Exhibit
10.2


 


LEVEL 3
COMMUNICATIONS, INC.


OSO MASTER
AWARD AGREEMENT


 


THIS OSO MASTER AWARD AGREEMENT (the
“Agreement”) is dated as of                                                           ,
between Level 3 Communications, Inc., a Delaware corporation (the “Company”),
and the individual whose name appears  on
the signature page to this Agreement (the “Grantee”), an “Employee”
as defined in the Company’s Level 3 Communications, Inc. Stock Plan (as
amended from time to time) (the “Plan”).


 


WHEREAS, the Company, pursuant to a
grant of authority from the Compensation Committee of the Company’s Board of
Directors (the “Committee”), may, from time to time, grant to the
Grantee a certain number of outperform stock appreciation rights, which are
referred to as “OSOs” (each such grant an “Award”), as described
below, pursuant to the Plan.


 


NOW, THEREFORE, the
parties agree as follows:


 


1.                                      Grants of Awards. 
Pursuant to the provisions of Section 9.1 of the Plan, the Company,
from time to time in its sole discretion, may grant Awards to the Grantee
relating to a specified number of OSOs that, under certain circumstances and in
accordance with the terms hereof, may result in the Grantee having the right to
acquire shares of common stock of the Company, par value $.01 per share (the “Award
Shares”).  Each Award will be
evidenced by an Outperform Stock Appreciation Right Award Letter (an “Award
Letter”) in the form attached as Exhibit A hereto (or such other form
as approved by the Company), which sets forth the date of the Award (the “Award
Date”), the number of OSOs that are the subject of the Award, and the “Initial
Price” of the Award Shares covered by the Award.  This Agreement sets forth general terms and
conditions applicable to all Awards granted on, or after the date hereof.


 


2.                                      Terms and Conditions of
Awards


 


2.1.                              Adjustment of Initial Price. 
The “Adjusted Price” shall be the Initial Price, adjusted upward
or downward as of the Settlement Date, by a percentage equal to the aggregate
percentage increase or decrease (expressed as a whole percentage point followed
by three decimal places) in the Standard and Poor’s 500 Index over the period
(the “Period”) beginning on the Trading Day immediately preceding the Award
Date applicable to the Award and ending on the Trading Day immediately
preceding the relevant Settlement Date (the “Aggregate Percentage S&P
Performance”).  For purposes of this
Agreement, the “Settlement  Date” shall mean the earlier to occur
of (i) the date set forth in the applicable Award Letter as the Settlement
Date of the Award and (ii) the effective date of a Change in Control, as
defined below.  For purposes of
determining the Aggregate Percentage S&P Performance with respect to any
Period, the Standard and Poor’s 500 Index as of the first day of the Period
shall be deemed to equal the closing value of such index on the Trading Day
immediately preceding the Award Date, and the Standard and Poor’s 500 Index on
the last day of the Period shall be deemed to equal the average closing value
of such index over the ten-consecutive-Trading Day period immediately preceding
the Settlement Date.  Notwithstanding
anything in this Agreement to the contrary, under no circumstances will the
Adjusted Price be less than the Initial Price on the Settlement Date.  In addition, if at any time during which the
provisions of this Section 2.1 


 

















 


would cause the Adjusted
Price to be less than the Initial Price, the Adjusted Price shall be fixed at
the Initial Price.


 


2.2.                              Term.  The term of
each Award shall expire on the earlier of the Settlement Date, the effective
date of a Change in Control or earlier as set forth in Section 4 hereof.


 


2.3.                              Vesting.  Subject to Section 2.4
hereof, the OSOs granted under an Award shall vest on the Settlement Date.


 


2.4.                              Accelerated Vesting upon Change in
Control.  Notwithstanding anything herein or in the
Plan to the contrary, and in accordance with the authority granted to the
Committee in Section 10.2.2 of the Plan, on the effective date of a “Change
in Control” (as defined in the Plan), (i) each Award shall be
canceled, and (ii) the Company or its successor shall pay to the Grantee
in consideration thereof an amount of cash equal to the value of any OSOs
(regardless of whether the OSOs were theretofore vested), assuming for this
purpose that the effective date of the Change in Control had been the day
during the prior 60-day period ending on the effective date of the Change in
Control which produces the highest such value, and (iii) any required
withholding related to such payment shall be satisfied by withholding the
appropriate amount of cash from such payment.


 


2.5.                              Consideration.  Vested
OSOs shall be settled on the Settlement Date as set forth in this
Agreement.  As promptly as practicable,
the Company shall deliver or pay to the Grantee with respect to and in
cancellation of each vested OSO, consideration (the “Settlement
Consideration”) equal to the product obtained when (a) the Fair Market
Value (as defined in Section 9.1) of a share of Stock as of the day prior
to the Settlement Date, less the Adjusted Price for the relevant Award Shares,
is multiplied by (b) the Multiplier (as defined in Section 2.6 below);
provided, that the Settlement
Consideration would be a positive number. 
The Settlement Consideration, if any, may be paid in (a) cash, (b) Stock
or (c) any combination of cash or Stock, at the Committee’s sole and
absolute discretion. In the event that the Company elects to pay some or all of
the Settlement Consideration in Stock, the number of shares of Stock to be
delivered shall be determined by dividing that portion of the Settlement
Consideration to be paid in Stock by the Fair Market Value of a share of Stock
as of the day prior to the Settlement Date. 
The payment of the Settlement Consideration, if any, shall be, in each case,
subject to withholding in accordance with Section 9.5.  For purposes of this Agreement, “Stock”
shall mean the Company’s common stock, par value $.01 per share.


 


2.6.                              Multiplier.  For purposes
of this Section 2.6, the following terms are defined:


 


(a)           “S&P Start Number” means the closing value
of the Standard and Poor’s 500 Index on the Trading Day immediately preceding
the relevant Award Date.


 


(b)          “S&P End Number” means the simple
arithmetic average of the closing value of the Standard and Poor’s 500 Index
over the ten-consecutive-Trading Day period immediately preceding the Settlement
Date.


 


2

















 


(c)           “Stock Start Number” means the Fair Market
Value of the Stock on the Trading Day immediately preceding the relevant Award
Date.


 


(d)          “Stock End Number” means the simple arithmetic
average of the Fair Market Value of the Stock over the ten-consecutive-Trading
Day period immediately preceding the Settlement Date.


 


(e)           “Duration” means the length of the relevant
Period, measured in years and fractions of years (expressed as a whole number
followed by three decimal places).


 


(f)             “Annualized Percentage S&P Performance”
means the annualized increase (or decrease) between the S&P Start Number
and the S&P End Number over the Period (expressed as a whole percentage
point followed by three decimal places), captured by the following formula:


 


	
  S&P End Number —
  S&P Start Number

  	
  x

  	
  100%

  	
   

  
	
  S&P Start Number

  	
   

  	
  Duration

  	
   

  



 


(g)          “Annualized Percentage Company Stock Price Performance”
means the annualized increase (or decrease) between the Stock Start Number and
the Stock End Number over the Period (expressed as a whole percentage point
followed by three decimal places), captured by the following formula:


 


	
  Stock End Number —
  Stock Start Number

  	
  x

  	
  100%

  	
   

  
	
  Stock Start Number

  	
   

  	
  Duration

  	
   

  



 


The “Multiplier”
shall be based on the “Outperform Percentage,” which is the excess, if
any, of the Annualized Percentage Company Stock Price Performance over the
Annualized Percentage S&P Performance.  The Multiplier shall be expressed as a whole
number and decimals, rounded to three decimal places, and be determined as
follows:


 


With respect to
each Award that has an Award Date that is on or after the date of this
Agreement:


 


3

















 


	
   

  	
  If Outperform
  Percentage is:

  	
   

  	
  The Multiplier will
  equal:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  0% or less

  	
   

  	
  0

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  More than 0%

  	
   

  	
   

  
	
   

  	
  but less than 11%

  	
   

  	
  The Outperform Percentage multiplied by 100
  multiplied by 4/11. (E.g., if
  Outperform Percentage = 5%, the Multiplier = 5.000 times 4/11 = 1.818)

  
	
   

  	
   

  	
   

  	
   

  
	
  11% or more

  	
   

  	
  4.000

  



 


In no event will
the Multiplier exceed 4.000 for Awards in which the Award Date is on or after
the date of this Agreement.


 


3.                                      Exempt 162(m) Treatment. 
The terms and conditions relating to Awards are designed so that each
Award will qualify as performance-based compensation within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”), and the
provisions of this Agreement shall be construed accordingly.  Consequently, if at the time of any purported
exercise of an Award by the Grantee, the Grantee is a “covered employee” within
the meaning of Section 162(m) of the Code, such purported exercise
shall not be effective prior to the time that the Company’s shareholders have
issued such approvals, and such other actions have been taken as may be
required, to qualify the Award as such performance-based compensation.


 


4.                                      Termination of
Employment/Expiration of Award.


 


4.1.                              Unvested OSOs.  Except
as set forth in Section 4.2 below, Awards shall expire as to any unvested Awards
as of the date the Grantee ceases to be employed by the Company or any of its
Affiliates for any reason .


 


4.2.                              Death, Disability and Retirement.  Notwithstanding
the provisions of Section 4.1 above, if the Grantee ceases to be employed
by the Company as a result of the Grantee’s death, retirement (in accordance
with the Company’s Retirement Benefit then in effect), or “Permanent Total
Disability” (as defined in the following sentence), each Award shall not
expire and shall remain outstanding until the Settlement Date.  The Grantee shall be considered to have
suffered a Permanent Total Disability if the Committee determines that the
Grantee is permanently unable to earn any wages in the same or other
employment.


 


5.                                      Non-Transferability. 
Except as specifically allowed by the Committee in writing, an Award and
the related OSOs shall not be transferable other than by will or the laws of
descent and distribution, and OSOs may be exercised, during the lifetime of the
Grantee, only (i) by the Grantee or (ii) on the Grantee’s behalf by a
court-appointed legal guardian.  More
particularly (but without limiting the generality of the foregoing), except as
provided above an Award, OSOs, and the right to receive Settlement
Consideration may not be assigned, transferred, pledged or hypothecated in any
way, shall not be assignable by operation of law, and shall not be subject to
execution, attachment or similar process. 
Any attempted assignment, 


 


4

















 


transfer, pledge,
hypothecation or other disposition of an Award, OSOs, or the right to receive Settlement
Consideration contrary to the provisions hereof and the levy of any execution,
attachment or similar process upon an Award, OSOs, or the right to receive Settlement
Consideration shall be null and void and without effect.


 


6.                                      Changes in Capital Structure, Etc.  Section 10.1 of the Plan shall apply to each
Award, provided that no action may be taken by the Committee pursuant thereto
which would prevent a Pooling Transaction from qualifying as such.


 


7.                                      Golden Parachute Gross-Up.


 


(a)                                  In the event it is
determined (as hereafter provided) that any payment or distribution by the
Company to or for the benefit of the Grantee pursuant to the terms of the
Agreement, whether paid or payable or distributed or distributable, including
without limitation the lapse or termination of any restriction on or the
vesting of an Award or OSOs granted under the Agreement (a “Payment”),
would be subject to the excise tax imposed by Section 4999 of the Code (or
any successor provision thereto) or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such excise tax (such
tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the “Excise Tax”), then the Grantee will be
entitled to receive an additional payment or payments (a “Gross-Up Payment”)
in an amount equal to the Excise Tax plus any penalties or taxes imposed on the
Grantee by virtue of such Gross-Up Payment such that, after payment by the
Grantee of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the
Grantee retains the full value of an Award and the OSOs thereunder, with the
exception of any regular income taxes owed by the Grantee on account of
exercise of OSOs.


 


(b)                                 Subject to the provisions of Section 7(d) hereof,
all determinations required to be made under this Agreement, including whether
an Excise Tax is payable by the Grantee and the amount of such Excise Tax and
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment,
will be made by an outside “Big 4” or similar international accounting firm
chosen by the Company (the “Accounting Firm”).  The Grantee will direct the Accounting Firm
to submit its determination and detailed supporting calculations to both the
Company and the Grantee within 15 calendar days after the effective date of the
Change in Control, and any other such time or times as may be requested by the
Company or the Grantee.  If the
Accounting Firm determines that any Excise Tax is payable by the Grantee, the
Company will pay the required Gross-Up Payment to the Grantee within five
business days after receipt of such determination and calculations, but in no
event later than the end of the Grantee’s taxable year following the Grantee’s
taxable year in which such tax owed by such Grantee that is subject to the
Gross-Up Payment is remitted to the applicable taxing authority.  If the Accounting Firm determines that no
Excise Tax is payable by the Grantee, it will, at the same time as it makes
such determination, furnish the Grantee with an opinion (addressed to both the Grantee
and the Company) or other evidence reasonably acceptable to the Grantee that
the Grantee has substantial authority not to report any Excise Tax on the
Grantee’s federal, state, local income or other tax return.  Any determination by the Accounting Firm as
to the amount of the Gross-Up Payment will be binding upon the Company and the
Grantee.  As a result of the uncertainty
in the application of Section 4999 of the Code (or any successor provision
thereto) and the 


 


5

















 


possibility of similar
uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
“Underpayment”), consistent with the calculations required to be made
hereunder.  In the event that the Company
exhausts or fails to pursue its remedies pursuant to Section 7(d) hereof
and the Grantee thereafter is required to make a payment of any Excise Tax, the
Grantee will direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Grantee as promptly as
possible.  The amount of any such
Underpayment will be promptly paid by the Company to, or for the benefit of,
the Grantee within five business days after receipt of such determination and
calculations, but in no event later than the end of the Grantee’s taxable year
following the Grantee’s taxable year in which such tax owed by such Grantee
that is subject to the Gross-Up Payment is remitted to the applicable taxing
authority.


 


(c)                                  The Company and the Grantee will each
provide the Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Grantee, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and issuance of the
determination contemplated by Section 7(b) hereof.


 


(d)                                 The federal, state and local income and
other tax returns filed by the Grantee will be prepared and filed on a
consistent basis with the determination of the Accounting Firm with respect to
the Excise Tax payable by the Grantee. 
The Grantee will make proper payment of the amount of any Excise Tax,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of the Grantee’s federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.  If prior to the filing of the Grantee’s
federal income tax return, or corresponding state and local tax return, if
relevant, the Accounting Firm determines that the amount of the Gross-Up
Payment should be reduced, the Grantee will within five business days pay to
the Company the amount of such reduction.


 


(e)                                  The fees and expenses of the Accounting
Firm for its services in connection with the determinations and calculations
contemplated by Sections 7(b) and (d) hereof will be borne by the
Company.  If such fees and expenses are
initially advanced by the Grantee, the Company will reimburse the Grantee the
full amount of such fees and expenses within five business days after receipt
from the Grantee of a statement therefor and reasonable evidence of his payment
thereof.


 


(f)                                    The Grantee will notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment.  Such notification will be given as promptly
as practicable but no later than 10 business days after the Grantee actually
receives notice of such claim and the Grantee will further apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid (in each case, to the extent known by the Grantee).  The Grantee will not pay such claim prior to
the earlier of (a) the expiration of the 30-calendar-day period following 


 


6

















 


the date on which he
gives such notice to the Company, and (b) the date that any payment of an
amount with respect to such claim is due. 
If the Company notifies the Grantee in writing prior to the expiration
of such period that it desires to contest such claim, the Grantee will (i) provide
the Company with any written records or documents in the Grantee’s possession
relating to such claim reasonably requested by the Company, (ii) take such
action in connection with contesting such claim as the Company will reasonably
request in writing from time to time, including without limitation accepting legal
representation with respect to such claim by an attorney competent in respect
of the subject matter and reasonably selected by the Company, (iii) cooperate
with the Company in good faith in order effectively to contest such claim, and (iv) permit
the Company to participate in any proceedings relating to such claim; provided, however, that
the Company will bear and pay directly all costs and expenses (including
interest and penalties) incurred in connection with such contest and will
indemnify and hold harmless the Grantee, on an after-tax basis, from and
against any Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of such representation and payment of
costs and expenses.  Without limiting the
foregoing provisions of this Section 7(f), the Company may, at its option,
control all proceedings taken in connection with the contest of any claim
contemplated by this Section 7(f) and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim (provided,
however, that the Grantee may participate therein at his own cost and expense)
and may, at its option, either direct the Grantee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Grantee agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company will determine; provided, however, that if the
Company directs the Grantee to pay the tax claimed and sue for a refund, the
Company will advance the amount of such payment to the Grantee on an
interest-free basis and will indemnify and hold the Grantee harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Grantee with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount.  Furthermore, the
Company’s control of any such contested claim will be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Grantee
will be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.


 


(g)                                 If, after the receipt by the Grantee of
an amount advanced by the Company pursuant to Section 7(f) hereof,
the Grantee receives any refund with respect to such claim, the Grantee will
(subject to the Company’s complying with the requirements of Section 7(f) hereof)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto).  If, after the receipt by the Grantee of an
amount advanced by the Company pursuant to Section 7(f) hereof, a
determination is made that the Grantee will not be entitled to any refund with
respect to such claim and the Company does not notify the Grantee in writing of
its intent to contest such denial or refund prior to the expiration of 30
calendar days after such determination, then such advance will be forgiven and will
not be required to be repaid and the amount of such advance will offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid pursuant to
this Agreement.


 


7

















 


(h)                                 If Grantee takes action to enforce this Section 7
against the Company (which for this purpose shall include making preparations
for taking such enforcement action), and such enforcement action is in whole or
part successful (whether by decision of a court or arbitrator, by settlement,
by mutual agreement of Grantee and the Company, or otherwise), the Company
shall promptly pay directly or, at Grantee’s election, reimburse Grantee for,
all legal and other expert fees and expenses incurred by Grantee in connection
with such action.


 


8.                                      General. 
Subject to the provisions of Section 2.5 with respect to the form
of the payment of the Settlement Consideration, the Company shall at all times
during the term of this Agreement reserve and keep available such number of
shares of Stock, as determined by the Compensation Committee from time to time,
as will be sufficient in the Compensation Committee’s good faith determination to
satisfy the requirements of this Agreement, shall pay all original issue and
transfer taxes with respect to the issue and transfer of shares of Stock
pursuant hereto and all other fees and expenses necessarily incurred by the
Company in connection therewith, and will from time to time use its best
efforts to comply with all laws and regulations which, in the opinion of
counsel for the Company, shall be applicable thereto.


 


9.                                      Miscellaneous


 


9.1.                              Fair Market Value and Trading Day. 
For purposes of this Agreement, the “Fair Market Value” of the
Stock shall mean as of any date of determination (i) the closing price per
share of Stock on the national securities exchange on which the Stock is
principally traded as of 4:15 pm New York City Time, or (ii) if the Stock
is not listed or admitted to trading on any such exchange, the last sale price
of a share of Stock as reported by the NASD, Inc. Automated Quotation (“NASDAQ”)
system, or (iii) if the Stock is not then listed on any securities
exchange and prices therefore are not then quoted in the NASDAQ system, then
the value determined by the Committee in good faith.  The term “Trading Day” means any day
on which the Stock is traded, as contemplated by subsection (i) or (ii) above.


 


9.2.                              No Stockholder Rights. 
The Grantee shall not have any of the rights of a stockholder with
respect to the Award Shares resulting from any Award prior to the issuance of
Stock, if any, to the Grantee upon the due exercise of the OSOs.


 


9.3.                              No Abrogation of Company’s Rights. 
Nothing in this Agreement shall confer upon the Grantee any right to
continued employment with the Company or interfere in any way with the right of
the Company to terminate the Grantee’s employment at any time.  The transfer of employment between any
combination of the Company and any Affiliate of the Company shall not be deemed
a termination of employment.


 


9.4.                              Effect of the Plan. 
The terms and provisions set forth in the Plan are incorporated herein
by reference as if they were set forth herein; provided,
however, that in the event of a direct
conflict between the terms of the Plan and the terms of this Agreement, the
terms of this Agreement shall govern. 
Reference to provisions of the Plan are to such provisions as they shall
be subsequently amended or renumbered; provided that no amendment to the Plan
which adversely affects an Award shall be effective as to that Award without
the written consent of the Grantee.  The
Grantee acknowledges that a current version of the Plan is available on the 


 


8

















 


Company’s intranet site,
and the Company agrees to supply to the Grantee a paper copy of the current
version of the Plan upon the Grantee’s request.


 


9.5.                              Withholding.  (a) Notwithstanding
anything contained herein to the contrary, other than Subsection 2.4 and Section 7,
the Company will not be obligated to issue the Settlement Consideration
unless the Grantee has paid (in cash or by certified or cashier’s check) to the
Company all withholding taxes required to be collected by the Company under
Federal, State, local or foreign law as a result of the issuance of the
Deferred Shares (“Withholding Taxes”). 
The Company shall be responsible for the determination of the amount of
any Withholding Taxes based on the value of the Settlement Consideration.  To the extent that the Grantee desires to pay
the Withholding Taxes in cash or by certified or cashier’s check, the Grantee
must deliver a Withholding Taxes Cash Payment Notification to the Company’s
stock OSO administrator substantially in the form of Exhibit B no later
than 45 days prior to the Settlement Date of any Award issued under this
Agreement.  To the extent that the
Grantee elects to pay the Withholding Taxes in cash or by certified or cashier’s
check, such payment must be received by the Company’s OSO administrator no
later than one (1) Business Day after the Settlement Date of any Award
that is the subject of the Withholding Taxes Cash Payment Notification.


 


(b)  The Company, in its sole discretion, may permit the Grantee
to pay any or all Withholding Taxes through delivery of outstanding Stock or by
the Company withholding a portion of the Settlement Consideration issuable
pursuant to this Agreement.  The Grantee,
however, will have no absolute right to pay the Withholding Taxes with Stock,
and, if such payment is permitted by the Company, such payment must be made in
strict compliance with rules for such payments established by the
Company.  As of the date of this
Agreement, unless the Company has received a properly executed and delivered
Withholding Taxes Cash Payment Notification from the Grantee, the Company
currently intends to have the Withholding Taxes paid through the withholding of
Stock issuable upon satisfaction of the terms and conditions set forth in this
Agreement whenever the Settlement Consideration is delivered by the Company in
the form of shares of Stock (a “net issuance”).  The Stock that is withheld by the Company as
part of the net issuance (the “Withheld Shares”) will be sold on behalf of the
Grantee as contemplated by Section 9.9 of this Agreement; provided, however, that at the sole discretion of the
Company, the Withheld Shares may be retained by the Company and the Company
will satisfy the Withholding Taxes from the Company’s available cash. The
Company reserves the right to change its method with respect to the Grantee for
the collection of Withholding Taxes that may be owed by the Grantee at any time
in its sole discretion, upon notice to the Grantee, which notice may be written
or electronic notice.


 


9.6.                              Plan and Agreement Govern. 
Although any information sent to or made available to the Grantee
concerning the Plan and this Award is intended to be an accurate summary of the
terms and conditions of the Award, this Agreement and the Plan are the
authoritative documents governing the Award and any inconsistency between the Agreement
and the Plan, on one hand, and any other summary information, on the other
hand, shall be resolved in favor of the Agreement and the Plan.


 


9.7.                              Affiliate.  The term “Affiliate”
shall have the mean ascribed to it in the Plan.


 


9

















 


9.8.                              Amendments. 
Notwithstanding anything herein to the contrary, this Agreement may be
amended by the Committee from time to time without the consent of the Grantee
to the extent the Committee deems it appropriate to cause this Agreement and/or
each Award hereunder to comply with Section 409A of the Internal Revenue
Code of 1986, as amended (“Section 409A”) (including the
distribution requirements thereunder) or be exempt from Section 409A
and/or the tax penalty under Section 409A(a)(1)(B).


 


9.9                                 Authorization to Trade.  By
the execution of this Agreement, to the extent that the Company elects to issue
the Settlement Consideration as a net issuance for the settlement of any Award
of OSOs, and, the Grantee has not properly executed and delivered to the
Company’s OSO administrator a Withholding Taxes Cash Payment Notification, the
Grantee hereby irrevocably instructs the Company and a broker of the Company’s
choosing, to sell on behalf of the Grantee at the “market price,” that number
of shares of Stock required to generate sufficient funds to equal the
Withholding Taxes required to be paid by the Grantee pursuant to Section 9.5.  The Grantee represents to the Company and the
broker that the Grantee is entering into this Agreement in good faith.  The Grantee shall have no ability to modify
these instructions other than by the proper execution and delivery to the
Company’s OSO administrator of a Withholding Taxes Cash Payment Notification.  It is the Grantee’s intention that this provision
comply with the requirements of Rule 10b5-1 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934.


 


[Signature page follows]


 


10

















 


IN WITNESS WHEREOF, this
Agreement is executed by the Grantee and by an authorized officer on behalf of
the Company, as of the date first above written.


 


	
   

  	
  LEVEL 3 COMMUNICATIONS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ITS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANTEE:

  	
   

  
	
   

  	
   

  	
  (Please sign)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  (Please print)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date of Hire:

  	
   

  
						



 


11

















 


EXHIBIT A


 


LEVEL 3
COMMUNICATIONS, INC.


OSO AWARD
LETTER


 


This OSO Award (the “Award”)
when taken together with the OSO Master Award Agreement dated as of                                 
and the individual whose name appears on the signature line below (the “Grantee”)
(the “Master Agreement”) constitutes an award to of outperform stock
appreciation rights that are referred to as OSOs under the Level 3
Communications, Inc. 1995 Stock Plan (as amended from time to time).


 


The terms and conditions
of this Award are set forth below and in the Master Agreement, the provisions
of which are incorporated herein by reference.


 


A.                                   The date of grant of
this Award is                     
(the “Award Date”).


 


B.                                     The Initial Price per share for each
Award Share covered by this Award is $                    .


 


C.                                     The Settlement Date of this Award is                             .


 


	
   

  	
  LEVEL 3 COMMUNICATIONS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  
	
   

  	
  ITS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANTEE:

  	
   

  
				



 


12

















 


EXHIBIT B


LEVEL
3 COMMUNICATIONS, INC.


WITHHOLDING
TAXES CASH PAYMENT NOTIFICATION


 


This Withholding
Taxes Cash Payment Notification is being delivered by the individual whose name
appears on the signature line below (the “Grantee”) in reference to an
OSO Award granted to the Grantee by Level 3 Communications, Inc. (the “Company”)
pursuant to that certain OSO Master Award Agreement dated as of                                 
between the Company and the Grantee (the “Master Agreement”).


 


Capitalized terms
used in this Withholding Taxes Cash Payment Notification without definition
have the meaning given to those terms in the Master Agreement.


 


This Withholding
Taxes Cash Payment Notification relates to the OSO Award granted to the Grantee
pursuant to the Award Letter issued to the Grantee dated                                           ,
the Settlement Date of which OSO Award is                                         
(the “Referenced OSO Award”).


 


The Grantee hereby
irrevocable elects to pay any Withholding Taxes that are owed by the Grantee
upon the Settlement Date of the Referenced OSO Award in cash or by certified or
cashier’s check made payable to Level 3 Communications, Inc. within one (1) Business
Day of the Settlement Date of the Referenced OSO Award.  All payments of Withholding Taxes are to be
made to the Company’s OSO award administrator.*


 


The Grantee hereby
represents and warrants to the Company that on the date hereof, the Grantee is
not in possession of material non-public information regarding the business or
financial condition of the Company and its subsidiaries.


 


To the extent that
the Grantee is subject to the Company’s Insider Trading Policy’s restrictions
on the ability to trade the Company’s securities other than during an open
trading window, the Grantee expressly acknowledges that:  (a) the Grantee has executed this
Withholding Taxes Cash Payment Notification during an open trading window
pursuant to the Company’s Insider Trading Policy; and (b) the Grantee may
not sell any shares of Stock that are distributed to the Grantee upon the
expiration of the Referenced OSO Award, so long as the trading window is
closed.


 


	
   

  	
  GRANTEE:

  	
   

  
	
   

  	
   

  	
  (Please
  sign)

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  (Please
  print)

  
	
   

  	
  Date of Hire:

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
							



 






* Delivery
information with respect to the payment of Withholding Taxes must be obtained
from the Company’s OSO administrator.


 


13