Document:

Exhibit 10.42

 

PURCHASE AND SALE AGREEMENT

 

among

 

UNOVA, INC.

 

UNOVA INDUSTRIAL AUTOMATION SYSTEMS, INC.

 

UNOVA IP CORP.

 

UNOVA UK LIMITED

 

and

 

COMPAGNIE DE FIVES-LILLE

 

CINETIC LANDIS GRINDING CORP.

 

CINETIC LANDIS GRINDING LIMITED

 

Dated:  October 27, 2005

 

 

INDEX OF DEFINED TERMS

	
  A

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accounts

  	
   

  	
  27

  
	
  Accounts Date

  	
   

  	
  27

  
	
  Acquisition Proposal

  	
   

  	
  78

  
	
  Acquisition Proposals

  	
   

  	
  78

  
	
  Actual Completion Date

  	
   

  	
  12

  
	
  Affiliate

  	
   

  	
  7

  
	
  Affiliated Group

  	
   

  	
  52

  
	
  Agreement

  	
   

  	
  1

  
	
  Agreement Adjustments

  	
   

  	
  16

  
	
  Agreement Date

  	
   

  	
  1

  
	
  Approved

  	
   

  	
  49

  
	
  Assets Held for Sale

  	
   

  	
  5

  
	
  Assumed Liabilities

  	
   

  	
  6, 8

  
	
  Assurances

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  B

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Business

  	
   

  	
  1

  
	
  Buyer UK

  	
   

  	
  1

  
	
  Buyer US

  	
   

  	
  1

  
	
  Buyer US’s 401(k) Plan

  	
   

  	
  76

  
	
  Buying Indemnified Parties

  	
   

  	
  87

  
	
   

  	
   

  	
   

  
	
  C

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cap

  	
   

  	
  93

  
	
  CFL

  	
   

  	
  1

  
	
  Claim Threshold

  	
   

  	
  93

  
	
  Closing

  	
   

  	
  6, 23

  
	
  Closing Balance Sheet

  	
   

  	
  16

  
	
  COBRA

  	
   

  	
  48

  
	
  Code

  	
   

  	
  7

  
	
  Company

  	
   

  	
  83

  
	
  Competitive Business

  	
   

  	
  83

  
	
  Confidentiality Agreement

  	
   

  	
  63

  
	
  consultants

  	
   

  	
  37

  
	
  Contaminants

  	
   

  	
  10

  
	
  Continuing Employees

  	
   

  	
  8, 75

  
	
  Contracts

  	
   

  	
  35

  
	
  Contribution Rate

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  D

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  De Minimis Settlement

  	
   

  	
  35

  
	
  Deadline Date

  	
   

  	
  85

  
	
  December Balance Sheet

  	
   

  	
  27

  
	
  December Financials

  	
   

  	
  27

  
	
  Direct Litigation Option

  	
   

  	
  91

  
	
  DOJ

  	
   

  	
  61

  
	
  Downward Net Working Asset Adjustment

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  E

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Election

  	
   

  	
  22

  
	
  employee benefit plan

  	
   

  	
  47

  
	
  Employee Benefit Plans

  	
   

  	
  5, 47

  
	
  Employees

  	
   

  	
  28, 42

  
	
  Employment Liabilities

  	
   

  	
  88

  
	
  Environmental Laws

  	
   

  	
  9, 34

  
	
  Environmental Liabilities

  	
   

  	
  9

  
	
  Environmental Permits

  	
   

  	
  33

  
	
  ERISA

  	
   

  	
  47

  
	
  ERISA Plan

  	
   

  	
  47

  
	
  Estimated Net Working Asset Adjustment

  	
   

  	
  18

  
	
  Excluded Assets

  	
   

  	
  4

  
	
  Excluded Contracts

  	
   

  	
  6

  
	
  Excluded Liabilities

  	
   

  	
  5, 10

  
	
  Extended Deadline Date

  	
   

  	
  85

  
	
   

  	
   

  	
   

  
	
  F

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Financial Statements

  	
   

  	
  28

  
	
  Freehold Property

  	
   

  	
  12

  
	
  FSSP

  	
   

  	
  76

  
	
  FSSP/UPP Transition Period

  	
   

  	
  76

  
	
  FTC

  	
   

  	
  61

  
	
   

  	
   

  	
   

  
	
  G

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GAAP

  	
   

  	
  16

  
	
  Governmental Body

  	
   

  	
  3, 6, 25

  
	
   

  	
   

  	
   

  
	
  H

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Hazardous Substance

  	
   

  	
  33, 34

  
	
  HSR Act

  	
   

  	
  61

  
	
  HSR Filing

  	
   

  	
  61

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ICC

  	
   

  	
  99

  
	
  Indebtedness

  	
   

  	
  6, 37

  
	
  Indemnified Party

  	
   

  	
  90

  
	
  Indemnifying Party

  	
   

  	
  90

  
	
  Indemnifying Purchasing Entities

  	
   

  	
  88

  
	
  Indemnifying Selling Entities

  	
   

  	
  87

  
	
  independent contractors

  	
   

  	
  37

  
	
  Independent Firm

  	
   

  	
  17

  
	
  Intellectual Property

  	
   

  	
  39

  
	
  Interested Person

  	
   

  	
  55

  

 

i

 

	
  Investigation Periods

  	
   

  	
  91

  
	
  IRS

  	
   

  	
  48

  
	
  IT System

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  J

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  June Balance Sheet

  	
   

  	
  27

  
	
  June Balance Sheet Date

  	
   

  	
  2

  
	
  June Financials

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  K

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  knowledge

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  L

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Landis Group

  	
   

  	
  1

  
	
  Landis Pension Plan

  	
   

  	
  63

  
	
  Landlord’s Consent

  	
   

  	
  12

  
	
  Law

  	
   

  	
  5, 26

  
	
  Leased Personal Property

  	
   

  	
  36

  
	
  Leased Real Property

  	
   

  	
  33

  
	
  Leasehold Property

  	
   

  	
  13

  
	
  Legally Required Statement

  	
   

  	
  97

  
	
  LIBOR

  	
   

  	
  18

  
	
  Lien

  	
   

  	
  31

  
	
  Liens

  	
   

  	
  2

  
	
  Loss

  	
   

  	
  87

  
	
  Losses

  	
   

  	
  87

  
	
   

  	
   

  	
   

  
	
  M

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MAG

  	
   

  	
  68

  
	
  material adverse change

  	
   

  	
  24

  
	
  material adverse effect

  	
   

  	
  24

  
	
  multiemployer plan

  	
   

  	
  48

  
	
  N

  	
   

  	
   

  
	
  Net Working Asset Target

  	
   

  	
  17

  
	
  Net Working Assets

  	
   

  	
  18

  
	
  Non-Compete Term

  	
   

  	
  83

  
	
  Note

  	
   

  	
  6

  
	
  Note Claim

  	
   

  	
  96

  
	
  NPL

  	
   

  	
  35

  
	
   

  	
   

  	
   

  
	
  O

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  operating lease

  	
   

  	
  31

  
	
  Owned Real Property

  	
   

  	
  2, 32

  
	
   

  	
   

  	
   

  
	
  P

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Parties

  	
   

  	
  1

  
	
  Party

  	
   

  	
  1

  
	
  Performance Bonds

  	
   

  	
  72

  
	
  Permit

  	
   

  	
  51

  
	
  Permitted Lien

  	
   

  	
  31

  
	
  Permitted Liens

  	
   

  	
  2

  
	
  Person

  	
   

  	
  6

  
	
  Phase 1 Report

  	
   

  	
  82

  
	
  Preliminary Closing Balance Sheet

  	
   

  	
  16

  
	
  Product Liability

  	
   

  	
  9

  
	
  Purchase Orders

  	
   

  	
  36

  
	
  Purchase Price

  	
   

  	
  6

  
	
  Purchased Assets

  	
   

  	
  2

  
	
  Purchased Contracts

  	
   

  	
  4

  
	
  Purchasing Entities

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  R

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Real Property

  	
   

  	
  33

  
	
  reasonable endeavors

  	
   

  	
  64

  
	
  Registered Properties

  	
   

  	
  13

  
	
  Related Agreements

  	
   

  	
  25

  
	
  Required Consents

  	
   

  	
  53

  
	
  Retiree Medical Plan

  	
   

  	
  64

  
	
  Review Period

  	
   

  	
  17

  
	
   

  	
   

  	
   

  
	
  S

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Sales Order

  	
   

  	
  60

  
	
  Sales Orders

  	
   

  	
  35

  
	
  Schedule of Contributions

  	
   

  	
  69

  
	
  Section 1060 Allocation

  	
   

  	
  7

  
	
  Securities Act

  	
   

  	
  26

  
	
  Seller Names

  	
   

  	
  77

  
	
  Selling Entities

  	
   

  	
  1

  
	
  Selling Indemnified Parties

  	
   

  	
  89

  
	
  South Beloit Facility

  	
   

  	
  5

  
	
  Statement of Objections

  	
   

  	
  17

  
	
   

  	
   

  	
   

  
	
  T

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tax Returns

  	
   

  	
  52

  
	
  Taxes

  	
   

  	
  4, 52

  
	
  Third Party Claim

  	
   

  	
  90

  
	
  Threshold

  	
   

  	
  93

  
	
  transaction

  	
   

  	
  55

  
	
  Transactions

  	
   

  	
  2

  
	
  Transfer Date

  	
   

  	
  2, 23

  
	
  Transfer Regulations

  	
   

  	
  22

  
	
  Transferring Members

  	
   

  	
  64

  
	
  Transition Services Agreement

  	
   

  	
  68

  
	
  TUPE Transfer

  	
   

  	
  46

  
	
   

  	
   

  	
   

  
	
  U

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  U.K. Properties

  	
   

  	
  13

  
	
  UIASI

  	
   

  	
  1

  
	
  UK Asset Sale

  	
   

  	
  2

  
	
  UK Employee

  	
   

  	
  49

  
	
  UK Landis Group

  	
   

  	
  1

  
	
  UK Pension Plan

  	
   

  	
  48

  
	
  UK Purchased Assets

  	
   

  	
  1

  
	
  UNOVA

  	
   

  	
  1

  
	
  UNOVA IP

  	
   

  	
  1

  

 

ii

 

	
  UNOVA UK

  	
   

  	
  1

  
	
  UNOVA’s Broker

  	
   

  	
  55

  
	
  UPP

  	
   

  	
  76

  
	
  Upward Net Working Asset Adjustment

  	
   

  	
  17

  
	
  US Asset Sale

  	
   

  	
  1

  
	
  US Employees

  	
   

  	
  75

  
	
  US Landis Group

  	
   

  	
  1

  
	
  US Purchased Assets

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  V

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Valuation

  	
   

  	
  69

  
	
  VAT

  	
   

  	
  22

  
	
  VATA

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  W

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WARN Act

  	
   

  	
  77

  
	
  Waynesboro Facility

  	
   

  	
  6

  
	
  WSJ RATE

  	
   

  	
  16

  

 

iii

 

CONTENTS

 

	
  ARTICLE 1.

  	
  The Transactions

  	
  2

  
	
   

  	
  1.1

  	
   

  	
  Transfer of Assets

  	
  2

  
	
   

  	
  1.2

  	
   

  	
  Excluded Assets

  	
  4

  
	
   

  	
  1.3

  	
   

  	
  [Reserved]

  	
  6

  
	
   

  	
  1.4

  	
   

  	
  Consideration

  	
  6

  
	
   

  	
  1.5

  	
   

  	
  Purchase Price and Payment; Deliveries at
  the Closing

  	
  6

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Purchase Price

  	
  6

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Payment of Purchase Price

  	
  6

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Deliveries at the Closing

  	
  6

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Purchase Price Allocation

  	
  7

  
	
   

  	
  1.6

  	
   

  	
  Assumed Liabilities

  	
  8

  
	
   

  	
  1.7

  	
   

  	
  Excluded Liabilities

  	
  10

  
	
   

  	
  1.8

  	
   

  	
  Transfer of English Owned Real Property and
  Obtaining English Reversioner’s Consent

  	
  12

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Matters Affecting the U.K. Properties

  	
  13

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Landlord’s Consents

  	
  13

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Completion

  	
  14

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Further Completion

  	
  15

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Assurances

  	
  15

  
	
   

  	
  1.9

  	
   

  	
  Closing Balance Sheet

  	
  16

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Definition of Closing Balance Sheets

  	
  16

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Preliminary Closing Balance Sheets

  	
  16

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Review of Preliminary Closing Balance Sheet

  	
  16

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Finalization of Closing Balance Sheet

  	
  17

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Net Working Asset Payment

  	
  17

  
	
   

  	
   

  	
   

  	
  (f)

  	
  Limitations
  on Certain Claims

  	
  18

  
	
   

  	
  1.10

  	
   

  	
  Right to Contest

  	
  18

  
	
   

  	
  1.11

  	
   

  	
  Nonassignable Contracts and Rights

  	
  18

  
	
   

  	
  1.12

  	
   

  	
  Value Added Tax

  	
  19

  
	
   

  	
  1.13

  	
   

  	
  UK Employees

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2.  

  	
  Closing and Transfer Date

  	
  23

  
	
   

  	
  2.1

  	
   

  	
  Closing

  	
  23

  
	
   

  	
  2.2

  	
   

  	
  Notice and Right to Cure

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3.   

  	
  Representations and Warranties of the
  Selling Entities

  	
  24

  
	
   

  	
  3.1

  	
   

  	
  Corporate Matters

  	
  24

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Due Organization, Good Standing and
  Qualification

  	
  24

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Corporate Authority to Conduct Business

  	
  25

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Corporate Power and Authority to Enter Into
  Agreements

  	
  25

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Due Execution and Enforceability

  	
  25

  
	
   

  	
   

  	
   

  	
  (e)

  	
  No Conflict

  	
  25

  
	
   

  	
   

  	
   

  	
  (f)

  	
  Subsidiaries and Other Equity Investments

  	
  26

  
	
   

  	
   

  	
   

  	
  (g)

  	
  Certain Additional Matters

  	
  26

  

 

i

 

	
   

  	
   

  	
   

  	
  (h)

  	
  UNOVA UK Insolvency Matters

  	
   

  
	
   

  	
  3.2

  	
   

  	
  Financial Statements; Undisclosed
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
  (a)

  	
  December Financials

  	
  27

  
	
   

  	
   

  	
   

  	
  (b)

  	
  June Financials

  	
  27

  
	
   

  	
   

  	
   

  	
  (c)

  	
  UNOVA UK’s Accounts

  	
  27

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Undisclosed Liabilities

  	
  28

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Events Subsequent to June Balance Sheet

  	
  28

  
	
   

  	
  3.3

  	
   

  	
  Accounts Receivable

  	
  30

  
	
   

  	
  3.4

  	
   

  	
  Inventories and Assets

  	
  30

  
	
   

  	
  3.5

  	
   

  	
  Absence of Liens and Encumbrances

  	
  31

  
	
   

  	
  3.6

  	
   

  	
  Real Property

  	
  32

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Real Property

  	
  32

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Realty Leases (as Lessor)

  	
  32

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Realty Leases (as Lessee)

  	
  33

  
	
   

  	
   

  	
   

  	
  (d)

  	
  [Reserved]

  	
  33

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Violation of Laws or Restrictive Covenants

  	
  33

  
	
   

  	
   

  	
   

  	
  (f)

  	
  Environmental Matters

  	
  33

  
	
   

  	
   

  	
   

  	
  (g)

  	
  Real Estate Liens or Encumbrances

  	
  35

  
	
   

  	
  3.7

  	
   

  	
  Right to Use Properties and Assets

  	
  35

  
	
   

  	
  3.8

  	
   

  	
  Contracts and Commitments

  	
  35

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Sales Orders, Bids and Proposals

  	
  35

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Purchase Orders

  	
  36

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Sales Representative, Distributor and
  Dealer Agreements

  	
  36

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Personal Property Leases (As Lessee)

  	
  36

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Noncompetition Agreements or Covenants

  	
  36

  
	
   

  	
   

  	
   

  	
  (f)

  	
  Confidential Nondisclosure Agreements

  	
  36

  
	
   

  	
   

  	
   

  	
  (g)

  	
  Consultants and Consultant Agreements

  	
  37

  
	
   

  	
   

  	
   

  	
  (h)

  	
  Indebtedness; Guarantees

  	
  37

  
	
   

  	
   

  	
   

  	
  (i)

  	
  Powers of Attorney, Proxies

  	
  37

  
	
   

  	
   

  	
   

  	
  (j)

  	
  Letters of Credit, Surety, Bid and
  Performance Bonds

  	
  38

  
	
   

  	
   

  	
   

  	
  (k)

  	
  Joint Venture Agreements

  	
  38

  
	
   

  	
   

  	
   

  	
  (l)

  	
  Other Material Contracts

  	
  38

  
	
   

  	
   

  	
   

  	
  (m)

  	
  [Reserved]

  	
  39

  
	
   

  	
   

  	
   

  	
  (n)

  	
  Restrictive Contracts

  	
  39

  
	
   

  	
  3.9

  	
   

  	
  Patents, Trade Names, Trademarks, Service
  Marks, Copyrights and Chip Registrations

  	
  39

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Intellectual Property Rights

  	
  39

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Licenses of Intellectual Property Rights To
  or From Third Parties

  	
  40

  
	
   

  	
   

  	
   

  	
  (c)

  	
  No Infringement

  	
  41

  
	
   

  	
  3.10

  	
   

  	
  Patent, Trade Name, Trademark, Service
  Mark, Copyright or Chip Registration Indemnification

  	
  41

  
	
   

  	
  3.11

  	
   

  	
  Confidential Information or Trade Secrets

  	
  41

  
	
   

  	
  3.12

  	
   

  	
  Products and Service Warranties

  	
  42

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Products

  	
  42

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Service Warranties

  	
  42

  

 

ii

 

	
   

  	
  3.13

  	
   

  	
  Employees; Employee Benefits

  	
  42

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Employees

  	
  42

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Employment Contracts

  	
  43

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Severance

  	
  43

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Indebtedness to Employees

  	
  44

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Loans or Advances to Employees

  	
  44

  
	
   

  	
   

  	
   

  	
  (f)

  	
  Collective Bargaining Agreements

  	
  44

  
	
   

  	
   

  	
   

  	
  (g)

  	
  Independent Contractors

  	
  45

  
	
   

  	
   

  	
   

  	
  (h)

  	
  Commitments

  	
  45

  
	
   

  	
   

  	
   

  	
  (i)

  	
  Employment history

  	
  45

  
	
   

  	
   

  	
   

  	
  (j)

  	
  Other Labor Matters

  	
  46

  
	
   

  	
   

  	
   

  	
  (k)

  	
  Employee Benefit Plans

  	
  47

  
	
   

  	
   

  	
   

  	
  (l)

  	
  ERISA Plans

  	
  47

  
	
   

  	
   

  	
   

  	
  (m)

  	
  UK Pension Plans

  	
  48

  
	
   

  	
  3.14

  	
   

  	
  Pending or Threatened Claims, Litigation
  and Governmental Proceedings

  	
  50

  
	
   

  	
  3.15

  	
   

  	
  Judgments, Orders and Consent Decrees

  	
  51

  
	
   

  	
  3.16

  	
   

  	
  Compliance With Laws

  	
  51

  
	
   

  	
  3.17

  	
   

  	
  Franchises, Permits, Etc.

  	
  51

  
	
   

  	
  3.18

  	
   

  	
  Taxes

  	
  52

  
	
   

  	
  3.19

  	
   

  	
  Governmental Authorizations; Consents

  	
  53

  
	
   

  	
  3.20

  	
   

  	
  No Breach of Statute or Contract

  	
  54

  
	
   

  	
  3.21

  	
   

  	
  Insurance

  	
  54

  
	
   

  	
  3.22

  	
   

  	
  Customers and Suppliers

  	
  54

  
	
   

  	
  3.23

  	
   

  	
  Transactions with Affiliates; Intercompany
  Arrangements

  	
  55

  
	
   

  	
  3.24

  	
   

  	
  Broker’s or Finder’s Fees

  	
  55

  
	
   

  	
  3.25

  	
   

  	
  Grants and Allowances

  	
  55

  
	
   

  	
  3.26

  	
   

  	
  Sufficiency of Purchased Assets

  	
  56

  
	
   

  	
  3.27

  	
   

  	
  No Other Representations

  	
  56

  
	
   

  	
  3.28

  	
   

  	
  Disclosure

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4.   

  	
  Representations and Warranties of
  Purchasing Entities

  	
  57

  
	
   

  	
  4.1

  	
   

  	
  Corporate Matters

  	
  57

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Due Organization

  	
  57

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Corporate Power and Authority to Enter Into
  Agreement

  	
  57

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Due Execution and Enforceability

  	
  57

  
	
   

  	
   

  	
   

  	
  (d)

  	
  No Conflict

  	
  58

  
	
   

  	
  4.2

  	
   

  	
  Required Consents

  	
  58

  
	
   

  	
  4.3

  	
   

  	
  Claims, Litigation and Governmental
  Proceedings

  	
  58

  
	
   

  	
  4.4

  	
   

  	
  Broker’s or Finder’s Fees

  	
  58

  
	
   

  	
  4.5

  	
   

  	
  Available Funds

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5.   

  	
  Certain Covenants Pending the Closing

  	
  60

  
	
   

  	
  5.1

  	
   

  	
  Full Access

  	
  60

  
	
   

  	
  5.2

  	
   

  	
  Carry On In Regular Course

  	
  60

  
	
   

  	
  5.3

  	
   

  	
  Consents; HSR

  	
  61

  
								

 

iii

 

	
   

  	
  5.4

  	
   

  	
  Notices of Certain Events; Continuing
  Disclosure

  	
  62

  
	
   

  	
  5.5

  	
   

  	
  Supplements to Disclosure

  	
  63

  
	
   

  	
  5.6

  	
   

  	
  Conditions Precedent

  	
  63

  
	
   

  	
  5.7

  	
   

  	
  Nondisclosure

  	
  63

  
	
   

  	
  5.8

  	
   

  	
  Reorganization of U.K. Pension Plans

  	
  63

  
	
   

  	
  5.9

  	
   

  	
  Assumption of Retiree Medical Plan

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6.   

  	
  Conditions Precedent to the Obligations of
  the Purchasing Entities to Close

  	
  66

  
	
   

  	
  6.1

  	
   

  	
  Representations and Warranties True

  	
  66

  
	
   

  	
  6.2

  	
   

  	
  Compliance With Agreement

  	
  66

  
	
   

  	
  6.3

  	
   

  	
  No Material Adverse Change

  	
  66

  
	
   

  	
  6.4

  	
   

  	
  No Litigation

  	
  66

  
	
   

  	
  6.5

  	
   

  	
  [Reserved]

  	
  67

  
	
   

  	
  6.6

  	
   

  	
  Consents and Approvals

  	
  67

  
	
   

  	
  6.7

  	
   

  	
  Instruments of Transfer

  	
  67

  
	
   

  	
  6.8

  	
   

  	
  [Reserved]

  	
  68

  
	
   

  	
  6.9

  	
   

  	
  Opinion of Counsel

  	
  68

  
	
   

  	
  6.10

  	
   

  	
  Amendment to MAG Transition Services
  Agreement

  	
  68

  
	
   

  	
  6.11

  	
   

  	
  Transition Services Agreement

  	
  68

  
	
   

  	
  6.12

  	
   

  	
  Title

  	
  68

  
	
   

  	
  6.13

  	
   

  	
  Leases

  	
  69

  
	
   

  	
  6.14

  	
   

  	
  Discharge of Indebtedness; Release of Liens

  	
  69

  
	
   

  	
  6.15

  	
   

  	
  [Reserved]

  	
  69

  
	
   

  	
  6.16

  	
   

  	
  [Reserved]

  	
  69

  
	
   

  	
  6.17

  	
   

  	
  UK Pension Plans

  	
  69

  
	
   

  	
  6.18

  	
   

  	
  Other

  	
  70

  
	
   

  	
  6.19

  	
   

  	
  Closing Conditions for UNOVA UK

  	
  70

  
	
   

  	
  6.20

  	
   

  	
  Benefit of Letters of Credit

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7.   

  	
  Conditions Precedent to the Obligations of
  the Selling Entities to Close

  	
  71

  
	
   

  	
  7.1

  	
   

  	
  Representations and Warranties True

  	
  71

  
	
   

  	
  7.2

  	
   

  	
  Compliance With Agreement

  	
  71

  
	
   

  	
  7.3

  	
   

  	
  No Litigation

  	
  71

  
	
   

  	
  7.4

  	
   

  	
  [Reserved]

  	
  71

  
	
   

  	
  7.5

  	
   

  	
  Consents and Approvals

  	
  71

  
	
   

  	
  7.6

  	
   

  	
  Purchase Price

  	
  72

  
	
   

  	
  7.7

  	
   

  	
  Note

  	
  72

  
	
   

  	
  7.8

  	
   

  	
  Instruments of Assumption

  	
  72

  
	
   

  	
  7.9

  	
   

  	
  Performance Bonds

  	
  72

  
	
   

  	
  7.10

  	
   

  	
  Leases

  	
  72

  
	
   

  	
  7.11

  	
   

  	
  Other

  	
  73

  
	
   

  	
  7.12

  	
   

  	
  Transition Services Agreement

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8.   

  	
  Further Requirements

  	
  74

  
	
   

  	
  8.1

  	
   

  	
  Access to Books and Records

  	
  74

  

 

iv

 

	
   

  	
  8.2

  	
   

  	
  Further Instruments and Assurances

  	
  74

  
	
   

  	
  8.3

  	
   

  	
  Litigation Cooperation

  	
  74

  
	
   

  	
  8.4

  	
   

  	
  Certain Employee Matters

  	
  74

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Employment

  	
  74

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Certain Employee Benefits

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
  (i)

  	
  Past Service Credit

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
  (ii)

  	
  Benefits under the Selling Entities’ Plans

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
  (iii)

  	
  U.S. Medical and Health Plan

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
  (iv)

  	
  Buyer US’s 401(k) Plan

  	
  76

  
	
   

  	
   

  	
   

  	
  (c)

  	
  WARN Act

  	
  77

  
	
   

  	
  8.5

  	
   

  	
  Use of UNOVA Name and Mark

  	
  77

  
	
   

  	
  8.6

  	
   

  	
  Exclusivity

  	
  78

  
	
   

  	
  8.7

  	
   

  	
  Taxes

  	
  78

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Taxes Relating to the Business and UNOVA UK

  	
  78

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Transfer Taxes

  	
  78

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Employment Taxes

  	
  79

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Stock Options

  	
  79

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Tax Treatment

  	
  79

  
	
   

  	
   

  	
   

  	
  (f)

  	
  Interpretation

  	
  79

  
	
   

  	
  8.8

  	
   

  	
  Settlement of Intercompany Accounts

  	
  79

  
	
   

  	
  8.9

  	
   

  	
  Intellectual Property Registrations

  	
  80

  
	
   

  	
  8.10

  	
   

  	
  Authorization; Mail

  	
  80

  
	
   

  	
  8.11

  	
   

  	
  Post-Closing Cooperation

  	
  80

  
	
   

  	
  8.12

  	
   

  	
  Purchased Assets Not Transferred

  	
  80

  
	
   

  	
  8.13

  	
   

  	
  Confidentiality

  	
  81

  
	
   

  	
  8.14

  	
   

  	
  Performance Bonds

  	
  81

  
	
   

  	
  8.15

  	
   

  	
  Claim Cooperation

  	
  82

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9.   

  	
  Noncompetition Agreement

  	
  83

  
	
   

  	
  9.1

  	
   

  	
  Noncompetition Agreement

  	
  83

  
	
   

  	
  9.2

  	
   

  	
  Limitations on Noncompetition Agreement

  	
  83

  
	
   

  	
  9.3

  	
   

  	
  Definition of Competitive Business

  	
  83

  
	
   

  	
  9.4

  	
   

  	
  Nonsolicitation

  	
  84

  
	
   

  	
  9.5

  	
   

  	
  Injunctive and Equitable Relief

  	
  84

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10.  

  	
  Termination

  	
  85

  
	
   

  	
  10.1

  	
   

  	
  Termination

  	
  85

  
	
   

  	
  10.2

  	
   

  	
  Notice of Termination

  	
  86

  
	
   

  	
  10.3

  	
   

  	
  Effect of Termination

  	
  86

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11.  

  	
  Indemnification

  	
  87

  
	
   

  	
  11.1

  	
   

  	
  Indemnification by the Selling Entities

  	
  87

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Misrepresentation or Breach of Warranty

  	
  87

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Breach of Covenant or Agreement

  	
  87

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Excluded Liabilities

  	
  87

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Pension Liabilities

  	
  87

  
	
   

  	
   

  	
   

  	
  (e)

  	
  Bulk Sales

  	
  88

  
									

 

v

 

	
   

  	
   

  	
   

  	
  (f)

  	
  UK Employees

  	
  88

  
	
   

  	
  11.2

  	
   

  	
  Indemnification by Purchasing Entities

  	
  88

  
	
   

  	
   

  	
  (a)

  	
  Misrepresentation or Breach of Warranty

  	
  89

  
	
   

  	
   

  	
  (b)

  	
  Breach of Covenant or Agreement

  	
  89

  
	
   

  	
   

  	
  (c)

  	
  Assumed Liabilities

  	
  89

  
	
   

  	
   

  	
  (d)

  	
  Operations of the Business

  	
  89

  
	
   

  	
   

  	
  (e)

  	
  Performance Bonds; Letters of Credit

  	
  89

  
	
   

  	
   

  	
  (f)

  	
  UK Employees

  	
  89

  
	
   

  	
   

  	
  (g)

  	
  Pension Liabilities

  	
  90

  
	
   

  	
  11.3

  	
   

  	
  Claims for Reimbursement

  	
  90

  
	
   

  	
  11.4

  	
   

  	
  Defense and Settlement of Third Party
  Claims

  	
  91

  
	
   

  	
  11.5

  	
   

  	
  [Reserved]

  	
  92

  
	
   

  	
  11.6

  	
   

  	
  Limitations on Indemnification

  	
  92

  
	
   

  	
   

  	
  (a)

  	
  Duration

  	
  92

  
	
   

  	
   

  	
  (b)

  	
  Amount

  	
  93

  
	
   

  	
   

  	
   

  	
  (i)

  	
  Basket

  	
  93

  
	
   

  	
   

  	
   

  	
  (ii)

  	
  Cap

  	
  93

  
	
   

  	
   

  	
   

  	
  (iii)

  	
  No Limitation on Certain Claims

  	
  94

  
	
   

  	
   

  	
  (c)

  	
  Other Limitations

  	
  94

  
	
   

  	
   

  	
  (d)

  	
  Duty to Mitigate Damages

  	
  95

  
	
   

  	
   

  	
  (e)

  	
  No Double Recovery

  	
  95

  
	
   

  	
   

  	
  (f)

  	
  No Waiver

  	
  95

  
	
   

  	
   

  	
  (g)

  	
  Set-Off Against Note

  	
  95

  
	
   

  	
  11.7

  	
   

  	
  Exclusive Remedy

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12.  

  	
  Miscellaneous Provisions

  	
  97

  
	
   

  	
  12.1

  	
   

  	
  Public Statements and Press Releases

  	
  97

  
	
   

  	
  12.2

  	
   

  	
  Costs and Expenses

  	
  97

  
	
   

  	
  12.3

  	
   

  	
  Amendment and Modification

  	
  97

  
	
   

  	
  12.4

  	
   

  	
  No Assignment

  	
  97

  
	
   

  	
  12.5

  	
   

  	
  Notices

  	
  98

  
	
   

  	
   

  	
  (a)

  	
  The Selling Entities

  	
  98

  
	
   

  	
   

  	
  (b)

  	
  A Purchasing Entity

  	
  98

  
	
   

  	
  12.6

  	
   

  	
  Counterparts and Facsimile

  	
  98

  
	
   

  	
  12.7

  	
   

  	
  Captions

  	
  98

  
	
   

  	
  12.8

  	
   

  	
  Schedules and Exhibits

  	
  98

  
	
   

  	
  12.9

  	
   

  	
  Waiver; Remedies

  	
  99

  
	
   

  	
  12.10

  	
   

  	
  Governing Law and Jurisdiction

  	
  99

  
	
   

  	
  12.11

  	
   

  	
  Resolution of Disputes

  	
  99

  
	
   

  	
  12.12

  	
   

  	
  Severability

  	
  99

  
	
   

  	
  12.13

  	
   

  	
  No Third Party Beneficiaries

  	
  99

  
	
   

  	
  12.14

  	
   

  	
  Construction

  	
  100

  
	
   

  	
  12.15

  	
   

  	
  Entire Agreement

  	
  100

  
	
   

  	
  12.16

  	
   

  	
  Currency

  	
  100

  

 

vi

 

PURCHASE AND
SALE AGREEMENT

 

This Purchase
and Sale Agreement (this “Agreement”)
is made and entered into on and as of the 27th day of October, 2005 (the “Agreement Date”), among UNOVA, Inc.
(“UNOVA”), a Delaware corporation;
UNOVA Industrial Automation Systems, Inc. (“UIASI”),
a Delaware corporation and a wholly-owned subsidiary of UNOVA; UNOVA IP Corp. (“UNOVA IP”), a Delaware corporation
and a wholly-owned subsidiary of UIASI; UNOVA UK Limited (“UNOVA
UK”) a company registered in England under Registration Number
1218921 and a wholly-owned subsidiary of UNOVA, (UNOVA, UIASI, UNOVA IP and
UNOVA UK are sometimes referred to collectively as the “Selling
Entities”); and Compagnie de Fives-Lille, a French corporation (“CFL ”), Cinetic Landis Grinding
Corp. (“Buyer US”), a Delaware
corporation and Cinetic Landis Grinding Limited (“Buyer
UK”), a United Kingdom corporation. CFL, Buyer US and Buyer UK
are sometimes referred to collectively as the “Purchasing
Entities”. Each of the Selling Entities and each of the
Purchasing Entities are sometimes referred to collectively as the “Parties” and individually as a “Party.”

 

W I T N E S S E T H:

 

WHEREAS, the “Landis Group” is comprised of the
following operating divisions of UNOVA: 
the Landis Grinding Systems, Gardner Abrasives, and CITCO divisions of
UIASI (the “US Landis Group”); and the
Landis Lund and Cranfield Precision divisions of UNOVA UK (the “UK Landis Group”);

 

WHEREAS, the
Landis Group is engaged in the design, manufacture, sale and service of
grinding and abrasives systems for camshaft, crankshaft, centerless and disc
grinder machines and other special high precision machine tools, including high
speed grinding spindles, highly engineered diamond and cBN® cutting tools,
superabrasive wheels and dressing products (such activity as carried on by the
Landis Group is referred to as the “Business”);

 

WHEREAS, Buyer
US desires to purchase from the Selling Entities, and the Selling Entities
desire to sell to Buyer US, substantially all of the assets, subject to the
assumption of specified liabilities, of the US Landis Group (the “US Purchased Assets”) upon the terms
and conditions set forth in this Agreement (the “US
Asset Sale”);

 

WHEREAS, Buyer
UK desires to purchase from UNOVA UK, and UNOVA UK desires to sell to Buyer UK,
substantially all of the assets, subject to the assumption of specified
liabilities of the UK Landis Group (the “UK Purchased Assets”),
as a going concern, upon the terms and conditions set forth in this Agreement
(the “UK Asset Sale”);

 

WHEREAS, the
US Asset Sale and the UK Asset Sale are sometimes referred to collectively
herein as the “Transactions”;

 

 

NOW,
THEREFORE, in consideration of the premises and the mutual benefits to be derived
from this Agreement and the Transactions provided for in this Agreement, the
Parties agree as follows:

 

ARTICLE 1.  

The Transactions

 

1.1                               Transfer of
Assets

 

Except as
otherwise provided in Section 1.2, effective as of the “Transfer Date” (as defined in
Article 2), the Selling Entities shall sell, transfer, assign, grant,
convey and deliver as legal and beneficial owner to Buyer US in respect of the
US Purchased Assets and to Buyer UK in respect of the UK Purchased Assets,
free and clear of all “Liens”
other than “Permitted Liens” (as such
terms are defined in Section 3.5), all of their right, title and interest
in and to their properties, rights and assets of every kind, nature and
description, whether real or personal, tangible or intangible, and wherever
situated, to the extent the same are used or held for use primarily or
exclusively in the operation of the Business, including all assets shown on the
June Balance Sheet (as defined in Section 3.2(b)) and not disposed of in
the ordinary course of business since June 30, 2005 (the “June Balance Sheet Date”), and all
assets of the Business acquired by the Selling Entities between the June
Balance Sheet Date and the Transfer Date, (such properties, rights and assets
are referred to as the “Purchased Assets”).
In the case of any of the Purchased Assets which are capable of transfer by
delivery, title to that Purchased Asset shall pass to the relevant Purchasing
Entity by delivery. Except as otherwise provided in Section 1.2, the
Purchased Assets shall include, without limitation, all of the following
property, rights and assets of the Selling Entities used primarily or
exclusively in the Business:

 

(a)           All
billed and unbilled accounts receivable, including without limitation, all
trade accounts receivable, notes receivable from customers, supplier credits
and all other obligations from customers with respect to sale of goods or
services, together with any unpaid interest or fees accrued thereon or other
amounts due with respect thereto, and any security or collateral therefor,
including recoverable advances and deposits;

 

(b)           All
land, buildings, leaseholds, leasehold improvements and other interests in
realty, including without limitation the “Owned Real Property”
(as defined in Section 3.6(a)) other than the South Beloit Facility (as
defined in Section 1.2(m)) and the Waynesboro Facility (as defined in
Section 1.2(n)), and all improvements, fixtures and fittings thereon, and
easements, servitudes, rights-of-way and other appurtenances thereto (such as
appurtenant rights in and to public streets);

 

(c)           All
machinery and equipment, including test equipment and fully depreciated
equipment;

 

(d)           All
tools, dies, molds and other tooling, including any rights in respect of tools,
dies, molds and other tooling in the possession of others;

 

2

 

(e)           All
supplies and other consumables on hand;

 

(f)            All
inventory, including raw materials, work-in-process, finished goods, spare
parts, replacement and component parts, and samples;

 

(g)           All
rights, if any, in any customer furnished materials;

 

(h)           All
motor vehicles;

 

(i)            All
transportation and packing and delivery equipment, materials and supplies;

 

(j)            All
office equipment and supplies;

 

(k)           All
office furniture and furnishings;

 

(l)            All
indemnity, fidelity and contract bonds issued by third parties in favor of the
Selling Entities, and which are set forth on Schedule
1.1(l);

 

(m)          All
causes of action, suits, judgments, claims and demands of any nature;

 

(n)           All
transferable franchises, licenses, approvals, permits and other authorizations
issued or granted by any “Governmental Body”
(as defined in Section 3.1(e));

 

(o)           All
computer equipment, including all hardware and software, and communications
equipment (including, without limitation, the transfer of Autocad without cost
to the Purchasing Entities);

 

(p)           All
research, engineering and technical designs, specifications, drawings,
databases, know-how, research and development files, laboratory books and
information;

 

(q)           All lists and information pertaining
to customers, suppliers, distributors, sales and purchasing agents and
personnel;

 

(r)            All patents, registered designs,
utility models, patent applications, trademarks, trademark applications, trade
names, domain names, service marks, logos, copyrights, chip registrations,
licenses, processes, inventions, formulae, trade secrets and royalties,
including all registrations, applications and related international priority
rights and all rights to sue for past infringement, including, without
limitation, the names or brands “Landis”, “Landis Cincinnati”, “Landis Gardner”,
“Gardner Abrasives”, “CITCO”, “Goldcrown”, “Landis Lund” and “CRANFIELD
PRECISION”;

 

(s)           All manufacturer and seller
warranties on any goods, fixtures, or services provided to the Selling
Entities;

 

(t)            All prepaid items and expenses,
rights of offset and credits of all kinds, including any such items and
expenses with respect to leases and rentals;

 

3

 

(u)           All books, records, files and papers,
whether in hard copy or computer format, including but not limited to invoices,
advertising materials, catalogs, price lists, mailing lists, photographs,
production data, sale and promotional materials and records, purchasing materials
and records and documentation developed or used for accounting, marketing,
engineering, manufacturing or any other purpose;

 

(v)           All bids and sales and service
proposals, including any rights to revoke or withdraw the same;

 

(w)          [Reserved];

 

(x)            All utility, lease and similar
deposits;

 

(y)           All medical, safety and health
supplies;

 

(z)            Except for any Excluded Contracts
(as defined in Section 1.2(o)), all rights under all contracts,
agreements, leases, licenses, commitments, sales and purchase orders used by
the Selling Entities or held by the Selling Entities for use in connection with
the Business, including, without limitation, the contracts listed on Schedules 3.8(a) through 3.8(g)
and Schedules 3.8(i) through 3.8(l) and including, for the avoidance of doubt, any
contracts or agreements entered by UNOVA UK under the name “Landis Lund” (the “Purchased Contracts”); and

 

(aa)         All goodwill associated with the
Business or the Purchased Assets together with the right to represent to third
parties that the Purchasing Entities are the successors to the Business.

 

1.2                               Excluded
Assets

 

Notwithstanding
anything in this Agreement to the contrary, the Purchased Assets shall not
include any right, title or interest in or to any of the following properties,
rights or assets of the Selling Entities (collectively, the “Excluded Assets”):

 

(a)           Cash, cash equivalents and short-term
securities;

 

(b)           Any and all claims for refunds, carry
backs or carry forwards of the Selling Entities in connection with “Taxes“ (as
defined in Section 3.18) and all Tax Returns and other documents filed by
the Selling Entities with any taxing authority;

 

(c)           Any intercompany receivable balance
due from UNOVA or any of its subsidiaries (other than intercompany trade
receivables between the Landis Group);

 

(d)           All insurance policies and self-insurance
programs and any coverage or other rights under such policies and self-insurance
programs;

 

4

 

(e)           Any property or asset designated as “assets
held for sale” on the books and records of the Selling Entities and which are
set forth on Schedule 1.2(e) (collectively, the “Assets
Held for Sale”);

 

(f)            Any property, right or asset to the
extent exclusively relating to any other Excluded Asset or any of the “Excluded Liabilities” (as defined
in Section 1.7);

 

(g)           All assets of all “Employee Benefit
Plans“ (as defined in Section 3.13(k)), including assets held in trust,
including assets held in medical trusts, or insurance contracts for the benefit
of Employee Benefit Plan participants or beneficiaries;

 

(h)           All books, records, files and data
pertaining to any of the Excluded Assets or any of the Excluded Liabilities;

 

(i)            Subject to Section 8.5, all
rights in, to and under the name “UNOVA” and the logos of the Selling Entities
other than those logos that are primarily or exclusively related to the
Business (including, without limitation, any logos with the names or brands
listed in Section 1.1(r));

 

(j)            Any rights of any of the Selling
Entities under this Agreement;

 

(k)           The franchise of each of the Selling
Entities to be a corporation and its articles or certificate of incorporation,
bylaws and other records pertaining to its corporate existence, and all books
and records of a nature required by “Law” (as defined
in Section 3.1(e)) to be maintained by the Selling Entities, including all
financial and tax records relating to the Business that form part of the
Selling Entities’ general ledger, provided that the Selling Entities shall make
available for duplication at the Purchasing Entities’ expense copies of such
financial and tax records as such documents exist as of the December Balance
Sheet Date, the June Balance Sheet Date and the Transfer Date to the extent
such records are related to the Business and as reasonably requested by the
Purchasing Entities;

 

(l)            All shares of capital stock or other
equity interests in any other Person (as defined below) owned by the Selling
Entities, including Honsberg Lamb Sonderwekzeugmaschinen GmbH;

 

(m)          The real property located at
481 Gardner Street, South Beloit, Illinois (the “South
Beloit Facility”);

 

(n)           The real property located at
20 East Sixth Street, Waynesboro, Pennsylvania (the “Waynesboro
Facility”); and

 

(o)           All rights existing under each
contract set forth on Schedule 1.2(o)
(the “Excluded Contracts”).

 

5

 

For purposes
of this Agreement, “Person” shall mean and
include an individual, a partnership, a corporation, a limited liability
company, a trust, a joint venture, an unincorporated organization and any “Governmental Body” (as defined in
Section 3.1(e)).

 

1.3                               [Reserved]

 

1.4                               Consideration

 

For and in
consideration of the sale to the Purchasing Entities of the Purchased Assets,
the Purchasing Entities shall (i) at Closing pay to UNOVA (as agent for
the Selling Entities) the “Purchase Price”
(as defined in Section 1.5(a)) in accordance with and to the extent
provided in Section 1.5 and (ii) the Purchasing Entities shall,
effective as of the Transfer Date, assume the “Assumed
Liabilities” (as defined in Section 1.6 and as limited by
Section 1.7).

 

1.5                               Purchase
Price and Payment; Deliveries at the Closing

 

(a)                                  Purchase
Price

 

The purchase
price for the Purchased Assets is $79,000,000 plus the assumption of the
Assumed Liabilities (the “Purchase
Price”). The Purchase Price is subject to further
adjustment following the Closing in accordance with Section 1.9. To the
extent any Indebtedness (as defined in Section 3.8(h)) is assumed by the
Purchasing Entities at the Transfer Date, the amount of such Indebtedness shall
be deducted from the Purchase Price. For purposes of this Section 1.5 “Indebtedness” means any contract,
agreement or instrument under which any of the Selling Entities guarantees,
endorses, or otherwise is, will or may become responsible for the obligations
or liabilities of any third party in respect of the Business for money
borrowed, advances made or goods or services purchased (other than endorsements
for collection of negotiable instruments).

 

(b)                                  Payment of
Purchase Price

 

At the “Closing” (as defined in
Section 2.1), the Purchasing Entities shall (i) pay and remit to
UNOVA (as agent for the Selling Entities) $69,000,000 in cash (less any
Indebtedness to be deducted pursuant to Section 1.5(a)) via wire transfers
of immediately available funds to UNOVA’s bank accounts as indicated in Schedule 1.5(b), (ii) deliver to UNOVA a
promissory note in the principal amount of $10,000,000 (the “Note”) substantially in the form
attached hereto as Exhibit A
and (iii) assume the Assumed Liabilities.

 

(c)                                  Deliveries
at the Closing

 

At the
Closing,

 

(i)            the
Selling Entities will deliver to the Purchasing Entities the various
certificates, instruments, and documents referred to in Article 6; and

 

6

 

(ii)           the
Purchasing Entities will deliver to the Selling Entities the various
certificates, instruments, and documents referred to in Article 7.

 

(d)                                  Purchase
Price Allocation

 

(i)            Allocation
to UK and US Assets

 

The parties
agree that the Purchase Price shall be allocated as follows:  $53,333,333 plus the amount of the Assumed
Liabilities of or relating to the US Landis Group shall be allocated to the US
Purchased Assets, and $25,666,667 plus the amount of the Assumed Liabilities of
or relating to the UK Landis Group shall be allocated to the UK Purchased
Assets.

 

(ii)           Section
1060 Allocation

 

Within six
(6) months after the Transfer Date, Buyer US (on behalf of itself and the
other Purchasing Entities) shall prepare and deliver to UNOVA an allocation of
the Purchase Price and the Assumed Liabilities among the US Purchased Assets
and the UK Purchased Assets sold to the Purchasing Entities in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
thereunder (the “Section 1060 Allocation”).
If UNOVA does not object to the Section 1060 Allocation prepared by Buyer
US within 30 days after receipt thereof, such allocations shall be final
for purposes of this Agreement. If UNOVA objects to the Section 1060
Allocation within 30 days after receipt thereof, Buyer US and UNOVA shall
meet promptly and in a good faith attempt to resolve any objections of UNOVA
and to use their best efforts to agree upon the allocation. In the event Buyer
US and UNOVA are unable to resolve their differences over the Section 1060
Allocation, such differences shall be resolved by the Independent Firm (as
defined in Section 1.9(d) in accordance with Section 1.9(d). The Parties shall
cooperate fully with each other and make available to each other such Tax data
and other information as may be reasonably required in order to timely complete
the Section 1060 Allocation and any other required statements or schedules.
Except as required pursuant to applicable Law or a determination (as defined in
Section 1313 of the Code or any similar provision of Law), the Parties and
their Affiliates (as defined below) shall report the Transactions for all Tax
purposes consistently with the Section 1060 Allocation. For purposes of
this Agreement, “Affiliate” means a Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the first mentioned Person. To
the extent that the parties require allocations of the Purchase Price and the
Assumed Liabilities at or prior to Closing, including for United Kingdom Law
purposes, then the parties shall endeavor to cooperate fully with each other to
agree upon such allocations on or prior to the Transfer Date

 

7

 

1.6                               Assumed
Liabilities

 

Upon the terms
and subject to the conditions of this Agreement and in reliance upon the
representations, warranties and agreements herein set forth, the Purchasing
Entities shall, effective at the time of the Transfer Date, assume, perform and
discharge all of the following debts, liabilities or obligations of the Selling
Entities (collectively, the “Assumed Liabilities”):

 

(a)           All liabilities arising out of or
relating primarily to the Business and recorded on the June Balance Sheet and
not discharged as of the Transfer Date (other than any Excluded Liabilities
thereon);

 

(b)           All current liabilities arising out
of or relating primarily to the Business and incurred in the ordinary course of
business since the June Balance Sheet Date that would have been required by
GAAP, consistently applied, to have been recorded on the June Balance Sheet if
they had arisen prior to the June Balance Sheet Date, but only to the extent
set forth on the Closing Balance Sheet (as defined in Section 1.9(a)),
other than any Excluded Liabilities thereon and other than the liabilities
described in Sections 1.6(c), 1.6(f), 1.6(g), 1.6(h), 1.6(i), 1.6(j),
1.6(l), 1.6(m) and 1.6(n) below which are assumed without regard to the amounts
set forth on the Closing Balance Sheet;

 

(c)           All liabilities and obligations of
the Selling Entities in respect of (i) the Purchased Contracts and
(ii) those contracts or other legally binding commitments that are the
type required to be disclosed in the Schedules but are not so disclosed because
they fall below the minimum threshold amount or materiality of the agreement or
commitments required to be so disclosed and which are assigned to the
Purchasing Entities other than in the case of clauses (i) and (ii),
liabilities or obligations attributable to any failure by the Selling Entities
to comply with the terms thereof;

 

(d)           Accrued payroll and vacation pay for “Continuing Employees”
(as defined in Section 8.4(a)) but only to the extent of the reserve
therefor shown on the Closing Balance Sheet, excluding any accrued amounts that
are required by Law to be paid by the Selling Entities on or prior to the
Transfer Date;

 

(e)           Accrued sales commissions to
Continuing Employees and to third parties in respect of the Business, but only
to the extent of the reserve therefor shown on the Closing Balance Sheet;

 

(f)            All losses, debts, liabilities and
obligations with respect to products sold or serviced (whether or not under
warranty) by the Selling Entities in respect of the Business, including
liabilities and obligations for and with respect to any refunds, adjustments,
allowances, repairs, exchanges, returns and warranty but excluding Product
Liability, (as defined in Section 1.6(h)) which is covered by sub-clause (h)
below (and any other Excluded Liabilities);

 

8

 

(g)           Any claim, debt, liability or
obligation for workers compensation (other than such debt, liability or
obligation that constitutes an Excluded Liability), automobile or general
liability in respect of the Business to the extent such claims arise from
events, actions or occurrences following the Transfer Date;

 

(h)           Any claim, debt, liability or
obligation for product liability claims, including bodily injury, death or
property damage  arising from the use or
operation of products manufactured, sold or serviced in whole or in part in the
Business (“Product Liability”) to the
extent such claims arise from events, actions or occurrences following the
Transfer Date;

 

(i)            Environmental Liabilities (as
defined below) arising from or relating in any way to (i) actions
occurring or conditions existing on or before the Transfer Date, where such
actions or conditions do not constitute a violation of “Environmental
Laws” (as defined in Section 3.6(f), as modified by
Section 1.7(j)), or (ii) actions occurring or conditions coming into
existence after the Transfer Date; provided, however, that with respect to the
Waynesboro Facility and the South Beloit Facility, which the Purchasing
Entities will be leasing from the Selling Entities after the Transfer Date, the
Purchasing Entities shall not assume any Environmental Liabilities arising from
or relating in any way to actions occurring or conditions existing on or before
the Transfer Date (whether or not a violation of Environmental Laws) arising
from or relating in any way to actions occurring or conditions coming into
existence after the Transfer Date except to the extent such actions or
conditions are caused by the Purchasing Entities. For purposes of this
Agreement, “Environmental Liabilities”
means any and all liabilities arising in connection with or in any way relating
to the Business, the Purchased Assets or the Real Property, whether contingent
or fixed, actual or potential, known or unknown, which arise under or relate to
matters governed by Environmental Laws;

 

(j)            Any claim, debt, liability or
obligation relating to the Landis Pension Plan (as defined in
Section 5.8), including, without limitation, in respect of (i) benefits
transferred to the Landis Pension Plan from the UNOVA Pension Fund, whether
before, on or after the Transfer Date (which transferred benefits shall include
any claim, debt, liability or obligation in respect of the provision of those
benefits in a manner complying with Article 141 (formerly
Article 119) of the Treaty of Rome and Section 62 of the Pensions Act
1995), (ii) any liability in respect of the levy to fund the Pension
Protection Fund payable pursuant to the Pensions Act 2004 and (iii) contributions
in respect of the period prior to the Transfer Date which have not become due
and payable before the Transfer Date other than contributions deducted by UNOVA
UK from members’ salaries before the Transfer Date and not paid to the Landis
Pension Plan by that date;

 

(k)           Any claim, debt, liability or
obligation arising from any progress payment, down payment or advance payment
received from any customer of the Business to the extent of the reserve
therefor on the Closing Balance Sheet;

 

9

 

(l)            Any claim, debt, liability or
obligation arising out of in respect of or as a result of the employment or
termination of employment of any Continuing Employee by the Purchasing Entities
(other than Excluded Liabilities);

 

(m)          Any actions, claims, proceedings,
losses, damages, payments, penalties, costs or expenses suffered or incurred in
relation to or arising out of any personal injury as a result of a person’s
exposure at any time after the Transfer Date to any and all asbestos and/or
asbestos-containing materials, lead and/or lead-containing materials, or mold
(whether or not the presence of such contaminants constitutes a violation of
Environmental Laws) (collectively, “Contaminants”)
present, discharged or released at, or migrating from any property owned,
occupied, controlled or used by the Purchasing Entities in respect of the
Business; provided, however, that for any personal injury that is determined to
have been caused by exposure to Contaminants as described in this
subsection 1.6(m) that relates to periods of exposure before and after the
Transfer Date, the loss arising from such personal injury shall be deemed to
have occurred ratably during the entire period of such exposure, and the
Purchasing Entities’ liability for such injury shall be limited to a pro rata
portion of the losses based on the period of exposure that occurred after the
Transfer Date; and

 

(n)           All FAS 106 liabilities relating
to the Retiree Medical Plan (as defined in Section 5.9).

 

1.7                               Excluded
Liabilities

 

Notwithstanding
any provision in this Agreement or any other writing to the contrary, the
Purchasing Entities are assuming only the Assumed Liabilities and are not
assuming any other liability or obligation of the Selling Entities (or any
predecessor owner of all or part of its business and assets) of whatever nature
whether presently in existence or arising or asserted hereafter. All such other
liabilities and obligations shall be retained by and remain obligations and
liabilities of the Selling Entities (collectively, the “Excluded Liabilities“).
Without limiting the foregoing, none of the following shall be Assumed
Liabilities for the purposes of this Agreement:

 

(a)           Any debt, liability or obligation of
the Selling Entities in respect of the Business for Taxes that relate to
periods ending on or prior to the Transfer Date (including any Taxes that arise
as a result of the Transactions), except as otherwise provided in
Section 8.7(b);

 

(b)           Any intercompany payable balances in
respect of the Business due to UNOVA or any of its subsidiaries (other than
intercompany trade payables between the Landis Group);

 

(c)           Any claim, debt, liability or
obligation for workers compensation, automobile or general liability in respect
of the Business, to the extent such claims arise from events, actions or
occurrences on or prior to the Transfer Date, other than a claim, debt,
liability or obligation to which Section 1.6(j) applies;

 

10

 

(d)           Any claim, debt, liability or
obligation to the extent related to any of the other Excluded Liabilities or
any of the Excluded Assets, other than a claim, debt, liability or obligation
to which Section 1.6(j) applies;

 

(e)           Any liabilities of the Selling
Entities arising under, or relating to the execution, delivery or consummation
of, this Agreement and the transactions contemplated hereby;

 

(f)            Any liabilities of the Selling
Entities for Indebtedness (as defined by Section 3.8(h)), including,
without limitation, the Indebtedness set forth on Schedule 3.8(h)
and Schedule 3.2(d);

 

(g)           Any claim, debt, liability or
obligation under Employee Benefit Plans other than the Assumed Liabilities set
forth in Sections 1.6(d), 1.6(e), 1.6(j) and 1.6(n);

 

(h)           Any claim, debt, liability or
obligation under the UNOVA Pension Fund, other than in respect of benefits
transferred to the Landis Pension Plan, whether before, on or after the
Transfer Date (which transferred benefits shall include any claim, debt,
liability or obligation in respect of the provision of those benefits in a
manner complying with Article 141 (formerly Article 119) of the
Treaty of Rome and Section 62 of the Pensions Act 1995);

 

(i)            Any
claim, debt, liability or obligation for Product Liability arising from the use
or operation of products manufactured, sold or serviced (in whole or in part)
in the Business to the extent such claims arise from events, actions or
occurrences on or prior to the Transfer Date;

 

(j)            Environmental
Liabilities arising from or relating in any way to (i) actions occurring
or conditions, whether known or unknown, existing on or before the Transfer
Date, where such actions or conditions constitute a violation of Environmental
Laws, or (ii) with respect to the Waynesboro Facility and South Beloit
Facility, which the Purchasing Entities will be leasing from the Selling
Entities after the Transfer Date, actions occurring or conditions coming into
existence after the Transfer Date to the extent such actions or conditions are
not caused by the Purchasing Entities. For purposes of this
Section 1.7(j), the known contamination on the Waynesboro Facility,
including both the contamination being addressed by the Selling Entities in
accordance with Pennsylvania’s Act 2 voluntary cleanup program and the
chlorinated volatile organic compound contamination that has migrated onto the
Waynesboro Facility from the adjacent Teledyne facility, shall be deemed a
condition existing before the Transfer Date and to constitute an Excluded
Liability;

 

(k)           All
claims, debts, liabilities and obligations pursuant to violations of applicable
Laws arising from, by or in connection with the Selling Entities, the Business,
the Purchased Assets, or the Real Property, in each case occurring or existing
on or before the Transfer Date, other than claims, debts, liabilities or
obligations to which Section 1.6(j) applies;

 

11

 

(l)            Those pending or threatened
litigation matters identified on Schedule 3.14;

 

(m)          Any actions, claims, proceedings, losses,
damages, payments, penalties, costs or expenses suffered or incurred in
relation to or arising out of any personal injury as a result of a person’s
exposure at any time before the Transfer Date to any and all Contaminants (as
defined in Section 1.6(m)) present, discharged or released at, or
migrating from any property owned, occupied, controlled or used by the Selling
Entities in respect of the Business; provided, however, that for any personal
injury that is determined to have been caused by exposure to Contaminants as
described in this subsection 1.7(m) that relates to periods of exposure
before and after the Transfer Date, the loss arising from such personal injury
shall be deemed to have occurred ratably during the entire period of such exposure,
and the Selling Entities’ liability for such injury shall be limited to a pro
rata portion of the losses based on the period of exposure that occurred prior
to the Transfer Date;

 

(n)           all claims, losses, debts,
liabilities and obligations for compensation to Employees which are set forth
in the certain letter dated September 15, 2005, and updated as of
September 22, 2005 from UNOVA to counsel for CFL; and

 

(o)           accrued bonuses payable to Continuing
Employees as of the Transfer Date and liabilities associated with amounts
withheld from employee salaries to the extent withheld as of the Transfer Date.

 

1.8                               Transfer of
English Owned Real Property and Obtaining English Reversioner’s Consent

 

For the purposes of this Section 1.8,
the following definitions shall apply:

 

(i)            “Actual Completion Date” means in
relation to each of the U.K. Properties the date on which that property is
transferred, conveyed or assigned to the Purchasing Entity.

 

(ii)           “Assurances” means the transfers,
conveyances or assignments of the U.K. Properties and “Assurance” shall mean any one of
them.

 

(iii)          “Freehold Property” means the U.K.
freehold property located in the United Kingdom as described in Schedule 3.6(a).

 

(iv)          “Landlord’s Consent” means any
reversioner’s consent to an assignment required under the terms of the lease
relating to the Leasehold Property.

 

(v)           “Leasehold Property” means the
leasehold property located in the United Kingdom occupied by the Selling
Entities as described (including the particular of the current rent provided)
in Schedule 3.6(c) and “Leasehold Property” means any one of
them.

 

(vi)          “Registered Properties” means the
U.K. Property numbered 4 in Schedule 3.6(a);

 

12

 

(vii)         “U.K. Properties” means those U.K.
freehold and leasehold premises occupied by the relevant Selling Entities which
are set forth in Schedule 3.6(a) and 3.6(c).

 

(a)                                  Matters
Affecting the U.K. Properties

 

The U.K. Properties are sold subject to and with the benefit of:

 

(i)            In
the case of the Registered Properties, the exceptions, reservations and
covenants (except charges to secure the repayment of money) contained or
referred to in the charges register of their respective title numbers;

 

(ii)           In
the case of the Leasehold Property, the covenants and conditions on the part of
the tenant contained in the leases under which the relevant property is held;

 

(iii)          All
local land charges; and

 

(iv)          All
notices served and ordered, demand, proposals or requirements made, by any
local or other public authorities.

 

(b)                                  Landlord’s
Consents

 

(i)            The
sale of the Leasehold Property is subject to the relevant Selling Entity which
occupies the relevant Leasehold Property obtaining Landlord’s Consent in
respect of that property.

 

(ii)           The
relevant Selling Entities shall as soon as reasonably practicable and at it’s
own cost apply for and use all reasonable endeavours to obtain Landlord’s
Consent as soon as possible.

 

(iii)          The
Purchasing Entity and the Buyer UK (as appropriate) shall use all reasonable
efforts to assist the relevant Selling Entity in obtaining Landlord’s Consent
and in particular shall promptly provide all such information and references as
the relevant Selling Entity may reasonably require in relation to the obtaining
of Landlord’s Consent and such other information as the landlord may be
entitled to request under the terms of the relevant property lease.

 

(iv)          As
appropriate, the Purchasing Entities and Buyer UK will enter into such
covenants as may be reasonably required by the landlord of the Leasehold
Property and provide such additional security for the performance by Buyer UK
of the tenant’s covenants as the landlord may reasonably require.

 

(v)           Buyer
UK shall on and from the Transfer Date be permitted to enter into occupation of
the Leasehold Property as licensee of the relevant Selling Entity subject to
the following provisions:

 

(A)          Buyer
UK shall be entitled to receive all profit and other income from the Leasehold
Property;

 

13

 

(B)           Buyer
UK shall pay or indemnify the relevant Selling Entity against all outgoings and
expenses attributable to Buyer UK’s period of occupation including all sums
payable under the property lease of the Leasehold Property, in respect of the
period after the Transfer Date;

 

(C)           The
Purchasing Entity and Buyer UK shall observe and perform all the covenants and
conditions (excluding any alienation covenants) contained or referred to in the
property lease relating to the Leasehold Property (save that in respect of any
covenants relating to the repair of the Relevant Property Buyer UK’s liability
shall be limited to keeping the Relevant Property in as good repair as when
Buyer UK went into occupation) and indemnify the relevant Selling Entity for
any costs or liabilities as a result of a breach or non-observance or non-performance
and such covenants and conditions;

 

(D)          The
relevant Selling Entity so far as it is lawfully able to do so shall permit the
Buyer UK to remain in occupation of the Relevant Property; and

 

(E)           The
Purchasing Entity and Buyer UK shall not carry out any activity for which the
consent of any third party may be required under the terms of the property
lease relating to the Leaseheld Property without such consent being obtained or
carry on any activity which would constitute a breach or non-observance of the
covenants and conditions of the relevant property lease.

 

(c)                                  Completion

 

(i)            If
the Landlord’s Consent is refused or has not been obtained within
12 months of the Transfer Date then both parties consider that the
relevant landlord is acting unreasonably in refusing or withholding consent the
relevant Selling Entity shall at the request of the Purchasing Entity and at
the joint expense of the relevant Selling Entity and Purchasing Entity seek the
opinion of a leading Counsel specializing in landlord and tenant law on whether
the landlord is unreasonably withholding or has unreasonably refused consent to
the assignment.

 

(ii)           If
such leading Counsel advises that the landlord is unreasonably withholding or
has unreasonably refused consent the relevant Selling Entity shall at the joint
expense of both parties apply to a court of competent jurisdiction for a
declaration that the landlord is acting unreasonably.

 

(iii)          If
the declaration is obtained the assignment of the Relevant Property shall be
completed five business days thereafter.

 

(iv)          If
the declaration referred to in Section 1.8(c)(ii) is refused or such
leading Counsel advises that consent to assign will be refused or withheld the
Selling Entities shall as soon as reasonably practicable apply to the relevant
landlord(s) for all necessary consents to the grant of an underlease of the
Relevant Property to the Buyer UK Entity for a term equal to the residue of the
term of the relevant property lease less three days at a rent equal to and
otherwise on the same terms as the said lease and the provisions of 

 

14

 

Sections 1.8(b)(ii) and 1.8(b)(iii) shall apply to the
obtaining of such consent and if such consent is obtained the Selling Entity
shall grant and the Buyer UK shall accept such underlease on the date five
business days after the date of receipt of such consent.

 

(d)                                  Further
Completion

 

(i)            Notwithstanding
Sections 1.1, 1.2 and 2.1 of this Agreement, completion of the sale of the
U.K. Properties shall take place:

 

(A)          In
the case of the Freehold Property, and the Leasehold Property if Landlord’s
Consent has been obtained on the Transfer Date; and

 

(B)           In
the case of the Leasehold Property in respect of which Landlord’s Consent is
necessary but has not been obtained by the Transfer Date, by the date five
business days after Landlord’s Consent has been obtained.

 

(ii)           On
the Actual Completion Date the Purchasing Entity shall deliver to the
relevant Selling Entity a duly executed Assurance in respect of each of the
U.K. Properties.

 

(e)                                  Assurances

 

The Assurances will contain (where applicable):

 

(i)            A
covenant by way of indemnity (but not further or otherwise) by the Purchasing
Entity with the relevant Selling Entity that the Purchasing Entity and its
successors in title will observe and perform:

 

(A)          The
exceptions, reservations and covenants contained or referred to in the case of
each of the Registered Properties, the entries (except those relating to charges
to secure the repayment of money) appearing in the charges registers of their
respective title numbers;

 

(B)           In
the case of the Leasehold Property, the covenants and conditions on the part of
the tenant contained in the relevant property leases; and will indemnify and
keep indemnified the relevant Selling Entity against all actions, claims,
demands and proceedings taken or made against the relevant Selling Entity and
all costs, damages, expenses, liabilities and losses incurred by the relevant
Selling Entity as a result of the breach, non-performance or non-observance of
the same; and

 

(ii)           (In
the case of the Leasehold Properties) an agreement and declaration to the
effect that the Selling Entity shall not be liable under any of the covenants
set out in Sections 3 or 4 of the Law of Property (Miscellaneous
Provisions) Act 1994 for the consequences of any breach of the terms of the
property leases relating to their state and condition.

 

15

 

(iii)          The
consideration for the Freehold Property determined as set forth in
Section 1.5(d)

 

1.9                               Closing
Balance Sheet

 

(a)                                  Definition
of Closing Balance Sheets

 

The “Closing Balance Sheet” shall be a
balance sheet reflecting the US Purchased Assets and Assumed Liabilities relating
to the US Landis Group calculated in US dollars and the
UK Purchased Assets and Assumed Liabilities relating to the UK Landis
Group calculated in US dollars (converting UK pounds in
US dollars at the spot rate published in the Wall Street Journal and
quoted by Reuters and other sources applicable to banks trading in amounts of
$1 million or more, as of 4 p.m. Eastern Time (the “WSJ Rate”) on the Transfer Date) as
of the Transfer Date, and prepared in accordance with generally accepted
accounting principles in the United States of America (“GAAP”),
applied on a basis consistent with the December Balance Sheet and the June
Balance Sheet (as such terms are defined in Section 3.2(a) and
Section 3.2(b), respectively); provided, however, the Closing Balance Sheet shall reflect the
adjustments (the “Agreement Adjustments”) that
are required to exclude the Excluded Assets and Excluded Liabilities.

 

(b)                                  Preliminary
Closing Balance Sheets

 

Within
60 days following the Transfer Date, Buyer US, with the assistance and
cooperation of the Selling Entities, shall prepare and deliver to UNOVA a
balance sheet reflecting the US Purchased Assets and Assumed Liabilities
relating to the US Landis Group calculated in US dollars and the
UK Purchased Assets and Assumed Liabilities relating to the UK Landis
Group calculated in US dollars (converting UK pounds in
US dollars at the WSJ Rate on the Transfer Date), prepared as
provided in paragraph 1.9(a) above (the “Preliminary
Closing Balance Sheet”). Buyer US shall also prepare and
deliver to UNOVA, within six business days following the Transfer Date, the
month-end financial and related business data for the Business reasonably
necessary to allow the Selling Entities to prepare their financial reports
consistent with the Selling Entities’ customary practices. After delivery of
the Preliminary Closing Balance Sheet, the Purchasing Entities shall provide
UNOVA and its accountants reasonable access during normal business hours to
materials used in the preparation of the Preliminary Closing Balance Sheet.

 

(c)                                  Review of
Preliminary Closing Balance Sheet

 

UNOVA shall
have 30 days following its receipt of the Preliminary Closing Balance
Sheet (the “Review Period”) to review the
same for compliance with GAAP and the Agreement Adjustments. On or before the
expiration of the Review Period, UNOVA shall deliver to Buyer US a written
statement accepting or objecting to the Preliminary Closing Balance Sheet. In
the event that UNOVA shall object to the Preliminary Closing Balance Sheet,
such statement (the “Statement of Objections”)
shall include a detailed itemization of UNOVA’s objections and the reasons
therefor. If UNOVA does not deliver to Buyer US the Statement of
Objections within the Review Period, the Selling Entities shall be deemed to 

 

16

 

have accepted the Preliminary Closing Balance Sheet. If UNOVA delivers
to Buyer US, the Statement of Objections within the Review Period, the
Selling Entities shall be deemed to have waived any objections to the
Preliminary Closing Balance Sheet that are not included in the Statement of
Objections.

 

(d)                                  Finalization
of Closing Balance Sheet

 

In the event
that UNOVA shall accept or shall be deemed to have accepted the Preliminary
Closing Balance Sheet as prepared and delivered by Buyer US, the
Preliminary Closing Balance Sheet shall constitute the Closing Balance Sheet
for purposes of this Agreement. In the event, however, that UNOVA shall object
to the Preliminary Closing Balance Sheet, UNOVA and Buyer US shall promptly
meet and in good faith attempt to resolve the issues that are in dispute. In
the event that the issues in dispute shall not have been resolved within
30 days following Buyer US’s receipt of UNOVA’s Statement of Objections,
such disputed issues shall be resolved by KPMG LLP, or another independent
certified accounting firm jointly selected by UNOVA and Buyer US (the “Independent Firm”), provided the
Parties shall attempt to reach a final resolution of any matters which remain
in dispute at the earliest practicable date. The decision of the Independent
Firm shall be final and binding on the Parties. The costs and expenses of the
Independent Firm in reviewing the issues in dispute shall be borne fifty
percent (50%) by Buyer US and fifty percent (50%) by UNOVA. The Preliminary
Closing Balance Sheet, as adjusted to reflect the adjustments agreed upon by
such Parties or determined by the Independent Firm, shall constitute the
Closing Balance Sheet for purposes of this Agreement.

 

(e)                                  Net Working
Asset Payment

 

If the Net
Working Assets (as defined below) shown on the final Closing Balance Sheet
(calculated in US dollars and converting UK pounds into
US dollars at the WSJ Rate on the Closing Date) are greater than 29% of
trailing 12-month revenues of the Business (the “Net
Working Asset Target”), then Buyer US and/or Buyer UK shall
within five business days of the final determination of the Closing Balance
Sheet pay UNOVA in US dollars by wire transfer of immediately available funds
an amount equal to such excess (the “Upward Net Working Asset
Adjustment”), plus interest on such excess amount from the
Transfer Date until the date of payment at LIBOR plus 0.25%. If the Net Working
Assets as shown on the Closing Balance Sheet are less than the Net Working
Asset Target, then UNOVA shall within five business days of the final
determination of the Closing Balance Sheet pay Buyer US and/or Buyer UK in
US dollars by wire transfer of immediately available funds an amount equal
to their proportionate share of such shortfall 
(the “Downward Net Working Asset Adjustment”),
plus interest on their proportionate share of such shortfall from the Transfer
Date until the date of payment at LIBOR plus 0.25%. For purposes of this
Agreement, “Net Working Assets” means, as
of the Transfer Date, the excess of the sum of total accounts receivable and
inventories over the sum of progress billings and total accounts payable on the
Closing Balance Sheet. In the event of a Downward Net Working Asset Adjustment,
the Purchasing Entities shall be entitled to satisfy claims pursuant to this
Section 1.9 from the Note by reducing the principal amount outstanding
under such Note by 

 

17

 

an amount equal to the payment due from UNOVA in respect of such claims.
“LIBOR” means an annual rate of
interest equal to the annual rate in effect in the London Interbank Market
applicable to one month deposits of U.S. dollars as reported in the Wall
Street Journal on the second business day preceding the Transfer Date. If the
Wall Street Journal is not published on such business day or does not report
such rate, such rate shall be as reported by such other publication or source
as UNOVA and Buyer US may mutually select.

 

(f)                                    Limitations on Certain Claims

 

Consistent with Section 11.6(c), the Purchasing Entities
acknowledge and agree that, following the final determination of the Closing
Balance Sheet the Purchasing Entities may not bring any claim against the
Selling Entities, and the Selling Entities shall not have any liability to the
Purchasing Entities, relating to: 
(a) the noncollectability of any accounts receivable or the amount
of the related bad debt reserve, (b) inventory obsolescence or the amount
of the related inventory reserve, (c) loss contracts for which a reserve
is reflected on the Closing Balance Sheet or (d) warranty claims or the
amount of the related warranty reserve, other than in the case of fraud or
willful misconduct and other than in respect of any claims relating to a breach
of the representations and warranties in Section 3.12.

 

1.10                        Right to
Contest

 

The assumption
and agreement by the Purchasing Entities to pay, perform and discharge the
Assumed Liabilities shall not prohibit the Purchasing Entities from contesting
with a third party, in good faith and at the expense of the Purchasing
Entities, the amount, validity or enforceability of any thereof; provided, however, that
the Purchasing Entities shall indemnify the Selling Entities for any Loss (as
defined in Section 11.1) arising from such contest, other than in
circumstances where the Purchasing Entities are entitled to indemnification for
the Loss arising from such contest pursuant to Section 11.

 

1.11                        Nonassignable
Contracts and Rights

 

To the extent
that the assignment by the Selling Entities of any contract, property, right or
asset to be assigned to the Purchasing Entities pursuant to this Agreement
shall require the consent or approval of any other party, and such consent or
approval shall not have been obtained on or prior to the Transfer Date, this
Agreement shall not constitute a contract to assign the same if an attempted
assignment would constitute a breach thereof or would in any way adversely
affect the rights of the Selling Entities (or any Purchasing Entity, as assignee)
thereunder. If any such consent or approval is required but not obtained on or
prior to the Transfer Date, the Parties covenant and agree that in such case,
the applicable Selling Entity shall continue to deal as instructed by the
Purchasing Entities with the other contracting party or parties, with the
benefits of such contract, property, right or asset after the Transfer Date
accruing to the benefit of the applicable Purchasing Entity and the liabilities
and obligations thereunder being performed by the applicable Purchasing Entity
on such Selling Entity’s behalf; such Selling Entity shall hold all moneys
received thereunder for the benefit of the applicable Purchasing Entity and
shall pay the same to the applicable Purchasing Entity within one business day
after receipt thereof; and the Parties shall use 

 

18

 

reasonable best efforts (but
without payment of any penalty or fee by any Party other than by the Selling
Entities as set forth in Schedule 1.11)
to obtain and secure any and all consents and approvals that may be necessary
to effect the valid sale, transfer or assignment of the same to the applicable
Purchasing Entity without change in any of the material terms or conditions
thereof, including without limitation the formal assignment or novation of any
of the same, if so required by the Purchasing Entities. The Parties further
covenant and agree to make or complete such transfers as soon as reasonably
possible and to cooperate with each other in any other reasonable arrangement
designed to provide for the applicable Purchasing Entity the benefits of and to
such properties, rights or assets and to provide for the performance by the
applicable Purchasing Entity of the liabilities and obligations related thereto.

 

1.12                        Value Added
Tax

 

(a)           It is intended that the
UK Purchased Assets shall be transferred to Buyer UK as a going concern
and that the provisions of Article 5 of the Value Added Tax (Special
Provisions) Order 1995 (SI 1995/1268) shall apply to such transfer and the
sale and purchase of the UK Purchased Assets and each of UNOVA UK and Buyer UK
shall use its reasonable endeavors to procure that the sale of the UK Purchased
Assets is treated as neither a supply of goods nor a supply of services under
the Article.

 

(b)           Notwithstanding sub-clause (a)
above, all sums paid or payable under this Agreement by Buyer UK to UNOVA UK
are exclusive of any VAT which is or may become chargeable on the supply to
supply for which sums form the whole or part of the consideration for VAT
purposes.

 

(c)           UNOVA UK and Buyer UK
shall within 30 days of the Closing give notice of such transfer to the
appropriate office of HM Revenue & Customs in accordance with such
regulations and requirements as may be applicable.

 

(d)           Buyer UK warrants to
UNOVA UK that:

 

(i)            after
the Closing the UK Purchased Assets are to be used by Buyer UK in carrying
on the same kind of business as that carried on by UNOVA UK before the Closing
and are not to be assigned immediately after Closing to any other person;

 

(ii)           Buyer
UK is already or will as a result of such transfer of the UK Purchased
Assets immediately on Closing become a taxable person (as defined in
Section 3 of the Value Added Tax Act 1994);

 

(iii)          it
has made or will make a valid election under paragraph 2 of
Schedule 10 VATA in respect of the Freehold Property effective from no
later than the Transfer Date and has given or will, no later than the Transfer
Date, give written notification of the election to and, if appropriate, has
obtained the prior written permission of HM Revenue and Customs as required by
paragraph 3 of Schedule 10;

 

19

 

(iv)          Paragraph 5(2B)
of the Value Added Tax (Special Provisions) Order 1995 (SI 1995/1268) as
amended by the Value Added Tax (Special Provisions) Order 2004 (SI 2004/779)
does not apply to Buyer UK.

 

(e)           Subject
to Section 1.12(f), if HM Revenue and Customs determine in writing that
VAT is payable on all or part of the consideration payable for the UK Purchased
Assets pursuant to this Agreement, Buyer UK shall pay the amount of any VAT
which may properly be chargeable on the sale of the UK Purchased Assets
pursuant to this Agreement on the later of:

 

(i)            the
date prior to the last business day on which UNOVA UK was liable to account to
HM Revenue and Customs for such VAT without incurring a potential liability to
penalties and interest; and

 

(ii)           the
date which is five business days after the delivery of a valid tax invoice and
a copy of the written determination of HM Revenue and Customs in respect
thereof;

 

(f)            if
after Buyer UK has paid an amount in respect of VAT pursuant to this Agreement,
HM Revenue and Customs determines that such VAT was not actually payable, then:

 

(i)            UNOVA
UK will repay such amount to Buyer UK forthwith on receipt of such written
determination from HM Revenue and Customs; or

 

(ii)           If
UNOVA UK has already accounted for such amount in respect of VAT at the time it
receives such determination, UNOVA UK shall reclaim such amount from HM Revenue
and Customs and repay such amount to Buyer UK on receiving repayment of or
obtaining credit in respect thereof.

 

(g)           If
HM Revenue and Customs determines in writing that VAT is payable on all or part
of the consideration payable for the UK Purchased Assets pursuant to this
Agreement:

 

20

 

(i)            UNOVA
UK shall as soon as reasonably practicable notify Buyer UK of such written
determination. Buyer UK may within 10 business days of receipt of such
notification from UNOVA UK request that UNOVA UK contest, at Buyer UK’s cost,
in writing such written determination from HM Revenue and Customs. UNOVA UK
shall give Buyer UK a reasonable opportunity to comment on any relevant
communication proposed to be sent to HM Revenue and Customs in this regard
(making available any information and documents in its control required to
establish to HM Revenue and Customs and any tribunal or court that no
liability, or a reduced liability, arises on the Buyer UK or any other company
under section 44 of VATA 1994 as a result of the sale of the UK Purchased
Assets. Until such reasonable opportunity to comment has been given UNOVA UK
may not, without Buyer UK’s written agreement not to be unreasonably withheld,
agree, compromise, settle or make any other arrangement with HM Revenue and
Customs which would result in Buyer UK incurring any liability under
Section 1.12(b) above in respect of VAT; and

 

(ii)           VAT
shall be treated as payable for the purposes of this Agreement only if HM
Revenue and Customs has so confirmed in writing after full disclosure of all
material facts and stated in writing that Buyer UK’s VAT office agrees with this
treatment, and after the taking of any steps by Buyer UK or UNOVA UK as are
contemplated by this Section 1.12(g).

 

Subject to (i) and (ii) above, to the
extent that HM Revenue and Customs confirms in writing its original
determination Buyer UK shall not have further rights under this
Section 1.12(g).

 

UNOVA UK shall not be required to contest
such determination of HM Revenue and Customs if it reasonably determines that
to do so would have a material effect on the future conduct of the business of
UNOVA UK or the Selling Entities or affect the rights or reputation of any of
them.

 

(h)           UNOVA
UK shall apply to HM Revenue and Customs and endeavor to obtain
a direction that all records referred to in Section 49 of the Value
Added Tax Act 1994 may be obtained by UNOVA UK. If such direction is obtained,
UNOVA UK will preserve the records for such period as may be required by law,
and shall allow Buyer UK, on reasonable notice, to inspect the records and take
copies thereof. If such direction is refused by HM Revenue and Customs,
then UNOVA UK shall within 10 business days after receipt of notification
of such refusal (or, if later, Closing) deliver to Buyer UK the VAT business
records relating to the UK Purchased Assets.

 

(i)            UNOVA
UK is registered for VAT under registration number 011-80110-14659.

 

(j)            Pursuant
to paragraphs 2 and 3 of Schedule 10 VATA 1994 UNOVA UK has made an
effective election to waive exemption in relation to the English Owned Real
Property (an “Election”), has notified HM
Revenue & Customs of such Election within the prescribed time limits
for the Election to be valid and neither it nor any relevant associate as

 

21

 

defined in paragraph 3 of
Schedule 10 VATA 1994 has revoked or will revoke such Election prior to
Closing.

 

(k)           All
VAT payable in respect of goods and services supplied or deemed to be supplied
by UNOVA UK in connection with the UK Purchased Assets prior to Closing and all
interest payable thereon and penalties attributable thereto shall be paid to HM
Revenue and Customs by UNOVA UK. UNOVA UK shall be entitled to receive and to
retain for its own benefit all reimbursement or credit from HM Revenue and
Customs for VAT borne by UNOVA UK on goods and services supplied to UNOVA UK
prior to Closing and any payments received in respect of VAT overpaid to HM
Revenue and Customs prior thereto.

 

(l)            In
this Section 1.12:

 

(i)            “VAT” means Value Added Tax
chargeable pursuant to the VATA; and

 

(ii)           “VATA” means the Value Added Tax Act
1994 and any legislation additional or supplemental thereto or amending or
replacing it from time to time.

 

1.13                        UK Employees

 

UNOVA UK and Buyer UK acknowledge that:

 

(a)           the
transfer of the UK Purchased Assets pursuant to this Agreement constitutes a
relevant transfer for the purposes of the Transfer of Undertaking (Protection
of Employment) Regulations 1981 (“Transfer Regulations”);
and

 

(b)           the
Employees of UNOVA UK (as listed in Schedule 3.13(a)(4))
will become employees of Buyer UK on the Transfer Date and UNOVA UK will use
all reasonable efforts to assist in the transfer of such Employees to the
employment of Buyer UK.

 

(Article 2 follows)

 

22

 

ARTICLE 2.

Closing and Transfer Date

 

2.1                               Closing

 

Subject to satisfaction or waiver of the
conditions contained in this Agreement, consummation of the purchase and sale
of the US Purchased Assets and the other transactions provided for in this
Agreement (the “Closing”) shall take place at
the offices of Perkins Coie LLP, counsel for UNOVA, located at 1201 Third
Avenue, Suite 4800, Seattle, WA 98101 commencing at 8:00 a.m. Pacific
Time on December 9, 2005 or at such other date or time or other place as
the Parties may mutually agree upon in writing; provided,
however, that the purchase and sale of
the UK Purchased Assets shall occur at the offices of SJ Berwin LLP,
222 Gray’s Inn Road, London WC1X8XF, United Kingdom on December 9
2005, or at such other date or time as the Parties may mutually agree upon in
writing (such date, the “Transfer Date”).
The purchase and sale of the US Purchased Assets and the UK Purchased Assets
and all other transactions provided in this Agreement shall be deemed to have
occurred simultaneously and shall be effective at 11:59 p.m. (Eastern
Time) on the Transfer Date, or at such other date or time as the Parties may
mutually agree upon in writing. The Parties acknowledge and agree that the date
of Closing shall be automatically extended as may be required if the Closing
shall not have occurred because either the time period under the HSR Act or any
similar Law shall not have expired or any adverse action shall have been
threatened or instituted in connection with the HSR Act or any similar Law, and
all other conditions precedent in Articles 6 and 7 have been
satisfied or are capable of being satisfied or, to the extent legally
permissible, have been waived; provided, however, that the date of Closing shall in no event be
extended beyond the Extended Deadline Date (as defined in Section 10.1(b))
without the prior written consent of the Parties.

 

2.2                               Notice and
Right to Cure

 

At all times prior to the Transfer Date, the
Parties shall promptly notify each other of the existence of any condition or
the occurrence of any event which will or is likely to result in the failure to
satisfy any one or more of the conditions set forth in Articles 6 and 7. If
any of such conditions shall not have been satisfied or waived on or by the
date on which the Closing is otherwise scheduled, then, subject to
Section 10.1(b) and provided that such Party is not in breach of this
Agreement, the Party which is unable to meet such condition shall have a
reasonable time and a reasonable opportunity to extend the Transfer Date (not
to exceed fourteen business days) in order to satisfy, at its expense, such
condition or conditions.

 

(Article 3 follows)

 

23

 

ARTICLE 3.

Representations and Warranties of the Selling Entities

 

As a material inducement to the Purchasing
Entities to enter into this Agreement and consummate the transactions
contemplated hereby, the Selling Entities jointly and severally represent and
warrant to the Purchasing Entities that the statements contained in this
Article 3 are true and complete as of the date of this Agreement and will
be true and complete as of the Transfer Date as follows; provided, however,
that Schedules 3.2(e), 3.13(a), 3.13(b), 3.13(c), 3.13(g) and 3.13(m) may
be updated by the Selling Entities as of the Closing to reflect the hiring or
departure of any Employee, the granting of early retirement to any Employee,
and any similar matter, each of which updated matters shall have been
undertaken in the ordinary course of business consistent with past practices:

 

3.1                               Corporate
Matters

 

(a)                                  Due
Organization, Good Standing and Qualification

 

Each of the Selling Entities is a corporation
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. Each of the Selling Entities is qualified to
conduct the Business as a foreign corporation in all jurisdictions where the
conduct of the Business or the ownership of its assets in respect of the
Business requires qualification, which jurisdictions are set forth on Schedule 3.1(a), except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect (as defined below) with respect to the Business.

 

For purposes of this Agreement, the terms “material adverse effect” or “material adverse change” with
respect to the Landis Group and the Business means any circumstance, event,
change, violation, failure, inaccuracy, effect or other matter that,
individually or when taken together with all other circumstances, events,
changes, violations, failures, inaccuracies, effects or other matters, would
reasonably be expected to have or does have a material adverse effect on
(a) the assets, liabilities, business, financial condition, or results of
operations of the Business taken as a whole, or (b) the ability of the
Selling Entities to timely consummate the transactions contemplated by this
Agreement; and such terms with respect to the Purchasing Entities means any
circumstance, event, change, violation, failure, inaccuracy, effect or other
matter that, individually or when taken together with all other circumstances,
events, changes, violations, failures, inaccuracies, effects or other matters,
would reasonably be expected to have or does have a material adverse effect on
(x) the assets, liabilities, business, financial condition or results of
operations of the Purchasing Entities, taken as a whole, or (y) the
ability of the Purchasing Entities to timely consummate the transactions
contemplated by this Agreement; provided, however, that in each case, the foregoing definitions
exclude the effects of changes that are generally applicable to (i) the
industries and markets in which the Business operates, (ii) the United
States economy or securities or capital markets or (iii) the world economy
or securities or capital markets.

 

24

 

(b)                                  Corporate
Authority to Conduct Business

 

Each of the Selling Entities has the
corporate power and authority to own, lease and operate its properties and
assets and to carry on the portion of the Business attributable to it as it is
now being conducted.

 

(c)                                  Corporate
Power and Authority to Enter Into Agreements

 

Each of the Selling Entities has the
corporate power and authority to execute and deliver this Agreement and the
other agreements, documents and instruments provided for herein (the “Related Agreements”) to which it is
a party and perform its obligations hereunder and thereunder.

 

(d)                                  Due
Execution and Enforceability

 

The execution, delivery and performance by
and on behalf of each of the Selling Entities of this Agreement and the Related
Agreements to which it is a party have been duly authorized by all necessary
corporate action, and no other corporate authorization on the part of each of
the Selling Entities is required in connection therewith. This Agreement constitutes
a valid and binding obligation of each of the Selling Entities, enforceable
against each of them in accordance with its terms, except to the extent the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by general equitable
principles. The Related Agreements to which each of the Selling Entities is a
party, when executed and delivered by the applicable Selling Entity, will
constitute valid and binding obligations of the respective Selling Entity,
enforceable against each of them in accordance with their respective terms,
except to the extent the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
or by general equitable principles.

 

(e)                                  No Conflict

 

With respect to each of the Selling Entities,
except as set forth on Schedule 3.1(e),
the execution and delivery of this Agreement and the Related Agreements to
which such Selling Entity is a party do not, and the consummation by it of any
of the transactions contemplated hereby or thereby will not:

 

(i)            conflict
with or violate its certificate of incorporation, bylaws or other constituent
documents;

 

(ii)           violate
any applicable Law (as defined below) of any federal, state, provincial, local
or foreign court or tribunal, government, regulatory body, agency or authority,
including any European national or supra-national antitrust authority (a “Governmental Body”);

 

25

 

(iii)          violate,
conflict with, result in any breach of, or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) or give
rise to any right of cancellation, termination or acceleration of any right or
obligation under any Contract (as defined in Section 3.8) or judgment to
which it is a party or by which it is bound; or

 

(iv)          result
in the creation of any Lien on any of the Purchased Assets.

 

For purposes of this Agreement, “Law” means any United States,
European Union, United Kingdom, federal, state, national, provincial, local or
foreign law, directive, code, regulation, statutory instrument, rule, order,
writ, ordinance, permit, license, injunction, judgment, ruling, policy guidance
note or decree having the force of law, including, without limitation, the Fair
Labor Standards Act, the HSR Act (as defined in Section 5.3), the
Securities Act of 1933, as amended (the “Securities Act”),
and similar applicable Laws in other jurisdictions, all Environmental Laws (as
defined in Section 3.6(f)) and all permitting and approval requirements
and common law in effect at the time of the relevant transaction; where such “Law” in effect at the time of the
transaction is amended or modified after the date of the relevant transaction, “Law” means as it was in effect on
the date of the relevant transaction.

 

(f)                                    Subsidiaries
and Other Equity Investments

 

Except as set forth on Schedule 3.1(f),
no Selling Entity has any subsidiary or other equity investment or other
securities in any corporation, company, partnership, joint venture or other
entity relating primarily or exclusively to the Business.

 

(g)                                 Certain
Additional Matters

 

With respect to each of the Selling Entities
other than UNOVA UK:

 

(i)            No
order has been made or petition presented or resolution passed for its winding
up or liquidation;

 

(ii)           No
administrative or other receiver under any bankruptcy or similar law has been
appointed by any person over the whole or any part of its business or assets;
and

 

(iii)          No
order has been made or petition presented under any bankruptcy or similar law
for the appointment of an administrator or other receiver.

 

(h)                                 UNOVA UK
Insolvency Matters

 

With respect to UNOVA UK, no administrative
receiver, receiver, liquidator or similar official has been appointed of the
whole or any part of the assets or undertaking of UNOVA UK and there are no
circumstances likely to give rise to the appointment of any such administrative
receiver, receiver, liquidator, administrator or similar official.

 

26

 

3.2                               Financial
Statements; Undisclosed Liabilities

 

(a)                                  December
Financials

 

Set forth on Schedule 3.2(a)
is the combined balance sheet of the Landis Group as of December 31, 2004
(the “December Balance Sheet”), and
the related combined statement of operations for the year then ended, as
prepared by UNOVA (collectively, the “December Financials”).
Except as otherwise disclosed on Schedule 3.2(a),
the December Financials have been prepared in conformity with GAAP consistently
applied throughout the periods covered, except as may be indicated in the notes
thereto, and present fairly in all material respects the combined financial
position and the combined results of the Landis Group operations for the year
then ended, excluding reclassifications required at the corporate level because
of discontinued operations status and excluding allocated costs related to
restricted stock and pensions allocated to the Landis Group in UNOVA’s
consolidation level adjustments to its reported financial statements.

 

(b)                                  June
Financials

 

(i)            Set
forth on Schedule 3.2(b)(i) is the combined
balance sheet of the Landis Group as of June 30, 2005 (the “June Balance Sheet”) and the related
combined statement of operations for the period then ended, as prepared by
UNOVA (collectively, the “June Financials”).
Except as otherwise disclosed on Schedule 3.2(b)(i),
the June Financials (including the notes thereto) have been prepared in
conformity with GAAP consistently applied throughout the period covered, except
as may be indicated in the notes thereto, and present fairly in all material
respects the combined financial position and the combined results of their
operations for the period then ended, excluding reclassifications required at
the corporate level because of discontinued operations status and excluding
allocated costs related to restricted stock and pensions allocated to the
Landis Group in UNOVA’s consolidation level adjustments to its reported
financial statements.

 

(ii)           The
aggregate amount of all FAS 106 liabilities for post-retirement medical
benefits with respect to the Business reflected in the June Balance Sheet has
been calculated in accordance with GAAP using the method and assumptions set
forth on Schedule 3.2(b)(ii). Since
June 30, 2005, none of the Selling Entities has exercised any discretion
or power to increase the benefits payable under the Retiree Medical Plan.

 

(c)                                  UNOVA UK’s
Accounts

 

Set forth on Schedule 3.2(c)
are the audited balance sheet as of December 31, 2004 (the “Accounts Date”) and the audited
profit and loss account for the financial year ended December 31, 2004 of
UNOVA UK (the “Accounts”). With respect to
the Accounts, UNOVA UK has received an opinion from the independent accounting
firm that audited the Accounts that the audited balance sheet presents fairly,
in all material respects, the financial position of UNOVA UK as of the Accounts
Date.

 

27

 

(d)                                  Undisclosed
Liabilities

 

Except as disclosed in the June Financials,
the December Financials and the Accounts (the “Financial
Statements”) or set forth on Schedule 3.2(d),
there are no liabilities of the Business of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other than liabilities
incurred in the ordinary course of business consistent with past practices since
the June Balance Sheet (excluding liabilities arising from the events listed in
Schedule 3.2(d) and those Assumed
Liabilities not required under GAAP to be reflected in the Financial
Statements) which in the aggregate are not material to the Business, taken as a
whole.

 

(e)                                  Events
Subsequent to June Balance Sheet

 

Since June 30, 2005, except as approved
in writing by Buyer US or disclosed on Schedule 3.2(e),
the Selling Entities have conducted the Business only in the ordinary course
and consistent with past practices, and without limiting the generality of the
foregoing except as aforesaid, there has not been any of the following:

 

(i)            Any
material adverse change or any event, occurrence, development or state of
circumstances or facts which could reasonably be expected to result in a
material adverse change;

 

(ii)           Any
damage, destruction or loss (whether or not covered by insurance) affecting the
properties, rights or assets of the Business in an amount greater than $100,000
individually or in the aggregate;

 

(iii)          Any
sale or other disposition of any capital asset used in the Business with an
original cost in excess of $50,000 individually, or $100,000 in the aggregate
(excluding any Assets Held for Sale);

 

(iv)          Any
increase in the wage, salary, bonus (including bonuses contingent upon or
related to the Transactions), commission or other compensation (other than
increases granted in the ordinary course of business and consistent with past
practice) payable or to become payable by any of the Landis Group to any of the
“Employees” (as defined in
Section 3.13(a)), other than the change in retirement benefits disclosed
to CFL in a letter from UNOVA dated October 4, 2005, or any change in any
existing, or creation of any new, insurance or other plan, other than the
Landis Pension Plan, under which any of the Landis Group provides benefits to
such Employees;

 

(v)           Any
grant of any severance or termination pay to any Employee of the Business,
entering into of any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any Employee of the
Business, or change in benefits payable under existing severance or termination
pay policies of the Selling Entities relating to the Business;

 

28

 

(vi)          Any
labor dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any Employees
or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to such Employees or;

 

(vii)         Any
Employee terminations (other than for poor performance or for cause) and/or
layoffs, and the Landis Group has preserved intact and kept available the
services of present Employees and, in each case in accordance with past
practice;

 

(viii)        Any
material release, waiver, cancellation or compromise by any of the Landis Group
of any claim or right (or series of related rights and claims) in respect of
the Business;

 

(ix)           Any
change in accounting methods, principles or practices used by the Business,
except insofar as may have been required by a change in GAAP or Law; or

 

(x)            Any
contingent liability incurred by the Selling Entities in respect of the
Business as guarantor or otherwise with respect to the obligations of others.

 

Furthermore, since June 30, 2005, except
as approved by Buyer US in writing or as disclosed on Schedule 3.2(e),
none of the Selling Entities or any of the Selling Entities’ officers,
directors or agents in their representative capacities on behalf of any such
entity, has:

 

(xi)           Paid,
discharged or satisfied any material claims, liabilities or obligations
(absolute, accrued or contingent) owed with respect to the Business other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations reflected
or reserved against in the Financial Statements, or prepaid any obligation in
excess of $100,000 owed with respect to the Business having a fixed maturity of
more than ninety (90) days from the date such obligation was issued or
incurred;

 

(xii)          Permitted
or allowed any of the Purchased Assets to be subjected to any Lien except
Permitted Liens or Liens that will be released prior to the Transfer Date;

 

(xiii)         Sold,
transferred or otherwise disposed of any of the property or assets (real,
personal or mixed, tangible or intangible) of the Business with an aggregate
net book value in excess of $100,000 (individually or in the aggregate), except
the sale of inventory in the ordinary course of business and except for any
Assets held for sale;

 

(xiv)        Disposed
of or permitted to lapse any rights to the use of any material trademark, trade
name, patent or copyright currently used in the conduct of the Business, or
disposed of or disclosed to any Person (other than representatives of the
Purchasing Entities or any other Person subject to a confidentiality agreement
or non-disclosure obligation) any material trade secret, formula, process or
know-how not theretofore a matter of public knowledge, which was used in the
conduct of the Business;

 

29

 

(xv)         Made
any single capital expenditure or commitment in excess of $50,000 for additions
to property, plant, equipment or intangible capital assets of the Business or
made aggregate capital expenditures in excess of $100,000 for additions to
property, plant, equipment or intangible capital assets of the Business; or

 

(xvi)        Agreed,
whether in writing or otherwise, to take any action described in this
Section 3.2(e).

 

(f)            With
respect to any Party hereunder, the term “knowledge”
hereunder shall refer to the actual knowledge of the executive officers of such
Person, provided that in respect of the Selling Entities the term “knowledge” hereunder shall be deemed
to include both the actual knowledge of the Selling Entities and also the
actual knowledge of the Persons set forth on Schedule 3.2(f).

 

3.3                               Accounts
Receivable

 

As of the date of this Agreement, all
accounts, notes and drafts receivable (including unbilled receivables) of the
Business reflected in the June Balance Sheet are bona fide, represent
transactions actually made in the ordinary course of business and, to the
knowledge of the Selling Entities are collectible in the ordinary course of
business, except to the extent of the reserve for uncollectible accounts
provided for in the June Balance Sheet. All accounts, note receivables and
other receivables of the Business at June 30, 2005 have been included in
the June Balance Sheet.

 

3.4                               Inventories
and Assets

 

(a)           The
inventories set forth in the June Balance Sheet were properly stated therein at
the lesser of cost or fair market value determined in accordance with GAAP
consistently applied. Since the June Balance Sheet, the inventories of the
Business have been maintained in the ordinary course of business. Except as
disclosed on Schedule 3.4(a) and except as
disclosed in the Financial Statements, all such inventory is owned free and
clear of all Liens. On the Transfer Date, all of the inventory recorded on the
June Balance Sheet will be in quantities sufficient for the normal operation of
the Business as currently conducted.

 

(b)           The
fixed asset register of the Selling Entities in respect of the Business (a copy
of which has been disclosed by UNOVA to Buyer UK and Buyer US) comprises a
complete and accurate record of all plant and machinery and all motor vehicles
and other vehicles, office and other equipment owned, used or possessed by any
of the Selling Entities in respect of the Business (and such register or
registers accurately reflect whether such plant and machinery, vehicles or
equipment are owned or leased by any of the Selling Entities).

 

(c)           The
Selling Entities in respect of the Business (other than for products supplied
to customers) has not provided any of their assets or property to any third
party on lease, hire, hire-purchase, conditional sale or credit sale agreement
terms.

 

30

 

(d)           Each
item of plant and machinery owned or used by the Selling Entities in the
operation of the Business is in working order (reasonable wear and tear
excepted) and has been, and through the Closing will be, maintained in a manner
consistent with the past maintenance practices of the Selling Entities.

 

3.5                               Absence of
Liens and Encumbrances

 

(a)           For
purposes of this Agreement, a “Lien” shall
mean any lien, encumbrance, mortgage, pledge, hypothecation, charge, security
interest, title retention or restriction or security agreement or arrangement
of any kind. “Permitted Lien” shall mean,
collectively, any (i) Liens for Taxes, assessments or governmental charges
or levies not yet due or, as disclosed on Schedule 3.5,
being contested in good faith and any Liens for Taxes disclosed on Schedule 3.18, (ii) statutory Liens of carriers,
warehousemen, mechanics, materialmen and the like arising in the ordinary
course of business that do not impair in any material respect the conduct of
the Business or the use of any of the Purchased Assets in the manner currently
conducted or used, disclosed on Schedule 3.5,
(iii) easements, restrictive covenants, rights of way and other similar
restrictions of record that do not impair in any material respect the conduct
of the Business or the use of any of the Purchased Assets in the manner
currently conducted or used, (iv) zoning, building and other similar
restrictions that do not impair in any material respect the conduct of the
Business or the use of any of the Purchased Assets in the manner currently
conducted or used, (v) easements, encroachments and other minor
imperfections of title that do not impair in any material respect the value of
the Purchased Assets or the continued conduct of the Business or the continued
use of any of the Purchased Assets in the manner currently conducted or used,
(vi) in the case of leased property, all matters, whether or not of
record, affecting the title of the lessor (and any underlying lessor) of the
leased property so long as such matters do not impair in any material respect
the conduct of the Business or the use of any of the Purchased Assets in the
manner currently conducted or used, (vii) any Lien created by a Purchasing
Entity in connection with this Agreement, (viii) other Liens set forth on Schedule 3.5, (ix) Liens relating to deposits made
in the ordinary course of business in connection with workers’ compensation,
employment insurance and other types of social security, (x) Liens to
secure the performance of leases, trade contracts or other similar agreements
and securing executory obligations under any lease that constitutes an “operating lease” under GAAP, and
(xi) Liens to secure payment obligations in connection with purchased
property in the ordinary course of business. Except as set forth on Schedule 3.5, each of the applicable Selling Entities
has good, and in the case of the US Assets, marketable title to or, in the
case of leased properties and assets, valid leasehold interests in, all of the
Purchased Assets free and clear of all Liens other than Permitted Liens. The
Selling Entities own all of the assets primarily or exclusively used by them in
the operation and conduct of the Business, or required by them for the normal
conduct of the Business, and those assets are the absolute legal and beneficial
property of the relevant Selling Entity, except for those assets leased by them
under leases specifically identified on Schedule 3.6(c)
and Schedule 3.8(d) hereto. Except as
described on Schedule 3.6(c) and Schedule 3.8(d) hereto, no financing statement with
respect to any of the Purchased Assets is active in any jurisdiction.

 

31

 

(b)           Upon
consummation of the transactions contemplated hereby, the Purchasing Entities
will acquire good and marketable title in and to, or a valid leasehold interest
in each of the Purchased Assets free and clear of all Liens (other than
Permitted Liens).

 

3.6                               Real
Property

 

(a)                                  Real
Property

 

Set forth on Schedule 3.6(a)
is the address and a description of all real property with respect to which any
of the Selling Entities in respect of the Business is the owner and holder of a
fee simple, insurable interest (collectively, the “Owned
Real Property”). To the knowledge of the Selling Entities, the
Owned Real Property complies with all applicable zoning, building, health and
public safety, fire, subdivision, land sales or similar laws, rules, ordinances
or regulations and all applicable Environmental Laws (as defined in
Section 3.6(f)) and, except as set forth on Schedule 3.6(a),
none of the Selling Entities has received any written notice that the Owned
Real Property does not comply with all applicable zoning, building, fire,
health and public safety, subdivision, land sales or similar laws, rules,
ordinances or regulations and all applicable Environmental Laws. Other than the
Selling Entities in respect of the Business, no party has the right to occupy,
possess or use any portion of the Owned Real Property. There are no material
defects in the physical condition of any land, buildings or improvements
constituting part of the Owned Real Property, including without limitation,
structural elements, mechanical systems, parking and loading areas, that would
impair the operation of the Business in any material respect in the manner in
which it has been conducted, nor any material failure to conduct customary
maintenance and repair reasonably necessary for such operation of the Business.
All water, sewer, gas, electric, telephone, drainage and other utilities
necessary for the lawful current operation of the Owned Real Property are
available and sufficient to service the operation of the Business as it has
been conducted. There are no material notices, orders, actions, suits or
proceedings (including arbitration or condemnation proceedings) pending or, to
the knowledge of the Selling Entities threatened, which could have a material
adverse effect on any portion of the Owned Real Property, at law or in equity
or before or by any Governmental Body.

 

(b)                                  Realty
Leases (as Lessor)

 

Except as set forth on Schedule 3.6(b),
no portion of the Owned Real Property has been leased. UNOVA has previously
furnished to Buyer US true, correct and complete copies of the leases or
similar contracts governing the Owned Real Property that has been leased and
any guaranties related thereto. Each such lease is in full force and effect, no
default or breach has occurred on the part of the Selling Entities or, to the
knowledge of the Selling Entities, any other party thereto. Except as set forth
on Schedule 3.6(b), no consent of any
party is required under any such lease in order to assign all rights and
benefits in each such lease to the applicable Purchasing Entity (or its
designee) and to keep such lease in full force and effect after the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.

 

32

 

(c)                                  Realty
Leases (as Lessee)

 

Set forth on Schedule 3.6(c)
is a list and description of all real property with respect to which any of the
Selling Entities is a lessee, guarantor or sublessee or other occupant (or in
which the Selling Entities have any actual liability either as previous
licensee or guarantor) and that is used primarily or exclusively in the
Business (the “Leased Real Property,” and,
along with the Owned Real Property, the “Real Property”).
UNOVA has previously furnished to Buyer US and Buyer UK true, correct and
complete copies of the leases or similar contracts governing the Leased Real
Property and any guaranties related thereto. Each such lease is in full force
and effect, no default or breach has occurred on the part of the Selling
Entities or, to the knowledge of the Selling Entities, any other party thereto.
Except as set forth on Schedule 3.6(c),
no consent of any landlord or any other party is required under any such lease
in order to assign all rights and benefits in each such lease to the applicable
Purchasing Entity (or its designee) and to keep such lease in full force and
effect after the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.

 

(d)                                  [Reserved]

 

(e)                                  Violation of
Laws or Restrictive Covenants

 

No notice of violation of any applicable Law
(including without limitation any zoning and land use Law), covenant,
condition, restriction, agreement or easement affecting any Real Property
owned, leased or occupied by the Selling Entities or its use or occupancy of
such property, has been received by the Selling Entities in respect of the
Business from any Governmental Body or other person entitled to enforce the
same.

 

(f)                                    Environmental
Matters

 

Except as otherwise disclosed on Schedule 3.6(f):

 

(i)            The
Selling Entities in respect of the Business have obtained and currently
maintain all material permits, registrations, consents, permissions, licenses
and other authorizations (the “Environmental Permits”)
which are presently required with respect to the operation of the Business or
any Real Property under applicable Law relating to pollution or the regulation
or protection of the environment or human health and safety, including without
limitation Laws and regulations relating to emission, migration, discharge or
release of regulated levels of any “Hazardous Substance”
(as defined below) into the environment (including without limitation soils,
sediment, ambient air (including indoor air), surface water, ground water,
drinking water supply, land surface or subsurface strata, and any other
environmental medium or natural resources, located both on and off-site) or
otherwise relating to the manufacture, processing, distribution, generation,
use, removal, abatement, remediation, treatment, storage, disposal, transport,
recycling, recovery, reclamation, management, handling, import or export of any
Hazardous Substance or waste and statutory and common law nuisance as in effect
at the date hereof but excluding all Laws relating to planning and/or zoning
(collectively, “Environmental Laws”). The
term “Hazardous

 

33

 

Substance”
shall mean any toxic or hazardous constituents, pollutants, waste waters,
byproducts, contaminants, chemicals, compounds, substances (whether in solid or
liquid form or in the form of a gas or vapor and whether alone or in
combination with any other substance), materials or wastes, including without
limitation asbestos, polychlorinated biphenyls, toxic mold, mildew, or fungi,
petroleum or any petroleum products or other constituents or petroleum-based
derivatives or urea formaldehyde. None of the Selling Entities has been notified
by any Governmental Body that any of the Environmental Permits will be
materially modified or suspended or revoked, and the Selling Entities have no
reason to believe that the Environmental Permits cannot be transferred or
reissued to the applicable Purchasing Entity or renewed upon their expiration
upon the same or similar terms and conditions as the current permits, subject
to requirements of applicable Environmental Laws governing such Environmental
Permits. Each of the Selling Entities is currently and has been since
January 1, 2004 in material compliance with the terms and conditions of
the Environmental Permits and all such permits are in full force and effect and
are disclosed in Schedule 3.6(f);

 

(ii)           Each
of the Selling Entities is, and has been since January 1, 2002, in
material compliance with and has no actual or contingent liability under all
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables imposed or required by Environmental
Laws. To the Selling Entities’ knowledge, there are no circumstances that may
prevent or interfere with such compliance in the future;

 

(iii)          There
is and has been no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, order, investigation, proceeding, notice
or demand letter received by or pending or, to the knowledge of the Selling
Entities, threatened against any of the Selling Entities in respect of the
Business or any Real Property;

 

(iv)          There
has been no storage, holding, existence, release, migration, spill, emission,
discharge, generation, processing, treatment, remediation, abatement, removal,
recycling, recovery, reclamation, disposal, handling, use or transportation of
any Hazardous Substance from, under, into, at or on any real property now or
previously owned, occupied, operated or leased by any of the Selling Entities
in respect of the Business which has resulted or is reasonably likely to result
in a violation by or a material liability of any of the Selling Entities in
respect of the Business under Environmental Laws or which has resulted in the
contamination or pollution of any real property now or previously owned,
occupied, operated, or leased by any of the Selling Entities in respect of the
Business that is required or could be required by any Governmental Body to be
investigated, reported, removed, treated, contained or remediated under
Environmental Laws;

 

(v)           No
underground storage tanks (as defined by 42 U.S.C. § 6991(1)) active
or abandoned, are or have been present at any real property now or formerly
owned, occupied, operated or leased by any of the Selling Entities in respect
of the Business;

 

34

 

(vi)          None
of the Selling Entities in respect of the Business has transported or disposed
of, or allowed or arranged for any third party to transport or dispose of, any
Hazardous Substance to or at any location that is listed or proposed for
listing on the National Priorities List (the “NPL”)
promulgated pursuant to CERCLA, CERCLIS, or any equivalent list of sites for
cleanup under any analogous state program, excepting those locations where the
Selling Entities were de minimis responsible parties and have resolved any
potential liabilities through a “De Minimis Settlement,”
as that term is defined by 42 U.S.C. Section 9622(g), with the United
States Environmental Protection Agency or an analogous state agency;

 

(vii)         Except
for routine filings related to the reassignment or assumption of permits and
consents and other operating requirements under Environmental Laws, no consent,
approval, authorization, registration or filing is required under Environmental
Laws in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby; and

 

(viii)        None
of the Selling Entities in respect of the Business is or has been a party to or
otherwise accept or have accepted the burden of an indemnity or other
contractual provision or arrangement concerning liabilities, losses, damages,
fines, penalties, charges, costs or expenses under Environmental Laws.

 

(g)                                 Real Estate
Liens or Encumbrances

 

Except as disclosed in any title insurance
policy delivered to Buyer US prior to the date hereof, none of the Owned Real
Property is subject to any easements, covenants, restrictions and reservations
(of record or otherwise), which prohibit or materially interfere with the
current use of such Owned Real Property.

 

3.7                               Right to Use
Properties and Assets

 

No Selling Entity is using any properties,
rights or assets to conduct the Business, including the Purchased Assets, which
are not duly owned, leased, licensed or otherwise contracted for by it. A
Selling Entity is the legal and beneficial owner of each of the Purchased Assets.

 

3.8                               Contracts
and Commitments

 

The agreements set forth on Schedules 3.8(a) through 3.8(l) are referred to
herein as the “Contracts.”

 

(a)                                  Sales
Orders, Bids and Proposals

 

Set forth on Schedule 3.8(a)
is a list and description of each individual outstanding sales order, sales
contract, change order, final bid or binding sales proposal of any of the
Selling Entities relating to the Business in excess of $100,000 (the “Sales Orders”). UNOVA has provided
Buyer US with access to copies of all Sales Orders. Except as

 

35

 

otherwise indicated on Schedule 3.8(a),
all Sales Orders currently in effect have been made in the ordinary course of
business and at arm’s length.

 

(b)                                  Purchase
Orders

 

Set forth on Schedule 3.8(b)
is a list and description of each individual outstanding purchase order and
purchase commitment of any of the Selling Entities relating to the Business in
excess of $100,000 (the “Purchase Orders”).
UNOVA has provided Buyer US with access to copies of all Purchase Orders. Except
as otherwise indicated on Schedule 3.8(b),
all Purchase Orders have been incurred in the ordinary course of business and
at arm’s length.

 

(c)                                  Sales
Representative, Distributor and Dealer Agreements

 

Set forth on Schedule 3.8(c)
is a list and description of all sales representative, sales agent, dealer and
distributor agreements and similar contracts or agreements of any of the
Selling Entities relating to the Business. All of such contracts and agreements
by their terms are terminable at any time by the applicable Selling Entity
without any additional payment, indemnity or other penalty upon not more than
90 days notice, except as otherwise disclosed on Schedule 3.8(c).

 

(d)                                  Personal
Property Leases (As Lessee)

 

Set forth on Schedule 3.8(d)
are (i) a list and description of each individual lease, contract and
other agreement under which any of the Selling Entities in respect of the
Business leases or rents (as lessee) any machinery, equipment, motor vehicle or
other personal property used in the Business (the “Leased
Personal Property”) and which is not terminable at any time by
the applicable Selling Entity without any additional payment, indemnity or
other penalty upon not more than 90 days notice, and under which the lease
or rent payments exceed $10,000 annually, and (ii) a list of each lease
under which any of the Selling Entities leases or rents (as lessee) any motor
vehicle used in the Business.

 

(e)                                  Noncompetition
Agreements or Covenants

 

Set forth on Schedule 3.8(e)
is a list and description of every agreement or other commitment imposing on
any of the Selling Entities any restriction on the manner in which it may
conduct the Business in competition with any third party.

 

(f)                                    Confidential
Nondisclosure Agreements

 

Set forth on Schedule 3.8(f)
is a list and description of all written agreements between any of the Selling
Entities and any third party in respect of the Business which contain
provisions for the nondisclosure by any of the Selling Entities of confidential
or proprietary information (excluding standard confidentiality provisions in
product sales or service agreements and excluding confidentiality agreements
with potential purchasers of all or any portion of the Landis Group).

 

36

 

(g)                                 Consultants
and Consultant Agreements

 

Schedule 3.8(g)
lists all Persons who are currently performing services for the Business who
are classified as “consultants” or “independent contractors” that receive an
annual compensation in excess of $50,000, the compensation of each such Person
and whether any Selling Entity is party to an agreement with such Person
(whether or not in writing). Set forth on Schedule 3.8(g)
is a list and description of all outstanding consultant agreements of any of
the Selling Entities in respect of the Business. For purposes of this
Section 3.8(g) the term “consultants”
and “independent contractors” shall not
be deemed to include attorneys, accountants and other similar professional
advisors.

 

(h)                                 Indebtedness;
Guarantees

 

Set forth on Schedule 3.8(h)
is a list and description of any Indebtedness of any Selling Entity in respect
of the Business. “Indebtedness” means
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise, (iv) any commitment by which a Person assures a creditor
against loss (including, without limitation, contingent reimbursement liability
with respect to letters of credit), (v) any indebtedness guaranteed in any
manner by a Person (including, without limitation, guarantees in the form of an
agreement to repurchase or reimburse), (vi) any liabilities under leases
recorded for accounting purposes by the applicable Person as capitalized leases
with respect to which a Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, (vii) any indebtedness secured by a Lien
on a Person’s assets, (viii) any unsatisfied obligation for “withdrawal
liability” to a “multiemployer plan” as such terms are defined under ERISA, (ix) any
amounts owed to any Person under any noncompetition, severance or similar
arrangements, (x) any change-of-control or similar payment which is
triggered by the transactions contemplated by this Agreement, (xi) any
liability of the Selling Entities under deferred compensation plans, phantom
stock plans, severance or bonus plans, or similar arrangements made payable in
whole or in part as a result of the Transactions contemplated herein,
(xii) any off-balance sheet financing of a Person (but excluding all
leases recorded for accounting purposes by the applicable Person as operating
leases), and (xiii) any accrued and unpaid interest on, and any prepayment
premiums, penalties or similar contractual charges in respect of, any of the
foregoing obligations computed as though payments is being made in respect
thereof on the Transfer Date.

 

(i)                                    Powers of
Attorney, Proxies

 

Set forth on Schedule 3.8(i)
is a list and description of all outstanding powers of attorney, agency or
proxies granted by any Selling Entity in respect of the Business.

 

37

 

(j)                                    Letters of
Credit, Surety, Bid and Performance Bonds

 

Set forth on Schedule 3.8(j)
is a list and description of all commercial letters of credit, stand-by letters
of credit, surety, bid, performance bonds and other similar instruments
(i) securing the obligations of any of the Selling Entities in respect of
the Business or (ii) securing any outstanding payment obligations of a
third party to any of the Selling Entities in respect of the Business.

 

(k)                                Joint
Venture Agreements

 

Set forth on Schedule 3.8(k)
is a list and description of all partnership, joint venture, investment or
other similar agreement of any of the Selling Entities in respect of the
Business.

 

(l)                                    Other Material
Contracts

 

(i)            Set
forth on Schedule 3.8(l) is a list and
description of any other contract or commitment of any of the Selling Entities
in respect of the Business that is material to the Business and which is not of
the type required to be disclosed in any other Schedule to this Agreement
pursuant to the provisions hereof. For purpose of this Section 3.8(l), a
contract or commitment shall be deemed material if the consideration paid or to
be paid thereunder exceeds $100,000 or the contract or commitment is not
terminable upon not more than 90 days notice without penalty or other
adverse consequences. Except as otherwise disclosed in this Section 3.8,
all Purchased Contracts are valid and in full force and effect, the applicable
Selling Entity has performed all material obligations required to be performed
thereunder, and there are not any defaults or events of default on the part of
any of the Selling Entities, or, to their knowledge, the other parties thereto.
Except as otherwise disclosed in this Section 3.8, none of the Selling
Entities has received notice that any party to any such Purchased Contract
intends to cancel, terminate or refuse to renew such Purchased Contract or to
exercise or decline to exercise any option or right thereunder. Assuming
receipt of all the Required Consents (including but not limited to the consents
in Schedule 6.6 to be obtained prior
to Closing), upon consummation of the transactions contemplated by this
Agreement, each such Purchased Contract shall continue in full force and effect
in accordance with its respective terms without penalty or other adverse
consequences, including, without limitation termination or cancellation.

 

(ii)           In
addition, except as set forth on Schedule 3.8(l),
no Selling Entity in respect of the Business has entered into any arrangement,
contract or commitment which:

 

(A)          was
entered into otherwise than on an arm’s length basis or in the ordinary course
of business; or

 

38

 

(B)           relates
to the supply of goods and/or services by or to the Selling Entities under or
in relation to which retrospective or future discounts, price reductions or
other incentives have been or are proposed to be given by the Selling Entities
which exceed 10% of the Selling Entities’ normal retail price for such goods or
services or which are not in the ordinary course of business; or

 

(C)           means
that they enjoy an exclusive relationship with any third party including any
exclusive purchase or supply relationship;

 

(D)          is
incapable of termination in accordance with its terms by the Selling Entities
on six months’ notice or less; or

 

(E)           has
a term that exceeds 12 months or more.

 

(m)                              [Reserved]

 

(n)                                 Restrictive
Contracts

 

There are no contracts to which the Selling
Entities are a party in connection with the Business which infringe or which
have been or which were required to be registered or notified under the
Restrictive Trade Practices Act, the Resale Prices Act, the Competition Act
1980, the Competition Act 1998 or the EC Treaty; and the Selling Entities have
not in relation to the Business received any process, notice or communication
by or on behalf of the Office of Fair Trading, the Competition Commission, the
European Commission or any other authority in any country which has jurisdiction
in anti-trust, monopoly, competition or consumer protection matters.

 

3.9                               Patents,
Trade Names, Trademarks, Service Marks, Copyrights and Chip Registrations

 

(a)                                  Intellectual
Property Rights

 

Set forth on Schedule 3.9(a)
is a list and description of (i) all patents, patent applications,
registered designs, design applications, utility models, registered trade
names, internet domains, trademark registrations and trademark applications,
service mark registrations and service mark applications, domain names,
copyright registrations and copyright registration applications, chip
registrations and chip registration applications, both domestic and foreign,
which are used in the Business and (ii) all material trade names, trade
marks and service marks (registered or unregistered), unregistered copyrights,
unregistered designs and software used in the Business (collectively, the “Intellectual Property”). Except as
otherwise indicated on Schedule 3.9(a),
such Intellectual Property, together with the Selling Entities’ trade secrets,
know-how, confidential information and all other intellectual property rights
of any nature, is all of the intellectual property that is material and
necessary to operate the Business as currently conducted. Except as otherwise indicated
on Schedule 3.9(a), the applicable
Selling Entity owns, as of record and beneficially, all right, title and
interest in and to the Intellectual Property and the Intellectual Property is
not subject

 

39

 

to any Lien other than Permitted Liens. No
claim is pending or, to the Selling Entities’ knowledge, threatened against any
of the Selling Entities and/or their officers, employees or consultants that
challenges the Selling Entities’ rights in the Intellectual Property or
otherwise adversely affects the aforesaid right, title and interest in and to
the Intellectual Property, nor have there have been any clams, disputes or
proceedings in respect of the use or ownership of the Intellectual Property in
the two years before the date of this Agreement or the Transfer Date. Except as
disclosed on Schedule 3.9(a), there are no
past or pending opposition proceedings, cancellation actions, reexaminations,
reissues, interference proceedings or revocation actions related to any of the
Intellectual Property. Except as disclosed on Schedule 3.9(a),
all patents or patent applications and trademarks, servicemarks, registered
designs, copyright registrations, domain names and applications constituting
Intellectual Property are in compliance with applicable Law (including without
limitation, payment of filing, examination and maintenance fees,) and are valid
and, to the knowledge of the Selling Entities, nothing has been done or omitted
to be done (and the Selling Entities are not aware of anything) which may cause
any of them to cease to be so, and are not subject to any maintenance fees,
taxes or actions falling due within ninety (90) days after the date of
Closing, assuming a Closing Date of December 9, 2005. The UK Purchased
Assets do not trade under any name, other than “Landis Lund” and “Cranfield
Precision” and no person, form or company other than UNOVA UK has any rights in
relation to the names “Landis Lund” or “Cranfield Precision” or has requested
or required UNOVA UK to refrain from using such name or attempted to prevent
such use by UNOVA UK.

 

(b)                                  Licenses of
Intellectual Property Rights To or From Third Parties

 

(i)            Set
forth on Schedule 3.9(b) is a list and
description of (i) all licenses, assignments and other transfers of
Intellectual Property granted to others by any of the Selling Entities that are
used in and material to the Business, and (ii) all licenses, assignments
and other transfers by others of patents, trade names, domain names,
trademarks, service marks, copyrights, chip registrations, trade secrets,
software (other than shrink-wrap licenses), know-how, industrial property,
technology or other proprietary rights granted to any of the Selling Entities
that are used in and material to the Business. All such agreements are in full
force and effect and there is no material default by any of the Selling
Entities or, to the knowledge of the Selling Entities any party thereto. Except
as otherwise disclosed on Schedule 3.9(b),
none of the agreements described above is subject to termination, cancellation,
penalty or change in its terms or provisions as a result of this Agreement or
the consummation of the transactions contemplated by this Agreement.

 

(ii)           To
the knowledge of the Selling Entities, the information and communications
technology infrastructure and systems including software, hardware, firmware
and networks which is or has been used in the Business by any of the Selling
Entities (the “IT System”) has not
experienced a material failure in the year prior to the Transfer Date. The IT
System, together with the Purchased Assets, comprises all of the information
technology material and necessary to operate the Business.

 

40

 

(c)                                  No
Infringement

 

Except as disclosed on Schedule 3.9(c)
and except with respect to pre-packaged or off-the-shelf software, (i) to
the knowledge of the Selling Entities, none of the Intellectual Property (other
than patents) or the rights of any of the Selling Entities in the Intellectual
Property (other than patents) are being infringed by any Person, and
(ii) neither the operation of the Business nor any activity by any of the
Selling Entities in connection with the Business infringes the rights of any
other Person in any Intellectual Property (other than patents). Except as
disclosed on Schedule 3.9(c), to the
knowledge, information and belief of the Selling Entities (a) none of the
patents included in the Intellectual Property or the rights of any of the
Selling Entities in any patents included in the Intellectual Property are being
infringed by any Person, and (b) neither the operation of the Business nor
any activity by any of the Selling Entity in connection with the Business
infringes the patent rights of any other Person.

 

3.10                        Patent,
Trade Name, Trademark, Service Mark, Copyright or Chip Registration
Indemnification

 

Except as set forth on Schedule 3.10,
there are no pending or, to the knowledge of the Selling Entities, threatened
indemnification claims or demands against any of the Selling Entities relating
to the Intellectual Property. Except as set forth on Schedule 3.10,
none of the propriety information or trade secrets of any of the Selling
Entities relating to the Business of any proprietary or confidential
information or trade secrets now the subject to a patent or patent application
has been disclosed to any other Person except pursuant to confidentiality
agreements between the Selling Entities and such Person.

 

3.11                        Confidential
Information or Trade Secrets

 

(a)           Except
as set forth on Schedule 3.9(a), none of the
proprietary or confidential information or trade secrets of any of the Selling
Entities relating to the Business or any proprietary or confidential
information or trade secrets now the subject of a patent or patent application,
has been disclosed to any other Person except pursuant to valid and binding
confidentiality agreements between the Selling Entities and such Person. Except
as set forth on Schedule 3.11, there are no
pending or, to the knowledge of the Selling Entities threatened proceedings
which challenge the rights of any of the Selling Entities in respect of any
proprietary or confidential information or trade secrets used in the Business.

 

(b)           In
respect of all and any Personal Data (as defined in the Data Protection Act
1998) processed by any of the Selling Entities, the applicable Selling Entity
has made all necessary registrations and notifications of its particulars in
accordance with the Data Protection Legislation (being all legislation relating
to data protection and to the recording, interception and monitoring of
communications and privacy including without limitation the Data Protection
Acts of 1984 and 1998, and the EU Data Protection Directive 95/46/EC, the
Privacy and Electronic Communications (EC Directive) Regulations 2003,
Part 1 of the Regulation of Investigatory Powers Act 2000 as amended and
any analogous legislation in any part of the world), and have otherwise
complied with the Data Protection Legislation.

 

41

 

3.12                        Products and
Service Warranties

 

(a)                                  Products

 

Each of the products produced, sold, packaged
or marketed by any of the Selling Entities in connection with the Business
prior to delivery is, and at all times has been, in compliance in all material
respects with all applicable Laws and, to the knowledge of the Selling
Entities, conforms in all material respects to any promises or affirmation of
fact made on the container, label or documentation for such products or in
connection with its sale. To the knowledge of the Selling Entities these
products perform in accordance with their respective documented specifications
and as the Selling Entities have expressly warranted to their customers. Except
as otherwise disclosed to the Purchasing Entities in Schedule 3.12(a) to
this Agreement, there have been no product recalls or claims (other than
warranty claims) against any of the Selling Entities in respect of the products
produced, sold, packaged or marketed by any of the Selling Entities in
connection with the Business.

 

(b)                                  Service
Warranties

 

Set forth on Schedule 3.12(b)
are all the standard product and service warranty policies of the Selling
Entities in respect of the Business. Except as otherwise indicated on Schedule 3.12(b), no Selling Entity has granted or
extended any currently outstanding product or service warranty, either in
duration, scope or otherwise, that is in excess of or different from the
standard policies set forth on Schedule 3.12(b).

 

3.13                        Employees;
Employee Benefits

 

(a)                                  Employees

 

Subject to European data protection
legislation, Schedule 3.13(a) sets forth,
with respect to each employee of the Selling Entities who is employed in the
Business (including any such employee of Seller who is on a leave of absence,
maternity leave, short or long term disability, or on layoff status subject to
recall) (the “Employees”) (i) the name
of such Employee and the date as of which such Employee was originally hired by
the Selling Entities, and whether the Employee is on an active or inactive
status; (ii) such Employee’s title; (iii) whether the Employee is
classified as exempt or non-exempt under the Fair Labor Standards Act;
(iv) such Employee’s base compensation as of the date of this Agreement,
equity vesting schedule, and whether such Employee is eligible to participate
in any Employee Benefit Plans; and (v) any governmental authorization that
is held by such Employee and that is used in connection with the Business. Except
as disclosed on Schedule 3.13(a), the
employment of each of the Employees of the Business is terminable by the
Selling Entities at will. No offer of employment has been made by the Selling
Entities to any individual which has not yet been accepted or which has been
accepted but where the individual’s employment has not yet started. All
contracts of service or consultancy with any Employee in the UK can be
terminated by three months notice or less without giving rise to any claim
(other than statutory redundancy or unfair dismissal, if applicable) other than
a claim under any applicable benefit plan. Employees in the UK holding stock
options in any

 

42

 

of the Selling Entities will be entitled to
exercise those stock options for a period not less than 3 months after the
Transfer Date.

 

(b)                                  Employment
Contracts

 

Schedule 3.13(b)
lists all current employee manuals and handbooks and employment agreements
relating to the employment of the Employees. To the extent permitted by law,
UNOVA has provided the Purchasing Entities with access to all employment policy
statements material records relating to health and safety issues (including,
without limitation, accident at work records, claim details, insurance records,
policy and guidance documents and training and monitoring records) and other
materials of material nature relating to the employment of the current
Employees of the Business. All Employees are employed on the terms set out in
the documents included on Schedule 3.13(b).
Except as disclosed on Schedule 3.13(b),
(i) none of the Employees of the Business is a party to any employment,
bonus, commission or other compensation agreement with any of the Selling
Entities, (ii) none of the Employees of the Business has notified or
otherwise indicated to the Selling Entities that he or she intends to terminate
his or her employment with the Selling Entities, (iii) the Selling
Entities do not have a present intention to terminate the employment of any
Employee of the Business, except as contemplated by Section 8.4 of the
Agreement; (iv) to the knowledge of the Selling Entities, no Employee at
management level in relation to the Business has since July 1, 2005
received an offer of employment from any other Person, (v) all employees
of the Business have executed the Selling Entities’ standard form of
noncompetition, nondisclosure and developments agreement; (vi) to the
knowledge of the Selling Entities, no Employee of the Business is a party to or
is bound by any employment contract, patent disclosure agreement,
noncompetition agreement or other restrictive covenant or other contract with
any third party that would be likely to affect in any way (A) the
performance by such Employee of any of his or her duties or responsibilities as
a Employee, or (B) the business or operations of the Business;
(vii) to the knowledge of the Selling Entities, no Employee employed at a
management level in relation to the Business is in violation of any term of any
employment contract, patent disclosure agreement, noncompetition agreement, or
any other restrictive covenant with any third party relating to the right of
any such Employee to be employed by the Selling Entities in respect of the
Business and (viii) the Selling Entities are not and have never been
engaged in any dispute or litigation with an Employee of the Business or former
Employee of the Business regarding Intellectual Property matters.

 

(c)                                  Severance

 

Except as disclosed on Schedule 3.13(c),
(i) none of the Selling Entities in respect of the Business has an
established severance pay practice or policy; (ii) no Employee of the
Business is entitled to any severance pay, bonus compensation, acceleration of
payment or vesting of any equity interest, or other payment from the Selling
Entities (other than accrued salary, vacation, or other paid time off in
accordance with the policies of the Selling Entities in respect of the
Business) as a result of or in connection with the transactions contemplated by
this Agreement or any Related Agreement or as a result of any termination by
the

 

43

 

Business on or after the Closing of any
Person employed by the Selling Entities on or prior to the Transfer Date.

 

(d)                                  Indebtedness
to Employees

 

Except as otherwise disclosed on Schedule 3.13(d), none of the Selling Entities in
respect of the Business is indebted to any of the present or former Employees
in any amount whatsoever, other than for accrued wages, bonuses and related
benefits and reasonable reimbursable business expenses incurred in the ordinary
course of business.

 

(e)                                  Loans or
Advances to Employees

 

Except as otherwise disclosed on Schedule 3.13(e), none of the Selling Entities has
outstanding and unsatisfied, in whole or in part, any loan or advance to any of
its present or former employees, other than reasonable advances for business
and related expenses made in the ordinary course of business.

 

(f)                                    Collective
Bargaining Agreements

 

(i)            Set
forth on Schedule 3.13(f) is a list and
description of all collective bargaining or similar agreements between any of
the Selling Entities and any group of Employees, union or labor organization
representing any Employees including any works agreement. Except as otherwise
disclosed on Schedule 3.13(f), no such
agreement or understanding is presently proposed or under discussion by the
Selling Entities with Employees. The Selling Entities in respect of the
Business do not have a duty to bargain with any other union or labor
organization.

 

(ii)           Except
as set forth on Schedule 3.13(f), the Selling
Entities do not recognize a trade union nor have they done anything which might
be construed as recognition. The Selling Entities have not received any further
application for recognition from a trade union. The Selling Entities do not
have any other works or supervisory council or other body representing
Employees which has a right to be represented or attend at or participate in
any board or council meeting or a right to be informed, consulted or make
representations in relation to the Business.

 

(iii)          UNOVA
UK has not received any employee request for information and consultation
pursuant to Regulation 7 of the Information and Consultation of Employees
Regulations 2004, regardless of whether the number of request is
sufficient to comply with the requirement for a valid employee request under
Regulation 7(2) of those regulations. UNOVA UK is not involved in any
negations with Employees pursuant to the Information and Consultation of
Employees Regulation 2004.

 

44

 

(g)                                 Independent
Contractors

 

All the Persons set forth on Schedule 3.8(g) and any other Person classified as such
by the Selling Entities in respect of the Business have been properly
classified as independent contractors and have been engaged in accordance with
all applicable foreign, federal, state and/or local laws, and have been paid
all compensation due them.

 

(h)                                 Commitments

 

(A)          The
Selling Entities are not obliged to increase, nor have they made provision to
increase, the total annual remuneration payable to the Employees by more than
five per cent.

 

(B)           Except
as set forth in Schedule 3.13(h)(B), no
remuneration reviews or negotiations for an increase in the remuneration or
benefits of an officer or Employee are current or due to take place within the
next six months.

 

(C)           Except
for the change in retirement benefits disclosed to CFL in the letter from UNOVA
dated October 4, 2005 or as set forth in Schedule 3.2(e):  (1) no legally binding assurances or
undertakings have been given to any of the Employees as to the continuation,
introduction, increase or improvement of any terms and conditions,
remuneration, benefits or other bonus or incentive scheme, and (2) to the
knowledge of the Selling Entities, no Employee has any expectation of the
introduction, increase or improvement of any of his terms and conditions,
remuneration, benefits or other bonus or incentive schemes. The Parties
acknowledge and agree that nothing in this Section 3.13(h)(C) or otherwise
in this Agreement shall restrict the ability of UNOVA UK to grant early
retirement to Employees in the ordinary course of its business, whether before,
on or after the date of this Agreement, and that UNOVA’s granting of early
retirement in the ordinary course of its business shall not constitute a breach
of the representations and warranties with respect to the Purchasing Entities
or provide a basis for a claim for indemnification by the Purchasing Entities
under this Agreement.

 

(i)                                    Employment
history

 

(A)          Except
as otherwise disclosed on Schedule 3.13(i) within the period of one year ending
on the date of this Agreement the Selling Entities in respect of the Business
have not:

 

(1)           made
or started implementation of any collective dismissals that have required or
will require notification to any state authority or notification to or
consultation with any trade union, works council, staff association or other
body representing employees; or

 

45

 

(2)           been
a party to any transfer of a business or undertaking other than the transactions
contemplated by this Agreement that has required or will require notification
to or consulting with any trade union, works council, staff association or
other body representing employees.

 

(B)           Except
as set forth on Schedule 3.13(i), UNOVA UK has no obligation to make any
payment on the redundancy of any Employee in excess of the statutory redundancy
payment and has not in the two years preceding the date of this Agreement
operated any discretionary practice of making any such excess payments to any
of its Employees. UNOVA UK has no obligation to follow any contractual
redundancy procedure.

 

(C)           In
relation to any business reorganization, restructuring or business transfer
which has taken place in relation to the Landis Group in the United Kingdom the
period of one year prior to this Agreement and which constitutes a transfer for
the purposes of the Transfer of Undertakings (Protection of Employment)
Regulations 1981 (“TUPE Transfer”),

 

none of the terms and conditions of
employment of any Employee of UNOVA UK has been varied within a period of six
months before or after any TUPE Transfer.

 

(j)                                    Other Labor
Matters

 

Except as set forth on Schedule 3.13(j),
(i) the Business is in compliance in all material respects with all
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment,
wages, hours and data protection; (ii) the Business is not delinquent in
any payments to any Employee for any wages, salaries, commissions, bonuses,
fees or other direct compensation due with respect to any services performed
for it to the date hereof or amounts required to be reimbursed to such
Employees; (iii) there are no, and within the last two (2) years
there have been no formal or informal grievances, complaints or charges with
respect to employment or labor matters (including, without limitation,
allegations of employment discrimination, retaliation or unfair labor
practices) pending or threatened against the Selling Entities in respect of the
Business in any judicial, regulatory or administrative forum, under any private
dispute procedure or internally; (iv) none of the employment policies or
practices of the Business are currently being audited or investigated, or to the
knowledge of the Selling Entities, subject to imminent audit or investigation
by any Governmental Authority; (v) the Selling Entities are not or have
not been within the last two (2) years subject to any order, decree,
injunction or judgment by an Governmental Authority or private settlement
contract in respect of any labor or employment matters concerning the Business;
(vi) the Selling Entities are in compliance with the requirements of the
Immigration Reform Control Act of 1986 with respect to all Employees; (vii) all
Employees other than Employees of UNOVA UK are employed at will;
(viii) there is no, and during the past two (2) years there has not
been any, labor strike, picketing of any nature, labor dispute, slowdown or any
other concerted interference with normal operations, stoppage or lockout
pending or, to the Selling

 

46

 

Entities’ knowledge, threatened against or
effecting the Business, and (ix) UNOVA UK has maintained materially up-to-date
records regarding the service of each of its Employees (including, without
limitation, details of terms of employments, payments of statutory sick pay,
statutory maternity pay, disciplinary and health and safety matters, income tax
and social security contributions, records for the purposes of the Working Time
Regulations 1998) and termination of employment.

 

(k)                                Employee
Benefit Plans

 

Set forth on Schedule 3.13(k)
is a list of all employee benefit plans and commitments under which liability
remains maintained or contributed to by the Selling Entities for the benefit of
the present or former employees of the Landis Group or any group of such
employees, or for the benefit of dependents of any of them (collectively, the “Employee Benefit Plans”), including
without limitation any pension, life and dependent life, accidental death and
health insurance (including medical, dental and vision), hospitalization,
medical examination, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, tax preparation assistance and
equalization, estate planning, pay-in-lieu, sick pay, sick leave, disability,
tuition refund, service award, company car, car allowance, scholarship,
relocation, patent award, living allowances, housing allowances, annual home leave
costs, employee assistance, travel, accident, dependent schooling and
supplements, fringe benefit and other employee benefit plans, contracts,
policies or practices providing employee or executive compensation or benefits.
None of the Selling Entities in respect of the Business has committed to
establish any agreement or arrangement of the type required to be disclosed on Schedule 3.13(k), except as otherwise indicated on such
Schedule. Except as otherwise disclosed on Schedule 3.13(k),
each of the Employee Benefit Plans complies, and has complied since
January 1, 2002, and has been administered in compliance in all material
respects, with all applicable Laws.

 

(l)                                    ERISA Plans

 

(A)          UNOVA
has provided Buyer US with access to copies of (1) each Employee Benefit
Plan that is an “employee benefit plan” as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), including amendments
thereto but excluding any such plan applying to Employees of UNOVA UK (each, an
“ERISA Plan”), or, in the case of any
unwritten ERISA Plan, a description thereof, (2) if applicable, the
current trust agreement for each ERISA Plan, including amendments thereto,
(3) if applicable, the most recent summary plan description for each ERISA
Plan and all modifications thereto, (4) if applicable, the most recent
Form 5500 filed for each ERISA Plan, (5) if applicable, the most
recent actuarial valuation report prepared in connection with any ERISA Plan,
and (6) if applicable, the most recent determination letter received from
the Internal Revenue Service with respect to such ERISA Plan.

 

47

 

(B)           Except
as otherwise disclosed on Schedule 3.13(l),
no ERISA Plan is a “multiemployer plan” (as
defined in Section 3(37) or Section 4001(a)(3) of ERISA) and, during
the last five years, no Selling Entity has incurred any withdrawal liability
under Section 4201 of ERISA to any multiemployer plan that covered
employees of the US division of the Landis Group.

 

(C)           With
respect to each ERISA Plan (1) all payments due from any such plan (or
from the applicable Selling Entity with respect to any such plan) have been
made, (2) the applicable Selling Entity has complied in all material
respects with, and each such ERISA Plan conforms in all material respects in
form and operation to, all applicable Laws, including without limitation ERISA
and the Code and all material reports and information relating to such ERISA
Plan required to be filed with any Governmental Body have been timely filed,
(3) all material reports and information required to be disclosed or
provided to participants or their beneficiaries have been timely disclosed or
provided, (4) there have been no prohibited transactions within the
meaning of Section 406 of ERISA or Section 4975 of the Code with
respect to any ERISA Plan, (5) each such ERISA Plan which is intended to
qualify under Section 401(a) of the Code (i) has received a favorable
determination letter from the Internal Revenue Service (the “IRS”) with respect to such
qualification under the Code as amended by those laws commonly referred to as “GUST”
or has timely filed for such a determination letter, or (ii) is a prototype or
volume submitter plan that is entitled to rely on the favorable GUST opinion or
advisory letter issued by the IRS to the prototype or volume submitter plan
sponsor of such ERISA Plan, and to the knowledge of the Selling Entities,
nothing has occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption, and (6) there are no
actions by any Governmental Body, suits or claims pending (other than routine
claims for benefits) or to the knowledge of the Selling Entities, threatened
with respect to any ERISA Plan or against the assets of such ERISA Plan.

 

(D)          With
respect to any Employee Benefit Plan subject to Title IV of ERISA or
Section 412 of the Code, except as disclosed on Schedule 3.13(l),
(1) all minimum funding contributions required under Section 302 of
ERISA and Section 412 of the Code have been timely made, (2) no
funding waivers have been received or requested from the IRS, (3) no
accumulated funding deficiency as described in Section 302(a) of ERISA and
Section 412(a) of the Code exists and (4) no notice of intent to
terminate has been filed and no amendment to treat such plan as terminated has
been adopted. Except as specifically designated as such in Schedule 3.13(l),
no ERISA Plan provides post-employment health or welfare benefits, except as
required by Part 6 of Subtitle B of Title I of ERISA
Section 4980B of the Code (“COBRA”) or
other applicable Law.

 

(m)                              UK Pension
Plans

 

(A)          Except
for the “UNOVA Pension Fund”, and the “Landis Pension Plan” (as defined in
Section 5.8(a)) (each a “UK Pension Plan”),
there is not in operation as of the date of this Agreement, and no
unimplemented proposal has been announced to enter into or establish, any
agreement, arrangement, custom or practice whether or not approved by

 

48

 

the Inland Revenue under
Chapter I or Chapter IV (as the case may be) of Part XIV Income
and Corporation Taxes Act 1988 (“Approved”)
for the payment by UNOVA UK of, or payment by UNOVA UK of a contribution
towards, a pension, lump sum or other similar benefit on retirement or death
for the benefit of any Employee of UNOVA UK (“UK
Employee”) or a UK Employee’s dependents.

 

(B)           UNOVA
UK has duly complied with all applicable legal and administrative requirements
relating to stakeholder pension schemes (as defined in Section 1(1) of the
Welfare Reform and Pensions Act 1999).

 

(C)           Except
pursuant to the purchase of the Cranfield Precision business by UNOVA UK, no UK
Employee has ever become employed by UNOVA UK as a result of a transfer
pursuant to the Transfer of Undertakings (Protection of Employment) Regulations
1981 (as amended).

 

(D)          Materially
full and accurate details of the UNOVA Pension Fund insofar as applicable to
the UK Employees and of the Landis Pension Plan have been made available to
Buyer UK, including (i) a copy of all trust deeds and rules of current
effect in relation to the UK Employees, (ii) a copy of all members’
booklets and announcements of current effect in relation to the UK Employees
(whether issued by UNOVA UK or otherwise) (including for the avoidance of doubt
any announcement in respect of any improvement of a benefit or other amendment
not yet incorporated into the documentation) issued to a UK Employee who is or
may become a member of either of them, (iii) a list of all the UK
Employees who are members of either of the UK Pension Plans, (iv) a copy
of each investment management agreement in force in relation to the management
of Landis Pension Plan’s assets, (v) copies of the HM Revenue and Customs
approval letter or interim approval letter for each of the UK Pension Plans and
the contracting-out certificate issued in respect of each of the UK Pension
Plans and the contracting-out certificates issued in respect of each of the UK
Pension Plans and (vi) all data relating to the benefits payable under each UK
Pension Plan necessary, when read with the documents referred to in (i) and
(ii) above, to enable Buyer UK to quantify the liabilities in respect of the UK
Employees under each of the UK Pension Plans at the date of his Agreement
(other than the liability in respect of the levy to fund the Pension Protection
Fund payable pursuant to the Pensions Act 2004).

 

(E)           Except
as set forth in Schedule 3.2(e) or with respect to the change in retirement
benefits relating to certain employees disclosed to CFL in a letter from UNOVA
dated October 4, 2005, at the date of this Agreement no discretion or
power has been exercised under either UK Pension Plan in respect of any UK
Employee (or request made for a discretion or power to be exercised) to (i) augment
benefits, (ii) provide a benefit that would not otherwise be provided, or
(iii) pay a contribution that would not otherwise have been paid.

 

(F)           Each
benefit (except a refund of contributions) payable under the Landis Pension
Plan on the death in service of a UK Employee is at the date of this Agreement
insured in full.

 

49

 

(G)           Except
for the change in retirement benefits disclosed to CFL in a letter from UNOVA
dated October 4, 2005 or as set forth in Schedule 3.2(e), no plan,
proposal or intention to amend, discontinue (in whole or in part) or exercise a
discretion in relation to either UK Pension Plan has been communicated to a UK
Employee at the date of this Agreement.

 

(H)          The
Landis Pension Plan is not in the process of being wound up.

 

(I)            No
amount due and payable by UNOVA UK in respect of the Landis Pension Plan is unpaid
and no contribution in respect of the month in which the Transfer Date occurs
has been or will be paid by UNOVA UK to the Landis Pension Plan, other than
contributions deducted by UNOVA UK from members’ salaries before the Transfer
Date and not paid to the Landis Pension Plan by that date.

 

(J)            Except
as set forth in Schedule 3.13(m), each UK
Pension Plan has, in relation to the UK Employees, been designed to comply with
and has been administered materially in accordance with, all applicable legal
and administrative requirements.

 

(K)          Except
as set forth in Schedule 3.13(m), in relation
to the UK Employees there no civil, criminal, arbitration, administrative, or
other proceeding or dispute (whether before the Pensions Ombudsman, the
Pensions Regulator or otherwise) concerning either UK Pension Plan or against
the trustees or administrator of either UK Pension Plan or UNOVA UK in relation
to either UK Pension Plan, and to the knowledge of the Selling Entities, except
as aforesaid, none is pending or threatened, and to the knowledge of the
Selling Entities, except as aforesaid, there is no matter that might give rise
to any proceeding or dispute concerning either UK Pension Plan.

 

(L)           At
the date of this Agreement, neither UNOVA UK nor any entity associated or
connected with UNOVA UK under the Insolvency Act of 1986 has received a
contribution notice or financial support direction (as defined in the Pensions
Act 2004) from the Pensions Regulator in relation to the Landis Pension Plan.

 

3.14                        Pending or
Threatened Claims, Litigation and Governmental Proceedings

 

Set forth on Schedule 3.14
is a list and description of every complaint, suit, action, judgment or court
order, arbitration or regulatory, administrative or governmental proceeding or
investigation or any other proceeding or investigation which is pending or, to
the knowledge of the Selling Entities threatened against any of the Selling
Entities in respect of the Business. Save for the Pension Regulator’s
proceedings and except as set forth in Schedule 3.14,
no investigation, suit, action or other judicial or governmental proceeding is
pending or, to the knowledge of the Selling Entities threatened before any
court or Governmental Body which may result in the restraint or prohibition of,
or the obtaining of substantial damages in connection with, this Agreement or
the consummation of the transactions provided for in this Agreement.

 

50

 

3.15                        Judgments,
Orders and Consent Decrees

 

Except as set forth on Schedule 3.15
and save in relation to the Pensions Regulator (a) none of the Selling
Entities in respect of the Business is subject to any judgment, order or decree
of, or agreement with, a Governmental Body that involves the transactions
contemplated herein or that would reasonably be expected to have a material
adverse effect on the Business; and (b) no such proceeding is pending or,
to the knowledge of the Selling Entities threatened against any of the Selling
Entities in respect of the Business.

 

3.16                        Compliance
With Laws

 

Except as set forth on Schedule 3.16,
none of the Selling Entities in respect of the Business is currently in
violation of or has since January 1, 2002 violated any applicable
provisions of any Laws in any material respects, including for the avoidance of
doubt the Business Names Act 1985. Save in relation to the Pensions Regulator,
none of the Selling Entities is under investigation with respect to and, to the
knowledge of the Selling Entities, has not been threatened to be charged with
or been given notice of any violation of, any law, rule, ordinance or
regulation applicable to the Purchased Assets or the conduct of the Business

 

3.17                        Franchises,
Permits, Etc.

 

Schedule 3.17
describes each governmental license, permit, consents, concession or franchise
(a “Permit”) material to the Business,
together with the name of the governmental agency or entity issuing such Permit.
Except as set forth on Schedule 3.17,
such Permits are valid and in full force and effect and, assuming the related
Required Consents (as defined in Section 3.19) have been obtained prior to
the Transfer Date, are transferable by the applicable Selling Entity and will
not be terminated or impaired or become terminable as a result of the
transactions contemplated hereby. Upon consummation of such transactions, the
Purchasing Entities will, assuming the related Required Consents have been
obtained prior to the Transfer Date, have all of the right, title and interest
in all the Permits.

 

51

 

3.18                        Taxes

 

Except as otherwise disclosed on Schedule 3.18, each of the Selling Entities, and any
affiliated group within the meaning of Section 1504 of the Code (or
comparable provision of state, local or foreign Law) (“Affiliated
Group”) of which each such Selling Entity is or has been a
member (but only for the taxable period during which the Selling Entity has
been a member thereof), (a) has filed or caused to be filed all federal,
state, local and foreign Tax returns, notices, reports, statements or other
information or documentation (“Tax Returns”)
required to be filed by it with a Tax authority under applicable federal,
state, local or foreign Law, and (b) has timely paid or caused to be paid
in full all Taxes owed (whether or not shown or required to be shown on such
Tax Returns). All such Tax Returns were at the time they were filed true,
complete and correct in all material respects. There are no Liens for Taxes on
any of the Purchased Assets except for Permitted Liens. Except as otherwise
disclosed on Schedule 3.18, all
deficiencies asserted or assessments made by any Tax authority against each of
the Selling Entities, and any Affiliated Group of which each such Selling
Entity is or has been a member (but only for the taxable period during which
the Selling Entity has been a member thereof), have been fully paid, and there
are no audits, investigations or examinations by any Tax authority with respect
to Taxes relating to the Business in progress, pending or, to the knowledge of
or the applicable Selling Entity, threatened. None of the Selling Entities in
respect of the Business is currently the beneficiary of any extension of time
within which to file any Tax Return (other than any income Tax Return of an
Affiliated Group of which such entity currently is a member, but not the parent
corporation), and none of the Selling Entities in respect of the Business has
waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. In respect of
the Business, to the knowledge of the applicable Selling Entity, no claim has
ever been made by a Tax authority in any jurisdiction where a Selling Entity
does not file Tax Returns that such Selling Entity is or may be subject to taxation
by that jurisdiction. None of the Selling Entities has any liability for the
Taxes of any Person (other than such Selling Entity or another member of the
Affiliated Group of which such entity is or has been a member, but only for the
taxable periods during which the Selling Entity has been a member thereof)
under Treasury Regulation Section 1.1502-6 (or any corresponding provision
of state, local or foreign Law), or as a transferee or successor, or by
contract, or otherwise. Each of the Selling Entities in respect of the Business
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, stockholder, independent
contractor, creditor or other third party. None of the Assumed Liabilities is
an obligation to make a payment that as a result of the Transactions will not
be deductible under Section 280G of the Code.

 

For purposes of this Agreement, the term “Taxes” means all domestic or foreign
federal, state and local taxes of any kind, including without limitation,
income, capital gains, gross receipts, franchise, employment, sales, use,
license, property or withholding taxes, social security contributions and VAT,
together with all interest, penalties and additions imposed with respect to
such amounts.

 

52

 

(a)           Proper
records have been maintained by UNOVA UK and UNOVA UK has complied in all
material respects with all statutory provisions, rules, regulations, orders and
directions in relation to the UK Purchased Assets concerning VAT, PAYE and
National Insurance Contributions including the making on time of accurate
returns and payments and the proper maintenance and preservation of records,
and UNOVA UK has not been given any penalty, notice or warning regarding the
same.

 

(b)           UNOVA
UK is not involved in any dispute, or the subject of any enquiries, with HM
Revenue & Customs or any other taxation authority, concerning any
matter likely to affect the UK Purchased Assets in any way other than routine
inquiries of a minor nature following the submission of computations and
returns.

 

(c)           UNOVA
UK has duly made all returns, given all notices and supplied all other
information required to be supplied to HM Revenue & Customs or to any
other governmental authority in relation to or otherwise affecting the UK
Purchased Assets and all such returns, notices and information were and remain
complete and accurate in all material respect and were made on the proper
basis.

 

(d)           UNOVA
UK is duly registered for Value Added Tax and all proper records have been kept
and all proper returns and payments made as required by law for the enactments
relating to Value Added Tax in connection with the Business.

 

(e)           None
of the UK Purchased Assets is a capital item, the input tax on which could be
subject to adjustment in accordance with the provisions of Part XV of the
Value Added Tax Regulations 1995.

 

(f)            All
documents (other than those which have ceased to have any legal effect) to
which UNOVA UK is party and which relate to the UK Purchased Assets and in the
enforcement of which the UK Buyer may be interested, have been duly stamped.

 

(g)           No
HM Revenue and Customs charge for unpaid inheritance tax (as provided by the
Inheritance Tax Act 1984 sections 237 and 238) over any of the UK
Purchased Assets is outstanding and no circumstances exist whereby any power
mentioned in the Inheritance Tax Act 1984 section 212 could be exercised
in relation to any of the UK Purchased Assets.

 

3.19                        Governmental
Authorizations; Consents

 

Set forth on Schedule 3.19
is a list and description of any consent, approval or authorization of, or
exemption by, or filing with (a) any Governmental Body and (b) any
Person (other than any Governmental Body referred to in clause (a)) under
any Contract, which is required in connection with the execution, delivery and
performance of this Agreement and the Related Agreements by any of the Selling
Entities (including consents required in connection with the assignment of
contracts to the Purchasing Entities) and including any consent, approval or
authorization for Buyer UK to carry on and trade the business consisting of the
UK Purchased Assets as a going concern in succession to UNOVA UK (the “Required Consents”).

 

53

 

3.20                        No Breach of
Statute or Contract

 

Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof by each of the
Selling Entities will breach or violate any applicable Law or any Contract or
other material instrument to which it, or any of the Selling Entities, is a
party or by which any of its properties, rights or assets are bound and the
terms of all Contracts and other material instruments have been complied with
by all their relevant parties.

 

3.21                        Insurance

 

Schedule 3.21(a)
lists all of the insurance policies (including the terms of any self-insurance
programs) and bonds (excluding instruments referred to in Section 3.8(j))
in force for the current policy year with respect to the Business and its
Employees and any pending claims or claims made under the insurance policies in
the last three years. The Selling Entities have, with respect to the Business,
maintained adequate insurance protection against all liabilities against which
it is customary for corporations engaged in the same or a similar business
similarly situated to insure. Such insurance polices remain in full force and
effect. None of the Selling Entities knows of any threatened termination of any
of such policies or bonds. None of the Selling Entities has any pending
insurance claims or unpaid proceeds of such claims relating to the operations
or former operations of the Business or any asset used or formerly used in the
Business.

 

3.22                        Customers
and Suppliers

 

(a)           Schedule 3.22 contains a true and complete list of
(i) the ten largest customers of each division of the Landis Group in
terms of revenues during the years ended December 31, 2003,
December 31, 2004 and in the first six months of 2005 showing the
approximate total sales to each such customer during such period and
(ii) the ten largest suppliers of each division of the Landis Group and in
terms of purchases of goods or services during such period, showing the
approximate total purchases by the Landis Group from each such supplier during
each such periods. No Selling Entity in respect of the Business has received
notice from and is not otherwise aware that (a) any customer (or group of
customers under common ownership or control) that accounted for a material
percentage of the aggregate products and services furnished by the Business
during the past 18 months has stopped or intends to stop purchasing the
products or services of the Business or (b) any supplier (or group of
suppliers under common ownership or control) that accounted for a material
percentage of the aggregate supplies purchased by the Business during the past
18 months has stopped or intends to stop supplying products or services to
the Business.

 

(b)           Except
for those customers and suppliers set forth on Schedule 3.22, in each of the
three financial years of the Landis Group ended on the June Balance Sheet and
during its current financial year no more than five per cent of the aggregate
amount (by value) of all the Landis Group’s sales or purchases have been or
will be made with or obtained from (as applicable) the same customer or
supplier (including any person connected with such customer or supplier).

 

54

 

(c)           Schedule 3.22
lists every claim or complaint in respect of the Landis Group’s products or
services, made in writing to the Landis Group by the customers set forth on
Schedule 3.22 in the two year period ending on the Agreement Date where
such claim or complaint relates to a value of $50,000 or more.

 

3.23                        Transactions
with Affiliates; Intercompany Arrangements

 

Except as set forth on Schedule 3.23,
(a) since January 1, 2002, there have been no transactions (as
defined below) between any of the Selling Entities in respect of the Business
and any Interested Person (as defined below) and (b) there are no
agreements, loans, leases, commitments or other continuing transactions between
any of the Selling Entities in respect of the Business and any Interested
Person. As used in the preceding sentence, the term “transaction”
includes, but is not limited to, any sale or transfer of property or assets,
the lease or other use of the property or assets, the provision of services and
the furnishing of personnel, whether or not for consideration. Except as set
forth on Schedule 3.23, (i) no
Interested Person has any interest in any property of any of the Selling
Entities in respect of the Business (ii) no Interested Person is indebted
to any of the Selling Entities in respect of the Business and (iii) none
of the Selling Entities in respect of the Business is indebted to any
Interested Person. For purposes of this Agreement,  “Interested Person”
means (A) any officer, director or stockholder of any of the Selling
Entities or any of their respective affiliates or (B) any member of any
such officer, director or stockholder’s family or any of their respective
affiliates. To the knowledge of the Selling Entities, no Interested Person
(x) has any material direct or indirect interest in any entity that does
business in an amount exceeding $50,000 with any of the Selling Entities or
(y) has any direct or indirect interest in any property, asset or right
that is used by any of the Selling Entities in the conduct of the Business.

 

3.24                        Broker’s or
Finder’s Fees

 

Except for KeyBanc Capital Markets, a
division of McDonald Investments Inc. (“UNOVA’s Broker”),
no Person other than UNOVA and its Affiliates (and their respective directors,
officers and employees) has arranged, or participated in arranging, on behalf
of the Selling Entities, the transactions provided for in this Agreement. Except
for certain fees to UNOVA’s Broker (which will be the responsibility of the
Selling Entities), there are no broker’s or finder’s fees to be paid by any of
the Selling Entities in connection with the transactions provided for in this
Agreement. None of the Selling Entities has any knowledge of, or has taken any
action that would give rise to, any claim for a broker’s or finder’s fee to be
paid by the Purchasing Entities in connection with the consummation of the transactions
provided for in this Agreement.

 

3.25                        Grants and
Allowances

 

None of the Selling Entities in respect of
the Business has received any investment grants or other grants or loans from
any governmental department or agency or any local or other authority by virtue
of any statute.

 

55

 

3.26                        Sufficiency
of Purchased Assets

 

As of the date of this Agreement, the
Purchased Assets, the Excluded Assets, and the assets used to provide the
services pursuant to the Transition Services Agreement (as defined in
Section 6.11) constitute, and on the Transfer Date will constitute, all of
the assets or property used or held for use in or otherwise necessary for the
operation of the Business as of each such date. On the Transfer Date, the
Purchased Assets, the assets of the Landis Pension Plan and the assets used to
provide the services pursuant to the Transition Services Agreement, will
constitute all of the assets necessary for the Purchasing Entities to continue to
operate the Business as it has been operated prior to the Transfer Date.

 

3.27                        No Other
Representations

 

Except for the representations and warranties
expressly made by the Selling Entities in this Agreement (including the
Exhibits and Schedules), none of the Selling Entities or any other Person makes
any express or implied representation or warranty concerning the Business on
behalf of the Selling Entities. Without limiting the generality of the
foregoing, and notwithstanding any otherwise express representations and
warranties made in this Article 3, the Selling Entities make no
representation or warranty to the Purchasing Entities with respect to
(a) any projections, estimates or budgets delivered to or made available
to the Purchasing Entities of future revenues, expenses or expenditures or
future results of operations or (b) except as expressly covered by a
representation and warranty contained in this Article 3, any other
information or documents (financial or otherwise) made available to the
Purchasing Entities or their counsel, accountants or advisers with respect to
the Business.

 

3.28                        Disclosure

 

The representations, warranties and
statements contained in this Agreement, the Related Agreements and in the
certificates, exhibits and schedules delivered in connection herewith and
therewith do not contain any untrue statement of a material fact and do not
omit to state a material fact necessary in order to make such representations,
warranties or statements not misleading in light of the circumstances under
which they were made.

 

(Article 4 follows)

 

56

 

ARTICLE 4.

Representations and Warranties of Purchasing Entities

 

As a material inducement to the Selling
Entities to enter into this Agreement and consummate the transactions
contemplated hereby, the Purchasing Entities jointly and severally represent
and warrant to the Selling Entities that the statements contained in this
Article 4 are true and complete as of the date of this Agreement and will
be true and complete as of the Transfer Date as follows:

 

4.1                               Corporate
Matters

 

(a)                                  Due
Organization

 

CFL is a French corporation organized,
validly existing and in good standing under the Laws of France. Buyer UK is a
United Kingdom corporation duly organized, validly existing and in good
standing under the Laws of the United Kingdom. Buyer US is a Delaware
corporation duly organized, validly existing and in good standing under the
Laws of Delaware.

 

(b)                                  Corporate
Power and Authority to Enter Into Agreement

 

Each of the Purchasing Entities has the
corporate power and authority to enter into this Agreement and the Related
Agreements to which it is a Party and to perform its obligations hereunder and
thereunder.

 

(c)                                  Due
Execution and Enforceability

 

The execution, delivery and performance by
and on behalf of each of the Purchasing Entities of this Agreement and the
Related Agreements to which it is a party have been duly authorized by all
necessary corporate action, and no other action on the part of each of the Purchasing
Entities is required in connection therewith. This Agreement constitutes a
valid and binding obligation of each of the Purchasing Entities, enforceable
against each of them in accordance with its terms, except to the extent the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by general equitable
principles. The Related Agreements to which each of the Purchasing Entities is
a party, when executed and delivered by the applicable Purchasing Entity, will
constitute valid and binding obligations of the respective Purchasing Entity,
enforceable against each of them in accordance with their respective terms,
except to the extent the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally or by general equitable principles.

 

57

 

(d)                                  No Conflict

 

With respect to each of the Purchasing
Entities, the execution and delivery of this Agreement and the Related
Agreements to which such Purchasing Entity is a party do not, and the
consummation by it of any of the transactions contemplated hereby or thereby
will not:

 

(i)            conflict
with or violate its articles of incorporation, bylaws or other constituent
documents;

 

(ii)           violate
any applicable Law of any Governmental Body; or

 

(iii)          violate,
conflict with, result in any breach of, or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under
any contract or judgment to which it is a party or by which it is bound, except
as would not be reasonably likely to have a material adverse effect on such
Purchasing Entity.

 

4.2                               Required
Consents

 

Set forth on Schedule 4.2
is a list and description of any consent, approval or authorization of, or
exemption by, or filing with (a) any Governmental Body and (b) any
Person (other than any Governmental Body referred to in clause (a) which is
required in connection with the execution, delivery and performance of this
Agreement and the Related Agreements by the Purchasing Entities, except for
governmental and business franchises, permits, reports, licenses and other
authorizations necessary to conduct the Business on the Transfer Date.

 

4.3                               Claims,
Litigation and Governmental Proceedings

 

No investigation, suit, action or other
judicial or governmental proceeding is pending or, to the knowledge of the
Purchasing Entities, threatened before any court or Governmental Body which is
likely to result in the restraint or prohibition of, or the obtaining of
substantial damages in connection with, this Agreement or the consummation of
the transactions provided for in this Agreement.

 

4.4                               Broker’s or
Finder’s Fees

 

Except for BNP Paribas Corporate Finance, no
Person or firm other than Buyer US and its Affiliates (and their respective
directors, officers and employees), has arranged, or participated in arranging,
on behalf of the Purchasing Entities or their Affiliates, the transactions
provided for in this Agreement. There are no broker’s or finder’s fees to be
paid by the Purchasing Entities or their Affiliates in connection with the
transactions provided for in this Agreement. Neither of the Purchasing Entities
nor any of their Affiliates has any knowledge of, and has taken no action which
would give rise to, any claim for a broker’s or finder’s fee to be paid by any
of the Selling Entities in connection with the consummation of the transactions
provided for in this Agreement.

 

58

 

4.5                               Available
Funds

 

The Purchasing Entities have adequate funds
to pay the Purchase Price and to operate the Business and to pay, perform and
discharge the Assumed Liabilities as they become due and payable. Buyer US is
not insolvent, and Buyer US will not be rendered insolvent by the
transactions contemplated by this Agreement. Without prejudice to the fact that
this Agreement does not provide for any financing condition, a true, correct
and complete copy of the Financing Term Sheet is attached hereto as Exhibit B.

 

(Article 5 follows)

 

59

 

ARTICLE 5.

Certain Covenants Pending the Closing

 

5.1                               Full Access

 

The Purchasing Entities and their authorized
representatives shall have reasonable access during normal business hours and
upon reasonable advance notice, but without unreasonably interrupting business,
to all the premises and to all books of account, records and properties of the
Business, including without limitation those relative to (a) the December
Financials and the June Financials and (b) the customers of and suppliers
to the Business; provided, however,
that the Purchasing Entities and their representatives agree that such access
and disclosure will not be permitted if it would (i) violate any
applicable Law, or (ii) cause competitive harm to any of the Selling
Entities or any of their Affiliates if the transactions contemplated by this
Agreement are not consummated. Subject to the foregoing limitations and the
requirements of this Agreement, including but not limited to Section 5.7,
UNOVA shall furnish or cause to be furnished to the Purchasing Entities and
their authorized representatives all information with respect to the Business
as the Purchasing Entities may reasonably request. No investigation by the
Purchasing Entities pursuant to this Section 5.1 shall affect any
representation or warranty given by the Selling Entities hereunder or any of
the Purchasing Entities’ rights under this Agreement, including without
limitation under Articles 10 and 11.

 

5.2                               Carry On In
Regular Course

 

From the date hereof until the Transfer Date,
the Selling Entities shall conduct the Business in the ordinary course
consistent with past practices and shall use their reasonable best efforts to preserve
intact the business organization and relationships with third parties and to
keep available the services of the present officers and Employees of the
Business, but without prejudice to the continued operation by UNOVA UK of the
existing early retirement practices in relation to the UK Employees. Without
limiting the generality of the foregoing, from the date hereof until the
Transfer Date, the Selling Entities shall not:

 

(a)           enter
into any sales order, sales contract, change order, final bid or binding sales
proposal relating to the Business (“Sales Order”)
other than (i) Sales Orders entered into in the ordinary course of
business and consistent with past practices and which are not knowingly or
intentionally bid at an anticipated loss, or (ii) any Sales Orders that
are substantially in accord with a bid or sales proposal set forth on Schedule 3.8(a);

 

(b)           without
the prior consent of Buyer US, which consent shall not be unreasonably withheld
or delayed, make any capital expenditures relating to the Business unless such
expenditure is made pursuant to a purchase order set forth on Schedule 3.8(b) or the aggregate of any such capital
expenditures is less than $100,000;

 

60

 

(c)           without
restricting the exercise of any power or discretion under the Landis Pension
Plan, and otherwise without the prior consent of Buyer US, which consent shall
not be unreasonably withheld or delayed (i) terminate or otherwise layoff
any Employees of the Business, and will preserve intact and keep available the
services of all Employees of the Business, (ii) hire or employ any new
salaried personnel of the Business, (iii) grant any increase in the rates
of pay of any Employee (other than routine increases granted in the ordinary
course of business and consistent with past practice), or (iv) by means of
any new or existing compensation or employee benefit plan increase the
compensation or amount or level of benefits of any Employee, other than, in
each case, any Employee whom the Parties agree will not be a Continuing
Employee, but without prejudice to Section 5.8; and

 

(d)           take
any decision or exercise any power or discretion in relation to the Landis
Pension Plan without consulting Buyer UK.

 

5.3                               Consents;
HSR

 

(a)           The
Parties, in cooperation and after consultation and mutual agreement, shall take
all reasonable action (without payment of any penalty or fee) required to
obtain all consents, approvals and agreements of, and to give all notices and
make all filings with, any third parties, including Governmental Bodies,
necessary to authorize, approve or permit the transfer to the Purchasing
Entities of the Purchased Assets, the Shares and the Assumed Liabilities as
provided for in this Agreement.

 

(b)           Without
limiting the foregoing, the Parties shall promptly respond to any requests for
information in connection with the Pre-merger Notification and Report Form (“HSR Filing”) required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “HSR
Act”) in connection with the transactions contemplated hereby. In
connection with the efforts referenced herein, each of the Purchasing Entities
on the one hand, and each of the Selling Entities on the other hand, shall
(i) use its reasonable best efforts to cooperate in all respects with the
other Parties hereto in connection with any filing or submission and in
connection with any investigation or other inquiry, including any proceeding
initiated by a private party, regarding the transactions contemplated hereby,
(ii) keep the other Parties, including their counsel, as the case may be,
informed of any material communication by or to such party or its counsel from
or to the Federal Trade Commission (the “FTC”), the
Antitrust Division of the Department of Justice (the “DOJ”)
or any other Governmental Body and of any material communication received or
given in connection with any proceeding by a private party, in each case
regarding any of the transactions contemplated hereby, (iii) permit the
other Parties and their legal counsel to review, consult with each other in
advance of and consider in good faith the views of the other in connection with
any correspondence, filings or communications given by it to, or between it
and, the FTC, the DOJ or any other Governmental Body or in connection with any
proceeding by a private party, regarding the transactions contemplated hereby,
and (iv) permit the other Parties and their legal counsel to attend and
participate in, any meeting or conference with, the FTC, the DOJ or any such other
Governmental Body or, in

 

61

 

connection with any proceeding
by a private party, with any other Person, regarding the transactions
contemplated hereby.

 

(c)           Without
limiting the provisions of paragraph (a) above, the Parties agree (i) to
promptly carry out all required filings under any applicable anti-trust Law
other than the HSR Act, and (ii) that all requests and enquiries from any
Governmental Body in relation to any anti-trust filing required by a European,
governmental, supranational or trade agency, court or other regulatory body
(other than under the HSR Act) shall be dealt with by the Purchasing Entities
in consultation with the Selling Entities and each of the Parties shall
promptly co-operate with each other and provide all necessary information and
assistance reasonably required by such government, agency, court or body upon
being requested to do so by the other.

 

5.4                               Notices of
Certain Events; Continuing Disclosure

 

(a)           To
the extent permitted by applicable Laws, UNOVA shall promptly notify Buyer US
and Buyer UK of the receipt between the date of this Agreement and Closing of,
and promptly provide them a copy of:

 

(i)            any
notice or other communication from any Person alleging the consent of such
Person is or may be required in connection with the transactions contemplated
by this Agreement;

 

(ii)           any
notice or other communication from any Governmental Body in connection with the
transactions contemplated by this Agreement, including, without limitation,
notices or communications received in connection with the HSR Filing;

 

(iii)          any
actions, suits, claims, investigations or proceedings commenced or, to
threatened against, or relating to or involving or otherwise affecting any of
the Selling Entities that could reasonably be expected to have a material
adverse effect on the Business or that relate to the consummation of the
transactions contemplated by this Agreement, or any material developments
relating to any actions, suits, claims, investigations or proceedings disclosed
pursuant to Section 3.14; and

 

(iv)          any
notice or other communication received by UNOVA UK from the office of the
Pensions Regulator in relation to the UK Pension Plans.

 

(b)           Until
the Transfer Date, the Selling Entities shall have the continuing obligation
promptly to advise Buyer US and Buyer UK with respect to any matter hereafter
arising or discovered that constitutes a breach or prospective breach of this
Agreement by the Selling Entities.

 

(c)           No
notice pursuant to this Section shall effect any representation or warranty
given by the Selling Entities hereunder or any of the Purchasing Entities’
rights under this Agreement, including, without limitation, under
Articles 10 and 11.

 

62

 

5.5                               Supplements
to Disclosure

 

From time to time prior to, and in any case,
at the Closing, the Selling Entities shall amend or supplement the Schedules
attached to this Agreement with respect to any matter that, if existing on the
date hereof or occurring at or prior to the Transfer Date, would have been
required to be set forth or described on such a Schedule or that is necessary
to complete or correct any information in any representation or warranty
contained in Article 3. No such supplement or amendment to any Schedule
pursuant to this Section 5.5 shall have any effect for the purpose of
determining satisfaction of any of the conditions set forth in Article 6
or the Purchasing Entities’ rights under this Agreement, including, without
limitation, Articles 10 and 11.

 

5.6                               Conditions
Precedent

 

The Parties shall use all reasonable efforts
to assure that the conditions precedent set forth in Articles 6 and 7 are
satisfied or waived on or prior to December 9, 2005, to the extent that
satisfaction of such conditions precedent is within their reasonable control.

 

5.7                               Nondisclosure

 

(a)           Each
of the Purchasing Entities shall hold in confidence, and shall use all
reasonable efforts to cause its representatives and its Affiliates to hold in
confidence, between the Agreement Date and the Transfer Date, any and all
confidential or secret information in respect of the Business furnished to it,
its representatives or its Affiliates by any of the Selling Entities or UNOVA
UK in connection with this Agreement and not to disclose or publish such
information without the prior written consent of UNOVA, provided that the
Purchasing Entities may disclose such information to its officers, directors,
employees, accountants, counsel, consultants, advisors, agents and lenders in
connection with the transactions contemplated by this Agreement so long as such
persons are informed by the Purchasing Entities of the confidential nature of
such information and are directed by the Purchasing Entities to treat such
information confidentially in accordance with this Agreement.

 

(b)           In
the event that this Agreement is terminated and the transactions provided for
in this Agreement are abandoned as contemplated by Section 10.1, the terms
of that certain Confidentiality Agreement, dated July 8, 2005, between CFL
and UNOVA (the “Confidentiality Agreement”),
shall remain in full force and effect, and each of the Purchasing Entities
confirms that it will comply with the obligations thereunder as if it were a
party thereto.

 

5.8                               Reorganization
of U.K. Pension Plans

 

(a)           UNOVA
UK and Buyer UK shall procure that on or before Closing there is executed a
Deed of Change of Principal Employer and Trustees relating to the Landis
Grinding Systems Pension Fund (the “Landis Pension Plan”)
in the form set out in Exhibit 5.8(a),
which the Parties agree provides that the change of principal employer of the

 

63

 

Landis Pension Plan shall be
effective simultaneously with the transfer of the UK Employees to Buyer UK.

 

(b)           UNOVA
UK shall procure that on or before the Transfer Date the benefits under the
UNOVA Pension Fund of those members of the Landis Pension Plan who have agreed
to the transfer of their accrued benefits from the UNOVA Pension Fund to the
Landis Pension Plan on the terms provided to Buyer UK set out at Exhibit 5.8(b) (the “Transferring
Members”) are transferred to the Landis Pension Plan on those
terms.

 

(c)           UNOVA
UK shall procure that the value of the assets transferred from the UNOVA
Pension Fund to the Landis Pension Plan in connection with the transfer
referred to in Section 5.8(b) calculated as at 1 July 2005 using the
method and assumptions set forth in Exhibit 5.8(c)
(the “Transferred Asset Value”)
shall be no more than £4 million less than the value of the liabilities
transferred from the UNOVA Pension Fund to the Landis Pension Plan in
connection with the transfer referred to in Section 5.8(b) calculated as
at 1 July 2005 using the method and assumptions set forth in Exhibit 5.8(c) (the “Transferred
Liability Value”). For the purpose of calculating the
Transferred Liability Value the normal retirement date of all members of the
Landis Pension Plan shall be taken to be and to always have been age 65 in
respect of all periods of pensionable service, including all periods in respect
of which liabilities transferred from the UNOVA Pension Fund, whether before,
on or after the Transfer Date, with no entitlement to bring their pensions into
payment before age 65, and no allowance shall be made for equalization of
guaranteed minimum pensions. However, there is an allowance for retirements
before normal retirement date in Exhibit 5.8(c).
Exhibit 5.8(c) reflects the
assumptions adopted in an interim valuation report as at 5 April 2005 in
relation to the UNOVA Pension Fund, a copy of which has been made available to
Buyer UK. Upon request UNOVA UK will provide Buyer UK with all information
reasonably necessary to enable Buyer UK to verify the calculations referred to
in this Section 5.8(c).

 

(d)           [Reserved]

 

(e)           Buyer
UK shall further procure that neither it nor any of its Affiliates
(i) takes any action or assists any Person in any manner which would
result in the UNOVA Pension Fund having to pay a larger amount to the Landis
Pension Plan than any amount actually paid before such action or assistance, or
(ii) encourages or assists any Person in making a claim against the
trustees of the UNOVA Pension Fund or UNOVA UK or any Affiliate; provided,
however, that the foregoing shall not limit the ability of the Purchasing Entities
to make a claim for indemnification under Article 11 of this Agreement.

 

5.9                               Assumption
of Retiree Medical Plan

 

(a)           Effective
as of the Transfer Date, the Selling Entities shall transfer and assign to
Buyer US, and Buyer US shall assume sponsorship of, and all obligations,
liabilities and rights of the Selling Entities (other than any rights of the
Selling Entities under non-transferable contracts and contracts that also cover
active employees of the

 

64

 

Selling Entities) with respect
to, the retiree medical benefit programs made available to employees of the
Landis Grinding Systems, Gardner Abrasives, and CITCO divisions of UIASI as in
effect immediately prior to the Transfer Date (the “Retiree
Medical Plan”), and the Selling Entities shall have no
obligation or liability with respect thereto on or after the Transfer Date.

 

(b)           At
the request of Buyer US, the Selling Entities shall use reasonable efforts to
cooperate with Buyer US in dealing with an insurance company or companies
selected by Buyer US in connection with the establishment of an insurance
contract or contracts to be entered into by Buyer US that are substantially
similar to the insurance contracts maintained by the Selling Entities in connection
with the Retiree Medical Plan immediately prior to the Transfer Date. The
Selling Entities shall take all other actions as may be reasonably necessary
or, in the reasonable opinion of Buyer US, desirable to effect the assumption
by Buyer US of the Retiree Medical Plan as described herein.

 

(Article 6 follows)

 

65

 

ARTICLE 6.

Conditions Precedent to the Obligations of the Purchasing Entities to Close

 

Each and every obligation of the Purchasing
Entities to be performed at Closing shall be subject to the satisfaction of the
following conditions:

 

6.1                               Representations
and Warranties True

 

The representations and warranties made by
the Selling Entities in this Agreement at the time of its execution and delivery
and in any certificate or other writing delivered by the Selling Entities
pursuant hereto, disregarding all qualifications and exceptions contained
therein relating to materiality or material adverse effect, shall be true and
correct in all respects on the Transfer Date as if made again and reaffirmed on
such date, except where the failure of such representations and warranties to
be so true and correct would not reasonably be expected to have or result in,
individually or in the aggregate, a material adverse effect on the Business. The
Purchasing Entities shall have received a certificate signed by a duly
authorized officer of UNOVA to the foregoing effect.

 

6.2                               Compliance
With Agreement

 

The Selling Entities shall have performed and
complied in all material respects with all of the obligations under this
Agreement which are to be performed or complied with by them on or prior to the
Transfer Date. The Purchasing Entities shall have received a certificate signed
by a duly authorized officer of UNOVA to the foregoing effect.

 

6.3                               No Material
Adverse Change

 

Since the June Balance Sheet Date there shall
have been no material adverse change in the operations of the Business, taken
as a whole.

 

6.4                               No
Litigation

 

No investigation, suit, action or other judicial
or governmental proceeding shall be pending or threatened before any court or
Governmental Body, which is reasonably likely to result in the restraint or
prohibition or the obtaining of substantial damages in connection with this
Agreement or the consummation of the transactions provided for in this
Agreement, or that may materially adversely affect the Purchasing Entities’
ability to operate the Business after the Transfer Date, and the Pensions
Regulator in the United Kingdom shall not have indicated that he intends to
issue a contribution notice or financial support direction under Part 1 of the
Pensions Act 2004 with respect to or affecting the Landis Pension Plan.

 

66

 

6.5                               [Reserved]

 

6.6                               Consents and
Approvals

 

The Parties shall have obtained all necessary
and material authorizations, consents and approvals required for the valid
consummation of the transactions provided for in this Agreement, provided,
however, that only those Required Consents listed on Schedule 6.6
shall be required to have been obtained as of Closing under this
Section 6.6, and each of such authorizations, consents and approvals shall
be in full force and effect. Without limiting the generality of the foregoing,
if applicable, (i) the time period under the HSR Act shall have expired or
early termination shall have been granted, and no adverse action shall have
been threatened or instituted in connection therewith, and (ii) the
European Commission, or any national relevant anti-trust authority, shall have
made an express or implied decision which, in accordance with the relevant
applicable anti-trust laws, unconditionally authorizes (without any request for
the Purchasing Entities to comply with certain undertakings) or does not prevent
the Transactions from being implemented under the terms and conditions
contemplated under this Agreement.

 

6.7                               Instruments
of Transfer

 

The applicable Selling Entities shall have
executed and delivered to the Purchasing Entities bills of sale meeting all
necessary requirements of United States and foreign Laws sufficient to transfer
to the Purchasing Entities the Purchased Assets as well as deeds conveying the
Owned Real Property (other than the South Beloit Facility and the Waynesboro
Facility) to the Purchasing Entities. The Selling Entities shall also deliver
the following:

 

(a)           A
certificate of the Secretary or an Assistant Secretary (or local equivalent) of
each of the Selling Entities setting forth a copy of the resolutions duly
adopted by its Board of Directors and, in the case of Selling Entities other
than UNOVA, stockholders authorizing and approving the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby;

 

(b)           Appropriate
instruments authorizing Buyer US and Buyer UK to endorse in the name of the
Selling Entities all checks, drafts, notes and other instruments for the
payment of money and to receive for the account of the Purchasing Entities all
proceeds thereof to which the Purchasing Entities are entitled under this
Agreement; and

 

(c)           A
certificate validly executed by a duly authorized officer of the Selling
Entities in a form reasonably acceptable to Buyer US for purposes of satisfying
Buyer US’s obligations under Treasury Regulation Section 1.1445-2(c)(3).

 

67

 

(d)           A
limited warranty deed, duly executed and acknowledged by the applicable Selling
Entity, conveying good and marketable title to the Owned Real Property (other
than the South Beloit Facility and Waynesboro Facility), free and clear from
all Liens other than Permitted Liens listed under paragraphs (i), (ii),
(iii), (iv), (v), (vii) and (viii) of Section 3.5(a).

 

(e)           The
transfer and assignment documents set forth in Section 8.11.

 

6.8                               [Reserved]

 

6.9                               Opinion of
Counsel

 

The
Purchasing Entities shall have received an opinion of Perkins Coie LLP to the
effect specified in Schedule 6.9. Such opinion shall recite that it may be
relied upon by the Purchasing Entities’ bank lenders as if it
were addressed to them.

 

6.10                        Amendment to
MAG Transition Services Agreement

 

The
Transition Services Agreement dated as of April 3, 2005 between UIASI and
MAG Industrial Automation Systems, Inc. (“MAG”)
shall be amended in a form reasonably satisfactory to the Purchasing Entities
pursuant to which MAG shall have agreed to provide IT Services to the Landis
Group until March 31, 2007.

 

6.11                        Transition
Services Agreement

 

The Selling Entities shall have executed and
delivered to the Purchasing Entities an agreement in substantially the form of Exhibit C (the “Transition Services
Agreement”) pursuant to which (i) the Selling Entities
Group shall continue to provide certain services to the Landis Group, and
(ii) the Purchasing Entities in respect of the Landis Group shall provide
certain services to the Selling Entities.

 

6.12                        Title

 

On the Transfer Date, title to the Owned Real
Property in the United States (excluding the South Beloit Facility and the
Waynesboro Facility) shall be insurable by a standard ALTA owner’s policy of
title insurance at standard rates, including, without limitation, easements and
appurtenances thereto, showing good and marketable title in fee simple to such
Owned Real Property to be vested in the Purchasing Entities, free and clear of
all Liens other than (a) Permitted Liens listed under paragraphs (i),
(ii), (iii), (iv), (v), (vii) and (viii) of Section 3.5(a), (b) Liens
approved by the Purchasing Entities and (c) the exclusions and preprinted
exceptions in the title company’s standard ALTA form of owner’s policy of title
insurance. The Purchasing Entities shall notify the Selling Entities of any
objections or exceptions to, or defects in, the title to any Owned Real
Property (excluding the South Beloit Facility and the Waynesboro Facility) that
appears in the commitments obtained by them for such title insurance at least
30 days prior to the Transfer Date. The Selling Entities agree to furnish such
indemnities and affidavits as may be reasonably required by the

 

68

 

title insurance company, or to use reasonable
efforts to deliver such other documents, in each case, as may be reasonably
required to vest in the Purchasing Entities good and marketable title in fee
simple to such Owned Real Property, free and clear as described above and to
enable the title insurer to issue a title insurance policy to the Purchasing
Entities in accordance with the foregoing on the Transfer Date. For purposes of
this Section 6.12, Owned Real Property shall not include the South Beloit
Facility and the Waynesboro Facility and the UK Freehold Property at Keighly,
England.

 

6.13                        Leases

 

(a)           UIASI
shall have executed and delivered to Buyer US an agreement in the form of Exhibit D-1 pursuant to which UIASI will lease the South
Beloit Facility to Buyer US.

 

(b)           UIASI
shall have executed and delivered to Buyer US an agreement in the form of Exhibit D-2 pursuant to which UIASI will lease the
Waynesboro Facility to Buyer US.

 

6.14                        Discharge of
Indebtedness; Release of Liens

 

(a)           The
Purchasing Entities shall have received evidence reasonably satisfactory to the
Purchasing Entities of the discharge of:

 

(i)            all
Liens (other than Permitted Liens excluding, for the avoidance of doubt, the
Liens listed in Schedule 3.5) on the
Purchased Assets; and

 

(ii)           all
Liens on the Purchased Assets securing UNOVA’s revolving credit facility and
UNOVA U.K.’s credit facility.

 

(b)           The
Purchasing Entities shall have received a letter from UNOVA UK’s bankers and
charges dated the date of Closing confirming that none of the floating charging
granted by UNOVA UK over any of the UK Purchased Assets has crystallized.

 

6.15                        [Reserved]

 

6.16                        [Reserved]

 

6.17                        UK Pension
Plans

 

With respect to the Landis Pension Plan, a
valuation (the “Valuation”) as at 1 July
2005 shall have been signed by the actuary to the Landis Pension Plan, the
related schedule of contributions (“Schedule of Contributions”)
(as required under Section 58 Pensions Act 1995) shall have been approved
and signed by or on behalf of the trustees of the Landis Pension Plan and the
Schedule of Contributions shall state a rate of employer contributions not
exceeding 16.2% of the pensionable salary of employees in Scheme A and 18.9% of
the pensionable salary of employees in Scheme B (in the aggregate, the (“Contribution Rate”),

 

69

 

and the Pension Regulator shall have raised
no objection to the Valuation or the Schedule of Contributions on or before
Closing in relation to the Landis Pension Plan.

 

6.18                        Other

 

Except as required by Law, any condition
specified in this Article 6 may be waived by the Purchasing Entities; provided
that no such waiver shall be effective unless it is set forth in a writing
executed by the Purchasing Entities or unless the Purchasing Entities agree in
writing to consummate the transactions contemplated by this Agreement without
fulfillment of such condition. No waiver of a closing condition by the
Purchasing Entities shall limit their rights under Article 11.

 

6.19                        Closing
Conditions for UNOVA UK

 

(a)           A
resolution in the agreed form shall have been passed at a duly convened and
constituted annual meeting or extraordinary general meeting of UNOVA UK
approving the transaction contemplated by this Agreement and any agreements
referred to herein.

 

(b)           The
business consisting of the UK Purchased Assets shall have been continued as a
going concern by UNOVA UK.

 

(c)           UNOVA
UK shall deliver or consent to be delivered or make fully available to Buyer UK
all of the UK Purchased Assets capable of being transferred by delivery or by
physical transfer.

 

6.20                        Benefit of
Letters of Credit

 

The Purchasing Entities shall be reasonably
satisfied that they shall receive the benefit after the Transfer Date of all
letters of credit in favor of the Selling Entities relating to the Business as
disclosed on Schedule 1.1(l), it being acknowledged that certain letters
of credit may not be transferable and accordingly that the Selling Entities
will continue to exercise their rights under such letters of credit for the
benefit of and at the reasonable discretion and out-of-pocket expense of the
Purchasing Entities.

 

(Article 7 follows)

 

70

 

ARTICLE 7.

Conditions Precedent to the Obligations of the Selling Entities to Close

 

Each and every obligation of the Selling
Entities to be performed at Closing shall be subject to the satisfaction of
each of the following conditions:

 

7.1                               Representations
and Warranties True

 

The representations and warranties made by
the Purchasing Entities in this Agreement at the time of its execution and
delivery and in any certificate or other writing delivered by the Purchasing
Entities pursuant hereto, disregarding all qualifications and exceptions
contained therein relating to materiality or material adverse effect, shall be
true and correct in all respects on the Transfer Date as if made again and
reaffirmed on such date, except where the failure of such representations and
warranties to be so true and correct would not reasonably be expected to have
or result in, individually or in the aggregate, a material adverse effect on
the Purchasing Entities. The Selling Entities shall have received a certificate
signed by a duly authorized officer of Buyer US to the foregoing effect.

 

7.2                               Compliance
With Agreement

 

Each of the Purchasing Entities shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are to be performed or complied with by it on or
prior to the Transfer Date. The Selling Entities shall have received a
certificate signed by a duly authorized officer of Buyer US to the foregoing
effect.

 

7.3                               No
Litigation

 

No investigation, suit, action or other
judicial or governmental proceeding shall be pending or threatened before any
court or Governmental Body which is reasonably likely to result in the
restraint or prohibition, or the obtaining of substantial damages in connection
with this Agreement or the consummation of the transactions provided for in
this Agreement, and the Pensions Regulator in the United Kingdom shall not have
indicated that he intends to issue a contribution notice or financial support
direction under Part 1 of the Pensions Act 2004 with respect to or affecting
the UNOVA Pension Fund.

 

7.4                               [Reserved]

 

7.5                               Consents and
Approvals

 

The Parties shall have obtained all necessary
and material authorizations, consents and approvals required for the valid
consummation of the transactions provided for in this Agreement, and each of
such authorizations, consents and approvals shall be in full force and effect,
provided, however, that (a) only those Required Consents listed on Schedule 6.6 shall be required to have been obtained as
of Closing under this Section 7.5, and (b)  if the Purchasing
Entities (i) waive receipt of a Required Consent listed in
Schedule 6.6 in connection with Closing, and (ii) waive any claim for
indemnification under Article 11 in

 

71

 

connection with the failure to obtain such
Required Consent, then this Section 7.5 shall be deemed satisfied with
respect to such Required Consent. Without limiting the generality of the
foregoing, if applicable, the time period under the HSR Act shall have expired
or early termination shall have been granted, and no adverse action shall have
been threatened or instituted in connection therewith.

 

7.6                               Purchase
Price

 

The Purchasing Entities shall have delivered
to UNOVA the Purchase Price.

 

7.7                               Note

 

The Note substantially in the form of Exhibit A shall have been delivered on the Transfer
Date.

 

7.8                               Instruments
of Assumption

 

The applicable Purchasing Entities shall have
executed and delivered to the applicable Selling Entities instruments of
assumption sufficient for the applicable Purchasing Entities to assume the
Assumed Liabilities applicable to the Purchased Assets acquired by it
including, without limitation, a Deed of Change of Principal Employer and
Trustees in the form set forth in Exhibit 5.8(a).
The Purchasing Entities shall also deliver a certificate of the Secretary or an
Assistant Secretary (or local equivalent) of each of such Persons setting forth
a copy of the resolutions duly adopted by its Board of Directors authorizing
and approving the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.

 

7.9                               Performance
Bonds

 

The Purchasing Entities shall have in place
financial instruments, including the issuance of a back-up letter of credit, if
necessary, in a form and manner acceptable to UNOVA and Barclays Bank to secure
the obligations of the Landis Group under those executory contracts, set forth
on Schedules 3.8(j) (the “Performance Bonds”).

 

7.10                        Leases

 

(a)           Buyer US
shall have executed and delivered to UIASI an agreement in the form of Exhibit D-1 pursuant to which UIASI will lease the
South Beloit Facility to Buyer US.

 

(b)           Buyer US
shall have executed and delivered to UIASI an agreement in the form of Exhibit D-2 pursuant to which UIASI will lease the
Waynesboro Facility to Buyer US.

 

72

 

7.11                        Other

 

Except as required by Law, any condition
specified in this Article 7 may be waived by the Selling Entities;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by the Selling Entities or unless the Selling Entities agree
in writing to consummate the transactions contemplated by this Agreement
without fulfillment of such condition. No waiver of a closing condition by the
Selling Entities shall limit their rights under Article 11.

 

7.12                        Transition
Services Agreement

 

The Purchasing Entities shall have executed
and delivered to the Selling Entities the Transition Services Agreement
pursuant to which (i) the Selling Entities Group shall continue to provide
certain services to the Landis Group, and (ii) the Purchasing Entities in
respect of the Landis Group shall provide certain services to the Selling
Entities.

 

(Article 8 follows)

 

73

 

ARTICLE 8.

Further Requirements

 

8.1                               Access to
Books and Records

 

From and after the Transfer Date,
(a) the Selling Entities and their authorized representatives shall have
reasonable access, during normal business hours and upon reasonable notice, to
inspect and examine and the right to photocopy all books of account and records
transferred to the Purchasing Entities pursuant to this Agreement that relate
to the affairs and business of the Landis Group conducted on or prior to the
Transfer Date, and (b) the Purchasing Entities will cooperate with the
Selling Entities as may be reasonably necessary to permit the Selling Entities
to close their books with respect to the Business as of the Transfer Date and
to prepare their customary financial reports, including but not limited to
furnishing to the Selling Entities and their authorized representatives with
existing financial and operating data and other information with respect to the
affairs and business of the Landis Group necessary to prepare such financial
reports; provided that such inspection, examination, photocopying and requests
for cooperation shall be conducted so as not to unreasonably interfere with the
Business. To the extent that any books and records that constitute Excluded
Assets pursuant to Section 1.2(h) are commingled with the books and
records transferred to the Purchasing Entities hereunder, the Purchasing
Entities shall notify the applicable Selling Entities before destroying any of
such books and records and shall afford the Selling Entities a reasonable
opportunity to photocopy or take possession of the same.

 

8.2                               Further
Instruments and Assurances

 

From and after the Agreement Date, each of
the Parties shall use its reasonable best efforts to take, or cause to be
taken, such other action as may be required to fully and effectively carry out
the transactions contemplated by this Agreement.

 

8.3                               Litigation
Cooperation

 

If any Party is a party to any suit, action,
proceeding or investigation concerning the Business conducted on or prior to
the Transfer Date (excluding any such suit, action, proceeding or investigation
between any of the Selling Entities, on the one hand, and any Purchasing
Entity, on the other hand), the Parties shall, upon the request of the Party
involved in such litigation and without charge to such Party, use their best
efforts to assist and cooperate fully with such Party in connection with such
litigation.

 

8.4                               Certain
Employee Matters

 

(a)                                  Employment

 

As soon as practicable following the
Agreement Date, the applicable Purchasing Entity shall offer employment as of
the Transfer Date to all Employees at their current work sites, (i) at
their current rates of base pay and (ii) with the types of benefits that
are listed on

 

74

 

Schedule 8.4(a) and that in the
aggregate are comparable to those that such Employees currently receive, in
each case, for a period of 12 months. Notwithstanding the foregoing and
except as is required to discharge the Assumed Liabilities under
Sections 1.6(j) and 1.6(n), Buyer US will not be required to provide any
defined pension plan or retiree medical benefits to Continuing Employees. Those
Employees who accept such offer are referred to collectively as the “Continuing Employees” (which, for
the avoidance of doubt, includes all those Employees of UNOVA UK who become
employees of Buyer UK on Closing pursuant to the Transfer Regulations). Nothing
in this Agreement creates any third-party beneficiary rights with respect to
employment of any Employee.

 

(b)                                  Certain
Employee Benefits

 

(i)                                    Past Service
Credit

 

The applicable Purchasing Entity shall credit
the Continuing Employees with their respective years of continuous service with
UNOVA or its Affiliates for purposes of eligibility and vesting under the
applicable Purchasing Entity’s employee benefit plans.

 

(ii)                                Benefits
under the Selling Entities’ Plans

 

The Selling Entities shall cease accrual of
benefits as of the Transfer Date with respect to any Continuing Employee under
any of their employee benefit plans that are not assumed by any Purchasing
Entity.

 

(iii)                            U.S. Medical
and Health Plan

 

Buyer US will have in effect in the United
States within 90 days of the Transfer Date a group insurance program under
which Continuing Employees of the Landis US division (the “US Employees”) will be
permitted to participate in benefits consisting of medical, hospital, life and
dental insurance benefits. Eligibility for, the benefits of (including the
reservation by Buyer US of the right to terminate or amend such program in
whole or in part at any time), and the amount, if any, of employee
contributions toward, such group insurance program will be determined by Buyer
US except that Buyer US’s group insurance with respect to US Employees
will:

 

(A)          Waive
application of its pre-existing conditions provision to any US Employee or
covered dependent for any medical condition such US Employee or covered
dependent has as of the Transfer Date unless such condition was or would have
been excluded from coverage as a pre-existing condition under the applicable
Selling Entity’s group insurance program covering such US Employee or
covered dependent as of the Transfer Date; and

 

(B)           Credit
each US Employee in Buyer US’s program plan year with eligible expenses
incurred by, and claims paid on behalf of, such US Employee in the current
program plan year of the Selling Entity’s group insurance program applicable to
such Employee for purposes of satisfying the deductible provisions, the out-of-pocket
maximum

 

75

 

provisions and the maximum
coverage provisions of Buyer US group insurance program, but only to the extent
Buyer US program plan year overlaps with the applicable Selling Entity’s
current program plan year.

 

(C)           UNOVA
will provide the benefits transition services, participation in health plans and
COBRA continuation coverage as set forth in the Transition Services Agreement.

 

(iv)                               Buyer US’s
401(k) Plan

 

Buyer US shall offer all Continuing Employees
the opportunity to enroll in Buyer US’s 401(k) plan (the “Buyer US’s 401(k) Plan”)
subject to the enrollment requirements of Buyer US’s 401(k) Plan. Except
as otherwise provided below with respect to the “FSSP/UPP
Transition Period” (as defined below), as soon as Buyer US shall
have reasonably concluded that UNOVA’s 401(k) plan (the “FSSP”) is tax-qualified, it shall
cause Buyer US’s 401(k) Plan to accept the direct rollover of the pre-tax
account balance under the FSSP of any Continuing Employee who elects to enroll
as an active participant in Buyer US’s 401(k) Plan and to have such
account balance transferred to Buyer US’s 401(k) Plan. UNOVA shall
cause the Plan Administrator designated under the FSSP to extend the repayment
period of a loan of any Continuing Employee from 30 days to 90 days
following the Transfer Date, it being understood that any such loan that is not
repaid by the end of the calendar quarter after the calendar quarter when the
most recent installment was due will be deemed to be in default. If mutually
acceptable to Buyer US and UNOVA and if legally permissible, UNOVA shall permit
the employees of the Landis US division who become Continuing Employees to
continue to participate in the FSSP and the UNOVA Pension Plan (the “UPP”) for a period of up to six
months following the Transfer Date (the “FSSP/UPP Transition Period”);
provided that in such event, Buyer US shall pay to UNOVA (or, in the sole
discretion of UNOVA, directly to the FSSP or the UPP, as the case may be) the
contributions, costs and administrative charges relative to the benefits earned
by such employees while participating in the FSSP and UPP during the FSSP/UPP
Transition Period. The payments of contributions, costs and administrative
charges described in the preceding sentence shall be made promptly after each
payroll period. In the case of contributions relative to benefits earned by
Continuing Employees under the FSSP, payments for each payroll period shall
include all employee contributions and related employer matching contributions
for such payroll period. In the case of contributions relative to benefits
earned by Continuing Employees under the UPP, payments for each payroll period
shall include a pro-rata portion of the required annual employer contribution
to the UPP, determined by dividing the projected annual employer contribution
to the UPP for Continuing Employees (as determined by the actuary for the UPP)
by the number of payroll periods over which Continuing Employees accrue
benefits in the UPP during the year. In the event that Buyer US fails to make
such payments as required, UNOVA shall be entitled to immediately terminate the
participation of such employees in the FSSP and UPP. Buyer US shall take
all steps required to maintain the tax-qualified status of the FSSP and the UPP
(as determined by UNOVA in its sole discretion, and including, if necessary,
adopting the FSSP

 

76

 

and UPP as a co-sponsor), and shall cooperate
with UNOVA in making any filings required by any Governmental Body with respect
to the FSSP and the UPP.

 

(c)                                  WARN Act

 

The Purchasing Entities shall comply with the
applicable provisions of the Worker Adjustment and Retraining Notification Act
of 1988 (the “WARN Act”) and any similar
federal, state or local Law, regarding the Employees and their employment with
any Purchasing Entity following the Transfer Date, and shall indemnify the
Selling Entities in respect thereof. The Selling Entities shall comply with the
applicable provisions of the WARN Act and any similar federal, state or local
law regarding the Employees and their employment with the Selling Entities
prior to or as of the Transfer Date, and shall, subject to satisfaction of the
covenants of the Purchasing Entities in Section 8.4(a), indemnify the
Purchasing Entities for their Losses in respect thereof.

 

8.5                               Use of UNOVA
Name and Mark

 

(a)           Notwithstanding
the provisions of Section 1.2(i), from and after the Transfer Date, the
Purchasing Entities shall be permitted to use, in the operation of the
Business, (i) the existing inventories of raw materials, work-in-process
and finished goods that bear the names “UNOVA” or “UNOVA Industrial Automation
Systems, Inc.” or any variation thereof or any trademark relating thereto, or
any acronym or abbreviation thereof (collectively, the “Seller
Names”) for a reasonable period to exhaust such inventories, but
in no event longer than one year following the Transfer Date, and
(ii) existing stationery, packaging, shipping, invoices, purchase orders
and similar supplies which bear any of the Seller Names for the period
necessary to exhaust such supplies, but in no event longer than one year
following the Transfer Date; provided, however, that in each case, the Purchasing Entities shall
use reasonable efforts (to the extent commercially feasible) to overprint,
overstamp, apply an appropriate label or otherwise obliterate the Seller Names
on such items or shall otherwise indicate that the Business has been sold to
the Purchasing Entities and is independent of any of the Selling Entities. Except
as provided in this Section 8.5, the Purchasing Entities shall not use or
permit any of the Landis Group to use the name “UNOVA”, or any confusingly
similar name or mark, or any trademarks (including applications and
registrations therefor) relating thereto, or any acronym or abbreviation
thereof.

 

(b)           The
Purchasing Entities shall not be obligated to change Seller Names on goods in
the hands of dealers, distributors and customers.

 

77

 

(c)           From
and after the Transfer Date, the Selling Entities shall not use the names or brands
held for use primarily or exclusively in the Business, including, without
limitation, the names or brands of “Landis”, “Landis Cincinnati,” “Landis
Gardner”, “Landis Lund”, “Gardner Abrasives”, “CITCO”, “Cranfield Precision”
and “Goldcrown” or any variation thereof or any trademark relating thereto, or
any acronym or abbreviation thereof.

 

8.6                               Exclusivity

 

Until the earlier of the Closing or
termination of this Agreement, the Selling Entities shall not, and shall not
permit or authorize any of their officers, directors, agents or representatives
to, directly or indirectly, solicit or encourage any “Acquisition
Proposals” (as defined below) or participate in any discussions
or negotiations relating to an Acquisition Proposal relating, directly or
indirectly, to the Landis Group. Until the earlier of the Closing or
termination of this Agreement, UNOVA shall promptly notify Buyer US in
writing of any such Acquisition Proposal or any communication or indication
from any person that it or any other person is considering making such an
Acquisition Proposal, whether oral or written. The term “Acquisition
Proposal” shall mean any proposal for any business combination
involving the Landis Group or the acquisition, directly or indirectly, of all
or a portion of the Purchased Assets.

 

8.7                               Taxes

 

(a)                                  Taxes
Relating to the Business and UNOVA UK

 

Subject to the provisions of
Section 8.7(d), the Selling Entities shall pay all Taxes with respect to
the ownership, use or operation of the Purchased Assets on or prior to the
Transfer Date and Buyer US, Buyer UK or their Affiliates shall pay all such
Taxes with respect to the Business and the ownership, use or operation of the
Purchased Assets after the Transfer Date. Any and all real property Taxes,
personal property Taxes, assessments, utilities, lease rentals, fuel and other
charges applicable to the Purchased Assets that are payable in the year that
includes the Transfer Date shall be pro-rated to the Transfer Date based on the
percentage of the year prior to the Transfer Date, and such Taxes and other pro-rated amounts shall
be allocated between the Parties by adjustment to the Purchase Price at the
Closing.

 

(b)                                  Transfer
Taxes

 

The Selling Entities, on the one hand, and
the Purchasing Entities, on the other hand, shall each be responsible for one-half
of all real estate, transfer, sales, use, excise, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with the Transactions, and shall, at their own expense, file all
necessary Tax Returns and other documentation with respect thereto. The Parties
shall cooperate with each other to minimize any such Taxes.

 

78

 

(c)                                  Employment
Taxes

 

Buyer US shall prepare and furnish to each of
the Continuing Employees employed in the United States following the Closing a
Form W-2
that shall reflect all wages and compensation paid to such employee for the
period after the Transfer Date in the calendar year in which the Transfer Date
occurs, and shall file with the Social Security Administration Forms W-2 (Copy A) with
respect to such employees and such period. The Selling Entities shall prepare
and furnish such Forms W-2
for the period prior to and including the Transfer Date. The Selling Entities
shall furnish to Buyer US the Forms W-4 and W-5,
as applicable, of each such employee. It is the intent of the Parties hereunder
that the obligations of Buyer US and the Selling Entities under this
Section 8.7(c) shall be carried out in accordance with Section 5 of
Revenue Procedure 2004-53.

 

(d)                                  Stock
Options

 

Notwithstanding any provision to the contrary
in this Agreement, the Selling Entities shall claim the benefit of federal,
state and local Tax deductions related to the exercise of all options to
purchase shares of UNOVA and none of the Purchasing Entities shall claim any
such Tax deductions. Subject to Section 8.7(c), the Selling Entities shall
be responsible for the proper payroll Tax treatment and the proper Tax
reporting of compensation relating to such option exercises. Notwithstanding
the preceding words of this Section 8.7(c), the Selling Entities shall
fully indemnify the relevant Purchasing Entities in respect of all Taxes
(including for the avoidance of doubt all national insurance contribution
liabilities and payments) arising in relation to the exercise of any option to
purchase shares or other securities in any of the Selling Entities or
affiliates thereof.

 

(e)                                  Tax
Treatment

 

Any indemnification payments made pursuant to
this Agreement shall be treated by the Parties, to the extent permitted by
applicable Law, as a purchase price adjustment unless determined otherwise in a
final determination as defined in Section 1313 of the Code.

 

(f)                                    Interpretation

 

The provisions of this Section 8.7 shall
control over any conflicting provisions of Article 11.

 

8.8                               Settlement
of Intercompany Accounts

 

On the Transfer Date, the Selling Entities
shall cause all intercompany payables and receivables (other than trade payables
or receivables) to be settled.

 

79

 

8.9          Intellectual Property Registrations

 

On or prior to
the Transfer Date, the Selling Entities shall execute the assignment documents
prepared by the Purchasing Entities in the form set out as Exhibit E
to transfer and assign all Intellectual Property applications and registrations
for the Intellectual Property which form part of the Purchased Assets and shall
provide such assignment documents to the Purchasing Entities for filing with
the relevant Governmental Body. The Parties hereto agree to cooperate fully for
an orderly transfer of such applications and registrations.

 

8.10        Authorization; Mail

 

The Selling
Entities agree that they will promptly transfer and deliver to Buyer UK
any cash or other property that the Selling Entities may receive in respect of
any receivables or other items which shall be transferred to Buyer US or Buyer
UK as provided herein. The Selling Entities authorize and empower Buyer US and
Buyer UK from and after the Transfer Date (a) to receive and open mail
addressed to them and (b) to deal with the contents thereof in any manner
Buyer US or Buyer UK sees fit, provided such mail and the contents thereof
relate to the Purchased Assets or otherwise to their Business or to any of the
Assumed Liabilities. The Selling Entities agree to deliver to Buyer US or Buyer
UK (as appropriate) promptly upon receipt and identification any mail, checks
or other documents received by them pertaining to the Purchased Assets or
otherwise to the Landis Group or any of the Assumed Liabilities.

 

8.11        Post-Closing Cooperation

 

To the extent
not already provided for under this Agreement, each of the Parties shall
cooperate fully, as and to the extent reasonably requested by the other
Parties, in providing information that may be required by such Parties in connection
with their respective audit, securities compliance and reporting and similar
post-Closing activities related to the transactions contemplated by this
Agreement.

 

8.12        Purchased Assets Not Transferred

 

Without prejudice to any other rights or remedies of the Purchasing
Entities under this Agreement, if any of the Purchased Assets has not been
transferred to or is not vested in one of the Purchasing Entities by virtue of
the transactions carried out pursuant to this Agreement, the relevant Purchasing
Entity may give written notice to the relevant Selling Entity at any time in
the 18 months following the Closing. If such notice is given:

 

(a)           the relevant Selling Entity shall, as soon
as practicable and so far as it is able, transfer at their cost (or procure the
transfer by the relevant Selling Entity) such asset (together with any benefit
or sum, net of tax and other out of pocket expenses, accruing to any Selling
Entity as a result of holding such asset since Closing) to such person as that
Purchasing Entity shall direct (provided that it is one of the Purchasing
Entities) on terms that no consideration is payable by any Purchasing Entity
for such transfer; and

 

80

 

(b)           that Purchasing Entity shall provide such
assistance to the Selling Entity as the Selling Entity reasonably requires for
the purposes of paragraph (a) of this Section 8.12.

 

8.13        Confidentiality

 

The Selling
Entities and their Affiliates will hold, and will use their best efforts to cause
their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning the Purchasing Entities
that have been furnished to the Selling Entities or their Affiliates in
connection with the transactions contemplated by this Agreement, and, after the
Transfer Date, all confidential documents and information concerning the
Business, except to the extent that such information can be shown to have been
(i) previously known on a nonconfidential basis by the Selling Entities,
(ii) in the public domain through no fault of the Selling Entities or
(iii) later lawfully acquired by the Selling Entities from sources other
than the Purchasing Entities; provided that the Selling Entities may disclose
such information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such persons are informed by the
Selling Entities of the confidential nature of such information and are
directed by the Selling Entities to treat such information confidentially in accordance
with this Agreement. The obligation of the Selling Entities and their
Affiliates to hold any such information in confidence shall be satisfied if
they exercise the same care with respect to such information as they would take
to preserve the confidentiality of their own similar information. If this
Agreement is terminated, to the extent permitted by applicable Law, the Selling
Entities and their Affiliates will, and will use their best efforts to cause
their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Purchasing
Entities, upon request, all documents and other materials, and all copies
thereof, obtained by the Selling Entities or their Affiliates or on their behalf
concerning the Purchasing Entities in connection with this Agreement that are
subject to such confidence.

 

8.14        Performance Bonds

 

The Purchasing
Entities shall effect the substitution of their credit and/or the credit of the
Landis Group under the Performance Bonds within nine months following the
Transfer Date. Pending such substitution, the Purchasing Entities shall
reimburse the Selling Entities for all costs incurred by Selling Entities in
maintaining the Performance Bonds and shall pay such amounts promptly upon
receipt of an invoice therefor. In the event that the beneficiary of any of the
Performance Bonds shall draw on the Performance Bonds for any reason, the
applicable Selling Entities shall be entitled to prompt reimbursement from the
Purchasing Entities for the amount so drawn plus all associated costs incurred
by the Selling Entities.

 

81

 

8.15        Claim Cooperation

 

If the
representations and warranties made by Enviros Consulting Limited to UNOVA in the
report entitled “Phase 1 Environment Review: 
Landis Lund Skpton Road, Cross Hills” dated June 2005 (ref: CAN
UN0370007A) (the “Phase 1 Report”) have
been breached and result in a Loss to the Purchasing Entities, to the extent
that UNOVA has a claim for breach under the Phase 1 Report, UNOVA shall
cooperate with the Purchasing Entities as may be reasonably requested by the
Purchasing Entities to pursue such claim at the sole expense of the Purchasing
Entities, including but not limited to assigning UNOVA’s claim for such breach
to the Purchasing Entities and paying over any damages received by UNOVA as a
result of such claim.

 

(Article 9
follows)

 

82

 

  ARTICLE 9.  

Noncompetition Agreement

 

9.1          Noncompetition Agreement

 

For and in
consideration of the benefits to be derived, directly and indirectly, from this
Agreement, each of the Selling Entities covenants and agrees that for a period
of five years (three years in Europe) (the “Non-Compete
Term”) following the Transfer Date, it shall not (and none of
its Affiliates shall), own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or be connected (as
director, officer, employee, consultant, agent, independent contractor, or
otherwise) in any other manner with any business activity constituting “Competitive Business” (as defined in
Section 9.3) or any business substantially similar thereto in any country
or territory in the world.

 

9.2          Limitations on Noncompetition Agreement

 

(a)           Notwithstanding
anything in Section 9.1 to the contrary, the Selling Entities and their
Affiliates shall not be prohibited from (i)  the acquisition or investment
in any corporation, company, partnership or other business entity (a “Company”) partially engaged in the
Competitive Business provided that such activity does not exceed five percent
(5%) of the net revenues or net assets of such Company, (ii) the ownership
of not more than one percent (1%), in the aggregate, of any class of debt or
equity security of any Company principally engaged in the Competitive Business
provided that such security is traded on a national securities exchange or an
inter-dealer quotation system, or (iii) any investments made by the
investment managers of UNOVA’s pension plans or the managers of UNOVA’s
401(k) plans or similar non-qualified retirement plans.

 

(b)           In the event that any
provision of this Article 9 shall be held invalid, illegal, void,
inoperative or unenforceable in an arbitration pursuant to Section 12.11
by reason of the geographic or business scope or the duration of such
provision, such invalidity, illegality or unenforceability shall attach only to
the scope or duration of such provision and shall not affect or render invalid,
illegal, void, inoperative or unenforceable any other provision of this
Agreement, and, to the fullest extent permitted by Law, this Agreement shall be
construed as if the geographic or business scope or the duration of such
provision had been more narrowly drafted so as not to be invalid, illegal,
void, inoperative or unenforceable.

 

9.3          Definition of Competitive Business

 

As used in
this Agreement, the term the “Competitive Business”
means the design, manufacture, sale and service of grinding and abrasives
systems for camshaft, crankshaft, centerless and disc grinder machines and
other special high precision machine tools, including high speed grinding
spindles, highly engineered diamond and cBN® cutting tools, superabrasive
wheels and dressing products.

 

83

 

9.4          Nonsolicitation

 

For a period
of two years following the Transfer Date, the Selling Entities shall not (and
none of their Affiliates shall), directly or indirectly, without the prior
written consent of Buyer US, (a) solicit, offer to hire, entice away or
hire any Continuing Employee as an employee, consultant, independent contractor
or otherwise, or (b) divert or attempt to divert from the Purchasing
Entities any business whatsoever included in the Business as conducted by the
Landis Group as of the Transfer Date by influencing or attempting to influence
any current or former customer or supplier of the Business as of the Transfer
Date. The foregoing restrictions shall not prohibit general employment
solicitations to the public or hiring of any Continuing Employee who contacts
any of the Selling Entities in response to such general solicitation.

 

9.5          Injunctive and Equitable Relief

 

The Selling
Entities agree that the remedy of damages for any breach of Article 9
would be inadequate and that, in the event of any such breach or threatened
breach by UNOVA or its Affiliates, the applicable Purchasing Entity shall be
entitled to injunctive relief in addition to any other remedy at Law, in equity
or under this Agreement to which it may be entitled.

 

(Article 10
follows)

 

84

 

 ARTICLE 10. 

Termination

 

10.1        Termination

 

This Agreement
may be terminated immediately upon the receipt of notice of termination as
provided for in Section 10.2, and the transactions provided for in this
Agreement may be abandoned, without liability on the part of the Party
effecting such termination except as otherwise provided in Section 10.3:

 

(a)           By
mutual written consent of all of the Parties;

 

(b)           By
any Party, if (i) any court of competent jurisdiction or any Governmental
Body shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby and such order, decree, ruling or other action
is or shall have become final and nonappealable, or (ii) the Closing shall
not have been consummated on or before December 9, 2005 (the “Deadline Date”); provided, that
(x) no party may terminate this Agreement pursuant to clause (b)(ii)
if such Party’s failure to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred on or
before the Deadline Date, and (y) if the Closing shall not have occurred
by the Deadline Date because either the time period under the HSR Act or any
similar Law shall not have expired or any adverse action shall have been
threatened or instituted in connection with the HSR Act or any similar Law, and
all other conditions precedent in Articles 6 and 7 have been
satisfied or are capable of being satisfied or, to the extent legally
permissible, have been waived, the Deadline Date shall be December 23,
2005 (the “Extended Deadline Date”);

 

(c)           Subject
to Section 2.2 and Section 10.1(b)(ii), by Buyer US, if any of
the conditions of Article 6 of this Agreement have not been satisfied on
or before the Deadline Date and have not been waived by the Purchasing Entities
in writing; provided, however,
that the foregoing termination right shall not exist to the extent that any
Purchasing Entity has breached any of its material obligations hereunder;

 

(d)           Subject
to Section 2.2 and Section 10.1(b)(ii), by UNOVA, if any of the
conditions of Article 7 of this Agreement have not been satisfied on or
before the Deadline Date and have not been waived by UNOVA in writing; provided, however, that
the foregoing termination right shall not exist to the extent that one or more
of the Selling Entities has breached any of its material obligations hereunder;

 

(e)           By
any Purchasing Entity, if any of the Selling Entities files on or before the
Transfer Date a petition in bankruptcy, reorganization, liquidation or
receivership or a petition in bankruptcy, reorganization or receivership is
filed on or before the Transfer Date against any of the Selling Entities;

 

85

 

(f)            By
UNOVA, if a Purchasing Entity files on or before the Transfer Date a petition
in bankruptcy, reorganization, liquidation or receivership or a petition in
bankruptcy, reorganization or receivership is filed on or before the Transfer
Date against a Purchasing Entity; or

 

(g)           By
the Purchasing Entities, upon a material breach of any representation, warranty
or covenant of the Selling Entities contained in this Agreement or any Related
Agreement; provided that such breach is not capable of being cured or has not
been cured within 30 days after the giving of notice thereof by the
Purchasing Entities to the Selling Entities.

 

10.2        Notice of Termination

 

Any Party
terminating this Agreement in accordance with Section 10.1 shall give the
other Parties prompt written notice of termination, setting forth in reasonable
detail the cause of termination.

 

10.3        Effect of Termination

 

In the event
of termination of this Agreement as provided in Section 10.1 and
Section 10.2, this Agreement will forthwith become void and have no
effect, without any liability on the part of any Party other than the
provisions of this Section 10.3 and Article 12, which provisions
survive such termination; provided that nothing herein will relieve any Party
from any liability for any material breach by such party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.

 

(Article 11
follows)

 

86

 

 ARTICLE 11. 

Indemnification

 

11.1        Indemnification by the Selling Entities

 

In order to
induce the Purchasing Entities to enter into this Agreement and to consummate
the transactions contemplated hereby, each of the Selling Entities
(collectively, the “Indemnifying Selling Entities”)
jointly and severally covenants and agrees to and shall indemnify each of the
Purchasing Entities and their respective officers, directors and affiliates
(collectively, the “Buying Indemnified Parties”)
and shall hold the Buying Indemnified Parties harmless against and with respect
to any and all losses, damages, costs or expenses (including reasonable
expenses of investigation and reasonable attorneys’ fees and costs) (“Losses” or individually a “Loss”) suffered or incurred by the
Buying Indemnified Parties and resulting from or arising out of the matters
described below in this Section 11.1. The Buyer Indemnified Parties’ right
to indemnification, payment of damages or other remedies based on the Selling
Entities’ covenants and representations or warranties will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time by the Purchasing Entities, whether
prior to or after the execution and delivery of this Agreement or the Transfer
Date.

 

(a)           Misrepresentation or Breach of Warranty

 

Any misrepresentation or breach of any of the representations and
warranties of the Selling Entities set forth in this Agreement (determined
without regard to any materiality qualification contained in any representation
or warranty giving rise to any claim for indemnity hereunder) or in any
certificate delivered pursuant to hereto;

 

(b)           Breach of Covenant or Agreement

 

Any breach or nonfulfillment any of the covenants, agreements or other
obligations of any of the Selling Entities set forth in this Agreement;

 

(c)           Excluded Liabilities

 

Any failure of the Selling Entities to discharge the Excluded
Liabilities when due;

 

(d)           Pension Liabilities

 

(i)            Any
claim that benefits under the UNOVA Pension Fund have not been calculated in a
way which complies with the requirements of Article 141 (formerly
Article 119) of the Treaty of Rome or Section 62 of the Pensions Act
1995 made by or in respect of the membership of any UK Employee other than
a claim made by or in respect of the membership of any such UK Employee
who agreed to the transfer of his or her accrued benefits from the UNOVA
Pension Fund to the Landis Pension Plan.

 

87

 

(ii)           Any
claim by or in respect of any UK Employee who became employed by UNOVA UK
pursuant to the purchase of the Cranfield Precision business by UNOVA UK that
any “relevant benefits” as defined in Section 612 of the Income and Corporation
Taxes Act 1988 are payable to or in respect of him in addition to the benefits
described in the documents and data referred to in Section 3.13(m)(D) by
virtue of the operation of the Transfer of Undertakings (Protection of Employment)
Regulations 1981 (as amended), but only in so far as such claim is in respect
of such benefits which relate to pensionable service before the Transfer Date
calculated by reference to pensionable salary as at the Transfer Date.

 

(e)           Bulk Sales

 

Any liability
or obligation relating to noncompliance with any applicable bulk sales or
transfer Law; and

 

(f)            UK Employees

 

(i)            Any claims,
proceedings, demands, awards, losses, damages, costs, liabilities, interest or
expenses (“Employment Liabilities”) that
may be suffered or incurred by Buyer UK in connection with the employment
or dismissal of any person who is not a UK Employee but who transfers or
claims to transfer to the Buyer UK pursuant to the Transfer Regulations (as
defined in Section 1.13) or otherwise as a result of the Buyer UK
entering into this Agreement or Closing provided Buyer UK takes all reasonable
steps to minimize those Employment Liabilities and save for any Employment
Liabilities which arise in respect of a finding or allegation that the Buyer UK
unlawfully discriminated against such person.

 

(ii)           Save
in relation to “relevant benefits” as defined in Section 612 of the Income and
Corporation Taxes Act 1988, UNOVA UK shall procure the performance and
discharge of all contractual, statutory and other obligations in respect of all
of the UK Employees up to and including the Transfer Date and, save as
aforesaid, the Selling Entities shall indemnify the Purchasing Entities against
any Employment Liabilities arising from any act or omission of UNOVA UK or
failure by UNOVA UK to discharge any obligation relating to any of the UK
Employees on or prior to the Transfer Date.

 

(iii)          Any
Employment Liabilities Buyer UK incurs if any UK Employee or his or her
employee representative brings a claim arising from a failure by UNOVA UK to
carry out its duty to inform and consult under Regulation 10 of the
Transfer Regulations provided the Buyer UK complies with its obligations
arising under Regulation 10(3) of the Transfer Regulations.

 

11.2        Indemnification by Purchasing Entities

 

In order to
induce the Selling Entities to enter into this Agreement and to consummate the
transactions contemplated hereby, the Purchasing Entities (the “Indemnifying Purchasing Entities”)
covenant and agree to and shall jointly and severally indemnify the 

 

88

 

Selling Entities and their
respective officers, directors and affiliates and additionally, in respect of
Section 11.2(g), the current and former trustees of the UNOVA Pension Fund
and of the Landis Pension Plan (collectively, the “Selling
Indemnified Parties”) and shall jointly and severally hold the
Selling Indemnified Parties harmless against and with respect to any and all
Losses suffered or incurred by the Selling Indemnified Parties and resulting
from or arising out of:

 

(a)           Misrepresentation or Breach of Warranty

 

Any
misrepresentation or breach of any of the representations and warranties of the
Purchasing Entities set forth in this Agreement (determined without regard to
any materiality qualification contained in any representation or warranty
giving rise to any claim for indemnity hereunder) or in any certificate
delivered pursuant hereto;

 

(b)           Breach of Covenant or Agreement

 

Any breach or
nonfulfillment by a Purchasing Entity of any of its respective covenants,
agreements or other obligations set forth in this Agreement;

 

(c)           Assumed Liabilities

 

Any failure of
the Purchasing Entities to discharge the Assumed Liabilities when due;

 

(d)           Operations of the Business

 

The operation
of the Business by Buyer UK and the other Purchasing Entities after the
Transfer Date, except to the extent that a Purchasing Entity is entitled to
indemnification from the Indemnifying Selling Entities pursuant to
Section 11.1;

 

(e)           Performance Bonds; Letters of Credit

 

Any claims
against any of the Selling Entities (i) under the Performance Bonds, or
(ii) in respect of any letters of credit in favor of the Selling Entities
relating to the Business that are maintained by any of the Selling Entities for
the benefit of the Purchasing Entities pursuant to the terms of this Agreement.

 

(f)            UK Employees

 

(i)            Buyer
UK shall procure the performance and discharge of all contractual, statutory
and other obligations in respect of all of the UK Employees after the Transfer
Date and all contractual, statutory and other obligations in respect of all the
UK Employees in relation to “relevant benefits” as defined in Section 6.12
of the Income and Corporation Taxes Act 1988 whether relating to a period
before, on or after the Transfer Date and Buyer UK shall indemnify UNOVA UK
against (i) any Employment Liabilities (as defined in Article 11.1(f)(i))
arising from any act or omission of Buyer UK or the failure of the Buyer UK to
discharge any obligation relating to any of the UK Employees after the 

 

89

 

Transfer Date (except where such obligation is an Excluded Liability);
and (ii) any anticipatory breach of the contract of employment of an Employee
of UNOVA UK by Buyer UK.

 

(ii)           Buyer
UK agrees to provide UNOVA UK with details of any measures it intends to take
in relation to the UK Employees (as required by Regulation 10(2)(d) of the
Transfer Regulations) and to indemnify UNOVA UK against any Employment
Liabilities it may incur as a result of any failure by Buyer UK to provide this
information to UNOVA UK.

 

(g)           Pension Liabilities

 

(i)            Any
claims or liabilities in relation to the Landis Pension Plan (including,
without limitation, any claim or liability relating to a contribution notice
issued under Section 38 or Section 47 of the Pensions Act 2004 or a
financial support direction issued under Section 43 of that Act, whether
the notice or direction is issued before, on or after the Transfer Date, and
any claim or liability relating to the levy to fund the Pension Protection Fund
payable pursuant to the Pensions Act 2004); provided, however, that the
foregoing right to indemnity shall not exist with respect to claims and
liabilities for which the Purchasing Entities are entitled to indemnification
under Section 11.1;

 

(ii)           Any
claim that any benefit under the UNOVA Pension Fund or that any transfer paid
by the UNOVA Pension Fund has not been calculated in accordance with Article
141 (formerly Article 119) of the Treaty of Rome or Section 62 of the Pensions
Act 1995 made by or in respect of the membership of any UK Employee who agreed
to the transfer of his or her accrued benefits from the UNOVA Pension Fund to
the Landis Pension Plan.

 

11.3        Claims for Reimbursement

 

In the event
that any of the Buying Indemnified Parties or the Selling Indemnified Parties
shall have (i) suffered any Loss, or (ii) received any notice of the
commencement of any action, proceeding or investigation or the making of any
claim or demand by a third party (a “Third Party Claim”),
in each case, in respect of which indemnification may be sought by such party
pursuant to this Article 11, the party who shall have suffered such Loss
or received such notice of such Third Party Claim and who shall seek indemnification
in respect thereof (the “Indemnified Party”)
shall give either UNOVA (if the Indemnified Party is a Buying Indemnified
Party), or Buyer US (if the Indemnified Party is a Selling Indemnified Party),
as the case may be (the “Indemnifying Party”),
prompt written notice of such Loss or Third Party Claim setting forth in
reasonable detail such information as it shall have pertaining thereto and the
Indemnified Party’s demand for indemnification in respect thereof.

 

90

 

In the case of
Third Party Claims, written notice thereof shall be given to the Indemnifying
Party as promptly as practicable; provided, however, that the failure of any Indemnified Party to give
timely notice shall not affect rights to indemnification hereunder if
(i) such failure to give timely notice does not materially affect the
ability or right of the Indemnifying Party to participate in the defense of
such Third Party Claim and the Indemnifying Party is not otherwise materially
prejudiced thereby, and (ii) actual notice is given to the Indemnifying
Party within a reasonable time.

 

The
Indemnifying Party shall have 30 days from the date of receipt of such
notice (the “Investigation Period”) to
investigate and dispute the nature, validity or amount of any such claim of
Loss or Third Party Claim. During the Investigation Period, the Indemnified
Party shall cooperate with the Indemnifying Party for the purpose of such
investigation and, without limitation, the Indemnified Party shall make available
to the Indemnifying Party the information relied upon by the Indemnified Party
to substantiate the Indemnified Party’s claim and the Indemnifying Party shall
have reasonable access, during normal business hours, to the books, records and
other documents of the Indemnified Party relating to such claim and shall have
the right to take copies at its expense of such relevant books, records and
documents for the purpose of such investigation. In the event that the
Indemnifying Party shall dispute the nature, validity or amount of a claim
hereunder, the Indemnifying Party shall give the Indemnified Party written
notice of such dispute within the Investigation Period, and the relevant
Parties shall meet promptly thereafter and in good faith attempt to resolve
such dispute. To the extent that such Parties cannot resolve any dispute by
agreement within 21 days following such notice of dispute, such dispute
shall be resolved pursuant to Section 12.11.

 

In the absence
of a dispute, the Indemnifying Party shall promptly, and in any event not later
than the expiration of the Investigation Period, reimburse the Indemnified
Party in full (subject to the limitations of Section 11.6) for such Loss,
as set forth in the notice. In the event that the Indemnifying Party shall
dispute only the amount (and not the validity) of the claim, the Indemnifying
Party shall, concurrently with the delivery of its notice of dispute, pay to
the Indemnified Party any undisputed portion of the claim.

 

11.4        Defense and Settlement of Third Party
Claims

 

(a)           In the event of a Third
Party claim, except for a claim involving a Governmental Body or a claim for
injunctive relief or non-monetary relief or a claim which may, in the
reasonable opinion of the Purchasing Entities, prejudice the legitimate
business interests of the Purchasing Entities or the Business, the Indemnifying
Party shall have the option to take control of the defense and investigation of
such Third Party Claim, and to employ and engage attorneys of its own choice to
handle and defend the same, at the Indemnifying Party’s sole cost, risk and
expense, provided that, upon assumption and control by the Indemnifying Party
of such defense, the Indemnifying Party shall be deemed to have acknowledged
its responsibility for all Losses relating to such claims, subject to the
limitations set forth in Section 11.6 (the “Direct
Litigation Option”). The Indemnifying Party may elect to
exercise the Direct Litigation Option by giving prior written notice to the 

 

91

 

Indemnified Party. If the
Indemnifying Party so elects, the Indemnified Party shall cooperate in all
reasonable respects with the Indemnifying Party and such attorneys in the
investigation, trial and defense of such Third Party Claim and any appeal
arising therefrom and shall permit access to the personnel of the Indemnified
Party and to any relevant books, records and documents within the possession or
control of the Indemnified Party in connection with such claim and to take
copies of such relevant materials at the expense of the Indemnifying Party; provided, however, that
the Indemnified Party may, at its own cost, participate in (but not control)
such investigation, trial and defense of such Third Party Claim and any appeal
arising therefrom. If the Indemnifying Party does not elect the Direct
Litigation Option, then the Indemnified Party shall defend against the Third
Party Claim in the manner it deems appropriate.

 

(b)           The Indemnified Party
(or the Indemnifying Party if it has exercised the Direct Litigation Option)
shall not settle, adjust or compromise the Third Party Claim except with the
prior consent of the Indemnifying Party (or the Indemnified Party), which
consent shall not be unreasonably withheld.

 

(c)           In no event shall a Party
make any admission of liability or enter into any settlement, adjustment or
compromise of any Third Party Claim without the prior written consent of the
other Party, if as a result of such admission, settlement, adjustment or
compromise an injunction or other non-monetary relief would be imposed against
the Indemnified Party.

 

11.5        [Reserved]

 

11.6        Limitations on Indemnification

 

(a)           Duration

 

Claims for
indemnification under Section 11.1 or 11.2 must be made prior to the
18 month anniversary of the Transfer Date, except for claims made pursuant
to the following:

 

(i)            Section 11.1(a)
(Misrepresentation or Breach of Warranty), to the extent it is based on a
breach of Section 3.13(l) (ERISA Plans), Section 3.13(m) (UK Pension
Plans) or of Section 3.18 (Taxes), which may be made at any time prior to
the expiration of the applicable statute of limitations (including any
extensions thereof) plus 30 days;

 

(ii)           Section 11.1(a)
(Misrepresentation or Breach of Warranty), to the extent it is based on a
breach of Section 3.6(f) (Environmental Matters) or Section 3.23
(Transactions with Affiliates; Intercompany Arrangements), which may be made at
any time prior to the fifth anniversary of the Transfer Date;

 

(iii)          Section 11.1(a)
(Misrepresentation or Breach of Warranty), to the extent it is based on a
breach of Section 3.1(c) (Corporate Power and Authority to Enter Into
Agreements), which may be made at any time;

 

92

 

(iv)          Section 11.1(b)
(Breach of Covenant or Agreement), Section 11.1(c) (Excluded Liabilities),
Section 11.1(d) (Pension Liabilities) or Section 11.1(f) (UK
Employees), which may be made at any time;

 

(v)           Section 11.2(a)
(Misrepresentation or Breach of Warranty), to the extent it is based on a
breach of Section 4.1(b) (Corporate Power and Authority to Enter Into
Agreements), which may be made at any time; and

 

(vi)          Section 11.2(b)
(Breach of Covenant or Agreement), Section 11.2(c) (Assumed Liabilities),
Section 11.2(d) (Operations of the Business), Section 11.2(f) (UK
Employees) or Section 11.2(g) (Pension Liabilities), which may be made at
any time.

 

Indemnification
pursuant to Section 11.1 or 11.2 shall be payable after the expiration of
the aforesaid periods (if any), so long as the claim was identified and
asserted in reasonable detail prior to such expiration.

 

(b)           Amount

 

(i)            Basket

 

Notwithstanding
anything to the contrary contained in Section 11.1 and subject to the
exceptions set forth in Section 11.6(b)(iii) and Section 11.6(c)(i),
neither the Indemnifying Selling Entities nor the Indemnifying Buying Entities,
as the case may be, shall be obligated to pay any claims for indemnification
pursuant to Section 11.1 until the aggregate of all Losses exceeds
$500,000 (the, “Threshold”), with any
individual claim below $50,000 forgiven (the, “Claim
Threshold”) whereupon the Buying Indemnified Parties and Selling
Indemnified Parties, as the case may be, shall be entitled to indemnification
for all Losses attributable to claims exceeding the Claim Threshold without
regard to the Threshold. For purposes of the Claim Threshold, a number of
claims arising out of the same fact, event or circumstance shall be aggregated
and shall form a single claim.

 

(ii)           Cap

 

Subject to the
exceptions set forth in Section 11.6(b)(iii) below, the maximum aggregate
amount that the Indemnifying Selling Entities or Indemnifying Buying Entities,
as the case may be, shall be obligated to pay pursuant to Section 11.1
shall be $8,000,000 (the “Cap”), and
provided further, that, with respect to the Indemnifying Selling Entities, the
maximum amount to be paid in cash for claims under Section 11.1(a)
(Misrepresentation or Breach of Warranty), other than claims for breaches of
Section 3.13(m) (UK Pension Plans), shall not exceed the amount of cash
received by UNOVA in respect of the Purchase Price. To the extent that the
Selling Entities would otherwise (but for the preceding sentence) be obligated
to pay indemnification pursuant to Section 11.1 the amount of such
indemnification shall reduce the balance of the Note and then the cash received
by the Selling Entities.

 

93

 

(iii)         No Limitation on Certain Claims

 

Notwithstanding
anything herein to the contrary, Buyer Indemnified Parties (i) shall be
entitled to dollar-for-dollar indemnification from the first dollar,
(ii) shall not be subject to the Threshold or Claim Threshold and
(iii) shall not be subject to the Cap with respect to:

 

(A)          Losses
involving a breach by the Selling Entities of any of the representations and
warranties contained in Section 3.1(c) (Corporate Power and Authority to
Enter Into Agreements), Section 3.13(l) (ERISA Plans), Section 3.18
(Taxes) and Section 3.23 (Transactions with Affiliates; Intercompany Arrangements);
provided, however,
that the maximum aggregate amount that the Indemnifying Selling Entities shall
be obligated to pay pursuant to this Section 11.6(b)(iii)(A) shall be the
Purchase Price;

 

(B)           Losses
involving Excluded Liabilities and liabilities under Section 11.1(d)
(Pension Liabilities);

 

(C)           Losses
arising from the fraud or willful misconduct of the Selling Entities,

 

(D)          Losses
arising from any breach or nonfulfillment by a Selling Entity of any of its
respective covenants set forth in this Agreement; and

 

(E)           Losses
arising from any breach of the representations and warranties set forth in
Section 3.13(m) (UK Pension Plans).

 

(c)           Other Limitations

 

(i)            Notwithstanding
anything herein to the contrary, Seller Indemnified Parties (i) shall be
entitled to dollar-for-dollar indemnification from the first dollar, and
(ii) shall not be subject to the Cap with respect to:

 

(A)          Losses
involving Assumed Liabilities and liabilities under Section 11.2(g)
(Pension Liabilities);

 

(B)           Losses
arising from the fraud or willful misconduct of the Purchasing Entities;

 

(C)           Losses
arising from any breach or nonfulfillment by a Purchasing Entity of any of its
respective covenants set forth in this Agreement;

 

(D)          Claims
under Sections 1.5(b); provided, however, that the maximum aggregate amount that the
Indemnifying Buying Entities shall be obligated to pay pursuant to this
Section 11.6(c)(i)(D) shall be the Purchase Price.

 

Notwithstanding
the foregoing, none of the Indemnifying Selling Entities shall have any
liability for the following:

 

94

 

(ii)           For
accounts receivable collectibility, inventory obsolescence, loss contracts for
which a reserve is reflected on the Closing Balance Sheet or warranty claims
following the final determination of the Closing Balance Sheet, (other than in
the case of fraud or willful misconduct and other than in respect of any claims
relating to a breach of the representations and warranties in
Section 3.12;

 

(iii)          Any
matter subject to indemnification pursuant to Section 11.1, to the extent
such liability would not have arisen but for a change in legislation or
accounting policies made after the Transfer Date or a change in the
interpretation of a Law as determined by any court of competent jurisdiction or
pursuant to an administrative rule-making decision of a governmental authority
after the Transfer Date; or

 

(iv)          Any
matter subject to indemnification pursuant to Section 11.1, to the extent
such liability would not have arisen but for some act, omission, transaction or
arrangement carried out at the written request or with the written approval of
a Purchasing Entity or its authorized representatives prior to Closing or which
was expressly authorized by this Agreement other than in respect of any claims
for a breach of any representation and warranty.

 

(d)           Duty to Mitigate Damages

 

Nothing in
this Article 11 shall limit or restrict the Parties’ general obligation
under the governing Law to mitigate any loss or damage which it may incur as a
result of any matter giving rise to indemnification under this Agreement.

 

(e)           No Double Recovery

 

Any Party’s
payment of an indemnification claim shall to the extent of such payment satisfy
and preclude any further indemnification claim against such Party which is
capable of being made in respect of the same subject matter.

 

(f)            No Waiver

 

No waiver of a
closing condition by a party or knowledge of a breach of representation or
warranty or covenant by the other Party shall limit a Party’s right under this
Section 11.

 

(g)           Set-Off Against Note

 

To the extent
that the Buying Indemnified Parties have incurred Losses for a claim and either
(a) a non-appealable judgment or final appellate decision including such
Losses has been entered against the Indemnifying Selling Entities, or (b) a
final settlement agreement including such Losses has been executed with the
Indemnifying Selling Entities as provided in Section 11.4, then upon
written notice to the Indemnifying Selling Entities, the Buying Indemnified 

 

95

 

Parties shall set off and
deduct the amounts of any Losses against the principal of the Note. If any bona
fide claims made in good faith by the Buyer Indemnified Parties remain
unresolved at the maturity of the Note (a “Note Claim”),
Buyer US shall place into an escrow account with an independent, third-party
escrow agent an amount equal to the amount of such pending claim outstanding
that will be subject to an escrow agreement to be mutually agreed upon by UNOVA
and Buyer US.

 

11.7        Exclusive Remedy

 

Except with
respect to claims related to fraud, the indemnification and other remedies set
forth under this Article 11 shall constitute the sole and exclusive
monetary remedies of the Parties with respect to any maters arising under or
relating to this Agreement. Subject to the foregoing, the Parties shall have
and retain all other rights existing in their favor in equity including any
actions for specific performance and/or injunctive or other equitable relief to
enforce or prevent any violations of the provisions of this Agreement.

 

(Article 12
follows)

 

96

 

 ARTICLE 12. 

Miscellaneous Provisions

 

12.1        Public Statements and Press Releases

 

No Party shall
make, issue or release any public announcement, press release, public statement
or public acknowledgment of the terms, conditions and status of, the
transactions provided for in this Agreement, without the prior written consent
of the other Parties as to the content and time of release and the media in
which such statement or announcement is to be made; provided,
however, that in the case of
announcements, statements or acknowledgments or revelation which any Party, in
the written opinion of such Party’s counsel, is required by Law or regulations,
including those of public stock exchanges on which the securities of such Party
or its affiliates are traded, to make, issue or release (a “Legally Required Statement”), the
making, issuing or releasing of any such Legally Required Statement shall not
constitute a breach of this Agreement if such Party shall have given, to the
extent reasonably possible, three days prior notice to the other Party, and
shall have attempted, to the extent reasonably possible, to clear such
disclosure with the other Party. Each Party agrees that it will not
unreasonably withhold or delay any such consent or clearance.

 

12.2        Costs and Expenses

 

Each Party
shall be responsible for and bear its respective costs and expenses in
connection with, or arising out of, the negotiation and execution of this
Agreement and consummation of the transactions provided for in this Agreement.

 

12.3        Amendment and Modification

 

This Agreement
may be amended, modified or supplemented only by a writing executed on behalf
of each of the Parties.

 

12.4        No Assignment

 

No Party shall
assign, in whole or in part, this Agreement or its respective rights and
obligations hereunder without the express prior written consent of the other
Parties, and any assignment by operation of Law or otherwise without the consent
of the Parties shall be void. Notwithstanding the foregoing, each of
Buyer US and Buyer UK may, without the prior consent of any other
Party, assign any or all of its rights and interests under this Agreement and
the Related Agreements to (a) any Affiliate and (b) their rights
under this Agreement and the Related Agreements for collateral security
purposes to any lender providing financing to Buyer US and Buyer UK,
such permitted assign or any of their Affiliates and any such lender may
exercise all of the rights and remedies of such assignee hereunder and
thereunder; provided, however, that notwithstanding any such assignment, the
Purchasing Entities shall remain liable for their obligations hereunder.

 

97

 

12.5        Notices

 

All notices,
requests, demands or other communications hereunder must be in writing and
executed by an authorized representative of the Party responsible therefor, and
must be given either by hand or telecopy, telefax or other telecommunication
device capable of creating a written record which acknowledges receipt, as
follows:

 

(a)           The Selling Entities

 

If such notice
is directed to any of the Selling Entities, it shall be sent to:  (i) UNOVA, Inc., 6001 – 36th Avenue
West, Everett, WA 98203-1264, Attention: 
General Counsel; Fax No. (425) 356-3574; or to such other person or
place as UNOVA shall have specified to the Purchasing Entities in writing by a
notice in accordance with this Section 12.5, with a copy to Perkins Coie
LLP, 1201 Third Avenue, Suite 4800, Seattle, Washington 98101,
Attention:  Andrew Bor, Fax No.
(206) 359-9000.

 

(b)           A Purchasing Entity

 

If such notice
is directed to any Purchasing Entity, it shall be sent to such Purchasing
Entity, c/o Compagnie de Fives-Lille, 38, rue de la Republique, 93 100
Mentreuil-sous-Bois, France, Fax No. +33-1-49.88.39.24, Attention:  General Counsel, or to such other person or
place as Buyer US shall have specified to UNOVA in writing by a notice in
accordance with this Section 12.5, with a copy to SJ Berwin LLP,
64 avenue Kleber, 75116 Paris, France, Attention: Maxence Bloch, Fax
No. 33(0) 1 44 34 63 47 and Goodwin Procter LLP, Exchange Place,
Boston, MA 02190, Attention: George Lloyd, Fax No. (617) 523-1231.

 

12.6        Counterparts and Facsimile

 

This Agreement
may be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute but one and
the same instrument and any of such counterparts may be delivered by facsimile
transmission.

 

12.7        Captions

 

The captions
and table of contents contained in this Agreement are provided for convenience
of reference only and shall not be deemed to constitute a part of this
Agreement.

 

12.8        Schedules and Exhibits

 

One complete
set of the Schedules and Exhibits has been marked for identification and
delivered to each of the Parties prior to the execution and delivery of this
Agreement. The Schedules and Exhibits are an integral part of this Agreement
and are incorporated into this Agreement by this reference.

 

98

 

12.9        Waiver; Remedies

 

No single or
partial waiver of any breach of any provision of this Agreement shall be held
to be a waiver of any other or subsequent breach, and the failure of a Party to
enforce at any time any provision of this Agreement shall not be deemed a
waiver of any right of any such Party to subsequently enforce such provision. All
remedies afforded in this Agreement shall be taken and construed as cumulative,
that is, in addition to every other remedy provided in this Agreement or by
Law.

 

12.10      Governing Law and Jurisdiction

 

This Agreement
shall be construed, interpreted and enforced in accordance with the Laws of the
State of New York, without resort to its conflict of Law rules.

 

12.11      Resolution of Disputes

 

Except for disputes to be resolved by the Independent Firm, all
disputes arising out of or in connection with this Agreement shall be finally
settled under the Rules of Arbitration of the International Chamber of Commerce
(“ICC ”) by one or more
arbitrators (and who shall be familiar and experienced with asset sale and
purchase agreements) appointed in accordance with such Rules.

 

The
arbitration proceedings shall take place in the City of New York and shall be
conducted in the English language. The award shall be binding and non-appealable,
and it shall be enforceable in any court of competent jurisdiction. There will
be no discovery procedure and the requests for the production of documents will
be limited pursuant to the IBA Rules (International Bar Association Rules) on
the taking of evidence in international commercial arbitration.

 

The successful
or prevailing party or parties shall be entitled to recover reasonable attorney’s
fees and other costs incurred in arbitration proceedings and actions brought
for the enforcement of this Agreement.

 

12.12      Severability

 

In the event
that any provision or any portion of any provision of this Agreement shall be
held invalid, illegal or unenforceable under applicable Law, the remainder of
this Agreement shall remain valid and enforceable, unless such invalidity,
illegality or unenforceability substantially diminishes the rights and
obligations, taken as a whole, of any Party.

 

12.13      No Third Party Beneficiaries

 

Nothing in this
Agreement, whether express or implied shall be enforceable by virtue of the
Contracts Rights of Third Parties Act 1999 or is intended to confer any rights
or remedies under or by reason of this Agreement on any persons other than the
Parties and 

 

99

 

their respective successors and
permitted assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any Party, nor
shall any provision of this Agreement give any third persons any right of
subrogation or action against any Party, save that the provisions of Article 11
shall be enforceable by any of the Persons entitled to indemnification
thereunder, whether or not such Person is a Party to this Agreement.

 

12.14      Construction

 

This Agreement
and the Related Agreements shall be interpreted without regard to any
presumption or rule requiring construction against the Party causing such
agreements to be drafted.

 

12.15      Entire Agreement

 

This Agreement,
including the Exhibits and Schedules and the Related Agreements, constitutes
the sole understanding and agreement of the Parties with respect to the subject
matter of this Agreement and supersedes and cancels all prior understandings
and agreements.

 

12.16      Currency

 

Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States funds.

 

(Signature pages follow)

 

100

 

IN WITNESS
WHEREOF, the Parties, intending to be legally bound, have caused this Agreement
to be executed on and as of the date first above written.

 

	
  CINETIC LANDIS GRINDING CORP. 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
  /s/
  FREDERIC SANCHEZ

  	
   

  
	
  NAME: 

  	
  Frederic Sanchez

  	
   

  
	
  TITLE:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CINETIC LANDIS GRINDING LIMITED 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
  /s/
  FREDERIC SANCHEZ

  	
   

  
	
  NAME: 

  	
  Frederic Sanchez

  	
   

  
	
  TITLE:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  COMPAGNIE DE FIVES-LILLE 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
  /s/
  FREDERIC SANCHEZ

  	
   

  
	
  NAME: 

  	
  Frederic Sanchez

  	
   

  
	
  TITLE:

  	
  President of the Executive Board

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  UNOVA, INC. 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
  /s/ KENNETH L. COHEN

  	
   

  
	
  NAME: 

  	
  Kenneth L. Cohen

  	
   

  
	
  TITLE:

  	
  Vice President, Treasurer & Tax

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  UNOVA Industrial Automation Systems, Inc. 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
  /s/ KENNETH L. COHEN

  	
   

  
	
  NAME: 

  	
  Kenneth L. Cohen

  	
   

  
	
  TITLE:

  	
  Vice President, Treasurer & Tax

  	
   

  
					

 

101

 

	
  UNOVA IP Corp. 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
  /s/ KENNETH L. COHEN

  	
   

  
	
  NAME: 

  	
  Kenneth L. Cohen

  	
   

  
	
  TITLE:

  	
  Vice President, Treasurer & Tax

  	
   

  
					

 

102Exhibit 4.1

 

EXECUTION COPY

 

 

LEVEL 3
COMMUNICATIONS, INC.,

 

as Guarantor,

 

LEVEL 3 FINANCING, INC.

 

as Issuer,

 

and

 

THE BANK OF
NEW YORK,

 

as Trustee

 

 

 

Indenture

 

Dated as of March 14,
2006

 

 

 

Floating Rate
Senior Notes Due 2011

 

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE ONE

  	
   

  
	
   

  	
   

  
	
  DEFINITIONS
  AND OTHER PROVISIONS OF GENERAL APPLICATION

  	
   

  
	
   

  	
   

  
	
  SECTION 101. Definitions

  	
  2

  
	
  SECTION 102. Compliance Certificates
  and Opinions

  	
  31

  
	
  SECTION 103. Form of Documents
  Delivered to Trustee

  	
  32

  
	
  SECTION 104. Acts of Holders

  	
  32

  
	
  SECTION 105. Notices, etc., to Trustee
  and the Issuer

  	
  33

  
	
  SECTION 106. Notice to Holders; Waiver

  	
  34

  
	
  SECTION 107. Effect of Headings and
  Table of Contents

  	
  34

  
	
  SECTION 108. Successors and Assigns

  	
  34

  
	
  SECTION 109. Separability Clause

  	
  34

  
	
  SECTION 110. Benefits of Indenture

  	
  35

  
	
  SECTION 111. Governing Law

  	
  35

  
	
  SECTION 112. Conflict with Trust
  Indenture Act

  	
  35

  
	
  SECTION 113. Legal Holidays

  	
  35

  
	
  SECTION 114. No Personal Liability of
  Directors, Officers, Employees and Stockholders

  	
  35

  
	
  SECTION 115. Independence of Covenants

  	
  36

  
	
  SECTION 116. Exhibits

  	
  36

  
	
  SECTION 117. Counterparts

  	
  36

  
	
  SECTION 118. Duplicate Originals

  	
  36

  
	
   

  	
   

  
	
  ARTICLE TWO

  	
   

  
	
   

  	
   

  
	
  SECURITY
  FORMS

  	
   

  
	
   

  	
   

  
	
  SECTION 201. Form and Dating

  	
  36

  
	
   

  	
   

  
	
  ARTICLE THREE

  	
   

  
	
   

  	
   

  
	
  THE
  SECURITIES

  	
   

  
	
   

  	
   

  
	
  SECTION 301. Amount of Securities

  	
  37

  
	
  SECTION 302. Execution and
  Authentication

  	
  38

  
	
  SECTION 303. Security Registrar and
  Paying Agent; Calculation Agent

  	
  38

  

 

i

 

	
  SECTION 304. Paying Agent To Hold
  Money in Trust

  	
  39

  
	
  SECTION 305. Holders Lists

  	
  39

  
	
  SECTION 306. Replacement Securities

  	
  39

  
	
  SECTION 307. Temporary Securities

  	
  39

  
	
  SECTION 308. Cancellation

  	
  39

  
	
  SECTION 309. Defaulted Interest

  	
  40

  
	
  SECTION 310. CUSIP Numbers

  	
  40

  
	
   

  	
   

  
	
  ARTICLE FOUR

  	
   

  
	
   

  	
   

  
	
  SATISFACTION
  AND DISCHARGE

  	
   

  
	
   

  	
   

  
	
  SECTION 401. Satisfaction and
  Discharge of Indenture

  	
  40

  
	
  SECTION 402. Application of Trust
  Money

  	
  41

  
	
   

  	
   

  
	
  ARTICLE FIVE

  	
   

  
	
   

  	
   

  
	
  REMEDIES

  	
   

  
	
   

  	
   

  
	
  SECTION 501. Events of Default

  	
  42

  
	
  SECTION 502. Acceleration of Maturity;
  Rescission and Annulment

  	
  43

  
	
  SECTION 503. Collection of
  Indebtedness and Suits for Enforcement by Trustee

  	
  44

  
	
  SECTION 504. Trustee May File
  Proofs of Claim

  	
  45

  
	
  SECTION 505. Trustee May Enforce
  Claims Without Possession of Securities

  	
  45

  
	
  SECTION 506. Application of Money
  Collected

  	
  46

  
	
  SECTION 507.
  Limitation on Suits

  	
  46

  
	
  SECTION 508.
  Unconditional
  Right of Holders to Receive Principal, Premium and Interest

  	
  47

  
	
  SECTION 509. Restoration of Rights and
  Remedies

  	
  47

  
	
  SECTION 510. Rights and Remedies
  Cumulative

  	
  47

  
	
  SECTION 511. Delay or Omission Not
  Waiver

  	
  47

  
	
  SECTION 512. Control by Holders

  	
  47

  
	
  SECTION 513. Waiver of Past Defaults

  	
  48

  
	
  SECTION 514. Waiver of Stay or
  Extension Laws

  	
  48

  
	
  SECTION 515. Undertaking for Costs

  	
  49

  
	
   

  	
   

  
	
  ARTICLE SIX

  	
   

  
	
   

  	
   

  
	
  THE
  TRUSTEE

  	
   

  
	
   

  	
   

  
	
  SECTION 601. Certain Duties and
  Responsibilities

  	
  49

  
	
  SECTION 602. Notice of Default

  	
  50

  
	
  SECTION 603. Certain Rights of Trustee

  	
  50

  

 

ii

 

	
  SECTION 604. Trustee Not Responsible
  for Recitals or Issuance of Securities

  	
  52

  
	
  SECTION 605. May Hold Securities

  	
  52

  
	
  SECTION 606. Money Held in Trust

  	
  52

  
	
  SECTION 607. Compensation and
  Reimbursement

  	
  52

  
	
  SECTION 608. Corporate Trustee
  Required; Eligibility; Conflicting Interests

  	
  53

  
	
  SECTION 609. Resignation and Removal;
  Appointment of Successor

  	
  54

  
	
  SECTION 610. Acceptance of Appointment
  by Successor

  	
  55

  
	
  SECTION 611. Merger, Conversion,
  Consolidation or Succession to Business

  	
  55

  
	
   

  	
   

  
	
  ARTICLE SEVEN

  	
   

  
	
   

  	
   

  
	
  HOLDERS’
  LISTS AND REPORTS BY TRUSTEE AND THE ISSUER

  	
   

  
	
   

  	
   

  
	
  SECTION 701. Disclosure of Names and
  Addresses of Holders

  	
  56

  
	
  SECTION 702. Reports by Trustee

  	
  56

  
	
  SECTION 703. Reports by Parent and the
  Issuer

  	
  56

  
	
   

  	
   

  
	
  ARTICLE EIGHT

  	
   

  
	
   

  	
   

  
	
  CONSOLIDATION,
  MERGER, CONVEYANCE, TRANSFER OR LEASE

  	
   

  
	
   

  	
   

  
	
  SECTION 801. Parent May Consolidate,
  etc., Only on Certain Terms

  	
  57

  
	
  SECTION 802. Successor Parent
  Substituted

  	
  58

  
	
  SECTION 803. Issuer May Consolidate,
  etc., Only on Certain Terms

  	
  58

  
	
  SECTION 804. Successor Issuer
  Substituted

  	
  59

  
	
  SECTION 805. Guarantor (other than
  Parent) May Consolidate, etc., Only on Certain Terms

  	
  60

  
	
  SECTION 806. Successor Guarantor
  Substituted

  	
  61

  
	
  SECTION 807. Offering Proceeds Note
  Guarantor May Consolidate, etc., Only on Certain Terms

  	
  61

  
	
   

  	
   

  
	
  ARTICLE NINE

  	
   

  
	
   

  	
   

  
	
  SUPPLEMENTAL
  INDENTURES

  	
   

  
	
   

  	
   

  
	
  SECTION 901. Supplemental Indentures
  Without Consent of Holders

  	
  62

  
	
  SECTION 902. Supplemental Indentures
  With Consent of Holders

  	
  63

  
	
  SECTION 903. Execution of Supplemental
  Indentures

  	
  64

  
	
  SECTION 904. Effect of Supplemental
  Indentures

  	
  64

  
	
  SECTION 905. Conformity with Trust
  Indenture Act

  	
  65

  
	
  SECTION 906. Reference in Securities
  to Supplemental Indentures

  	
  65

  
	
  SECTION 907. Notice of Supplemental
  Indentures

  	
  65

  

 

iii

 

	
  ARTICLE TEN

  	
   

  
	
   

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  SECTION 1001. Payment of Principal,
  Premium, if Any, and Interest

  	
  65

  
	
  SECTION 1002. Maintenance of Office or
  Agency

  	
  65

  
	
  SECTION 1003. Money for Security
  Payments to Be Held in Trust

  	
  66

  
	
  SECTION 1004. Corporate Existence

  	
  67

  
	
  SECTION 1005. Maintenance of
  Properties

  	
  67

  
	
  SECTION 1006. Insurance

  	
  68

  
	
  SECTION 1007. Reports

  	
  68

  
	
  SECTION 1008. Statement by Officers as
  to Default

  	
  68

  
	
  SECTION 1009. Change of Control
  Triggering Event

  	
  69

  
	
  SECTION 1010. Limitation on
  Consolidated Debt

  	
  71

  
	
  SECTION 1011. Limitation on Debt of
  the Issuer and Issuer Restricted Subsidiaries

  	
  75

  
	
  SECTION 1012. Limitation on Restricted
  Payments

  	
  79

  
	
  SECTION 1013. Limitation on Dividend
  and Other Payment Restrictions Affecting Restricted Subsidiaries

  	
  82

  
	
  SECTION 1014.
  Limitation on Liens

  	
  83

  
	
  SECTION 1015.
  Limitation
  on Sale and Leaseback Transactions

  	
  84

  
	
  SECTION 1016.
  Limitation on Asset Dispositions

  	
  85

  
	
  SECTION 1017. Limitation on Issuance
  and Sales of Capital Stock of Restricted Subsidiaries

  	
  87

  
	
  SECTION 1018. Transactions with
  Affiliates

  	
  88

  
	
  SECTION 1019. Limitation on
  Designations of Unrestricted Subsidiaries

  	
  89

  
	
  SECTION 1020. Limitation on Actions
  with respect to Existing Intercompany Obligations

  	
  91

  
	
  SECTION 1021. Covenant Suspension

  	
  92

  
	
  SECTION 1022. Special Interest Notice

  	
  93

  
	
  SECTION 1023. Authorizations and
  Consents of Governmental Authorities

  	
  94

  
	
   

  	
   

  
	
  ARTICLE ELEVEN

  	
   

  
	
   

  	
   

  
	
  REDEMPTION
  OF SECURITIES

  	
   

  
	
   

  	
   

  
	
  SECTION 1101. Right of Redemption

  	
  94

  
	
  SECTION 1102. Applicability of Article

  	
  94

  
	
  SECTION 1103. Election to Redeem;
  Notice to Trustee

  	
  94

  
	
  SECTION 1104. Selection by Trustee of
  Securities to Be Redeemed

  	
  95

  
	
  SECTION 1105. Notice of Redemption

  	
  95

  
	
  SECTION 1106. Deposit of Redemption
  Price

  	
  96

  
	
  SECTION 1107. Securities Payable on
  Redemption Date

  	
  96

  
	
  SECTION 1108. Securities Redeemed in
  Part

  	
  97

  

 

iv

 

	
  ARTICLE TWELVE

  	
   

  
	
   

  	
   

  
	
  DEFEASANCE
  AND COVENANT DEFEASANCE

  	
   

  
	
   

  	
   

  
	
  SECTION 1201. Issuer’s Option to
  Effect Defeasance or Covenant Defeasance

  	
  97

  
	
  SECTION 1202. Defeasance and Discharge

  	
  97

  
	
  SECTION 1203. Covenant Defeasance

  	
  98

  
	
  SECTION 1204. Conditions to Defeasance
  or Covenant Defeasance

  	
  99

  
	
  SECTION 1205. Deposited Money and
  Government Securities to Be Held in Trust; Other Miscellaneous Provisions

  	
  100

  
	
  SECTION 1206. Reinstatement

  	
  101

  
	
   

  	
   

  
	
  ARTICLE THIRTEEN

  	
   

  
	
   

  	
   

  
	
  GUARANTEES
  AND OFFERING PROCEEDS NOTE GUARANTEES

  	
   

  
	
   

  	
   

  
	
  SECTION 1301. Guarantees

  	
  101

  
	
  SECTION 1302. Contribution

  	
  104

  
	
  SECTION 1303. Release of Guarantees

  	
  104

  
	
  SECTION 1304. Successors and Assigns

  	
  104

  
	
  SECTION 1305. No Waiver

  	
  104

  
	
  SECTION 1306. Modification

  	
  104

  
	
  SECTION 1307. Execution of
  Supplemental Indenture for Future Guarantors

  	
  105

  
	
  SECTION 1308. Subordination of Note
  Guarantees

  	
  105

  
	
  SECTION 1309. Execution of Offering
  Proceeds Note Guarantees for Future Offering Proceeds Note Guarantors;
  Subordination of Offering Proceeds Note Guarantee

  	
  105

  
	
   

  	
   

  
	
  APPENDIX A - Provisions Relating to Initial
  Securities and Exchange Securities

  	
   

  
	
  EXHIBIT A - Form of Exchange Security

  	
   

  
	
  EXHIBIT B - Form of Incumbency
  Certificate

  	
   

  
	
  EXHIBIT C - Form of Supplemental
  Indenture (Future Guarantors)

  	
   

  
	
  EXHIBIT D - Form of Parent
  Intercompany Note Subordination Agreement

  	
   

  
	
  EXHIBIT E – Form of Offering
  Proceeds Note Guarantee

  	
   

  
	
  EXHIBIT F - Form of Offering
  Proceeds Note Subordination Agreement

  	
   

  
	
  EXHIBIT G - Form of Supplemental
  Indenture (Subordination of Note Guarantees)

  	
   

  

 

v

 

INDENTURE,
dated as of March 14, 2006, among Level 3 Communications, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called “Parent”), having its principal office at 1025 Eldorado
Boulevard, Broomfield, Colorado 80021, Level 3 Financing, Inc. (the Issuer”),
having its principal office at 1025 Eldorado Boulevard, Broomfield, Colorado
80021, and The Bank of New York, a New York banking corporation, as Trustee
(herein called the “Trustee”).

 

RECITALS OF THE ISSUER

 

The Issuer has
duly authorized the creation of an issue of Floating Rate Senior Notes Due 2011
(the “Initial Securities”) and, if and when issued pursuant to a Registered Exchange
Offer or Private Exchange Offer pursuant to a Registration Agreement for the
Initial Securities, Floating Rate Senior Notes Due 2011 (the “Exchange
Securities” and, together with the Initial Securities, the “Securities”), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Issuer and Parent have duly authorized the execution and delivery
of this Indenture.

 

All things
necessary have been done to make the Securities, when executed by the Issuer
and authenticated and delivered hereunder and duly issued by the Issuer, the
valid obligations of the Issuer and to make this Indenture a valid agreement of
each of Parent, the Issuer and the Trustee, in accordance with their and its
terms.

 

Simultaneously
with the closing of the offering of the Initial Securities, the Issuer will
lend the net proceeds of the issuance of the Securities and certain cash on
hand to Level 3 LLC in return for the Offering Proceeds Note. Currently, Level 3
LLC is the obligor on the Parent Intercompany Note. Pursuant to the Parent
Intercompany Note Subordination Agreement, Level 3 LLC’s obligations under
the Parent Intercompany Note will be subordinated to its obligations under the
Offering Proceeds Note upon the limited circumstances set forth therein. As set
forth herein, under certain circumstances, Restricted Subsidiaries will be
required to enter into a Note Guarantee and an Offering Proceeds Note Guarantee
and subordinate certain intercompany obligations to their obligations under
such guarantee pursuant to the Parent Intercompany Note Subordination Agreement.
On December 1, 2004, Parent, as guarantor, the Issuer, as borrower,
Merrill Lynch Capital Corporation, as administrative agent and collateral
agent, and certain lenders entered into a credit agreement pursuant to which
the lenders extended a $730.0 senior secured term loan to the Issuer. The
Issuer lent the proceeds of the term loan to Level 3 LLC in return for the Loan
Proceeds Note. Pursuant to the Offering Proceeds Note Subordination Agreement,
Level 3 LLC’s obligations under the Offering Proceeds Note will be subordinated
to its obligations under the Loan Proceeds Note upon the limited circumstances
set forth therein.

 

NOW,
THEREFORE, THIS INDENTURE WITNESSETH:

 

For and in
consideration of the premises and the purchase of the Securities by the Holders
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Securities, as follows:

 

 

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

 

SECTION 101.                    Definitions.

 

For all
purposes of this Indenture, including the recitals set forth above, except as
otherwise expressly provided or unless the context otherwise requires:

 

(a)                                  the terms defined in
this Article have the meanings assigned to them in this Article, and
include the plural as well as the singular;

 

(b)                                 all other terms used
herein which are defined in the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them therein;

 

(c)                                  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 “generally accepted accounting principles” with
respect to any computation required or permitted hereunder shall mean United
States generally accepted accounting principles as in effect on the date of this
Indenture;

 

(d)                                 the words “herein”, “hereof”
and “hereunder” and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section, paragraph or other
subdivision;

 

(e)                                  unless otherwise
indicated, references to Articles, Sections, paragraphs or other subdivisions
are references to such Articles, Sections, paragraphs or other subdivisions of
this Indenture; and

 

(f)                                    “or” is not
exclusive and “including” means including without limitation.

 

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

 

2

 

“Acquired Debt”
means, with respect to any specified Person, (i) Debt 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) Debt secured by a
Lien encumbering any Property acquired by such specified Person, which Debt was
not incurred in anticipation of, and was outstanding prior to, such merger,
consolidation or acquisition.

 

“Act”, when
used with respect to any Holder, has the meaning specified in Section 104.

 

“Additional
Securities” means, subject to the Issuer’s compliance with the covenants in
this Indenture, including Section 1010 and Section 1011, Floating
Rate Senior Notes due 2011 issued from time to time after the Issue Date under
the terms of this Indenture (other than pursuant to Section 306, 307, 1016
or 1108 of this Indenture and other than Exchange Securities or Private Exchange
Securities issued pursuant to an exchange offer for other Securities
outstanding under this Indenture).

 

“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 1016 and 1018 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 Parent 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 specified in Section 1018.

 

“Agent Member”
has the meaning specified in Section 2.1(b) of Appendix A.

 

“Asset
Disposition” means any transfer, conveyance, sale, lease, issuance or other
disposition by Parent 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 of Parent, but
excluding a disposition by a Restricted Subsidiary to Parent or a Restricted
Subsidiary or by Parent 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 1017),
(ii) substantially all of the assets of Parent or any Restricted
Subsidiary representing a division or line of business or (iii) other
Property of Parent 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
Parent; provided, however, that Parent has delivered to the
Trustee 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-

 

3

 

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 1016,
(ii) when used with respect to Parent, any Asset Disposition permitted
pursuant to Article Eight which constitutes a disposition of all or
substantially all of the assets of Parent and the Restricted Subsidiaries taken
as a whole, (iii) Receivables sales constituting Debt under Qualified
Receivable Facilities permitted to be Incurred pursuant to Section 1010 or
Section 1011 and (iv) any disposition that constitutes a Permitted
Investment or a Restricted Payment permitted by Section 1012.

 

“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 generally accepted accounting principles, 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 generally accepted accounting
principles. 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 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 of
Directors” of any Person means the board of directors 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 Trustee.

 

“Business Day”
means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day
on which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.

 

“Calculation
Agent” means a financial institution appointed by the Issuer to calculate the
interest payable on the Securities in respect of each Interest Period.

 

“Capital Lease
Obligation” of any Person means the obligation to pay rent or other payment
amount under a lease of (or other Debt arrangements conveying the right to use)
Property of such Person which is required to be classified and accounted for as
a capital lease or a liability on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles (a “Capital Lease”). The
stated maturity of such obligation shall be the

 

4

 

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 generally accepted
accounting principles.

 

“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 90 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-2 (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 Trustee), (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 Trustee)
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 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) and

 

5

 

(viii) investments in money market funds substantially all of
whose assets comprise securities of the types described in clauses (i) through
(vii).

 

“Change of
Control” has the meaning specified in Section 1009.

 

“Change of
Control Triggering Event” has the meaning specified in Section 1009.

 

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

 

“Commission”
means the Securities and Exchange Commission, as from time to time constituted,
created under the Exchange Act, or, if at any time after the execution of this
Indenture such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.

 

“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.

 

“Consolidated
Capital Ratio” means as of the date of determination the ratio of (i) the
aggregate amount of Debt of Parent 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 Parent from the issuance or sale of any
Capital Stock (including Preferred Stock) of Parent other than Disqualified
Stock subsequent to the Measurement Date, (c) the aggregate net proceeds
from the issuance or sale of Debt of Parent or any Restricted Subsidiary
subsequent to the Measurement Date convertible or exchangeable into Capital
Stock of Parent other than Disqualified Stock, in each case upon conversion or
exchange thereof into Capital Stock of Parent 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 Debt of Parent
or any Restricted Subsidiary (other than Debt that is subordinated to the
Securities or any applicable Note Guarantee or Offering Proceeds Note Guarantee)
and release of Parent and all Restricted Subsidiaries from all liability on the
Debt 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 Debt 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 Debt shall have been
issued or sold to Parent, a Subsidiary of Parent or an employee stock ownership
plan or trust established by Parent or any such Subsidiary for the benefit of
their employees.

 

“Consolidated
Cash Flow Available for Fixed Charges” for Parent and its Restricted
Subsidiaries or for the Issuer and the Issuer Restricted Subsidiaries for any
period means the Consolidated Net Income of Parent and its Restricted
Subsidiaries or the Issuer and the Issuer Restricted Subsidiaries, as
applicable, for such period increased by the sum of, to the extent reducing such
Consolidated Net Income for such period, (i) Consolidated Interest Expense
of

 

6

 

Parent and its Restricted Subsidiaries or the Issuer and the Issuer
Restricted Subsidiaries, as applicable, for such period, plus (ii) Consolidated
Income Tax Expense of Parent and its Restricted Subsidiaries or the Issuer and
the Issuer 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 Parent and its Restricted
Subsidiaries or for the Issuer and the Issuer 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 Issuer Restricted Subsidiary, as applicable
(calculated separately for such Restricted Subsidiary or Issuer Restricted
Subsidiary in the same manner as provided above for Parent or the Issuer, as
applicable) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to Parent or another Restricted
Subsidiary or to the Issuer or another Issuer Restricted Subsidiary, as
applicable, to the extent of such restrictions.

 

“Consolidated
Income Tax Expense” for Parent and its Restricted Subsidiaries or for the
Issuer and the Issuer Restricted Subsidiaries for any period means the
aggregate amounts of the provisions for income taxes of Parent and its Restricted
Subsidiaries or the Issuer and the Issuer Restricted Subsidiaries, as
applicable, for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.

 

“Consolidated
Interest Expense” for Parent and its Restricted Subsidiaries or the Issuer and
the Issuer Restricted Subsidiaries for any period means the interest expense
included in a consolidated income statement (excluding interest income) of Parent
and its Restricted Subsidiaries or the Issuer and the Issuer Restricted
Subsidiaries, as applicable, for such period in accordance with generally
accepted accounting principles, including without limitation or duplication
(or, to the extent not so included, with the addition of), (i) the
amortization of Debt 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 Debt guaranteed by Parent and its
Restricted Subsidiaries or the Issuer and the Issuer 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 Parent or
a Restricted Subsidiary or the Issuer or an Issuer Restricted Subsidiary, as
applicable) in connection with Debt Incurred by such plan or trust.

 

“Consolidated
Net Income” for Parent and its Restricted Subsidiaries or the Issuer and the
Issuer Restricted Subsidiaries for any period means the net income (or loss) of
Parent and its Restricted Subsidiaries or the Issuer and the Issuer Restricted
Subsidiaries, as applicable, for such period determined on a consolidated basis
in accordance with generally accepted accounting

 

7

 

principles; provided, however, that there shall be
excluded therefrom (a) for purposes of Section 1012 only, the net
income (or loss) of any Person acquired by Parent or a Restricted Subsidiary or
the Issuer or an Issuer 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 an Issuer Restricted Subsidiary, as applicable, except
to the extent of the amount of dividends or other distributions actually paid
to Parent or a Restricted Subsidiary or to the Issuer or an Issuer Restricted
Subsidiary, as applicable, by such Person during such period (except, for
purposes of Section 1012 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 Parent or
its Restricted Subsidiaries or the Issuer or the Issuer 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 generally accepted accounting principles,
(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 Parent or
any Restricted Subsidiary or the Issuer or any Issuer Restricted Subsidiary, as
applicable, of (1) options to purchase Capital Stock of Parent or such
Restricted Subsidiary or the Issuer or such Issuer 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, (i) with
respect to a Restricted Subsidiary or an Issuer Restricted Subsidiary, as
applicable, that is not a Wholly Owned Subsidiary any aggregate net income (or
loss) in excess of Parent’s or any Restricted Subsidiary’s or the Issuer’s or
any Issuer Restricted Subsidiary’s, as applicable, pro rata share of the net
income (or loss) of such Restricted Subsidiary or Issuer Restricted Subsidiary,
as applicable, that is not a Wholly Owned Subsidiary and (j) if the
period is the second, third or fourth fiscal quarter of 2003 or the first
fiscal quarter of 2004, an aggregate of $293,686,650 for all such quarters (such
amount relating to communications revenues recognized by Parent and its
Subsidiaries in connection with the amendment in February 2003 of the 1998
Cost Sharing and IRU Agreement with XO Communications); provided further
that there shall further be excluded therefrom the net income (but not net
loss) of any Restricted Subsidiary or any Issuer Restricted Subsidiary, as
applicable, that is subject to a restriction which prevents the payment of
dividends or the making of distributions to Parent or another Restricted Subsidiary
or to the Issuer or another Issuer 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 generally accepted
accounting principles, 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 generally
accepted accounting principles would be included on a consolidated balance
sheet of such Person and its

 

8

 

Subsidiaries after deducting therefrom all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, which in each case under generally accepted accounting principles
would be included on such consolidated balance sheet.

 

“Corporate
Trust Office” means the principal corporate trust office of the Trustee, at
which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is
located at 101 Barclay Street, Floor 8 West, New York, New York 10286, except
that, with respect to presentation of Securities for payment or for
registration of transfer or exchange, such term shall mean the office or agency
of the Trustee at which, at any particular time, its corporate agency business
shall be conducted.

 

“Credit
Facilities” means one or more credit agreements, including the Existing Credit
Facility, 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 Parent
and its Restricted Subsidiaries, or Purchase Money Debt, or Debt 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” 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,
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 Interest Rate or
Currency Protection 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 Debt at any time
of determination as used herein represented by (a) any Debt 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 Debt at such
time or (b) in the case of any Receivables sale constituting Debt, 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 Parent or a Wholly Owned
Restricted Subsidiary of Parent) thereof. The amount of Debt represented by an
obligation under an Interest Rate or Currency Protection Agreement shall be
equal to (x) zero if

 

9

 

such obligation has been Incurred pursuant to clause (x) of paragraph (b) of
Section 1010 or clause (viii) of paragraph (b) of Section 1011
or (y) the notional amount of such obligation if not Incurred pursuant to
such clause.

 

“Default”
means any event, act or condition the occurrence of which is, or after notice
or the passage of time or both would be, an Event of Default.

 

“Depository”
means The Depository Trust Company, its nominees and successors.

 

“Designation”
and “Designation Amount” have the respective meanings specified in Section 1019.

 

“Determination
Date,” with respect to an Interest Period, will be the second London Banking
Day preceding the first day of such Interest Period.

 

“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 final Stated Maturity of the Securities; provided, however,
that any Preferred Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require Parent or the
Issuer, respectively, to repurchase or redeem such Preferred Stock upon the
occurrence of a change of control occurring prior to the final Stated Maturity
of the Securities 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
Securities contained in Section 1009 and such Preferred Stock specifically
provides that Parent or the Issuer, respectively, will not repurchase or redeem
any such stock pursuant to such provisions prior to the Issuer’s repurchase of
such Securities as are required to be repurchased pursuant to Section 1009.

 

“Disqualified
Stock Dividends” means all dividends with respect to Disqualified Stock of Parent
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 Parent for the
period during which such dividends were paid.

 

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

 

“Event of
Default” has the meaning specified in Section 501.

 

“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).

 

10

 

“Exchange
Securities” has the meaning stated in the first recital of this Indenture.

 

“Excess
Proceeds” has the meaning specified in Section 1016.

 

“Existing
Credit Facility” means the Credit Agreement dated as of December 1, 2004,
among the Issuer, Parent, the lenders party thereto, and Merrill Lynch Capital
Corporation, as Administrative Agent.

 

“Existing
Notes” means Parent’s 27/8% 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, 111⁄4%
Senior Notes due 2010 in an aggregate principal amount not to exceed $96,000,000,
127/8% Senior Discount Notes due 2010 in an aggregate
principal amount at maturity not to exceed $488,000,000, 103⁄4% Senior Notes due
2008 in an aggregate principal amount not to exceed €59,000,000, 111⁄4% Senior
Notes due 2010 in an aggregate principal amount not to exceed €123,000,000, 91/8%
Senior Notes due 2008 in an aggregate principal amount not to exceed $398,000,000,
101⁄2% 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, 51⁄4% 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, 111⁄2% Senior Notes due 2010 in an aggregate principal
amount not to exceed $692,000,000 and the Issuer’s 103⁄4% Senior Notes due 2011
in an aggregate principal amount not to exceed $500,000,000.

 

“Expiration
Date” has the meaning specified in “Offer to Purchase” below.

 

“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 Parent acting in good faith
and shall be evidenced by a Board Resolution of Parent (except in the case of
the last paragraph under Section 1016) delivered to the Trustee.

 

“Federal
Bankruptcy Code” means the Bankruptcy Act of Title 11 of the United States
Code, as amended from time to time.

 

“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.

 

“Global
Security” means a Rule 144A Global Security or a Regulation S Global
Security, as the case may be.

 

11

 

“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.

 

“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 Parent or the
applicable Restricted Subsidiary, together with all accrued and unpaid interest
(if any) on such Government Securities).

 

“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
Debt 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 Debt or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such Debt,
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 Debt of the payment
of such Debt, (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 Debt 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.

 

“Guarantor”
means (1) Parent and (2) any other Person that becomes a Guarantor
pursuant to Section 1010, Section 1011, Article Eight or any
other provision of this Indenture.

 

“Holder” means
a Person in whose name a Security is registered in the Security Register.

 

“Incur” means,
with respect to any Debt 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 Debt or other obligation including the
recording, as required pursuant to generally accepted accounting principles or
otherwise, of any such Debt 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 generally accepted accounting principles that results in an obligation of
such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt and that neither the accrual of interest nor the
accretion of original issue discount shall be deemed an Incurrence of Debt. Debt
otherwise

 

12

 

incurred by a Person before it becomes a Subsidiary of Parent shall be
deemed to have been Incurred at the time at which it becomes a Subsidiary.

 

“Indenture”
means this instrument as originally executed and as it may from time to
time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof.

 

“Initial
Foreign Purchaser” means each non-U.S. person (within the meaning of
Regulation S) that purchased Initial Securities from the Initial
Purchasers in offshore transactions meeting the requirements of
Regulation S.

 

“Initial
Purchasers” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit
Suisse Securities (USA) LLC, Morgan Stanley & Co. Incorporated and
J.P. Morgan Securities Inc.

 

“Initial
Securities” has the meaning stated in the first recital of this Indenture.

 

“Interest
Payment Date” means the Stated Maturity of an installment of interest on the
Securities.

 

“Interest
Period” means the period commencing on and including an interest payment date
and ending on and including the day immediately preceding the next succeeding
interest payment date, with the exception that the first Interest Period shall
commence on and include the Issue Date and end on and include September 14,
2006

 

“Interest Rate
or Currency Protection Agreement” of any Person means any forward contract,
futures contract, swap, option or other financial agreement or arrangement
(including caps, floors, collars and similar agreements) relating to, or the
value of which is dependent upon, interest rates or currency exchange rates or
indices.

 

“Invested
Capital” means the sum of (a) $500,000,000, (b) the aggregate net
proceeds received by Parent from the issuance or sale of any Capital Stock,
including Preferred Stock, of Parent but excluding Disqualified Stock,
subsequent to the Measurement Date, and (c) the aggregate net proceeds
from the issuance or sale of Debt of Parent or any Restricted Subsidiary
subsequent to the Measurement Date convertible or exchangeable into Capital
Stock of Parent other than Disqualified Stock, in each case upon conversion or
exchange thereof into Capital Stock of Parent subsequent to the Measurement
Date; provided, however, that the net proceeds from the issuance
or sale of Capital Stock or Debt 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 Debt shall have
been issued or sold to Parent, a Subsidiary of Parent or an employee stock
ownership plan or trust established by Parent 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

 

13

 

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 Debt 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 Parent and its Restricted Subsidiaries to support the actual making
of Restricted Payments), but without any other adjustments for increases or
decreases in value, or 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.

 

“Issuer” means
the Person named as “Issuer” in the first paragraph of this Indenture, until a
successor Person shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter “Issuer” shall mean such successor Person.

 

“Issue Date”
means the date on which the Original Securities are initially issued.

 

“Issue Date
Purchase Money Debt” means Purchase Money Debt outstanding on the Issue Date; provided,
however, that the amount of such Purchase Money Debt when Incurred did
not exceed 100% of the cost of the construction, installation, acquisition,
lease, development or improvement of the applicable Telecommunications/IS
Assets.

 

“Issue Date
Rating” means Caa1 in the case of Moody’s and CCC- in the case of S&P,
which are the respective ratings assigned to the Securities by the Rating
Agencies on the Issue Date.

 

“Issuer Debt
Ratio” means the ratio of (a) the aggregate consolidated principal amount
(or, in the case of Debt issued at a discount, the then-Accreted Value) of Debt
of the Issuer and the Issuer Restricted Subsidiaries (other than Debt owed to
Parent or a Sister Restricted Subsidiary that is subordinated to the Offering
Proceeds Note (if Level 3 LLC is the obligor on such Debt) or to an Offering
Proceeds Note Guarantee of the obligor on such Debt), 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 Debt giving rise to
such calculation and any other Debt 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

 

14

 

Fixed Charges of the Issuer and the Issuer Restricted Subsidiaries for
the four full fiscal quarters next preceding such proposed Incurrence of Debt
for which consolidated financial statements are available and (y) Consolidated
Cash Flow Available for Fixed Charges of Parent 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 Issuer, any Issuer Restricted Subsidiary, Parent or any Sister Restricted
Subsidiary shall have made one or more Asset Dispositions or an Investment (by
merger or otherwise) in any Issuer Restricted Subsidiary or Sister Restricted
Subsidiary (or any Person which becomes an Issuer 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 an Issuer Restricted Subsidiary or a
Sister Restricted Subsidiary or was merged with or into the Issuer, any Issuer
Restricted Subsidiary or any Sister 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 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 Parent, 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 Parent 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.

 

“Issuer Order”
or “Issuer Request” means a written request or order signed in the name of the
Issuer by the Chairman of the Board of Directors, a Vice Chairman of the Board
of Directors, 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 the Issuer, and
delivered to the Trustee.

 

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

 

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

 

15

 

“Level 3 LLC”
means Level 3 Communications, LLC, a Delaware limited liability company and a
direct Wholly Owned Subsidiary of the Issuer.

 

“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 Parent 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.

 

“LIBOR,” with
respect to an Interest Period, will be the rate (expressed as a percentage per
annum) for deposits in U.S. dollars for a six-month period beginning on the second
London Banking Day after the Determination Date that appears on Telerate Page 3750
as of 11:00 a.m., London time, on the Determination Date. If Telerate Page 3750
does not include such a rate or is unavailable on a Determination Date, the
Calculation Agent will request the principal London office of each of four
major banks in the London interbank market, as selected by the Calculation
Agent, to provide such bank’s offered quotation (expressed as a percentage per
annum), as of approximately 11:00 a.m., London time, on such Determination
Date, to prime banks in the London interbank market for deposits in a
Representative Amount in U.S. dollars for a six-month period beginning on the
second London Banking Day after the Determination Date. If at least two such
offered quotations are so provided, the rate for the Interest Period will be
the arithmetic mean of such quotations. If fewer than two such quotations are
so provided, the Calculation Agent will request each of three major banks in
New York City, as selected by the Calculation Agent, to provide such bank’s
rate (expressed as a percentage per annum), as of approximately 11:00 a.m.,
New York City time, on such Determination Date, for loans in a Representative
Amount in U.S. dollars to leading European banks for a six-month period
beginning on the second London Banking Day after the Determination Date. If at
least two such rates are so provided, the rate for the Interest Period will be
the arithmetic mean of such rates. If fewer than two such rates are so provided,
then the rate for the Interest Period will be the rate in effect with respect
to the immediately preceding Interest Period.

 

“Loan Proceeds
Note” means the intercompany demand note dated December 1, 2004 in an
initial principal amount of $730,000,000 issued by Level 3 LLC to the Issuer to
evidence the loan in such amount made by the Issuer to Level 3 LLC with the
proceeds of the loans under the Existing Credit Facility, as it may be
amended from time to time.

 

“London
Banking Day” is any day on which dealings in U.S. dollars are transacted or,
with respect to any future date, are expected to be transacted in the London
interbank market.

 

16

 

“Maturity”,
when used with respect to any Security, means the date on which the principal
of such Security or an installment of principal becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, notice of redemption or otherwise.

 

“Measurement
Date” means April 28, 1998.

 

“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 national 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 Trustee by a
written notice given to the Issuer.

 

“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
Debt 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 Debt 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 generally accepted accounting principles 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 filed with the
Trustee; 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 Indenture and the Securities, 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

 

17

 

of the consideration is released to such Person or its Restricted
Subsidiary from escrow, such portion shall be treated for all purposes of this
Indenture and the Securities 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.

 

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

 

“Note
Guarantee” means an unconditional Guarantee of the due and punctual payment of
the principal of and premium, if any, and interest on the Securities, when and
as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and all other monetary obligations of the Issuer under
this Indenture and the Securities, and the due and punctual performance of all
covenants, agreements, obligations and liabilities of the Issuer under or
pursuant to this Indenture and the Securities, including the Parent Guarantee.

 

“Offer” has
the meaning specified in “Offer to Purchase” below.

 

“Offer to
Purchase” means a written offer (the “Offer”) sent by the Issuer by first-class mail,
postage prepaid, to each Holder of Securities at its address appearing in the
Security Register on the date of the Offer offering to purchase up to the
principal amount of Securities specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the “Expiration Date”) of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or
more than 60 days after the date of such Offer and a settlement date (the “Purchase
Date”) for purchase of Securities within five Business Days after the
Expiration Date. The Issuer shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing
of the Offer of the obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Issuer or, at the Issuer’s request, by the Trustee in
the name and at the expense of the Issuer. The Offer shall contain information
concerning the business of Parent and its Subsidiaries which the Issuer in good
faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase (which at a minimum will include (i) the
most recent annual and quarterly financial statements and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
contained in the documents required to be filed with the Trustee pursuant to
this Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material
developments in Parent’s business subsequent to the date of the latest of such
financial statements referred to in clause (i) (including a description of
the events requiring the Issuer to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer to
Purchase and the events requiring the Issuer to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein). The Offer
shall contain all instructions and materials necessary to enable such Holders
to tender Securities pursuant to the Offer to Purchase. The Offer shall also
state:

 

a. the Section of
this Indenture pursuant to which the Offer to Purchase is being made;

 

18

 

b. the Expiration Date and the Purchase Date;

 

c. the
aggregate principal amount of the Outstanding Securities offered to be
purchased by the Issuer pursuant to the Offer to Purchase (including, if less
than 100%, the manner by which such amount has been determined pursuant to the Section hereof
requiring the Offer to Purchase) (the “Purchase Amount”);

 

d. the purchase
price to be paid by the Issuer for $1,000 aggregate principal amount of
Securities accepted for payment (as specified pursuant to this Indenture) (the “Purchase
Price”);

 

e. that the
Holder may tender all or any portion of the Securities registered in the
name of such Holder and that any portion of a Security tendered must be
tendered in an integral multiple of $1,000 principal amount;

 

f. the place
or places where Securities are to be surrendered for tender pursuant to the
Offer to Purchase;

 

g. that any
Securities not tendered or tendered but not purchased by the Issuer will
continue to accrue interest;

 

h. that on the
Purchase Date the Purchase Price will become due and payable upon each Security
being accepted for payment pursuant to the Offer to Purchase and that interest
thereon, if any, shall cease to accrue on and after the Purchase Date;

 

i. that each
Holder electing to tender a Security pursuant to the Offer to Purchase will be
required to surrender such Security at the place or places specified in the
Offer prior to the close of business on the Expiration Date (such Security
being, if the Issuer or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);

 

j. that
Holders will be entitled to withdraw all or any portion of Securities tendered
if the Issuer (or the Paying Agent) receives, not later than the close of
business on the Expiration Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his tender;

 

k. that (i) if
Securities in an aggregate principal amount less than or equal to the Purchase
Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the
Issuer shall purchase all such Securities and (ii) if Securities in an
aggregate principal amount in excess of the Purchase Amount are tendered and
not withdrawn pursuant to the Offer to Purchase, the Issuer shall purchase
Securities having an aggregate principal amount equal to the Purchase Amount on
a pro  rata basis (with such adjustments as may be deemed
appropriate so that only Securities in denominations of $1,000 or integral
multiples thereof shall be purchased); and

 

19

 

l. that in the
case of any Holder whose Security is purchased only in part, the Issuer shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the Security so
tendered.

 

Any Offer to
Purchase shall be governed by and effected in accordance with the Offer for
such Offer to Purchase.

 

“Offering
Proceeds Note” means the intercompany demand note dated the Issue Date, in an
initial principal amount equal to $150,000,000, issued by Level 3 LLC to
the Issuer as it may be amended from time to time pursuant to Sections 301
and 1020.

 

“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 the
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 the Offering Proceeds Note, in
substantially the form set forth in Exhibit E hereto.

 

“Offering
Proceeds Note Guarantor” means any Restricted Subsidiary that provides an Offering
Proceeds Note Guarantee pursuant to Section 1010, Section 1011 or any
other provision of the Indenture.

 

“Offering
Proceeds Note Subordination Agreement” means the Offering Proceeds Note
Subordination Agreement, dated the Issue Date, among the Issuer, Parent and
Level 3 LLC, and the other Restricted Subsidiaries becoming party thereto as
contemplated therein, pursuant to which such Restricted Subsidiaries shall
subordinate obligations owed to the Issuer or any Restricted Subsidiary to any
obligations owed in respect of the Loan Proceeds Note, in substantially the form set
forth in Exhibit F hereto.

 

“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 Trustee, which shall comply with this Indenture.

 

“Opinion of
Counsel” means an opinion of counsel (who may be counsel to Parent or the
Issuer, including an employee of Parent or the Issuer).

 

“OECD” shall
mean the Organization for Economic Cooperation and Development.

 

“Original
Securities” has the meaning set forth in Section 301.

 

“Outstanding”,
when used with respect to Securities, means, as of the date of determination,
all Securities theretofore authenticated and delivered under this Indenture,
except:

 

20

 

(i)       Securities theretofore cancelled by the Trustee
or delivered to the Trustee for cancellation;

 

(ii)    on and after any maturity or redemption date,
Securities, or portions thereof, for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent (other than Parent or the Issuer) in trust or set aside and segregated in
trust by Parent, the Issuer (if Parent or the Issuer shall act as its own
Paying Agent) for the Holders of such Securities; provided that (a) the
Trustee or the Paying Agent, as applicable, is not prohibited from paying such
money to the Holders and (b) if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture;

 

(iii)                                                 Securities,
except to the extent provided in Sections 1202 and 1203, with respect to which
the Issuer has effected defeasance or covenant defeasance as provided in Article Twelve;
and

 

(iv)                                                Securities
which have been paid pursuant to Section 306 or in exchange for or in lieu
of which other Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands the Securities are
valid obligations of the Issuer;

 

provided,
however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities
owned by the Issuer or any other obligor upon the Securities or any Affiliate
of the Issuer or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which any
Responsible Officer of the Trustee actually knows to be so owned or as to which
the Trustee has received written notice shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding
if the pledgee establishes to the satisfaction of the Trustee the pledgee’s
right so to act with respect to such Securities and that the pledgee is not the
Issuer or any other obligor upon the Securities or any Affiliate of the Issuer
or such other obligor.

 

“Parent” means
the Person named as “Parent” in the first paragraph of this Indenture, until a
successor Person shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter “Parent” shall mean such successor Person.

 

“Parent
Guarantee” means the Note Guarantee of Parent.

 

“Parent
Intercompany Note” means the intercompany demand note dated December 8,
1999, as amended and restated on October 1, 2003, in the principal amount of
$14,370,673,908 as of December 31, 2005, issued by Level 3 LLC to
Parent.

 

21

 

“Parent
Intercompany Note Subordination Agreement” means the Parent Intercompany Note
Subordination Agreement dated the Issue Date, among the Issuer, Parent and
Level 3 LLC, and the other Restricted Subsidiaries and Sister Restricted
Subsidiaries becoming party thereto as contemplated therein, pursuant to which
such Restricted Subsidiaries shall subordinate obligations owed to Parent or
any Sister Restricted Subsidiary to any obligations owed in respect of the
Offering Proceeds Note, in substantially the form set forth in Exhibit D
hereto.

 

“Paying Agent”
means any Person (including Parent or the Issuer acting as Paying Agent) authorized
by Parent or the Issuer to pay the principal of (and premium, if any) or
interest on any Securities on behalf of the Issuer.

 

“Permitted
Holders” means the members of Parent’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 Exchange Act) at least 66 2/3% of the total voting power of the
Voting Stock of such Person.

 

“Permitted
Interest Rate or Currency Protection Agreement” of any Person means any
Interest Rate or Currency Protection 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 Debt 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 Debt
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 Interest Rate or Currency Protection Agreements; (f) bonds,
notes, debentures and other securities received as a result of Asset
Dispositions pursuant to and in compliance with Section 1016; (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 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 generally accepted
accounting principles shall have been made therefor; (b) other Liens
incidental to the conduct of Parent’s and its Restricted Subsidiaries’
businesses or the ownership of its Property not securing any Debt, and which do
not in the aggregate materially detract from the value of Parent’s and its
Restricted Subsidiaries’ Property when taken as a whole, or

 

22

 

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 Parent 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 Parent 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 Parent’s communications
network that (i) constitute capital assets in accordance with generally
accepted accounting principles and (ii) after giving effect to such
disposition, would result in Parent 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 Parent’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 Parent (i.e., Dallas), the entire through-portion of such network,
excluding the spurs which branch off the through-portion.

 

“Person” means
any individual, corporation, company, partnership, joint venture, limited
liability company, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof or any
other entity.

 

“Predecessor
Security” of any particular Security means every previous Security evidencing
all or a portion of the same debt as that evidenced by such particular
Security; and, for the purposes of this definition, any Security authenticated
and delivered under Section 306 in exchange for a mutilated security or in
lieu of a lost, destroyed or stolen Security shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Security.

 

“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 Parent or the Issuer or a
Wholly Owned Restricted Subsidiary of Parent or the Issuer, respectively. The
amount of any such dividend

 

23

 

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 issuer of such Preferred
Stock for the period during which such dividends were paid.

 

“Private
Exchange Offer” means the offer by the Issuer, pursuant to Section 2(f) of
the Registration Agreement dated March 14, 2006, or pursuant to any
similar Registration Agreement entered into in connection with the registration
of Additional Securities, to issue and deliver to certain purchasers, in
exchange for the Initial Securities held by such purchasers as part of
their initial distribution, a like aggregate principal amount of Private
Exchange Securities.

 

“Private
Exchange Securities” means the Exchange Securities to be issued pursuant to
this Indenture in connection with a Private Exchange Offer pursuant to the
relevant Registration Agreement.

 

“Private
Placement Legend” means the third paragraph of the legend set forth in the
Securities in the form set forth in Exhibit 1 to Appendix A.

 

“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 Indenture, 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 Parent 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
Amount” has the meaning specified in “Offer to Purchase” above.

 

“Purchase Date”
has the meaning specified in “Offer to Purchase” above.

 

“Purchase Money
Debt” means Debt (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 Parent or any Restricted
Subsidiary of any Telecommunications/IS Assets of Parent 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.

 

“Purchase
Price” has the meaning specified in “Offer to Purchase” above.

 

24

 

“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 Parent and its Restricted
Subsidiaries, 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, including, without limitation, the Existing Credit Facility.

 

“Qualified
Institutional Buyer” or “QIB” has the meaning specified in Rule 144A.

 

“Qualified
Receivable Facility” means Debt of Parent or any Subsidiary Incurred from time
to time pursuant to either (x) credit facilities secured by 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 Parent 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
Securities 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 Securities that is lower than the applicable Issue Date Rating
(or the equivalent thereof). If, prior to the Rating Date, either of the
ratings assigned to the Securities by the Rating Agencies is lower than the
applicable Issue 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.

 

“Redemption
Date”, when used with respect to any Security to be redeemed, in whole or in
part, means the date fixed for such redemption by or pursuant to this
Indenture.

 

“Redemption
Price”, when used with respect to any Security to be redeemed, means the price
at which it is to be redeemed pursuant to this Indenture.

 

“refinancing”
has the meaning specified in Section 1010(b)(viii) and 1011(b)(iv).

 

25

 

“Registered
Exchange Offer” means the offer by the Issuer, pursuant to the relevant
Registration Agreement, to certain Holders of Initial Securities, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like
aggregate principal amount of Exchange Securities registered under the Securities
Act.

 

“Registration
Agreement” means the Registration Agreement dated March 14, 2006, among
the Issuer, Parent and the Initial Purchasers relating to the Original
Securities or any similar agreement relating to any registration of Additional
Securities.

 

“Regular
Record Date” for the interest payable on any Interest Payment Date means the March 1
or September 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date.

 

“Regulation S”
means Regulation S under the Securities Act.

 

“Regulation S Global
Security” has the meaning specified in Section 2.1(a) of Appendix A.

 

“Representative
Amount” means a principal amount of not less than $1,000,000 for a single
transaction in the relevant market at the relevant time.

 

“Required
Filing Dates” has the meaning specified in Section 1007.

 

“Responsible
Officer”, when used with respect to the Trustee, means any officer within the
Trustee’s Corporate Trust Office, including any vice president, any assistant
secretary, any assistant treasurer, or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.

 

“Restricted
Payment” has the meaning specified in Section 1012.

 

“Restricted
Subsidiary” means (a) a Subsidiary of Parent or of a Restricted
Subsidiary, including the Issuer, that has not been designated or classified as
an Unrestricted Subsidiary pursuant to and in compliance with Section 1019
and (b) an Unrestricted Subsidiary that is redesignated as a Restricted
Subsidiary pursuant to such Section.

 

“Revocation”
has the meaning specified in Section 1019.

 

“Rule 144A”
means Rule 144A under the Securities Act.

 

“Rule 144A
Global Security” has the meaning specified in Section 2.1(a) of
Appendix A.

 

“S&P”
means Standard & Poor’s Ratings Service or, if Standard &
Poor’s Ratings 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;

 

26

 

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 Trustee by a written notice
given to the Issuer.

 

“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.

 

“Securities”
has the meaning stated in the first recital of this Indenture and more
particularly means any Securities authenticated and delivered under this
Indenture.

 

“Securities
Act” means the Securities Act of 1933, as amended (or any successor act), and
the rules and regulations thereunder (or respective successors thereto).

 

“Security
Register” and “Security Registrar” have the respective meanings specified in Section 303.

 

“Shelf
Registration Statement” means a registration statement issued by Parent and the
Issuer in connection with the offer and sale of Initial Securities pursuant to
the relevant Registration Agreement.

 

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

 

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

 

“Special
Assets” means (a) the Capital Stock or assets of RCN Corporation and
Commonwealth Telephone Enterprises, Inc. (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 Parent 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 1016).

 

“Special
Interest” has the meaning specified in Exhibit A.

 

27

 

“Stated
Maturity” when used with respect to a Security or any installment of interest
thereon, means the date specified in such Security as the fixed date on which
the principal of such Security or such installment of interest is due and
payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such Security at the
option of the Holder thereof upon the happening of any contingency beyond the
control of the Issuer unless such contingency has occurred).

 

“Subordinated
Debt” means Debt of Parent (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 Debt shall be subordinate to the
prior payment in full in cash of the Parent Guarantee 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 Debt (collectively, “payments of such
Debt”) 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 Securities exists, including as a result of acceleration; (ii) in
the event that any other Default exists with respect to the Securities, upon
notice by Holders of 25% or more in aggregate principal amount of the
Securities to the Trustee, the Trustee shall have the right to give notice to
Parent and the holders of such Debt (or trustees or agents therefor) of a
payment blockage, and thereafter no payments of such Debt 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 Securities during such period; (iii) if payment of such Debt is
accelerated when any Securities are Outstanding, no payments of such Debt may be
made until three Business Days after the Trustee receives notice of such
acceleration and, thereafter, such payments may only be made to the extent
the terms of such Debt permit payment at that time; and (iv) such Debt may not
(x) provide for payments of principal of such Debt 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 Parent
(including any redemption, retirement or repurchase which is contingent upon
events or circumstances but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Securities or (y) permit
redemption or other retirement (including pursuant to an offer to purchase made
by Parent) of such other Debt at the option of the holder thereof prior to the
final Stated Maturity of the Securities, 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 Parent) which is conditioned upon (A) a
change of control of Parent pursuant to provisions substantially similar to
those described in Section 1009 (and which shall provide that such Debt
will not be repurchased pursuant to such provisions prior to the Issuer’s
repurchase of the Securities required to be repurchased by the Issuer pursuant
to the provisions described in Section 1009) or (B) a sale or other
disposition of assets pursuant to provisions substantially similar to those
described in Section 1016 (and which shall provide that such Debt will not
be repurchased pursuant to such provisions prior to the Issuer’s repurchase of
the Securities required to be repurchased by the Issuer pursuant to the
provision described in Section 1016).

 

28

 

“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.

 

“Telecommunications/IS
Assets” means (a) any Property (other than cash, cash equivalents and
securities) to be owned by Parent or any Restricted Subsidiary and used in the
Telecommunications/IS Business; (b) for purposes of Sections 1010, 1011
and 1014 only, Capital Stock of any Person; or (c) for all other purposes
of this Indenture, Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by Parent or
another Restricted Subsidiary from any Person other than an Affiliate of
Parent; 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 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
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, however,
that the determination of what constitutes a Telecommunications/IS Business
shall be made in good faith by the Board of Directors of Parent.

 

“Telerate Page 3750”
means the display designated as “Page 3750” on the Moneyline Telerate service
(or such other page as may replace Page 3750 on that service).

 

“103⁄4% Notes”
means the Issuer’s 103⁄4% Senior Notes due 2011 issued pursuant to the Indenture
dated as of October 1, 2003, among the Issuer, Parent and The Bank of New
York, as trustee.

 

“Trust
Indenture Act” or “TIA” means the Trust Indenture Act of 1939 as in force at
the date as of which this Indenture was executed, except as provided in Section 9.05.

 

“Trustee”
means the Person named as the “Trustee” in the first paragraph of this Indenture
until a successor Trustee shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter “Trustee” shall mean such
successor Trustee.

 

29

 

“2013 Notes”
means the Issuer’s 12.25% Senior Notes due 2013 issued pursuant to the
Indenture dated as of March 14, 2006, among the Issuer, Parent and The
Bank of New York, as trustee.

 

“Unrestricted
Subsidiary” means (a) 91 Holding Corp. (the subsidiary that holds
indirectly Parent’s interests in the SR91 tollroad), Level 3 Finance LLC, Level
3 Finance II LLC, Eldorado Funding LLC, 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 of Parent designated as such pursuant
to and in compliance with Section 1019 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 Parent or any 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 of such Person.

 

The following
terms, unless otherwise defined pursuant to this Section 101, have the
meanings given to them in Appendix A:

 

“Additional Securities”

“Agent Members”

“Definitive Security”

“Depository”

“Distribution Compliance Period”

“Exchange Securities” 

“Euroclear”

“Global Security”

“Initial Purchasers”

“Initial Securities”

“Original Securities”

“Private Exchange” 

“Private Exchange Securities” 

“Purchase Agreement” 

 

30

 

“QIB”

“Registered Exchange Offer”

“Registration Agreement”

“Regulation S”

“Rule 144A”

“Rule 144A Global Security”

“Rule 144A Securities”

“Securities”

“Securities Act”

“Securities Custodian”

“Shelf Registration Statement”

“Transfer Restricted Securities”

 

SECTION 102.                    Compliance Certificates and
Opinions.

 

Upon any
application or request by the Issuer to the Trustee to take any action under
any provision of this Indenture, the Issuer shall furnish to the Trustee an
Officers’ Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenant compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

 

Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:

 

(1)                                  a
statement that each individual signing such certificate or opinion has read
such covenant or condition and the definitions herein relating thereto;

 

(2)                                  a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

 

(3)                                  a
statement that, in the opinion of each such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

 

(4)                                  a
statement as to whether, in the opinion of each such individual, such condition
or covenant has been complied with.

 

31

 

SECTION 103.                    Form of Documents Delivered
to Trustee.

 

In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.

 

Any
certificate or opinion of an officer of the Issuer or any Guarantor may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the Issuer or any
Guarantor, respectively, stating that the information with respect to such
factual matters is in the possession of the Issuer or any Guarantor,
respectively, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.

 

Where any
Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this
Indenture, they may, but need not, be consolidated (with proper identification
of each matter covered therein) and form one instrument.

 

SECTION 104.                    Acts of Holders.

 

(a)                                  Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Issuer. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the “Act” of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.

 

(b)                                 The
fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a
notary public or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact and
date of the

 

32

 

execution of any such
instrument or writing, or the authority of the Person executing the same, may also
be proved in any other manner that the Trustee deems sufficient.

 

(c)                                  The
principal amount and serial numbers of Securities held by any Person, and the
date of holding the same, shall be proved by the Security Register.

 

(d)                                 If
the Issuer shall solicit from the Holders of Securities any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Issuer may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Issuer
shall have no obligation to do so. Notwithstanding TIA Section 316(c),
such record date shall be the record date specified in or pursuant to such
Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith
and not later than the date such solicitation is completed. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall
be deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Securities shall be
computed as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.

 

(e)                                  Any
request, demand, authorization, direction, notice, consent, waiver or other Act
of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such
Security. However, any such Holder or future Holder may revoke the
request, demand, authorization, direction, notice, consent, waiver or other Act
of the Holder as to such Holder’s Security or portion of the Security if the
Trustee receives the notice of revocation before the date such Act becomes
effective.

 

SECTION 105.                    Notices, etc., to Trustee and
the Issuer.

 

Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given
or furnished to, or filed with,

 

(1)                                  the
Trustee by any Holder or by the Issuer shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the Trustee
at its Corporate Trust Office, Attention: 
Corporate Trust Administration, or

 

33

 

(2)                                  the
Issuer or any Guarantor by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Issuer or such
Guarantor addressed to it (in the case of a Guarantor, in care of the Issuer)
at the address of the Issuer’s principal office specified in the first
paragraph of this Indenture, or at any other address previously furnished in
writing to the Trustee by the Issuer.

 

SECTION 106.                    Notice to Holders; Waiver.

 

Where this
Indenture provides for notice of any event to Holders by the Issuer or the
Trustee, such notice shall be given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at the address of such Holder as it appears in
the Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Notices shall be
effective only upon receipt. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.

 

In case by
reason of the suspension of or irregularities in regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any
event to Holders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice for every purpose hereunder.

 

SECTION 107.                    Effect of Headings and Table of
Contents.

 

The Article and
Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

 

SECTION 108.                    Successors and Assigns.

 

All covenants
and agreements in this Indenture by the Issuer and Parent shall bind its
successors and assigns, whether so expressed or not.

 

SECTION 109.                    Separability Clause.

 

In case any
provision in this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

34

 

SECTION 110.                    Benefits of Indenture.

 

Nothing in
this Indenture or in the Securities, express or implied, shall give to any
Person, other than the parties hereto, any Paying Agent, any Security Registrar
and their successors hereunder and the Holders any legal or equitable right,
remedy or claim under this Indenture.

 

SECTION 111.                    Governing Law.

 

THIS
INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

SECTION 112.                    Conflict with Trust Indenture
Act.

 

The Trust
Indenture Act shall apply as a matter of contract to this Indenture for
purposes of interpretation, construction and defining the rights and obligations
hereunder. If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.

 

If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Indenture as so modified or excluded, as the
case may be.

 

SECTION 113.                    Legal Holidays.

 

In any case
where any Interest Payment Date, Redemption Date, or Stated Maturity or
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of principal
(or premium, if any) or interest need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date or Redemption Date or at the Stated Maturity
or Maturity; provided that no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date, Stated Maturity or
Maturity, as the case may be.

 

SECTION 114.                    No Personal Liability of
Directors, Officers, Employees and Stockholders.

 

No director,
officer, employee, incorporator or stockholder of the Issuer or any Guarantor,
as such, shall have any liability for any obligations of the Issuer or any
Guarantor under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation, solely by
reason of its status as a director, officer, employee, incorporator or
stockholder of the Issuer or a Guarantor. By accepting a Security, each Holder

 

35

 

waives and releases all such liability (but only such liability). The
waiver and release are part of the consideration for issuance of the
Securities.

 

SECTION 115.                    Independence of Covenants.

 

All covenants
and agreements in this Indenture shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default if
such action is taken or condition exists.

 

SECTION 116.                    Exhibits.

 

All exhibits
attached hereto are by this reference made a part hereof with the same
effect as if herein set forth in full.

 

SECTION 117.                    Counterparts.

 

This Indenture
may be executed in any number of counterparts, each of which shall be an
original; but such counterparts shall together constitute but one and the same
instrument.

 

SECTION 118.                    Duplicate Originals.

 

The parties may sign
any number of copies of this Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.

 

ARTICLE TWO

SECURITY FORMS

 

SECTION 201.                    Form and Dating.

 

Provisions
relating to the Initial Securities and the Exchange Securities are set forth in
Appendix A, which is hereby incorporated in and expressly made part of
this Indenture. The Initial Securities and the Trustee’s certificate of
authentication shall be substantially in the form of Exhibit 1 to
Appendix A which is hereby incorporated in and expressly made a part of
this Indenture. The Exchange Securities and the Trustee’s certificate of
authentication shall be substantially in the form of Exhibit A, which
is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which the Issuer is subject, if any, or
usage, provided that any such notation, legend or endorsement is in a form reasonably
acceptable to the Issuer. Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit 1 to
Appendix A and Exhibit A are part of the terms of this Indenture.

 

36

 

The definitive
Securities shall be printed, lithographed or engraved on steel-engraved borders
or may be produced in any other manner permitted by the rules of any
securities exchange or system on which the Securities may be listed or
eligible for trading, all as determined by the officers of the Issuer executing
such Securities, as evidenced by their execution of such Securities.

 

ARTICLE THREE

THE SECURITIES

 

SECTION 301.                    Amount of Securities. Subject
to Section 302, the Trustee shall authenticate Initial Securities for
original issue on the Issue Date in the aggregate principal amount of
$150,000,000 (the “Original Securities”).

 

The Issuer
shall be entitled, subject to its compliance with the covenants set forth in
this Indenture, including Section 1010 and Section 1011, to issue
Additional Securities under this Indenture which shall have identical terms as
the Original Securities, other than with respect to the date of issuance and
issue price. The Original Securities, any Additional Securities and all
Exchange Securities or Private Exchange Securities issued in exchange therefor
shall be treated as a single class for all purposes under this Indenture.

 

With respect
to the Additional Securities, the Issuer shall set forth in a Board Resolution
and an Officers’ Certificate, a copy of each which shall be delivered to the
Trustee, the following information:

 

(1)                                  the
aggregate principal amount of such Additional Securities to be authenticated
and delivered pursuant to this Indenture;

 

(2)                                  the
issue price, the issue date and the CUSIP number of such Additional Securities;
provided, however, that no Additional Securities may be
issued after the expiration of the “period of thirteen days” described in
Treasury Regulation Section 1.1275-1(f)(1)(iii) unless such issuance
would be a “qualified reopening” within the meaning of Treasury Regulation Section 1.1275-2(k)(3);
and

 

(3)                                  whether
such Additional Securities shall be Transfer Restricted Securities and issued
in the form of Securities as set forth in the Appendix to this Indenture
or shall be issued in the form of Exchange Securities as set forth in Exhibit A.

 

For each
issuance of Additional Securities, the Issuer 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 Securities so issued,
and the principal amount of the Offering Proceeds Note shall be increased by
such amount.

 

37

 

SECTION 302.                    Execution and Authentication.
Two Officers shall sign the Securities for the Issuer by manual or facsimile
signature.

 

If an Officer
whose signature is on a Security no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless.

 

At any time
and from time to time after the execution and delivery of this Indenture, the
Issuer may deliver Securities executed by the Issuer to the Trustee for
authentication, together with a written order of the Issuer in the form of
an Officers’ Certificate for the authentication and delivery of such
Securities, and the Trustee in accordance with such written order of the Issuer
shall authenticate and deliver such Securities.

 

A Security
shall not be valid until an authorized signatory of the Trustee manually signs
the certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.

 

The Trustee may appoint
an authenticating agent reasonably acceptable to the Issuer to authenticate the
Securities. Unless limited by the terms of such appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Security Registrar, Paying Agent or agent for service of notices and
demands.

 

SECTION 303.                    Security Registrar and Paying
Agent; Calculation Agent. The Issuer shall maintain an office or agency in
The City of New York where Securities may be presented for registration of
transfer or for exchange (the “Security Registrar”) and an office or agency in
The City of New York where Securities may be presented for payment to the
Paying Agent. The Security Registrar shall keep a register of the Securities
and of their transfer and exchange (the register maintained in the office of
the Security Registrar and in any other office or agency designated pursuant to
Section 1002 being herein sometimes referred to as the “Security Register”).
The Issuer may have one or more co-registrars and one or more additional
paying agents. The term “Paying Agent” includes any additional paying agent.

 

The Issuer
shall enter into an appropriate agency agreement with any Security Registrar,
Paying Agent, Calculation Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuer shall notify
the Trustee of the name and address of any such agent. If the Issuer fails to
maintain a Securities Registrar, Paying Agent or Calculation Agent, the Trustee
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 607.

 

The Issuer
initially appoints the Trustee as Security Registrar, Paying Agent and
Calculation Agent in connection with the Securities.

 

38

 

SECTION 304.                    Paying Agent To Hold Money in
Trust. Prior to each due date of the principal and interest on any
Security, the Issuer shall deposit with the Paying Agent a sum sufficient to
pay such principal and interest when so becoming due. The Issuer shall require
each Paying Agent (other than the Trustee) to agree in writing that the Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all money
held by the Paying Agent for the payment of principal of or interest on the
Securities and shall notify the Trustee of any default by the Issuer in making
any such payment. If the Issuer or a Wholly Owned Subsidiary acts as Paying
Agent, it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Issuer at any time may require a Paying Agent to
pay all money held by it to the Trustee and to account for any funds disbursed
by the Paying Agent. Upon complying with this Section, the Paying Agent shall
have no further liability for the money delivered to the Trustee.

 

SECTION 305.                    Holders Lists. The Trustee
shall preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of Holders. If the
Trustee is not the Security Registrar, the Issuer shall furnish to the Trustee,
in writing at least five Business Days before each Interest Payment Date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of Holders.

 

SECTION 306.                    Replacement Securities. If a
mutilated Security is surrendered to the Security Registrar or if the Holder of
a Security claims that such Security has been lost, destroyed or wrongfully
taken, the Issuer shall issue and the Trustee shall authenticate a replacement
Security if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable requirements of the
Trustee. Such Holder shall furnish an indemnity bond sufficient in the judgment
of the Issuer and the Trustee to protect the Issuer, the Trustee, the Paying
Agent, the Security Registrar and any co-registrar from any loss which any of
them may suffer if a Security is replaced. The Issuer and the Trustee may charge
the Holder for their expenses in replacing a Security.

 

Every
replacement Security is an additional obligation of the Issuer.

 

SECTION 307.                    Temporary Securities. Until
definitive Securities are ready for delivery, the Issuer may prepare and
the Trustee shall authenticate temporary Securities. Temporary Securities shall
be substantially in the form of definitive Securities but may have
variations that the Issuer considers appropriate for temporary Securities.
Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate
definitive Securities and deliver them in exchange for temporary Securities.

 

SECTION 308.                    Cancellation. The Issuer at
any time may deliver Securities to the Trustee for cancellation. The
Security Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel and dispose of in accordance
with its customary procedures (subject to the record retention requirements of
the Exchange Act) all Securities surrendered for registration of transfer,
exchange, payment or cancellation unless the Issuer directs the Trustee to

 

39

 

deliver
canceled Securities to the Issuer. The Issuer may not issue new Securities
to replace Securities it has redeemed, paid or delivered to the Trustee for
cancellation.

 

SECTION 309.                    Defaulted Interest. If the
Issuer defaults in a payment of interest on the Securities, the Issuer shall
pay the defaulted interest (plus interest on such defaulted interest to the
extent lawful) in any lawful manner. The Issuer may pay the defaulted
interest to the persons who are Holders on a subsequent special record date.
The Issuer shall fix or cause to be fixed any such special record date and
payment date to the reasonable satisfaction of the Trustee and shall promptly
mail to each Holder a notice that states the special record date, the payment
date and the amount of defaulted interest to be paid.

 

SECTION 310.                    CUSIP Numbers. The Issuer in
issuing the Securities may use “CUSIP” numbers (if then generally in use)
and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a
convenience to Holders; provided, however, that neither the
Issuer nor the Trustee shall have any responsibility for any defect in the “CUSIP”
number that appears on any Security, check, advice of payment or redemption
notice, and any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers. The Issuer will promptly notify the Trustee in writing of any change
in the “CUSIP” number(s).

 

ARTICLE FOUR

SATISFACTION AND DISCHARGE

 

SECTION 401.                    Satisfaction and Discharge of
Indenture. 

 

This Indenture
shall cease to be of further effect (subject to Section 1206 and except as
to surviving rights of registration of transfer, transfer, exchange and
replacement of Securities expressly provided for herein or pursuant hereto) and
the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when

 

(1)                                  either

 

(a)                                  all
Outstanding Securities have been delivered to the Trustee for cancellation; or

 

(b)                                 all
such Securities not theretofore delivered to the Trustee for cancellation

 

(i) have become
due and payable, or

 

40

 

(ii) will
become due and payable within one year, or

 

(iii) are
to be called for redemption within one year under irrevocable arrangements
satisfactory to the Trustee in its sole discretion for the giving of notice of
redemption by the Trustee in the name and at the expense of the Issuer,

 

and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the
Securities not theretofore delivered to the Trustee for cancellation, for
principal of (and premium, if any, on), and interest on, the Securities to
Maturity or the Redemption Date, as the case may be;

 

(2)                                  the
Issuer has paid or caused to be paid all other sums payable by the Issuer
hereunder; and

 

(3)                                  the
Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.

 

Notwithstanding
the satisfaction and discharge of this Indenture, the obligations under
Sections 607 and 609 and, if money shall have been deposited with the
Trustee pursuant to clause (1)(b) of this Section 401, the
obligations of the Trustee under Section 402 and the last paragraph of Section 1003
shall survive.

 

SECTION 402.                    Application of Trust Money.

 

Subject to the
provisions of the last paragraph of Section 1003, all money deposited with
the Trustee pursuant to Section 401 shall be held in trust and applied by
it, in accordance with the provisions of the Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the Issuer
acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal (and premium, if any) and interest
for whose payment such money has been deposited with the Trustee; but such
money need not be segregated from other funds except to the extent required by
law.

 

41

 

ARTICLE FIVE

REMEDIES

 

SECTION 501.                    Events of Default.

 

“Event of
Default”, wherever used herein, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

 

(1)                                  failure
to pay principal of (or premium, if any, on) any Security when due; or

 

(2)                                  failure
to pay any interest on any Security when due, continued for 30 days; or

 

(3)                                  default
in the payment of principal of (and premium, if any) and interest on Securities
required to be purchased pursuant to an Offer to Purchase pursuant to Section 1009
when due and payable; or

 

(4)                                  failure
to perform or comply with the provisions of Section 801, 803, 805,
807 or 1016; or

 

(5)                                  failure
to perform any covenant or agreement of Parent, the Issuer or any
Restricted Subsidiary in this Indenture or in any Security (other than a
covenant a default in whose performance is elsewhere in this Section specifically
dealt with) continued for 60 days after written notice to the Issuer by
the Trustee or Holders of at least 25% in aggregate principal amount of the
Outstanding Securities, which notice shall specify the default and state that
such notice is a “Notice of Default” hereunder; or

 

(6)                                  default
under the terms of any instrument evidencing or securing Debt of Parent or any
Restricted Subsidiary having an outstanding principal amount of not less than
$25,000,000 or its foreign currency equivalent at the time individually or in
the aggregate 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); or

 

(7)                                  the
rendering of a judgment or judgments against Parent 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; or

 

42

 

(8)                                  any
Note Guarantee ceases to be in full force and effect (other than in accordance
with the terms of such Note Guarantee) or any Guarantor denies or disaffirms
its obligations under its Note Guarantee; or

 

(9)                                  the
entry of a decree or order by a court having jurisdiction in the premises
adjudging Parent, the Issuer or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of Parent, the Issuer
or any Significant Subsidiary under the Federal Bankruptcy Code or any other
applicable federal, state or foreign law, or appointing a receiver, liquidator,
assignee, trustee, custodian or sequestrator (or other similar official) of
Parent, the Issuer or any Significant Subsidiary or of any substantial part of
its Property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
30 consecutive days; or

 

(10)                            the
institution by Parent, the Issuer or any Significant Subsidiary of proceedings
to be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief under
the Federal Bankruptcy Code or any other applicable federal, state or foreign
law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of Parent, the Issuer or any
Significant Subsidiary or of any substantial part of its Property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due.

 

SECTION 502.                    Acceleration of Maturity;
Rescission and Annulment.

 

If an Event of
Default (other than an Event of Default specified in Section 501(9) or
501(10) with respect to Parent or the Issuer) shall occur and be
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities may declare the principal
amount of all the Securities to be due and payable immediately, by a notice in
writing to the Issuer (and to the Trustee if given by Holders), and upon any
such declaration such principal amount shall become immediately due and
payable. If an Event of Default specified in Section 501(9) or 501(10) occurs
with respect to Parent or the Issuer, the principal amount of all the
Securities shall ipso  facto become immediately due and payable
without any declaration or other act on the part of the Trustee or any
Holder.

 

At any time
after a declaration of acceleration has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter provided in this Article Five, the Holders of a majority in
aggregate principal amount of the Outstanding Securities, by written notice to
the Issuer and the Trustee, may rescind and annul such declaration and its
consequences if

 

(1)                                  the
Issuer has paid or deposited with the Trustee a sum sufficient to pay

 

43

 

(A)                              all
overdue interest on all Outstanding Securities,

 

(B)                                all
unpaid principal of (and premium, if any, on) any Outstanding Securities which
has become due otherwise than by such declaration of acceleration, and interest
on such unpaid principal at the rate borne by the Securities,

 

(C)                                to
the extent that payment of such interest is lawful, interest on overdue
interest at the rate borne by the Securities, and

 

(D)                               all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
and

 

(2)                                  all
Events of Default, other than the nonpayment of amounts of principal of (or
premium, if any, on) Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in Section 513.

 

No such
rescission shall affect any subsequent default or impair any right consequent
thereon.

 

SECTION 503.                    Collection of Indebtedness and
Suits for Enforcement by Trustee.

 

The Issuer
covenants that if

 

(a)                                  Default is made in
the payment of any interest on any Security when due, continued for
30 days, or

 

(b)                                 default is made in the
payment of the principal of (or premium, if any, on) any Security when due,

 

the Issuer
will, upon demand of the Trustee, pay to the Trustee for the benefit of the
Holders of such Securities the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on
any overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon any overdue installment of
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.

 

If the Issuer
fails to pay such amounts forthwith upon such demand, the Trustee, in its own
name as trustee of an express trust, may institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same against
the Issuer or any other obligor upon the Securities and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Issuer or any other obligor upon the Securities, wherever
situated.

 

44

 

If an Event of
Default occurs and is continuing, the Trustee may in its discretion
proceed to protect and enforce its rights and the rights of the Holders by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

 

SECTION 504.                    Trustee May File Proofs of
Claim.

 

In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Issuer or any other obligor upon the Securities (including Parent and any
other Guarantor) or the Property of the Issuer or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as herein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Issuer for the payment of overdue principal, premium, if any, or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,

 

(i)       to file and prove a claim for the whole amount
of principal (and premium, if any) and interest owing and unpaid in respect of
the Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee and its agents and counsel) and of the Holders allowed in such
judicial proceeding, and

 

(ii)    to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;

 

and any
custodian, receiver, assignee, trustee, liquidator or sequestrator (or other
similar official) in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 607.

 

Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.

 

SECTION 505.                    Trustee May Enforce Claims
Without Possession of Securities.

 

All rights of
action and claims under this Indenture or the Securities may be prosecuted
and enforced by the Trustee without the possession of any of the Securities or
the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall,

 

45

 

after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.

 

SECTION 506.                    Application of Money Collected.

 

Any money
collected by the Trustee pursuant to this Article Five shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

 

FIRST:  To the payment of all amounts due the Trustee
under Section 607;

 

SECOND:  To the payment of the amounts then due and
unpaid for principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (and premium, if any) and
interest, respectively; and

 

THIRD:  The balance, if any, to the Issuer.

 

SECTION 507.                    Limitation on Suits.

 

No Holder of
any Securities shall have any right to institute any proceeding with respect to
this Indenture or for any other remedy hereunder, unless

 

(1)                                  such
Holder shall have previously given to the Trustee written notice of a
continuing Event of Default;

 

(2)                                  the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities shall have made written request and offered indemnity reasonably
satisfactory to the Trustee to institute such proceeding as trustee; and

 

(3)                                  the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Securities a direction inconsistent with
such request and shall have failed to institute such proceeding within
60 days;

 

it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders, or
to obtain or to seek to obtain priority or preference over any other Holders or
to enforce any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all the Holders.

 

46

 

SECTION 508.                    Unconditional Right of Holders
to Receive Principal, Premium and Interest.

 

Notwithstanding
any other provision in this Indenture, including Section 507, the Holder
of any Security shall have the right, which is absolute and unconditional, to
receive payment as provided herein (including, if applicable, Article Twelve)
and in such Security of the principal of (and premium, if any) and interest on
such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.

 

SECTION 509.                    Restoration of Rights and
Remedies.

 

If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Issuer, any Guarantor, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.

 

SECTION 510.                    Rights and Remedies Cumulative.

 

Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities in Section 306, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.

 

SECTION 511.                    Delay or Omission Not Waiver.

 

No delay or
omission of the Trustee or of any Holder of any Security to exercise any right
or remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article Five or by law to
the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the
case may be.

 

SECTION 512.                    Control by Holders.

 

The Holders of
a majority in aggregate principal amount of the Outstanding Securities shall
have the right to direct the time, method and place of conducting any
proceeding for any

 

47

 

remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided that

 

(1)                                  such
direction shall not be in conflict with any rule of law or with this
Indenture,

 

(2)                                  the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction, and

 

(3)                                  the
Trustee need not take any action which might involve it in personal liability
or be unjustly prejudicial to the Holders not consenting.

 

SECTION 513.                    Waiver of Past Defaults.

 

The Holders of
not less than a majority in principal amount of the Outstanding Securities may,
on behalf of the Holders of all the Securities, waive any past Default
hereunder and its consequences, except a Default

 

(1)                                  in
the payment of the principal of (or premium, if any) or interest on any
Security, or

 

(2)                                  in
respect of a covenant or provision hereof which under Article Nine cannot
be modified or amended without the consent of the Holder of each Outstanding
Security affected, or

 

(3)                                  in respect of the covenant contained in Section 1020,
which under Article Nine cannot be waived without the consent of the
Holders of two-thirds in principal amount of the Outstanding Securities.

 

The Issuer and
Parent shall deliver to the Trustee an Officers’ Certificate stating that the
requisite majority have consented to such waiver and attaching such consents
upon which, subject to Section 104, the Trustee may conclusively
rely. Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.

 

SECTION 514.                    Waiver of Stay or Extension
Laws.

 

The Issuer and
each Guarantor covenant (to the extent that they may lawfully do so) that
they shall not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Issuer and each
Guarantor (to the extent that they may lawfully do so) hereby expressly
waive all benefit or advantage of any such law and covenant that they shall not
hinder, delay or impede the execution

 

48

 

of any power herein granted to the Trustee, but shall suffer and permit
the execution of every such power as though no such law had been enacted.

 

SECTION 515.                    Undertaking for Costs.

 

In any suit
for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court
in its discretion may require the filing by any party litigant in the suit
of an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorney’s fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section 515 does not apply to a suit by the Trustee or a suit by
Holders of more than 10% in principal amount of the then Outstanding
Securities.

 

ARTICLE SIX

THE TRUSTEE

 

SECTION 601.                    Certain Duties and
Responsibilities.

 

(a)                                  Except
during the continuance of an Event of Default,

 

(1)                                  the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

 

(2)                                  in
the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture; but, in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture.

 

(b)                                 In
case an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person’s own
affairs.

 

(c)                                  No
provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that

 

49

 

(1)                                  this
paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section 601;

 

(2)                                  the
Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;

 

(3)                                  the
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Holders of a
majority in principal amount of the Outstanding Securities relating to the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture; and

 

(4)                                  no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
indemnity reasonably satisfactory to it against such risk or liability is not
reasonably assured to it.

 

(d)                                 Whether
or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section 601.

 

SECTION 602.                    Notice of Default.

 

If a Default
occurs and is continuing, the Trustee shall transmit, in the manner and to the
extent provided in TIA Section 313(c), notice of such Default within 60
days after it is known to any Responsible Officer of the Trustee or written
notice of it is received by the Trustee; provided, however, that,
except in the case of a Default in the payment of the principal of (or premium,
if any) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.

 

The Trustee is
not required to take notice or deemed to have notice of any Event of Default
with respect to the Securities, except an Event of Default under Section 5.01(1),
(2), (3) or (4) hereof (provided that in the case of Section 501(4),
such Event of Default constitutes a failure to purchase Securities pursuant to
an Offer to Purchase pursuant to Section 10.16), unless the Trustee shall
have received written notice at its Corporate Trust Office (which notice shall
reference the Securities, the Issuer and the Indenture) of such Event of
Default from the Issuer or any Holder or unless a Responsible Officer of the
Trustee shall otherwise have knowledge thereof.

 

SECTION 603.                    Certain Rights of Trustee.

 

Subject to Section 601
and to the provisions of TIA Sections 315(a) through 315(d):

 

50

 

(1)                                  the
Trustee may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;

 

(2)                                  any
request or direction of the Issuer mentioned herein shall be sufficiently
evidenced by an Issuer Request or Issuer Order and any resolution of the Board
of Directors may be sufficiently evidenced by a Board Resolution;

 

(3)                                  whenever
in the administration of this Indenture the Trustee shall deem it desirable
that a matter be proved or established prior to taking, suffering or omitting
any action hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, receive and rely upon
an Officers’ Certificate;

 

(4)                                  the
Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;

 

(5)                                  the
Trustee may act through counsel, agents, custodians and nominees and shall
not be responsible for the misconduct or negligence of any such person
appointed and supervised with due care and in good faith;

 

(6)                                  the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;

 

(7)                                  the
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer, personally or by agent or attorney
at the expense of the Company and shall incur no liability of any kind by
reason of such inquiry or investigation;

 

(8)                                  the
Trustee shall not be liable for any action taken, suffered or omitted by it in
good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture;

 

51

 

(9)                                  the
rights, privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its capacities hereunder,
and each agent, custodian and other Person employed to act hereunder; and

 

(10)                            the
Trustee may request that Parent or the Issuer deliver an Officers’
Certificate in substantially the form of Exhibit B hereto setting
forth the names of individuals and/or titles of officers authorized at such
time to take specified actions pursuant to this Indenture, which Officers’
Certificate may be signed by any person authorized to sign an Officers’
Certificate, including any person specified as so authorized in any such
certificate previously delivered and not superseded.

 

SECTION 604.                    Trustee Not Responsible for
Recitals or Issuance of Securities.

 

The recitals
contained herein and in the Securities, except for the Trustee’s certificates
of authentication, shall be taken as the statements of Parent or the Issuer, as
applicable, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder. The Trustee shall not be
accountable for the use or application by the Issuer of Securities or the
proceeds thereof.

 

SECTION 605.                    May Hold Securities.

 

The Trustee,
any Paying Agent, any Security Registrar or any other agent of Parent, the
Issuer or of the Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities and, subject to TIA Sections 310(b) and
311, may otherwise deal with Parent, the Issuer with the same rights it
would have if it were not any Trustee, Paying Agent, Security Registrar or such
other agent.

 

SECTION 606.                    Money Held in Trust.

 

Money held by
the Trustee in trust hereunder need not be segregated from other funds except
to the extent required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed in
writing with the Issuer.

 

SECTION 607.                    Compensation and Reimbursement.

 

The Issuer
agrees:

 

(1)                                  to
pay to the Trustee from time to time such compensation as shall be agreed in
writing between the Issuer and the Trustee for all services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);

 

52

 

(2)                                  except
as otherwise expressly provided herein, to reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this Indenture (including
the reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as shall be
determined to have been caused by the Trustee’s own negligence, willful
misconduct or bad faith; and

 

(3)                                  to
fully indemnify each of the Trustee and any predecessor trustee and its
directors, officers, employees and agents for, and to hold them harmless
against, any and all loss, liability, damage, claim or expense including taxes
(other than taxes based on the income of the Trustee) incurred without
negligence, willful misconduct or bad faith on the part of any of them,
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself or themselves
against any claim (whether asserted by the Issuer, a Guarantor, a Holder or any
other Person) or liability in connection with the exercise or performance of
any of its or their powers or duties hereunder.

 

The
obligations of the Issuer under this Section 607 to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder. As security for the performance of such
obligations of the Issuer, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the payment of principal of (and premium,
if any, on) or interest on particular Securities.

 

When the
Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 501(9) or (10), the expenses (including
the reasonable charges and expenses of its counsel) of and the compensation for
such services are intended to constitute expenses of administration under any
applicable federal, state or foreign bankruptcy, insolvency or other similar
law.

 

The provisions
of this Section 607 shall survive the termination of this Indenture or the
earlier resignation or removal of the Trustee.

 

SECTION 608.                    Corporate Trustee Required;
Eligibility; Conflicting Interests.

 

(a)                                  There
shall be at all times a Trustee hereunder which shall be subject to and comply
with the provisions of Section 310(a)(1) of the Trust Indenture Act
and shall have a combined capital and surplus of at least $50,000,000. If such
Person publishes reports of condition at least annually, pursuant to law or to
the requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then, for the purposes of this Section 608, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time a Responsible Officer of the Trustee shall have
actual knowledge that the Trustee ceases to be

 

53

 

eligible in accordance with the
provisions of this Section 608, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article VI.

 

(b)                                 The
Trustee shall be subject to and comply with Section 310(b) of the
Trust Indenture Act.

 

SECTION 609.                    Resignation and Removal;
Appointment of Successor.

 

(a)                                  No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article VI shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 610.

 

(b)                                 The
Trustee may resign at any time by giving written notice thereof to the
Issuer. If the instrument of acceptance by a successor Trustee required by Section 610
shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition,
at the expense of the Issuer, any court of competent jurisdiction for the
appointment of a successor Trustee.

 

(c)                                  The
Trustee may be removed at any time by Act of the Holders of not less than
a majority in aggregate principal amount of the Outstanding Securities,
delivered to the Trustee and to the Issuer. If the instrument of acceptance by
a successor Trustee required by Section 610 shall not have been delivered
to the Trustee within 30 days after the giving of such notice of removal, the
Trustee designated for removal may petition, at the expense of the Issuer,
any court of competent jurisdiction for the appointment of a successor Trustee.

 

(d)                                 If
at any time:

 

(1)                                  the
Trustee shall fail to comply with the provisions of TIA Section 310(b) after
written request therefor by the Issuer or by any Holder who has been a bona
fide Holder of a Security for at least six months, or

 

(2)                                  the
Trustee shall cease to be eligible under Section 608(a) and shall
fail to resign after written request therefor by the Issuer or by any Holder
who has been a bona fide Holder of a Security for at least six months, or

 

(3)                                  the
Trustee shall become incapable of acting or shall be adjudged a bankrupt or
insolvent or a receiver of the Trustee or of its property shall be appointed or
any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,

 

then, in any
such case, (i) the Issuer, by a Board Resolution, may remove the
Trustee or (ii) subject to TIA Section 3.15(e), any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.

 

54

 

(e)           If
the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, the Issuer, by a
Board Resolution, shall promptly appoint a successor Trustee. If the Issuer
does not promptly appoint a successor Trustee after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee shall
be appointed by Act of the Holders of a majority in aggregate principal amount
of the Outstanding Securities delivered to the Issuer and the retiring Trustee.
In either case, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede the
successor Trustee appointed by the Issuer. If no successor Trustee shall have
been so appointed by the Issuer or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.

 

(f)            The
Issuer shall give notice of each resignation and each removal of the Trustee
and each appointment of a successor Trustee to the Holders of Securities in the
manner provided for in Section 106. Each notice shall include the name of
the successor Trustee and the address of its Corporate Trust Office.

 

(g)           The
retiring Trustee shall not be liable for any of the acts or omissions of any
successor Trustee appointed hereunder.

 

SECTION 610.       Acceptance
of Appointment by Successor.

 

Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Issuer and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Issuer or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Issuer shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.

 

No successor
Trustee shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible under this Article VI.

 

SECTION 611.       Merger,
Conversion, Consolidation or Succession to Business.

 

Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder; provided that such
Person shall be otherwise qualified and eligible under this Article Six,
without the execution or

 

55

 

filing of any paper or any further act on the part of any of the
parties hereto. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion,
consolidation or transfer of assets to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
In case at that time any of the Securities shall not have been authenticated,
any successor Trustee may authenticate such Securities either in the name
of any predecessor hereunder or in the name of the successor Trustee. In all
such cases such certificates shall have the full force and effect which this
Indenture provides that the certificate of authentication of the Trustee shall
have; provided, however, that the right to adopt the certificate
of authentication of any predecessor Trustee or to authenticate Securities in
the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion, consolidation or transfer of assets.

 

ARTICLE SEVEN

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND THE ISSUER

 

SECTION 701.       Disclosure
of Names and Addresses of Holders. 

 

Every Holder
of Securities, by receiving and holding the same, agrees with the Issuer and
the Trustee that none of the Issuer or the Trustee or any agent of any of them
shall be held accountable by reason of the disclosure of any such information
as to the names and addresses of the Holders in accordance with TIA Section 3.12,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under TIA Section 3.12(b).

 

SECTION 702.       Reports
by Trustee.

 

Within
60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities, the Trustee shall transmit to the Holders,
in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).

 

A copy of each
such report at the time of its mailing to Holders shall be filed with the
Commission and the principal national securities exchange (if any) on which the
Securities are listed.

 

The Issuer
shall promptly notify a Responsible Officer of the Trustee if the Securities
become listed on any national securities exchange or of any delisting thereof.

 

SECTION 703.       Reports
by Parent and the Issuer.

 

Parent or the
Issuer shall file with the Trustee and deliver to the Holders of Securities the
reports and other information required to be provided by them pursuant to Section 1007.

 

56

 

ARTICLE EIGHT

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

 

SECTION 801.       Parent
May Consolidate, etc., Only on Certain Terms.

 

Parent 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 Parent 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 Parent is not the surviving Person or in which Parent 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, by a
supplemental indenture executed and delivered to the Trustee in form satisfactory
to the Trustee, all of Parent’s obligations under the Indenture and the Parent
Guarantee;

 

(2)           immediately before and
after giving effect to such transaction and treating any Debt which becomes an
obligation of Parent (or the successor entity) or a Restricted Subsidiary as a
result of such transaction as having been Incurred by Parent or such 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 Parent (or the
successor entity) is equal to or greater than that of Parent immediately prior
to the transaction;

 

(4)           immediately after
giving effect to such transaction and treating any Debt which becomes an obligation
of Parent (or the successor entity) or a Restricted Subsidiary as a result of
such transaction as having been Incurred by Parent or such Restricted
Subsidiary at the time of the transaction, Parent (or the successor entity)
could Incur at least $1.00 of additional Debt pursuant to paragraph (a) of
Section 1010;

 

(5)           if, as a result of any
such transaction, Property of Parent (or the successor entity) or any
Restricted Subsidiary would become subject to a Lien prohibited by Section 1014,
Parent or the successor entity to Parent shall have secured the Securities as
required by said covenant;

 

(6)           in the case of a
transfer, sale, lease, conveyance or other disposition of all or substantially
all of the assets of Parent, 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

 

57

 

(7)           Parent and the Issuer
have delivered to the Trustee an Officers’ Certificate and Opinion of Counsel
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 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 Section 801,
of Parent or, if applicable, of the successor entity as required pursuant to
the foregoing.

 

SECTION 802.       Successor
Parent Substituted.

 

Upon any
consolidation of Parent with or merger of Parent with or into any other Person
or any transfer, sale, lease, conveyance or other disposition of all or
substantially all the assets of Parent to any Person or Persons in accordance
with Section 801, the successor Person formed by such consolidation or
into which Parent 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, Parent under this Indenture with the same effect as
if such successor Person had been named as Parent herein, and the predecessor
Parent (which term shall for this purpose mean the Person named as “Parent” in
the first paragraph of this Indenture or any successor Person which shall have
become such in the manner described in Section 801), except in the case of
a lease, shall be released from all its obligations and covenants under this
Indenture and the Securities and may be dissolved and liquidated.

 

SECTION 803.       Issuer
May Consolidate, etc., Only on Certain Terms.

 

The Issuer
shall not, in a single transaction or a series of related transactions, (i) consolidate
or merge into Parent or permit Parent to consolidate with or merge into the
Issuer or (ii) except to the extent permitted under Section 1012,
directly or indirectly, transfer, sell, lease, convey or otherwise dispose of
all or substantially all its assets to Parent. Additionally, the Issuer 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 the Issuer or (ii) (other than, to the
extent permitted under Section 1012, to a Restricted Subsidiary that is or
becomes a Guarantor and an Offering Proceeds Note Guarantor or to Parent so
long as Parent 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 Issuer is not the surviving Person or in which the Issuer 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, by a supplemental indenture executed and delivered
to the Trustee in form satisfactory to the Trustee, all of the Issuer’s
obligations under this Indenture;

 

(2)           immediately before and
after giving effect to such transaction and treating any Debt which becomes an
obligation of the Issuer (or the successor entity) or an Issuer

 

58

 

Restricted Subsidiary as a result of such transaction as having been
Incurred by the Issuer or such Issuer 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 Issuer (or
the successor entity) is equal to or greater than that of the Issuer
immediately prior to the transaction;

 

(4)           immediately after
giving effect to such transaction and treating any Debt which becomes an
obligation of the Issuer (or the successor entity) or an Issuer Restricted
Subsidiary as a result of such transaction as having been Incurred by the
Issuer or such Issuer Restricted Subsidiary at the time of the transaction, the
Issuer (or the successor entity) could Incur at least $1.00 of additional Debt
pursuant to paragraph (a) of Section 1011;

 

(5)           if, as a result of any
such transaction, Property of the Issuer (or the successor entity) or any
Issuer Restricted Subsidiary would become subject to a Lien prohibited by the
provisions of Section 1014, the Issuer or the successor entity to the
Issuer shall have secured the Securities as required by said covenant;

 

(6)           in the case of a
transfer, sale, lease, conveyance or other disposition of all or substantially
all of the assets of the Issuer, 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

 

(7)           Parent and the Issuer
have delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each in form and substance reasonably satisfactory to the
Trustee, 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, 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 Section 803,
of the Issuer or, if applicable, of the successor entity as required pursuant
to the foregoing.

 

SECTION 804.       Successor
Issuer Substituted.

 

Upon any
consolidation of the Issuer with or merger of the Issuer with or into any other
Person or any transfer, sale, lease, conveyance or other disposition of all or
substantially all the assets of the Issuer to any Person or Persons in
accordance with Section 803, the successor Person formed by such
consolidation or into which the Issuer 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 Issuer
under this Indenture with the same effect as if such successor Person had been
named as the Issuer herein, and the predecessor Issuer

 

59

 

(which term shall for this purpose mean the Person named as the “Issuer”
in the first paragraph of this Indenture or any successor Person which shall
have become such in the manner described in Section 803), except in the
case of a lease, shall be released from all its obligations and covenants under
this Indenture and the Securities and may be dissolved and liquidated.

 

SECTION 805.       Guarantor
(other than Parent) May Consolidate, etc., Only on Certain Terms. 

 

A Guarantor
(other than Parent) 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 an Issuer
Restricted Subsidiary, the Issuer or another Guarantor that is an Issuer
Restricted Subsidiary, and with respect to a Guarantor that is a Sister
Restricted Subsidiary, another Guarantor that is a Sister Restricted Subsidiary
or Parent) or permit any other Person (other than, with respect to a Guarantor
that is an Issuer Restricted Subsidiary, another Guarantor that is an Issuer
Restricted Subsidiary, and with respect to a Guarantor that is a Sister
Restricted Subsidiary, Parent 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 1012, 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 an Issuer Restricted Subsidiary, the Issuer or
another Guarantor that is an Issuer Restricted Subsidiary, and with respect to
a Guarantor that is a Sister Restricted Subsidiary, another Guarantor that is a
Sister Restricted Subsidiary or Parent), unless:

 

(1)           immediately before and
after giving effect to such transaction and treating any Debt 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
assume, by a supplemental indenture executed and delivered to the Trustee in form satisfactory
to the Trustee, all of such Guarantor’s obligations under the Indenture and its
Note Guarantee; or (B) such transaction complies with Section 1016
(or Parent certifies in an Officers’ Certificate to the Trustee that it will
comply with the requirements of such covenant relating to application of the
proceeds of such transaction); and

 

(3)           Parent and the Issuer
have delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each in form and substance reasonably satisfactory to the
Trustee, 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

 

60

 

conditions precedent herein provided for relating to such transaction
have been complied with.

 

SECTION 806.       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 Section 805, 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 8.05(2)(B)) shall succeed to,
and be substituted for, and may exercise every right and power of, such
Guarantor under this Indenture 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 “New Guarantor” in the
first paragraph of the applicable supplemental indenture or any successor
Person which shall have become such in the manner described in Section 805),
except in the case of a lease, shall be released from all its obligations and
covenants under its Note Guarantee and the Securities and may be dissolved
and liquidated.

 

SECTION 807.       Offering
Proceeds Note Guarantor May Consolidate, etc., Only on Certain Terms.

 

An Offering
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 Offering Proceeds Note Guarantor
that is an Issuer Restricted Subsidiary, the Issuer or another Offering
Proceeds Note Guarantor that is an Issuer Restricted Subsidiary, and with
respect to an Offering Proceeds Note Guarantor that is a Sister Restricted
Subsidiary, another Offering Proceeds Note Guarantor that is a Sister
Restricted Subsidiary or Parent) or permit any other Person (other than, with
respect to an Offering Proceeds Note Guarantor that is an Issuer Restricted
Subsidiary, another Offering Proceeds Note Guarantor that is an Issuer
Restricted Subsidiary, and with respect to an Offering Proceeds Note Guarantor
that is a Sister Restricted Subsidiary, Parent or another Offering Proceeds
Note Guarantor that is a Sister Restricted Subsidiary) to consolidate with or
merge into such Offering Proceeds Note Guarantor or (ii) except to another
Offering Proceeds Note Guarantor to the extent permitted under Section 1012,
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 an Offering Proceeds Note Guarantor that is an Issuer
Restricted Subsidiary, the Issuer or another Offering Proceeds Note Guarantor that
is an Issuer Restricted Subsidiary, and with respect to an Offering Proceeds
Note Guarantor that is a Sister Restricted Subsidiary, another Offering
Proceeds Note Guarantor that is a Sister Restricted Subsidiary or Parent),
unless:

 

(1)           immediately before and
after giving effect to such transaction and treating any Debt which becomes an
obligation of such Offering Proceeds Note Guarantor as a result of such
transaction as having been Incurred by such Offering Proceeds Note

 

61

 

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 Offering Proceeds Note Guarantor is not the surviving
Person or in which such Offering 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 Offering Proceed
Note Guarantor’s obligations under the Offering Proceeds Note Guarantee and any
subordination agreement between the Issuer and such Offering Proceed Note
Guarantor relating to the Offering Proceeds Note; or (b) such transaction
complies with Section 1016 (or Parent certifies in an Officers’
Certificate to the Trustee that it will comply with the requirements of such
covenant relating to application of the proceeds of such transaction); and

 

(3)           Parent and the Issuer
have delivered to the Trustee and Officers’ Certificate and an Opinion of
Counsel, each in form and substance reasonably satisfactory to the
Trustee, 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 NINE

SUPPLEMENTAL INDENTURES

 

SECTION 901.       Supplemental
Indentures Without Consent of Holders.

 

The Issuer,
the Guarantors and the Trustee may, at any time and from time to time, without
notice to or consent of any Holders of Securities, enter into one or more
indentures supplemental hereto:

 

(1)           to evidence the
succession of another Person to the Issuer, Parent or any other Guarantor and
the assumption by such successor of the covenants of the Issuer, Parent or such
other Guarantor, respectively, herein, in the Securities and the applicable
Note Guarantee, as applicable; or

 

(2)           to add to the covenants
of Parent, the Issuer or any of their respective Subsidiaries, for the benefit
of the Holders, or to surrender any right or power conferred upon Parent, the
Issuer or any other Guarantor hereby; or

 

(3)           to add any additional
Events of Default; or

 

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(4)           to provide for
uncertificated Securities in addition to or in place of certificated
Securities; or

 

(5)           to evidence and provide
for the acceptance of appointment hereunder of a successor Trustee pursuant to
the requirements of Section 610; or

 

(6)           to secure the
Securities; or

 

(7)           to comply with the Trust
Indenture Act or the Securities Act (including Regulation S promulgated
thereunder); or

 

(8)           to add additional Note
Guarantees or to release any Guarantors from Note Guarantees as provided by the
terms of this Indenture; or

 

(9)           as set forth in Section 1308;
or

 

(10)         to cure any ambiguity
herein, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to add any other provision
with respect to matters or questions arising under this Indenture; provided
such actions shall not adversely affect the interests of the Holders in any
material respect.

 

SECTION 902.       Supplemental
Indentures With Consent of Holders.

 

With the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities, by Act of such Holders delivered to the Issuer and the
Trustee, the Issuer, the Guarantors and the Trustee may enter into one or
more indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or waiving or otherwise modifying in any manner the rights of the
Holders, including the waiver of certain past defaults under the Indenture
pursuant to Section 513; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security (or, in the case of clause (10) below,
two-thirds in principal amount of the Outstanding Securities) affected thereby:

 

(1)           change the Stated
Maturity of the principal of, or any installment of interest on, any Security,
or reduce the principal amount thereof or the interest thereon that would be
due and payable upon the Stated Maturity thereof, or change the place of
payment where, or the coin or currency in which, any Security or any premium or
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof; or

 

(2)           modify any provision of
Section 508 or Section 513; or

 

(3)           subordinate in right of
payment, or otherwise subordinate, the Securities or any Note Guarantee to any
other Debt (other than as set forth in Section 1308); or

 

63

 

(4)           except as otherwise
required herein, release any security interest that may have been granted
in favor of the Holders of the Securities; or

 

(5)           reduce the premium
payable upon the redemption of any Security nor change the time at which any
Security may be redeemed, as described in Exhibit A; or

 

(6)           reduce the premium
payable upon a Change of Control Triggering Event or, at any time after a
Change of Control Triggering Event has occurred, change the time at which the
Offer to Purchase relating thereto must be made or at which the Securities must
be repurchased pursuant to such Offer to Purchase; or

 

(7)           at any time after the
Issuer is obligated to make an Offer to Purchase with the Net Available
Proceeds from Asset Dispositions, change the time at which such Offer to
Purchase must be made or at which the Securities must be repurchased pursuant
thereto; or

 

(8)           make any change in any
Note Guarantee that would adversely affect the Holders of the Securities (other
than as set forth in Section 1308);

 

(9)           modify any provision of
this Section 902 (except to increase any percentage set forth herein); or

 

(10)         modify or amend Section 1020.

 

It shall not
be necessary for any Act of Holders under this Section 902 to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.

 

SECTION 903.       Execution
of Supplemental Indentures.

 

In executing,
or accepting the additional trusts created by, any supplemental indenture
permitted by this Article Nine or the modifications thereby of the trusts
created by this Indenture, the Trustee shall receive, and shall be fully
protected in relying upon, an Opinion of Counsel of the Issuer stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture and an Officers’ Certificate of the Issuer stating that all
conditions precedent to the execution of such supplemental indenture have been
fulfilled. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee’s own rights, duties or
immunities under this Indenture or otherwise.

 

SECTION 904.       Effect
of Supplemental Indentures.

 

Upon the
execution of any supplemental indenture under this Article Nine, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.

 

64

 

SECTION 905.       Conformity
with Trust Indenture Act.

 

Every
supplemental indenture executed pursuant to this Article Nine shall conform as
a matter of contract or law to the requirements of the Trust Indenture Act as
then in effect.

 

SECTION 906.       Reference
in Securities to Supplemental Indentures.

 

Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article Nine may bear a notation in form approved
by the Trustee and the Issuer as to any matter provided for in such supplemental
indenture. If the Issuer and shall so determine, new Securities so modified as
to conform, in the opinion of the Trustee and the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.

 

SECTION 907.       Notice
of Supplemental Indentures.

 

Promptly after
the execution by the Issuer, the Guarantors and the Trustee of any supplemental
indenture pursuant to this Article Nine, the Issuer shall give notice
thereof to the Holders of each Outstanding Security affected, in the manner
provided for in Section 106, setting forth in general terms the substance
of such supplemental indenture.

 

ARTICLE TEN

COVENANTS

 

SECTION 1001.     Payment
of Principal, Premium, if Any, and Interest. 

 

The Issuer
covenants and agrees for the benefit of the Holders that it shall duly and
punctually pay the principal of (and premium, if any) and interest on the
Securities in accordance with the terms of the Securities and this Indenture.

 

SECTION 1002.     Maintenance
of Office or Agency.

 

The Issuer
shall maintain in The City of New York an office or agency where
Securities may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Issuer in respect of the Securities and this Indenture may be
served. The Corporate Trust Office of the Trustee shall be such office or
agency of the Issuer, unless the Issuer shall designate and maintain some other
office or agency for one or more of such purposes. The Issuer shall give prompt
written notice to the Trustee of any change in the location of any such office
or agency. If at any time the Issuer shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served
at the Corporate Trust Office of the Trustee, and the Issuer hereby appoints
the Trustee as its agent to receive all such presentations, surrenders, notices
and demands.

 

65

 

The Issuer may also
from time to time designate one or more other offices or agencies (in or
outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes and may from time to
time rescind any such designation; provided, however, that no
such designation or rescission shall in any manner relieve the Issuer of its
obligation to maintain an office or agency in The City of New York for
such purposes. The Issuer shall give prompt written notice to the Trustee of
any such designation or rescission and any change in the location of any such
other office or agency.

 

SECTION 1003.     Money
for Security Payments to Be Held in Trust. 

 

If the Issuer
shall at any time act as its own Paying Agent, it shall, on or before each due
date of the principal of (or premium, if any) or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal of (or premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and shall promptly notify the Trustee
of its action or failure so to act.

 

Whenever the
Issuer shall have one or more Paying Agents for the Securities, it shall, on or
before each due date of the principal of (or premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Issuer
will promptly notify the Trustee of such action or any failure so to act.

 

The Issuer
shall cause each Paying Agent (other than the Trustee) to execute and deliver
to the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section 1003, that such Paying
Agent shall:

 

(1)           hold all sums held by
it for the payment of the principal of, premium, if any, or interest on
Securities in trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as herein provided;

 

(2)           give the Trustee notice
of any default by the Issuer (or any other obligor upon the Securities) in the
making of any payment of principal, premium, if any, or interest;

 

(3)           at any time during the
continuance of any such default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust by such Paying Agent;
and

 

(4)           indemnify the Trustee
and its officers, directors, employees and agents against any loss, cost or
liability caused by, or incurred as a result of, such Paying Agent’s acts or
omissions.

 

66

 

The Issuer may at
any time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or by Issuer Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the Issuer or such
Paying Agent, such sums to be held by the Trustee upon the same trusts as those
upon which such sums were held by the Issuer or such Paying Agent; and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such sums.

 

Any money
deposited with the Trustee or any Paying Agent, or then held by the Issuer, in
trust for the payment of the principal of, premium, if any, or interest on any
Security and remaining unclaimed for two years after such principal, premium or
interest has become due and payable shall be paid to the Issuer on Issuer Request
or (if then held by the Issuer) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor,
look only to the Issuer for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Issuer as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, shall at the expense of the Issuer cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City
of New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer.

 

SECTION 1004.     Corporate
Existence.

 

Subject to Article Eight,
Parent and the Issuer shall do or cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence, rights
(charter and statutory) and franchises of Parent, the Issuer and each
Subsidiary of the Issuer; provided, however, that Parent and the
Issuer shall not be required to preserve, with respect to Parent or the Issuer,
respectively, any such right or franchise or, with respect to any such
Subsidiary (subject to all the other covenants in this Indenture), any such
corporate existence, right or franchise, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of Parent and its Subsidiaries taken as a whole or the Issuer
and its Subsidiaries taken as a whole, respectively and that, in each case, the
loss thereof is not disadvantageous in any material respect to the Holders.

 

SECTION 1005.     Maintenance
of Properties.

 

The Issuer
shall cause all properties owned by the Issuer or any Issuer Restricted
Subsidiary or used or held for use in the conduct of its business or the
business of any Issuer 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 the Issuer 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 1005 shall prevent the Issuer from
discontinuing the maintenance of any of such properties if such

 

67

 

discontinuance is, in the judgment of the Issuer, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.

 

SECTION 1006.     Insurance.

 

The Issuer
shall at all times keep all of its and each Issuer Restricted Subsidiary’s
properties which are of an insurable nature insured with insurers, believed by
the Issuer to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by companies similarly
situated and owning like properties.

 

SECTION 1007.     Reports.

 

Whether or not
Parent is subject to Section 13(a) or 15(d) of the Exchange Act,
or any successor provision thereto, Parent shall file with the Commission the
annual reports, quarterly reports and other documents which Parent would have
been required to file with the Commission pursuant to such Section 13(a) or
15(d) or any successor provision thereto if Parent were subject thereto,
such documents to be filed with the Commission on or prior to the respective
dates (the “Required Filing Dates”) by which Parent would have been required to
file them. Parent or the Issuer shall also in any event (a) within
15 days of each Required Filing Date (i) transmit by mail to all
Holders, as their names and addresses appear in the Security Register, without
cost to such Holders, and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents (without exhibits) which Parent
would have been required to file with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act or any successor provisions thereto if Parent
were subject thereto and (b) if filing such documents by Parent with the
Commission is not permitted under the Exchange Act, promptly upon written
request, supply copies of such documents (without exhibits) to any prospective
Holder.

 

Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Issuer’s compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers’ Certificates).

 

SECTION 1008.     Statement
by Officers as to Default. 

 

(a)  The
Issuer shall deliver to the Trustee, on the date of delivery of each annual
report to be delivered pursuant to Section 1007, a brief certificate from
the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Issuer’s compliance during
the period covered by such report with all conditions and covenants under this
Indenture. If the signer has knowledge of any noncompliance that occurred
during such period, the certificate shall describe its status and what action
the Issuer has taken or is taking or proposes to take with respect thereto. For
purposes of this Section 1008(a), such compliance shall be determined
without regard to any period of grace or requirement of notice under this
Indenture.

 

68

 

(b)  When
any Default has occurred and is continuing under this Indenture, or if the
trustee for or the holder of any other evidence of Debt of the Issuer or any
Issuer Restricted Subsidiary gives any notice or takes any other action with
respect to a claimed default (other than with respect to Debt in the principal
amount of less than $25,000,000 or its foreign currency equivalent at the
time), the Issuer shall, within 30 days of such occurrence, notice or
other action, deliver to the Trustee by registered or certified mail or by
facsimile transmission an Officers’ Certificate specifying such event, notice
or other action, its status and what action the Issuer is taking or purposes to
take with respect thereto.

 

SECTION 1009.     Change
of Control Triggering Event.

 

(a)           Upon
the occurrence of a Change of Control Triggering Event, each Holder shall have
the right to require that the Issuer repurchase such Holder’s Securities in
whole or in part in integral multiples of $1,000, in accordance with the
procedures set forth in this Section 1009 and this Indenture.

 

(b)           Within
30 days of the occurrence of both a Change of Control and a Rating Decline
with respect to the Securities (a “Change of Control Triggering Event”), the
Issuer will be required to make an Offer to Purchase all Outstanding Securities
at a price in cash equal to 101% of the principal amount of the Securities on
the purchase date, plus accrued and unpaid interest (if any) to such purchase
date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).

 

(c)           The
Issuer and the Trustee shall perform their respective obligations for the
Offer to Purchase as specified in the Offer. Prior to the Purchase Date, the
Issuer shall (i) accept for payment Securities or portions thereof
tendered pursuant to the Offer, (ii) irrevocably deposit with the Paying
Agent (or, if the Issuer is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1003) money sufficient to pay the Purchase
Price of all Securities or portions thereof so accepted (provided that such
deposit may be made no later than 11:00 A.M. New York City time on
the Purchase Date if the Issuer elects) and (iii) deliver or cause to be
delivered to the Trustee all Securities so accepted together with an Officers’
Certificate stating the Securities or portions thereof accepted for payment by
the Issuer. The Paying Agent shall promptly mail or deliver to Holders of Securities
so accepted payment in an amount equal to the Purchase Price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Security
or Securities equal in principal amount to any unpurchased portion of the
Security surrendered as requested by the Holder. Any Security not accepted for
payment shall be promptly mailed or delivered by the Issuer to the Holder
thereof. In the event that the aggregate Purchase Price is less than the amount
delivered by the Issuer to the Trustee or the Paying Agent, the Trustee or the
Paying Agent, as the case may be, shall deliver the excess to the Issuer
immediately after the Purchase Date.

 

(d)           A
“Change of Control” means the occurrence of any of the following events:

 

(i)            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),

 

69

 

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
Parent; 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 Parent than such other person or group (for purposes of this
clause (i), 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

 

(ii)           the
sale, transfer, assignment, lease, conveyance or other disposition, directly or
indirectly, of all or substantially all the assets of (A) Parent and the
Restricted Subsidiaries, or (B) the Issuer and the Issuer 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 Parent or the Issuer, respectively, or one or more
Permitted Holders) shall have occurred; or

 

(iii)          during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of Parent (together with any new
directors whose election or appointment by such board or whose nomination for
election by the shareholders of Parent 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 Parent then in office; or

 

(iv)          the
shareholders of Parent or the Issuer shall have approved any plan of
liquidation or dissolution of Parent or the Issuer, respectively.

 

(e)           The
Issuer shall not be required to make an Offer to Purchase upon a Change of
Control Triggering Event if a third party makes the Offer to Purchase in the manner,
at the times and otherwise in compliance with the requirements set forth in
this Indenture applicable to an Offer to Purchase made by the Issuer and
purchases all Securities validly tendered and not withdrawn under such Offer to
Purchase.

 

(f)            In
the event that the Issuer makes an Offer to Purchase the Securities, the Issuer
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1
under, the Exchange Act. To the extent that the

 

70

 

provisions of any securities
laws or regulations conflict with provisions of this Section, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue
thereof.

 

SECTION 1010.     Limitation
on Consolidated Debt.

 

(a)           Parent
shall not, and shall not permit any Restricted Subsidiary (other than to the
extent permitted by paragraph (b) of Section 1011) to, directly or
indirectly, Incur any Debt; provided, however, that Parent or any
Restricted Subsidiary (subject, in the case of the Issuer and any Issuer
Restricted Subsidiary, to Section 1011) may Incur any Debt 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 aggregate consolidated principal
amount (or, in the case of Debt issued at a discount, the then-Accreted Value)
of Debt of Parent 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 Debt and any other Debt Incurred or repaid
since such balance sheet date and the receipt and application of the net
proceeds thereof, to (B) Consolidated Cash Flow Available for Fixed
Charges for Parent and its Restricted Subsidiaries for the four full fiscal
quarters next preceding the Incurrence of such Debt for which consolidated
financial statements are available, would be less than 5.0 to 1.0, or (ii) Parent’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 Debt
and any other Debt Incurred or repaid since such balance sheet date, (y) the
issuance of any Capital Stock (other than Disqualified Stock) of Parent since
such balance sheet date, including the issuance of any Capital Stock to be
issued concurrently with the Incurrence of such Debt, and (z) the receipt and
application of the net proceeds of such Debt or Capital Stock, as the case may be,
is less than 2.25 to 1.0.

 

(b)           Notwithstanding
the foregoing limitation, Parent or any Restricted Subsidiary (other than the
Issuer or any Issuer Restricted Subsidiary, except to the extent permitted by Section 1011)
may Incur any and all of the following (each of which shall be given
independent effect):

 

(i)            (A) Debt
under the Original Securities (including any Exchange Securities issued in
exchange for such Original Securities), any Note Guarantee in respect of the
Original Securities (including any Exchange Securities issued in exchange for such
Original Securities) or any Offering Proceeds Note Guarantee in respect of the
Offering Proceeds Note and (B) Debt under the 2013 Notes issued on the
Issue Date (including any 2013 Notes issued in an exchange offer for the 2013
Notes issued on the Issue Date), any Guarantee in respect of the 2013 Notes
issued on the Issue Date (including any 2013 Notes issued in an exchange offer
for the 2013 Notes issued on the Issue Date) or any Guarantee in respect of the
intercompany note issued by Level 3 LLC in respect of the proceeds of the 2013
Notes issued on the Issue Date;

 

(ii)           Debt
under Credit Facilities in an aggregate principal amount outstanding or
available (together with the sum of (A) the amount of any outstanding Debt
Incurred

 

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pursuant to clause (ii) of paragraph (b) of Section 1011,
plus (B) the amount of all refinancing Debt outstanding or available
pursuant to clause (vi) of paragraph (b) of Section 1011 in
respect of Debt previously Incurred pursuant to clause (ii) of paragraph (b) of
Section 1011, plus (C) the amount of all refinancing Debt outstanding
or available pursuant to clause (viii) below in respect of Debt previously
Incurred pursuant to this clause (ii)) at any one time not to exceed the
greater of (x) $750,000,000 and (y) 1.5 times Consolidated Cash Flow Available
for Fixed Charges of Parent and its Restricted Subsidiaries for the four full
fiscal quarters next preceding the Incurrence of such Debt for which
consolidated financial statements are available, which amount shall be
permanently reduced by the amount of Net Available Proceeds used to repay Debt
under the Credit Facilities or any refinancing Debt in respect of the Credit
Facilities Incurred pursuant to clause (vi) of paragraph (b) of Section 1011
or clause (viii) below), and not reinvested in Telecommunications/IS
Assets or used to purchase Securities or repay other Debt, pursuant to and as
permitted by Section 1016;

 

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

 

(iv)          Subordinated
Debt of Parent; provided, however, that the aggregate principal
amount (or, in the case of Debt issued at a discount, the Accreted Value) of
such Debt, together with any other outstanding Debt 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 Parent, and not reinvested in Telecommunications/IS Assets
or used to purchase Securities or repay other Debt, pursuant to and as
permitted by Section 1016), except to the extent such Debt in excess of
$500,000,000 (A) is subordinated to all other Debt of Parent other than
Debt 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
Debt prior to the Stated Maturity of the Securities and (C) (1) does
not provide for payments of principal of such Debt 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 Parent (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 Debt upon any event of default
thereunder), in each case on or prior to the Stated Maturity of the Securities,
and (2) does not permit redemption or other retirement (including pursuant
to an offer to purchase made by Parent but excluding through conversion into
capital stock of Parent, other than Disqualified Stock, without any payment by
Parent or its Restricted Subsidiaries to the holders thereof) of such Debt at
the option of the holder thereof on or prior to the Stated Maturity of the
Securities;

 

(v)           Debt
outstanding on the Measurement Date;

 

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(vi)          Debt
owed by Parent to any Restricted Subsidiary or Debt owed by a Restricted
Subsidiary to Parent or a Restricted Subsidiary; provided, however,
that (A) any Person that Incurs Debt owed to Parent or a Sister Restricted
Subsidiary pursuant to this clause (vi) is a Guarantor and an Offering
Proceeds Note Guarantor, (B) (x) upon the transfer, conveyance or other
disposition by such Restricted Subsidiary or Parent of any Debt so permitted to
a Person other than Parent or another Restricted Subsidiary of Parent 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
Debt and such Debt 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 such Debt (if clause (A) above applies) 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 Offering Proceeds Note Guarantee of such Offering Proceeds Note Guarantor;
and provided  further, however, that a Foreign Restricted
Subsidiary need not become a Guarantor or an Offering Proceeds Note Guarantor
pursuant to clause (A) above until such time and only so long as such
Foreign Restricted Subsidiary Guarantees any other Debt of Parent or any
Domestic Restricted Subsidiary;

 

(vii)         Debt
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 Debt was not Incurred in anticipation of such
transaction and was outstanding prior to such transaction;

 

(viii)        Debt
Incurred to renew, extend, refinance, defease, repay, prepay, repurchase,
redeem, retire, exchange or refund (each, a “refinancing”) Debt 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 Debt so refinanced plus the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt so refinanced or the amount of any premium
reasonably determined by the Board of Directors of Parent as necessary to
accomplish such refinancing by means of a tender offer or privately negotiated
repurchase, plus the expenses of Parent Incurred in connection with such
refinancing; provided, however, that (A) if the Person that
originally Incurred the Debt to be refinanced became, or would have been
required to become if not already, a Guarantor or an Offering Proceeds Note
Guarantor as a result of the Incurrence of the Debt being refinanced in
accordance with this covenant, (1) the Person that Incurs the refinancing
Debt pursuant to this clause (viii) shall be a Guarantor and an Offering
Proceeds Note Guarantor and (2) if the Debt to be refinanced is
subordinated to the Offering Proceeds Note Guarantee of such Offering Proceeds
Note Guarantor, the refinancing Debt shall be subordinated to the same extent

 

73

 

to the Offering Proceeds Note Guarantee of the Offering Proceeds Note
Guarantor Incurring such refinancing Debt, (B) the refinancing Debt shall
not be senior in right of payment to the Debt that is being refinanced and (C) in
the case of any refinancing of Debt Incurred pursuant to paragraph (a) above
or clause (i), (v), (vii) or (xii) or, if such Debt previously refinanced
Debt Incurred pursuant to any such clause, this clause (viii), the refinancing
Debt by its terms, or by the terms of any agreement or instrument pursuant to
which such Debt is issued, (x) does not provide for payments of principal of
such Debt 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 Parent 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 Debt upon any event of default thereunder), in each case
prior to the time the same are required by the terms of the Debt being
refinanced and (y) does not permit redemption or other retirement
(including pursuant to an offer to purchase made by Parent or any Restricted
Subsidiary) of such Debt at the option of the holder thereof prior to the time
the same are required by the terms of the Debt 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 Parent) which is
conditioned upon a change of control pursuant to provisions substantially
similar to those described under Section 1009;

 

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

 

(x)           Debt
consisting of Permitted Interest Rate or Currency Protection Agreements;

 

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

 

74

 

(xii)         Issue
Date Purchase Money Debt and Debt under the Existing Notes and the related
indentures and any restricted subsidiary guarantees issued prior to the Issue
Date in accordance with such related indentures.

 

(c)           Notwithstanding
any other provision of this Section 1010, the maximum amount of Debt that
Parent or any Restricted Subsidiary may Incur pursuant to this Section 1010
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 Debt under this Section 1010,
(i) Guarantees, Liens or obligations with respect to letters of credit
supporting Debt otherwise included in the determination of such particular
amount shall not be included and (ii) any Liens granted for the benefit of
the Securities pursuant to the provisions referred to in Section 1014
shall not be treated as Debt. For purposes of determining compliance with this Section 1010,
in the event that an item of Debt meets the criteria of more than one of the
types of Debt described in the above clauses, Parent, in its sole discretion,
shall classify such item of Debt and only be required to include the amount and
type of such Debt in one of such clauses.

 

SECTION 1011.     Limitation
on Debt of the Issuer and Issuer Restricted Subsidiaries. (a)  The
Issuer shall not, and shall not permit any Issuer Restricted Subsidiary to,
directly or indirectly, Incur any Debt; provided, however, that (i) the
Issuer or (ii) any Issuer Restricted Subsidiary may incur any Debt
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 Issuer 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 Issuer Restricted Subsidiary that Incurs Debt pursuant to this
paragraph (a) is a Guarantor and an Offering Proceeds Note Guarantor.

 

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

 

(i) Debt
of the Issuer or any Issuer Restricted Subsidiary (A) under the Original
Securities (including any Exchange Securities issued in exchange for such
Original Securities), any Note Guarantee in respect of the Original Securities
(including any Exchange Securities issued in exchange for such Original
Securities) or any Offering Proceeds Note Guarantee in respect of the Offering
Proceeds Note and (B) under the 2013 Notes issued on the Issue Date
(including any 2013 Notes issued in an exchange offer for the 2013 Notes issued
on the Issue Date), any Guarantee in respect of the 2013 Notes issued on the
Issue Date (including any 2013 Notes issued in an exchange offer for the 2013
Notes issued on the Issue Date) or any Guarantee in respect of the intercompany
note issued by Level 3 LLC in respect of the proceeds of the 2013 Notes issued
on the Issue Date;

 

75

 

(ii) Debt
of the Issuer or any Issuer Restricted Subsidiary under Credit Facilities in an
aggregate principal amount outstanding or available (together with the sum of (A) the
amount of any outstanding Debt Incurred pursuant to clause (ii) of
paragraph (b) of Section 1010, plus (B) the amount of all
refinancing Debt outstanding or available pursuant to clause (viii) of
paragraph (b) of Section 1010, plus (C) the amount of all
refinancing Debt outstanding or available pursuant to clause (vi) below in
respect of Debt previously Incurred pursuant to this clause (ii)) at any one
time not to exceed the greater of (x) $750,000,000 and (y) 1.5 times
Consolidated Cash Flow Available for Fixed Charges of Parent and its Restricted
Subsidiaries for the four full fiscal quarters next preceding the Incurrence of
such Debt for which consolidated financial statements are available, which
amount shall be permanently reduced by the amount of Net Available Proceeds
used to repay Debt under the Credit Facilities (or any refinancing Debt in
respect of the Credit Facilities Incurred pursuant to clause (viii) of
paragraph (b) of Section 1010 or clause (vi) below), and not
reinvested in Telecommunications/IS Assets or used to purchase Securities or
repay other Debt, pursuant to and as permitted by Section 1016;

 

(iii) Debt
of the Issuer or any Issuer Restricted Subsidiary outstanding on the
Measurement Date;

 

(iv) Debt
owed by the Issuer to a Restricted Subsidiary, Debt owed by an Issuer
Restricted Subsidiary to Parent or a Restricted Subsidiary (including Debt owed
by an Issuer Restricted Subsidiary to another Issuer Restricted Subsidiary),
and Debt with an aggregate principal amount not in excess of $10,000,000 at any
time outstanding owed by the Issuer to Parent or any Sister Restricted
Subsidiary; provided, however, that (A) any Issuer
Restricted Subsidiary that Incurs Debt owed to Parent or a Sister Restricted
Subsidiary pursuant to this clause (iv) is a Guarantor and an Offering
Proceeds Note Guarantor, (B)(x) upon the transfer, conveyance or other
disposition by such Issuer Restricted Subsidiary or the Issuer of any Debt so
permitted to a Person other than the Issuer or another Issuer Restricted
Subsidiary or (y) if for any reason such Issuer Restricted Subsidiary ceases to
be an Issuer Restricted Subsidiary, the provisions of this clause (iv) shall
no longer be applicable to such Debt and such Debt shall be deemed to have been
Incurred by the issuer thereof at the time of such transfer, conveyance or
other disposition or when such Issuer Restricted Subsidiary ceases to be an
Issuer Restricted Subsidiary and (C) the payment obligation of such Debt
(if clause (A) above applies) 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 Securities or the Offering
Proceeds Note Guarantee of such Offering Proceeds Note Guarantor, respectively;
and provided further, however, that a Foreign Restricted
Subsidiary need not become a Guarantor or an Offering Proceeds Note Guarantor
pursuant to clause (A) above until such time and only so long as such
Foreign Restricted Subsidiary Guarantees any other Debt of Parent or any
Domestic Restricted Subsidiary;

 

(v) Debt
Incurred by a Person (other than Parent or any Sister Restricted Subsidiary)
prior to the time (A) such Person became an Issuer Restricted Subsidiary, (B) such
Person merges into or consolidates with an Issuer Restricted Subsidiary or (C) an
Issuer Restricted Subsidiary merges into or consolidates with such Person (in a
transaction in which such Person becomes an

 

76

 

Issuer Restricted Subsidiary), which Debt 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 Debt pursuant to this clause (v), the Issuer could Incur at least $1.00 of
additional Debt 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 Issuer Restricted Subsidiary into which
such Person merges or consolidates is a Guarantor and an Offering Proceeds Note
Guarantor;

 

(vi) Debt
of the Issuer or any Issuer Restricted Subsidiary Incurred to renew, extend,
refinance, defease, repay, prepay, repurchase, redeem, retire, exchange or
refund (each, a “refinancing”) Debt of the Issuer or any Issuer Restricted
Subsidiary Incurred pursuant to paragraph (a) above or clause (i), (ii),
(iii), (v), (x) or (xi) 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 Debt so
refinanced plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Debt so refinanced or the
amount of any premium reasonably determined by the Board of Directors of Parent
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated repurchase, plus the expenses of the Issuer Incurred in
connection with such refinancing; provided, however, that (A) if
the Person that originally Incurred the Debt to be refinanced became, or would
have been required to become if not already, a Guarantor or an Offering
Proceeds Note Guarantor as a result of the Incurrence of the Debt being
refinanced in accordance with this covenant, (1) the Person that Incurs
the refinancing Debt pursuant to this clause (vi) (if not the Issuer)
shall be a Guarantor and an Offering Proceeds Note Guarantor and (2) if
the Debt to be refinanced is subordinated to the Offering Proceeds Note
Guarantee of such Offering Proceeds Note Guarantor, the refinancing Debt shall be
subordinated to the same extent to the Offering Proceeds Note Guarantee of the
Offering Proceeds Note Guarantor Incurring such refinancing Debt, (B) the
refinancing Debt shall not be senior in right of payment to the Debt that is
being refinanced and (C) in the case of any refinancing of Debt Incurred
pursuant to paragraph (a) above or clause (i), (v), (x) or (xi) or, if
such Debt previously refinanced Debt Incurred pursuant to any such clause, this
clause (vi), the refinancing Debt by its terms, or by the terms of any
agreement or instrument pursuant to which such Debt is issued, (x) does not
provide for payments of principal of such Debt 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 Issuer or any Issuer
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 Debt
upon any event of default thereunder), in each case prior to the time the same
are required by the terms of the Debt being refinanced and (y) does not permit
redemption or other retirement (including pursuant to an offer to purchase made
by the Issuer or an Issuer Restricted Subsidiary) of such Debt at the option of
the holder thereof prior to the time the same are required by the terms of the
Debt 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 Issuer) which is conditioned upon a change of control
pursuant to provisions substantially similar to those described under Section 1009;

 

77

 

(vii) Debt
of the Issuer or any Issuer 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 Debt 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 Issuer or any Issuer Restricted Subsidiary pursuant to such
agreements, Incurred in connection with the disposition of any business, assets
or Issuer Restricted Subsidiary (other than Guarantees of Indebtedness Incurred
by any Person acquiring all or any portion of such business, assets or Issuer
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 Issuer or any Issuer Restricted Subsidiary in connection with such
disposition;

 

(viii) Debt
of the Issuer or any Issuer Restricted Subsidiary consisting of Permitted
Interest Rate or Currency Protection Agreements;

 

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

 

(x) Issue Date
Purchase Money Debt initially Incurred by the Issuer or any Issuer Restricted
Subsidiary or another Person that became an Issuer Restricted Subsidiary on or
before the Issue Date; and

 

(xi) Debt
under the 103⁄4% Notes issued prior to the Issue Date.

 

(c) Notwithstanding
any other provision of this Section 1011, the maximum amount of Debt the
Issuer or any Issuer Restricted Subsidiary may Incur pursuant to this Section 1011
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 Debt under this Section 1011,
(1) Guarantees (other than Guarantees of Debt of Parent or any Sister
Restricted Subsidiary that are not Guarantees of Debt Incurred by Parent or any
Sister Restricted Subsidiary pursuant to clause (ii) of paragraph (b) of
Section 1010), Liens or obligations with respect to letters of credit
supporting Debt otherwise included in the determination of such particular
amount shall not be included and (2) any Liens granted for the benefit of
the Securities pursuant to the provisions referred to in Section 1014
described below shall not be treated as Debt. For purposes of determining
compliance with this Section 1011, (1) any Debt outstanding under the
Existing Credit Facility will be treated as Incurred on the Issue Date pursuant
to clause (ii) of paragraph (b) of this covenant and (2) in the
event that an item of Debt meets the criteria of more than one of the types of
Debt described in the above clauses, the Issuer, in its sole discretion, shall
classify

 

78

 

such item of Debt and only be required to include the amount and type
of such Debt in one of such clauses.

 

SECTION 1012.     Limitation
on Restricted Payments. (a)  Parent (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 Parent 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
Parent or a Restricted Subsidiary of dividends or distributions of greater
value than it would receive on a pro rata basis) or any dividends or
distributions payable solely in shares of Capital Stock of Parent (other than
Disqualified Stock) or in options, warrants or other rights to acquire Capital
Stock of Parent (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 Parent or any Restricted
Subsidiary of Parent or (y) any options, warrants or rights to purchase or
acquire shares of Capital Stock of Parent or any Restricted Subsidiary or any
securities convertible or exchangeable into shares of Capital Stock of Parent
or any Restricted Subsidiary, except, in any such case, any such purchase,
redemption or retirement or acquisition for value (A) paid to Parent 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 Parent 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 Parent; (iii) shall not
make, or permit any Restricted Subsidiary to make, any Investment (other than
an Investment in Parent 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 1019; (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, Debt of Parent which is subordinate in right of payment to the Parent
Guarantee or Debt of any Restricted Subsidiary which is subordinate in right of
payment to the Securities (in the case of the Issuer) or the Note Guarantee (in
the case of Restricted Subsidiaries other than the Issuer) of 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 Parent 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 Parent and the other Restricted
Subsidiaries (each of clauses (i) through (v) being a “Restricted
Payment”) 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,

 

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Parent could
not Incur at least $1.00 of additional Debt pursuant to paragraph (a) of Section 1010,
or (3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments made on or after the 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 Parent and its Restricted Subsidiaries
(or, in the case that Consolidated Net Income of Parent 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 Parent’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 Parent or any Restricted
Subsidiary in such Subsidiary; provided, however, that Parent or
a Restricted Subsidiary of Parent 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 Parent, from the issuance (other than to a Subsidiary
or an employee stock ownership plan or trust established by Parent or any such
Subsidiary for the benefit of their employees) of Capital Stock (other than Disqualified
Stock) of Parent, and (ii) from the issuance or sale of Debt of Parent or
any Restricted Subsidiary (other than to a Subsidiary, Parent or an employee
stock ownership plan or trust established by Parent 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 Disqualified Stock)
of Parent 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 Debt of Parent or any Restricted Subsidiary (other than Debt that
is subordinated to the Securities, the Offering Proceeds Note or any applicable
Note Guarantee or Offering Proceeds Note Guarantee) and release of Parent and
all Restricted Subsidiaries from all liability on the Debt 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) Parent may pay any dividend on Capital
Stock of any class of Parent within 60 days after the declaration
thereof if, on the date when the dividend was declared, Parent 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) Parent 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 Parent or any of
its Subsidiaries or

 

80

 

other Affiliates in an amount
not to exceed $3,000,000 in any 12-month period; (iii) Parent and any
Restricted Subsidiary may refinance any Debt otherwise permitted by clause
(viii) of paragraph (b) of Section 1010 or clause (vi) of
paragraph (b) of Section 1011; (iv) Parent and any Restricted
Subsidiary may retire or repurchase any Capital Stock of Parent or of any
Restricted Subsidiary or any Subordinated Debt of Parent in exchange for, or
out of the proceeds of substantially concurrent sale (other than to a
Subsidiary of Parent or an employee stock ownership plan or trust established
by Parent or any such Subsidiary for the benefit of their employees) of,
Capital Stock (other than Disqualified Stock) of Parent; 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) Parent 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 Parent (other than Disqualified Stock). 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
Issuer may not, and may not permit any Issuer Restricted Subsidiary
to, pay any dividend or make any distribution in respect of shares of its Capital
Stock held by Parent 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 “Parent
Transfers”), other than (i) Parent Transfers at such times and in such
amounts as shall be necessary to permit Parent to pay administrative expenses
attributable to the operations of its Restricted Subsidiaries, (ii) Parent
Transfers at such times and in such amounts as are sufficient for Parent 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 Debt of Parent, including pursuant to offers to
purchase) according to the terms of any Debt of Parent, (iii) Parent
Transfers (A) to permit Parent to satisfy its obligations in respect of
stock option plans or other benefit plans for management or employees of Parent
and its Subsidiaries, (B) to permit Parent to pay dividends on Preferred
Stock of Parent in an amount not to exceed the aggregate net cash proceeds
received by Parent (1) after September 30, 1999, from the issuance of
Capital Stock, and (2) from the issuance or sale of Debt of Parent or any
Restricted Subsidiary that after September 30, 1999, has been converted
into or exchanged for Capital Stock of Parent, (C) in an annual amount not
to exceed 50% of Parent’s Consolidated Net Income for the prior fiscal year and
(D) Parent Transfers in amounts not to exceed the amount required by
Parent to pay accrued and unpaid interest on any Debt of Parent due upon the
conversion, exchange or purchase of such Debt into, for or with Capital Stock
of Parent and (iv) additional Parent Transfers after October 1, 2003
in an aggregate amount not to exceed $50,000,000 in the aggregate.

 

81

 

SECTION 1013.     Limitation
on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

 

(a)           Parent
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 Parent or any other Restricted Subsidiary or pay any
Debt or other obligation owed to Parent or any other Restricted Subsidiary, (ii) to
make loans or advances to Parent or any other Restricted Subsidiary or (iii) to
transfer any of its Property to Parent or any other Restricted Subsidiary.

 

(b)           Notwithstanding
the foregoing limitation, Parent may, and may permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist (i) any
encumbrance or restriction pursuant to any agreement in effect on the Issue
Date, (ii) any customary (as conclusively determined in good faith by the
Chief Financial Officer of Parent) encumbrance or restriction applicable to a
Restricted Subsidiary that is contained in an agreement or instrument governing
or relating to Debt contained in any Qualified Credit Facility or Purchase
Money Debt; provided, however, that such encumbrances and
restrictions permit the distribution of funds to the Issuer in an amount
sufficient for the Issuer 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 Debt, including
pursuant to offers to purchase) according to the terms of this Indenture and
the Securities and other Debt that is solely an obligation of the Issuer, but provided
further, however, that such agreement may nevertheless contain
customary (as so determined) net worth, leverage, invested capital and other
financial covenants, customary (as so determined) covenants regarding the
merger of or sale of all or any substantial part of the assets of Parent
or any Restricted Subsidiary, customary (as so determined) restrictions on
transactions with affiliates and customary (as so determined) subordination
provisions governing Debt owed to Parent or any Restricted Subsidiary, (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
Debt 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 Debt of
Parent or a Restricted Subsidiary otherwise permitted under this Indenture, 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,

 

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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 Debt, and that do
not, individually or in the aggregate, detract from the value of Property of
Parent or any Restricted Subsidiary in any manner material to Parent 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 Indenture and the Securities.

 

SECTION 1014.     Limitation
on Liens.

 

Parent 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 Issue Date to secure any Debt without making, or causing
such Restricted Subsidiary to make, effective provision for securing the
Securities (x) equally and ratably with such Debt as to such Property for so
long as such Debt will be so secured or (y) in the event such Debt is Debt of
the Issuer, Parent or a Restricted Subsidiary that is a Guarantor and such Debt
is subordinate in right of payment to the Securities, the Parent Guarantee or
the applicable Note Guarantee, prior to such Debt as to such Property for so
long as such Debt will be so secured. The holders of such other secured Debt may exclusively
control the disposition of the property subject to the Lien.

 

The foregoing
restrictions shall not apply to:  (i) Liens
existing on the Issue Date and securing Debt outstanding on the Issue Date or
Liens Incurred on or after the Issue Date pursuant to any Credit Facility to
secure Debt permitted to be Incurred pursuant to clause (ii) of paragraph (b) under
Section 1010 or clause (ii) of paragraph (b) under Section 1011;
(ii) Liens Incurred on or after the Measurement Date securing Debt of
Parent or any Restricted Subsidiary (other than the Issuer or any Issuer
Restricted Subsidiary) in an amount which, together with the aggregate amount
of Debt then outstanding or available under all Credit Facilities (together
with all refinancing Debt then outstanding or available pursuant to clause (viii) of
paragraph (b) of Section 1010 or clause (vi) of paragraph (b) under
Section 1011 in respect of Debt previously Incurred under Credit
Facilities), does not exceed 1.5 times Consolidated Cash Flow Available for
Fixed Charges of Parent and its Restricted Subsidiaries for the four full
fiscal quarters preceding the Incurrence of such Lien for which Parent’s
consolidated financial statements are available, determined on a pro forma
basis as if such Debt had been Incurred and the proceeds thereof had been
applied at the beginning of such four fiscal quarters; (iii) Liens in
favor of Parent 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 Debt secured by any such Lien (except to
Parent or a Restricted Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of

 

83

 

such Lien by the issuer thereof; (iv) Liens outstanding on the
Issue Date securing Purchase Money Debt and Liens to secure Purchase Money Debt
Incurred after the Issue Date pursuant to clause (iii) of paragraph (b) under
Section 1010, 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 Debt 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 Debt Incurred to refinance,
in whole or in part, Debt 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 Debt so
secured is not increased except as otherwise permitted under clause (viii) of
paragraph (b) of Section 1010 or clause (vi) of paragraph (b) of
Section 1011; (vii) Liens Incurred on or after the Measurement Date
not otherwise permitted by the foregoing clauses (i) through (vi) (but
including in the computations of Liens permitted under this clause (vii) Liens
existing on the Issue Date which remain existing at the time of computation
which are otherwise permitted under clause (i)) securing Debt of Parent or any
Restricted Subsidiary (other than the Issuer or any Issuer Restricted
Subsidiary) in an aggregate amount not to exceed 5% of Parent’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 Debt of any
Person other than a Non-Telecommunications Subsidiary; (ix) Liens granted
after the Issue Date pursuant to this Section 1014 to secure the
Securities, the 2013 Notes or the 103⁄4% Notes; provided, however,
that no Lien may be granted to secure the 2013 Notes or the 103⁄4% Notes
unless a pari  passu Lien on the Property subject to such Lien is
concurrently granted to secure the Securities and remains in effect for so long
as such Lien securing the 2013 Notes or the 103⁄4% Notes; (x) Liens to secure
Debt Incurred pursuant to clause (viii) of paragraph (b) of Section 1011;
(xi) Liens to secure amounts deposited into an escrow account for the benefit
of the holders of the 2013 Notes or the 103⁄4% Notes in connection with the
prepayment by Level 3 LLC of the intercompany note issued by Level 3 LLC in
respect of the proceeds of the 2013 Notes or the intercompany note issued by
Level 3 LLC in respect of the proceeds of the 103⁄4% Notes, respectively; (xii)
Liens to secure amounts deposited into an escrow account for the benefit of the
Holders of the Securities in connection with the prepayment of the Offering
Proceeds Note by Level 3 LLC; and (xiii) Permitted Liens.

 

SECTION 1015.     Limitation
on Sale and Leaseback Transactions.

 

Parent 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) Parent or such Restricted
Subsidiary would be entitled to Incur (a) Debt in an amount equal to the
Attributable Value of the Sale and Leaseback Transaction pursuant to

 

84

 

Section 1010 or Section 1011 and (b) a Lien pursuant to Section 1014,
equal in amount to the Attributable Value of the Sale and Leaseback
Transaction, without also securing the Securities, and (ii) the Sale and
Leaseback Transaction is treated as an Asset Disposition and all of the
conditions of Section 1016 (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 1016.

 

SECTION 1016.     Limitation
on Asset Dispositions.

 

Parent shall
not, and shall not permit any Restricted Subsidiary to, make any Asset
Disposition unless: (i) Parent 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 Parent in good faith and evidenced by a Board Resolution of Parent
filed with the Trustee; and (ii) at least 75% of the consideration for
such disposition consists of cash or Cash Equivalents or the assumption of Debt
of the Issuer or any Issuer Restricted Subsidiary (other than Debt of the
Issuer that is subordinated to the Securities or Debt of any Issuer Restricted
Subsidiary that is subordinated to the Note Guarantee or Offering Proceeds Note
Guarantee of such Issuer Restricted Subsidiary) and release of the Issuer and
all Issuer Restricted Subsidiaries from all liability on the Debt assumed (or
if less than 75%, the remainder of such consideration consists of
Telecommunications/IS Assets); provided, however, that, to the
extent such disposition involves Special Assets, all or any portion of the
consideration may, at Parent’s election, consist of Property other than cash,
Cash Equivalents or the assumption of Debt or Telecommunications/IS Assets.

 

The Net
Available Proceeds (or any portion thereof) from Asset Dispositions may be
applied by Parent or a Restricted Subsidiary, to the extent Parent or such
Restricted Subsidiary elects (or is required by the terms of any Debt): (1) to
the permanent repayment or reduction of Debt then outstanding under any
Qualified Credit Facility, to the extent such Qualified Credit Facility would
require such application or prohibit payments pursuant to the Offer to Purchase
described in the following paragraph (other than Debt owed to Parent or any
Affiliate of Parent); 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 Parent or another
Restricted Subsidiary).

 

Any Net
Available Proceeds from an Asset Disposition not applied in accordance with the
preceding paragraph within 360 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, 540 days) from the date of
the receipt of such Net Available Proceeds shall constitute “Excess Proceeds.”  When the aggregate amount of Excess Proceeds
exceeds $10,000,000, the Issuer (or, in the case of Debt of Parent required or
permitted to be repurchased by Parent, Parent) will be required to make an
Offer to Purchase with such Excess Proceeds on a pro rata basis according to
principal amount (or, in the case of Debt issued at a discount, the then-Accreted
Value) for (x) Outstanding Securities at a price in cash equal to 100% of the

 

85

 

principal amount of the Securities on the purchase date plus accrued
and unpaid interest (if any) thereon (subject to the right of Holders of record
on the relevant record date to receive interest due on the relevant interest
payment date) and (y) any other Debt of the Issuer that is pari  passu
with the Securities, any Debt of a Guarantor that is pari  passu
with such Guarantor’s Note Guarantee or any Debt of a Restricted Subsidiary
that is a subsidiary of the Issuer but not a Guarantor, at a price no greater
than 100% of the principal amount thereof plus accrued and unpaid interest (if
any) to the purchase date (or 100% of the then-Accreted Value plus accrued and
unpaid interest (if any) to the purchase date in the case of original issue
discount Debt), to the extent, in the case of this clause (y), required under
the terms thereof (other than Debt owed to Parent or any Affiliate of Parent).
To the extent there are any remaining Excess Proceeds following the completion
of the Offer to Purchase, the Issuer shall apply such Excess Proceeds to the
repayment of other Debt of the Issuer or any Restricted Subsidiary that is a subsidiary
of the Issuer, to the extent permitted or required under the terms thereof. Any
other remaining Excess Proceeds may be applied to any use as determined by
Parent which is not otherwise prohibited by this Indenture, and the amount of
Excess Proceeds shall be reset to zero.

 

The Issuer,
Parent and the Trustee shall perform their respective obligations for the
Offer to Purchase as specified in the Offer. Prior to the Purchase Date, the
Issuer, or Parent, as applicable, shall (i) accept for payment Securities
or portions thereof tendered pursuant to the Offer, (ii) irrevocably
deposit with the Paying Agent (or, if the Issuer, or Parent, as applicable, are
acting as their own Paying Agent, segregate and hold in trust as provided in Section 1003)
money sufficient to pay the Purchase Price of all Securities or portions
thereof so accepted (provided that such deposit may be made no later than
11:00 A.M. New York City time on the Purchase Date if the Issuer, or
Parent, as applicable elect) and (iii) deliver or cause to be delivered to
the Trustee all Securities so accepted together with an Officers’ Certificate
stating the Securities or portions thereof accepted for payment. The Paying
Agent shall promptly mail or deliver to Holders of Securities so accepted payment
in an amount equal to the Purchase Price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security or Securities
equal in principal amount to any unpurchased portion of the Security
surrendered as requested by the Holder. Any Security not accepted for payment
shall be promptly mailed or delivered by the Issuer or Parent, as applicable,
to the Holder thereof. In the event that the aggregate Purchase Price is less
than the amount delivered by the Issuer or Parent, as applicable, to the
Trustee or the Paying Agent, the Trustee or the Paying Agent, as the case may be,
shall deliver the excess to the Issuer or Parent, as applicable, immediately
after the Purchase Date.

 

Not later than
the date upon which written notice of an Offer to Purchase is delivered to the
Trustee, Issuer or Parent, as applicable, shall deliver to the Trustee an
Officers’ Certificate as to (i) the amount of the Offer, (ii) the
allocation of the Net Available Proceeds from the Asset Disposition pursuant to
which such Offer is being made and (iii) the compliance of such allocation
with the provisions of this Section 1016.

 

In the event
that the Issuer or Parent, as applicable, make an Offer to Purchase the
Securities, the Issuer or Parent, as applicable, shall comply with any
applicable securities laws and regulations, including any applicable
requirements of Section 14(e) of, and Rule 14e-1 under,

 

86

 

the Exchange Act. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the Issuer or
Parent, as applicable, shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section by virtue thereof.

 

The Issuer
shall not, and shall not permit any Issuer Restricted Subsidiary to, sell,
transfer, lease or otherwise dispose of any Property to Parent or any Sister
Restricted Subsidiary unless (i) the Issuer or such Issuer 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 Note or any other intercompany Debt, is the principal
amount of the Offering Proceeds Note or such other Debt and any accrued and
unpaid interest thereon) and (ii) the consideration consists of either (A) 100%
in cash or Cash Equivalents or (B) Debt of Parent or the Restricted
Subsidiary to which Property was transferred that is secured by a Lien on such
transferred Property. Parent 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 Issuer or an Issuer Restricted Subsidiary) that, as determined by
the Board of Directors of Parent in good faith and evidenced by a Board Resolution
of Parent filed with the Trustee upon request of the Trustee, has a Fair 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. Any such Lien may be
second in priority to any Lien on such Property in favor of the lenders under a
Qualified Credit Facility. The provisions of this paragraph do not apply to (a) dividends
and distributions (other than any dividend or distribution of the Offering
Proceeds Note or any other intercompany Debt), (b) loans or advances and (c) purchases
of services or goods.

 

SECTION 1017.     Limitation
on Issuance and Sales of Capital Stock of Restricted Subsidiaries.

 

Parent shall
at all times own all the issued and outstanding Capital Stock of the Issuer.
The Issuer shall at all times own all the issued and outstanding Capital Stock
of Level 3 LLC. Parent 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
Parent or a Restricted Subsidiary except (i) a sale of all of the Capital
Stock of such Restricted Subsidiary owned by Parent and any Restricted
Subsidiary that complies with the provisions of Section 1016 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 1016 to the extent
such provisions apply and (y) the remaining interest of Parent 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 1012,
(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

 

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and such transaction complies with the provisions of Section 1016
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 Parent 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 Parent 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
Indenture. 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 no longer being a Restricted Subsidiary and (b) the
execution and delivery of a supplemental indenture providing for such release
in form satisfactory to the Trustee, any such Guarantor shall be released
from all its obligations under its Note Guarantee.

 

SECTION 1018.     Transactions
with Affiliates.

 

Parent 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 Parent or such
Restricted Subsidiary and (ii) on terms that are no less favorable to
Parent or such Restricted Subsidiary than those that would have been obtained
in a comparable arm’s-length transaction by Parent 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
Parent or the relevant Restricted Subsidiary to apply for comparative purposes,
is otherwise on terms that, taken as a whole, Parent has determined to be fair
to Parent or the relevant Restricted Subsidiary) and (b) Parent delivers
to the Trustee (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 Parent 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 Parent certifying that such
Affiliate Transaction or series of Affiliate Transactions complies with
clause (a) above and that such Affiliate Transaction or series of
Affiliate

 

88

 

Transactions has been approved by the Board of Directors of Parent,
including a majority of the disinterested members of the Board of Directors of
Parent; provided, however, that, in the event that there shall
not be at least two disinterested members of the Board of Directors of Parent
with respect to the Affiliate Transaction, Parent shall, in addition to such
Board Resolution, file with the Trustee 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 Parent, is independent with respect to
Parent 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 Parent or such Restricted Subsidiary.

 

Notwithstanding
the foregoing, the following shall not be deemed Affiliate Transactions:  (i) any
employment agreement entered into by Parent 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 Parent or any Restricted Subsidiary approved by a majority of the
disinterested members of the Board of Directors of Parent and consistent with
industry practice; (iii) transactions between or among Parent 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 Parent (other than a Restricted
Subsidiary); (iv) Restricted Payments and Permitted Investments permitted
by Section 1012 (other than Investments in Affiliates that are not Parent
or Restricted Subsidiaries); (v) transactions pursuant to the terms of any
agreement or arrangement as 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 Parent (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 1019.     Limitation
on Designations of Unrestricted Subsidiaries.

 

Parent shall
not designate (1) the Issuer or Level 3 LLC as an Unrestricted Subsidiary
or (2) any other Subsidiary of Parent (other than a newly created
Subsidiary in which no Investment has previously been made) as an “Unrestricted
Subsidiary” under this Indenture (a “Designation”) unless:

 

(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, Parent would be able to Incur $1.00 of
Debt under paragraph (a) of Section 1010; and

 

(c)           Parent
would not be prohibited under any provision of this Indenture 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 Parent’s equity interest in such Restricted Subsidiary) of
the Fair Market Value of the net assets of such Restricted Subsidiary on such
date.

 

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In the event
of any such Designation, Parent shall be deemed to have made an Investment
constituting a Restricted Payment pursuant to Section 1012 for all
purposes of this Indenture in the Designation Amount; provided, however,
that, upon a Revocation of any such Designation of a Subsidiary, Parent shall
be deemed to continue to have a permanent “Investment” in an Unrestricted
Subsidiary of an amount (if positive) equal to (i) Parent’s “Investment”
in such Subsidiary at the time of such Revocation less (ii) the portion
(proportionate to Parent’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 Parent or any
Restricted Subsidiary. In addition, neither Parent nor any Restricted
Subsidiary shall at any time (x) provide credit support for, or a Guarantee of,
any Debt of any Unrestricted Subsidiary (including any undertaking, agreement
or instrument evidencing such Debt); provided, however, that
Parent or a Restricted Subsidiary may pledge Capital Stock or Debt of any
Unrestricted Subsidiary on a nonrecourse basis such that the pledgee has no
claim whatsoever against Parent other than to obtain such pledged Capital Stock
or Debt, (y) be directly or indirectly liable for any Debt of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Debt 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 Debt, Lien or other obligation of any Unrestricted Subsidiary (including
any right to take enforcement action against such Unrestricted Subsidiary),
except in the case of clause (x) or (y) to the extent permitted under Sections 1012
and 1018.

 

Unless
Designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary
of Parent 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 1019,
no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary.

 

A Designation may be
revoked (a “Revocation”) by a Board Resolution of Parent delivered to the
Trustee, provided that Parent 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 Debt 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 Indenture.

 

All
Designations and Revocations must be evidenced by Board Resolutions of Parent
delivered to the Trustee (i) certifying compliance with the foregoing
provisions and (ii) giving the effective date of such Designation or
Revocation, such delivery to the Trustee to occur within 45 days after the
end of the fiscal quarter of Parent in which such Designation or Revocation is
made (or, in the case of a Designation or Revocation made during the last
fiscal quarter of

 

90

 

Parent’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 1019, such Restricted
Subsidiary shall, by delivery of a supplemental indenture providing for such
release in form satisfactory to the Trustee, be released from any Note
Guarantee previously made by such Subsidiary.

 

SECTION 1020.     Limitation
on Actions with respect to Existing Intercompany Obligations. Without the
consent of the holders of at least two-thirds in principal amount of the
Outstanding Securities:

 

(a)           the
Issuer shall not forgive or waive or fail to enforce any of its rights under
the Offering Proceeds Note, any Offering Proceeds Note Guarantee, the Parent
Intercompany Note Subordination Agreement or any other agreement with Parent or
any Restricted Subsidiary to subordinate a payment obligation on any Debt to
the prior payment in full in cash of all obligations with respect to the
Offering Proceeds Note or an Offering Proceeds Note Guarantee, and the Issuer
and Level 3 LLC may not amend the Offering Proceeds Note in a manner
adverse to the holders of the Securities; provided, however, that
nothing in this covenant shall compel the Issuer to demand payment under the
Offering Proceeds Note or any Offering Proceeds Note Guarantee except during a
bankruptcy, insolvency or similar proceeding;

 

(b)           in
the event Level 3 LLC (or any successor obligor under the Offering Proceeds
Note) repays all or a portion of the Offering Proceeds Note, the Issuer must (i) deposit
an amount of cash equal to the principal amount of the Offering Proceeds Note
then repaid in an escrow account with an unaffiliated financial institution for
the benefit of the Holders of the Securities, and as security for the prompt
and complete payment and performance when due of the Issuer’s obligations in
respect of the Securities, until such time as the Securities are no longer
outstanding or such cash is used pursuant to clause (ii) or (iii) of
this paragraph, (ii) redeem Securities having a principal amount equal to
the principal amount of the Offering Proceeds Note then repaid in accordance
with, and if at such time permitted by, the Securities, or (iii) purchase
Securities in the open market having a principal amount equal to the principal
amount of the Offering Proceeds Note then repaid; provided, however,
that if at any time the principal amount of the Offering Proceeds Note is
greater than the principal amount of Securities that remain outstanding, Level
3 LLC (or any successor obligor under the Offering Proceeds Note) may repay
or forgive or waive an amount of the Offering Proceeds Note equal to such
excess without complying with clause (i), (ii) or (iii) above;

 

(c)           Parent
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 1010 or clause (iv) of
paragraph (b) of Section 1011 to be subordinated to the prior payment
in full in cash of all obligations with respect to the

 

91

 

Offering Proceeds Note or an Offering 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 the Offering Proceeds Note;

 

(d)           Parent
and Level 3 LLC shall not amend the terms of the Parent Intercompany Note in a
manner adverse to the holders of the Securities, the determination of which
shall be made by the Board of Directors of Parent acting in good faith and
shall be evidenced by a Board Resolution of Parent except to permit
subordination of Level 3 LLC’s obligations under the Parent Intercompany Note
to its obligations under a Qualified Credit Facility as described, and to the
extent set forth in the Parent Intercompany Note Subordination Agreement;

 

(e)           Parent,
the Issuer and Level 3 LLC shall not amend the Parent Intercompany Note
Subordination Agreement in a manner adverse to the holders of the Securities
and Parent or any Restricted Subsidiary and the Issuer shall not amend any
other agreement between Parent or any Restricted Subsidiary and the Issuer to
subordinate a payment obligation on any Debt of Parent or any Restricted
Subsidiary to the prior payment in full in cash of all obligations with respect
to the Offering Proceeds Note or any Offering Proceeds Note Guarantee, in each
case, the determination of which shall be made by the Board of Directors of
Parent acting in good faith and shall be evidenced by a Board Resolution of
Parent except to permit subordination of their respective obligations under the
Offering Proceeds Note or any Offering Proceeds Note Guarantee to their
respective obligations under a Qualified Credit Facility as described, and to
the extent set forth, in the Parent Intercompany Note Subordination Agreement;
and

 

(f)            Parent
may not permit any Restricted Subsidiary to Guarantee the 103⁄4% Notes, the
intercompany note issued by Level 3 LLC in respect of the proceeds of the 103⁄4%
Notes, the 2013 Notes or the intercompany note issued by Level 3 LLC in respect
of the proceeds of the 2013 Notes unless such Restricted Subsidiary
concurrently Guarantees the Securities and such Guarantee of the Securities
remains in effect for so long as the Guarantee of the 103⁄4% Notes, the related
intercompany note, the 2013 Notes or the related intercompany note; provided,
however, that this provision shall not be deemed to be violated by the
Guarantee of the 103⁄4% Notes of Level 3 LLC outstanding on the Issue Date.

 

SECTION 1021.     Covenant
Suspension. During any period of time (a “Suspension Period”) that (i) the
ratings assigned to the Securities by both of the Rating Agencies are
Investment Grade Ratings and (ii) no Default or Event of Default has
occurred and is continuing, Parent and the Restricted Subsidiaries will not be
subject to the covenants set forth in Sections 1010, 1011, 1012, 1013,
1015(i)(a), 1016, 1017 (other than the first two sentences thereof), 1018, 801(3) and
(4), 803(3) and (4) and clause (b) of the first sentence of
Section 1019 (collectively, the “Suspended Covenants”). In the event that
Parent and the Restricted Subsidiaries are not subject to the Suspended
Covenants for any period of time as a result of the preceding sentence

 

92

 

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 Securities
below the required Investment Grade Ratings or a Default or Event of Default
occurs and is continuing, then Parent 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 1012 will
be made as though Section 1012 had been in effect during the entire period
of time from the Measurement Date. On the Reversion Date, all Debt Incurred
during the Suspension Period will be classified to have been Incurred pursuant
to paragraph (a) of Section 1010 or one of the clauses set forth in
paragraph (b) of Section 1010 or paragraph (a) of Section 1011
or one of the clauses set forth in paragraph (b) of Section 1011 (in
each case to the extent such Debt would be permitted to be Incurred thereunder
as of the Reversion Date and after giving effect to Debt Incurred prior to the
Suspension Period and outstanding on the Reversion Date). To the extent such
Debt would not be permitted to be Incurred pursuant to paragraph (a) of Section 1010
or one of the clauses set forth in paragraph (b) of Section 1010 or
paragraph (a) of Section 1011 or one of the clauses set forth in
paragraph (b) of Section 1011, such Debt will be deemed to have been
outstanding on the Measurement Date, so that it is classified as permitted
under Section 1010(b)(v) or Section 1011(b)(iii). If the
Incurrence of any Debt by a Restricted Subsidiary during the Suspension Period
would have been prohibited or conditioned upon such Restricted Subsidiary entering
into a Note Guarantee and an Offering Proceeds Note Guarantee had Section 1010
and Section 1011 been in effect at the time of such Incurrence, such
Restricted Subsidiary shall enter into a Note Guarantee and an Offering
Proceeds Note Guarantee that are senior to or pari  passu with
such Debt within ten days after the Reversion Date. For purposes of determining
compliance with Section 1016 on the Reversion Date, the Net Available
Proceeds from all Asset Sales 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
Indenture or cause a Default or Event of Default thereunder; provided, however,
that (1) Parent 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) Parent 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 Note Guarantee and an Offering 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 Parent and shall be conclusively evidenced by a board resolution to such
effect adopted in good faith by the Board of Directors of Parent. In reaching
their determination, the Board of Directors of Parent may, but need not,
consult with the Rating Agencies.

 

SECTION 1022.     Special
Interest Notice.

 

In the event
that the Issuer is required to pay Special Interest to Holders pursuant to the
Registration Agreement, the Issuer will provide written notice (“Special
Interest Notice”) to the Trustee of its obligation to pay Special Interest no
later than fifteen days prior to the proposed

 

93

 

payment date for the Special Interest, and the Special Interest Notice
shall set forth the amount of Special Interest to be paid by the Issuer on such
payment date. The Trustee shall not at any time be under any duty or
responsibility to any Holders to determine the Special Interest, or with
respect to the nature, extent, or calculation of the amount of Special Interest
owed, or with respect to the method employed in such calculation of the Special
Interest.

 

SECTION 1023.     Authorizations
and Consents of Governmental Authorities.

 

Each of Parent
and the Issuer will endeavor, and cause Level 3 LLC to endeavor, in good faith
using commercially reasonable efforts to cause Level 3 LLC to obtain all
material (as determined in good faith by the General Counsel of Parent)
authorizations and consents of Federal and State Governmental Authorities required
in order for it to Guarantee the Securities at the earliest practicable date
and to enter into a Guarantee of the Securities promptly thereafter. For
purposes of this covenant, the requirement that Parent, the Issuer or Level 3
LLC 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 Parent shall
determine in good faith to be adverse or materially burdensome. Upon the
reasonable request of Parent or the Issuer, the Trustee will cooperate with
Parent and the Issuer as necessary to enable them to comply with their
obligations under this covenant.

 

ARTICLE ELEVEN

REDEMPTION OF SECURITIES

 

SECTION 1101.     Right
of Redemption.

 

The Securities
will be subject to redemption at the option of the Issuer, in whole or in part,
at any time or from time to time, upon not less than 30 nor more than 60 days’
prior notice, on the terms and at the redemption prices (expressed as
percentages of principal amount) set forth in paragraph 5 on the reverse of the
form of Security, plus accrued and unpaid interest thereon (if any) to the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).

 

SECTION 1102.     Applicability
of Article.

 

This Article shall
govern any redemption of the Securities pursuant to Section 1101.

 

SECTION 1103.     Election
to Redeem; Notice to Trustee.

 

The election
of the Issuer to redeem any Securities pursuant to Section 1101 shall be
evidenced by a Board Resolution of the Issuer. The Issuer shall, at least
60 days prior to the Redemption Date fixed by the Issuer (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities to be

 

94

 

redeemed and shall deliver to the Trustee such documentation and
records as shall enable the Trustee to select the Securities to be redeemed
pursuant to Section 1104. Such notice shall be accompanied by an Officers’
Certificate and an Opinion of Counsel from the Issuer to the effect that such
redemption will comply with the conditions herein.

 

SECTION 1104.     Selection by
Trustee of Securities to Be Redeemed.

 

If less than
all the Securities are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed, or, if the Securities
are not so listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions of the principal of Securities; provided,
however, that no such partial redemption shall reduce the portion of the
principal amount of a Security not redeemed to less than $1,000.

 

The Trustee
shall promptly notify the Issuer in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.

 

For all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.

 

SECTION 1105.     Notice
of Redemption.

 

Notice of
redemption shall be given in the manner provided for in Section 106 not
less than 30 nor more than 45 days prior to the Redemption Date, to each
Holder of Securities to be redeemed.

 

Each notice of
redemption shall identify the Securities (including “CUSIP” number(s)) to be
redeemed and shall state:

 

(1)  the Redemption Date,

 

(2)  the
Redemption Price and the amount of accrued interest to the Redemption Date
payable as provided in Section 1107, if any,

 

(3)  if
less than all Outstanding Securities are to be redeemed, the identification
(and, in the case of a partial redemption, the principal amounts) of the
particular Securities to be redeemed,

 

95

 

(4)  in
case any Security is to be redeemed in part only, that on and after the
Redemption Date, upon surrender of such Security, the Holder will receive,
without charge, a new Security or Securities of authorized denominations for
the principal amount thereof remaining unredeemed,

 

(5)  that
on the Redemption Date the Redemption Price (and unpaid and accrued interest,
if any, to the Redemption Date payable as provided in Section 1107) will
become due and payable upon each such Security, or the portion thereof, to be
redeemed, and that, unless the Issuer defaults in making such redemption
payment or the Trustee or the Paying Agent is prohibited from making such
payment, interest thereon will cease to accrue on and after said date, and

 

(6)  the
place or places where such Securities are to be presented and surrendered for
payment of the Redemption Price and accrued interest, if any.

 

Notice of
redemption of Securities to be redeemed at the election of the Issuer shall be
given by the Issuer or, at the Issuer’s request, by the Trustee in the name and
at the expense of the Issuer.

 

SECTION 1106.     Deposit
of Redemption Price.

 

On or prior to
any Redemption Date (and if on any Redemption Date, before 11:00 A.M.
New York City time, on such date), the Issuer shall deposit with the
Trustee or with a Paying Agent (or, if the Issuer is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and unpaid and accrued
interest (subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date) on, all the
Securities which are to be redeemed on that date.

 

SECTION 1107.     Securities
Payable on Redemption Date.

 

Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified (together with unpaid and accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Issuer shall default
in the payment of the Redemption Price and accrued interest or the Trustee or
the Paying Agent shall be prohibited from making such payment) such Securities
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Issuer at the Redemption Price, together with unpaid and accrued interest, if
any, to the Redemption Date; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms.

 

96

 

If any
Security called for redemption shall not be so paid upon surrender thereof for
redemption, the principal (and premium, if any) shall, until paid, bear
interest from the Redemption Date at the rate borne by the Securities.

 

SECTION 1108.     Securities
Redeemed in Part.

 

Any Security
which is to be redeemed only in part shall be surrendered at the office or
agency of the Issuer maintained for such purpose pursuant to Section 1002
(with, if the Issuer and the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Issuer and the
Trustee duly executed by, the Holder thereof or such Holder’s attorney duly
authorized in writing), and the Issuer shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.

 

ARTICLE TWELVE

DEFEASANCE AND COVENANT DEFEASANCE

 

SECTION 1201.     Issuer’s
Option to Effect Defeasance or Covenant Defeasance.

 

The Issuer
may, at its option by Board Resolution of the Issuer, at any time, with respect
to the Securities, elect to have either Section 1202 or Section 1203
be applied to all Outstanding Securities upon compliance with the conditions
set forth below in this Article Twelve.

 

SECTION 1202.     Defeasance
and Discharge.

 

Upon the
Issuer’s exercise under Section 1201 of the option applicable to this Section 1202,
the Issuer and the Guarantors shall be deemed to have been discharged from
their obligations with respect to all Outstanding Securities on the date the
conditions set forth in Section 1204 are satisfied (hereinafter, “defeasance”).
For this purpose, such defeasance means that the Issuer shall be deemed to have
paid and discharged the entire indebtedness represented by the Outstanding
Securities, which shall thereafter be deemed to be “Outstanding” only for the
purposes of Section 1205 and the other Sections of this Indenture referred
to in clauses (A) and (B) below, and to have satisfied all their
other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Issuer, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
Issuer’s obligations with respect to such Securities under Section 2.3 of
Appendix A and Sections 303, 306, 307, 1002 and 1003 and the Issuer’s
rights under Section 1101, (B) rights of Holders to receive payment
of principal of, premium, if any, and interest on such Securities (but not the
Purchase Price referred to under Section 1009 or 1016) and any rights of
the Holders with respect to such amounts, (C) the rights, obligations and
immunities of the Trustee under the Indenture and (D) this Article

 

97

 

Twelve. Subject to compliance with this Article Twelve, the Issuer
may exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203 with respect to the
Securities. If the Issuer exercises its option under this Section 1202,
(u) each Guarantor, if any, shall be released from all its obligations under
its Note Guarantee, (v) all subordination provisions contained in the
Parent Intercompany Note and the Parent Intercompany Note Subordination
Agreement shall be deemed terminated as they relate to the Offering Proceeds
Note and the Offering Proceeds Note Guarantees, (w) the Offering Proceeds Note may be
prepaid in whole or in part, (x) no entity shall be obligated to guarantee the
Offering Proceeds Note, (y) the Offering Proceeds Note may be canceled and
(z) all obligations to provide Offering Proceeds Note Guarantees shall terminate
and all references in the Indenture to Offering Proceeds Note Guarantees and
Offering Proceeds Note Guarantees shall be disregarded and not be deemed to be
requirements to take or omit to take any action by Parent or any Restricted
Subsidiary.

 

SECTION 1203.     Covenant
Defeasance.

 

Upon the
Issuer’s exercise under Section 1201 of the option applicable to this Section 1203,
the Issuer and each Guarantor shall be released from their obligations under
any covenant contained in Sections 801(3), (4) and (5), 803(3), (4) and
(5) in Sections 804, 806, 1005, 1006, 1007 and 1023 and Sections 1009
through 1021 and from the operation of Sections 501(6), (7), (8), (9) and
(10) (but, in the case of Sections 501(9) and (10), with respect only
to Significant Subsidiaries), with respect to the Outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter, “covenant
defeasance”), and the Securities shall thereafter be deemed not to be “Outstanding”
for the purposes of any direction, waiver, consent, declaration or other Act of
Holders (and the consequences of any thereof) in connection with such
provisions, but shall continue to be deemed “Outstanding” for all other
purposes hereunder. For this purpose, such covenant defeasance means that, with
respect to the Outstanding Securities, the Issuer and the Guarantors may omit
to comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such provision, whether directly or indirectly, by
reason of any reference elsewhere herein to any such provision or by reason of
any reference in any such provision to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 501(3), (4), (5), (6), (7), (8), (9) or
(10) (but, in the case of Section 501(9) or (10), with respect
only to Significant Subsidiaries) but, except as specified above, the remainder
of this Indenture and such Securities shall be unaffected thereby. If the
Issuer exercises its option under this Section 1203, (u) each Guarantor
shall be released from all its obligations under its Note Guarantee, (v) all
subordination provisions contained in the Parent Intercompany Note and the
Parent Intercompany Note Subordination Agreement shall be deemed terminated as
they relate to the Offering Proceeds Note and the Offering Proceeds Note
Guarantees, (w) the Offering Proceeds Note may be prepaid in whole or in
part, (x) no entity shall be obligated to guarantee the Offering Proceeds Note,
(y) the Offering Proceeds Note may be canceled and (z) all obligations to
provide Offering Proceeds Note Guarantees shall terminate and all references in
the Indenture to Offering Proceeds Note Guarantees and Offering Proceeds Note Guarantees

 

98

 

shall be disregarded and not be deemed to be requirements to take or
omit to take any action by Parent or any Restricted Subsidiary.

 

SECTION 1204.     Conditions
to Defeasance or Covenant Defeasance.

 

The following
shall be the conditions to application of either Section 1202 or Section 1203
to the Outstanding Securities:

 

(1)           The
Issuer shall irrevocably have deposited or caused to be deposited with the
Trustee (or another trustee satisfying the requirements of Section 608 who
shall agree to comply with the provisions of this Article Twelve
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, at any time prior to the
Maturity of the Securities: (A) money in an amount, or (B) Government
Securities which through the payment of interest and principal will provide,
not later than one day before the due date of payment in respect of the
Securities, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge the principal of (and premium, if any, on) and
interest on, the Outstanding Securities on the Stated Maturity (or Redemption
Date, if applicable) of such principal (and premium, if any) or installment of
interest; provided that the Trustee (or such other trustee) shall have
been irrevocably instructed in writing to apply such money or the proceeds of
such Government Securities to said payments with respect to the Securities.
Before such a deposit, the Issuer may give to the Trustee, in accordance
with Section 1103, a notice of their election to redeem all of the
Outstanding Securities at a future date in accordance with Article Eleven,
which notice shall be irrevocable. Such irrevocable redemption notice, if
given, shall be given effect in applying the foregoing.

 

(2)           No
Default or Event of Default with respect to the Securities shall have occurred
and be continuing on the date of such deposit or, insofar as paragraphs (9) and
(10) of Section 501 are concerned with respect to the Parent and the
Issuer, at any time during the period ending on the 123rd day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).

 

(3)           Such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Issuer or any Guarantor is a party or by which it is
bound.

 

(4)           In
the case of an election under Section 1202, the Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (x) the Issuer has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (y) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred.

 

99

 

(5)           In
the case of an election under Section 1203, the Issuer shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders
of the Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such covenant defeasance had not
occurred.

 

(6)           The
Issuer shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that all conditions precedent provided for
relating to either the defeasance under Section 1202 or the covenant
defeasance under Section 1203 (as the case may be) have been complied
with.

 

(7)           The
Issuer shall have delivered to the Trustee an Opinion of Counsel acceptable to
the Trustee to the effect that such defeasance will not result in the trust
relating thereto or the Trustee being subject to regulation under the
Investment Company Act of 1940.

 

SECTION 1205.     Deposited
Money and Government Securities to Be Held in Trust; Other Miscellaneous
Provisions.

 

Subject to the
provisions of the last paragraph of Section 1003, all money and Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 1205,
the “Trustee”) pursuant to Section 1204 in respect of the Outstanding
Securities shall be held in trust and applied by the Trustee, in accordance
with the provisions of such Securities and this Indenture, to the payment,
either directly or through any Paying Agent (including the Issuer acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law or to the extent the Issuer or
Parent acts as the Issuer’s Paying Agent.

 

The Issuer
shall pay and indemnify the Trustee and (if applicable) its officers,
directors, employees and agents against any tax, fee or other charge imposed on
or assessed against the Government Securities deposited pursuant to Section 1204
or the principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
Outstanding Securities.

 

Anything in
this Article Twelve to the contrary notwithstanding, the Trustee shall
deliver or pay to the Issuer from time to time upon Issuer Request any money or
Government Securities held by it as provided in Section 1204 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance, as applicable, in
accordance with this Article Twelve.

 

100

 

SECTION 1206.     Reinstatement.

 

If the Trustee
or any Paying Agent is unable to apply any money in accordance with Section 401
or 1205 by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then the Issuer’s and each Guarantor’s obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 401, 1202 or 1203, as the case may be, until such
time as the Trustee or Paying Agent is permitted to apply all such money in
accordance therewith; provided, however, that if the Issuer or
any Guarantor makes any payment of principal of, premium, if any, or interest
on any Security following the reinstatement of its obligations, the Issuer or
such Guarantor shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money held by the Trustee or Paying
Agent.

 

ARTICLE THIRTEEN

Guarantees and Offering Proceeds Note Guarantees

 

SECTION 1301.     Guarantees.
Each Guarantor hereby unconditionally guarantees, jointly and severally, to
each Holder and to the Trustee and its successors and assigns (a) the full
and punctual payment of principal of (and premium, if any) and interest on the
Securities when due, whether at Stated Maturity, by acceleration, by redemption
or otherwise, and all other monetary obligations of the Issuer under this
Indenture and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Issuer under
this Indenture and the Securities (all the foregoing being hereinafter
collectively called the “Obligations”). Each Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without
notice or further assent from such Guarantor, and that such Guarantor will
remain bound under this Article Thirteen notwithstanding any extension or
renewal of any Obligation.

 

Each Guarantor
waives presentation to, demand of, payment from and protest to the Issuer of
any of the Obligations and also waives notice of protest for nonpayment. Each
Guarantor waives notice of any default under the Securities or the Obligations.
The obligations of each Guarantor hereunder shall not be affected by (a) the
failure of any Holder or the Trustee to assert any claim or demand or to
enforce any right or remedy against the Issuer or any other Person under this
Indenture, the Securities or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment
or modification of any of the terms or provisions of this Indenture, the
Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Obligations or any of them; (e) the
failure of any Holder or the Trustee to exercise any right or remedy against
any other guarantor of the Obligations; or (f) any change in the ownership
of such Guarantor.

 

Each Guarantor
further agrees that its Note Guarantee herein constitutes a guarantee of
payment, performance and compliance when due (and not a guarantee of
collection) and waives

 

101

 

any right to require that any resort be had by any Holder or the
Trustee to any security held for payment of the Obligations.

 

Except as
expressly set forth in Sections 805, 806, 1017, 1019, 1202, 1203, 1303 and
1308, the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of
the Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any
thereof, by any default, failure or delay, willful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to
any extent vary the risk of such Guarantor or would otherwise operate as a
discharge of such Guarantor as a matter of law or equity.

 

Each Guarantor
further agrees that its Note Guarantee herein shall continue to be effective or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of principal of (or premium, if any) or interest on any Obligation is rescinded
or must otherwise be restored by any Holder or the Trustee upon the bankruptcy
or reorganization of the Issuer or otherwise.

 

In furtherance
of the foregoing and not in limitation of any other right which any Holder or
the Trustee has at law or in equity against any Guarantor by virtue hereof,
upon the failure of the Issuer to pay the principal of (or premium, if any) or
interest on any Obligation when and as the same shall become due, whether at
Stated Maturity, by acceleration, by redemption or otherwise, or to perform or
comply with any other Obligation, each Guarantor hereby promises to and will,
upon receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the
unpaid amount of such Obligations, (ii) accrued and unpaid interest on
such Obligations (but only to the extent not prohibited by law) and (iii) all
other monetary Obligations of the Issuer to the Holders and the Trustee.

 

Each Guarantor
agrees that it shall not be entitled to any right of subrogation in respect of
any Obligations guaranteed hereby until payment in full in cash of all
Obligations. Each Guarantor further agrees that, as between it, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in Article Five
for the purposes of such Guarantor’s Note Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect
of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Obligations as provided in Article Five,
such Obligations (whether or not due and payable) shall forthwith become due
and payable by such Guarantor for the purposes of this Section.

 

102

 

Each Guarantor
also agrees to pay any and all costs and expenses (including reasonable
attorneys’ fees) incurred by the Trustee or any Holder in enforcing any rights
under this Section 1301.

 

103

 

SECTION 1302.     Contribution.
Each of the Issuer and any Guarantor (a “Contributing Party”) agrees that, in
the event a payment shall be made by any other Guarantor under any Note
Guarantee (the “Claiming Guarantor”), the Contributing Party shall indemnify
the Claiming Guarantor in an amount equal to the amount of such payment
multiplied by a fraction, the numerator of which shall be the net worth of the
Contributing Party on the date hereof and the denominator of which shall be the
aggregate net worth of the Issuer and all the Guarantors on the date hereof
(or, in the case of any Guarantor becoming a party hereto pursuant to Section 901,
the date of the supplemental indenture executed and delivered by such
Guarantor).

 

SECTION 1303.     Release
of Guarantees. The Note Guarantee of a Guarantor (other than Parent) will
be released (a) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of merger
or consolidation) to a Person that is not (either before or after giving effect
to such transaction) Parent or a Restricted Subsidiary, if the sale or other
disposition of all or substantially all of the assets of that Guarantor
complies with Section 1016 (or Parent certifies in an Officers’
Certificate to the Trustee that it will comply with the requirements of Section 1016
relating to application of the proceeds of such sale or disposition), (b) in
connection with any sale of all of the Capital Stock of a Guarantor (other than
Parent) to a Person that is not (either before or after giving effect to such
transaction) Parent or a Restricted Subsidiary, if the sale of all such Capital
Stock of that Guarantor complies with Section 1016 (or Parent certifies in
an Officers’ Certificate to the Trustee that it will comply with the
requirements of Section 1016 relating to application of the proceeds of
such sale or disposition), (c) if Parent properly designates any
Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary
pursuant to Section 1019 or (d) if the Issuer exercises the legal
defeasance option or covenant defeasance option in accordance with Article Twelve.

 

SECTION 1304.     Successors
and Assigns. This Article Thirteen shall be binding upon each Guarantor
and its successors and assigns and shall inure to the benefit of the successors
and assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Securities shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.

 

SECTION 1305.     No
Waiver. Neither a failure nor a delay on the part of either the
Trustee or the Holders in exercising any right, power or privilege under this Article Thirteen
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
The rights, remedies and benefits of the Trustee and the Holders herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article Thirteen
at law, in equity, by statute or otherwise.

 

SECTION 1306.     Modification.
No modification, amendment or waiver of any provision of this Article Thirteen,
nor the consent to any departure by any Guarantor therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in the specific instance
and for the purpose for

 

104

 

which given.
No notice to or demand on any Guarantor in any case shall entitle such
Guarantor to any other or further notice or demand in the same, similar or
other circumstances.

 

SECTION 1307.     Execution
of Supplemental Indenture for Future Guarantors. Each Subsidiary which is
required to become a Guarantor pursuant to any Section of the Indenture
shall promptly execute and deliver to the Trustee a supplemental indenture in
the form of Exhibit C hereto pursuant to which such Subsidiary shall
become a Guarantor under this Article Thirteen and shall guarantee the
Obligations. Concurrently with the execution and delivery of such supplemental
indenture, the Issuer shall deliver to the Trustee an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized, executed and
delivered by such Subsidiary and that, subject to the application of
bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other
similar laws relating to creditors’ rights generally and to the principles of
equity, whether considered in a proceeding at law or in equity, the Note
Guarantee of such Guarantor is a legal, valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms.
Each Person then a Guarantor authorizes the Issuer to enter into such a
supplemental indenture on its behalf.

 

SECTION 1308.     Subordination
of Note Guarantees. The Issuer, the Guarantors and the Trustee may, without
notice to or consent of any holder of Securities, enter into one or more
indentures supplemental to the Indenture substantially in the form of Exhibit G
hereto, or amend any indenture supplemental to the Indenture entered into by
the Issuer, such Guarantor and the Trustee for the purpose of adding an
additional Note Guarantee pursuant to Section 1010, Section 1011 or Section 1020
to provide that the payment obligation on a Note Guarantee of a Guarantor
(other than Parent or any Sister Restricted Subsidiary) be expressly
subordinated in any bankruptcy, liquidation or winding up proceeding of such
Guarantor to the prior payment in full in cash of all obligations of such
Guarantor under any Guarantee of, or obligation as borrower under, any
Qualified Credit Facility Incurred by Parent or a Restricted Subsidiary in
accordance with clause (ii) of paragraph (b) of Section 1010 or
clause (ii) of paragraph (b) of Section 1011; provided, however,
that (x) the terms of the subordination of a Note Guarantee to any such
Guarantee of, or obligation as borrower under, a Qualified Credit Facility may not
eliminate or otherwise adversely affect the subordination of the payment
obligation on any other Debt of such Guarantor to the payment obligation of the
Note Guarantee of such Guarantor and (y) any Guarantee (other than a Guarantee
of such Qualified Credit Facility) by such Guarantor of the 103⁄4% Notes or any
other Debt of Parent or any Sister Restricted Subsidiary also shall be
expressly subordinated in any bankruptcy, liquidation or winding up proceeding
of such Guarantor to the prior payment in full in cash of all obligations of
such Guarantor under its Guarantee of such Qualified Credit Facility to at
least the same extent and on the same terms and conditions as the subordination
provisions applicable to such Guarantor’s Note Guarantee.

 

SECTION 1309.     Execution
of Offering Proceeds Note Guarantees for Future Offering Proceeds Note
Guarantors; Subordination of Offering Proceeds Note Guarantee. (a) 
Each Subsidiary which is required to become an Offering Proceeds Note Guarantor
pursuant to any Section of the Indenture shall promptly execute, and
deliver a copy to the Trustee of, an Offering Proceeds Note Guarantee
substantially in the form set forth in Exhibit E hereto pursuant

 

105

 

to which such
Subsidiary shall become an Offering Proceeds Note Guarantor. Concurrently with
the execution and delivery of such Offering Proceeds Note Guarantee, the Issuer
shall deliver to the Trustee an Opinion of Counsel to the effect that such
Offering Proceeds Note Guarantee has been duly authorized, executed and
delivered by such Subsidiary and that, subject to the application of
bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other
similar laws relating to creditors’ rights generally and to the principles of
equity, whether considered in a proceeding at law or in equity, the Offering
Proceeds Note Guarantee of such Offering Proceeds Note Guarantor is a legal,
valid and binding obligation of such Offering Proceeds Note Guarantor,
enforceable against such Offering Proceeds Note Guarantor in accordance with its
terms. Any Offering Proceeds Note Guarantee of an Offering Proceeds Note
Guarantor will be released on the terms, and as set forth in, the form of
Offering Proceeds Note Guarantee attached as Exhibit E hereto.

 

(b)  Each
Offering Proceeds Note Guarantor required expressly to subordinate the payment
obligation of certain intercompany Debt to obligations with respect to the
Offering Proceeds Note Guarantee of such Offering Proceeds Note Guarantor
pursuant to, and on terms set forth in, clause (vi) of paragraph (b) of
Section 1010 or clause (iv) of paragraph (b) of Section 1011,
shall promptly execute, and deliver a copy to the Trustee of, a supplement to
the Parent Intercompany Note Subordination Agreement in substantially the form attached
as Exhibit D hereto.

 

106

 

IN WITNESS
WHEREOF, the parties hereto have caused this Indenture to be duly executed, all
as of the day and year first above written.

 

	
   

  	
  LEVEL 3 FINANCING, INC., as Issuer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Neil J. Eckstein

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Neil
  J. Eckstein

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Senior
  Vice President

  	
   

  
						

 

 

	
   

  	
  LEVEL 3 COMMUNICATIONS, INC., as Parent

  and a Guarantor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Thomas C. Stortz

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Thomas
  C. Stortz

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Executive
  Vice President

  	
   

  
						

 

107

 

	
   

  	
  THE BANK OF NEW YORK, as Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Stacey
  B. Poindexter

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Stacey
  B. Poindexter

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Assistant
  Vice President

  	
   

  
						

 

108

 

APPENDIX A

 

FOR OFFERINGS
TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A AND TO CERTAIN
PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.

 

PROVISIONS RELATING TO INITIAL SECURITIES

AND EXCHANGE SECURITIES

 

1. Definitions

 

1.1  Definitions

 

For the
purposes of this Appendix A the following terms shall have the meanings
indicated below:

 

“Additional
Securities” means, subject to the Issuer’s compliance with the covenants in
this Indenture, including Section 1010 and Section 1011, Floating
Rate Senior Notes due 2011 issued from time to time after the Issue Date under
the terms of the Indenture (other than pursuant to Section 306, 307, 1016
or 1108 of the Indenture and other than Exchange Securities or Private Exchange
Securities issued pursuant to an exchange offer for other Securities
outstanding under the Indenture).

 

“Definitive
Security” means a certificated Initial Security or Exchange Security or Private
Exchange Security bearing, if required, the restricted securities legend set
forth in Section 2.3(c).

 

“Depository”
means The Depository Trust Company, its nominees and their respective
successors.

 

“Distribution
Compliance Period”, with respect to any Securities, means the period of 40
consecutive days beginning on and including the later of (i) the day on
which such Securities are first offered to persons other than distributors (as
defined in Regulation S under the Securities Act) in reliance on Regulation S
and (ii) the Issue Date with respect to such Securities.

 

“Exchange
Securities” has the meaning stated in the first recital of the Indenture.

 

“Euroclear”
means the Euroclear Clearance System or any successor securities clearing
agency.

 

“Initial
Purchasers” means Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. Incorporated
and J.P. Morgan Securities Inc.

 

“Initial
Securities” has the meaning stated in the first recital of the Indenture.

 

“Original
Securities” means Initial Securities in the aggregate principal amount of
$150,000,000 issued on March 14, 2006.

 

 

“Private
Exchange” means the offer by the Issuer, pursuant to Section 2(f) of
the Registration Agreement dated as of March 14, 2006, or pursuant to any
similar provision of any other Registration Agreement, to issue and deliver to
certain purchasers, in exchange for the Initial Securities held by such
purchasers as part of their initial distribution, a like aggregate
principal amount of Private Exchange Securities.

 

“Private
Exchange Securities” means the Exchange Securities to be issued pursuant to
this Indenture in connection with a Private Exchange Offer pursuant to the
relevant Registration Agreement.

 

“Purchase
Agreement” means the Purchase Agreement dated as of March 9, 2006, among
Parent, the Issuer and the Initial Purchasers relating to the Original
Securities, or any similar agreement relating to any future sale of Initial
Securities by the Issuer.

 

“QIB” means a “qualified
institutional buyer” as defined in Rule 144A.

 

“Registered
Exchange Offer” means the offer by the Issuer, pursuant to the relevant
Registration Agreement, to certain Holders of Initial Securities, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like
aggregate principal amount of Exchange Securities registered under the Securities
Act.

 

“Registration
Agreement” means the Registration Agreement dated as of March 14, 2006,
among Parent, the Issuer and the Initial Purchasers relating to the Original
Securities, or any similar agreement relating to any registration of Additional
Securities.

 

“Rule 144A
Securities” means all Initial Securities offered and sold to QIBs in reliance
on Rule 144A.

 

“Securities”
has the meaning stated in the first recital of the Indenture and more
particularly means any Securities authenticated and delivered under this
Indenture.

 

“Securities
Act” means the Securities Act of 1933, as amended (or any successor act), and
the rules and regulations thereunder (or respective successors thereto).

 

“Securities
Custodian” means the custodian with respect to a Global Security (as appointed
by the Depository) or any successor person thereto, who shall initially be the
Trustee.

 

“Shelf
Registration Statement” means a registration statement issued by Parent and the
Issuer in connection with the offer and sale of Initial Securities or Private
Exchange Securities pursuant to the relevant Registration Agreement.

 

“Transfer
Restricted Securities” means Definitive Securities and any other Securities
that bear or are required to bear the legend set forth in Section 2.3(c) hereto.

 

A-2

 

1.2  Other Definitions

 

	
  Term

  	
   

  	
  Defined
  in Section:

  
	
  “Agent Members”

  	
   

  	
  2.1(b)

  
	
  “Global Security”

  	
   

  	
  2.1(a)

  
	
  “Regulation S”

  	
   

  	
  2.1

  
	
  “Rule 144A”

  	
   

  	
  2.1

  
	
  “Rule 144A Global
  Security”

  	
   

  	
  2.1(a)

  

 

2. The Securities

 

2.1  Form and Dating

 

The Initial
Securities will be offered and sold by the Issuer, from time to time, pursuant
to one or more Purchase Agreements. The Initial Securities will be resold
initially only to QIBs in reliance on Rule 144A under the Securities Act (“Rule 144A”)
and in reliance on Regulation S under the Securities Act (“Regulation S”).
Initial Securities may thereafter be transferred to, among others, QIBs
and purchasers in reliance on Regulation S.

 

(a)  Global
Securities. Initial Securities initially resold pursuant to Rule 144A
shall be issued initially in the form of one or more permanent global
Securities in definitive, fully registered form (collectively, the “Rule 144A
Global Security”) and Initial Securities initially resold pursuant to
Regulation S shall be issued initially in the form of one or more global
securities (collectively, the “Regulation S Global Security”), in each case
without interest coupons and with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto, which shall be deposited
on behalf of the purchasers of the Initial Securities represented thereby with
the Securities Custodian, and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Issuer and authenticated by the
Trustee as provided in this Indenture. The Rule 144A Global Security and
Regulation S Global Security are collectively referred to herein as “Global
Securities.”  The aggregate principal
amount of the Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depository
or its nominee as hereinafter provided.

 

(b)  Book-Entry
Provisions. This Section 2.1(b) shall apply only to a Global
Security deposited with or on behalf of the Depository.

 

The Issuer
shall execute and the Trustee shall, in accordance with this Section 2.1(b) and
pursuant to an order of the Issuer, authenticate and deliver initially one or
more Global Securities that (a) shall be registered in the name of the
Depository for such Global Security or Global Securities or the nominee of such
Depository and (b) shall be delivered by the Trustee to such Depository or
pursuant to such Depository’s instructions or held by the Trustee as Securities
Custodian.

 

Members of, or
participants in, the Depository (“Agent Members”) shall have no rights under
this Indenture with respect to any Global Security held on their behalf by the
Depository or by the Trustee as Securities Custodian or under such Global Security,
and the

 

A-3

 

Depository may be treated by the Issuer, the Trustee and any agent
of the Issuer or the Trustee as the absolute owner of such Global Security for
all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices of such Depository governing the
exercise of the rights of a holder of a beneficial interest in any Global
Security.

 

(c)  Definitive
Securities. Except as provided in Section 2.3 or 2.4, owners of beneficial
interests in Global Securities will not be entitled to receive physical
delivery of Definitive Securities.

 

2.2  Authentication. The Trustee shall
authenticate and deliver:  (1) Original
Securities, (2) any Additional Securities, and (3) the Exchange
Securities or Private Exchange Securities for issue only in a Registered
Exchange Offer or a Private Exchange, respectively, pursuant to the relevant
Registration Agreement, for a like principal amount of Initial Securities or
Private Exchange Securities, as applicable, upon a written order of the Issuer
signed by two Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of the Issuer. Such order shall specify the amount of the
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated and whether the Securities are to be Initial
Securities or Exchange Securities.

 

2.3  Transfer and Exchange. (a)  Transfer
and Exchange of Definitive Securities. When Definitive Securities are
presented to the Security Registrar or a co-registrar with a request:

 

(x)  to register the transfer of such Definitive
Securities; or

 

(y)  to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other authorized denominations,

 

the Security
Registrar or co-registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or exchange:

 

(i) 
shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Issuer and the Security Registrar or co-registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing; and

 

(ii)  if
such Definitive Securities bear a restricted securities legend, they are being
transferred or exchanged pursuant to an effective registration statement under
the Securities Act or pursuant to clause (A), (B) or (C) below, and
are accompanied by the following additional information and documents, as
applicable:

 

A-4

 

(A)  if
such Definitive Securities are being delivered to the Security Registrar by a
Holder for registration in the name of such Holder, without transfer, a
certification from such Holder to that effect; or

 

(B)  if
such Definitive Securities are being transferred to the Issuer, a certification
to that effect; or

 

(C)  if
such Definitive Securities are being transferred pursuant to an exemption from
registration in accordance with Rule 144 under the Securities Act, (i) a
certification to that effect and (ii) if the Issuer so requests, an opinion of
counsel or other evidence reasonably satisfactory to it as to the compliance
with the restrictions set forth in the legend set forth in Section 2.3(d)(i).

 

(b)  Transfer
and Exchange of Global Securities. (i)  The transfer and exchange
of Global Securities or beneficial interests therein shall be effected through
the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor. A transferor of a beneficial interest in a Global Security
shall deliver a written order given in accordance with the Depository’s
procedures containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global Security and
such account shall be credited in accordance with such instructions with a beneficial
interest in the Global Security and the account of the Person making the
transfer shall be debited by an amount equal to the beneficial interest in the
Global Security being transferred.

 

(ii) 
If the proposed transfer is a transfer of a beneficial interest in one
Global Security to a beneficial interest in another Global Security, the
Security Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such interest
is being transferred in an amount equal to the principal amount of the interest
to be so transferred, and the Security Registrar shall reflect on its books and
records the date and a corresponding decrease in the principal amount of the
Global Security from which such interest is being transferred.

 

(iii) 
Notwithstanding any other provisions of this Appendix A (other than the
provisions set forth in Section 2.4), a Global Security may not be transferred
as a whole except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository
or a nominee of such successor Depository.

 

A-5

 

(iv) 
In the event that a Global Security is exchanged for Definitive
Securities pursuant to Section 2.4 prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only in accordance
with such procedures as are substantially consistent with the provisions of
this Section 2.3 (including the certification requirements set forth on the
reverse of the Initial Securities intended to ensure that such transfers comply
with Rule 144A, Regulation S or such other applicable exemption from
registration under the Securities Act, as the case may be) and such other
procedures as may from time to time be adopted by the Issuer.

 

(c)  Legend.

 

(i) 
Except as permitted by the following paragraphs (ii), (iii) and (iv),
each certificate evidencing the Global Securities and the Definitive Securities
(and all Securities issued in exchange therefor or in substitution thereof)
shall bear a legend in substantially the following form:

 

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS NOTE,
AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE
HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE ISSUER AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE
OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE ISSUER, (2) SO LONG AS
THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
(“RULE 144A”), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
NOTE), (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (5) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES 

 

A-6

 

ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS NOTE,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) A NON-U.S. PERSON
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.”

 

Each
Definitive Security will also bear the following additional legend:

 

“IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.”

 

(ii) 
Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by a Global Security) pursuant to
Rule 144 under the Securities Act:

 

(A)  in the case of any Transfer
Restricted Security that is a Definitive Security, the Security Registrar shall
permit the Holder thereof to exchange such Transfer Restricted Security for a
Security that does not bear the legends set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and

 

(B)  in the case of any Transfer
Restricted Security that is represented by a Global Security, the Security
Registrar shall permit the Holder thereof to exchange such Transfer Restricted
Security for a Security that does not bear the legends set forth above and
rescind any restriction on the transfer of such Transfer Restricted Security,

 

in either case, if the Holder certifies in writing to the Security
Registrar that its request for such exchange was made in reliance on Rule 144
(such certification to be in the form set forth on the reverse of the Initial
Security).

 

(iii) 
After a transfer of any Initial Securities or Private Exchange
Securities, as the case may be, during the period of the effectiveness of a
Shelf Registration Statement with respect to such Initial Securities or Private
Exchange Securities, all requirements pertaining to restricted legends on such
Initial Security or such Private Exchange Security will cease to apply and an Initial
Security or

 

A-7

 

Private Exchange Security, as the case may be, in global form without
restricted legends will be available to the transferee of the beneficial
interests of such Initial Securities or Private Exchange Securities. Upon the
occurrence of any of the circumstances described in this paragraph, the Issuer
will deliver an Officers’ Certificate to the Trustee instructing the Trustee to
issue Securities without restricted legends.

 

(iv) 
Upon the consummation of a Registered Exchange Offer with respect to the
Initial Securities pursuant to which certain Holders of such Initial Securities
are offered Exchange Securities in exchange for their Initial Securities,
Exchange Securities in global form without the restricted legends will be
available to Holders or beneficial owners that exchange such Initial Securities
(or beneficial interests therein) in such Registered Exchange Offer. Upon the
occurrence of any of the circumstances described in this paragraph, the Issuer
will deliver an Officers’ Certificate to the Trustee instructing the Trustee to
issue Securities without restricted legends.

 

(v) 
Each certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or in substitution
thereof) shall bear a legend in substantially the following form:

 

“THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT IN AN AMOUNT
EQUAL TO THE DIFFERENCE BETWEEN ITS STATED REDEMPTION PRICE AT MATURITY (THE
SUM OF ALL PAYMENTS TO BE MADE ON THE NOTE OTHER THAN “QUALIFIED STATED
INTEREST”) AND ITS ISSUE PRICE. COMMENCING NO LATER THAN 10 DAYS AFTER THE
ISSUE DATE, THE ISSUER SHALL PROMPTLY MAKE AVAILABLE TO HOLDERS, UPON WRITTEN
REQUEST, INFORMATION ABOUT THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT, THE ISSUE DATE AND THE YIELD TO MATURITY OF THE NOTE. HOLDERS MAY
MAKE SUCH WRITTEN REQUESTS TO THE ISSUER AT LEVEL 3 FINANCING, INC., 1025
ELDORADO BOULEVARD, BROOMFIELD, COLORADO 80021, ATTENTION:  GENERAL COUNSEL.”

 

(d)  Cancellation or Adjustment of Global
Security. At such time as all beneficial interests in a Global Security
have either been exchanged for Definitive Securities, redeemed, repurchased or
canceled, such Global Security shall be returned by the Depository to the
Trustee for cancellation or retained and canceled by the Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, redeemed, repurchased or canceled, the principal
amount of Securities represented by such Global Security shall be reduced and
an adjustment shall be made on the books and records of the Trustee (if it is
then the Securities Custodian for such Global Security) with respect to such
Global Security, by the Trustee or the Securities Custodian, to reflect such
reduction.

 

A-8

 

(e)  Obligations with Respect to Transfers and
Exchanges of Securities.

 

(i)  To
permit registrations of transfers and exchanges, the Issuer shall execute and
the Trustee shall authenticate Definitive Securities and Global Securities at
the Security Registrar’s or co-registrar’s request.

 

(ii) No service charge shall be made for any
registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchange or transfer
pursuant to Sections 907, 1013, 1017 and 1108 of this Indenture).

 

(iii) 
The Security Registrar or co-registrar shall not be required to register
the transfer of or exchange of any Security for a period beginning 15 days
before the mailing of a notice of redemption or an offer to repurchase
Securities or 15 days before an interest payment date.

 

(iv) 
Prior to the due presentation for registration of transfer of any
Security, the Issuer, the Trustee, the Paying Agent, the Security Registrar or
any co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and none of the Issuer,
the Trustee, the Paying Agent, the Security Registrar or any co-registrar shall
be affected by notice to the contrary.

 

(v) 
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.

 

(f)  No Obligation of the Trustee.

 

(i) 
The Trustee shall have no responsibility or obligation to any beneficial
owner of a Global Security, a member of, or a participant in the Depository or
any other Person with respect to the accuracy of the records of the Depository
or its nominee or of any participant or member thereof, with respect to any
ownership interest in the Securities or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption or repurchase) or
the payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments to be
made to Holders under the Securities shall be given or made only to the
registered Holders (which shall be the Depository or its nominee in the case of
a Global Security). The rights of beneficial owners in any Global Security
shall be exercised only through the Depository subject to the applicable rules
and procedures of the Depository. The

 

A-9

 

Trustee may conclusively rely and shall be fully protected in relying
upon information furnished by the Depository with respect to its members,
participants and any beneficial owners.

 

(ii) 
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Depository
participants, members or beneficial owners in any Global Security) other than
to require delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required by, the
terms of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.

 

2.4  Definitive Securities

 

(a)           A
Global Security deposited with the Depository or with the Trustee as Securities
Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners
thereof in the form of Definitive Securities in an aggregate principal amount
equal to the principal amount of such Global Security, in exchange for such
Global Security, only if such transfer complies with Section 2.3 and (i) the
Depository notifies the Issuer that it is unwilling or unable to continue as a
Depository for such Global Security or if at any time the Depository ceases to
be a “clearing agency” registered under the Exchange Act, and a successor
Depository is not appointed by the Issuer within 90 days of such notice, or
(ii) a Default or an Event of Default has occurred and is continuing or (iii)
the Issuer, in its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of Definitive Securities under this Indenture.

 

(b)  Any Global Security that is transferable to
the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered
by the Depository to the Trustee, to be so transferred, in whole or from time
to time in part, without charge, and the Trustee shall authenticate and
deliver, upon such transfer of each portion of such Global Security, an equal
aggregate principal amount of Definitive Securities of authorized denominations.
Definitive Securities issued in exchange for any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depository shall direct. Any Definitive
Security delivered in exchange for an interest in the Global Security shall,
except as otherwise provided by Section 2.3(c), bear the restricted securities
legend set forth in Exhibit 1 hereto.

 

(c)  The registered Holder of a Global Security may
grant proxies and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take any action that
a Holder is entitled to take under this Indenture or the Securities.

 

A-10

 

(d)  In the event of the occurrence of any of the
events specified in Section 2.4(a)(i), (ii) or (iii), the Issuer will promptly
make available to the Trustee a reasonable supply of Definitive Securities in
definitive, fully registered form without interest coupons.

 

A-11

 

EXHIBIT 1

to APPENDIX A

 

[FORM OF FACE OF INITIAL SECURITY]

 

[Global Securities Legend]

 

UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO
ON THE REVERSE HEREOF.

 

[Restricted Securities Legend]

 

THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF
THE ISSUER THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
(X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR
SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE ISSUER AT
ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE, OTHER THAN (1) TO THE ISSUER, (2) SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (4) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED

 

 

BY RULE 144 (IF APPLICABLE)
UNDER THE SECURITIES ACT, OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF,
BY PURCHASING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN
ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT.

 

[Definitive Securities Legend]

 

[IN CONNECTION
WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.]

 

[Original Issue Discount Legend]

 

THIS NOTE HAS
BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT IN AN AMOUNT EQUAL TO THE DIFFERENCE
BETWEEN ITS STATED REDEMPTION PRICE AT MATURITY (THE SUM OF ALL PAYMENTS TO BE
MADE ON THE NOTE OTHER THAN “QUALIFIED STATED INTEREST”) AND ITS ISSUE PRICE. COMMENCING
NO LATER THAN 10 DAYS AFTER THE ISSUE DATE, THE ISSUER SHALL PROMPTLY MAKE AVAILABLE
TO HOLDERS, UPON WRITTEN REQUEST, INFORMATION ABOUT THE ISSUE PRICE, THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE AND THE YIELD TO MATURITY OF THE
NOTE. HOLDERS MAY MAKE SUCH WRITTEN REQUESTS TO THE ISSUER AT LEVEL 3
FINANCING, INC., 1025 ELDORADO BOULEVARD, BROOMFIELD, COLORADO 80021,
ATTENTION:  GENERAL COUNSEL.

 

2

 

[FORM OF FACE OF INITIAL SECURITY]

 

	
  No.

  	
  [up to]**
  $                 

  

 

Floating Rate Senior Note due 2011

 

	
  CUSIP No.          

  

 

LEVEL 3 FINANCING, INC., a Delaware
corporation, promises to pay to [Cede & Co.]**, or registered assigns, the
principal sum [of                
Dollars]* [as set forth on the             
Schedule of Increases or Decreases annexed hereto] on March 15, 2011.

 

Interest Payment Dates:  March 15 and September 15.

 

Record
Dates:  March 1 and September 1.

 

* 
Insert for Definitive Securities.

 

** Insert for Global Securities.  If the Security is to be issued in global
form, add the Global Securities Legend from Exhibit 1 to Appendix A
and the attachment from such Exhibit 1 captioned “TO BE ATTACHED TO GLOBAL
SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY”.

 

 

Additional
provisions of this Security are set forth on the other side of this Security.

 

IN WITNESS
WHEREOF, the parties have caused this instrument to be duly executed.

 

	
   

  	
  LEVEL 3
  FINANCING, INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  

 

 

TRUSTEE’S CERTIFICATE OF

AUTHENTICATION

 

Dated:

 

THE BANK OF NEW
YORK,

 

as Trustee, certifies

that this is one of

the Securities referred

to in the Indenture.

 

 

	
  by:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  

 

2

 

[FORM OF REVERSE SIDE OF INITIAL SECURITY]

 

Floating Rate Senior Note due 2011

 

1. Interest

 

(a) LEVEL 3
FINANCING, INC., a Delaware corporation (such corporation, and its successors
and assigns under the Indenture hereinafter referred to, being herein called
the “Issuer”), promises to pay interest on the principal amount of this
Security at the rate per annum as determined below. The Security will bear
interest at a rate per annum, reset semiannually, equal to LIBOR plus 6.375%,
as determined by the Calculation Agent. Interest on the Security will be
payable semiannually in arrears on March 15 and September 15 of each year,
commencing September 15, 2006. Interest on the Security will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from and including March 14, 2006. The amount of interest for each day
that the Security is outstanding (the “Daily Interest Amount”) will be
calculated by dividing the interest rate in effect for such day by 360 and
multiplying the result by the principal amount of the Security. The amount of
interest to be paid on the Security for each Interest Period will be calculated
by adding the Daily Interest Amounts for each day in the Interest Period.

 

All
percentages resulting from any of the above calculations will be rounded, if
necessary, to the nearest one hundred thousandth of a percentage point, with
five one-millionths of a percentage point being rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).

 

The interest
rate on the Security will in no event be higher than the maximum rate permitted
by New York law as the same may be modified by United States law of general
application.

 

The
Calculation Agent will, upon the request of the Holder of any Security, provide
the interest rate then in effect with respect to the Security. All calculations
made by the Calculation Agent in the absence of manifest error will be
conclusive for all purposes and binding on the Issuer, the Guarantors and the
Holders of the Security.

 

(b) Special
Interest. The holder of this Security is entitled to the benefits of a
Registration Agreement, dated as of March 14, 2006, among Parent, the Issuer
and the Initial Purchasers named therein, or any other similar Registration Rights
Agreement for the registration of Additional Securities (each, a “Registration
Agreement”). Capitalized terms used in this paragraph (b) but not defined
herein have the meanings assigned to them in the relevant Registration
Agreement. If (i) on or prior to June 12, 2006, neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed with
the Commission, (ii) on or prior to October 10, 2006, neither the Exchange
Offer Registration Statement nor the Shelf Registration Statement has been
declared effective, (iii) on or prior to November 21, 2006, neither the
Exchange Offer has been consummated nor the Shelf Registration Statement has
been

 

 

declared effective, or (iv)
after either the Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Original Securities or New Securities offered in
exchange for such Original Securities, in accordance with and during the
periods specified in, the Registration Agreement (each such event referred to
in clauses (i) through (iv), a “Registration Default”), interest (“Special
Interest”) will accrue on the principal amount of the Original Securities and
the New Securities offered in exchange for such Original Securities (in
addition to the stated interest on the Original Securities and such New Securities)
from and including the date on which the first such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured. Special Interest will accrue at a rate of 0.50% per annum during the
90-day period immediately following the occurrence of such Registration Default
and shall increase by 0.25% per annum at the end of each subsequent 90-day
period, but in no event shall such rate exceed 1.00% per annum. Special
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Notwithstanding the foregoing, in the case of an event referred
to in clause (ii) above, a Registration Default will not be deemed to have
occurred so long as the Issuer has used and is continuing to use its reasonable
best efforts to cause the Exchange Offer Registration Statement to be declared
effective.

 

2. Method
of Payment

 

The Issuer
will pay interest on the Securities (except defaulted interest) to the Persons
who are registered holders of Securities at the close of business on the March
1 or September 1 next preceding the interest payment date even if Securities
are canceled after the record date and on or before the interest payment date. Holders
must surrender Securities to a Paying Agent to collect principal payments. The Issuer
will pay principal and interest in money of the United States of America that
at the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Securities represented by a Global Security
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Issuer will make all payments in respect of a Definitive Security
(including principal, premium and interest), by mailing a check to the
registered address of each Holder thereof; provided, however, that, at the
option of the Issuer, payments on the Securities may also be made, in the case
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such Holder requests payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).

 

3. Paying
Agent and Security Registrar; Calculation Agent

 

Initially, THE
BANK OF NEW YORK, a New York banking corporation (the “Trustee”), will act as
Paying Agent, Security Registrar and Calculation Agent. The Issuer may

 

2

 

appoint and change any Paying
Agent, Security Registrar or co-registrar or Calculation Agent without notice.

 

4. Indenture

 

The Issuer
issued the Securities under an Indenture dated as of March 14, 2006 (the “Indenture”),
among Parent, the Issuer and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on
the date of the Indenture (the “TIA”). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of those terms.

 

The Securities
are unsubordinated unsecured obligations of the Issuer. [This Security is one
of the Original Securities referred to in the Indenture issued in an aggregate
principal amount of $150,000,000. The Securities include the Original Securities,
any Additional Securities, and any Exchange Securities issued in exchange for Original
or Additional Securities]. [This Security is one of the Additional Securities
issued in addition to the Original Securities and Exchange Securities issued in
exchange therefor in an aggregate principal amount of $150,000,000 previously
issued under the Indenture. The Original Securities, the Exchange Securities
issued in exchange for the Original Securities, the Additional Securities and any
Exchange Securities issued in exchange for the Additional Securities are
treated as a single class of securities under the Indenture.]  The Indenture imposes certain limitations on
the ability of Parent, the Issuer and their respective Restricted Subsidiaries
to, among other things, make certain Investments and other Restricted Payments,
pay dividends and other distributions, incur Debt, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with Affiliates,
create or incur Liens and make Asset Sales. The Indenture also imposes
limitations on the ability of Parent, the Issuer and their respective
Restricted Subsidiaries to consolidate or merge with or into any other Person
or sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all of the Property of such entities.

 

To guarantee
the due and punctual payment of the principal and interest on the Securities
and all other amounts payable by the Issuer under the Indenture and the
Securities when and as the same shall be due and payable, whether at maturity,
by acceleration or otherwise, according to the terms of the Securities and the
Indenture, Parent has unconditionally guaranteed the Securities on an unsubordinated
basis pursuant to the terms of the Indenture.

 

5. Optional
Redemption

 

The Securities
will be subject to redemption at the option of the Issuer, in whole or in part,
at any time from time to time on or after March 15, 2008, upon not less than 30
nor more than 60 days’ prior notice, at the Redemption Prices set forth below
(expressed as a percentage of principal amount), plus accrued and unpaid
interest thereon (if any) to the

 

3

 

Redemption Date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the twelve months
beginning March 15, of the years indicated below:

 

	
  Period

  	
   

  	
  Redemption Price

  	
   

  
	
  2008

  	
   

  	
  102.0

  	
  %

  
	
  2009

  	
   

  	
  101.0

  	
  %

  
	
  2010

  	
   

  	
  100.0

  	
  %

  

 

In addition,
at any time from time to time on or prior to March 15, 2008, the Issuer may
redeem up to 35% of the original aggregate principal amount of the Securities
at a Redemption Price equal to 100.0% of the principal amount of the Securities
so redeemed, plus a premium equal to the interest rate per annum on the
Securities applicable on the date that notice of redemption is given, plus
accrued and unpaid interest thereof (if any) to the Redemption Date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date), with the net cash proceeds
contributed to the capital of the Issuer of one or more private placements to
Persons other than Affiliates of Parent or underwritten public offerings of
Common Stock of Parent resulting, in each case, in gross proceeds of at least
$100,000,000 in the aggregate; provided, however, that at least
65% of the original aggregate principal amount of the Securities would remain
outstanding immediately after giving effect to such redemption. Any such
redemption shall be made within 90 days of such private placement or public
offering upon not less than 30 nor more than 60 days’ prior notice.

 

6. Sinking
Fund

 

The Securities
are not subject to any sinking fund.

 

7. Notice
of Redemption

 

Notice of
redemption will be mailed by first-class mail at least 30 days but not more
than 60 days prior to the Redemption Date to each Holder of Securities to be
redeemed at his or her registered address. Securities in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the Redemption Price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent on or before the Redemption Date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.

 

8.             Repurchase
of Securities at the Option of Holders upon Change of Control Triggering Event

 

Upon a Change
of Control Triggering Event, any Holder of Securities will have the right,
subject to certain conditions specified in the Indenture, to cause the Issuer
to repurchase all or any part of the Securities of such Holder at a purchase
price equal to 101% of the principal

 

4

 

amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant Interest Payment Date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.

 

9. Denominations;
Transfer; Exchange

 

The Securities
are in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Security Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Security Registrar need not register the
transfer of or exchange any Securities selected for redemption (except, in the
case of a Security to be redeemed in part, the portion of the Security not to
be redeemed) or to transfer or exchange any Securities for a period of 15 days
prior to the mailing of a notice of redemption of Securities to be redeemed or
15 days before an interest payment date.

 

10. Persons
Deemed Owners

 

The registered
Holder of this Security may be treated as the owner of it for all purposes.

 

11. Unclaimed
Money

 

If money for
the payment of principal or interest remains unclaimed for two years, the
Trustee or Paying Agent shall pay the money back to the Issuer at its written
request unless an abandoned property law designates another Person. After any
such payment, Holders entitled to the money must look only to the Issuer and
not to the Trustee for payment.

 

12. Discharge
and Defeasance

 

Subject to
certain conditions, the Issuer at any time may terminate some of or all its
obligations under the Securities and the Indenture if the Issuer deposits with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Securities to redemption or maturity, as the case may be.

 

13. Amendment,
Waiver

 

Subject to
certain exceptions set forth in the Indenture, (i) the Indenture or the
Securities may be amended without prior notice to any Holder but with the
written consent of the Holders of at least a majority (or, with respect to
certain covenants, the written consent of at least two-thirds) in aggregate
principal amount of the Outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the Outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Issuer and the

 

5

 

Trustee may amend the Indenture
or the Securities (i) to evidence the succession of another Person to the
Issuer, Parent or any other Guarantor and the assumption by such successor of
the covenants of the Issuer, Parent or any other Guarantor, respectively, in
the Indenture, the Securities and the applicable Note Guarantee, (ii) to add to
the covenants of Parent, the Issuer or any of their respective Subsidiaries,
for the benefit of the Holders, or to surrender any right or power conferred
upon Parent, the Issuer or any other Guarantor by the Indenture; (iii) to add
any additional Events of Default; (iv) to provide for uncertificated Securities
in addition to or in place of certificated Securities; (v) to evidence and
provide for the acceptance of appointment under the Indenture of a successor
Trustee; (vi) to secure the Securities; (vii) to comply with the Trust
Indenture Act or the Securities Act (including Regulation S promulgated
thereunder); (viii) to add additional Note Guarantees or to release any
Guarantors from Note Guarantees as provided by the terms of the Indenture; (ix) to
subordinate Note Guarantees under the circumstances and to the extent set forth
in the Indenture; and (x) to cure any ambiguity in the Indenture, to
correct or supplement any provision in the Indenture which may be inconsistent
with any other provision therein or to add any other provision with respect to
matters or questions arising under the Indenture; provided such actions
shall not adversely affect the interests of the Holders in any material respect.

 

14. Defaults
and Remedies

 

If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Securities then outstanding, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.

 

Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the
Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any trust
or power under the Indenture. The Holders of a majority in aggregate principal
amount of the Securities then outstanding, by written notice to the Issuer and
the Trustee, may rescind any declaration of acceleration and its consequences
if the rescission would not conflict with any judgment or decree, and if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration.

 

15. Trustee
Dealings with the Issuer

 

Subject to
certain limitations imposed by the TIA, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with and collect obligations owed to it by the Issuer or
its Affiliates and may otherwise deal with the Issuer or its Affiliates with
the same rights it would have if it were not Trustee.

 

6

 

16. No
Recourse Against Others

 

A director,
officer, employee, incorporator or stockholder, as such, of the Issuer or any
Guarantor shall not have any liability for any obligations of the Issuer under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation, solely by reason of its status as
a director, officer, employee, incorporator or stockholder of such Person. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.

 

17. Authentication

 

This Security
shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the
other side of this Security.

 

18. Abbreviations

 

Customary
abbreviations may be used in the name of a Securityholder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

19. Governing
Law

 

THIS SECURITY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.

 

20. CUSIP
Numbers

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Issuer has caused CUSIP numbers to be printed on the Securities
and has directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Securities or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

 

The Issuer
will furnish to any Holder of Securities upon written request and without
charge to the Holder a copy of the Indenture which has in it the text of this
Security.

 

7

 

ASSIGNMENT FORM

 

To assign this
Security, fill in the form below:

 

I or we assign
and transfer this Security to

 

(Print or type
assignee’s name, address and zip code)

 

(Insert
assignee’s soc. sec. or tax I.D. No.)

 

and
irrevocably appoint
                          
agent to transfer this Security on the books of the Issuer. The agent may
substitute another to act for him.

 

	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
    Your
  Signature:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
						

Sign exactly
as your name appears on the other side of this Security.

 

In connection
with any transfer of any of the Securities evidenced by this certificate
occurring prior to the expiration of the period referred to in Rule 144(k)
under the Securities Act after the later of the date of original issuance of
such Securities and the last date, if any, on which such Securities were owned
by the Issuer or any Affiliate of the Issuer, the undersigned confirms that
such Securities are being transferred in accordance with its terms:

 

CHECK ONE BOX BELOW

 

(1)           o            to
the Issuer; or

 

(2)           o            pursuant
to an effective registration statement under the Securities Act of 1933; or

 

(3)           o            inside
the United States to a “qualified institutional buyer” (as defined in Rule 144A
under the Securities Act of 1933) that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that such
transfer is being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or

 

(4)           o            outside
the United States in an offshore transaction within the meaning of Regulation S
under the Securities Act in compliance with Rule 904 under the Securities Act
of 1933; or

 

 

(5)           o            pursuant
to another available exemption from registration provided by Rule 144 under the
Securities Act of 1933.

 

Unless one of
the boxes is checked, the Trustee will refuse to register any of the Securities
evidenced by this certificate in the name of any person other than the
registered holder thereof; provided, however, that if box (4) or
(5) is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other information as
the Issuer has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.

 

	
   

  	
   

  
	
   

  	
  Your signature

  

 

Signature
Guarantee:

 

	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
  Signature must be guaranteed

  	
  Signature of Signature

  
	
  by a participant in a

  	
  Guarantee

  
	
  recognized signature guaranty

  	
   

  
	
  medallion program or other

  	
   

  
	
  signature guarantor acceptable

  	
   

  
	
  to the Trustee

  	
   

  

 

 

 

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED:

 

The undersigned
represents and warrants that it is purchasing this Security for its own account
or an account with respect to which it exercises sole investment discretion and
that it and any such account is a “qualified institutional buyer” within the
meaning of Rule 144A under the Securities Act of 1933, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Issuer as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  NOTICE:  To be executed by an

  
	
   

  	
   

  	
   

  	
     executive officer

  	
   

  
						

 

2

 

[TO BE ATTACHED TO GLOBAL SECURITIES]

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

 

The initial
principal amount of this Global Security is $[        ]. The following increases or decreases
in this Global Security have been made:

 

 

	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in

  Principal Amount of

  this Global Security

  	
   

  	
  Amount of increase in

  Principal Amount of

  this Global Security

  	
   

  	
  Principal amount of

  this Global Security

  following such

  decrease or increase

  	
   

  	
  Signature of

  authorized signatory

  of Trustee or

  Securities Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

3

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you
want to elect to have this Security purchased by the Issuer pursuant to Section
1016 (Asset Sale) or 1009 (Change of Control Triggering Event) of the
Indenture, check the box:

 

o

 

If you
want to elect to have only part of this Security purchased by the Issuer
pursuant to Section 1016 or 1009 of the Indenture, state the amount:

 

$

 

	
  Date:

  	
   

  	
    Your
  Signature:

  	
   

  	
   

  

(Sign exactly as your name appears on the other side of the Security)

 

	
  Signature Guarantee:

  	
   

  	
   

  
	
   

  	
  Signature must be guaranteed by a
  participant in a recognized signature guaranty medallion program or other
  signature guarantor acceptable to the Trustee.

  

 

 

EXHIBIT A

 

[FORM OF FACE OF SECURITY]

 

	
  No.

  	
  [up to]** $            

  

 

Floating Rate Senior Note due 2011

 

CUSIP No.             

 

LEVEL 3 FINANCING, INC., a Delaware
corporation, promises to pay to [Cede & Co.]** or registered assigns,
the principal sum [of             Dollars]*
[as set forth on the Schedule of Increases or Decreases annexed hereto] on March
15, 2011.

 

Interest
Payment Dates:  March 15 and September 15.

 

Record Dates:  March 1 and September 1.

 

THIS NOTE HAS
BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT IN AN AMOUNT EQUAL TO THE DIFFERENCE
BETWEEN ITS STATED REDEMPTION PRICE AT MATURITY (THE SUM OF ALL PAYMENTS TO BE
MADE ON THE NOTE OTHER THAN “QUALIFIED STATED INTEREST”) AND ITS ISSUE PRICE. COMMENCING
NO LATER THAN 10 DAYS AFTER THE ISSUE DATE, THE ISSUER SHALL PROMPTLY MAKE
AVAILABLE TO HOLDERS, UPON WRITTEN REQUEST, INFORMATION ABOUT THE ISSUE PRICE,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE AND THE YIELD TO MATURITY
OF THE NOTE. HOLDERS MAY MAKE SUCH WRITTEN REQUESTS TO THE ISSUER AT LEVEL 3
FINANCING, INC., 1025 ELDORADO BOULEVARD, BROOMFIELD, COLORADO 80021,
ATTENTION:  GENERAL COUNSEL.

 

*  Insert for Definitive Securities.

 

**  If the Security is to be issued in global
form, add the Global Securities Legend from Exhibit 1 to Appendix A and the
attachment from such Exhibit 1 captioned “TO BE ATTACHED TO GLOBAL SECURITIES -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY”.

 

 

Additional provisions
of this Security are set forth on the other side of this Security.

 

IN WITNESS
WHEREOF, the parties have caused this instrument to be duly executed.

 

	
   

  	
  LEVEL 3
  FINANCING, INC.,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  

 

TRUSTEE’S CERTIFICATE OF

AUTHENTICATION

 

Dated:

 

THE BANK OF
NEW YORK,

as Trustee, certifies

that this is one of

the Securities referred

to in the Indenture.

 

 

	
  by:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  

 

2

 

[FORM OF REVERSE SIDE OF SECURITY]

 

Floating Rate Senior Note due 2011

 

1. Interest

 

LEVEL 3
FINANCING, INC., a Delaware corporation (such corporation, and its successors
and assigns under the Indenture hereinafter referred to, being herein called
the “Issuer”), promises to pay interest on the principal amount of this
Security at the rate per annum as determined below. The Security will bear
interest at a rate per annum, reset semiannually, equal to LIBOR plus 6.375%,
as determined by the Calculation Agent. Interest on the Security will be
payable semiannually in arrears on March 15 and September 15 of each year,
commencing September 15, 2006. Interest on the Security will accrue from March
14, 2006 or, if interest has already been paid, from the date it was most recently
paid. The amount of interest for each day that the Security is outstanding (the
“Daily Interest Amount”) will be calculated by dividing the interest rate in
effect for such day by 360 and multiplying the result by the principal amount
of the Security. The amount of interest to be paid on the Security for each
Interest Period will be calculated by adding the Daily Interest Amounts for
each day in the Interest Period.

 

All
percentages resulting from any of the above calculations will be rounded, if necessary,
to the nearest one hundred thousandth of a percentage point, with five
one-millionths of a percentage point being rounded upwards (e.g., 9.876545% (or
..09876545) being rounded to 9.87655% (or .0987655)) and all dollar amounts used
in or resulting from such calculations will be rounded to the nearest cent
(with one-half cent being rounded upwards).

 

The interest
rate on the Security will in no event be higher than the maximum rate permitted
by New York law as the same may be modified by United States law of general
application.

 

The
Calculation Agent will, upon the request of the Holder of any Security, provide
the interest rate then in effect with respect to the Security. All calculations
made by the Calculation Agent in the absence of manifest error will be
conclusive for all purposes and binding on the Issuer, the Guarantors and the
Holders of the Security.

 

2. Method
of Payment

 

The Issuer
will pay interest on the Securities (except defaulted interest) to the Persons
who are registered holders of Securities at the close of business on the March
1 or September 1 next preceding the interest payment date even if Securities
are canceled after the record date and on or before the interest payment date. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Issuer will pay principal and interest in money of the United States of America
that at the time of payment is legal tender for payment of public and private
debts. Payments in respect of the Securities represented by a Global Security
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Issuer will 

 

 

make all payments in respect of
a Definitive Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that,
at the option of the Issuer, payments on the Securities may also be made, in
the case of a Holder of at least $1,000,000 aggregate principal amount of
Securities, by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder requests payment by wire
transfer by giving written notice to the Trustee or the Paying Agent to such
effect designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).

 

3. Paying
Agent and Security Registrar; Calculation Agent

 

Initially, THE
BANK OF NEW YORK, a New York banking corporation (the “Trustee”), will act as
Paying Agent, Security Registrar and Calculation Agent. The Issuer may appoint
and change any Paying Agent, Security Registrar or co-registrar or Calculation
Agent without notice.

 

4. Indenture

 

The Issuer
issued the Securities under an Indenture dated as of March 14, 2006 (the “Indenture”),
among Parent, the Issuer and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on
the date of the Indenture (the “TIA”). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of those terms.

 

The Securities
are unsubordinated unsecured obligations of the Issuer. [This Security is one
of the Original Securities referred to in the Indenture issued in an aggregate
principal amount of $150,000,000. The Securities include the Original
Securities, any Additional Securities, and any Exchange Securities issued in
exchange for Original or Additional Securities]. [This Security is one of the
Additional Securities issued in addition to the Original Securities and
Exchange Securities issued in exchange therefor in an aggregate principal
amount of $150,000,000 previously issued under the Indenture. The Original
Securities, the Exchange Securities issued in exchange for the Original
Securities, the Additional Securities and any Exchange Securities issued in
exchange for the Additional Securities are treated as a single class of
securities under the Indenture.]  The
Indenture imposes certain limitations on the ability of Parent, the Issuer and
their respective Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Debt, enter into consensual restrictions upon the payment
of certain dividends and distributions by such Restricted Subsidiaries, issue
or sell shares of capital stock of such Restricted Subsidiaries, enter into or
permit certain transactions with Affiliates, create or incur Liens and make Asset
Sales. The Indenture also imposes limitations on the ability of Parent, the
Issuer and their respective Restricted Subsidiaries to consolidate or merge
with or into any other Person or sell, transfer, assign, lease, convey or
otherwise dispose of all or substantially all of the Property of such entities.

 

2

 

To guarantee
the due and punctual payment of the principal and interest on the Securities
and all other amounts payable by the Issuer under the Indenture and the
Securities when and as the same shall be due and payable, whether at maturity,
by acceleration or otherwise, according to the terms of the Securities and the
Indenture, Parent has unconditionally guaranteed the Securities on an
unsubordinated basis pursuant to the terms of the Indenture.

 

5. Optional
Redemption

 

The Securities
will be subject to redemption at the option of the Issuer, in whole or in part,
at any time from time to time on or after March 15, 2008, upon not less than 30
nor more than 60 days’ prior notice, at the Redemption Prices set forth below
(expressed as a percentage of principal amount), plus accrued and unpaid
interest thereon (if any) to the Redemption Date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the twelve months beginning
March 15, of the years indicated below:

 

	
  Period

  	
   

  	
  Redemption Price

  	
   

  
	
  2008

  	
   

  	
  102.0

  	
  %

  
	
  2009

  	
   

  	
  101.0

  	
  %

  
	
  2010

  	
   

  	
  100.0

  	
  %

  

 

In addition,
at any time from time to time on or prior to March 15, 2008, the Issuer may
redeem up to 35% of the original aggregate principal amount of the Securities
at a Redemption Price equal to 100.0% of the principal amount of the Securities
so redeemed, plus a premium equal to the interest rate per annum on the
Securities applicable on the date that notice of redemption is given,plus
accrued and unpaid interest thereof (if any) to the Redemption Date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date), with the net cash proceeds
contributed to the capital of the Issuer of one or more private placements to
Persons other than Affiliates of Parent or underwritten public offerings of
Common Stock of Parent resulting, in each case, in gross proceeds of at least
$100,000,000 in the aggregate; provided, however, that at least
65% of the original aggregate principal amount of the Securities would remain
outstanding immediately after giving effect to such redemption. Any such
redemption shall be made within 90 days of such private placement or public
offering upon not less than 30 nor more than 60 days’ prior notice.

 

6. Sinking
Fund

 

The Securities
are not subject to any sinking fund.

 

7. Notice
of Redemption

 

Notice of
redemption will be mailed by first-class mail at least 30 days but not more
than 60 days prior to the Redemption Date to each Holder of Securities to be
redeemed at his or her registered address. Securities in denominations larger
than $1,000 may be redeemed in

 

3

 

part but only in whole
multiples of $1,000. If money sufficient to pay the Redemption Price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the Redemption
Date and certain other conditions are satisfied, on and after such date
interest ceases to accrue on such Securities (or such portions thereof) called
for redemption.

 

8.             Repurchase
of Securities at the Option of Holders upon Change of Control Triggering Event

 

Upon a Change
of Control Triggering Event, any Holder of Securities will have the right,
subject to certain conditions specified in the Indenture, to cause the Issuer
to repurchase all or any part of the Securities of such Holder at a purchase
price equal to 101% of the principal amount of the Securities to be repurchased
plus accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date that is on or prior to the date of
purchase) as provided in, and subject to the terms of, the Indenture.

 

9. Denominations;
Transfer; Exchange

 

The Securities
are in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. Upon any transfer or exchange, the Security Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Security Registrar need not register the
transfer of or exchange any Securities selected for redemption (except, in the
case of a Security to be redeemed in part, the portion of the Security not to
be redeemed) or to transfer or exchange any Securities for a period of 15 days
prior to the mailing of a notice of redemption of Securities to be redeemed or
15 days before an interest payment date.

 

10. Persons
Deemed Owners

 

The registered
Holder of this Security may be treated as the owner of it for all purposes.

 

11. Unclaimed
Money

 

If money for
the payment of principal or interest remains unclaimed for two years, the
Trustee or Paying Agent shall pay the money back to the Issuer at its written
request unless an abandoned property law designates another Person. After any
such payment, Holders entitled to the money must look only to the Issuer and
not to the Trustee for payment.

 

12. Discharge
and Defeasance

 

Subject to
certain conditions, the Issuer at any time may terminate some of or all its
obligations under the Securities and the Indenture if the Issuer deposits with
the Trustee

 

4

 

money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.

 

13. Amendment,
Waiver

 

Subject to
certain exceptions set forth in the Indenture, (i) the Indenture or the
Securities may be amended without prior notice to any Holder but with the
written consent of the Holders of at least a majority (or, with respect to
certain covenants, the written consent of at least two-thirds) in aggregate
principal amount of the Outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the Outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Issuer and the Trustee may amend
the Indenture or the Securities (i) to evidence the succession of another
Person to the Issuer, Parent or any other Guarantor and the assumption by such
successor of the covenants of the Issuer, Parent or any other Guarantor,
respectively, in the Indenture, the Securities and the applicable Note
Guarantee, (ii) to add to the covenants of Parent, the Issuer or any of their
respective Subsidiaries, for the benefit of the Holders, or to surrender any
right or power conferred upon Parent, the Issuer or any other Guarantor by the
Indenture; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Securities in addition to or in place of certificated
Securities; (v) to evidence and provide for the acceptance of appointment under
the Indenture of a successor Trustee; (vi) to secure the Securities; (vii) to
comply with the Trust Indenture Act or the Securities Act (including Regulation
S promulgated thereunder); (viii) to add additional Note Guarantees or to
release any Guarantors from Note Guarantees as provided by the terms of the
Indenture; (ix) to subordinate Note Guarantees under the circumstances and
to the extent set forth in the Indenture; and (x) to cure any ambiguity in
the Indenture, to correct or supplement any provision in the Indenture which
may be inconsistent with any other provision therein or to add any other
provision with respect to matters or questions arising under the Indenture; provided
such actions shall not adversely affect the interests of the Holders in any
material respect.

 

14. Defaults
and Remedies

 

If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Securities then outstanding, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.

 

Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the
Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any trust
or power under the Indenture. The Holders of a majority in aggregate principal
amount of the Securities then outstanding, by written notice to the Issuer and
the

 

5

 

Trustee, may rescind any declaration
of acceleration and its consequences if the rescission would not conflict with
any judgment or decree, and if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration.

 

15. Trustee
Dealings with the Issuer

 

Subject to
certain limitations imposed by the TIA, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with and collect obligations owed to it by the Issuer or
its Affiliates and may otherwise deal with the Issuer or its Affiliates with
the same rights it would have if it were not Trustee.

 

16. No
Recourse Against Others

 

A director,
officer, employee, incorporator or stockholder, as such, of the Issuer or any
Guarantor shall not have any liability for any obligations of the Issuer under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation, solely by reason of its status as
a director, officer, employee, incorporator or stockholder of such Person. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.

 

17. Authentication

 

This Security
shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent) manually signs the certificate of authentication on the
other side of this Security.

 

18. Abbreviations

 

Customary
abbreviations may be used in the name of a Securityholder or an assignee, such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

19. Governing
Law

 

THIS SECURITY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.

 

6

 

20. CUSIP
Numbers

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Issuer has caused CUSIP numbers to be printed on the Securities
and has directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Securities or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

 

The Issuer
will furnish to any Holder of Securities upon written request and without
charge to the Holder a copy of the Indenture which has in it the text of this
Security.

 

7

 

ASSIGNMENT FORM

 

To assign this
Security, fill in the form below:

 

I or we assign
and transfer this Security to

 

(Print or type
assignee’s name, address and zip code)

 

(Insert
assignee’s soc. sec. or tax I.D. No.)

 

and
irrevocably appoint
                          
agent to transfer this Security on the books of the Issuer. The agent may
substitute another to act for him.

 

	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
    Your
  Signature:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
						

Sign exactly
as your name appears on the other side of this Security. Signature must be
guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.

 

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you
want to elect to have this Security purchased by the Issuer pursuant to Section
1016 (Asset Sale) or 1009 (Change of Control Triggering Event) of the
Indenture, check the box:

 

o

 

If you
want to elect to have only part of this Security purchased by the Issuer
pursuant to Section 1016 or 1009 of the Indenture, state the amount:

 

$

 

	
  Date:

  	
   

  	
    Your
  Signature:

  	
   

  	
   

  

(Sign exactly as your name appears on the other side of the Security)

 

	
  Signature Guarantee:

  	
   

  	
   

  
	
   

  	
  Signature must be guaranteed by a
  participant in a recognized signature guaranty medallion program or other
  signature guarantor acceptable to the Trustee.

  

 

 

EXHIBIT B

 

INCUMBENCY
CERTIFICATE

 

The
undersigned,                         ,
being the                         
of                         
(the “Company”) does hereby certify that the individuals listed below are
qualified and acting officers of the Company as set forth in the right column
opposite their respective names and the signatures appearing in the extreme
right column opposite the name of each such officer is a true specimen of the
genuine signature of such officer and such individuals have the authority to
execute documents to be delivered to, or upon the request of, The Bank of New
York, as Trustee under the Indenture dated as of                        ,
20    , among the Company, [Level 3 Communications,
Inc./Level 3 Financing, Inc.] and The Bank of New York.

 

 

	
  Name

  	
   

  	
  Title

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

IN WITNESS
WHEREOF, the undersigned has duly executed and delivered this Certificate as of
the          day of                 ,
20    .

 

	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

EXHIBIT C

 

FORM OF SUPPLEMENTAL INDENTURE

 

SUPPLEMENTAL
INDENTURE (this “Supplemental Indenture”) dated as of        
            ,
among [GUARANTOR] (the “New Guarantor”), a direct or indirect subsidiary of
Level 3 Communications, Inc. (or its successor), a Delaware corporation (“Parent”),
LEVEL 3 FINANCING, INC., a Delaware corporation (the “Issuer”) on behalf of
itself and the Guarantors (the “Existing Guarantors”), if any, under the
Indenture referred to below, and THE BANK OF NEW YORK, a New York banking
corporation, as trustee under the indenture referred to below (the “Trustee”).

 

W I T N E S S E T H :

 

WHEREAS the
Issuer and Parent have heretofore executed and delivered to the Trustee an
Indenture dated as of March 14, 2006 (the “Indenture”; capitalized terms used
but not defined herein having the meanings assigned thereto in the Indenture),
providing for the issuance of its Floating Rate Senior Notes Due 2011;

 

WHEREAS the
Indenture permits the New Guarantor to execute and deliver to the Trustee a
supplemental indenture pursuant to which the New Guarantor shall
unconditionally guarantee all the Issuer’s obligations under the Securities
pursuant to a Guarantee on the terms and conditions set forth herein;

 

WHEREAS the
Guarantee contained in this Supplemental Indenture shall constitute a “Restricted
Subsidiary Guarantee”, and the New Guarantor shall constitute a “Guarantor”,
for all purposes of the Indenture; and

 

WHEREAS
pursuant to Section 901 and Section 1307 of the Indenture, the Trustee and
the Issuer are authorized to execute and deliver this Supplemental Indenture;

 

NOW THEREFORE,
in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the New Guarantor,
the Issuer, the Existing Guarantors and the Trustee mutually covenant and agree
for the equal and ratable benefit of the holders of the Securities as follows:

 

1. Agreement
to Guaranty. The New Guarantor hereby agrees, jointly and severally with
all the existing Guarantors, to unconditionally guarantee the Issuer’s
obligations under the Securities on the terms and subject to the conditions set
forth in Article 13 of the Indenture and to be bound by all other
applicable provisions of the Indenture and the Securities.

 

2. Successors
and Assigns. This Supplemental Indenture shall be binding upon the New
Guarantor and its successors and assigns and shall enure to the benefit of the

 

 

successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges conferred upon
that party in the Indenture and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.

 

3. No
Waiver. Neither a failure nor a delay on the part of either the Trustee or
the Holders in exercising any right, power or privilege under this Supplemental
Indenture, the Indenture or the Securities shall operate as a waiver thereof,
nor shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The rights, remedies and benefits of
the Trustee and the Holders herein and therein expressly specified are
cumulative and not exclusive of any other rights, remedies or benefits which
either may have under this Supplemental Indenture, the Indenture or the
Securities at law, in equity, by statute or otherwise.

 

4. Modification.
No modification, amendment or waiver of any provision of this Supplemental
Indenture, nor the consent to any departure by the New Guarantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand
on the New Guarantor in any case shall entitle the New Guarantor to any other
or further notice or demand in the same, similar or other circumstances.

 

5. Opinion
of Counsel. Concurrently with the execution and delivery of this
Supplemental Indenture, the Issuer shall deliver to the Trustee an Opinion of
Counsel to the effect that this Supplemental Indenture has been duly
authorized, executed and delivered by each of the New Guarantor and the Issuer
and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors’
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Guarantee of the New Guarantor is a legal,
valid and binding obligation of the New Guarantor, enforceable against the New
Guarantor in accordance with its terms.

 

6.  Ratification
of Indenture; Supplemental Indentures Part of Indenture. Except as
expressly amended hereby, the Indenture is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof shall remain in
full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.

 

7. Governing
Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT

 

C-2

 

THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

8. Counterparts.
The parties may sign any number of copies of this Supplemental Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.

 

9. Effect
of Headings. The Section headings herein are for convenience only and shall
not effect the construction thereof.

 

C-3

 

IN WITNESS
WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed as of the date first above written.

	
   

  	
  [NEW
  GUARANTOR],

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC., on behalf of

  itself as the Issuer and the Existing

  Guarantors, if any,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Trustee,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  

 

C-4

 

EXHIBIT D

 

PARENT
INTERCOMPANY NOTE SUBORDINATION AGREEMENT dated as of March 14, 2006 among
LEVEL 3 FINANCING, INC. (the “Issuer”), LEVEL 3 COMMUNICATIONS, LLC (“Level 3
LLC”), each Issuer Restricted Subsidiary (as defined in the Indenture described
below) that becomes party hereto as provided in Section 4.12 hereto (each
such Issuer Restricted Subsidiary and Level 3 LLC individually, a “Subordinated
Borrower,” and collectively, the “Subordinated Borrowers”), LEVEL 3
COMMUNICATIONS, INC. (“Parent”), each Sister Restricted Subsidiary (as defined
in the Indenture described below) that becomes party hereto as provided in
Section 4.13 hereto (each such Sister Restricted Subsidiary and Parent
individually, a “Subordinated Lender,” and collectively, the “Subordinated
Lenders”).

 

Reference is
made to (a) the Purchase Agreement dated as of March 9, 2006 (the “Purchase
Agreement”) among the initial purchasers party thereto (the “Purchasers”), the
Issuer and Parent, (b) the Indenture dated as of March 14, 2006 (the “Indenture”)
among the Issuer, Parent and The Bank of New York, as trustee (in such
capacity, the “Trustee”), (c) the intercompany demand note dated the Issue
Date, in an initial principal amount equal to $150,000,000, issued by
Level 3 LLC to the Issuer, as it may be amended from time to time pursuant
to Sections 301 and 1020 of the Indenture (the “Offering Proceeds Note”) and
(d) the intercompany demand note dated December 8, 1999, as amended and
restated on October 1, 2003 (the “Parent Intercompany Note”) issued by
Level 3 LLC to Parent, the outstanding balance of which, as of December
31, 2005, was $14,370,673,908. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Indenture.

 

The Issuer has
agreed to sell to the Purchasers, upon the terms set forth in the Purchase
Agreement, its Floating Rate Senior Notes due 2011 (the “Securities”) to be
guaranteed on an unsecured unsubordinated basis by Parent. The obligation of
the Purchasers to purchase the Securities is conditioned on, among other
things, the execution and delivery by Parent, the Issuer and Level 3 LLC
of a subordination agreement in the form hereof. Additionally, upon the
incurrence of certain intercompany indebtedness, the Indenture requires
Restricted Subsidiaries of Parent (other than the Issuer) to guarantee the
Offering Proceeds Note (each such guarantee, an “Offering Proceeds Note
Guarantee”, and each such Restricted Subsidiary that provides such a guarantee,
an “Offering Proceeds Note Guarantor”) and to subordinate their obligations
with respect to such newly incurred indebtedness to their obligations with
respect to their Offering Proceeds Note Guarantee. Offering Proceeds Note
Guarantors required to provide subordination with respect to intercompany
indebtedness and the creditors on such indebtedness are required to become
parties to this Agreement, if they are not yet parties. In order to induce the
Purchasers to purchase the Securities, Parent, the Issuer and

 

 

Level 3 LLC are willing to
execute and deliver this Agreement. Accordingly, Parent, as a Subordinated
Lender, the Issuer and Level 3 LLC, as a Subordinated Borrower, hereby
agree as follows:

 

ARTICLE I

 

Subordination

 

SECTION 1.1. Subordination.
Each Subordinated Lender hereby agrees that all obligations in respect of any
Debt owed to such Subordinated Lender by any Subordinated Borrower, including
the payment of principal, premium (if any), interest, Guarantees or all other
amounts payable thereunder (the “Subordinated Obligations”), are subordinate
and junior in right of payment, to the extent and in the manner provided in
this Article I, to the prior payment in full in cash of all obligations of
such Subordinated Borrower in respect of the Offering Proceeds Note, including
the payment of principal, premium (if any), interest (including interest
arising after the commencement of a bankruptcy or other proceeding, whether or
not such a claim is permitted in such proceeding), Offering Proceeds Note
Guarantees thereof or all other amounts payable thereunder (the “Senior
Obligations”).

 

SECTION 1.2. Subordination
in the Event of Dissolution or Insolvency of any Subordinated Borrower. Subject
to the terms of a subordination agreement entered into pursuant to Section
4.14, upon any distribution of the assets of any Subordinated Borrower in
connection with its dissolution or insolvency or upon any dissolution, winding
up, liquidation or reorganization of any Subordinated Borrower, whether in
bankruptcy, insolvency, reorganization, arrangement or receivership or similar
proceedings, or upon any assignment for the benefit of creditors or any other marshaling
of the assets and liabilities of any Subordinated Borrower:

 

(a) 
the Issuer shall first be entitled to receive payment in full in cash of
the Senior Obligations of such Subordinated Borrower in accordance with the
terms of such Senior Obligations before any Subordinated Lender shall be
entitled to receive any payment on account of the Subordinated Obligations owed
by such Subordinated Borrower to such Subordinated Lender, whether as
principal, premium (if any), interest, pursuant to an Offering Proceeds Note
Guarantee or otherwise; and

 

(b) 
any payment by, or distribution of the assets of, such Subordinated
Borrower of any kind or character, whether in cash, property or securities, to
which any Subordinated Lender would be entitled except for the provisions of
this Agreement shall be paid or delivered by the Person making such payment or
distribution (whether a trustee in bankruptcy, a receiver, custodian or
liquidating trustee or otherwise) directly to the Issuer to the extent
necessary to make payment in full in cash of all Senior Obligations remaining
unpaid, after giving effect to any concurrent payment or distribution to the
Issuer in respect of the Senior Obligations.

 

D-2

 

In the event
of any proceeding involving any Subordinated Borrower under any bankruptcy,
insolvency, reorganization, receivership or similar law, each Subordinated
Lender agrees, until the indefeasible payment in full of all monetary Senior
Obligations, not to ask, demand, sue for or take or receive from any
Subordinated Borrower in cash, securities or other property or by setoff,
purchase or redemption (including, without limitation, from or by way of
collateral), payment of all or any part of the Subordinated Obligations owed to
such Subordinated Lender (other than payments permitted pursuant to clause (b)
above) and agrees that in connection with any proceeding involving any
Subordinated Borrower under any bankruptcy, insolvency, reorganization,
receivership or similar law (i) the Issuer is irrevocably authorized and
empowered (in its own name or in the name of such Subordinated Borrower or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in the preceding sentence and
give acquittance therefor and to file claims and proofs of claim and take such
other action (including, without limitation, voting the applicable Subordinated
Obligations and enforcing any security interest or other lien securing payment
of such Subordinated Obligations) as the Issuer may deem necessary or advisable
for the exercise or enforcement of any of its rights or interests and (ii) each
Subordinated Lender shall duly and promptly take such action as the Issuer may
reasonably request to (A) collect amounts in respect of the applicable
Subordinated Obligations for the account of the Issuer and to file appropriate
claims or proofs of claim in respect of such Subordinated Obligations, (B)
execute and deliver to the Issuer such irrevocable powers of attorney,
assignments or other instruments as the Issuer may reasonably request in order
to enable the Issuer to enforce any and all claims with respect to, and any
security interests and other liens securing payment of, the applicable Subordinated
Obligations and (C) collect and receive any and all payments or distributions
which may be payable or deliverable upon or with respect to the applicable
Subordinated Obligations. A copy of this Agreement may be filed with any court
as evidence of the Issuer’s right, power and authority hereunder.

 

SECTION 1.3. Certain
Payments Held in Trust. Subject to the terms of a subordination agreement
entered into pursuant to Section 4.14, in the event that any payment by, or
distribution of the assets of, any Subordinated Borrower of any kind or
character, whether in cash, property or securities, and whether directly or
otherwise, shall be received by or on behalf of any Subordinated Lender at a
time when such payment is prohibited by this Agreement, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
to, the Issuer to the extent necessary to make payment in full in cash of all
Senior Obligations remaining unpaid, after giving effect to any concurrent
payment or distribution to the Issuer in respect of such Senior Obligations.

 

SECTION 1.4. Subrogation.
Subject to the prior indefeasible payment in full in cash of the Senior
Obligations, each Subordinated Lender shall be subrogated to the rights of the
Issuer to receive payments or distributions in cash, property or securities of
each applicable Subordinated Borrower in respect of the Senior Obligations
until all amounts owing on the applicable Subordinated Obligations shall be
paid in full, and as

 

D-3

 

between and among a
Subordinated Borrower, its creditors (other than the Issuer) and the applicable
Subordinated Lender, no such payment or distribution made to the Issuer by
virtue of this Agreement that otherwise would have been made to such
Subordinated Lender shall be deemed to be a payment by such Subordinated
Borrower on account of such Subordinated Obligations, it being understood that
the provisions of this Agreement are intended solely for the purpose of
defining the relative rights of the Subordinated Lenders, on the one hand, and
the Issuer, on the other hand.

 

ARTICLE II

 

Other Matters
Regarding the Subordinated Obligations

 

SECTION 2.1. Other
Creditors. Except in the limited circumstances set forth in Article I, nothing
contained in this Agreement is intended to or shall impair, as between and
among a Subordinated Borrower, its creditors and any Subordinated Lender, the
obligations of such Subordinated Borrower to pay to such Subordinated Lender
the Subordinated Obligations of such Subordinated Borrower as and when the same
shall become payable in accordance with the terms thereof, or affect the
relative rights of such Subordinated Lender and the other creditors of such
Subordinated Borrower.

 

SECTION 2.2. Proofs
of Claims. In the event of any dissolution, winding up, liquidation or
reorganization of any Subordinated Borrower, whether in bankruptcy, insolvency,
reorganization, arrangement or receivership proceedings or otherwise, or any
assignment for the benefit of creditors or any other marshaling of the assets
and liabilities of any Subordinated Borrower, each Subordinated Lender agrees
to file proofs of claim for the Subordinated Obligations owed to it upon demand
of the Issuer, in default of which the Issuer or an authorized representative
of the Issuer is hereby irrevocably authorized so to file in order to
effectuate the provisions hereof. This Section shall not be construed to permit
any Subordinated Lender to retain any payment received by it in respect of a
Subordinated Obligation that such Subordinated Lender is not entitled to
receive and retain under any other provision of this Agreement.

 

SECTION 2.3. Waivers.
(a)  Each Subordinated Lender waives the
right to compel any assets or property of any Subordinated Borrower or the
assets or property of any Offering Proceeds Note Guarantor or any other Person
to be applied in any particular order to discharge the Senior Obligations. Each
Subordinated Lender expressly waives the right to require the Issuer to proceed
against any Subordinated Borrower, any Offering Proceeds Note Guarantor or any
other Person, or to pursue any other remedy in the Issuer’s power which such
Subordinated Lender cannot pursue and which would lighten such Subordinated
Lender’s burden, notwithstanding that the failure of the Issuer to do so may
thereby prejudice such Subordinated Lender. Each Subordinated Lender agrees
that it shall not be discharged, exonerated or have its obligations hereunder
to the Issuer reduced (i) by the Issuer’s delay in proceeding against or
enforcing any remedy against any Subordinated Borrower, any Offering Proceeds
Note Guarantor or any other Person; (ii) by the Issuer releasing any
Subordinated Borrower, any Offering Proceeds

 

D-4

 

Note Guarantor or any other
Person from all or any part of the Senior Obligations; or (iii) by the
discharge of any Subordinated Borrower, any Offering Proceeds Note Guarantor or
any other Person by an operation of law or otherwise, with or without the
intervention or omission of the Issuer, except in each case unless all Senior
Obligations due to the Issuer have been indefeasibly paid in full in cash. The
Issuer’s vote to accept or reject any plan of reorganization relating to any
Subordinated Borrower, any Offering Proceeds Note Guarantor or any other
Person, or the Issuer’s receipt on account of all or part of the Senior
Obligations of any cash, securities or other property distributed in any
bankruptcy, reorganization, or insolvency case, shall not discharge, exonerate,
or reduce the obligations of any Subordinated Lender hereunder to the Issuer,
except in each case unless all Senior Obligations have been indefeasibly paid
in full in cash.

 

(b)  Each Subordinated Lender waives all rights
and defenses arising out of an election of remedies by the Issuer, even though
that election of remedies, including, without limitation, any nonjudicial
foreclosure with respect to security for the Senior Obligations, has impaired
the value of such Subordinated Lender’s rights of subrogation, reimbursement,
or contribution against any Subordinated Borrower, any Offering Proceeds Note
Guarantor or any other Person. Each Subordinated Lender expressly waives any
rights or defenses it may have by reason of protection afforded to any
Subordinated Borrower, any Offering Proceeds Note Guarantor or any other Person
with respect to the Senior Obligations pursuant to any anti deficiency laws or
other laws of similar import which limit or discharge the principal debtor’s indebtedness
upon judicial or nonjudicial foreclosure of real property or personal property
collateral for the Senior Obligations, if any.

 

(c)  Each Subordinated Lender agrees that, without
the necessity of any reservation of rights against it, and without notice to or
further assent by it, any demand for payment of the Senior Obligations made by
the Issuer may be rescinded in whole or in part by the Issuer, and any Senior
Obligation may be continued, and the Senior Obligations, or the liability of
any Subordinated Borrower or any Offering Proceeds Note Guarantor or any other
party upon or for any part thereof, or any Guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived, surrendered, or
released by the Issuer, in each case without notice to or further assent by
such Subordinated Lender, which will remain bound under this Agreement and
without impairing, abridging, releasing or affecting the subordination and
other agreements provided for herein.

 

(d)  Each Subordinated Lender waives any and all
notice of the creation, renewal, extension or accrual of any of the Senior
Obligations and notice of or proof of reliance by the Issuer upon this Agreement.
The Senior Obligations, and any of them, shall be deemed conclusively to have
been created, contracted or incurred in reliance upon this Agreement, and all
dealings between any Subordinated Borrower and the Issuer shall be deemed to
have been consummated in reliance upon this Agreement. Each Subordinated Lender
acknowledges and agrees that the Issuer has relied upon the

 

D-5

 

subordination and other
agreements provided for herein in consenting to this Agreement. Each
Subordinated Lender waives notice of or proof of reliance on this Agreement and
protest, demand for payment and notice of default.

 

SECTION 2.4. Legend.
Any and all instruments or records now or hereafter creating or evidencing the
Subordinated Obligations, whether upon refunding, extension, renewal,
refinancing, replacement or otherwise, shall contain the following legend:

 

“Notwithstanding anything contained herein to
the contrary, neither the principal of nor the interest on, nor any other amounts
payable in respect of, the indebtedness created or evidenced by this instrument
or record shall become due or be paid or payable, except to the extent
permitted under the Parent Intercompany Note Subordination Agreement dated as
of March 14, 2006, among Level 3 Communications, Inc., [any additional
Subordinated Lenders,] Level 3 Communications, LLC[, any additional
Subordinated Borrowers] and Level 3 Financing, Inc., which Parent Intercompany
Note Subordination Agreement is incorporated herein with the same effect as if
fully set forth herein.”

 

SECTION 2.5. Transfer
of Subordinated Obligations. Each Subordinated Lender agrees that it will
not sell, assign, transfer or otherwise dispose of all or any part of the
Subordinated Obligations owed to it unless the Person to whom such sale,
assignment, transfer or disposition is made shall acknowledge in writing
(delivered to the Issuer and the Purchasers) that it shall be bound by the
terms of this Agreement to the same extent as such Subordinated Lender, including
the terms of this Section 2.5, as though it is a party hereto as of the date
hereof.

 

SECTION 2.6. Obligations
Hereunder Not Affected. (a)  All
rights and interests of the Issuer hereunder, and all agreements and
obligations of each Subordinated Lender hereunder, shall remain in full force
and effect irrespective of:

 

(i)                                     any
lack of validity or enforceability of the Offering Proceeds Note, the Purchase
Agreement or any document contemplated thereby;

 

(ii)                                  any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Senior Obligations, or any other amendment or waiver of or
consent to departure from the Offering Proceeds Note;

 

(iii)                               any
release, amendment, waiver or other modification, whether in writing or by course
of conduct or otherwise, of, or consent to departure from, any Offering
Proceeds Note Guarantee; or

 

(iv)                              any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Subordinated Borrower in respect of its

 

D-6

 

Senior
Obligations or of any Subordinated Lender in respect of this Agreement.

 

(b)  This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of the Senior
Obligations or any part thereof is rescinded or must otherwise be returned by
the Issuer upon the insolvency, bankruptcy or reorganization of any
Subordinated Borrower or otherwise, all as though such payment had not been
made.

 

ARTICLE III

 

Representations
and Warranties of the Subordinated Lenders

 

Each
Subordinated Lender represents and warrants to the Issuer that:

 

(a)  It is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized.

 

(b)  The execution, delivery and performance by it
of this Agreement and the consummation of the transactions contemplated hereby
are within its powers, have been duly authorized by all necessary action on its
part, require no action by or in respect of, or filing with, any court or
governmental or regulatory body or agency (other than such as have been duly
taken or made) and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its certificate of
incorporation or by-laws (or other organizational documents, as applicable) or
of any material agreement, judgment, injunction, order, decree or other
instrument binding upon it or any of its subsidiaries.

 

(c)  This Agreement constitutes a valid and
binding agreement of such Subordinated Lender, enforceable against such
Subordinated Lender in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and equitable principles of general applicability.

 

ARTICLE IV

 

Miscellaneous

 

SECTION 4.1. Notices.
All communications and notices hereunder shall be in writing and shall be
mailed or delivered and sent by fax and confirmed at 1025 Eldorado Boulevard,
Broomfield, Colorado 80021, attention: 
General Counsel (Telecopy No. 720-888-5127; Telephone Confirm
720-888-2505), with a copy in like manner to Merrill Lynch, Pierce, Fenner
& Smith Incorporated, at Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York, 10281-1201 (Telecopy No. 212-449-9435).

 

D-7

 

SECTION 4.2. Successors
and Assigns. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party. All representations, warranties, covenants, promises and
agreements by or on behalf of each Subordinated Lender and each Subordinated
Borrower that are contained in this Agreement shall bind its successors and
assigns and inure to the benefit of the Issuer and the successors and assigns
of the Issuer. Each Subordinated Lender and each Subordinated Borrower agrees
that it shall not assign or delegate any of its obligations under this
Agreement without the prior written consent of the Issuer, and any attempted
assignment or delegation without such consent shall be void and of no effect.

 

SECTION 4.3. Governing
Law; Jurisdiction; Consent to Service of Process. (a)    THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

(b)  Each Subordinated Lender 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 this Agreement, 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 shall affect any right that
the Issuer may otherwise have to bring any action or proceeding relating to
this Agreement against any Subordinated Lender or its properties in the courts
of any jurisdiction.

 

(c)  Each Subordinated Lender 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 proceeding arising out of or relating to
this Agreement 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 Subordinated Lender hereby irrevocably
consents to service of process in the manner provided for notices in Section
4.1 hereto. Nothing in this

 

D-8

 

Agreement will affect the right
of any party to this Agreement to serve process in any other manner permitted
by law.

 

SECTION 4.4. Waivers;
Amendment. No failure or delay of the Issuer in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power by the Issuer preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Issuer hereunder and instruments creating or
securing its respective Senior Obligations are cumulative and are not exclusive
of any other rights or remedies provided by law. Neither this Agreement nor any
provision hereof may be waived, amended or modified except (i) in accordance
with Section 1020 of the Indenture and (ii) pursuant to an agreement or
agreements in writing entered into by the Issuer, each Subordinated Lender and
each Subordinated Borrower intending to be bound thereby.

 

SECTION 4.5. Waiver
of Claims. (a)  To the maximum extent permitted by law, each
Subordinated Lender waives any claim it might have against the Issuer with
respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of the
Issuer or its directors, officers, employees, agents or affiliates with respect
to any exercise of rights or remedies under the Offering Proceeds Note. Neither
the Issuer nor any of its respective directors, officers, employees, agents or
affiliates shall be liable for failure to demand, collect or realize upon any
Offering Proceeds Note Guarantee or for any delay in doing so or shall be under
any obligation to take any other action whatsoever with regard to the Offering
Proceeds Note or any part thereof.

 

(b)  Each Subordinated Lender, for itself and on
behalf of its successors and assigns, hereby waives any and all now existing or
hereafter arising rights it may have to require the Issuer to marshal assets
for the benefit of such Subordinated Lender, or to otherwise direct the timing,
order or manner of any enforcement of the Offering Proceeds Note. The Issuer is
under no duty or obligation, and each Subordinated Lender hereby waives any
right it may have to compel the Issuer, to pursue any Offering Proceeds Note
Guarantor or other Person who may be liable for the Senior Obligations.

 

(c)  Each Subordinated Lender hereby waives and
releases all rights which a guarantor or surety with respect to the Senior
Obligations could exercise.

 

(d)  Each Subordinated Lender hereby waives any
duty on the part of the Issuer to disclose to it any fact known or hereafter
known by the Issuer relating to the operation or financial condition of any
Subordinated Borrower or any Offering Proceeds Note Guarantor, or their
respective businesses. Each Subordinated Lender enters into this Agreement
based solely upon its independent knowledge of the applicable Subordinated
Borrower’s results of operations, financial condition and business and such
Subordinated Lender assumes full responsibility for obtaining any further or
future information with respect to the applicable Subordinated Borrower or its
results of operations, financial condition or business.

 

D-9

 

SECTION 4.6. Further
Assurances. Each Subordinated Lender and each Subordinated Borrower, at its
own expense and at any time from time to time, upon the written request of the
Issuer, will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Issuer reasonably may request
for the purposes of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted.

 

SECTION 4.7. Provisions
Define Relative Rights. This Agreement is intended solely for the purpose
of defining the relative rights of the Issuer on the one hand and the
Subordinated Lenders and the Subordinated Borrowers on the other, and no other
Person shall have any right, benefit or other interest under this Agreement.

 

SECTION 4.8. 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE 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 4.9. Severability.
In the event any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good faith negotiations to replace any invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 4.10. Counterparts.
This 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 instrument.

 

SECTION 4.11. Headings.
Article and Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.

 

SECTION 4.12. Additional
Subordinated Borrowers. Pursuant to clause (vi) of paragraph (b) of Section
1010 of the Indenture or clause (iv) of paragraph (b) of

 

D-10

 

Section 1011 of the Indenture,
upon execution and delivery by, as applicable, any Restricted Subsidiary or
Issuer Restricted Subsidiary of an instrument in the form of Annex I attached
hereto or otherwise in a form acceptable to the Issuer, such Restricted
Subsidiary or Issuer Restricted Subsidiary, as applicable, shall become a
Subordinated Borrower hereunder with the same force and effect as if originally
named as a Subordinated Borrower herein. The execution and delivery of any such
instrument shall not require the consent of any other Subordinated Borrower
hereunder. The rights and obligations of each Subordinated Borrower herein
shall remain in full force and effect notwithstanding the addition of any
Subordinated Borrower as a party to this Agreement.

 

SECTION 4.13. Additional
Subordinated Lenders. Pursuant to clause (vi) of paragraph (b) of Section
1010 of the Indenture or clause (iv) of paragraph (b) of Section 1011 of the
Indenture or both such clauses, upon execution and delivery by any Sister
Restricted Subsidiary of an instrument in the form of Annex I attached hereto
or otherwise in a form acceptable to the Issuer, such Sister Restricted
Subsidiary shall become a Subordinated Lender hereunder with the same force and
effect as if originally named as a Subordinated Lender herein. The execution
and delivery of any such instrument shall not require the consent of any other
Subordinated Lender hereunder. The rights and obligations of each Subordinated
Lender herein shall remain in full force and effect notwithstanding the
addition of any Subordinated Lender as a party to this Agreement.

 

SECTION 4.14. Subordination
of Senior Obligations to Qualified Credit Facility. The Issuer, a
Subordinated Borrower and the Subordinated Lenders may enter into an agreement
or arrangement that provides that the payment obligation on the Senior
Obligations of such Subordinated Borrower be expressly subordinated in any
bankruptcy, liquidation or winding up proceeding of such Subordinated Borrower
to the prior payment in full in cash of all obligations of such Subordinated
Borrower under any Guarantee of, or obligation as borrower under, any Qualified
Credit Facility Incurred by Parent or a Restricted Subsidiary in accordance
with clause (ii) of paragraph (b) of Section 1010 or clause (ii) of paragraph (b)
of Section 1011 of the Indenture; provided, however, that (x) the
terms of the subordination of such Senior Obligations of such Subordinated
Borrower, to any such Guarantee of or obligation as borrower under a Qualified
Credit Facility may not eliminate or otherwise adversely affect the
subordination of the payment obligation on any other Debt of such Subordinated
Borrower, to the payment obligation of the Senior Obligations of such
Subordinated Borrower, and (y) any Guarantee (other than a Guarantee of such
Qualified Credit Facility) by such Subordinated Borrower of any other Debt of
Parent or any Sister Restricted Subsidiary also shall be expressly subordinated
in any bankruptcy, liquidation or winding up proceeding of such Subordinated
Borrower, to the prior payment in full in cash of all obligations of such
Subordinated Borrower under its Guarantee of such Qualified Credit Facility to
at least the same extent and on the same terms and conditions as the
subordination provisions applicable to the Senior Obligations of such
Subordinated Borrower.

 

D-11

 

IN
WITNESS WHEREOF, Level 3 LLC, as a Subordinated Borrower, Parent, as a
Subordinated Lender and the Issuer have caused this
Agreement to be duly executed by their respective authorized representatives as
of the day and year first above written.

 

	
   

  	
   

  	
  LEVEL 3 COMMUNICATIONS, LLC,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEVEL 3 COMMUNICATIONS, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

D-12

 

Annex I to the Parent Intercompany

Note Subordination Agreement

 

SUPPLEMENT
NO. [   ] dated as of
[                  ]
to the Parent Intercompany Note Subordination Agreement dated as of March 14,
2006 (the “Parent Intercompany Note Subordination Agreement”), among
LEVEL 3 COMMUNICATIONS, LLC (“Level 3 LLC”), each Restricted
Subsidiary or Issuer Restricted Subsidiary becoming a party thereto pursuant to
Section 4.12 thereof (each such Restricted Subsidiary or Issuer Restricted
Subsidiary and Level 3 LLC, a “Subordinated Borrower”), LEVEL 3
COMMUNICATIONS, INC. (“Parent”), each Sister Restricted Subsidiary becoming a
party thereto pursuant to Section 4.13 thereof (each such Sister
Restricted Subsidiary and Parent, a “Subordinated Lender”) and LEVEL 3
FINANCING, INC. (the “Issuer”).

 

Reference is made to the Parent Intercompany Note Subordination
Agreement.

 

Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Parent Intercompany Note Subordination
Agreement.

 

Pursuant to clause (vi) of paragraph (b) of Section 1010 or clause (iv)
of paragraph (b) of Section 1011 of the Indenture, as applicable, a Restricted
Subsidiary or an Issuer Restricted Subsidiary is allowed to incur Debt from
Parent or a Sister Restricted Subsidiary provided that (i) such Restricted
Subsidiary or Issuer Restricted Subsidiary, as applicable, is a Guarantor and
an Offering Proceeds Note Guarantor and (ii) such Debt is expressly
subordinated in any bankruptcy, liquidation or winding up proceeding of such
Restricted Subsidiary or Issuer Restricted Subsidiary, as applicable, to such
Restricted Subsidiary’s or Issuer Restricted Subsidiary’s Offering Proceeds
Note Guarantee, as applicable. Section 4.12 of the Parent Intercompany
Note Subordination Agreement provides that a Restricted Subsidiary or an Issuer
Restricted Subsidiary may become a Subordinated Borrower under the Parent
Intercompany Note Subordination Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Restricted
Subsidiary or Issuer Restricted Subsidiary (the “New Subordinated Borrower”) is
executing this Supplement to become a Subordinated Borrower under the Parent
Intercompany Note Subordination Agreement in order to comply with the terms of
the Indenture and as consideration for amounts previously advanced to the
Issuer under the Indenture.

 

Accordingly, the New Subordinated Borrower agrees as follows:

 

In accordance with Section 4.12 of the Parent Intercompany Note Subordination
Agreement, the New Subordinated Borrower by its signature below becomes a
Subordinated Borrower under the Parent Intercompany Note Subordination

 

 

Agreement with the same force
and effect as if originally named therein as a Subordinated Borrower and the
New Subordinated Borrower hereby agrees to all the terms and provisions of the Parent
Intercompany Note Subordination Agreement applicable to it as a Subordinated
Borrower thereunder. Each reference to a “Subordinated Borrower” in the Parent
Intercompany Note Subordination Agreement shall be deemed to include the New
Subordinated Borrower. The Parent Intercompany Note Subordination Agreement is
hereby incorporated herein by reference.

 

The New Subordinated Borrower represents and warrants to the Issuer
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
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.

 

This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
a single contract. This Supplement shall become effective when the Issuer shall
have received counterparts of this Supplement that, when taken together, bear
the signatures of the New Subordinated Borrower and the Issuer. Delivery of an
executed signature page to this Supplement by facsimile transmission shall be
as effective as delivery of a manually executed counterpart of this Supplement.

 

Except as expressly supplemented hereby and pursuant to any other
supplement contemplated by Section 4.12 or 4.13 of the Parent Intercompany
Note Subordination Agreement, the Parent Intercompany Note Subordination
Agreement shall remain in full force and effect.

 

THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace any invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

All communications and notices hereunder shall be in writing and given
as provided in Section 4.1 of the Parent Intercompany Note Subordination
Agreement. All 

 

2

 

communications and notices
hereunder to the New Subordinated Borrower shall be given to it at the address
set forth under its signature below.

 

3

 

IN WITNESS
WHEREOF, the New Subordinated Borrower and the Issuer have duly executed this
Supplement to the Parent Intercompany Note Subordination Agreement as of the
day and year first above written.

 

	
   

  	
  [NAME OF NEW SUBORDINATED

  BORROWER],

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

4

 

Annex II to the Parent Intercompany

Note Subordination Agreement

 

SUPPLEMENT
NO. [   ] dated as of
[                       ]
to the Parent Intercompany Note Subordination Agreement dated as of March 14,
2006 (the “Parent Intercompany Note Subordination Agreement”), among
LEVEL 3 COMMUNICATIONS, LLC (“Level 3 LLC”), each Restricted
Subsidiary or Issuer Restricted Subsidiary becoming a party thereto pursuant to
Section 4.12 thereof (each such Restricted Subsidiary or Issuer Restricted
Subsidiary and Level 3 LLC, a “Subordinated Borrower”), LEVEL 3
COMMUNICATIONS, INC. (“Parent”), each Sister Restricted Subsidiary becoming a
party thereto pursuant to Section 4.13 thereof (each such Sister
Restricted Subsidiary and Parent, a “Subordinated Lender” and, collectively,
the “Subordinated Lenders”) and LEVEL 3 FINANCING, INC. (the “Issuer”).

 

Reference is made to the Parent Intercompany Note Subordination Agreement.

 

Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Parent Intercompany Note Subordination
Agreement.

 

Pursuant to clause (vi) of paragraph (b) of Section 1010 or clause (iv)
of paragraph (b) of Section 1011 of the Indenture, as applicable, a Restricted
Subsidiary or an Issuer Restricted Subsidiary is allowed to incur Debt from
Parent or a Sister Restricted Subsidiary provided that (i) such Restricted
Subsidiary or Issuer Restricted Subsidiary, as applicable, is a Guarantor and
an Offering Proceeds Note Guarantor and (ii) such Debt is subordinated in
any bankruptcy, liquidation or winding up proceeding of such Restricted
Subsidiary or Issuer Restricted Subsidiary, as applicable, to such Restricted
Subsidiary’s or Issuer Restricted Subsidiary’s Offering Proceeds Note Guarantee.
Section 4.13 of the Parent Intercompany Note Subordination Agreement
provides that a Sister Restricted Subsidiary may become a Subordinated Lender
under the Parent Intercompany Note Subordination Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned
Sister Restricted Subsidiary (the “New Subordinated Lender”) is executing this
Supplement to become a Subordinated Lender under the Parent Intercompany Note Subordination
Agreement in order to comply with the terms of the Indenture and as
consideration for amounts previously advanced to the Issuer under the
Indenture.

 

Accordingly, the New Subordinated Lender
agrees as follows:

 

In accordance with Section 4.13 of the Parent Intercompany Note Subordination
Agreement, the New Subordinated Lender by its signature below becomes a
Subordinated Lender under the Parent Intercompany Note Subordination Agreement

 

 

with the same force and effect
as if originally named therein as a Subordinated Lender and the New
Subordinated Lender hereby (a) agrees to all the terms and provisions of
the Parent Intercompany Note Subordination Agreement applicable to it as a
Subordinated Lender thereunder and (b) represents and warrants that the
representations and warranties made by it as a Subordinated Lender thereunder
are true and correct on and as of the date hereof. Each reference to a “Subordinated
Lender” in the Parent Intercompany Note Subordination Agreement shall be deemed
to include the New Subordinated Lender. The Parent Intercompany Note Subordination
Agreement is hereby incorporated herein by reference.

 

The New Subordinated Lender represents and warrants to the Issuer that
this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
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.

 

This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
a single contract. This Supplement shall become effective when the Issuer shall
have received counterparts of this Supplement that, when taken together, bear
the signatures of the New Subordinated Lender and the Issuer. Delivery of an
executed signature page to this Supplement by facsimile transmission shall be
as effective as delivery of a manually executed counterpart of this Supplement.

 

Except as expressly supplemented hereby and pursuant to any other
supplement contemplated by Section 4.12 or 4.13 of the Parent Intercompany
Note Subordination Agreement, the Parent Intercompany Note Subordination
Agreement shall remain in full force and effect.

 

THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace any invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

2

 

All communications and notices hereunder shall be in writing and given
as provided in Section 4.1 of the Parent Intercompany Note Subordination
Agreement. All communications and notices hereunder to the New Subordinated
Lender shall be given to it at the address set forth under its signature below.

 

3

 

IN WITNESS
WHEREOF, the New Subordinated Lender and the Issuer have duly executed this
Supplement to the Parent Intercompany Note Subordination Agreement as of the
day and year first above written.

 

 

	
   

  	
  [NAME OF NEW SUBORDINATED

  LENDER]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

4

EXHIBIT E

 

OFFERING
PROCEEDS NOTE GUARANTEE AGREEMENT (this “Agreement”) dated as of
[           ], between
[OFFERING PROCEEDS NOTE GUARANTOR] (the “Offering Proceeds Note Guarantor”), a
subsidiary of Level 3 Financing, Inc., and LEVEL 3 FINANCING, INC. (the
“Issuer”).

 

W I T N E S S E T H :

 

WHEREAS Level
3 Communications, LLC (“Level 3 LLC”) has heretofore executed and delivered to
Level 3 Financing, Inc. (the “Issuer”) an intercompany demand note in an
initial principal amount equal to $150,000,000, as it may be amended from time
to time pursuant to Sections 301 and 1020 of the Indenture (as defined
below) (the “Offering Proceeds Note”).

 

WHEREAS the
Issuer has heretofore executed and delivered to The Bank of New York, as
trustee, an Indenture dated as of March 14, 2006 (the “Indenture”; capitalized
terms used but not defined herein having the meanings assigned thereto in the
Indenture), providing for the issuance of its Floating Rate Senior Notes due
2011 (the “Securities”);

 

WHEREAS the
Indenture permits the Offering Proceeds Note Guarantor to incur certain Debt
provided, among other things, that such Offering Proceeds Note Guarantor
execute and deliver to the Issuer a Guarantee pursuant to which the Offering
Proceeds Note Guarantor shall unconditionally guarantee all Level 3 LLC’s
obligations under the Offering Proceeds Note pursuant to a Guarantee on the
terms and conditions set forth herein; and

 

WHEREAS the
Guarantee contained in this Guarantee Agreement shall constitute an “Offering
Proceeds Note Guarantee” for all purposes of the Indenture;

 

NOW THEREFORE,
in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Offering
Proceeds Note Guarantor and the Issuer mutually covenant and agree for the
equal and ratable benefit of the Issuer as follows:

 

ARTICLE I

 

Offering
Proceeds Note Guarantee

 

SECTION 1.01. Guarantees.
Subject to a subordination agreement entered into pursuant to Section 1.03, the
Offering Proceeds Note Guarantor hereby unconditionally guarantees to the
Issuer and its successors and assigns (a) the full and punctual payment in cash
of all obligations of Level 3 LLC in respect of the Offering

 

 

Proceeds Note, including the
payment of principal, premium (if any), interest (including interest arising
after the commencement of a bankruptcy or other proceeding, whether or not such
a claim is permitted in such proceeding) or any other amount payable thereunder
(the “Obligations”). The Offering Proceeds Note Guarantor further agrees that
the Obligations may be extended or renewed, in whole or in part, without notice
or further assent from the Offering Proceeds Note Guarantor and that the
Offering Proceeds Note Guarantor will remain bound under this Agreement
notwithstanding any extension or renewal of the Obligations.

 

The Offering
Proceeds Note Guarantor waives presentation to, demand of, payment from and
protest to Level 3 LLC of any of the Obligations and also waives notice of
protest for nonpayment. The Offering Proceeds Note Guarantor waives notice of
any default under the Obligations. The obligations of the Offering Proceeds
Note Guarantor hereunder shall not be affected by (a) the failure of the Issuer
to assert any claim or demand or to enforce any right or remedy against Level 3
LLC, any Offering Proceeds Note Guarantor or any other Person under the
Offering Proceeds Note or any other agreement or otherwise; (b) any extension
or renewal of any obligation thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of the Offering Proceeds Note,
any Offering Proceeds Note Guarantee or any other agreement or (d) the release
of any security held by the Issuer for the Obligations, if any.

 

The Offering
Proceeds Note Guarantor further agrees that its Guarantee herein constitutes a
Guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by the
Issuer to any security held for payment of the Obligations.

 

Except as
expressly set forth in Section 1.03 or Section 2.08, the obligations of the
Offering Proceeds Note Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of
the Obligations or otherwise. Without limiting the generality of the foregoing,
the obligations of the Offering Proceeds Note Guarantor herein shall not be
discharged or impaired or otherwise affected by the failure of the Issuer to
assert any claim or demand or to enforce any remedy under the Offering Proceeds
Note, any Offering Proceeds Note Guarantee or any other agreement, by any
waiver or modification of any term thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or by any other
act or thing or omission or delay to do any other act or thing which may or
might in any manner or to any extent vary the risk of the Offering Proceeds
Note Guarantor or would otherwise operate as a discharge of the Offering
Proceeds Note Guarantor as a matter of law or equity.

 

The Offering
Proceeds Note Guarantor further agrees that its Guarantee herein shall continue
to be effective or be reinstated, as the case may be, if at any time

 

E-2

 

payment, or any part thereof,
of principal of or (premium, if any) interest on any Senior Obligation is
rescinded or must otherwise be restored by the Issuer upon the bankruptcy or
reorganization of Level 3 LLC or otherwise.

 

In furtherance
of the foregoing and not in limitation of any other right which the Issuer has
at law or in equity against the Offering Proceeds Note Guarantor by virtue
hereof, upon the failure of Level 3 LLC to pay the principal of (or premium, if
any) or interest on the Obligations when and as the same shall become due or to
perform or comply with any other Senior Obligation, the Offering Proceeds Note
Guarantor hereby promises to and will, upon receipt of written demand by the
Issuer, forthwith pay, or cause to be paid, in cash, to the Issuer an amount equal
to all unpaid amounts in respect of the Obligations.

 

The Offering
Proceeds Note Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Obligations guaranteed hereby until payment in
full in cash of all Obligations.

 

The Offering
Proceeds Note Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys’ fees) incurred by the Issuer in enforcing any
rights under this Article I.

 

SECTION 1.02. Contribution.
The Offering Proceeds Note Guarantor (a “Contributing Party”) agrees that, in
the event a payment shall be made by any other Offering Proceeds Note Guarantor
under any other Offering Proceeds Note Guarantee (the “Claiming Offering
Proceeds Note Guarantor”), the Contributing Party shall indemnify the Claiming
Offering Proceeds Note Guarantor in an amount equal to the amount of such
payment multiplied by a fraction, the numerator of which shall be the net worth
of the Contributing Party (which shall be measured on the date hereof) and the denominator
of which shall be the aggregate net worth of Level 3 LLC on the Issue Date and
the Offering Proceeds Note Guarantors on the respective dates of the Offering
Proceeds Note Guarantee Agreements executed and delivered by such Offering
Proceeds Note Guarantors.

 

SECTION 1.03. Subordination
of Guarantees to Qualified Credit Facility. The Offering Proceeds Note
Guarantor may enter into an agreement or arrangement that provides that its
payment obligation on the Obligations arising hereunder be expressly
subordinated to the extent and under the conditions set forth in Section 1308
of the Indenture.

 

ARTICLE II

 

Miscellaneous

 

SECTION 2.01. Successors
and Assigns. This Agreement shall be binding upon the Offering Proceeds
Note Guarantor and its successors and assigns and

 

E-3

 

shall enure to the benefit of
the successors and assigns of the Issuer and, in the event of any transfer or
assignment of rights by the Issuer, the rights and privileges conferred upon
that party in the Offering Proceeds Note shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
of the Indenture.

 

SECTION 2.02. No
Waiver. Neither a failure nor a delay on the part of the Issuer in
exercising any right, power or privilege under this Agreement or the Offering
Proceeds Note shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Issuer herein and therein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Agreement or the Offering
Proceeds Note at law, in equity, by statute or otherwise.

 

SECTION 2.03. Modification.
Subject to Section 1020 of the Indenture, no modification, amendment or waiver
of any provision of this Agreement, nor the consent to any departure by the
Offering Proceeds Note Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Issuer, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Offering Proceeds Note Guarantor
in any case shall entitle the Offering Proceeds Note Guarantor to any other or
further notice or demand in the same, similar or other circumstances.

 

SECTION 2.04. Opinion
of Counsel. Concurrently with the execution and delivery of this Agreement,
the Offering Proceeds Note Guarantor shall deliver to the Issuer an Opinion of
Counsel to the effect that this Agreement has been duly authorized, executed
and delivered by the Offering Proceeds Note Guarantor and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors’ rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Guarantee of the Offering Proceeds Note Guarantor is a legal, valid
and binding obligation of the Offering Proceeds Note Guarantor, enforceable
against the Offering Proceeds Note Guarantor in accordance with its terms.

 

SECTION 2.05. Governing
Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

SECTION 2.06. Counterparts.
The parties may sign any number of copies of this Agreement. Each signed copy
shall be an original, but all of them together represent the same agreement.

 

E-4

 

SECTION 2.07. Effect
of Headings. The Section headings herein are for convenience only and shall
not effect the construction thereof.

 

SECTION 2.08. Termination
of Agreement and Release of Guarantee. This Agreement will be terminated
and all obligations hereunder of the Offering Proceeds Note Guarantor will be
released under the circumstances and conditions set forth in Section 1303 of
the Indenture.

 

E-5

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed as
of the date first above written.

 

	
   

  	
  [OFFERING PROCEEDS NOTE

  GUARANTOR],

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

E-6

 

EXHIBIT F

 

OFFERING
PROCEEDS NOTE SUBORDINATION AGREEMENT dated as of March 14, 2006 among
LEVEL 3 COMMUNICATIONS, INC. (“Level 3”), LEVEL 3 FINANCING,
INC. (the “Borrower”), LEVEL 3 COMMUNICATIONS, LLC (“Level 3
LLC”), each Restricted Subsidiary (as defined in the Credit Agreement described
below) that becomes party hereto as provided in Section 4.12 hereof (each
such Subsidiary and Level 3 LLC individually, a “Subordinated Borrower”,
and collectively, the “Subordinated Borrowers”), the BORROWER in its
capacity as obligee of the Offering Proceeds Note (as defined below), and each
Subsidiary that becomes party hereto as provided in Section 4.13 hereof (each
such Subsidiary, Level 3 and the BORROWER in its capacity as obligee of the
Offering Proceeds Note individually, a “Subordinated Lender”, and
collectively, the “Subordinated Lenders”).

 

Reference(1)
is made to (a) the Credit Agreement dated as of December 1, 2004 (the “Credit
Agreement”), among the Borrower, Level 3, the Lenders party thereto and
Merrill Lynch Capital Corporation, as Administrative Agent and Collateral Agent
(in such capacity, the “Administrative Agent”), (b) 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, as it may be amended
from time to time pursuant to Sections 301 and 1020 of the Indenture dated as
of March 14, 2006, among Level 3, the Borrower and The Bank of New York,
as trustee (the “Offering Proceeds Note”), (c) the intercompany
demand note dated December 1, 2004, in an initial principal amount equal to
$730,000,000, issued by Level 3 LLC to the Borrower, as it may be amended
from time to time pursuant to Sections 9.02 and 6.11 of the Credit Agreement
(such note, together with any additional loan proceeds note issued pursuant to
Section 9.02 of the Credit Agreement the “Loan Proceeds Note”) and (d)
the Parent Intercompany Note Subordination Agreement, dated as of March 14,
2006, among the Borrower, Level 3 LLC and Level 3 (the “Parent Intercompany
Note Subordination Agreement”). Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.

 

Pursuant to
Section 4.14 of the Parent Intercompany Note Subordination Agreement, the
Borrower, Level 3 LLC, any other Subordinated Borrower and Level 3 may enter
into an agreement which subordinates in any bankruptcy, liquidation or winding
up proceeding the obligations of a Subordinated Borrower under the Offering
Proceeds Note and any guarantee thereof to such Subordinated Borrower’s
obligations under a Qualified Credit Facility.

 

The Lenders
have provided to the Borrower, upon the terms set forth in the Credit
Agreement, a secured term loan (the “Term Loan” and, together with any
additional

 

(1) Revise recitals and
definitions to reflect any replacement or successor Qualifying Credit Facility.

 

 

loan provided pursuant to
Section 9.02 of the Credit Agreement, the “Loans”) guaranteed on a
secured unsubordinated basis by Level 3. In order to induce the Lenders to provide
the Term Loan, the Borrower has agreed that, pursuant to the Collateral
Agreement, it shall pledge all its rights, title and interest in, to and under
the Loan Proceeds Note to the Collateral Agent. Additionally, upon the
incurrence of certain intercompany indebtedness (including, without limitation,
any guarantee of the Offering Proceeds Note), the Credit Agreement requires
Restricted Subsidiaries of Level 3 (other than the Borrower) to guarantee the
Loan Proceeds Note (each such guarantee, a “Loan Proceeds Note Guarantee”,
and each such Restricted Subsidiary that provides such a guarantee, a “Loan
Proceeds Note Guarantor”) and to subordinate, in any bankruptcy,
liquidation or winding up proceeding, their obligations with respect to such
newly incurred indebtedness to their obligations with respect to their Loan
Proceeds Note Guarantee. Loan Proceeds Note Guarantors required to provide
subordination with respect to intercompany indebtedness and the creditors on
such indebtedness are required to become parties to this Agreement, if they are
not yet parties. In order to comply with the terms of the Credit Agreement,
Level 3, the Borrower and Level 3 LLC are willing to execute and deliver
this Agreement. Accordingly, Level 3, the Borrower (in its capacity as a
Subordinated Lender as obligee of the Offering Proceeds Note), and Level 3
LLC, as a Subordinated Borrower, hereby agree as follows:

 

F-2

 

ARTICLE I

 

Subordination

 

SECTION 1.1. Subordination.
Each Subordinated Lender hereby agrees that all obligations in respect of any
Indebtedness (including, without limitation, the Offering Proceeds Note and any
guarantee of the Offering Proceeds Note) owed to such Subordinated Lender by
any Subordinated Borrower, including the payment of principal, premium (if
any), interest, Guarantees or all other amounts payable thereunder (including
any payment by reason of subordination of any Indebtedness owed to such
Subordinated Lender to any Indebtedness subordinated hereby) (the “Subordinated
Obligations”), are subordinate and junior in right of payment, to the
extent and in the manner provided in this Article I, to the prior payment
in full in cash of all obligations of such Subordinated Borrower in respect of
the Loan Proceeds Note, including the payment of principal, premium (if any),
interest (including interest arising after the commencement of a bankruptcy or
other proceeding, whether or not such a claim is permitted in such proceeding),
Loan Proceeds Note Guarantees thereof or all other amounts payable thereunder
(the “Senior Obligations”).

 

SECTION 1.2. Subordination
in the Event of Dissolution or Insolvency of any Subordinated Borrower. Upon
any distribution of the assets of any Subordinated Borrower in connection with
its dissolution or insolvency or upon any dissolution, winding up, liquidation
or reorganization of any Subordinated Borrower, whether in bankruptcy,
insolvency, reorganization, arrangement or receivership or similar proceedings,
or upon any assignment for the benefit of creditors or any other marshaling of
the assets and liabilities of any Subordinated Borrower:

 

(a) 
the Borrower shall first be entitled to receive payment in full in cash
of the Senior Obligations of such Subordinated Borrower in accordance with the
terms of such Senior Obligations before any Subordinated Lender shall be
entitled to receive any payment on account of the Subordinated Obligations
(including any payment by reason of subordination of any Indebtedness to any
Subordinated Obligation) owed by such Subordinated Borrower to such
Subordinated Lender, whether as principal, premium (if any), interest, pursuant
to a Loan Proceeds Note Guarantee or otherwise; and

 

(b) 
any payment by, or distribution of the assets of, such Subordinated
Borrower of any kind or character (including any payment by reason of
subordination of any Indebtedness to any Subordinated Obligation), whether in
cash, property or securities, to which any Subordinated Lender would be
entitled except for the provisions of this Agreement shall be paid or delivered
by the Person making such payment or distribution (whether a trustee in
bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly
to the Borrower to the extent necessary to make payment in full in cash of all
Senior Obligations remaining unpaid, after giving effect to any concurrent
payment or distribution to the Borrower in respect of the Senior Obligations.

 

F-3

 

In the event
of any proceeding involving any Subordinated Borrower under any bankruptcy,
insolvency, reorganization, receivership or similar law, each Subordinated
Lender agrees, until the indefeasible payment in full of all monetary Senior
Obligations, not to ask, demand, sue for or take or receive from any
Subordinated Borrower in cash, securities or other property or by setoff,
purchase or redemption (including, without limitation, from or by way of
collateral), payment of all or any part of the Subordinated Obligations owed to
such Subordinated Lender (other than payments permitted pursuant to clause (b)
above) and agrees that in connection with any proceeding involving any
Subordinated Borrower under any bankruptcy, insolvency, reorganization,
receivership or similar law (i) the Borrower is irrevocably authorized and
empowered (in its own name or in the name of such Subordinated Borrower or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in the preceding sentence and
give acquittance therefor and to file claims and proofs of claim and take such
other action (including, without limitation, voting the applicable Subordinated
Obligations and enforcing any security interest or other lien securing payment
of such Subordinated Obligations) as the Borrower may deem necessary or
advisable for the exercise or enforcement of any of its rights or interests and
(ii) each Subordinated Lender shall duly and promptly take such action as the
Borrower may reasonably request to (A) collect amounts in respect of the
applicable Subordinated Obligations for the account of the Borrower and to file
appropriate claims or proofs of claim in respect of such Subordinated
Obligations, (B) execute and deliver to the Borrower such irrevocable powers of
attorney, assignments or other instruments as the Borrower may reasonably
request in order to enable the Borrower to enforce any and all claims with
respect to, and any security interests and other liens securing payment of, the
applicable Subordinated Obligations and (C) collect and receive any and all
payments or distributions which may be payable or deliverable upon or with
respect to the applicable Subordinated Obligations. A copy of this Agreement
may be filed with any court as evidence of the Borrower’s right, power and
authority hereunder.

 

SECTION 1.3. Certain
Payments Held in Trust. In the event that any payment by, or distribution
of the assets of, any Subordinated Borrower of any kind or character (including
any payment by reason of subordination of any Indebtedness to any Subordinated
Obligations), whether in cash, property or securities, and whether directly or
otherwise, shall be received by or on behalf of any Subordinated Lender at a
time when such payment is prohibited by this Agreement, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
to, the Borrower to the extent necessary to make payment in full in cash of all
Senior Obligations remaining unpaid, after giving effect to any concurrent
payment or distribution to the Borrower in respect of such Senior Obligations.

 

SECTION 1.4. Subrogation.
Subject to the prior indefeasible payment in full in cash of the Senior
Obligations, each Subordinated Lender shall be subrogated to the rights of the
Borrower to receive payments or distributions in cash, property or securities
of each applicable Subordinated Borrower in respect of the Senior Obligations

 

F-4

 

until all amounts owing on the
applicable Subordinated Obligations shall be paid in full, and as between and
among a Subordinated Borrower, its creditors (other than the Borrower) and the
applicable Subordinated Lender, no such payment or distribution made to the
Borrower by virtue of this Agreement that otherwise would have been made to
such Subordinated Lender shall be deemed to be a payment by such Subordinated
Borrower on account of such Subordinated Obligations, it being understood that
the provisions of this Agreement are intended solely for the purpose of
defining the relative rights of the Subordinated Lenders, on the one hand, and
the Borrower, on the other hand.

 

ARTICLE II

 

Other Matters
Regarding the Subordinated Obligations

 

SECTION 2.1. Other
Creditors. Except in the limited circumstances set forth in Article I,
nothing contained in this Agreement is intended to or shall impair, as between
and among a Subordinated Borrower, its creditors and any Subordinated Lender,
the obligations of such Subordinated Borrower to pay to such Subordinated
Lender the Subordinated Obligations of such Subordinated Borrower as and when
the same shall become payable in accordance with the terms thereof, or affect
the relative rights of such Subordinated Lender and the other creditors of such
Subordinated Borrower.

 

SECTION 2.2. Proofs
of Claims. In the event of any dissolution, winding up, liquidation or
reorganization of any Subordinated Borrower, whether in bankruptcy, insolvency,
reorganization, arrangement or receivership proceedings or otherwise, or any assignment
for the benefit of creditors or any other marshaling of the assets and
liabilities of any Subordinated Borrower, each Subordinated Lender agrees to
file proofs of claim for the Subordinated Obligations owed to it upon demand of
the Borrower, in default of which the Borrower or an authorized representative
of the Borrower is hereby irrevocably authorized so to file in order to
effectuate the provisions hereof. This Section shall not be construed to permit
any Subordinated Lender to retain any payment received by it in respect of a
Subordinated Obligation (including any payment by reason of subordination of
any Indebtedness to any Subordinated Obligation)  that such Subordinated Lender is not entitled
to receive and retain under any other provision of this Agreement.

 

SECTION 2.3. Waivers.
(a)  Each Subordinated Lender waives the
right to compel any assets or property of any Subordinated Borrower or the
assets or property of any Loan Proceeds Note Guarantor or any other Person to
be applied in any particular order to discharge the Senior Obligations. Each
Subordinated Lender expressly waives the right to require the Borrower to
proceed against any Subordinated Borrower, any Loan Proceeds Note Guarantor or
any other Person, or to pursue any other remedy in the Borrower’s power which
such Subordinated Lender cannot pursue and which would lighten such
Subordinated Lender’s burden, notwithstanding that the failure of the Borrower
to do so may thereby prejudice such Subordinated Lender. Each Subordinated Lender
agrees that it shall not be discharged, exonerated or have its obligations
hereunder to the Borrower reduced (i) by the Borrower’s delay in proceeding
against or enforcing

 

F-5

 

any remedy against any Subordinated
Borrower, any Loan Proceeds Note Guarantor or any other Person; (ii) by the
Borrower releasing any Subordinated Borrower, any Loan Proceeds Note Guarantor
or any other Person from all or any part of the Senior Obligations; or (iii) by
the discharge of any Subordinated Borrower, any Loan Proceeds Note Guarantor or
any other Person by operation of law or otherwise, with or without the
intervention or omission of the Borrower, in each case unless all Senior
Obligations due to the Borrower have been indefeasibly paid in full in cash. The
Borrower’s vote to accept or reject any plan of reorganization relating to any
Subordinated Borrower, any Loan Proceeds Note Guarantor or any other Person, or
the Borrower’s receipt on account of all or part of the Senior Obligations of
any cash, securities or other property distributed in any bankruptcy,
reorganization, or insolvency case, shall not discharge, exonerate, or reduce
the obligations of any Subordinated Lender hereunder to the Borrower, in each
case unless all Senior Obligations have been indefeasibly paid in full in cash.

 

(b)  Each Subordinated Lender waives all rights
and defenses arising out of an election of remedies by the Borrower, even
though that election of remedies, including, without limitation, any
nonjudicial foreclosure with respect to security for the Senior Obligations,
has impaired the value of such Subordinated Lender’s rights of subrogation,
reimbursement, or contribution against any Subordinated Borrower, any Loan
Proceeds Note Guarantor or any other Person. Each Subordinated Lender expressly
waives any rights or defenses it may have by reason of protection afforded to
any Subordinated Borrower, any Loan Proceeds Note Guarantor or any other Person
with respect to the Senior Obligations pursuant to any anti-deficiency laws or
other laws of similar import which limit or discharge the principal debtor’s
indebtedness upon judicial or nonjudicial foreclosure of real property or
personal property collateral for the Senior Obligations, if any.

 

(c)  Each Subordinated Lender agrees that, without
the necessity of any reservation of rights against it, and without notice to or
further assent by it, any demand for payment of the Senior Obligations made by
the Borrower may be rescinded in whole or in part by the Borrower, and any
Senior Obligation may be continued, and the Senior Obligations, or the
liability of any Subordinated Borrower or any Loan Proceeds Note Guarantor or
any other party upon or for any part thereof, or any Guarantee therefor or right
of offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived, surrendered, or
released by the Borrower, in each case without notice to or further assent by
such Subordinated Lender, which will remain bound under this Agreement and
without impairing, abridging, releasing or affecting the subordination and
other agreements provided for herein.

 

(d)  Each Subordinated Lender waives any and all
notice of the creation, renewal, extension or accrual of any of the Senior
Obligations and notice of or proof of reliance by the Borrower upon this
Agreement. The Senior Obligations, and any of them, shall be deemed
conclusively to have been created, contracted or incurred in reliance upon this
Agreement, and all dealings between any Subordinated Borrower and the

 

F-6

 

Borrower shall be deemed to
have been consummated in reliance upon this Agreement. Each Subordinated Lender
acknowledges and agrees that the Borrower has relied upon the subordination and
other agreements provided for herein in consenting to this Agreement. Each
Subordinated Lender waives notice of or proof of reliance on this Agreement and
protest, demand for payment and notice of default.

 

SECTION 2.4. Legend.
Any and all instruments or records now or hereafter creating or evidencing the
Subordinated Obligations, whether upon refunding, extension, renewal,
refinancing, replacement or otherwise, shall contain the following legend:

 

“Notwithstanding anything contained herein to
the contrary, neither the principal of nor the interest on, nor any other
amounts payable in respect of, the indebtedness created or evidenced by this
instrument or record shall become due or be paid or payable, except to the
extent permitted under the Offering Proceeds Note Subordination Agreement dated
March 14, 2006, among Level 3 Communications, Inc., [any additional
Subordinated Lenders,] Level 3 Communications, LLC[, any additional
Subordinated Borrowers] and Level 3 Financing, Inc., which Offering Proceeds
Note Subordination Agreement is incorporated herein with the same effect as if
fully set forth herein.”

 

SECTION 2.5. Transfer
of Subordinated Obligations. Each Subordinated Lender agrees that it will
not sell, assign, transfer or otherwise dispose of all or any part of the
Subordinated Obligations owed to it unless the Person to whom such sale,
assignment, transfer or disposition is made shall acknowledge in writing
(delivered to the Borrower and the Purchasers) that it shall be bound by the
terms of this Agreement to the same extent as such Subordinated Lender,
including the terms of this Section 2.5, as though it is a party hereto as of
the date hereof.

 

SECTION 2.6. Obligations
Hereunder Not Affected. (a)  All
rights and interests of the Borrower hereunder, and all agreements and
obligations of each Subordinated Lender hereunder, shall remain in full force
and effect irrespective of:

 

(i)                     any
lack of validity or enforceability of the Loan Proceeds Note, the Credit
Agreement or any document contemplated thereby;

 

(ii)                  any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Senior Obligations, or any other amendment or waiver of or
consent to departure from the Loan Proceeds Note;

 

(iii)               any
release, amendment, waiver or other modification, whether in writing or by
course of conduct or otherwise, of, or consent to departure from, any Loan
Proceeds Note Guarantee; or

 

F-7

 

(iv)              any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Subordinated Borrower in respect of its Senior Obligations or
of any Subordinated Lender in respect of this Agreement.

 

(b)  This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of the Senior
Obligations or any part thereof is rescinded or must otherwise be returned by
the Borrower upon the insolvency, bankruptcy or reorganization of any Subordinated
Borrower or otherwise, all as though such payment had not been made.

 

ARTICLE III

 

Representations
and Warranties of the Subordinated Lenders

 

Each
Subordinated Lender represents and warrants to the Borrower that:

 

(a)  It is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized.

 

(b)  The execution, delivery and performance by it
of this Agreement and the consummation of the transactions contemplated hereby
are within its powers, have been duly authorized by all necessary action on its
part, require no action by or in respect of, or filing with, any court or
governmental or regulatory body or agency (other than such as have been duly
taken or made) and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its certificate of
incorporation or by-laws (or other organizational documents, as applicable) or
of any material agreement, judgment, injunction, order, decree or other
instrument binding upon it or any of its subsidiaries.

 

(c)  This Agreement constitutes a valid and
binding agreement of such Subordinated Lender, enforceable against such
Subordinated Lender in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and equitable principles of general applicability.

 

ARTICLE IV

 

Miscellaneous

 

SECTION 4.1. Notices.
All communications and notices hereunder shall be in writing and shall be
mailed or delivered and sent by fax and confirmed at 1025 Eldorado Boulevard,
Broomfield, Colorado 80021, attention: General Counsel (Telecopy No.
720-888-5127; Telephone Confirm 720-888-2505), with a copy in like manner to
Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial
Center, North Tower, New York, New York, 10080 (Telecopy No. 212-449-9435).

 

F-8

 

SECTION 4.2. Successors
and Assigns. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party. All representations, warranties, promises and agreements
by or on behalf of each Subordinated Lender and each Subordinated Borrower that
are contained in this Agreement shall bind its successors and assigns and inure
to the benefit of the Borrower and the successors and assigns of the Borrower. Each
Subordinated Lender and each Subordinated Borrower agrees that it shall not
assign or delegate any of its obligations under this Agreement without the
prior written consent of the Borrower, and any attempted assignment or
delegation without such consent shall be void and of no effect.

 

SECTION 4.3. Governing
Law; Jurisdiction; Consent to Service of Process. (a)    THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

(b)  Each Subordinated Lender 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 this Agreement, 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 shall affect any right that
the Borrower may otherwise have to bring any action or proceeding relating to
this Agreement against any Subordinated Lender or its properties in the courts
of any jurisdiction.

 

(c)  Each Subordinated Lender 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 proceeding arising out of or relating to this Agreement
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 Subordinated Lender hereby irrevocably
consents to service of process in the manner provided for notices in Section
4.1 hereto. Nothing in this

 

F-9

 

Agreement will affect the right
of any party to this Agreement to serve process in any other manner permitted
by law.

 

SECTION 4.4. Waivers;
Amendment. No failure or delay of the Borrower in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power by the Borrower preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Borrower hereunder and instruments creating or
securing its respective Senior Obligations are cumulative and are not exclusive
of any other rights or remedies provided by law. Neither this Agreement nor any
provision hereof may be waived, amended or modified except in accordance with
Section 6.11 of the Credit Agreement pursuant to an agreement or agreements in
writing entered into by the Borrower, each Subordinated Lender and each
Subordinated Borrower intended to be bound thereby.

 

SECTION 4.5. Waiver
of Claims. (a)  To the maximum extent permitted by law, each
Subordinated Lender waives any claim it might have against the Borrower with
respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of the
Borrower or its directors, officers, employees, agents or affiliates with
respect to any exercise of rights or remedies under the Loan Proceeds Note. Neither
the Borrower nor any of its respective directors, officers, employees, agents
or affiliates shall be liable for failure to demand, collect or realize upon
any Loan Proceeds Note Guarantee or for any delay in doing so or shall be under
any obligation to take any other action whatsoever with regard to the Loan
Proceeds Note or any part thereof.

 

(b)  Each Subordinated Lender, for itself and on
behalf of its successors and assigns, hereby waives any and all now existing or
hereafter arising rights it may have to require the Borrower to marshal assets
for the benefit of such Subordinated Lender, or to otherwise direct the timing,
order or manner of any enforcement of the Loan Proceeds Note. The Borrower is
under no duty or obligation, and each Subordinated Lender hereby waives any
right it may have to compel the Borrower, to pursue any Loan Proceeds Note
Guarantor or other Person who may be liable for the Senior Obligations.

 

(c)  Each Subordinated Lender hereby waives and
releases all rights which a guarantor or surety with respect to the Senior
Obligations could exercise.

 

(d)  Each Subordinated Lender hereby waives any
duty on the part of the Borrower to disclose to it any fact known or hereafter
known by the Borrower relating to the operation or financial condition of any
Subordinated Borrower or any Loan Proceeds Note Guarantor, or their respective
businesses. Each Subordinated Lender enters into this Agreement based solely
upon its independent knowledge of the applicable Subordinated Borrower’s results
of operations, financial condition and business and such Subordinated Lender
assumes full responsibility for obtaining any further or future information
with

 

F-10

 

respect to the applicable
Subordinated Borrower or its results of operations, financial condition or
business.

 

SECTION 4.6. Further
Assurances. Each Subordinated Lender and each Subordinated Borrower, at its
own expense and at any time from time to time, upon the written request of the
Borrower, will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Borrower reasonably may
request for the purposes of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted.

 

SECTION 4.7. Provisions
Define Relative Rights. This Agreement is intended solely for the purpose
of defining the relative rights of the Borrower on the one hand and the
Subordinated Lenders and the Subordinated Borrowers on the other, and no other
Person shall have any right, benefit or other interest under this Agreement.

 

SECTION 4.8. 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE 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 4.9. Severability.
In the event any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good faith negotiations to replace any invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 4.10. Counterparts.
This 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 instrument.

 

SECTION 4.11. Headings.
Article and Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.

 

F-11

 

SECTION 4.12. Additional
Subordinated Borrowers. Upon execution and delivery by, as applicable, any
Subsidiary of Level 3 of an instrument in the form of Annex I attached hereto
or otherwise in a form acceptable to the Borrower, such Subsidiary of Level 3
shall become a Subordinated Borrower hereunder with the same force and effect
as if originally named as a Subordinated Borrower herein. The execution and
delivery of any such instrument shall not require the consent of any other
Subordinated Borrower hereunder. The rights and obligations of each
Subordinated Borrower herein shall remain in full force and effect
notwithstanding the addition of any Subordinated Borrower as a party to this
Agreement.

 

SECTION 4.13. Additional
Subordinated Lenders. Upon execution and delivery by any Subsidiary of
Level 3 of an instrument in the form of Annex II attached hereto or otherwise
in a form acceptable to the Borrower, such Subsidiary of Level 3 shall become a
Subordinated Lender hereunder with the same force and effect as if originally
named as a Subordinated Lender herein. The execution and delivery of any such
instrument shall not require the consent of any other Subordinated Lender
hereunder. The rights and obligations of each Subordinated Lender herein shall
remain in full force and effect notwithstanding the addition of any
Subordinated Lender as a party to this Agreement.

 

F-12

 

IN
WITNESS WHEREOF, Level 3, Level 3 LLC, as a Subordinated Borrower,
the Borrower (in its capacity as a Subordinated Lender as obligee of the
Offering Proceeds Note) and the Borrower have
caused this Agreement to be duly executed by their respective authorized
representatives as of the day and year first above written.

 

	
   

  	
   

  	
  LEVEL 3 COMMUNICATIONS, LLC,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEVEL 3 COMMUNICATIONS, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEVEL 3 FINANCING, INC., in its
  capacity

  as a Subordinated Lender as obligee of the

  Offering Proceeds Note

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

F-13

 

Annex I to the Offering Proceeds

Note Subordination Agreement

 

SUPPLEMENT
NO. [   ] dated as of
[                  ]
to the Offering Proceeds Note Subordination Agreement dated as of March 14,
2006 (the “Offering Proceeds Note Subordination Agreement”), among
LEVEL 3 COMMUNICATIONS, INC. (“Level 3”), LEVEL 3 COMMUNICATIONS, LLC
(“Level 3 LLC”), each Subsidiary of Level 3 becoming a party
thereto pursuant to Section 4.12 thereof (each such Subsidiary and
Level 3 LLC, a “Subordinated Borrower”), each Subsidiary of Level 3
becoming a party thereto pursuant to Section 4.13 thereof (each such
Subsidiary a “Subordinated Lender”) and LEVEL 3 FINANCING, INC.
(the “Borrower”).

 

Reference is made to the Offering Proceeds Note Subordination
Agreement.

 

Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Offering Proceeds Note Subordination
Agreement.

 

Section 4.12 of the Offering Proceeds Note Subordination Agreement
provides that a Subsidiary of Level 3 may become a Subordinated Borrower under
the Offering Proceeds Note Subordination Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary of
Level 3 (the “New Subordinated Borrower”) is executing this Supplement
to become a Subordinated Borrower under the Offering Proceeds Note
Subordination Agreement in order to comply with the terms of the Credit
Agreement and as consideration for amounts previously advanced to the Borrower
under the Credit Agreement.

 

Accordingly, the New Subordinated Borrower agrees as follows:

 

In accordance with Section 4.12 of the Offering Proceeds Note
Subordination Agreement, the New Subordinated Borrower by its signature below
becomes a Subordinated Borrower under the Offering Proceeds Note Subordination
Agreement with the same force and effect as if originally named therein as a
Subordinated Borrower and the New Subordinated Borrower hereby agrees to all
the terms and provisions of the Offering Proceeds Note Subordination Agreement
applicable to it as a Subordinated Borrower thereunder. Each reference to a “Subordinated
Borrower” in the Offering Proceeds Note Subordination Agreement shall be deemed
to include the New Subordinated Borrower. The Offering Proceeds Note
Subordination Agreement is hereby incorporated herein by reference.

 

The New Subordinated Borrower represents and warrants to the Borrower
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance

 

 

with its terms, subject to
applicable bankruptcy, insolvency, 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.

 

This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
a single contract. This Supplement shall become effective when the Borrower
shall have received counterparts of this Supplement that, when taken together,
bear the signatures of the New Subordinated Borrower and the Borrower. Delivery
of an executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Supplement.

 

Except as expressly supplemented hereby and pursuant to any other
supplement contemplated by Section 4.12 or 4.13 of the Offering Proceeds
Note Subordination Agreement, the Offering Proceeds Note Subordination
Agreement shall remain in full force and effect.

 

THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace any invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

All communications and notices hereunder shall be in writing and given
as provided in Section 4.1 of the Offering Proceeds Note Subordination
Agreement. All communications and notices hereunder to the New Subordinated
Borrower shall be given to it at the address set forth under its signature
below.

 

2

 

IN WITNESS
WHEREOF, the New Subordinated Borrower and the Borrower have duly executed this
Supplement to the Offering Proceeds Note Subordination Agreement as of the day
and year first above written.

 

	
   

  	
  [NAME OF NEW SUBORDINATED

  BORROWER],

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

3

 

Annex II to the Offering Proceeds

Note Subordination Agreement

 

SUPPLEMENT
NO. [   ] dated as of
[                       ]
to the Offering Proceeds Note Subordination Agreement dated as of March 14,
2006 (the “Offering Proceeds Note Subordination Agreement”), among
LEVEL 3 COMMUNICATIONS, INC. (“Level 3”), LEVEL 3 COMMUNICATIONS, LLC
(“Level 3 LLC”), each Subsidiary of Level 3 becoming a party
thereto pursuant to Section 4.12 thereof (each such Subsidiary and
Level 3 LLC, a “Subordinated Borrower”), each Subsidiary of Level 3
becoming a party thereto pursuant to Section 4.13 thereof (each such
Subsidiary a “Subordinated Lender” and, collectively, the “Subordinated
Lenders”) and LEVEL 3 FINANCING, INC. (the “Borrower”).

 

Reference is made to the Offering Proceeds Note Subordination
Agreement.

 

Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Offering Proceeds Note Subordination
Agreement.

 

Section 4.13 of the Offering Proceeds Note Subordination Agreement
provides that a Subsidiary of Level 3 may become a Subordinated Lender under
the Offering Proceeds Note Subordination Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary of
Level 3 (the “New Subordinated Lender”) is executing this Supplement to
become a Subordinated Lender under the Offering Proceeds Note Subordination
Agreement in order to comply with the terms of the Credit Agreement and as
consideration for amounts previously advanced to the Borrower under the Credit
Agreement.

 

Accordingly, the New Subordinated Lender
agrees as follows:

 

In accordance with Section 4.13 of the Offering Proceeds Note
Subordination Agreement, the New Subordinated Lender by its signature below
becomes a Subordinated Lender under the Offering Proceeds Note Subordination
Agreement with the same force and effect as if originally named therein as a
Subordinated Lender and the New Subordinated Lender hereby (a) agrees to
all the terms and provisions of the Offering Proceeds Note Subordination
Agreement applicable to it as a Subordinated Lender thereunder and
(b) represents and warrants that the representations and warranties made
by it as a Subordinated Lender thereunder are true and correct on and as of the
date hereof. Each reference to a “Subordinated Lender” in the Offering Proceeds
Note Subordination Agreement shall be deemed to include the New Subordinated
Lender. The Offering Proceeds Note Subordination Agreement is hereby
incorporated herein by reference.

 

 

The New Subordinated Lender represents and warrants to the Borrower
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
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.

 

This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
a single contract. This Supplement shall become effective when the Borrower
shall have received counterparts of this Supplement that, when taken together,
bear the signatures of the New Subordinated Lender and the Borrower. Delivery
of an executed signature page to this Supplement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Supplement.

 

Except as expressly supplemented hereby and pursuant to any other
supplement contemplated by Section 4.12 or 4.13 of the Offering Proceeds
Note Subordination Agreement, the Offering Proceeds Note Subordination
Agreement shall remain in full force and effect.

 

THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace any invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

All communications and notices hereunder shall be in writing and given
as provided in Section 4.1 of the Offering Proceeds Note Subordination
Agreement. All communications and notices hereunder to the New Subordinated
Lender shall be given to it at the address set forth under its signature below.

 

2

 

IN WITNESS
WHEREOF, the New Subordinated Lender and the Borrower have duly executed this
Supplement to the Offering Proceeds Note Subordination Agreement as of the day
and year first above written.

 

	
   

  	
  [NAME OF NEW SUBORDINATED

  LENDER]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

3

 

EXHIBIT G

 

SUPPLEMENTAL
INDENTURE (this “Supplemental Indenture”) dated as of [    ], among LEVEL 3 FINANCING, INC., a
Delaware corporation (the “Issuer”), LEVEL 3 COMMUNICATIONS, INC., a
Delaware corporation (“Parent”), LEVEL 3 COMMUNICATIONS, LLC, a limited
liability company (“Level 3 LLC”), and THE BANK OF NEW YORK, a New York
banking corporation, as trustee under the Indenture referred to below (the “Trustee”).

 

W I T N E S S E T H :(2)

 

WHEREAS the
Issuer, Parent and the Trustee have heretofore executed and delivered (a) an
Indenture dated as of March 14, 2006 (the “Indenture”; capitalized terms
used but not defined herein having the meanings assigned thereto in the
Indenture), providing for the issuance by the Issuer of its Floating Rate
Senior Notes Due 2011 (the “Securities”), and (b) a Supplemental Indenture
dated [    ], pursuant to which Level 3
LLC has guaranteed the Issuer’s obligations under the Indenture (the “Subordinated
Guarantee”);

 

WHEREAS the
Issuer, Parent, certain lenders (together with their successors and assigns and
any future Lenders under and as defined in the Credit Agreement (as hereafter
defined) (the “Lenders”) and Merrill Lynch Capital Corporation, as
administrative agent and collateral agent (the “Administrative Agent”),
have entered into a Credit Agreement dated as of December 1, 2004 (the “Credit
Agreement”), under which the Issuer has borrowed term loans in an aggregate
principal amount of $730,000,000 from the Lenders (the “Term Loans”);

 

WHEREAS the
obligations of the Issuer under the Credit Agreement and the other Loan
Documents (as defined therein) have been guaranteed by Level 3 LLC;

 

WHEREAS the
proceeds of the Term Loans have been advanced to Level 3 LLC under an
intercompany demand note dated December 1, 2004 in an initial principal amount
of $730,000,000 issued by Level 3 LLC to the Issuer (together with any
additional loan proceeds note issued pursuant to Section 9.02 of the Credit
Agreement, and as such note or any such additional note may be amended from
time to time, the “Loan Proceeds Note”);

 

WHEREAS the
Loan Proceeds Note has been pledged by the Issuer to the Collateral Agent (as
defined in the Credit Agreement) in order to assure the Lenders against loss in
respect of the obligations of the Issuer under the Credit Agreement;

 

(2) Revise recitals and
definitions to reflect any replacement or successor Qualifying Credit Facility.

 

 

WHEREAS
pursuant to Section 1308 of the Indenture, the Trustee is authorized to enter
into a supplemental indenture which subordinates in any bankruptcy, liquidation
or winding up proceeding a guarantee of an Issuer Restricted Subsidiary as
guarantor or borrower pursuant to the Indenture to the obligations of such
Subsidiary under a Qualified Credit Facility;

 

WHEREAS upon
the guarantee of the Securities by an Issuer Restricted Subsidiary (other than
Level 3 LLC), the Issuer, Parent, the Trustee and such Issuer Restricted
Subsidiary shall enter into a supplemental indenture in substantially the form
of this Supplemental Indenture pursuant to which such guarantee will be
subordinated in any bankruptcy, liquidation or winding up proceeding to the
obligations of such Issuer Restricted Subsidiary under the Loan Documents (as defined
in the Credit Agreement);

 

WHEREAS the
Credit Agreement constitutes a Qualified Credit Facility and the guarantee of
the obligations under the Credit Agreement by Level 3 LLC and the issuance and
pledge of the Loan Proceeds Note constitute Guarantees of a Qualified Credit
Facility;

 

WHEREAS
pursuant to Section 901 and Section 1307 of the Indenture, the Trustee,
Parent, the Issuer and Level 3 LLC are authorized to execute and deliver this
Supplemental Indenture;

 

NOW THEREFORE,
in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, Parent, the Issuer,
Level 3 LLC and the Trustee mutually covenant and agree for the equal and ratable
benefit of the holders of the Securities as follows:

 

ARTICLE I

 

Subordination

 

SECTION 1.1. Subordination.
The Trustee hereby agrees that all obligations in respect of any amounts
payable by Level 3 LLC pursuant to the Subordinated Guarantee, including the
guarantee of the payment of principal, premium (if any), interest or all other
amounts payable in respect of the Securities (the “Subordinated Obligations”),
shall be subordinate and junior in right of payment, to the extent and in the
manner provided in the Indenture (as supplemented by this Supplemental
Indenture), to the prior payment in full in cash of all obligations (including
without limitation the Obligations (as defined in the Credit Agreement)) of
Level 3 LLC under or in respect of the Loan Documents (as defined in the Credit
Agreement) and the Loan Proceeds Note, including the payment of principal,
premium (if any), interest (including interest arising after the commencement
of a bankruptcy or other proceeding, whether or not such a claim is permitted
in such proceeding), the guarantees thereof or all other amounts payable
thereunder (the “Senior Obligations”).

 

SECTION 1.2. Subordination
in the Event of Dissolution or Insolvency of Level 3 LLC. Upon any
distribution of assets of Level 3 LLC in connection with its

 

G-2

 

dissolution or insolvency or
upon any dissolution, winding up, liquidation or reorganization of Level 3 LLC,
whether in bankruptcy, insolvency, reorganization, arrangement or receivership
or similar proceedings, or upon any assignment for the benefit of creditors or
any other marshaling of the assets and liabilities of Level 3 LLC:

 

(a)  the holders of the Senior Obligations (the “Senior
Creditors”) shall first be entitled to receive payment in full in cash of
the Senior Obligations in accordance with the terms of such Senior Obligations
before the Securityholders shall be entitled to receive any payment on account
of the Subordinated Obligations owed by Level 3 LLC in respect of the
Securities, whether of principal, premium (if any), interest, pursuant to the
Subordinated Guarantee or otherwise; and

 

(b)  any payment by, or distribution of the assets
of, Level 3 LLC of any kind or character, whether in cash, property or securities,
to which the Securityholders would be entitled except for the provisions of
Section 1308 of the Indenture and this Supplemental Indenture shall be paid or
delivered by the Person making such payment or distribution (whether a trustee
in bankruptcy, a receiver, custodian or liquidating trustee or otherwise)
directly to the Administrative Agent or the Senior Creditors to the extent
necessary to make payment in full in cash of all Senior Obligations remaining
unpaid, after giving effect to any concurrent payment or distribution to the
Administrative Agent or the Senior Creditors in respect of the Senior
Obligations.

 

SECTION 1.3. Certain
Payments Held in Trust. In the event that any payment by, or distribution
of the assets of, Level 3 LLC of any kind or character, whether in cash,
property or securities, and whether directly or otherwise, shall be received by
or on behalf of the Trustee or the Securityholders at a time when such payment
is prohibited by or contrary to the agreements set forth in this Supplemental
Indenture, such payment or distribution shall be held in trust for the benefit
of, and shall be paid over to, the Administrative Agent or the Senior Creditors
to the extent necessary to make payment in full in cash of all Senior
Obligations remaining unpaid, after giving effect to any concurrent payment or
distribution to the Administrative Agent or the Senior Creditors in respect of
such Senior Obligations.

 

SECTION
1.4   Trustee Not Fiduciary. The
Trustee shall not be deemed to owe any fiduciary duty to the Senior Creditors
and shall not be liable to any such Senior Creditor if the Trustee shall in
good faith mistakenly pay over or distribute to the Securityholders or to the
Issuer or to any other person cash, property or securities to which any holders
of Senior Obligations shall be entitled by virtue of this Article or otherwise.
With respect to the holders of Senior Obligations, the Trustee undertakes to
perform or to observe only such of its covenants or obligations as are
specifically set forth in this Article and no implied covenants or obligations
with respect to holders of Senior Obligations shall be read into this
Supplemental Indenture against the Trustee.

 

SECTION 1.5. Legend.
Any and all instruments or records now or hereafter creating or evidencing the
Subordinated Obligations, whether upon refunding,

 

G-3

 

extension, renewal,
refinancing, replacement or otherwise, shall contain the following legend:

 

“Notwithstanding anything contained herein to
the contrary, neither the principal of nor the interest on, nor any other
amounts payable in respect of, the indebtedness created or evidenced by this
instrument or record shall be paid or payable with or by the funds provided by
Level 3 Communications, LLC, except to the extent permitted under the
Supplemental Indenture dated [    ],
among Level 3 Communications, Inc., Level 3 Communications, LLC, Level 3
Financing, Inc. and the Trustee, which Supplemental Indenture is incorporated
herein with the same effect as if fully set forth herein.”

 

SECTION 1.6. Obligations
Hereunder Not Affected. So long as the Credit Agreement shall constitute a
Qualified Credit Facility, this Supplemental Indenture shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
the Senior Obligations or any part thereof shall be rescinded or must otherwise
be returned by the Administrative Agent and the Senior Creditors upon the
insolvency, bankruptcy or reorganization of Level 3 LLC or otherwise, all as
though such payment had not been made.

 

ARTICLE II

 

Miscellaneous

 

SECTION 2.1. Governing
Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

SECTION 2.2. Modification.
No modification, amendment or waiver of any provision of this Supplemental
Indenture shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.

 

SECTION 2.3. Opinion
of Counsel. Concurrently with the execution and delivery of this
Supplemental Indenture, the Issuer shall deliver to the Trustee an Opinion of
Counsel to the effect that this Supplemental Indenture has been duly
authorized, executed and delivered by each of Parent, the Issuer and Level 3
LLC and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors’
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, this Supplemental Indenture is a

 

G-4

 

legal, valid and binding
obligation of Parent, the Issuer and Level 3 LLC, enforceable against each of
them in accordance with its terms.

 

SECTION 2.4.  Ratification
of Indenture; Supplemental Indentures Part of Indenture. Except as
expressly amended hereby, the Indenture is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof shall remain in
full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.

 

SECTION 2.5. Counterparts.
The parties may sign any number of copies of this Supplemental Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.

 

SECTION 2.8. Headings.
Article and Section headings used herein are for convenience of reference only,
are not part of this Supplemental Indenture and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Supplemental Indenture.

 

G-5

 

IN WITNESS
WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed as of the date first above written.

 

	
   

  	
  LEVEL 3 COMMUNICATIONS, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 COMMUNICATIONS, LLC,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as Trustee,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

G-6

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