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As filed with the Securities and Exchange Commission on July 18, 2014

Reg. No. 333-           


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Level 3 Communications, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  0-15658
(Primary Standard Industrial
Classification Code Number)
  47-0210602
(I.R.S. Employer
Identification No.)

1025 Eldorado Blvd.
Broomfield, Colorado 80021
(720) 888-1000

(Address, including ZIP code, and telephone number, including area code, of registrant's principal executive offices)

John M. Ryan
Executive Vice President, Chief Legal Officer and Secretary
1025 Eldorado Blvd.
Broomfield, Colorado 80021
(720) 888-1000

(Name, address, including ZIP code, and telephone number, including area code, of agent for service)



With Copies to:

David K. Boston
Laura L. Delanoy
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
(212) 728-8000

 

Tina A. Davis
Senior Vice President, General Counsel and Secretary
tw telecom inc.
10475 Park Meadows Drive
Littleton, CO 80124
(303) 566-1000

 

Steve A. Rosenblum
Stephanie J. Seligman
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
(212) 403-1000



Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the mergers described in the enclosed joint proxy statement/prospectus.

            If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.    o

            If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

            Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

            If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

            o    Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)

            o    Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)

CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities to be Registered
  Amount to be
Registered

  Proposed Maximum
Offering Price Per
Unit

  Proposed Maximum
Aggregate Offering
Price

  Amount of
Registration Fee

 

Common stock, par value $0.01 per share

  98,337,739(1)   N/A   $4,322,646,033(2)   $556,757(3)

 

(1)
Represents the estimated maximum number of shares of the Registrant's common stock to be issued pursuant to the merger agreement described herein based on the product obtained by multiplying (x) the sum of (i) 136,424,945 shares of tw telecom inc. common stock, par value $0.01 per share, (ii) 342,029, the aggregate number of shares of tw telecom common stock issuable pursuant to the exercise of options and (iii) 3,715,510, the aggregate number of shares of tw telecom common stock issuable upon the vesting of restricted stock and restricted stock units, each amount which is estimated to be issued and outstanding immediately prior to the mergers (and each of which will be cancelled on completion of the mergers), by (y) the exchange ratio of 0.7 shares of the Registrant's common stock.

(2)
Estimated solely for purposes of calculating the registration fee required by Section 6(b) of the Securities Act and calculated pursuant to Rules 457(f)(1), 457(f)(3) and 457(c) under the Securities Act. The proposed maximum aggregate offering price of the Registrant's common stock was calculated based upon the market value of tw telecom inc. common stock in accordance with Rule 457(c) under the Securities Act as follows: the product of (x) $40.77, the average of the high and low prices per share of tw telecom inc. common stock on July 11, 2014, as quoted on the NASDAQ Global Select Market, multiplied by (y) 140,482,484, the estimated number of shares of tw telecom inc. common stock to be exchanged in the merger as of July 15, 2014. Pursuant to Rule 457(f)(3) under the Securities Act, the amount of cash that may be payable by the Registrant has been deducted from the proposed maximum aggregate offering price, which amount of cash was calculated by multiplying (i) the cash consideration of $10.00 per share of tw telecom common stock by (ii) 140,482,484, the estimated number of shares of tw telecom inc. common stock to be exchanged in the merger as of July 15, 2014.

(3)
Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $128.80 per $1,000,000 of the proposed maximum aggregate offering price.

            The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such dates as the SEC, acting pursuant to said Section 8(a), may determine.

   


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The information in this joint proxy statement/prospectus is not complete and may be changed. The securities offered by this joint proxy statement/prospectus may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer or solicitation is not permitted.

PRELIMINARY—SUBJECT TO COMPLETION—DATED JULY 18, 2014



LOGO
 

LOGO

MERGERS PROPOSED—YOUR VOTE IS VERY IMPORTANT

           tw telecom inc. and Level 3 Communications, Inc. have entered into an Agreement and Plan of Merger, dated as of June 15, 2014 (which we refer to as the merger agreement). Pursuant to the terms and subject to the conditions of the merger agreement, a direct wholly owned subsidiary of Level 3 will merge with tw telecom (which we refer to as the merger) with tw telecom continuing as the surviving corporation and immediately following the merger, the surviving corporation will merge with another direct wholly owned subsidiary of Level 3 (which we refer to as Merger Sub 2), with Merger Sub 2 continuing as the surviving company (which we refer to as the subsequent merger and, together with the merger, as the mergers).

           Upon completion of the mergers, holders of outstanding shares of tw telecom common stock (excluding shares held by dissenting stockholders) will receive for each share of tw telecom common stock that they own (i) 0.7 shares of Level 3 common stock, including the associated rights under the rights agreement entered into on April 10, 2011, as amended, by Level 3 with Wells Fargo Bank, N.A., as rights agent, (which we refer to as the exchange ratio), and (ii) $10.00 in cash. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger. Based on the closing price of Level 3 common stock on the New York Stock Exchange on June 12, 2014, the last trading day before media reports of the possibility of a transaction appeared, the merger consideration represented approximately $39.56 in value for each share of tw telecom common stock. Based on the closing price of Level 3 common stock on                , 2014, the latest practicable trading day before the date of this joint proxy statement/prospectus, the merger consideration represented approximately $         in value for each share of tw telecom common stock. Level 3 stockholders will continue to own their existing Level 3 shares. tw telecom common stock is currently traded on the NASDAQ Global Select Market under the symbol "TWTC," and Level 3 common stock is currently traded on the New York Stock Exchange under the symbol "LVLT." We urge you to obtain current market quotations of tw telecom common stock and Level 3 common stock before voting.

           Based on the estimated number of shares of tw telecom and Level 3 common stock that will be outstanding immediately prior to the closing of the mergers, we estimate (assuming no tw telecom stockholders have exercised their statutory rights of appraisal) that, upon closing, existing Level 3 stockholders will own approximately 71% of Level 3 and former tw telecom stockholders will own approximately 29% of the outstanding shares of Level 3.

           tw telecom and Level 3 will each hold special meetings of their respective stockholders in connection with the proposed mergers.

    At the special meeting of tw telecom stockholders, tw telecom stockholders will be asked to vote on the proposal to approve and adopt the merger agreement and the mergers (which we refer to as the merger proposal). In addition, tw telecom will solicit stockholder approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to tw telecom's named executive officers in connection with the mergers, and the agreements and understandings pursuant to which such compensation may be paid or become payable (which we refer to as the compensation proposal). The proposal to approve and adopt the merger agreement and the mergers will be approved if a majority of the outstanding shares of tw telecom common stock entitled to vote thereon vote to approve and adopt the merger agreement and the mergers. In connection with their approval of the merger agreement, the stockholders of tw telecom will vote separately to approve, on an advisory (non-binding) basis, the compensation proposal, which is not a condition to the completion of the mergers. Approval, on an advisory (non-binding) basis, of the compensation proposal requires the affirmative vote of the majority of the votes cast at the tw telecom special meeting at which a quorum is present.

    At the special meeting of Level 3 stockholders, Level 3 stockholders will be asked to vote on the proposal to approve the issuance of shares of Level 3 common stock to tw telecom stockholders pursuant to the merger, as well as the proposal to approve an amendment to Level 3's Restated Certificate of Incorporation increasing the number of authorized shares of Level 3 common stock (which we refer to as the Level 3 charter amendment). The proposal to issue shares of Level 3 common stock will be approved if the holders of a majority of the votes of Level 3 capital stock cast at the Level 3 special meeting, and entitled to vote on the proposal, approve the share issuance, and the proposal to approve the adoption of the Level 3 charter amendment will be approved if the holders of a majority of the outstanding shares of Level 3 vote to approve the Level 3 charter amendment.

           We cannot complete the mergers unless the stockholders of tw telecom approve the merger proposal made by tw telecom, and the stockholders of Level 3 approve the proposals made by Level 3, each as described above. Whether or not you expect to attend either special meeting in person, please submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the tw telecom or Level 3 special meeting, as applicable.

           The tw telecom board of directors (which we refer to as the tw Board) has unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the mergers, are advisable and in the best interests of tw telecom and its stockholders. The tw Board unanimously recommends that the tw telecom stockholders vote "FOR" the proposal to approve and adopt the merger agreement and the mergers and "FOR" the proposal to approve, on an advisory basis, the compensation that may become payable to tw telecom's named executive officers in connection with the mergers.

           The Level 3 board of directors (which we refer to as the Level 3 Board) has unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the adoption of the Level 3 charter amendment and the issuance of shares of Level 3 common stock to tw telecom stockholders pursuant to the merger are in the best interests of Level 3 and its stockholders. The Level 3 Board unanimously recommends that the Level 3 stockholders vote "FOR" the proposal to approve the issuance of shares of Level 3 common stock to tw telecom stockholders pursuant to the merger and "FOR" the proposal to approve the adoption of the Level 3 charter amendment.

           The obligations of tw telecom and Level 3 to complete the mergers are subject to the satisfaction or waiver of certain conditions described in the accompanying joint proxy statement/prospectus. The accompanying joint proxy statement/prospectus also contains detailed information about tw telecom, Level 3, the special meetings, the merger agreement and the mergers. You should read this joint proxy statement/prospectus carefully and in its entirety before voting, including the section entitled "Risk Factors" beginning on page 39.

           We look forward to the successful completion of the mergers.

Sincerely,

Larissa L. Herda
Chairman and Chief Executive Officer
tw telecom inc.
  Jeff K. Storey
President and Chief Executive Officer
Level 3 Communications, Inc.

           Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

           This joint proxy statement/prospectus is dated                           , 2014 and is first being mailed to tw telecom and Level 3 stockholders on or about                           , 2014.


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LOGO

tw telecom inc.
10475 Park Meadows Drive
Littleton, Colorado 80124
(303) 566-1000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On                      , 2014

Dear Fellow Stockholders of tw telecom inc.:

        We are pleased to invite you to attend the special meeting of stockholders of tw telecom inc., a Delaware corporation (which we refer to as tw telecom), which will be held at                   , on                  , 2014 , at                  , local time, for the following purposes:

    to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of June 15, 2014 (which we refer to as the merger agreement), by and among tw telecom, Level 3 Communications, Inc., a Delaware corporation (which we refer to as Level 3), Saturn Merger Sub 1, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Level 3 (which we refer to as Merger Sub 1), and Saturn Merger Sub 2, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Level 3 (which we refer to as Merger Sub 2), which we have attached as Annex A to the joint proxy statement/prospectus accompanying this notice. Pursuant to the merger agreement, Merger Sub 1 will be merged with and into tw telecom (which we refer to as the merger) with each outstanding share of common stock of tw telecom being converted into the right to receive (i) 0.7 shares of common stock of Level 3 and (ii) $10.00 in cash. We refer to this proposal as the merger proposal.

    to consider and vote on a proposal to adjourn the tw telecom special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the merger proposal. We refer to this proposal as the tw telecom adjournment proposal.

    to consider and vote on a non-binding, advisory proposal to approve the compensation that may become payable to tw telecom's named executive officers in connection with the completion of the merger. We refer to this proposal as the compensation proposal.

        tw telecom will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the tw telecom special meeting.

        The tw telecom board of directors (which we refer to as the tw Board) has unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby are in the best interests of tw telecom and its stockholders. The tw Board unanimously recommends that tw telecom stockholders vote "FOR" the proposal to approve and adopt the merger agreement and the mergers, "FOR" the proposal to adjourn the tw telecom special meeting, if necessary, to solicit additional proxies, and "FOR" the proposal to approve, on an advisory basis, the compensation payable in connection with the mergers.

        The tw Board has fixed the close of business on                      , 2014 as the record date for determination of tw telecom stockholders entitled to receive notice of, and to vote at, the tw telecom special meeting or any adjournments or postponements thereof. Only stockholders of record of tw telecom at the close of business on the record date are entitled to notice of, and to vote at, the special meeting and at any adjournment of the meeting. A list of stockholders of record entitled to


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vote at the special meeting will be available for ten days before the special meeting at our executive offices and principal place of business at 10475 Park Meadows Drive, Littleton, Colorado 80124 for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. The list will also be available at the special meeting for examination by any stockholder of record present at the special meeting.

        Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of tw telecom common stock entitled to vote on the proposal. Approval of the tw telecom adjournment proposal and the compensation proposal each requires the affirmative vote of holders of a majority of the issued and outstanding shares of tw telecom common stock present in person or represented by proxy at the tw telecom special meeting and entitled to vote at the meeting.

        Your vote is important. Whether or not you expect to attend in person, we urge you to vote your shares as promptly as possible by (1) accessing the internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card or (3) marking, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the tw telecom special meeting. If your shares are held in the name of a broker, bank, trust company or other nominee, please follow the instructions on the voting instruction card furnished by the record holder.

        Please note that if you hold shares in different accounts, it is important that you vote the shares represented by each account.

        The enclosed joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement. We urge you to read this joint proxy statement/prospectus, including any documents incorporated by reference, and the annexes carefully and in their entirety. If you have any questions concerning the merger or this joint proxy statement/prospectus, would like additional copies or need help voting your shares of tw telecom common stock, please contact tw telecom's investor relations department:

tw telecom inc.
10475 Park Meadows Drive
Littleton, Colorado 80124
(303) 542-6894
Attn: Investor Relations

    By order of the Board of Directors,

 

 

Tina A. Davis
    Senior Vice President, General Counsel and Secretary

Littleton, Colorado
                      , 2014


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LOGO


NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of Level 3 Communications, Inc.:

        We are pleased to invite you to attend the special meeting of stockholders of Level 3 Communications, Inc. (which we refer to as Level 3), which will be held at                       , on                      , 2014, at                      , local time, to consider and vote on the following:

    a proposal to approve the issuance of shares of Level 3 common stock pursuant to the merger (which we refer to as the Level 3 stock issuance) as contemplated by the Agreement and Plan of Merger, dated as of June 15, 2014, by and among tw telecom inc. (which we refer to as tw telecom), Level 3, Saturn Merger Sub 1, LLC, a direct wholly owned subsidiary of Level 3 and Saturn Merger Sub 2, LLC, a direct wholly owned subsidiary of Level 3 (which we refer to as the merger agreement), a copy of which is included as Annex A to the joint proxy statement/prospectus of which this notice forms a part;

    a proposal to approve the adoption of an amendment to Level 3's Restated Certificate of Incorporation increasing to 443,333,333 the number of authorized shares of Level 3's common stock (which we refer to as the Level 3 charter amendment); and

    a proposal to adjourn the Level 3 special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the foregoing proposals.

        Level 3 will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. Please refer to the joint proxy statement/prospectus of which this notice forms a part for further information with respect to the business to be transacted at the special meeting.

        Completion of the mergers is conditioned on, among other things, approval of the Level 3 stock issuance and the adoption of the Level 3 charter amendment.

        The Level 3 board of directors (which we refer to as the Level 3 Board) has unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the Level 3 stock issuance and the Level 3 charter amendment, are in the best interests of Level 3 and its stockholders. The Level 3 Board unanimously recommends that Level 3 stockholders vote "FOR" the proposal to approve the Level 3 stock issuance, "FOR" the proposal to approve the adoption of the Level 3 charter amendment and "FOR" the proposal to adjourn the Level 3 special meeting, if necessary, to solicit additional proxies.

        The Level 3 Board has fixed the close of business on                      , 2014 as the record date for determination of Level 3 stockholders entitled to receive notice of, and to vote at, the Level 3 special meeting or any adjournments or postponements thereof. Only Level 3 stockholders of record at the close of business on the record date are entitled to receive notice of, and to vote at, the Level 3 special meeting. The Level 3 stock issuance requires the affirmative vote of holders of a majority of the outstanding shares of Level 3 common stock present in person or represented by proxy at the Level 3 special meeting and entitled to vote on the proposal. The Level 3 charter amendment requires the affirmative vote of the holders of a majority of the outstanding shares of Level 3 common stock. A list of the names of Level 3 stockholders of record will be available for ten days prior to the Level 3 special meeting for any purpose germane to the special meeting between the hours of 9:00 a.m. and 5:00 p.m., local time, at Level 3's headquarters, 1025 Eldorado Blvd., Broomfield, Colorado 80021. The Level 3 stockholder list will also be available at the Level 3 special meeting for examination by any stockholder present at such meeting.


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        Your vote is very important. For your convenience, in addition to submitting a proxy to vote your shares by signing and returning the enclosed proxy card in the postage-paid envelope provided, we have also made telephone and internet voting available to you. Simply follow the instructions on the enclosed proxy. If your shares are held in a 401(k) plan or in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished by the plan trustee or administrator, or record holder, as appropriate.

        The enclosed joint proxy statement/prospectus provides a detailed description of the mergers and the merger agreement as well as a description of the Level 3 common stock. We urge you to read this joint proxy statement/prospectus, including any documents incorporated by reference and the Annexes, carefully and in their entirety. If you have any questions concerning the mergers or this joint proxy statement/prospectus, would like additional copies or need help voting your shares of Level 3 common stock, please contact Level 3 Investor Relations:

Level 3 Communications, Inc.
1025 Eldorado Blvd.
Broomfield, Colorado 80021
(720) 888-1000
Attn: Investor Relations

  By Order of the Board of Directors of
Level 3 Communications, Inc.

 

James O. Ellis, Jr., Admiral, USN (retired)
Chairman of the Board

Broomfield, Colorado
                      , 2014


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REFERENCES TO ADDITIONAL INFORMATION

        This joint proxy statement/prospectus incorporates important business and financial information about tw telecom and Level 3 from documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus free of charge by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

tw telecom inc.
10475 Park Meadows Drive
Littleton, Colorado 80124
(303) 566-1000
Attn: Tina A. Davis, Senior Vice President, General
Counsel and Secretary
  Level 3 Communications, Inc.
1025 Eldorado Blvd.
Broomfield, Colorado
(720) 888-1000
Attn: John M. Ryan, Executive Vice President,
Chief Legal Officer and Secretary

        If you would like to request any documents, please do so no later than five business days before the date of Level 3's special meeting of stockholders (which is                      , 2014) or five business days before the date of tw telecom's special meeting of stockholders (which is                      , 2014), as applicable.

        For a more detailed description of the information incorporated by reference in this joint proxy statement/prospectus and how you may obtain it, see "Where You Can Find More Information" beginning on page 160.


ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

        This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (which we refer to as the SEC) by Level 3, constitutes a prospectus of Level 3 under the Securities Act of 1933, as amended (which we refer to as the Securities Act), with respect to the shares of Level 3 common stock to be issued pursuant to the merger. This joint proxy statement/prospectus also constitutes a joint proxy statement for both tw telecom and Level 3 under the Securities Exchange Act of 1934, as amended (which we refer to as the Exchange Act). It also constitutes a notice of meeting with respect to the special meeting of Level 3 stockholders and the special meeting of tw telecom stockholders.

        You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated                      , 2014, and you should assume that the information contained in this joint proxy statement/prospectus is accurate only as of such date. You should assume that the information incorporated by reference into this joint proxy statement/prospectus is only accurate as of the date of such information. Neither the mailing of this joint proxy statement/prospectus to tw telecom stockholders or Level 3 stockholders nor the issuance by Level 3 of shares of common stock pursuant to the merger will create any implication to the contrary.

        This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding tw telecom has been provided by tw telecom and information contained in this joint proxy statement/prospectus regarding Level 3 has been provided by Level 3.

        All references in this joint proxy statement/prospectus to "tw telecom" refer to tw telecom inc., a Delaware corporation; all references in this joint proxy statement/prospectus to "Level 3" refer to Level 3 Communications, Inc., a Delaware corporation; all references to "Merger Sub 1" refer to Saturn Merger Sub 1, LLC, a Delaware limited liability company and direct wholly owned subsidiary


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of Level 3 formed for the purpose of effecting the mergers; and all references to "Merger Sub 2" refer to Saturn Merger Sub 2, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Level 3 formed for the purpose of effecting the mergers. Unless otherwise indicated or as the context requires, all references to the "merger agreement" refer to the Agreement and Plan of Merger, dated as of June 15, 2014, by and among tw telecom, Level 3, Merger Sub 1 and Merger Sub 2, a copy of which is included as Annex A to this joint proxy statement/prospectus and all references to the "merger" refer to the merger of Merger Sub 1 into tw telecom, with tw telecom continuing as the surviving corporation, all references to the "subsequent merger" refer to the merger of the surviving corporation into Merger Sub 2, with Merger Sub 2 continuing as the surviving company, and all references to the "mergers" refer to the merger and the subsequent merger, together.


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TABLE OF CONTENTS

 
  Page  

QUESTIONS AND ANSWERS

    1  

SUMMARY

    12  

The Companies

    12  

Risk Factors

    13  

The Mergers

    13  

The Meetings

    24  

Selected Historical Consolidated Financial Data

    26  

Selected Unaudited Pro Forma Condensed Combined Financial Information of tw telecom and Level 3

    34  

Unaudited Comparative Per Share Data

    35  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    37  

RISK FACTORS

    39  

Risk Factors Relating to the Mergers

    39  

Risk Factors Relating to Level 3 Following the Mergers

    41  

Other Risk Factors of tw telecom and Level 3

    44  

THE COMPANIES

    45  

THE TW TELECOM SPECIAL MEETING

    46  

THE LEVEL 3 SPECIAL MEETING

    49  

THE MERGERS

    53  

Effects of the Mergers

    53  

Background of the Mergers

    53  

tw telecom's Reasons for the Mergers; Recommendation of tw telecom's Board of Directors

    59  

Opinion of tw telecom's Financial Advisor

    63  

Certain tw telecom Prospective Financial Information

    76  

Interests of tw telecom Directors and Executive Officers in the Mergers

    78  

Level 3's Reasons for the Mergers; Recommendation of Level 3's Board of Directors

    84  

Opinion of Level 3's Financial Advisor

    85  

Certain Level 3 Prospective Financial Information

    93  

Board of Directors Following the Mergers

    95  

Regulatory Clearances Required for the Mergers

    95  

Exchange of Shares in the Mergers

    96  

Treatment of tw telecom Share Options and Other Stock Awards

    97  

Dividend Policy

    97  

Listing of Level 3 Common Stock

    98  

Financing Related to the Mergers

    98  

De-Listing and Deregistration of tw telecom Shares

    99  

Appraisal Rights

    99  

Litigation Relating to the Mergers

    99  

THE MERGER AGREEMENT

    101  

Terms of the Mergers; Merger Consideration

    101  

Completion of the Mergers

    102  

Representations and Warranties

    102  

Conduct of Business

    105  

No Solicitation of Alternative Proposals

    108  

Changes in Board Recommendations

    110  

Efforts to Obtain Required Stockholder Votes

    111  

Efforts to Complete the Mergers

    111  

Governance Matters After the Mergers

    112  

i


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  Page  

Employee Benefits Matters

    112  

Indemnification and Insurance

    114  

Treatment of tw telecom Share Options and Other Stock Awards

    114  

Other Covenants and Agreements

    115  

Conditions to Completion of the Mergers

    118  

Termination of the Merger Agreement

    120  

Termination Fees and Expenses; Liability for Breach

    122  

Amendments, Extensions and Waivers

    123  

No Third Party Beneficiaries

    123  

Specific Performance

    124  

STT CROSSING VOTING AGREEMENT

    124  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

    125  

ACCOUNTING TREATMENT

    127  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

    128  

COMPARATIVE STOCK PRICE DATA AND DIVIDENDS

    142  

Stock Prices

    142  

Dividends

    144  

DIRECTORS AND OFFICERS OF LEVEL 3 FOLLOWING THE MERGERS

    144  

DESCRIPTION OF LEVEL 3 CAPITAL STOCK

    145  

Authorized Capital Stock

    145  

Common Stock

    145  

Preferred Stock

    146  

Stock Incentive and Other Compensation Plans

    146  

Antitakeover Effects of Delaware Law and Level 3's Organizational Documents

    146  

COMPARISON OF RIGHTS OF LEVEL 3 STOCKHOLDERS AND TW TELECOM STOCKHOLDERS

    148  

APPRAISAL RIGHTS

    154  

LEGAL MATTERS

    158  

EXPERTS

    158  

FUTURE STOCKHOLDER PROPOSALS

    158  

HOUSEHOLDING OF JOINT PROXY STATEMENT/PROSPECTUS

    159  

OTHER MATTERS

    159  

WHERE YOU CAN FIND MORE INFORMATION

    160  

ANNEX A Agreement and Plan of Merger

       

ANNEX B Opinion of Evercore Group L.L.C.

       

ANNEX C Opinion of Rothschild Inc.

       

ANNEX D STT Crossing Voting Agreement

       

ANNEX E Section 262 of the DGCL—Appraisal Rights

       

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QUESTIONS AND ANSWERS

        The following are some questions that you, as a stockholder of tw telecom or Level 3, may have regarding the mergers, the compensation proposal, the Level 3 stock issuance, the Level 3 charter amendment and the other matters being considered at the special meetings and answers to those questions. tw telecom and Level 3 urge you to carefully read the remainder of this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the mergers, the Level 3 stock issuance, the Level 3 charter amendment and the other matters being considered at the special meetings. Additional important information is also contained in the Annexes to, and the documents incorporated by reference into, this joint proxy statement/prospectus.

Q:    Why am I receiving this joint proxy statement/prospectus?

A:
You are receiving this document because you were a stockholder of record of tw telecom or Level 3 on the record date for the tw telecom special meeting or the Level 3 special meeting, respectively. tw telecom and Level 3 have agreed to a merger of tw telecom and Merger Sub 1 pursuant to the terms of the merger agreement, and the subsequent merger of the surviving corporation with Merger Sub 2, that is described in this joint proxy statement/prospectus. A copy of the merger agreement is included in this joint proxy statement/prospectus as Annex A.

    In order to complete the mergers, among other things:

      tw telecom stockholders must approve and adopt the merger agreement and the mergers; and

      Level 3 stockholders must approve the issuance of shares of Level 3 common stock to tw telecom stockholders pursuant to the merger and the adoption of the Level 3 charter amendment.

    tw telecom and Level 3 will hold separate special meetings of their respective stockholders to obtain these approvals. In addition, tw telecom will solicit stockholder approval, on an advisory (non-binding) basis, of the existing compensatory arrangements between tw telecom and its named executive officers providing for compensation in connection with the mergers (which we refer to as the compensation proposal). The separate vote, on an advisory (non-binding) basis, of the compensation proposal, is not a condition to the completion of the mergers. This joint proxy statement/prospectus, including its Annexes, contains and incorporates by reference important information about Level 3 and tw telecom, the mergers, the Level 3 stock issuance, the Level 3 charter amendment and the stockholder meetings of Level 3 and tw telecom, respectively. You should read all of the available information carefully and in its entirety. The enclosed proxy card and instructions allow you to vote your shares without attending the special meeting in person.

    Your vote is important. Please vote as soon as possible.

Q:    What will I receive in the mergers?

A:
tw telecom Stockholders: If the mergers are completed, holders of shares of tw telecom common stock (excluding such shares held by dissenting stockholders, Level 3, tw telecom and their respective subsidiaries) will receive for each share of tw telecom common stock (i) 0.7 shares of Level 3 common stock, including the associated rights under the rights agreement entered into on April 10, 2011 by Level 3 with Wells Fargo Bank, N.A., as rights agent, as amended (which we refer to as the rights agreement) (which rights, together with the 0.7 shares of Level 3 common stock, we refer to as the stock consideration) and (ii) $10.00 in cash (which we refer to as the cash consideration and, together with the stock consideration, the merger

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    consideration). tw telecom stockholders will not receive any fractional shares of Level 3 common stock in the mergers. Instead, Level 3 will issue one share of Level 3 common stock in lieu of any fractional shares of Level 3 common stock that a tw telecom stockholder would otherwise have been entitled to receive.

    Level 3 Stockholders: Level 3 stockholders will not receive any merger consideration and will continue to hold their shares of Level 3 common stock.

Q:    What is the value of the merger consideration?

A:
Because Level 3 will issue 0.7 shares of Level 3 common stock and deliver $10.00 in cash in exchange for each share of tw telecom common stock, the value of the merger consideration that holders of shares of tw telecom common stock (which holders we refer to as tw telecom stockholders) receive will depend on the price per share of Level 3 common stock at the effective time of the merger. That price will not be known at the time of the special meetings and may be more or less than the current price or the price at the time of the special meetings. This exchange ratio will not be adjusted for changes in the market price of either Level 3 common stock or tw telecom common stock between the date of signing the merger agreement and completion of the mergers. Based on the closing price of Level 3 common stock on the New York Stock Exchange on June 12, 2014, the last trading day before media reports of the possibility of a transaction appeared, the merger consideration represented approximately $39.56 in value for each tw telecom common share, which had a closing price of $32.33 per share on June 12, 2014. Based on the closing price of Level 3 common stock on                      , 2014, the latest practicable trading day before the date of this joint proxy statement/prospectus, the merger consideration represented approximately $             in value for each share of tw telecom common stock, which had a closing price of $             per share on                       , 2014, the latest practicable trading day before the date of this joint proxy statement/prospectus.

    Level 3 stockholders will continue to own their existing Level 3 shares. Level 3 common stock is currently traded on the New York Stock Exchange under the symbol "LVLT," and tw telecom common stock is currently traded on the NASDAQ Global Select Market under the symbol "TWTC." We urge you to obtain current market quotations of Level 3 common stock and tw telecom common stock.

Q:    Can I attend the special meeting and vote my shares in person?

A:
Yes. If you are a tw telecom stockholder of record or a Level 3 stockholder of record, you may vote your shares in person at the applicable meeting by completing a ballot at the meeting. Even if you currently plan to attend the meeting, it is recommended that you also submit your proxy as described above, so your vote will be counted if you later decide not to attend the meeting. If you submit your vote by proxy and later decide to vote in person at the meeting, the vote you submit at the meeting will override your proxy vote. If you are a "street name" holder (i.e., you hold the shares in the name of your brokerage firm or another nominee), you may vote your shares in person at the meeting only if you obtain and bring to the meeting a signed letter or other form of proxy from your broker, bank, trust company or other nominee giving you the right to vote the shares at the meeting.

Q:    How can I attend the meeting?

A:
tw telecom Stockholders: All of tw telecom's stockholders as of the record date are invited to attend the tw telecom special meeting. You will be asked to present valid photo identification, such as a driver's license or passport, before being admitted to the meeting. If you hold your shares in "street name", you also will be asked to present proof of ownership to be admitted to

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    the meeting. A brokerage statement or letter from your broker, bank, trust company or other nominee proving ownership of the shares on                      , 2014, the record date for the tw telecom special meeting, are examples of proof of ownership.

    To help tw telecom plan for the meeting, please indicate whether you expect to attend by responding affirmatively when prompted during internet or telephone voting or by marking the attendance box on the proxy card.

    Level 3 Stockholders: All of Level 3's stockholders as of the record date are invited to attend the Level 3 special meeting. You may be asked to present valid photo identification, such as a driver's license or passport, before being admitted to the meeting. If you hold your shares in "street name," you also may be asked to present proof of ownership to be admitted to the meeting. A brokerage statement or letter from your broker, bank, trust company or other nominee proving ownership of the shares on                      , 2014, the record date for the Level 3 special meeting, are examples of proof of ownership.

    To help Level 3 plan for the meeting, please indicate whether you expect to attend by responding affirmatively when prompted during internet or telephone voting or by marking the attendance box on the proxy card.

Q:    When and where will the special stockholders meetings be held?

A:
tw telecom Stockholders: The special meeting of tw telecom stockholders will be held at                      , on                       , 2014, at             , local time.

    Level 3 Stockholders: The special meeting of Level 3 stockholders will be held at                      , on                      , 2014, at              , local time.

Q:    Who is entitled to vote at the special stockholders meetings?

A:
tw telecom Stockholders: The tw Board has set                      , 2014 as the record date for the tw telecom special meeting. If you were a stockholder of record of issued and outstanding shares of tw telecom common stock at the close of business on                      , 2014, you are entitled to vote at the meeting. As of the record date,                      shares of tw telecom's common stock, representing all of tw telecom's voting stock, were issued and outstanding and, therefore, eligible to vote at the meeting.

    Level 3 Stockholders: The Level 3 Board has set                      , 2014 as the record date for the Level 3 special meeting. If you were a stockholder of record of outstanding shares of Level 3 common stock at the close of business on                      , 2014, you are entitled to vote at the meeting. As of the record date,                       shares of Level 3's common stock, representing all of Level 3's voting stock, were issued and outstanding and, therefore, eligible to vote at the meeting.

Q:    What constitutes a quorum at the special stockholders meetings?

A:
tw telecom Stockholders: Stockholders who hold shares representing a majority in total voting power of the outstanding capital stock of tw telecom entitled to vote at a meeting of the stockholders, present in person or represented by proxy, constitute a quorum for the transaction of business at the tw telecom special meeting.

    Level 3 Stockholders: Stockholders who hold shares representing at least a majority of the issued and outstanding shares entitled to vote at the Level 3 special meeting must be present in person or represented by proxy to constitute a quorum for the transaction of business at the Level 3 special meeting.

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Q:    What does it mean if I receive more than one set of proxy materials?

A:
If you receive more than one set of proxy materials or multiple control numbers for use in submitting your proxy, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or voting instruction card you receive or, if you submit your proxy by internet or telephone, vote once for each card or control number you receive.

Q:    How do I vote if I am a stockholder of record?

A:
tw telecom Stockholders: If you are a stockholder of record of tw telecom as of the close of business on the record date for the tw telecom special meeting, you may vote in person by attending the tw telecom special meeting or, to ensure your shares are represented at the tw telecom special meeting, you may authorize a proxy to vote by:

    accessing the internet site listed on the proxy card;

    calling the toll-free number listed on the proxy card; or

    signing the enclosed proxy card and returning it by mail.

    If you hold tw telecom shares in "street name," you can vote your shares in the manner prescribed by your broker, bank, trust company or other nominee. Your broker, bank, trust company or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing such broker, bank, trust company or other nominee how to vote your shares. Without instructions from you, your broker, bank, trust company or other nominee cannot vote your shares, which will have the effect described below.

    Level 3 Stockholders: If you are a stockholder of record of Level 3 as of the close of business on the record date for the Level 3 special meeting, you may vote in person by attending the Level 3 special meeting or, to ensure your shares are represented at the Level 3 special meeting, you may authorize a proxy to vote by:

      accessing the internet site listed on the proxy card;

      calling the toll-free number listed on the proxy card; or

      signing the enclosed proxy card and returning it by mail.

    If you hold Level 3 shares in "street name," you can vote your shares in the manner prescribed by your broker, bank, trust company or other nominee. Your broker, bank, trust company or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing such broker, bank, trust company or other nominee how to vote your shares. Without instructions from you, your broker, bank, trust company or other nominee cannot vote your shares, which will have the effect described below.

Q:    What are my voting rights?

A:
tw telecom Stockholders: Holders of tw telecom's common stock are entitled to one vote per share. As of the close of business on the record date for the tw telecom special meeting, a total of                      votes are entitled to be cast at the tw telecom special meeting.

    Level 3 Stockholders: Holders of Level 3's common stock are entitled to one vote per share. As of the close of business on the record date for the Level 3 special meeting, a total of                      votes are entitled to be cast at the Level 3 special meeting.

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Q:    What vote is required to approve each proposal?

A:
tw telecom Stockholders: Approval and adoption of the merger agreement and approval of the mergers requires the affirmative vote of the holders of a majority of the outstanding shares of tw telecom common stock entitled to vote thereon. Approval, on an advisory basis, of the compensation that may be paid or become payable to tw telecom's named executive officers in connection with the mergers, and the agreements and, understandings pursuant to which such compensation may be paid or become payable, as described in the section entitled "The Mergers—Interests of tw telecom Directors and Executive Officers in the Mergers—Advisory Vote on Compensation Proposal," requires the affirmative vote of the holders of a majority of the issued and outstanding shares of tw telecom common stock present and in person or represented by proxy at the tw telecom special meeting and entitled to vote thereon.

    Level 3 Stockholders: The Level 3 stock issuance requires the affirmative vote of a majority of the votes of Level 3 common stock cast at the Level 3 special meeting on the proposal. The Level 3 charter amendment requires the affirmative vote of holders of a majority of the issued and outstanding shares of Level 3 common stock.

    One of Level 3's stockholders, STT Crossing Ltd. (which we refer to as STT Crossing), has entered into a voting agreement with tw telecom and, solely with respect to certain covenants contained therein, Level 3 (which we refer to as the voting agreement), under which STT Crossing has agreed, among other things and subject to certain exceptions as set forth in the voting agreement, to vote its Level 3 common stock in favor of the adoption of the Level 3 charter amendment and the Level 3 stock issuance. See the section below entitled "STT Crossing Voting Agreement" beginning on page 124.

Q:    How does the tw Board recommend that tw telecom stockholders vote?

A:
The tw Board has unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the mergers, are advisable and in the best interests of tw telecom and its stockholders. The tw Board unanimously recommends that tw telecom stockholders vote "FOR" the proposal to approve and adopt the merger agreement and the mergers, "FOR" the proposal to adjourn the tw telecom special meeting, if necessary, to solicit additional proxies, and "FOR" the proposal to approve, on an advisory basis, the compensation payable in connection with the mergers.

Q:    How does the Level 3 Board recommend that Level 3 stockholders vote?

A:
The Level 3 Board has unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the Level 3 stock issuance and the Level 3 charter amendment, are in the best interests of Level 3 and its stockholders. The Level 3 Board unanimously recommends that Level 3 stockholders vote "FOR" the proposal to approve the Level 3 stock issuance, "FOR" the proposal to approve the adoption of the Level 3 charter amendment and "FOR" the proposal to adjourn the Level 3 special meeting, if necessary, to solicit additional proxies.

Q:    What is the difference between a stockholder of record and a "street name" holder?

A:
If your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares. If your shares are held in a stock brokerage account or by a bank, trust company or other nominee, then the broker, bank, trust company or other nominee is considered to be the stockholder of record with respect to those shares, while you are considered the beneficial owner of those shares. In the latter case, your shares are said to be held in "street name."

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Q:    My shares are held in "street name" by my broker, bank or other nominee. Will my broker, bank or other nominee automatically vote my shares for me?

A:
No. Your broker cannot vote your shares on "non-routine" matters, as described below in the section titled "What will happen if I return my proxy card without indicating how to vote," without instructions from you. Each proposal described in this joint proxy statement/prospectus is a "non-routine" matter. You should instruct your broker as to how to vote your shares, following the directions your broker provides to you. Please check the voting form used by your broker. If you do not provide your broker with instructions and your broker submits an unvoted proxy, your shares will be counted for purposes of determining a quorum but they will not be voted on any proposal on which your broker, bank or other nominee does not have discretionary authority. This is often called a "broker non-vote." Please note that you may not vote shares held in "street name" by returning a proxy card directly to tw telecom or Level 3 or by voting in person at your special meeting unless you first obtain a proxy from your broker, bank or other nominee.

Q:    What will happen if I fail to vote or I abstain from voting?

A:
tw telecom Stockholders: If you do not vote, it will be more difficult for tw telecom to obtain the necessary quorum to approve the merger proposal and the compensation proposal, and to obtain the necessary vote to approve the tw telecom adjournment proposal.

    You may vote "FOR," "AGAINST" or "ABSTAIN" on each of the proposals. An abstention and a broker non-vote will be counted for purposes of determining a quorum. However, if you are the stockholder of record, and you fail to vote by proxy or by ballot at the special meeting, your shares will not be counted for purposes of determining a quorum. Abstentions, failures to submit a proxy card or vote in person, by telephone, or through the internet and broker non-votes will be treated in the following manner with respect to determining the votes received for each of the proposals:

      an abstention will be treated as a vote "AGAINST" each of the merger proposal, the tw telecom adjournment proposal and the compensation proposal;

      a failure to submit a proxy card or vote in person, by telephone, or through the internet or a failure to instruct your broker or nominee to vote will, assuming a quorum is present, have no effect on the proposal to approve any adjournment of the tw telecom special meeting and the proposal to approve, on an advisory basis, the compensation payable in connection with the mergers, but will be treated as a vote "AGAINST" the proposal to approve and adopt the merger agreement and the mergers.

    Level 3 Stockholders: If you do not vote, it will be more difficult for Level 3 to obtain the necessary quorum to approve the Level 3 stock issuance and the Level 3 charter amendment, and obtain the necessary vote to approve the Level 3 charter amendment.

    You may vote "FOR," "AGAINST" or "ABSTAIN" on each of the proposals. An abstention and a broker non-vote will be counted for purposes of determining a quorum. However, if you are the stockholder of record, and you fail to vote by proxy or by ballot at the special meeting, your shares will not be counted for purposes of determining a quorum. Abstentions, failures to submit a proxy card or vote in person and broker non-votes will be treated in the following manner with respect to determining the votes received for each of the proposals:

      an abstention will have no effect on the proposal to approve any adjournment of the Level 3 special meeting;

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      a failure to submit a proxy card or vote in person or a broker non-vote will have no effect on the proposal to approve the Level 3 stock issuance and the proposal to approve any adjournment of the Level 3 special meeting;

      an abstention will be treated as a vote "AGAINST" the proposal to approve the Level 3 stock issuance and the proposal to approve the adoption of the Level 3 charter amendment; and

      a failure to submit a proxy card or vote in person or a broker non-vote will be treated as a vote "AGAINST" the proposal to approve the adoption of the Level 3 charter amendment.

Q:    What will happen if I return my proxy card without indicating how to vote?

A:
tw telecom Stockholders: If you are a stockholder of record and you submit your proxy by internet, telephone or mail but do not specify how you want to vote your shares on a particular proposal, tw telecom will vote your shares:

    FOR the proposal to approve and adopt the merger agreement and the mergers;

    FOR the proposal to approve any adjournment of the tw telecom special meeting, if necessary, to solicit additional proxies; and

    FOR the proposal to approve, on an advisory basis, the compensation payable in connection with the mergers.

    If you are a "street name" holder and fail to instruct the broker, bank, trust company or other nominee that is the stockholder of record how you want to vote your shares on a particular proposal, those shares are considered to be "uninstructed." Stockholders of record have the discretion to vote uninstructed shares on specified routine matters, but do not have the authority to vote uninstructed shares on non-routine matters, such as the merger proposal, the tw telecom adjournment proposal and the compensation proposal.

    Level 3 Stockholders: If you are a stockholder of record and you submit your proxy by internet, telephone or mail but do not specify how you want to vote your shares on a particular proposal, Level 3 will vote your shares:

      FOR the proposal to approve the Level 3 stock issuance;

      FOR the proposal to approve the adoption of the Level 3 charter amendment; and

      FOR the proposal to approve any adjournment of the Level 3 special meeting, if necessary, to solicit additional proxies.

    If you are a "street name" holder and fail to instruct the broker, bank, trust company or other nominee that is the stockholder of record how you want to vote your shares on a particular proposal, those shares are considered to be "uninstructed." Stockholders of record have the discretion to vote uninstructed shares on specified routine matters, but do not have the authority to vote uninstructed shares on non-routine matters, such as the proposals to approve the Level 3 stock issuance, the Level 3 charter amendment and, if necessary, to adjourn the Level 3 special meeting to solicit additional proxies.

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Q:    Can I change my vote or revoke my proxy after I have returned a proxy or voting instruction card?

A:
Yes. If you are the holder of record of either tw telecom common stock or Level 3 common stock, you can change your vote or revoke your proxy at any time before your proxy is voted at your special meeting. You can do this in one of four ways:

    by submitting a later-dated proxy by internet or telephone before the deadline stated on the enclosed proxy card;

    by submitting a later-dated proxy card;

    by sending a written notice of revocation to the Corporate Secretary of tw telecom or Level 3, as applicable, which must be received before the time of such special meeting; or

    by voting in person at the special meeting.

    If you are a "street name" holder, please refer to the voting instructions provided to you by your broker, bank, trust company or other nominee.

    Any holder of tw telecom common stock or Level 3 common stock entitled to vote in person at the tw telecom or Level 3 special meeting, respectively, may vote in person regardless of whether a proxy has been previously given. A Level 3 or tw telecom stockholder simply attending the Level 3 or tw telecom special meeting, respectively, will not constitute revocation of a previously given proxy.

Q:    Who pays for the cost of proxy preparation and solicitation?

A:
In accordance with the terms of the merger agreement, tw telecom will bear the entire cost of proxy solicitation for the tw telecom special meeting, Level 3 will bear the entire cost of proxy solicitation for the Level 3 special meeting, and tw telecom and Level 3 will share equally all expenses incurred in connection with the filing of the registration statement of which this document forms a part with the SEC and the printing and mailing of this document.

Q:    Will tw telecom be required to submit the merger agreement to its stockholders even if the tw Board has withdrawn (or amended or modified in a manner adverse to Level 3) its recommendation?

A:
Yes, unless the merger agreement has been terminated by either party pursuant to the terms of the merger agreement. For more information regarding the ability of tw telecom or Level 3 to terminate the mergers, see the sections entitled "The Merger Agreement—Termination of the Merger Agreement" beginning on page 120 and "The Merger Agreement—Termination Fees and Expenses; Liability for Breach," beginning on page 122.

Q:    Will Level 3 be required to submit the Level 3 stock issuance and the Level 3 charter amendment to its stockholders even if the Level 3 Board has withdrawn (or amended or modified in a manner adverse to tw telecom) its recommendation?

A:
Yes, unless the merger agreement has been terminated by either party pursuant to the terms of the merger agreement. For more information regarding the ability of Level 3 or tw telecom to terminate the mergers see the sections entitled "The Merger Agreement—Termination of the Merger Agreement" beginning on page 120 and "The Merger Agreement—Termination Fees and Expenses; Liability for Breach," beginning on page 122.

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Q:    What are the material U.S. federal income tax consequences of the mergers to U.S. holders of shares of tw telecom common stock?

A:
Level 3 and tw telecom intend for the mergers to be treated as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (which we refer to as the Code). It is a condition to Level 3's obligation to complete the mergers that Level 3 receive an opinion from Willkie Farr & Gallagher LLP, counsel to Level 3, to the effect that the mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to tw telecom's obligation to complete the mergers that tw telecom receive an opinion from Wachtell, Lipton, Rosen & Katz, special counsel to tw telecom, to the effect that the mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. Assuming the receipt and accuracy of these opinions, a holder of shares of tw telecom common stock will generally recognize gain (but not loss) for U.S. federal income tax purposes in an amount equal to the lesser of (i) the amount of gain realized (i.e., the excess, if any, of the sum of the amount of cash and the fair market value, as of the effective time of the merger, of the Level 3 shares received in the mergers over that stockholder's adjusted tax basis in its tw telecom shares surrendered) and (ii) the amount of cash received in the mergers.

    You should read the section titled "Material U.S. Federal Income Tax Consequences" beginning on page 125 for a more complete discussion of the U.S. federal income tax consequences of the mergers. Tax matters can be complicated, and the tax consequences of the mergers to you will depend on your particular situation. You should consult your tax advisor to determine the tax consequences of the mergers to you.

Q:    When do you expect the mergers to be completed?

A:
tw telecom and Level 3 hope to complete the mergers as soon as reasonably practicable and currently expect the closing of the mergers to occur before the end of calendar year 2014, but in no event will the closing take place prior to October 4, 2014. However, the mergers are subject to various regulatory clearances and the satisfaction or waiver of other conditions, as described in the merger agreement, and it is possible that factors outside the control of tw telecom and Level 3 could result in the mergers being completed at a later time or not at all. There can be no assurances as to when or if the mergers will close.

Q:    Do I need to do anything with my shares of common stock other than voting for the proposals at the special meeting?

A:
tw telecom Stockholders: If you are a tw telecom stockholder, after the mergers are completed, each share of tw telecom common stock you hold will be converted into 0.7 shares of Level 3 common stock, and the associated rights under the rights agreement and, the right to receive $10.00 in cash, together with an additional share of Level 3 common stock in lieu of any fractional shares, as applicable. You will receive instructions at that time regarding exchanging your shares for the merger consideration. You do not need to take any action at this time. Please do not send your tw telecom share certificates with your proxy card.

    Level 3 Stockholders: If you are a Level 3 stockholder, after the mergers are completed, you are not required to take any action with respect to your shares of Level 3 common stock.

Q:    Are stockholders entitled to appraisal rights?

A:
Under the General Corporation Law of the State of Delaware (which we refer to as the DGCL), holders of tw telecom common stock who deliver to tw telecom a written demand for appraisal before the vote on the adoption of the merger agreement at the tw telecom special meeting and who do not vote for the adoption and approval of the merger agreement and to approve the

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    mergers have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the mergers are completed, but only if they comply with all requirements of Delaware law, as described under "Appraisal Rights" below, beginning on page 154. This appraisal amount could be more than, the same as, or less than the amount a tw telecom stockholder would be entitled to receive under the merger agreement. Any holder of tw telecom capital stock intending to exercise appraisal rights must, among other things, submit a written demand for appraisal to tw telecom prior to the vote on the adoption and approval of the merger agreement and the transactions contemplated thereunder, not vote or otherwise submit a proxy in favor of adoption and approval of the merger agreement and the transactions contemplated thereunder and not submit a letter of transmittal. Failure to follow exactly the procedures specified under Delaware law will result in the loss of appraisal rights.

    The stockholders of Level 3 are not entitled to appraisal rights in connection with the mergers under Delaware law.

Q:    What happens if I sell my shares of tw telecom common stock before the tw telecom special meeting?

A:
The record date for the tw telecom special meeting is earlier than the date of the tw telecom special meeting. If you transfer your shares of tw telecom common stock after the tw telecom record date but before the tw telecom special meeting, you will retain your right to vote at the tw telecom special meeting, but will have transferred the right to receive the merger consideration in the mergers. In order to receive the merger consideration, you must hold your shares through the effective date of the mergers.

Q:    What if I hold shares in both tw telecom and Level 3?

A:
If you are a stockholder of both tw telecom and Level 3, you will receive two separate packages of proxy materials. A vote cast as a Level 3 stockholder will not count as a vote cast as a tw telecom stockholder, and a vote cast as a tw telecom stockholder will not count as a vote cast as a Level 3 stockholder. Therefore, please separately submit a proxy for each of your tw telecom and Level 3 shares.

Q:    Why am I being asked to cast an advisory (non-binding) vote to approve the compensation proposal?

A:
The Securities Exchange Act of 1934, as amended (which we refer to as the Exchange Act) and applicable SEC rules thereunder require tw telecom to seek an advisory (non-binding) vote with respect to certain payments that could become payable to its named executive officers in connection with the mergers.

Q:    What will happen if the stockholders of tw telecom do not approve the compensation proposal at the tw telecom special meeting?

A:
Approval of the compensation proposal is not a condition to the completion of the mergers. The vote with respect to the compensation proposal is an advisory vote and will not be binding on either tw telecom or Level 3. Therefore, if the other requisite stockholder approvals are obtained and the mergers are completed, the amounts payable under the compensation proposal will still be paid to tw telecom's named executive officers in accordance with applicable agreements and understandings.

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Q:    Who can help answer my questions?

A:
Level 3 stockholders or tw telecom stockholders who have questions about the mergers, the other matters to be voted on at the special meetings, or how to submit a proxy or who desire additional copies of this joint proxy statement/prospectus or additional proxy cards should contact:

If you are a Level 3 stockholder:   If you are a tw telecom stockholder:

Level 3 Communications, Inc.

 

tw telecom inc.

1025 Eldorado Blvd.
Broomfield, Colorado 80021
(720) 888-1000
Attn: Investor Relations

 

10475 Park Meadows Drive
Littleton, Colorado 80124
(303) 542-6894
Attn: Investor Relations

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SUMMARY

        This summary highlights information contained elsewhere in this joint proxy statement/prospectus and may not contain all of the information that is important to you with respect to the mergers, the Level 3 stock issuance and the Level 3 charter amendment and the other matters being considered at the tw telecom and Level 3 special stockholder meetings. tw telecom and Level 3 urge you to read the remainder of this joint proxy statement/prospectus carefully, including the attached Annexes, and the other documents to which we have referred you. See also the section entitled "Where You Can Find More Information" beginning on page 160. We have included page references in this summary to direct you to a more complete description of the topics presented below where appropriate.


The Companies

tw telecom inc.

        tw telecom inc., a Delaware corporation, is a leading national provider of managed network services, specializing in business Ethernet, data networking, converged, IP based virtual private network or "IP VPN", internet access, voice, including voice over Internet Protocol or "VoIP", and network security services to enterprise organizations, including public sector entities, and carriers throughout the U.S., including their global locations. tw telecom's customers include enterprise organizations in a wide variety of industry segments including, among others, the financial services, technology and scientific, health care, distribution, manufacturing and professional services industries, data centers, cloud applications providers, public sector entities, system integrators and communications service providers, including incumbent local exchange carriers ("ILECs"), competitive local exchange carriers ("CLECs"), wireless communications companies and cable companies.

        tw telecom's common stock is traded on the NASDAQ Global Select Market under the symbol "TWTC."

        The principal executive offices of tw telecom are located at 10475 Park Meadows Drive, Littleton, CO 80124 and its telephone number is (303) 566-1000.


Level 3 Communications, Inc.

        Level 3 Communications, Inc., a Delaware corporation, is a facilities based provider (that is, a provider that owns or leases a substantial portion of the plant, property and equipment necessary to provide its services) of a broad range of integrated communications services. Level 3 has created its communications network by constructing its own assets and through a combination of purchasing other companies and purchasing and leasing facilities from others. Level 3's network is an international, facilities based communications network. Level 3 designed its network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies.

        Level 3's common stock is traded on the New York Stock Exchange under the symbol "LVLT."

        The principal executive offices of Level 3 are located at 1025 Eldorado Blvd., Broomfield, Colorado 80021 and its telephone number is (720) 888-1000.


Saturn Merger Sub 1, LLC and Saturn Merger Sub 2, LLC

        Saturn Merger Sub 1, LLC and Saturn Merger Sub 2, LLC, direct wholly owned subsidiaries of Level 3, are Delaware limited liability companies that were each formed on June 12, 2014 for the sole purpose of effecting the mergers. In the mergers, Merger Sub 1 will be merged with tw telecom,

 

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with tw telecom continuing as the surviving corporation. Immediately thereafter, the surviving corporation will be merged with Merger Sub 2, with Merger Sub 2 continuing as the surviving company.


Risk Factors

        In addition to other information included in and incorporated by reference into this document, including the matters addressed in the section entitled "Cautionary Statement Regarding Forward-Looking Statements," you should carefully read and consider the risks related to the mergers, including the parties' ability to complete the mergers, the risks related to Level 3 following the mergers and the risks associated with each of the businesses of tw telecom and Level 3, beginning on page 39, before deciding whether to vote for the proposals presented in this document. Some of the most important risks are summarized below.


Risks Related to the Mergers

    The mergers are subject to conditions, including certain conditions that may not be satisfied, and may not be completed on a timely basis, or at all. Failure to complete the mergers could have a material and adverse effect on tw telecom and/or Level 3.

    The exchange ratio is fixed and will not be adjusted in the event of any change in either Level 3's or tw telecom's stock price.


Risks Related to Level 3 Following the Mergers

    Although tw telecom and Level 3 expect that Level 3's acquisition of tw telecom will benefit Level 3, Level 3 may not realize those benefits because of integration difficulties and other challenges.

    Current Level 3 stockholders and tw telecom stockholders will have a reduced ownership and voting interest after the mergers and will exercise less influence over management.

    The market price of Level 3's common stock may decline in the future as a result of the mergers or other factors.

    The tw telecom and Level 3 prospective financial information is inherently subject to uncertainties and the unaudited pro forma financial data for Level 3 included in this joint proxy statement/prospectus is preliminary, and Level 3's actual financial position and operations after the mergers may differ materially from these estimates and the unaudited pro forma financial data included in this joint proxy statement/prospectus.


The Mergers

        A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. tw telecom and Level 3 encourage you to read the entire merger agreement carefully because it is the principal document governing the mergers, the Level 3 stock issuance and the Level 3 charter amendment. For more information on the merger agreement, see the section entitled "The Merger Agreement" beginning on page 101.


Effects of the Mergers (see page 53)

        Subject to the terms and conditions of the merger agreement, Merger Sub 1, a newly formed subsidiary of Level 3, will be merged with tw telecom, with tw telecom continuing as the surviving corporation and, immediately following the merger, the surviving corporation will merge with Merger Sub 2, with Merger Sub 2 continuing as the surviving company.

 

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Terms of the Mergers; Merger Consideration (see page 101)

        tw telecom stockholders will have the right to receive $10.00 in cash and 0.7 shares of Level 3 common stock (which we refer to as the exchange ratio) for each share of tw telecom common stock they hold at the effective time of the merger. The exchange ratio is fixed and will not be adjusted for changes in the market value of tw telecom common stock or Level 3 common stock. As a result, the implied value of the consideration to tw telecom stockholders will fluctuate between the date of this joint proxy statement/prospectus and the effective date of the mergers. Based on the closing price of Level 3 common stock on the New York Stock Exchange on June 12, 2014, the last trading day before media reports of the possibility of a transaction appeared, the merger consideration represented approximately $39.56 in value for each share of tw telecom common stock. Based on the closing price of Level 3 common stock on the New York Stock Exchange on             , 2014, the latest practicable trading day before the date of this joint proxy statement/prospectus, the merger consideration represented approximately $         in value for each share of tw telecom common stock, as applicable. tw telecom common stock had a closing price of $         per share on                            , 2014, the latest practicable trading day before the date of this joint proxy statement/prospectus.


Material U.S. Federal Income Tax Consequences (see page 125)

        Level 3 and tw telecom intend for the mergers to be treated as a "reorganization" within the meaning of Section 368(a) of the Code. It is a condition to Level 3's obligation to complete the mergers that Level 3 receive an opinion from Willkie Farr & Gallagher LLP, counsel to Level 3, to the effect that the mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to tw telecom's obligation to complete the mergers that tw telecom receive an opinion from Wachtell, Lipton, Rosen & Katz, special counsel to tw telecom, to the effect that the mergers will be treated as a reorganization within the meaning of Section 368(a) of the Code. Assuming the receipt and accuracy of these opinions, a holder of shares of tw telecom common stock will generally recognize gain (but not loss) for U.S. federal income tax purposes in an amount equal to the lesser of (i) the amount of gain realized (i.e., the excess, if any, of the sum of the amount of cash and the fair market value, as of the effective time of the merger, of the Level 3 shares received in the mergers over that stockholder's adjusted tax basis in its tw telecom shares surrendered) and (ii) the amount of cash received in the mergers.

        You should read the section titled "Material U.S. Federal Income Tax Consequences" beginning on page 125 for a more complete discussion of the U.S. federal income tax consequences of the mergers. Tax matters can be complicated, and the tax consequences of the mergers to you will depend on your particular situation. You should consult your tax advisor to determine the tax consequences to you of the mergers.


Recommendation of tw telecom's Board of Directors (see page 59)

        After careful consideration, the tw Board unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the mergers, are advisable and in the best interests of tw telecom and its stockholders. For more information regarding the factors considered by the tw Board in reaching its decision to approve and adopt the merger agreement and the mergers, see the section entitled "tw telecom's Reasons for the Mergers; Recommendation of tw telecom's Board of Directors."

        In considering the recommendation of the tw Board with respect to the proposal to approve and adopt the merger agreement and the mergers, you should be aware that the tw telecom directors and executive officers have interests in the mergers that may be different from, or in addition to,

 

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yours. See the section entitled "The Mergers—Interests of tw telecom Directors and Executive Officers in the Merger" beginning on page 78.

        The tw Board unanimously recommends that the tw telecom stockholders vote "FOR" the merger proposal, "FOR" the tw telecom adjournment proposal, and "FOR" the compensation proposal.


Recommendation of Level 3's Board of Directors (see page 84)

        After careful consideration, the Level 3 Board unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the Level 3 stock issuance and the adoption of the Level 3 charter amendment, are in the best interests of Level 3 and its stockholders. For more information regarding the factors considered by the Level 3 Board in reaching its decision to approve the merger agreement, to authorize the Level 3 stock issuance and to adopt the Level 3 charter amendment, see the section entitled "The Mergers—Level 3's Reasons for the Mergers; Recommendation of Level 3's Board of Directors" beginning on page 84.

        The Level 3 Board unanimously recommends that Level 3 stockholders vote "FOR" the proposal to approve the Level 3 stock issuance, "FOR" the proposal to approve the adoption of the Level 3 charter amendment, and "FOR" the proposal to adjourn the Level 3 special meeting, if necessary, to solicit additional proxies.


Opinion of tw telecom's Financial Advisor (see page 63)

        In connection with the mergers, the tw Board retained Evercore Group L.L.C., (which we refer to as Evercore), to act as financial advisor to the tw Board. On June 15, 2014, at a meeting of the tw Board, Evercore rendered its oral opinion, subsequently confirmed by delivery of a written opinion later that day, that, as of June 15, 2014, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations and other matters set forth therein, the merger consideration to be received by tw telecom's stockholders was fair, from a financial point of view, to such stockholders.

        The full text of Evercore's written opinion, dated June 15, 2014, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated by reference in its entirety into this joint proxy statement/prospectus and is available for inspection and copying at tw telecom's principal executive offices. You are urged to read the opinion carefully and in its entirety. Evercore's opinion was addressed to, and provided for the information and benefit of, the tw Board (in its capacity as such) in connection with its evaluation of the fairness of the merger consideration to tw telecom's stockholders from a financial point of view, and did not address any other aspects or implications of the mergers. Evercore's opinion should not be construed as creating any fiduciary duty on Evercore's part to any party, and such opinion is not intended to be, and does not constitute, a recommendation to the tw Board or to any other persons in respect of the mergers, including as to how any holder of shares of tw telecom common stock should act or vote in respect of the mergers. Evercore's opinion does not address the relative merits of the mergers as compared to any other business or financial strategies that might be available to tw telecom, nor does it address the underlying business decision of tw telecom to engage in the mergers. The summary of Evercore's opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex B to this joint proxy statement/prospectus.

 

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        For a more complete description, see "The Mergers—Opinion of tw telecom's Financial Advisor" beginning on page 63. See also Annex B to this joint proxy statement/prospectus.


Opinion of Level 3's Financial Advisor (see page 85)

        In connection with the mergers, the Level 3 Board received an opinion, dated June 15, 2014, from Rothschild Inc. (which we refer to as Rothschild), to the effect that, as of June 15, 2014, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Rothschild, the merger consideration to be paid by Level 3 pursuant to the merger agreement was fair, from a financial point of view, to Level 3.

        The full text of Rothschild's opinion is attached as Annex C to this joint proxy statement/prospectus and is available for inspection and copying at Level 3's principal executive offices. The opinion outlines the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Rothschild in rendering its opinion. This summary is qualified in its entirety by reference to the full text of such opinion. Level 3's shareholders are urged to read the entire opinion carefully in connection with their consideration of the mergers. Rothschild's opinion speaks only as of the date of the opinion. The opinion was provided for the benefit of the Level 3 Board, in its capacity as such, in connection with its evaluation of the mergers. The opinion was limited to the fairness from a financial point of view, to Level 3, on the date of the opinion, of the merger consideration to be paid by Level 3 in the mergers, and Rothschild expressed no opinion as to the merits of the underlying decision by Level 3 to engage in the mergers or as to any aspect of the mergers other than the amount of the merger consideration. Rothschild's opinion did not constitute a recommendation to the Level 3 Board as to whether to approve the mergers or a recommendation to any shareholder as to how to vote or otherwise act with respect to the mergers or any other matter.

        For a more complete description, see "The Mergers—Opinion of Level 3's Financial Advisor" beginning on page 85. See also Annex C to this joint proxy statement/prospectus.


Interests of tw telecom Directors and Executive Officers in the Mergers (see page 78)

        Certain members of the board of directors and executive officers of tw telecom may be deemed to have interests in the mergers that are in addition to, or different from, the interests of other tw telecom stockholders generally. The tw Board was aware of these interests and considered them, among other matters, in approving the mergers and the merger agreement and in making the recommendations that tw telecom's stockholders approve and adopt the merger agreement and approve the mergers and the other transactions contemplated by the merger agreement. These interests include:

    Outstanding tw telecom stock options, shares of restricted stock and restricted stock units held by the members of the tw Board and tw telecom's executive officers will vest pursuant to their terms upon consummation of the merger and be settled for the merger consideration (less, in the case of stock options, the applicable exercise price);

    Change of control employment agreements with tw telecom's executive officers provide for severance benefits upon certain qualifying terminations of employment following the consummation of the merger;

    In connection with the execution of the merger agreement, tw telecom adopted a retention program in which tw telecom's executive officers are eligible to participate; and

    tw telecom's directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement.

 

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Board of Directors Following the Mergers (see page 95)

        On or prior to the effective time of the merger, under the terms of the merger agreement Level 3 will appoint to the Level 3 Board three members of the tw Board selected by tw telecom from any of the directors elected at the 2014 annual meeting of stockholders of tw telecom and approved by Level 3.


Regulatory Clearances Required for the Mergers (see page 95)

        tw telecom and Level 3 have each agreed to use reasonable best efforts to obtain all regulatory approvals required to complete the transactions contemplated by the merger agreement. These approvals include approval from or notices to the Department of Justice (which we refer to as the DOJ), the Federal Trade Commission (which we refer to as the FTC), the Federal Communications Commission (which we refer to as the FCC), and various other federal, state and local regulatory authorities and self-regulatory organizations.

        tw telecom and Level 3 have completed numerous applications and notifications to obtain the required regulatory approvals and are in the process of completing the remaining applications or notices. Although tw telecom and Level 3 believe that all required regulatory approvals can be obtained, tw telecom and Level 3 cannot be certain when or if these approvals will be obtained.


Treatment of Options to Purchase tw telecom Shares and Other Share-Based Awards (see page 97)

Options

        At the effective time of the mergers, each outstanding option to purchase shares of tw telecom common stock, whether vested or unvested, will be cancelled and converted into the right to receive the merger consideration in respect of each tw telecom share subject to the option, net of the aggregate per share exercise price and less applicable required withholding taxes. Any fractional shares of Level 3 common stock will be rounded down to the nearest whole share. Applicable tax withholdings will first reduce the amount of shares of Level 3 common stock payable in respect of the outstanding options.

Restricted Stock Units

        At the effective time of the mergers, each restricted stock unit award that is outstanding immediately prior to the effective time, whether vested or unvested, will be cancelled and converted into the right to receive the merger consideration (less applicable required withholding taxes) in respect of each tw telecom share subject to the award. Any fractional shares of Level 3 common stock will be rounded up to the nearest whole share. Applicable tax withholdings will first reduce the amount shares of Level 3 common stock payable in respect of the outstanding restricted stock units.

Restricted Stock Awards

        At the effective time of the mergers, each restricted stock award that is outstanding immediately prior to the effective time will vest in full and be cancelled and converted into the right to receive the merger consideration (less applicable required withholding taxes) in respect of each tw telecom share subject to the award. Any fractional shares of Level 3 common stock will be rounded up to the nearest whole share. Applicable tax withholdings will first reduce the amount of shares of Level 3 common stock payable in respect of the outstanding shares of restricted stock.

 

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Termination of the tw telecom Stock Incentive Plans and Qualified Stock Purchase Plan

        Prior to the effective time of the mergers, tw telecom will take all actions necessary to terminate tw telecom's stock incentive plans, to ensure that no person will have any rights under the plans except for the payments in respect of outstanding awards described above. Level 3 will take all action necessary to reserve for issuance a sufficient number of shares of Level 3 common stock to satisfy its obligations in respect of tw telecom equity awards. In addition, tw telecom has agreed to refrain from commencing any new offering periods under the tw telecom 2004 Qualified Stock Purchase Plan following the date of the merger agreement.


Financing Relating to the Mergers (see page 98)

        To finance the cash consideration and to refinance certain existing indebtedness of tw telecom, Level 3 has entered into a financing commitment letter, described below, pursuant to which the commitment parties (as defined below) have committed, subject to customary conditions, to provide senior credit facilities (which we refer to as the financing) for that financing.

        Level 3 entered into the financing commitment letter, as may be amended from time to time (which we refer to as the commitment letter), with Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc., Barclays Bank Plc, Goldman Sachs Bank USA, Jefferies Finance LLC, JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC (which we refer to as the commitment parties). The commitment letter provides for a senior secured term loan facility in an aggregate amount of $2.4 billion. The commitment letter also provides for a $600 million senior unsecured bridge facility, if up to $600 million of senior notes or certain other securities are not issued by Level 3 Financing, Inc., a wholly owned subsidiary of Level 3 (which we refer to as Level 3 Financing), or Level 3 to finance the mergers on or prior to the closing of the mergers. Under certain circumstances, the committed amounts can be allocated from the senior secured term loan facility to the bridge facility at the option of Level 3. The financing commitments of the commitment parties are subject to certain conditions set forth in the commitment letter. Level 3 has agreed under the merger agreement to use reasonable best efforts to obtain the financing and tw telecom has agreed under the merger agreement to cooperate with Level 3's efforts to secure the financing.


Completion of the Mergers (see page 102)

        tw telecom and Level 3 currently expect the closing of the mergers to occur before the end of calendar year 2014, but in no event will the closing take place prior to October 4, 2014. However, the mergers are subject to various regulatory clearances and the satisfaction or waiver of other conditions as described in the merger agreement, and it is possible that factors outside the control of tw telecom and Level 3 could result in the mergers being completed at a later time or not at all.


No Solicitation of Alternative Proposals (see page 108)

        The merger agreement precludes tw telecom and Level 3 from soliciting or engaging in discussions or negotiations with a third party with respect to a proposal for a competing transaction, including the acquisition of a significant interest in Level 3's or tw telecom's stock or assets. However, if tw telecom or Level 3 receives an unsolicited proposal from a third party for a competing transaction that Level 3's or tw telecom's board of directors, as applicable, among other things, determines in good faith constitutes, or would reasonably be expected to result in, a proposal that is superior to the transactions contemplated by the merger agreement, tw telecom or Level 3, as applicable, may furnish non-public information to and enter into discussions with, and only with, that third party regarding such competing transaction.

 

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Conditions to Completion of the Mergers (see page 118)

        The obligations of each of tw telecom, Level 3, Merger Sub 1 and Merger Sub 2 to effect the mergers are subject to the satisfaction, or waiver, of the following conditions:

    the approval and adoption of the merger agreement and approval of the mergers by the affirmative vote of the holders of a majority of the outstanding shares of tw telecom common stock entitled to vote thereon at the tw telecom special meeting at which a quorum is present;

    the approval of the Level 3 stock issuance by holders of a majority of the outstanding shares of Level 3 common stock present in person or represented by proxy and entitled to vote thereon at the Level 3 special meeting, and the approval of the adoption of the Level 3 charter amendment by holders of a majority of the outstanding shares of Level 3 common stock;

    the absence of any order, injunction or regulation by a court or other governmental entity that makes illegal or prohibits the consummation of the mergers;

    the waiting period (and any extension thereof) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended (which we refer to as the HSR Act), having expired or been earlier terminated;

    the requisite approvals from the FCC required to consummate the transactions having been obtained, and remaining in full force and effect;

    all consents required from certain other state regulators and governmental entities having been obtained, and remaining in full force and effect, except to the extent the failure to obtain such consents would not have a material adverse effect or prevent Level 3 and its subsidiaries from operating in the relevant state after the mergers;

    the shares of Level 3 common stock to be issued pursuant to the merger having been approved for quotation or listing on the New York Stock Exchange; and

    the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part and the absence of a stop order or proceedings threatened or initiated by the SEC for that purpose.

        In addition, the obligations of Level 3, Merger Sub 1 and Merger Sub 2 to effect the mergers are subject to the satisfaction, or waiver, of the following additional conditions:

    the representations and warranties of tw telecom relating to organization, authorization and validity of the merger agreement, certain capitalization matters, brokers, board approval and the requisite stockholder vote being true and correct in all material respects as of the date of the merger agreement and as of the date of the closing of the mergers (other than those representations and warranties that were made only as of an earlier date, which need only be true and correct as of that date);

    the representations and warranties of tw telecom relating to certain other capitalization matters being true and correct in all respects (except for such inaccuracies as are de minimis in the aggregate), as of the date of the merger agreement and as of the date of the closing of the mergers (other than those representations and warranties that were made only as of an earlier date, which need only be true and correct as of that date);

    the representations and warranties of tw telecom relating to the absence of a material adverse effect since December 31, 2013 being true and correct in all respects, as of the date of the merger agreement and as of the date of the closing of the mergers;

 

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    all other representations and warranties of tw telecom set forth in the merger agreement being true and correct both as of the date of the merger agreement and as of the date of the closing of the mergers (other than those representations and warranties that were made only as of an earlier date, which need only be true and correct as of that date), other than where the failure of these representations and warranties to be true and correct (without giving effect to any materiality qualifications contained in such representations and warranties) does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on tw telecom;

    tw telecom having performed or complied with, in all material respects, all of its agreements and covenants under the merger agreement at or prior to the consummation of the mergers;

    Level 3's receipt of a certificate executed by an executive officer of tw telecom certifying as to the satisfaction of the conditions described in the preceding five bullets; and

    Level 3's receipt of a written opinion from Willkie Farr & Gallagher LLP to the effect that the mergers will be treated as a "reorganization" within the meaning of Section 368(a) of the Code.

        In addition, the obligations of tw telecom to effect the mergers are subject to the satisfaction, or waiver, of the following additional conditions:

    the representations and warranties of Level 3, Merger Sub 1 and Merger Sub 2 relating to organization, authorization and validity of the merger agreement, certain capitalization matters, brokers, board approval and the requisite stockholder vote being true and correct in all material respects, as of the date of the merger agreement and as of the date of the closing of the mergers (other than those representations and warranties that were made only as of an earlier date, which need only be true and correct as of that date);

    the representations and warranties of Level 3 relating to certain capitalization matters being true and correct in all respects (except for such inaccuracies as are de minimis in the aggregate), as of the date of the merger agreement and as of the date of the closing of the mergers (other than those representations and warranties that were made only as of an earlier date, which need only be true and correct as of that date);

    the representations and warranties of Level 3, Merger Sub 1 and Merger Sub 2 relating to the absence of a material adverse effect since December 31, 2013 being true and correct in all respects, as of the date of the merger agreement and as of the date of the closing of the mergers;

    all other representations and warranties of Level 3, Merger Sub 1 and Merger Sub 2 being true and correct both as of the date of the merger agreement and as of the date of the closing of the mergers (other than those representations and warranties that were made only as of an earlier date, which need only be true and correct as of that date), other than where the failure of these representations and warranties to be true and correct (without giving effect to any materiality qualifications contained in such representations and warranties) does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Level 3;

    Level 3 having performed or complied with, in all material respects, all of its agreements and covenants under the merger agreement at or prior to the consummation of the mergers;

    tw telecom's receipt of a certificate executed by an executive officer of Level 3 certifying as to the satisfaction of the conditions described in the preceding five bullets; and

 

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    tw telecom's receipt of a written opinion from Wachtell, Lipton, Rosen & Katz to the effect that the mergers will be treated as a "reorganization" within the meaning of Section 368(a) of the Code.

        Approval of the compensation proposal described in this joint proxy statement/prospectus is not a condition to the completion of the mergers.


Termination of the Merger Agreement (see page 120)

        The merger agreement may be terminated at any time prior to the effective time of the merger, and, except as described below, whether before or after the receipt of the required stockholder approvals, under the following circumstances:

    by mutual written consent of tw telecom and Level 3;

    by either tw telecom or Level 3:

    if the mergers are not consummated by March 16, 2015 (which we refer to as the termination date); provided, however, that if all of the conditions to closing shall have been satisfied or shall be then capable of being satisfied, other than the antitrust, FCC and other regulatory approvals, the termination date may be extended by Level 3 or tw telecom, to a date not later than June 15, 2015; provided, however, that this right to terminate the merger agreement will not be available to any party whose failure to fulfill any obligation under the merger agreement has been the primary cause of the failure to close by the termination date;

    if any governmental entity issues a final and nonappealable order, decree or ruling, or takes any other action permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of the mergers or any other transaction contemplated by the merger agreement, provided, that the party seeking to terminate pursuant to this right used its reasonable best efforts to remove such restraint or prohibition; and that this right to terminate the merger agreement will not be available to any party whose breach of any provision of the merger agreement results in the imposition of such order, decree or ruling, or the failure of such order, decree or ruling to be resisted, resolved or lifted;

    if the tw telecom stockholders fail to approve and adopt the merger agreement and the mergers at the tw telecom special meeting; or

    if the Level 3 stockholders fail to approve the Level 3 stock issuance or the adoption of the Level 3 charter amendment at the Level 3 special meeting.

    by Level 3 if (i) prior to the tw telecom special meeting, the tw Board withdraws or adversely changes its recommendation of the merger agreement or the mergers or approves or recommends a superior proposal, (ii) tw telecom fails to call or hold the tw telecom special meeting, or (iii) tw telecom commits an intentional breach of any of its material obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled "The Merger Agreement—No Solicitation of Alternative Proposals";

    by tw telecom if (i) prior to the Level 3 special meeting, the Level 3 Board withdraws or adversely changes its recommendation of the Level 3 stock issuance or the Level 3 charter amendment or approves or recommends a superior proposal, (ii) Level 3 fails to call or hold the Level 3 special meeting, or (iii) Level 3 commits an intentional breach of any of its material obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled "The Merger Agreement—No Solicitation of Alternative Proposals";

 

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    by tw telecom if, concurrently, it (i) enters into a definitive agreement with respect to a superior proposal after complying with its applicable obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled "The Merger Agreement—No Solicitation of Alternative Proposals", (ii) pays Level 3 a termination fee of $200 million, and (iii) reimburses Level 3 for certain expenses incurred in pursuing the mergers;

    by Level 3 if, concurrently, it (i) enters into a definitive agreement with respect to a superior proposal after complying with its applicable obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled "The Merger Agreement—No Solicitation of Alternative Proposals", (ii) pays tw telecom a termination fee of $350 million, and (iii) reimburses tw telecom for certain expenses incurred in pursuing the mergers;

    by Level 3 upon a breach of any representation, warranty, covenant or agreement on the part of tw telecom contained in the merger agreement such that the conditions to Level 3's obligations to complete the mergers would not be satisfied, generally subject to a 40-day cure period. However, Level 3 does not have this right to terminate the merger agreement if it, Merger Sub 1 or Merger Sub 2 is then in material breach of any of its representations, warranties, covenants or agreements contained in the merger agreement;

    by tw telecom upon a breach of any representation, warranty, covenant or agreement on the part of Level 3, Merger Sub 1 or Merger Sub 2 contained in the merger agreement such that the conditions to tw telecom's obligations to complete the mergers would not be satisfied, generally subject to a 40-day cure period. However, tw telecom does not have this right to terminate the merger agreement if it is then in material breach of any of its representations, warranties, covenants or agreements contained in the merger agreement; or

    by tw telecom, following the satisfaction of all mutual conditions to the closing of the mergers and those applicable to tw telecom (other than, in each case, those conditions that by their nature are to be satisfied at the closing, provided that such conditions are reasonably capable of being satisfied at the closing), if Level 3 fails to obtain proceeds under the commitment letter (or any alternative financing arrangement(s)) sufficient to fund the cash consideration payable to tw telecom's stockholders, the cash payable to the holders of tw telecom options and to repay the debt of tw telecom to be repaid as a result of the mergers, by the end of the marketing period.


Termination Fees and Expenses (see page 122)

        Generally, all fees and expenses incurred in connection with the negotiation and completion of the transactions contemplated by the merger agreement will be paid by the party incurring those expenses, subject to the specific exceptions provided in the merger agreement. Upon termination of the merger agreement, Level 3 will be required to pay to tw telecom a termination fee of $350 million in certain circumstances and, in another circumstance, $450 million (where, subject to certain conditions, the failure of Level 3 to obtain from the commitment parties proceeds sufficient to consummate the mergers and refinance tw telecom's debt at the closing of the transaction) and, in some cases, expenses of tw telecom up to $10 million. Upon termination of the merger agreement under qualifying circumstances, tw telecom will be required to pay Level 3 a termination fee of $200 million. Additionally, upon termination of the merger agreement under qualifying circumstances, tw telecom will be required to reimburse Level 3 for up to $10 million of its expenses incurred in pursuing the mergers and, in certain circumstances, for additional expenses incurred by Level 3 in pursuing the financing. See the section titled "The Merger Agreement—Termination Fees and Expenses; Liability for Breach" beginning on page 122 for a more complete discussion of the

 

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circumstances under which tw telecom or Level 3 may be required to pay a termination fee and reimburse the other party for expenses incurred.


Accounting Treatment (see page 127)

        Level 3 prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (which we refer to as GAAP). The mergers will be accounted for by Level 3 using GAAP. Level 3 will allocate the purchase price to the fair value of tw telecom's tangible and intangible assets and liabilities at the acquisition date, with the excess purchase price being recorded as goodwill.


Appraisal Rights (see page 154)

        tw telecom stockholders will have the right to demand appraisal of their shares of tw telecom common stock and obtain payment in cash for the fair value of their shares, but only if they perfect their appraisal rights and comply with the applicable provisions of Delaware law. A copy of the Delaware statutory provisions related to appraisal rights is attached as Annex E to this document, and a summary of these provisions can be found under "Appraisal Rights" beginning on page 154. Failure to strictly comply with the applicable Delaware law provisions will result in the loss of the right of appraisal.

        Holders of Level 3 common stock are not entitled to appraisal rights in connection with the mergers.


Comparison of Stockholder Rights and Corporate Governance Matters (see page 148)

        tw telecom stockholders receiving merger consideration will have different rights once they become stockholders of Level 3 due to differences between the governing corporate documents of tw telecom and the governing corporate documents of Level 3. These differences are described in detail under the section entitled "Comparison of Rights of Level 3 Stockholders and tw telecom Stockholders" beginning on page 148.


Listing of Shares of Level 3 Common Stock; Delisting and Deregistration of tw telecom Common Shares (see pages 98 and 99)

        It is a condition to the completion of the mergers that the shares of Level 3 common stock to be issued pursuant to the merger be authorized for listing on the New York Stock Exchange (or any successor inter-dealer quotation system or stock exchange thereto) at the effective time of the merger. Upon completion of the mergers, tw telecom common shares currently listed on the NASDAQ Global Select Market will cease to be listed on the NASDAQ Global Select Market and will be subsequently deregistered under the Exchange Act.


STT Crossing Voting Agreement (see page 124)

        STT Crossing Ltd. (which we refer to as STT Crossing), a Level 3 stockholder, has entered into the voting agreement with tw telecom and solely with respect to certain covenants contained therein, Level 3, pursuant to which, STT Crossing agreed, among other things, subject to certain exceptions, to vote the shares of Level 3 common stock held by it in favor of the adoption of the Level 3 charter amendment and the Level 3 stock issuance and to refrain from transferring, selling or otherwise disposing of, granting proxy with respect to or pledging such shares of Level 3 common stock. The voting agreement will terminate upon the earliest of (i) mutual agreement between the parties, (ii) the effective time of the merger and (iii) the termination of the merger agreement. As of the close of business on the record date for the Level 3 special meeting, the shares of Level 3 common stock held by STT Crossing represented, in the aggregate, approximately       % of Level 3's voting shares.

 

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The Meetings

The tw telecom Special Meeting (see page 46)

        The special meeting of tw telecom stockholders will take place at                      , on                      , 2014, at                      , local time. At the special meeting, stockholders of tw telecom will be asked:

    to consider and vote on the merger proposal;

    to consider and vote on the tw telecom adjournment proposal; and

    to consider and vote on the compensation proposal.

        You may vote at the tw telecom special meeting if you owned common stock of tw telecom at the close of business on                      , 2014, the record date. As of the close of business on the record date, there were             shares of common stock of tw telecom outstanding and entitled to vote. You may cast one vote for each share of common stock of tw telecom that you owned as of the close of business on the record date.

        Completion of the mergers is conditioned on approval of the merger proposal. Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of tw telecom common stock entitled to vote on the proposal. Approval of the tw telecom adjournment proposal and the compensation proposal each requires the affirmative vote of holders of a majority of the issued and outstanding shares of tw telecom common stock present in person or represented by proxy at the tw telecom special meeting and entitled to vote at the meeting.


The Level 3 Special Meeting (see page 49)

        The special meeting of Level 3 stockholders will be held at                      , on                      , 2011, at                      , local time. The special meeting of Level 3 stockholders is being held to consider and vote on:

    the proposal to approve the Level 3 stock issuance;

    the proposal to approve the adoption of the Level 3 charter amendment; and

    the proposal to adjourn the Level 3 special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the foregoing proposal.

        Completion of the mergers is conditioned on approval of both the Level 3 stock issuance and the adoption of the Level 3 charter amendment.

        Only holders of record of Level 3 common stock at the close of business on                      , 2014, the record date for the Level 3 special meeting, are entitled to vote at the Level 3 special meeting or any adjournments or postponements thereof. At the close of business on the record date,                  shares of Level 3 common stock were issued and outstanding.

        You may cast one vote for each share of Level 3 common stock you own. The proposal to approve the Level 3 stock issuance requires the affirmative vote of holders of a majority of the outstanding shares of Level 3 capital stock present in person or represented by proxy and entitled to vote on the proposal, and the proposal to approve the adoption of the Level 3 charter amendment requires the affirmative vote of holders of a majority of the outstanding shares of Level 3 capital stock. If necessary to solicit additional proxies if there are not sufficient votes to approve the Level 3 stock issuance or the adoption of the Level 3 charter amendment, the holders of a majority of the shares of Level 3 common stock entitled to vote and present in person or by proxy, whether or not a quorum is present, may adjourn the Level 3 special meeting to another time or place without further notice unless the adjournment is for more than 30 days, or if after the adjournment a new record

 

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date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each Level 3 stockholder of record entitled to vote at the Level 3 special meeting.

        In connection with the merger agreement, on June 15, 2014, STT Crossing entered into the voting agreement with tw telecom and, solely with respect to certain covenants contained therein, Level 3, pursuant to which it agreed, among other things, subject to certain limited exceptions as set forth in the voting agreement, to vote the shares of Level 3 common stock held by it in favor of the Level 3 charter amendment and the Level 3 stock issuance at the Level 3 special meeting. The voting agreement is further described in the section entitled "STT Crossing Voting Agreement" beginning on page 124.


Voting by tw telecom and Level 3 Directors and Executive Officers (see pages 48 and 51)

        On the record date for the tw telecom special meeting, the directors and executive officers of tw telecom owned and were entitled to vote                  shares of tw telecom common stock, representing         % of the issued and outstanding tw telecom common stock. tw telecom currently expects that its directors and executive officers will vote their shares in favor of the above-listed proposals, although none of them has entered into any agreements obligating him or her to do so.

        On the record date for the Level 3 special meeting, the directors and executive officers of Level 3 owned and were entitled to vote                  shares of Level 3's common stock, representing         % of the outstanding Level 3 common stock. Level 3 currently expects that its directors and executive officers will vote their shares in favor of the above-listed proposals, although none of them has entered into any agreements obligating him or her to do so.

 

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Selected Historical Consolidated Financial Data

Selected Historical Consolidated Financial Data of tw telecom

        The following table presents tw telecom's selected historical consolidated financial data as of and for the three months ended March 31, 2014 and 2013, and as of and for the years ended, December 31, 2013, 2012, 2011, 2010, and 2009. You should read this information in conjunction with tw telecom's consolidated financial statements and related notes included in tw telecom's Quarterly Report on Form 10-Q for the three months ended March 31, 2014 filed on May 8, 2014 and Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed on February 14, 2014, which are incorporated by reference in this joint proxy statement/prospectus and from which this information is derived. See the section titled "Where You Can Find More Information" beginning on page 160.

 
  Three Months Ended
March 31,
  Fiscal Year Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (amounts in thousands, except per share and operating data amounts and ratios)
 

Statements of Operations Data:

                                           

Revenue(1):

                                           

Data and internet services

  $ 243,671   $ 211,721   $ 893,488   $ 783,301   $ 681,147   $ 570,294   $ 486,580  

Voice services

    77,361     76,030     306,541     302,096     293,304     297,303     304,697  

Network services

    58,367     64,955     250,588     274,921     298,136     320,403     345,457  
                               

Service Revenue

    379,399     352,706     1,450,617     1,360,318     1,272,587     1,188,000     1,136,734  
                               

Taxes and fees

    22,752     20,594     83,164     79,810     63,459     51,257     40,046  

Intercarrier compensation

    6,142     7,909     30,120     30,127     30,845     33,914     34,610  
                               

Total revenue

    408,293     381,209     1,563,901     1,470,255     1,366,891     1,273,171     1,211,390  
                               

Costs and expenses:

                                           

Operating (exclusive of depreciation, amortization and accretion shown separately below)(2)

    174,039     161,082     658,080     617,553     571,461     528,965     503,960  

Selling, general, and administrative(2)

    106,832     93,562     392,132     341,423     325,538     308,470     297,290  

Depreciation, amortization, and accretion

    82,456     74,395     308,768     284,292     283,329     289,564     296,167  
                               

Total costs and expenses

    363,327     329,039     1,358,980     1,243,268     1,180,328     1,126,999     1,097,417  
                               

Operating income

    44,966     52,170     204,921     226,987     186,563     146,172     113,973  

Interest expense, net

    (25,500 )   (28,063 )   (95,444 )   (92,964 )   (87,173 )   (80,344 )   (83,641 )

Debt extinguishment costs

    (1,282 )       (39,314 )   (77 )       (17,070 )    

Other income

                        825      
                               

Income before income taxes

    18,184     24,107     70,163     133,946     99,390     49,583     30,332  

Income tax expense (benefit)(3)

    8,393     10,963     33,705     57,058     41,479     (291,295 )   11,921  
                               

Net income

  $ 9,791   $ 13,144   $ 36,458   $ 76,888   $ 57,911   $ 340,878   $ 18,411  
                               
                               

Basic income per share

  $ 0.07   $ 0.09   $ 0.25   $ 0.51   $ 0.39   $ 2.26   $ 0.12  
                               
                               

Diluted income per share

  $ 0.07   $ 0.09   $ 0.24   $ 0.50   $ 0.38   $ 2.12   $ 0.12  
                               
                               

Weighted average shares outstanding, basic

    138,088     149,129     144,920     147,675     147,247     149,156     148,087  

Weighted average shares outstanding, diluted

    140,097     152,452     146,480     150,059     149,349     171,456     149,852  

 

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  Three Months Ended
March 31,
  Fiscal Year Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (amounts in thousands, except per share and operating data amounts and ratios)
 

Other Operating Data:

                                           

Modified EBITDA(4)(5)

  $ 136,808   $ 136,027   $ 552,521   $ 540,579   $ 497,709   $ 463,568   $ 436,658  

Modified EBITDA margin(1)(4)(5)(6)

    33.5 %   35.7 %   35.3 %   36.8 %   36.4 %   36.4 %   36.0 %

Net cash provided by operating activities

  $ 115,225   $ 81,600   $ 438,461   $ 463,676   $ 403,588   $ 385,752   $ 390,478  

Capital expenditures(7)

  $ 102,170   $ 90,853   $ 501,887   $ 343,425   $ 342,731   $ 321,844   $ 274,890  

Net interest coverage ratio(8)

    6.3     7.4     6.5     8.0     7.8     7.9     6.8  

Operating Data (as of the end of each period presented):

                                           

Operating networks

    76     75     75     75     75     75     75  

Fiber connected buildings, on-net(9)

    20,778     18,466     20,255     17,948     15,438     13,230     11,598  

Employees

    3,407     3,191     3,397     3,147     3,051     2,975     2,870  

Balance Sheet Data (as of the end of each period presented):

                                           

Cash and cash equivalents

  $ 178,839   $ 731,710   $ 284,419   $ 806,728   $ 353,394   $ 356,922   $ 445,907  

Investments

    176,394     181,575     194,576     167,564     131,525     118,672     24,865  

Property, plant, and equipment, net

    1,726,263     1,515,607     1,694,956     1,492,246     1,427,212     1,356,612     1,294,372  

Total assets

    2,812,544     3,182,986     2,922,460     3,223,737     2,708,226     2,650,954     2,328,462  

Long-term debt and capital lease obligations

    1,915,081     1,385,544     1,916,775     1,384,242     1,352,820     1,338,297     1,300,370  

Total debt and capital lease obligations

    1,923,959     1,766,231     1,949,245     1,759,211     1,360,553     1,345,499     1,307,939  

Total stockholders' equity

  $ 532,554   $ 1,080,693   $ 636,069   $ 1,111,939   $ 1,005,721   $ 966,641   $ 644,388  

Leverage ratios(10):

                                           

Gross

    3.5     3.2     3.6     3.3     2.8     3.0     3.1  

Net

    2.9     1.6     2.7     1.5     1.8     2.0     2.1  

(1)
Beginning January 1, 2014, tw telecom is reporting revenue from taxes and fees in a separate line on the consolidated statements of operations and is reporting revenue from dedicated high capacity Ethernet services in data and internet services rather than network services. These reclassifications have been made in the prior periods consolidated statement of operations to conform to the current year presentation. Neither of these changes affects total revenue in the table above for any of the periods.

(2)
Includes the following non-cash stock-based employee compensation expense:

 
  Three Months
Ended
March 31,
  Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (amounts in thousands)
 

Operating

  $ 539   $ 583   $ 2,178   $ 1,904   $ 2,327   $ 3,261   $ 3,654  

Selling, general, and administrative

    8,847     8,879     36,654     27,396     25,490     24,571     22,864  
(3)
Includes a non-cash income tax benefit of $299.0 million for the year ended December 31, 2010 to recognize the value of tax assets.

(4)
"Modified EBITDA" is a non-GAAP financial measure and is defined by tw telecom as net income (loss) before depreciation, amortization and accretion expense, interest expense, interest income, debt extinguishment costs, other income (loss), impairment charges, income tax expense (benefit), cumulative effect of change in accounting principle, and non-cash stock-based employee compensation expense. Not all of these items occur in each reporting period, but have been included in the definition based on historical activity. Modified EBITDA is not intended to replace operating income (loss), net income (loss), cash flow and other measures of financial performance and liquidity reported in accordance with accounting principles generally accepted in the United States. Rather, Modified EBITDA is a measure of operating performance and liquidity that investors may consider in addition to such measures. Other companies may define Modified EBITDA or similar terms differently. tw telecom management believes that Modified EBITDA is a standard measure of operating performance and liquidity that is commonly reported and widely used by analysts,

 

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    investors and other interested parties in the telecommunications industry because it eliminates many differences in financial, capitalization and tax structures, as well as non-cash and non-operating charges to earnings. tw telecom believes that Modified EBITDA trends are a valuable indicator of whether tw telecom's operations are able to produce sufficient operating cash flow to fund working capital needs, service debt obligations and fund capital expenditures. tw telecom currently uses Modified EBITDA for these purposes. Modified EBITDA also is used internally by tw telecom's management to assess ongoing operations and is a measure used to test compliance with certain covenants of its senior notes, its Revolver and its Term Loan. The definition of EBITDA under its Revolver, its Term Loan and its senior notes differs, but not materially, from the definition of Modified EBITDA used in this table. Modified EBITDA as used in this document may not be comparable to similarly titled measures reported by other companies due to differences in accounting and disclosure policies.

(5)
The reconciliation between net income and Modified EBITDA is as follows:
 
  Three Months
Ended
March 31,
  Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (amounts in thousands)
 

Net income

  $ 9,791   $ 13,144   $ 36,458   $ 76,888   $ 57,911   $ 340,878   $ 18,411  

Income tax expense (benefit)

    8,393     10,963     33,705     57,058     41,479     (291,295 )   11,921  

Interest income

    (148 )   (277 )   (692 )   (793 )   (545 )   (608 )   (360 )

Interest expense

    25,648     28,340     96,136     93,757     87,718     80,952     84,001  

Debt extinguishment costs

    1,282         39,314     77         17,070      

Other income

                        (825 )    

Depreciation, amortization and accretion

    82,456     74,395     308,768     284,292     283,329     289,564     296,167  

Non-cash stock-based compensation

    9,386     9,462     38,832     29,300     27,817     27,832     26,518  
                               

Modified EBITDA

  $ 136,808   $ 136,027   $ 552,521   $ 540,579   $ 497,709   $ 463,568   $ 436,658  
                               
                               

    The reconciliation between net cash provided by operations and Modified EBITDA, as a measure of liquidity, is as follows:

 
  Three Months
Ended
March 31,
  Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (amounts in thousands)
 

Net cash provided by operations

  $ 115,225   $ 81,600   $ 438,461   $ 463,676   $ 403,588   $ 385,752   $ 390,478  

Income tax expense (benefit)

    8,393     10,963     33,705     57,058     41,479     (291,295 )   11,921  

Deferred income taxes

    (8,017 )   (10,617 )   (30,738 )   (48,559 )   (35,756 )   293,529     (9,175 )

Interest income

    (148 )   (277 )   (692 )   (793 )   (545 )   (608 )   (360 )

Interest expense

    25,648     28,340     96,136     93,757     87,718     80,952     84,001  

Discount on debt, amortization of deferred debt issue costs and other

    (1,613 )   (6,795 )   (10,727 )   (25,469 )   (23,388 )   (21,404 )   (20,036 )

Changes in operating assets and liabilities

    (2,680 )   32,813     26,376     909     24,613     16,642     (20,171 )
                               

Modified EBITDA

  $ 136,808   $ 136,027   $ 552,521   $ 540,579   $ 497,709   $ 463,568   $ 436,658  
                               
                               
(6)
Modified EBITDA margin represents Modified EBITDA as a percentage of revenue.

(7)
Capital expenditures for the year ended December 31, 2013 included $119.8 million for a long-term fiber lease related to tw telecom's strategic market expansion for which the fiber had not yet been installed at December 31, 2013.

(8)
tw telecom's net interest coverage ratio is calculated by dividing net cash interest expense by Modified EBITDA. tw telecom believes that its net interest coverage ratio provides a measurement of its ability to cover its interest payments

 

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    on its debt and capital lease obligations. For this purpose, the net cash interest expense excludes non-cash interest expense. The reconciliation between interest expense and net cash interest expense is as follows:

 
  Three Months
Ended
March 31,
  Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (amounts in thousands)
 

Interest expense

  $ 25,648   $ 28,340   $ 96,136   $ 93,757   $ 87,718   $ 80,952   $ 84,001  

Discount on debt and amortization of deferred debt issue costs

    (1,613 )   (6,794 )   (10,726 )   (25,486 )   (23,473 )   (21,417 )   (19,418 )

Interest income

    (148 )   (277 )   (692 )   (793 )   (545 )   (608 )   (360 )
                               

Net cash interest expense

  $ 23,887   $ 21,269   $ 84,718   $ 67,478   $ 63,700   $ 58,927   $ 64,223  
                               
                               
(9)
During 2012, building additions include an increase of 532 previously connected buildings identified during alignment of key operating systems.

(10)
tw telecom's gross leverage ratio is calculated by dividing the principal amount of its total debt and capital lease obligations by Modified EBITDA. tw telecom's net leverage ratio is calculated by dividing the principal amount of its total debt and capital lease obligations less cash and cash equivalents and short-term investments by Modified EBITDA. tw telecom believes that its leverage ratios provide a measurement of its ability to cover its total debt and capital lease obligations.

 

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Selected Historical Consolidated Financial Data of Level 3

        The following table presents Level 3's selected historical consolidated financial data as of March 31, 2014 and 2013, and for the three months ended March 31, 2014 and 2013, and as of and for the years ended, December 31, 2013, 2012, 2011, 2010 and 2009. You should read this information in conjunction with Level 3's consolidated financial statements and related notes included in Level 3's Quarterly Report on Form 10-Q for the three months ended March 31, 2014 filed on May 8, 2014 and Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed on February 27, 2014, which are incorporated by reference in this document and from which this information is derived. See the section titled "Where You Can Find More Information" beginning on page 160.

 
  Three Months
Ended March 31,
  Fiscal Year Ended(1)  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (dollars in millions, except per share amounts)
 

Results of Operations:

                                           

Revenue(1)

  $ 1,609   $ 1,577   $ 6,313   $ 6,376   $ 4,333   $ 3,591   $ 3,695  

Income (loss) from continuing operations(2)

    112     (78 )   (109 )   (422 )   (827 )   (621 )   (624 )

Income (loss) from discontinued operations(1)

                    71     (1 )   6  

Net Income (Loss)

    112     (78 )   (109 )   (422 )   (756 )   (622 )   (618 )

Per Common Share:

                                           

Income (Loss) from continuing operations

    0.48     (0.36 )   (0.49 )   (1.96 )   (6.03 )   (5.61 )   (5.73 )

Income (Loss) from discontinued operations

                    0.52     (0.01 )   0.05  

Net Income (Loss)

    0.48     (0.36 )   (0.49 )   (1.96 )   (5.51 )   (5.62 )   (5.68 )

Net Income (Loss) (diluted)

    0.47     (0.36 )   (0.49 )   (1.96 )   (5.51 )   (5.62 )   (5.68 )

Dividends(3)

                             

Financial Position:

                                           

Total assets

    12,889     12,882     12,874     13,307     13,188     8,355     9,062  

Current portion of long-term debt(4)

    503     38     31     216     65     180     705  

Long-term debt, less current portion(4)

    7,856     8,508     8,331     8,516     8,385     6,268     5,755  

Stockholders' equity (deficit)(5)

    1,598     1,108     1,411     1,171     1,193     (157 )   491  

(1)
On October 4, 2011, Level 3 purchased Global Crossing Limited ("Global Crossing") (the "Amalgamation"). During 2011, Level 3 recorded revenue attributable to Global Crossing of approximately $654 million.

On November 14, 2011, Level 3 completed the sale of its coal mining business to Ambre Energy Limited as part of its long-term strategy to focus on core business operations. Revenue attributable to the coal mining business totaled approximately $54 million in 2011 through the date of sale, $60 million in 2010 and $67 million in 2009. As a result of the transaction, Level 3 recognized a gain on the transaction of approximately $72 million, which is included in its consolidated statements of operations within "Income (Loss) from Discontinued Operations, Net". The financial results of the coal mining business are included in Level 3's consolidated results of operations through the date of sale, and all periods have been revised to reflect the presentation within discontinued operations.

(2)
In 2009, Level 3 recognized a gain of approximately $14 million as a result of debt repurchases and exchanges of certain of Level 3's debt securities and $9 million of restructuring charges.

 

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    In 2010, Level 3 recognized a loss of approximately $59 million associated with the tender offer to repurchase Level 3's 12.25% Senior Notes due 2013 and as a result of the redemption of its 10% Convertible Senior Notes due 2011. Level 3 also recognized a $91 million benefit primarily related to the release of foreign deferred tax valuation allowances and $2 million of restructuring charges.

    In 2011, Level 3 recognized a loss of $100 million related to the redemption and repurchase of the 3.5% Convertible Senior Notes due in June 2012 and prepayment of the Tranche B Term Loan that was outstanding under the existing Senior Secured Term Loan, the conversion of certain of the 15% Convertible Senior Notes due 2013, the retirement of a portion of the 9.25% Senior Notes due 2014, the redemption of the 5.25% Convertible Senior Notes due 2011 and exchange of the 9% Convertible Senior Discount Notes due 2013. As a result of a change in the estimated useful lives of certain of Level 3's property, plant and equipment, Level 3 recognized a reduction of approximately $74 million in depreciation expense during the fourth quarter of 2011. The change in accounting estimate was accounted for on a prospective basis effective October 1, 2011. Level 3 also recognized $11 million of restructuring charges and $20 million of charges associated with the impairment of certain wireless spectrum licenses.

    In 2012, Level 3 recognized a $160 million loss on modification and extinguishment of debt as a result of the refinancing of the $650 million Tranche B II Term Loan and $550 million Tranche B III Term Loan in October 2012, the refinancing of the $1.4 billion Tranche A Term Loan in August 2012 and the repayment of existing vendor financing obligations, the redemption of the 8.75% Senior Notes due 2017 in August 2012, the redemption of the 9.25% Senior Notes due 2014 in February 2012 and the exchange of a portion of the 15% Convertible Senior Notes due 2013 in March 2012. Level 3 also recognized $34 million of restructuring charges. Level 3 completed an updated analysis and revised its estimated future cash flows of its asset retirement obligations as a result of a strategic review of Level 3's real estate portfolio in the fourth quarter of 2012. As a result, Level 3 reduced its asset retirement obligations liability by $73 million with an offsetting reduction to property, plant and equipment of $24 million, selling, general and administrative expenses of $47 million and depreciation and amortization of $2 million. In addition, as a result of the refinancing of the Tranche A Term Loan in 2012, two interest rate swap agreements maturing in early 2014 that had effectively hedged changes in the interest rate on a portion of the Tranche A Term Loan were deemed "ineffective" under GAAP. Level 3 recognized a non-cash loss on the agreements of approximately $60 million (excluding accrued interest), which represented the cumulative loss recorded in Accumulated Other Comprehensive Income (Loss) ("AOCI") at the date the instruments ceased to qualify as hedges.

    In 2013, Level 3 recognized an $84 million loss on modification and extinguishment of debt as a result of refinancing its $815 million Tranche B 2019 Term Loan and $595.5 million Tranche B 2016 Term Loan in August 2013, its $1.2 billion Tranche B-II 2019 Term Loan in October 2013 and its $640 million 10% Senior Notes due 2018 and $300 million Floating Rate Senior Notes due 2015 in December 2013. Additionally, Level 3 incurred $47 million of restructuring charges.

(3)
Level 3's current dividend policy, in effect since April 1998, is to retain future earnings for use in Level 3's business. As a result, management does not anticipate paying cash dividends on shares of common stock in the foreseeable future. In addition, Level 3 is restricted under certain debt-related covenants from paying cash dividends on shares of its common stock.

(4)
In 2009, Level 3 received net proceeds of $274 million as a result of amending and restating its existing senior secured credit facility to increase the borrowings through the creation of a new $280 million Tranche B Term Loan. Level 3 exchanged $142 million of its 6% Convertible Subordinated Notes due 2010 and $140 million of its 2.875% Convertible Senior Notes due 2010 for $200 million of 7% Convertible Senior Notes due 2015 and $78 million of cash. In

 

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    2009, Level 3 received net proceeds of $274 million from the issuance of its 7% Convertible Senior Notes due 2015, Series B. Also in 2009, Level 3 repurchased $126 million aggregate principal amount of its 6% Convertible Subordinated Notes due 2009, $55 million aggregate principal amount of its 6% Convertible Subordinated Notes due 2010, $13 million aggregate principal amount of its 2.875% Convertible Senior Notes due 2010, $131 million aggregate principal amount of its 5.25% Convertible Senior Notes due 2011, $56 million aggregate principal amount of its 10% Convertible Senior Notes due 2011, and $31 million aggregate principal amount of its 3.5% Convertible Senior Notes due 2012. Level 3 also redeemed the remaining $13 million of its 11.5% Senior Notes due 2010, repurchased the remaining $6 million aggregate principal amount of its Floating Rate Notes due 2011 and repaid at maturity the remaining $55 million of its outstanding 6% Convertible Subordinated Notes due 2009.

    In 2010, Level 3 received net proceeds of $613 million from the issuance of its 10% Senior Notes due 2018 and net proceeds of $195 million from the issuance of its 6.5% Convertible Senior Notes due 2016. In connection with the issuance of its 10% Senior Notes due 2018, Level 3 repurchased $550 million of the total outstanding 12.25% Senior Notes due 2013 primarily through a tender offer. In addition, Level 3 redeemed all of the outstanding $172 million aggregate principal amount of its 10% Convertible Senior Notes due 2011, $3 million of its 5.25% Convertible Senior Notes due 2011, the remaining $3 million of its 10.75% Senior Notes due 2011, and $2 million of its 2.875% Convertible Senior Notes due 2010. Upon maturity, Level 3 repaid the remaining $111 million of its 6% Convertible Subordinated Notes due 2010 and the remaining $38 million of its 2.875% Convertible Senior Notes due 2010.

    In 2011, Level 3 issued approximately $605 million of 11.875% Senior Notes due 2019 in two separate transactions, as well as $500 million of its 9.375% Senior Notes due 2019. Proceeds from the first 11.875% Senior Note offering were used to redeem $196 million of 5.25% Convertible Senior Notes. In the second offering, Level 3 exchanged $295 million of 9% Convertible Senior Discount Notes for the 11.875% Senior Notes. Level 3 Escrow, Inc., an indirect wholly owned subsidiary of Level 3, issued $600 million in aggregate principal amount of 8.125% Senior Notes due 2019. Level 3 Escrow, Inc. issued an additional $600 million in aggregate principal amount of its 8.125% Senior Notes due 2019 under the same indenture as the 8.125% Senior Notes previously issued, which were treated as a single series of notes under the indenture. In connection with the Amalgamation, all of the 8.125% Senior Notes due 2019 were assumed by Level 3 Financing, Inc., a direct wholly owned subsidiary of Level 3, and the proceeds were used to refinance certain existing indebtedness of Global Crossing. Level 3 exchanged approximately $128 million of its 15% Convertible Senior Notes due 2013 for approximately 5 million shares of its common stock. Level 3 also paid approximately $29 million in cash, representing interest due from the conversion through the 2013 maturity date. Level 3 also repurchased approximately $20 million of its 3.5% Convertible Senior Notes due 2012. Level 3 borrowed $550 million aggregate principal amount of its Tranche B III Term Loan. The net proceeds in addition to cash on hand were used to redeem the remaining $274 million aggregate principal amount of 3.5% Convertible Senior Notes due 2012 and prepay the $280 million Tranche B Term Loan that was outstanding under the existing Senior Secured Term Loan. Also in connection with the closing of the Amalgamation, Level 3 amended its existing credit agreement to incur an additional $650 million of borrowings through an additional Tranche B II Term Loan. The net proceeds from the Tranche B II Term Loan were used to consummate the Amalgamation, to refinance certain existing indebtedness of Global Crossing in connection with the consummation of the Amalgamation and for general corporate purposes.

    In 2012, Level 3 refinanced its existing $650 million Tranche B II Term Loan and $550 million Tranche B III Term Loan under its existing senior secured credit facility through the creation of a new term loan in the aggregate principal amount of $1.2 billion (the "Tranche B-II 2019 Term Loan") along with cash on hand. Level 3 also fully repaid the outstanding principal amount of its

 

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    Commercial Mortgage due 2015 along with accrued interest which was approximately $63 million. Also in 2012, Level 3 completed the offering of $300 million aggregate principal amount of its 8.875% Senior Notes due 2019 in a private offering. The net proceeds from that offering were used for general corporate purposes, including the repurchase, redemption, repayment or refinancing of Level 3's and its subsidiaries' existing indebtedness. Additionally in 2012, Level 3 completed the offering of $775 million aggregate principal amount of its 7% Senior Notes due 2020 in a private offering. The net proceeds from the offering of the notes, along with cash on hand, were used to redeem all of Level 3's outstanding 8.75% Senior Notes due 2017, including the payment of accrued and unpaid interest and applicable premiums. Level 3 refinanced its existing $1.4 billion Tranche A Term Loan under its existing senior secured credit facility through the creation of new term loans in the aggregate principal amount of $1.415 billion (the "New Term Loans") along with cash on hand and used the remaining net proceeds to repay $15 million in principal amount plus a premium for existing vendor financing obligations. Further in 2012, Level 3 exchanged approximately $100 million aggregate principal amount of its outstanding 15% Convertible Senior Notes due 2013 for approximately 5.4 million shares of its common stock, including an inducement premium. Also in 2012, Level 3 issued $900 million aggregate principal amount of its 8.625% Senior Notes due 2020. A portion of the net proceeds from the offering were used to redeem all of Level 3's outstanding 9.25% Senior Notes due 2014 in aggregate principal amount of $807 million.

    In 2013, Level 3 repaid at maturity approximately $172 million of its 15% Convertible Senior Notes due 2013. Level 3 also refinanced its existing $815 million Tranche B 2019 Term Loan through the creation of the $815 million Tranche B-III 2019 Term loan and its $595.5 million Tranche B 2016 Term Loan and $1.2 billion Tranche B-II 2019 Term Loan through the creation of a new term loan in the aggregate principal amount of $1.796 billion (the "Tranche B 2020 Term Loan"). Additionally, Level 3 completed the offering of $640 million aggregate principal amount of its 6.125% Senior Notes due 2021. The proceeds from the offering, together with cash on hand, were used to redeem all of the outstanding 10% Senior Notes due 2018. Also in 2013, Level 3 completed the offering of $300 million aggregate principal amount of its Floating Rate Senior Notes due 2018. The net proceeds of these notes, together with cash on hand, were used to redeem all of the outstanding Floating Rate Notes due 2015. Finally in 2013, the holders of approximately $200 million aggregate principal amount of Level 3's outstanding 6.5% Convertible Senior Notes due 2016 converted these notes for approximately 10.8 million shares of Level 3's common stock. The remaining $1 million principal amount of Level 3's 6.5% Convertible Senior Notes due 2016 was redeemed with cash on hand.

    Long-term debt, less current portion includes capital lease obligations. Refer to "Contractual Obligations" within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Level 3's Annual Report on Form 10-K for the year ended December 31, 2013 for further discussion of Level 3's total obligations.

(5)
In 2011, Level 3 issued approximately 4.7 million shares of common stock in exchange for $128 million aggregate principal amount of its 15% Convertible Senior Notes. Level 3 also issued approximately 89 million shares of common stock, valued at approximately $1.9 billion, as the stock portion of the purchase price to acquire Global Crossing.

In 2012, Level 3 issued approximately 5.4 million shares of common stock, including an inducement premium, in exchange for approximately $100 million aggregate principal amount of its outstanding 15% Convertible Senior Notes due 2013.

In 2013, Level 3 issued approximately 10.8 million shares of common stock when holders of approximately $200 million of its 6.5% Convertible Senior Notes due 2016 converted these notes.

 

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Selected Unaudited Pro Forma Condensed Combined Financial Information of
tw telecom and Level 3

        The following table shows selected unaudited pro forma condensed combined financial information about the combined financial condition and operating results of Level 3 after giving effect to the closing of the mergers. The unaudited pro forma condensed combined statement of operations data give effect to the closing of the mergers as if completed on January 1, 2013, and includes all adjustments which gives effect to the events that are directly attributable to the mergers, as long as the impact of such events that are directly attributable to the mergers are expected to continue and are factually supportable. The unaudited pro forma condensed combined balance sheet data as of March 31, 2014 gives effect to the closing of the mergers as if they had been completed on March 31, 2014 and includes all adjustments which give effect to the events that are directly attributable to the mergers and that are factually supportable. This information should be read in conjunction with the annual and quarterly reports and other information Level 3 and tw telecom have filed with the SEC and incorporated by reference in this document and with the unaudited pro forma condensed combined financial statements and related notes included in this joint proxy statement/prospectus. See sections titled "Where You Can Find More Information" beginning on page 160 and "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 128.

        The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined business had the mergers actually been completed at the beginning of each period presented, nor the impact of possible business model changes. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, cost savings, and asset dispositions, among other factors. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements, the aggregate value of purchase consideration and preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial statements are subject to adjustment and may vary significantly from the actual purchase price and allocation that will be recorded upon the closing of the mergers, which itself will be subject to further adjustment for up to one year following the closing.

 
  Year Ended
December 31, 2013
  Three Months
Ended
March 31, 2014
 
 
  (Unaudited)
 
 
  (In millions, except per share amounts)
 

Statement of Operations Data

             

Revenue

  $ 7,850   $ 2,010  

Operating income

  $ 747   $ 283  

Net income (loss) from continuing operations

  $ (213 ) $ 92  

Basic income (loss) per share from continuing operations

  $ (0.67 ) $ 0.28  

Diluted income (loss) per share from continuing operations

  $ (0.67 ) $ 0.27  

 

 
  March 31, 2014  
 
  (In millions)
 

Summary Balance Sheet

       

Net property, plant and equipment

  $ 9,996  

Goodwill

  $ 7,480  

Total assets

  $ 20,640  

Long-term debt, including current portion

  $ 11,475  

Shareholders' equity

  $ 5,916  

 

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Unaudited Comparative Per Share Data

        Presented below are tw telecom's historical per share data and Level 3's historical per share data for continuing operations for the three months ended March 31, 2014 and for the year ended December 31, 2013 and unaudited pro forma combined per share data for the three months ended March 31, 2014 and for the year ended December 31, 2013 after giving effect to the closing of the mergers as if completed on January 1, 2013. This information should be read together with the consolidated financial statements and related notes of tw telecom and Level 3 that are incorporated by reference in this document and with the unaudited pro forma condensed combined financial data included under "—Selected Unaudited Pro Forma Condensed Combined Financial Information of tw telecom and Level 3" beginning on page 34. The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the mergers had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of Level 3 following the mergers. The historical book value per share is computed by dividing total stockholders' equity (deficit) by the number of shares of common stock outstanding at the end of the period. The unaudited pro forma income per share of Level 3 following the mergers is computed by dividing the unaudited pro forma income by the unaudited pro forma weighted average number of shares outstanding. The unaudited pro forma book value per share of Level 3 following the mergers is computed by dividing total unaudited pro forma stockholders' equity by the unaudited pro forma number of shares of Level 3 common stock outstanding at the end of the period.

 
  tw telecom
Historical
  Level 3
Historical
  Level 3
Pro Forma
  tw telecom
Equivalent
Pro Forma(1)
 
 
  Three Months
Ended
March 31, 2014
  Three Months
Ended
March 31, 2014
  Three Months
Ended
March 31, 2014
  Three Months
Ended
March 31, 2014
 
 
  (in millions, except per share data)
 

Numerator:

                         

Net income from continuing operations

  $ 10   $ 112   $ 92   $ 10  

Denominator:

                         

Weighted Average shares outstanding for Basic EPS

    138.1     235.6     332.9     96.7  

Weighted Average shares outstanding for Diluted EPS

    140.1     239.3     336.6     98.1  

Net income per common share:

                         

Basic

  $ 0.07   $ 0.48   $ 0.28   $ 0.10  

Diluted

  $ 0.07   $ 0.47   $ 0.27   $ 0.10  
                   
                   

Book Value per common share(2)

  $ 3.86   $ 6.74   $ 17.70   $ 4.95  
                   
                   

(1)
Represents tw telecom Historical as adjusted by the exchange ratio of 0.7.

(2)
Common shares outstanding excludes 1 million shares reserved for share-based awards that would be converted into the right to receive merger consideration in the merger in accordance with the terms of the merger agreement.

 

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  tw telecom
Historical
  Level 3
Historical
  Level 3
Pro Forma
  tw telecom
Equivalent
Pro Forma(1)
 
 
  Year Ended
December 31, 2013
  Year Ended
December 31, 2013
  Year Ended
December 31, 2013
  Year Ended
December 31, 2013
 
 
  (in millions, except per share data)
 

Numerator:

                         

Net income (loss) from continuing operations

  $ 36   $ (109 ) $ (213 ) $ 36  

Denominator:

                         

Weighted Average shares outstanding for Basic EPS

    144.9     222.4     319.7     101.4  

Weighted Average shares outstanding for Diluted EPS

    146.5     222.4     319.7     102.5  

Net income (loss) per common share:

                         

Basic

  $ 0.25   $ (0.49 ) $ (0.67 ) $ 0.35  

Diluted

  $ 0.24   $ (0.49 ) $ (0.67 ) $ 0.35  
                   
                   

Book Value per common share(2)

  $ 4.51   $ 6.00   $ 17.57   $ 5.91  
                   
                   

(1)
Represents tw telecom Historical as adjusted by the exchange ratio of 0.7.

(2)
Common shares outstanding excludes 1 million shares reserved for share-based awards that would be converted into the right to receive merger consideration in the merger in accordance with the terms of the merger agreement.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This joint proxy statement/prospectus contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include, but are not limited to, (i) statements about the benefits of the acquisition of tw telecom by Level 3, including financial and operating results and synergy benefits that may be realized from the acquisition and the timeframe for realizing those benefits; (ii) Level 3's and tw telecom's plans, objectives, expectations and intentions; (iii) other statements contained in this communication that are not historical facts; and (iv) other statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "goal," "strategy," "future," "likely," "may," "should," "could," "will," and words of similar meaning or similar references to future periods.

        Forward-looking statements are neither historical facts nor assurances of future performance. Instead, forward-looking statements are based only on current beliefs, assumptions, and expectations regarding the future of our business, including the effects of the mergers, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are inherently subject to significant business, economic and competitive uncertainties, risks, and contingencies, which may include third-party approvals, many of which are beyond Level 3's or tw telecom's control and are difficult to predict. Therefore, you are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

        The following factors, among others, could cause Level 3's or tw telecom's actual results and financial condition to differ materially from those expressed or implied in the forward-looking statements: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (ii) the inability to complete the transactions contemplated by the merger agreement due to the failure to obtain the required stockholder approvals; (iii) the inability to satisfy the other conditions specified in the merger agreement, including without limitation the receipt of necessary governmental or regulatory approvals required to complete the transactions contemplated by the merger agreement; (iv) the inability to successfully integrate Level 3's business with tw telecom's business or to integrate the businesses within the anticipated timeframe; (v) the risk that the proposed transactions disrupt current plans and operations, increase operating costs and the potential difficulties in customer loss and employee retention as a result of the announcement and consummation of such transactions; (vi) the ability to realize the anticipated benefits of the mergers of Level 3 and tw telecom, including the realization of revenue and cost synergy benefits and to realize such benefits within the anticipated timeframe; (vii) the outcome of any legal proceedings that may be instituted against Level 3, tw telecom or others following announcement of the merger agreement and transactions contemplated therein; and (viii) the possibility that Level 3 or tw telecom may be adversely affected by other economic, business, and/or competitive factors. These risks and uncertainties also include those set forth under "Risk Factors," beginning on page 39.

        Other important factors that may affect Level 3's and the combined business' results of operations and financial condition include, but are not limited to: (i) a discontinuation of the development and expansion of the internet as a communications medium and marketplace for the distribution and consumption of data and video; (ii) continued uncertainty in the global financial markets and the global economy; (iii) disruptions in the financial markets that could affect Level 3's ability to obtain additional financing; and (iv) Level 3's ability to: increase revenue from the services it offers; successfully use new technology and information systems to support new and existing services; prevent process and system failures that significantly disrupt the availability and quality of the services that it provides; prevent its security measures from being breached, or its services from being degraded as a result of security breaches; develop new services that meet customer demands

 

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and generate acceptable margins; effectively manage expansions to its operations; provide services that do not infringe the intellectual property and proprietary rights of others; attract and retain qualified management and other personnel; and meet all of the terms and conditions of debt obligations.

        Additional information concerning these and other important factors can be found within Level 3's and tw telecom's filings with the SEC, which discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. Statements in this communication should be evaluated in light of these important factors. The forward-looking statements in this communication speak only as of the date they are made. Except for the ongoing obligations of Level 3 and tw telecom to disclose material information under the federal securities laws, Level 3 and tw telecom do not undertake any obligation to, and expressly disclaim any such obligation to, update or alter any forward-looking statement to reflect new information, circumstances or events that occur after the date such forward-looking statement is made unless required by law.


Prospective Financial Information

        The prospective financial information included in this document was not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information. The prospective financial information included in this document has been prepared by, and is the responsibility of, tw telecom's and Level 3's management, as applicable. Neither KPMG LLP nor Ernst & Young LLP has examined, compiled or performed any procedures with respect to the accompanying prospective financial information and, accordingly, neither KPMG LLP nor Ernst & Young LLP expresses an opinion or any other form of assurance with respect thereto. The KPMG LLP and Ernst & Young LLP reports incorporated by reference in this joint proxy statement/prospectus relate only to Level 3's and tw telecom's historical financial information, respectively. They do not extend to the prospective financial information and should not be read to do so.

        Neither tw telecom nor Level 3 assumes any responsibility for the accuracy of the accompanying prospective financial information or expresses any assurance with respect thereto.

 

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RISK FACTORS

        In addition to the other information included and incorporated by reference in this joint proxy statement/prospectus, including the matters addressed in the section entitled "Cautionary Statement Regarding Forward-Looking Statements," you should carefully consider the following risk factors before deciding whether to vote for the proposal to approve and adopt the merger agreement and the mergers, in the case of tw telecom stockholders, or for the proposals to approve the Level 3 stock issuance and adoption of the Level 3 charter amendment, in the case of Level 3 stockholders. In addition, you should read and consider the risks associated with each of the businesses of tw telecom and Level 3 because these risks will relate to Level 3 following the completion of the mergers. Descriptions of some of these risks can be found in the Annual Reports on Form 10-K for the fiscal year ended December 31, 2013, and any amendments thereto, for each of tw telecom and Level 3, as such risks may be updated or supplemented in each company's subsequently filed Quarterly Reports on Form 10-Q, which are incorporated by reference into this joint proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this document. See the section titled "Where You Can Find More Information" beginning on page 160.


Risk Factors Relating to the Mergers

The mergers are subject to conditions, including certain conditions that may not be satisfied, and may not be completed on a timely basis, or at all. Failure to complete the mergers and the transactions contemplated thereby could have material and adverse effects on tw telecom and Level 3.

        The completion of the mergers is subject to a number of conditions, including the receipt of required regulatory approvals, the approval and adoption of the merger agreement and approval of the mergers by the tw telecom stockholders and the approval of the Level 3 stock issuance and the adoption of the Level 3 charter amendment by the Level 3 stockholders, which make the completion and timing of the completion of the mergers uncertain. See the section titled "The Merger Agreement—Conditions to Completion of the Mergers" beginning on page 118 for a more detailed discussion. Also, either tw telecom or Level 3 may terminate the merger agreement if the mergers have not been completed by the termination date (subject to extension under certain circumstances), unless the failure of the mergers to be completed has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations.

        If the mergers are not completed on a timely basis, or at all, Level 3's and tw telecom's respective ongoing businesses may be adversely affected. Additionally, in the event the mergers are not completed, tw telecom and Level 3 will be subject to a number of risks without realizing any of the benefits of having completed the mergers, including the following:

    tw telecom may be required to pay to Level 3 a termination fee of $200 million and, in some cases, expenses of Level 3 up to $10 million if the mergers are terminated under qualifying circumstances, as described in the merger agreement;

    Level 3 may be required to pay to tw telecom a termination fee of $350 million or, $450 million and, in some cases, expenses of tw telecom up to $10 million if the mergers are terminated under qualifying circumstances, as described in the merger agreement;

    tw telecom and Level 3 will be required, subject to certain exceptions, to pay their respective costs relating to the mergers, such as legal, accounting, financial advisor and printing fees, whether or not the mergers are completed;

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    Time and resources committed by Level 3's and tw telecom's respective management to matters relating to the mergers (including integration planning) could otherwise have been devoted to pursuing other beneficial opportunities;

    The market price of Level 3 common stock or tw telecom common stock could decline to the extent that the current market price reflects a market assumption that the mergers will be completed; and

    If the merger agreement is terminated and the tw Board seeks another business combination, stockholders of tw telecom cannot be certain that tw telecom will be able to find a party willing to enter into a merger agreement on terms equivalent to or more attractive than the terms that Level 3 has agreed to in the mergers.

Uncertainty regarding the completion of the mergers may cause customers of tw telecom to delay or defer decisions concerning tw telecom and may adversely affect tw telecom's ability to attract and retain key employees.

        The mergers will happen only if stated conditions are met, including, among others, the approval and adoption of the merger agreement and approval of the mergers by the tw telecom stockholders, the approval of the Level 3 stock issuance and the adoption of the Level 3 charter amendment by the Level 3 stockholders and the receipt of regulatory approvals. Many of the conditions are beyond the control of tw telecom or Level 3. In addition, both tw telecom and Level 3 have rights to terminate the merger agreement under various circumstances. As a result, there may be uncertainty regarding the completion of the mergers. This uncertainty, along with potential customer uncertainty regarding the service to be provided by the combined company following the mergers, may cause customers of tw telecom to delay or defer decisions concerning purchases from tw telecom, which could negatively impact revenues, earnings and cash flow of tw telecom, regardless of whether the mergers are ultimately completed. Similarly, uncertainty regarding the completion of the mergers may foster uncertainty among employees about their future roles. This may adversely affect the ability of tw telecom and Level 3 to attract and retain key management, sales, marketing, trading and technical personnel, which could have an adverse effect on tw telecom's and Level 3's ability to generate revenues at anticipated levels prior or subsequent to the consummation of the mergers.

The merger agreement contains provisions that could discourage a potential competing acquiror of either tw telecom or Level 3 or could result in any competing proposal being at a lower price than it might otherwise be.

        The merger agreement contains "no shop" provisions that, subject to limited exceptions, restrict each of Level 3's and tw telecom's ability to solicit, initiate, encourage, facilitate or discuss competing third-party proposals for the acquisition of all or a significant portion of their company's assets or capital stock. In addition, each party generally has an opportunity to offer to modify the terms of the mergers in response to any competing acquisition proposals before the board of directors of such party that has received a third-party proposal may withdraw (or amend or modify in a manner adverse to the other party) its recommendation. In some circumstances, upon termination of the merger agreement, one of the parties will be required to pay a termination fee. See "The Merger Agreement—No Solicitation of Alternative Proposals" beginning on page 108, "The Merger Agreement—Termination of the Merger Agreement" beginning on page 120 and "The Merger Agreement—Termination Fees and Expenses; Liability for Breach" beginning on page 122.

        These provisions could discourage a potential third-party acquiror that might have an interest in acquiring all or a significant portion of tw telecom or Level 3 from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the mergers or might result in a

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potential third-party acquiror proposing to pay a lower price to the stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee or expenses of the other party that may become payable in certain circumstances.

        If the merger agreement is terminated and either tw telecom or Level 3 determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the mergers.

The exchange ratio is fixed and will not be adjusted in the event of any change in either Level 3's or tw telecom's stock price.

        Upon closing of the mergers, each share of tw telecom common stock will be converted into 0.7 shares of Level 3 common stock, including the associated rights under the rights agreement and the right to receive $10.00 in cash. This exchange ratio is fixed and will not be adjusted for changes in the market price of either Level 3 common stock or tw telecom common stock between the date of signing the merger agreement and completion of the mergers. Changes in the price of Level 3 common stock prior to the mergers will affect the value of Level 3 common stock that tw telecom common stockholders will receive on the closing date of the mergers.

        The prices of Level 3 common stock and tw telecom common stock at the closing of the mergers may vary from their prices on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus and on the date of each stockholders meeting. As a result, the value represented by the exchange ratio may also vary. Accordingly, at the time of the special stockholders meetings, tw telecom stockholders will not know with certainty the value of the shares of Level 3 common stock that they will receive upon completion of the mergers.

        These variations could result from changes in the business, operations or prospects of tw telecom or Level 3 prior to or following the mergers, regulatory considerations, general market and economic conditions and other factors both within and beyond the control of tw telecom or Level 3.


Risk Factors Relating to Level 3 Following the Mergers

Although Level 3 expects that Level 3's acquisition of tw telecom will result in benefits to Level 3, Level 3 may not realize those benefits because of integration difficulties and other challenges.

        The success of Level 3's acquisition of tw telecom will depend in large part on the success of management in integrating the operations, strategies, technologies and personnel of the two companies following the completion of the mergers. Level 3 may fail to realize some or all of the anticipated benefits of the mergers if the integration process takes longer than expected or is more costly than expected. The failure of Level 3 to meet the challenges involved in successfully integrating the operations of tw telecom or to otherwise realize any of the anticipated benefits of the mergers, including additional revenue opportunities, could impair the operations of Level 3. In addition, Level 3 anticipates that the overall integration of tw telecom will be a time-consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt Level 3's business.

        Potential difficulties the combined business may encounter in the integration process include the following:

    the integration of management teams, strategies, technologies, operations, products and services;

    the disruption of ongoing businesses and distraction of their respective management teams from ongoing business concerns;

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    the retention of the existing customers and/or vendors of both companies;

    the creation of uniform standards, controls, procedures, policies and information systems;

    the reduction of the costs associated with each company's operations;

    the consolidation and rationalization of information technology platforms and administrative infrastructures;

    the integration of corporate cultures and maintenance of employee morale;

    the retention of key employees; and

    potential unknown liabilities associated with the mergers.

        The anticipated benefits and synergies include the elimination or reduction of network related expenses, including third party access costs, the elimination of duplicative personnel, realization of efficiency in capital investments as well as the combination of offices in various locations and the elimination of numerous technology systems. However, these anticipated benefits and synergies assume a successful integration and are based on projections, which are inherently uncertain, and other assumptions. Even if integration is successful, anticipated benefits and synergies may not be achieved.

The mergers are subject to the receipt of consents and approvals from government entities that may impose conditions that could have an adverse effect on Level 3 following the mergers.

        Before the mergers may be completed, approvals or consents must be obtained from various securities, antitrust and other governmental authorities. In deciding whether to grant these approvals, the relevant governmental entity will make a determination of whether, among other things, the mergers are in the public interest. Regulatory entities may impose conditions on the completion of the mergers or require changes to the terms of the mergers or could impose restrictions on the conduct of business(es) of Level 3 following consummation of the mergers. Although the parties do not currently expect that any such material conditions, restrictions or changes would be imposed, there can be no assurance that they will not be, and such conditions, restrictions or changes could delay completion of the mergers or impose additional costs on or limit the revenues of the combined business following the mergers, any of which might have a material adverse effect on Level 3 following the mergers. See the section titled "The Mergers—Regulatory Clearances Required for the Mergers" beginning on page 95.

Current Level 3 stockholders and tw telecom stockholders will have a reduced ownership and voting interest after the mergers and will exercise less influence over management.

        Current Level 3 stockholders have the right to vote in the election of the Level 3 Board and on other matters affecting Level 3. Current tw telecom stockholders have the right to vote in the election of the tw Board and on other matters affecting tw telecom. Immediately after the mergers are completed, it is expected (assuming no tw telecom stockholders have exercised their rights of appraisal) that current Level 3 stockholders will own approximately 71% of Level 3 and current tw telecom stockholders will own approximately 29% of Level 3, respectively. As a result of the mergers, current Level 3 stockholders and current tw telecom stockholders will have less influence on the management and policies of Level 3 than they now have on the management and policies of Level 3 and tw telecom, respectively.

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Under the Restated Certificate of Incorporation of Level 3, as amended by the Level 3 charter amendment, Level 3 will be able to issue more shares of common stock than are expected to be outstanding immediately after the mergers are completed. As a result, such future issuances of common stock may have a dilutive effect on the earnings per share and voting power of Level 3's stockholders.

        The Level 3 charter amendment authorizes a greater number of shares of common stock than are expected to be outstanding immediately after the mergers are completed. If the mergers are completed, Level 3 will be able to issue more shares of common stock than are expected to be outstanding immediately after the mergers are completed. If the Level 3 Board elects to issue additional shares of common stock in the future, whether in public offerings, in connection with mergers and acquisitions or otherwise, such additional issuances may further dilute the earnings per share and voting power of the combined company's stockholders and may adversely affect the market price of their shares of common stock.

The market price of Level 3's common stock may decline in the future as a result of the mergers or other factors.

        The market price of Level 3's common stock may decline in the future as a result of the mergers for a number of reasons, including:

    the unsuccessful integration of tw telecom and Level 3;

    the failure of Level 3 to achieve the perceived benefits of the mergers, including financial results, as rapidly as or to the extent anticipated by Level 3 or financial or industry analysts;

    decreases in Level 3's revenue, EBITDA, profit margins or free cash flow before or after the closing of the mergers; or

    general market or economic conditions unrelated to Level 3's performance.

        These factors are, to some extent, beyond the control of Level 3.

The tw telecom and Level 3 prospective financial information is inherently subject to uncertainties and the unaudited pro forma financial data for Level 3 included in this document is preliminary, and Level 3's actual financial position and operations after the mergers may differ materially from these estimates and the unaudited pro forma financial data included in this joint proxy statement/prospectus.

        The unaudited pro forma combined financial statements and unaudited pro forma per share data for Level 3 included in this document are presented for illustrative purposes only and are not necessarily indicative of what Level 3's actual financial position or results of operations would have been had the mergers been completed on the dates indicated. Level 3's actual results and financial position after the mergers may differ materially and adversely from the unaudited pro forma financial data included in this joint proxy statement/prospectus. For more information, see the sections titled "Summary—Selected Unaudited Pro Forma Condensed Combined Financial Information of tw telecom and Level 3" beginning on page 34 and "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 128.

        While presented with numeric specificity, the tw telecom and Level 3 prospective financial information provided in this document was based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition and general business, economic, market and financial conditions and additional matters specific to tw telecom's or Level 3's business, as applicable) that are inherently subjective and uncertain and are beyond the control of the respective management. As a result, actual results may differ from the prospective

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financial information. Important factors that may affect actual results and cause these projected financial forecasts to not be achieved include, but are not limited to, risks and uncertainties relating to tw telecom's or Level 3's business, as applicable, (including each companies ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions. For more information see the sections titled "The Mergers—Certain tw telecom Prospective Financial Information" beginning on page 76 and "The Mergers—Certain Level 3 Prospective Financial Information" beginning on page 93.

Level 3's future results will suffer if the combined business does not effectively manage its expanded operations following the mergers.

        Following the mergers, Level 3 may continue to expand its operations through new product and service offerings and through additional strategic investments, acquisitions or joint ventures, some of which may involve complex technical and operational challenges. Level 3's future success depends, in part, upon its ability to manage its expansion opportunities, which pose numerous risks and uncertainties, including the need to integrate new operations into its existing business in an efficient and timely manner, to combine accounting and data processing systems and management controls and to integrate relationships with customers, vendors and business partners. In addition, future acquisitions or joint ventures after completion of the mergers may involve the issuance of additional shares of common stock of Level 3, which may dilute Level 3 stockholders' and tw telecom stockholders' ownership of Level 3.

        Furthermore, any future acquisitions of businesses or facilities could entail a number of risks, including:

    problems with the effective integration of operations;

    inability to maintain key pre-acquisition business relationships;

    increased operating costs;

    exposure to unanticipated liabilities; and

    difficulties in realizing projected efficiencies, synergies and cost savings.

        Neither Level 3 nor tw telecom can assure its respective stockholders that Level 3's future expansion or acquisition opportunities will be successful, or that the combined business will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.


Other Risk Factors of tw telecom and Level 3

        Level 3's and tw telecom's businesses are and will be subject to the risks described above. In addition, tw telecom and Level 3 are, and will continue to be, subject to the risks described in Level 3's and tw telecom's Annual Reports on Form 10-K for the fiscal year ended December 31, 2013, as amended and as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 160 for the location of information incorporated by reference in this joint proxy statement/prospectus.

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THE COMPANIES

tw telecom inc.

        tw telecom is a leading national provider of managed network services, specializing in business Ethernet, data networking, converged, IP VPN, internet access, voice, including VoIP, and network security services to enterprise organizations, including public sector entities, and carriers throughout the U.S., including their global locations. Our customers include enterprise organizations in a wide variety of industry segments including, among others, the financial services, technology and scientific, health care, distribution, manufacturing and professional services industries, data centers, cloud applications providers, public sector entities, system integrators and communications service providers, including ILECs, CLECs, wireless communications companies and cable companies.

        tw telecom's common stock is traded on the NASDAQ Global Select Market under the symbol "TWTC."

        The principal executive offices of tw telecom are located at 10475 Park Meadows Drive, Littleton, Colorado 80124 and its telephone number is (303) 566-1000.


Level 3 Communications, Inc.

        Level 3 is a facilities based provider (that is, a provider that owns or leases a substantial portion of the plant, property and equipment necessary to provide its services) of a broad range of integrated communications services. Level 3 has created its communications network by constructing its own assets and through a combination of purchasing other companies and purchasing and leasing facilities from others. Level 3's network is an international, facilities based communications network. Level 3 designed its network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies.

        Level 3's common stock is traded on the New York Stock Exchange under the symbol "LVLT."

        The principal executive offices of Level 3 are located at 1025 Eldorado Blvd., Broomfield, Colorado 80021 and its telephone number is (720) 888-1000. Additional information about Level 3 and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information" on page 160.


Saturn Merger Sub 1, LLC and Saturn Merger Sub 2, LLC

        Merger Sub 1 and Merger Sub 2, direct wholly owned subsidiaries of Level 3, are Delaware limited liability companies that were each formed on June 12, 2014 for the sole purpose of effecting the mergers. In the mergers, Merger Sub 1 will be merged with tw telecom, with tw telecom continuing as the surviving corporation. Immediately thereafter, the surviving corporation will be merged with Merger Sub 2, with Merger Sub 2 continuing as the surviving company.

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THE TW TELECOM SPECIAL MEETING

        This section contains information about the special meeting of tw telecom stockholders that has been called to consider and approve the merger proposal and the compensation proposal.

        Together with this document you will be sent a notice of the special meeting and a form of proxy that is solicited by the tw Board. The tw telecom special meeting will be held on                       , at              a.m., local time, at                      .


Matters to Be Considered

        The purpose of the tw telecom special meeting is to vote on:

    the merger proposal;

    the tw telecom adjournment proposal; and

    the compensation proposal.


Proxies

        Each copy of this document mailed to holders of tw telecom common stock as of the record date is accompanied by a form of proxy with instructions for voting by mail, by telephone or through the internet. If you hold stock in your name as a stockholder of record and are voting by mail, you should complete and return the proxy card accompanying this document to ensure that your vote is counted at the tw telecom special meeting, or at any adjournment or postponement of the special meeting, regardless of whether or not you plan to attend the tw telecom special meeting. You may also vote your shares by telephone or through the internet. Information and applicable deadlines for voting by telephone or through the internet are set forth in the enclosed proxy card instructions.

        If you hold your stock in "street name" through a bank, broker, trust company or other nominee, you must direct your bank, broker, trust company or other nominee to vote in accordance with the instructions you have received from your bank, broker, trust company or other nominee.

        If you hold stock in your name as a stockholder of record, you may revoke any proxy at any time before it is voted at the special meeting by signing and returning a proxy card with a later date by internet or telephone before the deadline stated on the proxy card, by delivering a proxy card with a later date or a written notice of revocation to tw telecom's corporate secretary, which must be received by us before the time of the special meeting, or by voting in person at the special meeting.

        Any stockholder entitled to vote in person at the tw telecom special meeting may vote in person regardless of whether or not a proxy has been previously given, but simply attending the tw telecom special meeting will not constitute revocation of a previously given proxy.

        Written notices of revocation and other communications about revoking your proxy should be addressed to:

    tw telecom inc.
    10475 Park Meadows Drive
    Littleton, Colorado 80124
    Attention: Tina A. Davis, Senior Vice President,
                      General Counsel and Secretary

        If your shares are held in "street name" by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies.

        All shares represented by valid proxies that are received through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via

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the internet or telephone. If you make no specification on your proxy card as to how you want your shares voted, your proxy will be voted "FOR" the merger proposal, "FOR" the tw telecom adjournment proposal and "FOR" the compensation proposal.


Solicitation of Proxies

        In accordance with the merger agreement, tw telecom will bear the entire cost of proxy solicitation for the tw telecom special meeting, except that Level 3 and tw telecom will share equally all expenses incurred in connection with the filing of the registration statement of which this joint proxy statement/prospectus forms a part with the SEC and the printing and mailing of this joint proxy statement/prospectus. tw telecom expects to retain a proxy solicitor to assist in its solicitation of proxies and pay customary fees for such solicitation. If necessary, tw telecom also may use several of its regular employees, who will not be specially compensated, to solicit proxies from tw telecom stockholders, either personally or by telephone, facsimile, letter or other electronic means. tw telecom will also request that banks, brokers, and other record holders forward proxies and proxy material to the beneficial owners of tw telecom common stock and secure their voting instructions, and tw telecom will provide customary reimbursement to such firms for the cost of forwarding these materials.


Record Date

        The close of business on                      , 2014 has been fixed as the record date for determining the tw telecom stockholders entitled to receive notice of and to vote at the tw telecom special meeting. At that time,                      shares of tw telecom common stock were outstanding, held by approximately                      holders of record.


Quorum

        Stockholders who hold shares representing at least a majority in total voting power of the outstanding capital stock of tw telecom entitled to vote at the tw telecom special meeting must be present in person or represented by proxy to constitute a quorum for the transaction of business at the tw telecom special meeting. The holders of a majority in voting power entitled to vote at the tw telecom special meeting that are present in person or represented by proxy thereat, whether or not a quorum is present, may adjourn the tw telecom special meeting to another time and place. At any adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the original meeting. Notice of any adjourned meeting need not be given, except if the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting.

        Abstentions and broker non-votes will be included in the calculation of the number of shares of tw telecom common stock represented at the special meeting for purposes of determining whether a quorum has been achieved.


Vote Required

        Each share of tw telecom common stock outstanding on the record date for the tw telecom special meeting entitles the holder to one vote on each matter to be voted upon at the tw telecom special meeting. Each of the proposals has the following vote requirement in order to be approved:

    approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of tw telecom common stock entitled to vote on the proposal; and

    approval of the tw telecom adjournment proposal and the compensation proposal each require the affirmative vote of holders of a majority of the issued and outstanding shares of tw

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      telecom common stock present in person or represented by proxy at the tw telecom special meeting and entitled to vote at the meeting.

        Abstentions, failures to submit a proxy card or vote in person, by telephone, or through the internet and broker non-votes will be treated in the following manner with respect to determining the votes received for each of the proposals:

    an abstention will be treated as a vote "AGAINST" each of the merger proposal, the tw telecom adjournment proposal and the compensation proposal; and

    a failure to submit a proxy card or vote in person, by telephone, or through the internet or a failure to instruct your broker or nominee to vote will, assuming a quorum is present, have no effect on the tw telecom adjournment proposal and the compensation proposal, but will be treated as a vote "AGAINST" the merger proposal.

        The tw Board urges tw telecom stockholders to promptly vote by completing, dating and signing the accompanying proxy card and returning it promptly in the enclosed postage-paid envelope; calling the toll-free number listed in the proxy card instructions if voting by telephone; or accessing the internet site listed in the proxy card instructions if voting through the internet. If you hold your stock in "street name" through a bank or broker, please vote by following the voting instructions of your bank or broker.

        Stockholders may also vote at the tw telecom special meeting by ballot. Votes cast at the meeting, in person or by proxy, will be tallied by tw telecom's inspector of election.


Voting Power of tw telecom's Directors and Executive Officers

        On the record date for the tw telecom special meeting, the directors and executive officers of tw telecom and their affiliates owned and were entitled to vote                      shares of tw telecom's common stock, representing       % of the outstanding tw telecom common stock.


Recommendation of the tw Board

        The tw Board has unanimously approved the merger agreement and the transactions contemplated by it, including the merger proposal. The tw Board has determined that the merger agreement and the transactions contemplated by it, including the merger proposal, are advisable and in the best interests of tw telecom and its stockholders and unanimously recommends that you vote "FOR" the merger proposal, "FOR" the tw telecom adjournment proposal and "FOR" the compensation proposal. See the section titled "The Mergers—tw telecom's Reasons for the Mergers; Recommendation of tw telecom's Board of Directors" beginning on page 59 for a more detailed discussion of the tw Board's recommendation.


Attending the tw telecom Special Meeting

        All holders of tw telecom common stock, including stockholders of record and stockholders who hold their shares through banks, brokers or other nominees, are invited to attend the tw telecom special meeting. Stockholders of record can vote in person at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you to be admitted. tw telecom reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification.

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THE LEVEL 3 SPECIAL MEETING

        This section contains information about the special meeting of Level 3 stockholders that has been called to consider and approve the Level 3 stock issuance and the Level 3 charter amendment.

        Together with this document you will be sent a notice of the special meeting and a form of proxy that is solicited by the Level 3 Board. The Level 3 special meeting will be held on                      , 2014, at              a.m., local time, at                      .


Matters to Be Considered

        The purpose of the Level 3 special meeting is to vote on:

    a proposal to approve the Level 3 stock issuance;

    a proposal to approve the adoption of the Level 3 charter amendment; and

    a proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies, if there are not sufficient votes at the time of the special meeting to approve the foregoing proposals.


Proxies

        Each copy of this document mailed to holders of Level 3 common stock as of the record date is accompanied by a form of proxy with instructions for voting by mail, by telephone or through the internet. If you hold stock in your name as a stockholder of record and are voting by mail, you should complete and return the proxy card accompanying this document to ensure that your vote is counted at the Level 3 special meeting, or at any adjournment or postponement of the special meeting, regardless of whether or not you plan to attend the Level 3 special meeting. You may also vote your shares by telephone or through the internet. Information and applicable deadlines for voting by telephone or through the internet are set forth in the enclosed proxy card instructions.

        If you hold your stock in "street name" through a bank, broker, trust company or other nominee, you must direct your bank, broker, trust company or other nominee to vote in accordance with the instructions you have received from your bank, broker, trust company or other nominee.

        If you hold stock in your name as a stockholder of record, you may revoke any proxy at any time before it is voted at the special meeting by signing and returning a proxy card with a later date by internet or telephone before the deadline stated on the proxy card, by delivering a proxy card with a later date or a written notice of revocation to Level 3's corporate secretary, which must be received by us before the time of the special meeting, or by voting in person at the special meeting.

        Any stockholder entitled to vote in person at the Level 3 special meeting may vote in person regardless of whether or not a proxy has been previously given, but simply attending the Level 3 special meeting will not constitute revocation of a previously given proxy.

        Written notices of revocation and other communications about revoking your proxy should be addressed to:

    Level 3 Communications, Inc.
    1025 Eldorado Blvd.
    Broomfield, Colorado 80021
    Attention: John M. Ryan, Executive Vice President, Chief Legal Officer and Secretary

        If your shares are held in "street name" by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies.

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        All shares represented by valid proxies that are received through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via the internet or telephone. If you make no specification on your proxy card as to how you want your shares voted, your proxy will be voted "FOR" the approval of the Level 3 stock issuance, "FOR" the approval of the adoption of the Level 3 charter amendment and "FOR" the proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies. According to the Level 3 amended and restated by-laws, only such business that is specified in Level 3's notice of the meeting may be conducted at a special meeting of stockholders.


Solicitation of Proxies

        In accordance with the merger agreement, Level 3 will bear the entire cost of proxy solicitation for the Level 3 special meeting, except that tw telecom and Level 3 will share equally all expenses incurred in connection with the filing of the registration statement of which this joint proxy statement/prospectus forms a part with the SEC and the printing and mailing of this joint proxy statement/prospectus. If necessary, Level 3 may use several of its regular employees, who will not be specially compensated, to solicit proxies from Level 3 stockholders, either personally or by telephone, facsimile, letter or other electronic means. Level 3 will also request that banks, brokers, and other record holders forward proxies and proxy material to the beneficial owners of Level 3 common stock and secure their voting instructions, and Level 3 will provide customary reimbursement to such firms for the cost of forwarding these materials.


Record Date

        The close of business on                      , 2014 has been fixed as the record date for determining the Level 3 stockholders entitled to receive notice of and to vote at the Level 3 special meeting. At that time,                      shares of Level 3 common stock were outstanding, held by approximately                       holders of record.


Quorum

        Stockholders who hold shares representing at least a majority of the issued and outstanding shares entitled to vote at the Level 3 special meeting must be present in person or represented by proxy to constitute a quorum for the transaction of business at the Level 3 special meeting. The holders of a majority of the shares entitled to vote and present in person or represented by proxy at the Level 3 special meeting, whether or not a quorum is present, may adjourn the Level 3 special meeting to another time and place. At any adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the original meeting. Notice of any adjourned meeting need not be given except by announcement at the meeting.

        Abstentions and broker non-votes will be included in the calculation of the number of shares of Level 3 common stock represented at the special meeting for purposes of determining whether a quorum has been achieved.


Vote Required

        Each share of Level 3 common stock outstanding on the record date for the Level 3 special meeting entitles the holder to one vote on each matter to be voted upon at the Level 3 special meeting. Each of the proposals has the following vote requirement in order to be approved:

    approval of the Level 3 stock issuance requires the affirmative vote of a majority of the votes of Level 3 common stock cast at the Level 3 special meeting on the proposal;

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    approval of the adoption of the Level 3 charter amendment 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; and

    approval of the proposal to adjourn the Level 3 special meeting, if necessary, to solicit additional proxies requires the affirmative vote of holders of a majority of all shares of Level 3 common stock present in person or represented by proxy at the Level 3 special meeting, even if less than a quorum.

        Abstentions, failures to submit a proxy card or vote in person, by telephone, or through the internet and broker non-votes will be treated in the following manner with respect to determining the votes received for each of the proposals:

    an abstention will have no effect on the proposal to approve any adjournment of the Level 3 special meeting;

    a failure to submit a proxy card or vote in person, by telephone, or through the internet or a broker non-vote will have no effect on the proposal to approve the Level 3 stock issuance and the proposal to approve any adjournment of the Level 3 special meeting;

    an abstention will be treated as a vote "AGAINST" the proposal to approve the Level 3 stock issuance and the proposal to approve the adoption of the Level 3 charter amendment; and

    a failure to submit a proxy card or vote in person, by telephone, or through the internet or a broker non-vote will be treated as a vote "AGAINST" the proposal to approve the adoption of the Level 3 charter amendment.

        The Level 3 Board urges Level 3 stockholders to promptly vote by completing, dating and signing the accompanying proxy card and returning it promptly in the enclosed postage-paid envelope; calling the toll-free number listed in the proxy card instructions if voting by telephone; or accessing the internet site listed in the proxy card instructions if voting through the internet. If you hold your stock in "street name" through a bank or broker, please vote by following the voting instructions of your bank or broker.

        Stockholders may also vote at the Level 3 special meeting by ballot. Votes cast at the meeting, in person or by proxy, will be tallied by                      , Level 3's inspector of election.

        One of Level 3's stockholders, STT Crossing Ltd., has entered into a voting agreement with tw telecom and, solely with respect to certain covenants contained therein, Level 3, under which STT Crossing has agreed, among other things and subject to certain exceptions as set forth in the voting agreement, to vote its Level 3 common stock in favor of the adoption of the Level 3 charter amendment and the Level 3 stock issuance. See the section below entitled "STT Crossing Voting Agreement" beginning on page 124.


Voting Power of Level 3's Directors and Executive Officers

        On the record date for the Level 3 special meeting, the directors and executive officers of Level 3 and their affiliates owned and were entitled to vote                      shares of Level 3's common stock, representing       % of the outstanding Level 3 common stock.


Recommendation of Level 3's Board of Directors

        The Level 3 Board has unanimously approved the merger agreement and the transactions contemplated by it, including the Level 3 stock issuance and the Level 3 charter amendment. The Level 3 Board has determined that the merger agreement and the transactions contemplated by it, including the Level 3 stock issuance and the Level 3 charter amendment, are advisable and in the

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best interests of Level 3 and its stockholders and unanimously recommends that you vote "FOR" the approval of the Level 3 stock issuance, "FOR" the approval of the adoption of the Level 3 charter amendment and "FOR" the proposal to approve the adjournment of the Level 3 special meeting, if necessary, to solicit additional proxies. See the section titled "The Mergers—Level 3's Reasons for the Mergers; Recommendation of Level 3's Board of Directors" beginning on page 84 for a more detailed discussion of the Level 3 Board's recommendation.


Attending the Level 3 Special Meeting

        All holders of Level 3 common stock, including stockholders of record and stockholders who hold their shares through banks, brokers or other nominees, are invited to attend the Level 3 special meeting. Stockholders of record can vote in person at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you to be admitted. Level 3 reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification.

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THE MERGERS

Effects of the Mergers

        Merger Sub 1, a direct wholly owned subsidiary of Level 3 that was formed for the purpose of effecting the mergers, will merge with tw telecom (which we refer to as the merger) with tw telecom continuing as the surviving corporation and immediately following the merger, the surviving corporation will merge with Merger Sub 2, a direct wholly owned subsidiary of Level 3 that was formed for the purpose of effecting the mergers, with Merger Sub 2 continuing as the surviving company (which we refer to as the subsequent merger and, together with the merger, the mergers).

        In the mergers, each share of tw telecom common stock issued and outstanding immediately prior thereto will be exchanged for 0.7 shares of Level 3 common stock (and the rights associated therewith under the rights agreement) and the right to receive $10.00 in cash, excluding shares held by dissenting stockholders exercising their statutory rights of appraisal. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the mergers. Based on the closing price of Level 3 common stock on the New York Stock Exchange on June 12, 2014, the last trading day before media reports of the possibility of a transaction appeared, the merger consideration represented approximately $39.56 in value for each share of tw telecom common stock. Based on the closing price of Level 3 common stock on                      , 2014, the latest practicable trading day before the date of this joint proxy statement/prospectus, the merger consideration represented approximately $             in value for each share of tw telecom common stock. Level 3 stockholders will continue to hold their existing Level 3 shares.


Background of the Mergers

        tw telecom's management and the board of directors of tw telecom (which we refer to as the tw Board) regularly review tw telecom's performance, prospects and strategy in light of the current business and economic environment, as well as developments in the telecommunications industry and opportunities and challenges facing participants in that industry. These reviews have included consideration, from time to time, of potential strategic alternatives, including strategic acquisitions and divestitures, a sale of the company, and remaining an independent, stand-alone company. They have also included periodic internal analyses of potential business combination partners, including Level 3.

        As part of these periodic internal reviews, on January 25, 2012, the tw Board met, together with tw telecom's management and representatives of Evercore Group L.L.C. (which we refer to as Evercore) and Wachtell, Lipton, Rosen & Katz (which we refer to as Wachtell Lipton). At this meeting the tw Board reviewed, among other things, a number of potential strategic alternatives, including potential business combinations with Level 3 and various other third parties. On April 4, 2012, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton, and reviewed a comprehensive update of potential future strategic opportunities and strategic alternatives. The tw Board reviewed tw telecom's stand-alone business strategy, potential balance sheet alternatives, potential acquisitions, and potential business combination partners, including Level 3.

        On May 14, 2012, Larissa L. Herda, tw telecom's chairman and chief executive officer, met with the chief executive officer of a third party (which we refer to as Party A). At this meeting, the chief executive officer of Party A expressed an interest in a potential business combination with tw telecom. Ms. Herda responded that she would discuss the possibility with the tw Board. On May 30, 2012, Ms. Herda met with the chief executive officer of another third party (which we refer to as Party B) and the chief executive officer of Party B also expressed an interest in a potential business combination with tw telecom. Ms. Herda responded that she would discuss the possibility with the tw Board.

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        On June 6, 2012, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton. At the meeting, Ms. Herda reviewed with the tw Board the approaches from Party A and Party B. Following discussion and review, the tw Board authorized management to seek to enter into confidentiality agreements with Party A and Party B and to hold discussions with both parties about the possibility of a business combination. On June 13, 2012, Party A entered into a confidentiality agreement with tw telecom and on June 22, 2012, Party B entered into a confidentiality agreement with tw telecom.

        On June 21, 2012, tw telecom held an initial management meeting with Party A to review tw telecom's business and permit Party A to commence due diligence. On June 27, 2012, tw telecom held a similar initial management meeting with Party B. Party A and Party B continued to conduct due diligence and evaluate a possible business combination for the remainder of June and throughout July and August.

        On July 2, 2012, the tw Board held a meeting at which management updated the tw Board with respect to the discussions with Party A and Party B. At this meeting, the tw Board also authorized management and its advisors to contact an additional third party (which we refer to as Party C), to determine Party C's interest in a potential business combination with tw telecom. Thereafter, representatives of Evercore contacted Party C, which entered into a confidentiality agreement with tw telecom on July 18, 2012, and participated in an initial management meeting with tw telecom on July 19, 2012. Following further due diligence, on July 25, 2012, Party C informed tw telecom that it had determined not to proceed with a potential business combination.

        On August, 10, 2012, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton. The tw Board reviewed with management and the advisors the status of discussions with Party A and Party B, the determination of Party C not to proceed, and the possibility of contacting Level 3. Among other things, the tw Board discussed the likelihood that Level 3 might be interested in a potential business combination, as well as the risks of contacting another party, including the added risk of leaks. After discussion, the tw Board authorized contacting Level 3. Thereafter, representatives of Evercore contacted Level 3, which entered into a confidentiality agreement with tw telecom on August 23, 2012, and participated in an initial management meeting with tw telecom on August 23, 2012. Following further due diligence, Level 3 determined that it would not proceed at that time with discussions relating to a potential business combination due to a number of factors, including Level 3's focus on integrating its October 2011 acquisition of Global Crossing Limited and Level 3's desire not to increase its leverage to finance the cash portion of the purchase price. On August 29, 2012, Level 3 informed tw telecom of its decision.

        On August 15, 2012, Party B submitted a preliminary non-binding offer, which was confirmed in writing on August 17, 2012, proposing an acquisition of tw telecom at $30 per share or greater, with the consideration to be paid at least half in cash and the remainder in stock. Party A submitted a preliminary non-binding offer in writing on August 22, 2012, proposing an acquisition of tw telecom at $30-32 per share, with the consideration to be paid 75% in cash and 25% in stock.

        On September 4, 2012, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton, to discuss, among other things, the status of the process to date and the next steps. Following discussion the tw Board authorized Evercore to send letters to Party A and Party B requesting them to submit final bids by September 24, 2012. Evercore sent these letters, which included a draft merger agreement, on September 5, 2012. Each of Party A's counsel and Party B's counsel sent markups of the draft merger agreement to Wachtell Lipton on September 14, 2012, and Wachtell Lipton sent revised drafts of the merger agreement to Party A's counsel on September 18, 2012 and to Party B's counsel on September 20, 2012. On September 20, 2012, Party B notified tw telecom that it had determined not to submit a final bid. On September 22, 2012, Party A also notified tw telecom that it had determined not to submit a final

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bid. Further discussions with representatives of Party A and Party B confirmed that neither party was willing to reconsider their decisions not to submit a final bid. Around the same time, rumors began to surface, which were then reflected in press reports, to the effect that tw telecom was in discussions with respect to a sale or business combination. In response to these rumors, Evercore received calls from financial advisors to two other parties, and representatives of one of these parties also contacted tw telecom, but no discussions resulted from these contacts. On September 25, 2012, the tw Board met to discuss these developments and determined not to proceed further in seeking a potential business combination. Thereafter, the tw Board continued its periodic reviews of strategic alternatives.

        On March 10, 2014, Jeff K. Storey, the president and chief executive officer of Level 3, and Ms. Herda both attended an investor conference and they briefly discussed recent developments in the industry. Mr. Storey suggested that they meet at a later date to continue this discussion. On April 2, 2014, Mr. Storey and Ms. Herda met to continue discussing industry developments and at that meeting Mr. Storey expressed interest in a potential business combination with tw telecom. Ms. Herda responded that she would discuss the possibility with the tw Board.

        On April 9, 2014, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton. At the meeting, Ms. Herda reviewed with the tw Board the approach from Level 3 and the strategic rationale for a potential business combination with Level 3. The Evercore representatives provided a financial analysis of tw telecom as a stand-alone company and a potential business combination with Level 3, as well as a potential business combination with another third party (which we refer to as Party D). The representatives of Evercore and members of tw telecom's management expressed the view that a potential business combination with Party D would be highly uncertain because they anticipated that any transaction with Party D would not be an all-cash transaction and it would be inherently difficult to value the consideration given that Party D was not a publicly traded company, and because the business fit and potential synergies with tw telecom were doubtful. The representatives of Evercore also expressed the view that other parties, including Parties A, B and C, were not likely to be interested in a potential business combination with tw telecom at this time. Following discussion and review, the tw Board authorized management to communicate to Level 3 that tw telecom would be willing to consider a proposal from Level 3 for a business combination with tw telecom, in the event that Level 3 should determine to make a proposal. Thereafter, Ms. Herda indicated to Mr. Storey that the tw Board would be open to considering a proposal from Level 3. Mr. Storey indicated his intention to discuss the matter with the board of directors of Level 3 (which we refer to as the Level 3 Board) at meetings scheduled in May 2014.

        On May 15, 2014, the Level 3 Board met to discuss the possibility of pursuing a potential business combination transaction with tw telecom. At that meeting members of senior management of Level 3 reported to the Level 3 Board on the status of the industry, the strategic rationale for pursuing the potential transaction and the anticipated benefits of a potential transaction to Level 3 stockholders as well as a financial analysis of the proposed transaction. After discussion, it was the consensus of the Level 3 Board that Mr. Storey should continue to pursue the preliminary discussions with Ms. Herda and tw telecom to determine whether the parties could come to an agreement with respect to the potential transaction.

        On May 16, 2014, Mr. Storey met with Ms. Herda and proposed a business combination in which Level 3 would acquire tw telecom for consideration of 0.6304 of a share of Level 3 common stock and $9.25 in cash per share of tw telecom common stock. Mr. Storey said that Level 3 valued this consideration at $37.00 per share of tw telecom common stock, based on a trading price of $44.02 for the Level 3 common stock. He also said that the proposal contemplated adding tw telecom directors to the Level 3 Board, and that Level 3 desired to move quickly.

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        On May 19, 2014, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton, to discuss and evaluate Level 3's proposal. The Evercore representatives reviewed valuation analyses with respect to tw telecom and Level 3 and financial analyses of the Level 3 proposal. They reviewed with the tw Board potential responses to the proposal, as well as potential interest of other buyers, which they considered unlikely other than the possibility of Party D. Management and the advisors discussed with the tw Board the risks of contacting other parties, including the increased risk of leaks as had occurred in 2012, and the risk of resulting business disruption and potential negative impact on tw telecom's employees. They also reviewed the process that tw telecom had gone through in 2012, and noted that any merger agreement in connection with the potential transaction would be expected to include provisions regarding the conditions under which tw telecom could negotiate and accept a superior proposal if one were to be made after execution of the agreement. The tw Board discussed these presentations and analyses, including the valuation of the Level 3 common stock and the multiples reflected in the current trading price of the Level 3 common stock. Following these presentations and further discussions, the tw Board authorized Ms. Herda to communicate a counterproposal for a business combination at $42.00 per share of tw telecom common stock, with the mix of consideration and the calculation of the exchange ratio to be determined. The tw Board also determined not to authorize management to contact other parties at that time with respect to a potential business combination, given the risks of contacting other parties and the assessment with respect to the low likelihood of interest of other parties. Ms. Herda communicated the counterproposal to Mr. Storey on May 20, 2014.

        On May 22, 2014, at a regularly scheduled meeting of the Level 3 Board, Mr. Storey updated the Level 3 Board on the status of the discussions with Ms. Herda. The Level 3 Board agreed that Mr. Storey should continue discussions regarding the potential business combination. Following this meeting, Mr. Storey called Ms. Herda to suggest that the two companies engage in mutual due diligence to assist Level 3 in formulating a revised proposal.

        On May 23, 2014, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton. Ms. Herda reviewed with the tw Board the response from Level 3 and the proposal to proceed with due diligence. After discussion, the tw Board authorized management to proceed with mutual due diligence. On May 27, 2014, tw telecom and Level 3 entered into a confidentiality agreement and conducted mutual due diligence over the course of the next few weeks, including all-day management meetings on May 30 and 31, 2014.

        On June 1, 2014, Ms. Herda and other members of tw telecom's management met with Mr. Storey and other members of Level 3's management to discuss tw telecom's counterproposal and a potential revised proposal from Level 3. Mr. Storey indicated that Level 3 would be willing to increase its proposal to $39.00 per share of tw telecom common stock, based on a 75% stock/25% cash mix of consideration and a fixed exchange ratio. Ms. Herda indicated that she did not believe this would be sufficient and suggested that she would be ready to discuss with the tw Board a proposal of $41.00 per share of tw telecom common stock. Following further discussion, Mr. Storey indicated that he would be willing to discuss with the Level 3 Board the possibility of a proposal at a consideration of 0.7 of a share of Level 3 common stock and $10.00 in cash per share of tw telecom common stock. Based on the closing price of the Level 3 common stock on May 30, 2014, the value of this proposal would be $40.56 per share of tw telecom common stock. Ms. Herda responded that she would be prepared to discuss such a proposal, were it made, with the tw Board.

        On June 4, 2014, the tw Board met, together with tw telecom's management and representatives of Evercore and Wachtell Lipton, to discuss, among other things, the possibility of a revised proposal from Level 3 at 0.7 of a share of Level 3 common stock and $10.00 in cash per share of tw telecom common stock, as well as to receive an update with respect to the mutual due diligence that the two companies had conducted. The management of tw telecom provided the tw

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Board with a due diligence report with respect to Level 3, and the representatives of Evercore reviewed with the tw Board valuation analyses and a financial analysis of the potential proposal from Level 3, including an analysis of the Level 3 common stock to be offered in the proposal. Following these presentations and discussions, the tw Board authorized management to continue discussions with Level 3, including the negotiation of a potential merger agreement, subject to further review by the tw Board, on the basis of this potential proposal. On June 5, 2014, Ms. Herda called Mr. Storey to confirm that tw telecom was prepared to continue discussions and negotiations with Level 3.

        On June 6, 2014, the Level 3 Board held a meeting with members of Level 3 senior management. Mr. Storey updated the board members on recent discussions with Ms. Herda and informed the Level 3 Board that tw telecom was willing to continue discussions and negotiate a potential merger agreement on the basis of Level 3's potential proposal. The Level 3 Board authorized management to move forward with discussions based on this proposal and to seek to negotiate a merger agreement with tw telecom. Following this meeting, Mr. Storey called Ms. Herda to tell her that the Level 3 Board was willing to proceed with negotiations on the basis of a proposal contemplating consideration of 0.7 of a share of Level 3 common stock and $10.00 in cash per share of tw telecom common stock. Mr. Storey said that Willkie Farr & Gallagher LLP (which we refer to as Willkie Farr) would provide Wachtell Lipton with a draft merger agreement, which was provided later that day.

        From June 6, 2014 through June 15, 2014, tw telecom and Level 3, together with Wachtell Lipton and Willkie Farr, negotiated the terms of the proposed merger agreement, including exchanging markups of the agreement and in person and telephonic meetings to discuss the drafts. Among the issues that were negotiated were the consequences if Level 3 was not able to obtain financing for the transaction and, if there were to be a reverse termination fee payable if Level 3 was not able to obtain financing, the size of that fee; the outside date for completion of the transaction; the ability of either party to terminate to accept a superior proposal and the size of the breakup fees that would be payable in this event; the scope of the parties' representations and warranties and interim operating covenants; the level of board representation of the tw telecom directors on the Level 3 Board; and the retention arrangements for tw telecom employees. In addition, tw telecom required as part of the transaction that it obtain a voting agreement from STT Crossing. An initial draft of the voting agreement was provided to STT Crossing on June 9, 2014 and the terms of the voting agreement were negotiated with STT Crossing. During this period, tw telecom and Level 3 also continued and completed their mutual due diligence.

        On the afternoon of June 12, 2014, the tw Board met, together with tw telecom's management, and representatives of Evercore and Wachtell Lipton. At this meeting, management and the representatives of Evercore provided an update on discussions and further due diligence activities, noting that there were no remaining open due diligence items, and provided an update of selected financial analysis items. The representatives of Wachtell Lipton provided a preliminary overview of the merger agreement and voting agreement and discussed the material terms of both agreements with the tw Board.

        On June 13, 2014, the tw Board met again, together with tw telecom's management, and representatives of Evercore and Wachtell Lipton. At this meeting, the representatives of Wachtell Lipton reviewed in detail a summary of the proposed terms and conditions of the merger agreement, voting agreement and Level 3's draft financing commitment papers, and responded to questions from the tw Board. The tw Board discussed the details of the transaction and next steps.

        On June 14, 2014, the tw Board met again, together with tw telecom's management and representatives of Evercore and Wachtell Lipton. At this meeting, the tw telecom management reviewed again the strategic rationale and benefits of a business combination with Level 3. The representatives of Evercore presented detailed valuation analyses with respect to tw telecom and

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Level 3, and a financial analysis of the proposed business combination based on the proposed consideration of 0.7 of a share of Level 3 common stock and $10.00 in cash per share of tw telecom common stock. The Evercore representatives said that Evercore would be prepared to deliver a fairness opinion with respect to the transaction if the agreements were finalized. Management and the advisors also updated the tw Board with respect to the outstanding issues under the merger agreement and voting agreement, including the size of the proposed fee that would be payable if Level 3 were not able to obtain financing for the transaction and the outside date for completion of the transaction.

        On June 15, 2014, the tw Board met, together with tw telecom's management, and representatives of Evercore and Wachtell Lipton, to consider approval of the proposed transaction. Members of tw telecom's management and the advisors reported on the proposed resolution of the issues that had been discussed the previous day. These included a proposed fee of $450 million that would be payable to tw telecom if Level 3 were not able to obtain financing for the transaction (which was a significant increase from Level 3's previous proposal), an outside date for completion of the transaction of nine months which now included, at tw telecom's request, an extension option of an additional three months if necessary to obtain regulatory approvals, and the finalization of the voting agreement. The representatives of Evercore confirmed that there had been no financial updates since their presentation the previous day, and rendered Evercore's oral opinion to the tw Board, which was later confirmed by delivery of a separate written opinion, dated June 15, 2014, that, as of such date, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations and other matters set forth therein, the merger consideration, consisting of the right to receive, for each tw telecom common share, 0.70 of a share of Level 3 of common stock and $10.00 in cash, was fair, from a financial point of view, to the holders of tw telecom common stock. After further discussion, including as to the matters discussed in the section entitled "tw telecom's Reasons for the Merger; Recommendation of the tw Board" beginning on page 59, the tw Board unanimously determined that the mergers and the merger agreement and the other transactions contemplated thereby are advisable and in the best interests of tw telecom and its stockholders, approved execution of the merger agreement and the voting agreement, and resolved to recommend that the tw telecom stockholders approve the adoption of the merger agreement.

        On June 15, 2014, the Level 3 Board held a meeting to take action on the proposed business combination. At the meeting members of senior management of Level 3 updated the Level 3 Board on the negotiation of the proposed merger with the management of tw telecom, and reviewed the valuation of tw telecom. Representatives of Willkie Farr discussed the fiduciary duties applicable to the Level 3 Board and reviewed in detail a summary of the proposed terms and conditions of the merger agreement, the voting agreement and the financing commitment papers. Representatives of Rothschild Inc. (which we refer to as Rothschild and which is not providing any financing in connection with the business combination and was engaged by Level 3 solely for the purpose of providing an opinion to the Level 3 Board as described below) reviewed for the Level 3 Board Rothschild's financial analyses of the merger consideration provided for in the proposed merger and answered questions from the directors with respect thereto. Rothschild then delivered its oral opinion, subsequently confirmed in writing, to the Level 3 Board that based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Rothschild as set forth in its opinion, the merger consideration proposed in the merger agreement was, as of the date of the opinion, fair, from a financial point of view, to Level 3. After additional discussions and deliberations including as to the matters discussed in the section entitled "Level 3's Reasons for the Mergers; Recommendation of the Level 3 Board", the Level 3 Board unanimously determined that the merger agreement, the mergers and the other transactions contemplated by the merger agreement, including the Level 3 stock issuance and the adoption of the Level 3 charter amendment, were advisable and fair to and in the best interests of Level 3 and its stockholders and approved the merger agreement, the mergers and the other transactions

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contemplated by the merger agreement. The Level 3 Board also resolved unanimously to recommend to Level 3's stockholders that they vote to approve the Level 3 stock issuance and approve the adoption of the Level 3 charter amendment.

        Following the conclusion of the Level 3 Board meeting, tw telecom, Level 3 and their respective counsel finalized the transaction documentation, and the parties executed the merger agreement and, with STT Crossing, executed the voting agreement on June 15, 2014. On the morning of June 16, 2014, the parties publicly released a joint announcement of the transaction.


tw telecom's Reasons for the Mergers; Recommendation of tw telecom's Board of Directors

        At a meeting held on June 15, 2014, the tw Board, by a unanimous vote, determined that the merger is in the best interests of tw telecom and its stockholders, and resolved that the merger agreement be submitted for consideration by the stockholders of tw telecom at a special meeting of stockholders and recommended that tw telecom's stockholders vote to adopt the merger agreement. In making its recommendation, the tw Board consulted with its legal and financial advisors and its senior management team at various times, and considered a number of factors, including the following principal factors that the tw Board believes support such determinations, approvals, resolutions and recommendations:

    the expectation that the merger will leverage the highly complementary businesses and assets of Level 3 and tw telecom, solidifying the position of the combined company as a premier global communications provider and providing substantial benefits to both companies' customers by creating a stronger, more nimble, customer service-oriented competitor to meet customers' increasingly complex local, national and global communications needs;

    the increasing competition, consolidation and potential further consolidation of other communication services providers, and the likely effects of these factors on the business, operations, management, financial condition and prospects of tw telecom were it to remain a stand-alone company;

    tw telecom management's estimate, consistent with Level 3 management's estimate, that the merger (i) is expected to create substantial total annualized synergies of approximately $240 million, and that the net present value of the potential synergies is estimated to be approximately $2 billion, and (ii) is expected to be accretive to free cash flow per share after the first year following closing of the merger;

    the fact that the implied value of the merger consideration of $39.56, based on the closing price per share of Level 3 common stock on June 12, 2014 (the last trading day before media reports of the possibility of a transaction appeared), represented:

    a premium of 22.36% based on the June 12, 2014 closing price per share of tw telecom common stock of $32.33;

    a premium of 22.84% based on the one-month average closing price per share of tw telecom common stock of $32.20;

    a premium of 26.60% based on the three-month average closing price per share of tw telecom common stock of $31.25; and

    a premium of 29.06% based on the six-month average closing price per share of tw telecom common stock of $30.65;

    the oral opinion, subsequently confirmed in writing, of Evercore delivered to the tw Board that, as of June 15, 2014, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations and other matters set forth in its written opinion, the merger consideration was fair, from a financial point of view, to the holders of the outstanding shares of tw telecom common stock, as well as the related financial analyses presented by Evercore to the tw Board, as more fully described below in "The Mergers—Opinion of tw telecom's Financial Advisor" beginning on page 63; and

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    the belief, based on the analyses presented to and discussed by the tw Board, that the Level 3 common stock was reasonably valued at current trading prices notwithstanding the significant increase in the trading prices of the Level 3 common stock in recent months; and

    the potential for further appreciation in value of Level 3 common stock following the completion of the merger due to synergies or otherwise, and the opportunity for tw telecom stockholders receiving shares of Level 3 common stock in the merger to participate in this appreciation.

        The tw Board also considered the likelihood that the merger would be completed, based on, among other things:

    the fact that Level 3 had obtained committed debt financing for the transaction, the reputation of the financing sources, Level 3's history of successful financing transactions and the obligation of Level 3 to use its reasonable best efforts to obtain the debt financing;

    the absence of a financing condition in the merger agreement;

    the fact that the merger agreement provides that, in the event of a failure of Level 3 to obtain the financing, assuming all other conditions are met or are capable of being satisfied, Level 3 will pay to tw telecom a termination fee of $450 million;

    the likelihood of obtaining regulatory approvals that are required to close the merger;

    the fact that Level 3 had agreed to use its reasonable best efforts to resolve objections, if any, as may be asserted with respect to the merger under any applicable laws or regulations;

    the fact that STT Crossing, a stockholder of Level 3, had entered into the voting agreement, pursuant to which STT Crossing has agreed to vote, subject to certain exceptions, the Level 3 common stock held by it in favor of the adoption of the Level 3 charter amendment and the Level 3 stock issuance;

    the fact that, in the event of a termination of the merger agreement due to a change in the Level 3 Board recommendation or Level 3 accepting a superior proposal, Level 3 will pay tw telecom a termination fee of $350 million, plus tw telecom and its affiliates' expenses up to $10 million, as described under "The Merger Agreement—Termination Fees and Expenses; Liability for Breach" beginning on page 122; and

    tw telecom's ability, under certain circumstances pursuant to the merger agreement, to seek specific performance to prevent breaches of the merger agreement, as described under "The Merger Agreement—Specific Performance" beginning on page 124 and to enforce specifically the terms of the merger agreement.

        The tw Board believed, after reviewing the merger agreement with its legal advisors, that the merger agreement offered reasonable assurances as to the likelihood of consummation of the merger, did not impose unreasonable burdens on tw telecom and would not preclude a superior proposal. In this regard, the tw Board particularly considered the following:

    the ability of the tw Board, in certain circumstances, to change its recommendation to tw telecom stockholders in favor of the merger, including in the event of (i) a superior proposal, where the tw Board may take into account a number of factors in determining whether such offer is "superior," or (ii) certain intervening events not known or reasonably foreseeable to the tw Board at or prior to the time the merger agreement was entered into;

    the judgment of the tw Board that the termination fee of $200 million, plus Level 3 and its affiliates' expenses up to $10 million, as described under "The Merger Agreement—Termination Fees and Expenses; Liability for Breach" beginning on page 122, payable by tw

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      telecom to Level 3 in the event of a termination of the merger agreement due to a change in the tw Board recommendation or tw telecom accepting a superior proposal, would not preclude potential superior offers;

    the ability of the tw Board in certain circumstances to provide material nonpublic information to, and engage in negotiations with, a third party that makes an unsolicited acquisition proposal that would reasonably be expected to lead to a superior proposal; and

    the rights of dissenting stockholders, if any, to demand to be paid the fair value of their shares of tw telecom common stock under Section 262 of the DGCL (which we refer to as Section 262).

        In addition to considering the factors described above, the tw Board also considered the following factors:

    the business, operations, management, financial condition, earnings and prospects of tw telecom;

    the business, operations, management, financial condition, earnings and prospects of Level 3;

    the results of tw telecom management's due diligence review of Level 3 and the reputation, business practices and experience of Level 3 and its management;

    the potential strategic alternatives available to tw telecom, including the possibility of remaining a stand-alone company in a consolidating industry with less scale than many of its much larger competitors, the projected financial results of tw telecom as a stand-alone company, and the belief of the tw Board that no other alternatives reasonably available to tw telecom were likely to create a greater value for tw telecom stockholders than the merger;

    the fact that, based on the fixed exchange ratio of 0.7 shares of Level 3 common stock for each tw telecom common share, the tw telecom stockholders would benefit from any increase in the trading price of Level 3 common shares prior to completion of the merger;

    the fact that, because tw telecom stockholders will own approximately 29% of the outstanding shares of Level 3 common stock immediately following completion of the merger, such tw telecom stockholders would have the opportunity to participate in the future performance of the combined company;

    the fact that the mergers are expected to be treated as a reorganization within the meaning of Section 368(a) of the Code;

    the ability of tw telecom to implement employee retention and benefit arrangements to address employee retention pending completion of the merger;

    the fact that the merger agreement permits tw telecom, subject to certain limitations, to operate in the ordinary course of business and to take the actions reasonably necessary to implement its current operating plan during the period prior to completion of the merger; and

    the timing considerations with respect to the completion of the merger.

        The tw Board also weighed the factors described above against a number of risks and other factors identified in its deliberations as weighing negatively against the merger, in particular:

    the fact that, because a substantial part of the merger consideration is payable in shares of Level 3 common stock in accordance with a fixed exchange ratio, tw telecom stockholders will be adversely affected by any decrease in the trading price of Level 3 common stock prior to completion of the merger, and may receive less value for their shares of tw telecom common stock upon completion of the merger than calculated based on the price of the Level 3

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      common stock at the time the tw Board approved the merger agreement, taking into account, however, that a portion of the merger consideration is payable in cash and will not be affected by a decrease in the stock price of shares of Level 3 common stock;

    the risk that the trading price of Level 3 common stock could be adversely impacted in the event of decreases in Level 3's revenue, EBITDA, profit margins or free cash flow or other factors before or after the closing of the merger;

    the risk that governmental entities may not approve the merger, or may impose conditions on tw telecom or Level 3 in order to gain approval for the merger that may adversely impact the ability of the combined business to realize the synergies that are projected to occur in connection with the merger;

    the risk that the merger would not occur if the financing contemplated by the debt commitment letter, described under "The MergersFinancing Related to the Mergers" beginning on page 98, or alternative financing, is not obtained, or that the merger might not be completed for other reasons;

    risks associated with Level 3's substantial indebtedness and the anticipated need to refinance such indebtedness as it comes due;

    the risk that certain key members of senior management might choose not to remain employed with the combined business after the merger, notwithstanding the change of control employment agreements described below;

    the challenges generally inherent in combining the businesses, operations and workforces of two communications companies, including the interaction of product and service lines, sales teams, service delivery processes, cash management processes, operating and business support systems and other critical business functions;

    the fact that forecasts of future results of operations and synergies are necessarily estimates based on assumptions, and that for these and other reasons there is a risk of not realizing anticipated performance or capturing anticipated operational synergies and cost savings between tw telecom and Level 3 and the risk that other anticipated benefits might not be realized;

    the potential negative effect that the pendency of the merger, or a failure to complete the merger, could have on tw telecom's business and relationships with its employees, customers and suppliers;

    the restrictions on the conduct of tw telecom's business prior to the completion of the merger, which may delay or prevent tw telecom from undertaking business opportunities that may arise outside the ordinary course of business or certain other actions it might otherwise take with respect to its operations pending completion of the merger, including financing activities;

    the possible impact on other potential acquirors of the termination fee of $200 million and up to $10 million of Level 3's expenses that would be payable by tw telecom if it terminates the merger agreement to accept a superior proposal; and

    other risks of the type and nature described under "Risk Factors" beginning on page 39 and the matters described under "Cautionary Statement Regarding Forward-Looking Statements" beginning on page 37.

        In considering the recommendation of the tw Board with respect to the proposal to adopt the merger agreement, you should be aware that tw telecom directors and executive officers may have interests in the merger that are different from, or in addition to, yours. The tw Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger

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agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of tw telecom. See the section entitled "The Mergers—Interests of tw telecom Directors and Executive Officers in the Mergers" beginning on page 78.

        The foregoing discussion of the information and factors considered by the tw Board in reaching its conclusions and recommendations is not intended to be exhaustive, but includes the material factors considered by the directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the tw Board did not find it practicable, and did not attempt, to quantify, rank or assign any relative or specific weights to the various factors considered in reaching its determination and making its recommendation. In addition, individual directors may have given different weights to different factors. The tw Board considered all of the foregoing factors as a whole and based its recommendation on the totality of the information presented.

        The tw Board recommends that you vote "FOR" the merger proposal, "FOR" the tw telecom adjournment proposal and "FOR" the compensation proposal.


Opinion of tw telecom's Financial Advisor

    Opinion of Evercore Group L.L.C.

        In connection with the mergers, the tw Board retained Evercore to act as financial advisor to the tw Board. In connection with this engagement, the tw Board requested that Evercore evaluate the fairness, from a financial point of view, of the merger consideration to be received by tw telecom's stockholders in connection with the mergers. On June 15, 2014, at a meeting of the tw Board held to evaluate the proposed transactions, Evercore delivered to the tw Board an oral opinion, confirmed by delivery of a written opinion later that day, that, as of June 15, 2014, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations and other matters set forth therein, the merger consideration to be received by tw telecom's stockholders was fair, from a financial point of view, to such stockholders.

        The full text of Evercore's written opinion, dated June 15, 2014, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement/prospectus and is incorporated by reference in its entirety into this proxy statement/prospectus and is available for inspection and copying at tw telecom's principal executive offices. You are urged to read Evercore's opinion carefully and in its entirety. Evercore's opinion was addressed to, and provided for the information and benefit of, the tw Board (in its capacity as such), in connection with its evaluation of the fairness of the merger consideration to tw telecom's stockholders from a financial point of view, and did not address any other aspects or implications of the mergers. Evercore's opinion should not be construed as creating any fiduciary duty on Evercore's part to any party, and such opinion is not intended to be, and does not constitute, a recommendation to the tw Board or to any other persons in respect of the mergers, including as to how any holder of shares of tw telecom common stock should act or vote in respect of the mergers. Evercore's opinion does not address the relative merits of the mergers as compared to any other business or financial strategies that might be available to tw telecom, nor does it address the underlying business decision of tw telecom to engage in the mergers. Finally, Evercore expressed no opinion as to the price at which shares of tw telecom or Level 3 would trade at any time. The summary of Evercore's opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex B to this proxy statement/prospectus.

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        In connection with rendering its opinion, Evercore, among other things:

    reviewed certain publicly available business and financial information relating to Level 3 and tw telecom deemed to be relevant, including publicly available research analysts' estimates;

    reviewed certain non-public historical financial and operating data relating to Level 3 prepared and furnished to tw telecom by management of Level 3;

    reviewed certain non-public projected financial data relating to Level 3 prepared and furnished to tw telecom by the management of Level 3 (which we refer to as the Level 3 management case);

    reviewed certain non-public projected financial data relating to tw telecom prepared and furnished to Evercore by the management of tw telecom (which we refer to as the tw telecom management case);

    reviewed certain projected financial data based on public research analyst reports relating to Level 3 with certain adjustments made by tw telecom's management to reflect alternative business assumptions (which we refer to as the Research Derived Projections);

    discussed the past and current operations, financial projections and current financial condition of Level 3 with the management of tw telecom and Level 3 (including their views on the risks and uncertainties of achieving such projections);

    reviewed the amount, timing and use of the synergies expected by tw telecom's management to result from the mergers (which we refer to as the tw telecom management synergies), as well as incremental integration costs expected by tw telecom to be incurred in connection with the mergers, each as estimated by the management of tw telecom;

    reviewed, the amount, timing and use of certain tax attributes of Level 3, tw telecom and the combined company as estimated by the management of tw telecom;

    reviewed the reported prices and the historical trading activity of the Level 3 common stock and tw telecom common stock;

    compared the financial performance of tw telecom and Level 3 and their stock market trading multiples with those of certain other publicly traded companies that Evercore deemed relevant;

    reviewed certain valuation multiples relating to the mergers with those of certain other transactions that Evercore deemed relevant;

    reviewed the pro forma impact of the mergers on Level 3;

    reviewed a draft of the merger agreement dated June 15, 2014, which was in substantially final form and from which Evercore assumed the final form will not differ in any respect material to its analysis; and

    performed such other analyses and examinations and considered such other factors as Evercore deemed appropriate.

        For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and assumed no liability therefor. With respect to the Level 3 management case, prepared and furnished to tw telecom by the management of Level 3, Evercore assumed that it was reasonably prepared on bases reflecting the best currently available estimates and good faith judgment of the management of Level 3, as to the future financial performance of Level 3. With

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respect to tw telecom management case and the Research Derived Projections, each prepared and furnished to Evercore by the management of tw telecom, Evercore assumed that they each were reasonably prepared on bases reflecting the best currently available estimates and good faith judgment of the management of tw telecom as to the future financial performance of tw telecom and Level 3. With respect to the tw telecom management synergies, Evercore assumed that it was reasonably prepared on bases reflecting the best currently available estimates and good faith judgment of the management of tw telecom as to the amount, timing and achievability of the tw telecom management synergies. Evercore expresses no view as to any projected financial data relating to tw telecom, Level 3, the tw telecom management synergies or the assumptions on which they are based. See "The Mergers—Certain tw telecom Prospective Financial Information" beginning on page 76 and "The Mergers—Certain Level 3 Prospective Financial Information" beginning on page 93.

        For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the mergers will be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the mergers will be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on tw telecom or the consummation of the mergers or materially reduce the benefits of the mergers to tw telecom's stockholders. Evercore assumed the executed merger agreement would not differ in any respect material to its analysis from the draft merger agreement dated June 15, 2014.

        Evercore did not make nor assume any responsibility for making any independent valuation or appraisal of the assets or liabilities of tw telecom, nor was Evercore furnished with any such appraisals, nor did Evercore evaluate the solvency or fair value of tw telecom under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore's opinion was necessarily based upon information made available to it as of the date of its opinion and financial, economic, market and other conditions as they existed and as could be evaluated on the date of its opinion. It should be understood that subsequent developments may affect Evercore's opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.

        Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness of the merger consideration, from a financial point of view, to tw telecom's stockholders entitled to receive such merger consideration pursuant to the merger agreement. Evercore did not express any view on, and its opinion did not address, the fairness of the proposed transaction to, or any consideration received in connection therewith by, the holders of certain excluded shares or any other securities, creditors or other constituencies of tw telecom, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of tw telecom, or any class of such persons, whether relative to the consideration in the mergers or otherwise. Evercore assumed that any modification to the structure of the mergers will not vary in any respect material to its analysis. Evercore's opinion did not address the relative merits of the mergers as compared to other business or financial strategies that might be available to tw telecom, nor did it address the underlying business decision of tw telecom to engage in the mergers. Evercore expressed no opinion as to the price at which shares of tw telecom or Level 3 would trade at any time. Evercore's opinion noted that Evercore is not a legal, regulatory, accounting or tax expert and that Evercore assumed the accuracy and completeness of assessments by tw telecom and its advisors with respect to legal, regulatory, accounting and tax matters.

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        Except as described above, the tw Board imposed no restriction or limitation on Evercore with respect to the investigations made or the procedures followed by Evercore in rendering its opinion. Evercore's opinion was only one of many factors considered by the tw Board in its evaluation of the mergers and should not be viewed as determinative of the views of the tw Board with respect to the mergers or the merger consideration.

        Set forth below is a summary of the material financial analyses reviewed by Evercore with the tw Board on June 15, 2014, in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before June 12, 2014 (the last trading day before media reports of the possibility of a transaction appeared, which we refer to as the Unaffected Date), and is not necessarily indicative of current market conditions.

        The following summary of financial analyses includes information presented in tabular format. These tables must be read together with the text of each summary in order to understand fully the financial analyses performed by Evercore. The tables alone do not constitute a complete description of the financial analyses performed by Evercore. Considering the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Evercore's financial analyses.

        In conducting its analysis, Evercore used various methodologies to review the valuation of each of Level 3 and tw telecom on a stand-alone basis and Level 3 and tw telecom on a relative basis, to assess the fairness of the merger consideration to be received by tw telecom's stockholders. Specifically, Evercore conducted analyses of historical share price, research analyst price targets, selected precedent premia, selected publicly traded companies, selected precedent transactions, discounted cash flow, present value of future share price, implied exchange ratio (based upon selected publicly traded companies, precedent transactions, discounted cash flow, and present value of future share price) and has / gets analysis. In conducting its analysis, Evercore utilized three sets of financial projections: (1) the tw telecom management case, (2) the Level 3 management case and (3) the Research Derived Projections, which were derived from certain projected financial data based on public research analyst reports relating to Level 3 through 2016 and that were adjusted by tw telecom's management to reflect a more conservative forward-looking case of Level 3 and to generate projections for 2017 and 2018 consistent with the assumptions made for the earlier years. Estimates for 2014 Adjusted EBITDA in the Research Derived Projections were based on the mid-point of Level 3 management's public guidance. See "The Mergers—Certain tw telecom Prospective Financial Information" beginning on page 76 and "The Mergers—Certain Level 3 Prospective Financial Information" beginning on page 93. The Research Derived Projections are as follows:

($ in millions)
Research Derived Projections
  FY2014   FY2015   FY2016   FY2017   FY2018  

Revenue

  $ 6,503   $ 6,703   $ 6,909   $ 7,118   $ 7,327  

Adjusted EBITDA(1)

  $ 1,835   $ 1,982   $ 2,151   $ 2,252   $ 2,353  

Capex

  $ 813   $ 838   $ 864   $ 890   $ 916  

Adjusted EBITDA less Capex

  $ 1,022   $ 1,144   $ 1,287   $ 1,362   $ 1,438  

(1)
Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation.

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Valuation of Level 3

Historical Trading Range Analysis

        Evercore reviewed, for reference and informational purposes only, the public trading prices for Level 3 common stock for the twelve months ended on the Unaffected Date. Evercore noted that, during this period, the closing trading price of the Level 3 common stock ranged from a low of $19.71 to a high of $44.77. Evercore compared the results of this analysis to the $42.23 per share price of the Level 3 common stock on the Unaffected Date.

Analyst Price Targets Range Analysis

        Evercore analyzed, for reference and informational purposes only, Wall Street equity research analyst estimates of potential future value for common stock (commonly referred to as price targets) of Level 3 based on publicly available equity research published on Level 3. Evercore noted that the range of equity analyst price targets of the Level 3 common stock as of the Unaffected Date ranged from $37.00 to $51.00 per share, with an average price target of $47.00 per share. Evercore compared the results of this analysis to the $42.23 per share price of the Level 3 common stock on the Unaffected Date. The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices of the Level 3 common stock and these estimates are subject to uncertainties, including the future financial performance of Level 3 and future market conditions.

Peer Trading Analysis

        Evercore reviewed and compared certain financial and operating information relating to tw telecom, Level 3 and Cogent Communications (which we refer to as Cogent). Although Cogent is not directly comparable to tw telecom or Level 3, it was chosen because it has certain characteristics that are similar to those of tw telecom or Level 3. Based on Evercore's professional judgment and experience in the enterprise telecommunications industry, Evercore considers these three publicly traded companies as the most relevant peer companies.

        For each of tw telecom, Level 3 and Cogent, Evercore calculated and analyzed the ratios of total enterprise value (which we refer to as TEV) (which represents market capitalization plus the total outstanding debt plus preferred stock and minority interest, less cash and cash equivalents balance) to Adjusted EBITDA, which is commonly referred to as TEV / Adjusted EBITDA multiple, for each of tw telecom's, Level 3's and Cogent's estimated calendar year 2014.

        The multiples for tw telecom, Level 3 and Cogent were calculated using the closing price of their respective common stock on the Unaffected Date and were based on, and derived from, publicly available information, publicly available research estimates published by independent equity research analysts associated with various Wall Street firms.

        The mean and median trading multiples are set forth below.

 
  TEV /
Adjusted
EBITDA
 
 
  2014  

Mean

    11.3x  

Median

    10.7x  

        Evercore applied a 10.0x to 12.0x 2014 Adjusted EBITDA multiple to determine an implied equity value per share range, under the Level 3 management case, of $43.18 to $57.38 per share of the Level 3 common stock. Evercore compared the results of this analysis to the $42.23 per share price of the Level 3 common stock on the Unaffected Date. Evercore selected the range of multiples reflected above based on Evercore's professional judgment and experience in the enterprise telecommunications industry.

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Discounted Cash Flow Analysis

        Evercore performed a discounted cash flow analysis of Level 3 in order to derive implied per share equity reference ranges for the Level 3 common stock as of June 30, 2014. A discounted cash flow analysis is a valuation methodology used to derive a valuation of an asset by calculating the present value of estimated future cash flows to be generated by the asset. Present value refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors. Evercore performed a discounted cash flow analysis for Level 3 by adding (1) the present value of Level 3's projected after-tax unlevered free cash flows from June 30, 2014 through 2018 to (2) the present value of certain net operating losses of Level 3 to (3) the present value of the terminal value of Level 3 as of the end of fiscal year 2018. For each period, unlevered free cash flow was derived as follows: Adjusted EBITDA plus certain non-cash adjustments less taxes less capital expenditures less changes in working capital, where changes in working capital can either be positive or negative. Terminal value refers to the value at a particular point in time of all future cash flows to be generated by an asset. Evercore used a discount rate range of 7.5% to 8.5% (which was selected by Evercore based upon an analysis of the weighted average cost of capital of Level 3) and terminal value range based on applying an 8.0x to 10.0x Adjusted EBITDA multiple (which was selected by Evercore based upon its professional judgment and experience in the enterprise telecommunications industry) to Level 3's 2018 projected Adjusted EBITDA. Performing this analysis on each of the Level 3 management case and the Research Derived Projections and assuming an 8% discount rate and a range of terminal Adjusted EBITDA multiples of 8.0x to 10.0x, Evercore derived the following range of implied equity values per share for Level 3:

 
  Implied Equity Value Per Share  

Research Derived Projections

  $ 41.42 - 54.22  

Level 3 management case

  $ 49.11 - 63.71  

        Evercore compared the results of this analysis to the $42.23 per share price of the Level 3 common stock on the Unaffected Date.

Net Present Value of Future Share Price Analysis

        Evercore calculated illustrative future stock prices of Level 3 by applying a forward multiple range of 8.5x to 9.9x, (Evercore selected this range based on a forward Adjusted EBITDA multiple of Level 3 of 9.9x on the Unaffected Date and an average historical Forward Adjusted EBITDA multiple of Level 3 of 8.5x), to estimated calendar years 2015 to 2018 Adjusted EBITDA (which we refer to as Forward Adjusted EBITDA) of Level 3 based on the Level 3 management case and the Research Derived Projections, and adjusting the resulting TEV by the estimated net debt based on the Level 3 management case and the Research Derived Projections to derive future Equity Value and dividing it by fully-diluted shares outstanding to derive future stock prices. These illustrative future stock prices were discounted back to June 30, 2014, using a discount rate of 10.0%, taking into consideration, among other things, a cost of equity calculation. This analysis indicated the following approximate range of implied equity values per share for Level 3:

 
  Implied Equity Value Per Share  

Research Derived Projections

  $ 36.00 - 49.00  

Level 3 management case

  $ 38.00 - 58.00  

        Evercore compared the results of this analysis to the $42.23 per share price of the Level 3 common stock on the Unaffected Date.

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Valuation of tw telecom

Historical Trading Range Analysis

        Evercore reviewed, for reference and informational purposes only, the public trading prices for tw telecom common stock for the twelve months ended on the Unaffected Date. Evercore noted that, during this period, the closing trading price of tw telecom common stock ranged from a low of $25.83 to a high of $33.70. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is above the historical trading range. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date.

Analyst Price Targets Range Analysis

        Evercore analyzed, for reference and informational purposes only, Wall Street equity research analyst estimates of price targets of tw telecom based on publicly available equity research published on tw telecom. Evercore noted that the range of equity analyst price targets of tw telecom common stock as of the Unaffected Date ranged from $30.00 to $40.00 per share, with an average price target of $34.25 per share. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is within the range of implied analyst price targets. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date. The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for tw telecom common stock and these estimates are subject to uncertainties, including the future financial performance of tw telecom and future market conditions.

Premiums Paid Analysis

        Evercore reviewed, for reference and informational purposes only, the premiums paid for U.S. targets with enterprise values greater than $1 billion in TEV since 2007. Using information from Securities DataCompany, a data source that monitors and publishes information on merger and acquisition transactions, the following categories were considered (i) stock consideration only (which we refer to as stock transactions), of which there were 33, (ii) cash and stock mixed consideration (which we refer to as cash and stock transactions), of which there were 89, and (iii) cash and stock mixed consideration where the stock component was over 75% of the total consideration (which we refer to as >75% Stock Transactions), of which there were 13.

        Premiums paid were calculated as the percentage by which the per share consideration paid in each such transaction exceeded the closing price per share of the target companies one day, one week and four weeks prior to transaction announcements. The results of this analysis are provided in the table below:

 
  1 Day Prior   1 Week Prior   4 Weeks Prior  

Stock Transactions

                   

Mean

    13.9 %   16.1 %   23.3 %

Median

    15.5 %   17.2 %   22.5 %

Cash and Stock Transactions

   
 
   
 
   
 
 

Mean

    28.9 %   30.4 %   31.8 %

Median

    27.9 %   30.3 %   28.6 %

>75% Stock Transactions

   
 
   
 
   
 
 

Mean

    23.3 %   28.3 %   21.7 %

Median

    16.3 %   18.1 %   19.8 %

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        Evercore applied each mean / median percentage premium to tw telecom's closing price per share 1 Day, 1 Week and 4 Weeks prior to the Unaffected Date to derive the implied equity value per share range. This analysis indicated a per share range of implied equity value for tw telecom of $36.22 to $42.67. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is within the range of implied premiums paid. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date.

Precedent Transactions Analysis

        Evercore reviewed implied transaction data for 14 transactions since 2010 involving target companies that Evercore deemed to have certain characteristics that are similar to those of tw telecom, more specifically, enterprise telecommunications / fiber asset transactions, although Evercore noted that none of the selected transactions or the selected companies that participated in the selected transactions are directly comparable to the proposed mergers. Evercore considered the most relevant transactions to be those with Total Enterprise Value of more than $1 billion. The selected transactions are set forth in the table below:

($ in millions)
Acquiror
  Target   Announcement
Date
  Total Enterprise
Value
 

Time Warner Cable Inc. 

  Dukenet Communications, LLC   10/2013   $ 600  

Berkshire Partners, LLC

  Lightower Fiber Networks LLC/ Sidera Networks, Inc.   12/2012     2,000  

Zayo Group, LLC

  First Telecom Services LLC   10/2012     110  

Zayo Group, LLC

  FiberGate, Inc.   6/2012     118  

Zayo Group, LLC

  AboveNet, Inc.   3/2012     2,189  

Zayo Group, LLC

  360networks holdings (USA) inc.   10/2011     332  

The Gores Group, LLC

  Alpheus Communications LLC   9/2011     150  

Level 3 Communications, Inc. 

  Global Crossing Limited   4/2011     3,001  

Zayo Group, LLC

  American Fiber Systems, Inc.   6/2010     114  

Lightower Fiber Networks LLC

  Lexent Metro Connect, LLC   9/2010     110  

Court Square Capital Partners

  Fibertech Networks, LLC   8/2010     535  

Windstream Corporation

  Kentucky Data Link, Norlight, Inc.   8/2010     782  

NTELOS Holding Corp. 

  FiberNet business of One Communications Corp.   7/2010     170  

ABRY Partners

  RCN Corporation   3/2010     527  

        The mean and median transaction value to Adjusted EBITDA multiples for the selected transactions were 9.2x and 8.7x respectively. Evercore reviewed the historical multiples paid in the selected transactions and derived a range of relevant implied multiples of TEV to Forward Adjusted EBITDA of 9.0x to 12x, based on Evercore's professional judgment and experience in enterprise telecommunications industry. This analysis indicated a per share range of implied equity value for tw telecom of $25.08 to $37.22. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is above the implied range of precedent transactions. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date.

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Peer Trading Analysis

        Evercore reviewed and compared certain financial and operating information relating to tw telecom, Level 3 and Cogent. Although Cogent is not directly comparable to tw telecom or Level 3, it was chosen because it has certain characteristics that are similar to those of tw telecom or Level 3. Based on Evercore's professional judgment and experience in the enterprise telecommunications industry, Evercore considers these three publicly traded companies as the most relevant peer companies.

        For each of tw telecom, Level 3 and Cogent, Evercore calculated and analyzed the ratios of TEV to Adjusted EBITDA for each of tw telecom's, Level 3's and Cogent's estimated calendar year 2014.

        The multiples for tw telecom, Level 3 and Cogent were calculated using the closing price of their respective common stock on the Unaffected Date and were based on, and derived from, publicly available information, including publicly available research estimates published by independent equity research analysts associated with various Wall Street firms.

        The mean and median trading multiples are set forth below.

 
  TEV /
Adjusted
EBITDA
 
 
  2014  

Mean

    11.3x  

Median

    10.7x  

        Evercore applied a 10.0x to 13.0x 2014 Adjusted EBITDA multiple to determine an implied equity value range, under the tw telecom management case, of $29.13 to $41.27 per share of tw telecom common stock. For the definition of Adjusted EBITDA, please see "Certain tw telecom Prospective Financial Information" beginning on page 76. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is within the range of implied peer trading. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date. Evercore selected the range of multiples reflected above based on Evercore's professional judgment and experience in the enterprise telecommunications industry.

Discounted Cash Flow Analysis

        Evercore performed a discounted cash flow analysis of tw telecom in order to derive implied per share equity reference ranges for tw telecom common stock as of June 30, 2014. Evercore performed a discounted cash flow analysis for tw telecom by adding (1) the present value of tw telecom's projected after-tax unlevered free cash flows from June 30, 2014 through 2019 to (2) the present value of certain net operating losses of tw telecom to (3) the present value of the terminal value of tw telecom as of the end of fiscal year 2019. For each period, unlevered free cash flow was derived as follows: Adjusted EBITDA plus certain non-cash adjustments less taxes less capital expenditures less changes in working capital, where changes in working capital can either be positive or negative. Evercore used a discount rate range of 7.5% to 8.5% (which was selected by Evercore based upon an analysis of the weighted average cost of capital of tw telecom) and terminal value range based on applying an 8.0x to 10.0x Adjusted EBITDA multiple (which was selected by Evercore based upon its professional judgment and experience in the enterprise telecommunications industry) to tw telecom's 2019 projected Adjusted EBITDA. This analysis was performed using the analysis from the tw telecom management case. Using this analysis and assuming 7.5% discount rate and a range of terminal Adjusted EBITDA multiples of 8.0x to 10.0x, Evercore derived a per

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share range of implied equity value for tw telecom of $32.59 to $41.78. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is within the range of implied discounted cash flows. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date.

Net Present Value of Future Share Price Analysis

        Evercore calculated illustrative future stock prices of tw telecom by applying a forward multiple range of 8.5x to 10.7x (Evercore selected this range based on forward Adjusted EBITDA multiple of tw telecom of 10.7x on the Unaffected Date and an average historical Forward Adjusted EBITDA multiple of tw telecom 8.5x), to estimated calendar years 2015 to 2018 Forward Adjusted EBITDA of tw telecom based on the tw telecom management case, and adjusting the resulting TEV by the estimated net debt based on the tw telecom management case to derive future Equity Value and dividing it by fully-diluted shares outstanding to derive future stock prices. These illustrative future stock prices were discounted back to June 30, 2014, using a discount rate of 10.0%, taking into consideration, among other things, a cost of equity calculation. Using this analysis, Evercore derived an approximate per share range of implied equity value for tw telecom of $26.00 to $44.00. Evercore compared the results of this analysis to the $39.56 implied per share merger consideration as of the Unaffected Date, noting that the implied merger consideration is within the range of implied future stock prices. Evercore also compared the results of this analysis to the $32.33 per share price of tw telecom common stock on the Unaffected Date.

Implied Exchange Ratio Analysis

        Evercore analyzed the implied exchange ratios from the valuation techniques utilized for the valuation of tw telecom and Level 3. These valuation techniques included Analyst Price Targets Range Analysis, Premiums Paid Analysis, Precedent Transactions Analysis, Peer Trading Analysis, Discounted Cash Flow Analysis and Net Present Value of Future Share Price Analysis. The Analyst Price Targets Range and Premiums Paid analyses were included for informational and reference purposes only. For the Analyst Price Targets Range Analysis, Evercore compared the high value for Level 3 to the high value for tw telecom, and the low value for Level 3 to the low value for tw telecom. For the Premiums Paid Analysis and Precedent Transactions Analysis, Evercore compared the high value for tw telecom to Level 3's share price on the Unaffected Date, and the low value of tw telecom to Level 3's share price on the Unaffected Date. For the Peer Trading Analysis, Evercore compared the high value for Level 3 to the low value for tw telecom, and the low value for Level 3 to the high value for tw telecom. For the Discounted Cash Flow Analysis and Net Present Value of Future Share Price Analysis, Evercore compared the high value for tw telecom to the midpoint value for Level 3, and the low value for tw telecom to the midpoint value for Level 3. Evercore selected these comparisons based on its professional judgment and experience in the enterprise telecommunications industry. All of the exchange ratios below are calculated on the basis of $10.00 per share of tw telecom common stock in cash consideration. The resulting exchange ratios were as follows:

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  Low Value
Exchange
Ratio
  High Value
Exchange
Ratio
 

Analyst Price Targets Range Analysis

    0.541x     0.588x  

Premiums Paid Analysis

    0.621x     0.774x  

Precedent Transactions Analysis

    0.357x     0.645x  

Peer Trading Analysis

    0.333x     0.724x  

Discounted Cash Flow Analysis

             

tw telecom management case / Research Derived Projections

    0.472x     0.665x  

tw telecom management case / Level 3 management case

    0.401x     0.563x  

Net Present Value of Future Share Price Analysis

             

tw telecom management case / Research Derived Projections

    0.376x     0.800x  

tw telecom management case / Level 3 management case

    0.333x     0.708x  

        Evercore compared the results of the foregoing analyses to the proposed exchange ratio of 0.7000 of a share of Level 3 common stock for each issued and outstanding share of tw telecom common stock, other than dissenting shares, noting that the proposed exchange ratio was within or above the range of the implied exchange ratios for each of the valuation techniques reviewed by Evercore.

Has/Gets Analysis

        Evercore also reviewed the following metrics for tw telecom both on a stand-alone and pro forma (for the mergers) basis:

    Implied per share equity value based on market value analysis

    Implied per share equity value based on discounted cash flow analysis

    Implied per share equity value based on net present value of future share price analysis

        With respect to the implied per share equity value based on the market value analysis, the stand-alone value was based on tw telecom's share price as of the Unaffected Date. The pro forma implied equity value per share was equal to the quotient obtained by dividing (A) the sum of (1) 27.5% (tw telecom's stockholders' pro forma ownership of the combined company) multiplied by an amount equal to the sum of (i) the pro forma equity value calculated by adding tw telecom's market value to Level 3's market value as of Unaffected Date plus (ii) the present value of the estimated tw management synergies, plus (iii) the net present value of the value of accelerated use of certain net operating losses as a result of the business combination, less (iv) the estimated transaction expenses, less (v) the cash payment to tw telecom's stockholders, and (2) the cash payment to tw telecom's stockholders by (B) the fully diluted shares outstanding of tw telecom common stock.

        With respect to the implied per share equity value based on the discounted cash flow analysis, Evercore assumed an 8.0% weighted average cost of capital and 9.0x terminal multiple for Level 3 and a 7.5% weighted average cost of capital and 9.0x terminal multiple for tw telecom, which were based on Evercore's professional judgment and experience in the enterprise telecommunications industry. The pro forma implied equity value per share was equal to the quotient obtained by dividing (A) the sum of (1) 27.5% (tw telecom's stockholders' pro forma ownership of the combined company) multiplied by an amount equal to the sum of (i) tw telecom's stand-alone discounted cash flow implied equity value, plus (ii) Level 3's stand-alone discounted cash flow implied equity value using the Level 3 management case or the Research Derived Projections as the case may be, plus (iii) the present value of the estimated tw management synergies, plus (iv) the net present value of the value of accelerated use of certain net operating losses as a result of the business combination,

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less (v) estimated transaction expenses, less (vi) the cash payment to tw telecom's stockholders, and (2) the cash payment by (B) the fully diluted shares outstanding of tw telecom common stock.

        With respect to the implied per share equity value based on the net present value of future share price analysis, Evercore assumed a 10.7x Forward Adjusted EBITDA multiple for tw telecom (based on tw telecom's Forward Adjusted EBITDA multiple as of the Unaffected Date) and a 10.1x Forward Adjusted EBITDA multiple for the combined company (based on weighted blended Forward Adjusted EBITDA multiple of Level 3 and tw telecom as of the Unaffected Date). For purposes of this analysis, Evercore compared the net present value of future share prices of tw telecom at the end of 2015 and at the end of 2017 to the net present value of the pro forma future equity value per share at the end of 2015 and 2017. The pro forma net present value of future share price was obtained by dividing (A) the sum of (1) 27.5% (tw telecom's stockholders' pro forma ownership of the combined company) multiplied by the pro forma future equity value discounted to June 30, 2014 by 10% (taking into consideration, among other things, a cost of equity calculation) and (2) the cash payment to tw telecom's stockholders by (B) the fully diluted shares outstanding of tw telecom common stock. Pro forma future equity value was derived by applying a 10.1x Forward Adjusted EBITDA multiple to the pro forma Forward Adjusted EBITDA of the combined company which included tw management synergies as realized and adjusting the resulting TEV by the estimated net debt.

        The comparison of tw telecom's stand-alone implied per share equity values to the pro forma implied equity values using market based analysis, discounted cash flow analysis, and net present value of future share price analysis indicated that pro forma implied per share values were higher than stand-alone implied per share values.

        The results of this analysis are provided in the table below:


Has/Gets Analysis

Valuation Methodology
  Stand-Alone  
Pro Forma
   
 

Market Based Analysis

  $ 32.33   $ 40.97        

 

Valuation Methodology
  Stand-Alone   Pro Forma using
Research Derived
Projections for Level 3
  Pro Forma using Level 3
management case
for Level 3
 

Discounted Cash Flow Analysis

  $ 37.19   $ 44.90   $ 49.18  

 

Valuation Methodology
  Stand-Alone   Pro Forma using
Research Derived
Projections for Level 3
  Pro Forma using Level 3
management case
for Level 3
 

NPV of Future Share Price 2015

  $ 37.94   $ 44.72   $ 46.09  

NPV of Future Share Price 2017

  $ 43.63   $ 47.56   $ 52.34  

General

        In connection with the review of the mergers by the tw Board, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore's opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the

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analyses. In addition, Evercore may have considered various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should therefore not be taken to be Evercore's view of the value of tw telecom or Level 3. No company used in the above analyses as a comparison is directly comparable to tw telecom, and no transaction used is directly comparable to the mergers. Further, Evercore's analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of tw telecom or Level 3 or their advisors.

        Evercore prepared these analyses solely for the purpose of providing an opinion to the tw Board as to the fairness, from a financial point of view, of the merger consideration to be received by tw telecom's stockholders entitled to receive such consideration. These analyses do not purport to be appraisals of tw telecom or Level 3 or to necessarily reflect the prices at which tw telecom or its securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore's analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates. The issuance of the fairness opinion was approved by an opinion committee of Evercore.

        The merger consideration was determined through arm's-length negotiations between tw telecom and Level 3. Evercore provided advice to the tw Board during these negotiations. Evercore did not, however, recommend any specific consideration to the tw Board or recommend that any specific consideration constituted the only appropriate consideration for the mergers.

        Under the terms of Evercore's engagement, Evercore provided the tw Board with financial advisory services and a fairness opinion in connection with the mergers. Pursuant to the terms of its engagement letter, tw telecom has agreed to pay Evercore fees for its services in connection with its engagement, including an opinion fee and a success fee. Evercore is entitled to receive an opinion fee of $4 million, which Evercore earned upon delivery of its fairness opinion to the tw Board. In addition, Evercore is entitled to receive a success fee currently estimated to be approximately $42.9 million, which Evercore will earn upon the consummation of the mergers and which fee may vary based on the stock consideration issued in the merger. In addition, the tw Board has agreed to reimburse Evercore for its reasonable out-of-pocket expenses (including reasonable legal fees, expenses and disbursements) incurred in connection with its engagement and to indemnify Evercore and any of its members, partners, officers, directors, advisors, representatives, employees, agents, affiliates or controlling persons, if any, against certain liabilities and expenses arising out of its engagement and any related transaction.

        Prior to its engagement, Evercore and its affiliates provided financial advisory services to tw telecom and its affiliates and has received customary fees for rendering such services. During the two-year period prior to the date of its opinion, no material relationship existed between Evercore and its affiliates and Level 3 pursuant to which compensation was received by Evercore or its affiliates as a result of such a relationship. Evercore may provide financial or other services to tw telecom or Level 3 in the future and in connection with any such services or their respective affiliates Evercore may receive compensation.

        In the ordinary course of business, Evercore or its affiliates may actively trade the securities, or related derivative securities, or financial instruments of tw telecom and its affiliates, for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or instruments.

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        The tw Board engaged Evercore to act as a financial advisor based on its qualifications, experience and reputation. Evercore is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses in connection with mergers and acquisitions, leveraged buyouts, competitive biddings, private placements and valuations for corporate and other purposes.


Certain tw telecom Prospective Financial Information

        tw telecom does not as a matter of course make public long-term forecasts as to future performance or other prospective financial information beyond the current fiscal year, and tw telecom is especially wary of making forecasts or projections for extended periods due to the unpredictability of the underlying assumptions and estimates. However, as part of the due diligence review of tw telecom in connection with the mergers, tw telecom's management prepared and provided to Level 3, as well as to Evercore and Rothschild in connection with their respective evaluation of the fairness of the merger consideration, non-public, internal financial forecasts regarding tw telecom's projected future operations for the 2014 through 2018 fiscal years. tw telecom has included below a summary of these forecasts for the purpose of providing stockholders and investors access to certain non-public information that was furnished to third parties and such information may not be appropriate for other purposes. These forecasts were also considered by the tw Board for purposes of evaluating the mergers. The tw Board also considered non-public, financial forecasts prepared by Level 3 regarding Level 3's anticipated future operations for the 2014 through 2018 fiscal years for purposes of evaluating Level 3 and the mergers. See "The Mergers—Certain Level 3 Prospective Financial Information" beginning on page 93 for more information about the forecasts prepared by Level 3.

        The tw telecom internal financial forecasts were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally accepted accounting principles in the United States. Ernst & Young LLP has not examined, compiled or performed any procedures with respect to the accompanying prospective financial information and, accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto. The Ernst & Young LLP reports incorporated by reference in this joint proxy statement/prospectus relate to tw telecom's historical financial information. They do not extend to the prospective financial information and should not be read to do so. The summary of these internal financial forecasts included below is not being included to influence your decision whether to vote for the mergers and the transactions contemplated in connection with the mergers, but because these internal financial forecasts were provided by tw telecom to Level 3 and Evercore and Rothschild.

        While presented with numeric specificity, these internal financial forecasts were based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition and general business, economic, market and financial conditions and additional matters specific to tw telecom's businesses) that are inherently subjective and uncertain and are beyond the control of tw telecom's management. Important factors that may affect actual results and cause these internal financial forecasts to not be achieved include, but are not limited to, risks and uncertainties relating to tw telecom's business (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions and other factors described in the "Risk Factors" section of tw telecom's Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. These internal financial forecasts also reflect numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are

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subject to change. As a result, actual results may differ materially from those contained in these internal financial forecasts. Accordingly, there can be no assurance that the forecasted results summarized below will be realized.

        The inclusion of a summary of these internal financial forecasts in this joint proxy statement/prospectus should not be regarded as an indication that any of tw telecom, Level 3 or their respective affiliates, advisors or representatives considered these internal financial forecasts to be predictive of actual future events, and these internal financial forecasts should not be relied upon as such nor should the information contained in these internal financial forecasts be considered appropriate for other purposes. None of tw telecom, Level 3 or their respective affiliates, advisors, officers, directors or representatives can give you any assurance that actual results will not differ materially from these internal financial forecasts, and none of them undertakes any obligation to update or otherwise revise or reconcile these internal financial forecasts to reflect circumstances existing after the date these internal financial forecasts were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying these forecasts are shown to be in error. Since the forecasts cover multiple years, such information by its nature becomes less meaningful and predictive with each successive year. tw telecom does not intend to make publicly available any update or other revision to these internal financial forecasts. None of tw telecom or its affiliates, advisors, officers, directors or representatives has made or makes any representation to any stockholder or other person regarding tw telecom's ultimate performance compared to the information contained in these internal financial forecasts or that the forecasted results will be achieved. tw telecom has made no representation to Level 3, in the merger agreement or otherwise, concerning these internal financial forecasts. The below forecasts do not give effect to the mergers. tw telecom urges all stockholders to review tw telecom's reported financial results in its most recent SEC filings.


tw telecom management case

 
  Fiscal Year  
($ in millions)
  2014E   2015E   2016E   2017E   2018E  

Revenue

  $ 1,687   $ 1,837   $ 2,003   $ 2,189   $ 2,398  

% growth

    7.9 %   8.9 %   9.0 %   9.3 %   9.6 %

Adjusted EBITDA(1)

  $ 566   $ 633   $ 705   $ 787   $ 879  

% growth

    2.4 %   11.8 %   11.4 %   11.6 %   11.7 %

% margin

    33.6 %   34.5 %   35.2 %   36.0 %   36.7 %

(1)
Adjusted EBITDA as used with reference to tw telecom has the same definition as Modified EBITDA as set forth in the section titled "Selected Historical Consolidated Financial Data" beginning on page 26.


Adjustments

The tw telecom sensitivity case

        Level 3's management made adjustments to the financial forecasts provided by tw telecom (which we refer to as the tw telecom sensitivity case). The tw telecom sensitivity case was created by Level 3's management to reflect more conservative future performance by tw telecom. Both the financial forecasts provided by tw telecom and this adjusted forecast were presented by Level 3's management to its board of directors and to Rothschild.

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tw telecom sensitivity case

 
  Fiscal Year  
($ in millions)
  2014E   2015E   2016E   2017E   2018E  

Revenue

  $ 1,687   $ 1,771   $ 1,867   $ 1,979   $ 2,103  

% growth

    7.9 %   5.0 %   5.4 %   6.0 %   6.2 %

Adjusted EBITDA(1)

  $ 566   $ 610   $ 657   $ 712   $ 771  

% growth

    2.4 %   7.8 %   7.7 %   8.3 %   8.3 %

% margin

    33.6 %   34.4 %   35.2 %   35.9 %   36.6 %

(1)
Adjusted EBITDA as used with reference to tw telecom has the same definition as Modified EBITDA as set forth in the section titled "Selected Historical Consolidated Financial Data" beginning on page 26.


Interests of tw telecom Directors and Executive Officers in the Mergers

        Certain members of the board of directors and executive officers of tw telecom may be deemed to have interests in the mergers that are in addition to, or different from, the interests of other tw telecom stockholders generally. The tw Board was aware of these interests and considered them, among other matters, in approving the mergers and the merger agreement and in making the recommendations that tw telecom's stockholders approve and adopt the merger agreement and approve the mergers and the other transactions contemplated by the merger agreement. For purposes of the plans and agreements described below, to the extent applicable, the completion of the transactions contemplated by the merger agreement will constitute a change of control or term of similar meaning. These interests are described in further detail below, and certain of them are quantified in the narrative and table below.

    Treatment of tw telecom Equity-Based Awards

        Options.    At the effective time of the mergers, each outstanding option to purchase shares of tw telecom common stock, whether vested or unvested, will be cancelled and converted into the right to receive the merger consideration in respect of each tw telecom share subject to the option, net of the aggregate per share exercise price and less applicable required withholding taxes. Any fractional shares of Level 3 common stock will be rounded down to the nearest whole share. Applicable tax withholdings will first reduce the amount of shares of Level 3 common stock payable in respect of the outstanding options.

        Restricted Stock Units.    At the effective time of the mergers, each restricted stock unit award that is outstanding immediately prior to the effective time, whether vested or unvested, will be cancelled and converted into the right to receive the merger consideration (less applicable required withholding taxes) in respect of each tw telecom share subject to the award. Any fractional shares of Level 3 common stock will be rounded up to the nearest whole share. Applicable tax withholdings will first reduce the amount shares of Level 3 common stock payable in respect of the outstanding restricted stock units.

        Restricted Stock Awards.    At the effective time of the mergers, each restricted stock award that is outstanding immediately prior to the effective time will vest in full and be cancelled and converted into the right to receive the merger consideration (less applicable required withholding taxes) in respect of each tw telecom share subject to the award. Any fractional shares of Level 3 common stock will be rounded up to the nearest whole share. Applicable tax withholdings will first reduce the amount of shares of Level 3 common stock payable in respect of the outstanding shares of restricted stock.

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        The treatment described above would apply to all holders of tw telecom equity awards, including tw telecom's executive officers and non-employee directors. For an estimate of the amounts that would become payable to each of tw telecom's executive officers on settlement of their unvested equity-based awards, see "—Quantification of Payments and Benefits to tw telecom's Named Executive Officers" below. We estimate that the aggregate amount that would be payable to tw telecom's six non-employee directors for their unvested equity-based awards (all of which are restricted stock awards) if the effective time of the merger were July 18, 2014 is approximately $5.23 million.

    Change of Control Employment Agreements

        tw telecom is party to change of control employment agreements with each of its executive officers, including its named executive officers, that provide for the severance benefits described below upon a termination of employment without cause or for good reason within 18 months following the consummation of the mergers (which we refer to as a qualifying termination). In consideration for the severance benefits under the change of control employment agreements, the executive officers have agreed to comply with restrictive covenants concerning noncompetition for six months following the applicable date of termination and restrictive covenants concerning nonsolicitation of employees, customers and business partners for twelve months following the applicable date of termination.

        If a qualifying termination occurs, the change of control employment agreements provide that the tw telecom executive officer's severance benefits would be comprised of the following:

        Severance Payment.    The executive officer would be entitled to a lump sum cash payment in an amount equal to the product of (a) 2.99 for Ms. Herda, 2.5 for Mr. Blount, and 2 for the other executive officers, multiplied by (b) the sum of the executive officer's annual base salary and target bonus under tw telecom's annual incentive plan.

        Short-Term Incentive Payment.    The executive officer would be entitled to a lump sum cash payment in an amount equal to the executive officer's target incentive under tw telecom's annual incentive plan, prorated for the number of days that have elapsed in the performance period through the date of termination. Notwithstanding this provision, under a retention program approved in connection with the execution of the merger agreement (described in further detail below), if the mergers close in 2014 and thereafter the executive officer's employment is terminated in 2014 prior to payment of the annual incentive, the executive officer would be entitled to a full (rather than prorated) annual incentive payment in respect of the 2014 payout under tw telecom's annual incentive plan.

        Insurance Continuation Payment.    The executive officer would be entitled to a lump sum cash payment in an amount equal to 18 months of insurance premiums based on the premium rate charged by tw telecom as of the date of termination for health care continuation coverage under COBRA for the type of coverage in which the executive officer was enrolled as of the date of termination. Under the change of control employment agreement with Ms. Herda, the amount of this payment has been fixed at $42,900.

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        Outplacement Benefits.    Ms. Herda would be entitled to outplacement benefits or secretarial and administrative support for up to one year following the date of termination in an amount not to exceed $75,000. The other executive officers would be entitled to $25,000 in lieu of outplacement benefits.

        For an estimate of the amounts that would become payable to each of tw telecom's named executive officers under their change of control employment agreements upon a qualifying termination, see "—Quantification of Payments and Benefits to tw telecom's Named Executive Officers" below.

    Retention Program

        In connection with the execution of the merger agreement, tw telecom adopted a retention program. Certain components of this retention program under which the executive officers are eligible to receive benefits are described below. In addition to the components described below, the executive officers would be entitled to a full (rather than prorated) annual incentive payment under the retention program upon a qualifying termination under the circumstances described above under "—Change of Control Employment Agreements." Any payments under the retention program that become due upon a qualifying termination are contingent upon the execution of a release of claims in favor of tw telecom and its affiliates.

        Supplemental Incentive.    In order to promote retention and company performance, the retention program provides for a supplemental incentive pool of up to $14 million in the aggregate under which the tw Board may make additional incentive awards under the annual incentive plan to employees. For the executive officers, any such additional incentives would be payable, subject to continued employment through the payment date or an earlier qualifying termination. As of the date of this filing, no supplemental incentives had been allocated to the executive officers.

        Transaction Bonus Pool.    In order to promote retention and incentivize employees to consummate the mergers, the retention program provides for a transaction bonus pool of up to $2 million in the aggregate under which tw telecom's chief executive officer may make cash awards to employees. Any such transaction bonuses would be payable, subject to the employee's continued employment, on the closing of the mergers or an earlier qualifying termination. As of the date of this filing, no transaction bonuses had been allocated to the executive officers.

        Reimbursement of Excise Taxes.    In the event that it is determined that any of the compensation or benefits payable in connection with the mergers would subject employees to excise taxes under Section 4999 of the Internal Revenue Code, tw telecom may make payments of up to $3 million in the aggregate to all such employees in order to mitigate the impact of such excise taxes. As of the date of this filing, no amounts have been allocated from this pool to the executive officers.

    Indemnification and Insurance

        Pursuant to the terms of the merger agreement, tw telecom's directors and executive officers will be entitled to certain ongoing indemnification and coverage under directors' and officers' liability insurance policies from the surviving corporation following the mergers. Such indemnification and insurance coverage is further described in the section entitled "The Merger Agreement—Indemnification and Insurance" beginning on page 114.

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    Quantification of Potential Payments to tw telecom's Named Executive Officers in Connection with the Mergers

        The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosures of information about certain compensation for each of tw telecom's named executive officers that is based on or otherwise relates to the mergers and assumes, among other things, that the named executive officers will experience a qualifying termination of employment immediately following the consummation of the mergers. All of tw telecom's executive officers are also named executive officers.

        Please note that the amounts described below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date and do not reflect certain compensation actions that may occur before the completion of the mergers. For purposes of calculating such amounts, we have assumed:

    July 18, 2014 as the closing date of the mergers, and

    a termination of each named executive officer's employment on July 18, 2014 by the combined company that constitutes a qualifying termination.

Name
  Cash
($)(1)
  Equity
($)(2)
  Perquisites/
Benefits
($)
  Tax
Reimbursement
($)(3)
  Total ($)  

Named Executive Officers(4)

                               

Larissa L. Herda

    9,571,920     28,773,029             38,344,949  

Mark A. Peters

    2,278,673     12,888,711             15,167,384  

John T. Blount

    3,344,014     17,204,647             20,548,661  

Tina A. Davis