Document:

Exhibit 10.1

 

EXECUTION COPY

 

 

 

PURCHASE AGREEMENT

 

AMONG

 

LEUCADIA NATIONAL CORPORATION,

 

BALDWIN ENTERPRISES, INC.,

 

LEVEL 3 COMMUNICATIONS, LLC

 

AND

 

LEVEL 3 COMMUNICATIONS, INC.

 

Dated as of October 30, 2005

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  PURCHASE AND
  SALE OF MEMBERSHIP UNITS

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  Components of
  Purchase Price

  	
  10

  
	
  SECTION 2.2.

  	
  Substitution
  Rights

  	
  11

  
	
  SECTION 2.3.

  	
  Closing Date
  Transactions

  	
  12

  
	
  SECTION 2.4.

  	
  Allocation of
  Purchase Price

  	
  12

  
	
  SECTION 2.5.

  	
  Further
  Assurances

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  ADJUSTMENT TO
  PURCHASE PRICE

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  Closing Date
  Adjustments

  	
  13

  
	
  SECTION 3.2.

  	
  Post-Closing
  Determination

  	
  14

  
	
  SECTION 3.3.

  	
  Post-Closing
  Adjustment

  	
  15

  
	
  SECTION 3.4.

  	
  Estimate of
  Adjusted Net Working Capital

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  CLOSING

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE SELLER

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  Corporate
  Organization

  	
  16

  
	
  SECTION 5.2.

  	
  Qualification to
  Do Business

  	
  16

  
	
  SECTION 5.3.

  	
  No Conflict or
  Violation

  	
  16

  
	
  SECTION 5.4.

  	
  Consents and
  Approvals

  	
  16

  
	
  SECTION 5.5.

  	
  Authorization
  and Validity of Agreement

  	
  17

  
	
  SECTION 5.6.

  	
  Capitalization
  and Related Matters

  	
  17

  
	
  SECTION 5.7.

  	
  Equity
  Investments

  	
  18

  
	
  SECTION 5.8.

  	
  Financial
  Statements

  	
  18

  
	
  SECTION 5.9.

  	
  Absence of
  Certain Changes or Events

  	
  19

  
	
  SECTION 5.10.

  	
  Tax Matters

  	
  20

  
	
  SECTION 5.11.

  	
  Absence of
  Undisclosed Liabilities

  	
  22

  
	
  SECTION 5.12.

  	
  Company Real
  Property

  	
  22

  
	
  SECTION 5.13.

  	
  Assets of the
  Company and its Subsidiaries

  	
  22

  
	
  SECTION 5.14.

  	
  Intellectual
  Property

  	
  22

  
	
  SECTION 5.15.

  	
  Licenses and
  Permits

  	
  22

  
	
  SECTION 5.16.

  	
  Compliance with
  Law

  	
  22

  
				

 

i

 

	
   

  	
   

  	
  Page

  
	
  SECTION 5.17.

  	
  Litigation

  	
  22

  
	
  SECTION 5.18.

  	
  Contracts

  	
  22

  
	
  SECTION 5.19.

  	
  Employee Plans

  	
  22

  
	
  SECTION 5.20.

  	
  Insurance

  	
  22

  
	
  SECTION 5.21.

  	
  Transactions
  with Directors, Officers, Managers, and Affiliates

  	
  22

  
	
  SECTION 5.22.

  	
  Suppliers and
  Customers

  	
  22

  
	
  SECTION 5.23.

  	
  Labor Matters

  	
  22

  
	
  SECTION 5.24.

  	
  Environmental
  Matters

  	
  22

  
	
  SECTION 5.25.

  	
  No Brokers

  	
  22

  
	
  SECTION 5.26.

  	
  Acquisition of
  the Shares

  	
  22

  
	
  SECTION 5.27.

  	
  SBC

  	
  22

  
	
  SECTION 5.28.

  	
  No Other
  Representations or Warranties

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE BUYER AND LEVEL 3

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 6.1.

  	
  Corporate
  Organization

  	
  22

  
	
  SECTION 6.2.

  	
  Qualification to
  Do Business

  	
  22

  
	
  SECTION 6.3.

  	
  No Conflict or
  Violation

  	
  22

  
	
  SECTION 6.4.

  	
  Consents and
  Approvals

  	
  22

  
	
  SECTION 6.5.

  	
  Authorization
  and Validity of Agreement

  	
  22

  
	
  SECTION 6.6.

  	
  Capitalization
  and Related Matters.

  	
  22

  
	
  SECTION 6.7.

  	
  SEC Filings

  	
  22

  
	
  SECTION 6.8.

  	
  No Material
  Adverse Effect

  	
  22

  
	
  SECTION 6.9.

  	
  Private Placement

  	
  22

  
	
  SECTION 6.10.

  	
  No Brokers

  	
  22

  
	
  SECTION 6.11.

  	
  Sufficiency of
  Funds

  	
  22

  
	
  SECTION 6.12.

  	
  No Other
  Representations or Warranties

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  COVENANTS OF
  LEUCADIA AND THE SELLER

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1.

  	
  Conduct of
  Business Before the Closing Date

  	
  22

  
	
  SECTION 7.2.

  	
  Consents and
  Approvals

  	
  22

  
	
  SECTION 7.3.

  	
  Access to
  Properties and Records

  	
  22

  
				

 

ii

 

	
   

  	
   

  	
  Page

  
	
  SECTION 7.4.

  	
  Pre-Closing
  Transfers

  	
  22

  
	
  SECTION 7.5.

  	
  Registration
  Statement and Level 3 Commission Filing Requirements

  	
  22

  
	
  SECTION 7.6.

  	
  Negotiations

  	
  22

  
	
  SECTION 7.7.

  	
  Certain Real
  Estate Matters

  	
  22

  
	
  SECTION 7.8.

  	
  Commercially
  Reasonable Efforts

  	
  22

  
	
  SECTION 7.9.

  	
  Notice of Breach

  	
  22

  
	
  SECTION 7.10.

  	
  Stock
  Certificate Legend

  	
  22

  
	
  SECTION 7.11.

  	
  Non-Solicitation

  	
  22

  
	
  SECTION 7.12.

  	
  Employees and
  Employee Benefits

  	
  22

  
	
  SECTION 7.13.

  	
  Tax Matters

  	
  22

  
	
  SECTION 7.14.

  	
  Name

  	
  22

  
	
  SECTION 7.15.

  	
  Reimbursements;
  Cash Balance

  	
  22

  
	
  SECTION 7.16.

  	
  Transferred
  Benefit Plans

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  COVENANTS OF
  LEVEL 3 AND THE BUYER

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  Commercially
  Reasonably Efforts

  	
  22

  
	
  SECTION 8.2.

  	
  Consents and
  Approvals

  	
  22

  
	
  SECTION 8.3.

  	
  Notice of Breach

  	
  22

  
	
  SECTION 8.4.

  	
  Listing of
  Shares

  	
  22

  
	
  SECTION 8.5.

  	
  WilTel Benefits
  Plans

  	
  22

  
	
  SECTION 8.6.

  	
  Access to
  Properties and Records

  	
  22

  
	
  SECTION 8.7.

  	
  Reimbursements;
  Cash Balance

  	
  22

  
	
  SECTION 8.8.

  	
  Retention
  Payments

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  INDEMNIFICATION

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  Survival

  	
  22

  
	
  SECTION 9.2.

  	
  Indemnification
  by Leucadia and the Seller

  	
  22

  
	
  SECTION 9.3.

  	
  Indemnification
  by Level 3 and the Buyer

  	
  22

  
	
  SECTION 9.4.

  	
  Procedures for
  Indemnification

  	
  22

  
	
  SECTION 9.5.

  	
  Exclusive Remedy

  	
  22

  
				

 

iii

 

	
   

  	
   

  	
  Page

  
	
  SECTION 10.

  	
  CONDITIONS
  PRECEDENT TO PERFORMANCE BY THE SELLER

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1.

  	
  Representations
  and Warranties of the Buyer and Level 3

  	
  22

  
	
  SECTION 10.2.

  	
  Performance of
  the Obligations of the Buyer and Level 3

  	
  22

  
	
  SECTION 10.3.

  	
  HSR Act

  	
  22

  
	
  SECTION 10.4.

  	
  No Violation of
  Orders

  	
  22

  
	
  SECTION 10.5.

  	
  No Material
  Adverse Change

  	
  22

  
	
  SECTION 10.6.

  	
  Lease Agreement

  	
  22

  
	
  SECTION 10.7.

  	
  Registration
  Rights Agreement

  	
  22

  
	
  SECTION 10.8.

  	
  Securities
  Matters

  	
  22

  
	
  SECTION 10.9.

  	
  Opinion of
  Counsel

  	
  22

  
	
  SECTION 10.10.

  	
  Other Closing
  Documents

  	
  22

  
	
  SECTION 10.11.

  	
  SBC Consent to
  Assignment

  	
  22

  
	
  SECTION 10.12.

  	
  The Buyer
  Reimbursements; Cash Balance

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  CONDITIONS
  PRECEDENT TO PERFORMANCE BY THE BUYER AND LEVEL 3

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 11.1.

  	
  Representations
  and Warranties of Leucadia and the Seller

  	
  22

  
	
  SECTION 11.2.

  	
  Performance of
  the Obligations of Leucadia and the Seller

  	
  22

  
	
  SECTION 11.3.

  	
  Approvals

  	
  22

  
	
  SECTION 11.4.

  	
  HSR Act

  	
  22

  
	
  SECTION 11.5.

  	
  No Violation of
  Orders

  	
  22

  
	
  SECTION 11.6.

  	
  No Pension Plan
  Termination

  	
  22

  
	
  SECTION 11.7.

  	
  No Material
  Adverse Change

  	
  22

  
	
  SECTION 11.8.

  	
  Pre-Closing
  Transfers

  	
  22

  
	
  SECTION 11.9.

  	
  The Company’s
  Credit Documents

  	
  22

  
	
  SECTION 11.10.

  	
  The Company’s
  Real Estate Debt Documents

  	
  22

  
	
  SECTION 11.11.

  	
  Lease Agreement

  	
  22

  
	
  SECTION 11.12.

  	
  Registration
  Rights Agreement

  	
  22

  
	
  SECTION 11.13.

  	
  Opinion of
  Counsel

  	
  22

  
	
  SECTION 11.14.

  	
  Other Closing
  Documents

  	
  22

  
	
  SECTION 11.15.

  	
  Tax Related
  Documentation

  	
  22

  
	
  SECTION 11.16.

  	
  The Seller
  Pre-Closing Transfers, Reimbursements and Cash Balance

  	
  22

  
				

 

iv

 

	
   

  	
   

  	
  Page

  
	
  SECTION 12.

  	
  TERMINATION

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 12.1.

  	
  Conditions of
  Termination

  	
  22

  
	
  SECTION 12.2.

  	
  Effect of Termination

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  MISCELLANEOUS

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 13.1.

  	
  Successors and
  Assigns

  	
  22

  
	
  SECTION 13.2.

  	
  Governing Law,
  Jurisdiction

  	
  22

  
	
  SECTION 13.3.

  	
  Expenses

  	
  22

  
	
  SECTION 13.4.

  	
  Severability

  	
  22

  
	
  SECTION 13.5.

  	
  Notices

  	
  22

  
	
  SECTION 13.6.

  	
  Parent
  Guaranties.

  	
  22

  
	
  SECTION 13.7.

  	
  Amendments;
  Waivers

  	
  22

  
	
  SECTION 13.8.

  	
  Public
  Announcements

  	
  22

  
	
  SECTION 13.9.

  	
  Entire Agreement

  	
  22

  
	
  SECTION 13.10.

  	
  Parties in
  Interest

  	
  22

  
	
  SECTION 13.11.

  	
  Scheduled
  Disclosures

  	
  22

  
	
  SECTION 13.12.

  	
  Section and
  Paragraph Headings

  	
  22

  
	
  SECTION 13.13.

  	
  Counterparts

  	
  22

  
				

 

v

 

INDEX TO SCHEDULES

 

	
  1.1

  	
  Adjusted Net
  Working Capital Categories

  
	
  1.2

  	
  Seller’s
  Knowledge

  
	
  1.5(a)

  	
  Miscellaneous
  Retention Plans

  
	
  1.5(b)

  	
  Former Executive
  Retention Agreements

  
	
  3.4

  	
  Estimate of
  Adjusted Net Working Capital

  
	
  5.1

  	
  Subsidiaries

  
	
  5.2

  	
  Qualification to
  do Business

  
	
  5.3

  	
  No Conflict or
  Violation

  
	
  5.4

  	
  Leucadia/Seller/Company
  Consents and Approvals

  
	
  5.6(b)

  	
  Capitalization
  and Related Matters

  
	
  5.7

  	
  Equity
  Investments

  
	
  5.8

  	
  Financial Statements

  
	
  5.9

  	
  Absence of
  Certain Changes or Events

  
	
  5.10

  	
  Tax Matters

  
	
  5.11

  	
  Absence of
  Undisclosed Liabilities

  
	
  5.12(a)

  	
  Owned Real
  Property

  
	
  5.12(b)

  	
  Leased Real
  Property

  
	
  5.12(c)

  	
  Lease Amendments
  Adverse to the Businesses

  
	
  5.12(d)

  	
  Agreements
  Affecting Company Real Property

  
	
  5.12(e)

  	
  Material
  Improvements, Systems and Fixtures

  
	
  5.13(a)

  	
  Assets of the
  Company and the Retained Subsidiaries

  
	
  5.14(a)

  	
  Unlicensed
  IP/Non-Compliance

  
	
  5.14(b)

  	
  Listed
  Intellectual Property

  
	
  5.14(c)

  	
  Agreements
  relating to the Intellectual Property

  
	
  5.14(d)

  	
  Intellectual
  Property Claims and Indemnification Agreements

  
	
  5.15

  	
  Licenses and
  Permits

  
	
  5.16

  	
  Compliance with
  Law

  
	
  5.17

  	
  Litigation

  
	
  5.18(a)

  	
  Contracts

  
	
  5.18(f)

  	
  Contracts with
  Beneficial Pricing Clauses

  
	
  5.18(h)

  	
  Maximum
  Liability - Leased Shared Network Circuits

  
	
  5.18(i)

  	
  Shared Network
  Circuits

  
	
  5.19(a)

  	
  Employee Benefit
  Plans

  
	
  5.19(g)

  	
  Claims/Actions
  against Employee Benefit Plans

  
	
  5.19(h)

  	
  ERISA
  Non-Compliance/Company Securities Included in Assets of Employee Benefit
  Plans

  
	
  5.19(i)

  	
  Employee Benefit
  Plan Payments

  
	
  5.19(j)

  	
  OPEB Plans
  Participants

  
	
  5.20

  	
  Insurance

  
	
  5.21

  	
  Transactions
  with Directors, Officers, Managers and Affiliates

  
	
  5.22(a)

  	
  Top Suppliers

  
	
  5.22(b)

  	
  Top Customers

  
	
  5.23(a)

  	
  Non-Terminable
  Employment Agreements/ Employment Agreements Requiring Payments/Consulting
  Agreements

  
	
  5.23(b)

  	
  Labor Law
  Violations/Notices

  

 

vi

 

	
  5.23(c)(i)

  	
  Maximum
  Aggregate Severance

  
	
  5.23(c)(ii)

  	
  Maximum
  Aggregate Obligations Under Company Plans

  
	
  5.24

  	
  Environmental
  Matters

  
	
  5.27(a)

  	
  SBC Credits,
  Refunds or Payments

  
	
  5.27(b)

  	
  Included
  Services Billed Amounts

  
	
  5.27(c)

  	
  SBC Material
  Disputes

  
	
  6.4

  	
  Buyer/Level 3
  Consents and Approvals

  
	
  6.6

  	
  Capitalization
  and Related Matters

  
	
  7.1(a)

  	
  Conduct of
  Businesses Before Closing Date

  
	
  7.1(a)(vii)

  	
  New Employment
  Plans/Arrangements

  
	
  7.1(b)(vi)

  	
  Capital
  Expenditure Projects

  
	
  7.4

  	
  Excluded Assets;
  Excluded Liabilities

  
	
  Annex A to 7.4

  	
  WilTel
  Technology Center, LLC Assets

  
	
  7.7(a)

  	
  Leases to be
  Renewed

  
	
  7.7(b)

  	
  Leases to Expire

  
	
  7.7(c)

  	
  Leases to be
  Terminated

  
	
  9.2(a)

  	
  Leucadia Covered
  Matters

  
	
  9.3(a)(iii)

  	
  Level 3 Covered
  Matters

  
	
  10.6

  	
  Form of
  Lease Agreement for Company’s Tulsa, Oklahoma headquarters

  
	
  10.9

  	
  Form of
  Opinion of Counsel to the Buyer

  
	
  10.11

  	
  SBC Consent to
  Assignment

  
	
  11.3

  	
  Required
  Consents and Approvals

  
	
  11.13

  	
  Form of
  Opinion of Counsel to the Seller

  

 

INDEX TO EXHIBITS

 

	
  Exhibit A

  	
  Form of
  Registration Rights Agreement

  

 

vii

 

PURCHASE AGREEMENT

 

PURCHASE AGREEMENT, dated as of October 30, 2005
(this “Agreement”), by and among Leucadia National Corporation, a New
York corporation (“Leucadia”), Baldwin Enterprises, Inc., a
Colorado corporation and wholly owned Subsidiary of Leucadia (the “Seller”),
Level 3 Communications, LLC, a Delaware limited liability company (the “Buyer”),
and Level 3 Communications, Inc., a Delaware corporation (“Level 3”).

 

W I  T  N  E  S  S  E  T
H:

 

WHEREAS, WilTel Communications Group, LLC, a Nevada
limited liability company (the “Company”), is a telecommunications
company that, together with its Subsidiaries, conducts the Telecommunications
Business and the Vyvx Business (together, the “Businesses”);

 

WHEREAS, Seller owns all of the issued and outstanding
membership units of the Company (the “Membership Units”); and

 

WHEREAS, the Buyer desires to purchase the Membership
Units from the Seller, and the Seller desires to sell the Membership Units to
the Buyer, in each case, upon the terms and subject to the conditions set forth
in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and
the respective covenants and agreements hereinafter contained, the parties
hereby agree as follows:

 

SECTION 1.  DEFINITIONS.

 

As used in this Agreement, the following terms shall
have the following meanings:

 

“Action” — See Section 5.17;

 

“Actual Adjusted Net Working Capital” — See Section 3.2;

 

“Actual Adjusted Net Working Capital Report” — See
Section 3.2;

 

“Additional Cash Amount” — See Section 2.1;

 

“Adjusted Net Working Capital” shall mean the
amount equal to (i) those current assets of the Company and the Retained
Subsidiaries (other than Excluded Assets) on a consolidated basis in the
balance sheet categories identified on Schedule 1.1 as being
included in the calculation of Adjusted Net Working Capital (it being
understood that current assets will be deemed to be increased by the remaining
balance of any reserve as of the Measurement Date that had been established on
or prior to October 24, 2005 by the Company or the Retained Subsidiaries
in respect of SBC disputes as to which written claims have been received by the
Company or its Subsidiaries on or before October 24, 2005, which increase
shall not exceed the amount of reserves set forth on Schedule 5.27(c))
minus (ii) those current liabilities of the Company and the
Retained Subsidiaries (other than Excluded Liabilities) on a consolidated basis

 

 

in the balance sheet categories identified on Schedule 1.1
as being included in the calculation of Adjusted Net Working Capital, in each
case, as of the close of business on the Measurement Date, and determined in
accordance with GAAP applied on a consistent basis consistent with, and
following the accounting principles, procedures, policies and methods employed
in preparing, the August 31 Balance Sheet;

 

“Affiliates” shall mean, with respect to a
Person, any Person, directly or indirectly, controlling, controlled by or under
common control with the Person specified;

 

“Agreement” — See Preamble hereto;

 

“Aircraft Leases” shall mean (i) Sublease
and Consent Agreement between CXL Aviation, LLC (sublessor) and WilTel Aircraft
Leasing, LLC (subleasee), dated September 30, 2005 (regarding N359WC), (ii) Sublease
and Consent Agreement between CX Aviation, LLC (sublessor) and WilTel Aircraft
Leasing, LLC (subleasee), dated September 30, 2005 (regarding N358WC) and (iii) Hangar
Lease Agreement between Tulsair Beechcraft, Inc. and Williams
Communications, LLC, dated April 25, 2001;

 

“Allocation” — See Section 2.4(a);

 

“August 31 Balance Sheet” — See Section 3.1(b);

 

“August Financial Statements” — See Section 5.8;

 

“Benefit Plan Substitution Right” — See Section 2.2(b);

 

“Businesses” — See Recitals hereto;

 

“Business Day” shall mean a day other than a
Saturday, Sunday or other day on which banks in the State of New York are
required or authorized to close;

 

“Buyer” — See Preamble hereto;

 

“Buyer Indemnitees” — See Section 9.2(a);

 

“Cash Purchase Price” — See Section 2.1;

 

“Cash Substitution Right” — See Section 2.2(a);

 

“Closing” — See Section 4;

 

“Closing Balance Sheet” — See Section 3.2;

 

“Closing Date” — See Section 4;

 

“COBRA” shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, including rules and
regulations adopted thereunder;

 

“Code” shall mean the Internal Revenue Code of
1986, as amended;

 

2

 

“Commission” shall mean the Securities and
Exchange Commission;

 

“Company” — See Recitals hereto;

 

“Company’s Credit Documents” shall mean the (i) Third
Amended and Restated Credit and Guaranty Agreement, dated as of September 24,
2004, among the Company, WilTel Communications, LLC, certain of its domestic
Subsidiaries, as loan parties, the several banks and other financial
institutions or entities from time to time parties thereto as lenders, Credit
Suisse First Boston, acting through its Cayman Islands branch, as
administrative agent, as first lien administrative agent and as second lien
administrative agent, and Wells Fargo Foothill, LLC, as syndication agent, and (ii) First
Amendment to Third Amended and Restated Credit and Guaranty Agreement, dated as
of September 2, 2005, (iii) Second Amended and Restated Security
Agreement, dated as of September 24, 2004, among the Company, WilTel
Communications, LLC, and the additional grantors party thereto in favor of
Credit Suisse First Boston, acting through its Cayman Islands branch, as
administrative agent, as first lien administrative agent and as second lien
administrative agent and (iv) and any related UCC financing statements
filed by the lenders a party thereto;

 

“Company’s Real Estate Debt Documents” shall
mean the (i) Long Term Note in the original principal amount of $100
million, made by WilTel Technology Center, LLC (f/k/a Williams Technology
Center, LLC), as borrower, WilTel Communications Group, LLC (f/k/a Williams
Communications Group, Inc.), as guarantor, and WilTel Communications, LLC
(f/k/a Williams Communications, LLC), as guarantor, in favor of the Williams
Headquarters Building Company, dated October 15, 2002, (ii) Mortgage
with Power of Sale, Security Agreement, Assignment of Leases, Rents and
Profits, Financing Statement and Fixture Filing, dated as of October 15,
2002, made by WilTel Technology Center, LLC (f/k/a Williams Technology Center,
LLC), as mortgagor, to Williams Headquarters Building Company, as mortgagee
(the “Mortgage”), as amended by the First Amendment to the Mortgage,
dated September 24, 2004, by and between Williams Headquarters Building
Company and WilTel Technology Center, LLC (f/k/a Williams Technology Center,
LLC) and (iii) Second Mortgage, Assignment
of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing
dated as of October 15, 2002  by Williams Technology Center, LLC to Bank of
America, N.A., as administrative agent,
dated October 15, 2002, as amended and assigned by Assignment of Beneficiary’s Interest and Amendment
to Mortgage, Assignment of Leases and Rents, Security Agreement and Financing
Statement of WilTel Technology Center, LLC as Mortgagor in favor of Credit
Suisse First Boston, acting through its Cayman Islands Branch, as
Administrative Agent, as First Lien Administrative Agent and as Second Lien
Administrative Agent, as Mortgagee, dated as of September 23, 2004;

 

“Company Real Property” — See Section 5.12(b);

 

“Confidentiality Agreement” shall mean that
certain Non-Disclosure Agreement by and among Leucadia, WilTel and Level 3,
dated October 13, 2004, as amended;

 

“Contracts” — See Section 5.18;

 

3

 

“Covered Employee” shall mean any employee of
the Company or the Retained Subsidiaries having the title of director or above
(other than the Chief Executive Officer of the Company as of the date hereof);

 

“Covered Matter” — See Section 9.2(a)(vii);

 

“Deferred Compensation Plan” — See Section 7.12(b);

 

“Discharged Real Estate Debt Documents” shall
mean the (i) Short Term Note in the original principal amount of
$74,360,295.29, made by WilTel Technology Center, LLC (f/k/a Williams
Technology Center, LLC), as borrower, WilTel Communications Group, Inc.
(f/k/a Williams Communications Group, Inc.), as guarantor, and WilTel
Communications, LLC (f/k/a Williams Communications, LLC), as guarantor, in
favor of the Williams Headquarters Building Company, dated October 15,
2002, (ii) Pledge Agreement, dated as of October 15, 2002, made by CG
Austria, Inc. to Williams Headquarters Building Company and (iii) Equitable
Mortgage, dated as of October 15, 2002 made by CG Austria, Inc. to
Williams Headquarters Building Company;

 

“Employee Benefit Plans” — See Section 5.19(a);

 

“Environmental Laws” shall mean any applicable
laws, regulations or other requirements of law relating to pollution or the
protection of the environment or natural resources;

 

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended, including the rules and
regulations adopted thereunder;

 

“ERISA Affiliate” shall mean any Person under
common control, or treated as a single employer, with the Company or any
Retained Subsidiaries, within the meaning of Section 414(b), (c), (m) or
(o) of the Code;

 

“Estimated Adjusted Net Working Capital” — See Section 3.1(b);

 

“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended;

 

“Excluded Assets” shall mean (i) all cash
and cash equivalents (including checks payable to the Company or any of its
Subsidiaries and deposited into a bank account or lock box prior to the
Measurement Date) of the Company and its Subsidiaries as of the close of
business on the Measurement Date to the extent in excess of $100 million, (ii) marketable
securities, (iii) all
payments to the Company or any of its Affiliates receivable from SBC pursuant
to the SBC Settlement Agreement, (iv) all right, title and interest in and
to the Transferred Subsidiaries, (v) all other rights and assets
set forth on Schedule 7.4 hereto and (vi) any cash received
after the Measurement Date on account of any of the assets set forth in (ii), (iii) or
(v) above;

 

“Excluded Liabilities” shall mean (i) all
liabilities of the Company and its Subsidiaries set forth on Schedule 7.4
hereto (including, without limitation, liabilities relating to the Company’s
Credit Documents, the Company’s Real Estate Debt Documents and the

 

4

 

Retirement Plan) and (ii) those liabilities and
obligations of the Company and its Subsidiaries relating to or arising from the
Excluded Assets;

 

“FCC” — See Section 5.4;

 

“Financial Statements” — See Section 5.8;

 

“Former Executive Retention Agreements” shall
mean those agreements set forth on Schedule 1.5(b);

 

“GAAP” shall mean U.S. generally accepted
accounting principles;

 

“Governmental Entity” shall mean any federal,
state, local or foreign court, governmental, regulatory or other public body,
agency or authority (including self-regulatory organizations), domestic or
foreign;

 

“Hazardous
Material” shall mean any hazardous substance, hazardous waste, contaminant,
pollutant, or toxic substance as defined under applicable Environmental Laws,
including petroleum and its fractions;

 

“HSR Act” — See Section 5.4;

 

“Income Taxes” shall mean all Taxes based upon,
measured by, or calculated with respect to (i) gross or net income or
gross or net receipts or profits (including, but not limited to, any capital
gains, alternative minimum taxes, net worth and any taxes on items of tax
preference, but not including sales, use, goods and services, real or personal
property transfer or other similar taxes), (ii) multiple bases (including,
but not limited to, corporate franchise, doing business or occupation taxes) if
one or more of the bases upon which such tax may be based upon, measured by, or
calculated with respect to, is described in clause (i) above, or (iii) withholding
taxes measured with reference to or as a substitute for any tax described in
clauses (i) or (ii) above; and “Income Tax” shall mean any one
of them;

 

“Indemnitee” — See Section 9.4;

 

“Indemnitor” — See Section 9.4;

 

“Independent Accounting Firm” — See Section 3.2;

 

“Initial Restricted Period” — See Section 7.11(a);

 

“Intellectual Property” shall mean U.S. and
foreign rights under patent, copyright, moral rights, trademark and service
mark (including the goodwill associated therewith), trade name, trade dress,
industrial design, database rights, domain name, trade secret law or any other
similar statutory provision or common law doctrine; all patents and patent
applications in any jurisdiction pertaining to the foregoing, including
re-issues, continuations, divisions, continuations-in-part, renewals or
extensions; and all other applications or registrations related to the
foregoing;

 

5

 

“IRS” shall mean the Internal Revenue Service;

 

“IRUs” — See Section 5.18(c)(i)(B);

 

“July 31 Balance Sheet” — See Section 5.8;

 

“Lease Agreement” — See Section 10.6;

 

“Leased Real Property” — See Section 5.12(b);

 

“Leases” — See Section 5.12(b);

 

“Leucadia” — See Preamble hereto;

 

“Level 3” — See Preamble hereto;

 

“Level 3 Common Stock” shall mean common stock,
par value $0.01 per share, of Level 3;

 

“Level 3 SEC Reports” — See Section 5.26(b);

 

“Licenses and Permits” — See Section 5.15;

 

“Lien” shall mean any mortgage, pledge,
security interest, encumbrance or title defect, lease, lien (statutory or
other), conditional sale agreement, claim, charge, limitation or restriction;

 

“Listed Intellectual Property” — See Section 5.14(b);

 

“Listed License Agreements” — See Section 5.14(c);

 

“Losses” — See Section 9.2(a);

 

“Material Adverse Effect” when used in
connection with the Company and the Retained Subsidiaries or Level 3 and its
Subsidiaries, as the case may be, shall mean any change, circumstance, effect
or event that, individually or when taken together, is or would reasonably be
expected to be materially adverse to (A) the business, assets,
liabilities, condition (financial or other) or results of operations of the
Company and the Retained Subsidiaries or Level 3 and its Subsidiaries, as the
case may be, in each case taken as a whole, except in each case for any change,
circumstance, effect or event (i) affecting the industry in which the
Company or Level 3, as the case may be, operate in general and which does not
disproportionately affect such entity in any material respect, (ii) affecting
general economic, regulatory or political conditions, which does not
disproportionately affect such entity in any material respect, or (iii) clearly
shown to be directly resulting from this Agreement and the announcement or
performance hereof and the transactions contemplated hereby, including without
limitation, the direct impact thereof on relationships with customers, suppliers
or employees, or (B) the ability of the Seller, Leucadia, the Company, the
Retained Subsidiaries or WilTel Technology Center, LLC or Level 3 or its
Subsidiaries, as the case may be, to perform their obligations under this
Agreement, the Lease

 

6

 

Agreement or the Registration Rights Agreement to
which they are a party or to consummate the transactions contemplated hereby or
thereby, including as a consequence of any material impediment, interference or
delay;

 

“Measurement Date” shall mean the earlier to
occur of the Closing Date and December 31, 2005;

 

“Membership Units” — See Recitals hereto;

 

“Miscellaneous Retention Plans” shall mean
those items set forth on Schedule 1.5(a);

 

“Month End” — See Section 3.1(b);

 

“Month End Balance Sheet” — See Section 3.1(b);

 

“Multiemployer Plan” — See Section 5.19(c);

 

“OPEB Plans” shall mean the WilTel Communications, LLC Health Plan
for Full-time Employees and the WilTel Communications, LLC Insurance Plan;

 

“Organizational Documents” shall mean
certificates of incorporation, by-laws, certificates of formation, limited
liability company operating agreements, limited liability partnership
agreements, partnership or limited partnership agreements or other formation or
governing documents of a particular entity;

 

“Owned Real Property” — See Section 5.12(a);

 

“PBGC” shall mean the Pension Benefit Guaranty
Corporation;

 

“Permitted Lien” shall mean (i) all
defects, exceptions, restrictions, easements, rights of way and encumbrances
disclosed in policies of title insurance referred to in Section 5.12(a); (ii) statutory
liens for current Taxes, assessments or other governmental charges not yet
delinquent or the amount or validity of which is being contested in good faith
by appropriate proceedings; (iii) mechanics’, carriers’, workers’,
repairers’ and similar Liens arising or incurred in the ordinary course of
business; (iv) zoning, entitlement and other land use and environmental
regulations by any Governmental Entity; (v) title of a lessor under a
capital or operating lease; (vi) purchase money security interests granted
to vendors with respect to trade payables recorded on the Company’s financial
statements in accordance with GAAP and arising in the ordinary course of
business; and (vii) such other imperfections in title, charges, easements,
restrictions or encumbrances which do not interfere materially with the use,
operation or enjoyment, or materially detract from the value of such property
or asset;

 

“Person” shall mean any individual,
corporation, company, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Entity or other entity;

 

7

 

“Post-Closing Tax Period” shall mean any
taxable period beginning after the Closing Date and the portion starting the
day following the Closing Date of any Straddle Period;

 

“Pre-Closing Taxes” shall mean all liability
for Taxes of the Company or any of its Subsidiaries but, in the case of Taxes
other than Income Taxes, only to the extent in excess of any Taxes reflected in
the determination of the Actual Adjusted Net Working Capital for Pre-Closing
Tax Periods, except for any such liability resulting from any transaction not
in the ordinary course of business occurring on the Closing Date after the
Closing;

 

“Pre-Closing Tax Period” shall mean any taxable
period ending on or before the Closing Date and the portion ending on and
including the Closing Date of any Straddle Period;

 

“Pre-Closing Transfers” — See Section 7.4;

 

“Property Taxes” shall mean all real, personal
and intangible property Taxes, and any similar Taxes;

 

“Purchase Price” — See Section 2.1;

 

“Registration Rights Agreement” — See Section 10.7;

 

“Registration Statement” — See Section 7.5;

 

“Retained Subsidiaries” shall mean all
Subsidiaries of the Company other than the Transferred Subsidiaries;

 

“Retirement Plan” — See Section 7.12(a);

 

“SBC” shall mean SBC Communications Inc.;

 

“SBC Agreement” shall mean the Master Services
Agreement among WilTel Communications, LLC, WilTel Local Network, LLC, SBC
Services, Inc. and SBC Communications Inc., dated as of June 15,
2005;

 

“SBC Settlement Agreement” shall mean the
Termination, Mutual Release and Settlement Agreement, dated June 15, 2005,
among SBC, SBC Operations, Inc., SBC Long Distance, LLC, WilTel
Communications Group, LLC, WilTel Communications LLC and Leucadia;

 

“Securities Act” shall mean the Securities Act
of 1933, as amended;

 

“Seller” — See Preamble hereto;

 

“Seller’s Knowledge,” or “Knowledge of the
Seller”, and other similar phrases shall mean the actual knowledge of the
individuals listed on Schedule 1.2, after due inquiry of the senior
employees of Leucadia, the Seller, the Company and its Subsidiaries who have
administrative or operational responsibility for the particular subject matter
in question;

 

8

 

“Severance Plan” shall mean the Company
Severance Protection Plan effective as of December 1, 2004;

 

“Shared Network Circuits” —  See Section 5.18(i);

 

“Shares” — See Section 2.1;

 

“Software” shall mean computer programs,
including but not limited to source code, object code, executable code,
programming tools, drawings, specifications and data related thereto, in any
form, together with all related documentation;

 

“State PUC” shall mean a state public service
and utility commission or similar Governmental Entity;

 

“Straddle Period” shall mean any taxable period
that commences prior to and includes (but does not end on) the Closing Date;

 

“Straddle Period Tax Proceeding” — See Section 7.13(f);

 

“Straddle Tax Return” shall mean any Tax Return
required to be filed by the Company or any of its Subsidiaries in respect of a
Straddle Period;

 

“Subsequent Restricted Period” — See Section 7.11(b);

 

“Subsidiaries” shall mean, with respect to any
Person, any corporation, association or other business entity of which more
than 50% of the total voting power of shares of stock or other equity interest
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereto is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof;

 

“Substituted Shares” — See Section 2.2;

 

“Substitution Rights”  shall mean the Cash Substitution Right and
the Benefit Plan Substitution Right;

 

“Tax Proceeding” — See Section 7.13(e);

 

“Taxes” shall mean (i) all federal, state,
local or foreign taxes, including, without limitation, income, gross income,
gross receipts, production, excise, employment, sales, use, transfer, ad valorem, value added, profits, license, capital stock,
franchise, severance, stamp, withholding, Social Security, employment,
unemployment, disability, worker’s compensation, payroll, utility, windfall
profit, custom duties, personal property, real property, registration,
alternative or add-on minimum, estimated and other taxes, governmental fees or
like charges of any kind whatsoever, including any interest, penalties or
additions thereto, whether disputed or not; (ii) any liability to pay
amounts due pursuant to clause (i) on behalf of another Person, including
any predecessor, under any contract, reimbursement or indemnity agreement, as
transferee, successor or otherwise; and (iii) any liability of any Person,
including any

 

9

 

predecessor, to pay amounts described in clause (i) by
reason of liability imposed under Treasury Regulations § 1.1502-6 or
similar provision imposing liability by reason of participation in a
consolidated, combined, unitary or similar Tax Return or similar filing; and “Tax” shall mean any
one of them;

 

“Tax Return” shall mean any report, return, information
return, filing, claim for refund or other information, including any schedules
or attachments thereto, and any amendments to any of the foregoing required to
be supplied to a taxing authority in connection with Taxes;

 

“Technology” shall mean, collectively,
discoveries, designs, formulas, algorithms, processes, procedures, models,
methods (including but not limited to business methods), techniques, ideas,
know-how, Software, tools, data, databases, confidential and proprietary
information, inventions (whether on not patentable), creations, improvements,
writings, designs, mask works or other works of authorship, and all recordings,
graphs, drawings, reports, analyses, other writings, Uniform Resource Locators,
Internet Web sites, and any other embodiment of the above, in any form whether
or not specifically listed herein;

 

“Telecommunications Business” shall mean the
business, other than the Vyvx Business of the Company and its Subsidiaries,
consisting of an inter-city and local fiber-optic network providing Internet,
data and voice and other telecommunications services;

 

“Transferee” — See Section 7.4;

 

“Transferred Benefit Plans” shall mean the
Retirement Plan and the Deferred Compensation Plan;

 

“Transferred Subsidiaries” shall mean WilTel
Aircraft Leasing, LLC, a Delaware limited liability company, and WilTel
Technology Center, LLC, a Delaware limited liability company, each of which is
a Subsidiary of the Company on the date hereof and which shall cease to be a
Subsidiary of the Company or the Retained Subsidiaries upon completion of the
Pre-Closing Transfers;

 

“Vendor Contracts” — See Section 5.18(c)(ii);

 

“Vyvx Business” shall mean the business segment
of the Company that provides data services, transmits audio, video and
multimedia content, and distributes advertising media in physical and
electronic form; and

 

“WARN” shall mean the Worker Adjustment and
Retraining Notification Act or any similar state or local “plant closing” law.

 

SECTION 2.  PURCHASE AND SALE OF MEMBERSHIP UNITS.

 

SECTION 2.1.  Components of Purchase Price.  Subject to the terms and conditions set forth
in this Agreement and in reliance upon the representations and warranties of
the Seller set forth below, on the Closing Date the Buyer shall purchase from
the Seller and the Seller shall sell to the Buyer, the Membership Units, free
and clear of all Liens, for a total

 

10

 

purchase price (the “Purchase Price”) consisting of (a) $370
million in cash (as such amount may be adjusted pursuant to either Section 2.2
or Section 3 hereof, the “Cash Purchase Price”), (b) 115
million newly issued shares of Level 3 Common Stock (as such number of shares
may be adjusted (i) pursuant to Section 2.2 hereof and (ii) as a
result of any stock split, combination, subdivision or reclassification,
merger, exchange of shares or other similar business combination transaction,
or any dividends or distributions with respect to such shares of Level 3 Common
Stock, in each case, after the date hereof and prior to the Closing (the “Shares”))
and (c) an additional cash payment of $100 million with respect to the
cash balance to be retained by the Company as of the Measurement Date (the “Additional
Cash Amount”).

 

SECTION 2.2.  Substitution Rights.

 

(a)                                  Cash
Substitution Right.  Not less than
three nor more than five Business Days prior to the Closing, the Buyer shall
have the right, in its sole discretion, upon written notice to the Seller, to
elect to reduce the number of Shares otherwise deliverable by the Buyer at the
Closing and in lieu of such number of Shares not being delivered (such number
of shares not being delivered hereunder referred to as the “Substituted
Shares”) pay cash to the Seller at the Closing (the “Cash Substitution
Right”).  If the Buyer exercises its
Cash Substitution Right, (i) the Cash Purchase Price shall be increased by
an amount equal to the product of (A) the number of such Substituted
Shares (as adjusted as a result of any stock split, combination, subdivision or
reclassification, merger, exchange of shares or other similar business
combination transaction, or any dividends or distributions with respect to such
shares of Level 3 Common Stock, in each case, after the date hereof and prior
to the Closing) and (B) the greater of (1) the average of the volume
weighted sales prices per share of Level 3 Common Stock as reported by the
NASDAQ Stock Market for the 10 trading-day period ending upon the trading day
immediately preceding the date the Buyer delivers written notice of its
exercise of the Cash Substitution Right and (2) $2.35, and (ii) the
number of Shares deliverable at Closing shall be reduced by the number of such
Substituted Shares.

 

(b)                                 Benefit
Plan Substitution Right.  Not less
than three nor more than five Business Days prior to the Closing, the Buyer
shall have the right, in its sole discretion, upon written notice to the
Seller, to elect to have the Company retain the sponsorship of the Transferred
Benefit Plans and the related liabilities and obligations thereunder in respect
of the participants in the Transferred Benefit Plans prior to the Closing Date
(the “Benefit Plan Substitution Right”). 
If the Buyer exercises its Benefit Plan Substitution Right, (i) the
number of Shares otherwise deliverable by the Buyer at the Closing (as adjusted
as a result of any stock split, combination, subdivision or reclassification,
merger, exchange of shares or other similar business combination transaction,
or any dividends or distributions with respect to such shares of Level 3 Common
Stock, in each case, after the date hereof and prior to the Closing) shall be
reduced by a number equal to the quotient obtained by dividing $80 million by
the greater of (A) the average of the volume weighted sales prices per
share of Level 3 Common Stock as reported by the NASDAQ Stock Market for the 10
trading-day period ending upon the trading day immediately preceding the date
the Buyer delivers written notice of its exercise of the Benefit Plan
Substitution Right and (B) $2.35, (ii) the Transferred Benefit Plans
shall no longer be Excluded Liabilities for purposes of this Agreement and
shall be deemed removed from Schedule 7.4 for all purposes hereof
and (iii) the assets of the Retirement Plan held in trust shall

 

11

 

no longer be Excluded Assets and shall be deemed removed from Schedule 7.4
for all purposes hereof.

 

SECTION 2.3.  Closing Date Transactions.  On the Closing Date, the Buyer shall (i) pay
the Cash Purchase Price and the Additional Cash Amount by wire transfer of
immediately available funds to such account (or accounts) as the Seller shall,
not less than two Business Days prior to the Closing Date, designate in writing
to the Buyer and (ii) issue the Shares to the Seller (with any fractional
shares that would otherwise result rounded to the nearest whole number) free
and clear of all Liens (other than Liens incurred by the Seller) and deliver or
cause to be delivered to the Seller one or more certificates therefor
registered in the name of the Seller.  On
the Closing Date, the Seller shall (a) deliver to the Buyer evidence of
the Membership Units being purchased by the Buyer from the Seller against
payment by the Buyer to the Seller of the Purchase Price for such Membership
Units and (b) duly amend the Organizational Documents of the Company to
reflect, effective as of the Closing Date, the admission of the Buyer as the
sole member of the Company and the withdrawal of the Seller as a member of the
Company.

 

SECTION 2.4.  Allocation of Purchase Price.

 

(a)                                  The
Buyer and the Seller agree to treat the sale of the Membership Units as a sale
of the assets of the Company by the Company to the Buyer for all federal, state
and local Income Tax purposes (including treatment as a sale of the assets of
any of the Company’s Subsidiaries that are disregarded for tax purposes).  As soon as reasonably practicable, but not
later than 75 days following the Closing Date, the Buyer shall prepare and
deliver to the Seller a schedule which shall set forth the allocation of
the Purchase Price, liabilities and other related items among the assets of the
Company (the “Allocation”).  The
Seller shall, within 40 days after the date on which the Allocation is
delivered to the Seller, provide the Buyer with a written notice stating those
items to which the Seller takes exception. 
If a change proposed by the Seller is disputed by the Buyer, then the
Seller and the Buyer shall negotiate in good faith to resolve such dispute.  If the Buyer and the Seller agree to the
Allocation, the parties further agree to act in accordance with the Allocation
in any federal, state and local income and franchise Tax Returns.

 

(b)                                 If
and to the extent the Buyer and the Seller agree to the Allocation, promptly
after the Closing Date (but not before a resolution of all disputes, if any,
with regard to the Closing Balance Sheet) the Buyer shall prepare, in
consultation with the Seller or the Seller’s designee, those statements or
forms (including Form 8594) required by Section 1060 of the Code and
the Treasury regulations promulgated thereunder with respect to the
Allocation.  Such statements or forms
shall be prepared consistently with the Allocation if and to the extent the
Buyer and the Seller agree to the Allocation. 
Such statements or forms shall be filed by the parties on their
respective federal income Tax Returns as required by Section 1060 of the
Code and the Treasury regulations promulgated thereunder and each party shall
provide the other party with a copy of such statement or form as filed.

 

SECTION 2.5.  Further Assurances.  Consistent
with the terms and conditions of this Agreement and to effectuate the purposes
of this Agreement and the other Pre-Closing Transactions, after the
Closing Date, (i) the Buyer and its Affiliates shall execute and deliver to the Seller such further instruments of
assignment, transfer, conveyance, endorsement, direction

 

12

 

or authorization and such other documents
reasonably requested by the Seller in order to perfect title of the Seller to
the Excluded Assets and shall transfer to the Seller any proceeds (insurance,
litigation or otherwise) of such assets realized or received by the Buyer or
its Affiliates after the Closing Date and (ii) the Seller and its
Affiliates shall execute and deliver to the Buyer such further instruments of
assignment, transfer, conveyance, endorsement, direction or authorization and
such other documents reasonably requested by the Buyer in order to perfect
title of the Buyer and its Affiliates to the assets, rights and business
conveyed hereunder and shall transfer to the Buyer the proceeds (insurance,
litigation or otherwise) of such assets realized or received by the Seller or
its Affiliates after the Closing Date.

 

SECTION 3.  ADJUSTMENT TO PURCHASE PRICE.

 

In addition to any adjustment relating to the Buyer’s
exercise of the Cash Substitution Right or the Benefit Plan Substitution Right,
the Purchase Price shall be subject to adjustment as follows:

 

SECTION 3.1.  Closing Date Adjustments.  At the Closing, the Purchase Price shall be
adjusted as set forth in this Section 3.1.

 

(a)                                  If
the Closing occurs after December 31, 2005, then the Cash Purchase Price
payable by the Buyer on the Closing Date shall be increased by an amount equal
to the interest on $370 million from January 1, 2006 to (but not
including) the Closing Date at a rate of 6.0% per annum.

 

(b)                                 Prior
to the Closing (but no less than two Business Days prior to the Closing Date),
the Seller shall deliver to the Buyer (i) the consolidated balance sheet
of the Company and the Retained Subsidiaries as of December 31, 2005 or (ii) if
the balance sheet described in clause (i) is not available, the then most
recent regularly prepared month end consolidated balance sheet of the Company
and the Retained Subsidiaries (which shall be as of a  date not more than 50 days prior to the
Closing Date).  The balance sheet
delivered pursuant to the foregoing sentence is referred to as the “Month
End Balance Sheet” and the date of such Month End Balance Sheet is referred
to as the “Month End.”  The Month
End Balance Sheet shall be accompanied by a schedule setting forth an
estimate of the Adjusted Net Working Capital as of the close of business on the
Month End (the “Estimated Adjusted Net Working Capital”).  The Month End Balance Sheet shall be prepared
in accordance with GAAP (except for the exclusion of the Transferred
Subsidiaries), applied on a basis consistent with (except for the exclusion of
the Transferred Subsidiaries), and following the accounting principles,
procedures, policies and methods employed in preparing, the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of August 31,
2005 (the “August 31 Balance Sheet”).  If the Estimated Adjusted Net Working Capital
set forth on the schedule accompanying the Month End Balance Sheet is less
than $26 million, the Cash Purchase Price payable to the Seller at the Closing
shall be reduced by an amount equal to such deficiency.  If the Estimated Adjusted Net Working Capital
set forth on the schedule accompanying the Month End Balance Sheet exceeds
$26 million, the Cash Purchase Price payable to the Seller at the Closing shall
be increased by an amount equal to such surplus.

 

13

 

SECTION 3.2.  Post-Closing Determination.  Within 60 calendar days after the Closing
Date, the Seller shall deliver to the Buyer the consolidated balance sheet of
the Company and the Retained Subsidiaries as of the close of business on the
Measurement Date (the “Closing Balance Sheet”).  The Closing Balance Sheet shall be prepared
in accordance with GAAP (except for the exclusion of the Transferred
Subsidiaries), applied on a basis consistent with (except for the exclusion of
the Transferred Subsidiaries), and following the accounting principles,
procedures, policies and methods employed in preparing, the August 31
Balance Sheet.  The Closing Balance Sheet
shall be accompanied by a schedule setting forth the actual Adjusted Net
Working Capital as of the close of business on the Measurement Date (the “Actual
Adjusted Net Working Capital”). 
During the preparation of the Closing Balance Sheet by the Seller and
the period of any dispute with respect to the application of this Section 3.2,
the Buyer shall cooperate with the Seller to the extent reasonably requested by
the Seller to prepare the Closing Balance Sheet and the Actual Adjusted Net
Working Capital Report or to investigate the basis for any dispute.  The calculation of the Actual Adjusted Net
Working Capital shall be examined by the Buyer who shall, not later than 30
calendar days after receipt of the Closing Balance Sheet, deliver a report
thereon (the “Actual Adjusted Net Working Capital Report”) to the
Seller.  The Actual Adjusted Net Working
Capital Report shall list those items included in the Actual Adjusted Net
Working Capital, if any, to which the Buyer takes exception and the Buyer’s
proposed adjustment.  If the Buyer fails
to deliver to the Seller the Actual Adjusted Net Working Capital Report within
30 calendar days following receipt of the Closing Balance Sheet, the Buyer
shall be deemed to have accepted the Actual Adjusted Net Working Capital for
the purposes of any adjustment to the Purchase Price under Section 3.3.  If the Seller does not give the Buyer notice
of its objections to the Actual Adjusted Net Working Capital Report within 30
calendar days following receipt of the Actual Adjusted Net Working Capital
Report, the Seller shall be deemed to have accepted the Closing Balance Sheet
as adjusted by the Buyer in the Actual Adjusted Net Working Capital Report for
the purposes of any adjustment to the Purchase Price under Section 3.3.  If the Seller gives the Buyer notice of its
objections to the Actual Adjusted Net Working Capital Report, and if the Seller
and the Buyer are unable, within 15 calendar days after receipt by the Buyer of
the notice from the Seller of objections, to resolve the disputed exceptions,
such disputed exceptions will be referred to Deloitte & Touche LLP or
another firm of independent certified public accountants (the “Independent
Accounting Firm”) mutually acceptable to the Seller and the Buyer.  The Independent Accounting Firm shall, within
60 days following its selection, deliver to the Seller and the Buyer a written
report determining such disputed exceptions, and its determinations will be
conclusive and binding upon the parties thereto for the purposes of any
adjustment to the Purchase Price under Section 3.3.  The fees and disbursements of the Independent
Accounting Firm acting under this Section 3.2 shall be apportioned between
the Buyer and the Seller based on the total dollar value of disputed exceptions
resolved in favor of each such party, with each such party bearing such
percentage of the fees and disbursements of the Independent Accounting Firm as
the aggregate disputed exceptions resolved against that party bears to the
total dollar value of all disputed exceptions considered by the Independent
Accounting Firm.  For the avoidance of
doubt, the delivery and timing of receipt of any document sent by the parties
pursuant to this Section 3 shall be governed by the provisions set forth
in Section 13.5 — “Notices.”

 

14

 

SECTION 3.3.  Post-Closing Adjustment.

 

(a)                                  If
the Actual Adjusted Net Working Capital is less than the Estimated Adjusted Net
Working Capital, the Seller shall, within three calendar days following the
final determination of the Actual Adjusted Net Working Capital pursuant to Section 3.2,
and based upon such final determination, pay to the Buyer the amount of such
deficiency in cash, together with interest on such amount from and including
the Closing Date to but excluding the date of payment at a rate of 6.0% per
annum.  Any payment by the Seller to the
Buyer under this Section 3.3(a) shall be made by wire transfer of
immediately available funds to such account as the Buyer shall designate in
writing to the Seller.

 

(b)                                 If
the Actual Adjusted Net Working Capital is more than the Estimated Adjusted Net
Working Capital, the Buyer shall, within three calendar days following the
final determination of the Actual Adjusted Net Working Capital pursuant to Section 3.2,
and based upon such final determination, pay to the Seller the amount of such
excess in cash, together with interest on such amount from and including the
Closing Date to but excluding the date of payment at a rate of 6.0% per
annum.  Any payment by the Buyer to the
Seller under this Section 3.3(b) shall be made by wire transfer of
immediately available funds to such account as the Seller shall designate in
writing to the Buyer.

 

SECTION 3.4.  Estimate of Adjusted Net Working Capital.  Schedule 3.4 sets forth an estimate of the Adjusted Net
Working Capital as of August 31, 2005, it being agreed that the August 31,
2005 Adjusted Net Working Capital is provided for illustrative purposes only
and is not intended to be a binding expression of any Adjusted Net Working
Capital calculation required under this Agreement.

 

SECTION 4.  CLOSING.

 

The closing (the “Closing”) for the
consummation of the transactions contemplated by this Agreement shall take
place at the offices of Willkie Farr & Gallagher LLP at 787 Seventh
Avenue, New York, New York 10019 at 10:00 a.m. on the third Business Day
after all the conditions to the obligations of the parties hereunder set forth
in Sections 10 and 11 hereof have been satisfied or waived (other than those
conditions that are not capable of being satisfied until the Closing, but
subject to the satisfaction or waiver of those conditions), or at such other
place and time as may be mutually agreed to by the parties hereto (the “Closing
Date”).

 

SECTION 5.  REPRESENTATIONS AND WARRANTIES OF THE
SELLER.

 

In this Section 5, (a) none of the
representations and warranties contained herein relate to the Transferred
Subsidiaries, the Excluded Assets or the Excluded Liabilities, in each case,
unless expressly stated otherwise, and (b) all of the representations and
warranties relate solely to and include the Businesses, the Company and the Retained
Subsidiaries, in each case, unless expressly stated otherwise.

 

The Seller hereby represents and warrants to the Buyer
as follows:

 

15

 

SECTION 5.1.  Corporate Organization.  Each of the Seller, Leucadia, the Company,
the Retained Subsidiaries and WilTel Technology Center, LLC is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, limited liability company or limited
partnership power (as the case may be) to own its properties and assets and to
conduct its business as now conducted. 
Copies of the Organizational Documents of the Seller, the Company, each
of the Retained Subsidiaries and WilTel Technology Center, LLC, with all
amendments thereto to the date hereof, have been furnished or made available to
the Buyer or its representatives, and such copies are accurate and complete as
of the date hereof.  A complete and
correct chart showing the Company and all of its direct and indirect
Subsidiaries is set forth in Schedule 5.1.

 

SECTION 5.2.  Qualification to Do Business.  Each of the Seller, Leucadia, the Company and
the Retained Subsidiaries is duly qualified to do business as a foreign
corporation, limited liability company or partnership (as the case may be) and
is in good standing in every jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company and the Retained
Subsidiaries.  Schedule 5.2
sets forth all jurisdictions in which each of the Company and the Retained
Subsidiaries are qualified to do business.

 

SECTION 5.3.  No Conflict or Violation.  The execution, delivery and performance by
Leucadia and the Seller of this Agreement and the Registration Rights Agreement
and by the Company and WilTel Technology Center, LLC of the Lease Agreement do
not and will not (i) violate or conflict with any provision of any
Organizational Document of Leucadia, the Seller, the Company or any of its
Subsidiaries, (ii) violate any provision of law, or any order, judgment or
decree of any Governmental Entity, (iii) except as set forth in Schedule 5.3,
violate or result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contract or result in the creation or
imposition of any Lien upon any of the assets, properties or rights of either
of the Company or any of its Subsidiaries or result in or give to others any
rights of cancellation, modification, amendment, acceleration, revocation or
suspension of any of the Contracts or obligations thereunder, or Licenses and
Permits that, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on the Company and the Retained Subsidiaries or (iv) violate
or result in a breach of or constitute (with due notice or lapse of time or
both) a default under any material contract, agreement or instrument to which
the Seller or Leucadia is a party or by which it is bound or to which any of
its properties or assets is subject that, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on the ability
of the Seller, Leucadia or WilTel Technology Center, LLC to perform their
respective obligations under this Agreement, the Lease Agreement and the
Registration Rights Agreement or to consummate the transactions contemplated
hereby or thereby, including as a consequence of any material impediment,
interference or delay.

 

SECTION 5.4.  Consents and Approvals.  Except as set forth in Schedule 5.4,
no consent, waiver, authorization or approval of any Governmental Entity, and
no declaration or notice to or filing or registration with any Governmental
Entity, is required in connection with the execution and delivery by Leucadia
or the Seller of this Agreement, by Leucadia and the

 

16

 

Seller of the Registration Rights Agreement and by the Company and
WilTel Technology Center, LLC of the Lease Agreement or the performance by
Leucadia, the Seller, the Company or WilTel Technology Center, LLC of their
respective obligations hereunder or thereunder, except for (i) the filing
of Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the “HSR Act”), (ii) filings
required under, and compliance with other applicable rules, regulations and
requirements of, the Federal Communications Commission (the “FCC”) and
the relevant State PUC’s set forth on Schedule 5.4, and (iii) such
other governmental consents, waivers, authorizations, approvals, declarations,
notices, filings or registrations that in the case of this clause (iii), if not
obtained, made or given, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company and the
Retained Subsidiaries.

 

SECTION 5.5.  Authorization and Validity of Agreement.  Leucadia and the Seller have all requisite
corporate power and authority to enter into this Agreement and the Registration
Rights Agreement and to carry out their respective obligations hereunder and
thereunder.  The Company and WilTel
Technology Center, LLC have all requisite limited liability company power to
enter into the Lease Agreement and to carry out their obligations thereunder.  The execution and delivery of this Agreement,
the Lease Agreement and the Registration Rights Agreement and the performance
of the respective obligations of Leucadia, the Seller, the Company, and WilTel
Technology Center, LLC hereunder and thereunder have been duly authorized by
all necessary limited liability company or corporate action (as the case may
be) and no other limited liability company or corporate proceedings (as the
case may be) on the part of Leucadia, the Seller, the Company or WilTel
Technology Center, LLC are necessary to authorize such execution, delivery and
performance.  This Agreement has been
duly executed by Leucadia and the Seller and, assuming due execution and
delivery by Level 3 and the Buyer, shall constitute their valid and binding
obligation, enforceable against them in accordance with its terms, subject to (i) the
effect of bankruptcy, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors’
rights generally, (ii) general equitable principles (whether considered in
a proceeding in equity or at law) and (iii) an implied covenant of good
faith and fair dealing.

 

SECTION 5.6.  Capitalization and Related Matters.

 

(a)                                  All
of the outstanding Membership Units are validly issued, fully paid and
nonassessable and are held solely of record and beneficially by the Seller, a
wholly owned indirect subsidiary of Leucadia. 
The Seller has, as of the date hereof and shall have on the Closing
Date, valid and marketable title to all of the Membership Units, free and clear
of any Liens, other than those Liens under the Company’s Credit Documents.  The Membership Units are the sole outstanding
securities of the Company; the Company does not have outstanding any securities
convertible into or exchangeable for any Membership Units, any rights to
subscribe for or to purchase or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance
of, any Membership Units, or any stock or securities convertible into or
exchangeable for any Membership Units; and neither Leucadia, the Seller, any
Affiliate of the Seller nor the Company is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire, or to
register under the Securities Act, any Membership Units.

 

17

 

(b)                                 Except
as set forth on Schedule 5.6(b), all of the outstanding shares of
capital stock, or membership units or other ownership interests of, each
Retained Subsidiary, as applicable, is validly issued, fully paid and
nonassessable and is owned of record and beneficially by the Company or another
Retained Subsidiary.  Except as set forth
on Schedule 5.6(b), the Company has, as of the date hereof and
shall have on the Closing Date, valid and marketable title, directly or
indirectly, to all of the shares of capital stock of, or membership units or
other ownership interests in, each Retained Subsidiary, free and clear of any
Liens, other than those Liens under the Company’s Credit Documents.  Such outstanding shares of capital stock of,
or membership units or other ownership interests in, the Retained Subsidiaries,
as applicable, are the sole outstanding securities of the Retained Subsidiaries;
the Retained Subsidiaries do not have outstanding any securities convertible
into or exchangeable for any capital stock of, or membership units or other
ownership interests in, the Retained Subsidiaries, any rights to subscribe for
or to purchase or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any other character relating to the issuance of, any capital stock
of, or membership units or other ownership interests in, the Retained
Subsidiaries, or any stock or securities convertible into or exchangeable for
any capital stock of, or membership units or other ownership interests in, the
Retained Subsidiaries; and neither Leucadia, the Seller, any Affiliate of the
Seller, the Company or any Retained Subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire, or to
register under the Securities Act, any capital stock of, or membership units or
other ownership interests in, any Retained Subsidiary.

 

SECTION 5.7.  Equity Investments.  Except as set forth in Schedule 5.7,
the Company and its Subsidiaries do not directly or indirectly own, or hold any
rights to acquire, any capital stock or any other securities, interests or
investments in any other Person other than the Subsidiaries and investments
that constitute cash, cash equivalents or marketable securities that constitute
Excluded Assets.  Upon the Closing,
neither the Company nor any Retained Subsidiary will directly or indirectly
own, or hold any rights to acquire, any such capital stock, securities,
interests or investments in the Transferred Subsidiaries.

 

SECTION 5.8.  Financial Statements.  The Seller has heretofore furnished to the
Buyer (a) copies of the audited consolidated balance sheet of the Company
and its Subsidiaries as of November 5, 2003, together with the related
consolidated statements of operations, stockholders’ equity (deficit) and cash
flows for the period from January 1, 2003 to November 5, 2003, the
period from November 1, 2002 to December 31, 2002, and the period
from January 1, 2002 to October 31, 2002  and the notes thereto, accompanied by the
reports thereon of Ernst & Young LLP, (b) copies of the audited
consolidated balance sheets of the Company and its Subsidiaries at December 31,
2004 and December 31, 2003, together with the results of their operations
and cash flows for the year ended December 31, 2004 and the period from November 6,
2003 through December 31, 2003 and the notes thereto, accompanied by the
reports thereon of PricewaterhouseCoopers LLP and (c) copies of the
unaudited August 31 Balance Sheet, together with the related consolidated
unaudited statements of operations and statement of cash flows for the period
then ended attached hereto as Schedule 5.8 (the “August Financial
Statements” and together with the financial statements referred to in
clauses (a) and (b) above being hereinafter collectively referred to
as the “Financial Statements”).  The Financial Statements (including
with regard to clauses (a) and (b) above the notes thereto) (i) were
prepared in accordance with GAAP (other than the statement of cash flows
referred to in clause (c) above), applied on a consistent

 

18

 

basis throughout (x) the periods covered by the Financial Statements in
clause (b) above and (y) the periods covered by the Financial Statements
in clause (c) above, and (ii) present fairly in all material respects
the financial position, results of operations, cash flows and changes in
financial position of the Company and its Subsidiaries as of such dates and for
the periods then ended (subject, in the case of the August Financial
Statements, to normal year-end audit adjustments consistent with prior periods
and except that such August Financial Statements do not contain all
footnote disclosures normally required under GAAP).  The August Financial Statements have
been prepared on a basis consistent with those Financial Statements set forth
in clause (b) above and the accounting methods employed in preparing the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of July 31,
2005 (the “July 31 Balance Sheet”), together with the related
consolidated unaudited statement of operations for the period then ended
(copies of each of which the Seller has heretofore furnished to the
Buyer).  Since December 31, 2004,
there has not been any change in any method of accounting of either of the
Company or any of the Retained Subsidiaries. 
The Company has recorded the adjustments set forth in the column “Estimated
Adjustments” on Schedule 5.8 in accordance with GAAP.

 

SECTION 5.9.  Absence of Certain Changes or Events.

 

(a)                                  Except
as set forth in Schedule 5.9 or as reflected in the July 31
Balance Sheet, since July 31, 2005, there has not been:

 

(i)                                     any
Material Adverse Effect on the Company and the Retained Subsidiaries;

 

(ii)                                  any
material loss, damage, destruction or other casualty to the assets or
properties of either of the Company or any of the Retained Subsidiaries (other
than any for which insurance awards have been received or guaranteed); or

 

(iii)                               through
the date hereof any loss of the employment, services or benefits of any
employee of the Company or any of its Subsidiaries with the title of vice
president or above.

 

(b)                                 Since
July 31, 2005, the Company and the Retained Subsidiaries have operated in
the ordinary course of their business consistent with past practice and, except
(1) as set forth in Schedule 5.9 hereto, (2) with respect
to any Excluded Assets or Excluded Liabilities, (3) Liens in connection
with the Company’s Credit Documents, (4) as otherwise reflected in the July 31
Balance Sheet or (5) as otherwise permitted or required under this
Agreement, each of the Company and the Retained Subsidiaries has not:

 

(i)                                     failed
to discharge or satisfy any Lien or pay or satisfy any obligation or liability
(whether absolute, accrued, contingent or otherwise), other than liabilities
being contested in good faith and for which adequate reserves have been
provided and Permitted Liens;

 

(ii)                                  mortgaged,
pledged or subjected to any Lien (other than Permitted Liens) any of its
assets, properties or rights material to the operation of the Businesses as
currently conducted;

 

19

 

(iii)                               sold
or transferred any of its material assets or canceled any material debts or
claims or waived any material rights;

 

(iv)                              sold
or transferred (other than to a Retained Subsidiary) any patents, trademarks or
copyrights or any patent, trademark or copyright applications;

 

(v)                                 defaulted
on any material obligation;

 

(vi)                              entered
into any transaction material to its business, except in the ordinary course of
business consistent with past practice;

 

(vii)                           laid
off any significant number of its employees;

 

(viii)                        discontinued
the offering of any material services or product of the Businesses;

 

(ix)                                incurred
any material obligation or liability for the payment of severance benefits;

 

(x)                                   declared,
paid, or set aside for payment any dividend or other distribution in respect of
shares of its capital stock, membership units or other securities, or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of its
capital stock, membership units or other securities, or agreed to do so (other
than the Pre-Closing Transfers); or

 

(xi)                                entered
into any agreement or made any commitment to do any of the foregoing.

 

SECTION 5.10.  Tax Matters.  Except as set forth on Schedule 5.10,

 

(a)                                  (i) the
Company and each of its Subsidiaries and each of their predecessors, if any,
has filed (or has been included in the filing of) on or prior to the due date
(after giving effect to any extensions) all material Tax Returns required by
applicable law to be filed with respect to the Company and each of its
Subsidiaries and all Taxes shown to be due on such Tax Returns have been timely
paid; (ii) all such Tax Returns were true, correct and complete in all
material respects as of the time of such filing; (iii) all material
amounts of Taxes owed by the Company (whether or not shown on any Tax Return)
and each of its Subsidiaries and each of their predecessors, if required to
have been paid, have been paid (except for Taxes which are being contested in
good faith, with adequate reserves being established in accordance with GAAP);
and (iv) any liability of the Company or any of its Subsidiaries for Taxes
not yet due and payable, or which are being contested in good faith, have been
provided for on the financial statements of the Company in accordance with GAAP
or the books and records of the Company in accordance with GAAP;

 

(b)                                 there
is no action, suit, proceeding, investigation, audit or claim now pending
against the Company or any of its Subsidiaries in respect of any Tax, nor, to
the Seller’s Knowledge, has any claim for additional Tax been overtly
threatened by any Tax authority;

 

20

 

(c)                                  since
January 1, 1995, no claim has been made by any Tax authority in a
jurisdiction where the Company or any of its Subsidiaries has not filed a Tax
Return that it is or may be subject to Tax by such jurisdiction, nor to the
Seller’s Knowledge, is any such assertion overtly threatened;

 

(d)                                 (i) there
is no outstanding request for any extension of time for the Company or any of
its Subsidiaries to pay any Taxes or file any Tax Returns; (ii) there has
been no waiver or extension of any applicable statute of limitations for the
assessment or collection of any Taxes of the Company or any of its Subsidiaries
that is currently in force, and no power of attorney granted by or with respect
to the Company and its Subsidiaries for Taxes is currently in force; (iii) the
statute of limitation for tax years concerning any material tax or any material
amount of tax of the Company and its Subsidiaries has closed for all years
ending prior to January 1, 1995; and (iv) neither the Company nor any
of its Subsidiaries is a party to or bound by any agreement, whether written or
unwritten, providing for the payment of Taxes, payment for Tax losses,
entitlements to refunds or similar Tax matters;

 

(e)                                  the
Company and each of its Subsidiaries have withheld, collected and paid all
Taxes required to be withheld in connection with any amounts paid or owing to
any employee, creditor, independent contractor or other third party;

 

(f)                                    the
Seller is not a “foreign person” within the meaning of Section 1445 of the
Code;

 

(g)                                 none
of the Company’s Subsidiaries that is or was treated as an association taxable
as a corporation for U.S. federal income tax purposes has distributed stock of
another Person, or has had its stock distributed by another Person, in a
transaction that was governed in whole or in part by Section 355 of the
Code (i) within the past 2 years or (ii) in a distribution that would
otherwise constitute part of a “plan” or “series of related transactions”
(within the meaning of Section 355(e) of the Code) in conjunction
with the transaction contemplated by this Agreement;

 

(h)                                 each
of the Subsidiaries that is or was treated as an association taxable as a
corporation for U.S. federal income tax purposes has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section 6662
of the Code;

 

(i)                                     (i) neither
the Company nor any of its Subsidiaries is a party to any Contract, arrangement
or plan that would result, separately or in the aggregate, in a payment by
reason of the transactions contemplated by this Agreement that would not be
deductible under Section 280G of the Code (or any corresponding provision
of state, local or foreign Tax law); and (ii) the disallowance of a
deduction under Section 162(m) of the Code (or any corresponding provision
of state, local or foreign Tax law) for employee remuneration will not apply to
any amount paid or payable by the Company under any Contract, benefit plan,
program, arrangement or understanding currently in effect;

 

(j)                                     (i) none
of the assets, properties or rights of the Company and its Subsidiaries are “tax-exempt
use property” within the meaning of Section 168(h) of the Code;

 

21

 

(ii) none of the assets, properties or rights of the Company and
its Subsidiaries include any lease made pursuant to former Section 168(f)(8) of
the Internal Revenue Code of 1954; and (iii) there is no Lien other than a
Permitted Lien affecting any of the assets, properties or rights of the Company
and its Subsidiaries that arose in connection with any failure or alleged
failure to pay any Tax;

 

(k)                                  neither
the Company nor any of its Subsidiaries or any predecessor thereof has been a
member of an affiliated group (within the meaning of Code § 1504(a))
filing a consolidated federal income Tax Return (other than a group the common
parent of which is Leucadia);

 

(l)                                     the
Company and its Subsidiaries have neither (i) made, changed or revoked, or
permitted to be made, changed or revoked, any material election or method of
accounting with respect to Taxes affecting or relating to the Company and its
Subsidiaries since the filing of the applicable Tax Return relating to Tax
periods ending on or before December 31, 2003, nor (ii) entered into,
or permitted to be entered into, any closing or other agreement or settlement
with respect to Taxes affecting or relating to the Company and its
Subsidiaries;

 

(m)                               the
Company and each of its Subsidiaries is and has always been classified as an
entity disregarded as separate from its owner (within the meaning of Treasury
Regulations § 301.7701-2(c)(2)) for U.S. federal Tax purposes and will
continue to be so classified up to and including the Closing Date; and

 

(n)                                 neither
the Company nor any of its Subsidiaries have a permanent establishment in a
jurisdiction outside the United States.

 

This Section 5.10 represents the sole and
exclusive representations and warranties 
of the Seller regarding Tax matters.

 

SECTION 5.11.  Absence of Undisclosed Liabilities.  Except as set forth in Schedule 5.11,
neither of the Company nor any of the Retained Subsidiaries has any material
indebtedness or liability, absolute or contingent, known or unknown, which is
not shown or provided for on the July 31 Balance Sheet other than
liabilities as shall have been incurred or accrued in the ordinary course of
business since July 31, 2005. 
Except as shown in the July 31 Balance Sheet or in Schedule 5.11,
neither of the Company nor any of the Retained Subsidiaries is directly or
indirectly liable upon or with respect to (by discount, repurchase agreements
or otherwise), or obliged in any other way to provide funds in respect of, or
to make guarantees or assume, any debt, obligation or dividend of any Person
other than the Company or any Retained Subsidiaries, except endorsements in the
ordinary course of business in connection with the deposit, in banks or other
financial institutions, of items for collection.

 

SECTION 5.12.  Company Real Property.

 

(a)                                  Schedule 5.12(a) contains
a true and complete list of all real property owned in fee simple by the
Company or the Retained Subsidiaries (the “Owned Real Property”).  The Seller has made available to the Buyer
copies of any title insurance policies (together with copies of any documents
of record listed as exceptions to title on such policies) currently insuring
each Owned Real Property and copies of the most recent surveys of the same to
the

 

22

 

extent the Seller, the Company or its Subsidiaries has such
documents.  The Company or the Retained
Subsidiaries have good and valid title to all of the Owned Real Property free
and clear of all Liens other than Permitted Liens.

 

(b)                                 Schedule 5.12(b) sets
forth a list of all leases, licenses, subleases and occupancy agreements,
together with all amendments thereto, with respect to all properties which are
material to the operation of the Businesses (other than with respect to any
IRUs, cross-connection, interconnection, co-location or entrance facility
arrangements) in which either of the Company or the Retained Subsidiaries has a
leasehold interest, license or similar occupancy rights (each, a “Lease”
and collectively, the “Leases”; the property covered by Leases under
which either of the Company or the Retained Subsidiaries is a lessee is
referred to herein as the “Leased Real Property”; the Leased Real Property, together with the Owned Real Property,
collectively being the “Company Real Property”).  Neither the
Company nor any of the Retained
Subsidiaries is a party to any
Contract (other than a Lease) with the lessor of any of the Leased Real
Properties, which gives such lessor any right to terminate or adversely alter
the terms of the Lease to which such lessor is a party.  Except as set forth in Schedule 5.11
and Schedule 5.17, the Company or the Retained Subsidiaries enjoys peaceful and undisturbed
possession of the Leased Real Property pursuant to the Leases in all material
respects except for Leases expiring in accordance with their terms after the
date hereof and prior to the Closing Date.  No option has been exercised under any of
such Leases, except options whose exercise has been evidenced by a written
document, a true and complete copy of which has been delivered or made
available to the Buyer with the corresponding Lease.

 

(c)                                  Except
as set forth on Schedule 5.12(c), since July 31, 2005, no
Lease has been modified or amended in writing in any way materially adverse to
the operation of the Businesses and no party to any Lease has given either of
the Company or the Retained Subsidiaries written notice of or, to the Seller’s
Knowledge, made a claim with respect to any breach or default.

 

(d)                                 Except
as set forth in Schedule 5.12(d) and other than with respect
to IRUs, co-location, cross-connection, interconnection, entrance facilities or
other rights incidental to the provision of services established in the
ordinary course of business, none of the Company Real Property is subject to any option, lease, sublease, license or other
agreement granting to any Person or entity any right to the use, occupancy or
enjoyment of such property or any portion thereof or to obtain title to all or any portion of such property.

 

(e)                                  Except
as set forth on Schedule 5.12(e), all material improvements,
systems and fixtures on the Company
Real Property are in good operating condition and repair, and generally
are adequate and suitable in all material respects for the present and
continued use, operation and maintenance thereof as now used, operated or
maintained.  All improvements on the Company Real Property constructed by
or on behalf of the Company or any Retained Subsidiary, to the Seller’s
Knowledge, were constructed in compliance in all material respects with
applicable laws, ordinances and regulations affecting such Company Real Property, except for
possible nonconforming uses or violations that do not and will not interfere
with the present use, operation or maintenance thereof by either of the Company
or the Retained Subsidiaries as now used, operated or maintained or access
thereto, and neither of the Company or the Retained

 

23

 

Subsidiaries has received any written notice, or to the Seller’s
Knowledge, any verbal notice, to the contrary.

 

SECTION 5.13.  Assets of the Company and its Subsidiaries.

 

(a)                                  The
Company and the Retained Subsidiaries own, license under valid and enforceable
licenses or lease under valid and enforceable leases and will own, license or
lease after the Closing all of the assets, properties and rights material to
the operation of the Businesses as currently conducted.  Except as set forth on Schedule 5.13(a),
neither the Company nor the Retained Subsidiaries have any material assets,
properties, rights or interests of any kind or nature that either they are
presently or have been since July 31, 2005, using, holding or operating in
the Businesses prior to the Closing that will not continue to be used, held or
owned by them immediately following the Closing.

 

(b)                                 Except
as set forth on Schedule 5.13(a), the Transferred Subsidiaries do
not own any assets or properties which are material to the operation of the
Businesses as currently conducted, and such Transferred Subsidiaries do not
have any rights with respect thereto.

 

(c)                                  The
assets and rights of the Transferred Subsidiaries consist exclusively of (i) the
ownership of the Company’s Tulsa, Oklahoma headquarters, including all owned or
leased furniture, equipment and fixtures located therein set forth on Annex
A to Schedule 7.4 and (ii) rights under the Aircraft
Leases.

 

(d)                                 Each
of the Company and the Retained Subsidiaries has good and valid fee simple title, free and clear of
any Liens, to, or a valid leasehold interest under enforceable leases in, all
of its assets, properties and rights, other than pursuant to (i) the
Company’s Credit Documents, (ii) the Company’s Real Estate Debt Documents
and (iii) Permitted Liens.  The
Discharged Real Estate Debt Documents have been discharged in full, all Liens
under the Discharged Real Estate Debt Documents have been released and all
obligations of the Company and the Retained Subsidiaries under the Discharged
Real Estate Debt Documents or related to the debt evidenced or secured by same
have been satisfied.

 

SECTION 5.14.  Intellectual Property.

 

(a)                                  Except
as listed in Schedule 5.14(a): (i) each of the Company and the
Retained Subsidiaries owns or has a valid and enforceable license to use, (and
as applied to Software owned by the Company or the Retained Subsidiaries, to
reproduce, modify, distribute and sublicense copies of) all Intellectual
Property and Technology used in and material to the operation of the Businesses
as presently conducted; (ii) the Intellectual Property and Technology
owned by or licensed to each of the Company and the Retained Subsidiaries
includes all of the Intellectual Property and Technology material to the operation
of the Businesses as presently conducted; (iii) each of the Company and the Retained Subsidiaries
is in compliance with all material contractual obligations relating to the
protection of Intellectual Property and Technology licensed to them; (iv) to
the Seller’s Knowledge, no third party is infringing any Intellectual Property
of the Company or any of its Retained Subsidiaries in any material respect; (v) no
claims are pending or, to the Seller’s Knowledge, threatened that the Company
or any of 

 

24

 

its Retained Subsidiaries has infringed or misappropriated Intellectual
Property of a third party, and to the Seller’s Knowledge the conduct of the
Businesses does not infringe or misappropriate any Intellectual Property of a
third party in any material respect; and (vi) no claims are pending or, to
the Seller’s Knowledge, threatened challenging the ownership, validity or
enforceability of the Intellectual Property owned by the Company or any of its
Retained Subsidiaries or the possession or use of the Technology owned by the
Company or any of its Retained Subsidiaries.

 

(b)                                 Schedule 5.14(b) sets
forth a complete and current list of patents and applications therefor,
copyright registrations and applications therefor, registered trademarks,
registered service marks and applications therefor and domain names owned by,
filed in the name of, or applied for, by the Company anywhere in the world (the
“Listed Intellectual Property”),
including the owner of record, date of application or issuance and relevant
jurisdiction as to each. Except as listed in Schedule 5.14(b), all
Listed Intellectual Property is owned by the Company and/or the Retained
Subsidiaries, free and clear of all Liens. Except as listed in Schedule 5.14(b),
there are no actions that must be taken or payments that must be made by the
Company or the Retained Subsidiaries within ninety (90) days of the Closing
that, if not taken or paid, will adversely affect the Listed Intellectual
Property or the right of the Buyer to use the same as and where used as of the
effective date hereof. To the Seller’s Knowledge, all Listed Intellectual
Property is valid, subsisting, unexpired, in proper form and enforceable.
Except as listed in Schedule 5.14(b), no Listed Intellectual
Property is the subject of any proceeding before any governmental, registration
or other authority in any jurisdiction, other than any office action or other
form of preliminary or final refusal of registration. The consummation of the
transactions contemplated by this Agreement will not alter or impair any Listed
Intellectual Property owned by the Company or the Retained Subsidiaries.

 

(c)                                  Except
with respect to licenses by which the Company or the Retained Subsidiaries
authorize customers to use Software owned by the Company or the Retained
Subsidiaries and licenses for Software integrated with or embedded in products
sold by them in the ordinary course of business, Schedule 5.14(c) sets
forth a complete list of agreements by which Intellectual Property and
Technology owned by the Company or the Retained Subsidiaries have been licensed
to a third party.  Except with respect to
(i) licenses by which the Company or the Retained Subsidiaries are
authorized to use or sublicense to their customers Software owned by third
parties and integrated with or embedded in products purchased by the Company or
the Retained Subsidiaries for use or resale in the ordinary course of business
and (ii) licenses of generally available Software with an annual
maintenance fee of no more than $25,000, Schedule 5.14(c) further
sets forth a complete list of agreements by which the Company and the Retained
Subsidiaries are authorized to use Intellectual Property and Technology owned
by third parties that  are material to
the conduct of the Businesses as presently conducted (“Listed License
Agreements”). Except as set forth in Schedule 5.14(c), the
Company and the Retained Subsidiaries are in material compliance with all the
Listed License Agreements and neither the Company nor the Retained Subsidiaries
will be, as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any Listed
License Agreement.  Neither Company nor the
Retained Subsidiaries has received written notice of a material default of any
Listed License Agreement which remains uncured as of the Closing.

 

(d)                                 Except
as set forth in Schedule 5.14(d), neither the Company nor the
Retained Subsidiaries has made any claim of a violation, infringement, misuse
or

 

25

 

misappropriation by any third party (including any employee or former
employee of the Company or the Retained Subsidiaries) of any Intellectual
Property owned by the Company or the Retained Subsidiaries, which claim is
pending.  Except as set forth in Schedule 5.14(d),
neither the Company nor the Retained Subsidiaries have entered into any
agreement to indemnify any other Person against any charge of infringement of
any Intellectual Property, other than indemnification provisions contained in
employment policies and agreements, customer agreements, agreements for the
purchase of capacity, equipment procurement agreements, software license
agreements and maintenance agreements related to the foregoing arising in the
ordinary course of business.

 

(e)                                  The
Company and Retained Subsidiaries have taken reasonable steps, including,
without limitation, the execution of appropriate confidentiality agreements, to
protect and preserve the confidentiality of all the Company’s and Retained
Subsidiaries’ trade secrets, including customer data, owned and licensed
Software, owned and licensed databases and customer lists, and all disclosures
of such information to, and use by, any third party (other than (i) to
competent regulators, accountants and counsel, in each instance acting in their
professional capacities, or (ii) pursuant to an applicable court order)
have been pursuant to the terms of written confidentiality undertakings between
such third party and the Company or Retained Subsidiaries.

 

(f)                                    To
the Knowledge of the Seller and except in connection with occasional sales of
excess equipment or inventory, neither the Company nor the Retained
Subsidiaries have purchased or sold any material telecommunications equipment
without procuring or having the transferee procure a software license for the
imbedded software in such equipment.

 

(g)                                 This
Section 5.14 shall constitute the sole and exclusive representations and
warranties regarding Intellectual Property of the Seller other than as set
forth in Sections 5.13(a) and (b) hereof.

 

SECTION 5.15.  Licenses and Permits.  Exclusive of any zoning or construction
permits, contractor licenses or local government licenses and permits to do
business, variances, orders, exceptions or similar licenses issued by
Governmental Entities, which the parties hereto agree are not material either
individually or in the aggregate, Schedule 5.15 sets forth a true
and complete list of all material licenses, permits, franchises,  registrations, authorizations and approvals
issued or granted to any of the Company or the Retained Subsidiaries by any
Governmental Entity (the “Licenses and Permits,” which such term shall
not include the Listed License Agreements), applicable to the Company and the
Retained Subsidiaries, any of their respective properties or other assets or
the Businesses.  The Company and the
Retained Subsidiaries are (and since January 1, 2004 have been) in
compliance in all material respects with the Licenses and Permits.  The Company and the Retained Subsidiaries
hold all Licenses and Permits necessary for the lawful conduct of their
respective businesses and for them to operate the Businesses as currently
conducted.  Except as set forth on Schedule 5.15,
the Company and the Retained Subsidiaries are (and since January 1, 2004
have been) in compliance in all material respects with the terms of all
Licenses and Permits and no administrative or judicial proceeding is pending
or, to the Seller’s Knowledge, overtly threatened to amend, terminate, revoke,
limit, suspend or cancel any such License or Permit.  Since January 1, 2004, except as set
forth on Schedule 5.15, neither the Company nor any of the Retained
Subsidiaries

 

26

 

has received written notice to the effect that (a) any
Governmental Entity claimed or alleged that the Company or any Retained
Subsidiary was not in compliance with all Licenses and Permits applicable to
the Company or the Retained Subsidiaries, any of their properties or other
assets or the Businesses or (b) any Governmental Entity was considering
the amendment, termination, suspension, revocation or cancellation of any
License or Permit.  Copies of the
Licenses and Permits and all pending applications therefor have been made
available to the Buyer.

 

SECTION 5.16.  Compliance with Law.  Except as set forth in Schedule 5.16,
the operations of the business of the Company and the Retained Subsidiaries
have been conducted in accordance in all material respects with all applicable
laws, regulations and orders of all courts and other Governmental Entity having
jurisdiction over such entity and its assets, properties and operations.  Except as set forth in Schedule 5.16,
since January 1, 2004, none of the Company or the Retained Subsidiaries
has received notice of any violation (or any investigation with respect
thereto) of any such law, regulation or order, and none of the Company or the
Retained Subsidiaries is in default with respect to any material order, writ,
judgment, award, injunction or decree of any national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
applicable to any of its assets, properties or operations.

 

SECTION 5.17.  Litigation.  Except as set forth in Schedule 5.17,
there are no material claims, actions, suits, proceedings, subpoenas or, to the
Seller’s Knowledge, investigations (each, an “Action”) pending or, to
the Seller’s Knowledge, overtly threatened, before any Governmental Entity, or
before any arbitrator of any nature, brought by or against any of the Company
or its Subsidiaries or involving, affecting or relating to their respective
assets, properties or rights or the transactions contemplated by this
Agreement.  There is no material
judgment, decree, injunction, rule or order of any Governmental Entity, or
before any arbitrator of any nature outstanding, or to the Seller’s Knowledge,
overtly threatened to be imposed, against either of the Company or the Retained
Subsidiaries.

 

SECTION 5.18.  Contracts.

 

(a)                                  Schedule 5.18(a) sets
forth a complete and correct list of all Contracts.

 

(b)                                 Each
Contract is valid, binding and enforceable against the Company or the Retained
Subsidiaries party thereto and, to the Seller’s Knowledge, against the other
parties thereto in accordance with its terms, and is in full force and effect,
subject to (i) the effect of bankruptcy, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors’ rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law) and (iii) an
implied covenant of good faith and fair dealing.  Each of the Company and the Retained
Subsidiaries has performed all obligations required to be performed by it to
date under, and is not in default or delinquent in performance, status or any
other respect (claimed or actual) in connection with, any Contract, and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default and, to the Seller’s Knowledge, no other party to any
Contract is in default in respect thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default, in
each case, except for those defaults or delinquencies that would not,
individually or in the aggregate, reasonably be expected to materially
adversely affect the ability of the Company and the Retained Subsidiaries to
conduct the Businesses as currently conducted.

 

27

 

The Seller has delivered to the Buyer or its representatives true and
complete copies of all the Contracts.

 

(c)                                  A
“Contract” means any agreement, contract or commitment, oral or written,
to which either of the Company or any Retained Subsidiary is a party or by
which it or any of its assets are bound (other than the Listed License
Agreements) constituting:

 

(i)                                     (A) one
of the 50 largest (by revenue generated for the Company and the Retained
Subsidiaries in 2005 through July 31st) Telecommunications Business
contracts or agreements for the sale, license (as licensor) or lease (as
lessor) by the Company or any of the Retained Subsidiaries of services,
products, Intellectual Property or other assets to any third party; (B) one
of the 20 largest (by revenue generated for the Company and the Retained
Subsidiaries in 2005 through August 31st) Vyvx Business contracts or
agreements for the sale, license (as licensor) or lease (as lessor) by the
Company or any of the Retained Subsidiaries of services, products, Intellectual
Property or other assets to any third party; or (C) a contract or
agreement relating to the sale, license or lease by the Company or any of the
Retained Subsidiaries of any indefeasible rights of use of capacity or infrastructure
(“IRUs”);

 

(ii)                                  (A) a
Telecommunications Business contract, agreement or purchase under a tariff for
the purchase, license (as licensee) or lease (as lessee) by the Company or any
of the Retained Subsidiaries of services, materials, products, personal
property, supplies, Intellectual Property or other assets from any supplier or
vendor or for the furnishing of services to the Company or any of the Retained
Subsidiaries involving total payments in excess of $250,000 from January 1,
2005 through July 31, 2005 or (B) a Vyvx Business contract, agreement
or purchase under a tariff for the purchase, license (as licensee) or lease (as
lessee) by the Company or any of the Retained Subsidiaries of services,
materials, products, personal property, supplies, Intellectual Property or
other assets from any supplier or vendor or for the furnishing of services to
the Company or any of the Retained Subsidiaries involving total payments in
excess of $300,000 from January 1, 2005 through July 31, 2005 (the
foregoing in clauses (A) and (B) are collectively, the “Vendor
Contracts”);

 

(iii)                               a
peering agreement of the Company or a Retained Subsidiary used by the Company
or its Retained Subsidiaries since January 1, 2005;

 

(iv)                              a
mortgage, indenture, security agreement, guaranty or other agreement or
instrument relating to the borrowing of money or extension of credit (other
than accounts receivable and accounts payable in the ordinary course of
business);

 

(v)                                 an
employment, employment change of control, retention, severance or material
consulting agreement with individuals (other than a sales commission plan
entered into in the ordinary course of business or any Employee Benefit Plans
set forth on Schedule 5.19(a));

 

(vi)                              a
joint venture, partnership or limited liability company agreement with third
parties;

 

28

 

(vii)                           a
non-competition agreement or any other agreement or obligation which purports
to limit in any material respect (i) the manner in which, or the
localities in which, the Businesses may be conducted or (ii) the ability
of either of the Company or the Retained Subsidiaries to provide any type of
service;

 

(viii)                        a Lease
set forth on Schedule 5.12(b) hereto;

 

(ix)                                an
agreement requiring capital expenditures by the Company or its Retained
Subsidiaries in excess of $500,000 following the Measurement Date (exclusive of
the items set forth on Schedule 7.1(b)(vi) hereto); or

 

(x)                                   any
other material agreement not in the ordinary course of business of the Company
and its Subsidiaries.

 

(d)                                 [Intentionally
Omitted]

 

(e)                                  [Intentionally
Omitted]

 

(f)                                    Except
as set forth on Schedule 5.18(f), none of the contracts or
agreements for the sale, license (as licensor) or lease (as lessor) by the
Company or any of its Subsidiaries of services, products, Intellectual Property
rights or other assets to any third party contain any exclusivity clause,
most-favored-nations clause, benchmarking clause or marked-to-market pricing
provision.  Each of the Company and its
Subsidiaries (as applicable) is not in material default in any respect (claimed
or actual) in connection with any exclusivity clause, most favored nations
clause, benchmarking clause or marked-to-market pricing provision contained in
any contract listed on Schedule 5.18(f), and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default.

 

(g)                                 All
of the peering agreements of the Company and its Retained Subsidiaries that
will be in effect as of the Closing are terminable by the Company or the
Retained Subsidiaries on 90 days’ prior notice without liability or obligation
to the Company or the Retained Subsidiaries.

 

(h)                                 Schedule 5.18(h) sets
forth the estimated aggregate maximum liability of the Company and the Retained
Subsidiaries as of January 1, 2006, (i) to SBC and its Affiliates in
the event of the termination of agreements and tariffs with SBC and its
Affiliates relating to leased Shared Network Circuits and (ii) to all
other leased Shared Network Circuit vendors in the event of the termination of
agreements and tariffs with such vendors relating to the leased Shared Network
Circuits.

 

(i)                                     Schedule 5.18(i) sets
forth a list of all leased entrance facility and DS-3 muxed circuits of the
Company and the Retained Subsidiaries other than those that are terminable by
the Company or the Retained Subsidiaries on less than 60 days’ prior notice
without liability to the Company or the Retained Subsidiaries (collectively,
the “Shared Network Circuits”) that is correct in all material respects
as of September 30, 2005 and is the basis for the estimate provided
pursuant to Section 5.18(h), together with the vendor name, speed, monthly
recurring charge, and termination date for each circuit.

 

29

 

SECTION 5.19. 
Employee Plans.

 

(a)                                  Schedule 5.19(a) sets
forth all “employee benefit plans,” as defined in Section 3(3) of
ERISA, and all other plans, policies and agreements providing severance pay,
sick leave, vacation pay, salary continuation, retirement benefits, deferred
compensation, bonus pay, incentive pay, stock options, hospitalization
insurance, medical insurance, life insurance, cafeteria benefits, dependent care reimbursements, prepaid legal
benefits, scholarships or tuition reimbursements, maintained by the
Company or any of the Retained Subsidiaries or to which the Company or any of
the Retained Subsidiaries is obligated to contribute thereunder for current or
former employees the Company and the Retained Subsidiaries (excluding the
Transferred Benefit Plans, the “Employee Benefit Plans”).

 

(b)                                 True,
correct and complete copies of the following documents, with respect to each of
the Employee Benefit Plans, have been delivered to the Buyer, to the extent
applicable:  (i) all plans and
related trust documents, and amendments thereto; (ii) Forms 5500 filed for the three most recent plan years; (iii) the most recent
IRS determination letter; and (iv) the most recent summary plan
descriptions, annual reports and
material modifications.

 

(c)                                  None
of the Employee Benefit Plans is a multiemployer plan, as defined in Section 3(37)
of ERISA (“Multiemployer Plan”). 
Neither the Company nor any ERISA Affiliate has withdrawn in a complete
or partial withdrawal, within the meaning of Section 4201 of ERISA, from
any Multiemployer Plan, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan which has not been
satisfied in full.

 

(d)                                 Each
Employee Benefit Plan that is intended to qualify under Section 401 of the
Code and the trust maintained pursuant thereto is exempt from federal income
taxation under Section 501 of the Code, and nothing has occurred with
respect to the operation of any such Employee Benefit Plan that would
reasonably be expected to cause the loss of such qualification or exemption or
the imposition of any material liability, penalty or tax under ERISA or the
Code.

 

(e)                                  All
contributions (including all employer contributions and employee salary
reduction contributions) and all premiums required to have been paid under any
of the Employee Benefit Plans or by law (without regard to any waivers granted
under Section 412 of the Code) to any funds or trusts established
thereunder or in connection therewith have been made by the due date thereof
(including any valid extension).  No
accumulated funding deficiencies exist in any of the Employee Benefit Plans
subject to Section 412 of the Code.

 

(f)                                    Neither
the Company nor any ERISA Affiliate has terminated any Employee Benefit Plan
subject to Title IV, or incurred any outstanding liability under Section 4062
of ERISA, to the PBGC or to a trustee appointed under Section 4042 of
ERISA.  Neither the Company nor any ERISA
Affiliate has engaged in any transaction described in Section 4069 of
ERISA.

 

(g)                                 Except as set forth on Schedule 5.19(g) hereto,
there are no pending material actions, claims or lawsuits which have
been asserted or instituted against the Employee Benefit Plans, the assets of
any of the trusts under such plans or the plan sponsor or the plan

 

30

 

administrator, or against any fiduciary of the Employee Benefit Plans
with respect to the operation or
administration of such plans or
the investment of plan assets (other than routine benefit claims), nor
does the Seller have Knowledge of facts which could form the basis for any such
claim or lawsuit.  Except as set forth on Schedule 5.19(g) hereto,
no Employee Benefit Plan has been the subject of an audit, investigation or
examination by any Governmental Entity within the three preceding years.

 

(h)                                 Except
as set forth on Schedule 5.19(h), the Employee Benefit Plans have
been maintained, in all material respects, in accordance with their terms and
with all provisions of ERISA, the Code and other applicable federal and state
laws.  None of the Company, the Retained
Subsidiaries, or, to the Seller’s Knowledge, any “party in interest” or “disqualified
person” with respect to the Employee Benefit Plans has engaged in a “prohibited
transaction” within the meaning of Section 406 of ERISA or 4975 of the
Code.  Except as set forth on Schedule 5.19(h),
no stock or other security issued by the Company or any Affiliate forms or has
formed a part of the assets of any Employee Benefit Plan.

 

(i)                                     Except
as set forth on Schedule 5.19(i) hereto, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, either alone or as a prerequisite to the occurrence
of any subsequent event: (i) result in any payment becoming due to any
employee (current, former or retired) of the Company or the Retained
Subsidiaries; (ii) increase any benefits otherwise payable under any
Employee Benefit Plan; (iii) result in the acceleration of the time of
payment or vesting of any benefits under any Employee Benefit Plan; or (iv) constitute
a “change in control” or similar event under any Employee Benefit Plan.

 

(j)                                     Schedule 5.19(j)
sets forth the names of the persons eligible to participate in the OPEB Plans,
their ages and years of service credited under the OPEB Plans on the date
hereof, date of retirement (if applicable), and whether they are union
employees.

 

SECTION 5.20.  Insurance.  Schedule 5.20 lists the material
surety bonds, fidelity bonds as well as the insurance companies, policy numbers,
aggregate coverage amount and type, and deductibles of all material policies of
title, liability, fire, casualty, business interruption, workers’ compensation
and other forms of insurance insuring each of the Company and the Retained
Subsidiaries and their assets, properties and operations.  The Seller has made available to the Buyer a
true and complete copy of all such bonds and policies.  Except as set forth in Schedule 5.20,
all such policies and bonds are in full force and effect and none of the Company
or the Retained Subsidiaries is in material default under any provisions of any
such bond or policy of insurance nor has any of the Company or the Retained
Subsidiaries received notice of cancellation of or cancelled any such insurance
without replacement thereof.  For all
claims made under such bonds or policies, the Company and its Subsidiaries have
timely complied with any applicable notice provisions, except where the failure
to so comply would not materially adversely affect the operation of the Businesses
as currently conducted.

 

SECTION 5.21.  Transactions with Directors, Officers,
Managers, and Affiliates.  Except as
set forth in Schedule 5.21 and with respect to any Excluded
Liabilities or Excluded Assets, none of the Company or the Retained Subsidiaries
is a party to any agreement or arrangement (other than employment agreements or
arrangements) with any of the directors,

 

31

 

officers, managers, members, partners or stockholders of the Company or
the Retained Subsidiaries or to the Seller’s knowledge, any Affiliate (other
than the Company or any Retained Subsidiary) or immediate family member of any
of the foregoing under which it:  (i) leases
any real or personal property (either to or from such Person); (ii) licenses
technology (either to or from such Person); (iii) is obligated to purchase
any tangible or intangible asset from or sell such asset to such Person; (iv) purchases
products or services from such Person; (v) pays or receives commissions,
rebates or other payments; or (vi) provides or receives any other material
benefit.  Except as set forth on Schedule 5.21,
to the Seller’s Knowledge, during the period from and including November 6,
2003 to and including September 30, 2005, none of the directors, officers,
managers, members or stockholders of the Company or the Retained Subsidiaries,
or any immediate family member of any of such Persons, has been a director,
officer, manager or member of, or has had any direct or indirect interest in
(other than beneficial ownership of less than 5% of the outstanding capital
stock of any publicly traded company or any passive investment) any customer
identified on Schedule 5.22(b). 
No Affiliate of the Company and the Retained Subsidiaries (other than
the Company and the Retained Subsidiaries) owns or has any rights in or to any
of the assets, properties or rights used by either of the Company or the
Retained Subsidiaries in the ordinary course of its businesses except as set
forth on Schedule 5.21.

 

SECTION 5.22.  Suppliers and Customers.

 

(a)                                  Schedule 5.22(a) sets
forth a list of the top 25 suppliers of the Telecommunications Business and the
top 20 suppliers of the Vyvx Business by dollar amount paid by the Company and
the Retained Subsidiaries (taken together) during the seven-month period ended July 31,
2005 (with respect to the Telecommunications Business) and the seven-month
period ended July 31, 2005 (with respect to the Vyvx Business), from whom
the Company or any Retained Subsidiary has purchased goods and/or
services.  As of the date hereof, no such
supplier has expressed in writing, and to the Seller’s Knowledge no such
supplier has expressed verbally, to the Company or any Retained Subsidiary its
intention to cancel or otherwise terminate or materially reduce or modify its
relationship with the Company or any Retained Subsidiary.

 

(b)                                 Schedule 5.22(b) sets
forth a list of the top 25 customers of the Telecommunications Business and the
top 20 customers of the Vyvx Business by revenue derived by the Company and the
Retained Subsidiaries (taken together) during the seven-month period ended July 31,
2005 (with respect to the Telecommunications Business) and the eight-month
period ended August 31, 2005 (with respect to the Vyvx Business), to whom
the Company or any Retained Subsidiary has sold goods and/or services.  As of the date hereof, other than SBC prior
to June 15, 2005, no such customer has expressed in writing, and to the
Seller’s Knowledge no such customer has expressed verbally, to the Company or
any Retained Subsidiary its intention to cancel or otherwise terminate or
materially reduce or modify its relationship with the Company or any Retained
Subsidiary.

 

SECTION 5.23. 
Labor Matters.

 

(a)                                  Except
as set forth in Schedule 5.23(a): (i)  neither of the Company
or the Retained Subsidiaries is a party to any outstanding employment
agreements or contracts with

 

32

 

officers, managers or employees of either of the Company or the
Retained Subsidiaries that are not terminable at will, or that provide for the
payment of any bonus or commission; (ii) neither of the Company or the
Retained Subsidiaries is a party to any agreement, policy or practice that
requires it to pay termination, change
of control or severance pay to salaried, non-exempt or hourly employees
of such Company (other than as required by law); (iii) neither of the
Company or the Retained Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to its employees nor does
the Seller know of any activities or proceedings of any labor union within the
preceding three years to organize any such employees; and (iv) neither of
the Company or the Retained Subsidiaries is a party to any consulting
agreements with any individual providing services to the Company or any of the
Retained Subsidiaries.

 

(b)                                 Except
as set forth in Schedule 5.23(b): (i) each of the Company and
the Retained Subsidiaries is in compliance in all material respects with all
applicable laws relating to employment and employment practices, the classification of employees, wages,
hours, collective bargaining, unlawful discrimination, civil rights, safety and
health, workers’ compensation, the collection and payment of withholding and/or
social security Taxes and terms and conditions of employment; (ii) there
are no charges with respect to or relating to either of the Company or the
Retained Subsidiaries pending or, to the Seller’s Knowledge, threatened before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices; and (iii) neither
of the Company or the Retained Subsidiaries has received any notice from any
national, state, local or foreign agency responsible for the enforcement of
labor or employment laws of an intention to conduct an investigation of either
of the Company or the Retained Subsidiaries and no such investigation is in
progress.

 

(c)                                  The
maximum aggregate severance obligations of the Company and the Retained
Subsidiaries under all programs, policies, arrangements (including under the
Severance Plan) or otherwise, assuming the requisite conditions for the payment
of severance were triggered and the Closing and all payments occur on January 1,
2006, would not be more than the amount set forth on Schedule 5.23(c)(i) based
upon the assumptions set forth on Schedule 5.23(c)(i).  Assuming the Closing and all payments occur
on January 1, 2006, the maximum aggregate obligations payable under the
following plans would not exceed the amount set forth on Schedule 5.23(c)(ii) based
upon the assumptions set forth on Schedule 5.23(c)(ii):  (i) the WilTel Communications, LLC
Employee Retention Plan, as adopted effective April 11, 2004; and (ii) the
Miscellaneous Retention Plans.  There are
no non-current liabilities of the Company or the Retained Subsidiaries in
respect of the Former Executive Retention Agreements.

 

SECTION 5.24.  Environmental Matters.  Except as disclosed on Schedule 5.24
and except for conditions that would not reasonably be expected to result in
the Company and its Subsidiaries incurring material liability under
Environmental Laws:

 

(a)                                  each
of the Company and the Retained Subsidiaries is, and to the Knowledge of the
Seller has been, in compliance in all material respects with all applicable
Environmental Laws, which compliance includes obtaining, maintaining and
complying in material respects with all material licenses, permits and other
authorizations required under all Environmental Laws;

 

33

 

(b)                                 to
the Seller’s Knowledge, each of the Company and the Retained Subsidiaries has
not received any notice of violation or potential liability under any
Environmental Laws from any Person or any governmental agency inquiry, request
for information, or demand letter under any Environmental Law relating to
operations or properties, whether currently or formerly owned or operated, of
the Company or the Retained Subsidiaries or their predecessors as of the
Closing Date, which is outstanding and would reasonably be expected to result
in the Company or any Retained Subsidiary incurring material liability under
Environmental Laws;

 

(c)                                  each
of the Company and the Retained Subsidiaries is not subject to any outstanding
orders arising under Environmental Laws nor are there any administrative, civil
or criminal actions, suits or proceedings pending or, to the Seller’s
Knowledge, threatened, against the Company or the Retained Subsidiaries, or to
Seller’s Knowledge, their predecessors under any Environmental Law;

 

(d)                                 to
the Seller’s Knowledge, there has been no release of Hazardous Materials by the
Company or any Retained Subsidiary at, on or under any of the Company Real
Property or other properties currently or formerly owned or leased by the
Company or the Retained Subsidiaries or their predecessors, which would
reasonably be expected to result in the Company or any Retained Subsidiary or
their predecessors incurring any material liability or damages under
Environmental Laws;

 

(e)                                  the
Seller has made available to the Buyer copies of all material environmental
studies, investigations, reports or assessments prepared by or for the Seller,
or in the Seller’s possession, concerning the Company, its Retained
Subsidiaries, the Company Real Property and any real property previously owned,
operated or used for disposal by the Company or the Retained Subsidiaries or
their predecessors, which are in the possession, custody or control of the
Seller.

 

(f)                                    This
Section 5.24 shall constitute the sole and exclusive representations and
warranties regarding environmental matters, Environmental Laws or Hazardous
Materials.

 

SECTION 5.25.  No Brokers.  No broker, finder or similar intermediary has
acted for or on behalf of, or is entitled to any broker’s, finder’s or similar
fee or other commission from either of Leucadia, the Seller, the Company or its
Subsidiaries in connection with this Agreement or the transactions contemplated
hereby.

 

SECTION 5.26.  Acquisition of the Shares.  (a)  The Seller is acquiring the Shares
to be issued by Level 3 hereunder for its own account for investment and not
with a view towards the resale, transfer or distribution thereof, nor with any
present intention of distributing such shares in violation of applicable
federal securities laws.

 

(b)                                 The
Seller has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of its investment in the
Company as contemplated by this Agreement, and is able to bear the economic
risk of such investment for an indefinite period of time.  The Seller has been afforded access to Level
3’s Annual Report on Form 10-K for the fiscal year ended December 31,
2004 and the Level 3’s Quarterly Report on

 

34

 

Form 10-Q for fiscal quarters ended March 31, 2005 and June 30,
2005 (“Level 3 SEC Reports”) and has been afforded an opportunity to ask
questions of and receive answers from representatives of Level 3 and the Buyer
concerning the terms and conditions of this Agreement and the acquisition of
such Shares.

 

(c)                                  The
Seller is an “accredited investor” as such term is defined in Rule 501(a) promulgated
under the Securities Act.

 

(d)                                 The
Seller understands that the Shares have not been registered under the
Securities Act or any state securities law, by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act and
such state securities laws, which exemption depends upon, among other things,
the bona fide nature of the Seller’s investment intent as expressed
herein.  The Seller understands that such
securities must be held indefinitely unless they are subsequently registered
under the Securities Act and such state securities laws or a subsequent disposition
thereof is exempt from registration.  The
Seller understands that the exemption from registration afforded by Rule 144
(the provisions of which are known to the Seller) promulgated under the
Securities Act depends upon the satisfaction of various conditions and that, if
applicable, Rule 144 may afford the basis for sales only in limited
amounts.

 

SECTION 5.27.  SBC.

 

(a)                                  Except
as set forth in Schedule 5.27(a), as of the date hereof, no
credits, refunds or payments of any kind are due or owing to SBC.  The Company and its Subsidiaries have billed
SBC pursuant to the SBC Agreement in a manner that is consistent, accurate and
in accordance with the terms of such agreement in all material respects.

 

(b)                                 Schedule 5.27(b) sets
forth the amounts billed to SBC and its Affiliates for Included Services
pursuant to, and as that term is defined in, the SBC Agreement as of October 15,
2005 and for each of the calendar months of July, August and September 2005.

 

(c)                                  SBC
has never made an indemnification claim or other claim for Losses against the
Company or any of its Affiliates.  Except
as set forth in Schedule 5.27(c), to the Seller’s Knowledge, there
are no material disputes pending with or overtly threatened by SBC.

 

(d)                                 The
Company and its Affiliates have not requested, and SBC and its Affiliates have
not paid for, any reimbursements contemplated by Section 3.3(B) of
the SBC Agreement.

 

SECTION 5.28.  No Other Representations or Warranties.  Except for the representations and warranties
contained in this Section 5, neither the Seller nor Leucadia nor any other
Person makes any other express or implied representation or warranty on behalf
of the Seller or Leucadia with respect to the Company and the Retained
Subsidiaries.

 

SECTION 6.  REPRESENTATIONS AND WARRANTIES OF THE
BUYER AND LEVEL 3.

 

The Buyer and Level 3 hereby jointly and severally
represent and warrant to Leucadia and the Seller as follows:

 

35

 

SECTION 6.1.  Corporate Organization.  The Buyer is a limited liability company and
Level 3 is a corporation, each of which has been duly organized, validly
existing and is in good standing under the laws of the State of Delaware, and
has all requisite limited liability company or corporate power (as the case may
be) and authority to own its properties and assets and to conduct its
businesses as now conducted.

 

SECTION 6.2.  Qualification to Do Business.  The Buyer and Level 3 are duly qualified to
do business as a foreign limited liability company or corporation (as the case
may be) and is in good standing in every jurisdiction in which the character of
the properties owned or leased by it or the nature of the business conducted by
it makes such qualification necessary except where the failure to be so
qualified or in good standing that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Buyer or Level
3.

 

SECTION 6.3.  No Conflict or Violation.  The execution, delivery and performance by
the Buyer and Level 3 of this Agreement and by Level 3 of the Registration
Rights Agreement do not and will not (i) violate or conflict with any
provision of any Organizational Documents of the Buyer and Level 3, (ii) violate
any provision of law, or any order, judgment or decree of any Governmental
Entity or (iii) violate or result in a breach of or constitute (with due
notice or lapse of time or both) a default under any material contract,
agreement or instrument to which the Buyer or Level 3 is a party or by which it
is bound or to which any of its properties or assets is subject that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Buyer or Level 3.

 

SECTION 6.4.  Consents and Approvals.  Except as set forth in Schedule 6.4,
no consent, waiver, authorization or approval of any Governmental Entity, and
no declaration or notice to or filing or registration with any Governmental
Entity, is required in connection with the execution and delivery by Level 3
and the Buyer of this Agreement and the execution and delivery by Level 3 of
the Registration Rights Agreement or the performance by Level 3 and the Buyer
of their obligations hereunder or thereunder, except for (i) the filing of
Notification and Report Form under the HSR Act, (ii) filings with the
Commission and the NASDAQ Stock Market, including without limitation, the
filing of the registration statement covering the resale of the Shares to be
issued hereunder (the “Registration Statement”) and a Notification Form for
Listing Additional Shares with respect to the Shares to be issued hereunder,
respectively, and (iii) such other consents, waivers, authorizations,
approvals, declarations, notices, filings or registrations that, if not
obtained, made or given, would not, individually or in the aggregate, reasonably
be expected to impair in any material respect the ability of Level 3 or the
Buyer to perform its obligations hereunder, or prevent or materially impede,
interfere with, hinder or delay the consummation of the transactions
contemplated hereby.

 

SECTION 6.5.  Authorization and Validity of Agreement.  The Buyer and Level 3 have all requisite
limited liability company or corporate power (as the case may be) and authority
to enter into this Agreement and the Registration Rights Agreement to which
they are a party and to carry out their respective obligations hereunder and
thereunder.  The execution and delivery
of this Agreement and the Registration Rights Agreement and the performance of
the Buyer’s and Level 3’s respective obligations hereunder and thereunder have
been duly authorized by all necessary limited liability company or corporate
action (as the case may be) of the Buyer and

 

36

 

Level 3, and no other limited liability company or corporate
proceedings (as the case may be) on the part of the Buyer and Level 3 are
necessary to authorize such execution, delivery and performance.  This Agreement has been duly executed by the
Buyer and Level 3 and, assuming due execution and delivery by Leucadia and the
Seller, shall constitute their valid and binding obligation, enforceable
against them in accordance with its terms, subject to (i) the effect of
bankruptcy, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting the enforcement of creditors’ rights generally, (ii) general
equitable principles (whether considered in a proceeding in equity or at law)
and (iii) an implied covenant of good faith and fair dealing.

 

SECTION 6.6.  Capitalization and Related Matters.

 

(a)                                  As
of the date hereof, Level 3’s capital stock consists of (a) 1.5 billion
authorized shares of Level 3 Common Stock and (b) 10,000,000 authorized
shares of preferred stock, par value $0.01 per share, of which no shares of
preferred stock are outstanding.  As of October 27,
2005, there were 701,076,214 shares of Level 3 Common Stock outstanding.   Except as set forth on Schedule 6.6
hereto as of June 30, 2005, (i) neither Level 3 nor any of its
Subsidiaries has outstanding any stock or other securities convertible into or
exchangeable for any shares of capital stock of Level 3, any rights to
subscribe for or to purchase or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance
of, any capital stock of Level 3, or any stock or securities convertible into
or exchangeable for any capital stock of Level 3 other than those issued under
employee benefit plans of Level 3; and (ii) neither Level 3 nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of capital stock of Level
3.  All of the outstanding shares of Level
3 Common Stock have been duly and validly issued and are fully paid and
non-assessable.  As of the Closing, the
Shares will be duly authorized and, upon issuance, sale and delivery as
contemplated by this Agreement, the Shares will be validly issued, fully paid
and non-assessable securities of Level 3.

 

(b)                                 All
of the outstanding membership units of the Buyer are owned of record and
beneficially by Level 3, directly or indirectly.

 

SECTION 6.7.  SEC Filings.

 

(a)                                  The
Buyer has delivered or made available to Leucadia and the Seller a correct and
complete copy of the Level 3 SEC Reports. 
The Level 3 SEC Reports have been timely filed pursuant to the Exchange
Act.

 

(b)                                 The
Level 3 SEC Reports complied as to form in all material respects with the
requirements of the Exchange Act in effect on the date of filing.  The Level 3 SEC Reports, when filed pursuant
to the Exchange Act, did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.

 

(c)                                  Each
of Level 3’s financial statements (including the related notes) included in the
Level 3 SEC Reports present fairly in all material respects the consolidated

 

37

 

financial position and consolidated results of operations and cash
flows of Level 3 and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the period involved except as otherwise noted therein, and
subject, in the case of any unaudited interim financial statements included
therein, to normal year-end adjustments and to the absence of complete
footnotes.

 

SECTION 6.8.  No Material Adverse Effect.  Since June 30, 2005, there has not been
any Material Adverse Effect on Level 3 and its Subsidiaries.

 

SECTION 6.9. 
Private Placement.  The
issuance of the Shares to Leucadia pursuant to this Agreement will not require
registration under the Securities Act, assuming that (i) the
representations and warranties of the Seller made to Level 3 and the Buyer in
connection with this Agreement and the transactions contemplated by this
Agreement are true, complete and accurate (upon which assumption Level 3 and
the Buyer have relied without independent investigation); and (ii) the
Seller complies with its representations and warranties set forth in Section 5.26
of this Agreement.

 

SECTION 6.10.  No Brokers.  No broker, finder or similar intermediary has
acted for or on behalf of, or is entitled to any broker’s, finder’s or similar
fee or other commission from the Buyer in connection with this Agreement or the
transactions contemplated hereby, other than JP Morgan Securities Inc. and
Evercore Partners.

 

SECTION 6.11.  Sufficiency of Funds.  The Buyer has, and at the Closing will have,
sufficient funds available to pay the Cash Purchase Price and the Additional
Cash Amount at the Closing.

 

SECTION 6.12.  No Other Representations or Warranties.  Except for the representations and warranties
contained in this Section 6, neither the Buyer nor Level 3 nor any other
Person makes any other express or implied representation or warranty on behalf
of the Buyer nor Level 3.

 

SECTION 7.  COVENANTS OF LEUCADIA AND THE SELLER.

 

Leucadia and the Seller hereby jointly and severally
covenant as follows:

 

SECTION 7.1.  Conduct of Business Before the Closing
Date.  (a)  Without the prior
written consent of the Buyer, between the date hereof and the Closing Date,
Leucadia and the Seller shall not permit either the Company or its Retained
Subsidiaries to, except (W) as contemplated by this Agreement, (X) as set forth
in Schedule 7.1(a), (Y) as it relates exclusively to the Excluded
Assets or the Excluded Liabilities or (Z) in connection with the Pre-Closing
Transfers:

 

(i)                                     make
any material change in the conduct of its businesses or enter into any
transaction, other than in the ordinary course of business consistent with past
practices;

 

(ii)                                  make
any change in any Organizational Document; issue any additional shares of
capital stock, membership units or partnership interests or other

 

38

 

equity securities or
grant any option, warrant or right to acquire any capital stock, membership
units or partnership interests or other equity securities or issue any security
convertible into or exchangeable for such securities or alter in any way any
its outstanding securities or make any change in outstanding shares of capital
stock, membership units or partnership interests or other ownership interests
or its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise. 
Leucadia and the Seller shall advise Level 3 of the aggregate amount of
cash, cash equivalents and marketable securities transferred or to be
transferred to Leucadia or an Affiliate (other than the Company and its
Retained Subsidiaries) pursuant to this Agreement;

 

(iii)                               make
any sale, assignment, transfer, abandonment, sublease, assignment or other conveyance of its assets, Company Real Property or
rights or any part thereof, other than pursuant to IRUs that are entered into
in the ordinary course of business and on customary terms and which IRUs result
in payments to the Company and its Subsidiaries of an aggregate amount not to
exceed the greater of (i) $65,000 per day for each day between the date
hereof and the Closing Date and (ii) $4.0 million;

 

(iv)                              subject
any of its assets, properties or rights or any part thereof, to any Lien or
suffer such to exist other than such Liens as may arise in the ordinary course
of business consistent with past practice by operation of law, Permitted Liens
and Liens pursuant to the Company’s Credit Documents or the Company’s Real
Estate Debt Documents;

 

(v)                                 redeem,
retire, purchase or otherwise acquire, directly or indirectly, any shares of
the capital stock, membership units or partnership interests or other ownership
interests of the Company and its Subsidiaries or declare, set aside or pay any
dividends or other distribution in respect of such shares or interests (other
than to issue a dividend to the Seller of Excluded Assets and to satisfy
intercompany indebtedness balances);

 

(vi)                              acquire, lease or sublease any material
assets, raw materials or properties (including any real property), or enter
into any other transaction, other than in the ordinary course of business
consistent with past practice;

 

(vii)                           enter
into any new (or amend any existing) employee benefit plan, program or
arrangement or any new (or amend any existing) employment, severance,
retention, change of control or consulting agreement, grant any general
increase in the compensation of officers or employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to become
payable to any employee, except in accordance with pre-existing contractual
provisions or consistent with past practice;

 

(viii)                        make or
commit to make capital expenditures that are not otherwise in the ordinary
course of business, and (x) that require aggregate payments in excess of
$500,000 per week for each week between the Measurement Date and the

 

39

 

Closing Date or (y) that
require aggregate payments after the Closing in excess of $2,000,000;

 

(ix)                                pay,
lend or advance any amount to, or sell, transfer or lease any properties or
assets to, or enter into any agreement or arrangement with, any of its
Affiliates other than among the Company and the Retained Subsidiaries;

 

(x)                                   fail
to keep in full force and effect insurance comparable in amount and scope to
coverage maintained at the date hereof;

 

(xi)                                make
any change in any method of accounting or accounting principle or method except
for any such change required by reason of a concurrent change in GAAP, or write
off as uncollectible any accounts receivable except in the ordinary course of
business consistent with past practice;

 

(xii)                             make
or change any material Tax election, change an annual accounting period or
adopt or change any material accounting method, file any amended Tax Return,
enter into any closing agreement, settle any material Tax claim or assessment
relating to the Company or any of its Subsidiaries, surrender any material
right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment relating to the
Company or any of its Subsidiaries, or take any other similar action relating
to the filing of any Tax Return or the payment of any Tax;

 

(xiii)                          (A) modify,
amend in any material respect or terminate any contract in any manner that
would reasonably be expected to have an adverse effect on the Company and the
Retained Subsidiaries or (B) make or enter into supplier contracts
(including any purchases under tariffs) having a term of more than 12 months
that (x) would have payment obligations over the course of such contracts in
excess of $1.0 million in the aggregate or (y) are not otherwise in the
ordinary course of business consistent with past practice;

 

(xiv)                         settle,
release or forgive any material litigation; or

 

(xv)                            commit
to do any of the foregoing.

 

(b)                                 From
and after the date hereof and until the Closing Date, Leucadia and the Seller
shall cause each of the Company and its Subsidiaries to:

 

(i)                                     continue
to maintain, in all material respects, its assets, properties, rights and
operations in accordance with present practice in a condition suitable for
their current use;

 

(ii)                                  file,
when due or required, all Tax Returns and other reports required to be filed
and pay when due all Taxes lawfully levied or assessed against it, unless the
validity thereof is contested in good faith and by appropriate proceedings
diligently conducted;

 

40

 

(iii)                               continue
to conduct its business in the ordinary course consistent with past practice;

 

(iv)                              keep
its books of account, files and records in the ordinary course and in accordance
with existing practice;

 

(v)                                 use
commercially reasonable efforts in light of the transactions contemplated
herein consistent with the operation of the Company’s business in the ordinary
course and consistent with past practice to preserve intact its operations,
organization and reputation;

 

(vi)                              pay
or accrue by the Measurement Date for the capital expenditure projects listed
on Schedule 7.1(b)(vi) hereto and make commercially reasonable
efforts to complete such projects; and

 

(vii)                           use
commercially reasonably efforts to continue to spend the amounts under the
Vendor Contracts at rates consistent with past practice and in a manner that is
reasonably likely to avoid assessments against the Company or its Retained
Subsidiaries during the 12 months after the Closing.

 

(c)                                  Nothing
contained in this Agreement shall give to Level 3 or Buyer, directly or
indirectly, rights to control or direct the operations of the Company or the
Retained Subsidiaries prior to the Closing Date.  Prior to the Closing Date, the Company and
the Retained Subsidiaries shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its and its
Subsidiaries’ operations.

 

SECTION 7.2.  Consents and Approvals.  Leucadia and the Seller shall, and shall
cause each of the Company and its Subsidiaries to (a) use their
commercially reasonable efforts to obtain all consents, waivers, authorizations
and approvals of all Governmental Entities, and of all other Persons, required
in connection with the execution, delivery and performance by the Seller and
Leucadia of this Agreement, and the Buyer and Level 3 shall cooperate with the
Seller and Leucadia in obtaining such consents and (b) cooperate with the
Buyer and Level 3 in preparing and filing all documents required to be
submitted by the Buyer or Level 3 to any Governmental Entity, in connection
with such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained by the Buyer
or Level 3 in connection with such transactions (which assistance and
cooperation shall include, without limitation, timely furnishing to the Buyer
and Level 3 all information concerning Leucadia, the Seller and the Company and
its Subsidiaries that counsel to the Buyer determines is required to be
included in such documents).

 

SECTION 7.3.  Access to Properties and Records.  Leucadia and the Seller shall cause each of
the Company and the Retained Subsidiaries to afford to the Buyer and Level 3,
and to the accountants, counsel and representatives of the Buyer and Level 3,
reasonable access during normal business hours throughout the period prior to
the Closing Date (or the earlier termination of this Agreement pursuant to Section 12)
to all properties, books, contracts, commitments and files and records (but
limited with respect to Tax Returns and correspondence with accountants to
these portions of Tax Returns and correspondence with accountants that

 

41

 

relate to the Company and its Retained Subsidiaries and to the extent
reasonably necessary to evaluate the purchase of the Membership Units) of the
Company and its Subsidiaries and, during such period, shall furnish promptly to
the Buyer and Level 3 all other information concerning the Company and the
Retained Subsidiaries, properties and personnel as the Buyer and Level 3 may
reasonably request to evaluate the transactions contemplated hereby; provided
that neither Leucadia nor the Seller shall be required to provide access to any
such properties, personnel or information to the extent relating exclusively to
the Excluded Assets or Excluded Liabilities. 
Leucadia and the Seller also shall cause each of the Company and the
Retained Subsidiaries to afford to the Buyer and Level 3 reasonable access to
its assets and operations throughout the period prior to the Closing Date to
evaluate the transactions contemplated hereby. 
Unless otherwise agreed to by Leucadia and the Seller, all information
provided to Buyer and Level 3 and their advisors and representatives shall be
kept confidential in accordance with the terms of the Confidentiality
Agreement; provided, however, that such obligation will terminate
upon the Closing with respect to information relating to the Company and the
Retained Subsidiaries (except, if the Buyer has not exercised the Benefit Plan
Substitution Right pursuant to Section 2.2(b), in connection with Level 3’s
and the Buyer’s investigation of the Transferred Benefit Plans in accordance
with Section 7.16).  No
investigation or receipt of information pursuant to this Section 7.3 shall
qualify any representation or warranty of Leucadia or the Seller or the
conditions to the obligations of the Buyer or Level 3.

 

SECTION 7.4.  Pre-Closing Transfers.  On or prior to the Closing, Leucadia and the
Seller shall cause the Company and the Retained Subsidiaries to transfer to one
or more entities directly or indirectly wholly owned by Leucadia (other than
the Company or the Retained Subsidiaries) (the “Transferee”) all of the
right, title and interest of the Company and the Retained Subsidiaries in and
to the Excluded Assets.  Such transfer
shall be on an “as is, where is” basis, and the Company and the Retained
Subsidiaries will make no representations or warranties, either express or
implied, to the Transferee with respect to the Excluded Assets and the
Transferee will have no recourse against the Company and the Retained
Subsidiaries with respect to the Excluded Assets or the Excluded Liabilities.  In addition, Leucadia and the Seller shall
cause the Transferee to assume and to pay, perform, settle and discharge when
due all obligations with respect to the Excluded Liabilities.  Furthermore, to the extent that any of the
Excluded Assets or the Excluded Liabilities require the Company and the
Retained Subsidiaries to perform obligations thereunder (including any
guarantees), Leucadia and the Seller shall, prior to the Closing, obtain from
the other parties thereto the written unconditional release of the Company and
the Retained Subsidiaries from all obligations (including any guarantees) and
liabilities under such contracts and provide any required notices to any Person
or shall otherwise indemnify the Buyer and Level 3 with respect thereto without
limitation pursuant to the provisions of Section 9.3(b)(ii) and (iii) hereof.  In connection with obtaining the release of
the Company and the Retained Subsidiaries from the Company’s Credit Documents,
the Company may borrow funds from Leucadia or an Affiliate of Leucadia and,
subject to Section 7.15(a), such inter-company loans will be repaid by the
Company at or prior to the Closing.  For
purposes of this Agreement, such transfer of the Excluded Assets and assumption
of the Excluded Liabilities and release or indemnification of the Company’s and
the Retained Subsidiaries’ obligations thereunder (including any guarantees)
are collectively referred to as the “Pre-Closing Transfers.”  Notwithstanding the foregoing, prior to
transferring the capital stock, membership units or other ownership interests
of the Transferred Subsidiaries to the Transferee, Leucadia and the Seller
shall cause the Company and the Retained Subsidiaries to transfer to the
Company or a

 

42

 

Retained Subsidiary all of the right, title and interests of the
Transferred Subsidiaries in and to any of the assets and rights primarily used
in the Businesses.  Leucadia and the
Seller shall assume full liability for any and all Taxes that result from the
Pre-Closing Transfers to the extent in excess of any Tax (except liability for
any Income Tax) reflected in the determination of the Actual Adjusted Net
Working Capital.

 

SECTION 7.5.  Registration Statement and Level 3
Commission Filing Requirements.  
Leucadia and the Seller shall and shall use their commercially
reasonable efforts to cause the Company and its Subsidiaries to (i) prepare and
timely deliver to the Buyer, such that the Buyer can meet any Commission filing
deadlines with respect to the transactions contemplated by this Agreement,
audited GAAP financial statements of the Company and its consolidated
Subsidiaries for the year ended December 31, 2004 and, upon the completion
thereof, the year ended December 31, 2005, as well as unaudited quarterly financials
of the Company and its consolidated subsidiaries for the nine months ended
September 30, 2005 and the financial statements for 2006 quarterly periods
ending prior to the Closing, for inclusion in the Registration Statement or to
meet Level 3’s Commission filing requirements with respect to the transactions
contemplated by this Agreement, (ii) cause Leucadia’s independent public
accountants to perform the procedures specified by the American Institute of
Certified Public Accountants for a review of financial information as described
in SAS 100, Interim Financial Information with respect to the unaudited
financial statements of the Company and its consolidated Subsidiaries for the
nine months ended September 30, 2005 and the financial statements for 2006
quarterly periods ending prior to the Closing and (iii) to the extent required
by the Company’s independent public accountants, cooperate with Level 3 and the
Company to obtain the consent of the Company’s independent public accountants,
when required, with respect to the 2004 and 2005 audited financial statements
so that such audited financial statements can, if required, be included in the
Registration Statement or other Commission reports required to filed with or
furnished to the Commission by Level 3 with respect to the transactions
contemplated by this Agreement.  Level 3
and the Buyer acknowledge that if the Closing has occurred, timely delivery of
certain items required under this Section 7.5 will require the cooperation and
efforts of Level 3 and the Buyer to the same extent as Leucadia and the Seller.

 

SECTION 7.6.  Negotiations.  From and after the date hereof and until the
earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Section 12 hereof, Leucadia and the Seller shall not, and
shall cause any Persons acting on behalf of Leucadia, the Seller, the Company
and its Subsidiaries not to encourage, solicit, engage in discussions or
negotiations with, or provide any information to, any Person or group (other
than the Buyer or its representatives) concerning any merger, sale of
substantial assets, sale of shares of capital stock, membership units or
partnership interests or similar transaction involving the Company and the
Retained Subsidiaries (other than with respect to the Excluded Assets and
Excluded Liabilities).

 

SECTION 7.7.  Certain Real Estate Matters.  Prior to the Closing, Leucadia and the Seller
shall cause the Company and its Subsidiaries to (i) renew the Leases set
forth on Schedule 7.7(a), (ii) allow the Leases set forth on Schedule 7.7(b) to
expire in accordance with their terms and (iii) terminate the intercompany
leases set forth on Schedule 7.7(c), in the case of clauses (ii) and
(iii), with no liability or obligation on the part of the Company, the Retained
Subsidiaries, the Buyer or Level 3, except as therein provided.

 

43

 

SECTION 7.8.  Commercially Reasonable Efforts.  Upon the terms and subject to the conditions
of this Agreement, Leucadia and the Seller will use and shall cause each of the
Company and its Subsidiaries to use, their commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable consistent with applicable law to
consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.  Upon
the terms and subject to the conditions of this Agreement, Leucadia and the
Seller shall execute the Registration Rights Agreement on the Closing Date and
Leucadia and the Seller shall cause the Company and WilTel Technology Center,
LLC to execute the Lease Agreement on the Closing Date.

 

SECTION 7.9. 
Notice of Breach.  Through
the Closing Date, Leucadia and the Seller shall (a) promptly give written
notice with particularity upon having knowledge of any matter that constitutes
or is reasonably likely to constitute a breach of any representation, warranty,
agreement or covenant of Leucadia or the Seller contained in this Agreement and
(b) promptly notify Level 3 upon having knowledge of the announced
intention of any of the suppliers or customers listed on Schedule 5.22(a) and
Schedule 5.22(b), respectively, to cancel, terminate or materially
reduce its relationship with the Company or any Retained Subsidiary as such
relationship exists on the date hereof. 
No notification pursuant to this Section 7.9 shall qualify any
representation or warranty of Leucadia or the Seller or the conditions to the
obligations of the Buyer or Level 3.

 

SECTION 7.10.  Stock Certificate Legend.  The certificates evidencing the Shares will
bear substantially the following legend reflecting the foregoing restrictions
on the transfer of such Shares:

 

“The
securities evidenced hereby have not been registered under the Securities Act,
and may not be transferred except pursuant to an effective registration under
the Act or in a transaction which, in the opinion of counsel reasonably
satisfactory to Level 3 Communications, Inc. qualifies as an exempt
transaction under the Act and the rules and regulations promulgated
thereunder.  Such securities are also
subject to the agreements, covenants and restrictions in regard to the transfer
of such securities as provided in that certain Registration Rights and Transfer
Restriction Agreement, dated as of [the Closing Date], among Level 3
Communications, Inc., Leucadia National Corporation and Baldwin
Enterprises, Inc., a copy of which Registration Rights and Transfer
Restriction Agreement is on file at the office of the Secretary of Level 3
Communications, Inc.”

 

SECTION 7.11.  Non-Solicitation.

 

(a)                                  During
the period commencing on the date of this Agreement and ending on the 12-month
anniversary of the Closing Date (the “Initial Restricted Period”), each
of the Seller and Leucadia shall not and shall cause their Affiliates not to,
directly or indirectly, without the prior written consent of the Buyer, induce
or solicit for employment or engagement as a

 

44

 

consultant, or hire or engage as a consultant, any Covered Employee of
the Company and the Retained Subsidiaries, provided, that neither (i) generalized
searches through media advertisement, employment firms or otherwise that are
not directed to such personnel nor (ii) soliciting or hiring such
individuals following their termination of employment or notification of
termination by the Company or the Retained Subsidiaries shall constitute a
violation of the foregoing; provided, such hiring occurs after the
actual date of termination.

 

(b)                                 During
the period commencing on the day after the 12-month anniversary of this
Agreement and ending on the 18-month anniversary of the Closing Date (the “Subsequent
Restricted Period”), each of the Seller and Leucadia shall not and shall
cause their Affiliates not to, directly or indirectly, without the prior
written consent of the Buyer, induce or solicit for employment or engagement as
a consultant, any Covered Employee of the Company and the Retained
Subsidiaries, provided, that neither (i) generalized searches
through media advertisement, employment firms or otherwise that are not
directed to such personnel nor (ii) soliciting such individuals following
their termination of employment or notification of termination by the Company
or the Retained Subsidiaries shall constitute a violation of the foregoing.

 

(c)                                  The
parties agree that a monetary remedy for a breach of the agreements set forth
in Sections 7.11(a) and (b) hereof will be inadequate and
impracticable and further agree that such a breach would cause Level 3 and the
Buyer irreparable harm, and that Level 3 and the Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages.  In the event of such a
breach, Leucadia and the Seller agree that Level 3 and the Buyer shall be
entitled to such injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions as a court of competent
jurisdiction shall determine.

 

(d)                                 If
any provision of this Section 7.11 is invalid in part, it shall be
curtailed, as to time, location or scope, to the minimum extent required for
its validity under the laws of the United States and shall be binding and
enforceable with respect to the Seller and Leucadia as so curtailed.

 

SECTION 7.12.  Employees and Employee Benefits.

 

(a)                                  Certain current and former employees of
the Company and its Subsidiaries (including certain predecessor companies)
participate in a qualified defined benefit pension plan known as the WilTel
Communications, LLC Pension Plan (the “Retirement Plan”).  Prior to the Closing Date, Leucadia and the
Seller shall take all necessary and appropriate action to:  (i) cause the Company and its
Subsidiaries to amend or revise the Retirement Plan so that no further benefits
will be accrued by their employees under such plan on or after the Closing
Date, (ii) assume the sponsorship of the Retirement Plan and the related
obligations and liabilities thereunder accrued in respect of the eligible
employees prior to the Closing Date, and (iii) cause the Company and its
Subsidiaries to cease to sponsor and maintain the Retirement Plan as of the date such sponsorship is assumed by
Leucadia and the Seller; provided, however, that the covenants of
the Seller set forth in clauses (i) through (iii) of this Section 7.12(a) shall
be of no further force and effect upon the exercise by the Buyer of its Benefit
Plan Substitution Right in accordance with Section 2.2(b).  The Company and its Subsidiaries shall have
no obligation to

 

45

 

implement a qualified defined benefit
pension plan for their employees on or after the Closing Date.

 

(b)                                 Certain current and former employees of
the Company and its Subsidiaries participate in a nonqualified deferred
compensation plan known as the WilTel Communications, LLC Supplemental
Executive Retirement Plan (the “Deferred Compensation Plan”).  Prior to the Closing Date, Leucadia and the
Seller shall take all necessary and appropriate action to:  (i) cause the Company and its
Subsidiaries to amend or revise the Deferred Compensation Plan so that no
further benefits will be accrued by their employees under such plan on or after
the Closing Date, (ii) assume the sponsorship of the Deferred Compensation
Plan and the related obligations and liabilities thereunder accrued in respect
of the eligible employees prior to the Closing Date, and (iii) cause the
Company and its Subsidiaries to cease to sponsor and maintain the Deferred
Compensation Plan as of the date such sponsorship is assumed by Leucadia and
the Seller; provided, however, that the covenants of the
Seller set forth in clauses (i) through (iii) of this Section 7.12(b) shall
be of no further force and effect upon the exercise by the Buyer of its Benefit
Plan Substitution Right in accordance with Section 2.2(b). 
The Company and its Subsidiaries shall have no obligation to implement a
nonqualified deferred compensation plan for their employees on or after the
Closing Date.

 

(c)                                  Within
three days after the date hereof, the Seller shall deliver to the Buyer a list
dated as of October 28, 2005 containing the name, position, starting
employment date, current annual salary, bonus and commissions in 2004 of each
current employee of either of the Company or its Retained Subsidiaries.

 

(d)                                 No
provision of this Section 7.12 shall create any third party beneficiary or
other rights in any employee or former employee (including any beneficiary or
dependent thereof) of the Company or of any of its Subsidiaries in respect of
continued employment (or resumed employment) and no provision of this Section 7.12
shall create any such rights in any such Persons in respect of any benefits
that may be provided, directly or indirectly, under any employee plan or
arrangement which may be established or maintained by the Buyer or any of its
Affiliates after the Closing Date.  No
provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any such plans or arrangements of
the Buyer or any of its Affiliates.

 

SECTION 7.13.  Tax Matters.

 

(a)                                  All
transfer, documentary, sales, use, stamp, registration and other such Taxes,
and all recording charges (including any penalties and interest) incurred in
connection with consummation of the transactions contemplated by this Agreement
shall be paid by the Buyer and the parties shall cooperate in the filing of all
necessary Tax Returns and other documentation with respect to such Taxes and
charges.

 

(b)                                 (i) The
Seller shall prepare and file, or cause to be prepared and filed, when due all
Tax Returns that are required to be filed by or with respect to the Company and
its Subsidiaries for all Pre-Closing Tax Periods to the extent that such Tax
Returns are required to be filed on or prior to the Closing Date, taking into
account all valid extensions of time to file such returns. The Seller shall
also prepare and file or cause to be prepared and filed when due all

 

46

 

Tax Returns that are required to be filed by or with respect to the
Company and its Subsidiaries for all Pre-Closing Tax Periods to the extent such
Tax Returns relate to Income Taxes, irrespective of when due.  (ii) The Buyer shall prepare and file or
cause to be prepared and filed when due all Tax Returns that are required to be
filed by or with respect to the Company and its Subsidiaries for all
Pre-Closing Tax Periods to the extent that such Tax Returns relate to Taxes
other than Income Taxes and are required to be filed after the Closing Date,
taking into account all valid extensions of time to file such returns.  (iii) The Seller shall pay, or cause to
be paid, any Taxes due in respect of any such Tax Returns in excess of any
Taxes reflected in the determination of the Actual Adjusted Net Working
Capital, which shall be paid by the Company, but such limitation shall have no
application to Income Taxes.  In the case
of Tax Returns prepared by the Buyer pursuant to clause (ii), the Buyer shall cooperate
with and shall follow the direction of the Seller in the preparation of such
Tax Returns and the Seller shall pay over to the Buyer the amount of any Tax
owing under such Tax Return to be paid by the Seller under this Section 7.13(b) within
three days of receiving notice from the Buyer of such amount, which notice
shall be delivered not be less than seven days prior to the due date of such
return; provided, however, that there is at least substantial
authority for the positions required to be taken on such Tax Returns.  The
Tax Returns prepared pursuant to the first sentence of clause (i) and
clause (ii) shall be prepared consistent with past practice unless there
shall be no reasonable basis therefor and unless the failure to prepare such
returns in such a manner would not reasonably be expected to have a
material and adverse effect on the Company, the Retained Subsidiaries or
the Buyer after the Closing.

 

(c)                                  The
Buyer shall prepare and file, or cause to be prepared and filed, when due all
Straddle Tax Returns and shall cause the Company to pay the Taxes shown to be
due thereon; provided, however, that the Seller shall pay over to
the Buyer within three days of receiving notice from the Buyer of such amount,
which notice shall be delivered not less than seven days prior to the due date
of such Straddle Tax Return for the portion of any such Tax that relates to the
portion of the Straddle Period ending on the Closing Date, but only to the
extent in excess of any Taxes reflected in the determination of the Actual
Adjusted Net Working Capital, which shall be paid by the Company.  The Seller will furnish to the Buyer all
information and records reasonably requested by the Buyer for use in
preparation of any Straddle Tax Return. 
The Buyer shall furnish the Seller with a completed draft of any Straddle
Tax Return for the Seller to review and comment upon no later that 20 days
before the Buyer files any such return or such shorter period that may be
practical in the circumstances, provided that reasonably adequate time under
the circumstances is provided to the Seller for such review.  The Buyer shall not file any such Straddle
Tax Return without the Seller’s consent, which consent may not be unreasonably
withheld, conditioned or delayed.

 

(d)                                 In
the case of any Straddle Period, (i) Property Taxes of the Company and its
Subsidiaries for the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for the entire Straddle Period multiplied by a fraction,
the numerator of which is the number of days during the Straddle Period that are
in the Pre-Closing Tax Period and the denominator of which is the number of
days in the Straddle Period; and (ii) the Taxes of the Company and its
Subsidiaries (other than Property Taxes) for the portion of the Straddle Period
that constitutes a Pre-Closing Tax Period shall be computed as if such taxable
period ended as of the close of business on the Closing Date.  If necessary because the assets were reported
to the tax authorities on a combined basis (i.e., Closing occurs on or
before December 31, 2005), the

 

47

 

Property Taxes shall be allocated by the Buyer between the assets
acquired in this transaction and the Buyer’s remaining assets in accordance
with the Buyer’s reasonable asset allocation practice.  If the Buyer’s allocation is disputed by the
Seller, then the Seller and the Buyer shall negotiate in good faith to resolve
such dispute.

 

(e)                                  If
a Tax authority commences any audit, examination, litigation or otherwise makes
any claim or proposes any adjustment that relates to a Pre-Closing Tax Period
(other than an Straddle Period) (collectively, a “Tax Proceeding”), then
the Buyer shall promptly furnish written notice to the Seller of such Tax
Proceeding.  Failure to give such notice
shall not relieve the Seller from any liability which it may have on account of
this indemnification or otherwise, except to the extent that the Seller is
prejudiced thereby.  The Seller shall
have the shorter of (i) 45 days after receipt of such notice or (ii) 15
days less than the number of days before a response to the relevant Tax
authority is required, but in no event shall the Seller have less than 15 days,
to decide whether to undertake, conduct and control (through counsel of its own
choosing and at its own expense) the response to such Tax Proceeding and the
settlement or defense thereof, and the Buyer shall fully cooperate with Seller
in connection therewith including, but not limited to, providing powers of
attorney authorizing Leucadia (or its designee) to control and take action in
connection with any such Taxes.  The
Seller shall permit the Buyer to participate in such response, settlement or
defense through counsel chosen by the Buyer (but the fees and expenses of such
counsel shall be paid by Buyer).  If any
settlement materially adversely affects any Subsidiary in a Post-Closing Tax
Period, the Seller shall not pay or settle any such claim without the prior
written consent of Buyer (which consent shall not be unreasonably withheld,
conditioned or delayed).  If within the
shorter of (x) 45 days after the receipt of the Buyer’s notice of a Tax
Proceeding or (y) 20 days less than the number of days before a response to the
relevant Tax authority is required (but in no event less than 20 days), the
Seller does not notify the Buyer that the Seller elects (at its cost and
expense) to undertake the defense thereof, or gives such notice and thereafter
fails to contest such claim in good faith, then the Buyer shall have the right
to contest, settle or compromise such Tax Proceeding and the Buyer shall not
thereby waive any right to indemnity for such Tax Proceeding under this
Agreement and, for the avoidance of doubt, the Buyer shall be indemnified by
the Seller for the Buyer’s reasonable costs, including attorneys’ and consultants’
fees in defending and settling such proceedings; provided, however,
the Buyer shall not, and shall cause the Subsidiaries not to, pay or settle any
such Tax Proceedings without the prior written consent of Seller (which consent
shall not be unreasonably withheld, conditioned or delayed).

 

(f)                                    If
a Tax authority commences any audit, examination, litigation, or otherwise
makes any claim or proposes any adjustment that relates to a Straddle Period
(collectively, a “Straddle Period Tax Proceeding”), then the Buyer shall
promptly furnish written notice to the Seller of such Straddle Period Tax
Proceeding.  Failure to give such notice
shall not relieve the Seller from any liability which it may have on account of
this indemnification or otherwise, except to the extent that the Seller is
prejudiced thereby.  The Buyer shall
undertake, conduct and control (through counsel of its own choosing and at its
own expense) the response to such Straddle Period Tax Proceeding and the
settlement or defense thereof.  The
Seller shall cooperate with the Buyer in connection therewith, and the Buyer
shall permit the Seller to participate in such response, settlement or defense
through counsel chosen by the Seller (but the fees and expenses of such counsel
shall be paid by Seller). To the extent any settlement adversely affects the
Seller in a Pre-Closing Tax Period, the Buyer shall not pay or settle any

 

48

 

such claim without the prior written consent of the Seller (which consent
shall not be unreasonably withheld, conditioned or delayed).  If within the shorter of (i) 45 days
after the receipt of the Buyer’s notice of a Straddle Period Tax Proceeding or (ii) 15
days less than the number of days before a response to the relevant Tax
authority is required (but in no event less than 15 days), the Buyer fails to
contest such claim in good faith or to prevent action to foreclose a lien
against or attachment of the Buyer’s property, then the Seller shall have the
right to contest, settle or compromise such Straddle Period Tax Proceeding and
the Seller shall not thereby waive any right to indemnity for such Straddle
Period Tax Proceeding under this Agreement; provided, however,
the Seller shall not pay or settle any such Straddle Period Tax Proceeding
without the prior written consent of the Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed).

 

(g)                                 The
Buyer shall not, and shall not permit any of its Affiliates to, carry back any
loss, credit or other Tax attribute of the Company or any of its Subsidiaries
to a Pre-Closing Tax Period without the prior written consent of the Seller,
which consent may not be unreasonably withheld, conditioned or delayed.

 

(h)                                 All
tax sharing, indemnity or allocation agreements or arrangements among the
Company and its Subsidiaries on the one hand and Seller, Leucadia or their
Affiliates on the other hand shall terminate at or prior to the Closing and the
parties thereto shall have no further obligation thereunder.

 

(i)                                     Level
3 and the Buyer, on the one hand, and Leucadia and the Seller, on the other
hand, will cooperate with each other in connection with the preparation and
filing of Tax Returns required under this Agreement and will provide to each
other access, at any reasonable time and from time to time, at the business
location at which the books and records are maintained, after the Closing Date,
to such Tax data relating to the Company and the Retained Subsidiaries as
Leucadia and the Seller or Level 3 and the Buyer, as the case may be, may from
time to time reasonably request.

 

SECTION 7.14.  Name. 
Promptly after the Closing, Leucadia and the Seller shall cause WilTel
Aircraft Leasing, LLC, a Delaware limited liability company, and WilTel
Technology Center, LLC, a Delaware limited liability company, to change their
names to such names that do not include “WilTel” and to otherwise cease using
such name in its operations.

 

SECTION 7.15.  Reimbursements; Cash Balance.

 

(a)                                  If
the Closing occurs after December 31, 2005, the Seller shall pay to the
Company at the Closing an amount equal to all cash used by the Company, the
Retained Subsidiaries or the Business on and after January 1, 2006 with
respect to Excluded Liabilities (including, without limitation, (i) payments
of interest or principal under the Company’s Credit Documents or the Company’s
Real Estate Debt Documents and (ii) payments of operating and maintenance
expenses or capital expenditures with respect to the Company’s Tulsa, Oklahoma
headquarters) or Excluded Assets (including, without limitation, payments to
acquire marketable securities).

 

49

 

(b)                                 If
on the Measurement Date, the Company and the Retained Subsidiaries have an
aggregate cash balance of less than $100 million (after giving effect to the
Pre-Closing Transfers), the Seller shall make a contribution to the capital of
the Company on the Measurement Date to the extent necessary to cause the
Company and the Retained Subsidiaries to have a $100 million aggregate cash
balance immediately following the Measurement Date.

 

(c)                                  The
Seller shall on the Closing deliver to the Buyer a certificate signed by an
officer of the Seller setting forth in detail all of the amounts to be
reimbursed pursuant to Section 7.15(a).

 

(d)                                 All
payments referred to in Section 7.15(a) and (b) shall be made on
the respective due date for such payments by wire transfer of immediately
available funds.

 

SECTION 7.16.  Transferred Benefit Plans.  In connection with the Buyer’s ability to
exercise the Benefit Plan Substitution Right, the Seller shall provide to the
Buyer and Level 3 complete and unrestricted access, during normal business
hours, to all information concerning the Transferred Benefit Plans within the
possession of the Company, its Subsidiaries, the Seller and Leucadia, together
with complete and unrestricted access, during normal business hours, to the
employees of the Company and the advisors and consultants to the Company with
respect to the Transferred Benefit Plans, in each case solely for the purpose
of conducting its investigation of the Transferred Benefit Plans.  If the
Buyer exercises its Benefit Plan Substitution Right, the Seller and Leucadia
will represent and warrant the foregoing to the Buyer and Level 3 and will agree
to indemnify the Buyer and Level 3 for any breach of such representation,
subject to the provisions of Section 9.2(b).  Unless otherwise agreed to by Leucadia and
the Seller, all information provided to the Buyer and Level 3 and their
advisors and representatives pursuant to this Section 7.16 shall be kept
confidential in accordance with the terms of the Confidentiality Agreement, provided,
however, that such obligations will expire on the Closing if the Buyer
exercises its Benefit Plan Substitution Right in accordance with Section 2.2(b).
 All requests for information under this Section 7.16 shall be made
in writing to Mardi de Verges, Senior Vice President of the Company.

 

SECTION 8.  COVENANTS OF LEVEL 3 AND THE BUYER.

 

SECTION 8.1.  Commercially Reasonably Efforts.  Upon the terms and subject to the conditions
of this Agreement, the Buyer and Level 3 will use their commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable consistent with applicable law
to consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.  Upon
the terms and subject to the conditions of this Agreement, Level 3 shall
execute on the Closing Date the Registration Rights Agreement.

 

SECTION 8.2.  Consents and Approvals.  The Buyer and Level 3 shall use commercially
reasonable efforts (which in no event shall (a) require the Buyer or any
Affiliate of the Buyer to divest assets owned by Level 3 and its Subsidiaries
as of the date hereof other than assets that in the aggregate are not material
to their respective operations taken as a whole or (b) require the Company
or the Retained Subsidiaries to divest assets owned by them as of the date
hereof other than assets that in the aggregate are not material to their
respective operations taken

 

50

 

as a whole), (i) to obtain all consents and approvals of third
parties and Governmental Entities required to be obtained by them to effect the
transactions contemplated by this Agreement and (ii) to not allow any
other transaction, as to which they or their Affiliates are a party, to impede,
interfere with or delay in any material way with obtaining such consents.  The Buyer and Level 3 shall cooperate with
the Seller and Level 3 in obtaining all consents required hereunder.

 

SECTION 8.3. 
Notice of Breach.  Through
the Closing Date, the Buyer and Level 3 shall promptly give written notice with
particularity upon having knowledge of any matter that constitutes or is
reasonably likely to constitute a breach of any representation, warranty,
agreement or covenant of the Buyer or Level 3 contained in this Agreement.  No notification pursuant to this Section 8.3
shall qualify any representation or warranty of the Buyer or Level 3 or the
conditions to the obligations of the Seller or Leucadia.

 

SECTION 8.4. 
Listing of Shares.  Level 3
shall file a Notification Form for Listing of Additional Shares with the
NASDAQ Stock Market for the Shares to be issued hereunder.

 

SECTION 8.5.  WilTel Benefits Plans.  From and after the Closing Date until the
second anniversary thereof, Level 3 shall not, and shall cause the Company not
to terminate, modify or amend the Severance Plan in any manner that would
adversely affect the rights, benefits and privileges of the participants in the
Severance Plan.  Following the Closing,
Level 3 shall, and shall cause the Company (a) to comply with all
obligations and make all payments under the Severance Plan, the WilTel
Communications, LLC Employee Retention Plan and the Miscellaneous Retention
Plans in accordance with their respective terms and (b) if not previously
paid, to pay to the participants in the WilTel Communications, LLC Long-Term
Cash Incentive Plan in accordance with the terms of such plan equal to the
amounts set forth on Schedule 7.1(a)(vii) and to pay to the
participants in the Company’s 2005 bonus plan in accordance with the terms of
such plan the amounts accrued on the Closing Balance Sheet with respect to such
bonus plan; provided, however, that in the event the Closing
occurs before December 31, 2005, then solely for purposes of the foregoing
calculations, the Closing shall be deemed to have occurred on January 2,
2006.

 

SECTION 8.6.  Access to Properties and Records.  Following the Closing, Level 3 and Buyer
shall cause each of the Company and the Retained Subsidiaries to afford to
Leucadia and the Seller, and to the accountants, counsel and representatives of
Leucadia and the Seller, reasonable access to all properties, books, contracts,
commitments and files and records of the Company and the Retained Subsidiaries
and shall make available to Leucadia and the Seller, and to the accountants,
counsel and representatives of Leucadia and the Seller, such of the officers
and employees of the Company and its Retained Subsidiaries as Leucadia and the
Seller may reasonably request solely for the purpose of the timely (i) preparation
of the Company’s 2005 consolidated financial statements, (ii) preparation
of internal reporting packages, supplemental schedules and responses to review
questions normally requested as part of Leucadia’s 2005 annual closing process,
(iii) completion of management’s 2005 assessment of the effectiveness of
the Company’s internal control over financial reporting, (iv) completion
of the report of Leucadia’s independent registered public accountants with
respect to their 2005 audit of the Company’s financial statements, their 2005
audit of management’s assessment of the Company’s internal control over
financial reporting and their 2005 audit of the effectiveness of

 

51

 

the Company’s internal control over financial reporting and (v) for
the period from January 1, 2006 to the Closing, preparation of the Company’s
consolidated financial statements, internal reporting packages, supplemental
schedules and responses to review questions normally requested as part of
Leucadia’s normal quarterly closing process. 
Level 3 acknowledges that it has received Leucadia’s reporting
requirements and reporting timetable for the 2005 calendar year.  Leucadia and the Seller shall treat all
information provided by Level 3 and the Buyer with the same level of care and
confidentiality as each maintains with respect to its own information.

 

SECTION 8.7.  Reimbursements; Cash Balance.

 

(a)                                  If
the Closing occurs after December 31, 2005, the Buyer shall pay to the
Seller at the Closing an amount in cash equal to the product of (i) $11,500
and (ii) the number of days from January 1, 2006 to but excluding the
Closing Date.

 

(b)                                 If
(i) the Closing occurs after December 31, 2005, (ii) the Seller
has complied in all respects with its obligations under Section 7.15(a) and
(b), and (iii) after giving effect to the Pre-Closing Transfers and the
payments contemplated by Section 7.15(a), the Company and the Retained
Subsidiaries would have an aggregate cash balance immediately following the
Closing of less than $100 million, Level 3 or the Buyer shall make a contribution
to the capital of the Company immediately after the Closing to the extent
necessary to cause the Company and the Retained Subsidiaries to have a $100
million aggregate cash balance immediately following the Closing.

 

(c)                                  All
payments referred to in Section 8.7(a) and (b) shall be made on
the respective due date for such payments by wire transfer of immediately
available funds.

 

SECTION 8.8.  Retention Payments.  To the extent that the aggregate amount set
forth on Schedule 5.23(c)(ii) is greater than the aggregate of
all payments actually made by the Company pursuant to the WilTel
Communications, LLC Employee Retention Plan, as adopted effective April 11,
2004 and the Miscellaneous Retention Plans referred to in clauses (i) and (ii) of
Section 5.23(c), Level 3 shall promptly pay to the Seller the amount of
such excess after the Closing and within two months after the payments are due
in accordance with the applicable agreements.

 

SECTION 9.  INDEMNIFICATION.

 

SECTION 9.1.  Survival.  Each of the representations, warranties and
covenants set forth in this Agreement shall survive the Closing except that Section 5.10(c) and
(n) shall not apply to any Post-Closing Tax Periods; provided, however,
that no claim, lawsuit, or other proceeding arising out of or related to the
breach of any representation or warranty contained in this Agreement may be
made by any Indemnitee unless notice of such claim, lawsuit or other
proceeding, is given to the Indemnitor in accordance with Section 9.4, (i) for
all representations and warranties (other than those contained in Sections 5.6,
5.10 (but with respect to Section 5.10, this exception shall only apply to
the extent such representations and warranties relate to Income Taxes), 5.19
(to the extent such representations and warranties do not relate to the
Excluded Assets or the Excluded Liabilities), 5.24 and 6.6) prior to the
18-month anniversary of the Closing Date; (ii) for representation and
warranties contained in Sections 5.10 (to the extent

 

52

 

those representations and warranties 
relate to Income Taxes) and 5.19 (to the extent such representations and
warranties do not relate to the Excluded Assets or the Excluded Liabilities),
within 45 days after the expiration of the applicable statute of limitations;
and (iii) for the representations and warranties contained in Section 5.24,
prior to the 24-month anniversary of the Closing Date.

 

SECTION 9.2.  Indemnification by Leucadia and the Seller.

 

(a)                                  Notwithstanding
the Closing and regardless of any investigation at any time made by or on
behalf of the Buyer or Level 3 or of any knowledge or information that the
Buyer or Level 3 may have, Leucadia and the Seller shall jointly and severally
indemnify and fully defend, save and hold the Buyer, Level 3 and their
Subsidiaries, including following the Closing, the Company and the Retained
Subsidiaries (the “Buyer Indemnitees”) harmless if any Buyer Indemnitee
shall at any time or from time to time suffer any damage, liability, loss, cost,
expense (including all reasonable attorneys’ fees), deficiency, interest,
penalty, impositions, assessments or fines (collectively, “Losses”)
arising out of or resulting from, or shall pay or become obliged to pay any sum
on account of, one or more of the following:

 

(i)                                     any
breach of any representation or warranty of the Seller or Leucadia contained in
this Agreement or in any certificate delivered to the Buyer or Level 3 in
connection with the Closing (but with respect to the representations and warranties
contained in Section 5.10, only to the extent any such representation or
warranty relates to Income Taxes);

 

(ii)                                  any
failure of the Seller or Leucadia duly to perform or observe any covenant or
agreement contained in this Agreement on the part of the Seller or Leucadia to
be performed or observed;

 

(iii)                               any
Excluded Asset, Excluded Liability or the Pre-Closing Transfers (including the
failure to obtain the written unconditional releases of the Company and the
Retained Subsidiaries from obligations or liabilities relating to the Excluded
Assets or the Excluded Liabilities);

 

(iv)                              any
Pre-Closing Taxes excluding any Tax or liability described in clause (v);

 

(v)                                 any
liability in respect of any Tax not attributable to the Company, any of its
Subsidiaries, any of their assets or any of their operations, which liability
is imposed on the Company or any of its Subsidiaries pursuant to Treasury
Regulations § 1.1502-6 or any analogous state, local or foreign law or
regulation by reason of the Company or any of its Subsidiaries having been a
member of any consolidated, combined or unitary group on or prior to the
Closing, but only to the extent in excess of any Taxes (other than Income Taxes
as to which this limitation does not apply) reflected in the determination of
the Actual Adjusted Net Working Capital;

 

(vi)                              (A) the Retirement Plan and all
other pension plans maintained or sponsored by or to which contributions are
required of any ERISA Affiliate and that are subject to Title IV of ERISA or Section 412
of the Code, including, but not limited to (1)

 

53

 

claims of the PBGC, the IRS and
any other Governmental Agency relating to the funding of such plans, (2) claims
of participants and beneficiaries relating to benefit payments under such plans
and (3) claims relating to fiduciary violations under ERISA, and (B) the
Deferred Compensation Plan; provided, however, that if the Buyer
exercises its Benefit Plan Substitution Right in accordance with Section 2.2(b),
neither Leucadia nor the Seller shall have any liability with respect to the
Retirement Plan or the Deferred Compensation Plan hereunder;

 

(vii)                           any “Covered Matter” listed on Schedule 9.2(a) in
accordance with such Schedule; or

 

(viii)                        the
Buyer’s and Level 3’s enforcement of their rights under this Section 9.2.

 

(b)                                 Notwithstanding
anything herein to the contrary:

 

(i)                                     Leucadia
and the Seller shall not have any liability under Section 9.2(a)(i) (other
than with respect to (x) Section 5.6, (y) Section 5.10 (limited
however to Income Taxes) and (z) the second and third sentences of Section 5.23(c))
or Section 9.2(a)(iv) unless the aggregate of all Losses relating
thereto for which the Seller and Leucadia would, but for this Section 9.2(b)(i),
be liable exceeds on a cumulative basis an amount equal to $10
million and then only to the extent of any such excess;

 

(ii)                                  the
maximum amount for which Leucadia and the Seller shall be liable with respect
to matters covered by Section 9.2(a)(i) (other than with respect to
(x) Section 5.6, (y) Section 5.10 (limited however to Income Taxes)
and (z) the second and third sentences of Section 5.23(c)) or Section 9.2(a)(iv) shall
not exceed in the aggregate $100 million;

 

(iii)                               neither
Leucadia nor the Seller shall have a right to contribution against either of
the Company or its Subsidiaries or any similar right in respect of any amounts
paid by the Seller to the Buyer Indemnities pursuant to the provisions of this Section 9.2;

 

(iv)                              in
all cases determining whether there has been a breach of a representation or
warranty by Leucadia or the Seller for purposes of this Section 9.2, or in
determining the amount of any Losses with respect to such breach, such
representations and warranties shall be read without regard to any materiality
qualifier (including, without limitation, any reference to Material Adverse
Effect) contained therein;

 

(v)                                 the
parties agree that any amount payable to the Buyer or Level 3 made pursuant to
this Section 9.2 shall be treated for tax purposes as an adjustment to the
Purchase Price, unless otherwise required by applicable law;

 

(vi)                              the
parties agree that any amount payable to the Buyer or Level 3 made pursuant to
this Section 9.2 shall be calculated net of any tax benefits realized in
cash (or as an offset to an obligation payable currently) within a period of
five years following the Closing Date by the Indemnitee or its Affiliates as a
result of the Loss. In

 

54

 

the case of any Tax
benefits realized after the indemnity amount has been paid by the Seller (but
within the five-year period following the Closing Date), the Buyer shall make a
further payment to the Seller when such benefits are received.  Tax benefits shall be considered realized
when there is a reduction in the Buyer’s liability for Taxes, determined
by comparing the amount of such liability without the Tax benefits to
the amount of such liability when such Tax benefits are taken into account;

 

(vii)                           the
parties agree that, if the liabilities pursuant to Section 9.2 exceed $50
million in the aggregate, Leucadia and the Seller shall be entitled to satisfy
50% of such liabilities in excess of $50 million by delivery of Shares, with
stock powers duly endorsed, with the value of each Share at the time of such
payment being deemed to be the average of the volume weighted sales prices per
share of Level 3 Common Stock as reported by the NASDAQ Stock Market (or such
other nationally recognized trading market on which the Level 3 Common Stock is
then principally traded) for the 10 trading-day period ending upon the trading
day immediately preceding the date that Leucadia and/or the Seller makes the
payment pursuant to this Section 9.2;

 

(viii)                        neither
Leucadia nor the Seller shall have any liability under this Section 9.2
for a Loss to the extent such Loss has been reflected in the Actual Adjusted
Net Working Capital as finally determined pursuant to Section 3.2 hereof;
and

 

(ix)                                neither
Leucadia nor the Seller shall have any liability with respect to the Transferred
Benefit Plans in the event the Buyer exercises the Benefit Plan Substitution
Right in accordance with Section 2.2(b).

 

SECTION 9.3.  Indemnification by Level 3 and the Buyer.

 

(a)                                  Notwithstanding
the Closing and regardless of any investigation at any time made by or on
behalf of the Seller or Leucadia or of any knowledge or information that the
Seller or Leucadia may have, the Buyer and Level 3 shall jointly and severally
indemnify and fully defend, save and hold Leucadia and the Seller harmless if
Leucadia or the Seller shall at any time or from time to time suffer any Losses
arising out of or resulting from, or shall pay or become obligated to pay any
sum on account of any one or more of the following:

 

(i)                                     any
breach of any representation or warranty of Level 3 or the Buyer contained in
this Agreement or in any certificate delivered to Leucadia or the Seller in
connection with the Closing;

 

(ii)                                  any
failure of Level 3 or the Buyer duly to perform or observe any covenant or
agreement contained in this Agreement on the part of Level 3 or the Buyer to be
performed or observed;

 

(iii)                               the
matters addressed in the letter set forth as Schedule 9.3(a)(iii) to
the extent and subject to the limitations and procedures set forth therein; or

 

(iv)                              any
Taxes for any Straddle Period of the Company or its Subsidiaries not payable or
indemnifiable by Leucadia or Seller pursuant to Section 7.13 and Section 9.2(a).

 

55

 

(b)                                 Notwithstanding
anything herein to the contrary:

 

(i)                                     The
Buyer and Level 3 shall not have any liability under Section 9.3(a)(i) (other
than with respect to Section 6.6) unless the aggregate of all Losses
relating thereto for which the Buyer and Level 3 would, but for this Section 9.3(b)(i),
be liable exceeds on a cumulative basis an amount equal to $10 million and then
only to the extent of any such excess;

 

(ii)                                  the
maximum amount for which the Buyer and the Seller shall be liable with respect
to matters covered by Section 9.3(a)(i) (other than with respect to Section 6.6)
shall not exceed in the aggregate $100 million;

 

(iii)                               in
all cases determining whether there has been a breach of a representation or
warranty by the Buyer or Level 3 for purposes of this Section 9.3, or in
determining the amount of any Losses with respect to such breach, such
representations and warranties shall be read without regard to any materiality
qualifier contained therein;

 

(iv)                              the
parties agree that any amount payable to the Seller or Leucadia made pursuant
to this Section 9.3 shall be treated for tax purposes as an adjustment to
the Purchase Price, unless otherwise required by applicable law;

 

(v)                                 the
parties agree that any amount payable to the Seller or Leucadia made pursuant
to this Section 9.3 shall be calculated net of any tax benefits realized
in cash (or as an offset to an obligation payable currently) within a period of
five years following the Closing Date by the Indemnitee or its Affiliates as a
result of the Loss.  In the case of any
Tax benefits realized after the indemnity amount has been paid by the Buyer
(but within the five-year period following the Closing Date), the Seller
promptly shall make a further payment to the Buyer when such benefits are
received.  Tax benefits shall be
considered realized when there is a reduction in the Seller’s liability for
Taxes, determined by comparing the amount of such liability without
the Tax benefits to the amount of such liability when such Tax benefits
are taken into account; and

 

(vi)                              if
the Buyer exercises the Benefit Plan Substitution Right, the Buyer and Level 3
shall indemnify Leucadia and the Seller for any Losses arising out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
the Retirement Plan and the Deferred Compensation Plan.

 

SECTION 9.4.  Procedures for Indemnification.  Other than as set forth in Section 7.13(e) and
(f), if a party entitled to indemnification under this Section 9 (an “Indemnitee”)
asserts that a party obligated to indemnify it under this Section 9 (an “Indemnitor”)
has become obligated to such Indemnitee pursuant to Section 9.2 or 9.3, or
if any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Indemnitor may become obligated to an
Indemnitee hereunder, such Indemnitee shall give written notice to the
Indemnitor; provided, however, that the failure of the Indemnitee
to give prompt notice to the Indemnitor shall not release the Indemnitor of its
indemnification obligations hereunder, except to the extent the Indemnitor
shall have been materially prejudiced by such failure.  The Indemnitor agrees to defend, contest or
otherwise protect the Indemnitee against any such suit,

 

56

 

action, investigation, claim or proceeding at its sole cost and expense
subject to the provisions of this Section 9.  The Indemnitor shall have the sole power to
direct and control the defense of any such suit, action, investigation, claim
or proceeding.  The Indemnitee shall have
the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of the Indemnitee’s choice.  The Indemnitee shall make available all
information and assistance that the Indemnitor may reasonably request and shall
fully cooperate with the Indemnitor in such defense, including with respect to
indemnification with respect to Taxes, providing powers of attorney authorizing
Leucadia or its designee to control and take action in connection with any such
Taxes.  In the event of a failure of the
Indemnitee to provide cooperation as required under this Section 9.4, the
Indemnitor’s obligation to indemnify the Indemnitee shall be reduced to the
extent of the Losses with respect to which the Indemnitor’s ability to defend
against the action, investigation, claim or proceeding underlying such
indemnification obligation has been prejudiced by such failure.  The Indemnitor shall not compromise or settle
any such suit, action, investigation, claim or proceeding unless (x) such
compromise or settlement is on exclusively monetary terms and shall be paid
entirely by the Indemnitor (subject to the provisions of Section 9.2(b)(i) and
(ii) and 9.3(b)(i) and (ii), which shall be controlling) and the
Indemnitee receives an unconditional release in such compromise or settlement
or (y) the Indemnitee shall have consented in writing to the terms of such
compromise or  settlement, which consent
shall not unreasonably withheld; provided, however, that if the
Indemnitee fails to consent thereto, the Indemnitor’s liability with respect to
such matter shall not exceed the proposed settlement amount.  If the Indemnitor fails timely to defend,
contest or otherwise protect against such suit, action, investigation, claim or
proceeding, the Indemnitee shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and the
Indemnitee shall be entitled to recover the entire cost thereof from the
Indemnitor subject to the provisions of this Section 9, including, without
limitation, reasonable attorneys’ fees, disbursements and amounts paid as the
result of such suit, action, investigation, claim or proceeding.

 

SECTION 9.5. 
Exclusive Remedy.  From and
after the Closing Date, the sole and exclusive remedy for any breach or failure
to be true and correct, or alleged breach or failure to be true and correct, of
any representation or warranty or any covenant or agreement in this Agreement,
except for claims relating to fraud or for injunctive relief, shall be
indemnification in accordance with this Section 9.

 

SECTION 10.  CONDITIONS PRECEDENT TO PERFORMANCE BY THE
SELLER.

 

The obligations of the Seller to consummate the
transactions contemplated by this Agreement is subject to the fulfillment, at
or before the Closing Date, of the following conditions, any one or more of
which may be waived by the Seller in its sole discretion:

 

SECTION 10.1.  Representations and Warranties of the
Buyer and Level 3.  Each of the
representations and warranties of the Buyer and Level 3 contained in this
Agreement (read without any materiality qualifications) shall be true and
correct as of the date of this Agreement and as of the Closing Date (except to
the extent such representations and warranties speak as of an earlier date),
other than such failures to be true and correct that, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect with respect to Level 3 and its Subsidiaries.  Notwithstanding the foregoing, Section 6.8
shall be disregarded

 

57

 

for purposes of the prior sentence if the Buyer exercises its Cash
Substitution Right in full in accordance with Section 2.2 within the time
periods set forth in Section 12.1(d).

 

SECTION 10.2.  Performance of the Obligations of the
Buyer and Level 3.  Level 3 and the
Buyer shall have performed in all material respects all obligations required
under this Agreement to be performed by it on or before the Closing Date.  The Seller shall have received a certificate
as to the satisfaction of the conditions set forth in Sections 10.1 and 10.2
dated the Closing Date and signed by any officer of Level 3 and the Buyer.

 

SECTION 10.3.  HSR Act.  Any applicable waiting period under the HSR
Act shall have expired or been terminated.

 

SECTION 10.4.  No Violation of Orders.  No temporary restraining order, preliminary
or permanent injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect;
provided that any party invoking this condition shall have used commercially
reasonable efforts to have any such order, injunction or restraint vacated or
removed.

 

SECTION 10.5.  No Material Adverse Change.  During the period from the date hereof to the
Closing Date, there shall not have been any Material Adverse Effect with
respect to Level 3 and its Subsidiaries; provided, however, that
this closing condition shall be void and be of no further force and effect if
the Buyer exercises its Cash Substitution Right in full in accordance with the
time periods set forth in Section 2.2 or Section 12.1(d).

 

SECTION 10.6. 
Lease Agreement.  The
Company shall have executed the lease agreement, in the form attached hereto as
Schedule 10.6 (the “Lease Agreement”), for a portion of the
Tulsa, Oklahoma headquarters, all as set forth more particularly therein.

 

SECTION 10.7.  Registration Rights Agreement.  Level 3 shall have executed the registration
rights and transfer restriction agreement in the form attached hereto as Exhibit A
(the “Registration Rights Agreement”).

 

SECTION 10.8.  Securities Matters.  The Shares issued hereunder, if any, shall
have been admitted for listing on the NASDAQ Stock Market.

 

SECTION 10.9. 
Opinion of Counsel.  The
Seller and Leucadia shall have received an opinion, dated as of the Closing
Date, from Willkie Farr & Gallagher LLP, counsel to the Buyer,
covering the matters set forth on Schedule 10.9, subject to
customary limitations and qualifications for opinions given in transactions of
the kind contemplated hereby.

 

SECTION 10.10.  Other Closing Documents.  The Seller and Leucadia shall have received
such other certificates, instruments and documents in confirmation of the
representations and warranties of the Buyer and Level 3 or in furtherance of
the transactions contemplated by this Agreement as the Seller or its counsel
may reasonably request.

 

SECTION 10.11.  SBC Consent to Assignment.  The Consent to Assignment, dated October 28,
2005, among SBC and its Affiliates party to the SBC Settlement Agreement,

 

58

 

Leucadia, the Company and WilTel Communications, LLC, attached hereto
as Schedule 10.11, shall be in full force and effect.

 

SECTION 10.12.  The Buyer Reimbursements; Cash Balance.  The Buyer or Level 3 (as applicable) shall
have complied in all respects with the covenants set forth in Section 8.7(a) and
(b) and shall have paid all amounts due thereunder.

 

SECTION 11.  CONDITIONS PRECEDENT TO PERFORMANCE BY THE
BUYER AND LEVEL 3.

 

The obligations of Level 3 and the Buyer to consummate
the transactions contemplated by this Agreement are subject to the fulfillment,
at or before the Closing Date, of the following conditions, any one or more of
which may be waived by Level 3 and the Buyer in their sole discretion:

 

SECTION 11.1.  Representations and Warranties of Leucadia
and the Seller.  Each of the
representations and warranties of the Seller contained in this Agreement (read
without any materiality qualifications) shall be true and correct as of the
date of this Agreement and as of the Closing Date (except to the extent such
representation and warranties speak as of an earlier date), other than such
failures to be true and correct that, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect with respect
to the Company and its Retained Subsidiaries.

 

SECTION 11.2.  Performance of the Obligations of Leucadia
and the Seller.  Each of Leucadia and
the Seller shall have performed in all material respects all obligations
required under this Agreement to be performed by it on or before the Closing
Date; provided, however, that the obligation of Level 3 and the
Buyer to consummate the transactions contemplated hereby shall not be affected
by the failure by Leucadia and the Seller to perform their respective
obligations under Section 7.1 of this Agreement, unless such failure to
perform such obligations was not in good faith or would reasonably be expected
to result, individually or in the aggregate, in a Material Adverse Effect with
respect to the Company and its Retained Subsidiaries.  Level 3 and the Buyer shall have received a
certificate as to the satisfaction of the conditions in Section 11.1,
11.2, 11.6 and 11.8 dated the Closing Date and signed by any officer of each of
Leucadia and the Seller.

 

SECTION 11.3.  Approvals.  All consents, waivers, authorizations and
approvals of any Governmental Entity set forth on Schedule 11.3
required in connection with the execution, delivery and performance of this
Agreement shall have been duly obtained and shall be in full force and effect
on the Closing Date.

 

SECTION 11.4.  HSR Act.  Any applicable waiting period under the HSR
Act shall have expired or been terminated.

 

SECTION 11.5.  No Violation of Orders.  No temporary restraining order, preliminary
or permanent injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect;
provided that any party invoking this condition shall have used

 

59

 

commercially reasonable efforts to have any such order, injunction or
restraint vacated or removed.

 

SECTION 11.6.  No Pension Plan Termination.  The Retirement Plan shall not, at the
initiation of the PBGC or otherwise, have been terminated pursuant to Title IV
of ERISA, no actions or proceedings for the termination of such pension plan
shall have been initiated or be pending and none of the Company, any of its
Subsidiaries or any ERISA Affiliate shall have authorized or agreed to any such
termination.

 

SECTION 11.7.  No Material Adverse Change.  During the period from the date hereof to the
Closing Date, there shall not have been any Material Adverse Effect with
respect to the Company and the Retained Subsidiaries.

 

SECTION 11.8.  Pre-Closing Transfers.  The Company and its Subsidiaries shall have
completed the Pre-Closing Transfers in accordance with the terms of Section 7.4.

 

SECTION 11.9.  The
Company’s Credit Documents.  Leucadia
or the Seller shall have on the Closing Date paid in full all obligations of
the Company and the Retained Subsidiaries under the Company’s Credit Documents
and the Seller shall have delivered to the Buyer a written payoff letter of the
lenders a party thereto, in a form reasonably satisfactory to the Buyer,
stating that upon the lenders’ receipt of such payment on the Closing Date, all
obligations of the Company and the Retained Subsidiaries under the Company’s
Credit Documents shall be discharged and any Lien held by them with respect to
the assets and properties of the Company and the Retained Subsidiaries under
the Company’s Credit Documents shall be released in full.

 

SECTION 11.10.  The Company’s Real Estate Debt Documents.  Leucadia shall have delivered to the Buyer
executed releases of the obligations of the Company and WilTel Communications,
LLC with respect to the Company’s Real Estate Debt Documents.

 

SECTION 11.11.  Lease Agreement.  WilTel Technology Center, LLC and the Company
shall have executed the Lease Agreement.

 

SECTION 11.12.  Registration Rights Agreement.  Leucadia and the Seller shall have executed
the Registration Rights Agreement.

 

SECTION 11.13.  Opinion of Counsel.  The Buyer and Level 3 shall have received an
opinion, dated as of the Closing Date, from Weil, Gotshal & Manges
LLP, counsel to Leucadia and the Seller, and such other local counsel to the
Seller covering the matters set forth on Schedule 11.13, subject to
customary limitations and qualifications for opinions given in transactions of
the kind contemplated hereby.

 

SECTION 11.14.  Other Closing Documents.  The Buyer and Level 3 shall have received
such other certificates, instruments and documents in confirmation of the
representations and warranties of the Seller and Leucadia or in furtherance of
the transactions contemplated by this Agreement as the Buyer or its counsel may
reasonably request.

 

60

 

SECTION 11.15.  Tax Related Documentation.  The Seller shall deliver to Buyer a
non-foreign affidavit dated as of the Closing Date, in form and substance
required under Treasury Regulation Section 1.1445-2(b)(2)(iv)(B) issued
pursuant to Section 1445 of the Code stating that the Seller is not a “Foreign
Person” as defined in Section 1445 of the Code.

 

SECTION 11.16.  The Seller Pre-Closing Transfers,
Reimbursements and Cash Balance.  The
Seller shall have complied in all respects with the covenants set forth in Section 7.4
and Section 7.15(a) and (b) and shall have paid all amounts due
to the Company thereunder.

 

SECTION 12.  TERMINATION.

 

SECTION 12.1.  Conditions of Termination.  Notwithstanding anything to the contrary
contained herein, this Agreement may be terminated at any time before the
Closing:

 

(a)                                  By
mutual consent of the Seller and the Buyer;

 

(b)                                 By
the Buyer, if Leucadia or the Seller has breached any representation, warranty,
covenant or agreement contained in this Agreement and has not, in the case of a
breach of a covenant or agreement, cured such breach within 15 Business Days
after written notice to the Seller of its intent to
terminate this Agreement pursuant to this Section 12.1(b) (provided,
that the Buyer and Level 3 are not then in material breach of the terms of this
Agreement, and provided  further, that no cure period shall be
required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 11.1 or the first sentence of 11.2 hereof,
as the case may be, will not be satisfied;

 

(c)                                  By the Seller,
if Level 3 or the Buyer has breached any representation, warranty, covenant or
agreement contained in this Agreement (other than Section 6.8) and has
not, in the case of a breach of a covenant or agreement, cured such breach
within 15 Business Days after written notice to the Buyer of its intent to
terminate this Agreement pursuant to this Section 12.1(c) (provided,
that the Seller and Leucadia are not then in material breach of the terms of
this Agreement, and provided  further, that no cure period shall
be required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 10.1 or the first sentence Section 10.2
hereof, as the case may be, will not be satisfied;

 

(d)                                 By the Seller,
if Level 3 or the Buyer has breached Section 6.8 of this Agreement such
that the condition set forth in Section 10.1 would not be satisfied and
has not given written notice to the Seller of the Buyer’s irrevocable election to
exercise the Cash Substitution Right in full in accordance with Section 2.2
of this Agreement within 10 Business Days after the Seller has given written
notice to the Buyer of its intent to terminate this Agreement pursuant to this Section 12.1(d) (provided,
that the Seller and Leucadia are not then in material breach of the terms of
this Agreement);

 

(e)                                  By
the Seller or the Buyer if:  (i) there
shall be a final, non-appealable order of a federal or state court in effect
preventing consummation of the transactions contemplated hereby; or (ii) there
shall be enacted any federal or state statute which would make consummation of
the transactions contemplated hereby illegal; or

 

61

 

(f)                                    By
the Seller or the Buyer if the Closing shall not have been consummated by May 1,
2006; provided that the Buyer or the Seller may extend such date by one (1) additional
month if the condition set forth in Section 11.3 is the only condition
remaining to be satisfied on such date (other than those conditions that are
only capable of being satisfied on the Closing) and such party reasonably
believes in good faith that such condition is likely to be satisfied within
such additional one-month period; and provided  further that the
right to terminate this Agreement under this Section 12.1(f) shall
not be available to any party whose failure to fulfill any material obligation
under this Agreement has been both willful and the cause of, or resulted in,
the failure of the Closing to occur on or before such date.

 

SECTION 12.2.  Effect of Termination.  In the event of the termination of this
Agreement as provided in Section 12.1 hereof, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of the Seller or the Buyer, or their respective officers, directors,
stockholders, members or other Persons under their control, except to the
extent that such termination results from the willful breach by a party hereto
of any of its representations, warranties, covenants or agreements set forth in
this Agreement, and provided that the provisions of Sections 9.2(b)(ii), Section 9.3(b)(ii),
12 and 13, hereof and the second to last sentence in Section 7.3 hereof
shall remain in full force and effect and survive any termination of this
Agreement.

 

SECTION 13.  MISCELLANEOUS.

 

SECTION 13.1.  Successors and Assigns.  Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect; provided, however,  that the Buyer may assign its rights
hereunder to an Affiliate which is a Subsidiary of Level 3; provided, further
that such Affiliate enters into a written agreement with the other parties
hereto to be bound by the provisions of this Agreement in all respects and to
the same extent as the assigning party is bound and provided that the assigning
party shall continue to be bound by all of the obligations hereunder as if such
assignment had not occurred and to perform such obligations to the extent such
Affiliate fails to do so. 
Notwithstanding the foregoing, Level 3 shall not be relieved of its
obligation to issue the Shares or to guarantee the obligations of Buyer
hereunder following any permitted assignment hereunder and Leucadia shall not
be relieved of its obligation to guarantee the obligations of Seller hereunder
following any permitted assignment hereunder. 
This Agreement shall inure to the benefit of and shall be binding upon
the successors and permitted assigns of the parties hereto.

 

SECTION 13.2.  Governing Law, Jurisdiction.  This Agreement shall be construed, performed
and enforced in accordance with, and governed by, the laws of the State of New
York.  The parties hereto irrevocably
elect as the sole judicial forum for the adjudication of any matters arising
under or in connection with this Agreement, and consent to the jurisdiction of,
the courts of the County of New York, State of New York or the United States of
America for the Southern District of New York.

 

SECTION 13.3.  Expenses.  Except as otherwise provided herein,
regardless of whether or not the transactions contemplated hereby are
consummated, (i) each of the Seller and

 

62

 

Leucadia, on the one hand, and the Buyer and Level 3, on the other
hand, will pay its own costs and expenses incident to, preparing for, entering
into and carrying out this Agreement and the consummation of the transactions
contemplated hereby and (ii) the Seller and Leucadia shall pay such costs
and expenses of the Company and its Subsidiaries to the extent not paid prior
to the Closing or not reflected in the final determination of Actual Adjusted
Net Working Capital.

 

SECTION 13.4.  Severability.  In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.

 

SECTION 13.5.  Notices.  All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on
the party to whom notice is to be given or (ii) on the day after delivery
(or if delivered on a Saturday, the next following Business Day) to Federal
Express or similar overnight courier or the Express Mail service maintained by
the United States Postal Service (in all cases mailed for next day delivery),
to the party as follows:

 

If to Leucadia or the Seller:

 

Leucadia
National Corporation

315
Park Avenue South

New
York, New York 10010

Attn:  Joseph
S. Steinberg, President

 

With a copy (which shall not constitute notice) to:

 

Weil,
Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attn:  Andrea A. Bernstein, Esq.

 

If to the Buyer or Level 3:

 

Level
3 Communications, Inc.

1025
Eldorado Blvd.

Building
2000

Broomfield,
Colorado  80021

Attn:  General
Counsel

 

With a copy (which shall not constitute notice) to:

 

Willkie
Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019

Attn:  David K. Boston, Esq.

 

63

 

Any party may change its address for the purpose of
this Section by giving the other party written notice of its new address
in the manner set forth above.

 

SECTION 13.6.  Parent Guaranties.

 

(a)                                  Leucadia
shall perform, or cause to performed, when due all the covenants and agreements
to be performed under this Agreement by the Seller.

 

(b)                                 Level
3 shall perform, or cause to performed, when due all the covenants and
agreements to be performed under this Agreement by the Buyer.

 

SECTION 13.7.  Amendments; Waivers.  This Agreement may be amended or modified,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by the parties
hereto, or in the case of a waiver, by the party waiving compliance.  Any waiver by any party of any condition, or
of the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall not be deemed
to be nor construed as a further or continuing waiver of any such condition, or
of the breach of any other provision, term, covenant, representation or
warranty of this Agreement.

 

SECTION 13.8.  Public Announcements.  The parties agree that after the signing of
this Agreement, no party shall, or shall permit any of its Affiliates to, make
any press release or public announcement concerning this transaction without
the prior approval of the other parties, unless a press release or public
announcement is required by law, judicial or administrative process or by
obligations pursuant to any listing agreement with any national securities
exchange or the NASDAQ Stock Market. 
Before a party makes any such announcement or other disclosure, it
agrees to give the other parties prior notice and an opportunity to comment on
the proposed disclosure.

 

SECTION 13.9.  Entire Agreement.  This Agreement contains the entire
understanding among the parties hereto with respect to the transactions contemplated
hereby and supersedes and replaces all prior agreements and understandings,
oral or written, with regard to such transactions, unless otherwise provided
herein.  The Confidentiality Agreement
and all Exhibits and Schedules hereto and any documents and instruments
delivered pursuant to any provision hereof, including the Lease Agreement and
the Registration Rights Agreement, are expressly made a part of this Agreement
as fully as though completely set forth herein.

 

SECTION 13.10.  Parties in Interest.  Nothing in this Agreement is intended to
confer any rights or remedies under or by reason of this Agreement on any
Persons other than parties hereto and their respective successors and permitted
assigns.  Nothing in this Agreement is
intended to relieve or discharge the obligations or liability of any third
Persons to the Seller, Leucadia, Level 3 or the Buyer.  No provision of this Agreement shall give any
third parties any right of subrogation or action over or against the Seller,
Leucadia, the Buyer or Level 3.

 

SECTION 13.11.  Scheduled Disclosures.  Disclosure of any matter, fact or
circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto (unless
reasonably apparent from a reading of the Schedules).

 

64

 

SECTION 13.12.  Section and Paragraph Headings.  The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.

 

SECTION 13.13.  Counterparts.  This Agreement may be executed in
counterparts (including by facsimile), each of which shall be deemed an
original, but all of which shall constitute the same instrument.

 

[Remainder of Page Intentionally Left Blank.]

 

65

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first above written.

 

	
   

  	
  LEUCADIA NATIONAL CORPORATION,

  
	
   

  	
  a New York corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Joseph A.
  Orlando

  	
   

  
	
   

  	
   

  	
  Name:  Joseph
  A. Orlando

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BALDWIN ENTERPRISES, INC.,

  
	
   

  	
  a Colorado corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Joseph A.
  Orlando

  	
   

  
	
   

  	
   

  	
  Name:  Joseph
  A. Orlando

  
	
   

  	
   

  	
  Title:  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 COMMUNICATIONS, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Q. Crowe

  	
   

  
	
   

  	
   

  	
  Name:  James
  Q. Crowe

  
	
   

  	
   

  	
  Title:  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEVEL 3 COMMUNICATIONS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  James Q.
  Crowe

  	
   

  
	
   

  	
   

  	
  Name:  James
  Q. Crowe

  
	
   

  	
   

  	
  Title:  Chief
  Executive OfficerExhibit 10.2

 

EXHIBIT A

 

[Form Of]

 

REGISTRATION
RIGHTS AND TRANSFER RESTRICTION AGREEMENT

 

BY AND BETWEEN

 

LEVEL 3
COMMUNICATIONS, INC.

 

LEUCADIA NATIONAL
CORPORATION

 

AND

 

BALDWIN
ENTERPRISES, INC.

 

 

Dated as of
          
    ,      

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  EFFECTIVENESS; DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Effectiveness

  	
  1

  
	
  1.2

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  REGISTRATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Shelf Registration

  	
  6

  
	
  2.2

  	
  Certain Underwritten
  Offerings Pursuant to the Shelf Registration

  	
  7

  
	
  2.3

  	
  Piggyback Underwritten
  Offerings

  	
  10

  
	
  2.4

  	
  Registration Procedures

  	
  12

  
	
  2.5

  	
  Standstill Agreement;
  Restrictions on Transfer

  	
  15

  
	
  2.6

  	
  Blackout Periods;
  Suspension of Dispositions

  	
  16

  
	
  2.7

  	
  Indemnification

  	
  18

  
	
  2.8

  	
  Assignment of
  Registration Rights

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  RULE 144

  	
  21

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Current Public
  Information

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  MISCELLANEOUS

  	
  22

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Notices

  	
  22

  
	
  4.2

  	
  Governing Law

  	
  22

  
	
  4.3

  	
  Submission to
  Jurisdiction

  	
  23

  
	
  4.4

  	
  Successors and Assigns

  	
  23

  
	
  4.5

  	
  Counterparts

  	
  23

  
	
  4.6

  	
  Severability

  	
  23

  
	
  4.7

  	
  Entire Agreement

  	
  23

  
	
  4.8

  	
  No Waivers; Amendments

  	
  23

  
	
  4.9

  	
  Specific Enforcement;
  Cumulative Remedies

  	
  24

  
	
  4.10

  	
  Time of the Essence

  	
  24

  
	
  4.11

  	
  Construction

  	
  24

  
	
  4.12

  	
  Information

  	
  24

  

 

i

 

[FORM OF]

REGISTRATION RIGHTS AND TRANSFER RESTRICTION AGREEMENT

 

This AGREEMENT (this “Agreement”), dated as of            
      ,          ,
is entered into by and among Level 3 Communications, Inc., a Delaware
corporation (the “Company”), Leucadia National Corporation, a New York
corporation (“Leucadia”), and Baldwin Enterprises, Inc. (“Baldwin”),
a Colorado corporation and wholly owned subsidiary of Leucadia.

 

RECITALS

 

WHEREAS, the Company, Leucadia and Baldwin are parties
to an Acquisition Agreement, dated as of October 30, 2005 (the “Acquisition
Agreement”); and

 

WHEREAS, pursuant to the Acquisition Agreement, Baldwin
will receive shares of common stock, par value $0.01 per share of the Company.

 

NOW, THEREFORE, in consideration of the promises,
mutual covenants and agreements hereinafter contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

ARTICLE 1

EFFECTIVENESS; DEFINITIONS

 

1.1                                 Effectiveness.  This Agreement shall be effective as of the “Closing”
as defined in the Acquisition Agreement (hereinafter, the “Closing”).

 

1.2                                 Definitions.

 

“Acquisition Agreement” shall have the meaning
set forth in the Recitals hereto.

 

“Advice” shall have the meaning set forth in Section 2.6.2
hereof.

 

“Affiliate” means, with respect to any Person,
any Person who, directly or indirectly, controls, is controlled by or is under
common control with any Person; and the term “control” (including the terms “controlled
by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting securities, by
contract or otherwise.

 

“Agreement” shall have the meaning set forth in
the introductory paragraph hereof.

 

“Beneficially Ownership” or “Beneficially
Owning” shall have the meaning ascribed to such term under Rule 13d-3
of the Exchange Act.

 

 

“Blackout Period” shall have the meaning set
forth in Section 2.6.1 hereof.

 

“Block” means one (1) single trade at one (1) single
price with one (1) or more counterparties of at least five million
(5,000,000) shares of Registrable Securities.

 

“Board” means the Board of Directors of the
Company.

 

“Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks are authorized or
required to close under the laws of the United States or the State of New York.

 

“Common Stock” means the common stock, par
value $0.01 per share of the Company.

 

“Common Stock Equivalents” means, without duplication
with any other Common Stock or Common Stock Equivalents, any rights, warrants,
options, convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock and securities convertible or
exchangeable into Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of any future event.

 

“Company” shall have the meaning set forth in
the introductory paragraph hereof.

 

“Company Notice” shall have the meaning set
forth in Section 2.3.1 hereof.

 

“Delay Fee” means a daily charge per share of
Registrable Securities, calculated at the rate of 6% per year (based on a 365
day year) on the aggregate Market Value, as of the first date of any period for
which the Delay Fee is applied, multiplied by the number of Registrable
Securities that each Investor holds on the relevant date (subject to equitable
adjustment in the case of securities other than Common Stock).

 

“Damages” shall have the meaning set forth in Section 2.7.1
hereof.

 

“Effective Date” shall mean the date the
Registration Statement becomes effective under the Securities Act.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, or any similar federal statute, and the rules and
regulations promulgated by the SEC thereunder.

 

“Holder” shall mean Baldwin, Leucadia and any
subsidiary of Leucadia.

 

“Investor” means
the Holder and any transferee of the Registrable Securities thereof to whom the
Holder assigns its rights under this Agreement, in whole or in part, and who
agrees to become bound by the provisions of this Agreement in accordance with Section 2.8
hereof.

 

2

 

“Investor Affiliate”
or “Investor Affiliates” shall have the meaning set forth in Section 2.7.1
hereof.

 

“Investor Notice” shall have the meaning set
forth in Section 2.1.4 hereof.

 

“Market Value” means, as of any date, the
average per share closing price of the Common Stock on the NASDAQ National
Market over the 10-day trading period ending on the trading day immediately
prior to such date.

 

“Maximum Offering Size” shall have the meaning
set forth in Section 2.2.1 hereof.

 

“NASD” means the National Association of
Securities Dealers, Inc.

 

“Notifying Investor”
shall have the meaning set forth in Section 2.2.1.

 

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

 

“Piggyback Notice”
shall have the meaning set forth in Section 2.2.1 hereof.

 

“Receiving Investor”
shall have the meaning set forth in Section 2.2.1.

 

“register,” “registered” and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.

 

“Registrable Securities” means the shares of
Common Stock to be acquired by the Holder pursuant to the transactions
contemplated by the Acquisition Agreement and any shares of capital stock or
other securities issued or issuable from time to time with respect to the
Common Stock as a result of a reclassification, share combination, share
subdivision, stock split, share dividend, merger, consolidation or similar
transaction or event or otherwise as a distribution on or in exchange for or
with respect to the Common Stock until (a) a registration statement
covering all such Registrable Securities has been declared effective by the SEC
and such Registrable Securities have been disposed of pursuant to an effective
registration statement, or (b) such Registrable Securities are sold
pursuant to Rule 144 (or any similar provision then in force).

 

“Registration Expenses” means any and all
expenses incident to the performance of or compliance with any registration or
marketing of securities, including all (i) registration and filing fees,
and all other fees and expenses payable in connection with the listing of
securities on any securities exchange or automated interdealer quotation
system, (ii) fees and expenses of compliance with any securities or “blue
sky” laws (including reasonable fees and disbursements of counsel in connection
with “blue

 

3

 

sky” qualifications of the securities registered), (iii) expenses
in connection with the preparation, printing, mailing and delivery of any
registration statements, prospectuses and other documents in connection
therewith and any amendments or supplements thereto, (iv) security
engraving and printing expenses, (v) internal expenses of the Company
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (vi) fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses relating to any comfort letters or costs associated with the delivery
by independent certified public accountants of any comfort letters), (vii) fees
and expenses of any special experts retained by the Company in connection with
such registration, (viii) reasonable fees and out-of-pocket expenses of
one counsel to the Investors in an aggregate amount not to exceed $35,000 in an
underwritten offering pursuant to Section 2.2, (ix) filing
fees and reasonable and customary attorneys’ fees in connection with filings
with the NASD in connection with any review by the NASD of the underwriting
arrangements for any underwritten offering pursuant to Section 2.2,
(x) costs of printing and producing any agreements among underwriters,
underwriting agreements, any “blue sky” or legal investment memoranda and any
selling agreements and other documents in connection with the offering, sale or
delivery of the Registrable Securities, (xi) transfer agents’ and registrars’
fees and expenses and the fees and expense of any other agent or trustee appointed
in connection with such offering, (xii) expenses of the Company relating to any
analyst or investor presentations or any “road shows” undertaken in connection
with an underwritten offering of the Registrable Securities pursuant to Section 2.2
 and
(xiii) any other fees and disbursements of underwriters customarily paid by
issuers or sellers of securities by excluding any underwriters discounts and
commissions attributable to the sale of Registrable Securities (other than fees
and expenses of any “qualified independent underwriter”, including fees and
expenses of counsel thereto, and fees and expenses payable in connection with
any ratings of the Registrable Securities, including expenses relating to any
presentations to rating agencies).

 

“Resale Prospectus” shall have the meaning set
forth in Section 2.1.4 hereof.

 

“Rule 144” means Rule 144 under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and any successor rule or regulation under the Securities
Act.

 

“Rule 144A” means Rule 144A under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and any successor rule or regulation under the Securities
Act.

 

“Rule 145” means Rule 145 under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and any successor rule or regulation under the Securities
Act.

 

4

 

“Rule 415” means Rule 415 under the
Securities Act as in effect on the date hereof and such rule as from time
to time amended and nay successor rule or regulation under the Securities
Act.

 

“SEC” means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.

 

“Securities Act” means the Securities Act of
1933, as amended, or any similar federal statute, and the rules and
regulations promulgated by the SEC thereunder.

 

“Shelf Registration Statement” shall have the
meaning provided in Section 2.1.1 hereof.

 

“Substitution Rights” shall have the meaning
provided in the Acquisition Agreement.

 

“Suspension Notice” shall have the meaning set
forth in Section 2.6.2 hereof.

 

“Suspension Period” shall have the meaning set
forth in Section 2.6.2 hereof.

 

“Takeover Proposal” means any bona fide offer
or proposal by a third party to acquire, directly or indirectly, more than 50%
of assets of the Company and its Subsidiaries, taken as a whole, or more than
50% of the Common Stock then outstanding pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock or other equity
interests, sale of assets, tender offer, exchange offer or similar transaction.

 

“Transferee” shall have the meaning set forth
in Section 2.8 hereof.

 

“Transfer” shall mean to sell, contract to
sell, pledge, grant any option to purchase, acquire any option to sell,
hypothecate, loan, make a short sale or otherwise transfer or dispose of to any
Person, other than to a subsidiary of the Investor which subsidiary agrees in
writing to be bound by the terms of the Agreement.

 

“Transfer Date” shall have the meaning set
forth in Section 2.5.2 hereof.

 

“Transfer Period” shall have the meaning set
forth in Section 2.5.2 hereof.

 

“Underwriting Notice” shall have the meaning
set forth in Section 2.2.1 hereof.

 

5

 

ARTICLE 2

REGISTRATION

 

2.1                                 Shelf Registration.

 

2.1.1                        Shelf Registration
Statement.  The Company shall
promptly upon the consummation of the Closing file with the SEC a shelf
registration statement relating to the offer and sale by the Holder at any time
and from time to time on a delayed or continuous basis in accordance with Rule 415,
through such method or methods of distribution as the Holder shall select, and
in accordance with this Agreement, of all the Registrable Securities (the “Shelf
Registration Statement”); provided that the Shelf Registration
Statement shall be filed no later than the second Business Days after the
Closing or the date on which the Holder provides all information requested by
the Company with respect to the Shelf Registration Statement, so long as the
Company has requested such information from the Holder in a timely manner.  The Company shall use its best efforts to have
the Shelf Registration Statement declared effective as expeditiously as
possible, but no later than thirty (30) days from the date of filing.  The Company shall use its reasonable best
efforts to keep the Shelf Registration Statement effective under the Securities
Act until the second anniversary of the Closing (or for such longer period if
extended pursuant to Section 2.6.3 hereof).  In the event the Shelf Registration Statement
cannot be kept effective for such period, the Company shall, subject to Section 2.6
hereof, use its reasonable best efforts to prepare and file with the SEC and
have declared effective as promptly as practicable another registration
statement on the same terms and conditions as the initial Shelf Registration
Statement and such registration statement shall be considered the Shelf Registration
Statement for purposes hereof.  The
Company shall supplement and amend the Shelf Registration Statement to reflect
changes in the manner of distribution reasonably requested by the Investors.

 

2.1.2                        Adjustment.  If at any time the outstanding shares of
Registrable Securities as a class shall have been increased, decreased, changed
into or exchanged for a different number or class of shares or securities as a
result of a reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, combination or exchange of shares or other
similar change in capitalization, then an appropriate and proportionate
adjustment shall be made to the number of shares of such stock for all purposes
under this Agreement.

 

2.1.3                        Expenses.  The Company shall be liable for and pay all
Registration Expenses in connection with any registration pursuant Section 2.1.1
hereof.

 

2.1.4                        Notice of Intended Use
of Prospectus.  If, at any time
after the Closing, any Investor intends to use or deliver the prospectus
forming a part of the Shelf Registration Statement (or any prospectus
supplement or amendment thereto) in connection with any offer or sale of
Registrable Securities covered thereby (“Resale Prospectus”), such
Investor shall first give written notice thereof to the Company at least two (2) Business
Days prior to the first date such prospectus or prospectus supplement will be
used or delivered by such Investor in connection with such offer or sale (the “Investor
Notice”).  Notwithstanding anything
to the contrary contained in this

 

6

 

Agreement,
in the event that an Investor provides the Company with the Investor Notice
that specifies that the Investor intends to use or deliver the Resale Prospectus
on a continuous basis for a period of time specified in such Investor Notice,
then the Investor Notice shall be deemed to have been provided each day during
the continuous period of time specified in the Investor Notice.

 

2.1.5                        Eligibility on Form S-3.  The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the
sale by the Investors of the Registrable Securities and covenants that on and
after the filing of the Registration Statement pursuant to Section 2.1.1
hereof it will meet the requirements for the use of Form S-3, and the
Company has filed all reports required to be filed by the Company with the SEC
in a timely manner and covenants that it will continue to do so to obtain and
maintain such eligibility for the use of Form S-3.  In the event that Form S-3 is not
available for sale by the Investors of the Registrable Securities, then (i) the
Company shall register the sale of the Registrable Securities on another
appropriate form as soon as practicable and (ii) the Company shall
undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the SEC.

 

2.1.6        Most
Favored Nation Clause. 
Notwithstanding anything to the contrary in this Agreement until the
earlier to occur of (A) the second anniversary of the date hereof and (B) the
date on which no Investor holds Registrable Securities, the Company hereby
covenants that the terms and conditions applicable to the length and frequency
of Blackout Periods shall be at least as favorable as those offered by the
Company to any other Person, and this Agreement shall be automatically amended,
without any affirmative action taken by the parties hereto, as may be necessary
to effect such covenant.

 

2.2                                 Certain Underwritten
Offerings Pursuant to the Shelf Registration.

 

2.2.1                        Underwriting Notice.  In the event that any Investor holding thirty
percent (30%) or more of the Registrable Securities then outstanding (and with
respect to the Holder, as otherwise permitted by the last sentence of this Section 2.2.1)
shall seek to undertake an underwritten offering of any Registrable Securities
(including, without limitation, in connection with any security issued by the
Holder that is convertible into or exchangeable for any Registrable Security)
pursuant to the Shelf Registration Statement, such Investors shall first give
written notice thereof to the Company (the “Underwriting Notice” and
each such party giving notice, a “Notifying Investor”) to the other
Investors (the “Receiving Investors”) at least ten (10) Business
Days prior to the anticipated initiation of such underwritten offering,
specifying the number of Registrable Securities sought to be offered.  The Company shall advise the Notifying
Investor and the Receiving Investors and each Receiving Investor shall advise
the Notifying Investor and the Company in writing within five (5) Business
Days after receipt of such Underwriting Notice (or if the Notifying Investors
intend to execute the underwriting agreement with respect to such underwritten
offering prior to such date, the Notifying Investors shall so

 

7

 

notify
the Company and the Receiving Investors in the Underwriting Notice, and each
Receiving Investor shall advise the Notifying Investor and the Company in writing
on or before the date on which the underwriting agreement is executed but no
less than five (5) Business Days after receipt of such Underwriting
Notice), specifying the number, if any, of shares of Registrable Securities
that such Receiving Investors, as applicable, seek to include in such
underwritten offering (each a “Piggyback Notice”), and subject to the
next sentence, such shares of Registrable Securities shall be included in such
underwritten offering.  If the managing
underwriter of the underwritten offering pursuant to which Registrable
Securities are included pursuant to this Section 2.2 shall advise
the Company and the Investors in writing that, in its view, the number of
securities requested to be included in such underwritten offering exceeds the
largest number of securities which can be sold in such offering without
adversely affecting the offering, including with respect to the price at which
such shares can be sold (the “Maximum Offering Size”), the Company and
the Investors will include in such underwritten offering, to the extent of the
number which the Investors are so advised can be sold in such offering, a pro
rata amount, based upon the number of Registrable Securities sought to
be offered by each Investor as set forth in the Underwriting Notice and the
Piggyback Notice.  Notwithstanding
anything contained herein to the contrary, and whether or not the Holder owns 30%
(thirty percent) or more of the Registrable Securities outstanding at such
time, the Holder shall be entitled to be the sole Notifying Investor for at
least one of three underwritten offerings permitted herein, so long as the
Underwriting Notice given by the Holder covers not less than the minimum amount
specified in Section 2.2.4(C) hereof.

 

2.2.2        Expenses.  The Company shall be liable for and pay all
Registration Expenses in connection with any underwritten offering pursuant to Section
2.2.1 hereof; provided, however, that in any underwritten
offering pursuant to this Section 2.2 the Investors shall pay any
underwriting commissions and discounts incurred pursuant to and in connection
with any underwritten offering by the Investors and the other fees and expenses
in excess of the thresholds set forth in the definition of “Registration
Expenses.”

 

2.2.3                        No Piggyback Rights.  For the avoidance of doubt, only an Investor
is permitted to provide a Piggyback Notice and seek to include shares of Common
Stock or Registrable Securities of the Company in an underwritten offering made
pursuant to this Section 2.2.

 

2.2.4                        Procedures.  Subject to Section 2.6 hereof, the
Company shall (i) make reasonably available for inspection by the Investors,
any underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained by
the Investors or any such underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Company, (ii) cause
the Company’s officers, directors, employees, and use its reasonable best
efforts to cause the Company’s accountants and auditors, to supply all relevant
information reasonably requested by the Investors or any such underwriter,
attorney, accountant or agent in connection with the underwritten offering, (iii) as
may be reasonably requested, cause the Company’s officers and employees to
participate in investor presentations to prospective investors and analysts,
including via “road shows,”

 

8

 

and (iv) generally
accommodate any participating underwriter’s reasonable requests relating to its
due diligence efforts; provided, however, that the Investors
shall only be entitled to effect up to a total of three (3) underwritten
offerings of Registrable Securities pursuant to the Shelf Registration
Statement; provided, further, however, that no such
offering pursuant to Section 2.2.1 hereof shall be made by the
Holder:

 

(A)                              on
more than one occasion during any period of sixty (60) consecutive days after
any other such offering of Registrable Securities in accordance with this Section 2.2
was consummated;

 

(B)                                within
sixty (60) days of the consummation of an offering of Registrable Securities in
which the Investors were offered the opportunity to participate pursuant to Section 2.3
hereof, provided that all the Registrable Securities requested by the Investors
to be so registered were registered for sale in such offering; and

 

(C)                                unless
the Investors will offer for sale at least thirty million (30,000,000) shares
of Common Stock or the equivalent number of shares of Registrable Securities or,
with respect to the third underwritten offering,  at least forty million (40,000,000) shares of
Common Stock or the equivalent number of shares of Registrable Securities.(1)

 

2.2.5                        Effective Registration
Statement.  For purposes of
determining an Investor’s right to sell Registrable Securities pursuant to the
Shelf Registration Statement in an underwritten offering referred to in Section 2.2.1
hereof, an offering of such nature shall not be deemed to have been effected
unless (A) a registration statement with respect thereto has become
effective and remained in effect for the relevant period set forth in Section 2.4.1(b) hereof
(provided, however, that a registration which does not become
effective solely by reason of the refusal of all of the Investors to proceed
with the offering or the refusal by the Company to proceed based upon the
written opinion of outside counsel to the lead underwriter delivered to and
reasonably acceptable to the Company to the effect that proceeding is inappropriate
as a legal matter for a reason relating to circumstances of all of the
Investors shall be deemed to have been effected), (B) after it has become
effective, such registration has not become subject to any stop order,
injunction or other order or requirement of the SEC or other governmental
agency or court for any reason, other than solely by reason of some act or
omission by the Investors with respect thereto, or such stop order, injunction
or other order has been lifted so as to permit such offering and sale of
Registrable Securities, and (C) the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are satisfied or any failure to satisfy such conditions was
solely by reason of some act or omission by the Investors.

 

2.2.6                        Underwriting
Agreements.  If requested by
the underwriters for any underwritten offering by the Investors to be conducted
pursuant to Section 2.2.1

 

(1)                                  To
the extent the Company exercises its Substitution Rights, these thresholds will
be reduced proportionately.

 

9

 

hereof,
the Company will enter into an underwriting agreement with such underwriters
for such offering, such agreement to be in customary form for offerings of this
type and acceptable to the Investors (it being agreed that the Company’s prior
underwriting agreements to the extent applicable for offerings of this type
will be considered in determining what is customary), whose acceptance shall
not be unreasonably withheld, to contain such representations and warranties by
the Company and such other terms as are generally prevailing in agreements of
this type, including, without limitation, representations and indemnities by
the Company and other customary indemnifications.  The Investors will cooperate with the Company
in the negotiation of the underwriting agreement and will give consideration to
the reasonable suggestions of the Company regarding the form thereof.

 

2.2.7                        Holdback Agreement.  Unless the managing underwriter otherwise
agrees, each of the Company and the Investors agree (and the Company agrees, in
connection with any underwritten registration, to use its commercially
reasonable efforts to cause its Affiliates to agree) not to effect any public
sale or private offer or distribution of any Common Stock or Common Stock
Equivalents during such time period after the pricing of any underwritten
offering pursuant to this Section 2.2 as may reasonably be
requested by the managing underwriter (such period of time not to exceed ninety
(90) days); provided, however, that the foregoing restriction
shall not apply to (i) if applicable, any offering made as part of such
underwritten registration, (ii) up to $100 million of 3(a)(9) offerings
and (iii) other exceptions customary for offerings of this type (it being
agreed that the Company’s prior underwriting agreements to the extent
applicable for offerings of this type will be considered in determining what is
customary).

 

2.2.8                        Selection of Underwriters.  In an underwritten offering of Registrable
Securities effected pursuant to this Section 2.2, the Notifying
Investors shall select the investment banking firm or firms to manage the
underwritten offering; provided, however, that such selection
shall be subject to the consent of the Company; provided, further,
that the Company agrees that any selection of Jefferies & Company, Inc.
shall be acceptable.

 

2.2.9                        Participation in
Underwritten Offerings.  Neither an
Investor nor any other Person may participate in any underwritten offering in
which Registrable Securities are to be offered pursuant to this Section 2.2
unless such Person (i) agrees to sell such Person’s securities on the
basis provided in any underwriting arrangements approved, subject to the terms
and conditions hereof, by the Company and the Investors to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) reasonably required under the terms of such underwriting
arrangements.

 

2.3                                 Piggyback Underwritten
Offerings.

 

2.3.1                        Right to Piggyback.  In the event that the Company shall seek to
undertake an underwritten public offering of registered shares of Common Stock
for cash (whether for the account of the Company or the account of any
securityholder of the

 

10

 

Company),
except in the case of an offering registered on Form S-4 or S-8 (or any
successor form) for the registration of securities to be offered in a
transaction of the type referred to in Rule 145 or to be offered to
employees of and/or consultants to the Company or subsidiaries thereof, the
Company shall first give written notice thereof (the “Company Notice”)
to each Investor, which Company Notice shall be given not less than ten (10) Business
Days prior to the anticipated initiation of such underwritten offering and
shall offer the Investors the opportunity to include any or all of its
Registrable Securities in such underwritten offering, subject to the
limitations contained in Section 2.3.3 hereof, unless the managing
underwriter for such underwritten public offering has advised the Company that
the shares to be offered by the Company in such offering constitute the Maximum
Offering Size, in which case, the Company shall give the Investors written
notice to this effect prior to the initiation of such offering in lieu of the
Company Notice and each Investor shall not have the right to include its
Registrable Securities in such offering.

 

2.3.2                        Notice of
Participation in Piggyback Offerings. 
Each Investor shall advise the Company in writing within five (5) Business
Days after the date of receipt of the Company Notice, specifying the number of
Registrable Securities, if any, the Investor seeks to include in such
underwritten offering.  The Company shall
thereupon include in such underwritten offering the number of Registrable
Securities so requested by such Investor to be included, subject to Section 2.3.3
hereof, and shall use reasonable best efforts to effect registration of such
Registrable Securities under the Securities Act; provided, however,
that the Company may at any time withdraw or cease proceeding with any such
underwritten offering of such Investor’s Registrable Securities if it shall at
the same time withdraw or cease proceeding with the underwritten offering of
all other shares of Common Stock originally proposed to be registered.

 

2.3.3                        Priority on Piggyback
Offerings.  If the managing
underwriter of the underwritten offering pursuant to which Registrable
Securities are included pursuant to this Section 2.3 shall advise
the Company and the Investors in writing that, in its view, the number of
securities requested to be included in such underwritten offering (including
securities to be sold by the Company or by other Persons not holding
Registrable Securities) exceeds the Maximum Offering Size, the Company will
include in such underwritten offering, to the extent of the number which the
Company is so advised can be sold in such underwritten offering, (i) first,
securities of the Company that the Company proposes to sell, (ii) second,
Registrable Securities held by the Investors, and (iii) third, securities
of the Company held by other Persons having registration rights proposed to be
included in such registration statement, allocated, if necessary, on a pro
rata basis in accordance with the number of shares proposed to be
included in such registration by such Investors and/or such other Persons, as
applicable.

 

2.3.4                        Expenses.  The Company shall be liable for and pay all
of Registration Expenses in connection with any underwritten offering in which
the Investors have the opportunity to participate pursuant to this Section 2.3;
provided, however, that in any underwritten offering pursuant to
this Section 2.3 the Investors shall pay any underwriting
commissions and discounts incurred pursuant to and in connection

 

11

 

with any
underwritten offering by such Investor and the other fees and expenses in
excess of the thresholds set forth in the definition of “Registration Expenses.”

 

2.3.5                        Limitation on
Subsequent Registration Rights. 
The Company acknowledges and agrees that the Company will not grant to any
other Person or allow the exercise by any other Person rights to piggyback or
participate in registered underwritten offerings of shares of Common Stock for
cash in priority to the rights granted to the Investors in this Section 2.3
or that would impair the rights of the Investors under this Agreement
(including with respect to the timing of any underwritten offering initiated by
the Investors pursuant hereto).

 

2.4                                 Registration
Procedures.

 

2.4.1                        Actions to be taken by
the Company.  If and when the
Company is required to use its reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act as provided
herein, the Company shall, as expeditiously as possible, but subject to the
provisions of Section 2.6 hereof:

 

(a)                                  prepare and file with
the SEC a registration statement on any appropriate form under the Securities
Act with respect to such Registrable Securities and thereafter use its
reasonable best efforts to cause such registration statement to become
effective as promptly as practicable under the circumstances and to remain
effective for the period set forth in subparagraph (b) below;

 

(b)                                 prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
distribution thereof or, in the case of the Shelf Registration Statement, the
expiration of the period set forth in Section 2.1 hereof;

 

(c)                                  furnish to each seller
of Registrable Securities and the underwriters of the securities being
registered such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus), any documents incorporated by
reference therein and such other documents as such seller or underwriters may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller or the sale of such securities by such
underwriters (it being understood that, subject to Section 2.6
hereof and the requirements of the Securities Act and applicable state
securities laws, the Company consents to the use of the prospectus and any
amendment or supplement thereto by each seller and the underwriters in
connection with the offering

 

12

 

and sale of the Registrable Securities covered by the
registration statement of which such prospectus, amendment or supplement is a
part);

 

(d)                                 use its reasonable
best efforts to register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions as the managing
underwriter reasonably requests (or, in the event the registration statement
does not relate to an underwritten offering, as the holders of a majority of
such Registrable Securities may reasonably request); use its reasonable best
efforts to keep each such registration or qualification (or exemption
therefrom) effective during the period in which such registration statement is
required to be kept effective and take any other action which may be reasonably
necessary or advisable to enable the Investor and such underwriter to
consummate the disposition in such jurisdictions of the securities owned by the
Investor; and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Investor to consummate the disposition of
the Registrable Securities owned by the Investor in such jurisdictions (provided,
however, that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph or (B) consent to general
service of process in any such jurisdiction);

 

(e)                                  promptly notify each
seller and each underwriter and (if requested by any such Person) confirm such
notice in writing (i) when the registration statement, a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of the issuance by any state securities or
other regulatory authority of any order suspending the qualification or
exemption from qualification of any of the Registrable Securities under state
securities or “blue sky” laws or the initiation of any proceedings for that
purpose and (iii) of the happening of any event which makes any statement
made in a registration statement or related prospectus untrue or which requires
the making of any changes in such registration statement, prospectus or
documents so that in either event they will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and, as
promptly as practicable thereafter, prepare and file with the SEC and furnish a
supplement or amendment to such prospectus so that, as thereafter deliverable
to the purchasers of such Registrable Securities, such prospectus will not
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;

 

(f)                                    if requested by the
managing underwriter or any seller promptly incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or any seller

 

13

 

reasonably requests to be included therein, including,
without limitation, with respect to the Registrable Securities being sold by such
seller, the purchase price being paid therefor by the underwriters and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering, and promptly make all required filings
of such prospectus supplement or post-effective amendment;

 

(g)                                 as promptly as
practicable after filing with the SEC of any document which is incorporated by
reference into a registration statement (in the form in which it was
incorporated), make a copy of each such document available to each seller or,
at such seller’s request, deliver a copy of each such document to such seller;

 

(h)                                 cooperate with the sellers
and the managing underwriter to facilitate the timely preparation and delivery
of certificates (which shall not bear any restrictive legends unless required
under applicable law) representing securities sold under any registration
statement, and enable such securities to be in such denominations and
registered in such names as the managing underwriter or such sellers may
request and keep available and make available to the Company’s transfer agent
prior to the effectiveness of such registration statement a supply of such
certificates;

 

(i)                                     furnish to each seller
and underwriter a signed counterpart of (A) an opinion or opinions of
counsel to the Company, and (B) a comfort letter or comfort letters from
the Company’s independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the sellers or managing underwriter reasonably
requests;

 

(j)                                     cause the Registrable
Securities included in any registration statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed;

 

(k)                                  provide a transfer
agent and registrar for all Registrable Securities registered hereunder and
provide a CUSIP number for the Registrable Securities included in any
registration statement not later than the effective date of such registration
statement;

 

(l)                                     cooperate with each seller
and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD;

 

(m)                               during the period, if
any, when the prospectus is required to be delivered under the Securities Act,
promptly file all documents required to be filed with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;

 

14

 

(n)                                 notify each of the
sellers promptly of any request by the SEC for the amending or supplementing of
such registration statement or prospectus or for additional information;

 

(o)                                 prepare and file with
the SEC promptly any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for the Company or the managing
underwriter, is required in connection with the distribution of the Registrable
Securities;

 

(p)                                 enter into such
agreements (including underwriting agreements in the managing underwriter’s
customary form) as are customary in connection with an underwritten
registration; and

 

(q)                                 advise each seller,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal at the earliest possible
moment if such stop order should be issued.

 

2.4.2                        Information to be
Provided by the Investors.  The Investors
shall furnish the Company such information regarding such Investor and the
distribution of such securities as the Company may from time to time reasonably
request in writing and as shall be required in connection with the Company’s
performance of its obligations hereunder.

 

2.5                                 Standstill Agreement;
Restrictions on Transfer.

 

2.5.1                        Standstill.  Notwithstanding anything to the contrary
contained in this Agreement, neither the Holder nor any of its Affiliates shall
(i) until June 22, 2006, increase its Beneficial Ownership of the
Common Stock and (ii) thereafter until the third anniversary of the date
hereof, increase its Beneficial Ownership above 15% (fifteen percent) of the
Company’s total outstanding Common Stock without the prior written consent of
the Board, provided, however, that the foregoing limitation set
forth in clause (ii) shall terminate and be of no further force and effect
from and after the time, if ever, that, the Holder’s and any of its Affiliates
Beneficial Ownership of the Common Stock falls below 5% (five percent) of the
Company’s total outstanding Common Stock.

 

2.5.2                        Prohibitions during
Transfer Period.  Prior to the
Effective Date, neither the Holder nor its Affiliates shall Transfer any shares
of Common Stock.  Other than as set forth
below, until the first to occur of (A) 150 days following the Effective
Date and (B) June 22, 2006 (the “Transfer Period”), the Holder
and its Affiliates shall not Transfer in the aggregate on any given day (a “Transfer
Date”) such number of shares of Common Stock that exceeds (i) the
product of (x) three million (3,000,000) shares of Common Stock and (y)
the number of trading days in the period from and including the Closing Date to
and including the Transfer Date less (ii) the aggregate number of shares

 

15

 

of
Common Stock Transferred by the Holder and its Affiliates in accordance with
this Section 2.5.2 during the period from and including the Closing
Date to, but excluding, the Transfer Date; provided, however, that
in no event shall the Holder and its Affiliates be permitted to Transfer,
whether directly or indirectly, more than six million (6,000,000) shares of
Common Stock on such Transfer Date, and provided, further, that in
determining the maximum number of shares of Common Stock that may be sold in
any one day as provided above, any Transfers permitted by the succeeding
sentence shall not be included in such calculation.  Notwithstanding anything herein to the
contrary, the transfer restriction set forth in this Section 2.5.2
shall not apply to:  (1) any
Transfer of shares of Common Stock by the Holder or its Affiliate to any of the
Persons listed on Annex A hereto; (2) any Transfer of shares of Common
Stock after a Takeover Proposal has been made, provided that such
Takeover Proposal is approved by (A) a majority of the members of the
Board or (B) the holders of more than majority of the shares of Common
Stock issued and outstanding as of the date such Takeover Proposal is made; (3) underwritten
offerings permitted by Section 2.2 or Section 2.3
hereof; (4) sales negotiated between the Holder and a buyer in which such
buyer represents to the Holder that either (A) the buyer’s acquisition of Common
Stock will not result in the buyer Beneficially Owning (based upon the number
of shares of Common Stock reported as being outstanding in the Company’s most
recently filed report with the SEC) 5% or more of Common Stock outstanding
after giving effect to the consummation of such sale or (B) such buyer already
Beneficially Owns 5% or more of the Common Stock and, upon consummation of the
proposed sale, will continue to Beneficially Own more than 5% of the Common
Stock (in each case based upon the number of shares of Common Stock reported as
being outstanding in the Company’s most recently filed report with the SEC); (5) any
Block transaction; and (6) any dividend or other pro rata distribution of
the Common Stock made to record shareholders of Leucadia.

 

The Holder (and any subsequent transferee who agrees
to be bound by the terms of this Section 2.5.2) agrees that within
15 Business Days after the consummation of any Transfer referred to in (1) or
(4) above, the Holder (or any subsequent transferee who agrees to be bound
by this Section 2.5.2) shall deliver documentation to the Company
that identifies the buyer, the number of shares of Common Stock transferred and
the date of such Transfer.

 

2.6                                 Blackout Periods;
Suspension of Dispositions.

 

2.6.1                        Blackout Periods.  Notwithstanding anything to the contrary
contained herein (other than as set forth in Section 2.1 hereof),
for a period not to exceed twenty (20) consecutive calendar days and not to
exceed sixty (60) calendar days in any twelve-month period (each a “Black
Out Period”), provided that there must be an interim period of at least
sixty (60) consecutive days between the end of one Black Out Period and the
beginning of another Black Out Period, the Company will not be required to file
any registration statement pursuant to this Agreement, file any amendment
thereto, furnish any supplement to a prospectus included in a registration
statement pursuant to Section 2.4.1(e)(iii) hereof, make any
other filing with the SEC required pursuant to this Agreement, cause any
registration statement or other filing with the SEC to become effective, or
take any similar action, and any and all sales of Registrable Securities by the

 

16

 

Investors
pursuant to an effective registration statement shall be suspended:  (i) if an event has occurred and is
continuing as a result of which any such registration statement or prospectus
would, in the Company’s reasonable judgment based on advice of outside counsel
to the Company, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) if the Company notifies the Investors that
such actions would, in the good faith judgment of outside counsel to the
Company, require the disclosure of material non-public information which the
Company has a bona fide business purpose for preserving as confidential and
which the Company would not otherwise be required to disclose or (iii) if
the Company notifies the Investors that, in the Company’s good faith judgment
(after consultation with the Company’s proposed managing underwriter, initial
purchaser or outside financial advisor), it is necessary to suspend sales of
Registrable Securities by the Investors, to facilitate a pending or proposed
public or Rule 144A offering by the Company or Common Stock or Common
Stock Equivalents, provided, however, that the Company (X) shall not be
able to exercise any rights under this clause (iii) during the first three
(3) months following the date hereof, and (Y) shall only be able to use
its blocking rights under this clause (iii) for a period not to exceed 15
consecutive days and not more than two times in any twelve month period.  Upon the termination of the condition
described in clauses (i), (ii)  or (iii) of above, the Company shall
promptly give written notice to the Investors and shall promptly file any
registration statement or amendment thereto required to be filed by it pursuant
to this Agreement, furnish any prospectus supplement or amendment required to
be furnished pursuant to Section 2.4.1(e)(iii) hereof, make
any other filing with the SEC required of it or terminate any suspension of
sales it has put into effect and shall take such other actions to permit
registered sales of Registrable Securities as contemplated by this Agreement.  If the Company does not take the foregoing
action as required to permit the Investors to sell the Registrable Securities
upon the end of the permitted relevant Black Out Period, the Company shall pay
to the Investors the Delay Fee for the number of days that the Investors are
unable to sell Registrable Securities.

 

2.6.2                        Suspension of
Dispositions.  Each Investor
agrees by acquisition of any Registrable Securities that, upon receipt of any
notice (a “Suspension Notice”) from the Company of the happening of any
event of the kind described in Section 2.4.1(e)(iii) hereof
such Investor will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
(the “Suspension Period”) until such Investor’s receipt of the copies of
the supplemented or amended prospectus, or until it is advised in writing (the “Advice”)
by the Company that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company, such Investor
will deliver to the Company all copies, other than permanent file copies then
in such Investor’s possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.  The Company shall use its reasonable best
efforts and take such actions as are reasonably necessary to render the Advice
as promptly as practicable.

 

2.6.3                        Extensions.  For the purposes of Sections 2.1.1, 2.1.6,
2.3.1 and 4.1 hereof, the occurrence of any Blackout Period or
Suspension Period pursuant to this

 

17

 

Section 2.6 shall cause the
second anniversary of the date hereof to be deemed extended by the number of
days equivalent to the duration of any periods during which the Holder may not
sell Registrable Securities pursuant to a registration statement required
hereunder.

 

2.7                                 Indemnification.

 

2.7.1                        Indemnification by the
Company.  The Company agrees to
indemnify and reimburse, to the fullest extent permitted by law, each
underwriter of Registrable Securities, each Investor and each of such Investor’s
directors, officers, employees and agents and each other Person who controls
the Investor Holder (within the meaning of the Securities Act or the Exchange
Act) (each an “Investor Affiliate” and collectively, the “Investor
Affiliates”) (i) against any and all losses, claims, damages,
liabilities, and expenses, joint or several (including, without limitation, reasonable
attorneys’ fees and disbursements except as limited by Section 2.7.3
hereof) (“Damages”) based upon, arising out of, related to or resulting
from any untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus, or preliminary prospectus relating to the
Registrable Securities any amendment thereof or supplement thereto, or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading, (ii) against any and all loss,
liability, claim, damage, and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation or investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon, arising out of, related to or resulting from
any such untrue statement or omission or alleged untrue statement or omission
and (iii) against any and all costs and expenses (including reasonable
fees and disbursements of counsel) as may be reasonably incurred in
investigating, preparing, or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon, arising out of, related to or resulting from
any such untrue statement or omission or alleged untrue statement or omission,
or such violation of the Securities Act or Exchange Act, to the extent that any
such expense or cost is not paid under subparagraph (i) or (ii) above;
provided, however, that the Company shall not be liable in any
such case to the extent that such statements are made in reliance upon and in
strict conformity with information furnished in writing to the Company by an
Investor or any Investor Affiliate for use therein or arise from an Investor’s
or any Investor Affiliate’s failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished an Investor or any Investor Affiliate with a sufficient
number of copies of the same.  The
reimbursements required by this Section 2.7.1 will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred.

 

2.7.2                        Indemnification by the
Investor.  In connection with
any registration statement in which an Investor is participating, each such
Investor will, to the fullest extent permitted by law will indemnify the Company
and its directors and officers and each Person who controls the Company (within
the meaning of the Securities Act or the Exchange Act) against any and all
Damages resulting from any untrue statement or

 

18

 

alleged
untrue statement of a material fact contained in the registration statement,
prospectus, or any preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which they were made not misleading, but only
to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission is contained in any information or affidavit so
furnished in writing by such Investor or any Investor Affiliate specifically
for inclusion in the registration statement; provided, however,
that the obligation to indemnify will be several, not joint and several, among
such Investors of Registrable Securities, and the liability of each such
Investor of Registrable Securities will be in proportion to, and provided,
further, that such liability will be limited to, the net amount received by
such seller from the sale of Registrable Securities pursuant to such
registration statement; provided, that such Investor shall not be liable
in any such case to the extent that prior to the filing of any such
registration statement or prospectus or amendment thereof or supplement
thereto, such Investor has furnished in writing to the Company information
expressly for use in such registration statement or prospectus or any amendment
thereof or supplement thereto which corrected or made not misleading
information previously furnished to the Company.

 

2.7.3                        Notice of Claims, etc.  Any Person entitled to indemnification
hereunder will (A) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification (provided that the
failure to give such notice shall not limit the rights of such Person except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice) and (B) unless in such indemnified party’s reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with a single counsel reasonably satisfactory
to the indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (X) the
indemnifying party has agreed to pay such fees or expenses, or (Y) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person.  In the event the indemnified party reasonably
believes such a conflict of interest exists, the indemnifying party shall
indemnify the indemnified party for all reasonable costs and expenses of one
separate counsel for the indemnified party in accordance with Sections 2.7.1
or 2.7.2 hereof) above, as applicable. 
If such defense is not assumed by the indemnifying party as permitted
hereunder, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
will not be unreasonably withheld).  If
such defense is assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or otherwise compromise the
applicable claim unless (1) such settlement or compromise contains a full
and unconditional release of the indemnified party and the settlement or
compromise does not require any admission of wrongdoing on the part of the
indemnified party or (2) the indemnified party otherwise consents in
writing.  An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such

 

19

 

indemnifying
party with respect to such claim, unless in the reasonable judgment of any
indemnified party, a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the reasonable
fees and disbursements of such additional counsel or counsels.

 

2.7.4                        Contribution.  Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by Section 2.7.1
or 2.7.2 hereof are unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities, or
expenses (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, liabilities, or expenses
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified party in
connection with the actions which resulted in the losses, claims, damages,
liabilities or expenses as well as any other relevant equitable
considerations.  The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or indemnified party, and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided that in no
event shall the obligation of any indemnifying party to contribute under this Section 2.7.4
exceed the amount that such indemnifying party would have been obligated to pay
by way of indemnification if the indemnification provided for under Sections
2.7.1 or 2.7.2 hereof had been available under the
circumstances.  The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section 2.7.4
were determined by pro  rata allocation (even if the Investors or
any underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in this Section 2.7.4.  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified party
in connection with investigating or, except as provided in Section 2.7.3
hereof, defending any such action or claim. 
Notwithstanding the provisions of this Section 2.7.4, the
Investors shall not be required to contribute an amount greater than the dollar
amount by which the net proceeds received by the Investors with respect to the
sale of any Registrable Securities exceeds the amount of damages which such
Investor has otherwise been required to pay by reason of any and all untrue or
alleged untrue statements of material fact or omissions or alleged omissions of
material fact made in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto related to such sale
of Registrable Securities.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.  The Investors’ obligations in this Section 2.7.4
to contribute shall be several in proportion to the amount of Registrable
Securities registered by them and not joint.

 

20

 

If indemnification is available under this Section 2.7,
the indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 2.7.1 and 2.7.2 hereof without
regard to the relative fault of said indemnifying party or indemnified party or
any other equitable consideration provided for in this Section 2.7.4
subject, in the case of the Investors, to the limited dollar amounts set forth
in Section 2.7.2 hereof.

 

2.7.5                        Effectiveness of
Indemnification.  The
indemnification and contribution provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf
of the indemnified party or any officer, director, or controlling Person of
such indemnified party and will survive the transfer of securities.

 

2.8                                 Assignment of
Registration Rights.  The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
assignable by the Holder and any subsequent Investor, in whole or in part,
including the Holder’s rights pursuant to Section 2.2 hereof to an
Investor (a “Transferee”), provided that: (i) the Holder agrees in
writing with the Transferee to transfer or assign such rights, and a copy of
such agreement is promptly furnished to the Company after such transfer or
assignment; (ii) the Company is, promptly after such transfer or
assignment, furnished with written notice of (a) the name and address of
such Transferee, and (b) the securities with respect to which such
registration rights are being transferred or assigned and the amount being
transferred or assigned; (iii) at or before the time the Company receives
the written notice contemplated by clause (ii) of this sentence the
Transferee agrees in writing with the Company to be bound by all of the
provisions contained herein (including with respect to Section 2.5.2);
(iv) such Transferee shall be an “accredited investor” as that term is
defined in Rule 501 of Regulation D promulgated under the 1933 Act; (v) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2.1
hereof, the Transferee agrees to pay all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment; provided,
however, that any assignment by the Holder of its rights hereunder to
any of its subsidiaries shall not be subject to this clause v; and (vi) after
giving effect to the Transfer, the Transferee will beneficially own not less
than 30% of the Common Stock issued under the Acquisition Agreement (or such
comparable amount of Registrable Securities).

 

ARTICLE 3

RULE 144

 

3.1                                 Current Public
Information.  With a view to
making available to the Investors the benefits of certain rules and
regulations of the SEC that may at any time permit the sale of securities to
the public without registration, the Company agrees to use its reasonable best
efforts to:

 

(i)                                     make and keep public
information available, as those terms are understood and defined in Rule 144,
at all times after the date hereof;

 

21

 

(ii)                                  file with the SEC in a
timely manner all reports and other documents required to be filed by the
Company under the Securities Act and the Exchange Act; and

 

(iii)                               furnish to any
Investor, so long as such Investor owns any Registrable Securities, upon
request by such Investor, (a) a written statement by the Company that it
has complied with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, (b) a copy of the most recent annual
or quarterly report of the Company and (c) such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Investors may reasonably request in
availing itself of any rule or regulation of the SEC allowing the Investors
to sell any such securities without registration.

 

ARTICLE 4

MISCELLANEOUS

 

4.1                                 Notices.  All notices, requests and other
communications that are required or may be given under this Agreement shall,
unless otherwise provided for elsewhere in this Agreement, be in writing and
shall be deemed to have been duly given if and when delivered by commercial
courier or other hand delivery, as follows:

 

	
  For the Company:

   

  Level 3 Communications, Inc.

  1025 Eldorado Blvd.

  Building 2000

  Broomfield, CO 80021

  Attention: General Counsel

  	
   

  	
  For the Holder:

  
Leucadia National Corporation

  315 Park Avenue South

  New York, NY 10010

  Attention: Joseph S.
  Steinberg, President

  
	
   

  	
   

  	
   

  
	
  with a copy (which shall not constitute notice) to:

  	
   

  	
  with a copy (which shall not constitute notice) to:

  
	
   

  	
   

  	
   

  
	
  Willkie Farr &
  Gallagher LLP

  787 Seventh Avenue

  New York, New York 10019

  Attention: David K. Boston, Esq.

  	
   

  	
  Weil, Gotshal & Manges LLP

  767 Fifth Avenue

  New York, New York 10153

  Attention: Andrea A. Bernstein, Esq.

  

 

Any notice or communication hereunder shall be deemed
to have been given or made as of the date so delivered if personally delivered
and five (5) calendar days after mailing if sent by registered or
certified mail (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).

 

If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.

 

22

 

4.2                                 Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.

 

4.3                                 Submission to
Jurisdiction.  ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY AND THE HOLDER EACH HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND
APPELLATE COURTS FROM ANY THEREOF.  EACH
OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF TO THE COMPANY OR THE HOLDER, AS THE CASE MAY BE,
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO
SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 4.1.  THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.

 

4.4                                 Successors and Assigns.  Except as otherwise expressly provided
herein, this Agreement shall be binding upon and benefit the Company, the
Holder, and their respective successors and permitted assigns.

 

4.5                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document.

 

4.6                                 Severability.  In the event any provision in this Agreement
shall be held invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and the remaining provisions shall not in any way be affected or
impaired thereby.

 

4.7                                 Entire Agreement.  This Agreement and any exhibits and other
documents referred to herein constitute the entire agreement and understanding
among the parties hereto in respect of the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements and understandings, both
oral and written, among the parties hereto, or between any of them, with
respect to the subject matter hereof and thereof.

 

4.8                                 No Waivers; Amendments.  No failure or delay on the part of the
Company or any Investor in exercising any right, power or remedy hereunder
shall

 

23

 

operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.  The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or any Investor at law or in
equity or otherwise.  Any provision of
this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Company and the Investors.

 

4.9                                 Specific Enforcement;
Cumulative Remedies.  The parties hereto
acknowledge that money damages may not be an adequate remedy for violations of
this Agreement and that any party, in addition to any other rights and remedies
which the parties may have hereunder or at law or in equity, may, in his or its
sole discretion, apply to a court of competent jurisdiction for specific performance
or injunction or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.  All rights,
powers and remedies provided under this Agreement or otherwise available in
respect hereof at law or in equity shall be cumulative and not alternative, and
the exercise or beginning of the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such rights, powers or
remedies by such party.

 

4.10                           Time of the Essence.  Time shall be of the essence in this
Agreement.

 

4.11                           Construction.  In construing this Agreement, the following
principles shall be followed: (i) no consideration shall be given to the
captions of the articles, sections, subsections or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not as an aid
in construction; (ii) no consideration shall be given to the fact or
presumption that any of the parties had a greater or lesser hand in drafting
this Agreement; (iii) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate; (iv) the word “includes” and
its syntactic variants mean “includes, but is not limited to” and corresponding
syntactic variant expressions; (v) the plural shall be deemed to include
the singular, and vice versa; (vi) each gender shall be deemed to include
the other genders; and (vii) any exhibit, appendix, attachment and schedule to
this Agreement is a part of this Agreement.

 

4.12                           Information.  The parties acknowledge and agree that in the
course of discussions relating to this Agreement and the transaction
contemplated hereby, neither the Company nor the Holder believes that the
Company has conveyed to the Holder any material non-public information in
respect of the Company and/or its business, operations, pending transactions,
financial condition, results of operations, or prospects.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

 

24

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first written above.

 

	
   

  	
   

  	
  LEVEL 3 COMMUNICATIONS, INC.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEUCADIA NATIONAL CORPORATION,

  
	
   

  	
   

  	
  a New York corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BALDWIN ENTERPRISES, INC.,

  
	
   

  	
   

  	
  a Colorado corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Signature Page 

to 

Registration Rights and Transfer Restriction Agreement

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