SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant |X|
Filed by Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only(as permitted by Rule
14-6(e)(2)
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Sec. 240.14a-11(c) or 240.14a-12
Level 3 Communications, Inc.
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11(Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing by registration for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY PROXY MATERIALS
[Logo]
LEVEL 3 COMMUNICATIONS, INC.
3555 Farnam Street
Omaha, NE 68131
April ___, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Level 3 Communications, Inc. ("Level 3") to be held at 9:00 a.m. on May 27,
1999, at The Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102.
At the Annual Meeting you will be asked to consider and act upon the
following matters:
o the reelection to the Board of Directors of Level 3 of four Class II
Directors for a three-year term until the 2002 Annual Meeting of
Stockholders;
o the adoption of an amendment to Level 3's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock
from 500 million to 1.5 billion; and
o the transaction of such other business as may properly come before the
Annual Meeting.
The Level 3 Board of Directors recommends that its stockholders reelect
four Class II directors for a three-year term until the 2002 Annual Meeting of
Stockholders and approve the proposed amendment to the Restated Certificate of
Incorporation. See "REELECTION OF CLASS II DIRECTORS PROPOSAL" and "COMMON STOCK
PROPOSAL," respectively.
Information concerning the matters to be considered and voted upon at the
Annual Meeting is set forth in the attached Notice of Annual Meeting and Proxy
Statement. It is important that your shares be represented at the Annual
Meeting, regardless of the number you hold. Therefore, whether or not you plan
to attend the Annual Meeting, as soon as possible please either delivery your
proxy by calling a toll free telephone number or the Internet, as described in
the enclosed telephone and Internet voting instructions. In addition to these
convenient methods of voting, you can sign, date and return your proxy card in
the envelope that has been provided. This will not prevent you from voting your
shares in person if you subsequently choose to attend the Annual Meeting.
Sincerely,
Walter Scott, Jr.
Chairman of the Board
<PAGE>
PRELIMINARY PROXY MATERIALS
[Logo]
LEVEL 3 COMMUNICATIONS, INC.
3555 Farnam Street
Omaha, NE 68131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 27, 1999
To the Stockholders of Level 3 Communications, Inc.:
The Annual Meeting of Stockholders of Level 3 Communications, Inc., a
Delaware corporation ("Level 3"), will be held at The Joslyn Art Museum, 2200
Dodge Street, Omaha, Nebraska 68102 at 9:00 a.m. on May 27, 1999 for the
following purposes:
1. To reelect the four class II Directors to the Board of Directors of Level 3
for a three-year term until the 2002 Annual Meeting of Stockholders;
2. To adopt an amendment to Level 3's Restated Certificate of Incorporation to
increase the number of authorized shares of common stock from 500 million
to 1.5 billion; and
3. To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 7, 1999 as
the record date for the determination of the holders of the common stock, par
value $.01 per share of Level 3 (the "Level 3 Common Stock") entitled to notice
of, and to vote at, the meeting. Accordingly, only holders of record of Level 3
Common Stock at the close of business on that date will be entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
The four Class II Directors will be elected by a plurality of the votes
cast by holders of Level 3 Common Stock present in person or by proxy and
entitled to vote at the Annual Meeting. The proposal to adopt an amendment to
Level 3's Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 500 million to 1.5 billion requires the
affirmative vote of the holders of a majority of the votes entitled to be cast
in respect of all outstanding shares of Level 3 Common Stock.
The matters to be considered at the Annual Meeting are more fully described
in the accompanying Proxy Statement, and the annexes thereto, which form a part
of this Notice.
<PAGE>
PRELIMINARY PROXY MATERIALS
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. IN ADDITION, TO ENSURE
YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES BY CALLING
THE TOLL FREE TELEPHONE NUMBER OR USING THE INTERNET AS MORE FULLY EXPLAINED IN
THE TELEPHONE AND INTERNET VOTING INSTRUCTIONS. ANY STOCKHOLDER ATTENDING THE
ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS RETURNED A PROXY.
By Order of the Board of Directors
Walter Scott, Jr.
Chairman of the Board
Dated: April ___, 1999
<PAGE>
PRELIMINARY PROXY MATERIALS
[Logo]
LEVEL 3 COMMUNICATIONS, INC.
3555 Farnam Street
Omaha, NE 68131
Proxy Statement
April ____, 1999
ANNUAL MEETING OF STOCKHOLDERS
May 27, 1999
SOLICITATION AND VOTING
This Proxy Statement ("Statement") is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors (the "Board") of
Level 3 Communications, Inc. ("Level 3" or the "Company") to be voted at the
Annual Meeting of Stockholders to be held on May 27, 1999, or any adjournment
thereof (the "Annual Meeting"). This Proxy Statement, the Notice of Annual
Meeting and the accompanying Proxy are being mailed to Stockholders on or about
April ___, 1999.
As of April 7, 1999, the record date for the determination of persons
entitled to vote at the Annual Meeting, there were 338,125,256 shares of the
Company's Common Stock, par value $.01 per share (the "Level 3 Common Stock"),
outstanding. Each share of Level 3 Common Stock is entitled to one vote on each
matter to be voted upon by the Stockholders at the Annual Meeting.
The four Class II Directors will be elected by a plurality of the votes
cast by holders of Level 3 Common Stock present in person or by proxy and
entitled to vote at the Annual Meeting. The proposal to adopt an amendment to
Level 3's Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 500 million to 1.5 billion requires the
affirmative vote of the holders of a majority of the votes entitled to be cast
in respect of all outstanding shares of Level 3 Common Stock.
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of Level 3 Common Stock entitled to vote as of the
Record Date is required to constitute a quorum at the Annual Meeting. Under
applicable Delaware law, abstentions and "broker non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
as to a matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum at the Annual Meeting. If such a quorum
should not be present, the Annual Meeting may be adjourned from time to time
until the necessary quorum is obtained.
<PAGE>
PRELIMINARY PROXY MATERIALS
All shares of Level 3 Common Stock represented by properly executed proxies
which are returned and not revoked will be voted in accordance with the
instructions, if any, given therein. If no instruction are provided in a proxy,
it will be voted FOR the Board's nominees for Director, FOR adoption of
amendment to the Restated Certificate of Incorporation, and in accordance with
the proxy-holders' best judgment as to any other business raised at the Annual
Meeting. If you elect to deliver your proxy by telephone or the Internet as
described in the enclosed telephone and Internet voting instructions, your
shares will be voted as you direct. Your telephone or Internet delivery
authorizes the named proxies to vote your shares in the same manner as if you
marked, signed and returned your proxy card.
Any Stockholder who delivers, whether by telephone, Internet or through the
mail, a proxy may revoke it at any time before it is voted by delivering to the
Secretary of the Company a written statement revoking the proxy, by executing
and delivering a later dated proxy, by using the telephone voting procedures,
the Internet voting procedures or by voting in person at the Annual Meeting.
Level 3 will bear its own cost of solicitation of proxies. In addition to
the use of the mails, proxies may be solicited by the directors and officers of
Level 3 by personal interview, telephone, telegram or e-mail. Such directors and
officers will not receive additional compensation for such solicitation but may
be reimbursed for out-of-pocket expenses incurred in connection therewith.
Arrangements may also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of shares of Level 3 Common Stock held of record by such persons, in
which case Level 3 will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith.
REELECTION OF CLASS II DIRECTORS PROPOSAL
The Level 3 Board of Directors currently consists of 11 directors, divided
into three classes, designated Class I, Class II and Class III. Each of Class I
and Class III currently consists of three directors and Class II consists of
four directors. Class I currently has one vacancy. All four of the current Class
II directors are standing for reelection. At the Annual Meeting, these Class II
Directors will be reelected to hold office for a three-year term until the 2002
annual meeting, or until their successors have been elected and qualified. If
any nominee shall, prior to the Annual Meeting, become unavailable for election
as a Director, the persons named in the accompanying form of proxy will vote for
that nominee, if any, in their discretion as may be recommended by the Level 3
Board of Directors, or the Level 3 Board of Directors may reduce the number of
Directors to eliminate the vacancy.
Information as to Nominees for Election as Class I Directors
The respective ages, positions with Level 3, business experience,
directorships in other companies and Level 3 Board of Directors committee
memberships, of the nominees for election are set forth below.
William L. Grewcock, 73, has been a director of Level 3 since January 1968.
Prior to the separation of the Company's construction related business and its
non-construction related business in March 1998 (See Explanatory Note below),
Mr. Grewcock was Vice Chairman of the
<PAGE>
PRELIMINARY PROXY MATERIALS
Company for more than five years. He is presently a director of Peter Kiewit
Sons', Inc. ("PKS"). Mr. Grewcock is a member of the Audit Committee of the
Board of Directors.
Richard R. Jaros, 47, has been a director of Level 3 since June 1993 and
served as President of Level 3 from 1996 to 1997. Mr. Jaros served as Executive
Vice President of Level 3 from 1993 to 1996 and Chief Financial Officer of Level
3 from 1995 to 1996. He also served as President and Chief Operating Officer of
MidAmerican Energy Holdings, Inc. ("MidAmerican") from 1992 to 1993, and is
presently a director of MidAmerican, Commonwealth Telephone Enterprises, Inc.
("Commonwealth") and RCN Corporation ("RCN"). Mr. Jaros is a member of the
Compensation Committee of the Board of Directors.
Robert E. Julian, 59, has been a director of Level 3 since March 1998. Mr.
Julian has also been Chairman of the Board of PKS Information Services, Inc., a
wholly owned subsidiary of Level 3 since 1995. Mr. Julian was also a director
from 1987 to June 1997. From 1992 to 1995 Mr. Julian served as Executive Vice
President and Chief Financial Officer of Level 3. Mr. Julian is the chairman of
the Audit Committee of the Board of Directors.
David C. McCourt, 42, has been a director of Level 3 since March 1998. Mr.
McCourt has also served as Chairman and Chief Executive Officer of Commonwealth
and RCN since October 1997. From 1993 to 1997 Mr. McCourt served as Chairman of
the Board and Chief Executive Officer of C-TEC Corporation. Mr. McCourt is a
member of the Audit Committee and Compensation Committee of the Board of
Directors.
The Board of Directors unanimously recommends a vote FOR the nominees named
above.
Explanatory Note
On March 31, 1998, the Company exchanged for all of its then outstanding
Class C Stock, all of the capital stock of a subsidiary (the "Construction
Subsidiary") holding the stock of Kiewit Construction Group Inc. ("KCG"), the
construction subsidiary of the Company (the "Split-Off"). In connection with the
Split-Off, the Company was renamed "Level 3 Communications, Inc." and the
Construction Subsidiary was renamed "Peter Kiewit Sons', Inc."
Information presented in this Proxy Statement relating to periods prior to
March 31, 1998, relate to information for the members of the Company's Board of
Directors and executive officers at that time.
Board of Directors' Meetings
The Level 3 Board of Directors had 8 formal meetings in 1998 and acted by
written consent action on 6 occasions. In 1998, no director attended less than
75% of the meetings of the Board of Directors and the committees of which he was
a member.
<PAGE>
PRELIMINARY PROXY MATERIALS
Executive Committee
The Executive Committee exercises, to the maximum extent permitted by law,
all powers of the Board of Directors between board meetings, except those
functions assigned to specific committees.
Audit Committee
The Audit Committee reviews the services provided by Level 3's independent
auditors, consults with the independent auditors and reviews the need for
internal auditing procedures and the adequacy of internal controls.
In connection with the Company's relocation of its principal executive
offices to Broomfield, Colorado, the Company has designated Arthur Andersen LLP
as independent auditors to audit the Level 3 financial statements for the 1998
fiscal year.
Compensation Committee
The Compensation Committee determines the compensation of the Chief
Executive Officer and reviews the compensation and stock option awards of all
other executives.
Compensation Committee Interlocks and Insider Participations
Prior to the Split-Off, the Compensation Committee of the Company consisted
of Messrs. Robert B. Daugherty and Charles M. Harper and Mr. Peter Kiewit, Jr.,
none of whom is an officer or employee of Level 3. After the Split-Off, the
Compensation Committee of the Company consists of Messrs. Michael B. Yanney,
David C. McCourt, Philip B. Fletcher (effective March 1999) and Richard R.
Jaros, none of whom is an officer or employee of the Company. Mr. Jaros has
entered into a separation agreement with the Company, pursuant to which, among
other things, he has received certain severance payments. See "Certain
Relationships and Related Transactions."
Compensation Committee Report
The Compensation Committee (the "Committee") is responsible for determining
the cash and equity compensation of James Q. Crowe, President and Chief
Executive Officer. The Committee reviews and approves the cash compensation of
certain of Level 3's other senior executives based upon the recommendations of
Mr. Crowe.
Level 3 believes that the compensation levels of its executive officers,
who provide leadership and strategic direction, should consist of: (i) fair base
salaries, (ii) significant cash bonus opportunities based on achievement of
objectives established by Level 3 and (iii) ownership of Level 3 Common Stock
and stock options to join management's interests with stockholders' interests,
targeted to provide opportunities that are comparable to other similarly
situated telecommunications and high growth technology companies.
Level 3 considers the following factors (ranked in order of
importance) when determining compensation of executive officers: (i) Level 3's
performance measured by attainment of
<PAGE>
PRELIMINARY PROXY MATERIALS
specific objectives, (ii) the individual performance of each executive officer,
(iii) Level 3's stock price performance, (iv) comparative industry compensation
levels and (v) historical cash and compensation levels. The comparable industry
compensation data is based in part on public telecommunications companies that
are included in the Nasdaq Telecommunications Stock Index, which was chosen as
the peer group for the Performance Graph and on the other publicly traded
telecommunications and high growth technology companies with comparable market
capitalization.
Determination of the Chief Executive Officer's Compensation
For Fiscal 1998, the Level 3's performance objectives included:
o complete the separation of the construction operations and non-construction
operations of the Company during the first half of 1998 and pursue a
listing of the company's common stock;
o complete the construction of Gateway facilities in 15 major U.S. cities and
continue to expand the development of both local networks and Level 3's
proposed intercity network in the United States;
o commence construction of Level 3's nearly 16,000 mile intercity network
after selecting a company to act as program manager for the project;
o secure required rights-of-way for the construction of the U.S. intercity
network;
o accelerate the development of networks internationally, primarily in
Western Europe;
o attract and retain experienced personnel to enable Level 3 to meet its
tactical and strategic goals; and
o continue the acquisition of sufficient capital at an acceptable cost in
order to fund the Level 3 business plan.
These goals were met in fiscal 1998. The separation of the construction and
non-construction operations of the Company was completed on March 31, 1998 and
the company's common stock began trading on The Nasdaq National Market on April
1, 1998. As of December 31, 1998, Level 3 had launched offering services in 15
major U.S. markets. Peter Kiewit Sons', Inc. was selected as the program manager
for the construction of the Level 3 U.S. intercity network and construction had
commenced by the end of the year. At December 31, 1998, Level 3 had secured a
majority of the rights-of-way that are necessary to construct the U.S. intercity
network. By the end of 1998, Level 3 had hired approximately 1,200 employees in
the communications portion of its business. Finally, during 1998, the Company
raised approximately $2.5 billion in gross proceeds from two successful high
yield debt offerings.
Based on the achievement of these goals and for aggressively pursuing the
implementation of Level 3's business plan to expand its information services
business to provide a broad range of communications services over a new
end-to-end network based on Internet Protocol technology, Mr. Crowe received a
cash bonus paid in December of 1998 of $300,000
<PAGE>
PRELIMINARY PROXY MATERIALS
for his performance in fiscal 1998, and was awarded a total of 320,000
Outperform Stock Options.
Equity Compensation
The Committee approves all awards made under the Level 3 1995 Stock Plan.
Periodically the Committee approves grants to existing employees and also
approves awards to new employees as an incentive to join Level 3.
The Compensation Committee:
Philip B. Fletcher
Richard R. Jaros
David C. McCourt
Michael B. Yanney, Chairman
For the year ended December 31, 1998
<PAGE>
PRELIMINARY PROXY MATERIALS
Executive Compensation
The table below shows the annual compensation of the chief executive
officer and the next four most highly compensated executive officers of the
Company for the 1998 fiscal year (the "Named Executive Officers").
<TABLE>
<CAPTION>
- ------------------------------ -------- --------------------------------------- ----------------------------- ----------------
Annual Compensation All Other
Compensation
Name and Principal Position Year Long Term Compensation ($)(4)
- ------------------------------ -------- --------------------------------------- ----------------------------- ----------------
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
Securities
Other Annual Restricted underlying
Compensation Stock Options/SARs
Salary ($) Bonus ($) ($) award(s) (#) (#)(1)
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
James Q. Crowe 1998 350,012 300,000 -- -- -- 32,740
President and CEO 1997 144,128 -- -- -- -- --
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
R. Douglas Bradbury 1998 249,999 250,000 62,500(2) -- -- 70,704
Executive Vice President and 1997 102,564 -- -- -- 1,000,000 --
CFO
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
Kevin J. O'Hara 1998 237,109 250,000 115,579(2) -- -- 70,704
Executive Vice President and 1997 82,051 -- -- -- 500,000 --
COO
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
Michael D. Jones 1998 151,269 150,000 -- 150,000 200,000 4,800
Senior Vice President and
CIO (3)
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
Mark L. Gershien 1998 183,7500 120,000 64,016(1) -- 520,000 42,902
Senior Vice President
Sales (3)
- ------------------------------ -------- ----------- ----------- --------------- ------------- --------------- ----------------
<FN>
(1) See discussion below regarding Outperform Stock Option grants.
</FN>
<FN>
(2) Other Annual Compensation means perquisites and other personal benefits
received by each of the Named Executive Officers, if over $50,000. The only
reportable amounts are amounts that represent relocation allowances and the
payment of closing costs relating to the purchase of a new residence in the
Broomfield, Colorado area.
</FN>
<FN>
(3) Messrs. Jones and Gershein were not employed by the Company during 1997.
</FN>
<FN>
(4) The amounts in this column represent (i) amounts of salary and bonus
forgone by the Named Executive Officers pursuant to the Level 3
Communications, Inc. 1998 Deferred Stock Purchase Plan (the "ShareWorks
Match Plan"), (ii) Level 3 matching contributions to the ShareWorks Match
Plan on behalf of the Named Executive Officers, and (iii) year-end
contributions to the accounts of the Named Executive Officers pursuant to
the Level 3 Communications, Inc. Employee Stock Bonus Plan (the "ShareWorks
grant plan"). These amounts are held in accounts for the Named Executive
Officers as shares or units of Level 3 Common Stock. These amounts
represent the year-end value of such accounts based on the last reported
sale price of the Level 3 Common Stock on December 31, 1998.
</FN>
</TABLE>
<PAGE>
PRELIMINARY PROXY MATERIALS
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------- ---------------------------------
Potential realizeable value at
assumed annual rates of stock
price appreciation for option
Individual Grants term
- ------------------------------------------------------------------------------------------- ---------------------------------
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
Number of Percent of
securities total
underlying options/SARs Exercise or
Options/SARs granted to base price Expiration
Name granted (#) employees in FY ($/sh) Date 5% ($) 10% ($)
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
James Q. Crowe -- -- -- -- -- --
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
R. Douglas Bradbury -- -- -- -- -- --
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
Kevin J. O'Hara -- -- -- -- -- --
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
Michael D. Jones 200,000(1) 3% 17.50 5/1/2003 6,540,943 8,253,864
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
Mark L. Gershien 520,000(2) 9% 6.50 1/19/2008 31,022,298 49,397,825
- -------------------------- ---------------- ----------------- --------------- ------------- -------------- ------------------
<FN>
(1) Options granted to Mr. Jones vest in equal installments over three years.
Vesting is accelerated upon a change of control.
</FN>
<FN>
(2) Options granted to Mr. Gershien vest in equal installments over five years.
Vesting is accelerated upon a change of control.
</FN>
</TABLE>
No Named Executive Officer received any stock appreciation rights ("SARs")
or long-term incentive performance ("LTIP") payouts for the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Aggregate Options/SAR Exercises and Fiscal Year End Option/SAR Value Table
- --------------------------------------------------------------------------------------------------------------------------------
- -------------------------- --------------- ---------------- --------------------------------- ----------------------------------
Shares Number of Securities Underlying Value of Unexercised
Acquired on Value Realized Unexercised Options/SARs at In-the-money Options/SARs at
Name Exercise ($) FY-End (#) FY-End ($)(1)
- -------------------------- --------------- ---------------- --------------------------------- ----------------------------------
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
Exercisable Unexerciseable Exercisable Unexerciseable
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
James Q. Crowe -- -- -- -- -- --
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
R. Douglas Bradbury -- -- 250,000 750,00 9,425,000 28,275,000
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
Kevin J. O'Hara -- -- 125,000 375,000 4,712,500 14,137,500
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
Michael D. Jones -- -- -- 200,000 -- 5,125,000
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
Mark L. Gershien -- -- -- 520,000 -- 19,045,000
- -------------------------- --------------- ---------------- -------------- ------------------ --------------- ------------------
<FN>
(1) On December 31, 1998, the last reported sale price for the Level 3 Common
Stock as reported by The Nasdaq Stock Market was $43.125.
</FN>
</TABLE>
<PAGE>
PRELIMINARY PROXY MATERIALS
Outperform Stock Option Grants
Level 3 has adopted the Outperform Stock Option ("OSO") program, which
differs from long term incentive ("LTI") programs generally adopted by Level 3's
competitors that make employees eligible for conventional non-qualified stock
options ("NQSOs"). While widely adopted, Level 3 believes such NQSO programs
reward eligible employees when company stock price performance is inferior to
investments of similar risks, dilute public stockholders in a manner not
directly proportional to performance and fail to provide a preferred return on
stockholders' invested capital over the return to option holders. Level 3
believes that the OSO program is superior to an NQSO-based program with respect
to these issues while, at the same time, providing eligible employees a
success-based reward balancing the associated risk.
The OSO program was designed by Level 3 so that its stockholders receive a
market related return on their investment before OSO holders receive any return
on their options. Level 3 believes that the OSO program aligns directly
management's and stockholders' interests by basing stock option value on Level
3's ability to outperform the market in general, as measured by the S&P 500
Index. The value received for awards under the OSO plan is based on a formula
involving a multiplier related to how much Level 3 Common Stock outperforms the
S&P 500 Index. Participants in the OSO program do not realize any value from
OSOs unless the Level 3 Common Stock price outperforms the S&P 500 Index. To the
extent that the Level 3 Common Stock outperforms the S&P 500, the value of OSOs
to an option holder may exceed the value of NQSOs.
The following table summarizes the grant of OSOs to the Named Executive
Officers during 1998. OSOs are granted quarterly during the year. Effective with
the grants made in September 1998, OSOs are granted on the first day of the last
month of a calendar quarter.
<PAGE>
PRELIMINARY PROXY MATERIALS
<TABLE>
<CAPTION>
OSO Grants in Last Fiscal Year
- ---------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------- --------------------------------- -----------------------------------
Total Number of OSOs at FY-End Value of Total Unexercised
Individual Grants (#)(1) In-the-money OSOs at FY-End ($)(2)
- ----------------------------------------------------------- --------------------------------- -----------------------------------
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
Number of OSOs
granted per Expiration
Name Quarter (#) Date Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
James Q. Crowe 80,000 4/1/2002 0 320,000 0 2,848,000
80,000 7/1/2002
80,000 9/1/2002
80,000 12/1/2002
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
R. Douglas Bradbury 25,000 4/1/2002 0 100,000 0 890,000
25,000 7/1/2002
25,000 9/1/2002
25,000 12/1/2002
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
Kevin J. O'Hara 25,000 4/1/2002 0 100,000 0 890,000
25,000 7/1/2002
25,000 9/1/2002
25,000 12/1/2002
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
Michael D. Jones 17,500 4/1/2002 0 70,000 0 623,000
17,500 7/1/2002
17,500 9/1/2002
17,500 12/1/2002
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
Mark L. Gershien 15,000 4/1/2002 0 60,000 0 534,000
15,000 7/1/2002
15,000 9/1/2002
15,000 12/1/2002
- -------------------------- ---------------- --------------- -------------- ------------------ -------------- --------------------
<FN>
(1) An OSO award vests in equal quarterly installments over two years. No OSO
award, including a vested OSO award, can be exercised until the second
anniversary of the date of its grant. The OSO awards provide for
acceleration of vesting and the lifting of the two year prohibition on
exercise in the event of a change of control, as defined in the Level 3
1995 Stock Plan (as amended on April 1, 1998).
</FN>
<FN>
(2) OSO value at December 31, 1998 has been computed based upon the OSO formula
and multiplier as of that date. The value of an OSO is subject to change
based upon the performance of the Level 3 Common Stock relative to the
performance of the S&P 500 Index from the time of the grant of the OSO
award until the OSO award has been exercised.
</FN>
</TABLE>
<PAGE>
PRELIMINARY PROXY MATERIALS
Section 16(a) Beneficial Ownership Reporting Compliance
To Level 3's knowledge, no person that was a director, executive officer or
beneficial owner of more than 10% of the outstanding shares of Level 3 Common
Stock failed to timely file all reports required under Section 16(a) of the
Securities Exchange Act of 1934.
Director's Compensation
During 1998, each of the directors of the Company who were not employed by
the Company during 1998 received directors fees consisting of an annual retainer
of $124,942. Messers. Yanney and Julian received an annual retainer of $128,000,
which includes additional fees for serving as chairman of the Compensation
Committee and Audit Committee, respectively. These fees have been paid to these
directors in the form of grants of Level 3's Outperform Stock Options.
Certain Relationships and Related Transactions
All share information has been adjusted to reflect the Company's 2-for-1
stock split, effected as a stock dividend in August 1998.
In connection with his retention as Chief Executive Officer of the Company,
Mr. Crowe entered into an engagement agreement (the "Engagement Agreement") with
the Company. Under the Engagement Agreement, the Company acquired from Mr.
Crowe, Mr. Bradbury and an additional individual, Broadband Capital Group,
L.L.C., a company formed to develop investment opportunities, for a purchase
price of $68,523, the owners' cash investment in that company. Pursuant to the
Engagement Agreement, the Company sold 10,000,000 shares of the Company's former
Class D Diversified Group Convertible Exchangeable Common Stock, par value
$.0625 per share (the "Class D Stock") to Mr. Crowe and 2,500,000 shares of
Class D Stock to Mr. Bradbury, in each case at $5.425 per share. The Engagement
Agreement also provided that the Company would make available for sale, from
time to time prior to the consummation of the Split-off, to certain employees of
the Company designated by Mr. Crowe in connection with the implementation of the
Business Plan ("Business Plan Employees"), up to an aggregate of 10,500,000
shares of Class D Stock.
The Company entered into a separation agreement with Mr. Jaros, a director
of the Company, in connection with the resignation of Mr. Jaros as an executive
officer of the Company effective July 31, 1997. Under the separation agreement,
the Company paid Mr. Jaros $262,350 as an executive bonus payments in 1998.
On July 1, 1998, the Company issued 187,706 shares of its common stock to
Mr. Colin V.K. Williams, an Executive Vice President of the Company, in
connection with the Company's acquisition of UltraLine (Bermuda) Limited, a
company owned by Mr. Williams. The value of the transaction, based upon the
trading price of its common stock on that date, was approximately $5 million.
On June 18, 1998, Level 3 entered into a contract with Peter Kiewit Sons,
Inc. for the construction of Level 3's nearly 16,000 mile North American
intercity network. Construction, which is expected to be completed during the
first quarter of 2001, will cost an estimated $2
<PAGE>
PRELIMINARY PROXY MATERIALS
billion. In 1998, Level 3 incurred costs under this contract of approximately
$87.0 million. In addition, Level 3 has retained PKS as the general contractor
for the construction of Level 3's campus headquarters facility being built in
the City of Broomfield, Colorado. In 1998, Level 3 incurred costs under this
contract of approximately $22.7 million.
In connection with the Split-off, Level 3 and PKS entered into various
agreements intended to implement the Split-off, including a separation agreement
and a tax-sharing agreement.
Separation Agreement. Level 3 and PKS entered into a separation agreement
(the "Separation Agreement") relating to the allocation of certain risks and
responsibilities between PKS and Level 3 after the Split-off and certain other
matters. The Separation Agreement provides that each of PKS and Level 3 will
indemnify the other with respect to the activities of its subsidiary business
groups, except as specifically provided under other agreements between the
companies. The cross-indemnities are intended to allocate financial
responsibility to PKS for liabilities arising out of the construction businesses
formerly conducted by Level 3, and to allocate to Level 3 financial
responsibility for liabilities arising out of the non-construction businesses
conducted by Level 3. The Separation Agreement also allocates between PKS and
Level 3 certain corporate-level risk exposures not readily allocable to either
the construction businesses or the non-construction businesses.
The Separation Agreement provides that each of Level 3 and PKS will be
granted access to certain records and information in the possession of the other
company, and requires that each of Level 3 and PKS retain all such information
in its possession for a period of ten years following the Split-off. Under the
Separation Agreement, each company is required to give the other company prior
notice of any intention to dispose of any such information.
The Separation Agreement provides that, except as otherwise set forth
therein or in any related agreement, costs and expenses in connection with the
Split-off will be paid 82.5% by Level 3 and 17.5% by PKS. On March 18, 1998,
Level 3 and PKS entered into an amendment to the Separation Agreement that
provides that PKS will bear substantially all of those expenses if the Level 3
Board determines to force conversion of all outstanding Class R Stock of Level 3
on or before July 15, 1998 (a "Forced Conversion Determination").
The Level 3 Board made such a determination and, accordingly, substantially
all of those expenses will be borne by PKS.
Tax Sharing Agreement. Level 3 and PKS have entered into a tax sharing
agreement (the "Tax Sharing Agreement") that defines each company's rights and
obligations with respect to deficiencies and refunds of federal, state and other
taxes relating to operations for tax years (or portions thereof) ending prior to
the Split-off and with respect to certain tax attributes of Level 3 and PKS
after the Split-off. Under the Tax Sharing Agreement, with respect to periods
(or portions thereof) ending on or before the Split-off, Level 3 and PKS
generally will be responsible for paying the taxes relating to such returns
(including any subsequent adjustments resulting from the redetermination of such
tax liabilities by the applicable taxing authorities) that are allocable to the
non-construction business and the construction business, respectively.
<PAGE>
PRELIMINARY PROXY MATERIALS
The Tax Sharing Agreement also provides that Level 3 and PKS will indemnify
the other from certain taxes and expenses that would be assessed on PKS and
Level 3, respectively, if the Split-off were determined to be taxable, but
solely to the extent that such determination arose out of the breach by Level 3
or PKS, respectively, of certain representations made to the Internal Revenue
Service in connection with the private letter ruling issued with respect to the
Split-off. Under the Tax Sharing Agreement, if the Split-off were determined to
be taxable for any other reason, those taxes and certain other taxes associated
with the Split-off (together, "Split-Off Taxes") would be allocated 82.5% to
Level 3 and 17.5% to PKS. The Tax Sharing Agreement, however, provides that
Split-Off Taxes will be allocated one-half to each of Level 3 and PKS if a
Forced Conversion Determination is made. As a result of the Forced Conversion
Determination, the Split-Off Taxes will be so allocated. Finally, the Tax
Sharing Agreement provides, under certain circumstances, for certain liquidated
damage payments from Level 3 to PKS if the Split-off were determined to be
taxable, which are intended to compensate stockholders of PKS indirectly for
taxes assessed upon them in that event. Those liquidated damage payments,
however, are reduced because of the Forced Conversion Determination.
Mine Management Agreement. In 1992, PKS and Level 3 entered into a mine
management agreement (the "Mine Management Agreement") pursuant to which a
subsidiary of PKS, Kiewit Mining Group Inc. ("KMG"), provides mine management
and related services for Level 3's coal mining properties. In consideration of
the provision of such services, KMG receives a fee equal to thirty percent of
the adjusted operating income of the coal mining properties. The term of the
Mine Management Agreement expires on January 1, 2016.
In connection with the Split-off, the Mine Management Agreement was amended
to provide KMG with a right of offer in the event that Level 3 were to determine
to sell any or all of its coal mining properties. Under the right of offer,
Level 3 would be required to offer to sell those properties to KMG at the price
that Level 3 would seek to sell the properties to a third party. If KMG were to
decline to purchase the properties at that price, Level 3 would be free to sell
them to a third party for an amount greater than or equal to that price. If
Level 3 were to sell the properties to a third party, thus terminating the Mine
Management Agreement, it would be required to pay KMG an amount equal to the
discounted present value to KMG of the Mine Management Agreement, determined, if
necessary, by an appraisal process.
<PAGE>
PRELIMINARY PROXY MATERIALS
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of Level 3 Common Stock, as of March 9, 1999, by Level 3's
directors, the Named Executive Officers, and directors and executive officers as
a group, and each person known by the Company to beneficially own more than 5%
of the outstanding Level 3 Common Stock.
Percent of
Name Number of Shares of common stock
common stock beneficially owned
Walter Scott, Jr.(1) 34,980,455 10.4%
James Q. Crowe 11,327,614 3.4
R. Douglas Bradbury(2) 2,805,190 *
Mark L. Gershien(3) 204,000 *
Kevin J. O'Hara(4) 1,881,180 *
Colin V.K. Williams 426,344 *
Philip B. Fletcher 5,000 *
William L. Grewcock(5) 11,525,428 3.4
Richard R. Jaros(6) 3,497,498 1.0
Robert E. Julian 3,993,580 1.2
David C. McCourt 115,000 *
Kenneth E. Stinson 729,728 *
Michael B. Yanney 100,000 *
Directors and Executive Officers as a Group 72,227,376 21.5
(15 persons)
Donald L. Sturm(7) 18,373,750 5.5
* Less than 1%.
(1) Includes 99,700 shares of Level 3 Common Stock held by the Suzanne Scott
Irrevocable Trust as to which Mr. Scott shares voting and investment
powers.
(2) Includes 250,000 shares of Level 3 Common Stock subject to vested
non-qualified stock options.
(3) Includes 104,000 shares of Level 3 Common Stock subject to vested
non-qualified stock options.
(4) Includes 46,000 shares of Level 3 Common Stock held by Kevin J. O'Hara
Family LTD Partnership. Includes 125,000 shares of common stock subject to
vested non-qualified stock options.
(5) Includes 1,154,600 shares of Level 3 Common Stock held by Grewcock Family
Limited Partnership. Includes 351,230 shares of Level 3 Common Stock held
by the Bill & Berniece Grewcock Foundation as to which Mr. Grewcock shares
voting and investment powers.
(6) Includes 370,000 shares of Level 3 Common Stock held by the Jaros Family
Limited Partnership. Includes 1,200,000 shares of Level 3 Common Stock held
by Mr. Jaros and 800,000 shares of Level 3 Common Stock subject to options
held by a grantor trust, of which Mr. Jaros is the residual beneficiary.
See "Certain Transactions and Relationships."
<PAGE>
PRELIMINARY PROXY MATERIALS
(7) Mr. Sturm's business address is 3033 East First Avenue, Denver, Colorado
80206. Based solely on Mr. Sturm's Schedule 13D dated May 5, 1998, adjusted
for a subsequent stock dividend, Mr. Sturm owns 15,610,310 shares of Level
3 Common Stock, and has voting and investment power with respect to
2,613,440 shares held by trusts and partnerships established for family
members and beneficially owns 150,000 shares as a member of the board of
directors of the University of Denver.
Performance Graph
The following performance graph shall not be deemed to be incorporated by
reference by means of any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act of 1933, as amended or
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates such information by reference, and shall not otherwise
be deemed filed under such acts.
The graphs below compare the cumulative total return (stock appreciation
plus reinvested dividends) of the Company's common stock with two indexes of
publicly traded stocks. Prior to the Split-Off, the Company had two classes of
common stock, Class C Construction & Mining Group Restricted Convertible
Exchangeable Common Stock, par value $.0625 per share (the "Class C Stock") and
Class D Stock. For substantially all of the periods presented the Company's
stock was not publicly traded. Beginning in the fourth quarter 1997, the
Company's Class D Stock commenced trading on the over-the-counter market of the
National Association of Securities Dealers, Inc. During the fourth quarter, the
only quarter during which trading occurred, the range of the high and low bid
information for the Class D Stock was $20.41 to $29.00. The Level 3 Common Stock
now trades on The Nasdaq National Market under the symbol "LVLT." Because the
Split-off occurred during 1998, no performance graph information is presented
for the Class C Stock. For performance graph information regarding the Class C
Stock, please see the proxy materials of PKS.
Pursuant to the terms of the Company's Restated Certificate of
Incorporation for all periods presented in the graphs depicted below, other than
for the last three quarters of 1998, the Company's stock was valued by a formula
contained in the Restated Certificate of Incorporation. Company stock was valued
at the end of the Company's fiscal year and the formula value was reduced as
dividends are declared during the following year. For purposes of the graphs, it
has been assumed that dividends were immediately reinvested in additional shares
of Level 3 Common Stock, although such reinvestment was not permitted in actual
practice. Although for fiscal years prior to 1998, the Company's fiscal year
ended on the last Saturday in December, its stock is compared against indexes
which assume a fiscal year ending December 31.
Because of two corporate restructuring events during the last five years,
further assumptions about total return are required. The Company's stock was
reclassified on January 8, 1992. Each old share of Class C Stock was exchanged
for one new share of Class C Stock and one share of Class D Stock. The five year
cumulative total return is shown as if the change occurred on January 1, 1992.
On September 30, 1995, the Company distributed to its Class D stockholders
by way of a tax free dividend its stock holdings in MFS Communications Company,
Inc. For each share of Class D Stock, 1.741 shares of MFS common stock and .651
share of MFS preferred stock were distributed. On the distribution date, 1.741
shares of MFS common stock had a public market
<PAGE>
PRELIMINARY PROXY MATERIALS
value of $76.17 and .651 share of MFS preferred stock had a value of $.65
(together, a "distribution unit" of $76.82). For purposes of the graph below, it
is assumed that each distribution unit was immediately sold for $76.82 and the
proceeds reinvested in additional shares of Class D Stock, which then had the
reduced formula price of $40.40 per share.
The formula value of the Class D Stock was linked to the performance of the
Company's Diversified Group (which are the operations that remained in the
Company after the Split-Off), which is primarily engaged in communications,
information services and coal mining businesses.
The graph compares the cumulative total return of the Level 3 Common Stock
(formerly Class D Stock) for the five year period 1993-1998 with the Dow Jones
Coal Index and the NASDAQ Telecommunications Index. The graph assumes that the
value of the investment was $100 on December 31, 1992, and that all dividends
and other distributions were reinvested. In addition, all stock prices and
dividends reflect a dividend of four shares of Class D Stock for each
outstanding share of Class D Stock that was effective December 1997 and a
dividend of one share of Level 3 Common Stock (formerly Class D Stock) for each
outstanding share of Level 3 Common Stock effective August 1998.
<PAGE>
PRELIMINARY PROXY MATERIALS
Comparison of 5 Year Cumulative Total Return
Among the Level 3 Common Stock, the S&P 500 Index,
the Nasdaq Telecommunications Index and the Dow Jones Coal Index
[Performance Graph]
1993 1994 1995 1996 1997 1998
Common Stock 100 101 244 270 290 2,147
S&P 500 Index 100 101 139 171 229 294
Dow Jones Coal Index 100 98 104 113 97 80
NASDAQ Telecommunications Index 100 83 109 112 166 273
<PAGE>
PRELIMINARY PROXY MATERIALS
COMMON STOCK PROPOSAL
The adoption of the proposal to amend the Company's Restated Certificate of
Incorporation (the "Common Stock Proposal") would increase the number of
authorized shares of Level 3 Common Stock in the Restated Certificate from 500
million to 1.5 billion.
Reasons for the Common Stock Proposal
The Board believes the increase in the number of authorized shares of Level
3 Common Stock will provide flexibility in connection with future activities,
including:
o stock dividends or splits;
o financings;
o investment opportunities;
o acquisitions of other companies;
o employee benefit plans; and
o for other corporate purposes that the Board deems advisable.
The Company has announced its intention to issue shares from time-to-time
for corporate acquisitions, but there can be no assurance that any such issuance
or issuance for other purposes will be made, or, if made, as to the timing,
type, or size of any issuance. The authorized but unissued Level 3 Common Stock,
including the increased number of shares of Level 3 Common Stock if the Common
Stock Proposal is approved by the stockholders and made effective, may be issued
from time to time as determined by the Board without further stockholder action,
unless issued in transactions, such as certain mergers, which require
stockholder approval.
Accordingly, the Company would be in a position to use its capital stock to
take advantage of market conditions and opportunities without the delay and
expense associated with the holding of a special meeting of stockholders.
Although the Company may, based upon its review of prevailing market conditions,
issue and sell shares of Level 3 Common Stock in the public markets, currently
there is no agreement, arrangement or understanding relating to an issuance and
sale of Level 3 Common Stock. The Company has an effective Registration
Statement, which allows for the sale, from time to time, of securities of the
Company, including Level 3 Common Stock, with an aggregate value of
approximately $1.2 billion. No preemptive rights exist with respect to any
outstanding shares of Common Stock. The issuance of additional shares of Level 3
Common Stock may cause dilution in the equity and earnings of the present
stockholders.
Of the 500 million shares of Level 3 Common Stock currently authorized, as
of the Record Date, 338,125,256 shares were issued and outstanding. As of the
Record Date, there were 161,874,744 shares authorized but unissued, 70,000,000
shares of which were reserved for issuance upon the exercise of awards under the
Company's stock plans.
<PAGE>
PRELIMINARY PROXY MATERIALS
If the Common Stock Proposal is adopted, the first paragraph of Article 4
of the Restated Certificate will be amended to read as stated in Annex A to this
Proxy Statement.
The Board unanimously recommends a vote FOR approval of the Common Stock
Proposal.
OTHER MATTERS
It is not anticipated that any matters other than those described in this
Proxy Statement will be brought before the Annual Meeting. If any other matters
are presented, however, it is the intention of the persons named in the proxy to
vote the proxy in accordance with the discretion of the persons named in the
proxy.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the 2000 Annual
Meeting must be received by Level 3 on or before March 27, 2000, but no earlier
than February 26, 2000 to be included in the proxy material of Level 3 relating
to such meeting. In addition, such proposal must also include a brief
description of the business to be brought before the annual meeting, the
stockholder's name and record address, the number of shares of Level 3 Common
Stock which are owned beneficially or of record by such stockholder, a
description or any arrangements or understandings between the stockholder and
any other person in connection with such proposal and any material interest of
such stockholder in such proposal and a representation that the stockholder
intends to appear in person or by proxy at the Annual Meeting. If the
stockholder wishes to nominate one or more persons for election as a director,
such stockholder's notice must comply with additional provisions as set forth in
the Level 3 By-laws, including certain information with respect to the persons
nominated for election as directors and any information relating to the
stockholder that would be required to be disclosed in a Proxy Filing. Any such
proposals should be directed to the Secretary, Level 3 Communications, Inc.,
3555 Farnam Street, Omaha, Nebraska 68131.
<PAGE>
PRELIMINARY PROXY MATERIALS
Annex A
Set forth below is the text of ARTICLE IV of the Restated Certificate of
Incorporation of Level 3 Communications, Inc. if the Common Stock Proposal is
approved:
"ARTICLE IV
AUTHORIZED CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have the authority to issues is 1,518,500,000, consisting of 1,500,000,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), 8,500,000
shares shall be Class R Convertible Common Stock, par value $0.01 per share (the
"Class R Stock") and 10,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock).
Ten shares of the Common stock are hereby designated as Common Stock,
Non-Redeemable Series. The rights, powers, preferences, privileges and
limitations of Common Stock, Non-Redeemable Series shall be identical to those
of all other shares of Common Stock, except as described in Articles V and IX
hereof."
<PAGE>
PRELIMINARY PROXY MATERIALS
[Logo]
LEVEL 3 COMMUNICATIONS, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 27, 1999
9:00 A.M.
THE JOSLYN ART MUSEUM
2200 DODGE STREET
OMAHA, NEBRASKA 68102
[Logo] LEVEL 3 COMMUNICATIONS, INC.
3555 FARNUM STREET, OMAHA, NE 68131 REVOCABLE PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 27, 1999.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
By signing the proxy, you revoke all prior proxies and appoint Thomas C. Stortz
and Neil J. Eckstein, and each of them, with full power of substitution, to vote
your shares on the matters shown on the reverse side and any other matters which
may come before the Annual Meeting and all adjournments as described in the
Notice of Annual Meeting and Proxy Statement dated April , 1999, receipt of
which is hereby acknowledged.
SEE REVERSE FOR VOTING INSTRUCTIONS.
TO BE SIGNED ON REVERSE SIDE.
<PAGE>
PRELIMINARY PROXY MATERIALS
COMPANY #
CONTROL #
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK --- EASY --- IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
o Control Number which are located above. o Follow the simple instructions
the Voice provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/LVLT/ -- QUICK -- EASY -- IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Level 3 Communications, Inc., c/o Shareowner
Services-, P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of directors: 01 William L. Grewcock 03 Robert E. Julian
02 Richard R. Jaros 04 David C. McCourt
[ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. To adopt an amendment to Level 3 Communications, Inc.'s Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock from 500 million to 1.5 billion. [ ]For [ ] Against [ ]
Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments or
postponements thereof. [ ]For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ] Indicate changes below:
Date -------------------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc., should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
