Document:

Exhibit 10.2

 

EXECUTION COPY

 

LEVEL 3 COMMUNICATIONS, INC.

 

$175,000,000

6.5% Convertible Senior Notes due 2016

 

UNDERWRITING AGREEMENT

 

New York, New York

September 14, 2010

 

Merrill
Lynch, Pierce, Fenner & Smith

Incorporated

as
Representative of the several Underwriters

One
Bryant Park

New
York, New York  10036

 

Ladies
and Gentlemen:

 

Level 3
Communications, Inc., a corporation organized under the laws of Delaware
(the “Company”), proposes to sell to the several underwriters named in
Schedule I hereto (the “Underwriters”), for whom you (the “Representative”)
are acting as representative, $175,000,000 aggregate principal amount of
its 6.5% Convertible Senior Notes due 2016 (the “Underwritten Securities”).  The Company also proposes to grant to the
Underwriters an option to purchase up to $26,250,000 additional principal
amount of such Convertible Senior Notes to cover over-allotments, if any (the “Option
Securities”; and together with the Underwritten Securities, the “Securities”).  The Securities are convertible into shares of
Common Stock, par value $0.01 per share (the “Common Stock”), of the Company at
the conversion rate set forth in the Final Prospectus.  The Securities are to be issued under an
indenture dated as of December 24, 2008 (the “Base Indenture”), between
the Company and The Bank of New York Mellon, as trustee (the “Trustee”), as
supplemented by a third supplemental indenture to be dated as of September 20,
2010 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”).  To the extent there are no additional
Underwriters listed on Schedule I other than you, the term Representative
as used herein shall mean you, as Underwriter, and the term Underwriters shall
mean either the singular or plural as the context requires.  Any reference herein to the Registration
Statement, the Basic Prospectus, any Preliminary Prospectus or the Final
Prospectus shall be deemed to refer to and include the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 which were filed
under the Exchange Act on or before the Effective Date of the Registration
Statement or the issue date of the Basic Prospectus, any Preliminary Prospectus
or the Final Prospectus, as the case may be; and any reference herein to the
terms “amend”, “amendment” or “supplement” with respect to the Registration
Statement, the Basic Prospectus, any Preliminary Prospectus or the Final
Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the Effective Date of the Registration Statement,
or the issue date of the Basic Prospectus, any Preliminary Prospectus or the
Final Prospectus, as the case may be, deemed to be incorporated therein by
reference.  Certain terms used herein are
defined in Section 19 hereof.

 

 

1.  Representations and Warranties.  The Company represents and warrants to, and
agrees with, each Underwriter as set forth below in this Section 1.

 

(a)  The Company meets the requirements for
use of Form S-3 under the Securities Act and has prepared and filed with
the Commission an automatic shelf registration statement, as defined in
Rule 405 (file number 333-154976) on Form S-3, including a related
basic prospectus, for registration under the Securities Act of the offering and
sale of the Securities.  Such
Registration Statement, including any amendments thereto filed prior to the
Applicable Time, became effective upon filing. 
The Company may have filed with the Commission, as part of an amendment
to the Registration Statement or pursuant to Rule 424(b), the Preliminary
Prospectus, which has previously been furnished to you.  The Company will file with the Commission a
final prospectus supplement relating to the Securities in accordance with
Rule 424(b).  As filed, such final
prospectus supplement shall contain all information required by the Securities
Act and the rules thereunder, and, except to the extent the Representative
shall agree in writing to a modification, shall be in all substantive respects
in the form furnished to you prior to the Applicable Time or, to the extent not
completed at the Applicable Time, shall contain only such specific additional
information and other changes (beyond that contained in the Basic Prospectus
and the Preliminary Prospectus) as the Company has advised you, prior to the
Applicable Time, will be included or made therein.  At the Applicable Time, the Company was
eligible to use the Registration Statement for an offering pursuant to
Rule 415(a)(1)(x).  The initial
Effective Date of the Registration Statement was not earlier than the date
three years before the Applicable Time.

 

(b)  On the Effective Date, the Registration
Statement did, and when the Final Prospectus is first filed in accordance with
Rule 424(b) and on the Closing Date (as defined herein) and on any
date on which Option Securities are purchased, if such date is not the Closing
Date (a “settlement date”), the Final Prospectus (and any supplement thereto)
will, comply in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the Trust Indenture Act and the respective
rules thereunder; on the Effective Date and at the Applicable Time, the
Registration Statement did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; on the
Effective Date and on the Closing Date the Indenture did or will comply in all
material respects with the applicable requirements of the Trust Indenture Act
and the rules thereunder; and, on the date of any filing pursuant to
Rule 424(b) and on the Closing Date and any settlement date, the
Final Prospectus (together with any supplement thereto) will not include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as
to (i) that part of the Registration Statement which shall constitute the
Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of the Trustee or (ii) the information contained in or
omitted from the Registration Statement or the Final Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter 

 

2

 

through
the Representative specifically for inclusion in the Registration Statement or
the Final Prospectus (or any supplement thereto), it being understood and
agreed that the only such information furnished by or on behalf of any
Underwriter consists of the information described as such in Section 8
hereof.

 

(c)  At the Applicable Time, (i) the
Disclosure Package and (ii) each electronic road show, when taken together
as a whole with the Disclosure Package, does 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 the light of the circumstances under which they
were made, not misleading.  The preceding
sentence does not apply to statements in or omissions from the Disclosure
Package based upon and in conformity with written information furnished to the
Company by any Underwriter through the Representative specifically for use
therein, it being understood and agreed that the only such information
furnished by or on behalf of any Underwriter consists of the information
described as such in Section 8 hereof.

 

(d)  (i) At the time of filing the
Registration Statement, (ii) at the time of the most recent amendment
thereto for the purposes of complying with Section 10(a)(3) of the
Securities Act (whether such amendment was by post-effective amendment,
incorporated report filed pursuant to Sections 13 or 15(d) of the Exchange
Act or form of prospectus), (iii) at the time the Company or any person
acting on its behalf (within the meaning, for this clause only, of Rule 163(c))
made any offer relating to the Securities in reliance on the exemption in Rule 163,
and (iv) at the date and time that this agreement is executed and
delivered by the parties hereto (with such date being used as the determination
date for purposes of this clause (iv)), the Company was or is (as the case may
be) a “well-known seasoned issuer” as defined in Rule 405.  The Company agrees to pay the fees required
by the Commission relating to the Securities within the time required by Rule 456(b)(1)
without regard to the proviso therein and otherwise in accordance with Rules 456(b) and
457(r).

 

(e)  (i) At the earliest time after the
filing of the Registration Statement that the Company or another offering
participant made a bona fide
offer (within the meaning of Rule 164(h)(2)) of the Securities and
(ii) as of the Applicable Time (with such date being used as the
determination date for purposes of this clause (ii)), the Company was not
and is not an Ineligible Issuer (as defined in Rule 405), without taking account
of any determination by the Commission pursuant to Rule 405 that it is not
necessary that the Company be considered an Ineligible Issuer.

 

(f)  Each Issuer Free Writing Prospectus does
not include any information that conflicts with the information contained in
the Registration Statement, including any document incorporated therein and any
prospectus supplement deemed to be a part thereof that has not been superseded
or modified.  The foregoing sentence does
not apply to statements in or omissions from any Issuer Free Writing Prospectus
based upon and in conformity with written information furnished to the Company
by any Underwriter through the Representative specifically for use therein, it
being understood and agreed that the only such information furnished by or on
behalf of any Underwriter consists of the information described as such in Section 8
hereof.

 

3

 

(g)  Subsequent to the respective dates as of
which information is given in the Disclosure Package and the Final Prospectus,
except as set forth or contemplated in the Disclosure Package and the Final
Prospectus, neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations, direct or contingent, which are material to the
Company and its subsidiaries taken as a whole, nor entered into any transaction
not in the ordinary course of business that is material to the Company and its
subsidiaries taken as a whole, and there has not been, singularly or in the
aggregate, any material adverse effect in the properties, business, results of
operations, financial condition, affairs or business prospects of the Company
and its subsidiaries taken as a whole (a “Material Adverse Effect”).  Without limiting the foregoing, neither the Company
nor any of its subsidiaries has sustained since the respective dates as of
which information is given in the Disclosure Package and the Final Prospectus
any loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental or regulatory action, order or decree, constituting a
Material Adverse Effect, otherwise than as set forth or contemplated in the
Disclosure Package and the Final Prospectus.

 

(h)  Each of the Company and the Subsidiaries
(x) has been duly organized and is validly existing as a corporation or
other business organization under the laws of its jurisdiction of organization
and is in good standing under the laws of such jurisdiction, (y) has the
requisite corporate power and authority to carry on its business as it is
currently being conducted and as described in the Disclosure Package and the
Final Prospectus, and to own, lease and operate its properties and (z) is
duly qualified and is authorized to do business and is in good standing in each
jurisdiction where the operation, ownership or leasing of property or the
conduct of its business requires such qualification, except where any failure
to be so qualified would not, singularly or when aggregated with failures to be
qualified elsewhere, have a Material Adverse Effect.  The Company has the requisite corporate power
and authority to execute, deliver and perform this Agreement and the Supplemental
Indenture and to issue, sell and deliver the Securities.  As of the date of its execution, the Company
had the requisite corporate power and authority to execute, deliver and perform
the Base Indenture.  The term “Subsidiary”
means each entity listed on Schedule II hereto and the Company has no “significant
subsidiaries” (as defined in Regulation S-X) other than the Subsidiaries.

 

(i)  The Company has an authorized equity
capitalization of 2,910,000,000 shares, consisting of 2,900,000,000 shares
of Common Stock, par value $0.01 per share, and 10,000,000 shares of
Preferred Stock, par value $0.01 per share. 
All of the issued shares of capital stock of the Company have been duly
and validly authorized and are fully paid and non-assessable and conform in all
material respects to the descriptions thereof contained in the Disclosure
Package and the Final Prospectus.  The
shares of Common Stock initially issuable upon conversion of the Securities
have been duly and validly authorized and, when issued upon conversion of the
Securities in accordance with the terms of the Indenture, will be validly
issued, fully paid and nonassessable; the Board of Directors of the Company or
a duly constituted committee thereof has duly and validly adopted resolutions
reserving such shares of Common Stock for issuance upon conversion of the
Securities; the holders of outstanding shares of capital stock of the Company
are not entitled to preemptive or other rights to subscribe for the Securities
or 

 

4

 

the
shares of Common Stock issuable upon conversion thereof; and, except as set
forth in the Disclosure Package and the Final Prospectus and except for
outstanding warrants and options to purchase shares of Common Stock that in the
aggregate represent less than 1% of the Common Stock outstanding on the date
hereof, no options, warrants or other rights to purchase, agreements or other
obligations to issue, or rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership interests in the
Company are outstanding.  All of the
issued and outstanding shares of capital stock or equity interests of each of
the Subsidiaries have been duly and validly authorized and issued, are fully
paid and non-assessable and, except as set forth or contemplated in the
Disclosure Package and the Final Prospectus, are owned, directly or through
subsidiaries, by the Company, free and clear of any lien or other claim or
encumbrance (other than the pledge of such shares or equity interests pursuant
to the agreements the Company and certain of its subsidiaries have entered into
in connection with the senior secured term loan described in the Disclosure
Package and the Final Prospectus).

 

(j)  The Securities have been duly authorized,
and, when executed by the Company and authenticated by the Trustee in
accordance with the terms of the Indenture and delivered to and duly paid for
by the Underwriters in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture and will be convertible into Common Stock in
accordance with their terms.  The Base
Indenture has been duly authorized, executed and delivered by the Company and
duly qualified under the Trust Indenture Act and, when the Supplemental
Indenture is executed and delivered by the Company and the Trustee, the
Indenture will constitute a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors’ rights
and to general equity principles.  The
Securities and the Indenture will conform to the description thereof in the
Disclosure Package and the Final Prospectus.

 

(k)  There is no franchise, contract or other
document of a character required to be described in the Disclosure Package or
the Final Prospectus, or to be filed as an exhibit to the Registration
Statement, which is not described or filed as required; and the statements
(i) incorporated by reference in the Disclosure Package and the Final
Prospectus from the Company’s Annual Report on Form 10-K for the year
ended December 31, 2009, under the heading “Legal Proceedings”, as
supplemented by the Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 2010 and June 30, 2010, and (ii) in the
Preliminary Prospectus and the Final Prospectus under the heading “Business—Regulation”,
in each case fairly summarize the matters therein described.

 

(l)  This Agreement has been duly authorized,
executed and delivered by the Company.

 

(m)  The Company is not and, after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in the Disclosure Package and the Final
Prospectus, will not be an “investment company” as defined in the Investment
Company Act of 1940, as amended.

 

5

 

(n)  The execution and delivery of this
Agreement and the Indenture, the issuance and sale of the Securities hereunder,
the issuance of Common Stock upon conversion of the Securities, the performance
by the Company of this Agreement and the Indenture and the consummation of the
other transactions herein and therein contemplated will not (x) conflict with
or result in a breach or violation of any of the respective charters, by-laws
or other organizational documents of the Company or any of the Subsidiaries,
(y) violate or conflict with any statute, rule or regulation
applicable to the Company or any Subsidiary or any order or decree of any
governmental or regulatory agency or body or any court having jurisdiction over
the Company or any Subsidiary or any of their respective properties or
(z) after giving effect to the waivers and consents obtained on or prior
to the date hereof, if any, conflict with or result in a breach or violation of
any term or provision of, constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the obligation
to create or impose) a lien or other claim or encumbrance with respect to, any
bond, note, debenture or other evidence of indebtedness or any indenture,
mortgage or deed of trust or any other agreement or instrument to which the
Company or any of the Subsidiaries, is a party or by which it or any of them is
bound, or to which any properties of the Company or any of the Subsidiaries is
or may be subject, except, in the case of clauses (y) and (z) for
violations, conflicts, breaches, defaults, accelerations of obligations or
liens that would not, individually or in the aggregate, have a Material Adverse
Effect.  No material authorization,
approval or consent or order of, or filing, registration or qualification with,
any court or governmental or regulatory body or agency is required in
connection with the transactions contemplated by this Agreement or the
Indenture except as have been made or obtained and except as may be required by
and made with or obtained from state securities laws or regulations, or, with
respect to filing the Final Prospectus with the Commission in accordance with
Rule 424(b) under the Securities Act.

 

(o)  Except as described in the Disclosure
Package and the Final Prospectus, there is no action, suit or proceeding before
or by any court, arbitrator or governmental or regulatory official, agency or
body, domestic or foreign, pending against or affecting the Company or any of
its subsidiaries, or any of their respective properties, that, if determined
adversely, is reasonably expected to affect adversely the issuance of the
Securities or in any manner draw into question the validity of this Agreement,
the Indenture or the Securities or to result, singularly or when aggregated
with other pending actions and actions known to be threatened that are not
described in the Disclosure Package and the Final Prospectus, in a Material
Adverse Effect, or that is reasonably expected to materially and adversely
affect the consummation of this Agreement or the Indenture or the transactions
contemplated hereby or thereby, and to the best of the Company’s knowledge, no
such proceedings are contemplated or threatened.

 

(p)  None of the Company or any of the
Subsidiaries is or after giving effect to the issuance of the Securities will
be (i) in violation of its respective charter, bylaws or other organizational
documents or (ii) in default in the performance of any bond, debenture,
note or any other evidence of indebtedness or any indenture, mortgage, deed of
trust or other contract, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them is bound, or to which
any of the property or assets of the Company or any of the Subsidiaries is
subject, or (iii) in violation of any law or 

 

6

 

statute
or any judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except in the case of clauses (ii) or
(iii) above, for any such default or violation that could not, singularly
or in the aggregate, have a Material Adverse Effect.

 

(q)  KPMG LLP, who have certified certain of
the consolidated financial statements and supporting schedules of the Company
included or incorporated by reference in the Disclosure Package and the Final
Prospectus, are independent public accountants with respect to the Company and
its subsidiaries, as required by the Securities Act.  The consolidated historical statements,
together with related schedules and notes, if any, included or incorporated by
reference in the Disclosure Package and the Final Prospectus comply as to form
in all material respects with the requirements of the Securities Act.  Such historical financial statements fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries at the respective dates indicated and the results
of their operations and their cash flows for the respective periods indicated,
in accordance with generally accepted accounting principles, except as
otherwise expressly stated therein, as consistently applied throughout such
periods.  The other financial and
statistical information and data included in the Disclosure Package and the
Final Prospectus are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.

 

(r)  Each of the Company and the Subsidiaries
has all certificates, consents, exemptions, orders, permits, licenses,
authorizations, or other approvals (each, an “Authorization”) of and from, and
has made all declarations and filings with, all Federal, state, local and other
governmental or regulatory bodies or agencies, and all courts and other
tribunals, necessary or required to own, lease, license and use its properties
and assets and to conduct its business as currently operated in the manner
described in the Disclosure Package and the Final Prospectus, except to the
extent that the failure to obtain or file any such Authorizations would not,
singularly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  All such Authorizations
are in full force and effect with respect to the Company and the Subsidiaries,
and the Company and the Subsidiaries are in compliance in all material respects
with the terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto.

 

(s)  The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
(iii) access to material assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the recorded
accountability for material assets is compared on a periodic basis, which the
Company believes are reasonable intervals, with the existing assets and
appropriate action is taken with respect to any material differences.  The Company and its applicable executive
officers have complied with Rule 13a-14 under the Exchange Act.

 

7

 

(t)  Except as disclosed in the Disclosure
Package and the Final Prospectus, no holder of any security of the Company has
or will have any right to require the registration of such security by virtue
of the offering and sale of the Securities under this Agreement other than
(i) any such right that has been expressly waived in writing and
(ii) any such right in respect of outstanding warrants to purchase shares
of Common Stock of the Company that in the aggregate represent less than 1% of
the shares of Common Stock of the Company outstanding on the date hereof.  No holder of any of the outstanding shares of
capital stock of the Company or any other person is entitled to preemptive or
other rights to subscribe for the Securities.

 

(u)  The Company has not taken nor will it
take, directly or indirectly, any action prohibited by Regulation M under the
Exchange Act, in connection with the offering of the Securities.

 

(v)  Prior to the date hereof, the Company has
furnished to the Representative letters, substantially in the form of
Exhibit E hereto, duly executed by the executive officers and directors of
the Company set forth on Schedule IV hereto and addressed to the
Representative.

 

(w)  The Registration Statement is not the
subject of a pending proceeding or examination under Section 8(d) or
8(e) of the Securities Act, and the Company is not the subject of a
pending proceeding under Section 8A of the Securities Act in connection
with the offering of the Securities.

 

(x)  The operations of the Company and its subsidiaries
are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements in all material respects and
the money laundering statutes and the rules and regulations thereunder and
any related or similar rules, regulations or guidelines, issued, administered
or enforced by any governmental agency (collectively, the “Money Laundering
Laws”) and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened.

 

(y)  None of the Company, any of its
subsidiaries or, to the knowledge of the Company, any director, officer, agent
or employee of the Company or any of its subsidiaries is currently subject to
any sanctions administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”); and the Company will not directly or indirectly
use the proceeds of the offering of the Securities hereunder, or lend,
contribute or otherwise make available such proceeds to any subsidiary, joint
venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered
by OFAC.

 

(z)  Neither the Company nor any of its
subsidiaries nor, to the knowledge of the Company, any director, officer, agent
or employee of the Company or any of its subsidiaries is aware of or has taken
any action, directly or indirectly, that would result in a violation by such
persons of the Foreign Corrupt Practices Act of 1977, as amended, 

 

8

 

and
the rules and regulations thereunder (the “FCPA”), including, without
limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any “foreign
official” (as such term is defined in the FCPA) or any foreign political party
or official thereof or any candidate for foreign political office, in
contravention of the FCPA; and the Company and its subsidiaries have conducted
their businesses in compliance in all material respects with the FCPA and have
instituted and maintain policies and procedures designed to ensure, and which
are reasonably expected to continue to ensure, continued compliance in all
material respects therewith.

 

(aa)  The
Company and its subsidiaries and their respective officers and directors are in
compliance in all material respects with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act,” which term, as used
herein, includes the rules and regulations of the Commission promulgated
thereunder).

 

Any
certificate signed by any officer of the Company and delivered to the
Representative or counsel for the Underwriters in connection with the offering
of the Securities shall be deemed a representation and warranty by the Company,
as to matters covered thereby, to each Underwriter.

 

2.  Purchase and Sale.  (a)  Subject to the terms and conditions
and in reliance upon the representations and warranties set forth herein, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at the purchase price
of 97.25% of the principal amount thereof, plus accrued interest, if any, from
September 20, 2010 to the Closing Date, the principal amount of
Underwritten Securities set forth opposite such Underwriter’s name on
Schedule I hereto.

 

(b) 
Subject to the terms and conditions and in reliance upon the representations
and warranties set forth herein, the Company hereby grants an option to the
several Underwriters to purchase, severally and not jointly, the Option
Securities at the same purchase price as the Underwriters shall pay for the
Underwritten Securities, plus accrued interest, if any, from September 20,
2010 to the settlement date for the Option Securities.  Said option may be exercised only to cover
over-allotments in the sale of the Underwritten Securities by the Underwriters.  Said option may be exercised for 30 days
after the date hereof and may be exercised in whole or in part from time to
time upon written notice by the Representative to the Company setting forth the
principal amount of Option Securities as to which the several Underwriters are
exercising the option and the settlement date. 
Delivery of the Option Securities, and payment therefor, shall be made
as provided in Section 3 hereof. 
The principal amount of Option Securities to be purchased by each
Underwriter shall be the same percentage of the total principal amount of
Option Securities to be purchased by the several Underwriters as such
Underwriter is purchasing of the Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional Securities.

 

3.  Delivery and Payment.  Delivery of and payment for the Underwritten
Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third
Business Day prior to the Closing Date) shall be made at 

 

9

 

10:00 AM, New York City time, on September 20,
2010, or at such time on such later date not more than three Business Days
after the foregoing date as the Representative shall designate, which date and
time may be postponed by agreement between the Representative and the Company
or as provided in Section 9 hereof (such date and time of delivery and
payment for the Securities being herein called the “Closing Date”).  Delivery of the Securities shall be made to
the Representative for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representative of the
purchase price thereof to or upon the order of the Company by wire transfer
payable in same-day funds to an account specified by the Company.  Delivery of the Underwritten Securities and
the Option Securities shall be made through the facilities of The Depository
Trust Company unless the Representative shall otherwise instruct.

 

If
the option provided for in Section 2(b) hereof is exercised after the
third Business Day prior to the Closing Date, the Company will deliver the
Option Securities (at the expense of the Company) to the Representative, at One
Bryant Park, New York, New York, on the date specified by the
Representative (which shall be within three Business Days after exercise of
said option) for the respective accounts of the several Underwriters, against
payment by the several Underwriters through the Representative of the purchase
price thereof to or upon the order of the Company by wire transfer payable in
same-day funds to an account specified by the Company.  If settlement for the Option Securities
occurs after the Closing Date, the Company will deliver to the Representative on
the settlement date for the Option Securities, and the obligation of the
Underwriters to purchase the Option Securities shall be conditioned upon
receipt of, supplemental opinions, certificates and letters confirming as of
such date the opinions, certificates and letters delivered on the Closing Date
pursuant to Section 6 hereof.

 

4.  Offering by Underwriters.  It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set
forth in the Final Prospectus.

 

5.  Agreements.  The Company agrees with the several
Underwriters that:

 

(a)  Prior to the termination of the offering
of the Securities, the Company will not file any amendment of the Registration
Statement or supplement (including the Final Prospectus or any preliminary
prospectus) to the Basic Prospectus unless the Company has furnished you a copy
for your review prior to filing and will not file any such proposed amendment
or supplement to which you reasonably object. 
The Company will cause the Final Prospectus, properly completed, and any
supplement thereto to be filed in a form reasonably approved by the
Representative with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to the Representative of such timely filing.  The Company will promptly advise the
Representative (1) when the Final Prospectus, and any supplement thereto,
shall have been filed (if required) with the Commission pursuant to
Rule 424(b), (2) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been filed
or become effective, (3) of any request by the Commission or its staff for
any amendment of the Registration Statement, or any Rule 462(b) Registration
Statement, or for any supplement to the Final Prospectus or for any additional
information, (4) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution
or 

 

10

 

threatening
of any proceeding for that purpose and (5) of the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the institution or threatening of
any proceeding for such purpose.  The
Company will use its best efforts to prevent the issuance of any such stop
order or the occurrence of any such suspension of the Registration Statement
and, upon such issuance or occurrence, to obtain as soon as possible the
withdrawal of such stop order or relief from such occurrence or prevention,
including, if necessary, by filing an amendment to the Registration Statement
or a new registration statement and using its best efforts to have such
amendment or new registration statement declared effective as soon as
practicable.

 

(b)  The Company will prepare a final term
sheet, containing solely a description of the Securities, in a form approved by
the Underwriters and will file such term sheet pursuant to Rule 433(d) within
the time required by such Rule.

 

(c)  If there occurs an event or development
as a result of which the Disclosure Package would include an untrue statement
of a material fact or would omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances then prevailing,
not misleading, the Company will notify promptly the Representative so that any
use of the Disclosure Package may cease until it is amended or supplemented.

 

(d)  If, at any time when a prospectus
relating to the Securities is required to be delivered under the Securities Act
(including in circumstances where such requirement may be satisfied pursuant to
Rule 172), any event occurs as a result of which the Final Prospectus as
then supplemented would include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein in the
light of the circumstances under which they were made not misleading, or if it
shall be necessary to amend the Registration Statement, file a new registration
statement or supplement the Final Prospectus to comply with the Securities Act
or the Exchange Act or the respective rules thereunder, including in
connection with use or delivery of the Final Prospectus, the Company promptly
will (1) notify the Representative of any such event, (2) prepare and
file with the Commission, subject to the first sentence of paragraph (a) of
this Section 5, an amendment or supplement or new registration statement
which will correct such statement or omission or effect such compliance,
(3) use its reasonable best efforts to have any amendment to the
Registration Statement or new registration statement declared effective as soon
as practicable in order to avoid any disruption in use of the Final Prospectus
and (4) supply any supplemented Final Prospectus to you in such quantities
as you may reasonably request.

 

(e)  As soon as practicable, the Company will
make generally available to its security holders an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158.

 

(f)  The Company will furnish to the
Representative and counsel for the Underwriters, without charge, a conformed
copy of the Registration Statement (including exhibits thereto) and to each
other Underwriter a copy of the Registration Statement 

 

11

 

(without
exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Securities Act (including in circumstances where
such requirement may be satisfied pursuant to Rule 172), as many copies of
each Preliminary Prospectus, the Final Prospectus and each Issuer Free Writing
Prospectus and any supplement thereto as the Representative may reasonably
request.  The Company will pay the
expenses of printing or other production of all such documents.

 

(g)  The Company will cooperate with the
Representative in arranging, at the Company’s cost, for the qualification of
the Securities for sale under the laws of such jurisdictions as the
Representative may designate and will maintain such qualifications in effect so
long as required for the sale of the Securities; provided, however, that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction where it
is not then subject.  The Company
promptly will advise the Representative of the receipt by it of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose.

 

(h)  The Company agrees that, unless it
obtains the prior written consent of the Representative, and each Underwriter,
severally and not jointly, agrees with the Company that, unless it has obtained
or will obtain, as the case may be, the prior written consent of the Company,
it has not made and will not make any offer relating to the Securities that
would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a “free writing prospectus” (as defined in Rule 405) required
to be filed by the Company with the Commission or retained by the Company under
Rule 433, other than the final term sheet prepared and filed pursuant to
Section 5(b) hereto; provided that the prior written consent
of the parties hereto shall be deemed to have been given in respect of the Free
Writing Prospectuses included in Schedule III hereto and any electronic or
graphic road show.  Any such free writing
prospectus consented to by the Representative or the Company is hereinafter
referred to as a “Permitted Free Writing Prospectus.”  The Company agrees that (x) it has
treated and will treat, as the case may be, each Permitted Free Writing
Prospectus as an Issuer Free Writing Prospectus and (y) it has complied
and will comply, as the case may be, with the requirements of Rules 164
and 433 applicable to any Permitted Free Writing Prospectus, including in
respect of timely filing with the Commission, legending and record keeping.

 

(i)  The Company will not for a period of
75 days following the time of execution of this Agreement, without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (“Merrill Lynch”), offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed to
result in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any majority
controlled affiliate of the Company or any person in privity with the Company
or any majority controlled affiliate of the Company) directly or indirectly,
including the filing (or participation in the filing) of a registration
statement with the Commission in respect of, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent position within
the meaning of Section 

 

12

 

16
of the Exchange Act, any shares of capital stock or securities convertible
into, or exchangeable for, shares of capital stock (other than the Securities)
or publicly announce an intention to effect any such transaction, except
for:  (A) Common Stock issued
pursuant to any employee benefit plan, stock ownership or stock option plan or
dividend reinvestment plan in effect at the Applicable Time or options granted
pursuant to any such plan in effect at the Applicable Time, provided that such
options cannot be exercised for any remaining portion of such 75-day period,
(B) Common Stock issued in connection with the exercise of any warrants or
convertible securities outstanding at the Applicable Time, (C) Common
Stock issued to prospective employees in connection with such employees being
hired by the Company or any of its subsidiaries, (D) Common Stock to be
issued after the end of such 75-day period as direct consideration to the
sellers in any acquisition or Common Stock to be issued as direct consideration
during such 75-day period to the sellers in any acquisition with respect to
which the recipients of such Common Stock agree in writing with the
underwriters to be bound by the foregoing restrictions, (E) issuances of
shares of Common Stock and securities convertible into shares of Common Stock,
in either case issued in exchange for outstanding debt securities of the
Company or any of its subsidiaries, provided that the number of such shares of
Common Stock and the number of shares of Common Stock issuable upon conversion
of such convertible securities shall not exceed 50,000,000 shares of Common
Stock in the aggregate, (F) Common Stock sold in connection with the
payment of taxes or exercise prices relating to awards under any employee
benefit plan, stock ownership or stock incentive plan and (G) the
Securities.

 

(j)  The Company will not take, directly or
indirectly, any action designed to or that would constitute or that might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.

 

(k)  The Company will apply the net proceeds
from the sale of the Securities sold by it substantially in accordance with its
statements under the caption “Use of Proceeds” in the Disclosure Package and
the Final Prospectus.

 

(l)  The Company will reserve and keep
available at all times, free of preemptive rights, the full number of shares of
Common Stock issuable upon conversion of the Securities.

 

(m)  Between the Applicable Time and the
Closing Date, the Company will not do or authorize any act or thing that would
result in an adjustment of the Conversion Rate, as defined in the Indenture.

 

13

 

6.  Conditions to the Obligations of the
Underwriters.  The obligations of the
Underwriters to purchase the Underwritten Securities and the Option Securities,
as the case may be, shall be subject to the accuracy of the representations and
warranties on the part of the Company contained herein as of the Applicable
Time, the Closing Date and any settlement date pursuant to Section 3
hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional
conditions:

 

(a)  The Final Prospectus, and any supplement
thereto, shall have been filed in the manner and within the time period
required by Rule 424(b); the final term sheet contemplated by
Section 5(b) hereto, and any other material required to be filed by
the Company pursuant to Rule 433(d) under the Act, shall have been
filed with the Commission within the applicable time periods prescribed for
such filings by Rule 433; and no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or threatened.

 

(b)  The Company shall have requested and
caused Willkie Farr & Gallagher LLP, counsel for the Company, to have
furnished to the Representative their opinion, dated the Closing Date and addressed
to the Representative on behalf of the Underwriters, to the effect of
Exhibit A.

 

(c)  The Company shall have caused Bingham
McCutchen LLP, regulatory counsel for the Company, to have furnished to the
Representative their opinion, dated the Closing Date and addressed to the
Representative on behalf of the Underwriters, to the effect of Exhibit B.

 

(d)  The Company shall have caused internal
counsel for the Company to have furnished to the Representative its opinion as
to Canadian regulatory matters, dated the Closing Date, and addressed to the
Representative on behalf of the Underwriters, to the effect of Exhibit C.

 

(e)  The Company shall have furnished to the
Representative the opinion of Thomas C. Stortz, Executive Vice President,
Chief Legal Officer and Secretary of the Company, or any Assistant General
Counsel of the Company, dated the Closing Date and addressed to the
Representative on behalf of the Underwriters, to the effect of Exhibit D.

 

(f)  The Representative shall have received
from Cravath, Swaine & Moore LLP, counsel for the Underwriters,
such opinion or opinions, dated the Closing Date and addressed to the
Representative on behalf of the Underwriters, with respect to the issuance and
sale of the Securities, the Registration Statement, the Disclosure Package, the
Final Prospectus (together with any supplement thereto) and other related
matters as the Representative may reasonably require, and the Company shall
have furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.

 

(g)  The Company shall have furnished to the
Representative a certificate of the Company, signed by the President and Chief
Executive Officer and the Group Vice 

 

14

 

President
and Chief Financial Officer of the Company, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined the
Registration Statement, the Disclosure Package, the Final Prospectus, any
supplements or amendments thereto and this Agreement and that:

 

(i) 
the representations and warranties of the Company in this Agreement that are
qualified as to materiality are true and correct and all other representations
and warranties of the Company in this Agreement are true and correct in all
material respects on and as of the Closing Date with the same effect as if made
on the Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date;

 

(ii) 
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or, to the
Company’s knowledge, threatened; and

 

(iii) 
since the date of the most recent financial statements included or incorporated
by reference in the Disclosure Package and the Final Prospectus (exclusive of
any supplements thereto), there has not been, singularly or in the aggregate,
any material adverse effect, in the properties, business, results of
operations, financial condition, affairs or business prospects of the Company
and its subsidiaries taken as a whole, whether or not arising from transactions
in the ordinary course of business, except as set forth in or contemplated in
the Disclosure Package and the Final Prospectus (exclusive of any supplement
thereto).

 

(h)  At the time of execution of this
Agreement and at the Closing Date, the Company shall have requested and caused
KPMG LLP to furnish to the Representative letters, dated respectively as of the
time of execution of this Agreement and as of the Closing Date, in form and
substance satisfactory to the Representative, confirming that they are
independent registered accountants within the meaning of the Securities Act and
the Exchange Act and the respective applicable rules and regulations
adopted by the Commission thereunder and that they have performed a review of
the unaudited interim financial information of the Company for the three-month
period ended March 31, 2010 and the six-month period ended June 30,
2010, and as at March 31, 2010 and June 30, 2010, in accordance with
Statement on Auditing Standards No. 100, and stating in effect that:

 

(i) 
in their opinion the audited financial statements and financial statement
schedules included or incorporated by reference in the Registration Statement,
the Preliminary Prospectus and the Final Prospectus and reported on by them
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the related rules and
regulations adopted by the Commission;

 

15

 

(ii) 
on the basis of a reading of the latest unaudited financial statements made
available by the Company and its subsidiaries; their limited review, in
accordance with the standards established under Statement on Auditing Standards
No. 100, of the unaudited interim financial information for the
three-month period ended March 31, 2010 and the six-month period ended
June 30, 2010, and as at March 31, 2010 and June 30, 2010;
carrying out certain specified procedures (but not an examination in accordance
with generally accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such letter;
a reading of the minutes of the meetings of the stockholders, directors and
audit and compensation committees of the Company and the Subsidiaries; and
inquiries of certain officials of the Company who have responsibility for
financial and accounting matters of the Company and its subsidiaries as to
transactions and events subsequent to December 31, 2009, nothing came to
their attention which caused them to believe that:

 

(A)                               any unaudited financial statements included or
incorporated by reference in the Registration Statement, the Preliminary
Prospectus and the Final Prospectus do not comply as to form in all material
respects with applicable accounting requirements of the Securities Act and with
the related rules and regulations adopted by the Commission with respect
to financial statements included or incorporated by reference in quarterly
reports on Form 10-Q under the Exchange Act; and said unaudited financial
statements are not in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements included or incorporated by reference in the Registration Statement,
the Preliminary Prospectus and the Final Prospectus; or

 

(B)                               with respect to the period subsequent to
June 30, 2010, there were any changes, at a specified date not more than
five days prior to the date of the letter, in the long-term debt of the Company
and its subsidiaries or capital stock of the Company or decreases in the
stockholders’ equity of the Company as compared with the amounts shown on the
June 30, 2010 consolidated balance sheet included or incorporated by
reference in the Registration Statement, the Preliminary Prospectus and the
Final Prospectus, or for the period from July 1, 2010 to such specified
date there were any increases, as compared with the corresponding period in the
preceding quarter, in net loss or loss from continuing operations before income
taxes or in total or per share amounts of net income/loss of the Company and
its subsidiaries, except in all instances for changes or increases set forth in
such letter, in which case the letter shall be accompanied by an explanation by
the Company as to the 

 

16

 

significance thereof unless said explanation is not deemed necessary by
the Representative; or

 

(C)                               the information included or incorporated by
reference in the Registration Statement, the Preliminary Prospectus and the
Final Prospectus in response to Regulation S-K, Item 301
(Selected Financial Data), Item 302 (Supplementary Financial
Information) and Item 402 (Executive Compensation) and Item 503(d) (Ratio
of Earnings to Fixed Charges) is not in conformity with the applicable
disclosure requirements of Regulation S-K; and

 

(iii) 
they have performed certain other specified procedures as a result of which
they determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company and its
subsidiaries) set forth in the Registration Statement, the Preliminary
Prospectus and the Final Prospectus and in Exhibit 12 to the Registration
Statement, including the information set forth under the captions “Summary”, “Risk
Factors”, “Use of Proceeds”, “Capitalization”, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, “Business” and “Description
of the Notes” in the Preliminary Prospectus and the Final Prospectus, the
information included or incorporated by reference in Items 1, 2, 6, 7, 11,
12 and 13 of the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2009 incorporated by reference in the Registration
Statement, the Preliminary Prospectus and the Final Prospectus, and the
information included in the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included or incorporated by reference in
the Company’s Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2010 and June 30, 2010 incorporated by reference in the
Registration Statement, the Preliminary Prospectus and the Final Prospectus
agrees with the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation.

 

All
references in this Section 6(h) to the Registration Statement, the
Preliminary Prospectus and the Final Prospectus shall be deemed to include any
amendment or supplement thereto at the date of the applicable letter.

 

(i)  Subsequent to the time of execution of
this Agreement or, if earlier, the dates as of which information is given in
the Registration Statement (exclusive of any amendment thereof), the Disclosure
Package and the Final Prospectus (exclusive of any supplement thereto), there
shall not have been (i) any increase, change or decrease specified in the
letter or letters referred to in paragraph (h) of this Section 6
or (ii) any change, or any development involving a prospective change, in
or affecting the properties, business, results of operations, financial
condition, affairs or business prospects of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or 

 

17

 

contemplated
in the Disclosure Package and the Final Prospectus (exclusive of any supplement
thereto) the effect of which, in any case referred to in clause (i) or
(ii) above, is, in the sole judgment of the Representative, so material
and adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Registration
Statement (exclusive of any amendment thereof), the Disclosure Package and the
Final Prospectus (in each case exclusive of any supplement thereto).

 

(j)  Subsequent to the time of execution of
this Agreement, there shall not have been (i) any decrease in the rating
of any of the Company’s debt securities by Standard & Poor’s Ratings
Service, Moody’s Investors Service, Inc. or Fitch Ratings Ltd. or
(ii) any notice given of any intended or potential decrease in any such
rating or that  Standard & Poor’s
Ratings Service, Moody’s Investors Service, Inc. or Fitch Ratings Ltd. has
under surveillance or review (other than any such notice with positive
implications of a possible upgrading) its rating of the Company’s or any
Subsidiary’s debt securities.

 

(k)  The shares of Common Stock initially
issuable upon conversion of the Securities shall have been listed and admitted
and authorized for trading, subject to official notice of issuance, on the
Nasdaq Global Select Market, and reasonably satisfactory evidence of such
actions shall have been provided to the Representative.

 

(l)  Prior to the Closing Date, the Company
shall have furnished to the Representative such further information,
certificates and documents as the Representative may reasonably request.

 

(m)  The Representative shall have received
the letters referred to in Section 1(w) hereof, and such letters
shall remain in full force and effect at the Closing Date.

 

If
any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or
if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representative and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representative.  Notice of such cancelation shall be given to
the Company in writing or by telephone or facsimile confirmed in writing.

 

The
documents required to be delivered by this Section 6 shall be delivered at
the office of Cravath, Swaine & Moore LLP, counsel for the
Underwriters, at 825 Eighth Avenue, New York,
New York 10019, on the Closing Date.

 

7.  Reimbursement of Underwriters’ Expenses.  If the sale of the Securities provided for
herein is not consummated because any condition to the obligations of the
Underwriters set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, in each case, other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally through Merrill Lynch on demand for all reasonable out-of-pocket
expenses (including 

 

18

 

reasonable fees and disbursements of counsel) that
shall have been incurred by them in connection with the proposed purchase and
sale of the Securities.  Except as
provided in the preceding sentence or elsewhere in this Agreement, the Underwriters
shall be responsible for all costs and expenses incurred by them in connection
with their purchase of the Securities hereunder and the resale of any of the
Securities, including, without limitation, their own out-of-pocket lodging,
meal and other “roadshow” expenses and fees and disbursements of counsel for
the Underwriters and such other “roadshow” expenses as shall be agreed upon by
the Company and the Representative.

 

8.  Indemnification and Contribution.  (a)  The Company agrees to indemnify and
hold harmless each Underwriter, the directors, officers, employees and agents
of each  Underwriter and each person who
controls any Underwriter within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement for the registration of the Securities as
originally filed or in any amendment thereof, or in the Basic Prospectus, any
preliminary prospectus (including the Preliminary Prospectus), the Final
Prospectus, the Disclosure Package, any Issuer Free Writing Prospectus or the
information contained in the final term sheet prepared and filed pursuant to Section 5(b) hereof,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter through the
Representative specifically for inclusion therein.  This indemnity agreement will be in addition
to any liability which the Company may otherwise have.

 

(b)  Each
Underwriter severally and not jointly agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signs the Registration
Statement, and each person who controls the Company within the meaning of
either the Securities Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to the
Company by or on behalf of such Underwriter through the Representative
specifically for inclusion in the documents referred to in the foregoing
indemnity.  This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have.  The Company acknowledges that (i) the
list of Underwriters and their respective participation in the sale of the
Securities, (ii) the sentences related to concessions and discounts,
(iii) the paragraphs related to stabilization and syndicate covering
transactions, (iv) the representations relating to offerings in the
European Union, including the United Kingdom, and (v) the paragraph
related to electronic distributions of the prospectus supplement under the
heading “Underwriting” in the Preliminary Prospectus and the Final Prospectus,
constitute the 

 

19

 

only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Final Prospectus.

 

(c) 
Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph  (a) or (b) above.  The indemnifying party shall be entitled to
appoint counsel of the indemnifying party’s choice at the indemnifying party’s
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to the indemnified
party.  Notwithstanding the indemnifying
party’s election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the expense of
the indemnifying party.  An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding and does not include a statement as to, or an admission of,
fault, culpability or a failure to act by or on behalf of an indemnified
party.  It is understood, however, that
the Company shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of only one separate firm of attorneys (in addition to any
local counsel) at any time for all such Underwriters and controlling persons,
which firm shall be designated in writing by Merrill Lynch.  An indemnifying party shall not be liable
under this Section 8 to any indemnified party regarding any settlement or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such 

 

20

 

claim or action) unless
such settlement, compromise or consent is consented to by such indemnifying
party, which consent shall not be unreasonably withheld.

 

(d) 
In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters severally
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively “Losses”) to which the Company
and one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by the Underwriters on the other from the offering of the Securities; provided, however,
that in no case shall any Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the  Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. 
If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Underwriters severally shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand
and of the Underwriters on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations.  Benefits received by the
Company  shall be deemed to be equal to
the total net proceeds from the offering of the Securities (before deducting
expenses) received by it, and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Final Prospectus.  Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information provided by the Company on the one hand or
the Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission.  The
Company  and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. 
Notwithstanding the provisions of this paragraph (d), 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.  For purposes of this Section 8, each
person who controls an Underwriter within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such Underwriter, and
each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).

 

9.  Default by an Underwriter.  If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the Representative shall have the right, within 24 hours thereafter,
to make arrangements for one or more of the non-defaulting Underwriters, or any
other underwriters, to purchase all, but not less than all, of the Securities
which the 

 

21

 

defaulting Underwriter or Underwriters agreed but
failed to purchase, in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the Representative shall not have completed such
arrangements within such 24 hour period, then the remaining Underwriters shall
be obligated severally to take up and pay for (in the respective proportions
which the amount of Securities set forth opposite their names in
Schedule I hereto bears to the aggregate amount of Securities set forth
opposite the names of all the remaining Underwriters) the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however,
that in the event that the aggregate amount of Securities which the defaulting
Underwriter or  Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate amount of  Securities set forth in Schedule I
hereto, the remaining Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the Securities, and if
such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company, except as provided in Section 11 hereof.  In the event of a default by any Underwriter
as set forth in this Section 9, the Closing Date shall be postponed for
such period, not exceeding seven Business Days, as the Representative shall
determine in order that the required changes in the Registration Statement and
the Final Prospectus or in any other documents or arrangements may be
effected.  Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company and any nondefaulting Underwriter for damages occasioned by its
default hereunder.

 

10.  Termination.  This Agreement shall be subject to
termination in the absolute discretion of the Representative, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in any of the Company’s securities
shall have been suspended by the Commission or the Nasdaq Global Select Market
or trading in securities generally on the New York Stock Exchange or the Nasdaq
Global Select Market shall have been suspended or limited or minimum prices
shall have been established on such Exchange or the Nasdaq Global Select
Market, (ii) a banking moratorium shall have been declared either by Federal
or New York State authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of which on
financial markets is such as to make it, in the sole judgment of the
Representative, impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Prospectus (exclusive
of any supplement thereto).

 

11.  Representations and Indemnities to
Survive.  The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter or the Company or any of the officers,
directors, employees, agents or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment for the
Securities.  The provisions of
Sections 7, 8 and 14 hereof shall survive the termination or cancelation
of this Agreement.

 

12.  Notices.  All communications hereunder will be in
writing and effective only on receipt, and, if sent to the Underwriters, will
be mailed, delivered or sent by fax and confirmed to them, care of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, at One Bryant Park, New
York, New York 10036, attention of Syndicate Department, with a copy to ECM 

 

22

 

Legal; or, if sent to the Company, will be mailed,
delivered or sent by fax and confirmed to it at 1025 Eldorado Boulevard,
Broomfield, Colorado 80021, attention: General Counsel.

 

13.  Successors.  This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.

 

14.  No Advisory or Fiduciary Relationship.  The Company acknowledges and agrees that (a) the
purchase and sale of the Securities pursuant to this Agreement, including the
determination of the public offering price of the Securities and any related
discounts and commissions, is an arm’s-length commercial transaction between
the Company, on the one hand, and the several Underwriters, on the other hand, (b) in
connection with the offering contemplated hereby and the process leading to
such transaction each Underwriter is and has been acting solely as a principal
and is not the agent or fiduciary of the Company, or its stockholders,
creditors, employees or any other party, (c) no Underwriter has assumed or
will assume an advisory or fiduciary responsibility in favor of the Company
with respect to the offering contemplated hereby or the process leading thereto
(irrespective of whether such Underwriter has advised or is currently advising
the Company on other matters) and no Underwriter has any obligation to the
Company with respect to the offering contemplated hereby except the obligations
expressly set forth in this Agreement, (d) the Underwriters and their
respective affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Company, and (e) the
Underwriters have not provided any legal, accounting, regulatory or tax advice
with respect to the offering contemplated hereby and the Company has consulted
its own legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate.

 

15.  Integration.  This Agreement supersedes all prior
agreements and understandings (whether written or oral) between the Company and
the Underwriters, or any of them, with respect to the subject matter hereof.

 

16.  Applicable Law.  This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York (without
regard to the conflict of law provisions thereof).

 

17.  Counterparts.  This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

 

18.  Headings.  The section headings used herein are for
convenience only and shall not affect the construction hereof.

 

19.  Definitions.  The terms which follow, when used in this
Agreement, shall have the meanings indicated.

 

“Applicable Time” shall mean 9:00 PM (New York City time) on the date
of this Agreement or such other time as agreed by the Company and the
Representative.

 

23

 

“Basic Prospectus” shall mean the prospectus referred to in
Section 1(a) above contained in the Registration Statement at the
Effective Date.

 

“Business Day” shall mean any day other than a Saturday, a Sunday
or a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in New York City.

 

“Commission” shall mean the Securities and Exchange Commission.

 

“Disclosure Package” shall mean (i) the Preliminary Prospectus, as
amended and supplemented to the Applicable Time, (ii) the Issuer Free
Writing Prospectus identified in Schedule III hereto and (iii) any other
Free Writing Prospectus that the parties hereto shall hereafter expressly agree
in writing to treat as part of the Disclosure Package.

 

“Effective Date” shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto became or become
effective.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

 

“Final Prospectus” shall mean the prospectus supplement relating to the
Securities that was first filed pursuant to Rule 424(b) after the
time of execution of this Agreement, together with the Basic Prospectus.

 

“Free Writing Prospectus” shall mean a free writing prospectus, as
defined in Rule 405.

 

“Issuer Free Writing Prospectus” shall mean an issuer free writing
prospectus, as defined in Rule 433.

 

“Preliminary Prospectus” shall mean the most recent preliminary
prospectus supplement to the Basic Prospectus which is used prior to the filing
of the Final Prospectus, together with the Basic Prospectus.

 

“Registration Statement” shall mean the Registration Statement referred
to in Section 1(a) above, including exhibits and financial statements
and any prospectus supplement relating to the Securities that is filed with the
Commission pursuant to Rule 424(b) and deemed part of such registration
statement pursuant to Rule 430B, as amended on each Effective Date and, in
the event any post-effective amendment thereto becomes effective prior to the
Closing Date, shall also mean such Registration Statement as so amended.

 

“Rule 158”, “Rule 164”, “Rule 172”, “Rule 405”, “Rule 415”,
“Rule 424”, “Rule 430B”, “Rule 433” and “Rule 503” refer to
such rules under the Securities Act.

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.

 

24

 

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

 

25

 

If
the foregoing is in accordance with your understanding of our agreement, please
sign and return to us the enclosed duplicate hereof, whereupon this letter and
your acceptance shall represent a binding agreement among the Company and the
several Underwriters.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEVEL
  3 COMMUNICATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Sunit Patel

  
	
   

  	
   

  	
  Name:
  Sunit Patel

  
	
   

  	
   

  	
  Title:
  EVP & CFO

  

 

 

CONFIRMED
AND ACCEPTED,

as
of the date first above written:

 

 

MERRILL
LYNCH, PIERCE, FENNER & SMITH

                              INCORPORATED

 

 

	
  By:

  	
  /s/
  Mark Bush

  	
   

  
	
   

  	
  Name:
  Mark Bush

  	
   

  
	
   

  	
  Title: Managing Director

  	
   

  

 

For
themselves and as Representative of the other Underwriters named in Schedule I
hereto.

 

 

SCHEDULE I

 

	
  Underwriters

  	
   

  	
  Principal Amount of

  Underwritten Securities

  to be Purchased

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Merrill Lynch, Pierce, Fenner & Smith
  Incorporated

  	
   

  	
  $

  	
  61,250,000

  	
   

  
	
  Citigroup Global Markets Inc.

  	
   

  	
  $

  	
  52,500,000

  	
   

  
	
  Morgan Stanley & Co. Incorporated

  	
   

  	
  $

  	
  35,000,000

  	
   

  
	
  Deutsche Bank Securities Inc.

  	
   

  	
  $

  	
  17,500,000

  	
   

  
	
  Wells Fargo Securities, LLC

  	
   

  	
  $

  	
  8,750,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  175,000,000

  	
   

  

 

 

SCHEDULE
II

 

Subsidiaries

 

Level
3 Financing, Inc.

Level
3 Communications, LLC

Broadwing,
LLC

TelCove
Operations, LLC

WilTel
Communications, LLC

Broadwing
Communications, LLC

BTE
Equipment, LLC

Level
3 International, Inc.

Level
3 Holdings, B.V.

Level
3 Communications Limited (UK)

Level
3 Communications GmbH (Germany)

Level
3 Holdings, Inc.

KCP, Inc.

 

 

SCHEDULE
III

 

Pricing
Supplement dated September 14, 2010 (attached)

 

 

Filed pursuant to Rule 433

Free Writing Prospectus dated September 14, 2010

Registration Statement No. 333-154976

 

LEVEL 3 COMMUNICATIONS, INC.

Pricing Term Sheet — September 14, 2010

$175,000,000 6.5% Convertible Senior Notes due 2016

 

The
following information, filed pursuant to Rule 433, supplements the
Preliminary Prospectus Supplement dated September 13, 2010, to the
accompanying Prospectus dated November 4, 2008, filed as part of
Registration Statement No. 333-154976.

 

	
  Issuer:

  	
   

  	
  Level
  3 Communications, Inc. (the “Issuer”)

  
	
   

  	
   

  	
   

  
	
  Title
  of Securities:

  	
   

  	
  6.5%
  Convertible Senior Notes due 2016 (the “Notes”)

  
	
   

  	
   

  	
   

  
	
  Face
  (Principal Amount):

  	
   

  	
  $175,000,000

  
	
   

  	
   

  	
   

  
	
  Over-allotment
  Option:

  	
   

  	
  $26,250,000

  
	
   

  	
   

  	
   

  
	
  Gross
  Proceeds:

  	
   

  	
  $175,000,000

  
	
   

  	
   

  	
   

  
	
  Net
  Proceeds (before expenses):

  	
   

  	
  $170,187,500

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  October 1,
  2016, unless earlier converted or repurchased

  
	
   

  	
   

  	
   

  
	
  Offer
  Price:

  	
   

  	
  100%,
  plus accrued interest, if any, from September 20, 2010

  
	
   

  	
   

  	
   

  
	
  Coupon:

  	
   

  	
  6.5%

  
	
   

  	
   

  	
   

  
	
  Interest
  Payment Dates:

  	
   

  	
  April 1
  and October 1

  
	
   

  	
   

  	
   

  
	
  First
  Interest Payment Date:

  	
   

  	
  April 1,
  2011

  
	
   

  	
   

  	
   

  
	
  Reference
  Price:

  	
   

  	
  $0.95,
  the last reported sale price for the Issuer’s common stock on the Nasdaq
  Global Select Market on September 14, 2010

  
	
   

  	
   

  	
   

  
	
  Conversion
  Premium:

  	
   

  	
  Approximately
  30.0% over the Reference Price

  
	
   

  	
   

  	
   

  
	
  Initial
  Conversion Price:

  	
   

  	
  Approximately
  $1.235 per share of common stock, subject to adjustment

  
	
   

  	
   

  	
   

  
	
  Initial
  Conversion Rate:

  	
   

  	
  809.7166
  shares of common stock per $1,000 principal amount of Notes, subject to
  adjustment

  
	
   

  	
   

  	
   

  
	
  Trade
  Date:

  	
   

  	
  September 14,
  2010

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
  September 20,
  2010

  
	
   

  	
   

  	
   

  
	
  CUSIP/ISIN
  Numbers:

  	
   

  	
  52729N
  BR0 / US52729NBR08

  
	
   

  	
   

  	
   

  
	
  Sole
  Bookrunning Manager:

  	
   

  	
  Merrill
  Lynch, Pierce, Fenner & Smith Incorporated

  
	
   

  	
   

  	
   

  
	
  Lead
  Manager:

  	
   

  	
  Citigroup
  Global Markets Inc.

  
	
   

  	
   

  	
   

  
	
  Co-Managers:

  	
   

  	
  Deutsche
  Bank Securities Inc. 

  Morgan Stanley & Co. Incorporated 

  Wells Fargo Securities, LLC

  

 

 

	
  Redemption
  at the Option of the Issuer:

  	
   

  	
  After
  October 1, 2013, the Issuer may redeem the Notes, in whole or in part,
  at its option at any time or from time to time at a redemption price equal to
  100% of the principal amount of the Notes being redeemed, plus accrued and
  unpaid interest thereon (if any) to, but excluding, the applicable redemption
  date if the closing sale price of the Issuer’s common stock has exceeded 150%
  of the then effective conversion price (calculated by dividing $1,000 by the
  then applicable conversion rate) for at least 20 trading days in any
  consecutive 30-day trading period ended on the trading day prior to the
  mailing of the notice of redemption.

  
	
   

  	
   

  	
   

  
	
  Adjustment
  to Shares Delivered upon Conversion in Connection with a Make-Whole Premium
  Upon a Change in Control:

  	
   

  	
  The
  following table sets forth the adjustments to the conversion rate, expressed
  as a number of additional shares to be received per $1,000 in principal
  amount of the Notes, in connection with a make-whole premium upon a change in
  control (as defined in the Preliminary Prospectus Supplement):

  

 

	
  Stock Price

  on 

  	
   

  	
  Effective Date

  	
   

  
	
  Effective

  Date

  	
   

  	
  September

  20, 2010

  	
   

  	
  October 1,

  2011

  	
   

  	
  October 1,

  2012

  	
   

  	
  October 1,

  2013

  	
   

  	
  October 1,

  2014

  	
   

  	
  October 1,

  2015

  	
   

  	
  October 1,

  2016

  	
   

  
	
  $0.95

  	
   

  	
  242.9149

  	
   

  	
  242.9149

  	
   

  	
  242.9149

  	
   

  	
  242.9149

  	
   

  	
  242.9149

  	
   

  	
  242.9149

  	
   

  	
  242.9149

  	
   

  
	
  $1.10

  	
   

  	
  204.4138

  	
   

  	
  189.9607

  	
   

  	
  175.3535

  	
   

  	
  170.1801

  	
   

  	
  168.8946

  	
   

  	
  151.4651

  	
   

  	
  99.3743

  	
   

  
	
  $1.25

  	
   

  	
  165.8749

  	
   

  	
  148.8118

  	
   

  	
  129.1106

  	
   

  	
  115.7064

  	
   

  	
  113.0509

  	
   

  	
  95.4003

  	
   

  	
  0.0000

  	
   

  
	
  $1.50

  	
   

  	
  123.1259

  	
   

  	
  104.8860

  	
   

  	
  81.0359

  	
   

  	
  53.7197

  	
   

  	
  51.4139

  	
   

  	
  40.2717

  	
   

  	
  0.0000

  	
   

  
	
  $1.75

  	
   

  	
  95.8216

  	
   

  	
  78.2801

  	
   

  	
  54.2374

  	
   

  	
  14.5311

  	
   

  	
  13.1628

  	
   

  	
  9.7654

  	
   

  	
  0.0000

  	
   

  
	
  $2.00

  	
   

  	
  77.1272

  	
   

  	
  60.2703

  	
   

  	
  37.2919

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $2.25

  	
   

  	
  64.2107

  	
   

  	
  48.8934

  	
   

  	
  28.2658

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $2.50

  	
   

  	
  54.6272

  	
   

  	
  40.8452

  	
   

  	
  22.6452

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $2.75

  	
   

  	
  47.2700

  	
   

  	
  34.9219

  	
   

  	
  18.9416

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $3.00

  	
   

  	
  41.5524

  	
   

  	
  30.4659

  	
   

  	
  16.3827

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $3.50

  	
   

  	
  33.0640

  	
   

  	
  24.1040

  	
   

  	
  12.9784

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $4.00

  	
   

  	
  27.0441

  	
   

  	
  19.7154

  	
   

  	
  10.7101

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $4.50

  	
   

  	
  22.5249

  	
   

  	
  16.4659

  	
   

  	
  9.0346

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  $5.00

  	
   

  	
  19.0222

  	
   

  	
  13.9449

  	
   

  	
  7.7225

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  

 

The
exact stock prices and effective dates may not be set forth in the table above,
in which case:

 

·                  If the stock price is between two stock
prices in the table or the actual effective date is between two effective dates
in the table, the amount of the conversion rate adjustment will be determined
by a straight-line interpolation between the adjustment amounts set forth for
such two stock prices or such two effective dates on the table based on a
360-day year, as applicable.

 

·                  If the stock price is greater than $5.00 per
share, subject to adjustment as of any date on which the conversion rate of the
notes is otherwise adjusted, no adjustment in the applicable conversion rate
will be made.

 

·                  If the stock price is less than $0.95 per
share, subject to adjustment as of any date on which the conversion rate of the
notes is otherwise adjusted, no adjustment in the applicable conversion rate
will be made.

 

 

Notwithstanding
the foregoing, in no event will the conversion rate exceed 1052.6315 shares of
common stock per $1,000 in principal amount of Notes, which maximum amount is
subject to adjustments in the same manner as the conversion rate as set forth
under “—Conversion Rights” in the Preliminary Prospectus Supplement.

 

Affiliates
of other underwriters have been, and may from time to time continue to be,
lenders under the Credit Agreement, and an affiliate of Wells Fargo Securities,
LLC, Wells Fargo Shareowner Services, is the transfer agent and registrar for
our common stock.

 

The
Issuer has previously filed a registration statement (including a prospectus
and the related preliminary prospectus supplement) on Form S-3 with the
Securities and Exchange Commission (the “SEC”) for the offering to which this
communication relates, which registration statement became effective on November 4,
2008.  Before you invest, you should read
the preliminary prospectus supplement to the prospectus in that registration
statement, the prospectus and the other documents the Issuer has filed with the
SEC for more complete information about the Issuer and this offering. You may
get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. 
Alternatively, a copy of the prospectus supplement and the prospectus
relating to this offering may also be obtained by calling BofA Merrill Lynch at
866-500-5408.

 

 

SCHEDULE IV

 

Walter Scott, Jr.

James Q. Crowe

Charles C. Miller, III

Sunit S. Patel

Jeff K. Storey

 

 

EXHIBIT A

 

Opinion of

Willkie Farr & Gallagher LLP

Counsel for the Company

 

1.     Each of the Company and
Level 3 Communications, LLC has been duly incorporated or formed and is validly
existing as a corporation or limited liability company in good standing under
the laws of the jurisdiction of its incorporation or formation, and has the requisite
power and authority to carry on its business and own its properties as
currently being conducted as described in the Disclosure Package and the Final
Prospectus.

 

2.     To such counsel’s
knowledge, all the outstanding equity interests of Level 3 Communications, LLC
have been duly and validly authorized and are duly issued and are fully paid
and nonassessable, and except as otherwise set forth in the Disclosure Package
and the Final Prospectus, all outstanding equity interests of Level 3
Communications, LLC are owned by the Company either directly or through wholly
owned subsidiaries, to the knowledge of such counsel, free and clear of any
agreement providing for a security interest in such equity interests to secure
any obligation and any stockholders’ agreements, voting trusts, claims or other
encumbrances (other than the pledge of the equity interests of Level 3
Communications, LLC pursuant to the agreements the Company and certain of its
subsidiaries have entered into in connection with the senior secured term loan
described in the Disclosure Package and the Final Prospectus).

 

3.     (i) To the knowledge
of such counsel, there is no pending or threatened action, suit or proceeding
by or before any court or governmental or regulatory agency, authority or body
or any arbitrator involving the Company or any of its Subsidiaries listed on
Annex I to this opinion letter or its or their property of a character required
to be disclosed in the Registration Statement which is not adequately disclosed
or incorporated by reference in the Disclosure Package and the Final
Prospectus, and (ii) to the knowledge of such counsel, there is no
contract or other document of a character required to be described in the
Registration Statement, the Preliminary Prospectus or the Final Prospectus, or
to be filed as an exhibit thereto, which is not described or filed as required;
and (iii) the statements included in the Preliminary Prospectus and the
Final Prospectus under the headings “Description of the Notes” and “Description
of Capital Stock,” insofar as such sections summarize the terms of the
Securities, the Common Stock and the Indenture, and under the heading “Material
U.S. Federal Tax Considerations,” insofar as such section summarizes matters of
law, fairly summarize in all material respects the matters therein described.

 

4.     The Registration Statement
has become effective under the Securities Act; any required filing of the Basic
Prospectus, any Preliminary Prospectus and the Final Prospectus and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that purpose have
been instituted or threatened and the Registration Statement, the Preliminary
Prospectus and the Final Prospectus (other than the financial statements and
related schedules and other financial information contained therein or omitted
therefrom, as to which such counsel need 

 

 

express
no opinion) appear on their face to comply as to form in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and
the respective rules thereunder.

 

5.     The Company is not and,
after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Final Prospectus, will
not be an “investment company” as defined in the Investment Company Act of
1940, as amended.

 

6.     To the knowledge of such
counsel, no material consent, approval, authorization, license, certificate,
permit or order of any court or governmental agency or body is required for the
execution, delivery and performance of this Agreement and the Securities or for
the consummation of the transactions contemplated hereby or thereby, except
such as may be required by the Federal Communications Commission or similar
state regulatory authorities or under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters (as to which such counsel need not opine) and such other approvals
(to be specified in such opinion) as have been obtained.

 

7.     Neither the execution and
delivery of this Agreement or the Indenture, the issue and sale of the
Securities, nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms thereof including the issuance of
Common Stock upon conversion of the Securities, will conflict with, result in a
breach of, or constitute a default under the (x) certificate of
incorporation, by-laws or other organizational documents of the Company or of
any Subsidiary, (y) the terms of any agreement or instrument listed on
Annex II hereto, or (z) any judgment, order or regulation known to
such counsel to be applicable to the Company or any of its Subsidiaries of any
court, regulatory body, administrative agency, governmental agency, authority
or body or arbitrator having jurisdiction over the Company or any of its
Subsidiaries, except orders or regulations of the Federal Communications
Commission or similar state regulatory authorities or regulations of any state
securities commission (as to which such counsel need not opine), except, in the
case of clauses (y) and (z) for breaches or defaults that would
not, individually or in the aggregate, have a Material Adverse Effect.

 

8.     To the knowledge of such
counsel, no holders of securities of the Company have rights to the
registration of such securities in connection with or as a result of the
offering and sale of the Securities under this Agreement.

 

9.     The Company’s actual
authorized equity capitalization is as set forth in the Disclosure Package and
the Final Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Disclosure Package and the
Final Prospectus; the shares of Common Stock initially issuable upon conversion
of the Securities have been duly and validly authorized, and, when issued upon
conversion in accordance with the terms of the Indenture, will be validly
issued, fully paid and nonassessable; the Board of Directors of the Company or
a duly constituted committee thereof has duly and validly adopted resolutions
reserving such shares of Common Stock for issuance upon conversion; and the
holders of outstanding shares of capital stock of the Company are not entitled
to preemptive or other rights to subscribe for the Securities under the
certificate of incorporation and by-laws of the Company and the General
Corporation Law of the State of Delaware.

 

2

 

10.   The Securities have been
duly authorized and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Underwriters
in accordance with the terms of this Agreement, will constitute valid and
legally binding obligations of the Company entitled to the benefits of the
Indenture, subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

 

11.   The Indenture has been duly
authorized, executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles;
and the Indenture has been duly qualified under the Trust Indenture Act.

 

12.   The Company has full
corporate right, power and authority to execute and deliver this Agreement and
the Supplemental Indenture and to perform its obligations hereunder or
thereunder, including the issuance of the Securities; as of the date of its
execution, the Company had full corporate right, power and authority to execute
and deliver the Base Indenture and to perform its obligations thereunder,
including the issuance of the Securities; and all corporate action required to
be taken by the Company for the due and proper authorization, execution and
delivery of this Agreement and the Indenture and for the consummation of the
transactions contemplated hereby or thereby has been duly and validly taken.

 

13.   This Agreement has been duly
authorized, validly executed and delivered by the Company.

 

In
addition, such counsel shall state that they have participated in conferences
with representatives of the Company, the Underwriters and their counsel, at
which conferences the contents of the Disclosure Package and the Final
Prospectus were discussed, and, although, except as otherwise described in
paragraph 3(iii) above, such counsel has not independently checked or
verified and does not pass upon and assumes no responsibility for the factual
accuracy, completeness or fairness of the statements contained in the
Registration Statement, the Disclosure Package or the Final Prospectus, no
facts have come to such counsel’s attention to cause them to believe that
(i) at the Applicable Time the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) at the Applicable Time the Disclosure Package contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading or (iii) the Final Prospectus as of
its date or as of the Closing Date included or includes any untrue statement of
a material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and with respect to clauses (i), (ii) and (iii), in
each case, other than the financial statements and related schedules and other
financial information contained therein or omitted therefrom and other than the
sections entitled “Risk Factors—We are subject to significant regulation that
could change in an adverse manner,” “—The laws in certain countries currently
do not permit us to offer services directly in those countries” and “—

 

3

 

Potential
regulation of Internet service providers in the United States could adversely
affect our operations,” “Business—Regulation” included in the Final Prospectus
and comparable sections in the Company’s Exchange Act reports incorporated in
the Preliminary Prospectus and the Final Prospectus by reference, as to which
such counsel need not express a view).

 

Such
opinion may be limited to the laws of the State of New York, the Federal laws
of the United States of America and the General Corporation Law and the Limited
Liability Company Act of the State of Delaware.

 

All
references in this Exhibit A to the Final Prospectus shall be deemed to
include any amendment or supplement thereto at the Closing Date.  The opinion of such counsel shall be rendered
to the Underwriters at the request of the Company and shall so state.

 

4

 

ANNEX I TO EXHIBIT A

 

Subsidiaries

 

Level
3 Financing, Inc.

Level
3 Communications, LLC

Broadwing,
LLC

TelCove
Operations, LLC

WilTel
Communications, LLC

Broadwing
Communications, LLC

BTE
Equipment, LLC

Level
3 International, Inc.

Level
3 Holdings, Inc.

KCP, Inc.

 

 

 

ANNEX II TO EXHIBIT A

 

1.                                       Amendment
Agreement, dated as of April 16, 2009 among Level 3 Communications, Inc.,
Level 3 Financing, Inc., the lenders party thereto and Merrill Lynch
Capital Corporation, as agent.

 

2.                                       Credit
Agreement, dated as of March 13, 2007, as amended and restated as of April 16,
2009 in the form attached to the Amendment Agreement, among Level 3
Communications, Inc., Level 3 Financing, Inc., the lenders party
thereto and Merrill Lynch Capital Corporation, as agent.

 

3.                                       First
Amendment, dated as of May 15, 2009, to the Amended and Restated Credit
Agreement dated as of April 16, 2009.

 

4.                                       Amended and
Restated Indenture, dated as of July 8, 2003, between Level 3
Communications, Inc. and The Bank of New York, as trustee.

 

5.                                       First
Supplemental Indenture, dated as of July 8, 2003, between Level 3
Communications, Inc. and The Bank of New York, as trustee.

 

6.                                       First
Supplemental Indenture, dated as of September 20, 1999, between Level 3
Communications, Inc. and IBJ Whitehall Bank & Trust Company, as
trustee.

 

7.                                       Second
Supplemental Indenture, dated as of February 29, 2000, between Level 3
Communications, Inc. and The Bank of New York (as successor to IBJ
Whitehall Bank & Trust Company), as trustee.

 

8.                                       Supplemental
Indenture, dated as of October 20, 2004 among Level 3 Financing, Inc.,
Level 3 Communications, LLC and The Bank of New York, as trustee.

 

9.                                       Indenture,
dated as of October 24, 2003 among Level 3 Communications, Inc. and
The Bank of New York, as trustee.

 

10.                                 First
Supplemental Indenture, dated as of February 7, 2005, by and between Level
3 Communications, Inc. and The Bank of New York, as trustee.

 

11.                                 Indenture,
dated as of December 2, 2004, between Level 3 Communications, Inc.
and The Bank of New York, as trustee.

 

12.                                 Supplemental
Indenture, dated December 1, 2004, among Level 3 Financing, Inc.,
Level 3 Communications, Inc., Level 3 Communications, LLC and The Bank of
New York, as trustee.

 

13.                                 Second
Supplemental Indenture, dated as of April 4, 2005, by and between Level 3
Communications, Inc. and The Bank of New York, as trustee.

 

 

14.                                 Third
Supplemental Indenture, dated as of June 13, 2006, between Level 3
Communications, Inc. and The Bank of New York, as trustee, relating to
Level 3 Communications, Inc.’s 3.5% Convertible Senior Notes due 2012.

 

15.                                 Indenture,
dated as of October 30, 2006, among Level 3 Communications, Inc.,
Level 3 Financing, Inc., and The Bank of New York, as trustee, relating to
Level 3 Financing, Inc.’s 9.25% Senior Notes due 2014.

 

16.                                 Supplemental
Indenture, dated as of January 4, 2007, among Broadwing Financial Services, Inc.,
Level 3 Communications, Inc., Level 3 Financing, Inc. and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s 9.25% Senior
Notes Due 2014.

 

17.                                 Indenture,
dated as of February 14, 2007, among Level 3 Communications, Inc.,
Level 3 Financing, Inc. and The Bank of New York, as trustee, relating to
Level 3 Financing, Inc.’s Floating Rate Senior Notes due 2015.

 

18.                                 Indenture,
dated as of February 14, 2007, among Level 3 Communications, Inc.,
Level 3 Financing, Inc. and The Bank of New York, as trustee, relating to
Level 3 Financing, Inc.’s 8.75% Senior Notes due 2017.

 

19.                                 Amended and
Restated Supplemental Indenture, dated as of March 13, 2007, among Level 3
Financing, Inc., Level 3 Communications, Inc., Broadwing Financial
Services, Inc. and The Bank of New York, as trustee, relating to Level 3
Financing, Inc.’s 9.25% Senior Notes Due 2014.

 

20.                                 Supplemental
Indenture, dated as of April 9, 2007, among Level 3 Communications, LLC,
Level 3 Communications, Inc., Level 3 Financing, Inc. and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s 9.25% Senior
Notes Due 2014.

 

21.                                 Supplemental
Indenture, dated as of April 9, 2007, among Level 3 Financing, Inc.,
Level 3 Communications, Inc., Level 3 Communications, LLC and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s 9.25% Senior
Notes Due 2014.

 

22.                                 Supplemental
Indenture, dated as of May 29, 2007, among Level 3 Communications, LLC,
Level 3 Communications, Inc., Level 3 Financing, Inc. and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s 8.75% Senior
Notes Due 2017.

 

23.                                 Supplemental
Indenture, dated as of May 29, 2007, among Level 3 Financing, Inc.,
Level 3 Communications, Inc., Level 3 Communications, LLC and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s 8.75% Senior
Notes Due 2017.

 

24.                                 Supplemental
Indenture, dated as of May 29, 2007, among Level 3 Communications, LLC,
Level 3 Communications, Inc., Level 3 Financing, Inc. and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s Floating Rate
Senior Notes Due 2015.

 

25.                                 Supplemental
Indenture, dated as of May 29, 2007, among Level 3 Financing, Inc.,
Level 3 Communications, Inc., Level 3 Communications, LLC and The Bank of
New York, as trustee, relating to Level 3 Financing, Inc.’s Floating Rate
Senior Notes Due 2015.

 

2

 

26.                                 Indenture,
dated as of December 24, 2008, among Level 3 Communications, Inc. and
The Bank of New York, as trustee.

 

27.                                 First
Supplemental Indenture, dated as of December 24, 2008, among Level 3
Communications, Inc. and The Bank of New York Mellon, as trustee, relating
to Level 3 Communications, Inc.’s 15% Convertible Senior Notes Due 2013.

 

28.                                 Indenture,
dated as of June 26, 2009, among Level 3 Communications, Inc. and The
Bank of New York, as trustee, relating to Level 3 Financing, Inc.’s 7%
Convertible Senior Notes Due 2015.

 

29.                                 Guarantee
Agreement, dated as of March 13, 2007, as supplemented, among Level 3
Communications, Inc., the Subsidiaries party thereto and Merrill Lynch
Capital Corporation.

 

30.                                 Collateral
Agreement, dated as of March 13, 2007, as supplemented, among Level 3
Financing Inc., Level 3 Communications, Inc., the Subsidiaries party
thereto and Merrill Lynch Capital Corporation.

 

31.                                 Indemnity,
Subrogation and Contribution Agreement, dated as of March 13, 2007, as
supplemented, among Level 3 Communications, Inc., Level 3 Financing, Inc.,
the Subsidiaries party thereto and Merrill Lynch Capital Corporation.

 

32.                                 Omnibus
Offering Proceeds Note Subordination Agreement, dated as of March 13,
2007, among Level 3 Communications, Inc., Level 3 Communications, LLC,
Level 3 Financing, Inc. and the Subsidiaries party thereto.

 

33.                                 Supplement No. 1
to Omnibus Proceeds Note Subordination Agreement, dated as of March 13,
2007, among Level 3 Financing, Inc. and Broadwing Financial Services, Inc.

 

34.                                 Amended and
Restated Loan Proceeds Note, dated as of December 1, 2004, as amended and
restated on March 13, 2007 and on April 16, 2009, and as further
amended and restated on May 15, 2009 made by Level 3 Communications, LLC
to Level 3 Financing, Inc.

 

35.                                 Amended and
Restated Loan Proceeds Note Collateral Agreement, dated as of December 1,
2004, as amended and restated on March 13, 2007 and as further amended and
restated on April 16, 2009, among Level 3 Financing, Inc., Level 3
Communications, LLC and Merrill Lynch Capital Corporation.

 

36.                                 Amended and Restated
Loan Proceeds Note Guarantee Agreement, dated as of January 4, 2007, as
amended and restated on March 13, 2007.

 

37.                                 Standstill Agreement, dated
as of October 26, 2009, between Level 3 Communications, Inc. and
Southeastern Asset Management, Inc., on behalf certain institutional
clients.

 

3

 

38.                                 Supplemental Indenture,
dated as of January 20, 2010, among Level 3 Communications, Inc.,
Level 3 Communications, LLC, Level 3 Financing, Inc. and The Bank of New
York Mellon, as trustee, relating to Level 3 Financing, Inc.’s 12.25%
Senior Notes Due 2013.

 

39.                                 Indenture, dated as of January 20,
2010, among Level 3 Communications, Inc., Level 3 Financing, Inc. and
The Bank of New York Mellon, as trustee, relating to Level 3 Financing, Inc.’s
10% Senior Notes Due 2018.

 

40.                                 Supplemental Indenture,
dated as of March  19, 2010, among Level 3 Communications, LLC, Level 3
Communications, Inc., Level 3 Financing, Inc. and The Bank of New
York Mellon, as trustee, relating to Level 3 Financing, Inc.’s 10% Senior
Notes Due 2018.

 

41.                                 Supplemental Indenture,
dated as of March  19, 2010, among Level 3 Communications, LLC, Level 3
Communications, Inc., Level 3 Financing, Inc. and The Bank of New
York Mellon, as trustee, relating to Level 3 Financing, Inc.’s 10% Senior
Notes Due 2018.

 

4

 

EXHIBIT B

 

Opinion of

Bingham McCutchen LLP

Regulatory Counsel for the Company

 

1.             The licenses, permits and
authorizations set forth in Attachment A to this opinion constitute all of the
material licenses, permits and authorizations required by the Federal
Communications Commission (“FCC”) and the State Regulatory Agencies (as defined
below) for the provision of telecommunications services by the Company and the
Subsidiaries as such counsel understands those services currently to be
provided based solely on the declaration of an executive officer of the Company
attached to the opinion, where the failure to obtain or hold such license,
permit or authority would materially adversely affect the ability of the
Company or the Subsidiaries to provide such service.  To our Knowledge, none of the Company or any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such license, certificate, permit or authorization which
singly or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would have a material adverse affect on the Company or such
Subsidiary, taken as a whole, in connection with the provision of such
services.

 

2.             Except as set forth in Attachment B
to this opinion, to our Knowledge, after reasonable inquiry, neither the
Company nor any of the Subsidiaries is subject to any pending or overtly
threatened in writing proceeding, complaint or investigation before the FCC or
any State Regulatory Agency based on any alleged violation by any of the
Company or the Subsidiaries in connection with the provision of or failure to
provide telecommunications services.

 

3.             The disclosure related to the
federal and state Telecommunications Laws included in the Preliminary
Prospectus and the Final Prospectus under the headings “Risk Factors — We are
subject to significant regulation that could change in an adverse manner,” and “Risk
Factors — Potential regulation of Internet service providers in the United
States could adversely affect our operations,” and in the Company’s Annual
Report on Form 10-K for the year ending December 31, 2009, “Business
— Regulation — Federal Regulation” and “Business — Regulation — State
Regulation”  (collectively, the “Applicable
Sections”) insofar such statements purport to constitute a summary of the
Telecommunications Laws fairly summarize the matters of law therein described
in all material respects.

 

4.             No material consent, approval,
authorization, license, certificate, permit or order of the FCC or any State
Regulatory Agency is required for the consummation of the transactions
contemplated by the Underwriting Agreement, the Securities or the Indenture.

 

5.             Neither the execution and delivery
of the Underwriting Agreement, the Securities or the Indenture, nor the issue
and sale of the Securities contemplated thereby will conflict with or result in
a material violation of any published order or regulation of the FCC or any
State Regulatory Agency applicable to the Company or any of the Subsidiaries,
where the conflict or violation would have a material adverse effect on the
business of the Company or the Subsidiaries, taken as a whole, in connection
with the provision of telecommunications services.

 

 

Such
counsel has not determined the accuracy or completeness of, nor otherwise
verified, the factual information furnished in the Disclosure Package and the
Preliminary Prospectus or the Final Prospectus, including any amendments or
supplements thereto as of the date hereof. 
Such counsel has generally reviewed and discussed with representatives
of the Company and the Subsidiaries, and counsel for those entities, the
information furnished in the Disclosure Package and the Final Prospectus,
including any amendments or supplements thereto as of the date hereof.  Although such counsel has not independently
checked or verified and is neither passing upon nor assuming any responsibility
for the factual accuracy, completeness or fairness of the statements contained
in the Disclosure Package, or the Applicable Sections of the Final Prospectus,
including any amendments or supplements thereto as of the date hereof, nothing
has become known to the attorneys who have been engaged in the review and
discussion of the information furnished in the Preliminary Prospectus and the
Final Prospectus in the course of their review and discussion that would cause
those attorneys to believe that the statements included in the Preliminary
Prospectus and the Final Prospectus, under the headings set forth in paragraph
3 above, including any amendments or supplements thereto as of the date hereof,
at the Applicable Time, or on the Closing Date contain an untrue statement of
material fact or omit to state a material fact that would make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  Such counsel expresses no
belief as to the statements contained under any other heading of the
Preliminary Prospectus or the Final Prospectus, including any amendments or
supplements thereto as of the date hereof. 
Such counsel expresses no belief with respect to the financial
statements (and notes and schedules thereto) and other statistical, financial
or accounting data therein included.

 

Such
counsel’s opinions may be based solely on the Communications Act of 1934, as
amended, decisions of the FCC and FCC rules and regulations, comparable
state statutes governing telecommunications, and the rules and regulations
of comparable state regulatory agencies with direct regulatory jurisdiction
over telecommunications matters in the states in which the Company or the
Subsidiaries provide intrastate services (“State Regulatory Agencies”).  Such counsel’s opinion may be limited solely
to matters arising under these authorities regarding federal common carrier
telecommunications regulatory requirements and comparable state regulatory
requirements in states in which the Company and the Subsidiaries provide
intrastate telecommunications services.

 

Such
counsel is a member of the Bar of the District of Columbia and is not admitted
to the bars of the states in which the State Regulatory Agencies are
located.  In rendering this opinion, such
counsel has relied as to certain matters of fact on certificates of responsible
officers of the Company and public officials.

 

All
references in this Exhibit B to the Final Prospectus shall be deemed to
include any amendment or supplement thereto as of the Closing Date.  The opinion of such counsel shall be rendered
to the Underwriters at the request of the Company and shall so state.

 

2

 

EXHIBIT C

 

Opinion of

Internal Counsel for the Company Covering Canadian Regulatory Issues

 

1.                       The statements
in the Preliminary Prospectus and the Final Prospectus under the captions “Risk
Factors—The laws in certain countries currently do not permit us to offer
services directly in those countries” and “Canadian Regulation” insofar as such
statements describe or summarize matters of law or constitute legal
conclusions, fairly describe or summarize all matters referred to therein.

 

 

EXHIBIT D

 

Opinion of

Thomas C. Stortz, Executive Vice President,

Chief Legal Officer and Secretary of the Company

 

1.     Each of the Subsidiaries,
other than Level 3 Communications, LLC, as to which such counsel need not
opine, has been duly incorporated or formed and is validly existing and in good
standing in the jurisdiction of its incorporation or formation, and has the
requisite corporate power and authority to carry on its business and own its
properties as currently being conducted and as described in the Disclosure
Package and the Final Prospectus.

 

2.     All the outstanding shares
of capital stock or other equity interests of each Subsidiary, other than Level
3 Communications, LLC, as to which such counsel need not opine, have been duly
and validly authorized and are duly issued and are fully paid and
nonassessable, and have not been issued and are not owned or held in violation
of any statutory preemptive right of stockholders; to the knowledge of such
counsel after due inquiry, such shares or other equity interests are not held
in violation of any other preemptive right of stockholders, and except as
otherwise set forth in the Disclosure Package and the Final Prospectus, all
outstanding shares of capital stock or other equity interests of the
Subsidiaries are owned by the Company either directly or through wholly owned
Subsidiaries, to the knowledge of such counsel, after due inquiry, free and
clear of any agreement providing for a security interest in such shares or
equity interests to secure any obligation and any stockholders’ agreements,
voting trusts, claims or other encumbrances (other than the pledge of such
shares or equity interests pursuant to the agreements the Company and certain
of its subsidiaries have entered into in connection with the senior secured
credit facility described in the Disclosure Package and the Final Prospectus).

 

3.     Neither the execution and
delivery of this Agreement or the Indenture, the issue and sale of the
Securities, nor the consummation of any other of the transactions herein or
therein contemplated nor the fulfillment of the terms thereof, including the
issuance of the Common Stock upon conversion of the Securities, will conflict
with, result in a breach of, or constitute a default under the terms of any
indenture or other agreement or instrument actually known to such counsel,
after due inquiry (which does not include (i) a review of all the agreements
or instruments in the Company’s files or of agreements or instruments such
counsel has not been involved with or (ii) a canvassing of the Company’s
employees), and to which the Company or any Subsidiary is a party or bound or
its property is subject.

 

4.     The information included or
incorporated by reference in the Preliminary Prospectus and the Final
Prospectus under the headings “Risk Factors—Environmental liabilities from our
historical operations could be material” and “Legal Proceedings”, insofar as
such headings summarize matters of law, fairly summarize the matters therein
described.

 

Such
opinion may be limited to the laws of the State of Nebraska, the Federal laws
of the United States of America and the General Corporation Law and the Limited
Liability Company Act of the State of Delaware.

 

 

All
references in this Exhibit D to the Final Prospectus shall be deemed to
include any amendment or supplement thereto at the Closing Date.  The opinion of such counsel shall be rendered
to the Underwriters at the request of the Company and shall so state.

 

2

 

EXHIBIT E

 

	
   

  	
  Dated:

  

 

Merrill
Lynch, Pierce, Fenner & Smith

Incorporated

as
Representative of the several Underwriters

One
Bryant Park

New
York, New York  10036

 

Ladies
and Gentlemen:

 

This
letter is being delivered to you in connection with a proposed Underwriting
Agreement (the “Underwriting Agreement”) between Level 3 Communications, Inc.,
a Delaware corporation (the “Company”) and the Representative of the several
Underwriters named in Schedule I thereto, whereby the Underwriters have
agreed to purchase the Company’s Convertible Senior Notes due 2016 (the “Securities”),
which are convertible into shares of common stock, par value $0.01 per share (“Common
Stock”), of the Company pursuant to the Underwriting Agreement.

 

In
order to induce you to purchase the Securities pursuant to the Underwriting
Agreement, the undersigned will not, without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, offer, sell,
contract to sell, pledge or otherwise dispose of, or file (or participate in
the filing of) a registration statement with the U.S. Securities and Exchange
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section 16
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the U.S. Securities and Exchange Commission promulgated
thereunder with respect to, any shares of capital stock of the Company or any
securities convertible or exercisable or exchangeable for such capital stock,
or publicly announce an intention to effect any such transaction, for a period
of 75 days after the date of the Underwriting Agreement, other than
(i) shares of Common Stock disposed of as bona fide gifts,
(ii) transfers incident to estate planning matters, including transfers of
shares of Common Stock to one or more trusts for the benefit of the undersigned
or members of the undersigned’s family, (iii)  testamentary transfers and
other transfers of shares of Common Stock made pursuant to the laws of descent
and distribution and (iv) shares of Common Stock sold in connection with
the payment of taxes or exercise prices relating to awards under any employee
benefit plan, stock ownership or stock incentive plan, provided, however,
that in the case of any transfer, distribution or disposition pursuant to
clause (i), (ii) or (iii) each donee, distributee or disposition
recipient shall agree to be bound by the foregoing restrictions.

 

 

If
for any reason the Underwriting Agreement shall be terminated prior to the
Closing Date (as defined in the Underwriting Agreement), the agreement set
forth above shall likewise be terminated.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Address:

  

 

2Exhibit
10.1

 

FIRST AMENDMENT TO CREDIT
AGREEMENT

 

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “First
Amendment”) is made and entered into as of the 15th day of September, 2010, by
and among

 

(i)              AMERICAN EQUITY INVESTMENT LIFE
HOLDING COMPANY, an Iowa corporation, and its successors and assigns (the “Borrower”);
and

 

(ii)             THE FINANCIAL INSTITUTIONS that are
signatory Lender parties hereto and their successors and assigns.

 

Recitals:

 

A.            The Borrower, the “Lenders” party thereto, KeyBank
National Association, in its capacity as Administrative Agent for the Lenders,
and certain other parties are the parties to that certain Credit Agreement
dated as of November 20, 2006 (the “Credit Agreement”), pursuant to which,
inter  alia, the Lenders (as this and other capitalized terms used
herein and not otherwise defined herein are defined in the Credit Agreement)
agreed, subject to the terms and conditions thereof, to advance Loans to the
Borrower.

 

B.            As of the date hereof, the aggregate unpaid principal
balance of the Revolving Loans is $150,000,000.

 

C.            The Borrower has requested certain modifications to the
Credit Agreement, and, subject to the terms and conditions of this First
Amendment, the undersigned Lenders have agreed to grant such request.

 

Agreements:

 

NOW, THEREFORE, in consideration of the foregoing
Recitals and the mutual agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:

 

 

1.             Amendments to Credit Agreement.

 

(a)           The final paragraph of the definition of “Debt” in Section 1.01
(Defined Terms) is hereby amended by deleting therefrom the word “or” before
clause (iii) thereof and by adding the following provision as a new clause
(iv) thereof:

 

or (iv) other than for
the purposes of Section 7(g), any payment obligation under any 2010
Warrants, except to the extent that any such payment obligation, if and when
any such payment obligation may arise, is greater than the amount of any
concurrent payment or payments received by the Borrower in connection with the
termination, cancellation or early unwind of any 2010 Convertible Debt Hedges.

 

(b)           Clause (c) of the definition of “Interest Expense” in
Section 1.01 (Defined Terms) is hereby amended and restated in its
entirety to provide as follows:

 

(c)           non-cash interest expense accrued on the Convertible 2004
Debt and the 2010 Convertible Debt.

 

(c)           The following new defined terms are hereby added to Section 1.01
(Defined Terms) in the appropriate alphabetical order:

 

“2010 Convertible Debt” has the
meaning specified in Section 6.01(a)(vii).

 

“2010
Convertible Debt Documents” means the 2010 Convertible
Debt Indenture, the Borrower’s Convertible Senior Notes Due 2015 issued
thereunder, and related instruments, agreements and other documents, all of
which shall conform to the Existing 2010 Terms, as such documents are amended,
supplemented or otherwise modified from time to time pursuant to this
Agreement.

 

“2010
Convertible Debt Hedges” means each of the call option transaction
confirmation letter agreements to be dated on or about September 15, 2010
(the “2010 Original Hedge Date”) referencing the 2010 Convertible Debt
Documents between the Borrower and one or more financial institutions and any
additional call option transaction confirmation letter agreements referencing
the 2010 Convertible Debt Documents that may be entered into by the Borrower
and one or more financial institutions on or before the 30th day immediately
following the 2010 Original Hedge Date, in each case, substantially in the form
of Exhibit B hereto, as such agreements are amended, supplemented or
otherwise modified from time to time pursuant to this Agreement.

 

“2010
Convertible Debt Indenture” means the Indenture in
respect of the 2010 Convertible Debt to be dated on or about September 20,
2010 by and between the Borrower and U.S. Bank National Association, as
Trustee.

 

2

 

“2010
Warrants” means each of the warrant transaction confirmation
letter agreements to be dated on or about September 15, 2010 (the “2010
Original Warrant Date”) between the Borrower and one or more financial
institutions, and any additional warrant transaction confirmation letter
agreements that may be entered into by the Borrower and one or more financial
institutions on or before the 30th day immediately following the 2010 Original
Warrant Date, in each case, substantially in the form of Exhibit C hereto,
as such agreements are amended, supplemented or otherwise modified from time to
time pursuant to this Agreement.

 

“Existing
2010 Terms” means terms and conditions of the 2010 Convertible
Debt Documents, as described in the draft confidential offering memorandum
delivered by counsel to the Borrower to counsel to the Administrative Agent on September 13,
2010, together with modifications thereto that do not in any material respect (i) increase
the amount of principal evidenced or governed thereby, change (to a date
earlier than December 31, 2014) any date upon which any payment of
principal or interest is due thereon, change any event of default or condition
to an event of default with respect thereto (other than to eliminate or make
less onerous any such event or default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof
(other than to eliminate, in whole or in part, or make less onerous such
provisions), or change any collateral therefor (other than to release such
collateral) or (ii) increase in any material respect the obligations of
the Borrower thereunder or to confer any additional rights on the holders of
such Debt (or a trustee or other representative on their behalf).

 

“Shoe
Issuance” has the meaning specified in Section 6.01(a)(vii).

 

(d)           Section 2.10(b) (Mandatory Prepayments) is
hereby amended and restated in its entirety to provide as follows:

 

(b)           Mandatory Prepayments. (i) If
at any date the Total Outstanding Amount exceeds the Total Commitment
calculated as of such date, then not later than the next succeeding Business
Day, the Borrower shall be required to prepay the Loans in an amount equal to
such excess until the Total Outstanding Amount does not exceed the Total
Commitment.

 

(ii)           On each date on which the Borrower receives any proceeds
of any 2010 Convertible Debt, the Borrower shall prepay the Loans in an amount
equal to the lesser of (A) the aggregate then unpaid principal balance of
all of the Loans and (B) the aggregate amount of such proceeds of 2010
Convertible Debt received by the Borrower on such date, net of the cash
consideration paid for the 2010 Convertible Debt Hedges entered into in
connection therewith and of other customary and reasonable commissions, fees
and other expenses (including, without limitation, underwriting discounts and
commissions) incurred by the Borrower in connection with the incurrence of the
2010 Convertible Debt.

 

3

 

(e)           Clause (e) of Section 5.02 (Notice of Material Events) is
hereby amended and restated in its entirety to provide as follows:

 

(e)  at least five Business Days prior to the
effectiveness of any amendment to the terms of the Convertible 2004 Debt or to
the 2010 Convertible Debt, or the effectiveness of any agreement governing any
Debt in replacement or exchange thereof, a copy of such amendment or agreement;

 

(f)          Clause (vii) of Section 6.01(a) (Debt;
Certain Equity Securities) is hereby re-designated to be clause (viii), and the
following provision is hereby added to Section 6.01(a) as a new
clause (vii) thereof:

 

(vii) Debt of $150,000,000 in aggregate
principal amount incurred on or about September 20, 2010 (the “2010
Original Incurrence Date”) by the Borrower plus up to an additional $50,000,000
in aggregate principal amount that may be incurred by Borrower on or before the
30th day immediately following the 2010 Original Incurrence Date (each
incurrence of all or any portion of such additional $50,000,000 aggregate
principal amount being a “Shoe Issuance”), in each case, pursuant to a note
offering exempt from the registration requirements of the Securities Act of
1933, as amended (collectively, the “2010 Convertible Debt”), which 2010
Convertible Debt at all times shall be on terms consistent in all material
respects with the Existing 2010 Terms, and any Debt, not greater than
$200,000,000 in principal amount and otherwise on terms not more restrictive on
or otherwise less favorable to the Borrower in any material respect than the
Existing 2010 Terms, in exchange therefor, whether or not the notes, debentures
or other instruments evidencing such exchange Debt are exempt from such
registration requirements (without limiting the generality of the foregoing, it
is the intention hereby that the terms of the 2010 Convertible Debt, including
the effect of any modification thereof, and the terms of any Debt in exchange
or replacement thereof, (i) provide for a final scheduled maturity not
earlier than September 15, 2015 and (ii) otherwise shall not be more
restrictive on, or otherwise less favorable to, the Borrower in any material
respect than the Existing 2010 Terms); and

 

(g)          Clause (v) of Section 6.04 (Investments, Loans,
Advances, Guarantees and Acquisitions) is hereby amended and restated in its
entirety to provide as follows:

 

(v) Hedging Agreements in the ordinary course
of the Borrower’s or such Subsidiary’s business and any 2010 Convertible Debt
Hedges,

 

(h)         Section 6.15(b) (Amendment of Material Documents;
Prepayments) is hereby amended and restated in its entirety to provide as
follows:

 

4

 

(b)           (i) The Borrower shall not, and shall not permit any
Subsidiary to, enter into any amendment, waiver or other modification of any of
the Convertible 2004 Debt Documents, any of the 2010 Convertible Debt
Documents, any of the Trust Preferred Securities Notes or any indenture or
other agreement governing the Trust Preferred Securities Notes, or of any
document evidencing or otherwise governing any Material Debt (i) if the
effect of such amendment, waiver or other modification is to increase the
interest rate on such Debt, increase the amount of principal due on any date,
change (to earlier dates) any dates upon which payments of principal or
interest are due thereon, change any event of default or condition to an event
of default with respect thereto (other than to eliminate or make less onerous
any such event or default or increase any grace period related thereto), change
the redemption, prepayment or defeasance provisions thereof, or change any
collateral therefor (other than to release such collateral), or (ii) if the
effect of such amendment or change, together with all other amendments or
changes made, is to increase in any material respect the obligations of the
obligor thereunder or to confer any additional rights on the holders of such
Debt (or a trustee or other representative on their behalf).

 

(ii)           The Borrower shall not, and shall not permit any
Subsidiary to, enter into any amendment, waiver or other modification of any of
the 2010 Convertible Debt Hedges or any of the 2010 Warrants (i) if the
effect of such amendment, waiver or other modification is to increase the
amount of any payment in cash due on any date that is earlier than December 31,
2014, change (to a date earlier than December 31, 2014) any dates upon
which any such payment in cash is due thereunder, change any event of default
or termination event or condition to an event of default or termination event
with respect thereto (other than to eliminate or make less onerous any such
event or default or termination event or increase any grace period related
thereto) or (ii) if the effect of such amendment, waiver or other
modification, together with all other amendments, waivers or other
modifications made, is to increase in any material respect the obligations of
the Borrower thereunder or to confer any additional rights on the
counterparties thereto (or a trustee or other representative on their behalf); provided that this clause (ii) shall
not prohibit any amendment to any 2010 Convertible Note Hedge to increase the
number of call options pursuant to such 2010 Convertible Note Hedge that may be
entered into by the Borrower on or before the 30th day immediately following
the 2010 Original Hedge Date in connection with a Shoe Issuance.

 

(i)            The second proviso to paragraph (g) of Article 7
(Events of Default) is hereby amended and restated in its entirety to provide
as follows:

 

provided, further, that none of (A) the
occurrence of an event or condition that requires a mandatory payment of cash,
or the mandatory payment of cash, in each case, required by Section 10.01
of the Indenture described in the definition of Convertible 2004 Debt Documents
(as it provides on the date hereof), (B) the occurrence of an event or
condition that requires a mandatory payment of cash, or the mandatory payment
of cash, in each case, pursuant to the section of the 2010 Convertible Debt
Indenture corresponding to the provisions set forth below the captions “Description
of notes—Conversion rights—Conversion upon satisfaction of sale price
condition,” “—Conversion upon

 

5

 

satisfaction of trading price condition,” “—Conversion
upon specified corporate events,” “—Conversion on or after June 15, 2015”
and “—Settlement upon conversion” of the confidential offering memorandum
referred to in the definition of the Existing 2010 Terms, (C) any event or
condition enabling or pemitting the termination, cancellation or early unwind
of any 2010 Warrants, or any mandatory payment of cash upon any termination,
cancellation or early unwind of any 2010 Warrants to the extent that the amount
of such mandatory payment is less than or equal to the amount of any concurrent
payment or payments received by the Borrower in connection with the
termination, cancellation or early unwind of any 2010 Convertible Debt Hedges,
nor (D) the occurrence of an event or condition that requires a mandatory
prepayment of Material Debt, or the mandatory prepayment of Material Debt, in
each case, required to be made by reason of the sale or other disposition
(including, without limitation, condemnation or insured casualty) of assets
securing such Material Debt, shall be deemed to be an event or condition
described in any of clauses (i), (ii) and (iii) above;

 

(j)            The forms of (i) a 2010 Convertible Debt Hedge and (ii) a
2010 Warrant attached hereto are hereby added as new Exhibits B and C,
respectively, of the Credit Agreement.

 

2.             Amendment
Effective Date; Conditions Precedent. The amendments set forth in Paragraph
1, above, shall not be effective unless and until the date on which all of the
following conditions precedent have been satisfied (such date of effectiveness
being the “First Amendment Effective Date”):

 

(a)           Officer’s
Certificate. On the First Amendment Effective Date and after giving effect
to the amendments set forth in Paragraph 1, above, (i) there shall exist
no Default, and a Financial Officer or other executive officer of the Borrower,
on behalf of the Borrower, shall have delivered to the Administrative Agent
written confirmation thereof dated as of the First Amendment Effective Date,
and (ii) the representations and warranties of the Borrower under Article 3
of the Credit Agreement shall have been reaffirmed in writing by a Financial
Officer or other executive officer of the Borrower, on behalf of the Borrower,
as being true and correct in all material respects as of the First Amendment
Effective Date (unless and to the extent that any such representation and
warranty is stated to relate solely to an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date).

 

6

 

(b)         First Amendment. The Administrative Agent (or its
counsel) shall have received from the Borrower and from Lenders sufficient to
constitute the Required Lenders either (i) a counterpart of this First
Amendment signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this First Amendment) that such
party has signed a counterpart of this First Amendment.

 

(c)          Corporate Authorization. The Borrower shall have
delivered to the Administrative Agent a copy, certified by its Secretary or
Assistant Secretary, of its Board of Directors’ resolutions authorizing the
execution and delivery of this First Amendment and the transactions
contemplated hereby.

 

(d)         Agent Expenses. The Borrower shall have paid or
caused to be paid to the Administrative Agent on or prior to the First
Amendment Effective Date, to the extent then invoiced, all reasonable
out-of-pocket expenses, including fees, charges and disbursements of its
special counsel, Squire, Sanders & Dempsey L.L.P. (the “Special
Counsel”), required to be reimbursed or paid by the Borrower hereunder or under
any other Loan Document.

 

(e)          Other Matters. The Administrative Agent shall have
received such other certificates, opinions and documents, in form and substance
reasonably satisfactory to the Administrative Agent, as the Administrative
Agent may reasonably request.

 

3.           No Modifications. Except as expressly provided in
this First Amendment, all of the terms and conditions of the Credit Agreement
and the other Loan Documents remain unchanged and in full force and effect.

 

4.           Confirmation of Obligations. The Borrower hereby
confirms that, as of the date hereof, the Borrower is indebted to the Lenders
for the Loans in the amounts and as of the date

 

7

 

set forth in Recital B, above, and is also obligated to the Lenders in
respect of other obligations as set forth in the Credit Agreement and the other
Loan Documents. The Borrower further acknowledges and agrees that as of the
date hereof, it has no claim, defense or set-off right against any Lender or
the Administrative Agent of any nature whatsoever, whether sounding in tort,
contract or otherwise, and has no claim, defense or set-off of any nature
whatsoever to the enforcement by any Lender or the Administrative Agent of the
full amount of the Loans and other obligations of the Borrower under the Credit
Agreement and the other Loan Documents.

 

5.           Administrative Agent’s Expense. The Borrower agrees
to reimburse the Administrative Agent promptly for its reasonable documented
out-of-pocket costs and expenses incurred in connection with this First
Amendment and the transactions contemplated hereby, including, without
limitation (but without duplication of fees and expenses paid pursuant to Section 2(d) above),
the reasonable fees and expenses of the Special Counsel.

 

6.           Governing Law; Binding Effect. This First Amendment
shall be governed by and construed in accordance with the laws of the State of
New York and shall be binding upon and inure to the benefit of the Borrower,
the Lenders and the Administrative Agent and their respective successors and
assigns.

 

7.           Counterparts. This First Amendment may be executed
in any number of counterparts, each of which when so executed shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart. Any
party hereto may execute and deliver a counterpart of this First Amendment by
delivering by facsimile or email transmission a signature page of this
First Amendment signed by such party, and any such facsimile or email signature
shall be treated in all respects as having the same effect as an original
signature. Any party delivering by

 

8

 

facsimile or email transmission a counterpart executed by it shall
promptly thereafter also deliver a manually signed counterpart of this First
Amendment; provided that any failure to deliver such manually signed
counterpart shall not affect the effectiveness of this First Amendment or the
consent of such party to the First Amendment and the provisions contained
herein.

 

8.           Miscellaneous.

 

(a)           Upon the effectiveness of this First Amendment, this First
Amendment shall be a Loan Document.

 

(b)           The invalidity, illegality, or unenforceability of any
provision in or Obligation under this First Amendment in any jurisdiction shall
not affect or impair the validity, legality, or enforceability of the remaining
provisions or obligations under this First Amendment or of such provision or
obligation in any other jurisdiction.

 

(c)           This First Amendment and all other agreements and
documents executed in connection herewith have been prepared through the joint
efforts of all of the parties. Neither the provisions of this First Amendment
or any such other agreements and documents nor any alleged ambiguity shall be
interpreted or resolved against any party on the ground that such party’s
counsel drafted this First Amendment or such other agreements and documents, or
based on any other rule of strict construction. Each of the parties hereto
represents and declares that such party has carefully read this First Amendment
and all other agreements and documents executed in connection herewith and
therewith, and that such party knows the contents thereof and signs the same
freely and voluntarily. The parties hereby acknowledge that they have been
represented by legal counsel of their own choosing in negotiations for and
preparation of this First Amendment and all other agreements and documents
executed in connection therewith and

 

9

 

that each of them has read the same and had their contents fully
explained by such counsel and is fully aware of their contents and legal
effect.

 

10.          Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
FIRST AMENDMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER SOUNDING IN CONTRACT, TORT OR OTHER THEORY) ARISING OUT
OF OR RELATING TO THIS FIRST AMENDMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS FIRST
AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION IN THIS
SECTION.

 

[No additional provisions
are on this page; the page next following is a signature page.]

 

10

 

IN WITNESS WHEREOF, the parties hereto have hereunto
set their hands as of the date first above written.

 

	
   

  	
  BORROWER

  
	
   

  	
   

  
	
   

  	
  AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John M. Matovina

  
	
   

  	
   

  	
  John M. Matovina

  
	
   

  	
   

  	
  Chief Financial Officer and Treasurer

  

 

11

 

	
   

  	
  LENDERS

  
	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL ASSOCIATION,

  as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary K. Young

  
	
   

  	
   

  	
  Mary K. Young

  
	
   

  	
   

  	
  Senior Vice President

  

 

12

 

	
  [Lender Signatures
  Continued]

  
	
   

  	
   

  
	
   

  	
  BANKERS TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John M. Doll

  
	
   

  	
   

  	
  John M. Doll

  
	
   

  	
   

  	
  Vice President

  

 

13

 

	
  [Lender Signatures
  Continued]

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas A. Kiepura

  
	
   

  	
   

  	
  Thomas A. Kiepura

  
	
   

  	
   

  	
  Vice President

  

 

14

 

	
  [Lender Signatures
  Continued]

  
	
   

  	
   

  
	
   

  	
  SUNTRUST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ K. Scott Bazemore

  
	
   

  	
   

  	
  K. Scott Bazemore

  
	
   

  	
   

  	
  Vice President

  

 

15

 

	
  [Lender Signatures
  Continued]

  
	
   

  	
   

  
	
   

  	
  WEST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin S. Smith

  
	
   

  	
   

  	
  Kevin S. Smith

  
	
   

  	
   

  	
  Sr. Vice President

  

 

16

 

	
   

  	
  AGENT ACKNOWLEDGMENT:

  
	
   

  	
   

  
	
   

  	
  The Administrative Agent hereby acknowledges its receipt of the
  foregoing First Amendment as of the date first above written.

  
	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL ASSOCIATION, as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary K. Young

  
	
   

  	
   

  	
  Mary K. Young

  
	
   

  	
   

  	
  Senior Vice President

  

 

17

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