined by Level 3 and
shall be conclusively evidenced by a board resolution to such effect adopted in
good faith by the Board of Directors of Level 3. In reaching their
determination, the Board of Directors of Level 3 may, but need not, consult with
the Rating Agencies.

SECTION 6.13. Consolidation, Merger, Conveyance, Transfer or Lease. (a) Level 3
May Consolidate, etc., Only on Certain Terms. Level 3 shall not, in a single
transaction or a series of related transactions, (i) consolidate with or merge
into any other Person or Persons or permit any other Person to consolidate with
or merge into Level 3 or (ii) directly or indirectly, transfer, sell, lease,
convey or otherwise dispose of all or substantially all its assets to any other
Person or Persons unless:

(1) in a transaction in which Level 3 is not the surviving Person or in which
Level 3 transfers, sells, leases, conveys or otherwise disposes of all or
substantially all of its assets to any other Person, the resulting surviving or
transferee Person (the “successor entity”) is organized under the laws of the
United States of America or any State thereof or the District of Columbia and
shall expressly assume all of Level 3’s Obligations under the Loan Documents in
a form satisfactory to the Administrative Agent;

(2) immediately before and after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of Level 3 (or the successor
entity) or a Restricted Subsidiary as a result of such transaction as having
been Incurred by Level 3 or such Restricted Subsidiary at the time of the
transaction, no Default or Event of Default shall have occurred and be
continuing;

 

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(3) immediately after giving effect to such transaction, the Consolidated Net
Worth of Level 3 (or the successor entity) is equal to or greater than that of
Level 3 immediately prior to the transaction;

(4) immediately after giving effect to such transaction and treating any
Indebtedness which becomes an obligation of Level 3 (or the successor entity) or
a Restricted Subsidiary as a result of such transaction as having been Incurred
by Level 3 or such Restricted Subsidiary at the time of the transaction, Level 3
(or the successor entity) could Incur at least $1.00 of additional Indebtedness
pursuant to paragraph (a) of Section 6.01;

(5) in the case of a transfer, sale, lease, conveyance or other disposition of
all or substantially all of the assets of Level 3, such assets shall have been
transferred as an entirety or virtually as an entirety to one Person and such
Person shall have complied with all the provisions of this paragraph; and

(6) Level 3 and the Borrower have delivered to the Administrative Agent an
Officers’ Certificate and Opinion of Counsel, each in form and substance
reasonably satisfactory to the Administrative Agent, stating that such
consolidation, merger, transfer, sale, lease, conveyance or other disposition
and the assumption by such Person of the Obligations under the Loan Documents,
complies with this Section and that all conditions precedent herein have been
complied with, and, with respect to such Officers’ Certificate, setting forth
the manner of determination of the Consolidated Net Worth, in accordance with
clause (3) of this subsection (a), of Level 3 or, if applicable, of the
successor entity as required pursuant to the foregoing.

(b) Successor Level 3 Substituted. Upon any consolidation of Level 3 with or
merger of Level 3 with or into any other Person or any transfer, sale, lease,
conveyance or other disposition of all or substantially all the assets of
Level 3 to any Person or Persons in accordance with Section 6.13(a), the
successor Person formed by such consolidation or into which Level 3 is merged or
to which such transfer, sale, lease, conveyance or other disposition is made
shall succeed to, and be substituted for, and may exercise every right and power
of, Level 3 under this Agreement with the same effect as if such successor
Person had been named as Level 3 herein, and the predecessor Level 3 (which term
shall for this purpose mean the Person named as “Level 3” in the first paragraph
of this Agreement or any successor Person which shall have become such in the
manner described in Section 6.13(a)), except in the case of a lease, shall be
released from all its obligations and covenants under this Agreement and the
other Loan Documents and may be dissolved and liquidated.

(c) Borrower May Consolidate, etc., Only on Certain Terms. The Borrower shall
not, in a single transaction or a series of related transactions,
(i) consolidate or merge into Level 3 or permit Level 3 to consolidate with or
merge into the Borrower or (ii) except to the extent permitted under
Section 6.03, directly or indirectly, transfer, sell, lease, convey or otherwise
dispose of all or substantially all its assets to Level 3. Additionally, the
Borrower shall not, in a single transaction or a series

 

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of related transactions, (i) consolidate with or merge into any other Person or
Persons or permit any other Person to consolidate with or merge into the
Borrower or (ii) (other than, to the extent permitted under Section 6.03, to a
Restricted Subsidiary that is or becomes a Guarantor and a Loan Proceeds Note
Guarantor or to Level 3 so long as Level 3 is a Guarantor) directly or
indirectly, transfer, sell, lease, convey or otherwise dispose of all or
substantially all its assets to any other Person or Persons, unless:

(1) in a transaction in which the Borrower is not the surviving Person or in
which the Borrower transfers, sells, leases, conveys or otherwise disposes of
all or substantially all of its assets to any other Person, the successor entity
is organized under the laws of the United States of America or any State thereof
or the District of Columbia and shall expressly assume all of the Borrower’s
Obligations under the Loan and the Loan Documents in a form satisfactory to the
Administrative Agent;

(2) immediately before and after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of the Borrower (or the successor
entity) or a Borrower Restricted Subsidiary as a result of such transaction as
having been Incurred by the Borrower or such Borrower Restricted Subsidiary at
the time of the transaction, no Default or Event of Default shall have occurred
and be continuing;

(3) immediately after giving effect to such transaction, the Consolidated Net
Worth of the Borrower (or the successor entity) is equal to or greater than that
of the Borrower immediately prior to the transaction;

(4) immediately after giving effect to such transaction and treating any
Indebtedness which becomes an obligation of the Borrower (or the successor
entity) or a Borrower Restricted Subsidiary as a result of such transaction as
having been Incurred by the Borrower or such Borrower Restricted Subsidiary at
the time of the transaction, the Borrower (or the successor entity) could Incur
at least $1.00 of additional Indebtedness pursuant to paragraph (a) of
Section 6.02;

(5) in the case of a transfer, sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Borrower, such assets shall have
been transferred as an entirety or virtually as an entirety to one Person and
such Person shall have complied with all the provisions of this paragraph; and

(6) Level 3 and the Borrower have delivered to the Administrative Agent an
Officers’ Certificate and an Opinion of Counsel, each in form and substance
reasonably satisfactory to the Administrative Agent, stating that such
consolidation, merger, transfer, sale, lease, conveyance or other disposition
and the assumption by such Person of the Obligations under the Loan Documents
complies with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with, and, with respect to such
Officers’ Certificate, setting forth the manner of determination of the
Consolidated Net Worth, in accordance with clause (3) of this subsection (c), of

 

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the Borrower or, if applicable, of the successor entity as required pursuant to
the foregoing.

(d) Successor Borrower Substituted. Upon any consolidation of the Borrower with
or merger of the Borrower with or into any other Person or any transfer, sale,
lease, conveyance or other disposition of all or substantially all the assets of
the Borrower to any Person or Persons in accordance with Section 6.13(c), the
successor Person formed by such consolidation or into which the Borrower is
merged or to which such transfer, sale, lease, conveyance or other disposition
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Borrower under this Agreement and each other Loan Document
with the same effect as if such successor Person had been named as the Borrower
herein, and the predecessor Borrower (which term shall for this purpose mean the
Person named as the “Borrower” in the first paragraph of this Agreement or any
successor Person which shall have become such in the manner described in
Section 6.13(c), except in the case of a lease, shall be released from all its
obligations and covenants under this Agreement and the Term Loan and may be
dissolved and liquidated.

(e) Guarantor (other than Level 3) May Consolidate, etc., Only on Certain Terms.
A Guarantor (other than Level 3) shall not, in a single transaction or a series
of related transactions, (i) consolidate with or merge into any other Person or
Persons (other than, with respect to a Guarantor that is a Borrower Restricted
Subsidiary, the Borrower or another Guarantor that is a Borrower Restricted
Subsidiary and with respect to a Guarantor that is a Sister Restricted
Subsidiary, another Guarantor that is a Sister Restricted Subsidiary or Level 3)
or permit any other Person (other than, with respect to a Guarantor that is a
Borrower Restricted Subsidiary, another Guarantor that is a Borrower Restricted
Subsidiary, and with respect to a Guarantor that is a Sister Restricted
Subsidiary, Level 3 or another Guarantor that is a Sister Restricted Subsidiary)
to consolidate with or merge into such Guarantor or (ii) except to another
Guarantor to the extent permitted under Section 6.03, directly or indirectly,
transfer, sell, lease, convey or otherwise dispose of all or substantially all
its assets to any other Person or Persons (other than, with respect to a
Guarantor that is a Borrower Restricted Subsidiary, the Borrower or another
Guarantor that is a Borrower Restricted Subsidiary, and with respect to a
Guarantor that is a Sister Restricted Subsidiary, another Guarantor that is a
Sister Restricted Subsidiary or Level 3), unless:

(1) immediately before and after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of such Guarantor as a result of
such transaction as having been Incurred by such Guarantor at the time of the
transaction, no Default or Event of Default shall have occurred and be
continuing;

(2) either (A) in a transaction in which such Guarantor is not the surviving
Person or in which such Guarantor transfers, sells, leases, conveys or otherwise
disposes of all or substantially all of its assets to any other Person, the
resulting surviving or transferee Person is organized under the laws of the
United States of America or any State thereof or the District of Columbia and
shall expressly

 

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assume all of such Restricted Subsidiary’s Obligations under the Loan Documents
in a form satisfactory to the Administrative Agent; or (B) such transaction
complies with Section 6.07 (or Level 3 certifies in an Officers’ Certificate to
the Administrative Agent that it will comply with the requirements of such
covenant relating to application of the proceeds of such transaction); and

(3) Level 3 and the Borrower have delivered to the Administrative Agent an
Officers’ Certificate and an Opinion of Counsel, each in form and substance
reasonably satisfactory to the Administrative Agent, stating that such
consolidation, merger, transfer, sale, lease, conveyance or other disposition
and, if a supplement to any Loan Document is required in connection with such
transaction, such supplement complies with this Article and that all conditions
precedent herein provided for relating to such transaction have been complied
with.

(f) Successor Guarantor Substituted. Upon any consolidation of a Guarantor with
or merger of a Guarantor with or into any other Person or any transfer, sale,
lease, conveyance or other disposition of all or substantially all the assets of
a Guarantor to any Person or Persons in accordance with subsection (e), the
successor Person formed by such consolidation or into which such Guarantor is
merged or to which such transfer, sale, lease, conveyance or other disposition
is made (other than any such transaction made in accordance with
Section 6.13(e)(2)(B)) shall succeed to, and be substituted for, and may
exercise every right and power of, such Guarantor under the Loan Documents with
the same effect as if such successor Person had been named as a Guarantor
herein, and the predecessor Guarantor (which term shall for this purpose mean
the Person named as the “Guarantor” in the first paragraph of the applicable
supplement to this Agreement or any successor Person which shall have become
such in the manner described in subsection (e)), except in the case of a lease,
shall be released from all its Obligations and covenants under the Loan
Documents and may be dissolved and liquidated.

(g) Loan Proceeds Note Guarantor May Consolidate, etc., Only on Certain Terms. A
Loan Proceeds Note Guarantor shall not, in a single transaction or a series of
related transactions, (i) consolidate with or merge into any other Person or
Persons (other than, with respect to an Loan Proceeds Note Guarantor that is an
Borrower Restricted Subsidiary, the Borrower or another Loan Proceeds Note
Guarantor that is an Borrower Restricted Subsidiary, and with respect to an Loan
Proceeds Note Guarantor that is a Sister Restricted Subsidiary, another Loan
Proceeds Note Guarantor that is a Sister Restricted Subsidiary or Level 3) or
permit any other Person (other than, with respect to an Loan Proceeds Note
Guarantor that is an Borrower Restricted Subsidiary, another Loan Proceeds Note
Guarantor that is an Borrower Restricted Subsidiary, and with respect to an Loan
Proceeds Note Guarantor that is a Sister Restricted Subsidiary, Level 3 or
another Loan Proceeds Note Guarantor that is a Sister Restricted Subsidiary) to
consolidate with or merge into such Loan Proceeds Note Guarantor or (ii) except
to another Loan Proceeds Note Guarantor to the extent permitted under
Section 6.03, directly or indirectly, transfer, sell, lease, convey or otherwise
dispose of all or substantially all its assets to any other Person or Persons
(other than, with respect to a

 

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Loan Proceeds Note Guarantor that is a Borrower Restricted Subsidiary, the
Borrower or another Loan Proceeds Note Guarantor that is a Borrower Restricted
Subsidiary, and with respect to an Loan Proceeds Note Guarantor that is a Sister
Restricted Subsidiary, another Loan Proceeds Note Guarantor that is a Sister
Restricted Subsidiary or Level 3), unless:

(1) immediately before and after giving effect to such transaction and treating
any Indebtedness which becomes an obligation of such Loan Proceeds Note
Guarantor as a result of such transaction as having been Incurred by such Loan
Proceeds Note Guarantor at the time of the transaction, no Default or Event of
Default shall have occurred and be continuing;

(2) either (a) in a transaction in which such Loan Proceeds Note Guarantor is
not the surviving Person or in which such Loan Proceeds Note Guarantor
transfers, sells, leases, conveys or otherwise disposes of all or substantially
all of its assets to any other Person, the resulting surviving or transferee
Person is organized under the laws of the United States of America or any State
thereof or the district of Columbia and shall expressly assume all of such Loan
Proceed Note Guarantor’s obligations under the Loan Proceeds Note Guarantee and
any subordination agreement between the Borrower and such Loan Proceed Note
Guarantor relating to the Loan Proceeds Note; or (b) such transaction complies
with Section 6.07 (or Level 3 certifies in an Officers’ Certificate to the
Administrative Agent that it will comply with the requirements of such covenant
relating to application of the proceeds of such transaction); and

(3) Level 3 and the Borrower have delivered to the Administrative Agent an
Officers’ Certificate and an Opinion of Counsel, each in form and substance
reasonably satisfactory to the Administrative Agent, stating that such
consolidation, merger, transfer, sale, lease, conveyance or other disposition
and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, complies with this Article and that
all conditions precedent herein provided for relating to such transaction have
been complied with.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan when and as the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in clause (a) of this Article)
payable by it under this Agreement or any other Loan Document, when and as the

 

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same shall become due and payable, and such failure shall continue unremedied
for a period of 30 days;

(c) the Borrower shall fail to pay the Loans when required pursuant to
Section 2.04(f);

(d) any representation or warranty made or deemed made by or on behalf of
Level 3, the Borrower or any Restricted Subsidiary in or in connection with any
Loan Document or any amendment or modification thereof or waiver thereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, shall prove to have been incorrect in
any material respect when made or deemed made and shall continue to be material
at the time tested;

(e) Level 3, the Borrower or any Restricted Subsidiary shall fail to observe or
perform with the covenants contained in Sections 6.07 or 6.13(a), (c), (e) or
(g);

(f) Level 3, the Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in any Loan Document
(other than a covenant, condition or agreement a default in the performance of
which is elsewhere in this Article specifically dealt with) and such failure
shall continue unremedied for 60 days after written notice to the Borrower by
the Administrative Agent or the Required Lenders, which notice shall specify the
default and state that such notice is a “Notice of Default” hereunder;

(g) Level 3 or any Restricted Subsidiary shall default under the terms of any
instrument evidencing or securing Material Indebtedness of Level 3 or any
Restricted Subsidiary which default results in the acceleration of the payment
of such indebtedness or constitutes the failure to pay such indebtedness when
due (after expiration of any applicable grace period);

(h) a judgment or judgments shall be rendered against Level 3 or any Restricted
Subsidiary in an aggregate amount in excess of $25,000,000 or its foreign
currency equivalent at the time and shall not be waived, satisfied or discharged
for any period of 45 consecutive days during which a stay of enforcement shall
not be in effect;

(i) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of Level 3, the Borrower or any Significant Subsidiary or its debts, or
of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Level 3, the Borrower or any Significant
Subsidiary or for a substantial part of its assets, and, in any such case, such
proceeding or petition

 

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shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;

(j) Level 3, the Borrower or any Significant Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (i) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Level 3, the Borrower or any Significant
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;

(k) Level 3, the Borrower or any Significant Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due;

(l) any Lien purported to be created under this Agreement or any Security
Document shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral (other than immaterial portions of
the Collateral or except as otherwise contemplated by the Security Documents),
with the priority required by this Agreement or the applicable Security
Document, except (i) as provided in Section 9.14 or (ii) as a result of the
Collateral Agent’s failure to maintain possession of any stock certificates,
promissory notes or other instruments delivered to it under this Agreement or
the applicable Security Document; or

(m) any material provision of any Loan Document, after the delivery thereof,
ceases to be in full force and effect (other than in accordance with the terms
of such Loan Document) or Level 3, the Borrower or any Guarantor denies or
disaffirms its obligations under any material provision of a Loan Document.

then, and in every such event (other than an event with respect to the Borrower
or Level 3 described in clause (i) or (j) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Borrower,
take any or all of the following actions, at the same or different
times: declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower and
enforce, as Collateral Agent, all the rights and remedies under the Security
Documents; and in case of any event with respect

 

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to Level 3 or the Borrower described in clause (i) or (j) of this Article, the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower, and
the Collateral Agent may, to the extent permitted by applicable law, exercise
all rights and remedies under the Security Documents.

ARTICLE VIII

The Agent

Each of the Lenders hereby irrevocably appoints the Agent as its agent and
authorizes the Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Agent by the terms of the Loan Documents,
together with such actions and powers as are reasonably incidental thereto.

In the event the institution serving as the Agent hereunder shall also be a
Lender, it shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the Agent, and
such institution and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with Level 3, the Borrower or any
Subsidiary or Affiliate thereof as if it were not the Agent hereunder.

The Agent shall not have any duties or obligations except those expressly set
forth in the Loan Documents. Without limiting the generality of the foregoing,
(a) the Agent shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing, (b) the Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that the Agent is required to exercise in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and shall not have any duty to take any action or exercise any
powers that would result in the incurrence by it of costs or expenses unless
arrangements satisfactory to it to ensure the prompt payment of all such costs
or expenses shall have been made by the Lenders, and (c) except as expressly set
forth in the Loan Documents, the Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
Level 3, the Borrower or any of the Subsidiaries of Level 3 that is communicated
to or obtained by the institution serving as Agent or any of its Affiliates in
any capacity. The Agent shall not be liable for any action taken or not taken by
it with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross
negligence or willful misconduct. The Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Agent by Level 3, the Borrower or a Lender, and the Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
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representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered thereunder or in
connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in the Assignment and Amendment
Agreement or elsewhere in any Loan Document, other than to confirm receipt of
items expressly required to be delivered to the Agent. As to any matters not
expressly provided for by this Agreement and the other Loan Documents (including
enforcement or collection), the Administrative Agent and the Collateral Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Requisite
Lenders, and such instructions shall be binding upon all Lenders, provided,
however, that the Administrative Agent and the Collateral Agent shall not be
required to take any action that (i) the Administrative Agent or the Collateral
Agent in good faith believes exposes it to personal liability unless it receives
an indemnification satisfactory to it from the Lenders with respect to such
action or (ii) is contrary to this Agreement or applicable law.

The Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person. The Agent also may rely upon any statement made to
it orally or by telephone and believed by it to be made by the proper Person,
and shall not incur any liability for relying thereon. The Agent may consult
with legal counsel (who may be counsel for Level 3 or the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

The Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by the Agent. The Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of each Agent and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Agent.

Subject to the appointment and acceptance of a successor as provided in this
paragraph, the Agent may resign at any time by notifying the Lenders and
Level 3. Upon any such resignation, the Required Lenders shall have the right,
with, so long as no Default or Event of Default shall have occurred and be
continuing, the consent of Level 3 (which consent shall not be unreasonably
withheld or delayed) to appoint a successor. If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders, appoint a successor Agent
which shall be a Lender or a bank with an office in New York, New York, or an

 

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Affiliate of such Lender or any such bank. Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. The fees payable by Level 3 and the Borrower to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed with such successor. After the Agent’s resignation hereunder,
the provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Agent or any other Lender and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or related agreement or any document
furnished hereunder or thereunder.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy or Email, as follows:

(a) if to Level 3 or the Borrower, to it at Level 3 Communications, Inc., 1025
Eldorado Boulevard, Broomfield, Colorado 80021, Attention of Chief Financial
Officer and General Counsel;

(b) if to the Administrative Agent, to it at Deutsche Bank, 60 Wall Street, 39th
Floor, New York, New York, Attention of Michael Ray (Telephone No. 212-250-4184,
Telecopy No. 212-797-0407, Email Address michael.c.ray@db.com, with a copy to
Merrill Lynch Capital Corporation, Merrill Lynch World Headquarters, 4 World
Financial Center, 22nd Floor, New York, New York 10080, Attention of Arminee
Bowler (Telephone No. 212-449-2662, Email Address arminee_bowler@ml.com);

(c) if to any other Lender, to it at its address (or telecopy number) set forth
in its Administrative Questionnaire.

 

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Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments; Addition of Term or Revolving Tranches.
(a) No failure or delay by the Administrative Agent or any Lender in exercising
any right or power hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent and
the Lenders hereunder and under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of any Loan Document or consent to any departure by any
Loan Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan
shall not be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.

(b) Except as provided in paragraph (d) of this Section, none of this Agreement,
any other Loan Document or any provision hereof or thereof may be waived,
amended or modified except, in the case of this Agreement, pursuant to an
agreement or agreements in writing entered into by Level 3, the Borrower and the
Required Lenders or, in the case of any other Loan Document, pursuant to an
agreement or agreements in writing entered into by the Administrative Agent and
the Loan Party or Loan Parties that are parties thereto, in each case with the
consent of the Required Lenders; provided that no such agreement shall
(i) increase the Commitment of or impose additional obligations on any Lender
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or reduce the rate of interest thereon without the written consent of
each Lender affected thereby, (iii) postpone the scheduled date of payment of
the principal amount of any Loan or any interest thereon, or reduce the amount
of, waive or excuse any such payment, without the written consent of each Lender
affected thereby, (iv) change Section 2.11(b) or (c) in a manner that would
alter the pro rata sharing of payments required thereby without the written
consent of each Lender (except as provided in paragraph (d) of this Section),
(v) change any of the provisions of this Section or the definition of “Required
Lenders” or any other provision of any Loan Document specifying the number or
percentage of Lenders required to waive, amend or modify any rights thereunder
or make any determination or grant any consent thereunder, without the written
consent of each Lender (except as provided in paragraph (d) of this Section),
(vi) release Level 3 or any other Guarantor from its Guarantee of the
Obligations under the Guarantee Agreement (except as expressly provided in
Section 6.07, 6.08, 6.10 or 9.14 or in the Guarantee Agreement), or limit its
liability in respect of any such Guarantee, without the written consent of each
Lender, (vii) release all or any substantial part of the Collateral from the
Liens of the Security Documents (except as expressly provided in Section 6.07,
6.08, 6.10 or 9.14 or in Collateral Agreement), or

 

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subordinate such Liens, without the written consent of each Lender or
(viii) except to the extent necessary to comply with applicable law, amend or
modify Section 9.04 in a manner that would by the terms of such amendment or
waiver, as applicable, restrict the ability of the Lenders to make assignments,
without the written consent of each Lender, provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, without the prior written consent of the Administrative
Agent.

(c) If, in connection with any proposed change, waiver, discharge or termination
of any of the provisions of this Agreement referred to in any of clauses (i)
through (vii) of the first proviso in paragraph (b) of this Section, the consent
of the Required Lenders shall be obtained but the consent of one or more other
Lenders whose consent is sought shall not be obtained, then the Borrower shall
have the right, so long as all non-consenting Lenders whose individual consents
are sought are treated as described in either clauses (A) or (B) below, to
either (A) replace each such non-consenting Lender or Lenders with one or more
replacement Lenders in accordance with the provisions of Section 2.12(b) so long
as, at the time of such replacement, each such replacement Lender consents to
the proposed change, waiver, discharge or termination or (B) repay the
outstanding Loans of each such non-consenting Lender in accordance with
Sections 2.04(a) and 2.09; provided that, unless the Loans that are repaid
pursuant to preceding clause (B) are immediately replaced in full at such time
through the addition of new Lenders or the increase of the outstanding Loans of
existing Lenders (who in each case must specifically consent thereto), then in
the case of any action pursuant to preceding clause (B) each Lender (determined
after giving effect to the proposed action) shall specifically consent thereto.

(d) Notwithstanding anything in paragraph (b) of this Section to the contrary,
this Agreement and the other Loan Documents may be amended at any time and from
time to time to establish revolving credit commitments or one or more additional
classes of term loans by an agreement in writing entered into by Level 3, the
Borrower, the Administrative Agent, the Collateral Agent and each person
(including any Lender) that shall agree to provide such a revolving credit
commitment or make a term loan of any class so established (but without the
consent of any other Lender), and each such person that shall not already be a
Lender shall, at the time such agreement becomes effective, become a Lender with
the same effect as if it had originally been a Lender under this Agreement with
the revolving credit commitment and/or term loans set forth in such agreement;
provided that the aggregate outstanding principal amount of the revolving credit
commitments and term loans of all classes established pursuant to this paragraph
shall at no time exceed the maximum principal amount of the Indebtedness
permitted to be incurred at such time under Section 6.01(b)(ii) and
6.02(b)(ii)). Any such agreement shall amend the provisions of this Agreement
and the other Loan Documents to set forth the terms of the revolving credit
commitments or class of term loans established thereby (including the amount and
final maturity thereof (which, in the case of any class of term loans, shall not
be earlier than the Maturity Date), any provisions relating to amortization or
mandatory prepayments or offers to prepay (it being agreed that not more than 1%
of the aggregate principal amount of the term loans of any class shall amortize
during any calendar year prior to the Maturity Date and that provisions for

 

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mandatory prepayments of and offers to prepay the term loans of any class may
require such term loans to be prepaid or offered the right to be prepaid ratably
with the Loans but shall not include any additional mandatory prepayment
rights), the interest to accrue and be payable thereon and any fees to be
payable in respect thereof) and to effect such other changes (including changes
to the provisions of this Section, Section 2.11 and the definition of “Required
Lenders” and changes to provide for a note of Level 3 LLC evidencing the advance
of the proceeds of any loans) as Level 3, the Borrower and the Administrative
Agent shall deem necessary or advisable in connection with the establishment of
any such revolving credit commitments or class of term loans; provided that no
such agreement shall (i) effect any change described in any of clauses (i),
(ii), (iii), (vi) or (vii) of paragraph (b) of this Section without the consent
of each person required to consent to such change under such clause (it being
agreed, however, that the establishment of any revolving commitment or class of
term loans will not, of itself, be deemed to effect any of the changes described
in clauses (vi) or (vii) of such paragraph (b)), or (ii) amend Article V, VI or
VII to establish any affirmative or negative covenant, Event of Default or
remedy that by its terms benefits any such revolving credit commitments or class
of term loans but not the Loans without the prior written consent of Lenders
holding a majority in interest of the Loans. Without limiting the foregoing, a
Qualified Receivable Facility permitted by Sections 6.01 and 6.02 may be
established pursuant to and in accordance with the provisions of this paragraph
and may have a first priority Lien on Collateral consisting of Receivables,
collections thereof and accounts established solely for the collection of such
Receivables, and the Agent is authorized and directed to enter into all such
amendments to the Loan Documents as it shall deem necessary or advisable to
establish such first priority Lien and to subordinate to such Lien on customary
terms (as determined by the Agent and Level 3) the Liens on such Receivables
securing the other Obligations. The loans of any class established pursuant to
this paragraph shall, to the extent provided in the amendment entered into in
connection therewith, be entitled to all the benefits afforded by this Agreement
and the other Loan Documents, and shall benefit equally and ratably (except as
provided in the next preceding sentence) from the Guarantees created by the
Guarantee Agreement and security interests created by the Collateral Agreement
and the other Security Documents. Level 3 and the Borrower shall take any
actions reasonably required by the Administrative Agent to ensure and/or
demonstrate that the Guarantee and Collateral Requirement continues to be
satisfied after the establishment of any such revolving credit commitments or
class of term loans.

For each borrowing under an Additional Tranche, the Borrower shall use the net
proceeds of each such issuance and additional funds as necessary to lend to
Level 3 LLC an amount equal to the principal amount of the Additional Tranche so
issued, and the principal amount of the Loan Proceeds Note shall be increased by
such amount.

(e) [Intentionally omitted]

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) Level 3 and the Borrower
shall pay, on a joint and several basis, (i) all reasonable out-of-pocket
expenses incurred by the Agent and its Affiliates, including the reasonable
fees, charges

 

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and disbursements of counsel for the Agent, in connection with all ministerial
activities in the administration of the Loan Documents and any amendments,
modifications or waivers of the provisions thereof and (ii) all reasonable
out-of-pocket expenses incurred by the Agent and its Affiliates and each Lender
in connection with the enforcement of the Loan Documents, including rights under
this Section, or in connection with the Loans, but Level 3 and the Borrower
shall only be liable for the fees and expenses of counsel for the Agent and one
other counsel for all such other Persons (as well as separate local and
regulatory counsel). The Borrower also shall pay all Lien search, filing,
recording and similar fees incurred by the Collateral Agent in connection with
the creation and perfection of the security interests contemplated by the Loan
Documents (other than the filing fees in connection with any local fixture
filings and the expenses in connection with obtaining real estate descriptions
for fixture filings).

(b) Level 3 and the Borrower shall indemnify, on a joint and several basis, the
Agent, each Related Party of the Agent (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby or thereby, the performance by the
parties to the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby
or thereby, or the Collateral, (ii) any Loan or the use of the proceeds thereof,
(iii) any actual or alleged presence or release of Hazardous Materials on or
from any property owned or operated by Level 3, the Borrower or any of the
Subsidiaries of Level 3, or any Environmental Liability related in any way to
Level 3, the Borrower or any of the Subsidiaries of Level 3, or (iv) any actual
or prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee. It
is agreed that the expenses for which Level 3 and the Borrower agree to
indemnify the Agent under this paragraph shall not include expenses associated
with (i) the arrangement and syndication of the Loans, (ii) the preparation,
execution and delivery of the Loan Documents, (iii) the enforcement of the Loan
Documents or (iv) the filing fees in connection with any local fixture filings
and the expenses in connection with obtaining real estate descriptions for
fixture filings; provided, that nothing in this sentence shall have the effect
of reducing any rights of the Agent or its Affiliates pursuant to paragraph
(a) of this Section or of reducing the Borrower’s responsibility for expenses
related to claims, litigation, investigations or proceedings referred to in
clause (iv) of the immediately preceding sentence.

(c) To the extent that Level 3 and the Borrower fail to pay any amount required
to be paid by them to the Agent or any Related Party of the Agent under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Agent such

 

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Lender’s pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought), based on the amount of its
Commitment or outstanding Loans or, if no Loans shall be outstanding, on the
amount of its Loans on the most recent date on which Loans were outstanding, of
such unpaid amount; provided that (i) the unreimbursed expense or indemnified
loss, claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against the Agent in its capacity as such and (ii) such
indemnity shall not, as to the Agent or any Related Party, be available to the
extent that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of the
Agent or such Related Party, as the case may be.

(d) To the extent permitted by applicable law, neither Level 3 nor the Borrower
shall assert, and each hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly after written
demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto, the Indemnitees
and their respective successors and assigns permitted hereby, except that
(i) the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, Indemnitees, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby, the
Related Parties of the Agent) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

(b) Any Lender may assign to one or more assignees all or a portion of its
rights under this Agreement (including all or a portion of the Loans at the time
owing to it) to an Eligible Transferee; provided, that (i) except in the case of
an assignment to a Lender, the amount of the Loans of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent) shall be an integral multiple of $1,000,000 (or the entire remaining
amount of the assigning Lender’s Loans, if less than $1,000,000) unless the
Administrative Agent shall otherwise consent, provided that (A) in the event of
concurrent assignments to two or more assignees that are Affiliates of one
another, or to two or more Approved Funds managed by the same investment advisor
or by affiliated investment advisors, all such concurrent assignments shall be
aggregated in determining compliance with this subsection and (B) in the event
of concurrent

 

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assignments to or by two or more assignors that are Affiliates of one another,
or to or by two or more Approved Funds managed by the same investment advisor or
by affiliated investment advisors, all such concurrent assignments shall be
aggregated in determining compliance with this subsection; (ii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement; (iii) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Assumption, together with a processing and recordation fee of
$3,500 (except that in the event of (A) concurrent assignments to two or more
assignees that are Affiliates of one another, or to two or more Approved Funds
managed by the same investment advisor or by affiliated investment advisors or
(B) concurrent assignments by two or more assignees that are Affiliates of one
another, or by two or more Approved Funds managed by the same investment advisor
or by affiliated investment advisors, only one such fee shall be payable); and
(iv) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

(c) Subject to acceptance and recording thereof pursuant to paragraph (d) of
this Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.08,
2.09, 2.10 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (f) of
this Section. Each assignment hereunder shall be deemed to be an assignment of
the related rights under the Security Documents.

(d) The Administrative Agent shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the “Register”). The entries in the Register shall be conclusive, and
the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and any
Lender at any reasonable time and from time to time upon reasonable prior
notice. Upon its receipt of a duly completed Assignment and Assumption executed
by an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder) and the
processing and recordation fee referred to in paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register. No assignment shall be effective
for

 

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purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.

(e) By executing and delivering an Assignment and Assumption, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that its
Commitment and the outstanding balances of its Loans, in each case without
giving effect to assignments thereof that have not become effective, are as set
forth in such Assignment and Assumption; (ii) except as set forth in
clause (i) above, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other Loan
Document or any other instrument or document furnished pursuant hereto or
thereto, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of any of the foregoing, or the financial condition of the
Loan Parties or the performance or observance by the Loan Parties of any of
their obligations under this Agreement or under any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (iii) each of
the assignee and the assignor represents and warrants that it is legally
authorized to enter into such Assignment and Assumption; (iv) such assignee
confirms that it has received a copy of this Agreement, together with copies of
any amendments or consents entered into prior to the date of such Assignment and
Assumption and copies of the most recent financial statements delivered pursuant
to Section 5.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Assumption; (v) such assignee will independently and without
reliance upon the Agents, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Agents to take
such action as agents on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to them by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations that by the terms of this Agreement are required
to be performed by it as a Lender.

(f) (i) Any Lender may, without the consent of the Borrower, or the
Administrative Agent, sell participations to one or more other Persons (each a
“Participant”) in all or a portion of such Lender’s rights and/or obligations
under this Agreement (including all or a portion of its Commitment and the Loans
owing to it); provided that (i) such Lender’s obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
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such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver that
affects such Participant and that, under Section 9.02(b), would require the
consent of each affected Lender. Subject to paragraph (f)(ii) of this Section,
the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.08, 2.09 and 2.10 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.11(c) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 2.08, 2.09 or 2.10 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant unless the
sale of the participation to such Participant is made with the Borrower’s prior
written consent, which consent shall specifically refer to this exception. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 2.10 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 2.10(e) as though it were a
Lender.

(g) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any other amount payable
under this Agreement is outstanding and unpaid and so long as the Commitments
have not expired or terminated. The provisions of Sections 2.08, 2.09, 2.10 and
9.03 and Article VIII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans or the termination of this Agreement or any provision
hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement, the
other Loan Documents and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties

 

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relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective as provided in the Assignment and
Amendment Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing and the Loans shall have become due and payable pursuant to
Article VII, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under
this Agreement held by such Lender, irrespective of whether or not such Lender
shall have made any demand under this Agreement and although such obligations
may be unmatured. The rights of each Lender under this Section are in addition
to other rights and remedies (including other rights of setoff) which such
Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.

(b) Each of Level 3 and the Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Administrative Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or any other Loan Document against
Level 3, the Borrower or its properties in the courts of any jurisdiction.

(c) Each of Level 3 and the Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or

 

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proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. The Administrative Agent and each Lender agrees
to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its and its Affiliates’ directors,
officers, employees and agents, including accountants, legal counsel and other
advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed
to keep such Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section,
to any pledgee referred to in Section 9.04(g) or to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the
Borrower, (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section, (ii) becomes available to
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basis from a source other than Level 3 or the Borrower, (i) to any direct or
indirect contractual counterparty in swap agreements or such contractual
counterparty’s professional advisor (so long as such contractual counterparty or
professional advisor to such contractual counterparty agrees to be bound by the
provisions of this Section or (j) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender’s investment portfolio
in connection with ratings issued with respect to such Lender. For the purposes
of this Section, “Information” means all information received from Level 3 or
the Borrower relating to Level 3 or the Borrower or its business (including
information obtained through the exercise of a Lender’s rights under
Sections 5.01) other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by Level 3 or the Borrower. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 9.14. Release of Subsidiary Loan Parties and Collateral. (a) The
Enhanced Collateral Date (as defined in the Existing Credit Agreement) occurred
on May 12, 2005 and each Subsidiary of Level 3 that ceased to be a “Designated
Guarantor Subsidiary” and a “Designated Grantor Subsidiary” by reason of the
proviso of those terms (as defined in the Existing Credit Agreement) was
automatically released from its obligations under, and all Collateral owned by
it and the Equity Interests of each such released Subsidiary owned by or on
behalf of the Borrower was automatically released from the Liens created by, the
Security Documents, and the Collateral Agent shall, without the consent of any
Lender, execute and deliver, to the extent not done prior to the Amendment
Effectiveness Date, all such releases, termination statements or other
instruments, and take all such further actions, as shall be reasonably requested
by Level 3 to evidence any such release.

(b) Notwithstanding any contrary provision herein or in any other Loan Document,
if Level 3 shall request the release under any Security Document of (i) any of

 

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its Subsidiaries (other than the Borrower or Level 3 LLC) or any Collateral to
be sold or otherwise disposed of (including through the sale or disposition of
any Subsidiary (other than the Borrower or Level 3 LLC) owning any such
Subsidiary or Collateral) to a Person other than Level 3 or a Subsidiary of
Level 3 in a transaction permitted under the terms of this Agreement (including
to the extent permitted by Section 6.07, 6.08 or 6.10), (ii) any Receivables,
collections thereof and accounts established solely for the collection of such
Receivables to secure the Incurrence of Indebtedness pursuant to a Qualified
Receivable Facility as permitted by Section 6.01(b)(ii) or 6.02(b)(ii) or
(iii) any Property that is to become subject to any Lien permitted to be
Incurred under Section 6.05(ii)(3) or (4), and shall deliver to the Collateral
Agent a certificate to the effect that such sale or other disposition and the
application of the proceeds thereof will comply with the terms of this Agreement
and that no Event of Default shall have occurred and be continuing, the
Collateral Agent, if satisfied that the applicable certificate is correct, and
if satisfied with any arrangements for the receipt and deposit of proceeds of
such transaction to the extent required under Section 6.07(b), shall, unless an
Event of Default has occurred and is continuing, execute and deliver all such
instruments, releases, financing statements or other agreements, and take all
such further actions, as shall be necessary to effectuate the release of such
Subsidiary or such Collateral substantially simultaneously with or at any time
after the completion of such sale or other disposition; provided that (i) if the
Collateral to be sold or otherwise disposed of is sold or otherwise disposed of
by a Grantor in the ordinary course of business in a transaction permitted by
the Credit Agreement to a Person other than Level 3 or a Subsidiary of Level 3
and (ii) such sale or other disposal would not constitute an Asset Disposition,
then such Collateral shall be automatically released from any Lien created by
this Agreement or any other Loan Document upon the effectiveness of such sale or
disposition. Any such release shall be without recourse to, or representation or
warranty by, the Collateral Agent and shall not require the consent of any
Lender. The Collateral Agent shall execute and deliver all such releases,
termination statements or other instruments, and take all such further actions,
as shall be necessary to effectuate or confirm any release of Collateral
required by this paragraph.

(c) Without limiting the provisions of Section 9.03, Level 3 and the Borrower
shall reimburse the Collateral Agent for all reasonable out-of-pocket costs and
expenses, including the reasonable fees, charges and disbursements of counsel,
incurred by it in connection with any action contemplated by this Section.

(d) No such termination or cessation shall release, reduce or otherwise
adversely affect the obligations of any other Loan Party under this Agreement or
any other Loan Document, all of which obligations continue to remain in full
force and effect.

SECTION 9.15. Senior Debt Status. In the event that Level 3 or any Subsidiary of
Level 3 shall at any time issue or have outstanding any Indebtedness that by its
terms is subordinated to any other Indebtedness of Level 3 or such Subsidiary,
Level 3 shall take or cause such Subsidiary to take all such actions as shall be
necessary to cause the Obligations to constitute senior indebtedness (however
denominated) in respect of such subordinated Indebtedness and to enable the
Lenders to have and exercise any payment blockage or other remedies available or
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senior indebtedness under the terms of such subordinated Indebtedness. Without
limiting the foregoing, the Obligations are hereby designated as “senior
indebtedness” and, if relevant, as “designated senior indebtedness” in respect
of all such subordinated Indebtedness and are further given all such other
designations as shall be required under the terms of any such subordinated
Indebtedness in order that the Lenders may have and exercise any payment
blockage or other remedies available or potentially available to holders of
senior indebtedness under the terms of such subordinated indebtedness.

SECTION 9.16. No Fiduciary Relationship. Each of Level 3 and the Borrower, on
behalf of themselves and the Subsidiaries, agree that in connection with all
aspects of the transactions contemplated hereby and any communications in
connection therewith, Level 3, the Borrower, the Subsidiaries and their
Affiliates, on the one hand, and the Agent and the Lenders and their Affiliates,
on the other hand, will have a business relationship that does not create, by
implication or otherwise, any fiduciary duty on the part of the Agent, the
Lenders, or their Affiliates, and no such duty will be deemed to have arisen in
connection with any such transactions or communications.

SECTION 9.17. Amendment and Restatement; No Novation. This Agreement constitutes
an amendment and restatement of the Existing Credit Agreement effective from and
after the Amendment Effectiveness Date. The execution and delivery of this
Agreement shall not constitute a novation of any indebtedness or other
obligations owing to the Lenders or the Agent under the Existing Credit
Agreement based on any facts or events occurring or existing prior to the
execution and delivery of the Assignment and Amendment Agreement.

 

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LEVEL 3 FINANCING, INC., By:       

 

LEVEL 3 COMMUNICATIONS, INC., By:       

 

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MERRILL LYNCH CAPITAL CORPORATION,
as Administrative Agent and Collateral Agent, By:       

 

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